<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Hamilton Bancorp Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
HAMILTON BANCORP INC.
September 7, 2000
Dear Stockholder:
On behalf of the Board of Directors, I am pleased to extend to you an
invitation to attend the Annual Meeting of Stockholders of Hamilton Bancorp Inc.
to be held in Miami, Florida, on Monday, October 23, 2000, beginning at 10:00
a.m., Eastern Daylight Time.
The notice of meeting and proxy statement which appear on the following
pages contain information about matters which are to be considered at the
meeting. During the meeting we will also review our results of operations for
the past year and present other information concerning Hamilton Bancorp Inc. and
its subsidiary, Hamilton Bank, N.A. The meeting should be interesting and
informative, and we hope you will be able to attend.
In order to ensure that your shares are voted at the meeting, please
complete, date, sign and return the enclosed proxy in the enclosed postage-paid
envelope at your earliest convenience. Every stockholder's vote is important,
whether you own a few shares or many.
Sincerely yours,
/s/ Eduardo A. Masferrer
Eduardo A. Masferrer
Chairman and Chief Executive Officer
3750 N.W. 87th Avenue, Miami, Florida 33178
<PAGE> 3
HAMILTON BANCORP INC.
3750 N.W. 87th Avenue, Miami, Florida 33178
NOTICE OF ANNUAL MEETING
TO BE HELD ON OCTOBER 23, 2000
September 7, 2000
The Annual Meeting of Stockholders of Hamilton Bancorp Inc. will be
held at the offices of Hamilton Bancorp at 3750 N.W. 87th Avenue, Miami,
Florida, on Monday, October 23, 2000 at 10:00 a.m., Eastern Daylight Time, for
the purpose of considering and acting on the following matters:
1. a proposal to elect the seven nominees named in the attached
proxy statement as directors of Hamilton Bancorp in each case
until their successors are duly elected and qualified;
2. a proposal to approve Hamilton Bancorp's 2000 Executive
Incentive Compensation Plan; and
3. such other business as may properly come before the Meeting or
any adjournments thereof.
All holders of record of Hamilton Bancorp's Common Stock on the books
of Hamilton Bancorp at the close of business on August 31, 2000 are entitled to
notice of and to vote at the Meeting.
By Order of the Board of Directors.
/s/ J. Reid Bingham
J. Reid Bingham
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE THAT YOUR SHARES ARE VOTED AT THE MEETING. YOUR VOTE IS
IMPORTANT, WHETHER YOU OWN A FEW SHARES OR MANY.
<PAGE> 4
HAMILTON BANCORP INC.
3750 N.W. 87th Avenue, Miami, Florida 33178
----------
PROXY STATEMENT
----------
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Hamilton Bancorp Inc. in connection with the Annual Meeting of Stockholders of
Hamilton Bancorp and any adjournments or postponements thereof to be held at the
offices of Hamilton Bancorp at 3750 N.W. 87th Avenue, Miami, Florida, on Monday,
October 23, 2000, at 10:00 a.m., Eastern Daylight Time. The accompanying form of
proxy is for use at the Meeting if a stockholder does not attend the Meeting in
person or wishes to have his or her shares voted by proxy even if he or she
attends the Meeting. The proxy may be revoked by the person giving it at any
time before it is exercised by (i) giving written notice of such revocation to
the Secretary of Hamilton Bancorp (ii) submitting a proxy having a later date or
(iii) appearing at the Meeting and deciding to vote in person. All shares
represented by valid proxies received pursuant to this solicitation and not
revoked before they are exercised will be voted in the manner specified thereon.
If no specification is made, proxies will be voted in favor of approval of
Proposals 1 and 2 described below. This proxy statement, the enclosed proxy and
the 1999 Annual Report to Stockholders are being first mailed to Hamilton
Bancorp's stockholders entitled to notice of the Meeting on or about September
8, 2000. The Annual Report does not constitute "soliciting material" and is not
to be deemed "filed" with the Securities and Exchange Commission.
Hamilton Bancorp will bear the cost of preparing this proxy statement
and of soliciting proxies in the enclosed form. Proxies may be solicited by
employees of Hamilton Bancorp and its subsidiaries, either personally, by letter
or by telephone. Such employees will not be specifically compensated for
soliciting such proxies.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of August 31, 2000, Hamilton Bancorp had outstanding 10,070,313
shares of Common Stock, par value $.01 per share. Each holder of Common Stock
will have the right to one vote for each share of such stock standing in such
holder's name on the books of Hamilton Bancorp as of the close of business on
August 31, 2000 with respect to each matter voted on at the Meeting. Hamilton
Bancorp is not aware of any stockholder who was the beneficial owner of more
than 5% of the outstanding shares of Common Stock on August 31, 2000 except for
Mr. Eduardo A. Masferrer who reports beneficial ownership of 810,539 shares of
Common Stock or 8.0% of the outstanding shares of Common Stock.
<PAGE> 5
The presence in person or by proxy of a majority of the shares of
Common Stock outstanding on August 31, 2000 will constitute a quorum for
purposes of conducting business at the Meeting. For purposes of determining the
votes cast with respect to any matter presented for consideration at the Meeting
only those votes cast "FOR" or "AGAINST" are included. Abstentions and broker
non- votes (i.e., shares held by brokers on behalf of their customers, which may
not be voted on certain matters because the brokers have not received specific
voting instructions from their customers with respect to such matters) will be
counted solely for purpose the of determining whether a quorum is present.
PROPOSAL 1. ELECTION OF DIRECTORS
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
Directors of Hamilton Bancorp will be elected by a plurality of the
votes, represented in person or by proxy, cast at the Annual Meeting. Shares
cannot be voted for a greater number of persons than the number of nominees
named herein. Should any nominee be unavailable for election by reason of death
or other unexpected occurrence, the enclosed proxy, to the extent permitted by
applicable law, may be voted with discretionary authority in connection with the
nomination by the Board of Directors and election of any substitute nominee. In
addition, the Board may reduce the number of directors to be elected at the
Meeting.
The Board of Directors recommends that the stockholders elect the seven
(7) nominees for directors listed below as directors of Hamilton Bancorp in each
case until their successors are duly elected and qualified.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
ELECTION OF THE SEVEN (7) NOMINEES NAMED BELOW, IN EACH CASE UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
Listed below are the names of the seven (7) nominees to serve as
directors, together with their ages, their principal occupations during the past
five years, any other directorships they hold with companies having securities
registered under the Securities Exchange Act of 1934 and the years during which
their current consecutive terms as directors of Hamilton Bancorp first
commenced. No director or nominee for director beneficially owns more than 5% of
the outstanding shares of Common Stock except for Mr. Eduardo A. Masferrer who
reports beneficial ownership of 8.0% of the outstanding shares of Common Stock.
Also listed below are the other Executive Officers of Hamilton Bancorp together
with their ages, their principal occupations during the past five years and any
other directorships they hold with companies having securities registered under
the Securities Exchange Act of 1934.
DIRECTORS' NAME, AGE, PRINCIPAL OCCUPATION AND CERTAIN OTHER DIRECTORSHIPS
Eduardo A. Masferrer, age 51 Director Since 1988
MR. MASFERRER has served as Hamilton Bancorp's Chairman of the Board
since 1988 and
2
<PAGE> 6
as its President and Chief Executive Officer since 1990. Mr. Masferrer
has also served as a director of Hamilton Bank, N.A. since his election
in 1988, as Chief Executive Officer of Hamilton Bank since 1990 and as
President of Hamilton Bank from 1990 to 1997. Mr. Masferrer is the
husband of Ms. Maura A. Acosta.
William Alexander, age 76 Director Since 1997
MR. ALEXANDER has served as a director and Vice Chairman of Hamilton
Bank since his election in 1988.
Juan Carlos Bernace, age 39 Director Since 1999
MR. BERNACE has served as an Executive Vice President of Hamilton
Bancorp since 1997 and as President, Senior Lending Officer and a
Director of Hamilton Bank since 1997, as Executive Vice President of
Hamilton Bank from 1996 to 1997 and as Senior Vice President-Manager of
Corporate Trade Finance of Hamilton Bank from prior to 1995 to 1996.
Ronald E. Frazier, age 57 Director Since 1999
MR. FRAZIER has served as a director of Hamilton Bank since his
election in 1982. Mr. Frazier is the founder and, since its
establishment 1973, has served as the President of Ronald E. Frazier &
Associates, P.A., a consulting firm specializing in architecture and
urban design and planning.
Ronald A. Lacayo, age 44 Director Since 1999
MR. LACAYO has served as a director of Hamilton Bank since his election
in 1988. In 1999 Mr. Lacayo served as Chairman and Chief Executive
Officer of Banco Nicaraguense de Industria y Comercio, S.A., a
commercial bank in Nicaragua. Since 1996, Mr. Lacayo also has served as
the President and Chief Executive Officer of Cruger Wets S.A., a
financial consulting firm in Miami, Florida, and from prior to 1995 as
the Secretary of The Record Companies Group, an El Salvadorian
manufacturer of automotive batteries. From prior to 1995 to 1997 Mr.
Lacayo was the President and Chief Executive Officer of Raymel
Corporation, a sportswear manufacturer in Miami, Florida.
George A. Lyall, age 76 Director Since 1999
MR. LYALL has served as a director of Hamilton Bank since his election
in 1988. Since 1991 Mr. Lyall has served as the Chairman of the Board
of Miami Air International, a charter air carrier.
