<PAGE>
SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or
Section 240.14a-12
PALFED, Inc.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Charles M. Flickinger
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
ATLANTA, GEORGIA 30309-3996
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $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:
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:(1)
4) Proposed maximum aggregate value of transaction:
- -------------------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
-----------------------------------------------------
[ ] 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>
PALFED, INC.
107 Chesterfield Street South
Aiken, South Carolina 29801
(803) 642-1400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996
TO SHAREHOLDERS OF PALFED, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PALFED,
Inc. ("PALFED") will be held at the Aiken City Hall Meeting Room, 214 Park
Avenue, Aiken, South Carolina 29801 on April 23, 1996, at 10:00 a.m. Eastern
Time, for the following purposes:
1. The election of three (3) Directors of PALFED.
2. To approve amendments to the PALFED 1993 Stock Option Plan
(Proposal 2).
3. To approve amendments to the PALFED 1993 Restricted Stock
Incentive Award Plan (Proposal 3).
4. To approve amendments to the PALFED Amended and Restated
Directors Stock Plan (Proposal 4).
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Holders of PALFED's Common Stock of record at the close of business on
March 15, 1996 (the "Record Date") will be entitled to notice of and to vote at
the meeting or any adjournment thereof.
Whether or not you expect to be present in person at the meeting, please
sign and date the accompanying proxy and return it promptly in the enclosed
postage-paid reply envelope. This will assist us in preparing for the meeting.
By Order of the Board of Directors
Howard M. Hickey, Jr.
Secretary
March 25, 1996
Aiken, South Carolina
SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY BECAUSE HE OR SHE OWNS
SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. YOUR PROXY WILL
BE VOTED WITH RESPECT TO THE MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY
SPECIFICATIONS ON THE PROXY.
<PAGE>
PALFED, INC.
107 CHESTERFIELD STREET SOUTH
AIKEN, SOUTH CAROLINA 29801
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PALFED, Inc. ("PALFED" or the "Company") to
be used at the Annual Meeting of Shareholders of PALFED (the "Annual Meeting")
to be held at the Aiken City Hall Meeting Room, 214 Park Avenue, Aiken, South
Carolina 29801, at 10:00 a.m., Eastern Time, on April 23, 1996, and any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement and
accompanying form of proxy and PALFED's 1995 Annual Report to Shareholders were
first mailed or given to shareholders on or about March 25, 1996.
SOLICITATION OF PROXIES
This proxy solicitation will be conducted principally by mail, but may also
be by telephone or in person, and the cost will be paid by PALFED. Proxies may
also be solicited in favor of the proposals by Morrow & Co. of New York, New
York at a cost to the Company of approximately $3,500 plus out-of-pocket
expenses. Banks, brokers, nominees and other custodians and fiduciaries will be
requested to forward proxy solicitation material to their principals and
customers where appropriate, and PALFED will reimburse such banks, brokers,
nominees, custodians and fiduciaries for their reasonable out-of-pocket expenses
in sending the proxy materials to beneficial owners of the shares.
ACTIONS TO BE TAKEN UNDER THE PROXY
In voting by proxy, shareholders may vote in favor of all nominees for
director or withhold their votes as to some or all nominees. Unless instructed
otherwise in the space provided in the proxy form, all properly executed proxies
received by PALFED will be voted FOR the election of the three nominees for
director set forth below under the heading "Election of Directors" (Proposal 1),
FOR approval of the amendments to the PALFED 1993 Stock Option Plan (Proposal
2), FOR approval of the amendments to the PALFED 1993 Restricted Stock Incentive
Award Plan (Proposal 3), and FOR approval of the amendments to the PALFED
Amended and Restated Directors Stock Plan (Proposal 4).
Any shareholder giving a proxy may revoke it at any time before it is
exercised by giving written notice of revocation or a duly executed proxy
bearing a later date to PALFED's Secretary. In order to be effective, such
notice or later dated proxy must be received by PALFED prior to the exercise of
the earlier proxy. A shareholder may also attend the Annual Meeting, revoke his
proxy and vote in person.
PALFED's management knows of no matter to be brought before the Annual
Meeting other than those mentioned in this Proxy Statement. If, however, any
other matters properly come before the Annual Meeting, it is intended that the
proxies will be voted in accordance with the judgment of the person or persons
voting such proxies.
In accordance with PALFED's Bylaws, in order for any new business or any
nomination for Director to be brought before an Annual Meeting of Shareholders
by a shareholder, the shareholder must deliver to the Secretary of the Company
written notice of such new business or nomination for Director at least five (5)
days prior to the date of the Annual Meeting.
<PAGE>
OUTSTANDING SECURITIES AND VOTING RIGHTS
The only class of securities entitled to vote at the meeting is PALFED's
common stock, $1.00 par value ("Common Stock"). The close of business on March
15, 1996 has been fixed as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting or at any adjournment or
adjournments thereof. At March 15, 1996, there were 5,222,142 shares of Common
Stock outstanding and entitled to be voted at the Annual meeting.
Each shareholder of PALFED is entitled to one vote for each share of Common
Stock held. There are no cumulative voting rights in the election of directors.
QUORUM AND REQUIRED VOTE
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock is necessary to constitute a quorum
at the Annual Meeting. Any proxy authorized to be voted at the Annual Meeting
on any matter, including on routine matters pursuant to the discretionary
authority granted in management's proxy, whether or not the proxy is marked to
"WITHHOLD AUTHORITY", to "ABSTAIN" or to effect a broker nonvote, will be
counted in establishing a quorum.
The election of each nominee as a director will require the presence of a
quorum at the Annual Meeting and the affirmative vote of a majority of the
shares voting at the Annual Meeting. Votes withheld, abstentions and broker
nonvotes (proxies submitted by a broker marked to indicate that the shares are
not voted on a proposal), will not be included in vote totals for director
nominees and will have no effect on the outcome of the vote. Approval of the
amendment to the Stock Option Plan (Proposal 2), the amendments to the
Restricted Stock Incentive Award Plan (Proposal 3) and the amendments to the
Amended and Restated Directors Stock Plan (Proposal 4) will require the presence
of a quorum and the affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting. Votes withheld, broker
nonvotes and abstentions will have the effect of a vote against Proposals 2, 3
and 4.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 15, 1996, certain information
concerning each person, group or other entities known by the Company to be
beneficial owners, as defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of more than five percent (5%) of the outstanding
shares of Common Stock, the only class of voting securities currently
outstanding:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address Beneficial Ownership Common Stock
---------------- -------------------- ------------
<S> <C> <C>
Mid-Atlantic Investors 474,000(1) 9.1
Jerry Zucker
H. Jerry Shearer
P. O. Box 7574
Columbia, SC 29202
</TABLE>
- ---------------------------------
(1) Information Concerning beneficial ownership of Mid-Atlantic Investors
and Messrs. Zucker and Shearer is based on a Schedule 13D dated October 27, 1995
filed by Mid-Atlantic Investors and Messrs. Zucker and Shearer. As reported in
the Schedule 13D, Mr. Zucker holds sole voting and dispositive power as to
303,000 shares of Common Stock, Mr. Shearer holds sole voting and dispositive
power as to 11,000 shares of Common Stock, and Messrs. Shearer and Zucker and
Mid-Atlantic Investors hold shared voting and dispositive power as to 160,000
shares of Common Stock.
-3-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table and related notes set forth certain information, as of
March 1, 1996, concerning the beneficial ownership of Common Stock by all
directors, including nominees for director, the executive officers named in the
Summary Compensation Table, and by all officers, directors and nominees as a
group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(2)
- ------------------------ ----------------------------- ---------------
<S> <C> <C>
William F. Cochrane 8,300(3) *
Patrick D. Cunning 60,148 1.13%
Joe W. DeVore 33,550 *
Howard M. Hickey, Jr. 40,102 *
J. Cleveland Holmes 6,511(4) *
Edward Larry Hutto 7,912 *
Harold D. Kingsmore 8,845 *
R. Bruce McBratney 24,568 *
Albert H. Peters, Jr. 33,419(5) *
Darrell R. Rains 45,101 *
Ambrose L. Schwallie 5,180(6) *
Charles E. Simons, III 20,400(7) *
Neil W. Trask, Jr. 6,545 *
John C. Troutman 141,781 2.66%
All Executive Officers
and Directors as a Group
(21 persons) 442,362 8.29%
</TABLE>
- --------------------------
(1) Shares beneficially owned include shares held by spouses, minor
children, family partnerships and trusts, shares subject to options exercisable
currently or within 60 days, shares held under the PALFED Employee Savings and
Stock Ownership Plan, and restricted shares subject to forfeiture and transfer
restrictions. Share totals for each of the outside directors include 1,000
restricted shares and options to acquire 3,000 shares granted under the Amended
and Restated Directors Stock Plan. Except as otherwise noted, the persons
included in the table have sole voting and investment power with respect to
shares beneficially owned by them.
(2) Percentages marked by an asterisk (*) indicate less than one percent
(1%) of the outstanding Common Stock.
(3) Includes 4,300 shares owned jointly with Mr. Cochrane's spouse.
(4) Includes 2,511 shares owned jointly with Mr. Holmes' spouse.
(5) Includes 8,167 shares owned by Mr. Peters' spouse for which Mr. Peters
disclaims beneficial ownership.
(6) Includes 1,180 shares owned jointly with Mr. Schwallie's spouse.
(7) Includes 6,081 shares owned jointly with Mr. Simons' spouse.
-4-
<PAGE>
REPORTS OF BENEFICIAL OWNERSHIP
Section 16(a) of the Exchange Act requires PALFED's officers and directors,
and persons who own more than ten percent of Common Stock, to file reports of
ownership and changes in ownership with the SEC and The Nasdaq Stock Market.
Officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish PALFED with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to PALFED, or
written representations that no Forms 5 were required, PALFED believes that
during 1995 its officers, directors and greater than ten percent beneficial
owners complied with all applicable Section 16(a) filing requirements.
ELECTION OF DIRECTORS
GENERAL
Directors are elected for staggered terms of three years each, and the
directors are divided into three classes, each class to be as nearly equal in
number as possible. A member of the Board of Directors who reaches the age of
70 becomes a Retired Director as of the date of the next Annual Meeting. J.
Cleveland Holmes and Neil W. Trask, directors of PALFED since 1986, are 70 and
will retire at the 1996 Annual Meeting. The number of directors is currently
set at eleven (11), but will be set at nine (9) following retirement of Messrs.
Holmes and Trask at the Annual Meeting. The Board of Directors intends to
consider increasing the size of the Board in the future to fill the positions
vacated by Messrs. Holmes and Trask.
At the Annual Meeting, Messrs. R. Bruce McBratney, Albert H. Peters and
Ambrose L. Schwallie, all of whom currently serve as Directors of the Company
and all of whose terms expire at the Annual Meeting, will be nominated for
reelection to serve three-year terms.
There are no arrangements or understandings between the Company and any
person pursuant to which any of the above persons has been or will be elected a
director. There are no family relationships among the directors, executive
officers and nominees for directors of the Company, Palmetto Federal and their
subsidiaries.
It is intended that each Proxy solicited on behalf of the Board of
Directors will be voted only for the election of the designated nominees. At
this time, the Board of Directors knows of no reason why any nominee might be
unable to serve, but if that should occur before the Annual Meeting, it is
intended that the Proxies will be voted for the election of such other person or
persons as the Board of Directors may recommend.
