Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FirstSpartan Financial Corp.
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(Name of Registrant as Specified in Its Charter)
FirstSpartan Financial Corp.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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[ ] 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:
N/A
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE>
September 17, 1999
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of FirstSpartan Financial Corp. The meeting will be held at the Spartanburg
County Library, 151 South Church Street, Spartanburg, South Carolina, on
Wednesday, October 20, 1999 at 10:00 a.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Company.
Directors and officers of the Company, as well as a representative of Deloitte &
Touche LLP, the Company's independent auditors, will be present to respond to
appropriate questions of stockholders.
It is important that your shares are represented at this meeting,
whether or not you attend the meeting in person and regardless of the number of
shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/Billy L. Painter
Billy L. Painter
President and Chief Executive Officer
<PAGE>
FIRSTSPARTAN FINANCIAL CORP.
380 E. Main Street
Spartanburg, South Carolina 29302
(864) 582-2391
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 20, 1999
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
FirstSpartan Financial Corp. (the "Company") will be held at the Spartanburg
County Library, 151 South Church Street, Spartanburg, South Carolina, on
Wednesday, October 20, 1999, at 10:00 a.m., local time, for the following
purposes:
1. To elect three directors to serve for a term of three years;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the Company for the fiscal year
ending June 30, 2000; and
3. To transact any other business that may properly come before
the meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Stockholders of record at the close of business on August 31, 1999 are
entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited
by the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/R. Lamar Simpson
R. Lamar Simpson
Corporate Secretary
Spartanburg, South Carolina
September 17, 1999
IMPORTANT: The prompt return of proxies will save the Company the expense of
further requests for proxies in order to ensure a quorum. A self-addressed
envelope is enclosed for your convenience. No postage is required if mailed in
the United States.
<PAGE>
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PROXY STATEMENT
OF
FIRSTSPARTAN FINANCIAL CORP.
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ANNUAL MEETING OF STOCKHOLDERS
October 20, 1999
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of FirstSpartan Financial Corp.
("FirstSpartan" or the "Company") to be used at the annual meeting of
stockholders of the Company. The Company is the holding company for First
Federal Bank ("First Federal" or the "Bank"). The annual meeting will be held at
the Spartanburg County Library, 151 South Church Street, Spartanburg, South
Carolina on Wednesday, October 20, 1999, at 10:00 a.m., local time. This proxy
statement and the enclosed proxy card are being first mailed to shareholders on
or about September 17, 1999.
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VOTING AND PROXY PROCEDURE
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Who Can Vote at the Meeting
You are entitled to vote your FirstSpartan common stock if the records
of the Company showed that you held your shares as of the close of business on
August 31, 1999. As of the close of business on that date, a total of 3,787,970
shares of FirstSpartan common stock were outstanding. Each share of common stock
has one vote. As provided in the Company's Certificate of Incorporation, record
holders of the Company's common stock who beneficially own, either directly or
indirectly, in excess of 10% of the Company's outstanding shares are not
entitled to any vote in respect of the shares held in excess of the 10% limit.
Attending the Meeting
If you are a beneficial owner of FirstSpartan common stock held by a
broker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of FirstSpartan common stock held in street name in person at the
meeting, you will have to get a written proxy in your name from the broker, bank
or other nominee who holds your shares.
Vote Required
The annual meeting will be held if a majority of the outstanding shares
of common stock entitled to vote is represented at the meeting, constituting a
quorum. If you return valid proxy instructions or attend the meeting in person,
your shares will be counted for purposes of determining whether there is a
quorum, even if you abstain from voting. Broker non-votes also will be counted
for purposes for determining the existence of a quorum. A broker non-vote occurs
when a broker, bank or other nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received voting
instructions from the beneficial owner.
1
<PAGE>
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
must be elected by a plurality of the votes cast at the annual meeting. This
means that the nominees receiving the greatest number of votes will be elected.
Votes that are withheld and broker non- votes will have no effect on the outcome
of the election. In voting on the ratification of the appointment of Deloitte &
Touche LLP as independent auditors, you may vote in favor of the proposal, vote
against the proposal or abstain from voting. This matter will be decided by the
affirmative vote of a majority of the votes present in person or represented by
proxy at the annual meeting and broker non-votes will have no effect on the
voting. However, abstentions will have the effect of a vote against the
proposal.
Voting by Proxy
This proxy statement is being sent to you by the Board of Directors of
FirstSpartan for the purpose of requesting that you allow your shares of
FirstSpartan common stock to be represented at the annual meeting by the persons
named in the enclosed proxy card. All shares of FirstSpartan common stock
represented at the meeting by properly executed proxies will be voted according
to the instructions indicated on the proxy card. If you sign and return a proxy
card without giving voting instructions, your shares will be voted as
recommended by the Company's Board of Directors. The Board of Directors
recommends a vote FOR each of the nominees and FOR ratification of Deloitte &
Touche LLP as independent auditors.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their own judgment to determine how to vote your shares. This includes a motion
to adjourn or postpone the meeting in order to solicit additional proxies. If
the annual meeting is postponed or adjourned, your FirstSpartan common stock may
be voted by the persons named in the proxy card on the new meeting date as well,
unless you have revoked your proxy. The Company does not know of any other
matters to be presented at the meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the annual
meeting, deliver a later dated proxy, or attend the meeting and vote your shares
in person. Attendance at the annual meeting will not in itself constitute
revocation of your proxy.