Benton L. Moyer, age 58 Director Since 1999
MR. MOYER has served as a director of Hamilton Bank since his election
in January 1999. From 1968 until his retirement in 1996, Mr. Moyer was
employed by the Bank of Boston, principally as a General Manager, in
Latin America, Australia, Taiwan and Boston. Since 1996 Mr. Moyer has
served as a senior consultant for H. C. Wainwright, a financial
consulting firm in Boston, Massachusetts. Since 1999 Mr. Moyer has also
served as a director and Vice Chairman of Banco Bisa, a Bolivian bank.
3
<PAGE> 7
OTHER CURRENT EXECUTIVE OFFICERS NAME, AGE, PRINCIPAL OCCUPATION AND CERTAIN
OTHER DIRECTORSHIPS
Maura A. Acosta, age 50
MS. ACOSTA has served as an Executive Vice President of Hamilton
Bancorp since 1997, as a Director from 1997 to 1999 and as First Vice
President from 1993 to 1997. Ms. Acosta has also served as an Executive
Vice President of Hamilton Bank since 1994 and prior to 1994 as a
Senior Vice President of Hamilton Bank. Ms. Acosta is the wife of Mr.
Eduardo A. Masferrer.
J. Reid Bingham, age 54
MR. BINGHAM has served as General Counsel and Secretary of Hamilton
Bancorp and Hamilton Bank since 1996. From prior to 1995 to 1996 Mr.
Bingham was a partner in the law firm of Concepcion, Sexton, Bingham &
Urdaneta.
Felix M. Garcia, age 50
MR. GARCIA has served as an Executive Vice President of Hamilton Bank
since 2000. From 1999 to 2000, Mr. Garcia served as Executive Vice
President and Head of Corporate Lending of Union Planters Bank. From
1985 to 1999, Mr. Garcia held various positions with Republic National
Bank of Miami, including Executive Vice President and Chief Credit
Officer from 1993 to 1999. From 1972 to 1985 Mr. Garcia held various
positions with the Office of Comptroller of the Currency.
James J. Gartner, age 58
MR. GARTNER has served as Executive Vice President - Risk Management of
Hamilton Bank since March 2000. From 1998 to 2000 Mr. Gartner was
Executive Vice President and a Director of First National Bank of
Nevada and First Bank Arizona, N.A., Scottsdale, Arizona. From 1996 to
1998 Mr. Gartner was Executive Vice President and Director of Bank of
Arizona, Scottsdale, Arizona, and Executive Vice President of The Bank
of New Mexico, Albuquerque, New Mexico. From prior to 1995 to 1996 Mr.
Gartner was Executive Vice President and Chief Credit Officer of Fourth
Financial Corp., Wichita, Kansas.
Maria Justo, age 41
MS. JUSTO has served as an Executive Vice President of Hamilton Bank
since April 2000 and as Senior Vice President from July 1999 to April
2000. From 1996 to 1999 Ms. Justo was President and Chief Executive
Officer of Eagle National Bank, N.A., Miami, Florida. From prior to
1995 to 1996 Ms. Justo was Vice President and Team Leader for the
Southern Cone of Barclays Bank PLC, Miami Agency.
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<PAGE> 8
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth information concerning the beneficial
ownership of the Common Stock of Hamilton Bancorp as of August 31, 2000 by (i)
each director and nominee for director, (ii) each person known to Hamilton
Bancorp to be the beneficial owner of more than 5% of its outstanding Common
Stock, (iii) the Chief Executive Officer and the other Executive Officers listed
in the summary compensation table and (iv) all directors and Executive Officers
of Hamilton Bancorp as a group.
Amount and Nature of Percentage of Outstanding
Name of Beneficial Owner Beneficial Ownership Shares Owned
------------------------ -------------------- -------------------------
Eduardo A. Masferrer ......... 810,539(1) 8.0%
Maura A. Acosta .............. 99,475(2) 1.0%
William Alexander ............ 22,353(3) *
Juan Carlos Bernace .......... 124,864(4) 1.1%
Ronald E. Frazier ............ 50,084(5) *
Ronald A. Lacayo ............. 101,019(6) 1.0%
George A. Lyall .............. 56,074(7) *
Benton L. Moyer .............. 5,000(8) *
John M. R. Jacobs ............ 16,245(9) *
J. Reid Bingham .............. 45,920(10) *
All Directors and executive
officers of Hamilton Bancorp
as a group, including those
listed above (13 persons)..... 1,255,653(11) 11.93%
------------------------
* Less than 1%
(1) Includes (i) 17,687 shares of Common Stock held by Mr. Masferrer and
his wife, Maura A. Acosta, as joint tenants with rights of survivorship
and (ii) 48,750 shares of Common Stock issuable upon the exercise of
options granted to Mr. Masferrer under the Stock Option Plans. Does not
include 81,788 of the shares of Common Stock reported as beneficially
owned by Maura A. Acosta or 19,325 of Common Stock issuable upon the
exercise of options granted to Mr. Masferrer under the Stock Option
Plans, which options are not currently exercisable.
(2) Includes (i) 17,687 shares of Common Stock held by Ms. Acosta and her
husband, Eduardo A. Masferrer, as joint tenants with rights of
survivorship and (ii) 81,288 shares of Common Stock issuable upon the
exercise of options granted to Ms. Acosta under the Stock Option Plans.
Does not include 792,852 of the shares of Common Stock reported as
beneficially owned by Eduardo
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<PAGE> 9
A. Masferrer or 14,155 shares of Common Stock issuable upon the
exercise of options granted to Ms. Acosta under the Stock Option Plans,
which options are not currently exercisable.
(3) Includes 19,749 shares of Common Stock issuable upon the exercise of
options granted to Mr. Alexander under the Stock Option Plans. Does not
include 3,666 shares of Common Stock issuable upon the exercise of
options granted to Mr. Alexander under the Stock Option Plans, which
options are not currently exercisable.
(4) Includes 120,864 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bernace under the Stock Option Plans. Does not
include 21,975 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bernace under the Stock Option Plans, which
options are not currently exercisable.
(5) Includes 50,084 shares of Common Stock issuable upon the exercise of
options granted to Mr. Frazier under the Stock Option Plans. Does not
include 3,666 shares of Common Stock issuable upon the exercise of
options granted to Mr. Frazier under the Stock Option Plans, which
options are not currently exercisable.
(6) Includes 27,084 shares of Common Stock issuable upon the exercise of
options granted to Mr. Lacayo under the Stock Option Plans. Does not
include 3,666 shares of Common Stock issuable upon the exercise of
options granted to Mr. Lacayo under the Stock Option Plans, which
options are not currently exercisable.
(7) Includes 50,245 shares of Common Stock issuable upon the exercise of
options granted to Mr. Lyall under the Stock Option Plans. Does not
include 3,666 shares of Common Stock issuable upon the exercise of
options granted to Mr. Lyall under the Stock Option Plans, which
options are not currently exercisable.
(8) Does not include 6,000 shares of Common Stock issuable upon the
exercise of options granted to Mr. Moyer under the Stock Option Plans,
which options are not currently exercisable.
(9) Includes 15,245 shares of Common Stock issuable upon the exercise of
options granted to Mr. Jacobs under the Stock Option Plans. Does not
include 7,748 shares of Common Stock issuable upon the exercise of
options granted to Mr. Jacobs under the Stock Option Plans, which
options are not currently exercisable.
(10) Includes 38,420 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bingham under the Stock Option Plans. Does not
include 8,023 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bingham under the Stock Option Plans, which
options are not currently exercisable.
(11) Includes an aggregate of 451,568 shares of Common Stock issuable upon
the exercise of options granted under the Stock Option Plans. Does not
include an aggregate of 116,505 shares of Common Stock issuable upon
the exercise of options granted under the Stock Option Plans, which
options are not currently exercisable. See footnotes (1) - (10) above
6
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
AUDIT COMMITTEE. The Audit Committee of the Board of Directors held two
meetings in 1999. The principal responsibilities of the Committee are to ensure
that the Board of Directors receives objective information regarding policies,
procedures and activities of Hamilton Bancorp with respect to auditing,
accounting, internal accounting controls, financial reporting, regulatory
matters and such other activities of Hamilton Bancorp as may be directed by the
Board of Directors. The following directors are the current members of the Audit
Committee: Messrs. Ronald Frazier, Thomas F. Gaffney, Ronald A. Lacayo, George
Lyall and Ben L. Moyer.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors held three meetings in 1999. The Compensation Committee is authorized,
among other things, to review and make recommendations to the Board of Directors
regarding employee compensation, to administer various employee benefit plans
and to monitor employment conditions and personnel policies. The following
directors are the current members of the Compensation Committee: Messrs. William
Alexander, Ronald Frazier and George Lyall.
ATTENDANCE. The Board of Directors of Hamilton Bancorp held six
meetings in 1999. All of the directors attended at least 75% of the aggregate of
the meetings of the Board of Directors of Hamilton Bancorp and of the above
committees on which they served, during the period they were directors and
members of such committees in 1999.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by Hamilton
Bancorp for services rendered during the past year to the five most highly
compensated Executive Officers (the "Named Officers") of Hamilton Bancorp and/or
Hamilton Bank.