-5-
<PAGE>
<TABLE>
<CAPTION>
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
Term as Director of
Director PALFED
Name and Age Expires Since
- ------------ ------- -----
<S> <C> <C>
NOMINEES FOR
THREE-YEAR TERM ENDING IN 1998:
R. Bruce McBratney (68) 1996 1993
Albert H. Peters, Jr. (66) 1996 1987
Ambrose L. Schwallie (48) 1996 1989
CONTINUING DIRECTORS:
William F. Cochrane (67) 1997 1988
Patrick D. Cunning (49) 1998 1990
Edward Larry Hutto (59) 1997 1987
Harold D. Kingsmore (63) 1998 1992
Charles E. Simons, III (53) 1997 1987
John C. Troutman (56) 1998 1993
</TABLE>
NOMINEES FOR A 3-YEAR TERM:
R. BRUCE McBRATNEY retired from Pershing & Co. in 1987 following 35 years
of association with New York Stock Exchange firms. Mr. McBratney served on the
Palmetto Federal Advisory Board in Beaufort, South Carolina from 1990 to 1992,
and served as a director of Montclair Savings Bank in New Jersey for 20 years.
ALBERT H. PETERS, JR. is the Chairman of the Board and from October 13,
1992 through February 28, 1993 served as Interim President and Chief Executive
Officer of PALFED and Palmetto Federal Savings Bank of South Carolina ("Palmetto
Federal"). Mr. Peters previously served as Manager of Plant Facilities and
Services for E. I. DuPont at the Savannah River Plant, Aiken, South Carolina
from 1984 until 1989, when he retired after working for E. I. DuPont since 1953.
AMBROSE L. SCHWALLIE has been President of the Westinghouse Savannah River
Company since 1991. From 1989 to 1991 he was an Executive Vice President of
Westinghouse.
-6-
<PAGE>
CONTINUING DIRECTORS:
WILLIAM F. COCHRANE has served as President of Alcoa, South Carolina, Inc.
since 1983.
EDWARD LARRY HUTTO serves as Vice President and General Manager for
Cummings Oil Company, Inc., an oil marketer, in Hampton, South Carolina. He has
been employed by the Cummings Oil Company since 1963.
CHARLES E. SIMONS, III has been engaged in the private practice of law as a
sole practitioner in Aiken, South Carolina since 1982. Mr. Simons also has been
a municipal judge for the City of Aiken since 1987.
PATRICK D. CUNNING is an Executive Vice President of Palmetto Federal and
serves as President of Palmetto Service Corporation ("PSC"), a wholly-owned
subsidiary of Palmetto Federal. Prior to being named President of PSC in 1987,
Mr. Cunning was Chief Appraiser and Vice President of PSC, which he joined in
1975.
HAROLD D. (Doug) KINGSMORE is President and Chief Executive Officer of
Graniteville Company. He has been the President of Graniteville Company since
1986.
JOHN C. TROUTMAN became the President and Chief Executive Officer of PALFED
and Palmetto Federal on March 1, 1993. Prior to 1993, he held a number of
positions with Citizens and Southern National Bank (now NationsBank), most
recently as the Southeast Florida Commercial Division Manager for NationsBank.
From 1989 to 1992 he was Regional Executive Vice President, East Coast of
Florida for Citizens and Southern National Bank of Florida. From 1988 to 1989
Mr. Troutman was President and Chief Operating Officer of Citizens and Southern
National Bank of South Carolina.
REQUIRED VOTE
Election of each of the three (3) nominees named above will require the
presence of a quorum and the affirmative vote of a majority of the shares of
Common Stock voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF EACH OF THE THREE NOMINEES NAMED ABOVE.
-7-
<PAGE>
DIRECTOR COMPENSATION
All PALFED directors also are directors of Palmetto Federal, but do not
receive any additional compensation for serving as directors of the Bank.
Directors who are employees of the Company or any of its subsidiaries do not
receive any directors fees or other compensation for serving as directors of
PALFED or the Bank. There are no family relationships among any of the
directors of PALFED or any of its subsidiaries.
In 1995, each director who was not employed by PALFED or Palmetto Federal
received a $600 monthly retainer, plus $200 per Board or Committee meeting
attended. During 1995, PALFED's Chairman of the Board, Albert H. Peters, Jr.,
received a $1300 monthly retainer, plus directors' fees of $250 per Board or
Committee meeting chaired and $200 per Committee meeting attended. The Chairman
of each Committee also received $250 per Committee meeting chaired. Consulting
directors, Henry W. Gibson, Donald W. Ropp, and Edwin H. Seim received fees of
$500 per Board meeting attended and $200 per Committee meeting attended.
Advisory director W. Stephen Harley received fees of $100 per Board meeting
attended. In addition, under the Amended and Restated Directors Stock Plan (the
"Directors Plan"), approved by the shareholders at the 1995 Annual Meeting, each
outside director, consulting director and advisory director received, effective
as of April 26, 1995, 1,000 restricted shares of Common Stock and options to
acquire 3,000 shares of Common Stock at an exercise price of $9.88 per share.
The restricted shares of Common Stock vest one year from the grant date.
Effective January 1, 1996, PALFED increased director compensation for
attendance at Board meetings. During 1996, each director will receive $400 per
Board meeting attended. The monthly retainer and committee meeting fees were
not increased from 1995 levels. Additionally, the Personnel and Compensation
Committee (the "Committee") approved, subject to shareholder approval, certain
amendments to the Directors Plan that will grant options to acquire 3,000 shares
of Common Stock to each outside director as of the day following the Annual
Meeting. Currently, only the nominees elected at the 1996 Annual Meeting will
receive options under the Directors Plan. Consulting and advisory directors are
granted options under the Directors Plan at the discretion of the Committee and,
effective as of April 24, 1996, the Committee intends to grant options to
acquire 3,000 shares of Common Stock to consulting directors, Gibson, Ropp and
Seim. The Committee also intends to grant options to acquire 3,000 shares of
Common Stock to retiring directors Holmes and Trask. All options will have an
exercise price equal to the market value of Common Stock on the date of the
grant.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1995, the PALFED Board of Directors held 12 meetings. The Board of
Directors has established Executive, Audit and Regulatory Compliance, and
Personnel and Compensation Committees. Each director attended at least 75
percent of the total number of the Board's meetings or meetings of committees on
which he served.
The Executive Committee has the responsibility to act for the Board on an
interim basis between regularly established Board meeting dates. The members of
the Executive Committee currently are Messrs. Peters (Chairman), Cochrane,
Cunning, Holmes, Simons and Troutman. Mr. Ropp also attended meetings of the
Executive Committee as a consulting director. The Executive Committee met 17
times in 1995.
The Audit and Regulatory Compliance Committee presently consists of Messrs.
Schwallie (Chairman), Holmes, Hutto, McBratney and Simons. Messrs. Peters and
Troutman also serve as ex-officio members of this Committee. Mr. Seim also
attended meetings of this Committee as a consulting director. This Committee
has responsibility for recommending to the Board of Directors the independent
auditors of PALFED and Palmetto Federal, and reviewing their degree of
independence, as well as reviewing with independent auditors and internal
auditors the plans and results of PALFED's internal auditing procedures. The
Committee also directs and monitors Palmetto Federal's Community Reinvestment
Act activities, products and programs, as well as reviews all regulatory
compliance activities. The Audit and Regulatory Compliance Committee met 5
times in 1995.
-8-
<PAGE>
In addition, Palmetto Federal has an Executive Loan Committee, consisting
of the members of PALFED's Executive Committee and Howard M. Hickey Jr., which
has the responsibility for reviewing and recommending to the Palmetto Federal
Board of Directors all major loan facilities and reviewing the status of all of
Palmetto Federal's criticized assets. The Palmetto Federal Executive Loan
Committee met 23 times in 1995.
COMPENSATION COMMITTEE REPORT
The PALFED Personnel and Compensation Committee (the "Committee") is
composed entirely of outside directors who are not employees of the Company or
any of its subsidiaries. The Committee currently consists of Messrs. Cochrane,
Kingsmore, Simons, and Trask. Dr. Gibson and Mr. Ropp also attended meetings of
the Committee as consulting directors, and Messrs. Peters and Troutman also
attended meetings of the Committee. The Committee held 3 meetings in 1995.
The Committee: (i) reviews and recommends employee and officer promotions
and compensation levels, including compensation arrangements for the Company's
President and Chief Executive Officer; (ii) establishes general policies
relating to compensation of all employees, and reviews and administers employee
relations policies; and (iii) reviews and administers the Company's employee
benefit plans, including PALFED's stock option plans, restricted stock award
plan, and 401(k) Plan. The Board of Directors reviews all decisions made by the
Committee with respect to compensation of the Company's executive officers,
however, awards under PALFED's stock option plans and restricted stock plan are
made solely by the Committee.
Pursuant to the proxy rules promulgated by the SEC, this report describes
the compensation policies of the Committee applicable to the executive officers
of the Company, including the 1995 compensation of Mr. Troutman. This report
and the section that follows the Committee's report entitled "Shareholder
Return" and related explanation shall not be deemed to be "soliciting material"
or to be "filed" with the SEC or incorporated by reference into any filings
under the Securities Act of 1933, as amended (the "Securities Act"), or under
the Exchange Act, whether made before or after the date of this Proxy Statement
notwithstanding statements made in the Company's previous SEC filings that all
subsequent filings, in whole or in part, include this Proxy Statement.
COMPENSATION POLICIES
PALFED's compensation policies are intended to attract and retain qualified
executive officers and to align the interests of management and shareholders
through stock options and stock grants. The Committee evaluates employee and
executive compensation with data gathered from peer group comparisons and market
surveys. The Committee compares the Company's executive salaries with those of
other similarly sized thrifts and banks in South Carolina and the Southeast.
The Committee believes comparisons with other South Carolina financial
institutions are more representative than the broader group represented in the
performance graph used for comparisons of cumulative shareholder returns. The
Committee considers the base salaries of PALFED and Palmetto Federal executives,
as a whole, to be at the mid-to-lower range when compared with the base salaries
of similarly situated executives in the thrift or banking industry in Palmetto
Federal's market area. While the Committee has no established base salary
targets, the Committee seeks to set compensation levels that are competitive
with similarly situated financial institutions. Accordingly, the Committee
continued its objective of greater reliance on incentives to supplement base
salaries.
-9-
<PAGE>
To align PALFED more closely with other similarly sized thrifts and
financial institutions, the Committee raised salary range mid-points for all
grade levels. Additionally, the Committee recommended and the Board approved an
overall 4% increase in cash compensation, allocated among employees on a merit
basis. The Committee utilized awards of incentive compensation for executive
officers and other key employees to place greater emphasis on the enhancement of
shareholder value, measured by return on net tangible equity, reduction of
nonperforming assets and real estate owned, and other elements of risk
management. Additionally, the Committee will consider an individual's
contribution and other initiatives, as well as the handling of regulatory
issues. To align employee interests with the shareholders, the Committee
recommended payment of approximately one-quarter of executive bonuses in
restricted shares of Common Stock.
In February 1995, PALFED and Palmetto Federal awarded cash bonuses based on
1994 performance to certain executive officers, including the Chief Executive
Officer, and to other officers under the Executive Incentive Bonus program
administered by the Committee. A total bonus pool of approximately $310,000 was
available for distribution with the Committee generally allocating approximately
75% of this amount to senior management. The majority of individual bonuses
were paid 75% in cash and the remainder in restricted shares of Common Stock
awarded under the Restricted Stock Plan. The Committee granted 10,464
restricted shares of Common Stock with a one year restriction period.