If your FirstSpartan common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow in order to have your shares voted. Your broker or bank may allow you to
deliver your voting instructions via the telephone or the Internet. Please see
the instruction form that is provided by your broker, bank or other nominee and
accompanies this proxy statement.
Participants in First Federal's ESOP and 401(k) Plan
If you are a participant in the First Federal Bank Employee Stock
Ownership Plan (the "ESOP") or if you hold shares through the Bank's 401(k)
Plan, the proxy card represents a voting instruction to the trustees as to the
number of shares in your plan account. Each participant in the ESOP and 401(k)
Plan may direct the trustees as to the manner in which shares of Common Stock
allocated to the participant's plan account are to be voted. Unallocated shares
of Common Stock held by the ESOP and allocated shares for which no voting
instructions are received will be voted by the trustees in the same proportion
as shares for which the trustees have received voting instructions.
2
<PAGE>
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STOCK OWNERSHIP
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The following table provides information as of August 31, 1999 with
respect to persons known to the Company to be the beneficial owners of more than
5% of the Company's outstanding common stock. A person may be considered to own
any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investing power.
<TABLE>
<CAPTION>
Number of Shares Percent of Common
Name and Address Owned Stock Outstanding
- ---------------------- ------------------------- -----------------------------
<S> <C> <C>
First Federal Bank Employee Stock Ownership Plan 534,594(1) 14.1%
380 E. Main Street
Spartanburg, South Carolina 29302
Thomson Horstmann & Bryant, Inc. 234,500 6.2%
Park 80 West
Plaza Two
Saddle Brook, New Jersey 07663
First Citizens Bancorporation of 219,500 5.8%
South Carolina, Inc.
1230 Main Street
Columbia, South Carolina 29201
</TABLE>
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(1) Under the terms of the ESOP, the trustees will vote unallocated shares and
allocated shares for which no voting instructions are received in the same
proportion as shares for which the trustees have received voting
instructions from participants. As of August 31, 1999, 70,825 shares have
been allocated to participants' accounts and 463,769 shares remain
unallocated. The trustee of the ESOP is The Southeastern Trust Company.
3
<PAGE>
The following table provides information about the shares of
FirstSpartan common stock that may be considered to be owned by each director or
nominee for director of the Company and by all directors and executive officers
of the Company as a group as of August 31, 1999. A person may be considered to
own any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power.
<TABLE>
<CAPTION>
Number of Shares
That May Be
Number of Acquired Within Percent of
Shares 60 Days By Common Stock
Name/Title Owned Exercising Options Outstanding
- -------------------------------------- -------------------------- --------------------- ---------------------
<S> <C> <C> <C>
Directors (2)
Robert R. Odom 17,060 7,384 *
E. Lea Salter 16,361 7,384 *
David E. Tate 14,437 7,384 *
Robert L. Handell 17,711 7,384 *
E.L. Sanders 27,473 7,384 *
R. Wesley Hammond 13,111 7,384 *
Named Executive Officers (3)(4)
Billy L. Painter (5)(9) 73,660 23,629 2.57
R. Lamar Simpson (6)(10) 15,223 10,338 *
Hugh H. Brantley (7)(11) 39,464 10,338 1.31
J. Stephen Sinclair (8)(12) 50,500 10,338 1.61
All Executive Officers and 285,000 98,947 10.14
Directors as a Group (10 persons)
</TABLE>
- -------------
* Less than 1% of shares outstanding
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, a person is deemed to be the beneficial owner, for purposes
of this table, of any shares of Common Stock if he or she has voting or
investment power with respect to such security. The table includes shares
owned by spouses, other immediate family members in trust, shares held in
retirement accounts or funds for the benefit of the named individuals,
and other forms of ownership over which shares the persons named in the
table may possess voting and/or investment power.
(2) Includes shares of restricted stock awarded to each outside director
under the FirstSpartan Financial Corp. Management Recognition and
Development Plan (the "MRDP"). Such awards began vesting at a rate of 20%
each year beginning on July 9, 1999. Participants in the MRDP exercise
all rights incidental to ownership, including voting rights.
(3) SEC regulations define the term "named executive officers" to include the
chief executive officer, regardless of compensation level, and the four
most highly compensated executive officers, other than the chief
executive officer, whose total annual salary and bonus for the last
completed fiscal year exceeded $100,000. Messrs. Painter, Simpson,
Brantley and Sinclair were the Company's only "named executive officers"
for the fiscal year ended June 30, 1999.
(4) Includes shares of restricted stock awarded under the MRDP. Such awards
began vesting at a rate of 20% each year beginning on July 9, 1999.
