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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-20960
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Hamilton Bancorp Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Florida 65-0149935
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3750 N.W. 87th Avenue, Miami, Florida 33178
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (305) 717-5500
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
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None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
9.75% Beneficial Unsecured Securities, Series A
(Liquidation Amount $10 per Capital Security) of Hamilton Capital Trust I
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(Title of Class)
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Indicate by check mark X whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this From 10-K. [ ]
The aggregate market value of Registrant's Common Stock held by
non-affiliates of the Registrant as of March 23, 2000 was $153,682,346 based
upon the average of the high and low price of a share of Common Stock as
reported by the NASDAQ National Market on such date. As of March 23, 2000,
10,081,147 shares of Registrant's Common Stock were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents (as more specifically
identified elsewhere in this Annual Report) are incorporated by reference
herein:
Part of Form 10-K into which
Name of Document the document is incorporated
Portions of the Registrant's Proxy Statement for Part III
2000 Annual Meeting of Stockholders
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FORWARD-LOOKING STATEMENTS
Information contained (or incorporated by reference) in this Annual
Report may constitute "forward-looking statements." Statements used (or
incorporated by reference) in this Annual Report which use words such as
"believes," "expects," "may," "will," "should," "projected," "contemplates" or
"anticipates" or the negative of such terms or other variations may constitute
forward-looking statements. Forward-looking statements are inherently uncertain,
and there is no assurance that such forward-looking statements will be accurate.
Such forward-looking statements include, without limitation, the Company's
expectations and estimates as to domestic and international business and
economic conditions and its business operations, including growth in net
interest income and net income and allocations of country exposures. Other
factors, such as the general state of the United States economy, as well as the
economic and political conditions of the countries in which the Company conducts
business operations, could also cause actual results to vary materially from the
future results covered in such forward-looking statements.
PART I
ITEM 1. BUSINESS.
General
Hamilton Bancorp Inc. ("Hamilton Bancorp"), through its subsidiary,
Hamilton Bank, N.A. ("Hamilton Bank"), (Hamilton Bancorp and Hamilton Bank are
collectively referred to herein as the "Company"), is engaged in providing
global trade finance with particular emphasis on trade with and between South
America, Central America and the Caribbean (collectively, the "Region") and the
United States or otherwise involving the Region. Management believes that trade
finance provides the Company with the opportunity for substantial and profitable
growth, primarily with moderate credit risk, and that Hamilton Bank is the only
domestic financial institution in the State of Florida focusing primarily on
financing foreign trade. Through its relationships with approximately 500
correspondent banks and with importers and exporters in the United States and
the Region, as well as its location in South Florida, which is becoming a focal
point for trade in the Region, the Company has been able to take advantage of
substantial growth in this trade. Much of this growth has been associated with
the adoption of economic stabilization policies in the major countries of the
Region.
The Company operates in all major countries throughout the Region and
has been particularly active in several smaller markets, such as Guatemala,
Ecuador, Panama and Peru. Management believes that these smaller markets are not
primary markets for the larger, multinational financial institutions and,
therefore, customers in such markets do not receive a similar level of service
from such institutions as that provided by the Company. To enhance its position
in certain markets, the Company has made minority investments in indigenous
financial institutions in Guyana, El Salvador, Peru and Nicaragua. The Company
has also strengthened its relationships with correspondent financial
institutions in the Region by acting as placement agent, from time to time, for
debt instruments or certificates of deposit issued by many of such institutions.
The Company seeks to generate income by participating in multiple
aspects of trade transactions that generate both fee and interest income. The
Company earns fees primarily from opening and confirming letters of credit and
discounting acceptances and earns interest on credit extended, primarily in the
form of
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commercial loans, for pre- and post-export financing, such as refinancing of
letters of credit, and to a lesser extent, from discounted acceptances. As the
economy in the Region has grown and stabilized and the Company has begun to
service larger customers, the balance of the Company's trade financing
activities has shifted somewhat from letters of credit to the discounting of
commercial trade paper and the granting of loans, resulting in relatively less
fee income but increased interest income. Virtually all of the Company's
business is conducted in United States dollars. Management believes that the
Company's primary focus on trade finance, its wide correspondent banking network
in the Region, broad range of services offered, management experience,
reputation and prompt decision-making and processing capabilities provide it
with important competitive advantages in the trade finance business. The Company
seeks to mitigate its credit risk through its knowledge and analysis of the
markets it serves, by obtaining third-party guarantees of both local banks and
importers on many transactions, by often obtaining security interests in goods
being financed and by the short-term, self-liquidating nature of trade
transactions. At December 31, 1999, approximately 56% of the Company's loan
portfolio consisted of short-term principally trade related loans maturing
within 180 days and approximately 69% maturing within 365 days. Credit is
generally extended under specific credit lines for each customer and country.
These credit lines are reviewed at least annually.
Lending activities are funded primarily through domestic consumer
deposits gathered through a network of eight branches in Florida and one branch
in San Juan, Puerto Rico as well as deposits received from correspondent banks,
corporate customers and private banking customers within the Region. The
Company's branches are strategically located in markets where it believes there
is both a concentration of retail deposits and foreign trade activity. The
Company also participates in various community lending activities, and under
several United States and Florida laws and regulations Hamilton Bank is
considered a minority bank and is able to participate in certain beneficial
minority programs involving both deposits and loans.
Developments in Certain Emerging Market Countries
The economies of various countries in the Region, including Brazil,
Ecuador and Venezuela, have been characterized by frequent and occasionally
drastic intervention by the governments and volatile economic cycles.
Governments have often changed monetary, credit, tariff and other policies to
influence the course of their respective economies. The actions of the
Brazilian, Ecuadorian and Venezuelan Governments to control inflation and effect
other policies have often involved wage and price controls as well as other
interventionist measures, such as Ecuador's freezing of bank accounts early in
1999. Changes in policies in other countries in the Region involving tariffs,
exchange controls, regulations and taxation could significantly increase the
likelihood of causing restrictions on transfers of Dollars out of such
countries, as could inflation, devaluation, social instability and other
political, economic or diplomatic developments.
Brazilian, Ecuadorian and Venezuelan financial and securities markets,
as well as other financial and securities markets in the Region, are, to varying
degrees, influenced by economic and market conditions in other emerging market
countries and other countries in the Region. Although economic conditions are
different in each country, investor reaction to developments in one country can
have significant effects on the financial markets and securities of issuers in
other countries. These developments have adversely affected the securities and
other financial markets in many emerging markets, including Brazil, Ecuador and
Venezuela. One result of these difficulties has been the closing of numerous
banks in some countries in the Region, especially in Ecuador. To date, however,
the Ecuadorian government has guaranteed the obligations of such closed banks in
Ecuador. The ensuing increased market volatility in these securities and other
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financial markets has also been attributed, at least in part, to the effect of
these and other similar events. There can be no assurance that the various
financial and securities markets in the Region, including Brazil, Ecuador and
Venezuela, will not continue to be adversely affected by events elsewhere,
especially in other emerging markets and in other countries in the Region.
The Company will continue to take advantage of the United States and
international economic environment by emphasizing the financing of trade from
the Region into the United States. As a result of the deterioration of economic
conditions in some countries in the Region, trade flows into the Region on a
relative basis diminished in 1999 compared to recent years. In light of the
United States' strong economy, government budget surplus, relatively low
interest rates, strong stock market, high employment levels and strong consumer
demand, trade flows from the Region into the United States increased as such
countries attempt to capitalize on export opportunities as a way to increase
production, stimulate revenues and thereby "export out" of their economic
difficulties. The Company in 1999 placed, and expects to continue to place, more
emphasis on financing imports of goods into the United States and thereby
increase the relative size of its assets employed in the United Sates as
compared to its exposure in the Region. In addition, prudent risk management, in
particular with regard to emerging market countries, calls for avoidance of high
concentrations of risk in these countries in relation to a bank's capital.
Currently, United States bank regulatory agencies consider that exposure in
these markets should be limited to levels that would not impair the safety and
soundness of a banking institution. As a consequence, the Company's exposure in
the Region was significantly reduced in 1999 in relation to the Company's
capital.
Background of the Company
Hamilton Bancorp was formed as a bank holding company in 1988 in Miami,
Florida, to acquire 99.7% of the issued and outstanding shares of Hamilton Bank.
Hamilton Bank was acquired by Hamilton Bancorp to take advantage of perceived
opportunities to finance foreign trade between United States corporate customers
and companies in the Region, as the area emerged from the Latin American debt
crisis of the early 1980's, particularly since most non-Regional financial
institutions had limited interest in financing trade with the Region at that
time. Members of the Company's management, who had extensive experience in trade
finance in the Region, re-established contacts in the Region, primarily with
banks. Hamilton Bank initially offered its services confirming letters of credit
for banks in the Region. Hamilton Bank then began to market its other trade
related services and products to beneficiaries of its letters of credit. As
Hamilton Bank's relationships with correspondent banks developed and as it
developed corporate clients in the United States, Hamilton Bank's trade finance
activity continued to increase. Hamilton Bank's business expanded into its other
products and services, which primarily included other types of trade financing
instruments.
Market for Company Services
International trade between the United States and the Region as well as
between the State of Florida and the Region has grown significantly during the
five year period ended December 31, 1999. Recent treaties and agreements
relating to trade are expected to eliminate certain trade barriers and open up
certain economic sectors to competition, as well as to liberalize trade between
the United States and many countries with respect to a variety of goods and
services. A high and increasing percentage of this trade requires financing. The
growth and importance of trade in the United States and the Region also
increases the number of small and medium-sized firms engaged in trade and in
need of trade finance services. Many financial institutions in the United States
in general and Florida in particular are not adequately staffed to handle such
financing on a large
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scale, or to judge the creditworthiness of companies or banks in the Region and,
accordingly, eschew trade financing or limit the scope of their trade financing
activity. This has been partially responsible for the expanding market for the
Company's trade financing services.
Management believes that the Company has carved out a niche for itself
as the only Florida financial institution the business of which is focused
predominantly on financing foreign trade in the Region. The Company initially
focused on providing services and products to smaller banks and corporate
customers in the Region and smaller companies in Florida doing business in the
Region, as well as financial institutions and customers in smaller countries in
the Region where a more limited number of large, multinational banks conduct
business. The Company's willingness to provide trade financing in these
situations frequently results in it obtaining business from the same customers
involving larger countries in the Region, as well. A significant percentage of
the Company's trade financing business now involves such larger countries. The
Company does not, however, have a significant share of the overall market in
larger countries in the Region, such as Brazil and Argentina, where it competes
more frequently with larger, multinational financial institutions. The Company
also provides products and services for multinational corporations, such as
major commodities houses, and purchases participation interests in the trade
financing of multinational financial institutions to companies in the Region.
The Company's trade financing allows for the movement of commodities such as
sugar, grain and steel, and consumer goods such as textiles and appliances, as
well as computer hardware, capital equipment and other items.
Trade Finance Services and Products
The manufacture or production and distribution of any product or good
generally results in a number of trade transactions which, together, make up a
trade cycle. For example, a seller of shirts purchases buttons and materials,
arranges for manufacture and often contracts with a distributor who sells the
products to retailers. The Company attempts to become involved in and to finance
as many stages of a trade cycle as possible. Since the Company's primary focus
is on trade finance, the Company offers a wider array of trade finance products
and services than most institutions it competes with, although some of the
Company's products and services, such as import and export letters of credit,
are offered by almost all financial institutions engaged in trade finance, and
most of the Company's products are offered by some financial institutions. The
principal trade related products and services which the Company offers include:
o COMMERCIAL DOCUMENTARY LETTERS OF CREDIT. Commercial
documentary letters of credit are obligations issued by a
financial institution in connection with trade transactions
where the financial institution's credit is effectively
substituted for that of its customer, who is buying goods or
services from the beneficiaries of those letters of credit.
When the bank issuing a letter of credit is not well known or
is an unacceptable risk to the beneficiary, the issuing bank
must obtain a guarantee or confirmation of the letter of
credit by an acceptable bank in the beneficiary's market. When
the Company confirms a letter of credit it assumes the credit
risk of the issuing bank and generally takes a security
interest in the goods being financed. These obligations, which
are governed by their own special set of legal rules, call for
payment by the financial institution against presentation of
certain documents showing that the purchased goods or services
have been provided or are forthcoming. From time to time, a
financial institution issues a commercial documentary letter
of credit ("back-to-back") against receipt of a letter of
credit from another bank in order to finance the purchase of
goods. The Company commenced its trade financing activities by
confirming letters of credit for correspondent financial
institutions in the Region and then began to sell other
products and services to the beneficiaries of
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such letters of credit. Commercial letters of credit are
contingent liabilities of the Company that are not recorded on
the Company's balance sheet and which generate fee income.
Upon payment of a letter of credit, the Company may refinance
the obligation through a loan which will be reflected on the
Company's balance sheet as "Loans-net."
o BANKERS' ACCEPTANCES. A bankers' acceptance is a time draft
drawn on a bank and accepted by it. Acceptance of the draft
obligates the bank to unconditionally pay the face value to
whomever presents it at maturity. Drafts accepted by the
Company are reflected on the asset side of the Company's
balance sheet as "Due from Customers on Bankers' Acceptances"
and on the liability side as "Bankers' Acceptances
Outstanding." The Company receives a fee upon acceptance of a
draft. Discounted bankers' acceptances represent the purchase
by a financial institution of a draft at a discount. This
assists an exporter in providing terms to an importer under a
letter of credit and also provides liquidity to the exporter.
Discounted bankers' acceptances are discounts of forward
maturity items and are included on the Company's balance sheet
under "Loans-net." The Company receives both fee and interest
income from discounted bankers' acceptances.
o DISCOUNTED TRADE ACCEPTANCES. Discounted trade acceptances
represent an obligation of an importer to pay money on a
certain date in the future, which obligation has been accepted
by the importer as payable to the exporter, then sold by the
exporter at a discount to a financial institution. If with
recourse, the financial institution as holder of this
instrument has recourse at maturity of the acceptance to the
exporter as well as the accepting importer. If without
recourse, the financial institution holding the acceptance has
no recourse to the exporter, but only to the accepting
importer. Discounted trade acceptances are discounts of
forward maturity items and are included on the Company's
balance sheet under "Loans-net." The Company receives
primarily interest income from discounted trade acceptances.
o PRE-EXPORT FINANCING. Pre-export financing is provided by a
financial institution, either directly or indirectly through a
second bank, to an exporter who has a definitive international
contract for the sale of certain goods or services. Such
financing funds the exporter's manufacture, assembly and sale
of these goods or services to the purchaser abroad. Pre-export
financing is reflected on the balance sheet as "Loans-net".
The Company receives primarily interest income from pre-export
financing.
o WAREHOUSE RECEIPT FINANCING. Warehouse receipt financing
provides temporary financing, usually at a significant loan to
collateral discount, for goods temporarily held in an
independent warehouse pending their sale and/or delivery in a
trade transaction. The goods are evidenced by a receipt issued
by the independent warehouse where the goods are stored.
Possession of that receipt gives the financial institution a
perfected security interest in those goods to collateralize
the credit that it is providing. Warehouse receipt financing
is reflected on the balance sheet as "Loans-net". The Company
receives primarily interest income from warehouse receipt
financing.
o DOCUMENTARY COLLECTIONS. For a fee, a United States financial
institution will assist financial institutions to collect at
maturity various drafts, acceptances or other obligations
which have come due and which are owed by parties abroad or in
the United States. Documentary collections are not reflected
on the balance sheet and are not contingent obligations of the
Company. The Company receives fee income from documentary
collections.
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o FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange services
consist of the purchase of foreign currency on behalf of a
customer. This service includes both spot and forward
transactions. Such transactions may be conducted in both hard
and soft currencies (i.e., those which are widely accepted
internationally and those that are not). The Company conducts
such transactions in both types of currencies. Foreign
exchange transactions are not reflected on the balance sheet
and represent contingent liabilities of the Company. The
Company receives fee income from foreign exchange
transactions.
o STANDBY LETTERS OF CREDIT. Standby letters of credit
effectively represent a guarantee of payment to a third party
by a financial institution, usually not in connection with an
individual trade transaction. The Company does not favor
standby letters of credit. They are only issued by the Company
in situations where the Company believes it is adequately and
properly secured or that the customer is in very strong
financial condition. Standby letters of credit are not
reflected on the balance sheet and represent contingent
liabilities of the Company. The Company receives fee income
from standby letters of credit.
o INTERNATIONAL CASH MANAGEMENT. The Company assists
corporations and banks in the Region with the clearing of
checks drawn on United States financial institutions. As a
United States financial institution and a member of the
Federal Reserve System, Hamilton Bank is able to provide quick
and efficient clearing of these items. The provision of these
services often leads to the Company providing other products
and services to corporations and banks.
Most of the Company's customers are serviced through its International
Banking and Domestic Corporate Trade Departments. The International Banking
Department services the Company's international corporate and correspondent
banking customers. The Domestic Corporate Trade Department services United
States-based relationships, primarily with domestic corporate clients. Each
corporate customer's account is coordinated by a specific officer at the
Company. Each such customer will also generally do business with the Company
officers responsible for the countries involved in a particular transaction.
Company officers meet in person with key officials from each of the
correspondent banks and corporate customers each year. In addition, the Company
communicates with its correspondent banks and corporate customers in a variety
of other ways.
Competition
International trade financing is a highly competitive industry that is
dominated by large, multinational financial institutions such as Citibank, N.A.,
ABN-AMRO Bank and Barclays Bank PLC, among others. With respect to trade finance
in or relating to larger countries in the Region, primarily in South America,
these larger institutions are the Company's primary competition. The Company has
less competition from these multinational financial institutions providing trade
finance services with or in smaller countries in the Region, primarily in
Central America and the Caribbean, because the volume of trade financing in such
smaller countries has not been as attractive to these larger institutions. With
respect to Central American and Caribbean countries, as well as United States
domestic customers, the Company also competes with regional United States and
smaller local financial institutions engaged in trade finance. Many of the
Company's competitors, particularly multinational financial institutions, have
substantially greater financial and other resources than the Company. In
general, the Company competes on the basis of the range of services offered,
convenience and speed of service, correspondent banking relationships and on the
basis of the rates of fees
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and commissions charged. Management believes that none of the Company's
significant United States competitors have the focus on trade finance and offer
the range of services that the Company offers. Management further believes that
the Company's strong trade culture, range of services offered, liquid portfolio,
management experience, reputation and prompt decision-making and processing
capabilities provide it with a competitive advantage that allows it to compete
favorably with its competitors for the trade finance business in the Region. The
Company also has adjusted to its competition by often participating in
transactions with certain of its competitors, particularly the larger,
multinational financial institutions.
Although to date the Company has competed successfully, on a limited
basis, in those countries in the Region which have high trade volumes, such as
Brazil and Argentina, there can be no assurance that the Company will be able to
continue competing successfully in those countries with either large,
multinational financial institutions or regional United States or local
financial institutions. Any significant decrease in the Company's trade volume
in such large-volume countries could adversely affect the Company's result of
operations. Although the Company faces less competition from multinational
financial institutions in those countries in the Region, particularly countries
in Central America and the Caribbean, where the trading volume has not been
large enough to be meaningful for multinational financial institutions, there
can be no assurance that such financial institutions will not seek to finance
greater volumes of trade in those countries or that the Company would be able to
successfully compete with such financial institutions in the event of increased
competition. In addition, there is no assurance that the Company will be able to
continue to compete successfully in smaller countries with the regional United
States financial institutions and smaller local financial institutions engaged
in trade finance in such countries. Continued political stability and
improvement in economic conditions in such countries are likely to result in
increased competition.
Employees
At December 31, 1999 the Company had 259 full-time employees. The
Company's employees are not represented by a collective bargaining group, and
the Company considers its overall relations with its employees to be good.
Hamilton Bancorp Regulation
GENERAL
As a result of its ownership of Hamilton Bank, Hamilton Bancorp is
registered as a bank holding company and is regulated and subject to periodic
examination by the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the United States Bank Holding Company Act.
Pursuant to the United States Bank Holding Company Act and the Federal
Reserve's regulations, Hamilton Bancorp is limited to the business of owning,
managing or controlling banks and engaging in certain other financial related
activities, including those activities that the Federal Reserve determines from
time to time to be so closely related to the business of banking as to be a
proper incident thereto.
On November 12, 1999 the Gramm-Leach-Bliley Act ("G-L-B Act") was
enacted. The G-L-B Act is a major financial services modernization law that,
among other things, facilitates broad new affiliations among securities firms,
insurance firms and bank holding companies by repealing the 66-year old
provisions of the Glass-Steagall Act. The major provisions of the G-L-B Act
became effective March 11, 2000. The
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G-L-B Act permits the formation of financial holding companies ("FHCs") - i.e.,
bank holding companies with substantially expanded powers - under which
affiliations among bank holding companies, securities firms and insurance firms
may occur, subject to a blend of umbrella supervision and regulation of the
newly formed consolidated entity by the Federal Reserve, oversight of the FHC's
bank and thrift subsidiaries by their primary federal and state banking
regulators and functional regulation of the FHC's nonbank subsidiaries - such
as broker-dealers and insurance affiliates - by their respective specialized
regulators.
The United States Bank Holding Company Act requires, among other
things, the prior approval of the Federal Reserve in any case where a bank
holding company proposes to (i) acquire all or substantially all of the assets
of a bank, (ii) acquire direct or indirect ownership or control of more than 5%
of the outstanding voting stock of any bank (unless it already owns a majority
of such bank's voting shares), (iii) merge or consolidate with any other bank
holding company or (iv) establish, or become, a FHC.
Hamilton Bancorp is required by the Federal Reserve to act as a source
of financial strength and to take measures to preserve and protect Hamilton
Bank. As a result, Hamilton Bancorp may be required to inject capital in
Hamilton Bank if Hamilton Bank at any time lacks such capital and requires it.
The Federal Reserve may charge a bank holding company such as Hamilton Bancorp
with unsafe and unsound practices for failure to commit resources to a
subsidiary bank when required. Any loans from Hamilton Bancorp to Hamilton Bank
which would count as capital of Hamilton Bank must be on terms subordinate in
right of payment to deposits and to most other indebtedness of Hamilton Bank.
The Federal Reserve, the Office of the Comptroller of the Currency
("OCC") and the Federal Deposit Insurance Corporation collectively have
extensive enforcement authority over bank holding companies and national banks
in the United States. This enforcement authority, initiated generally for
violations of law and unsafe or unsound practices, includes, among other things,
the ability to assess civil money penalties, to initiate injunctive actions, to
issue orders prohibiting or removing a bank holding company's or a bank's
officers, directors and employees from participating in the institution and, in
rare cases, to terminate deposit insurance.
The Federal Reserve's, the OCC's and the Federal Deposit Insurance
Corporation's enforcement authority was enhanced substantially by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). FIRREA
significantly increased the amount and the grounds for civil money penalties.
Also, under FIRREA, should a failure of Hamilton Bank cause a loss to the
Federal Deposit Insurance Corporation, any other Federal Deposit Insurance
Corporation-insured subsidiaries of Hamilton Bancorp could be required to
compensate the Federal Deposit Insurance Corporation for the estimated amount of
the loss (Hamilton Bancorp does not currently have any such subsidiaries).
Additionally, pursuant to FDICIA, Hamilton Bancorp in the future could have the
potential obligation to guarantee the capital restoration plans of any
undercapitalized Federal Deposit Insurance Corporation insured depository
institution subsidiaries it may control.
CAPITAL ADEQUACY
The federal bank regulatory authorities have adopted risk-based capital
guidelines to which Hamilton Bancorp and Hamilton Bank are each subject. The
guidelines establish a systematic analytical framework that makes regulatory
capital requirements more sensitive to differences in risk profile among banking
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organizations, takes off-balance sheet exposures into explicit account in
assessing capital adequacy and minimizes disincentives to holding liquid,
low-risk assets. These risk-based capital ratios are determined by allocating
assets and specified off-balance sheet financial instruments into four weighting
categories, with higher levels of capital being required for the categories
perceived as representing greater risk.
Under these guidelines a banking organization's capital is divided into
two tiers. The first tier (Tier 1) includes common equity, perpetual preferred
stock (excluding auction rate issues) and minority interests that are held by
others in a consolidated subsidiary, less goodwill and any disallowed
intangibles. Supplementary (Tier 2) capital includes, among other items,
cumulative and limited-life preferred stock, mandatory convertible securities,
subordinated debt and the allowance for loan and lease losses, subject to
certain limitations and less required deductions as provided by regulation.
Banking organizations are required to maintain a risk-based capital
ratio of total capital (Tier 1 plus Tier 2) to risk-weighted assets of 8% of
which at least 4% must be Tier 1 capital. The federal bank regulatory
authorities may, however, set higher capital requirements when a banking
organization's particular circumstances warrant. As a practical matter, banking
organizations are expected to maintain capital ratios well above the regulatory
minimums. The risk-based capital ratios of Hamilton Bancorp and Hamilton Bank as
of December 31, 1998 and 1999 are discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Capital Resources."
In addition, the federal bank regulatory authorities have established
guidelines for a minimum leverage ratio (Tier 1 capital to average total
assets). These guidelines provide for a minimum leverage ratio of 3% for banking
organizations that meet certain specified criteria, including excellent asset
quality, high liquidity, low interest rate exposure and the highest regulatory
rating. Banking organizations not meeting these criteria or which are
experiencing or anticipating significant growth are required to maintain a
leverage ratio which exceeds the 3% minimum by at least 100 to 200 basis points.
The leverage ratios of Hamilton Bancorp and Hamilton Bank as of December 31,
1998 and 1999 are discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Capital Resources."
Failure to meet applicable capital guidelines could subject a bank or
bank holding company to a variety of "prompt corrective action" enforcement
remedies available to the federal bank regulatory authorities, including
limitation on the ability to pay dividends, the issuance of a capital directive
to increase capital and, in the case of a bank, the issuance of a cease and
desist order, the imposition of civil money penalties, the termination of
deposit insurance by the Federal Deposit Insurance Corporation or (in severe
cases) the appointment of a conservator or receiver.
While Hamilton Bancorp is well capitalized for the purposes of the
"prompt corrective action" provisions of FDICIA, to date it has not paid any
dividends and does not anticipate doing so. Nevertheless, due to economic
difficulties being experienced by various countries in the Region, the Federal
Reserve has requested that Hamilton Bancorp not pay any dividends or incur any
debt (excluding existing "trust preferred" securities) without the consent of
the Federal Reserve.
INTERSTATE BANKING
As of September 29, 1995, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 permitted adequately capitalized and managed
bank holding companies to acquire control of banks in any
9
<PAGE> 12
state. Although individual states could authorize interstate branches earlier,
beginning on June 1, 1997, the Interstate Banking Act allows banks to branch
across state lines, unless a state elects to opt-out entirely. Florida did not
so opt-out and allows out-of-state banks to enter Florida by merger with an
existing Florida-based bank and to branch throughout the state. This has
further increased competition for Hamilton Bank by allowing large banks from
other parts of the United States to operate directly in Florida.
Regulation of Hamilton Bank
GENERAL
Hamilton Bank, as a Federal Deposit Insurance Corporation-insured
national bank, is subject to regulation primarily by the OCC and secondarily by
the Federal Deposit Insurance Corporation. Also, as a national bank Hamilton
Bank is a member of the Federal Reserve System and its operations are therefore
also subject to certain Federal Reserve regulations. Various other federal and
state consumer laws and regulations also affect the operations of Hamilton Bank.
As a national bank, Hamilton Bank may be able to engage in certain
activities approved by the OCC which the Federal Reserve would not necessarily
approve for Hamilton Bancorp or its non-national bank "operating subsidiaries".
The OCC has been particularly aggressive in recent years in allowing national
banks to undertake an ever-increasing range of securities and insurance
activities through their operating subsidiaries. Along these lines, national
banks, among other things, are permitted on a case-by-case basis to operate
subsidiaries that may engage in activities some of which are not permissible for
the bank itself. Although the applicable OCC regulations do not authorize any
new activities per se, national banks have used them to expand further into the
businesses of insurance and securities underwriting.