Additionally, in November, 1995 the Committee awarded incentive stock
options to acquire 75,000 shares of Common Stock to certain officers, including
the Chief Executive Officer, and to other employees. The Committee generally
allocated 75% of all option awards to senior management, including the Chief
Executive Officer. The number of options awarded to each executive officer was
based on the recommendations of the Chief Executive Officer, each officer's
current salary and level of responsibility, and the Committee's subjective
evaluation of the individual's contribution to the performance of PALFED and its
subsidiaries. The Committee granted options to those individuals whose
contributions were principally responsible for achieving specified corporate
objectives including, but not limited to, reductions in general and
administrative expenses, and progress in the reduction of nonperforming assets
and disposition of real estate owned. The exercise price of the options awarded
in November, 1995 was $12.78 per share, the market price of Common Stock on the
date of the grant. The options are exercisable for ten years and will vest in
three years, at the rate of one-third of the grant per year. Options granted do
not have performance contingencies, but generally require the employee to remain
employed by the Company or its subsidiaries until the options vest. The value
of the options depends entirely on the future performance of Common Stock, which
reinforces the importance of long term shareholder value and further aligns the
interests of executive officers to that of the Company's shareholders.
-10-
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Upon review of the previous year's personal accomplishments and the Bank's
overall performance, the Committee approved a 10.3% salary increase for John C.
Troutman, Chief Executive Officer, raising his base salary to $160,000.
Additionally, he received a cash bonus of $44,324 during 1995 of which 25% was
paid in 2,003 restricted shares of Common Stock. Mr. Troutman also was awarded
options to purchase 13,123 shares of Common Stock at $12.78 per share based on
the Committee's subjective evaluation of Mr. Troutman's performance.
William F. Cochrane, Chairman
Harold D. Kingsmore
Charles E. Simons, III
Neil W. Trask, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Palmetto Federal engaged in customary banking transactions
with members of the Committee and had outstanding loans to several directors and
executive officers, including Mr. Simons. These loans were made in the ordinary
course of business and were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with others. In the opinion of management, these loans do not
involve more than the normal risk of collectibility or present other unfavorable
features. During 1995, the Company and its subsidiaries paid $5,385 in legal
fees to Mr. Simons' law firm for legal services, and it is anticipated that Mr.
Simons will furnish legal services to PALFED and its subsidiaries during 1996.
There are no other interlocks or relationships among members of the Committee or
PALFED's officers that require disclosure under applicable SEC regulations.
-11-
<PAGE>
SHAREHOLDER RETURN
Set forth below is a performance graph comparing the yearly percentage
changes in the cumulative total shareholder return on PALFED's Common Stock with
the Standard & Poor's 500 Index (the "S&P 500") and the Nasdaq Financial Stocks
Index for the five-year period commencing December 31, 1990 and ending December
31, 1995:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
Value of $100
Invested on December 31, 1990 at December 31,
---------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PALFED $ 80 $197 $158 $161 $267
S&P 500 Index 130 140 154 156 215
Nasdaq Financial 155 221 257 258 376
Stocks Index
</TABLE>
-12-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation of persons who served as Chief Executive Officer during 1995
and other highest compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------------------------------
Bonus Other Annual
Name and Principal Position Year Salary ($) ($) Compensation ($)(1)
- --------------------------- ---- ---------- ------ -------------------
<S> <C> <C> <C> <C>
John C. Troutman 1995 160,006 44,324 --
President and Chief 1994 145,006 33,450 --
Executive Officer 1993 123,754 -- 17,886(5)
Patrick D. Cunning 1995 116,004 31,027 --
Executive Vice President 1994 110,384 16,500 --
1993 102,030 -- --
Joe W. DeVore 1995 83,203 18,173 --
Executive Vice President 1994 78,783 8,250 --
and Senior Lending Officer 1993 73,138 -- --
Howard M. Hickey, Jr. 1995 86,903 20,250 --
Executive Vice President 1994 84,600 11,475 --
and General Counsel 1993 76,874 -- --
Darrell R. Rains 1995 99,004 23,250 --
Executive Vice President 1994 94,400 13,500 --
and Chief Financial Officer 1993 87,276 -- --
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------------------------------
Awards Payouts
-------------------------------------------- ----------- All Other
Restricted Stock Options/SAR LTIP Compensation
Name and Principal Position Awards ($)(2) (No.)(3) Payouts ($) ($)(4)
- --------------------------- ---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
John C. Troutman 14,772 13,123 n/a 8,291
President and Chief -- 9,531 n/a 3,975
Executive Officer 93,800 9,300 n/a --
Patrick D. Cunning 10,340 9,225 n/a 7,187
Executive Vice President 5,603 6,679 n/a 3,602
-- 9,020 n/a 3,196
Joe W. DeVore 6,055 6,452 n/a 6,727
Executive Vice President 2,801 3,890 n/a 4,675
and Senior Lending Officer -- 4,160 n/a 4,130
Howard M. Hickey, Jr. 6,248 6,300 n/a 5,402
Executive Vice President 3,895 4,200 n/a 3,251
and General Counsel -- 6,590 n/a 3,034
Darrell R. Rains 7,751 7,802 n/a 5,764
Executive Vice President 4,583 5,200 n/a 3,478
and Chief Financial Officer -- 7,100 n/a 1,768
</TABLE>
- --------------------------
(1) Amounts shown do not include amounts for employee benefits
(including group life and health insurance) that are generally available to all
salaried employees, or which have a value as a benefit to the named individual
that did not exceed the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for any individual named.
(2) Dollar values shown in the Restricted Stock Awards column are
based on the closing market price of Common Stock on the date of the grant.
Restrictions on Awards granted in 1993, 1994 and 1995 lapsed one year from the
date of the grant. Restricted shares of Common Stock are entitled to vote and
receive dividends paid on Common Stock. At December 31, 1995, the aggregate
number of restricted shares of Common Stock held by the executive officers named
in the Summary Compensation Table and the value of these shares, based upon the
$11.88 per share closing price of the Common Stock on December 29, 1995, were as
follows:
<TABLE>
<CAPTION>
Number
Name of Shares Value ($)
- ---- --------- ---------
<S> <C> <C>
John C. Troutman 2,003 23,796
Patrick D. Cunning 1,402 16,656
Joe W. DeVore 821 9,753
Howard M. Hickey, Jr. 915 10,870
Darrell R. Rains 1,051 12,486
</TABLE>
-13-
<PAGE>
- ----------------------------
(3) Grants of Incentive Stock Options.
(4) Employer matching contributions under the Company's 401(k) Plan
and taxable life insurance over $50,000.
(5) Mr. Troutman's 1993 compensation included moving and relocation
expenses of $16,766 and use of an automobile.
COMPENSATION AGREEMENTS AND PLANS
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS. Effective as of
November 22, 1994, PALFED and Palmetto Federal entered into Executive Salary
Continuation Agreements (such agreements are referenced to individually as an
"Agreement" and collectively as the "Agreements") with nine officers, including
Messrs. Troutman, Cunning, DeVore, Hickey and Rains. The Agreements for each of
the officers are identical in all material respects.
Each Agreement has a three year term with successive one year renewals. In
the event of the executive's resignation or termination, except for "cause", due
to a "Change of Control" and a "Change of Duties or Salary" (as both terms are
defined in the Agreement), the executive is entitled to receive an aggregate
payment equal to three times his average annual compensation for the five years
preceding the Change of Control. For purposes of the Agreements, a "change of
control" generally is defined as a change in control in either PALFED or
Palmetto Federal within the meaning of Office of Thrift Supervision ("OTS")
regulations or that would be reported under Regulation 14A promulgated under the
Exchange Act. A change of control also is deemed to have occurred (i) if any
person, directly or indirectly, acquires or becomes the beneficial owner of
securities representing 25 percent or more of the combined voting power of
PALFED's outstanding voting securities, or (ii) during any period of two
consecutive years individuals constituting a majority of PALFED's directors
cease to constitute a majority of the Board (unless the election of new
directors was approved by a vote of at least two-thirds of the directors then in
office). A "change in duties or salary" mean a reduction of annual salary, a
change in duties and responsibilities which result in the assignment of duties
and responsibilities inferior to those at the time of a change in control, or
relocation to a city or geographic location more than 5 miles from the Company's
principal office in Aiken, South Carolina. The executive has no duty to
mitigate the amount of payments he receives under his Agreement, nor may any
other compensation he earns reduce the amount of payments he receives under the
Agreement. If the triggering event described in the Agreements had occurred as
of December 31, 1995, the cash compensation payable to Messrs. Troutman,
Cunning, DeVore, Hickey and Rains would have been approximately $524,000,
$351,000, $244,000, $254,000 and $282,000, respectively.
RETIREMENT INCOME PLAN. Palmetto Federal maintains a tax-qualified
noncontributory Defined Benefit Pension plan (the "Pension Plan"). All salaried
employees of Palmetto Federal and its subsidiaries are eligible to participate
upon meeting certain age and service requirements. The PALFED Personnel and
Compensation Committee administers the Pension Plan. Contributions made by
Palmetto Federal are determined under the aggregate cost method.
Benefits under the Pension Plan are paid upon retirement or, under certain
circumstances, upon death. The Pension Plan also provides for payment of
accrued benefits to an employee who terminates employment before retirement,
when the employee has a vested interest in the accrued benefit. Benefits are
fully vested upon completion of six years' service. Benefits are payable
monthly, in amounts based on an employee's final average earnings and years of
service and are reduced by a portion of the employee's Social Security benefits.
The Pension Plan provides for normal retirement at age 65. The Pension Plan
also provides that an employee may retire and begin receiving payments when the
employee has attained age 55 and has accumulated at least ten years' service.
An employee who elects early retirement receives a reduced benefit.
-14-
<PAGE>
The following table sets forth estimated annual pension benefits payable
upon retirement to participants at normal retirement age in the compensation and
service classifications specified.
<TABLE>
<CAPTION>
Years of Service*
----------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 21,518 28,691 35,864 43,036 50,209
$125,000 27,518 36,691 45,864 55,036 64,209
$150,000 33,518 44,691 55,864 67,036 78,209
</TABLE>
- --------------------------
* Full retirement benefits are earned with 35 or more years of credited
service at age 65. Benefits are payable for ten-years certain and life
thereafter.
Compensation for purposes of computing annual benefits under the pension
plan includes total compensation, including any bonus compensation. Covered
compensation eligible for the accrual of pension benefits is limited to $150,000
in annual compensation. Messrs. Troutman, Cunning, DeVore, Hickey and Rains,
the only named executives participating in the Pension Plan, have 3, 20, 14, 9
and 10 years of credited service under the Pension Plan, respectively. Benefits
shown are computed based on life with 10-year service.
EXECUTIVE BONUS PLAN. The Company maintains an Executive Incentive Bonus
Plan (the "Bonus Plan") for high ranking officers who have been employed by the
Company or any of its subsidiaries for at least one year. Individual payments
are awarded at the discretion of the Personnel and Compensation Committee
considering the individual's contribution and base salary as a percent of the
total base salary of all executives included within the Plan, but payments may
vary from this relationship. In February 1995, PALFED awarded bonuses of
approximately $310,000 under the Bonus Plan based on 1994 performance, a portion
of which was paid in grants of restricted shares of Common Stock.
RESTRICTED STOCK PLAN. The Restricted Stock Plan provides for grants of
shares of Common Stock subject to certain restrictions. The Personnel and
Compensation Committee determines the number of shares awarded under the
Restricted Stock Plan and the restrictions on the shares. Generally, restricted
shares will be forfeited unless an employee remains employed by the Company or
one of its subsidiaries for a minimum of one year from the date of the award.