Participants in the MRDP exercise all rights incidental to ownership,
including voting rights.
(5) Mr. Painter is also a director of the Company.
(6) Treasurer, Secretary and Chief Financial Officer of the Company and Chief
Financial Officer of the Bank.
(footnotes continued on following page)
4
<PAGE>
(7) Executive Vice President and Chief Operating Officer of the Bank.
(8) Executive Vice President of Lending of the Bank.
(9) Includes 3,742 shares owned indirectly through the ESOP.
(10) Includes 2,702 shares owned indirectly through the ESOP.
(11) Includes 2,558 shares owned indirectly through the ESOP.
(12) Includes 2,536 shares owned indirectly through the ESOP.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors consists of seven members. Six of them
are independent directors and one is a member of management. The Board is
divided into three classes with three-year staggered terms, with approximately
one-third of the directors elected each year. The nominees for election this
year are Billy L. Painter, Robert L. Handell and Robert R. Odom, each of whom is
a director of the Company and the Bank.
It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the nominees named above. If any nominee is unable
to serve, the persons named in the proxy card would vote your shares to approve
the election of any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee might be unable to serve.
The Board of Directors recommends a vote FOR the election of all of the
nominees.
The following table sets forth certain information regarding the nominees
for election at the meeting, as well as information regarding those directors
continuing in office after the meeting.
<TABLE>
<CAPTION>
Year First
Elected Term to
Age (1) Director (2) Expire
--------- -------------- ----------
<S> <C> <C> <C>
BOARD NOMINEES
Billy L. Painter.................... 54 1984 2002 (3)
Robert L. Handell................... 82 1950 2002 (3)
Robert R. Odom...................... 77 1953 2002 (3)
DIRECTORS CONTINUING IN OFFICE
E. Lea Salter....................... 64 1988 2000
R. Wesley Hammond................... 50 1990 2000
E.L. Sanders........................ 65 1987 2001
David E. Tate....................... 59 1993 2001
</TABLE>
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(1) As of June 30, 1999.
(2) Includes prior service on the Board of Directors of the Bank. Each member
of the Board of Directors also serves as a director of the Bank and vice
versa.
(3) Assuming the individual is re-elected.
5
<PAGE>
The present principal occupation and other business experience during
the last five years of each nominee for election and each director continuing in
office is set forth below:
E.L. Sanders is a retired insurance executive. He is past Chairman of
the Board of Directors for Mobile Meals of Spartanburg and past Vice Chairman of
the Board of Directors of the Foundation for the Multi-Handicapped, Blind and
Deaf of South Carolina. Mr. Sanders is on the Board of Directors and is a past
President of the Civitan Club of Spartanburg.
David E. Tate has been President and sole owner of Tate Metal Works,
Inc., a tank fabrication and erection company, since 1972. He was the South
Carolina Small Business Person of the Year in 1998.
Billy L. Painter has served as the Bank's President and Chief Executive
Officer since 1984. Mr. Painter is a former Chairman of the Spartanburg Area
Chamber of Commerce. He serves on the Boards of Piedmont Interstate Fair,
Spartanburg Development Council and Habitat for Humanity. He also serves on the
Advisory Board of Salvation Army and is Chairman of the Spartanburg County
Transportation Committee.
Robert L. Handell is a former Managing Officer of the Bank with 52
years of service. He is the past President of the Chamber of Commerce, United
Way and the Spartanburg Civitan Club.
Robert R. Odom is a senior partner in the law firm of Odom, Terry,
Cantrell & Hammett, Spartanburg, South Carolina, with which he has been
associated for 50 years.
E. Lea Salter is retired and is the former President of Christman &
Parsons, Inc., general contractors. He is active in the Lions Club of
Spartanburg.
R. Wesley Hammond is the President and Chief Operating Officer of
Hammond-Brown-Jennings, a furniture company. He is past-President of the
Southern Home Furnishings Association and currently serves as Chairman of the
Executive Committee of that organization.
Meetings and Committees of the Board of Directors
The Company's and the Bank's Boards of Directors conduct their business
through meetings of the Boards and through their committees. No director of the
Company or the Bank attended fewer than 75% of the total meetings of the Boards
and committees on which such person served during this period.
The Company's and Bank's Boards of Directors have established Executive
and Audit Committees that are comprised of the same members and whose objectives
are parallel.
The Executive Committees consist of Directors Odom (Chairman), Handell,
Painter and Salter. They have the authority to act on behalf of the Board of
Directors between regular meetings. All actions of the Executive Committee are
presented for ratification by the Board of Directors at its next regularly
scheduled meeting.
The Audit Committees consist of Directors Salter (Chairman), Handell
and Hammond. They receive and review all reports prepared by the Company's and
the Bank's internal and external auditors.
6
<PAGE>
In addition to the above committees, the Company's Board of Directors
has established Compensation and Nominating Committees. The Bank also has a
Personnel Committee, among others. The Company's Compensation Committee and the
Bank's Personnel Committee are comprised of the same members and have parallel
objectives.