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<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation Awards
---------------------------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($) # ($)
------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eduardo A. Masferrer............... 1999 853,534 662,000 --(1) --(4) 2,500(2)
Chairman of the 1998 775,900 1,103,591 --(1) -0- 4,621(2)
Board, President and 1997 705,400 798,058 9,500(3) -0- 4,400(2)
Chief Executive Officer
Juan Carlos Bernace.................. 1999 220,000 70,000 --(1) --(4) 2,500(2)
Executive Vice President 1998 200,000 100,000 --(1) 35,576 4,648(2)
1997 152,499 95,000 --(1) 48,396 4,400(2)
Maura A. Acosta....................... 1999 203,000 49,000 --(1) --(4) 2,500(2)
Executive Vice President 1998 195,000 70,000 --(1) 20,062 4,664(2)
1997 191,800 60,000 --(1) 19,163 4,400(2)
John M. R. Jacobs..................... 1999 160,000 42,000 --(1) --(4) 2,070(2)
Senior Vice President 1998 140,000 80,000 --(1) 10,000 4,050(2)
1997 93,205 -0- --(1) 8,578 -0-
J. Reid Bingham....................... 1999 170,000 24,500 -(1) --(4) 2,431(2)
General Counsel and 1998 165,000 35,000 -(1) 10,000 4,855(2)
Secretary 1997 150,000 30,000 -(1) 12,253 1,688(2)
</TABLE>
----------
(1) The aggregate amount of perquisites and other personal benefits
provided to such Named Officer is less than 10% of the total annual
salary and bonus of such officer.
(2) Represents matching and additional contributions made by Hamilton Bank
under its 401(k) plan.
(3) Represents Hamilton Bank director fees paid to Mr. Masferrer during the
first three months of 1997.
(4) Does not include the following options to purchase shares of Common
Stock granted in January 2000 for performance in 1999:
Eduardo A. Masferrer - 19,325
Juan Carlos Bernace - 13,117
Maura A. Acosta - 7,468
John M. R. Jacobs - 4,415
J. Reid Bingham - 4,690
DIRECTORS' COMPENSATION
The directors of Hamilton Bancorp, other than Executive Officers or
directors of Hamilton Bank,
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<PAGE> 12
receive a quarterly retainer of $4,000 and a fee of $1,000 for each meeting of
the Board or committee attended in excess of regular quarterly meetings of the
Board and one meeting of each committee per year. The directors of Hamilton
Bank, other than Executive Officers, receive from Hamilton Bank a monthly
retainer of $6,000 ($6,900 effective May 1, 2000), a fee of $1,500 for each
meeting attended of the Board of Directors of Hamilton Bank and a fee of $1,000
for each meeting attended of a Board committee of Hamilton Bank. Hamilton
Bancorp also reimburses all directors of Hamilton Bancorp for all travel-related
expenses incurred in connection with their activities as directors.
HAMILTON BANCORP BONUS POLICY
Historically, Hamilton Bank has distributed an aggregate percentage of
up to 11% (approximately 5% in 1999) of pre-tax net income, after the deduction
of loan loss provisions ("Available Pre-Tax Net Income"), to its executive
officers and other employees as bonuses. Up to five percent (5%) of the
Available Pre-Tax Net Income has historically been distributed to Eduardo A.
Masferrer, Hamilton Bancorp's Chairman of the Board, President and Chief
Executive Officer, although in 1998 and 1999 the amount was 3% and 2%,
respectively. Up to 6% (3.2% in 1999) of the Available Pre-Tax Net Income has
historically been distributed to other employees based upon and in accordance
with the following criteria: (i) each employee whose job performance was
satisfactory or better, as determined by an appropriate department head, has
received a bonus equal to two weeks' salary, (ii) each employee whose quarterly
job performance is significantly above average, as determined by an appropriate
department head, has received an additional bonus equal to one week's salary for
each quarter in which such a review is received and (iii) any remaining portion
of the percentage is distributed to those employees who have made superior
contributions to Hamilton Bank and Hamilton Bancorp during the year as
determined by the Personnel Management Committee. Hamilton Bank may also make an
additional contribution from the Available Pre-Tax Net Income to the 401(k) plan
for its executive officers and other employees on behalf of all participants in
the 401(k) plan at the end of the year. During the year ended December 31, 1999,
$1,572,689 of Available Pre-Tax Net Income was distributed pursuant to the bonus
plan.
HAMILTON BANCORP STOCK OPTION PLANS
In December 1993, Hamilton Bancorp adopted the 1993 Stock Option Plan
for Key Employees and Directors, pursuant to which 624,302 shares of Common
Stock are currently reserved for issuance upon exercise of options. In June
1998, Hamilton Bancorp adopted the 1998 Executive Incentive Compensation Plan,
pursuant to which 87,500 shares of Common Stock are currently reserved for
issuance upon exercise of options. The 1993 Stock Option Plan and the 1998
Executive Incentive Compensation Plan (collectively, the "Stock Option Plans")
are designed as a means to retain and motivate key employees and directors.
Hamilton Bancorp's Compensation Committee, or in the absence thereof, the Board
of Directors, administers and interprets the Stock Option Plans and is
authorized to grant options thereunder to all eligible employees of Hamilton
Bancorp including executive officers and directors (whether or not they are
employees) of Hamilton Bancorp or affiliated companies. Options granted under
the Stock Option Plans are on such terms and at such prices as determined by the
Compensation Committee, except that the per share exercise price of incentive
stock options cannot be less than the fair market value of the Common Stock on
the date of grant. Each option is exercisable after the period or periods
specified in the option agreement, but no option may be exercisable after the
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<PAGE> 13
expiration of ten years from the date of grant. The 1993 Stock Option Plan will
terminate on December 3, 2003 and the 1998 Stock Option Plan will terminate on
June 15, 2008, unless either is sooner terminated by Hamilton Bancorp's Board of
Directors. Incentive stock options granted to an individual who owns (or is
deemed to own) at least 10% of the total combined voting power of all classes of
stock of Hamilton Bancorp or its subsidiary must have an exercise price of at
least 110% of the fair market value of the Common Stock on the date of grant,
and a term of no more than five years. The Stock Option Plans also authorize
Hamilton Bancorp to make or guarantee loans to optionees to enable them to
exercise their options. Such loans must (i) provide for recourse to the
optionee, (ii) bear interest at a rate not less than the prime rate of interest
and (iii) be secured by the shares of Common Stock purchased. The Board of
Directors has the authority to amend or terminate the Stock Option Plans,
provided that no such amendment may impair the rights of the holder of any
outstanding option without the written consent of such holder, and provided
further that certain amendments of the Stock Option Plans are subject to
stockholder approval.
No options to purchase shares of Common Stock were granted under the
Stock Option Plans to the Named Officers during the year ended December 31,
1999.
Options to purchase shares of Common Stock were granted, however, under
the Stock Option Plans to the Named Officers in January 2000 with respect to
such Named Officers' performance during the year ended December 31, 1999. The
following table sets forth certain information with respect to options to
purchase shares of Common Stock granted under the Stock Option Plans in January
2000 with respect to the Named Officers' performance during the year ended
December 31, 1999. The table also describes the hypothetical gains that would
exist for the respective options granted based on assumed rates of annual
compounded stock appreciation of 5% and 10% from the date of grant to the end of
the option term. These hypothetical gains are based on assumed rates of
appreciation and, therefore, the actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall stock
market conditions and the Named Officer's continued employment with Hamilton
Bancorp or its subsidiaries. As a result, the amounts reflected in this table
may not necessarily be achieved.
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OPTION GRANTS IN JANUARY 2000
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
---------------------------- Value At Assumed Annual
Number of % of Rates of Stock Price
Securities Total Options Appreciation for Option
Underlying Granted to Exercise Term
Options Employees in Price Expiration -----------------------
Name Granted (#) January 2000 ($/Sh) Date 5% 10%
---- ----------- ------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Eduardo A. Masferrer .. 19,325 19.97% $ 17.75 1/3/10 $215,723 $546,684
Juan Carlos Bernace ... 13,117 13.56% 17.75 1/3/10 $146,423 $371,066
Maura A. Acosta ....... 7,468 7.72% 17.75 1/3/10 $ 83,364 $211,262
J. Reid Bingham ....... 4,692 4.85% 17.75 1/3/10 $ 52,376 $132,732
John M. R. Jacobs ..... 4,415 4.56% 17.75 1/3/10 $ 49,284 $124,896
</TABLE>
The following table shows information concerning the exercise of stock
options during fiscal year 1999 by each of the Named Officers and the fiscal
year-end value of their unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Unexercised The-Money Options
Shares Options At FY-End (#) At FY-End ($)(1)
Acquired Value ------------------------- -------------------------
Name On Exercise Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Eduardo A. Masferrer .... -0- -0- 48,750/-0- $395,850/-0-
Maura A. Acosta ......... -0- -0- 74,600/13,375 $395,850/-0-
Juan Carlos Bernace ..... -0- -0- 109,005/23,717 $395,850/-0-
John M. R. Jacobs ....... -0- -0- 11,911/6,667 $-0-/-0-
J. Reid Bingham ......... -0- -0- 35,086/6,667 $158,340/-0-
</TABLE>
----------
(1) Represents the difference between the closing price of Hamilton
Bancorp's common stock on December 31, 1999 ($17.75) and the exercise
price of the options multiplied by the number of shares represented by
such options.
11
<PAGE> 15
401(k) PLAN
Hamilton Bank maintains a 401(k) plan for its executive officers and
other employees. Under the terms of the 401(k) plan, for each dollar contributed
by an employee, Hamilton Bank intends to contribute a discretionary amount on
behalf of the participant (the "Matching Contribution"). In addition, at the end
of the plan year, Hamilton Bank may make an additional contribution from the
Available Pre-Tax Net Income bonus pool on behalf of all participants at the end
of the year ("Additional Contribution"). The amount that Hamilton Bank
contributes to the 401(k) plan has historically varied from year to year. During
the year ended December 31, 1999, Hamilton Bank made a $0.25 Matching
Contribution and no Additional Contribution on behalf of each participant in the
aggregate amount of $80,204.