During 1995, the Company used the Restricted Stock Plan as a supplement to the
Bonus Plan by paying a portion of each employee's annual bonus in restricted
stock. In February 1995, the Company granted awards for 10,464 restricted
shares of Common Stock with a one year restriction period from the date of the
grant.
Additionally, effective as of February 15, 1996, the Company granted awards
for 106,345 restricted shares of Common Stock to executive officers and
employees of the Company. Approximately 6,345 restricted shares relate to
bonuses based on 1995 performance and will vest one year from the grant date.
The remaining 100,000 restricted shares relate to grants that will vest over 5
to 10 years and are subject to the Company achieving certain performance levels,
as well as the continued employment of the officers and employees receiving such
grants.
STOCK OPTION PLANS. The Company currently maintains incentive stock option
plans adopted in 1985, 1993 and 1995 (referred to collectively as the "Option
Plans"). The 1985 Option Plan terminated on September 24, 1995, although
outstanding options will remain exercisable according to their terms. All of
the options granted under the Option Plans were granted at the fair market value
of the underlying shares of Common Stock on the date of the grant of the option.
-15-
<PAGE>
At December 31, 1995, options to acquire 290,485 shares of Common Stock
were outstanding under the Option Plans. In 1995, PALFED granted options at an
exercise price of $12.78 per share to acquire 75,000 shares of Common Stock
under the Option Plans. The following table lists all grants of options under
the Option Plans to the executive officers named in the Summary Compensation
Table for the year ended December 31, 1995 and contains certain information
about the potential realizable value of those options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------- Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of
Securities Total Options Exercise Stock Price Appreciation
Underlying Granted to Price/ Expiration For Option Term(3)
Options Granted Employees in 1995(1) ($/Share)(2) Date 5% ($) 10% ($)
---------------- -------------------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John C. Troutman 13,123 17.5 12.78 11/14/2005 137,791 267,290
Patrick D. Cunning 9,225 12.3 12.78 11/14/2005 96,862 187,895
Joe W. DeVore 6,452 8.6 12.78 11/14/2005 67,746 131,415
Howard M. Hickey, Jr. 6,300 8.4 12.78 11/14/2005 66,150 128,314
Darrell R. Rains 7,802 10.4 12.78 11/14/2005 81,921 158,911
</TABLE>
- --------------------------
(1) In 1995, the Company granted options to acquire 75,000 shares
under the Option Plans.
(2) All options were granted at an exercise price equal to the
market price of Common Stock on the date of grant.
(3) These amounts represent certain assumed rates of appreciation
only. Actual gains, if any, on stock option exercises are dependent on the
future performance of Common Stock and overall market conditions. The
amounts reflected in this table may not necessarily be achieved.
STOCK OPTIONS EXERCISES. None of the named executive officers exercised
any stock options during 1995. The following table reflects the number of
shares covered by both exercisable and unexercisable stock options and values
for all in-the-money options granted to the named executive officers as of
December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money Options at
December 31, 1995 December 31, 1995 ($)(1)
----------------- ------------------------
Shares Acquired Value Exercisable/ Exercisable/
On Exercise Realized Unexercisable Unexercisable
--------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
John C. Troutman -- n/a 9,377 / 22,577 47,206 /107,586
Patrick D. Cunning -- n/a 24,973 / 19,451 115,141 /104,565
Joe W. DeVore -- n/a 10,870 / 11,132 42,565 /51,455
Howard M. Hickey, Jr. -- n/a 20,293 / 13,297 78,364 /69,455
Darrell R. Rains -- n/a 20,467 / 16,135 92,234 /83,202
</TABLE>
- -----------------------
(1) Values are based on the $11.88 per share closing price of Common Stock
on December 29, 1995, less the exercise price of the option.
-16-
<PAGE>
REPRICINGS OF OPTIONS AND STOCK APPRECIATION RIGHTS. PALFED did not
reprice any options during 1995. PALFED has no Stock Appreciation Rights.
LONG-TERM INCENTIVE PLAN AWARDS. The Company has no "long-term incentive
plan" as defined by applicable SEC regulations, which excludes the Restricted
Stock Plan and the Option Plans.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN. PALFED has an Employee Savings
and Stock Ownership Plan (the "401(k) Plan") for the employees of the Company
and any of its subsidiaries or affiliates. All assets of the 401(k) Plan are
held in trust. During 1994, the Company amended the 401(k) Plan to allow
participating employees to invest in several mutual funds and in Common Stock.
Prior to July, 1994, all assets of the 401(k) Plan were invested in Common
Stock. The 401(k) Plan may acquire shares of Common Stock directly from PALFED
or in open market purchases. The Company has registered 355,000 shares of
Common Stock for issuance pursuant to the 401(k) Plan, which is intended to
remain in effect indefinitely. During 1995, the 401(k) Plan acquired 17,921
shares of Common Stock in the open market to be held in the accounts of the
participating employees. The 401(k) Plan constitutes a "qualified cash or
deferred arrangement" within the meaning of Section 401(k) of the Internal
Revenue Code and is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
All employees who have been employed by PALFED or an affiliate or
subsidiary for at least one year of service are eligible to participate in the
401(k) Plan. Executive officers may participate in the 401(k) Plan on the same
terms as other employees, subject to any limitations on amounts that may be
contributed to the 401(k) Plan. During 1995, 282 employees were eligible to
participate in the ESOP Plan, of which approximately 205 employees participated
in the ESOP Plan. As of January 1, 1996, 251 employees were eligible to
participate in the 401(k) Plan, of which 188 employees had elected to
participate for 1996. Under the 401(k) Plan employees can authorize payroll
deductions which are matched by employer contributions. During 1995, the
employer matching contribution was 75 percent. In addition, the 401(k) Plan
allows the employer to make supplemental contributions. Subject to certain
vesting requirements (three years for employer matching contributions and five
years for employer supplemental contributions), distributions from the 401(k)
Plan will be made only on the employee's retirement or in the event of permanent
disability or termination before retirement.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
Prior to the adoption of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), Palmetto Federal had a policy of offering
consumer and residential mortgage loans on preferential terms to its officers,
directors and employees, in accordance with then applicable Federal Home Loan
Bank Board (now OTS) regulations. All such loans to executive officers,
directors and principal shareholders were made in the ordinary course of
business on substantially the same terms and collateral (except for interest
rates and loan origination fees) as those of comparable transactions prevailing
at the time, and did not involve more than the normal risk of collectibility or
other unfavorable features. In response to the requirements of FIRREA, Palmetto
Federal no longer offers favorable rates to the executive officers, directors
and principal shareholders of the Company or any of its subsidiaries. Palmetto
Federal's policy with respect to loans to its other employees remains unchanged.
Those loans which were originally made to directors and executive officers under
preferential terms will continue under then-applicable terms. However, any new
line of credit and any new loans made to an executive officer, director or
principal shareholder are subject to the requirements of Regulation O and are
made on the same terms as to an unaffiliated person. All such loans are
approved in advance by Palmetto Federal's Executive Loan Committee and the Board
of Directors.
-17-
<PAGE>
Set forth below is certain information relating to aggregate indebtedness
outstanding as of December 31, 1995 in excess of $60,000 of loans made to
persons who were during 1995 principal shareholders, executive officers and
directors of PALFED or Palmetto Federal or related to such persons. Each of the
loans termed "Mortgage" is a first mortgage on the underlying property.
Cashline is a revolving home equity line of line secured by the borrower's
residence. Personal Cashline is an unsecured revolving line of credit loan.
<TABLE>
<CAPTION>
Balance at Largest
Type of Date of Original December 31, Balance Interest
Name Loan Loan Balance(1) 1995 In 1995 Rate
- ---- ------- ------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Patrick D. Cunning Mortgage 03/15/94 $199,000 $185,458 $193,765 6.75
Director, Executive Cashline 12/26/95 49,000 5,039 5,039 7.75
Vice President
Charles E., Mortgage 05/05/93 86,000 75,672 99,528 6.875
Simons, III Mortgage 06/08/73 45,000 8,966 12,154 7.50
Director Cashline 11/16/87 25,000 4,103 9,919 Variable
Consumer 12/26/94 9,940 8,737 9,879 7.45
John C. Troutman Mortgage 05/24/93 144,000 129,013 135,317 6.875
Director, President and
Chief Executive Officer
W. Barry Adams Mortgage 07/17/89 88,000 80,723 82,432 5.75
Executive Vice Personal
President Cashline 10/22/85 5,000 1,002 2,049 Variable
Joe W. DeVore Mortgage 02/28/94 160,000 145,811 155,537 6.875
Executive Vice Personal
President Cashline 03/01/85 7,500 0 3,761 Variable
Cashline 08/17/85 45,000 13,087 13,087 Variable
Howard M. Hickey, Mortgage 03/24/93 110,000 106,764 108,047 6.875
Jr., Executive Personal
Vice President and Cashline 11/05/87 5,000 4,778 5,000 Variable
General Counsel Cashline 12/14/93 10,000 9,869 9,953 Variable
Consumer 05/26/95 21,205 19,571 21,205 9.25
Darrell R. Rains Mortgage 11/01/93 203,150 198,468 200,797 6.75
Executive Vice Cashline 12/26/95 49,000 5,004 5,004 7.75
President and Chief
Financial Officer
Michael B. Smith Mortgage 01/28/91 121,450 113,609 115,769 5.75
Senior Vice President Personal
and Controller Cashline 11/13/90 4,500 0 2,562 Variable
</TABLE>
- --------------------------
(1) The original balance shown for both Cashline and Personal
Cashline loans is the amount of the authorized line of credit.
Palmetto Federal has outstanding loans to some other members of the
immediate families of certain of its officers and directors and to consulting
directors. These loans were made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and do
not involve more than a normal risk of collectibility or present other
unfavorable features.
-18-
<PAGE>
APPROVAL OF AMENDMENTS TO
PALFED 1993 STOCK OPTION PLAN
(PROPOSAL 2)
GENERAL
Subject to approval by PALFED's shareholders, the proposed amendment to the
PALFED, Inc. 1993 Stock Option Plan (the "1993 Option Plan" or the "Plan") would
increase the number of shares of Common Stock authorized under the Plan by
reserving an additional 100,000 shares available for grant under the Plan.
BACKGROUND AND PURPOSE OF THE 1993 OPTION PLAN
The 1993 Option Plan, originally approved by the shareholders at the 1993
Annual Meeting, is intended to advance the interests of the Company and its
subsidiaries by encouraging officers and other key employees to obtain a
proprietary interest in the Company by acquiring Common Stock. The Board of
Directors believes that the Company's stock option plans have created
significant incentives for employees and officers, and aid the Company and its
subsidiaries in retaining and motivating qualified employees. The Board of
Directors considers it important for the future success of the Company to
continue to grant stock options on a basis comparable with the Company's
competitors. By increasing the ownership of Common Stock among the Company's
officers and employees, the 1993 Option Plan emphasizes the mutual interests of
employees and shareholders.
PRINCIPAL FEATURES OF THE 1993 OPTION PLAN
Under the 1993 Option Plan, incentive stock options ("ISOs") and other non-
qualified stock options ("Non-ISOs") (collectively, "Options") may be granted.
The following discussion summarizes the principal features of the 1993 Option
Plan. Additional information concerning the 1993 Option Plan is set forth at
pages 15 and 16 of this Proxy Statement.