The applicable OCC regulations contain "fire walls" intended to protect
a national bank from the risks taken by its subsidiary, including a 10% cap on
the amount of bank capital that may be invested in the new subsidiary, as well
as requirements that extensions of credit to the operating subsidiary be
fully-collateralized and that transactions between the bank and the subsidiary
be conducted at arm's-length. Also, other safeguards are that the parent
national bank's exposure to any losses the subsidiary may incur be limited to
the bank's equity investment in the subsidiary, and that the parent national
bank be well-capitalized both before and after the investment is made.
Effective March 11, 2000, the G-L-B Act authorizes the formation of
"financial subsidiaries" of national banks and allows them to engage in the same
types of activities permissible for nonbank subsidiaries of FHCs (including
securities underwriting and dealing), with the exception of insurance
underwriting, real estate investment and real estate development.
Hamilton Bank does not own or control an operating subsidiary or a
financial subsidiary.
As a national bank, Hamilton Bank may not ordinarily lend more than 15%
of its capital unsecured
10
<PAGE> 13
to any one borrower, and may lend up to an additional 10% of its capital to that
same borrower on a fully secured basis involving readily marketable collateral
having a market value, as determined by reliable and continuously available
price quotations, equal at least to the amount borrowed. In addition, there are
various other circumstances in which Hamilton Bank may lend in excess of such
limits, including authority to lend up to 35% of capital and surplus when the
loan is secured by documents of title to readily marketable staples and certain
other exceptions relevant to international trade finance.
Federal law also imposes additional restrictions on Hamilton Bank with
respect to loans and extensions of credit to certain related parties and
purchases from and other transactions with Hamilton Bancorp's principal
shareholders, officers, directors and affiliates. Such loans and extensions of
credit (i) must be made on substantially the same terms (including interest
rates and collateral) as, and follow credit underwriting procedures that are not
less stringent than, those prevailing at the time for comparable transactions
with members of the general public or otherwise available to any employee of
Hamilton Bank and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features. In addition, extensions of credit to each
such person beyond certain limits set by applicable law must be approved by
Hamilton Bank's Board of Directors, with the individual who is applying for the
credit abstaining from participation in the decision. Hamilton Bank also is
subject to certain lending limits and restrictions on overdrafts to such
persons. A violation of these restrictions may result in the assessment of
substantial civil monetary penalties against Hamilton Bank or any officer,
director, employee, agent or other person participating in the conduct of the
affairs of Hamilton Bank or the imposition by the Federal Reserve of a cease and
desist order.
As part of its examination process, the OCC has directed Hamilton Bank,
among other things, to take substantial transfer risk reserves related to
Hamilton Bank's exposure in Ecuador and "mark to market" certain assets based
upon the OCC's interpretation of regulatory accounting rules. While Hamilton
Bank has taken the actions directed by the OCC, it disagrees with the OCC's
interpretations of the regulatory accounting rules and is appealing such
directions within the OCC. See "Management's Discussion and Anaylsis of
Financial Condition and Results of Operations - Capital Resources and Interest
Earning Deposits with Other Banks and Securities." In this connection, the OCC
has initiated formal administrative action under Section 8 of the Federal
Deposit Insurance Act which Hamilton Bank has not agreed to and which Hamilton
Bank is appealing and disputing in appropriate administrative actions within the
OCC. As a result of these proceedings and directions, however, Hamilton Bank may
not accept new, or renew, "brokered deposits" without the prior approval of the
Federal Deposit Insurance Corporation or appoint new directors or senior
officers without the prior approval of the OCC. Hamilton Bank does not
anticipate that either of such restrictions will have any material adverse
effect on its business or operations. The transfer risk reserves taken by
Hamilton Bank at the direction of the OCC are for regulatory accounting purposes
only, and do not materially adversely affect its financial statements included
in this Form 10-K and prepared in accordance with Generally Accepted Accounting
Principles ("GAAP"). Hamilton Bank is satisfied that the reserves it took in the
third quarter of 1999 relating to its Ecuador and other Latin American exposures
are adequate and in accordance with GAAP.
DIVIDENDS
Hamilton Bank is subject to legal limitations on the frequency and
amount of cash dividends that can be paid to Hamilton Bancorp. The OCC, in
general, also has the ability to prohibit cash dividends by Hamilton Bank which
would otherwise be permitted under applicable regulations if the OCC determines
that such distribution would constitute an unsafe or unsound practice.
For Hamilton Bank, the approval of the OCC is required for the payment
of cash dividends in any calendar year if the total of all cash dividends
declared by Hamilton Bank in that year exceeds the current year's net income
combined with the retained net income of the two preceding years. "Retained net
income" means the net income of a specified period less any common or preferred
stock cash dividends declared for that period. Moreover, no cash dividends may
be paid by a national bank in excess of its undivided profits account.
In addition, the Federal Reserve and the Federal Deposit Insurance
Corporation have issued policy statements which provide that, as a general
matter, insured banks and bank holding companies may pay cash dividends only out
of current operating earnings.
In accordance with the above regulatory restrictions, Hamilton Bank
currently has the ability to pay cash dividends, and on December 31, 1999 an
aggregate of $48.5 million was available for the payment of dividends to
Hamilton Bancorp without prior regulatory approval.
There are also statutory limits on other transfer of funds to Hamilton
Bancorp and any other future
11
<PAGE> 14
non-banking subsidiaries of Hamilton Bancorp by Hamilton Bank, whether in the
form of loans or other extensions of credit, investments or asset purchases.
Such transfers by Hamilton Bank generally are limited in amount to 10% of
Hamilton Bank's capital and surplus, to Hamilton Bancorp or any such future
Hamilton Bancorp subsidiary, or 20% in the aggregate to Hamilton Bancorp and all
such subsidiaries. Furthermore, such loans and extensions of credit are required
to be fully collateralized in specified amounts depending on the nature of the
collateral involved.
FDICIA
FDICIA was enacted on December 19, 1991. It substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made significant revisions to other federal banking statutes. FDICIA provided
for, among other things, (i) a recapitalization of the Bank Insurance Fund of
the Federal Deposit Insurance Corporation (the "BIF") by increasing the Federal
Deposit Insurance Corporation's borrowing authority and providing for
adjustments in its assessments rates; (ii) annual on-site examinations of
federally-insured depository institutions by banking regulators; (iii) publicly
available annual financial condition and management reports for financial
institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more scrutiny
and restrictions placed on depository institutions with lower levels of capital;
(vi) additional grounds for the appointment of a conservator or receiver; (vii)
a requirement that the Federal Deposit Insurance Corporation use the least-cost
method of resolving cases of troubled institutions in order to keep the costs to
insurance funds at a minimum; (viii) more comprehensive regulation and
examination of foreign banks; (ix) consumer protection provisions, including a
Truth-in-Savings Act; (x) a requirement that the Federal Deposit Insurance
Corporation establish a risk-based deposit insurance assessment system; (xi)
restrictions or prohibitions on accepting brokered deposits, except for
institutions which significantly exceed minimum capital requirements; and (xii)
certain additional limits on deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to depository institutions
that do not meet minimum capital requirements. Pursuant to FDICIA, the federal
bank regulatory authorities have adopted regulations setting forth a five-
tiered system for measuring the capital adequacy of the depository institutions
they supervise. Under these regulations, a depository institution is classified
in one of the following capital categories: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically under-capitalized." Based on the current regulatory capital position
of Hamilton Bank, Hamilton Bancorp believes that Hamilton Bank's capital
position exceeds the highest classification of "well capitalized."
FDICIA generally prohibits Hamilton Bank from making any capital
distribution (including payment of a cash dividend) or paying any management
fees to Hamilton Bancorp if Hamilton Bank would thereafter be undercapitalized.
Undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans acceptable to the federal
banking agencies. If a depository institution fails to submit an acceptable
plan, it is treated as if it is "significantly undercapitalized."
Significantly undercapitalized depository institutions may be subject
to a number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, and requirements to
reduce total assets and to stop accepting deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator, generally within 90
12
<PAGE> 15
days of the date such institution is determined to be critically
undercapitalized.
FDICIA also provided for increased funding of the Federal Deposit
Insurance Corporation insurance funds. Under the Federal Deposit Insurance
Corporation's risk-based insurance premium assessment system, each bank whose
deposits are insured by the BIF is assigned one of the nine risk classifications
based upon certain capital and supervisory measures and, depending upon its
classification, is assessed premiums. On November 14, 1995, the Federal Deposit
Insurance Corporation board of directors voted to lower the BIF premium range to
zero from .27% effective January 1996. The rate schedule is subject to future
adjustments by the Federal Deposit Insurance Corporation. In addition, the
Federal Deposit Insurance Corporation has authority to impose special
assessments from time to time. As a result of the enactment of the Federal
Deposit Insurance Funds Act of 1996 on September 30, 1996, commercial banks are
now required to pay part of the interest on the Financing Corporation's bonds
issued to deal with the savings and loan crisis of the late 1980's. As a result,
commercial bank deposits are now also subject to assessment by the Financing
Corporation upon the approval by the Federal Deposit Insurance Corporation of
such assessment. Beginning in 1997 and until the earlier of December 31, 1999 or
the date on which the last saving association ceases to exist, the assessment
rate the Financing Corporation imposes on a commercial bank must be at a rate
equal to one-fifth the assessment rate applicable to deposits assessable by the
Savings Association Insurance Fund.
RESERVE REQUIREMENTS
Hamilton Bank is required to maintain reserves against its transaction
account. The reserves must be maintained in an interest-free account at the
Federal Reserve Bank of Atlanta. Reserve requirements and the amount of required
reserves is subject to adjustment by the Federal Reserve from time to time. The
current rate for reserves is 3% of a depository institution's transaction
accounts (less certain permissible deductions) up to $52 million, plus 10% of
the amount over $52 million.
ITEM 2. PROPERTIES.
The Company's operations are currently managed from their corporate
headquarters located in Miami, Florida, where a branch office is also located.
Hamilton Bank's other branch offices are located in Tampa, Winter Haven,
Sarasota, West Palm Beach, Weston and Miami, Florida, and in San Juan, Puerto
Rico. Three of the facilities are owned by the Company and six are leased
(including the Company's headquarters).
The table below summarizes the Company's owned and leased facilities.
<TABLE>
<CAPTION>
Approximate Leased or
Location Type of Facility Square Feet Owned
- -------- ---------------- ----------- ---------
<S> <C> <C> <C>
Miami, Florida Corporate 75,500 Leased
headquarters
and branch
Miami, Florida Branch 3,000 Leased
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
Approximate Leased or
Location Type of Facility Square Feet Owned
- -------- ---------------- ----------- ---------
<S> <C> <C> <C>
Miami, Florida Branch 3,000 Owned
San Juan, Puerto Rico Branch 3,500 Leased
Sarasota, Florida Branch 2,000 Owned
Tampa, Florida Branch 3,000 Leased
West Palm Beach, Florida Branch 5,000 Leased
Weston, Florida Branch 3,500 Leased
Winter Haven, Florida Branch 4,500 Owned
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
On January 13, 1998 Development Specialists, Inc., the Liquidating
Trustee of the Model Imperial Liquidating Trust established under the Plan of
Reorganization in the Model Imperial, Inc. Chapter 11 Bankruptcy proceeding,
filed an action against Hamilton Bank in the United States Bankruptcy Court for
the Southern District of Florida objecting to Hamilton Bank's proof of claim in
the Chapter 11 proceeding and affirmatively seeking damages against Hamilton
Bank in excess of $34 million for alleged involvement with former officers and
directors of Model Imperial, Inc. in a scheme to defraud Model Imperial, Inc.
and its bank lenders. The action is one of several similar actions that were
filed by the Trustee against other defendants that were involved with Model
Imperial seeking essentially the same amount of damages as in the action against
Hamilton Bank. The Company believes the claims are without merit and is
vigorously defending the action. A trial of various bankruptcy preference
issues was held in November, 1999, and the parties are awaiting the judge's
ruling.
As indicated in "Item 1 -- Regulation of Hamilton Bank -- General,"
Hamilton Bank is engaged in administrative proceedings within the OCC.
Neither Hamilton Bancorp nor Hamilton Bank is involved in any other
legal proceedings except for routine litigation incidental to the business of
banking, none of which is expected to have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) The Company's Common Stock is traded on the NASDAQ National Market
(Symbol HABK). The following table sets forth the high and low sales prices of a
share of Common Stock as reported by the NASDAQ National Market for the last two
calendar years.
14
<PAGE> 17
Quarter High Low
------- ---- ---
Fourth Quarter 1999 $21.75 $17.814
Third Quarter 1999 27.25 21.25
Second Quarter 1999 26.25 20.00
First Quarter 1999 29.00 22.375
Fourth Quarter 1998 29.668 23.00
Third Quarter 1998 40.75 21.00
Second Quarter 1998 36.25 31.656
First Quarter 1998 37.00 27.75
As of March 23, 2000 there were approximately 50 holders of record of
the Company's Common Stock and the closing price of Common Stock as reported by
the NASDAQ National Market for such date was $16.50. The Company has not paid
any cash dividends to date on its Common Stock and does not intend to pay any
such cash dividends in the foreseeable future. As stated in Part I above, due to
economic difficulties being experienced by various countries in the Region, the
Federal Reserve has requested that Hamilton Bancorp not pay any dividends
without the consent of the Federal Reserve.
15
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA.
TABLE ONE. FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA.
(Dollars in thousands except per share amounts)
The selected consolidated financial data for the five years ended December 31,
1999 have been derived from the Company's audited financial statements. The data
set forth below should be read in conjunction with the consolidated financial
statements and related notes, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere herein.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income $ 60,357 $ 53,981 $ 38,962 $ 27,250 $ 23,885
Provision for credit losses 20,300 9,621 6,980 3,040 2,450
------------ ------------ ------------ ------------ ------------
Net interest income after provision for
credit losses 40,057 44,360 31,982 24,210 21,435
Trade finance fees and commissions 12,035 13,101 12,768 9,325 9,035
Structuring and syndication fees 6,266 3,352 2,535 138 419
Customer services fees 1,528 1,149 934 1,379 995
Net gain (loss) on sale of assets
available for sale 562 (220) 108 -- 3
Other income 299 171 97 143 237
------------ ------------ ------------ ------------ ------------
Other non-interest income 20,690 17,553 16,442 10,985 10,689
------------ ------------ ------------ ------------ ------------
Operating expenses 32,104 28,093 23,423 19,630 18,949
------------ ------------ ------------ ------------ ------------
Income before provision for income taxes 28,643 33,820 25,001 15,565 13,175
------------ ------------ ------------ ------------ ------------
Provision for income taxes 10,283 12,021 9,098 5,855 5,172
------------ ------------ ------------ ------------ ------------
Net income $ 18,360 $ 21,799 $ 15,903 $ 9,710 $ 8,003
============ ============ ============ ============ ============
PER COMMON SHARE DATA:
Net income per common share (1) $ 1.79 $ 2.12 $ 1.73 $ 1.79 $ 1.47
Book value per common share $ 13.28 $ 12.29 $ 10.00 $ 8.07 $ 6.41
Average weighted shares (1) 10,275,223 10,304,180 9,173,680 5,430,030 5,430,030
AVERAGE BALANCE SHEET DATA:
Total assets $ 1,645,889 $ 1,508,052 $ 1,007,846 $ 687,990 $ 534,726
Total loans 1,194,667 1,168,451 737,921 485,758 370,568
Total deposits 1,435,272 1,301,444 842,117 574,388 444,332
Stockholder's equity 135,187 108,943 79,311 39,969 32,358
PERFORMANCE RATIOS:
Net interest spread 3.28% 3.28% 3.56% 3.89% 4.20%
Net interest margin 3.89% 3.89% 4.31% 4.56% 4.94%
Return on average equity 13.58% 20.01% 20.05% 24.29% 24.73%
Return on average assets 1.12% 1.45% 1.58% 1.41% 1.50%
Efficiency ratio (2) 39.61% 39.27% 42.28% 51.31% 54.68%
ASSET QUALITY RATIOS:
Allowance for credit losses as a
percentage of total loans 1.92% 1.08% 1.07% 1.07% 1.05%
Non-performing assets as a percentage
of total loans 1.49% 0.73% 0.65% 0.91% 1.07%
Allowance for credit losses as a
percentage of non-performing assets 115.27% 149.01% 166.03% 117.97% 98.56%
Net loan charge-offs as a percentage of
average outstanding loans 0.98% 0.61% 0.32% 0.36% 0.58%
CAPITAL RATIOS:
Leverage capital ratio 7.50% 7.98% 7.88% 5.80% 5.68%
Tier 1 capital 11.16% 12.03% 12.43% 10.20% 9.98%
Total capital 12.46% 13.19% 13.78% 11.50% 10.92%
Average equity to average assets 8.21% 7.22% 7.87% 5.81% 6.05%
</TABLE>
(1) Represents diluted earnings per share and average weighted shares
outstanding, respectively.
(2) Amount reflects operating expenses as a percentage of net interest income
plus non-interest income.
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<PAGE> 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Hamilton Bancorp Inc. ("Bancorp") is a bank holding company which conducts
operations principally through its 99.8 percent owned subsidiary Hamilton Bank,
N.A. (the "Bank") collectively (the "Company"). The Bank is a national bank
which specializes in financing trade flows between domestic and international
companies on a global basis. The Bank has a network of nine FDIC-insured
branches, eight in Florida, with locations in Miami, Sarasota, Tampa, West Palm
Beach, Winter Haven and Weston, and one in San Juan, Puerto Rico.
The Company completed its initial public offering of 2,400,000 shares of common
stock on March 26, 1997. Following the public offering, on April 9, 1997 the
Company issued 360,000 additional shares of common stock upon the exercise of
the over-allotment option granted to Oppenheimer and Company, Inc. and NatWest
Securities Ltd.
On December 28, 1998, a trust formed by the Company issued $11.0 million of 9.75
percent Beneficial Unsecured Securities, Series A (the "Preferred Securities").
On January 14, 1999, the Trust issued an additional $1.7 million of Preferred
Securities upon the exercise of an over-allotment by the underwriters. These
securities are considered to be Tier 1 capital for regulatory purposes.
KEY PERFORMANCE HIGHLIGHTS FOR 1999
The Company continued to experience significant growth in its core business as
both the net interest income and non interest income increased. The Company is
well positioned to benefit should the economies in Latin America recover in the
next year and beyond. During 1999, however, the Company's earnings declined $3.4
million or 15.8 percent, to $18.4 million from $21.8 million, relative to the
prior year, primarily due to an increase in provisions for credit losses of $15
million taken in the third quarter as a result of events in Ecuador and
conditions in Latin America. Net income per share (basic) was $1.82 from $2.18
and (diluted) was $1.79 from $2.12 for the years ended December 31, 1999 and
1998, respectively.
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
NET INTEREST INCOME
An analysis of the Company's net interest income and average balance sheet for
the last five years is presented in TABLE ONE and TABLE TWO. Net interest income
is the difference between interest and fees earned on loans and investments and
interest paid on deposits and other sources of funds, and it constitutes the
Company's principal source of income. Net interest income increased to $60.4
million for the year ended December 31, 1999 from $54.0 million for the same
period in 1998, a 12 percent increase. The increase was due largely to the
growth in average earning assets while maintaining the same net interest margin.
Average earning assets increased to $1,550.8 million for the year ended December
31, 1999 from $1,389.0 million for the same period in 1998, a 12 percent
increase, while yields earned on average assets decreased by 31 basis points
compared to the same period. Average loans and acceptances discounted increased
to $1,194.7 million for the year ended December 31, 1999 from $1,168.5 million
for the same period in 1998, a 2 percent increase, while average
interest-earning deposits due from other banks increased to $175.9 million for
the year ended December 31, 1999 from $122.3 million for the same period in
1998, a 44 percent increase. Net interest margin remained at 3.89 percent for
the years ended December 31, 1999 and 1998, representing the first time in seven
years that the net interest margin has not decreased.
Interest income increased to $134.0 million for the year ended December 31, 1999
from $124.3 million for the same period in 1998, an 8 percent increase,
reflecting largely an increase in loans in the United States. Interest expense
increased to $73.6 million for the year ended December 31, 1999 from $70.3
million for the same period in 1998, a 5 percent increase, reflecting the
17
<PAGE> 20
increase in deposits to fund asset growth offset by a 31 basis point decrease in
interest rates paid. Average interest-bearing deposits increased to $1,358.3
million for the year ended December 31, 1999 from $1,231.7 million for the same
period in 1998, a 10 percent increase. The growth in deposits was primarily a
result of the Company increasing its core deposit base through its expanding
branch network, as well as its international customers. Average time deposits
from banks decreased to $85.7 million for the year ended December 31, 1999 from
$128.9 million for the same period in 1998 or a 34 percent decrease, due largely
to the Company's reduced activities in the Region.
An analysis of the Company's yields earned and average loan balances segregating
domestic and foreign earning assets is presented in TABLE THREE. The yields
earned on foreign loans increased 30 basis points to 9.2 percent while yields
earned on domestic loans have decreased by 160 basis points to 8.5 percent from
10.1 percent.
PROVISION FOR CREDIT LOSSES
The Company's provision for credit losses increased to $20.3 million for the
year ended December 31, 1999 from $9.6 million for the same period in 1998. This
111 percent increase was largely a result of an increase in provisions for
credit losses of $15 million taken in the third quarter as a result of events in
Ecuador and conditions in Latin America. Net loan chargeoffs during the year
ended December 31, 1999 amounted to $11.7 million compared to $7.1 million for
the year 1998. The allowance for credit losses was increased to $21.4 million at
December 31, 1999 from $12.8 at December 31, 1998, a 67 percent increase. The
ratio of the allowance for credit losses to total loans was 1.92 percent at
December 31, 1999 from 1.08 percent as of the same period in 1998. A more
detailed review of the provision for credit losses is presented in TABLE
SEVENTEEN through TABLE NINETEEN.
NON-INTEREST INCOME
Non-interest income increased to $20.7 million for the year ended December 31,
1999 from $17.6 million for the same period in 1998, an 18 percent increase.
Trade finance fees and commissions decreased by $1.1 million due largely to
lower letter of credit volume which is related to slow economic conditions in
the Region. Structuring and syndication fees increased by $2.9 million as a
result of various structuring and syndication transactions completed during the
year; increasing these fees to $6.3 million from $3.4 million for the years
ended December 31, 1999 and 1998, respectively. Customer service fees increased
by $379 thousand due largely to Harmoney(R) related fees charged during the
period. Harmoney is the Bank's remote banking system which allows customers to
access trade finance services and cash management through the internet. The
changes in non-interest income from year to year are analyzed in TABLE SIX.
18
<PAGE> 21
TABLE TWO. YIELDS EARNED AND RATES PAID
(Dollars in thousands)
<TABLE>
<CAPTION>
For The Years Ended
--------------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998 December 31, 1997
-------------------------------- ------------------------------ -------------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------- --------- ------ ---------- ---------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest earning assets
Loans:
Commercial loans $1,073,858 $ 95,742 8.92 $1,013,558 $ 91,465 9.02 $ 612,069 $ 57,288 9.36%
Acceptances discounted 110,505 10,016 9.06 131,158 12,165 9.27 107,818 10,733 9.95%
Overdraft 7,372 1,659 22.50 12,212 2,306 18.89 6,890 1,307 18.96%
Mortgage loans 2,932 203 6.92% 11,523 949 8.24% 11,144 934 8.38%
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Total Loans 1,194,667 107,620 9.01 1,168,451 106,885 9.15 737,921 70,262 9.52%
Time deposits with banks 175,925 15,940 9.06 122,278 10,989 8.99 102,360 8,909 8.70%
Investments 148,804 8,787 5.91 70,916 4,903 6.91 44,978 2,980 6.63%
Federal funds sold 31,370 1,647 5.25 27,307 1,484 5.43 18,186 1,008 5.54%
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Total investments and
interest earning
deposits with banks 356,099 26,374 7.41 220,501 17,376 7.88 165,524 12,897 7.79%
Total interest earning assets 1,550,766 133,994 8.64 1,388,952 124,261 8.95 903,445 83,159 9.20%
---------- ----- ---------- ----- ---------- -----
Total non interest earning
assets 95,123 119,100 104,401
---------- ---------- ----------
Total assets $1,645,889 $1,508,052 $1,007,846
========== ========== ==========
Interest bearing liabilities
Deposits:
NOW and Savings sccounts 23,255 566 2.43 20,218 424 2.10 20,101 439 2.18%
Money market 43,850 2,116 4.83 46,342 2,177 4.70 43,752 2,060 4.71%
Presidential money market 44,749 2,159 4.82 3,284 121 3.68 3,385 97 2.87%
Certificate of deposits
(including IRA) 1,154,974 63,090 5.46 1,033,030 59,730 5.78 582,933 34,463 5.91%
Time deposits from banks
(IBF) 85,746 3,858 4.50 128,853 7,266 5.64 127,964 6,853 5.36%
Other 5,761 435 7.55 18 1 2.96 61 2 2.92%
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Total deposits 1,358,335 72,224 5.32 1,231,745 69,719 5.66 778,196 43,913 5.64%
Trust preferred securities 12,650 1,232 9.74%
Federal funds purchased 1,461 78 5.34 3,423 197 5.77 4,975 284 5.70%
Other borrowings 1,356 103 7.60 4,743 364 8.65 0 0 0.00%
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Total interest bearing
liabilities 1,373,802 73,637 5.36 1,239,912 70,280 5.67 783,171 44,197 5.64%
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Non interest bearing
liabilities
Demand deposits 76,937 69,699 63,921
Other liabilities 59,963 89,498 81,443
---------- ---------- ----------
Total non interest bearing
liabilities 136,900 159,197 145,364
Stockholders' equity 135,187 108,943 79,311
---------- ---------- ----------
Total liabilities and
stockholder's equity $1,645,889 $1,508,052 $1,007,846
========== ========== ==========
Net interest income /
net interest spread $ 60,357 3.28% $ 53,981 3.28% $ 38,962 3.56%
========== ===== ========== ===== ========== =====
Margin:
Interest income /
interest earning asset 8.64% 8.95% 9.20%
Interest expense /
interest earning assets 4.75% 5.06% 4.89%
----- ----- -----
Net interest margin 3.89% 3.89% 4.31%
===== ===== =====
</TABLE>
19
<PAGE> 22
\TABLE THREE. YIELDS EARNED - DOMESTIC AND FOREIGN EARNING ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
For The Years Ended
-----------------------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998 December 31, 1997
----------------------------------- ----------------------------------- ----------------------------------
% of % of $ of
Average Total Average Total Average Total
Average Yield/ Average Average Yield/ Average Average Yield/ Average
Balance Interest Rate Assets Balance Interest Rate Assets Balance Interest Rate Assets
--------- -------- ------- ------- -------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest
earning assets
Loans:
Domestic $ 350,000 $ 29,918 8.5% 21.3% $ 249,027 $ 25,155 10.1% 16.5% $ 175,209 $ 18,240 10.4% 17.4%
Foreign 844,667 77,702 9.2% 51.3% 919,424 81,730 8.9% 61.0% 562,712 52,022 9.2% 55.8%
---------- -------- --- ----- ---------- -------- ---- ----- --------- ------- ---- -----
Total Loans 1,194,667 107,620 9.0% 72.6% 1,168,451 106,885 9.1% 77.5% 737,921 70,262 9.5% 73.2%
Investment and time
deposits with banks
Domestic 140,890 7,924 5.6% 8.5% 71,751 3,924 5.5% 4.7% 45,786 2,487 5.4% 4.5%
Foreign 215,209 18,450 8.6% 13.1% 148,750 13,452 9.0% 9.9% 119,738 10,410 8.7% 11.9%
---------- -------- --- ----- ---------- -------- ---- ----- ---------- -------- ---- -----
Total investments and
interest earning 356,099 26,374 7.4% 21.6% 220,501 17,376 7.9% 14.6% 165,524 12,897 7.8% 16.4%
Total interest
earning assets 1,550,766 $ 133,994 8.6% 94.2% 1,388,952 $124,261 8.9% 92.1% 903,445 $ 83,159 9.2% 89.6%
============== ============== ============== -----
Total non interest
earning assets 95,123 5.8% 119,100 7.9% 104,401 10.4%
---------- ----- ---------- ----- ---------- -----
Total Assets $1,645,889 100.0% $1,508,052 100.0% $1,007,846 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
20
<PAGE> 23
TABLE FOUR. RATE VOLUME ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
Compared to Year Ended Compared to Year Ended
December 31, 1998 December 31, 1997
-------------------------------------- -------------------------------------
Changes Due To: Changes Due To:
Volume Rate Total Volume Rate Total
-------- -------------- -------- -------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
interest income due to:
Loans:
Commercial loans $ 5,442 $ (1,165) $ 4,277 $ 37,578 $ (3,401) $ 34,177
Acceptances discounted (1,915) (233) (2,148) 2,323 (891) 1,432
Overdrafts (914) 267 (647) 1,009 (10) 999
Mortgage loans (708) (38) (746) 32 (17) 15
Investments:
Time deposits with other banks 4,821 129 4,950 1,734 346 2,080
Investment securities 5,385 (1,500) 3,885 1,719 204 1,923
Federal funds sold 221 (59) 162 505 (29) 476
-------- -------- -------- -------- -------- --------
Total earning assets 12,332 (2,599) 9,733 44,900 (3,798) 41,102
-------- -------- -------- -------- -------- --------
Deposits:
NOW and savings 64 78 142 9 (24) (15)
Money market (117) 56 (61) 122 (5) 117
Presidential money market 1,528 510 2,038 (3) 27 24
Certificates of deposits 7,051 (3,691) 3,360 13,027 12,240 25,267
Time deposits with banks (IBF) (2,431) (977) (3,408) 48 365 413
Other 319 115 434 (1) -- (1)
Trust preferred securities 1,232 -- 1,232 -- -- --
Federal funds purchased (113) (6) (119) (88) 2 (86)
Other borrowings (260) (1) (261) 364 -- 364
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 7,273 (3,916) 3,357 13,478 12,607 26,083
-------- -------- -------- -------- -------- --------
Change in net interest income $ 5,059 $ 1,317 $ 6,376 $ 31,422 $(16,433) $ 15,019
======== ======== ======== ======== ======== ========
</TABLE>
21
<PAGE> 24
TABLE FIVE. RATE VOLUME ANALYSIS - DOMESTIC AND FOREIGN
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
Compared to Year Ended Compared to Year Ended
December 31, 1998 December 31, 1997
-------------------------------------- -------------------------------------
Changes Due To: Changes Due To:
Volume Rate Total Volume Rate Total
-------- -------------- -------- -------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
interest income due to:
Loans:
Domestic $ 10,200 $ (5,437) $ 4,763 $ 7,685 $ (770) $ 6,915
Foreign (6,645) 2,617 (4,028) 32,978 (3,270) 29,708
Investments and time deposits with banks:
Domestic 3,782 219 4,001 1,410 27 1,437
Foreign 6,010 (1,013) 4,997 2,522 520 3,042
-------- -------- -------- -------- -------- --------
Total earning assets $ 13,347 $ (3,614) $ 9,733 $ 44,595 $ (3,493) $ 41,102
======== ======== ======== ======== ======== ========
</TABLE>
TABLE SIX. NON-INTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1997 to 1998 1998 to 1999
1997 % Change 1998 % Change 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Trade finance fees and commissions $ 12,768 2.6% $ 13,101 -8.1% $ 12,035
Structuring and syndication fees 2,535 32.2% 3,352 86.9% 6,266
Customer service fees 934 23.0% 1,149 33.0% 1,528
Gain (loss) on sale of assets 108 -303.7% (220) -355.5% 562
Other 97 76.3% 171 74.9% 299
-------- ------ -------- ------ --------
Total non-interest income $ 16,442 6.8% $ 17,553 17.9% $ 20,690
======== ====== ======== ====== ========
</TABLE>
OPERATING EXPENSES
Operating expenses increased to $32.1 million for the year ended December 31,
1999 from $28.1 million for the same period in 1998, a 14 percent increase. A
discussion of the significant components of noninterest expense in 1999 compared
to 1998 is as follows: employee compensation and benefits remained at $14.5
million for the years ended December 31, 1999 and 1998. Occupancy expenses
remained stable at $4.2 million for the years ended December 31, 1999 and 1998.