EMPLOYMENT AGREEMENT
Effective October 1, 1999, Hamilton Bancorp entered into a new
employment agreement with Eduardo A. Masferrer for Mr. Masferrer's service to
Hamilton Bancorp as Chairman of the Board, President and Chief Executive Officer
for the employment period from October 1, 1999 through December 31, 2004 (the
"Employment Agreement"). The term of the Employment Agreement is automatically
extended for an additional year each December 31, unless either Hamilton Bancorp
or Mr. Masferrer provides written notice of election not to renew at least 90
days before the applicable December 31.
Mr. Masferrer's annual rate of base salary under the Employment
Agreement is set at the rate in effect as of the date of the Employment
Agreement (US$853,534) through December 31, 1999. Thereafter, base salary shall
be reviewed by Hamilton Bancorp at least annually and any base salary increase
shall be effective each January 1, beginning January 1, 2000. Hamilton Bancorp
may not, however, reduce Mr. Masferrer's base salary at any time during the term
of the Employment Agreement. In addition, the Employment Agreement provides for
eligibility for 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 Hamilton Bancorp. The amount actually awarded to Mr. Masferrer
will be determined by Hamilton Bancorp's Board of Directors. Pursuant to the
Employment Agreement, Mr. Masferrer received an Annual Incentive Payment of
$662,000 for Hamilton Bancorp's 1999 fiscal year. Mr. Masferrer is also entitled
to receive certain enumerated perquisites, a supplemental retirement benefit
which shall be no less than $650,000 per year beginning at age 65 and paid
annually for 15 years and to participate in the various employee benefit plans
which Hamilton Bancorp maintains or adopts during his employment period.
The Employment Agreement provides for severance payments to Mr.
Masferrer in the event that Hamilton Bancorp terminates Mr. Masferrer's
employment during the employment period without cause or if Mr. Masferrer
resigns for "good reason" (resignation due to a breach by Hamilton Bancorp of
its obligations under the Employment Agreement), including an amount equal to
the remaining term of the Employment Agreement times the current annual base
salary in effect at the date of termination, an amount equal to two times the
aggregate Annual Incentive Payment paid to Mr. Masferrer 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
and any amounts due under the
12
<PAGE> 16
supplemental retirement benefit plan and any stock option plans without regard
to "vesting."
The Employment Agreement provides for a change of control benefit if
within 24 months after a change of control Hamilton Bancorp terminates Mr.
Masferrer's employment other than for cause or disability or if Mr. Masferrer
terminates his employment for "good reason." The change of control benefit is an
amount equal to 2.99 times his average annualized compensation in the preceding
5 years. Hamilton Bancorp shall also pay to Mr. Masferrer any amounts due under
the supplemental retirement benefit plan and any stock option plans without
regard to "vesting."
Each of the other Named Officers also entered into employment
agreements with Hamilton Bancorp, each dated October 1, 1999. The agreements
provide that the Named Officers' compensation will not be reduced below his/her
1999 salary as reflected in the Summary Compensation Table and are for a term of
two to three years. Each contract also provides for a performance bonus in the
event of a change in control of Hamilton Bancorp at a per share price exceeding
$24 per share. The performance bonus will be equal to the Named Officer's
compensation for the year preceding the change in control. Each December 31 the
term of each employment contract is extended for an additional year unless
Hamilton Bancorp or the Named Officer affirmatively elects not to so extend the
employment agreement.
All of the employment agreements provide that if the employee leaves
Hamilton Bancorp and its subsidiaries such employee will not attempt to
influence any customers of Hamilton Bancorp and its subsidiaries to curtail any
business they may transact with Hamilton Bancorp and its subsidiaries or attempt
to influence any employee of Hamilton Bancorp and its subsidiaries to terminate
his/her employment with Hamilton Bancorp and its subsidiaries.
The term "change of control" as used in the employment agreements means
(i) a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions with respect to which persons who were the
shareholders of Hamilton Bancorp immediately prior to such transaction do not,
immediately thereafter, directly or indirectly, own more than 80% of the
combined voting power of the reorganized, merged or consolidated entity's then
outstanding voting securities; (ii) a liquidation or dissolution of Hamilton
Bancorp; (iii) the sale of more than 50% of the assets of Hamilton Bancorp to
any person or entity not controlled by or under common control with Hamilton
Bancorp 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 Hamilton Bancorp or its subsidiaries) of
more than twenty percent (20%) of either the then outstanding shares of common
stock or the combined voting power of Hamilton Bancorp's then outstanding voting
securities entitled to vote generally in election of directors.
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of three non-employee directors:
Messrs. William Alexander, Ronald Frazier and George Lyall. This report relates
to compensation paid for Hamilton Bancorp's 1999 fiscal year to Eduardo A.
Masferrer, Chairman, President and Chief Executive Officer of Hamilton Bancorp
and all of the executive officers of Hamilton Bancorp.
13
<PAGE> 17
COMPENSATION PHILOSOPHY
Hamilton Bancorp's executive compensation program is designed to
closely link compensation to corporate performance and returns to stockholders.
The principal objectives of this strategy are to attract and retain high quality
executive talent, to motivate these executives to achieve Hamilton Bancorp's
strategic goals and to link executive and stockholder interests. To this end,
Hamilton Bancorp has developed an overall compensation strategy and specific
compensation plans that tie a significant portion of executive compensation to
Hamilton Bancorp's success in meeting specified performance goals and to
appreciation in the price of Hamilton Bancorp's Common Stock.
To meet these goals, the Compensation Committee reviews Hamilton
Bancorp and personal performance, stock price and executive compensation levels.
An independent executive compensation consultant has been used from time to time
to assess the competitiveness of the executive compensation program in relation
to those of other public corporations with which Hamilton Bancorp competes for
executive talent. The corporations whose compensation practices have been
studied as part of this comparative review include the full range of
corporations with which Hamilton Bancorp competes for executive talent both
within and outside the banking industry.
The key elements of Hamilton Bancorp's executive compensation in fiscal
1999 consisted of three components, each of which is intended to serve Hamilton
Bancorp's overall compensation philosophy: base salary, the annual bonus and
stock options. The Compensation Committee's policies with respect to each of
these elements, including the basis for the compensation awarded to Mr. Eduardo
A. Masferrer, Hamilton Bancorp's Chairman, President and Chief Executive
Officer, are discussed below. In addition, while the elements of compensation
described below are considered separately, the Compensation Committee takes into
account the full compensation package afforded by Hamilton Bancorp and Hamilton
Bank to each individual, including pension benefits, insurance and other
benefits, as well as the programs described below.
Under Section 162 (m) of the Internal Revenue Code of 1986, as amended,
publicly traded corporations such as Hamilton Bancorp are not permitted to
deduct compensation in excess of $1,000,000 paid to certain top executives,
unless the compensation qualifies as "performance-based compensation". The
annual cash bonus paid to Mr. Eduardo A. Masferrer with respect to 1999 resulted
in his compensation exceeding $1,000,000, but was deductible as "performance
based compensation". For 1998 and subsequent years the Compensation Committee
set Mr. Masferrer's "performance based compensation" bonus percentage at five
percent (5%) of Available Pre-Tax Net Income, although the Committee reserves
the right to reduce this amount in its discretion after year end results are
known. It is expected that if compensation paid to Mr. Masferrer with respect to
2000 exceeds $1,000,000, it will be deductible as "performance based
compensation".
BASE SALARY
Base salaries for executive officers are determined by evaluating the
responsibilities of the executive's position and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions at
other companies.
14
<PAGE> 18
Executives' base salaries are reviewed by the Compensation Committee on
an annual basis and adjustments are determined by (i) evaluating the performance
of Hamilton Bancorp and each executive officer, (ii) considering changes in
responsibilities for executives, (iii) with respect to executive officers with
responsibility for a particular business unit, considering the unit's financial
results and (iv) considering increases in median pay levels for comparable
positions at other companies and salary increases granted to other employees of
Hamilton Bancorp, aiming to implement similar increases to maintain a
competitive position.
Mr. Masferrer's base salary for fiscal year 1999 was $853,534 per year
pursuant to the Employment Agreement between Hamilton Bancorp and Mr. Masferrer
dated October 1, 1999. Mr. Masferrer's base salary for fiscal year 2000 will be
$896,210. This salary reflects a 5% increase over Mr. Masferrer's salary for
1999 and represents a merit increase reflecting the increased growth and
increased profitability of Hamilton Bancorp.
ANNUAL BONUS
Pursuant to Hamilton Bancorp's Annual Bonus Policy, Executive Officers
are eligible for an annual cash bonus based on their contribution to Hamilton
Bancorp during the year. Historically Hamilton Bancorp has distributed up to 11%
(5% to Mr. Eduardo A. Masferrer and 6% to other Executive Officers and
employees) of its pre-tax net income, after the deduction of loan loss
provisions ("Available Pre-Tax Net Income"), as bonuses to its Executive
Officers and other employees. In 1999 Hamilton Bancorp distributed approximately
five percent (5%) of the Available Pre-Tax Net Income, two percent (2%) was
distributed to Mr. Masferrer by the Personnel, Compensation and Benefits
Committee of Hamilton Bank and three percent (3%) to other Executive Officers
and employees. The distribution to other Executive Officers and employees was
made first as additional weeks' salary based upon a formula relating to each
employee's periodic job performance evaluations, second as an additional
contribution to the 401(k) plan for Executive Officers and other employees and
the balance to those employees, including Executive Officers, who made superior
contributions to Hamilton Bancorp during the year.