The Company's Compensation Committee and the Bank's Personnel Committee
consist of Directors Odom (Chairman), Salter and Sanders. They are responsible
for all personnel issues, including the compensation of senior management. See
the Report of the Compensation Committee of the Company included elsewhere in
this proxy statement for further information.
The full Board of Directors of the Company acts as a Nominating
Committee for the annual selection of management's nominees for election as
directors of the Company.
The following table sets forth the number of meetings of the Company's
and the Bank's Boards of Directors and committees:
Company Bank
----------- ------------
Board of Directors.................. 13 19
Committees:
Executive........................ -- --
Audit............................ 2 5
Compensation..................... 2 N/A
Personnel........................ N/A 2
Nominating....................... 1 1
7
<PAGE>
Directors' Compensation
Directors' Fees. Directors of the Bank receive a fee of $1,500 per
month. Directors' fees totaled $126,000 for the fiscal year ended June 30, 1999.
In addition, Mr. Odom receives annual compensation of $10,200 for his service as
Chairman of the Board. No separate fees are paid for service on the Company's
Board of Directors.
Director Emeritus Plan. The Director Emeritus Plan provides that each
director elected to the Board of Directors of the Bank on or after March 17,
1987 shall become a director emeritus on (i) the date the director attains age
72 or (ii) the expiration of the director's then current term of office after
attaining age 72, whichever event occurs last. In addition, a director with at
least 10 years of service on the Board may, upon attaining age 65, apply to the
Board to assume director emeritus status. Under the Director Emeritus Plan, a
director emeritus receives 50% of the fee payable to regular Board members for
attendance at monthly Board meetings. If the director emeritus attends the
monthly Board meeting, the amount payable is increased to 75% of the fee payable
to regular Board members. The Board may also designate as a director emeritus a
director who becomes disabled. An additional feature of the Director Emeritus
Plan provides that, in the event of a change in control of the Company or the
Bank (as defined in the Director Emeritus Plan), each director would be treated
as a director emeritus on the effective date of the change in control. Within 30
days of such date, each director emeritus would receive a payment equal to three
times the fees received by the director during the 12-month period ending prior
to the effective date of the change in control. Assuming a change in control had
occurred at June 30, 1999, the aggregate amount payable under the Director
Emeritus Plan to all directors would be approximately $408,000.
Stock Option Plan. Under the FirstSpartan Financial Corp. 1997 Stock
Option Plan (the "Stock Option Plan"), which was adopted by the Company's
stockholders on January 21, 1998, five of the six non-employee directors
received non-qualified stock options to purchase 22,152 shares (Mr. Tate
received 22,151 shares) of common stock at an exercise price of $42.00, the fair
market value of the common stock on July 8, 1998, the date the options were
granted. However, on October 28, 1999, the Company's Compensation Committee
decided to reprice such options such that the exercise price became $33.75 the
fair market value of the common stock on the date of repricing. See "Report of
the Compensation Committee of the Company." The options will vest equally over a
three-year period commencing on the first anniversary of the date of grant. In
the event of a change in control of the Company (as defined in the Plan), each
outstanding stock option grant will become fully vested and immediately
exercisable. All options granted under the plan expire 10 years following the
date of grant.
Management Recognition and Development Plan. Additionally, under the
MRDP, which was also adopted by the Company's stockholders on January 21, 1998,
five of the six non-employee directors received stock awards of 8,861 shares
(Mr. Odom received 8,860 shares).
8
<PAGE>
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EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation Table
The following information is furnished for the chief executive officer
and all other executive officers of First Federal who received salary and bonus
of $100,000 or more during the year ended June 30, 1999.
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------
Annual Compensation Awards
------------------------------ -----------------------
Other Securities
Annual Restricted Underlying All Other
Compensation Stock Awards Options/SARs Compensation
Name and Principal Positions Year Salary($) Bonus($) ($)(1) ($)(2) (#)(3) ($)
- ---------------------------- ---- ------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Billy L. Painter 1999 $156,000 $25,000 $-- $1,265,334 70,886 $431,548(4)
President and 1998 146,620 40,000 -- -- -- 69,323
Chief Executive Officer......... 1997 138,910 35,000 -- -- -- 41,412
R. Lamar Simpson
Treasurer, Secretary and Chief
Financial Officer of the Company 1999 $ 96,575 $20,000 $-- $ 372,120 31,013 $142,573(5)
and Chief Financial Officer 1998 90,666 16,000 -- -- -- 33,721
of the Bank..................... 1997 83,608 12,500 -- -- -- 18,608
Hugh H. Brantley
Executive Vice President 1999 $ 95,064 $16,000 $-- $ 669,858 31,013 $228,804(6)
and Chief Operating Officer 1998 92,481 16,000 -- -- -- 33,196
of the Bank..................... 1997 87,939 12,500 -- -- -- 15,264
J. Stephen Sinclair 1999 $ 94,509 $16,000 $-- $ 669,858 31,013 $228,455(7)
Executive Vice President 1998 91,523 16,000 -- -- -- 33,265
of Lending of the Bank.......... 1997 87,345 12,500 -- -- -- 14,966
</TABLE>
- -------------
(1) Other annual compensation excludes perquisites and other personal benefits
that were less than 10% of the total annual salary and bonus reported.