Other expenses increased to $13.3 million for the year ended December 31, 1999
from $9.3 million for the same period in 1998, due in substantial part to an
increase in legal expense as a result of various litigation actions commenced by
or against the Company in 1998 which continued in 1999. The Company's efficiency
ratio remained consistent at 39 percent in 1999 and 1998. The changes in
operating expenses from year to year are analyzed in TABLE SEVEN.
The Company's income tax expense was $10.3 million and $12.0 million for 1999
and 1998, respectively. The effective tax rate was 36 percent of pretax income
in both years. NOTE SIX of the consolidated financial statements includes an
analysis of the components of the provision for income taxes.
22
<PAGE> 25
TABLE SEVEN. OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------
1997 to 1998 1998 to 1999
1997 % Change 1998 % Change 1999
-------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Employee compensation and benefits $ 13,162 10.4% $ 14,527 0.2% $ 14,556
Occupancy and equipment 3,251 30.1% 4,229 1.0% 4,273
Other operating expenses 6,902 12.1% 7,736 24.7% 9,648
Legal Expense 108 1382.4% 1,601 126.5% 3,627
-------- ------ -------- ----- --------
Total Operating Expenses $ 23,423 19.9% $ 28,093 14.3% $ 32,104
======== ====== ======== ===== ========
</TABLE>
YEAR 2000
Since June 1997, the Company assessed and prepared its computer systems and
applications to be functional on January 1, 2000. Due to these efforts, the
Company did not experience any material system errors or failures as a result
of Year 2000 issues.
Concurrently, the Company upgraded its computer systems during 1999 to
accommodate the growth of the past two years. These new systems were Year 2000
compliant. Consequently, the total costs relating exclusively to Year 2000
compliance were approximately $100,000, which was funded from normal operations.
1998 COMPARED TO 1997
NET INTEREST INCOME
An analysis of the Company's net interest income and average balance sheet for
the last five years is presented in TABLE ONE and TABLE TWO. Net interest income
increased to $54.0 million for the year ended December 31, 1998 from $39.0
million for the same period in 1997, a 39 percent increase. The increase was due
largely to the growth in average earning assets offset, to some extent, by a
decrease in net interest margin. Average earning assets increased to $1,389.0
million for the year ended December 31, 1998 from $903.4 million for the same
period in 1997, a 54 percent increase, while yields earned on average assets
decreased by 25 basis points compared to the same period. Average loans and
acceptances discounted increased to $1,168.5 million for the year ended December
31, 1998 from $737.9 million for the same period in 1997, a 58 percent increase,
while average interest-earning deposits due from other banks increased to $122.3
million for the year ended December 31, 1998 from $102.4 million for the same
period in 1997, a 19 percent increase. Net interest margin decreased to 3.89
percent for the year ended December 31, 1998 from 4.31 percent for the same
period in 1997, a 42 basis point decrease. The primary reasons for this decrease
were (i) loan yields relative to reference rates decreased in certain countries
in the Region and (ii) transactions with larger customers and transactions with
multi-national customers, which command more competitive pricing.
Interest income increased to $124.3 million for the year ended December 31, 1998
from $83.2 million for the same period in 1997, a 49 percent increase,
reflecting an increase in loans in the Region and the United States, partially
offset by a decrease in prevailing interest rates and a tightening of loan
spreads in the Region as discussed above. Interest expense increased to $70.3
million for the year ended December 31, 1998 from $44.2 million for the same
period in 1997, a 59 percent increase, reflecting the increase in deposits to
fund asset growth and a two basis point increase in interest rates paid. Average
interest-bearing deposits increased to $1,231.7 million for the year ended
December 31, 1998 from $778.2 million for the same period in 1997, a 58 percent
increase. The growth in deposits was primarily a result of the Company
increasing its core deposit base from its expanding branch network, as well as
its international customers. The Company's time deposits due from banks also
increased to $128.9 million for the year ended December 31, 1998 from $128.0
million for the same period in 1997.
An analysis of the Company's yields earned and average loan balances segregating
domestic and foreign earning assets is presented
23
<PAGE> 26
in TABLE THREE. The yields earned on domestic loans have decreased by three
basis points to 10.1 percent from 10.4 percent.
PROVISION FOR CREDIT LOSSES
The Company's provision for credit losses increased to $9.6 million for the year
ended December 31, 1998 from $7.0 million for the same period in 1997. This 37
percent increase was largely a function of the 22 percent growth in total loans.
Net loan chargeoffs during the year ended December 31, 1998 amounted to $7.1
million compared to $2.4 million for the year ended December 31, 1997. The
allowance for credit losses was increased to $12.8 million at December 31, 1998
from $10.3 million at December 31, 1997, a 24 percent increase. The ratio of the
allowance for credit losses to total loans was 1.08 percent at December 31, 1998
from 1.07 percent for the same period in 1997. A more detailed review of the
provision for credit losses is presented in TABLE SEVENTEEN through TABLE
NINETEEN.
NON-INTEREST INCOME
Non-interest income increased to approximately $17.6 million for the year ended
December 31, 1998 from $16.4 million for the same period in 1997, a 7 percent
increase. Trade finance fees and commissions increased by $333 thousand due
largely to lending facility fees which increased by $185 thousand during 1998
compared to 1997 as a result of the growth in loans. Structuring and syndication
fees increased by $817 thousand as a result of various structuring and
syndication transactions completed during the year increasing these fees to $3.4
million from $2.5 million for the years ended December 31, 1998 and 1997,
respectively. Customer service fees increased by $215 thousand. The changes in
non-interest income from year to year are analyzed in TABLE SIX.
OPERATING EXPENSES
Operating expenses increased to $28.1 million for the year ended December 31,
1998 from $23.4 million for the same period in 1997, a 20 percent increase. The
growth in expenditures was primarily to support revenue growth. A discussion of
the significant components of noninterest expense in 1998 compared to 1997 is as
follows: employee compensation and benefits increased to $14.5 million for the
year ended December 31, 1998 from $13.2 million for the same period in 1997, a
10 percent increase. This was primarily due to an increase in the number of
employees to 264 at December 31, 1998 from 250 at the same period in 1997. The
majority of the employees were added to support the Puerto Rico branch and other
areas within the bank. There were also salary increases for existing personnel.
Occupancy expenses increased to $4.2 million for the year ended December 31,
1998 from $3.3 million for the same period in 1997, a 27 percent increase as a
result of the additional branches. Other expenses increased to $9.3 million for
the year ended December 31, 1998 from $7.0 million for the same period in 1997,
primarily due to the increase in legal expense as a result of various litigation
actions commenced by or against the Company in 1998. The Company's efficiency
ratio experienced a favorable decrease to 39 percent in 1998 from 42.3 percent
in 1997. The changes in operating expenses from year to year are analyzed in
TABLE SEVEN.
The Company's income tax expense for 1998 was $12.0 million, for an effective
tax rate of 35.5 percent of pretax income. Income tax expense for 1997 was $9.1
million for an effective rate of 36.4 percent. The decrease in the effective tax
rate is the result of a state income tax refund for prior year filings. The
increase of income tax expense was the result of the 35 percent increase in
pretax income. As the Company increases its foreign loans and investments in
relation to total assets these activities are not taxable in the State of
Florida, thus reducing the overall effective tax rate. NOTE SIX of the
consolidated financial statements includes an analysis of the components of the
provision for income taxes.
BALANCE SHEET REVIEW
1999 COMPARED TO 1998
The Company manages its balance sheet by monitoring interest rate sensitivity,
credit risk, liquidity risk and capital positions to reduce the potential
adverse impact on net interest income that might result from changes in
interest rates. Control of interest rate risk is conducted through systematic
monitoring of maturity mismatches. The Company's investment decision-making
takes into account not only the rates of return and their underlying degree of
risk, but also liquidity requirements, including minimum cash reserves,
withdrawal and maturity of deposits and additional demand for funds.
Total consolidated assets increased one percent, or $14.9 million for the year
ended December 31, 1999, which included an increase of $53.2 million in
interest-earning assets and a decrease of $38.3 million in non-interest earning
assets. The increase in consolidated assets reflects an increase of $159.7
million in securities available for sale offset by a decrease in net loans of
$71.7 million. The overall increase in consolidated assets
24
<PAGE> 27
was principally funded by deposits from the branch network and in retained
earnings.
CASH, DEMAND DEPOSITS WITH OTHER BANKS AND FEDERAL FUNDS SOLD
Cash, demand deposits with other banks and federal funds sold are considered
cash and cash equivalents. Balances of these items fluctuate daily depending on
many factors which include or relate to the particular banks that are clearing
funds, loan payoffs, deposit gathering and reserve requirements. Cash, demand
deposits with other banks and federal funds sold were $85.1 million at December
31, 1999 compared to $111.8 million at December 31, 1998.
INTEREST-EARNING DEPOSITS WITH OTHER BANKS AND SECURITIES
Interest-earning deposits with other banks decreased to $187.7 million at
December 31, 1999 from $200.2 million at December 31, 1998. As part of its
overall liquidity management process, the Company places funds with foreign
correspondent banks. These placements are primarily short-term, typically 180
days or less. The purpose of these placements is to obtain an enhanced return on
high quality short-term instruments and to solidify existing relationships with
correspondent banks. The banks with which placements are made and the amount
placed are currently approved by the Bank's Asset Liability Committee. In
addition, this Committee reviews adherence with internal interbank liability
policies and procedures. As indicated in TABLE EIGHT these interest-earning
deposits with other banks are well-diversified throughout the Region and in
other countries. The level of such deposits has decreased principally, related
to reductions in Ecuador, Bahamas and the Dominican Republic. The short-term
nature of these deposits allows the Company the flexibility to redeploy these
assets into higher yielding loans which are largely related to the financing of
trade.
Investment securities increased to $276.1 million at December 31, 1999 from
$115.0 million at December 31, 1998. The increase has been primarily in foreign
debt securities classified as available for sale. On December 31, 1999
management changed its original intent with respect to $166 million in bearer
debt securities which were classified as loans and accounted for as held to
maturity securities under Statement of Financial Accounting Standards ("SFAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities. These
securities, along with all other securities classified as held to maturity, were
transferred to and are being accounted for as securities available for sale at
fair market value under SFAS No. 115.
NOTE TWO of the consolidated financial statements reports amortized fair value
and maturity information on the securities portfolio.
25
<PAGE> 28
TABLE EIGHT. INTEREST-EARNING DEPOSITS WITH OTHER BANKS
(Dollars in thousands)
Country December 31, 1999
- ------- -----------------
Argentina $ 47,000
Brazil 37,635
Ecuador 28,000
Suriname 25,000
Panama 10,250
Bahamas (1) 10,000
Jamaica 8,500
British West Indies 5,000
Dominican Republic 5,000
Bolivia 3,500
Guyana 3,000
Nicaragua 2,000
Paraguay 2,000
United States 800
---------
Total $ 187,685
=========
(1) Consists of placements in the Bahamas branch of a multinational financial
institution.
26
<PAGE> 29
LOAN PORTFOLIO
The Company's loan portfolio decreased by $63.3 million during the year ended
December 31, 1999 in relation to December 31, 1998. This decrease was due
primarily to the transfer of bearer debt securities classified as loans to
securities available for sale discussed earlier. At December 31, 1999,
commercial-domestic loans increased by $105.6 million which resulted from
management's ability to increase lending in the U. S. market. At December 31,
1999 approximately 41 percent of the Company's portfolio consisted of loans to
domestic borrowers and 59 percent of the Company's portfolio consisted of loans
to foreign borrowers. This represents an increase of 27.9 percent in U. S.
exposure as the Company concentrated its efforts on this market due to slow
economic conditions in the Region. Details on the loans by type are shown in
TABLE NINE below.
The Company's loan portfolio is largely trade related in nature and is
relatively short-term. Approximately 69 percent of loans had maturities of less
than one year. Additionally, the loan portfolio is an important source of
liquidity since the Company's predominant business, international trade finance,
is self liquidating in nature and a significant part of the loans and extensions
of credit mature within one year. The term to maturity of the Company's loans at
December 31, 1999 are shown on TABLE TEN.
TABLE NINE. LOANS BY TYPE
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial and industrial(1) $ 394,841 $ 289,264 $ 179,673 $ 110,750 $ 96,856
Acceptances discounted 59,040 56,706 45,153 23,314 33,059
Residential mortgages 2,140 10,494 12,008 10,610 11,363
---------- --------- --------- --------- --------
Subtotal Domestic 456,021 356,464 236,834 144,674 141,278
Foreign:
Banks and other financial institutions 224,155 304,011 349,643 129,376 136,681
Commercial and industrial(1) 338,411 405,819 319,925 179,824 81,433
Acceptances discounted 59,256 72,597 55,301 80,935 62,838
Government and official institutions 38,358 40,639 3,091 750 750
---------- ---------- --------- --------- --------
Subtotal Foreign 660,180 823,066 727,960 390,885 281,702
---------- ---------- --------- --------- --------
Total loans $1,116,201 $1,179,530 $ 964,794 $ 535,559 $422,980
========== ========== ========= ========= ========
</TABLE>
(1) Includes pre-export financing, warehouse receipts and refinancing of
letters of credits.
27
<PAGE> 30
TABLE TEN. LOAN MATURITIES
(In thousands)
<TABLE>
<CAPTION>
As of December 31, 1999 (1)
--------------------------------------------------------------
Mature
Mature After One But Mature
Within Within After Five
One Year Five Years Years Total
-------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
Domestic loans:
Commercial and Industrial $242,717 $ 132,416 $ 19,492 $ 394,625
Acceptances discounted 59,040 -- -- 59,040
Foreign loans:
Commercial and Industrial 412,781 172,830 15,314 600,925
Acceptances discounted 58,161 1,095 -- 59,256
-------- --------- -------- ----------
Total $772,699 $ 306,341 $ 34,806 $1,113,846
======== ========= ======== ==========
Fixed $474,518 $ 207,850 $ 27,518 $ 709,886
Adjustable 298,181 98,491 7,288 403,960
-------- --------- -------- ----------
Total fixed and adjustable $772,699 $ 306,341 $ 34,806 $1,113,846
======== ========= ======== ==========
</TABLE>
(1) Does not include mortgage loans and installment loans in the aggregate
amount of $2.3 million.
TABLES ELEVEN AND TWELVE reflect both the Company's growth and diversification
in financing trade flows between the United States and the Region in terms of
loans by country and cross-border outstanding by country. The aggregate amount
of the Company's cross-border outstandings by primary credit risk includes cash
and demand deposits with other banks, interest-earning deposits with other
banks, investment securities, due from customers on bankers acceptances, due
from customers on deferred payment letters of credit and net loans. Exposure
levels in any given country at the end of each period may be impacted by the
flow of trade between the United States (and to a large extent, Florida) and the
given countries, the price of the underlying goods or commodities being financed
and overall economic conditions in a given country.
At December 31 1999 approximately 25.9 percent in principal amount of the
Company's loans were outstanding to borrowers in four countries other than the
United States: Panama (11.4 percent), Guatemala (6.0 percent), Brazil (4.4
percent) and El Salvador (4.1 percent). The United States exposure grew $100.0
million representing 40.9 percent of the loan portfolio compared to 30.2 percent
in 1998.
28
<PAGE> 31
TABLE ELEVEN. LOANS BY COUNTRY
(Dollars in thousands)
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------------
1999 1998 1997
-------------------- ------------------- ----------------------
% OF % OF % OF
TOTAL TOTAL TOTAL
COUNTRY AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
- ------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
United States $ 456,021 40.9% $ 356,464 30.2% $ 236,834 24.5%
Argentina 35,494 3.2% 38,171 3.2% 58,477 6.0%
Bolivia (2) -- -- 20,816 1.8% 38,058 3.9%
Brazil 49,214 4.4% 60,685 5.1% 58,040 6.0%
British West Indies (2) 22,082 2.0% -- -- -- --
Colombia 28,437 2.5% 43,793 3.7% 23,768 2.5%
Dominican Republic 41,604 3.7% 29,563 2.5% 40,161 4.2%
Ecuador 43,622 3.9% 46,917 4.0% 74,485 7.7%
El Salvador 45,847 4.1% 37,196 3.2% 40,306 4.2%
Guatemala 66,531 6.0% 119,227 10.1% 91,178 9.5%
Honduras 42,352 3.8% 59,564 5.0% 59,439 6.2%
Jamaica (2) 28,628 2.6% 29,066 2.5% -- --
Mexico (2) -- -- 25,250 2.1% -- --
Panama 127,419 11.4% 119,615 10.1% 77,295 8.0%
Peru 29,648 2.7% 49,382 4.2% 68,094 7.1%
Russia (2) -- -- -- -- 17,500 1.8%
Suriname (2) -- -- 21,868 1.9% -- --
Venezuela 17,842 1.6% 19,756 1.7% 16,299 1.7%
Other (1) 81,460 7.3% 102,197 8.7% 64,860 6.7%
---------- ----- ---------- ---- ------------ -----
Total $1,116,201 100.0% $1,179,531 00.0% $ 964,794 100.0%
========== ===== ========== ==== ============ =====
</TABLE>
(1) Other consists of loans to borrowers in countries in which loans did not
exceed 1 percent of total loans.
(2) These countries had loans which did not exceed 1 percent of total loans in
the periods indicated.
29
<PAGE> 32
At December 31, 1999 approximately 31.7 percent in cross-border outstanding were
due from borrowers in five countries other than the United States: Brazil (10.0
percent), Panama (6.7 percent), Argentina (6.6 percent), Ecuador (4.5 percent)
and Guatemala (3.9 percent).
TABLE TWELVE. TOTAL CROSS-BORDER OUTSTANDING BY COUNTRY AND TYPE
(Dollars in million)
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------
% of % of % of
Total Total Total
1999 Assets 1998 Assets 1997 Assets
------ ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Argentina $ 113 6.6% $ 59 3.5% $ 69 5.2%
Bahamas (2) 21 1.2% -- -- -- --
Bolivia 18 1.0% 26 1.5% 44 3.3%
Brazil 173 10.0% 100 5.9% 85 6.3%
British West Indies (2) -- -- 36 2.1% 11 0.8%
Colombia 48 2.8% 54 3.2% 24 1.8%
Costa Rica (2) -- -- 16 0.9% -- --
Dominican Republic 55 3.2% 48 2.8% 39 2.9%
Ecuador 78 4.5% 100 5.9% 90 6.7%
El Salvador 44 2.6% 52 3.1% 46 3.4%
Guatemala 68 3.9% 131 7.7% 92 6.9%
Honduras 43 2.5% 69 4.1% 52 3.9%
Jamaica 35 2.0% 40 2.4% 32 2.4%
Mexico (2) 20 1.2% 25 1.5% -- --
Nicaragua (2) -- -- 15 0.9% 12 0.9%
Panama 116 6.7% 119 7.0% 72 5.4%
Peru 42 2.4% 56 3.3% 74 5.5%
Russia (2) -- -- -- -- 17 1.3%
Suriname (2) 32 1.9% 27 1.6% -- --
United Kingdom (2) 15 0.9% -- -- -- --
Venezuela (2) 17 1.0% 19 1.1% -- --
Other (1) 75 4.4% 83 4.9% 39 2.9%
------ ----- ------ ----- ------ -----
Total $1,013 58.8% $1,075 63.4% $ 798 59.6%
====== ===== ====== ===== ====== =====
</TABLE>
(1) Other consists of cross-border outstanding to countries in which such
cross-border outstanding did not exceed 0.75 percent of the Company's
total assets at any of the periods indicated.
(2) These countries had cross-border outstanding which did not exceed 0.75
percent of total assets in the periods indicated.
30
<PAGE> 33
TOTAL CROSS-BORDER OUTSTANDINGS BY TYPE
<TABLE>
<CAPTION>
At December 31,
---------------------------------
1999 1998 1997
------ ------ ----
<S> <C> <C> <C>
Government and official institutions $ 114 $ 73 $ 25
Banks and other financial institutions 451 498 442
Commercial and industrial 384 418 275
Acceptances discounted 64 86 56
------ ------ ----
Total $1,013 $1,075 $798
====== ====== ====
</TABLE>
DUE FROM CUSTOMERS ON BANKERS' ACCEPTANCES AND DEFERRED PAYMENT LETTERS OF
CREDIT.
Due from customers on bankers' acceptances and deferred payment letters of
credit were $27.8 million and $5.8 million, respectively, at December 31, 1999
compared to $75.6 million and $6.5 million, respectively, at December 31, 1998.
This decrease reflects the reduction in letter of credit activity in the Region
largely as a result of slow economic conditions. These assets represent a
customer's liability to the Company while the Company's corresponding liability
to third parties is reflected on the balance sheet as "Bankers Acceptances
Outstanding" and "Deferred Payment Letters of Credit Outstanding."
DEPOSITS
The primary sources of the Company's domestic time deposits are its eight Bank
branches located in Florida and one in Puerto Rico. The Company has three Bank
branches in Miami, one each in Tampa, Winter Haven, Sarasota, West Palm Beach
and Weston. In pricing its deposits, the Company analyzes the market carefully,
attempting to price its deposits competitively with the larger financial
institutions in the area. TABLE TWO provides information on average deposit
amounts and rates paid to each deposit category. Total deposits were $1,535.6
million at December 31, 1999 compared to $1,477.1 million at December 31, 1998.
Average interest-bearing deposits increased by 10.2 percent to $1,358.3 million
at December 31, 1999 from $1,231.7 million at December 31, 1998. The Company
was successful in expanding its deposit base in time deposits and certificates
of deposit in denominations of less than $100,000 which increased 23.3 percent
to $630 million at December 31, 1999 from $511.4 million at December 31, 1998.
In the summer of 1999, the Company opened its newest branch in Weston, which
positively contributed to the deposit growth achieved in all markets.
Additionally, the Company expanded Presidential Money Market deposits over the
year which grew to $44.7 million at December 31, 1999 from $3.3 million at
December 31, 1998.
TRUST PREFERRED SECURITIES
In December 1998, the Company issued $11 million in Beneficial Unsecured
Securities, of Series A ("Trust Preferred Securities") out of a guarantor trust
at a rate of 9.75 percent. The Trust Preferred Securities are considered Tier I
capital for regulatory purposes. Trust Preferred Securities increased by $1.7
million upon the exercise of an over-allotment option by the underwriter in
January 1999. See Note Seven of the Consolidated Financial Statements for
further details.
31
<PAGE> 34
TABLE THIRTEEN reports maturity periods of certificate of deposits of $100,000
and greater.
TABLE THIRTEEN. MATURITIES OF AND AMOUNTS OF CERTIFICATES OF DEPOSITS AND OTHER
TIME DEPOSITS $100,000 OR MORE (In thousands)
<TABLE>
<CAPTION>
Certificates Other Time
of Deposit Deposits-IBF
$100,000 or More $100,000 or More Total
---------------- ---------------- --------
<S> <C> <C> <C>
Three months or less $ 87,410 $ 24,025 $111,435
Over 3 through 6 months 109,583 7,531 117,114
Over 6 through 12 months 136,999 2,750 139,749
Over 12 months 75,433 -- 75,433
-------- -------- --------
Total $409,425 $ 34,306 $443,731
======== ======== ========
</TABLE>
OFF-BALANCE SHEET
CONTINGENCIES
In the normal course of business, the Company utilizes various financial
instruments with off-balance sheet risk to meet the financing needs of its
customers, including commitments to extend credit, commercial letters of credit,
shipping guarantees, standby letters of credit and forward foreign exchange
contracts.
TABLE FOURTEEN reports the total volume and average monthly volume of the
Company's export and import letters of credit for the periods indicated. The
letter of credit volume decreased by 30 percent to $524.8 million from $746.8
million as a result of shifts toward more on-balance sheet financing and slower
economic conditions throughout the Region.
TABLE FOURTEEN. CONTINGENCIES - COMMERCIAL LETTERS OF CREDIT
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1999 1998 1997
----------------------- -------------------------- ------------------------
Average Average Average
Total Monthly Total Monthly Total Monthly
Volume Volume Volume Volume Volume Volume
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Export Letters of Credit (1) $ 227,904 $ 18,992 $ 397,683 $ 33,140 $ 424,748 $ 35,396
Import Letters of Credit (1) 296,943 24,745 349,099 29,092 394,758 32,897
--------- -------- --------- -------- --------- --------
Total $ 524,847 $ 43,737 $ 746,782 $ 62,232 $ 819,506 $ 68,293
========= ======== ========= ======== ========= ========
</TABLE>
(1) Represents certain contingent liabilities not reflected on the Company's
balance sheet.