STOCK OPTIONS
Under Hamilton Bancorp's 1993 Stock Option Plan and 1998 Executive
Incentive Compensation Plan, the Compensation Committee may grant options to
purchase Common Stock at its then current market value. The Compensation
Committee sets guidelines for the number of such awards based on factors
including competitive compensation data, the importance of the executive's
position, incentive towards achievement of future long-term goals, corporate
performance and individual performance against objectives agreed upon between
each employee and his or her manager. The options granted in January 2000 for
performance in 1999 vest in thirds twelve, eighteen and twenty-four months after
the grant if the executive is then employed with Hamilton Bancorp or Hamilton
Bank.
CONCLUSION
Through the programs described above, a substantial portion of Hamilton
Bancorp's executive
15
<PAGE> 19
compensation is linked directly to individual and corporate performance and
stock price appreciation. The Compensation Committee intends to continue the
policy of directly linking a significant portion of executive compensation to
corporate performance and stockholder returns.
COMPENSATION COMMITTEE
William Alexander
Ronald E. Frazier
George A. Lyall
CERTAIN TRANSACTIONS WITH MANAGEMENT
From time to time, Hamilton Bank makes loans and extends credit to
certain of Hamilton Bancorp's and/or Hamilton Bank's officers and directors and
to certain companies affiliated with such persons. In the opinion of Hamilton
Bancorp all of such loans and extensions of credit were made in the ordinary
course of business, on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other third parties. At December 31, 1999, an aggregate of $544,000 of loans and
extensions of credit were outstanding to executive officers and directors of
Hamilton Bancorp and/or Hamilton Bank and to companies affiliated with such
persons.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Hamilton
Bancorp's directors, executive officers and holders of more than 10% of Hamilton
Bancorp's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of Hamilton Bancorp. Based solely upon its review of
Section 16(a) reports furnished to Hamilton Bancorp and upon representations
made to Hamilton Bancorp, Hamilton Bancorp believes that during 1999 its
directors, executive officers and holders of more than 10% of its Common Stock
complied with all Section 16(a) filing requirements, with the exception that Mr.
William Alexander filed a late Form 4 relating to his sale of 2,188 shares of
Hamilton Bancorp Common Stock in November 1998.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return on Hamilton Bancorp's Common Stock, based on the market price
of the Common Stock, with the cumulative total return of companies on Standard &
Poor's Small Cap 600 Index and the NASDAQ Bank Index, for the period commencing
March 31, 1997 and ended December 31, 1999. Returns are based upon the quarter-
end to quarter-end price and assume dividends, if any, are reinvested. The graph
assumes $100 was invested on March 31, 1997 in Hamilton Bancorp's Common Stock,
Standard & Poor's Small Cap 600 Index and the NASDAQ Bank Index.
[Graph]
<TABLE>
<CAPTION>
Date HABK Nasdaq Bank Index S&P Small Cap
---- ---- ----------------- -------------
<S> <C> <C> <C>
03/31/97 100 100 100
06/30/97 155 117 118
09/30/97 159 137 137
12/31/97 169 151 132
03/31/98 191 161 147
06/30/98 209 154 140
09/30/98 151 126 110
12/31/98 155 133 129
03/31/99 150 127 118
06/30/99 139 136 135
09/30/99 123 122 129
12/31/99 103 123 144
</TABLE>
16
<PAGE> 20
PROPOSAL 2. APPROVAL OF HAMILTON BANCORP'S 1998 EXECUTIVE INCENTIVE
COMPENSATION PLAN
BACKGROUND AND PURPOSE
The Board of Directors has adopted the Hamilton Bancorp Inc. 2000
Executive Incentive Compensation Plan (the "2000 Plan") and recommended that it
be submitted to Hamilton Bancorp's stockholders for their approval at the Annual
Meeting. The terms of the 2000 Plan are the same as Hamilton Bancorp's existing
1998 Executive Incentive Compensation Plan (the "1998 Plan") except the 2000
plan provides for 300,000 shares of Common Stock reserved for issuance upon
exercise of options. The terms of the 2000 Plan provide for grants of stock
options and performance or annual incentive awards that may be settled in cash,
options or stock (collectively, "Awards"). The 2000 Plan does not supersede the
1993 Stock Option Plan (" 1993 Plan") or the 1998 Plan. The effective date of
the 2000 Plan is as of January 1, 2000 (the "Effective Date") if approved by
stockholders. No Awards have been made under the 2000 Plan as of the date of
this Proxy Statement.
Stockholder approval of the Plan is required (i) for purposes of
compliance with certain exclusions from the limitations of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which are further
described below, (ii) in order for the 2000 Plan to be eligible under the "plan
lender" exemption from the margin requirements of Regulation G promulgated under
the 1934 Act and (iii) by the rules of the NASDAQ National Market.
17
<PAGE> 21
The following is a summary of certain principal features of the 2000
Plan. This summary is qualified in its entirety by reference to the complete
text of the 2000 Plan, which is attached to this Proxy Statement as Exhibit A.
Stockholders are urged to read the actual text of the 2000 Plan in its entirety.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS
Under the 2000 Plan, the total number of shares of Common Stock that
may be subject to the granting of options at any time during the term of the
Plan shall be equal to 300,000 shares, plus the number of shares with respect to
which options previously granted under the 2000 Plan terminate, expire or are
canceled without being exercised and the number of shares that are surrendered
in payment of the exercise price of any options or any tax withholding
requirements.
In addition, the 2000 Plan imposes individual limitations on the amount
of certain Awards, in part to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options granted to any one
participant may not exceed 150,000 options, subject to adjustment in certain
circumstances. The maximum amount that may be paid out as an annual incentive
Award or other cash Award in any fiscal year to any one participant, and the
maximum amount that may be earned as a performance Award or other cash Award in
respect of a performance period by any one participant, is $5,000,000.
The Compensation Committee is authorized to adjust the limitations
applicable to the number of options that may be granted under the 2000 Plan or
to any participant and is authorized to adjust outstanding Options (including
adjustments to exercise prices of options and other affected terms of Options)
in the event that a dividend or other distribution (whether in cash, shares of
Common Stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange or other similar corporate transaction or event affects the Common
Stock, so that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants. The Compensation Committee is also
authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
ELIGIBILITY
The persons eligible to receive Awards under the 2000 Plan are the
officers, directors and employees of Hamilton Bancorp and its subsidiaries. An
employee on leave of absence may be considered as still in the employ of
Hamilton Bancorp or a subsidiary for purposes of eligibility for participation
in the 2000 Plan.
ADMINISTRATION
The 2000 Plan is to be administered by the Compensation Committee, each
member of which must be a "non-employee director" as defined under Rule 16b-3
under the 1934 Act and an "outside director" for purposes of Section 162(m) of
the Code. However, except as otherwise required to comply with Rule 16b-3 of the
1934 Act, or Section 162(m) of the Code, the Board may exercise any power or
18
<PAGE> 22
authority granted to the Compensation Committee. Subject to the terms of the
2000 Plan, the Compensation Committee or the Board is authorized to select
eligible persons to receive Awards, determine the type and number of Awards to
be granted and the number of shares of Common Stock to which Options will
relate, specify times at which Options will be exercisable or settleable
(including performance conditions that may be required as a condition thereof),
set other terms and conditions of Awards, prescribe forms of Award agreements,
interpret and specify rules and regulations relating to the 2000 Plan, and make
all other determinations that may be necessary or advisable for the
administration of the 2000 Plan.
STOCK OPTIONS
The Compensation Committee or the Board is authorized to grant stock
options, including both incentive stock options ("ISO's"), which can result in
potentially favorable tax treatment to the participant, and non-qualified stock
options. The exercise price per share subject to an option are determined by the
Compensation Committee, but in the case of an ISO must not be less than the fair
market value of a share of Common Stock on the date of grant. For purposes of
the 2000 Plan, the term "fair market value" means the fair market value of
Common Stock, Awards or other property as determined by the Compensation
Committee or the Board or under procedures established by the Compensation
Committee or the Board. Unless otherwise determined by the Compensation
Committee or the Board, the fair market value of Common Stock as of any given
date shall be the closing sales price per share of Common Stock as reported on
the principal stock exchange or market on which Common Stock is traded on the
immediately preceding day or, if there are no sales on that day, then on the
last previous day on which a sale was reported. The maximum term of each option,
the times at which each option will be exercisable, and provisions requiring
forfeiture of unexercised options at or following termination of employment
generally are fixed by the Compensation Committee or the Board, except that no
option may have a term exceeding ten years. Unless further limited by the
Compensation Committee in any option grant, options may be exercised by the
payment of the exercise price in cash, by certified or official bank check or
money order, with shares owned by the participant for more than 6 months, by
authorization for Hamilton Bancorp to withhold shares issuable upon exercise of
the option, by a cashless exercise program with a broker or by any combination
of the foregoing. The Compensation Committee in its sole discretion may accept a
personal check in full or partial payment of any shares.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS
The right of a participant to exercise or receive a grant or settlement
of an Award, and the timing thereof, may be subject to such performance
conditions (including subjective individual goals) as may be specified by the
Compensation Committee or the Board. In addition, the 2000 Plan authorizes
specific annual incentive Awards, which represent a conditional right to receive
cash, shares of Common Stock or other Awards upon achievement of certain
preestablished performance goals and subjective individual goals during a
specified fiscal year. Performance Awards and annual incentive Awards granted to
persons whom the Compensation Committee expects will, for the year in which a
deduction arises, be "covered employees" (as defined below) will, if and to the
extent intended by the Compensation Committee, be subject to provisions that
should qualify such Awards as "performance-based compensation" not subject to
the limitation on tax deductibility by Hamilton Bancorp under Code Section
162(m).