(2) Includes restricted stock awards of 30,127, 8,680, 15,949 and 15,949
granted to Messrs. Painter, Simpson, Brantley and Sinclair under the MRDP.
The dollar amounts set forth in the table represent the market value of the
shares awarded on the date of grant and, therefore, do not take into
account the decrease in the market value of the shares resulting from the
$12 per share special cash distribution paid on June 25, 1999. As of June
30, 1999, the market value of the shares held by Messrs. Painter, Simpson,
Brantley and Sinclair was $700,453, $205,995, $370,814 and $370,814,
respectively. The awards will vest in five equal annual installments,
provided the recipient continues in the employ of the Company or the Bank,
commencing on July 9, 1999, the first anniversary of the effective date of
the award.
(3) Includes stock options granted pursuant to the Stock Option Plan during
fiscal year 1999. See "Option Grants in Last Fiscal Year" table for
discussion of options granted under the Stock Option Plan.
(4) Consists of directors' fees ($18,000), market value of stock allocated
under ESOP ($42,688), employer 401(k) Plan matching contributions ($8,000),
term life insurance premiums ($1,336), and $12 per share special cash
distribution paid on MRDP holdings ($361,524) in accordance with the
anti-dilution provisions of the MRDP.
(5) Consists of market value of stock allocated under ESOP ($30,349), employer
401(k) Plan matching contributions ($5,653), term life insurance premiums
($251), and $12 per share special cash distribution paid on MRDP holdings
($106,320) in accordance with the anti-dilution provisions of the MRDP.
(6) Consists of market value of stock allocated under ESOP ($30,544), employer
401(k) Plan matching contributions ($5,702), term life insurance premiums
($1,170), and $12 per share special cash distribution paid on MRDP holdings
($191,388) in accordance with the anti-dilution provisions of the MRDP.
(7) Consists of market value of stock allocated under ESOP ($30,265), employer
401(k) Plan matching contributions ($5,650), term life insurance premiums
($1,152), and $12 per share special cash distribution paid on MRDP holdings
($191,388) in accordance with the anti-dilution provisions of the MRDP.
9
<PAGE>
Employment and Severance Agreements
The Company and the Bank entered into three-year employment agreements
with Messrs. Painter, Simpson, Brantley and Sinclair. Under the employment
agreements, the current base salaries for Messrs. Painter, Simpson, Brantley and
Sinclair are approximately $156,000, $97,890, $97,946 and $96,890, respectively,
which will be paid by the Bank and may be increased at the discretion of the
Board of Directors or an authorized committee of the Board of Directors of the
Bank. Messrs. Painter's, Simpson's, Brantley's and Sinclair's salaries may not
be decreased during the term of the employment agreements without their prior
written consent. On the anniversary of the commencement date of the agreements,
the term of the agreements may be extended by the Board of Directors for an
additional year unless a termination notice is given by Messrs. Painter,
Simpson, Brantley and Sinclair. The agreements are terminable by the Company or
the Bank for just cause at any time or in certain events specified by federal
regulations.
The agreements provide for severance payments if employment is
terminated following a change in control. These payments, which will be made
promptly after any change in control, will be equal to 2.99 times the average
annual compensation paid to Messrs. Painter, Simpson, Brantley and Sinclair
during the five years immediately preceding the change in control. Under the
agreements, a "change in control" occurs if, at anytime during the term of the
agreement, a person other than the Company purchases shares of common stock
pursuant to a tender or exchange offer for such shares, any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities, the membership of the Board of
Directors changes as the result of a contested election, or stockholders of the
Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Company's assets, or a plan of partial or complete
liquidation has occurred. Assuming that a change in control had occurred at June
30, 1999 and that Messrs. Painter, Simpson, Brantley and Sinclair elected to
receive a lump sum cash payment, they would be entitled to payments of
approximately $711,246, $423,684, $408,419 and $406,062, respectively.
The Company and the Bank have also entered into employment and
severance agreements with other senior officers of the Company and/or the Bank
on substantially similar terms.
Stock Option Plan
The Company maintains the Stock Option Plan, which provides
discretionary awards of options to purchase Common Stock to officers, directors
and employees as determined by the Board of Directors. The following table lists
all grants of options under the Stock Option Plan to the Named Executive
Officers for fiscal year 1999 and contains certain information about potential
value of those options based upon certain assumptions as to the appreciation of
the Company's stock over the life of the option.