32
<PAGE> 35
The Company provides letter of credit services globally. TABLE FIFTEEN sets
forth the distribution of the Company's contingent liabilities by country of the
applicant and issuing bank for import and export letters of credit,
respectively. As shown by the table, contingent liabilities increased by 17
percent to $150.6 million at December 31, 1999 from December 31, 1998 as a
result of increased letters of credit related to domestic corporate names.
TABLE FIFTEEN. CONTINGENT LIABILITIES (1)
(In thousands)
<TABLE>
<CAPTION>
At December 31,
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Argentina (3) $ -- $ 1,680 $ --
Aruba (3) 3,720 -- --
Bolivia (3) -- 3,890 3,883
Brazil (3) -- -- 4,123
Colombia (3) -- -- 3,936
Costa Rica 9,893 2,846 3,168
Dominican Republic 4,707 7,015 4,759
Ecuador (3) -- 3,703 17,839
El Salvador 2,734 1,995 3,837
Guatemala 9,475 26,132 11,577
Guyana (3) 4,165 2,374 --
Haiti 5,705 2,088 7,857
Honduras 4,174 2,427 5,550
Nicaragua (3) -- -- 3,386
Panama 14,242 14,538 12,439
Paraguay (3) -- 1,961 2,395
Peru (3) 3,573 -- 5,566
Suriname (3) 5,677 11,690 --
Switzerland (3) -- 1,588 --
United States 74,643 39,415 94,629
Venezuela (3) 2,593 -- --
Other (2) 6,143 5,374 13,139
-------- -------- --------
Total $151,444 $128,716 $198,083
======== ======== ========
</TABLE>
(1) Includes export and import letters of credit, standby letters of credit and
letters of indemnity.
(2) Other includes those countries in which contingencies represent less than 1
percent of the Company's total contingencies at each of the above dates.
(3) These countries had contingencies, which did not exceed 1 percent of the
Company's total contingencies as of the period indicated.
33
<PAGE> 36
LIQUIDITY
The Company seeks to manage its assets and liabilities to reduce the potential
adverse impact on net interest income that might result from changes in interest
rates through systematic monitoring of maturity mismatches. The Company's
investment decision-making takes into account not only the rates of return and
their underlying degree of risk, but also liquidity requirements, including
minimum cash reserves, withdrawal and maturity of deposits and additional demand
for funds. For any given period, the pricing structure is matched when an equal
amount of assets and liabilities reprice. An excess of assets or liabilities
over these matched items results in a gap or mismatch, as shown on TABLE
SIXTEEN. A positive gap denotes asset sensitivity and normally means that an
increase in interest rates would have a positive effect on net interest income
while a decrease in interest rates would have a negative effect on net interest
income. However, because different types of assets and liabilities with similar
maturities may reprice at different rates or may otherwise react differently to
changes in overall market rates or conditions, changes in prevailing interest
rates may not necessarily have such effects on net interest income. All of the
Company's assets and liabilities are denominated in dollars and therefore the
Company has no material foreign exchange risk.
Cash and cash equivalents were $85.1 million on December 31, 1999, a decrease
from $111.8 million from December 31, 1998. During 1999, net cash provided by
operating activities was $58.2 million, net cash used in investing activities
was $139.3 million and net cash provided by financing activities was $54.4
million. For further information on cash flows, see the Consolidated Statement
of Cash Flows in the Consolidated Financial Statements.
The Company's principal sources of liquidity and funding are its diverse deposit
base and the sales of bankers' acceptances as well as loan participations. The
level and maturity of deposits necessary to support the Company's lending and
investment activities is determined through monitoring loan demand and through
its asset/liability management process. Considerations in managing the Company's
liquidity position include, but are not limited to, scheduled cash flows from
existing assets, contingencies and liabilities, as well as projected liquidity
needs arising from anticipated extensions of credit. Furthermore, the liquidity
position is monitored daily by management to maintain a level of liquidity
conducive to efficient operations and is continuously evaluated as part of the
asset/liability management process.
Historically, the Company has increased its level of deposits to allow for its
planned asset growth. Customer deposits have increased through the branch
network, and private banking customers, as well as deposits related to the trade
activity. The majority of the Company's deposits are short-term and closely
match the short-term nature of the Company's assets. At December 31, 1999
interest-earning assets maturing within 180 days were $909 million, representing
55 percent of total earning assets. The short-term nature of the loan portfolio
and the fact that a portion of the loan portfolio consists of bankers'
acceptances provides additional liquidity to the Company. Liquid assets at
December 31, 1999 were $375 million, 22 percent of total assets, and consisted
of cash and cash equivalents, due from banks-time and foreign debt securities.
At December 31, 1999 the Company had been advised of $52 million in available
interbank funding.
TABLE SIXTEEN presents the projected maturities or interest rate adjustments of
the Company's earning assets and interest-bearing funding sources based upon the
contractual maturities or adjustment dates at December 31, 1999. The
interest-earning assets and interest-bearing liabilities of the Company and the
related interest rate sensitivity gap given in the following table may not be
reflective of positions in subsequent periods.
34
<PAGE> 37
TABLE SIXTEEN. INTEREST RATE SENSITIVITY
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------------------------------------------------------------
0 to 30 31 to 90 91 to 180 181 to 365 1 to 5 Over 5
Days Days Days Days Years Years Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans $ 201,001 $ 215,045 $ 220,886 $ 135,581 $ 307,825 $ 35,863 $1,116,201
Federal funds sold 63,400 -- -- -- -- -- 63,400
Investment securities 20,942 26,461 43,343 49,310 24,726 106,040 270,822
Interest earning deposits
with other banks 41,800 31,250 44,477 45,158 25,000 -- 187,685
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 327,143 272,756 308,706 230,049 357,551 141,903 1,638,108
---------- ---------- ---------- ---------- ---------- ---------- ----------
Funding Sources:
Savings and transaction
deposits 37,699 28,663 67,828 -- -- -- 134,190
Certificates of deposits
of $100k or more 46,687 40,723 109,583 136,999 75,433 -- 409,425
Certificates of deposits
under $100k 62,476 130,588 203,792 329,633 90,356 -- 816,845
Other time deposits 21,695 2,330 7,531 2,750 -- -- 34,306
Funds overnight 63,450 -- -- -- -- -- 63,450
Trust preferred securities -- -- -- -- -- 12,650 12,650
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total $ 232,007 $ 202,304 $ 388,734 $ 469,382 $ 165,789 $ 12,650 $1,470,866
========== ========== ========== ========== ========== ========== ==========
Interest sensitivity gap $ 95,136 $ 70,452 ($ 80,028) ($ 239,333) $ 191,762 $ 129,253 $ 167,242
========== ========== ========== ========== ========== ========== ==========
Cumulative gap $ 95,136 $ 165,588 $ 85,560 ($ 153,773) $ 37,989 $ 167,242
========== ========== ========== ========== ========== ========== ==========
Cumulative gap as a
percentage of total
earning assets 5.81% 10.11 5.22% -9.39% 2.32% 10.21%
========== ========== ========== ========== ========== ==========
</TABLE>
35
<PAGE> 38
CREDIT QUALITY REVIEW
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses reflects management's judgment of the level of
allowance adequate to provide for reasonably foreseeable losses, based upon the
following factors: (i) the economic conditions in those countries in the Region
in which the Company conducts trade finance activities; (ii) the credit
condition of its customers and correspondent banks, as well as the underlying
collateral, if any; (iii) historical experience and (iv) the average maturity
of its loan portfolio.
In addition, although the Company's credit losses have been relatively limited
to date, management believes that the level of the Company's allowance should
reflect the potential for political and economic instability in certain
countries of the Region and the possibility that serious economic difficulties
in a country could adversely affect all of the Company's loans to borrowers in
or doing business with that country.
Determining the appropriate level of the allowance for credit losses requires
management's judgment, including application of the factors described above to
assumptions and estimates made in the context of changing political and economic
conditions in many of the countries of the Region. Accordingly, there can be no
assurance that the Company's current allowance for credit losses will prove to
be adequate in light of future events and developments. At December 31, 1999,
the allowance for credit losses was approximately $21.4 million, an increase of
67 percent from $12.8 million at December 31, 1998. This increase relates to the
increase in provision for credit losses discussed earlier.
36
<PAGE> 39
TABLE SEVENTEEN provides certain information with respect to the Company's
allowance for credit losses, provision for credit losses and chargeoff and
recovery activity for the periods shown.
TABLE SEVENTEEN. CREDIT LOSS EXPERIENCE
(In thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance of allowance for credit losses at
beginning of period $ 12,794 $ 10,317 $ 5,725 $ 4,450 $ 4,133
Charge-offs:
Domestic:
Commercial (3,299) (3,357) (1,693) (951) (1,097)
Acceptances -- (100) -- -- --
Residential -- -- -- -- --
Installment (5) -- (3) (8) (3)
----------- ----------- ----------- ----------- -----------
Total domestic (3,304) (3,457) (1,696) (959) (1,100)
Foreign:
Government and official institutions -- -- -- -- --
Banks and other financial institutions (2,330) (3,901) (896) (678) --
Commercial and industrial (6,216) -- -- (146) (1,044)(1)
Acceptances discounted -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total foreign (8,546) (3,901) (896) (824) (1,044)
----------- ----------- ----------- ----------- -----------
Total charge-offs (11,850) (7,358) (2,592) (1,783) (2,144)
Recoveries:
Domestic:
Commercial 1 12 203 16 10
Acceptances -- -- -- -- --
Residential -- -- -- -- --
Installment 3 -- 1 2 1
Foreign:
Banks and other financial institutions 163 202 -- -- --
----------- ----------- ----------- ----------- -----------
Total recoveries 167 214 204 18 11
----------- ----------- ----------- ----------- -----------
Net (charge-offs) recoveries (11,683) (7,144) (2,388) (1,765) (2,133)
Provision for credit losses 20,300 9,621 6,980 3,040 2,450
----------- ----------- ----------- ----------- -----------
Balance at end of period $ 21,411 $ 12,794 $ 10,317 $ 5,725 $ 4,450
=========== =========== =========== =========== ===========
Average loans $ 1,194,667 $ 1,168,451 $ 737,921 $ 485,758 $ 370,568
Total loans $ 1,116,201 $ 1,179,530 $ 964,794 $ 535,559 $ 422,980
Net charge-offs to average loans 0.98% 0.61% 0.32% 0.36% 0.58%
Allowance to total loans 1.92% 1.08% 1.07% 1.07% 1.05%
</TABLE>
(1) Related to extension of credit to a domestic-based business operated by a
company organized under the laws of a foreign country.
37
<PAGE> 40
TABLE EIGHTEEN sets forth an analysis of the allocation of the allowance for
credit losses by category of loans and the allowance for credit losses allocated
to foreign loans. The allowance is established to cover potential losses
inherent in the portfolio as a whole or is available to cover potential losses
on any of the Company's loans.
TABLE EIGHTEEN. ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Allocation of the allowance by category of
loans:
Domestic:
Commercial $ 3,199 $ 1,138 $ 2,053 $ 1,964 $ 680
Acceptances 269 211 315 226 333
Residential mortgages 10 66 59 54 57
------- ------- ------- ------- ------
Total domestic 3,478 1,415 2,427 2,244 1,070
Foreign:
Government and official institutions 1,496 -- -- -- --
Banks and other financial institutions 5,152 3,033 3,854 2,112 1,900
Commercial and industrial 11,015 8,010 3,442 920 1,101
Acceptances discounted 270 336 594 449 379
------- ------- ------- ------- ------
Total foreign 17,933 11,379 7,890 3,481 3,380
Total $21,411 $12,794 $10,317 $ 5,725 $4,450
======= ======= ======= ======= ======
Percent of loans in each category to total
loans:
Domestic:
Commercial 35.4% 24.5% 18.6% 20.6% 22.8%
Acceptances 5.3% 4.8% 4.7% 4.4% 7.8%
Residential 0.2% 0.9% 1.2% 2.0% 2.7%
------- ------- ------- ------- ------
Total domestic 40.9% 30.2% 24.5% 27.0% 33.3%
Foreign:
Government and official institutions 3.4% 3.4% 0.1% 0.1% 0.2%
Banks and other financial institutions 20.1% 25.8% 36.5% 24.2% 32.3%
Commercial and industrial 30.3% 34.4% 33.2% 33.6% 19.3%
Acceptances discounted 5.3% 6.2% 5.7% 15.1% 14.9%
------- ------- ------- ------- ------
Total foreign 59.1% 69.8% 75.5% 73.0% 66.7%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ======
</TABLE>
38
<PAGE> 41
TABLE NINETEEN. ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES ALLOCATED TO FOREIGN
LOANS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $ 11,379 $ 7,890 $ 3,481 $ 3,380 $ 2,062
Provision for credit losses 15,100 7,188 5,305 925 2,362
Net charge-offs (8,546) (3,699) (896) (824) (1,044)(1)
-------- ------- ------- ------- -------
Balance, end of period $ 17,933 $11,379 $ 7,890 $ 3,481 $ 3,380
======== ======= ======= ======= =======
</TABLE>
(1) Related to extensions of credit to a domestic-based business operated by a
company organized under the laws of a foreign country.
The Company usually places an asset on nonaccrual status when any payment of
principal or interest is over 90 days past due or earlier if management
determines the collection of principal or interest to be unlikely. Loans over 90
days past due may not be placed on nonaccrual if they are in the process of
collection and are either secured by property having a realizable value at least
equal to the outstanding debt and accrued interest or are fully guaranteed by a
financially responsible party whom the Company believes is willing and able to
discharge the debt, including accrued interest. In most cases, if a borrower has
more than one loan outstanding under its line with the Company and any of its
individual loans becomes over 90 days past due, the Company places all
outstanding loans to that borrower on nonaccrual status.
The Company does not have a rigid chargeoff policy but instead charges off loans
on a case-by-case basis as determined by management and approved by the Board of
Directors. In some instances, loans may remain in the nonaccrual category for a
period of time during which the borrower and the Company negotiate restructured
repayment terms.
The Company attributes its consistent basis of asset quality to the short-term
nature of its loan portfolio, the composition of its borrower base, the
importance that borrowers in the Region attach to maintaining their continuing
access to financing for foreign trade and to the Company's loan underwriting
policies.
The Company accounts for impaired loans in accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan. Under these standards,
individually identified impaired loans are measured based on the present value
of payments expected to be received, using the historical effective loan rate as
the discount rate. Alternatively, measurement may also be based on observable
market prices or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the collateral. The
Company evaluates commercial loans individually for impairment, while groups of
smaller-balance homogeneous loans (generally residential mortgage and
installment loans) are collectively evaluated for impairment.
The following table sets forth information regarding the Company's nonperforming
loans at the dates indicated. Total nonperforming loans to total loans increased
when compared to historical levels as a result of additional loans entering the
nonperforming category. Management monitors these loans very closely.
39
<PAGE> 42
TABLE TWENTY. NONPERFORMING LOANS
(In thousands)
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Domestic:
Non accrual $ 6,995 $ 2,189 $ 3,100 $ 3,087 $ 1,345
Past due over 90 days and accruing -- 69 -- -- 582
-------- ------- ------- ------- -------
Total domestic nonperforming loans 6,995 2,258 3,100 3,087 1,927
Foreign:
Non accrual 9,588 6,396 2,949 1,654 2,287
Past due over 90 days and accruing 1,992 404 -- 112 301
-------- ------- ------- ------- -------
Total foreign nonperforming loans 11,580 6,800 2,949 1,766 2,588
Total nonperforming loans (1) $ 18,575 $ 9,058 $ 6,049 $ 4,853 $ 4,515
======== ======= ======= ======= =======
Total nonperforming loans to total loans 1.66% 0.77% 0.48% 0.91% 1.07%
Total nonperforming assets to total assets 1.08% 0.53% 0.64% 0.64% 0.73%
</TABLE>
(1) During such periods the Company did not have any loans which were deemed
to be "troubled debt restructurings" as defined in SFAS No. 15,
Accounting by Debtors and Creditors for Troubled Debt Restructurings.
At December 31, 1999 and December 31, 1998 the Company had no nonaccruing
investment securities.
For the year ended December 31, 1999 the amount of interest income that was
accrued on the loans in the previous table was approximately $155 thousand. For
the year ended December 31, 1999 the amount of interest income that would have
been accrued on the loans in the previous table in accordance with their
contractual terms was approximately $1.6 million, of which $1.5 million
represented interest income on foreign loans and $68 thousand on domestic loans.
Management does not believe that there is a material amount of loans not
included in the foregoing table where known information about possible credit
problems of the borrowers would cause management to have serious doubts as to
the ability of the borrowers to comply with the present loan repayment terms and
which may result in such loans becoming nonaccruing loans.
CAPITAL RESOURCES
Stockholders' equity at December 31, 1999 was $135.0 million compared to $123.5
million at December 31, 1998 after adjustments for fair value accounting. This
increase was due primarily to $18.4 million of retained earnings. During 1997
the Company paid dividends on preferred stock of $319 thousand, which were
within the amounts allowed by banking and holding company regulations.
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can result in certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. The regulations require
the Company and the Bank to meet specific capital adequacy guidelines that
involve quantitative measures of their assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Company's and the Bank's capital classification is also subject to qualitative
judgments by the regulators about interest rate risk, concentration of credit
risk and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of Tier
I capital (as defined in the regulations) to total average assets (as defined)
and minimum ratios of Tier I and total capital (as defined) to risk-weighted
assets (as defined).
The Company was required by the OCC to record, under protest, a transfer risk
reserve of $32 million related to the Bank's exposure in Ecuador. This reserve
was recorded for regulatory reporting purposes only and not for the Company's
consolidated financial statements prepared in accordance with generally accepted
accounting principles. The Company is appealing, within the OCC, this
requirement. NOTE EIGHT of the consolidated financial statements reports Company
and Bank capital ratios.
40
<PAGE> 43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK MANAGEMENT
In the normal course of conducting business activities, the Company is exposed
to market risk which includes both price and liquidity risk. The Company's price
risk arises from fluctuations in interest rates, and foreign exchange rates that
may result in changes in values of financial instruments. The Company does not
have material direct market risk related to commodity and equity prices.
Liquidity risk arises from the possibility that the Company may not be able to
satisfy current and future financial commitments or that the Company may not be
able to liquidate financial instruments at market prices. Risk management
policies and procedures have been established and are utilized to manage the
Company's exposure to market risk. The strategy of the Company is to operate at
an acceptable risk environment while maximizing its earnings.
Market risk is managed by the Asset Liability Committee which formulates and
monitors the performance of the Company based on established levels of market
risk as dictated by policy. In setting the tolerance levels of market risk, the
Committee considers the impact on both earnings and capital potential changes in
the outlook in market rates, global and regional economies, liquidity, business
strategies and other factors.
The Company's asset and liability management process is utilized to manage
interest rate risk through the structuring of balance sheet and off-balance
sheet portfolios. It is the strategy of the Company to maintain as neutral an
interest rate risk position as possible. By utilizing this strategy the Company
"locks in" a spread between interest-earning assets and interest-bearing
liabilities. Given the matching strategy of the Company and the fact that it
does not maintain significant medium and/or long-term exposure positions, the
Company's interest rate risk will be measured and quantified through an interest
rate sensitivity report. For any given period, the Company's pricing structure
is matched when an equal amount of assets and liabilities reprice. An excess of
assets or liabilities over these matched items results in a gap or mismatch. A
positive gap denotes asset sensitivity and normally means that an increase in
interest rates would have a positive effect on net interest income. On the other
hand a negative gap denotes liability sensitivity and normally means that a
decline in interest rates would have a positive effect in net interest income.
However, because different types of assets and liabilities with similar
maturities may reprice at different rates or may otherwise react differently to
changes in overall market rates or conditions, changes in prevailing interest
rates may not necessarily have such effects on net interest income.
TABLE SIXTEEN provides the Company's Interest Rate Sensitivity Reports as of
December 31, 1999. This table shows that interest-bearing liabilities maturing
or repricing within one year exceeded interest-earning assets by $153.4 million.
The Company monitors that the assets and liabilities are closely matched to
minimize interest rate risk. On December 31, 1999 the interest rate risk
position of the Company was not significant since the impact of a 100 basis
point rise or fall of interest rates over the next 12 months is estimated at 2
percent of net income.
Substantially all of the Company's assets and liabilities are denominated in
dollars, therefore the Company has no material foreign exchange risk. In
addition, the Company has no trading account securities; therefore it is not
exposed to market risk resulting from trading activities.
NOTE THIRTEEN of the consolidated financial statements reports fair value of
financial instruments. As reported in this note, the carrying values approximate
their fair values which generally minimizes the exposure to market risk
resulting from interest rate fluctuations. This minimal risk is the result of
the short-term nature of the Company's interest-earning assets and the matching
maturity level of the interest-bearing liabilities.
On a daily basis the Bank's Chief Financial Officer and the Bank's Treasurer are
responsible for measuring and managing market risk.
41
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to information under the captions "Information as to
Directors and Executive Officers" and "Meetings of the Board of Directors and
Committees" in the Registrant's definitive proxy statement relating to its 2000
Annual Meeting of Stockholders, which will be filed with the Commission within
120 days after the close of the Registrant's fiscal year ended December 31,
1999, all of which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth in the Registrant's
definitive proxy statement relating to its 2000 Annual Meeting of Stockholders
under the caption "Executive Compensation" and continuing
42
<PAGE> 45
through the caption "Certain Transactions with Management" (excluding the
information set forth under the caption "Compensation Committee Report") which
will be filed with the Commission within 120 days after the close of the
Registrant's fiscal year ended December 31, 1999, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information set forth under the caption
"Ownership of Equity Securities" in the Registrant's definitive proxy statement
relating to its 2000 Annual Meeting of Stockholders, which will be filed with
the Commission within 120 days after the close of the Registrant's fiscal year
ended December 31, 1999, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information set forth under the caption
"Certain Transactions with Management" in the Registrant's definitive proxy
statement relating to its 2000 Annual Meeting of Stockholders, which will be
filed with the Commission within 120 days after the close of the Registrant's
fiscal year ended December 31, 1999, which information is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. The following financial statements and financial
statement schedules are contained herein or are incorporated herein by
reference:
<TABLE>
<CAPTION>
Page in
Form 10-K
<S> <C>
Independent Auditors' Report 46
Consolidated Statements of Condition as of December 31, 1999
and 1998. 47
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 48
Consolidated Statements of Comprehensive Income for the years
ended December 31, 1999, 1998 and 1997 49
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1999, 1998 and 1997 50
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 51
Notes to Consolidated Financial Statements 52
</TABLE>
43
<PAGE> 46
All Schedules are omitted because they are either not required or the
information is otherwise included in the consolidated financial statements or
notes thereto.
2. Exhibits. The following exhibits are contained herein or are
incorporated herein by reference:
DESCRIPTION OF EXHIBIT
3.1 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1, Registration No. 333-20435)
3.2 Amended and Restated Bylaws of the Company as amended March 21, 2000
4.1 Form of Common Stock certificate (incorporated by reference to Exhibit
4.1 of the Company's Registration Statement on Form S-1, Registration
No. 333-20435)
10.1 Company's 1993 Stock Option Plan, as amended (incorporated by reference
to Exhibit 10.1 of the Company's Registration Statement on Form S-1,
Registration No. 333-20435)
10.2 Company's 1998 Stock Option Plan.
10.3 Lease Agreement, dated December 20, 1997, by and between Hamilton Bank,
N.A. and System Realty Twelve, Inc. regarding the Company's corporate
headquarters (incorporated by reference to Exhibit 10.2 of the
Company's Registration Statement on Form S-1, Registration No.
333-20435)
10.4 Employment Agreement dated October 1, 1999 with Mr. Eduardo A.
Masferrer
10.5 Employment Agreement dated October 1, 1999 with Mr. Juan Carlos Bernace
10.6 Employment Agreement dated October 1, 1999 with Ms. Maura Acosta
10.7 Employment Agreement dated October 1, 1999 with Mr. J. Reid Bingham
10.8 Employment Agreement dated March 13, 2000 with Mr. James J. Gartner
10.9 Employment Agreement dated October 1, 1999 with Mr. John M.R. Jacobs
10.10 Employment Agreement dated October 1, 1999 with Ms. Maria Justo
10.11 Employment Agreement dated October 1, 1999 with Ms. Alina Cannon
10.12 Employment Agreement dated October 1, 1999 with Mr. Adolfo D. Martinez
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K were filed during the fourth quarter of
1999.
44
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, this 13th day of
April, 2000.
HAMILTON BANCORP INC.
/s/ Eduardo A. Masferrer
----------------------------
Eduardo A. Masferrer, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on April 13, 2000 on
behalf of the Registrant and in the capacities indicated.