19
<PAGE> 23
For purposes of Section 162(m), the term "covered employee" means Hamilton
Bancorp's chief executive officer and each other person whose compensation is
required to be disclosed in Hamilton Bancorp's filings with the Commission by
reason of that person being among the four highest compensated officers of
Hamilton Bancorp as of the end of a taxable year. If and to the extent required
under Section 162(m) of the Code, any power or authority relating to a
performance Award or annual incentive Award intended to qualify under Section
162(m) of the Code is to be exercised by the Compensation Committee and not the
Board.
Subject to the requirements of the 2000 Plan, the Compensation
Committee or the Board will determine performance Award and annual incentive
Award terms, including the required levels of performance with respect to
specified business criteria, the corresponding amounts payable upon achievement
of such levels of performance, termination and forfeiture provisions and the
form of settlement. In granting annual incentive or performance Awards, the
Compensation Committee or the Board may establish unfunded award "pools," the
amounts of which will be based upon the achievement of a performance goal or
goals based on one or more of certain business criteria described in the 2000
Plan (including, for example, total stockholder return, net income, pretax
earnings, EBITDA, earnings per share, and return on investment). During the
first 90 days of a fiscal year or performance period, the Compensation Committee
or the Board will determine who will potentially receive annual incentive or
performance Awards for that fiscal year or performance period, either out of the
pool or otherwise.
After the end of each fiscal year or performance period, the
Compensation Committee or the Board will determine (i) the amount of any pools
and the maximum amount of potential annual incentive or performance Awards
payable to each participant in the pools and (ii) the amount of any other
potential annual incentive or performance Awards payable to participants in the
2000 Plan. The Compensation Committee or the Board may, in its discretion,
determine that the amount payable as an annual incentive or performance Award
will be reduced from the amount of any potential Award.
OTHER TERMS OF AWARDS
Awards may be settled in the form of cash, shares of Common Stock or
other Awards, in the discretion of the Compensation Committee or the Board. The
Compensation Committee or the Board may condition any payment relating to an
Award on the withholding of taxes and may provide that a portion of any shares
of Common Stock or other property to be distributed will be withheld (or
previously acquired shares of Common Stock or other property be surrendered by
the participant) to satisfy withholding and other tax obligations. Awards
granted under the 2000 Plan generally may not be pledged or otherwise encumbered
and are not transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the participant's death,
except that the Compensation Committee or the Board may, in its discretion,
permit transfers for estate planning or other purposes subject to any applicable
restrictions under Rule 16b-3.
ACCELERATION OF VESTING; CHANGE IN CONTROL
The Compensation Committee or the Board may, in its discretion,
accelerate the exercisability, the lapsing of restrictions or the expiration of
deferral or vesting periods of any Award, and such
20
<PAGE> 24
accelerated exercisability, lapse, expiration and if so provided in the Award
agreement, vesting shall occur automatically in the case of a "change in
control" of Hamilton Bancorp, as defined in the 2000 Plan. For purposes of the
2000 Plan, the term "change in control" generally means approval by stockholders
of any reorganization, merger or consolidation or other transaction or series of
transactions if persons who were stockholders immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power of the reorganized,
merged or consolidated company's then outstanding, voting securities, or a
liquidation or dissolution of Hamilton Bancorp or the sale of all or
substantially all of the assets of Hamilton Bancorp (unless the reorganization,
merger, consolidation or other corporate transaction, liquidation, dissolution
or sale is subsequently abandoned).
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter, suspend, discontinue or
terminate the 2000 Plan or the Compensation Committee's authority to grant
Awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which
shares of Common Stock are then listed or quoted. Thus, stockholder approval may
not necessarily be required for every amendment to the 2000 Plan which might
increase the cost of the 2000 Plan or alter the eligibility of persons to
receive Awards. Unless earlier terminated by the Board, the 2000 Plan will
terminate on January 1, 2010.
SECURITIES ACT REGISTRATION
Hamilton Bancorp intends to register the shares of Common Stock
available for Awards under the 2000 Plan pursuant to a Registration Statement on
Form S-8 filed with the Commission.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS
The following is a brief description of the federal income tax
consequences generally arising with respect to Awards of options under the 2000
Plan.
The grant of an option will create no tax consequences for the
participant or Hamilton Bancorp. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the freely transferable and non-forfeitable shares of Common
Stock acquired on the date of exercise.
Upon a disposition of shares of Common Stock acquired upon exercise of
an ISO before the end of the applicable ISO holding periods, the participant
must generally recognize ordinary income equal to the lesser of (i) the fair
market value of the shares of Common Stock at the date of exercise of the ISO
minus the exercise price, or (ii) the amount realized upon the disposition of
the ISO shares of Common Stock minus the exercise price. Otherwise, a
participant's disposition of shares of Common Stock acquired upon the exercise
of an option (including an ISO for which the ISO holding periods are met)
21
<PAGE> 25
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in such
shares of Common Stock (the tax basis generally being the exercise price plus
any amount previously recognized as ordinary income in connection with the
exercise of the option).
Hamilton Bancorp generally will be entitled to a tax deduction equal to
the amount recognized as ordinary income by the participant in connection with
an option. Hamilton Bancorp generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant. Accordingly,
Hamilton Bancorp will not be entitled to any tax deduction with respect to an
ISO if the participant holds the shares of Common Stock for the ISO holding
periods prior to disposition of the shares.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, Hamilton Bancorp intends that options and certain other Awards
granted to employees whom the Compensation Committee expects to be covered
employees at the time a deduction arises in connection with such Awards, qualify
as such "performance-based compensation," so that such Awards will not be
subject to the Section 162(m) deductibility cap of $1 million. Future changes in
Section 162(m) or the regulations thereunder may adversely affect the ability of
Hamilton Bancorp to ensure that options or other Awards under the 2000 Plan will
qualify as "performance-based compensation" that is fully deductible by Hamilton
Bancorp under Section 162(m).
The foregoing discussion, which is general in nature and is not
intended to be a complete description of the federal income tax consequences of
the 2000 Plan, is intended for the information of stockholders considering how
to vote at the Annual Meeting and not as tax guidance to participants in the
2000 Plan. This discussion does not address the effects of other federal taxes
or taxes imposed under state, local or foreign tax laws. Participants in the
2000 Plan should consult a tax advisor as to the tax consequences of
participation.
NEW PLAN BENEFITS. As described above, the selection of employees who
will receive awards under the 2000 Plan, if it is approved by the stockholders,
and the size and type of Awards will be determined by the Compensation Committee
in its discretion. Except as described below, no Awards have been made under the
2000 Plan, nor are any such Awards now determinable. Accordingly it is not
possible to predict the benefits or amounts that will be received by, or
allocated to, particular individuals or groups of employees in 2000.
REQUIRED VOTE. The affirmative vote of a majority of the shares of
Common Stock, represented in person or by proxy, cast at the Annual Meeting is
required to approve the 2000 Executive Incentive Compensation Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN.
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PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
APPROVAL OF THE 2000 EXECUTIVE INCENTIVE COMPENSATION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Hamilton Bancorp has reappointed Deloitte &
Touche as independent auditors to audit the financial statements of Hamilton
Bancorp for the current fiscal year.
Representatives of Deloitte & Touche are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
STOCKHOLDERS PROPOSALS
Proposals of stockholders intended to be presented at the 2001 annual
meeting of Hamilton Bancorp must be in writing, not exceeding 500 words in
length, and received by the Secretary of Hamilton Bancorp at its main offices,
3750 N.W. 87 Avenue, Miami, Florida 33178, no later than January 1, 2001. If
such proposal or proposals are in compliance with applicable rules and
regulations, they will be included in Hamilton Bancorp's proxy statement and
form a proxy for that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. Reid Bingham
J. Reid Bingham
Secretary
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EXHIBIT A
HAMILTON BANCORP INC.
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN
--------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
HAMILTON BANCORP INC., a Florida corporation (the "Company"), and its
Subsidiaries and Affiliates by providing an additional incentive to attract and
retain qualified and competent persons who are key employees or directors of the
Company and its Subsidiaries and Affiliates, and upon whose efforts and judgment
the success of the Company and its Subsidiaries and Affiliates are 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 11(c) hereof to receive a cash payment,
Shares or other Award, unless otherwise determined by the Committee,
after the end of a specified fiscal year.
(c) "Award" shall mean any cash award, Option, Restricted Stock,
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 pursuant to Section 16(a) hereof.
(f) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(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
Subsidiaries and 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.
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(i) "Eligible Person" means each Officer of the Company (as defined
under the Exchange Act) and other officers, directors and employees of
the Company and its Subsidiaries and Affiliates. An employee on leave
of absence may be considered as still in the employ of the Company or
its Subsidiary or Affiliate 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 mean
the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee or
the Board in its sole discretion shall determine otherwise in a fair
and uniform manner. For the purpose of determining Fair Market Value,
the "Closing Price" of the Common Stock on any business day shall be
(i) if the Common Stock is listed or admitted for trading on any United
States national securities exchange, or if actual transactions are
otherwise reported on a consolidated transaction reporting system, the
last reported sale price of Common Stock on such exchange or reporting
system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common
use, the last reported sale price of Common Stock on such system or, if
sales prices are not reported, the mean between the closing high bid
and low asked quotations for such day of Common Stock on such system,
as reported in any newspaper of general circulation or (iii) 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 or the Board 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 mean a Director who is not an
employee of the Company or any Subsidiary or Affiliate.