ADMINISTRATION. The Personnel and Compensation Committee (the "Committee")
administers the 1993 Option Plan. Members of the Committee are outside
directors who cannot participate in the 1993 Option Plan and are "disinterested
persons" within the meaning of Rule 16b-3 of the Exchange Act. The Committee
has full authority to (1) determine the officers and employees to whom Options
will be granted, as well as the terms of the Options and the number of shares of
Common Stock awarded or offered pursuant to such Options, (2) determine whether
an Option will constitute an ISO intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or a Non-ISO not intended
to qualify under Code Section 422, and (3) interpret the provisions of, and
prescribe, amend and rescind any rules and regulations relating to the 1993
Option Plan.
ELIGIBILITY. Only employees of the Company and its subsidiaries are
eligible to receive Options under the 1993 Option Plan. As of March 1, 1996,
approximately 300 employees were eligible to receive Options.
SHARES AVAILABLE UNDER THE 1993 OPTION PLAN. Currently, a total of 150,000
shares of Common Stock are reserved for issuance under Options granted under the
1993 Option Plan. As of March 1, 1996, prior to the adoption of the proposed
amendment, 250 shares remained available for grant under the 1993 Option Plan.
To ensure sufficient shares available for future Options, the proposed amendment
authorizes an additional 100,000 shares of Common Stock to be reserved for the
grant of Options.
On March 15, 1996, the closing price of Common Stock on the Nasdaq National
Market was $13.13 per share.
-19-
<PAGE>
TERMS OF OPTIONS. Each Option granted under the 1993 Option Plan may be
exercised on such dates, during such periods and for such number of shares as
determined by the Committee. No Option will be exercisable after the expiration
of ten (10) years from the date it is granted. Generally, no Option is
exercisable for at least six months after the date of grant. The purchase price
of the Common Stock underlying each Option is determined by the Committee;
provided that the option price for ISOs may not be less than the fair market
value of Common Stock at the time an ISO is granted. An Option may be
exercisable in installments as designated by the Committee. Upon exercise of an
Option, an option holder must pay for the Common Stock subject to the exercise
in cash, with other shares of Common Stock, or by a combination of cash and
Common Stock.
TERMINATION AND AMENDMENT. The Committee or the Board of Directors may
terminate the 1993 Option Plan at any time, and the Plan will terminate
automatically ten (10) years from the date of its adoption by the PALFED Board
of Directors. Outstanding Options granted before the termination or expiration
of the Plan remain exercisable until they expire or lapse according to their
terms. The Committee or the Board of Directors may amend the Plan at any time,
except that: (1) no amendment may adversely affect the rights of a holder under
any outstanding Options without the consent of such holder, and (2) no amendment
may be made without shareholder approval, if such shareholder approval is
necessary to assure the continued qualification of the 1993 Option Plan under
Rule 16b-3 of the Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES
Participation in the 1993 Option Plan has the federal income tax
consequences summarized below. This summary does not purport to be complete or
to deal with particular fact situations, and is based on present federal income
tax statutes and regulations and is therefore subject to change when such
statutes or regulations change. The 1993 Option Plan is not subject to any
provision of ERISA and is not qualified under Section 401(a) of the Code, which
applies only to certain qualified pension, profit-sharing and stock bonus plans.
Any Option issued pursuant to the 1993 Option Plan which is not designated
as an Incentive Stock Option ("ISO") will constitute a Non-Qualified Stock
Option ("Non-ISO"). For federal income tax purposes, an employee who is granted
an ISO or a Non-ISO will not realize taxable income at the time such Option is
granted, and PALFED will not be entitled to a tax deduction at such time.
NON-QUALIFIED STOCK OPTIONS. In general, upon the exercise of a Non-ISO an
employee will recognize taxable income and the Company will be entitled to a tax
deduction in an amount equal to the excess of the fair market value of the
shares acquired on such date over the option price paid for such shares. In
determining the amount of taxable gain or loss upon any subsequent sale of
Common Stock obtained by exercise of a Non-ISO, the tax basis of such stock will
be an amount equal to its fair market value on the date used to determine the
amount of holder's taxable income upon the exercise of the Option. Common Stock
must be held for more than one year after exercise to qualify for long-term
capital gain treatment.
INCENTIVE STOCK OPTIONS. For regular income tax purposes, no taxable
income is recognized by an employee upon the exercise of an ISO, and PALFED is
not entitled to a tax deduction upon exercise of an ISO. For the purpose of
determining the amount of taxable gain or loss, the tax basis of such stock will
be an amount equal to the option price paid for the shares. Provided an
employee exercising an ISO holds the shares acquired upon exercise of the option
for more than one year after the date of exercise and more than two years after
the date of grant of such option, any gain realized on a subsequent sale of
Common Stock obtained by exercise of an ISO will be long-term capital gain.
However, if such shares are disposed of by the employee before the expiration of
the one or two-year periods described in the preceding sentence, the taxpayer
will be deemed to have made a "disqualifying disposition" of the shares. If a
disqualifying disposition
-20-
<PAGE>
occurs, the tax treatment to the holder is similar to the treatment that would
be accorded if the option were a Non-ISO, except that the timing of the
recognition of the income may differ. If a disqualifying disposition occurs,
the holder will recognize taxable income equal to the difference between the
amount realized on the disposition of the shares and the option price paid for
the shares. Any gain will be treated as ordinary income to the holder in an
amount not exceeding the difference between the fair market value of Common
Stock at the date of exercise of the Option and the amount paid for the shares.
The balance of the gain, if any, will be treated as long-term capital gain if
the shares have been held for at least one year at the date of sale, and as
short-term capital gain if they have been held for less than one year. Special
rules may apply to an employee who is subject to Section 16(b) of the Exchange
Act.
PAYMENT OF OPTION PRICE BY TRANSFERRING OTHER SHARES OF COMMON STOCK. In
general, the transfer of shares of Common Stock by an employee in payment of the
exercise price of either an ISO or a Non-ISO is not a taxable transaction to the
extent the fair market value of the shares received upon exercise of the Option
is equal to the fair market value of the shares exchanged in payment therefor.
The basis of the shares received in exchange for the shares surrendered in
payment of the option price, to the extent their fair market value does not
exceed the fair market value of the shares surrendered, will be the same as the
basis of the shares surrendered.
ESTIMATE OF PLAN BENEFITS
As the grant of Options under the 1993 Option Plan is entirely within the
discretion of the Personnel and Compensation Committee, the number of Options
that will be granted in the future to eligible employees cannot be determined.
REQUIRED VOTE
Approval of the amendments to the 1993 Option Plan to increase the number
of shares of Common Stock authorized under the Plan will require the affirmative
vote of a majority of the outstanding shares of Common Stock entitled to vote.
Votes withheld, abstentions and broker nonvotes will be included in vote totals
and will have the effect of a vote against approval of the amendments to the
1993 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND THE PALFED 1993 STOCK OPTION PLAN.
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APPROVAL OF AMENDMENTS TO
PALFED 1993 RESTRICTED STOCK INCENTIVE AWARD PLAN
(PROPOSAL 3)
GENERAL
Subject to approval by PALFED's shareholders, the proposed amendments to
the PALFED, Inc. 1993 Restricted Stock Incentive Award Plan (the "Restricted
Stock Plan" or the "Plan") would increase the number of shares of Common Stock
authorized under the Plan by reserving an additional 50,000 shares available for
grants under the Plan and amend a provision in the Plan to increase from twenty
percent (20%) to one-third the maximum number of shares that may be awarded
under the Plan to any employee.
The Restricted Stock Plan provides for the grant of shares of Common Stock
(an "Award" or collectively "Awards") subject to certain restrictions.
Currently, the Plan provides that no employee may acquire more than twenty
percent (20%) of the aggregate number of shares of Common Stock issuable
pursuant to Awards granted under the Plan. Based on the 150,000 shares of
Common Stock currently available under the Restricted Stock Plan, no more than
30,000 shares of Common Stock may be granted under the Plan to any single
employee. As of March 1, 1996, John C. Troutman, President and Chief Executive
Officer of the Company, had been awarded 30,000 shares of Common Stock pursuant
to Awards under the Plan. To allow additional flexibility to make future Awards
to Mr. Troutman as well as the Company's other executive officers, the proposed
amendments to the Restricted Stock Plan would increase this limitation to up to
one-third of the aggregate number of shares of Common Stock issuable pursuant to
Awards granted under the Plan.
BACKGROUND AND PURPOSE OF THE RESTRICTED STOCK PLAN
The Restricted Stock Plan, approved by the shareholders at the 1993 Annual
Meeting, is intended to advance the interests of the Company and its
subsidiaries by encouraging officers and other key employees to acquire Common
Stock. The Board of Directors believes that the Company's stock plans,
including the Restricted Stock Plan, have created significant incentives for
employees and officers, and aid the Company and its subsidiaries in retaining
and motivating qualified employees. The Board of Directors considers the
continued grant of stock based incentive compensation important for the future
success of the Company. By increasing the ownership of Common Stock among the
Company's officers and employees, the Restricted Stock Plan encourages the
identification of the mutual interests of employees and shareholders.
PRINCIPAL FEATURES OF THE RESTRICTED STOCK PLAN
The following discussion summarizes the principal features of the
Restricted Stock Plan. Additional information concerning the Restricted Stock
Plan is set forth at page 15 of this Proxy Statement.
ADMINISTRATION. The Personnel and Compensation Committee (the "Committee")
administers the Restricted Stock Plan. The Committee has full authority to (1)
determine the officers and employees to whom Awards will be granted, as well as
the terms of the Awards and the number of shares of Common Stock awarded or
offered pursuant to such Awards, and (2) interpret the provisions of, and
prescribe, amend and rescind any rules and regulations relating to the Plan.
The Committee, in its discretion, may permit acceleration of the expiration of
any vesting or restriction period with respect to any part or all of the shares
subject to an Award, and may remove or modify any restrictions on previously
granted Awards.
ELIGIBILITY. Pursuant to the Restricted Stock Plan, only employees of the
Company and its subsidiaries are eligible to receive Awards under the Restricted
Stock Plan. As of March 1, 1996, approximately 300 employees were eligible to
receive Awards under the Plan.
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<PAGE>
SHARES AVAILABLE UNDER THE RESTRICTED STOCK PLAN. Currently, a total of
150,000 shares of Common Stock are available for Awards granted under the
Restricted Stock Plan. As of March 1, 1996, 18,945 shares of Common Stock
remained available for future Awards under the Plan. To ensure sufficient
shares available for future Awards, the proposed amendment authorizes an
additional 50,000 shares of Common Stock to be reserved for the grant of Awards.
On March 15, 1996, the closing price of Common Stock on the Nasdaq National
Market was $13.13 per share.
TERMS OF AWARDS. Awards of shares of Common Stock ("Restricted Stock") are
evidenced by Restricted Stock Agreements ("Agreements") that set forth the
conditions and terms of the Award. In each Agreement, the employee agrees to
remain in the employment of PALFED (or one of its subsidiaries) for a specified
period, which generally is at least one year from the date of the Agreement.
Each Agreement also sets forth the terms upon which the restrictions on the
Restricted Stock may lapse. The Award is terminated and the Restricted Stock
subject to such Award is forfeited if at any time within the restricted period
of time specified in the Agreement, the employee is permanently separated from
the Company for any reason other than death, retirement or permanent disability.
The Committee, in its discretion, may permit acceleration of the expiration of
any vesting or restriction period with respect to any part or all of the shares
subject to an Award, and may remove or modify any restrictions on previously
granted Awards.