/s/ Eduardo A. Masferrer /s/ William Alexander
- ------------------------- ---------------------------
Eduardo A. Masferrer William Alexander
Director Director
/s/ Juan Carlos Bernace /s/ Ronald Frazier
- ------------------------- ---------------------------
Juan Carlos Bernace Ronald Frazier
Director Director
/s/ Thomas F. Gaffney /s/ Ronald A. Lacayo
- ------------------------- ---------------------------
Thomas F. Gaffney Ronald A. Lacayo
Director Director
/s/ George Lyall /s/ Ben L. Moyer
- ------------------------- ---------------------------
George Lyall Ben L. Moyer
Director Director
/s/ John M. R. Jacobs
- ---------------------------
John M. R. Jacobs, Senior Vice President
Chief Financial Officer and Treasurer
45
<PAGE> 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Hamilton Bancorp Inc.:
We have audited the accompanying consolidated statements of condition of
Hamilton Bancorp Inc. and its subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally acepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial condition of the Company at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 24, 2000
46
<PAGE> 49
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1999 AND 1998
(Dollars in Thousands, Except Share Information)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
CASH AND DEMAND DEPOSITS WITH OTHER BANKS $ 21,710 $ 24,213
FEDERAL FUNDS SOLD 63,400 87,577
----------- -----------
Total cash and cash equivalents 85,110 111,790
INTEREST-EARNING DEPOSITS WITH OTHER BANKS 187,685 200,203
SECURITIES AVAILABLE FOR SALE (Amortized cost: $288,710
in 1999 and $85,509 in 1998) 274,277 84,725
SECURITIES HELD TO MATURITY 30,291
LOANS - NET 1,091,976 1,163,705
DUE FROM CUSTOMERS ON BANKERS ACCEPTANCES 27,767 75,567
DUE FROM CUSTOMERS ON DEFERRED PAYMENT LETTERS OF CREDIT 5,835 6,468
PROPERTY AND EQUIPMENT - NET 5,209 4,775
ACCRUED INTEREST RECEIVABLE 19,111 19,201
GOODWILL - NET 1,658 1,833
OTHER ASSETS 22,672 9,005
----------- -----------
TOTAL $ 1,721,300 $ 1,707,563
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 1,535,606 $ 1,477,052
OTHER BORROWINGS 6,116
TRUST PREFERRED SECURITIES 12,650 11,000
BANKERS ACCEPTANCES OUTSTANDING 27,767 75,567
DEFERRED PAYMENT LETTERS OF CREDIT OUTSTANDING 5,835 6,468
OTHER LIABILITIES 5,544 7,814
----------- -----------
Total liabilities 1,587,402 1,584,017
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4, 12)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000,000 shares authorized, 10,081,147 shares
issued and outstanding at December 31, 1999 and
10,050,062 shares issued and outstanding at December 31, 1998 101 100
Capital surplus 60,708 60,117
Retained earnings 82,175 63,815
Accumulated other comprehensive loss (9,086) (486)
----------- -----------
Total stockholders' equity 133,898 123,546
----------- -----------
TOTAL $ 1,721,300 $ 1,707,563
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
47
<PAGE> 50
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands, Except Share Information)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 107,620 $ 106,885 $ 70,262
Deposits with other banks 15,940 10,989 8,909
Investment securities 8,787 4,903 2,980
Federal funds sold 1,647 1,484 1,008
------------ ------------ ------------
Total 133,994 124,261 83,159
------------ ------------ ------------
INTEREST EXPENSE:
Deposits 72,224 69,719 43,913
Trust preferred securities 1,232
Federal funds purchased and other borrowings 181 561 284
------------ ------------ ------------
Total 73,637 70,280 44,197
------------ ------------ ------------
NET INTEREST INCOME 60,357 53,981 38,962
PROVISION FOR CREDIT LOSSES 20,300 9,621 6,980
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 40,057 44,360 31,982
------------ ------------ ------------
NON-INTEREST INCOME:
Trade finance fees and commissions 12,035 13,101 12,768
Syndication and structuring fees 6,266 3,352 2,535
Customer service fees 1,528 1,149 934
Net gain (loss) on sale of assets 562 (220) 108
Other 299 171 97
------------ ------------ ------------
Total 20,690 17,553 16,442
OPERATING EXPENSES:
Employee compensation and benefits 14,556 14,527 13,162
Occupancy and equipment 4,273 4,229 3,251
Other 13,275 9,337 7,010
------------ ------------ ------------
Total 32,104 28,093 23,423
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 28,643 33,820 25,001
PROVISION FOR INCOME TAXES 10,283 12,021 9,098
------------ ------------ ------------
NET INCOME $ 18,360 $ 21,799 $ 15,903
============ ============ ============
NET INCOME PER COMMON SHARE:
Basic $ 1.82 $ 2.18 $ 1.81
============ ============ ============
Diluted $ 1.79 $ 2.12 $ 1.73
============ ============ ============
AVERAGE SHARES OUTSTANDING:
Basic 10,069,898 9,983,208 8,806,379
============ ============ ============
Diluted 10,275,223 10,304,180 9,173,680
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
48
<PAGE> 51
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET INCOME $ 18,360 $ 21,799 $ 15,903
OTHER COMPREHENSIVE (LOSS) INCOME, Net of tax:
Unrealized (depreciation) appreciation in securities available for
sale during year (8,600) (433) 18
Less: Reclassification adjustment for gains included
in net income (69)
-------- -------- --------
Total (8,600) (433) (51)
-------- -------- --------
COMPREHENSIVE INCOME $ 9,760 $ 21,366 $ 15,852
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
49
<PAGE> 52
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(Dollars in Thousands, Except Share Information)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------------- --------------------- CAPITAL
SHARES AMOUNT SHARES AMOUNT SURPLUS
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 101,207 1 $ 5,205,030 52 $ 17,318
Net change in unrealized loss on securities
available for sale, net of taxes (51) (51)
Cash dividends on preferred stock,
net of withholding taxes (319)
Conversion of preferred stock into
common stock with 6.5 to 1 split (101,207) (1) 466,160 5 (4)
Conversion of Bank stock and warrants
into common stock with 6.5 to 1 split 1,396,759 14 (14)
Sale of 2,760,000 shares of common
stock in public offering, net 2,760,000 27 38,966
Net income
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 9,827,949 98 56,266
Issuance of 222,113 shares of common
stock from exercise of options 222,113 2 2,048
Reduction of tax liability due to
deductibility of stock options exercised 1,803
Net change in unrealized loss on securities
available for sale, net of taxes
Net Income
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 10,050,062 100 60,117
Issuance of 31,085 shares of common
stock from exercise of options 31,085 1 286
Reduction of tax liability due to
deductibility of stock options exercised 305
Net change in unrealized loss on securities
available for sale, net of taxes
Net Income
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $10,081,147 $ 101 $ 60,708
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
RETAINED COMPREHENSIVE STOCKHOLDERS'
EARNINGS LOSS EQUITY
-------- ---- --------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 26,432 (2) 43,800
Net change in unrealized loss on securities
available for sale, net of taxes (51) (51)
Cash dividends on preferred stock,
net of withholding taxes
Conversion of preferred stock into
common stock with 6.5 to 1 split (319) (319)
Conversion of Bank stock and warrants
into common stock with 6.5 to 1 split
Sale of 2,760,000 shares of common
stock in public offering, net 38,993
Net income 15,903 15,903
----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 42,016 (53) 98,327
Issuance of 222,113 shares of common
stock from exercise of options 2,050
Reduction of tax liability due to
deductibility of stock options exercised 1,803
Net change in unrealized loss on securities
available for sale, net of taxes (433) (433)
Net Income 21,799 21,799
----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 63,815 (486) 123,546
Issuance of 31,085 shares of common
stock from exercise of options 287
Reduction of tax liability due to
deductibility of stock options exercised 305
Net change in unrealized loss on securities
available for sale, net of taxes (8,600) (8,600)
Net Income 18,360 18,360
----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $ 82,175 $ (9,086) $ 133,898
=========== =========== ===========
</TABLE>
50
<PAGE> 53
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,360 $ 21,799 $ 15,903
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,283 1,173 1,024
Provision for credit losses 20,300 9,621 6,980
Deferred tax benefit (3,746) (723) (2,615)
Write down on security available for sale 4,106 587
Net gain on sale of securities available for sale (108)
Net loss (gain) on sale of loans and other real estate owned (561) 220
Proceeds from the sale of bankers acceptances and loan
participations 25,238 102,402 80,007
Increase in accrued interest receivable and other assets (4,767) (7,963) (5,248)
(Decrease) increase in other liabilities (2,008) 4,554 107
--------- --------- ---------
Net cash provided by operating activities 58,205 131,670 96,050
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in interest-earning deposits with other banks 12,518 (86,473) (33,253)
Purchase of securities available for sale (762,150) (245,442) (201,448)
Purchase of securities held to maturity (14,703) (31,299)
Proceeds from paydowns of securities held to maturity 3,307 989
Purchase of loan participations (69,414) (17,463)
Proceeds from sales and maturities of securities available for sale 763,180 214,037 176,203
Increase in loans - net (88,727) (327,696) (512,139)
Purchases of property and equipment - net (1,495) (936) (2,166)
Proceeds from sale of loans and other real estate owned 18,224 21,798
--------- --------- ---------
Net cash used in investing activities (139,260) (472,485) (572,803)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits - net 58,554 342,005 496,407
Proceeds from trust preferred securities offering 1,650 11,000
(Repayment of) proceeds from other borrowing (6,116) 6,116
Net proceeds from issuance of common stock 287 2,050 38,993
Cash dividends on preferred stock (319)
--------- --------- ---------
Net cash provided by financing activities 54,375 361,171 535,081
--------- --------- ---------
NET (DECEASE) INCREASE IN CASH AND CASH EQUIVALENTS (26,680) 20,356 58,328
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 111,790 91,434 33,106
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 85,110 $ 111,790 $ 91,434
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the year $ 73,536 $ 68,665 $ 42,555
========= ========= =========
Income taxes paid during the year $ 14,957 $ 12,717 $ 9,077
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Other real estate owned acquired through foreclosure $ 165
=========
</TABLE>
51
<PAGE> 54
HAMILTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hamilton Bancorp Inc. (the "Company") is a holding company formed in 1988
primarily to acquire ownership in Hamilton Bank, N.A. (the "Bank"), a
national Federal Reserve member bank which commenced operations in
February 1983. As of December 31, 1999, the Company owned 99.78% of the
outstanding common stock of the Bank. The Bank's business is focused
primarily on foreign trade and providing innovative services for its
financial correspondents and exporting/importing firms. The Bank offers
these services through its main office and three branches in Miami,
Florida, and a branch in Tampa, Winter Haven, Sarasota, West Palm Beach,
Weston, Florida and San Juan, Puerto Rico.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry. The following summarizes the more significant of these policies:
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of the Company, the Bank and Hamilton Capital Trust I
(the "Trust", see Note 7). All significant intercompany amounts have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS - For purposes of the consolidated statements of
cash flows, the Company considers cash, demand deposits with other banks,
and federal funds sold as cash and cash equivalents. Generally, federal
funds are sold for one-day periods.
The Federal Reserve requires banks to maintain certain average reserve
balances, in the form of vault cash or funds on deposit with the Federal
Reserve, based upon the total of a bank's net transaction accounts. At
December 31, 1999 and 1998, the Bank met its average reserve requirement.
INVESTMENT SECURITIES - Investment securities are accounted for under
Statement of Financial Accounting Standards ("SFAS") No. 115, ACCOUNTING
FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Under SFAS No. 115,
investment securities must be classified and accounted for under the
following conditions:
TRADING ACCOUNT SECURITIES - Trading account securities are held in
anticipation of short-term sales or market movements. Trading account
securities are stated at fair value. Gains or losses on the sale of
trading account securities, as well as unrealized fair value
adjustments, are included in operating income. At December 31, 1999 and
1998, the Company held no trading account securities.
52
<PAGE> 55
SECURITIES AVAILABLE FOR SALE - Securities to be held for unspecified
periods of time including securities that management intends to use as
part of its asset/liability strategy, or that may be sold in response
to changes in interest rates, changes in prepayment risk, or other
similar factors are classified as available for sale and are carried at
fair value. Unrealized gains or losses are reported as a net amount in
accumulated other comprehensive income (loss) within stockholders'
equity until realized. Gains and losses are recognized using the
specific identification method upon realization.
SECURITIES HELD TO MATURITY - Securities that management has a positive
intent and the ability to hold to maturity are carried at cost,
adjusted for amortization of premiums and accretions of discounts over
the life of the securities using a method which approximates the
level-yield method.
TRANSFERS - Transfers of securities between classifications are
recorded at fair value. Unrealized gains (losses) on securities
transferred into available for sale are recorded as accumulated other
comprehensive income (loss) within stockholders' equity, while
unrealized gains (losses) on securities transfers into trading are
recognized in income immediately. Unrealized gains (losses) on
securities transferred to held to maturity are continued to be
maintained in accumulated other comprehensive income (loss) within
stockholders' equity, however, such unrealized gains (losses) are
amortized to income over the period until maturity as an adjustment of
yield, using the effective yield method.
ALLOWANCE FOR CREDIT LOSSES - The allowance for credit losses is
established through a provision for credit losses charged to expense based
on management's evaluation of the potential losses in its loan portfolio.
Such evaluation, which includes a review of all loans for which full
collectability may not be reasonably assured, considers, among other
matters, historical loss experience, net realizable value of collateral,
current economic conditions and trends, geographical considerations, and
such other factors as in management's judgment deserve recognition. Many
of these factors involve a significant degree of estimation and are beyond
management's control or are subject to changes which may be unforeseen.
Although management believes the allowance is adequate to absorb losses on
existing loans that may become uncollectible, the ultimate losses may vary
significantly from the current estimates.
IMPAIRED LOANS - A loan is impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all
amounts due according to the contractual terms of the loan agreement. A
loan is not impaired during a period of delay in payment if the creditor
expects to collect all amounts due including interest accrued at the
contractual interest rate for the period of delay. Individually identified
impaired loans are measured based on the present value of payments
expected to be received, using the historical effective loan rate as the
discount rate. Alternatively, measurement may also be based on observable
market prices, or for loans that are solely dependent on the collateral
for repayment, measurement may be based on the fair value of the
collateral. The Company evaluates commercial loans individually for
impairment, while groups of smaller-balance homogeneous loans (generally
residential mortgage and installment loans) are collectively evaluated for
impairment. The Company has classified all non-accrual loans as impaired.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed by the
straight-line method over the estimated useful lives of the related
assets. Leasehold improvements are amortized by the straight-line method
over the remaining term of the applicable leases or their useful lives,
whichever is shorter. The useful lives used are as follows:
Building 30 years
Leasehold improvements 5 - 10 years
Furniture and equipment 5 - 7 years
Automobiles 5 years
GOODWILL - Goodwill of approximately $861,000 arising from the acquisition
of the Bank during 1988 and of approximately $1,980,000 arising from the
Bank's branch purchase and assumption of deposits during 1994 are being
amortized on a straight-line basis over a period of twenty and fifteen
years, respectively. The Company reviews goodwill periodically for events
or changes in circumstances that may indicate that the carrying amount is
not recoverable on an undiscounted cash flow basis.
FEDERAL FUNDS PURCHASED - Federal funds purchased generally mature within
one to four days from the transaction date. At December 31, 1999 and 1998,
there were no federal funds purchased outstanding.
53
<PAGE> 56
INCOME RECOGNITION - Interest income on loans is recognized based upon the
principal amounts outstanding. Loans over 90 days past due may not be
placed on nonaccrual if they are in the process of collection and are
either secured by property having a realizable value at least equal to the
outstanding debt and accrued interest or are fully guaranteed by a
financially responsible party whom the Bank believes is willing and able
to discharge the debt, including accrued interest. Loans are placed on a
nonaccruing status when management believes that interest on such loans
may not be collected in the normal course of business.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan.
Trade finance fees and commissions include fees for letters of credit and
acceptances. Nonrefundable fees on letters of credit and acceptances are
recognized at execution date.
Syndication and structuring fees are earned in connection with the
purchase, participation and placement, without recourse or future
obligation, of trade finance obligations and for arranging financing for
domestic and foreign customers. Nonrefundable fees earned for such
transactions are fully recognized in income at the time the transaction is
consummated.
TRANSFERS OF FINANCIAL ASSETS - Transfers of loans and securities for
which the Company has surrendered control over those assets are accounted
for as sales to the extent that consideration other than beneficial
interests in the transferred assets is received in exchange. If a sale,
the Company recognizes and initially measures assets controlled and
liabilities incurred at fair value and gain or loss is recognized
immediately into income. All financial asset transfers not meeting the
sale criteria are required to be accounted for as secured borrowing with
collateral (or other security interest) pledged. During 1999, 1998 and
1997, the Company recorded no gains or losses on transfers of loans and
securities.
INCOME TAXES - The provision for income taxes is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities. The Company provides for deferred
taxes under the liability method. Under such method, deferred taxes are
adjusted for tax rate changes as they occur. Deferred income tax assets
and liabilities are computed annually for differences between the
financial statements and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
NET INCOME PER COMMON SHARE - Basic earnings per share is computed based
on the average number of common shares outstanding and diluted earnings
per share is computed based on the average number of common and potential
common shares (consisting of stock options, see Note 9) outstanding under
the treasury stock method.
STOCK SPLIT - On January 21, 1997, the Company's Board of Directors (the
"Board") approved a 6.5 for 1 common stock split (see Note 9). Retroactive
restatement has been made to all share amounts to reflect the stock split.
STOCK-BASED COMPENSATION - SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, encourages, but does not require, companies to record
compensation cost for stock-based employee and non-employee members of the
Board compensation plans at fair value. The Company has chosen to continue
to account for stock-based compensation to employees and non-employee
members of the Board using the intrinsic value method as prescribed by
Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations. Accordingly,
compensation cost for stock options issued to employees and non-employee
members of the Board are measured as the excess, if any, of the fair value
of the Company's stock at the date of grant over the amount an employee or
non-employee member of the Board must pay for the stock.
RECLASSIFICATIONS - Certain amounts in the 1998 and 1997 financial
statements have been reclassified for comparative purposes.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. Among other provisions, SFAS No. 133
establishes accounting and reporting standards for derivative instruments
and for hedging activities. It also requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the
FASB issued SFAS 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATE OF SFAS STATEMENT NO. 133, which
changes the effective date of SFAS 133 for financial statements for fiscal
years beginning after June 15, 2000. Management has not determined what
effects, if any, the adoption of SFAS No. 133 will have on the Company's
consolidated financial statements.
54
<PAGE> 57
2. INVESTMENT SECURITIES
A comparison of the amortized cost and fair value of investment securities
at December 31, 1999 and 1998 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999
---------------------------------------------------
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Foreign debt securities $180,138 $ 1,283 $ 10,311 $171,110
U.S. Government and agency securities 54,698 5 5 54,698
Mortgage backed securities 28,370 -- 1,792 26,578
Perpetual subordinated euronotes 15,000 -- 3,579 11,421
Foreign bank stocks 4,180 -- -- 4,180
Municipal bonds 3,239 -- -- 3,239
Federal Reserve Bank stock 1,985 -- -- 1,985
Other 1,100 28 62 1,066
-------- -------- -------- --------
Total $288,710 $ 1,316 $ 15,749 $274,277
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Government and agency securities $ 46,835 $ 11 $ 2 $ 46,844
Foreign debt securities 20,284 15 383 19,916
Perpetual subordinated euronotes 15,000 -- -- 15,000
Federal Reserve Bank stock 1,262 -- -- 1,262
Foreign bank stocks 1,028 -- 276 752
Other 1,100 28 177 951
-------- -------- -------- --------
Total $ 85,509 $ 54 $ 838 $ 84,725
======== ======== ======== ========
HELD TO MATURITY:
Mortgage backed securities $ 17,242 $ 30 $ 203 $ 17,069
Municipal bonds 3,000 -- -- 3,000
Foreign government debt securities 10,049 -- -- 10,049
-------- -------- -------- --------
Total $ 30,291 $ 30 $ 203 $ 30,118
======== ======== ======== ========
</TABLE>
There were no sales of securities available for sale during the years
ended December 31, 1999 and 1998. During the year ended December 31, 1997, gross
realized gains on the sale of securities available for sale were approximately
$109,000 and gross realized loss were approximately $1,000.
55
<PAGE> 58
Investment securities with an amortized cost and fair value of
approximately $79,896,000 and $78,207,000, respectively, at December 31,
1999, were pledged as collateral for public deposits.
The following table shows the amortized cost and the fair value by
maturity distribution of the securities portfolio at December 31, 1999:
AVAILABLE FOR SALE
---------------------
AMORTIZED FAIR
COST VALUE
--------- ------
Within one year $144,571 $140,057
One to five years 25,952 24,726
Five to ten years 57,063 55,029
Over ten years 38,859 35,813
---------- ----------
Total 266,445 255,625
Federal Reseve Bank stock 1,985 1,985
Foreign bank stocks 4,180 4,180
Perpetual subordinated euronotes 15,000 11,421
Other 1,100 1,066
---------- ----------
Total securities $ 288,710 $ 274,277
========== ==========
3. LOANS
Loans consist of the following at December 31, 1999 and 1998 (dollars in
thousands):
1999 1998
---- ----
Commercial (primarily trade related):
Domestic $ 394,625 $ 289,032
Foreign 600,924 750,469
Acceptances discounted - trade related:
Domestic 59,040 56,706
Foreign 59,256 72,597
Residential mortgages 2,140 10,494
Installment 216 232
---------- ----------
Total 1,116,201 1,179,530
Less:
Unearned income:
Acceptances discounted 2,669 2,814
Other 145 217
Allowance for credit losses 21,411 12,794
---------- ----------
Loans - net $1,091,976 $1,163,705
========== ==========
The Bank's business activity is mostly with customers and correspondent
banks located in South Florida, Central America, South America, and the
Caribbean. The majority of the credits are for the finance of imports and
exports and have maturities of up to 180 days. These credits are secured
either by banks, factored receivables, cash, or the underlying goods.
Management closely monitors its credit concentrations by industry,
geographic locations, and type of collateral as well as individual
customers.
As of December 31, 1998, the Company had approximately $136 million in
bearer debt securities which were classified as loans and were accounted
for as held to maturity securities under SFAS No. 115. During 1999, all
held to maturity securities were transferred to and are being accounted
for as available for sale securities under SFAS No. 115.
56
<PAGE> 59
A summary of the activity in the allowance for credit losses for the years
ended December 31, 1999, 1998 and 1997 is as follows (dollars in
thousands):
1999 1998 1997
---- ---- ----
Balance at the beginning of year $ 12,794 $ 10,317 $ 5,725
Provision charged to operations 20,300 9,621 6,980
Loan charge-offs, net of recoveries (11,683) (7,144) (2,388)
-------- -------- --------
Balance at the end of year $ 21,411 $ 12,794 $ 10,317
======== ======== ========
At December 31, 1999 and 1998, the recorded investment in impaired loans
was approximately $16,583,000 and $8,586,000, respectively. These impaired
loans required an allowance for credit losses of approximately $6,173,000
and $2,786,000, respectively. The average recorded investment in impaired
loans during the years ended December 31, 1999 and 1998 was approximately
$17,884,000 and $8,562,000, respectively. For the years ended December 31,
1999, 1998 and 1997 the Bank recognized interest income on these impaired
loans prior to their classification as impaired of approximately $155,000,
$412,000 and $65,000, respectively.
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31, 1999
and 1998 (dollars in thousands):
1999 1998
---- ----
Land $ 811 $ 811
Building and improvements 1,559 1,530
Leasehold improvements 2,260 2,553
Furniture and equipment 6,965 5,691
Automobiles 80 80
------- -------
Total 11,675 10,665
Less accumulated depreciation and amortization 6,466 5,890
------- -------
Property and equipment - net $ 5,209 $ 4,775
======= =======
Depreciation and amortization expense related to property and equipment
for the years ended December 31, 1999, 1998 and 1997 was approximately
$1,060,000, $944,000, and $841,000, respectively.
The Bank owns the land and the building for one of its Miami branches, the
Winter Haven and Sarasota branches and leases its main facilities, six
branches and certain equipment under noncancelable agreements (accounted
for as operating leases). The leases have renewal periods of five to ten
years, available to the Bank under the same terms and conditions as the
initial leases and one subject to annual rent adjustments based upon the
Consumer Price Index.
57
<PAGE> 60
The approximate future minimum payments, by year and in the aggregate, on
these leases at December 31, 1999 are as follows (dollars in thousands):
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
2000 $2,345
2001 2,174
2002 1,860
2003 1,776
2004 1,761
Thereafter 3,654
-----
Total minimum lease payments $ 13,570
========
Rent expense was approximately $1,802,000, $1,726,000, and $1,381,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
5. DEPOSITS
Deposits consist of the following at December 31, 1999 and 1998 (dollars
in thousands):
1999 1998
---- ----
Noninterest-bearing $ 77,390 $ 76,895
---------- ----------
Interest-bearing:
NOW, money market and savings 142,790 90,477
Time, under $100,000 816,845 672,736
Time, $100,000 and over 409,425 530,373
International Banking Facility (IBF) deposits 89,156 106,571
---------- ----------
Total interest-bearing 1,458,216 1,400,157
---------- ----------
Total $1,535,606 $1,477,052
========== ==========
Time deposits in amounts of $100,000 and over at December 31, 1999 mature
as follows (dollars in thousands):
AMOUNT
------
Three months or less $ 87,410
Three months to twelve months 246,582
One year to five years 75,433
--------
Total $409,425
========
58
<PAGE> 61
6. INCOME TAXES
The components of the provision for income taxes are as follows for the
years ended December 31, 1999, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current income taxes:
Federal $ 12,844 $ 11,503 $ 10,352
State 395 149 481
Foreign 790 1,092 880
-------- -------- --------
Total current provision 14,029 12,744 11,713
-------- -------- --------
Deferred income taxes:
Federal (3,539) (683) (2,515)
State (207) (40) (100)
-------- -------- --------
Total deferred (benefit) provision (3,746) (723) (2,615)
-------- -------- --------
Provision for income taxes $ 10,283 $ 12,021 $ 9,098
======== ======== ========
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to pretax income for the
following reasons:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 35.0 % 35.0 % 35.0 %
Increase in taxes:
State income tax, net of federal income tax benefit 0.4 0.1 1.0
Other, net 0.5 0.4 0.4
------ ------ ----
Effective income tax rate 35.9 % 35.5 % 36.4 %
====== ====== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. The tax effects
of significant items comprising the Company's net deferred tax asset as of
December 31, 1999 and 1998 are as follows (dollars in thousands):
1999 1998
---- ----
Deferred tax assets:
Difference between book and tax basis
of allowance for credit losses $7,628 $4,734
Difference between book and tax basis of property 193 63
Non-accrual interest 492
------- ------
Total deferred tax assets 8,313 4,797
------- ------
Deferred tax liabilities-other 230
Net deferred tax asset 8,313 4,567
Available for sale securities 5,347 298
------- ------
$13,660 $4,865
======= ======
59
<PAGE> 62
Recognition of deferred tax assets is based on management's belief that it
is more likely than not that the tax benefit associated with certain
temporary differences and tax credits will be realized. A valuation
allowance is recorded for those deferred tax items for which it is more
likely than not that realization will not occur. No valuation allowances
have been recorded at December 31, 1999 and 1998, respectively.
7. TRUST PREFERRED SECURITIES
On December 28, 1998, the Company issued $11,000,000 of 9.75% Beneficial
Unsecured Securities, Series A (the "Preferred Securities") out of a
guarantor trust. On January 14, 1999, the Trust issued an additional
$1,650,000 of Preferred Securities upon the exercise of an over-allotment
by the underwriters. The Trust holds 9.75% Junior Subordinated Deferrable
Interest Debentures, Series A (the "Subordinated Debentures") of the
Company purchased with the proceeds of the securities issued. Interest
from the Subordinated Debentures of the Company is used to fund the
preferred dividends of the Trust. Distributions on the Preferred
Securities are cumulative and are payable quarterly. The Trust must redeem
the Preferred Securities when the Subordinated Debentures are paid at
maturity on or after December 31, 2028, or upon earlier redemption.
Subject to the Company having received any required approval of regulatory
agencies, the Company has the option at any time on or after December 31,
2008 to redeem the Subordinated Debentures, in whole or in part.
Additionally, the Company has the option at any time prior to December 31,
2008 to redeem the Subordinated Debentures, in whole but not in part, if
certain regulatory or tax events occur or if there is a change in certain
laws that require the Trust to register under the law. The Preferred
Securities are considered to be Tier I capital for regulatory purposes.
8. STOCKHOLDERS' EQUITY
REGULATORY MATTERS - The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
60
<PAGE> 63
The components of regulatory capital used to calculate capital ratios are
detailed in the table below:
<TABLE>
<CAPTION>
At December 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Stockholders' equity per generally accepted accounting principles $ 133,898 $ 123,546
Trust preferred securities 12,650 11,000
Less intangible assets (1,658) (1,429)
Other accumulated comprehensive loss 9,086 486
Less: mandated regulatory adjustments (net of applicable
income taxes) (24,875)
--------- ---------
Tier 1 Capital 129,101 133,603
Allowance for credit losses 14,933 12,794
--------- ---------
Total Capital $ 144,034 $ 146,397
========= =========
</TABLE>
As part of its examination process, the Office of the Comptroller of the
Currency ("OCC") has directed the Bank, among other things, to take $32
million in transfer risk reserves related to the Bank's exposure in
Ecuador and "mark to market" certain assets based upon the OCC's
interpretation of regulatory accounting rules. While the Bank has taken
the actions directed by the OCC for regulatory reporting purposes only, it
disagrees with the OCC's interpretations of the regulatory accounting
rules and is appealing such directions within the OCC. In this connection,
the OCC has initiated formal administrative action under Section 8 of the
Federal Deposit Insurance Act which the Bank has not agreed to and which
the Bank is appealing and disputing in appropriate administrative actions
within the OCC. As a result of these proceedings and directions, however,
the Bank may not accept new, or renew, "brokered deposits" without the
prior approval of the Federal Deposit Insurance Corporation or appoint new
directors or senior officers without the prior approval of the OCC. The
Bank does not anticipate that either of such restrictions will have any
material adverse effect on its business or operations. The Company is
satisfied that the reserves it recorded in the third quarter of 1999
relating to its Ecuador and other Latin American exposures are adequate
and in accordance with generally accepted accounting principles.
The Company is subject to risk-based capital and leverage guidelines
issued by the Board of Governors of the Federal Reserve System and the
Bank is subject to similar guidelines issued by the OCC. These guidelines
are used to evaluate capital adequacy and include the required minimums
shown in the following table.
To be "well capitalized" under federal bank regulatory agency definitions,
a depository institution must have a Tier 1 ratio of at least 6%, a
combined Tier 1 and Tier 2 ratio of at least 10% and a leverage ratio of
at least 5% and not be subject to a directive, order or written agreement
to meet and maintain specific capital levels. The regulatory agencies are
required by law to take specific prompt actions with respect to
institutions that do not meet minimum capital standards. As of December
31, 1999 and 1998, the Bank's capital ratios exceeded the ratios set by
the regulatory agencies for "well capitalized" depository institutions.