(o) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(p) "Officer" shall mean the Company's Chairman of the Board,
President, Chief Executive Officer, principal financial officer,
principal accounting officer, any vice-president of the Company in
charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a
policy-making function, or any other person who performs similar
policy-making functions for the Company. Officers of Subsidiaries shall
be deemed Officers of the Company if they perform such policy-making
functions for the Company.
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As used in this paragraph, the phrase "policy-making function" does not
include policy-making functions that are not significant. If pursuant
to Item 401(b) of Regulation S-K (17 C.F.R.ss.229.401(b)) the Company
identifies a person as an "executive officer," the person so identified
shall be deemed an "Officer" even though such person may not otherwise
be an "Officer" pursuant to the foregoing provisions of this paragraph.
(q) "Option" (when capitalized) shall mean any option granted under
this Plan.
(r) "Outside Director" shall mean a member of the Board who qualifies
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 Securities Exchange Act.
(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" shall mean a right, granted to an Eligible
Person under Section 11 hereof, to receive Awards based upon
performance criteria specified by the Committee or the Board.
(u) "Plan" shall mean this 2000 Executive Incentive Compensation Plan
for the Company.
(v) "Restricted Stock" means Shares granted to a Participant under
Section 10 hereof, that are subject to certain restrictions and/or
risks of forfeiture.
(w) "Share" shall mean a share of Common Stock.
(x) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing
50 percent or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
3. SHARES SUBJECT TO AWARDS.
(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS. Subject
to adjustment as provided in Section 12(a) hereof, the total number of
Shares reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 300,000, plus (ii) the number of
Shares with respect to Awards previously granted under the Plan that
terminate without being exercised, expire, are forfeited or canceled,
and the number of Shares that are surrendered in payment of any Awards
or any tax withholding with regard thereto. Any Shares delivered under
the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares. Subject to adjustment as provided in Section
12(a) hereof, in no event shall the aggregate number of Shares which
may be issued pursuant to ISOs exceed 300,000 Shares.
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(b) PER PERSON AWARD LIMITATION. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted
Awards relating to more than 150,000 Shares, subject to adjustment as
provided in Section 12(a), under each of Sections 5(a) and 10(a). In
addition, the maximum amount that may be earned as an Annual Incentive
Award or other cash Award in any fiscal year by any one Participant
shall be $5,000,000, 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.
4. INCENTIVE AND NON-QUALIFIED OPTIONS.
(a) 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 a Non-Qualified Stock Option. All
Incentive Stock Options shall be granted within 10 years from the
effective date of this Plan. Incentive Stock Options may not be granted
to any person who is not an employee of the Company or any Subsidiary
or Affiliate.
(b) 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 Section 422(b) of the Internal Revenue Code are
exercisable for the first time by any individual during any calendar
year (under all plans of the Company and its parent and subsidiary
corporations as defined in Section 424 of the Internal Revenue Code),
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 shall take into consideration
the contribution the person has made to the success of the Company or
its Subsidiaries or Affiliates 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 and its Subsidiaries and Affiliates with regard to these
matters. The Committee may from time to 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) 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.
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(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 with the Company or its
Subsidiaries or Affiliates. 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 or its Subsidiaries or
Affiliates.
(d) Notwithstanding any other provision of this Plan, 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 parent or subsidiary corporation (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.
(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 16 of this Plan and all whose
members are Outside Directors.
(f) Incentive Stock Options may not be granted to any Outside
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 option 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 or Subsidiary or
Affiliate 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
consideration to be paid for the Shares to be issued upon exercise of
an Option as well as the method of payment of the exercise price and of
any withholding and employment taxes applicable thereto, shall consist
of: (1) cash, (2) certified or official bank check, (3) money order,
(4) Shares that have been held by the Participant for at least six (6)
months (or such other Shares as the Company determines will not cause
the Company to recognize for financial accounting purposes a charge for
compensation expense), (5) the withholding of Shares issuable upon
exercise of the Option, (6) pursuant to a
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"cashless exercise" procedure, by delivery of a properly executed
exercise notice together with such other documentation, and subject to
such guidelines, as the Committee shall require to effect an exercise
of the Option and delivery to the Company by a licensed broker
acceptable to the Company of proceeds from the sale of Shares or a
margin loan sufficient to pay the exercise price and any applicable
income or employment taxes, or (7) in such other consideration as the
Committee deems appropriate, or by a combination of the above. In the
case of an Incentive Stock Option, the permissible methods of payment
shall be specified at the time the Option is granted. 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, or through the withholding of Shares issuable upon
exercise of the Option, the value of the Shares surrendered or withheld
shall be their Fair Market Value on the date the Option is exercised.
The Company in its sole discretion may, on an individual basis or
pursuant to a general program established in connection with this Plan,
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 the
prime rate of the Company's principal lender, and (iv) contain such
other terms as the Committee 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 12
hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8 and in
Section 13 hereof.
(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 on which the
Option is granted.
(b) 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) Unless otherwise provided in any Option agreement, the unexercised
portion of any Option shall automatically and without notice terminate
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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 Affiliate is
terminated other than by reason of (A) Cause, which, solely
for purposes of this Plan, shall mean the termination of the
Participant's employment by reason of the Optionee's willful
misconduct or gross negligence, (B) a mental or physical
disability (within the meaning of Internal Revenue Code
Section 22(e)) of the Participant as determined by a medical
doctor satisfactory to the Committee, or (C) death of the
Participant;
(ii) immediately upon the termination of the Participant's
employment with the Company or any Subsidiary or Affiliate for
Cause;
(iii) twelve months after the date on which the Participant's
employment is terminated with the Company or any Subsidiary or
Affiliate by reason of a mental or physical disability (within
the meaning of Internal Revenue Code Section 22(e)) as
determined by a medical doctor satisfactory to the Committee;
(iv) (A) twelve months after the date of termination of the
Participant's employment with the Company or any Subsidiary or
Affiliate by reason of death of the Participant, or, if later,
(B) three months after the date on which the Participant shall
die if such death shall occur during the one year period
specified in Subsection 9(a)(iii) hereof. All references
herein to the termination of the Participants employment
shall, in the case of a Participant who is not an employee of
the Company or a Subsidiary or Affiliate, refer to the
termination of the Participants service with the Company or a
Subsidiary or Affiliate.
(b) The Committee in its sole discretion may by written notice (a
cancellation notice) cancel, effective upon the consummation of any
corporate transaction described in Subsection 13(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. RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(a) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee or the Board). During the
restricted period applicable to the Restricted Stock, subject to
Section 14 below, the Restricted Stock may not be sold, transferred,
pledged, hypothecated, margined or
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otherwise encumbered by the Participant.
(b) FORFEITURE. Except as otherwise determined by the Committee at the
time of the Award, upon termination of a Participant's employment or
service with the Company or any Subsidiary or Affiliate during the
applicable restriction period, the Participant's Restricted Stock that
is at that time subject to restrictions shall be forfeited and
reacquired by the Company; provided that the Committee may provide, by
rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted
Stock.
(c) CERTIFICATES FOR STOCK. Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name
of the Participant, the Committee may require that such certificates
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the Company
retain physical possession of the certificates, and that the
Participant deliver a stock power to the Company, endorsed in blank,
relating to the Restricted Stock.
(d) DIVIDENDS AND SPLITS. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any cash dividends
paid on a share of Restricted Stock be automatically reinvested in
additional shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the
Committee, Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock with respect to which such Shares or other
property has been distributed.
11. 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
11(b) and 11(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
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goals and other terms set forth in this Section 11(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 of performance with
respect to each of such criteria, as specified by the
Committee consistent with this Section 11(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 11 hereof that are intended to
qualify as "performanced-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 11(b)(ii) hereof during the given performance
period, as specified by the Committee in accordance with
Section 11(b)(iii) hereof. The
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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, Stock, other
Awards or other property, in the discretion of the Committee.
The Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such
Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES.
If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated
by the Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m),
the grant, exercise and/or settlement of such Annual Incentive Award
shall be contingent upon achievement of preestablished performance
goals and other terms set forth in this Section 11(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 11(b)(ii)
hereof during the given performance period, as specified by
the Committee in accordance with Section 11(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 11(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 11(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
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Committee shall determine the amount, if any, of (A) the
Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Participant
in the Annual Incentive Award pool, or (B) the amount of
potential Annual Incentive Award otherwise payable to each
Participant. The Committee may, in its discretion, determine
that the amount payable to any Participant as an Annual
Incentive Award shall be reduced from the amount of his or her
potential Annual Incentive Award, including a determination to
make no Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a fiscal year or settlement of
such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under
Section 11(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 11(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) STATUS OF SECTION 11(b) AND SECTION 11(c) AWARDS UNDER CODE SECTION
162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 11(b) and 11(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 11(b), (c) and (d) and Section 3(b) hereof, 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.