TERMINATION AND AMENDMENT. The Committee or the Board of Directors may
terminate the Restricted Stock Plan at any time, and the Plan will terminate
automatically when all Awards have been issued and are no longer subject to
restrictions or forfeiture. The Committee may amend the Plan at any time,
except that no amendment may be made without shareholder approval, if the
amendment would increase the aggregate number of shares of Common Stock that may
be issued under the Plan, withdraw administration from the Committee, or permit
any person while a member of the Committee to be eligible to receive an Award.
FEDERAL INCOME TAX CONSEQUENCES
Upon termination of the restrictions on shares of Common Stock, the
employee recognizes ordinary income in the year the restrictions are terminated,
in an amount equal to the fair market value of the shares at the date of
termination of such restrictions, and the Company is entitled to a deduction in
the same amount at such time.
ESTIMATE OF PLAN BENEFITS
As the grant of Awards under the Plan is entirely within the discretion of
the Personnel and Compensation Committee, the number of Awards that will be
granted in the future to eligible employees cannot be determined.
REQUIRED VOTE
Approval of the amendments to the Restricted Stock Plan will require the
affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote. Votes withheld, abstentions and broker nonvotes will be
included in vote totals and will have the effect of a vote against approval of
the amendments to the Restricted Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND THE PALFED RESTRICTED STOCK PLAN.
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<PAGE>
APPROVAL OF AMENDMENTS TO
PALFED AMENDED AND RESTATED DIRECTORS STOCK PLAN
(PROPOSAL 4)
GENERAL
Subject to approval by PALFED's shareholders, the proposed amendments to
the PALFED, Inc. Amended and Restated Directors Stock Plan (the "Directors Plan"
or the "Plan") would (i) increase by 100,000 shares the number of shares of
Common Stock authorized under the Plan, and (ii) provide for annual grants of
stock options ("Options") to outside each director, contingent upon the Company
achieving certain net income levels (collectively the "Proposed Amendments").
Under the Directors Plan as currently in effect, only the outside directors who
are elected at the 1996 Annual Meeting will receive Options to acquire 3,000
shares of Common Stock at the fair market value of the Common Stock on the date
of the grant. The Proposed Amendments will not affect the Options granted to
consulting and advisory directors, which are granted at the discretion of the
Personnel and Compensation Committee. If the Proposed Amendments are not
approved, the Directors Plan, as currently in effect, will continue.
The Proposed Amendments would provide annual grants of Options to each
outside director, instead of only those directors who are nominees and are
elected to the Board of Directors. Subject to the Company achieving certain
minimum net income levels, the Committee believes that Options should be awarded
to all outside directors as a group, rather than only the particular nominees
who are elected to the Board. The Committee originally intended that the
Directors Plan approved in 1995 would allow annual Option grants to all
directors. The Proposed Amendments are intended to correct an ambiguity in the
Plan to clarify that all outside directors will receive Option grants.
BACKGROUND AND PURPOSE OF THE DIRECTORS PLAN
The Directors Plan, approved by the shareholders at the 1995 Annual
Meeting, is intended to advance the interests of the Company and its
subsidiaries by encouraging PALFED's outside directors to acquire Common Stock
and provide an additional incentive for such directors to continue as directors.
PALFED believes that the Directors Plan will aid in attracting and retaining
outside directors and that increased Common Stock ownership by directors further
aligns shareholder and director interests.
PRINCIPAL FEATURES OF THE DIRECTORS PLAN
The following discussion summarizes the principal features and effects of
the Directors Plan. The Directors Plan generally provides for the grant of
stock options ("Options") subject to the Company achieving certain minimum net
income levels. The Director Plan also provides for the grant of shares of
Common Stock subject to certain restrictions ("Restricted Stock") to new
directors.
ADMINISTRATION. The Personnel and Compensation Committee (the "Committee")
of the Board of Directors administers the Directors Plan. Subject to the terms
of the Directors Plan, the Committee has full authority to (1) interpret and
construe the terms of the Directors Plan and prescribe, amend and rescind any
rules and regulations relating to the Directors Plan, and (2) determine the
terms and provisions of Awards to consulting, advisory or honorary directors.
The Committee has no discretion as to the selection of directors to receive
Awards, but may determine the selection of consulting and advisory directors for
Awards, as well as the terms of any Awards to consulting or advisory directors.
ELIGIBILITY. Only directors who are not employees of the Company or any
of its subsidiaries are eligible to participate in the Plan (defined as an
"Eligible Director" under the Plan). Consulting and advisory directors also are
eligible to participate in the Plan, but receive Options only at the discretion
of the
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<PAGE>
Committee. As of March 15, 1996, nine of PALFED's eleven directors, three
consulting directors and one advisory director were eligible to participate in
the Directors Plan.
SHARES AVAILABLE UNDER THE DIRECTORS PLAN. Currently, a total of 150,000
shares of Common Stock may be issued under Awards granted under the Directors
Plan. The unexercised portion of shares of Common Stock allocable to expired or
terminated Awards may become subject to Awards under the Directors Plan. As of
March 15, 1996, 98,000 shares of Common Stock remained available for future
Awards under the Plan. To ensure sufficient shares of Common Stock available
for future Awards, the Proposed Amendments authorize an additional 100,000
shares of Common Stock under the Plan.
On March 15, 1996, the closing price of the Common Stock on the Nasdaq
National Market was $13.13 per share.
OPTIONS. The Directors Plan as currently in effect, provides that each
nominee for election as a director will be granted, upon election to the Board
of Directors, an Option to acquire shares of Common Stock in accordance with the
following schedule: (i) Options to acquire 3,000 shares of Common Stock, if
PALFED's net income for the previous fiscal year exceeds $4 million, (ii)
Options to acquire 2,000 shares of Common Stock, if PALFED's net income exceeds
$3 million, and (iii) Options to acquire 1,000 shares of Common Stock, if
PALFED's net income exceeds $2 million. No Options are granted under the
Directors Plan, if PALFED does not have net income of at least $2 million for
its prior fiscal year. Under the Directors Plan, net income is defined as
PALFED's net income after taxes for the previous fiscal year, exclusive of
extraordinary items, loan loss provisions and accounting adjustments.
Based on the Company's 1995 operating results, each of Messrs. McBratney,
Peters and Schwallie, the nominees for election as directors of the Company,
will upon reelection to the Board of Directors receive Options for 3,000 shares
of Common Stock.
The Proposed Amendments would provide annual Options to each outside
director, instead of only those directors who are nominees and are elected to
the Board of Directors. Since approximately one-third of PALFED's directors are
elected at each Annual Meeting, the Committee believes that Options should be
awarded to all directors as a group, rather than only the particular directors
who are elected to the Board.
TERMS OF OPTIONS. Options granted under the Directors Plan generally may
be exercised one (1) year after the date of the grant. Options may not be
exercised for at least six months from the date of grant. No Option is
exercisable after the expiration of three (3) years from the date it is granted
or one (1) year after the holder ceases to be an Eligible Director. The
purchase price of the Common Stock underlying each Option may not be less than
the fair market value of Common Stock as of the date an Option is granted.
RESTRICTED STOCK GRANTS. Under the Directors Plan, new directors, upon
election to the Board of Directors, automatically receive, as of the first
business day following such director's initial election by the shareholders to
the Board of Directors, an award for 1,000 shares of Restricted Stock. In 1995,
each outside director, consulting director and advisory director received, as of
the date of the Company's 1995 Annual Meeting of Shareholders, 1,000 shares of
Restricted Stock with a one year restriction period. Current directors,
consulting directors and advisory directors are not eligible for additional
restricted stock grants under the Directors Plan.
TERMINATION AND AMENDMENT. The Committee or the Board of Directors may
terminate the Directors Plan at any time. Outstanding Awards granted before the
termination of the Directors Plan remain exercisable until they expire or lapse
according to their terms. The Committee or the Board of Directors may amend the
Directors Plan except that no amendment may be made without shareholder
approval, if such shareholder approval is necessary to assure the continued
qualification of the Plan under Rule 16b-3 of the Exchange Act.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Participation in the Directors Plan has the federal income tax consequences
summarized below. This summary does not purport to be complete or to deal with
particular fact situations, and is based on present federal income tax statutes
and regulations and is therefore subject to change when such statutes or
regulations change. The Directors Plan is not subject to any provision of ERISA
and is not qualified under Section 401(a) of the Code, which applies only to
certain qualified pension, profit-sharing and stock bonus plans.
STOCK OPTIONS. Options issued pursuant to the Directors Plan do not
qualify as incentive stock options and constitute non-qualified stock options.
For federal income tax purposes, a director will not realize taxable income at
the time an Option is granted, and PALFED will not be entitled to a tax
deduction at such time.
In general, a director will recognize taxable income upon the exercise of
an Option in an amount equal to the excess of the fair market value of the
shares acquired on such date over the option price paid for such shares. The
Company will be entitled to a tax deduction in the amount of ordinary income
recognized by the director. In determining the amount of taxable gain or loss
upon any subsequent sale of Common Stock obtained by exercise of an Option, the
tax basis of such stock will be an amount equal to its fair market value on the
date used to determine the amount of holder's taxable income upon the exercise
of the Option. Common Stock must be held for more than one year after exercise
to qualify for long-term capital gain treatment.
RESTRICTED STOCK. Upon termination of the restrictions on shares of Common
Stock, the director recognizes ordinary income in the year the restrictions are
terminated in an amount equal to the fair market value of the shares at the date
of termination of such restrictions, and the Company is entitled to a deduction
in the same amount at such time.
ESTIMATE OF NEW PLAN BENEFITS
Since Options are granted to consulting and advisory directors only at the
discretion of the Committee, the number of Options that will be awarded to such
persons in the future cannot be determined. Under the Directors Plan, as
proposed to be amended, each of the four (4) outside directors that are not
currently nominees for election to the Board would receive Options for 3,000
shares of Common Stock. The value of Options cannot be determined until Options
vest and will depend on the market price of Common Stock at the time Options are
exercised.
REQUIRED VOTE
Approval of the proposed amendments to Directors Plan will require the
affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote. Votes withheld, abstentions and broker nonvotes will be
included in vote totals and will have the effect of a vote against approval of
the proposed amendments to the Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND THE PALFED AMENDED AND RESTATED DIRECTORS STOCK PLAN.
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<PAGE>
INDEPENDENT AUDITORS
The Board of Directors intends to select independent public accountants for
PALFED and its subsidiaries for 1996 following the Annual Meeting. Coopers &
Lybrand L.L.P. has been the independent public accountants for PALFED or its
predecessors since 1982. Representatives of Coopers & Lybrand L.L.P. are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
1997 ANNUAL MEETING
A shareholder who wishes to submit a proposal for action at the 1997 Annual
Meeting must submit a proposal sufficiently in advance so that it is received at
the Company's principal executive offices no later than November 15, 1996. The
shareholder also should notify the Company in writing regarding his intention to
appear personally at the meeting to present his proposal at the time he submits
his proposal. Nothing in this paragraph shall be deemed to require the Company
to include in its Proxy Statement and proxy relating to the 1997 Annual Meeting
of Shareholders any shareholder proposal or nomination which does not meet in
all respects the requirements for inclusion established by the SEC in effect at
the time such proposal or nomination is received.
OTHER MATTERS
Management of PALFED is not aware of any other matter to be presented for
action at the Annual Meeting other than those mentioned in the Notice of Annual
Meeting of Shareholders and referred to in this Proxy Statement. If any other
matter comes before the meeting, it is the intention of the persons named in the
enclosed proxy to vote on such matters in accordance with their judgment.