The Company's consolidated and the Bank's actual capital amounts and
ratios are also presented in the table (dollars in thousands).
61
<PAGE> 64
<TABLE>
<CAPTION>
TO BE WELL
REQUIRED CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------------- ------------------------- --------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ---------- ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999:
COMPANY
Total Capital (to Risk Weighted Assets) $ 144,034 12.5% $92,436 8.0 %
========== ===== ======== =====
Tier I Capital (to Risk Weighted Assets) $ 129,101 11.2% $46,218 4.0 %
========== ===== ======== =====
Tier I Capital (to Average Assets) $ 129,101 7.5% $51,659 3.0 %
========== ==== ======== =====
BANK
Total Capital (to Risk Weighted Assets) $ 136,501 11.4 % $92,511 8.0 % $ 119,389 10.0 %
========== ====== ======== ===== ========== ======
Tier I Capital (to Risk Weighted Assets) $ 121,497 10.2 % $47,755 4.0 % $ 71,633 6.0 %
========== ====== ======== ===== ========= =====
Tier I Capital (to Average Assets) $ 121,497 7.1 % $68,503 4.0 % $ 85,629 5.0 %
========== ===== ======== ===== ========= =====
AS OF DECEMBER 31, 1998:
COMPANY
Total Capital (to Risk Weighted Assets) $ 146,397 13.2% 8.0 % 8.0 %
========== ===== ===== =====
Tier I Capital (to Risk Weighted Assets) $ 133,603 12.0% 4.0 % 4.0 %
========== ===== ===== =====
Tier I Capital (to Average Assets) $ 133,603 8.0% 3.0 % 3.0 %
========== ==== ===== =====
BANK
Total Capital (to Risk Weighted Assets) $ 134,680 12.2 % 8.0 % 8.0 % $ 110,768 10.0 %
========== ====== ===== ===== ========== ======
Tier I Capital (to Risk Weighted Assets) $ 121,886 11.0 % 4.0 % 4.0 % $ 66,461 6.0 %
========== ====== ===== ===== ========== ======
Tier I Capital (to Average Assets) $ 121,886 7.3 % 4.0 % 4.0 % $ 83,086 5.0 %
========== ====== ===== ===== ========== ======
</TABLE>
The Bank is currently disputing certain additional adjustments mandated by
the OCC for regulatory reporting purposes. If the Bank were to record
these adjustments the capital ratios for the Company and the Bank as of
December 31, 1999 would be as follows:
COMPANY BANK
------- ----
Total Capital (to Risk Weighted Assets) 11.5% 10.9%
Tier I Capital (to Risk Weighted Assets) 10.2% 9.6%
Tier I Capital (to Average Assets) 6.9% 6.5%
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1999, approximately $48,479,000 of retained earnings were available for
dividend declaration without prior regulatory approval. During 1999 and
1998, approximately $4,614,000 and $2,252,000 of dividends were paid by
the Bank to the Company, respectively, which are within the amounts
allowed by regulations.
The Company has placed more emphasis on financing imports of goods into
the United States and thereby increased the relative size of its assets
employed in the domestic market as compared to its exposure in the Region
(as defined in Note 14). The Company will also focus on the Hispanic
business community in light of bank consolidations in recent months which
has resulted in the absorption of several Hispanic banks in the South
Florida area. In addition, prudent risk management, in particular with
regard to emerging market countries, calls for avoidance of high
concentrations of risk in these countries in relation to a bank's capital.
Currently, United States bank regulatory agencies consider that exposure
in these markets should be limited to levels that would not impair the
safety and soundness of a banking institution. As a consequence, the
Company's exposure in the Region was significantly reduced at December 31,
1998 and was further reduced in 1999. The Company expects the 1999 levels
will be maintained in 2000. While the Company is well capitalized for the
purposes of the "prompt corrective action" provisions, to date it has not
paid any dividends and does not anticipate doing so. Nevertheless, due to
62
<PAGE> 65
economic difficulties being experienced by various countries in the
Region, the Federal Reserve has requested that the Company not pay any
dividends or incur any debt (excluding "trust preferred securities")
without the consent of the Federal Reserve.
PUBLIC OFFERING - On March 26, 1997 the Company completed its initial
public offering issuing an aggregate of 2,760,000 shares at $15.50 per
share with net proceeds of approximately $38,994,000. In connection with
the initial public offering, the Board amended and restated the articles
of incorporation of the Company authorizing 75,000,000 shares of common
stock and 10,000,000 shares of "blank check" preferred stock. In addition,
the Board approved a 6.5 for 1 common stock split and reorganization of
the capital structure of the Company consisting of (i) the conversion of
all outstanding shares of the Company's Preferred Shares (Series B and C)
into 466,160 shares (post-stock split) of common stock and (ii) the
issuance of an aggregate of 1,396,759 shares (post-stock split) of common
stock for all outstanding warrants to purchase shares of common stock of
the Bank.
PREFERRED STOCK - During June 1994, the Company's Board amended and
restated the Company's articles of incorporation providing for the
issuance of shares of Series B and Series C ("Preferred Shares"), 14%
fixed rate, non-cumulative, non-voting, perpetual preferred stock.
The Company, on June 30, 1994, issued an aggregate of 60,207 shares of
Series B Preferred Shares at $50 per share and on December 31, 1994 issued
41,000 shares of Series C Preferred Shares at $50 per share. In connection
with the public offering and reorganization the preferred shares were
converted into 466,160 shares (post-stock split) of common stock.
WARRANTS - In connection with the stock purchase and sale agreement dated
March 21, 1988, stock warrants were issued which granted an option to
acquire additional common shares of the Bank in an amount equal to twenty
percent of the outstanding common shares of the Bank at the time of
exercise, at $.01 per share. The option was for a period of ten years that
commenced on May 28, 1988. In connection with the public offering and
reorganization the warrants (and bank stock resulting from exercise of
warrants) were converted into 1,396,759 shares (post-stock split) of
common stock.
9. STOCK OPTION PLAN
In December 1993, the Company adopted the 1993 Stock Option Plan (the
"1993 Plan"), pursuant to which 877,500 shares of Common Stock (post-stock
split) were reserved for issuance upon exercise of options. The 1993 Plan
is designed as a means to retain and motivate key employees and directors.
The Company's Compensation Committee, or in the absence thereof, the
Board, administers and interprets the 1993 Plan and is authorized to grant
options thereunder to all eligible employees of the Company, including
executive officers and directors (whether or not they are employees) of
the Company 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. The 1993 Plan will terminate on December 31, 2003,
unless sooner terminated by the Company's Board.
Option activity for the years ended December 31, 1999, 1998 and 1997 are
presented below:
63
<PAGE> 66
<TABLE>
<CAPTION>
NUMBER OPTION FAIR
1999 OF SHARES PRICE VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance 711,219 $ 9.23 - 29.125
Exercised (31,085) 9.23
Canceled (31,113) 25.00 - 29.125
------- -----------------
Ending Balance 649,021 $ 9.23 - $29.125
======
Options which became exercisable
during the year 186,803
Options exercisable at December 31, 533,436
</TABLE>
<TABLE>
<CAPTION>
NUMBER OPTION FAIR
1998 OF SHARES PRICE VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance 776,875 $ 9.23 - 29.125
Granted (1) 173,388 25.00 - 25.47 $7.64 -7.50
Exercised (222,113) 9.23
Canceled (16,931) 9.23 - 29.125
--------- -----------------
Ending Balance 711,219 $9.23 - $29.125
=========
Options which became exercisable
during the year 649,500
Options exercisable at December 31, 427,387
</TABLE>
<TABLE>
<CAPTION>
NUMBER OPTION FAIR
1997 OF SHARES PRICE VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance 585,000 $ 9.23
Granted (1) 193,500 29.125 $ 6.55
Canceled (1,625) 9.23
--------- -----------------
Ending Balance 776,875 $9.23 - $29.125
========= =================
Options which became exercisable
during the year --
Options exercisable at December 31, --
- ----------------------------------------------------------------------------------------
</TABLE>
(1) The grants vest twelve months after the grant as to 33.3% of the grant,
33.3% vesting eighteen months after grant and the remaining 33.4% vesting
twenty-four months after grant or upon the death of the option holder if
earlier.
The following table summarizes information about all stock options
outstanding at December 31, 1999:
OPTIONS OUTSTANDING
----------------------------------------------------------------
OPTIONS REMAINING
OUTSTANDING CONTRACTED LIFE EXERCISE PRICE
----------------------------------------------------------------
320,415 6 years $ 9.230
176,768 8 years $ 29.125
151,838 9 years $ 25.00 - $ 25.47
64
<PAGE> 67
The Company applies APB No. 25 and related interpretations in accounting
for its stock options plan to employees and non-employee members of the
Board as described in Note 1. Accordingly, no compensation expense has
been recognized in the years ended December 31, 1999, 1998 and 1997,
related to this plan.
For purposes of the following proforma disclosures, the fair value of the
options granted in 1998 and 1997 have been estimated on the date of grant
using the Black-Scholes options pricing model with the following
assumptions used for grants in 1998 and 1997, respectively: no dividend
yield; expected volatility of 48% and 32%; risk-free interest rate of 4.5%
and 5.68% and an expected term of two years and the fair value of the
options granted in 1996 was estimated using the minimum value method
prescribed by SFAS No. 123 for nonpublic entities. Had compensation cost
been determined based on the fair value at the date of grant consistent
with requirement of SFAS 123 the Company's net income and net income and
per common share would have been reduced to the proforma amounts indicated
below (dollars in thousands, except share information).
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---- ---- ----
Net income:
As reported $ 18,360 $ 21,799 $ 15,903
Proforma 17,301 21,185 15,762
Net income per common share:
Basic:
As reported 1.82 2.18 1.81
Proforma 1.72 2.12 1.79
Diluted:
As reported 1.79 2.12 1.73
Proforma 1.68 2.06 1.72
10. 401(K) PLAN
The Company maintains a 401(k) plan, which was initiated in 1993, for its
executive officers and other employees. Under the terms of the 401(k)
plan, for each dollar contributed by an employee, the Company intends to
contribute a discretionary amount on behalf of participants (the "Matching
Contribution"). In addition, at the end of the plan year, the Company may
make an additional contribution (the "Additional Contributions") on behalf
of participants. Additional Contributions are allocated in the same
proportion that the Matching Contribution made on the participant's behalf
bears to the Matching Contribution made on behalf of all participants
during the year. The amount that the Company contributes to the 401(k)
plan has historically varied from year to year. During the years ended
December 31, 1999, 1998 and 1997, the Company's matching and additional
contributions amounted to approximately $82,000, $155,000 and $128,000
respectively.
65
<PAGE> 68
11. RELATED PARTY TRANSACTIONS
Directors, officers and their related entities have borrower and depositor
relationships with the Bank in the ordinary course of business. Loan
balances to these individuals and their related entities approximated
$544,000 and $324,000 at December 31, 1999 and 1998, respectively, and the
balance of deposit accounts approximated $1,897,000 and $1,722,000 at
December 31, 1999 and 1998, respectively. At December 31, 1999 there were
no outstanding commercial and standby letters of credit transactions
outstanding with these individuals. At December 31, 1998 there were
approximately $100,000 of outstanding commercial and standby letters of
credit transactions with these individuals and their related entities
12. OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES
OFF-BALANCE SHEET RISK AND COMMITMENT. In the normal course of business,
the Bank utilizes various financial instruments with off-balance sheet
risk to meet the financing needs of its customers, including commitments
to extend credit, commercial letters of credit, shipping guarantees,
standby letters of credit and forward foreign exchange contracts. These
financial instruments involve, to varying degrees, elements of credit
risk. The credit risk associated with these financial instruments, as
further discussed herein, is not recorded in the statement of condition.
The contractual or notional amounts of such instruments reflect the extent
of involvement the Bank has in particular classes of financial
instruments. The credit risks associated with financial instruments are
generally managed in conjunction with the Bank's statements of condition
activities and are subject to normal credit policies, financial controls,
and risk limiting and monitoring procedures.
Credit losses are incurred when one of the parties fails to perform in
accordance with the terms of the contract. The Bank's exposure to credit
loss is represented by the contractual or notional amount of the
commercial letters of credit, shipping guarantees, and standby letters of
credit. This is the maximum potential loss of principal in the event the
commitment is drawn upon and the counterparty defaults.
A summary of the Bank's contractual or notional amounts for financial
instruments with off-balance sheet risk as of December 31, 1999 and 1998
along with a further discussion of these instruments, is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
CONTRACTUAL OR
NOTIONAL AMOUNT
--------------------------------
1999 1998
------------- ---------------
<S> <C> <C>
Commercial letters of credit $ 129,475 $ 116,078
Standby letters of credit 21,340 12,566
Shipping guarantees (indemnity letters) 629 72
Commitments to purchase foreign currency 5,862 2,850
Commitments to sell foreign currency 5,879 4,303
Commitments to extend credit 64,220 47,636
</TABLE>
A commercial letter of credit is an instrument containing the commitment
of the Bank stating that the Bank will honor drawings under and in full
compliance with the terms of the letter of credit. The letters of credit
are usually drawn on the presentation of certain required documents, such
as commercial invoice and bills of lading. Essentially, letters of credit
facilitate the purchase of merchandise by the Bank's customers by
substituting the credit standing of the Bank for that of the Bank's
customer. Commercial letter of credit contracts are generally for a short
commitment period.
66
<PAGE> 69
Standby letters of credit are commitments issued to guarantee the
performance of a customer to a third party. The Bank issues standby
letters of credit to ensure contract performance or assure payment by its
customers. The guarantees extend for periods up to 12 months. The risk
involved in issuing standby letters of credit is the same as the credit
risk involved in extending loan facilities to customers and they are
subject to the same credit approvals and monitoring procedures. The Bank
holds certificates of deposit and guarantees from other banks as
collateral supporting those commitments for which collateral is deemed
necessary. The extent of collateral held for standby letters of credit
commitments at December 31, 1999 varies from zero percent to 100 percent.
Shipping guarantees (also known as indemnity letters) are letters of
guarantee issued by the Bank on behalf of its customer in favor of
shipping agents. Normally, such facility is extended in instances where
goods purchased under letters of credit have arrived at the port of
destination and the shipping documents necessary for the release of the
goods have not been received by the Bank. The purpose of the shipping
guarantee is to indemnify the transportation company for any loss that
might arise from the release of goods to the Bank's customer in the
absence of the shipping documents.
The Bank enters into forward foreign exchange contracts with its customers
for the delayed exchange of foreign currency for U.S. dollars on behalf of
such customers. These contracts provide a vehicle for the Bank's customers
to hedge their future obligations in foreign currency. Upon entering such
contracts with its customers, the Bank meets these foreign currency
commitments by entering into equivalent contracts with other banks to
purchase or sell equal amounts of the foreign currency to be delivered or
received. Risks arise from the possible inability of the Bank's
counterparties to meet the terms of their contracts and from movements in
foreign currency exchange rates. However, the full notional amount of the
contract is not at risk, as the Bank has the ability to settle these
contracts in the foreign exchange market.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank, upon
extension of credit, is based on management's credit evaluation of the
counterparty.
LITIGATION. On January 31, 1998, Development Specialists, Inc., the
Liquidating Trustee of the Model Imperial Liquidating Trust established
under the Plan of Reorganization in the Model Imperial, Inc. Chapter 11
Bankruptcy proceeding, filed an action against the Bank in the United
States Bankruptcy Court for the Southern District of Florida objecting to
the Bank's proof of claim in the Chapter 11 proceeding and affirmatively
seeking damages against the Bank in excess of $34 million for alleged
involvement with former officers and directors of Model Imperial, Inc. in
a scheme to defraud Model Imperial, Inc. and its bank lenders. The action
is one of several similar actions filed by the Trustee against other
defendants that were involved with Model Imperial seeking the same damages
as in the action against the Bank. The Company believes the claims are
without merit, and the Bank is vigorously defending the action. A trial on
various bankruptcy preference issues was held in November 1999, and the
parties are awaiting the judge's ruling.
From time to time the Bank is engaged in additional litigation incidental
to its operations.
While any litigation contains an element of uncertainty, the Bank, after
considering the advice of legal counsel, believes the outcome of all
aforementioned litigation will not have a material adverse effect on the
Bank's financial position, results of operations or liquidity.
67
<PAGE> 70
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial
statements since December 31, 1999 and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein
(dollars in thousands).
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- ---------- --------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 85,110 $ 85,110 $ 111,790 $ 111,790
Interest-earning deposits
with other banks 187,685 187,685 200,203 200,203
Securities available for sale 274,277 274,277 84,725 84,725
Securities held to maturity 30,291 30,118
Loans, net 1,091,976 1,082,589 1,163,705 1,160,775
Liabilities:
Demand deposits 220,180 220,180 167,372 167,372
Time deposits 1,315,426 1,315,434 1,309,680 1,314,000
Other borrowings 6,116 6,116
Trust preferred securities 12,650 9,962 11,000 11,000
Contingent assets and liabilities:
Bankers acceptances 27,767 208 75,567 567
Deferred payment letters of credit 5,835 26 6,468 29
Off-balance sheet instruments unrealized gains (losses):
Commitments to extend credit 124 90
Commercial letters of credit 323 273
Standby letters of credit 320 188
Indemnity letters of credit 2 1
Commitments to purchase foreign currency 66 (8)
Commitments to sell foreign currency 238 29
</TABLE>
CASH AND CASH EQUIVALENTS - The carrying amount of cash on hand, demand
deposits with other banks, and federal funds sold is a reasonable estimate
of fair value.
INTEREST-EARNING DEPOSITS WITH OTHER BANKS - The fair value of time
deposits with other banks (several of which are foreign) is estimated
using the rates currently offered for deposits of similar remaining
maturities and taking into account the creditworthiness of the other bank.
68
<PAGE> 71
SECURITIES AVAILABLE FOR SALE, SECURITIES HELD TO MATURITY AND TRUST
PREFERRED SECURITIES - The fair values are based on quoted market prices
or dealer quotes. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
LOANS - The interest rates for commercial loans and acceptances discounted
are based on the prime lending rate. The Bank updates these interest rates
on a monthly basis. Thus, the carrying amount of commercial loans and
acceptances discounted is a reasonable estimate of fair value. The fair
value of other types of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
DEMAND DEPOSITS AND TIME DEPOSITS - The fair value of demand deposits,
savings accounts, and certain money market deposits is the amount payable
on demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.
OTHER BORROWINGS - The carrying amount of other borrowings is a reasonable
estimate of fair value.
CONTINGENT ASSETS AND LIABILITIES - The fair values of these assets and
corresponding liabilities are estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms
of the agreements and the present creditworthiness of the counterparties.
OFF-BALANCE SHEET INSTRUMENTS - The fair value of commitments is estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed-rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of
credit is based on fees currently charged for similar agreements, or on
the estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date. The fair values of
commitments to purchase and sell foreign currency are based on quoted
market prices or dealer quotes.
14. FOREIGN ACTIVITIES
The Company's foreign activities primarily consist of providing global
trade finance, with particular emphasis on trade finance, with and between
South America, Central America, the Caribbean (the "Region") and the
United States or otherwise involving the Region. The Company considers
assets and revenues as associated with foreign activities on the basis of
the country of domicile of the customer. The nature of the Company's
operations make it difficult to determine precisely foreign activities
profitability since it involves the use of certain judgmental allocations.
Rates used to determine charges or credits for funds used or generated by
foreign activities are based on actual costs during the period for
selected interest-bearing sources of funds. Other operating income and
expenses are determined based upon internal allocations appropriate to the
individual activities. A summary of
69
<PAGE> 72
the Company's domestic and foreign activities as of and for the years
ended December 31, 1999, 1998 and 1997 is as follows (dollars in
thousands):
INCOME BEFORE
OPERATING PROVISION FOR NET TOTAL
INCOME INCOME TAXES INCOME ASSETS
--------- ------------ --------- -----------
1999
Domestic $ 27,739 $ 12,789 $ 9,855 $ 653,206
Foreign 53,308 15,854 8,505 1,070,184
---------- ---------- ---------- ----------
Total $ 81,047 $ 28,643 $ 18,360 $1,723,390
========== ========== ========== ==========
1998
Domestic $ 16,708 $ 8,789 $ 6,897 $ 610,834
Foreign 54,826 25,031 14,902 1,096,729
---------- ---------- ---------- ----------
Total $ 71,534 $ 33,820 $ 21,799 $1,707,563
========== ========== ========== ==========
1997
Domestic $ 12,635 $ 5,548 $ 3,529 $ 426,130
Foreign 42,769 19,453 12,374 916,004
---------- ---------- ---------- ----------
Total $ 55,404 $ 25,001 $ 15,903 $1,342,134
========== ========== ========== ==========
15. PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for Hamilton Bancorp Inc. (Parent Company
only) is as follows (dollars in thousands):
STATEMENTS OF CONDITION
DECEMBER 31,
-------------------
1999 1998
-------- --------
ASSETS
Demand deposit with the Bank $ 5,536 $ 190
Securities available for sale 888 9,763
Goodwill, net 361 404
Other assets 1,351 960
Investment in subsidiaries 100,153 93,543
Investment in the Bank's preferred stock 38,650 30,050
-------- --------
Total $146,939 $134,910
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Subordinated debentures held by the Trust $ 13,041 $ 11,340
Other liabilities -- 24
Stockholders' equity 133,898 123,546
-------- --------
Total $146,939 $134,910
======== ========
70
<PAGE> 73
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
STATEMENTS OF INCOME
Interest income $ 313 $ 530 $ 339
Dividends from Bank and other income 4,708 2,258 1,105
--------- --------- ---------
Total income 5,021 2,788 1,444
Interest expense 1,270 12
Operating expenses 1,290 1,539 294
--------- --------- ---------
Total expenses 2,560 1,551 294
--------- --------- ---------
Income before equity in undistributed income of subs2,461y 1,237 1,150
Equity in undistributed income of subsidiaries 15,229 20,391 14,787
--------- --------- ---------
Income before income tax (benefit) provision 17,690 21,628 15,937
Income tax (benefit) provision (670) (171) 34
--------- --------- ---------
Net income $ 18,360 $ 21,799 $ 15,903
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income $ 18,360 $ 21,799 $ 15,903
Adjustments to reconcile net income to
net cash provided by operations:
Equity in undistributed income of subsidiary (15,229) (20,391) (14,787)
Write down on security available for sale 587
Amortization of goodwill 43 43 43
Other (517) 1,198 (269)
--------- --------- ---------
Net cash provided by operating activities 2,657 3,236 890
--------- --------- ---------
Cash flows from investing activities:
Purchase of securities available for sale (80,307) (140,163) (96,504)
Proceeds from maturities of securities available for sale 89,354 131,172 95,216
Payment for investment in Bank's common stock 0 0 (20,237)
Payment for investment in the Bank's preferred stock (8,600) (15,300) (10,000)
Payment for investment in the Trust's common stock (51) (340)
--------- --------- ---------
Net cash used in investing activities 396 (24,631) (31,525)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 592 2,050 38,994
Proceeds from issuance of trust preferred securities 1,701 11,340
Cash dividends on preferred stock 0 0 (319)
Net cash provided by (used in) financing activities 2,293 13,390 38,675
--------- --------- ---------
Net (decrease) increase in cash 5,346 (8,005) 8,040
Cash at beginning of year 190 8,195 155
--------- --------- ---------
Cash at end of year $ 5,536 $ 190 $ 8,195
========= ========= =========
</TABLE>
71
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
HAMILTON BANCORP INC.
(A FLORIDA CORPORATION)
(AS AMENDED ON MARCH 21, 2000)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1. Shareholders .............................................. 1
1.1 Annual Meeting ............................................ 1
1.2 Special Meeting ........................................... 1
1.3 Place of Meeting .......................................... 1
1.4 Action Without a Meeting .................................. 1
1.5 Notice Of Meeting ......................................... 1
1.6 Waiver of Notice Meeting .................................. 1
1.7 Fixing of Record Date ..................................... 2
1.8 Voting Record ............................................. 2
1.9 Voting Per Share .......................................... 2
1.10 Voting of Shares .......................................... 3
1.11 Proxies ................................................... 3
1.12 Quorum .................................................... 4
1.13 Manner of Action .......................................... 4
1.14 Voting for Directors ...................................... 4
1.15 Inspectors of Election .................................... 4
1.16 Conduct of Meetings ....................................... 5
Article 2. Board of Directors ............................................ 5
2.1 General Powers ............................................ 5
2.2 Number, Terms, Classification and Qualification ........... 5
2.3 Regular Meetings .......................................... 5
2.4 Special Meetings .......................................... 5
2.5 Waiver of Notice of Meeting ............................... 6
2.6 Quorum .................................................... 6
2.7 Manner of Action .......................................... 6
2.8 Presumption of Assent ..................................... 6
2.9 Action Without a Meeting .................................. 6
2.10 Meetings of the Board of Directors by Means of a Conference
Telephone or Similar Communications Equipment ............. 6
2.11 Resignation ............................................... 7
2.13 Vacancies ................................................. 7
2.14 Compensation .............................................. 7
Article 3. Committees of the Board of Directors ...................... 7
Article 4. Officers .................................................. 8
4.1 Officers .................................................. 8
4.2 Appointment and Term of Office ............................ 8
4.3 Resignation ............................................... 8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.4 Removal ................................................................... 8
4.5 Vacancies ................................................................. 8
4.6 Duties of Officers ........................................................ 8
4.7 Vice Presidents ........................................................... 8
4.8 Secretary ................................................................. 9
4.9 Treasurer ................................................................. 9
4.10 Other Officers, Employees and Agents ...................................... 9
4.11 Compensation .............................................................. 9
Article 5. Certificates of Stock ..................................................... 9
5.1 Certificates for Shares ................................................... 9
5.2 Transfer of Shares; Ownership of Shares ................................... 9
5.3 Lost Certificates ......................................................... 10
5.4 Legends for Preferences and Restrictions on Transfer ...................... 10
5.5 Registered Shareholders ................................................... 10
5.6 Redemption of Control Shares .............................................. 10
Article 6. Actions With Respect to Securities of Other Corporations .................. 11
Article 7. Amendments ................................................................ 11
Article 8. Corporate Seal ............................................................ 11
Article 9. Indemnification ........................................................... 11
Article 10. Gender .................................................................... 11
Article 11. Dividends ................................................................. 11
Article 12. Reserves .................................................................. 12
Article 13. Checks .................................................................... 12
Article 14. Fiscal Year ............................................................... 12
</TABLE>
-ii-
<PAGE> 4
BYLAWS OF
HAMILTON BANCORP INC.
ARTICLE 1. SHAREHOLDERS
1.1 ANNUAL MEETING. A meeting of shareholders shall be held each year
for the election of directors and for the transaction of any other business that
may come before the meeting. Annual meetings shall be held on such date and at
such time fixed, from time to time, by the Board of Directors.
1.2 SPECIAL MEETING. Special meetings of the shareholders shall be held
if called in accordance with the procedures set forth in the Corporation's
Articles of Incorporation for the call of a special meeting of shareholders.
1.3 PLACE OF MEETING. The Board of Directors may designate any place,
either within or without the State of Florida, as the place of meeting for any
annual or special meeting of the shareholders. If no designation is made, the
place of meeting shall be the principal office of the Corporation in the State
of Florida.
1.4 ACTION WITHOUT A MEETING. Any required vote of shareholders must be
taken at a meeting duly called and held, and may not be taken by written consent
in lieu of a meeting.
1.5 NOTICE OF MEETING. Except as set forth in the Florida Business
Corporation Act (hereinafter referred to as the "FBCA"), written or printed
notice stating the place, day and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by first-class mail, by, or at the
direction of, the president or the secretary, or the officer or other persons
calling the meeting, to each-shareholder of record entitled to vote at such
meeting. If the notice is mailed at least thirty (30) days before the date of
the meeting, it may be effected by a class of United States mail other than
first-class. If mailed, such notice shall be effective when mailed, if mailed
postage prepaid and correctly addressed to the shareholder's address shown in
the current record of shareholders the corporation.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
If, however, after the adjournment, the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be given
as provided in this Section to each shareholder of record on the new record date
entitled to vote at such meeting.