12. ADJUSTMENTS.
(a) In the event that any dividend or other distribution (whether in
the form of cash, Shares, or other property), recapitalization, forward
or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or
other similar corporate transaction or event affects the Shares such
that a substitution or adjustment is
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determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the rights of Participants under the Plan,
or because the Company shall cease to exist as a result of such
transaction, then the Committee shall, in such manner as it may deem
equitable, substitute or adjust any or all of (i) the number and kind
of Shares which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of Shares by which annual
per-person Award limitations are measured under Section 3 hereof, (iii)
the number and kind of Shares subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase
price relating to any Award and/or make provision for payment of cash
or other property in respect of any outstanding Award. In addition, the
Committee (and the Board if and only to the extent such authority is
not required to be exercised by the Committee to comply with Code
Section 162(m)) is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals, and Annual Incentive Awards
and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well
as acquisitions and dispositions of businesses and assets) affecting
the Company, any Subsidiary, Affiliate or any business unit, or the
financial statements of the Company or any Subsidiary or Affiliate, or
in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view
of the Committee's assessment of the business strategy of the Company,
any Subsidiary, Affiliate or business unit thereof, performance of
comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made
if and to the extent that such authority or the making of such
adjustment would cause Options, Performance Awards or Annual Incentive
Awards granted hereunder to Participants designated by the Committee as
Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and the regulations thereunder
to otherwise fail to qualify as "performance-based compensation" under
Code Section 162(m) and regulations thereunder.
(b) 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 a direct sale or upon the exercise of rights or
warrants to subscribe therefor, 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 to, the number of (or, in the case of Options, the exercise
price) for Shares then subject to outstanding Awards granted under the
Plan.
(c) Without limiting the generality of the foregoing, the existence of
outstanding Awards 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.
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13. CHANGE IN CONTROL.
(a) EFFECT OF CHANGE IN CONTROL. If and to the extent provided in the
Award, in the event of a "Change in Control," as defined in Section
13(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully
exercisable and vested as of the time of the Change in
Control;
(ii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested
as of the time of the Change in Control; and
(iii) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the
Plan, such performance goals and other conditions will be
deemed to be met if and to the extent so provided by the
Committee in the Award agreement relating to such Award.
(b) DEFINITION OF CHANGE IN CONTROL. A "Change in Control" shall be
deemed to occur:
(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; or
(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);
(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); or
(iv) the acquisition (other than from the Company) by any
person, entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more
than 20% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors (hereinafter referred
to as the ownership of a "Controlling Interest") excluding,
for this purpose, any acquisitions by (1) the Company or its
Subsidiaries, (2) any person, entity or "group" that as of the
date on which the Award is granted owns beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act) of a Controlling Interest or (3) any
employee benefit plan of the Company or its Subsidiaries.
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<PAGE> 40
14. TRANSFERABILITY OF AWARDS. No Award or other right or interest of a
Participant under the Plan, including any Award or right which constitutes a
derivative security as generally defined in Rule 16a-1(c) under the Exchange
Act, shall be pledged, hypothecated or otherwise encumbered or subject to any
lien, obligation or liability of such Participant to any party (other than the
Company or a Subsidiary or Affiliate), or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to
a beneficiary upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative, except
that Awards and other rights (other than ISOs) may be transferred to one or more
beneficiaries or other transferees during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers and exercises are permitted by the
Committee or the Board pursuant to the express terms of an Award agreement
(subject to any terms and conditions which the Committee or the Board may impose
thereon, and further subject to any prohibitions or restrictions on such
transfers pursuant to Rule 16b-3). A beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the Committee
or the Board, and to any additional terms and conditions deemed necessary or
appropriate by the Committee or the Board.
15. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the Company shall
not be obligated to issue any Shares unless it is advised by counsel of
its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and
may require any stock so issued to bear a legend, may give its transfer
agent instructions, and may take such other steps, as in its judgment
are reasonably required to prevent any such violation.
(b) As a condition to any sale or issuance of Shares pursuant to this
Plan, the Committee may require such agreements or undertakings as the
Committee may deem necessary or advisable to facilitate compliance with
any applicable law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Participant to the
Company, 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
(ii) a representation, warranty and/or agreement to be bound
by any legends endorsed upon the certificate(s) for such
Shares that are, in the opinion of the Committee, necessary or
appropriate to facilitate compliance with the provisions of
any securities laws deemed by the Committee to be applicable
to the issuance and transfer of such Shares.
16. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a committee appointed by the
Board (the "Committee") which shall consist of not less than two
Directors, each of whom shall be Outside Directors. The membership of
the Committee shall be constituted so as to comply at all times with
the applicable
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<PAGE> 41
requirements of Rule 16b-3 promulgated under the Securities Exchange
Act and Section 162(m) of the Internal Revenue Code. 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 determinations by the
Committee, and the interpretation and construction of any provision of
the Plan or any Award by the Committee, 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 Awards to
employees or Directors of the Company or any Subsidiary or Affiliate
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 Awards granted by the Board.
17. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted
under another plan of the Company, any Subsidiary, Affiliate or any
business entity to be acquired by the Company or a Subsidiary or
Affiliate, or any other right of a Participant to receive payment from
the Company or any Subsidiary or Affiliate. Such additional, tandem,
and substitute or exchange Awards may be granted at any time. If an
Award is granted in substitution or exchange for another Award or
award, the Committee shall require the surrender of such other Award or
award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu
of cash amounts payable under other plans of the Company or any
Subsidiary or Affiliate, in which the value of the Shares subject to
the Award is equivalent in value to the cash compensation (for example,
Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Shares
minus the value of the cash compensation surrendered (for example,
Options granted with an exercise price "discounted" by the amount of
the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such period as
may be determined by the Committee; provided that in no event shall the
term of any Option exceed a period of ten years (or such shorter term
as may be required in respect of an ISO under Section 422 of the Code).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan
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<PAGE> 42
and any applicable Award agreement, payments to be made by the Company
or a Subsidiary or Affiliate upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Shares,
other Awards or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of
any Award may be accelerated, and cash paid in lieu of Shares in
connection with such settlement, in the discretion of the Committee or
upon occurrence of one or more specified events. Installment or
deferred payments may be required by the Committee (subject to Section
20 of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or crediting of
a reasonable interest rate on installment or deferred payments or the
grant or crediting of dividend equivalents or other amounts in respect
of installment or deferred payments denominated in Shares.
18. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein
for the making of any issuance or delivery of any Award or Shares to any
Participant or beneficiary, any law or regulation of any governmental authority
having jurisdiction in the premises shall require the Company, any Subsidiary or
Affiliate, as appropriate, to withhold, or to make any deduction for, any taxes
or take any other action in connection with the issuance or delivery then to be
made, such issuance or delivery shall be deferred until such withholding or
deduction shall have been provided for by the Participant or beneficiary, or
other appropriate action shall have been taken.
19. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Securities 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 Committee or
the Board may from time to time adopt rules and regulations under, and
amend, the Plan in furtherance of the intent of the foregoing.
(b) The Plan and any Option agreements entered into pursuant to 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 or any such Option agreement 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 and the Option agreement shall be construed and
enforced as if such provision had never been included in the Plan or
the Option agreement.
(c) This Plan shall be governed by the laws of the State of Florida.
(d) Headings contained in this Plan are for convenience only and shall
in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such
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other gender as is appropriate.
20. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee or the
Board may from time to time amend, suspend or terminate the Plan or any Award;
provided, however, that, any amendment to the Plan shall be subject to the
approval of the Company's shareholders if such shareholder approval is required
by any federal or state law or regulation (including, without limitation, Rule
16b-3 or to comply with Section 162(m) of the Internal Revenue Code) or the
rules of any Stock exchange or automated quotation system on which the Common
Stock may then be listed or granted. Except to the extent provided in this Plan,
no amendment, suspension or termination of the Plan or any Award issued
hereunder shall substantially impair the rights or benefits of any Participant
pursuant to any Award previously granted without the consent of the Participant.
21. UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Shares pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Shares, other Awards or other property, or
make other arrangements to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject to
such terms and conditions as the Committee may specify and in accordance with
applicable law
22. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is September 1, 2000 provided that the shareholders shall approved the Plan by
November 1, 2000, and the Plan shall terminate on the 10th anniversary of the
effective date.
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PROXY
HAMILTON BANCORP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned does hereby constitute and appoint EDUARDO A. MASFERRER,
or failing him, JUAN CARLOS BERNACE, or failing him, J. REID BINGHAM and each
of them with power of substitution to each, the proxies of the undersigned to
vote all shares of HAMILTON BANCORP INC. which the undersigned may be entitled
to vote at the Annual Meeting of its stockholders to be held on October 23,
2000, at 10:00 a.m., local time, and at any adjournment or adjournments thereof
upon the matters described in the accompanying Proxy Statement and upon any
other business that may properly come before the meeting or adjournment
thereof. Said proxies are directed to vote or to refrain from voting as checked
below upon the following matters, and otherwise in their discretion upon other
matters in connection with the following or otherwise as may properly come
before the meeting or any adjournment thereof.
(Continued on the other side)
PLEASE MARK YOUR CHOICE IN DARK INK PER THE EXAMPLE IN THE UPPER RIGHT HAND
CORNER AND SIGN AND DATE BELOW.
<TABLE>
<S> <C>
Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS. 2. APPROVAL OF 2000 EXECUTIVE INCENTIVE COMPENSATION PLAN.
VOTE FOR WITHHOLD
ALL (except FROM
as marked VOTING
to the contrary FOR ALL FOR AGAINST ABSTAIN
below)
[ ] [ ] [ ] [ ] [ ]
To withhold a vote for any individual director, please strike a line through the name below.
William Alexander George Lyall
Juan Carlos Bernace Eduardo A. Masferrer
Ronald Frazier Ben L. Moyer
Ronald A. Lacayo
(1) PLEASE DATE, SIGN EXACTLY AS YOUR NAME APPEARS,
AND RETURN THIS FORM IN THE ENCLOSED ENVELOPE.
(2) Your Shares will be voted according to your instructions.
If you do not indicate specific instructions in the spaces
provided above, but you properly sign the instruction card,
your shares will be voted "FOR".
</TABLE>
Signature __________________________________________________ Date ______________