By Order of the Board of Directors,
Howard M. Hickey, Jr.
Secretary
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<PAGE>
PALFED, Inc.
1996 Annual Meeting of Shareholders
PLANS SUBJECT TO SHAREHOLDER ACTION
-----------------------------------
In accordance with Instruction 3 of Item 10 of Schedule 14A, PALFED,
Inc. (the "Company") is filing with the Commission copies of the following plans
to be acted on at the Company's Annual Meeting of Shareholders to be held on
April 23, 1996:
(1) PALFED, Inc. 1993 Stock Option Plan;
(2) PALFED, Inc. 1993 Restricted Stock Incentive Award Plan; and
(3) PALFED, Inc. Amended and Restated Directors Stock Plan.
Copies of these plans are not included in the Company's definitive
proxy materials and are not being mailed to shareholders with the Company's
Notice of Annual Meeting, Proxy Statement and form of proxy.
The Company previously filed a Registration Statement on Form S-8 for
each of the above-referenced plans. If the shareholders approve the proposed
amendments to each of the plans at the 1996 Annual Meeting (Proposals 2, 3 and
4), the Company expects to file additional Registration Statements on Form S-8
to register any additional securities that are authorized under these plans, but
have not been previously registered.
<PAGE>
PALFED, INC.
1993 STOCK OPTION PLAN
----------------------
(As amended as of March 1, 1996)
1. PURPOSE OF THE PLAN. The PALFED, Inc. 1993 Stock Option Plan
(the "Plan") is intended to advance the interests of PALFED, Inc. (the
"Company") and its "subsidiaries" (as defined in Section 424 of Internal Revenue
Code of 1986, as amended (the "Code")) by encouraging and providing an
opportunity for officers and other key employees of the Company and its
subsidiaries to acquire shares of the Company's common stock. In addition, the
Plan is intended to enhance the ability of the Company and its subsidiaries to
attract and retain employees, to stimulate the efforts of such employees and to
strengthen their desire to remain in the employ of the Company and its
subsidiaries.
The Plan provides for the grant of stock options which qualify as
"incentive stock options" ("Incentive Stock Options") within the meaning of
Section 422 of the Code, or stock options which do not qualify as Incentive
Stock Options ("Non-Qualified Stock Options") (Incentive Stock Options and Non-
Qualified Stock Options are hereinafter collectively referred to as "Options").
2. STOCK SUBJECT TO THE PLAN. The maximum number of shares of
common stock, $ 1.00 par value ("Common Stock"), of the Company that may be
issued under Options granted under the Plan shall be a total of 250,000 shares
of Common Stock. If an Option expires or terminates for any reason without
being exercised in full, the unpurchased shares subject to such Option shall
again be available for purposes of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors consisting of not less than three (3)
directors who are "disinterested persons" within the meaning of Rule 16b-3
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used
herein, the term "Committee" refers to such committee or, in absence of
appointment of such committee, to the Board of Directors. Subject to the terms
of the Plan, the Committee shall have full authority in its discretion to
determine the officers or employees of the Company and its subsidiaries to whom
Options shall be granted and the terms and provisions of Options. In making
such determinations, the Committee may take into account the nature of the
services rendered and to be rendered by the respective officers and employees,
their present and potential contributions to the Company and any other factors
that the Committee deems relevant. The Committee may also make the issuance or
exercise of Options subject to the satisfaction of specified financial
performance goals established by the Committee in its discretion. Subject to
the provisions of the Plan, the Committee shall have full and conclusive
authority to interpret and construe the terms and intent of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Option agreements (which
need not be identical); and to make all other determinations necessary or
advisable for the proper administration of the Plan.
4. ELIGIBILITY AND LIMITS. Options may be granted only to officers
and other key employees of the Company and its present or future subsidiaries.
No Incentive Stock Option shall be granted to any person who, at the time such
Option is granted, owns (as defined in Sections 422 and 424 of the Code) Common
Stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, and no Incentive Stock Option may be
granted to a director not otherwise employed by the Company. In the case of an
Incentive Stock Option, the aggregate fair market value (determined as of the
time an Incentive Stock is granted) of Common Stock with respect to which
Incentive Stock can become exercisable for the first time by any person during
any one calendar year under this Plan and under all other
<PAGE>
plans of the Company and its subsidiary corporations (within the meaning of
Sections 422 and 424 of the Code) shall not exceed $100,000.
5. INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS. At the
time any Option is granted under this Plan, the Committee shall determine
whether said Option is to be an Incentive Stock Option or a Non-Qualified Stock
Option, and the Option shall be clearly identified as to such status. The
number of shares as to which Incentive Stock Options and Non-Qualified Stock
Options shall be granted shall be determined by the Committee in its sole
discretion, subject to the provisions of section 4 above with respect to the
aggregate fair market value of the Stock for which an officer or employee shall
be granted Incentive Stock Options in any calendar year and subject to the
provisions of section 2 above as to the total number of shares for which Options
may be granted under the Plan. At the time any Incentive Stock Option granted
under this Plan is exercised, the certificates representing the shares of Common
Stock purchased pursuant to such Option shall be clearly identified as
representing shares purchased upon exercise of an Incentive Stock Option.
6. TERMS AND CONDITIONS OF OPTIONS. Subject to the following terms
and conditions, all Options granted under this Plan shall be in such form and
upon such terms and conditions, not inconsistent with this Plan, as the
Committee shall from time to time determine.
(a) OPTION TERM. No Option shall be exercisable after the expiration
of ten (10) years from the date the Option is granted.
(b) OPTION. The option price per share of Common Stock purchasable
under an Option granted under this Plan shall be as set forth in the applicable
Option agreement; provided that the option price for an Incentive Stock Option
shall not be less than the fair market value of a share of Common Stock (as
determined in good faith by the Committee) on the date such Incentive Stock
Option is granted. The date an Option is granted shall be the date on which the
Committee has approved the terms and conditions of an Option agreement
evidencing the Option, has determined the recipient of the Option and the number
of shares covered by the Option, and has taken all such other action as
necessary to complete the grant of the Option.
(c) PAYMENT. Payment for all shares purchased pursuant to exercise
of an Option shall be made in cash, or if the Option agreement so provides, by
delivery of Common Stock at its fair market value on the date of delivery. Such
payment shall be made at the time that the Option or any part thereof is
exercised, and no shares shall be issued or delivered until full payment
therefor has been made. The holder of an Option shall, as such, have none of
the rights of a shareholder.
(d) CONDITIONS TO EXERCISE OF AN OPTION. Subject to the provisions
of paragraph (g) below, each Option granted under the Plan shall be exercisable
at such time or times, or upon the occurrence of such event or events, and in
such amounts, as the Committee shall specify in the Option agreement, except
that no Option may be exercised to any extent until the holder shall have been
employed by the Company or one of its subsidiaries for at least six (6) months
from the date of the grant.
(e) NONTRANSFERABILITY OF OPTION. An Option shall not be assignable
or transferable except by will or by the laws of descent and distribution, and
shall be exercisable, during the holder's lifetime, only by the holder. Any
distributee by will or by the laws of descent and distribution shall be bound by
the provisions of this Plan. Any attempt to assign, pledge, transfer,
hypothecate or otherwise dispose of an Option, and any levy of execution,
attachment or similar process on an Option shall be null and void.
(f) TERMINATION OF EMPLOYMENT OR DEATH. In the event of termination
of employment of the holder for any reason other than death or disability, the
holder may not exercise an Option more than three (3) months after the date of
such termination of employment; provided, however, that no Option shall be
exercised following the date of notice to the holder of termination of his
employment by the Company or
2
<PAGE>
by any of its subsidiaries for violation by him or her of any provision of any
written employment contract between the Company or any of its subsidiaries and
the holder, or for "cause" (as defined in the Option agreement between the
holder and the Company). Upon any termination of employment of the holder by
reason of disability, within the meaning of Section 105(d)(4) of the Code, the
holder may not exercise an Option later than twelve (12) months after the date
of such termination of employment. If the holder of an Option dies, such Option
may be exercised (to the extent that the holder shall have been entitled to do
so at the date of his death) by a legatee or legatees of the holder under his
last will, or by his personal representatives or distributees, at any time
within the twelve (12) month period following his death. Notwithstanding this
paragraph (f), no Option may be exercised more than ten (10) years after the
date on which such Option was granted. For purposes of this paragraph (f),
employment of a holder shall not be deemed terminated so long as the holder is
employed by, or a director of, a parent or subsidiary of the Company or another
corporation (or a parent or subsidiary corporation of such other corporation)
which has assumed the Option of the holder in a transaction to which Section
424(a) of the Code is applicable.
(g) ACCELERATION OF RIGHT OF EXERCISE. Notwithstanding the vesting
provisions of subparagraph (d) above, but subject to the provisions of
subparagraph (b) above, an Option may be exercised in any amount up to the full
number of shares covered by the Option without regard to the date of grant of
the Option if: (i) a tender offer or exchange offer has been made for at least
twenty-five percent (25%) of the outstanding shares of Common Stock, other than
one made by the Company, provided that the corporation, person or other entity
making such offer purchases or otherwise acquires shares of Common Stock
pursuant to such offer; or (ii) the shareholders of the Company have approved a
definitive agreement (the "Agreement") to merge or consolidate with or into
another corporation pursuant to which the Company will not survive or will
survive only as a subsidiary of another corporation or to sell or otherwise
dispose of all or substantially all of its assets; or (iii) any person, entity
or group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(excluding for purposes of this section any employee benefit plan of the Company
which acquires beneficial ownership of voting securities of the Company) becomes
the holder of twenty-five percent (25%) or more of the outstanding shares of
Stock. If any of the events specified in this subparagraph (g) have occurred,
the Option shall be fully exercisable: (x) in the event of (i) above, within a
30-day period commencing on the date of expiration of the tender offer or
exchange offer; or (y) in the event of (ii) above, within a 30-day period
commencing on the date of approval by the shareholders of the Agreement; or (z)
in the event of (iii) above, within a 30-day period commencing on the date upon
which the Company is provided a copy of Schedule 13D (filed pursuant to Section
13(d) of the Exchange Act and rules and regulations promulgated thereunder)
indicating that any person or group has become the holder of twenty-five percent
(25%) or more of the outstanding shares of Common Stock or, if the Company is
not subject to Section 13(d) of the Exchange Act, within a 30-day period
commencing on the date upon which the Company receives written notice that any
person or group has become the holder of twenty-five percent (25%) or more of
the outstanding shares of Common Stock.
7. CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION. The number of
shares of Common Stock as to which Options may be granted, the number of shares
covered by each outstanding Option, and the price per share of each outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a subdivision or
combination of shares, the payment of a stock dividend, or other combination or
reclassification of the Common Stock effected without receipt of consideration
by the Company. If the Company shall be the surviving entity in any merger or
consolidation, recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Option shall be entitled to
purchase upon any exercise of an Option, at the same times and upon the same
terms and conditions as are then provided in the Option, the number and class of
shares of Common Stock or other securities to which a holder of the same number
of shares of Common Stock at the time of such transaction would have been
entitled to receive as a result of such transaction. Any such adjustment may
provide for the elimination of any fractional shares which might otherwise
become subject to any Option without payment therefor. Comparable rights shall
accrue to each holder in the event of successive mergers or consolidations. In
the event of any such changes in capitalization of the Company, the Committee or
the Board of Directors may make such additional adjustments in the number and
class of shares of Stock or other
3
<PAGE>
securities with respect to which outstanding Options are exercisable and with
respect to which future Options may be granted as the Committee in its sole
discretion shall deem equitable or appropriate, subject to the provisions of
section 10. In the event of a dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving corporation or
in which the Company survives only as a subsidiary of another corporation,
provision shall be made for each outstanding Option to become exercisable prior
to such dissolution, liquidation, merger or consolidation, except to the extent
that another corporation or other legal entity assumes such Option or
substitutes another option therefor in a transaction to which Section 424(a) of
the Code applies. In the event of a change of the Company's shares of Common
Stock into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be Common
Stock within the meaning of the Plan.