1.6 WAIVER OF NOTICE MEETING. Whenever any notice is required to be
given to any shareholder, a waiver thereof in writing signed by the person or
persons entitled to such notice,
<PAGE> 5
whether signed before, during or after the time of the meeting stated therein,
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records, shall be equivalent to the giving of such notice. Attendance
of a person at a meeting shall constitute a waiver of (a) lack of or defective
notice of such meeting, unless the person objects at the beginning of the
meeting to the holding of the meeting or the transacting of any business at the
meeting or (b) lack of defective notice of a particular matter at a meeting that
is not within the purpose or purposes described in the meeting notice, unless
the person objects to considering such matter when it is presented.
1.7 FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purposes, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 1.7, such determination
shall apply to any adjournment thereof, except where the Board of Directors
fixes a new record date for the adjourned meeting or as required by law.
1.8 VOTING RECORD. After fixing a record date for a meeting of
shareholders, the Corporation shall prepare an alphabetical list of the names of
all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of FBCA ss. 607.1602(3)),
during regular business hours and at his expense, during the period it is
available for inspection.
The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
1.9 VOTING PER SHARE. Except as otherwise provided in the Articles of
Incorporation or by FBCA ss. 607.0721, each shareholder is entitled to one (1)
vote for each outstanding share held by him on each matter voted at a
shareholders' meeting.
-2-
<PAGE> 6
1.10 VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy.
Shares standing the name of another corporation, domestic or foreign,
may be voted by the officer, agent or proxy designated by the bylaws of such
corporate shareholder or, in the absence of any applicable bylaw, by such person
or persons as the Board of Directors of the corporate shareholder may designate.
In the absence of any such designation or, in case of conflicting designation by
the corporate shareholder, the chairman of the board, the president, any vice
president, the secretary and the treasurer of the corporate shareholder, in that
order, shall be presumed to be fully authorized to vote such shares.
Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name or the name of his nominee.
Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name.
If shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the secretary of the Corporation
is given notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
then acts with respect to voting shall have the following effect: (a) if only
one votes, the person or by proxy, his act binds all; (b) if more than one vote,
in person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consent, or objections and for the purpose of ascertaining the
presence of a quorum.
1.11 PROXIES. Any shareholder of the Corporation, other person entitled
to vote on behalf of a shareholder pursuant to FBCA ss. 607.0721, or
attorney-in-fact for such persons may vote the shareholder's shares in person or
by proxy. Any shareholder of the Corporation may appoint a proxy to vote or
otherwise act for him by signing an appointment form either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form.
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An appointment of a proxy is effective when received by the secretary
of the Corporation or such other officer or agent which is authorized to
tabulate votes, and shall be valid for up to 11 months, unless a longer period
is expressly provided in the appointment form.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest.
1.12 QUORUM. Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
1.13 MANNER OF ACTION. If a quorum is present, action on a matter
(other than the election of directors) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless a greater or lesser number of affirmative votes is
required by the Articles of Incorporation or by law.
1.14 VOTING FOR DIRECTORS. Unless otherwise provided in the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present.
1.15 INSPECTORS OF ELECTION. Prior to each meeting of shareholders, the
Board of Directors or the president may appoint one or more Inspectors of
Election. Upon his appointment, each such Inspector shall take and sign an oath
faithfully to execute the duties of Inspector at such meeting with strict
impartiality and to the best of his ability. Such Inspectors shall determine the
number of shares outstanding, the number of shares present at the meeting and
whether a quorum is present at such meeting. The Inspectors shall receive votes
and ballots and shall determine all challenges and
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questions as to the right to vote and shall thereafter count and tabulate all
votes and ballots and determine the result. Such Inspectors shall do such
further acts as are proper to conduct the elections of directors and the vote on
other matters with fairness to all shareholders. The Inspectors shall make a
certificate of the results of the elections of directors and the vote on other
matters. No Inspector shall be a candidate for election as a director of the
Corporation.
1.16 CONDUCT OF MEETINGS. The Chairman of the Board (or in his absence,
the Vice Chairman, the President or such other designee of the Chairman of the
Board) shall preside at the annual and special meetings of shareholders and
shall be given full discretion in establishing the rules and procedures to be
followed in conducting the meetings, except as otherwise provided by law, the
Articles of Incorporation or in these bylaws.
ARTICLE 2. - BOARD OF DIRECTORS
2.1 GENERAL POWERS. Except as provided in the Articles of Incorporation
and by law, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
2.2 NUMBER, TERMS, CLASSIFICATION AND QUALIFICATION. The Board of
Directors of the Corporation shall consist of not less than one (1) nor more
than twenty-one (21) directors with the exact number to be fixed from time to
time by the affirmative vote of a majority of directors then in office or the
affirmative vote of the holders of a majority of the shares entitled to vote on
that matter. No decrease in the number of directors shall have the effect of
shortening the term of an incumbent direct. A Director must be a natural person
of at least eighteen (18) years of age, but need not be a citizen of the United
States of America, a resident of the State of Florida, or a shareholder of the
Corporation. Each director shall hold office until his successor shall have been
elected and qualified or until his earlier resignation, removal from office or
death.
2.3 REGULAR MEETINGS. An annual regular meeting of the Board of
Directors may be held without notice immediately after, and at the same place
as, the annual meeting of shareholders for the purpose of the election of
officers and the transaction of such other business as may come before the
meeting, and at such other time and place as may be determined by the Board of
Directors. The Board of Directors may, at any time and from time to time,
provide by resolution, the time and place, either within or without the State of
Florida, for the holding of the annual regular meeting or additional regular
meetings of the board of directors without other notice than such resolution.
2.4 SPECIAL MEETINGS AND NOTICE. Special meetings of the Board of
Directors may be called by the Secretary on the written request of any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may designate any place, either within or without the State
of Florida, as the place for holding any special meeting of the Board of
Directors called by them. If no designation is made, the place of the meeting
shall be the principal office of the Corporation in the State of Florida.
Written notice of special meetings of the Board of Directors shall be given to
each director at least forty-eight (48) hours before the meeting. Except as
required
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by statute, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting. Notices to directors shall either be
in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation or by oral communication
(whether telephonically or face-to-face). Notice by mail shall be deemed to be
given at the time when the same shall be received. Notice to directors may also
be given by facsimile, telegram, or other form of electronic communication
2.5 WAIVER OF NOTICE OF MEETING. Notice of a meeting of the Board of
Directors need not be given to any director who signs a written waiver of notice
before, during or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and a waiver of any and all
objections to the place of the meeting, the time of the meeting and the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
2.6 QUORUM. A majority of the number of directors fixed by, or in the
manner provided in, these bylaws shall constitute a quorum for the transaction
of business; provided, however, that whenever, for any reason, a vacancy occurs
in the board of directors, a quorum shall consist of a majority of the remaining
directors until the vacancy has been filled.
2.7 MANNER OF ACTION. The act of a majority of the directors present at
a meeting at which a quorum is present when the vote is taken shall be the act
of the Board of Directors.
2.8 PRESUMPTION OF ASSENT. A director of the Corporation who is present
at a meeting of the Board of Directors or a committee of the Board of Directors
when corporate action is taken shall be presumed to have assented to the action
taken, unless he objects at the beginning of the meeting, or promptly upon his
arrival, to holding the meeting or transacting specific business at the meeting,
or he votes against or abstains from the action taken.
2.9 ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at a meeting of the board of directors or a committee thereof may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors. Action taken under this Section is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A consent signed under this Section shall have the
effect of a meeting vote and may be described as such in any document.
2.10 MEETINGS OF THE BOARD OF DIRECTORS BY MEANS OF A CONFERENCE
TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT. Members of the Board of Directors
may participate in a meeting of the board by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
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2.11 RESIGNATION. Any director may resign at any time by giving written
notice to Corporation, the Board of Directors or its chairman. The resignation
of any director shall take effect when the notice is delivered unless the notice
specifies a later effective date, in which event the board of directors may fill
the pending vacancy before the effective date if they provide that the successor
does not take office until the effective date.
2.12 REMOVAL. Any director, or the entire Board of Directors, may be
removed at any time, with or without cause, by action of the shareholders, and
any director may be removed for cause by the Board of Directors. In the case of
any director which is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove him. The
notice of the meeting at which a vote is taken to remove a director must set
forth that the purpose or one of the purposes of the meeting is the removal of
such director or directors.
2.13 VACANCIES. Any vacancy occurring in the Board of Directors and any
directorship to be filled by reason of an increase in the size of the Board of
Directors shall be filled as provided in the Corporation's Articles of
Incorporation. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, or until the next election of one
or more directors by shareholders if the vacancy is caused by an increase in the
number of directors.
2.14 COMPENSATION. Each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors and committee thereof, and
may be paid a stated salary as a director or a fixed sum for attendance at each
meeting of the board of directors (or committee thereof) or both, as may from
time to time be determined by action of the Board of Directors. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
ARTICLE 3. COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an executive committee
and one or more other committees each of which, to the extent provided in such
resolution, shall have and may exercise all the authority of the Board of
Directors, except as prohibited by ss. 607.0825(1) of the FBCA.
Each committee must have two or more members who serve at the pleasure
of the Board of Directors. The Board of Directors, by resolution adopted in
accordance with this article, may designate one or more directors as alternate
members of any committee, who may act in the place and stead of any absent
member or members at any meeting of such committee.
Vacancies in the membership of a committee may be filled by the Board
of Directors at a regular or special meeting of the Board of Directors. Each
committee shall keep minutes and other appropriate records of its proceedings
and report the same to the Board of Directors when required. The designation of
any such committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed upon it or him
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by law.
ARTICLE 4. - OFFICERS
4.1 OFFICERS. The officers of the Corporation shall be as determined by
the Board of Directors and may include a Chairman of the Board, President, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may also appoint one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers and such other
officers, as the Board of Directors shall deem appropriate. Any two (2) or more
offices may be held by the same person.
4.2 APPOINTMENT AND TERM OF OFFICE. The officers of the Corporation may
be appointed annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
appointment of officers shall not occur at such meeting, such appointment shall
occur as soon thereafter as practicable. Each officer shall hold office until
his successor shall have been duly appointed and qualified, or until his earlier
resignation, removal from office or death.
4.3 RESIGNATION. Any officer of the Corporation may resign from his
respective office or position by delivering notice to the Corporation. Such
resignation if effective when delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date and the
Corporation accepts the future effective date, the Board of Directors may fill
the pending vacancy before the effective date if the board provides that the
successor does not take office until the effective date.
4.4 REMOVAL. Any officer elected or appointed by the Board of Directors
may be removed, with or without cause, by the Board of Directors. Removal shall
be without prejudice to the contract rights, if any, of the person removed.
Election or appointment of any officer shall not itself create contract rights.
4.5 VACANCIES. Any vacancy, however, occurring, in any office may be
filled by the Board of Directors.
4.6 DUTIES OF OFFICERS. The Chairman of the Board of the Corporation,
or if there shall not be a Chairman of the Board, the President, shall preside
at all meetings of the Board of Directors and of the shareholders. The Chairman
of the Board, or if there shall not be a Chairman of the Board, the President,
shall be the chief executive officer of the Corporation. Subject to the
foregoing, the officers of the Corporation shall have such powers and duties as
usually pertain to their respective offices and such additional powers and
duties specifically conferred by law, by the Articles of Incorporation, by these
Bylaws, or as may be assigned to them from time to time by the Board of
Directors.
4.7 VICE PRESIDENTS. Each vice president shall possess, and may
exercise, such power
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and authority, and shall perform such duties, as may from time to time be
assigned to him by the Board of Directors.
4.8 SECRETARY. The secretary shall keep the minutes of the proceedings
of the shareholders and of the Board of Directors in one or more books provided
for that purpose, see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law, be custodian of the corporate
records and of the seal of the Corporation and keep a register of the post
office address of each shareholder of the Corporation. In addition, the
secretary shall possess, and may exercise, such power and authority, and shall
perform such duties, as may from time to time be assigned to him by the Board of
Directors and as are incident to the office of secretary.
4.9 TREASURER. The treasurer shall have charge and custody of, and be
responsible for, all funds and securities of the Corporation, receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositaries as shall be utilized by the
Corporation. In addition, the treasurer shall possess, and may exercise such
power and authority, and shall perform such duties, as may from time to time be
assigned to him by the Board of Directors and as are incident to the office of
treasurer.
4.10 OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, the officer so appointing him
and such officer or officers who may from time to time be designated by the
Board of Directors to exercise such supervisory authority.
4.11 COMPENSATION. The compensation of the officers of the Corporation
shall be fixed from time to time by either the Board of Directors or an
appropriate committee of the Board of Directors, as the case may be.
ARTICLE 5. - CERTIFICATES OF STOCK
5.1 CERTIFICATES FOR SHARES. The Board of Directors shall determine
whether shares of the Corporation shall be uncertificated or certificated. If
certificated shares are issued, certificates representing shares in the
Corporation shall be signed (either manually or by facsimile) by the president
or vice president and the secretary or an assistant secretary (which may be the
same person) and may be sealed with the seal of the Corporation or a facsimile
thereof. A certificate which has been signed by an officer or officers who later
shall have ceased to be such officer when the certificate is issued shall
nevertheless be valid.
5.2 TRANSFER OF SHARES; OWNERSHIP OF SHARES. Transfers of shares of
stock of the Corporation shall be made only upon the stock transfer books of the
Corporation, and only after the surrender to the Corporation of the certificates
representing such shares. Except as provided by ss. 607.0721 of the FBCA, the
person in whose name shares stand on the books of the Corporation shall
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be deemed by the Corporation to be the owner thereof for all purposes and the
Corporation shall not be bound to recognize any equitable or other claim to, or
interest in, such shares on the part of any other person, whether or not is
shall have express or other notice thereof.
5.3 LOST CERTIFICATES. The Corporation shall issue a new stock
certificate in the place of any certificate previously issued if the holder of
record of the certificate: (a) makes proof in affidavit form that the
certificate has been lost, destroyed or wrongfully taken; (b) requests the
issuance of a new certificate before the Corporation has notice that the lost,
destroyed or wrongfully taken certificate has been acquired by a purchaser for
value in good faith and without notice of any adverse claim; (c) at the
discretion of the Board of Directors, gives bond-in such form and amount as the
Corporation may direct, to indemnify the Corporation, the transfer agent and
registrar against any claim that may be made on account of the alleged loss,
destruction, or theft of a certificate; and (d) satisfies any other reasonable
requirements imposed by the Corporation.
5.4 LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares of capital stock and the variations in rights, preferences and
limitations determined for each series within a class (and the authority of the
Board of Directors to determine variations for future series) shall be
summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the Corporation
will furnish the shareholder a full statement of this information on request and
without charge. Every certificate representing shares that are restricted as to
the sale, disposition, or transfer of such shares shall also indicate that such
shares are restricted as to transfer and there shall be set forth or fairly
summarized upon the certificate, or the certificate shall indicate that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of such restrictions. If the Corporation issues any shares that
are not registered under the Securities Act of 1933, as amended, or registered
or qualified under applicable state securities laws, the transfer of any such
shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT THE
HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED."
5.5 REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
recognize the exclusive rights of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Florida.
5.6 REDEMPTION OF CONTROL SHARES. As provided by the Florida Business
Corporation
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Act, if a person acquiring control shares of the Corporation does not file an
acquiring person statement with the Corporation, the Corporation may, at the
discretion of the Board of Directors, redeem the control shares at the fair
value thereof at any time during the 60-day period after the last acquisition of
such control shares. If a person acquiring control shares of the Corporation
files an acquiring person statement with the Corporation, the control shares may
be redeemed by the Corporation, at the discretion of the Board of Directors,
only if such shares are not accorded full voting rights by the shareholders as
provided by law.
ARTICLE 6. - ACTIONS WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS
Unless otherwise directed by the Board of Directors, the president or a
designee of the president shall have power to vote and otherwise act on behalf
of the Corporation, in person or by proxy, at any meeting of shareholders of or
with respect to, any action of shareholders of any other corporation in which
the Corporation may hold securities and to otherwise exercise any and all rights
and powers which the Corporation may possess by reason of its ownership of
securities in other corporations.
ARTICLE 7. - AMENDMENTS
Unless otherwise provided by law, these bylaws may be altered, amended
or repeated in whole or in part, or new bylaws may be adopted, as provided in
the Articles of Incorporation.
ARTICLE 8. - CORPORATE SEAL
The board of directors shall provide for a corporate seal which shall
be circular and shall have the name of the Corporation, the year of its
incorporation and the state of incorporation inscribed on it.
ARTICLE 9. - INDEMNIFICATION
The Corporation shall indemnify its officers and directors as provided
in the Articles of Incorporation.
ARTICLE 10. - GENDER
All words used in these bylaws in the masculine gender shall extend to
and shall include the feminine and neuter genders.
ARTICLE 11. - DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of capital stock in
cash, property, or its own shares of capital stock pursuant to law and subject
to the provisions of the Articles of Incorporation.
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ARTICLE 12. - RESERVES
The Board of Directors may by resolution create a reserve or reserves
out of earned surplus for any proper purpose or purposes, and may abolish any
such reserve in the same manner.
ARTICLE 13. - CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
ARTICLE 14. - FISCAL YEAR
The fiscal year of the Corporation shall end on December 31 of each
year, unless otherwise fixed by resolution of the Board of Directors.
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EXHIBIT 10.2
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 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
<PAGE> 2
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-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.
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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.
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.
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(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 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.
8. EXERCISABILITV 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.
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(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 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
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(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
(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.
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(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 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 levels
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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
"performance-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 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
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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 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
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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 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.
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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] 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 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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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective this 1st day of October, 1999, among
Hamilton Bancorp Inc., a Florida corporation, Hamilton Bank, N.A., a national
banking association located in Miami, Florida (collectively, the "Company"), and
Eduardo A. Masferrer (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in the
best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained in
this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote his
best efforts to the business of the Company, and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person with the title of President
and Chief Executive Officer of a multi-bank holding company of national
chartered banks. The Executive shall report directly to the Board of Directors.
The Executive's duties may, from time to time, be changed or modified at the
discretion of the Board of Directors of the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the Company
agrees to employ the Executive for a term of five years and three months,
commencing as of October 1, 1999 (the "Effective Date") and continuing through
December 31, 2004, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the five-year term
through: a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an additional
year each December 31, unless either the Company or the Executive provides
written notice of election not to renew, at least 90 days before the applicable
December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the Executive an annual base salary in effect as of the
date of the Agreement through December 31, 1999. Thereafter, base
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salary shall be reviewed by the Company at least annually and any base
salary increase shall be effective each January 1, beginning January 1,
2000. The Company may not, however, reduce the Executive's base salary
at any time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment") up to five percent (5%) of pre-tax net
income, after the deduction of loan loss provisions of the company. The
amount actually awarded to the Executive will be determined by the
Company's Board of Directors. Any applicable bonus shall be paid by
February 28 of each year (with the first bonus payable by February 28,
2000, relating to the 1999 year).
(c) NON-QUALIFIED RETIREMENT PLANS. The Company shall provide
a supplemental retirement benefit to the Executive which shall be no
less than $650,000 per year beginning at age 65 and paid annually for
15 years, as amended or replaced by a successor plan approved by the
Company's Board of Directors.
(d) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(e) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(f) VACATION. The Executive shall be entitled to five weeks of
paid vacation during each full year of his employment hereunder in
accordance with the vacation policy adopted by the Company. In
addition, upon any Termination under Section 5, except for Termination
for Cause, the Executive will be paid any vacation earned in the
calendar year of the termination but not taken through the date of the
termination.
(g) AUTOMOBILE. The Company will provide the Executive with an
automobile (the "Automobile") for use by the Executive in connection
with the performance of his duties under this Agreement.
(h) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
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(i) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(j) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company;
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(iii) notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless
and until there have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less
than two-thirds (2/3) of the entire authorized membership of
the Board at a meeting of the Board called and held for the
purpose (after reasonable notice and an opportunity for the
Executive, together with counsel, to be heard before the
Board), finding that in the good faith opinion of the Board he
was guilty of conduct set forth above in clauses (i) or (ii)
of this Section 5(b) and specifying the particulars thereof in
detail.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined herein:
(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Sections 4(c) and 4(d) according with the terms,
conditions and limitations of the plans and any separate
agreements under sections 4(c) and 4(d) without regard to
"vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect the Non-Qualified
Retirement Plan under Section 4(c), Stock Options under
Section 4(d), the Life Insurance under Section 4(e) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
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participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. TERMINATION AFTER CHANGE OF CONTROL BENEFIT. If within 24 months after a
Change of Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall terminate
his employment for Good Reason, then the Company shall pay to the Executive a
benefit as defined in this Section 6(b).
(a) CHANGE OF CONTROL. The term "Change of Control" shall have
the following meaning:
(i) A reorganization, merger, consolidation or other
form of corporate transaction or series of transactions, in
each case, with respect to which persons who were the
shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other
transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power
entitled to vote generally in the election of director of
the reorganized, merged or consolidated entity's then
outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the
Company to any person or entity not controlled by or under
common control with the Company (unless such
reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is
subsequently abandoned); or
(iv) The acquisition by any person, entity or
"group", within the meaning of Section 13 (d) (3) or 14
(d) (2) of the Securities Exchange Act, (excluding any
employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then
outstanding shares of common stock or the combined voting
power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors.
(b) AMOUNT. Upon a termination after a Change of Control as
provided above, the Executive will receive a Change of Control Benefit
equal to 2.99 times the Executive's Base Annual Compensation as
defined in this Section 6(b)(i) at the date of the Change of Control
assuming the individual is in good employment.
(i) BASE ANNUAL COMPENSATION. The Executive's average
annualized compensation paid by the Company and its affiliates
which was includible in the Executive's gross income during
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the most recent five taxable years ending before the date of
the Change of Control. This definition covers amounts
includible in compensation, i.e., the base salary and cash
annual incentive prior to any deferred arrangements, and
defined as the individual's "base amount" under Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code").
(ii) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS.
The company shall pay to the Executive any amounts due under
sections 4(c) and 4(d) according with the terms, conditions
and limitations of the plans and any separate agreements under
sections 4(c) and 4(d) without regard to "vesting" thereunder.
(c) CONSIDERATION OF BENEFIT. As consideration for the
benefit paid in Section 6(a) and (b) the Executive agrees to work with
the new organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under 6(a) and (b).
(d) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee
which constitute "parachute payments," as defined in Section 280G of
the Code, then the payments made to the Executive shall be the maximum
of (x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax
imposed by Section 4999 of the Code, and (y) the payments to the
Employee (including payments to the Employee which are not included in
the Agreement) after taking into account the excise tax imposed by
Section 4999 of the Code.
(e) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 6 in a lump sum
upon the Executive's Termination of Employment.
7. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges that
he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means any
secret or confidential information or know-how and shall include, but shall not
be limited to, the plans, customers, costs, prices, uses, and applications of
products and services, results of investigations, studies owned or used by such
person, and all products, processes, compositions, computer programs, and
servicing, marketing or operational methods and techniques at any time used,
developed, investigated, made or sold by such person, before or during the term
of this Agreement, that are not readily available to the public or that are
maintained as confidential by such person. The Executive shall maintain in
confidence any Confidential Information of third parties received as a result of
his employment with the Company in accordance with the Company's obligations to
such third parties and the policies established by the Company.
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8. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
9. NO COMPETITION. Throughout the term of the Agreement and, unless the
Agreement terminates pursuant to Sections 3, 5(b) or 5(c), through the second
anniversary of the expiration of this Agreement, the Executive shall not
directly or indirectly engage in the business of banking, or any other business
in which any member of the Company directly or indirectly engages during the
term of the Agreement; provided, however, that the restriction in this Section 9
shall apply only to United States based financial institutions such as banks,
brokerages, insurance companies, savings and loans or any other such United
States based institution that conducts business in the international trade
financing market. For purposes of this Section 9, the Executive shall be deemed
to engage in a business if he directly or indirectly, engages or invests in,
owns, manages, operates, controls or participates in the ownership, management,
operation or control of, is employed by, associated or in any manner connected
with, or renders services or advice to, any business engaged in international
trade financing, provided, however, that the Executive may invest in the
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if (x) such securities are listed on any national
or regional securities (exchange or have been registered under Section 12(g) of
the Securities Exchange Act of 1934 and (y) the Executive does not beneficially
own (as defined Rule 1 3d-3 promulgated under the Securities Exchange Act of
1934) in excess of 5% of the outstanding capital stock of such enterprise. In
consideration for the provisions of this Section 9, the Company will provide
compensation to the Executive equal to the number two (2) times his annual Base
Salary at the time of Termination.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his or
her employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement, and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
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his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 6
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
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(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and binding without the right of appeal; the
sole and exclusive remedy regarding any claims, counterclaims,
issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction
or offset; and any costs or fees incident to enforcing the
award shall, to the maximum extent permitted by law, be
charged against the party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
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business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts would still be payable to him hereunder as if he had
continued to live, all such amounts, unless other provided herein,
shall be paid in accordance with the terms of this Agreement to his
designee or, if there be no such designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and all
other communications provide for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered or certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth below,
provided that all notices to the Company shall be directed to the
attention of the Chief Executive Officer of the Company with a copy to
the Secretary of the Company, or to such other in writing in accordance
herewith, except that notices of change of address shall be effective
only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
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(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section headings
herein is for purposes of convenience only and shall not effect the
interpretation or substance of any provisions contained herein.
Similarly, the use of the masculine gender with respect to pronouns in
this Agreement is for purposes of convenience and includes either sex
who may be a signatory.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
______________________________
Eduardo A. Masferrer By __________________________
Chairman and CEO Title:
6971 S.W. 79 Avenue By __________________________
Miami, Florida 33143 Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and Juan Carlos Bernace (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote his
best efforts to the business of the Company and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a multi-bank holding company of national chartered banks and with the title of
President of a national chartered bank. The Executive shall report as directed
by the Board of Directors of the Company. The Executive's duties may, from time
to time, be changed or modified at the discretion of the Board of Directors of
the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of three years and three
months, commencing as of October 1, 1999 (the "Effective Date") and continuing
through December 31, 2002, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or a Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew at
least 90 days before the applicable December 31.
4. SALARY AND BENEFITS.
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(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the Executive an annual base salary in effect as of the
date of the Agreement through December 31, 1999. Thereafter, base
salary shall be reviewed by the Company at least annually and any base
salary increase shall be effective each January 1, beginning January 1,
2000. The Company may not, however, reduce the Executive's base salary
at any time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of his employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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<PAGE> 3
5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined herein:
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<PAGE> 4
(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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<PAGE> 5
on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate his employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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<PAGE> 6
most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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<PAGE> 7
programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of his employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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<PAGE> 8
injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
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<PAGE> 9
binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
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<PAGE> 10
legatees. If the Executive should die while any amounts would still be
payable to him hereunder as if he had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to his designee or, if there be no such
designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
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provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
Juan Carlos Bernace By __________________________
Title:
5320 Alhambra Circle
Coral Gables, Florida 33146 By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and Maura A. Acosta (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to her assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote her
best efforts to the business of the Company and shall perform her duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person with the title of Executive
Vice President in charge of foreign shareholder relations of a holding company
of national chartered banks with substantial Latin American shareholders. The
Executive shall report as directed by the Board of Directors of the Company. The
Executive's duties may, from time to time, be changed or modified at the
discretion of the Board of Directors of the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of three years and three
months, commencing as of October 1, 1999 (the "Effective Date") and continuing
through December 31, 2002, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or a Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew at
least 90 days before the applicable December 31.