10
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
-----------------------------------------------------------------------------------------------
Number of Potential Realized Value
Securities % of Total of Assumed Annual Rates
Underlying Options of Stock Price Appreciation
Options Granted to Exercise or for Option Term
Granted Employees in Base Price Expiration --------------------------
Name (#)(1)(2)(3) Fiscal Year (4) Per Share (5) Date (6) 5% ($) 10% ($)
- ------ ------------- ------------- ------------ ------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Billy L. Painter...... 70,886 17.1% $21.75 July 8, 2008 $1,872,353 $4,744,909
R. Lamar Simpson...... 31,013 7.5 21.75 July 8, 2008 819,164 2,075,923
Hugh H. Brantley...... 31,013 7.5 21.75 July 8, 2008 819,164 2,075,923
J. Stephen Sinclair... 31,013 7.5 21.75 July 8, 2008 819,164 2,075,923
</TABLE>
- -------------------
(1) Options granted under the Stock Option Plan become exercisable in three
equal annual installments commencing on July 8, 1999, provided, that the
recipient remains in the employ of the Company or the Bank.
(2) The purchase price may be made in whole or in part in cash or Common Stock.
(3) All options are intended to be Incentive Stock Options to the extent
permissible under Section 422 of the Code.
(4) Includes options granted to officers, directors and employees.
(5) The exercise price reflects the Company's determination to reprice such
options on October 28, 1998. In addition, as authorized under the
anti-dilution provisions of the Stock Option Plan, the exercise price has
been adjusted to reflect a $12 per share special cash distribution paid by
the Company on June 25, 1999.
(6) The option term is 10 years.
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding options held by the
Named Executive Officers as of June 30, 1999. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year end price of the Common
Stock.
<TABLE>
<CAPTION>
Fiscal Year-End Option Value
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End(#)(1) at Fiscal Year-End($)(2)(3)
---------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------- ------------ --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Billy L. Painter.................. -- 70,886 -- $106,329
R. Lamar Simpson.................. -- 31,013 -- 46,520
Hugh H. Brantley.................. -- 31,013 -- 46,520
J. Stephen Sinclair............... -- 31,013 -- 46,520
</TABLE>
- ----------------
(1) The options in this table have an exercise price of $21.75 per share, which
reflects the repricing of the options on October 28, 1998 and, as authorized
under the anti-dilution provisions of the Stock Option Plan, an adjustment
made to the exercise price in connection with a $12 per share special cash
distribution paid by the Company on June 25, 1999.
(2) The price of the Common Stock on June 30, 1999 was $23.25 per share.
11
<PAGE>
<TABLE>
<CAPTION>
Ten-Year Options Repricings
Number of Length of
Securities Original Option
Underlying Market Price Exercise Price Term Remaining
Options of Stock at Time at Time of New at Date of
Repriced or of Repricing or Repricing Exercise Repricing or
Name Date Amended (#) Amendment ($) or Amendment Price ($) Amendment
- ------ --------------- ------------ -------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Billy L. Painter October 28, 1998 70,886 $33.75 $42.00 $33.75 9.70 years
R. Lamar Simpson October 28, 1998 31,013 33.75 42.00 33.75 9.70 years
Hugh H. Brantley October 28, 1998 31,013 33.75 42.00 33.75 9.70 years
J. Stephen Sinclair October 28, 1998 31,013 33.75 42.00 33.75 9.70 years
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Report of the Compensation Committee of the Company and the Performance Graph
shall not be incorporated by reference into any such filings.
Report of the Compensation Committee of the Company. The Compensation
Committee of the Company and the Personnel Committee of the Bank ("Committees")
administer all policies that govern executive compensation for the Company and
the Bank. Since the Company has no employees other than Bank employees who
perform services to the Company without additional compensation, the Bank's
Personnel Committee evaluates the performance of each named executive officer
and other senior officers of the Company and the Bank and determines the
compensation of all such executives except for the chief executive officer. With
respect to the chief executive officer's compensation, the Personnel Committee
makes recommendations to the Board of Directors which reviews the
recommendations and determines his compensation based on their report. The
Company's executive compensation policies are intended to retain and attract key
executives who are vital to the success of the Company and the Bank by providing
a compensation package that is competitive in the financial industry and
motivational to each individual executive.
Compensation of Executive Officers. Currently, the compensation for
executive officers consists principally of a base salary and bonus. The
Personnel Committee determines an annual base salary level for all senior
officers and named executive officers except for the base salary of the chief
executive officer. With respect to the chief executive officer's base salary,
the Personnel Committee makes recommendations to the Board of Directors which
reviews the recommendations and determines his base salary based on their
report. Annual base salaries are generally effective November 1 of each year.
Factors considered in setting base salaries include the executive's performance,
the Company's and Bank's overall performance and compensation levels in the
financial industry, among other factors.
A bonus program has also been established for all senior officers,
including the named executive officers. A bonus pool is established based upon
meeting certain objective performance factors, including profitability
measurements, loan delinquency ratios and other financial measurements. The
bonus pool is allocated to individual participants in the pool based upon job
position and individual performance. The Personnel Committee administers the
bonus program and may use its judgement in the application of the objective
criteria, such as excluding nonrecurring items from profitability measures under
the program. As the case with base salaries, the Personnel Committee makes
aggregate and individual bonus awards to all senior officers and named executive
officers except for awards to the chief executive officer. The Board of
12
<PAGE>
Directors reviews the recommendations of the Personnel Committee concerning the
chief executive officer and awards his bonus under the program. The awards for
the fiscal year are generally made prior to June 30 of each year.