4. SALARY AND BENEFITS.
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(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the Executive an annual base salary in effect as of the
date of the Agreement through December 31, 1999. Thereafter, base
salary shall be reviewed by the Company at least annually and any base
salary increase shall be effective each January 1, beginning January 1,
2000. The Company may not, however, reduce the Executive's base salary
at any time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of her employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of her duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of her
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate her employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of her employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform her duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that she has not historically
performed her duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by her not in good faith
and without reasonable belief that her action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates her employment for Good Reason, as defined herein:
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<PAGE> 4
(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without her express written consent, the
assignment to the Executive of any duties inconsistent with
her positions, duties, responsibilities and status with the
Company, or a change in her reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of her employment
for Cause, Disability or retirement or as a result of her
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without her express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce her benefits under any
of such plans or deprive her of any material fringe benefit
enjoyed by her, or the failure by the Company to provide the
Executive with the number of paid vacation days to which she
is then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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<PAGE> 5
on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate her employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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<PAGE> 6
most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that she will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of her duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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<PAGE> 7
programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of her employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of her employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate her
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with her present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by her relating to a change of her principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) her aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate her employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use her name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
her name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of her name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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<PAGE> 8
injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
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<PAGE> 9
binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that
she or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when she is either a party, witness or a participant in any
legal action brought against the Company. She will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated her employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign her
rights or delegate her duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
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<PAGE> 10
legatees. If the Executive should die while any amounts would still be
payable to her hereunder as if she had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to her designee or, if there be no such
designee, to her estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
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provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
Maura A. Acosta By __________________________
Title:
6971 S.W. 79th Avenue
Miami, Florida 33143
By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and J. Reid Bingham (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote his
best efforts to the business of the Company and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a multi-bank holding company of national chartered banks and of a national
chartered bank. The Executive shall report as directed by the Board of Directors
of the Company. The Executive's duties may, from time to time, be changed or
modified at the discretion of the Board of Directors of the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of three years and three
months, commencing as of October 1, 1999 (the "Effective Date") and continuing
through December 31, 2002, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or a Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew at
least 90 days before the applicable December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the
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Executive an annual base salary in effect as of the date of the
Agreement through December 31, 1999. Thereafter, base salary shall be
reviewed by the Company at least annually and any base salary increase
shall be effective each January 1, beginning January 1, 2000. The
Company may not, however, reduce the Executive's base salary at any
time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of his employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined herein:
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(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate his employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of his employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
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binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
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legatees. If the Executive should die while any amounts would still be
payable to him hereunder as if he had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to his designee or, if there be no such
designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
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provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
J. Reid Bingham By __________________________
Title:
600 Biltmore Way, #316
Coral Gables, Florida 33134 By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated March 13, 2000, among Hamilton Bancorp Inc., a
Florida corporation, Hamilton Bank, N.A. (the "Bank"), a national banking
association located in Miami, Florida (collectively, the "Company"), and James
J. Gartner (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Bank during the term of this Agreement. The Executive agrees to devote his best
efforts to the business of the Company and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive -
risk management - of a national chartered bank. The Executive shall report as
directed by the Board of Directors of the Bank. The Executive's duties may, from
time to time, be changed or modified at the discretion of the Board of Directors
of the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of one year and nine and one
half months, commencing as of March 13, 2000 (the "Effective Date") and
continuing through December 31, 2001, unless renewed under this Section 3. The
Company may terminate the Executive's employment prior to the end of the
three-year term through: a Termination Due to Disability under Section 5(a), a
Termination With Cause under Section 5(b) or Termination Without Cause under
Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew,
at least 45 days before the applicable December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the
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Executive an annual base salary of US$180,000 through December 31,
2000. Thereafter, base salary shall be reviewed by the Company at least
annually and any base salary increase shall be effective each January
1, beginning January 1, 2001. The Company may not, however, reduce the
Executive's base salary at any time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2001,
relating to the 2000 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of his employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined herein:
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(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control
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occurs during the term of this Agreement and if the compensation paid upon such
Change of Control on a per share basis equals or exceeds the closing price of a
share of the Company's common stock on the date hereof plus twenty percent
thereof, the Executive shall be paid a performance bonus equal to the
Executive's compensation paid by the Company and its affiliates which was
includible in the Executive's gross income during the most recent taxable year
ending before the date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate his employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
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(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending
before the date of the Change of Control (including, amounts includible
in compensation, i.e., the base salary and cash annual incentive prior
to any deferred arrangements) PROVIDED, HOWEVER, that such amount shall
not exceed an amount equal to three (3) times the Executive's average
annualized compensation paid by the Company and its affiliates which
was includible in the Executive's gross income during the most recent
five taxable years ending before the date of the Change of Control
(defined as the individual's "base amount" under Section 280G of the
Internal Revenue Code of 1986, as amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or
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confidential information or know-how and shall include, but shall not be limited
to, the plans, customers, costs, prices, uses, and applications of products and
services, results of investigations, studies owned or used by such person, and
all products, processes, compositions, computer programs, and servicing,
marketing or operational methods and techniques at any time used, developed,
investigated, made or sold by such person, before or during the term of this
Agreement, that are not readily available to the public or that are maintained
as confidential by such person. The Executive shall maintain in confidence any
Confidential Information of third parties received as a result of his employment
with the Company in accordance with the Company's obligations to such third
parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or
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attempted breach of the Executive's obligations under Sections 8 through 10 may
be inadequate, agrees that the Company may be entitled to specific performance
and injunctive and other equitable remedies in case of any such breach or
attempted breach, and further agrees to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such injunctive
or other equitable relief. The Company shall have the right to offset against
amounts to be paid to the Executive pursuant to the terms hereof any amounts
from time to time owing by the Executive to the Company. The termination of the
Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a waiver
by the Company of any breach by the Executive of this Agreement or any other
obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
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(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and binding without the right of appeal; the
sole and exclusive remedy regarding any claims, counterclaims,
issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction
or offset; and any costs or fees incident to enforcing the
award shall, to the maximum extent permitted by law, be
charged against the party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
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(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts would still be payable to him hereunder as if he had
continued to live, all such amounts, unless other provided herein,
shall be paid in accordance with the terms of this Agreement to his
designee or, if there be no such designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
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(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any provisions contained
herein. Similarly, the use of the masculine or feminine gender with
respect to pronouns in this Agreement is for purposes of convenience
and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
___________________________
James J. Gartner By __________________________
Title:
Address:
By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and John M. R. Jacobs (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote his
best efforts to the business of the Company and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a national chartered bank. The Executive shall report as directed by the Board
of Directors of the Company. The Executive's duties may, from time to time, be
changed or modified at the discretion of the Board of Directors or the CEO of
the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of two years and three months,
commencing as of October 1, 1999 (the "Effective Date") and continuing through
December 31, 2001, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the two-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew,
at least 45 days before the applicable December 31.
4. SALARY AND BENEFITS.
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(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the Executive an annual base salary in effect as of the
date of the Agreement through December 31, 1999. Thereafter, base
salary shall be reviewed by the Company at least annually and any base
salary increase shall be effective each January 1, beginning January 1,
2000. The Company may not, however, reduce the Executive's base salary
at any time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of his employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined
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herein:
(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
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6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control on a per share basis equals or exceeds the closing
price of a share of the Company's common stock on the date hereof plus twenty
percent thereof, the Executive shall be paid a performance bonus equal to the
Executive's compensation paid by the Company and its affiliates which was
includible in the Executive's gross income during the most recent taxable year
ending before the date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate his employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
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(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending
before the date of the Change of Control (including, amounts includible
in compensation, i.e., the base salary and cash annual incentive prior
to any deferred arrangements) PROVIDED, HOWEVER, that such amount shall
not exceed an amount equal to three (3) times the Executive's average
annualized compensation paid by the Company and its affiliates which
was includible in the Executive's gross income during the most recent
five taxable years ending before the date of the Change of Control
(defined as the individual's "base amount" under Section 280G of the
Internal Revenue Code of 1986, as amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or
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confidential information or know-how and shall include, but shall not be limited
to, the plans, customers, costs, prices, uses, and applications of products and
services, results of investigations, studies owned or used by such person, and
all products, processes, compositions, computer programs, and servicing,
marketing or operational methods and techniques at any time used, developed,
investigated, made or sold by such person, before or during the term of this
Agreement, that are not readily available to the public or that are maintained
as confidential by such person. The Executive shall maintain in confidence any
Confidential Information of third parties received as a result of his employment
with the Company in accordance with the Company's obligations to such third
parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or
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attempted breach of the Executive's obligations under Sections 8 through 10 may
be inadequate, agrees that the Company may be entitled to specific performance
and injunctive and other equitable remedies in case of any such breach or
attempted breach, and further agrees to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such injunctive
or other equitable relief. The Company shall have the right to offset against
amounts to be paid to the Executive pursuant to the terms hereof any amounts
from time to time owing by the Executive to the Company. The termination of the
Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a waiver
by the Company of any breach by the Executive of this Agreement or any other
obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
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(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and binding without the right of appeal; the
sole and exclusive remedy regarding any claims, counterclaims,
issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction
or offset; and any costs or fees incident to enforcing the
award shall, to the maximum extent permitted by law, be
charged against the party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
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(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts would still be payable to him hereunder as if he had
continued to live, all such amounts, unless other provided herein,
shall be paid in accordance with the terms of this Agreement to his
designee or, if there be no such designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
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(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any provisions contained
herein. Similarly, the use of the masculine or feminine gender with
respect to pronouns in this Agreement is for purposes of convenience
and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
John M. R. Jacobs By __________________________
Title:
Address:
By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and Maria Justo (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to her assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Bank during the term of this Agreement. The Executive agrees to devote her best
efforts to the business of the Company and shall perform her duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a national chartered bank. The Executive shall report as directed by the Board
of Directors of the Bank. The Executive's duties may, from time to time, be
changed or modified at the discretion of the Board of Directors or the CEO of
the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of three years and three
months, commencing as of October 1, 1999 (the "Effective Date") and continuing
through December 31, 2002, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or a Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew at
least 90 days before the applicable December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the
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Executive an annual base salary in effect as of the date of the
Agreement through December 31, 1999. Thereafter, base salary shall be
reviewed by the Company at least annually and any base salary increase
shall be effective each January 1, beginning January 1, 2000. The
Company may not, however, reduce the Executive's base salary at any
time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of her employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of her duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of her
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate her employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of her employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform her duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that she has not historically
performed her duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by her not in good faith
and without reasonable belief that her action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates her employment for Good Reason, as defined herein:
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(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to two times
the aggregate amount paid to the Executive under Sections 4(b)
for the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without her express written consent, the
assignment to the Executive of any duties inconsistent with
her positions, duties, responsibilities and status with the
Company, or a change in her reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of her employment
for Cause, Disability or retirement or as a result of her
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without her express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce her benefits under any
of such plans or deprive her of any material fringe benefit
enjoyed by her, or the failure by the Company to provide the
Executive with the number of paid vacation days to which she
is then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 24 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate her employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that she will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of her duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of her employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of her employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate her
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with her present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by her relating to a change of her principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) her aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate her employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use her name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
her name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of her name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
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binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that
she or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when she is either a party, witness or a participant in any
legal action brought against the Company. She will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated her employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign her
rights or delegate her duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
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legatees. If the Executive should die while any amounts would still be
payable to her hereunder as if she had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to her designee or, if there be no such
designee, to her estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
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provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
Maria Justo By __________________________
Title:
1421 Ancona Avenue
Coral Gables, Florida 33146 By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and Alina Cannon (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to her assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Bank during the term of this Agreement. The Executive agrees to devote her best
efforts to the business of the Company and shall perform her duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a national chartered bank. The Executive shall report as directed by the Board
of Directors of the Bank. The Executive's duties may, from time to time, be
changed or modified at the discretion of the Board of Directors or the CEO of
the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of one year and three months,
commencing as of October 1, 1999 (the "Effective Date") and continuing through
December 31, 2000, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew,
at least 30 days before the applicable December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the
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Executive an annual base salary in effect as of the date of the
Agreement through December 31, 1999. Thereafter, base salary shall be
reviewed by the Company at least annually and any base salary increase
shall be effective each January 1, beginning January 1, 2000. The
Company may not, however, reduce the Executive's base salary at any
time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of her employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of her duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of her
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate her employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of her employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform her duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that she has not historically
performed her duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by her not in good faith
and without reasonable belief that her action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates her employment for Good Reason, as defined herein:
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(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to the
aggregate amount paid to the Executive under Sections 4(b) for
the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without her express written consent, the
assignment to the Executive of any duties inconsistent with
her positions, duties, responsibilities and status with the
Company, or a change in her reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of her employment
for Cause, Disability or retirement or as a result of her
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without her express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce her benefits under any
of such plans or deprive her of any material fringe benefit
enjoyed by her, or the failure by the Company to provide the
Executive with the number of paid vacation days to which she
is then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 12 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate her employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that she will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of her duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of her employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of her employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate her
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with her present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by her relating to a change of her principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) her aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate her employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use her name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
her name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of her name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
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binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that
she or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when she is either a party, witness or a participant in any
legal action brought against the Company. She will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated her employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign her
rights or delegate her duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
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legatees. If the Executive should die while any amounts would still be
payable to her hereunder as if she had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to her designee or, if there be no such
designee, to her estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
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provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
Alina Cannon By __________________________
Title:
Address:
By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of October, 1999, among Hamilton
Bancorp Inc., a Florida corporation, Hamilton Bank, N.A. (the "Bank"), a
national banking association located in Miami, Florida (collectively, the
"Company"), and Adolfo D. Martinez (the "Executive").
INTRODUCTION
The Boards of Directors of the Company have determined that it is in
the best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control of the Company
or the assertion of claims and actions against employees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Bank during the term of this Agreement. The Executive agrees to devote his best
efforts to the business of the Company and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person who is a senior executive of
a national chartered bank. The Executive shall report as directed by the Board
of Directors of the Bank. The Executive's duties may, from time to time, be
changed or modified at the discretion of the Board of Directors or the CEO of
the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term of one year and three months,
commencing as of October 1, 1999 (the "Effective Date") and continuing through
December 31, 2000, unless renewed under this Section 3. The Company may
terminate the Executive's employment prior to the end of the three-year term
through a Termination Due to Disability under Section 5(a), a Termination With
Cause under Section 5(b) or Termination Without Cause under Section 5(c).
The term of this Agreement shall be automatically extended for an
additional year each December 31, commencing December 31, 2000, unless either
the Company or the Executive provides written notice of election not to renew,
at least 30 days before the applicable December 31.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the term of this
Agreement, pay the
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Executive an annual base salary in effect as of the date of the
Agreement through December 31, 1999. Thereafter, base salary shall be
reviewed by the Company at least annually and any base salary increase
shall be effective each January 1, beginning January 1, 2000. The
Company may not, however, reduce the Executive's base salary at any
time during the term of this Agreement.
(b) ANNUAL INCENTIVE PAYMENT. Each year during this Agreement,
the Executive shall be eligible to receive an annual incentive payment
(the "Annual Incentive Payment). The amount actually awarded to the
Executive will be determined by the Company's or the Bank's
Compensation Committee. Any applicable bonus shall be paid by February
28 of each year (with the first bonus payable by February 28, 2000,
relating to the 1999 year).
(c) STOCK OPTIONS. The Company shall provide a stock option
program to the Executive in accordance with the 1998 and 2000 Executive
Incentive Plans, as amended or replaced by a successor plan approved by
the Company's Board of Directors and, if necessary, its shareholders.
The Executive will not be eligible to participate in any stock option
plans reserved for outside directors.
(d) LIFE INSURANCE. The Company shall provide life insurance
coverage on the life of the Executive in accordance with the Company's
Group Term Life Insurance Plan. The life insurance benefit will be paid
upon death according to the following schedule; however, the death
benefit is limited to a maximum of $350,000.
YEARS OF SERVICE DEATH BENEFIT
---------------- -------------
1-5 2 x Salary
5-10 3 x Salary
10-15 4 x Salary
15+ 5 x Salary
(e) VACATION. The Executive shall be entitled to the number of
weeks of paid vacation during each full year of his employment
hereunder in accordance with the vacation policy adopted by the
Company. In addition, upon any Termination under Section 5, except for
Termination for Cause, the Executive will be paid any vacation earned
in the calendar year of the termination but not taken through the date
of the termination.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses incurred by the
Executive in the course of his duties, in accordance with any business
conducted on behalf of the Company.
(g) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in the employee benefit programs generally available to
employees of the Company, and to all normal perquisites provided to
senior executive officers of the Company.
(h) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or
perquisite provided to the Executive shall be deemed to be in lieu of
base salary, bonus, or other compensation.
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5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) DISABILITY. The Company may terminate the Executive's
employment for Disability if the Executive is incapacitated or absent
and unable to perform substantially all the regular Duties of his
employment as defined under the Total Disability From Your Own
Occupation under the Company's Long Term Disability Plan. If, during
the term of this Agreement, the Executive's employment terminates due
to Disability, the Company shall provide long term disability insurance
that provides for an annual benefit of 2/3 of the Executive's Base
Salary; however, this benefit is limited to the maximum allowed under
the Company's Long Term Disability Plan in effect from time to time,
but not less than $6,000 per month.
(b) VOLUNTARY RESIGNATION OR TERMINATION FOR CAUSE. If the
Executive shall voluntarily terminate his employment for other than
Good Reason or if the Company shall discharge the Executive for Cause,
as defined herein, this Agreement shall terminate immediately and the
Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been
paid, provided, however, that with respect to any stock options,
restricted stock, incentive plans, deferred compensation arrangements,
or other plans or programs in which the Executive is participating at
the time of termination of his employment, the Executive's rights and
benefits under each such plan shall be determined in accordance with
the terms, conditions, and limitations of the plan and any separate
agreement executed by the Executive which may then be in effect.
For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the
Executive to perform his duties with the Company (other than
any such failure resulting from incapacity due to Disability),
after a demand for specific performance is delivered to the
Executive by the Board which identifies individual goals and
objectives which must be accomplished to remedy the
Executive's performance, as well as provides rationale as to
the reason the Board believes that he has not historically
performed his duties;
(ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If during the term of the Agreement, the Executive's employment is
terminated by the Company without Cause or the Executive voluntarily
terminates his employment for Good Reason, as defined herein:
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(i) BASE SALARY. The Company shall pay the Executive
in a lump sum an amount equal to the remaining term of this
Agreement times the current annual base salary as provided in
Section 4(a) in effect at the date of termination;
(ii) ANNUAL INCENTIVE. To compensate the Executive
for the current year's annual incentive, the Company shall pay
to the Executive in a lump sum an amount equal to the
aggregate amount paid to the Executive under Sections 4(b) for
the most recently completed calendar year multiplied by a
ratio whose numerator is the number of the current month as of
the date of termination and the denominator is twelve.
(iii) NONQUALIFIED RETIREMENT PLANS AND STOCK
OPTIONS. The Company shall pay to the Executive any amounts
due under Section 4(c) according with the terms, conditions
and limitations of the plans and any separate agreements under
Section 4(c) without regard to "vesting" thereunder.
For purposes of this Agreement, the term "Good Reason" shall
mean:
(i) Without his express written consent, the
assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities, titles
or offices, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions,
except in connection with the termination of his employment
for Cause, Disability or retirement or as a result of his
death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may
be increased from time to time;
(iii) Without his express written consent the failure
by the Company to continue in effect any Stock Options under
Section 4(c), the Life Insurance under Section 4(d) in which
the Executive is participating (or plans providing
substantially similar benefits), the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him, or the failure by the Company to provide the
Executive with the number of paid vacation days to which he is
then entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect on the date hereof; or
(iv) Any failure of the Company to obtain the
assumption of, or the agreement to perform, this Agreement by
any successor as contemplated in Section 16(a) hereof.
6. PERFORMANCE BONUS UPON CERTAIN CHANGES OF CONTROL. If a Change of
Control occurs during the term of this Agreement and if the compensation paid
upon such Change of Control
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on a per share basis equals or exceeds the closing price of a share of the
Company's common stock on the date hereof plus twenty percent thereof, the
Executive shall be paid a performance bonus equal to the Executive's
compensation paid by the Company and its affiliates which was includible in the
Executive's gross income during the most recent taxable year ending before the
date of the Change of Control.
The term "Change of Control" as used in this Agreement shall have the
following meaning:
(i) A reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, directly or
indirectly, own more than 80% of the combined voting power entitled to
vote generally in the election of director of the reorganized, merged
or consolidated entity's then outstanding voting securities;
(ii) A liquidation or dissolution of the Company;
(iii) The sale of more than 50% of the assets of the Company
to any person or entity not controlled by or under common control with
the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(iv) The acquisition by any person, entity or "group", within
the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act))
of more than twenty percent (20%) of either the then outstanding shares
of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors.
7. TERMINATION AFTER CHANGE OF CONTROL BENEFIT.
(a) TERMINATION. If within 12 months after a Change of
Control, the Company shall terminate the Executive's employment other
than pursuant to Section 5(a) or 5(b) hereof or if the Executive shall
terminate his employment for Good Reason, then the Company shall pay to
the Executive a benefit as defined in Section 7(b).
(b) AMOUNT. Upon a termination after a Change of Control as
provided in Section 7(a), the Executive will receive a Change of
Control Benefit equal to the greater of (i) two (2) times the
Executive's Base Annual Compensation as defined in Section 7(c) at the
date of the Change of Control assuming the individual is in good
employment or (ii) the amount payable to the Executive as provided in
Section 5(c).
(c) BASE ANNUAL COMPENSATION. The Executive's compensation
paid by the Company and its affiliates which was includible in the
Executive's gross income during the
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most recent taxable year ending before the date of the Change of
Control (including, amounts includible in compensation, i.e., the base
salary and cash annual incentive prior to any deferred arrangements)
PROVIDED, HOWEVER, that such amount shall not exceed an amount equal to
three (3) times the Executive's average annualized compensation paid by
the Company and its affiliates which was includible in the Executive's
gross income during the most recent five taxable years ending before
the date of the Change of Control (defined as the individual's "base
amount" under Section 280G of the Internal Revenue Code of 1986, as
amended).
(d) NONQUALIFIED RETIREMENT PLANS AND STOCK OPTIONS. The
Company shall also pay to the Executive any amounts due under Section
4(c) according with the terms, conditions and limitations of the plans
and any separate agreements under Section 4(c) without regard to
"vesting" thereunder.
(e) CONSIDERATION OF BENEFIT. As consideration for the benefit
paid in Section 7, the Executive agrees to work with the new
organization for a period of no less than six months. If the
organization, however, terminates the employment of the Executive
except under Termination for Cause, the Executive is still entitled to
the benefit specified under this section 7.
(f) LIMITATION OF BENEFIT: Notwithstanding anything to the
contrary in this Agreement, if there are payments to the Employee which
constitute "parachute payments," as defined in Section 280G of the
Code, then the payments made to the Executive shall be the maximum of
(x) one dollar ($1.00) less than the amount which would cause the
payments to the Employee (including payments to the Employee which are
not included in this Agreement) to be subject to the excise tax imposed
by Section 4999 of the Code, and (y) the payments to the Employee
(including payments to the Employee which are not included in the
Agreement) after taking into account the excise tax imposed by Section
4999 of the Code.
(g) PAYMENT OF BENEFIT. The Company shall pay any Change of
Control Benefit payable as provided in this Section 7 in a lump sum
upon the Executive's Termination of Employment.
8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he will have access to certain information of the Company and that such
information is confidential and constitutes valuable, special and unique
property of the Company. The Executive shall not at any time, either during or
subsequent to the term of this Agreement, disclose to others, use, copy or
permit to be copied, except in pursuance of his duties for and on behalf of the
Company, it successors, assigns or nominees, any Confidential Information of the
Company (regardless of whether developed by the Executive) without the prior
written consent of the Company.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies owned or used by
such person, and all products, processes, compositions, computer
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programs, and servicing, marketing or operational methods and techniques at any
time used, developed, investigated, made or sold by such person, before or
during the term of this Agreement, that are not readily available to the public
or that are maintained as confidential by such person. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of his employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.
9. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.
10. NO TAMPERING. Throughout the term of the Agreement and through the
second anniversary of the expiration thereof, the Executive shall not (a)
request, induce or attempt to influence any customers of the Company to curtail
or cancel any business they may transact with the Company; or (b) request,
induce or attempt to influence any employee of the Company to terminate his
employment with the Company.
11. RELOCATION. The Company's requiring the Executive to be based
anywhere other than Miami, Florida except for required travel on the Company's
business to an extent substantially consistent with his present business travel
obligations, or, in the event the Executive consents to any relocation, the
failure by the Company to pay (or reimburse the Executive) for all reasonable
moving expenses incurred by him relating to a change of his principal residence
in connection with such relocation and to indemnify the Executive against any
loss (defined as the difference between the actual sale price of such residence
and the higher of (a) his aggregate investment in such residence or (b) the fair
market value of such residence as determined by a real estate appraiser
designated by the Executive and reasonably satisfactory to the Company) realized
on the sale of the Executive's principal residence in connection with any such
change of residence, shall constitute Good Reason for the Executive to
voluntarily terminate his employment.
12. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of the Agreement and may continue
to use materials generated during the term of the Agreement for a period of six
months thereafter. The Executive shall receive no additional consideration if
his name, picture or likeness is so used. The Executive further agrees that any
negatives, prints or other material for printing or reproduction purposes
prepared in connection with the use of his name, picture or likeness by the
Company shall be and are the sole property of the Company.
13. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 8
through 10 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
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injunctive or other equitable relief. The Company shall have the right to offset
against amounts to be paid to the Executive pursuant to the terms hereof any
amounts from time to time owing by the Executive to the Company. The termination
of the Agreement pursuant to Section 3, 5(a) or 5(b) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.
14. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 13 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 14, to arbitration.
(a) ARBITRATORS. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
(b) PROCEEDINGS. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Miami, Florida, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and
8
<PAGE> 9
binding without the right of appeal; the sole and exclusive
remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly
paid in United States dollars free of any deduction or offset;
and any costs or fees incident to enforcing the award shall,
to the maximum extent permitted by law, be charged against the
party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) ACKNOWLEDGMENT OF PARTIES. Each party acknowledges that he
or it has voluntarily and knowingly entered into an agreement to
arbitration under this Section by executing this Agreement.
15. INDEMNIFICATION. The Executive shall be protected against any and
all legal actions when he is either a party, witness or a participant in any
legal action brought against the Company. He will be protected through any
programs that cover the outside directors or other executives of the Company.
16. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would
be entitled hereunder if the Executive terminated his employment for
Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(b) EXECUTIVE'S HEIRS, ETC. The Executive may not assign his
rights or delegate his duties or obligations hereunder without the
written consent of the Company. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and
9
<PAGE> 10
legatees. If the Executive should die while any amounts would still be
payable to him hereunder as if he had continued to live, all such
amounts, unless other provided herein, shall be paid in accordance with
the terms of this Agreement to his designee or, if there be no such
designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and
all other communications provide for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth below, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(d) AMENDMENT OR WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board of Directors of
the Company (which shall in any event include the Company's Chief
Executive Officer). No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or
reduced in scope, or otherwise be stricken from this Agreement to the
extent required for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS. The Executive's
obligations under this Agreement shall survive regardless of whether
the Executive's employment by the Company is terminated, voluntarily or
involuntarily, by the Company or the Executive, with or without Cause.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
(i) CAPTIONS AND GENDER. The use of captions and Section
headings herein is for purposes of convenience only and shall not
effect the interpretation or substance of any
10
<PAGE> 11
provisions contained herein. Similarly, the use of the masculine or
feminine gender with respect to pronouns in this Agreement is for
purposes of convenience and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the Executive and duly authorized Company officers
have signed this Agreement.
EXECUTIVE: COMPANY:
HAMILTON BANCORP INC.
_________________________
Adolfo D. Martinez By __________________________
Title:
Address:
By __________________________
Title:
HAMILTON BANK, N.A.
By __________________________
Title:
By __________________________
Title:
3750 N.W. 87th Avenue
Miami, Florida 33178
11
<PAGE> 1
EXHIBIT 21.1
Hamilton Bank, N.A. is a 99.7% owned subsidiary of Hamilton Bancorp Inc.
Hamilton Capital Trust I, a Delaware business trust, is a 100% owned subsidiary
of Hamilton Bancorp Inc.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by the reference in Registration Statement No.
333-34725 of Hamilton Bancorp Inc. on Form S-8 of our report dated March 24,
2000, appearing in this Annual Report on Form 10-K of Hamilton Bancorp Inc. for
the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
April 13, 2000
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