Compensation of Chief Executive Officer. During the fiscal year ended
June 30, 1999, the base salary of Billy L. Painter, President and Chief
Executive Officer of the Company and the Bank, was $145,426. In addition, he
received a performance bonus of $25,000 and other compensation of $70,024 as set
forth in the Summary Compensation Table presented earlier herein. This resulted
in total compensation of $240,450, which represents a 6.2% decrease from the
previous year. The Board of Directors believes that Mr. Painter's compensation
is appropriate based on the Bank's compensation policy, consideration of
salaries for similar positions in the financial industry and the Bank's
performance during the fiscal year.
Mr. Painter does not serve on the Committees and did not participate in
the Board of Director's review and adoption of the Personnel Committee's
recommendations concerning his compensation.
Repricing of Stock Options. On October 21, 1998, the Compensation
Committee approved the repricing of options granted on July 9, 1998 under the
Stock Option Plan. The decision to reprice was made due to the sharp decline in
the price of the Company's common stock due to market conditions that affected
the entire industry. It was the view of the Compensation Committee that stock
option grants with exercise prices that were substantially above the current
market price of the common stock would not provide meaningful incentives to
those individuals holding these options. As stock options serve as the most
valuable incentive in the compensation package, the Compensation Committee
approved the repricing as a means of ensuring that employees will continue to
have meaningful equity incentives to motivate them to work for the continued
success of the Company. Furthermore, the decision to reprice was also based on
the fact that the decline in the stock price occurred shortly after the granting
of the options and was not due to the failure of the Company to meet
expectations nor any mismanagement. The Compensation Committee decided that the
options should be repriced at the average between the high and low trading price
on October 28, 1998. That date was selected since the trading range of its
common stock on that date was approximately halfway between the low and high
trading prices for the year.
The Compensation Committee of the Company and Personnel Committee of the Bank
consisting of:
/s/ Robert R. Odom, Chairman
/s/ E.L. Sanders
/s/ E. Lea Salter
Compensation Committee Interlocks and Insider Participation. No
executive officer of the Company or the Bank has served as a member of the
compensation committee of another entity, one of whose executive officers served
on the Compensation Committee of the Company or the Personnel Committee of the
Bank. No executive officer of the Company or the Bank has served as a director
of another entity, one of whose executive officers served on the Compensation
Committee of the Company or the Personnel Committee of the Bank. No executive
officer of the Company or the Bank has served as a member of the compensation
committee of another entity, one of whose executive officers served as a
director of the Company or the Bank.
13
<PAGE>
Performance Graph. The following graph compares the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return on the Nasdaq Index (U.S. Companies) and with the SNL $250 Million to
$500 Million Asset Thrift Index. Total return assumes the reinvestment of all
dividends. The base amount for the Company's Common Stock is $36 11/16 per
share, which was the closing price on the initial day of trading on July 9,
1997. The initial offering price for the Company's Common Stock was $20.00 per
share.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Period Ended
--------------------------------------------------------
7/09/97 12/31/97 6/30/98 12/31/98 6/30/99
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FirstSpartan Financial Corp............................. $100.00 $110.14 $114.35 $ 83.80 $ 99.03
The Nasdaq Index (U.S. Companies)....................... 100.00 106.27 127.79 149.75 182.77
SNL $250 Million to $500 Million Asset Thrift Index..... 100.00 136.93 137.31 118.88 148.65
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of any registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the SEC. Executive
officers, directors and greater than 10% shareholders are required by regulation
to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that each of the Company's
executive officers and directors has complied with applicable reporting
requirements for transactions in FirstSpartan common stock during the fiscal
year ended June 30, 1999.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
Federal regulations require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons (unless the loan or extension of
credit is made under a benefit program generally available to all other
employees and does not give preference to any insider over any other employee)
and does not involve more than the normal risk of repayment or present other
unfavorable features. The Bank is therefore prohibited from making any new loans
or extensions of credit to the Bank's executive officers and directors with
different rates or terms than those offered to the general public and has
adopted a policy to this effect. The aggregate amount of loans by the Bank to
its executive officers and directors was approximately $1.2 million at June 30,
1999. Such loans (i) were made in the ordinary course of business, (ii) were
made on substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
the Bank's other customers, and (iii) did not involve more than the normal risk
of collectibility or present other unfavorable features when made.
Robert R. Odom, Chairman of the Board of the Company and the Bank, is a
senior partner with the law firm of Odom, Terry, Cantrell & Hammett,
Spartanburg, South Carolina, which serves as general counsel to the Bank. The
Bank paid a retainer of $18,000 and legal fees of approximately $68,000 to the
firm during the fiscal year ended June 30, 1999 for services rendered to the
Bank.
15
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has appointed Deloitte & Touche LLP to be its
auditors for the 2000 fiscal year, subject to the ratification by stockholders.
A representative of Deloitte & Touche LLP is expected to be present at the
annual meeting to respond to appropriate questions from stockholders and will
have the opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved
by a majority of the votes cast by stockholders at the annual meeting, other
independent public accountants will be considered by the Board of Directors. The
Board of Directors recommends that stockholders vote FOR the ratification of the
appointment of auditors.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Company will pay the cost of this proxy solicitation. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of FirstSpartan common stock. In addition to soliciting
proxies by mail, directors, officers and regular employees of the Company may
solicit proxies personally or by telephone. None of these persons will receive
additional compensation for these activities.
The Company's Annual Report to Stockholders has been mailed to
stockholders as of the close of business on August 31, 1999. Any stockholder who
has not received a copy of the Annual Report may obtain a copy by writing to the
Secretary of the Company. The Annual Report is not to be treated as part of the
proxy solicitation material or as having been incorporated herein by reference.
A copy of the Company's Form 10-K for the fiscal year ended June 30,
1999, as filed with the SEC will be furnished without charge to stockholders as
of the close of business on August 31, 1999 upon written request to the
Corporate Secretary, FirstSpartan Financial Corp., 380 E. Main Street,
Spartanburg, South Carolina.
16
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Proposals that stockholders seek to have included in the proxy
statement for the Company's next annual meeting must be received by the Company
no later than May 20, 2000. If such annual meeting is held on a date more than
30 calendar days from October 20, 2000, a stockholder proposal must be received
by a reasonable time before the proxy solicitation for such annual meeting is
made. Any such proposals will be subject to the requirements of the proxy rules
adopted by the Securities and Exchange Commission.
The Company's Certificate of Incorporation provides that in order for a
stockholder to make nominations for the election of directors or proposals for
business to be brought before a meeting of stockholders, a stockholder must
deliver written notice of such nominations and/or proposals to the Secretary of
the Company not less than 30 nor more than 60 days prior to the date of the
meeting; provided that if less than 31 days' notice of the meeting is given to
stockholders, such notice must be delivered not later than the close of the
tenth day following the day on which notice of the meeting was mailed to
stockholders. Based on the date of the Meeting, in order for a stockholder to
make timely notice of a nomination or proposal for the Company's annual meeting
next year, it is anticipated that such notice must be received by the Secretary
of the Company by September 25, 2000. As specified in the Certificate of
Incorporation, the written notice with respect to nominations for election of
directors must set forth certain information regarding each nominee for election
as a director, including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director, if elected, and
certain information regarding the stockholder giving such notice. The notice
with respect to business proposals to be brought before the Meeting must state
the stockholder's name, address and number of shares of Common Stock held, and
briefly discuss the business to be brought before the Meeting, the reasons for
conducting such business at the Meeting and any interest of the stockholder in
the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
/s/R. Lamar Simpson
R. Lamar Simpson
Corporate Secretary
Spartanburg, South Carolina
September 17, 1999
17
<PAGE>
REVOCABLE PROXY
FirstSpartan Financial Corp.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 20, 1999
The undersigned hereby appoints the official Proxy Committee of the Board of
Directors of FirstSpartan Financial Corp. (the "Company"), consisting of R.
Wesley Hammond, E. L. Sanders and David E. Tate, with full powers of
substitution to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held at the Spartanburg County
Library, 151 South Church Street, Spartanburg, South Carolina, on Wednesday,
October 20, 1999, at 10:00 a.m., Eastern Time, and at any and all adjournments
thereof, as follows:
1. The election as director of the nominees listed below (except as marked to
the contrary below):
Billy L. Painter Robert R. Odom Robert L. Handell
[ ] VOTE FOR [ ] VOTE WITHHELD
INSTRUCTIONS: To withhold your vote for any individual nominee, write the
nominee's name on the line below.
- --------------------------------------------------------------------------------
2. The ratification of Deloitte & Touche LLP as independent auditors for the
fiscal year ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such other matters as may properly come before the
meeting.
THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY
THE BOARD OF DIRECTORS IN ITS BEST JUDGEMENT. PRESENTLY, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY ALSO
CONFERS DISCRETIONARY AUTHORITY ON THE BOARD OF DIRECTORS TO VOTE WITH RESPECT
TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEES ARE UNABLE TO SERVE
OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF THE
MEETING.
This proxy card will also be used to provide voting instructions to the trustees
for any shares of common stock of the Company allocated to participants under
the First Federal Bank Employee Stock Ownership Plan or First Federal Bank's
401(k) Plan.
<PAGE>
Please be sure to sign below and
date this Proxy in the box provided.
--------------------------------------
Date
--------------------------------------
Stockholder sign above
--------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
FirstSpartan Financial Corp.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the above signed be present and elect to vote in person at the Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The above signed acknowledges receipt from the Company prior to the execution
of this proxy of the Notice of Annual Meeting of Stockholders, a Proxy Statement
for the Annual Meeting of Stockholders, and the 1999 Annual Report to
Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, indicate your full
title. If shares are held jointly, only one registered holder need sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