Except as expressly provided in this section 7, the holder of an
Option shall have no rights by reason of any subdivision or combination of
shares of Common Stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of Common Stock of any class
or by reason of any dissolution, liquidation, merger, consolidation or
distribution to the Company's shareholders of assets or stock of another
corporation, and any issuance by the Company of shares of Common Stock of any
class, or securities convertible into shares of Common Stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the Option. The
existence of the Plan and the Options granted pursuant to the Plan shall not
affect in any way the right or power of the Company to make or authorize any
adjustment, reclassification, reorganization or other change in its capital or
business structure, any merger or consolidation of the Company, any issue of
debt or equity securities having preferences or priorities as to the Common
Stock or the rights thereof, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.
8. RESTRICTION ON ISSUANCE OF SHARES. The Company shall not be
obligated to sell or issue any shares of Common Stock pursuant to any Option
agreement if such issuance would result in the violation of any laws, including
the Securities Act of 1933, as amended (the "1933 Act") or any rules and
regulations promulgated by the Office of Thrift Supervision ("OTS") or Federal
Deposit Insurance Corporation ("FDIC") or any successor agency of the OTS or
FDIC.
9. PURCHASE FOR INVESTMENT; OTHER REPRESENTATIONS OF HOLDER. In the
event that the offering of shares with respect to which an Option is being
exercised is not registered under the 1933 Act, but an exemption is available
which requires an investment representation or other representation, each holder
electing to purchase such shares will be required to represent that such shares
are being acquired for investment and not with a view to the sale or
distribution thereof, and to make such other representations as are deemed
necessary by counsel to the Company.
10. TERMINATION AND AMENDMENT OF THE PLAN. The Plan shall terminate
on the date ten years after adoption of the Plan by the Board of Directors and
no Option shall be granted under the Plan after that date, but Options granted
before termination of the Plan shall remain exercisable thereafter until they
expire or lapse according to their terms. The Plan may be terminated, modified
or amended by the shareholders or the Board of Directors of the Company;
provided, however, that:
(a) no such termination, modification or amendment without the
consent of the holder of an Option shall adversely affect his or her rights
under such Option; and
(b) any modification or amendment that would (i) increase the
aggregate number of shares of Common Stock that may be issued under the Plan
(other than an increase merely reflecting a change in capitalization such as a
stock dividend or stock split), (ii) modify the designation of employees
eligible to receive Options under the Plan, or (3) materially increase the
benefits accruing to holders of Options granted or to be granted under the Plan,
within the meaning of Rule 16b-3 issued by the Securities and Exchange
Commission under the Act, as amended, shall be effective only if it is approved
by the shareholders of the
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<PAGE>
Company at the next annual meeting of shareholders after the date of adoption by
the Board of Directors of such modification or amendment.
11. APPROVAL BY SHAREHOLDERS. The Plan shall become effective when
adopted by the Board of Directors, but no Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, any
Options previously granted under the Plan shall terminate, and no further
Options shall be granted. Subject to this limitation, Options may be granted
under the Plan at any time after the effective date and before the date fixed
for termination of the Plan.
12. MISCELLANEOUS.
--------------
(a) CONSTRUCTION. All Incentive Stock Options to be granted
hereunder are intended to comply with Sections 422 and 424 of the Code, and all
provisions of this Plan and all Incentive Stock Options granted hereunder shall
be construed in such manner as to effect that intent. This Plan and all Common
Stock acquired by the exercise of Options granted pursuant to this Plan are
intended to comply with all applicable provisions of SEC Rule 16b-3 or any
successor provision under the Exchange Act, and this Plan shall be construed in
such manner as to effect that intent insofar as holders subject to Section 16 of
the Exchange Act are concerned. In administering this Plan, the Committee may
adopt such requirements as it deems appropriate to comply with Sections 422 and
424 of the Code or SEC Rule 16b-3, and the Board of Directors may amend this
Plan to the extent necessary to comply with such provisions, subject to section
10 of this Plan.
(b) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right
to be granted an Option, and the grant of an Option shall not be construed as
giving any person the right to continued employment. Nothing contained in the
Plan or in any Option granted under the Plan shall confer upon any option holder
any right with respect to the continuation of his or her employment by the
Company or a subsidiary corporation or interfere in any way with the right of
the Company or a subsidiary corporation, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the holder from the rate in
existence at the time of the grant of an Option.
(c) WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under this Plan, the Company shall have
the right to require the recipient to remit to the Company an amount sufficient
to satisfy any federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
(d) NO FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued under the Plan, and cash shall be paid in lieu of any fractional
shares in settlement of Options granted under the Plan.
(e) GOVERNING LAW. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of the State of South Carolina.
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<PAGE>
PALFED, INC.
1993 RESTRICTED STOCK INCENTIVE AWARD PLAN
(As amended as of March 1, 1996)
1. PURPOSE OF THE PLAN. The PALFED, Inc. 1993 Restricted Stock Incentive
Award Plan (the "Plan") is intended to advance the interest of PALFED, Inc. (the
"Company") and its subsidiaries by providing an opportunity for officers and
other employees to acquire a greater equity interest in the Company. The Plan
is intended to enhance the ability of the Company and its subsidiaries in
recruiting and retaining officers and key employees, to provide additional
incentive compensation to such individuals, and to stimulate the efforts of such
employees and to strengthen their desire to remain in the employ of the Company
and its subsidiaries. The Plan provides for the grant of shares of Company
common stock (an "Award" or collectively, the "Awards") that are subject to
certain restrictions.
2. STOCK SUBJECT TO THE PLAN. The maximum number of shares of
common stock, $ 1.00 par value ("Common Stock"), of the Company that may be
issued under Awards granted under the Plan shall be a total of 200,000 shares of
Common Stock. If an Award expires, is cancelled, forfeited or terminated for
any reason, the shares of Common Stock subject to such Award shall again be
available for future Awards under this Plan. Common Stock awarded pursuant to
this Plan is hereinafter referred to as "Restricted Stock".
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors consisting of not less than three (3)
directors who are "disinterested persons" within the meaning of Rule 16b-3
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used
herein, the term "Committee" refers to such committee or, in absence of
appointment of such committee, to the Board of Directors. Subject to the terms
of the Plan, the Committee shall have full authority in its discretion to
determine the officers or employees of the Company and its subsidiaries to whom
Awards shall be granted and the terms and provisions of Awards. In making such
determinations, the Committee may take into account the nature of the services
rendered and to be rendered by the respective officers and employees, their
present and potential contributions to the Company and any other factors that
the Committee deems relevant. The Committee may also make the issuance or
exercise of Awards subject to the satisfaction of specified financial
performance goals established by the Committee in its discretion. Subject to
the provisions of the Plan, the Committee shall have full and conclusive
authority to interpret and construe the terms and intent of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Restricted Stock agreements
(which need not be identical); and to make all other determinations necessary or
advisable for the proper administration of the Plan.
4. ELIGIBILITY AND LIMITS. Awards may be granted only to officers
and other employees of the Company and its present or future subsidiaries who
are employed by the Company or one of its subsidiaries. The term "subsidiary",
as used in this Plan, shall mean any corporation or other business organization
in which the Company owns, directly or indirectly, fifty percent (50%) or more
of the voting stock or capital stock at the time of the granting of such Award.
No employee shall acquire pursuant to Awards granted under the Plan more than
one-third of the aggregate number of shares of Restricted Stock issuable
pursuant to Awards under the Plan.
5. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Subject to the
following terms and conditions, Awards shall be evidenced by Restricted Stock
agreements ("Agreements") executed by the Company and the employee receiving the
Award (the "Recipient") in such form and not inconsistent with the Plan as the
Committee shall approve from time to time.
<PAGE>
(a) RESTRICTED PERIOD. Shares of Restricted Stock awarded pursuant
to an Award shall be subject to such conditions, terms and restrictions
(including performance goals, forfeiture and transfer) and for such period or
periods as shall be determined by the Committee. In each Agreement, the
Recipient shall agree to remain in the employment of the Company or one of its
subsidiaries for a specified period, which shall be at least one (1) year from
the date of the Award, at the pleasure of the Company. In the event that a
Recipient is permanently separated from the Company for any reason other than
death, retirement or permanent disability, within the period of time stated in
an Agreement, the Restricted Stock shall be forfeited. Notwithstanding the
foregoing, the Committee shall have the power to permit, in its discretion, an
acceleration of the expiration of the applicable restriction period with respect
to any part or all of the shares awarded to a Recipient.
(b) RESTRICTIONS ON TRANSFER. Shares of Restricted Stock awarded,
and the right to vote such shares and to receive dividends thereon, may not be
sold, assigned, transferred, pledged or otherwise encumbered, during the
restriction period applicable to such shares. Notwithstanding the foregoing,
and except as otherwise provided in this Plan or an Agreement, the Recipient
shall have all other rights of a shareholder, including, but not limited to, the
right to receive dividends and the right to vote such shares.
(c) CERTIFICATES. Each certificate issued in respect of shares of
Restricted Stock awarded to a Recipient shall be registered in the name of such
Recipient and deposited with the Company, or its designee, and shall bear the
following legend:
"This certificate and the shares of common stock represented
hereby are subject to the terms and conditions (including
forfeiture and restrictions against transfer) contained in the
PALFED, Inc. Restricted Stock Incentive Award Plan and an
Agreement entered into between PALFED, Inc. and the registered
owner. Release from such terms and conditions shall be obtained
only in accordance with the provisions of the Plan and Agreement,
copies of which are on file in the office of the Secretary of
PALFED, Inc., Aiken, South Carolina."
(d) APPLICABILITY OF RESTRICTIONS TO ADDITIONAL SECURITIES. Any
shares of Restricted Stock or other securities of the Company or any other
entity which are issued as a distribution on, or in exchange for, Restricted
Stock or into which Restricted Stock is converted as a result of a
recapitalization, stock dividend, distribution of securities, stock split or
combination of shares or a merger, consolidation or sale of substantially all of
the assets of the Company shall be subject to the restrictions set forth in the
Agreement, which shall inure to the benefit of any surviving or successor
corporation which is the issuer of such securities. The certificates
representing any such shares or other securities shall bear a legend
substantially in the form prescribed in section 5(d) with such changes as may be
appropriate in the context.
(e) SECTION 83(B) ELECTION. Each Agreement shall provide that the
Recipient may not elect to pay taxes under Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code").
(f) LAPSE OF RESTRICTIONS. Each Agreement shall specify the
condition and terms upon which any restrictions upon shares under this section 5
shall lapse, as determined by the Committee. Notwithstanding the restrictions
set forth in this section 5 or in any Agreement, all restrictions on any
outstanding shares of Restricted Stock shall lapse, without regard to the date
of grant of an Award, if: (i) a tender offer or exchange offer has been made
for at least twenty-five percent (25%) of the outstanding shares of Common
Stock, other than one made by the Company, provided that the corporation, person
or other entity making such offer purchases or otherwise acquires shares of
Common Stock pursuant to such offer; or (ii) the shareholders of the Company
have approved a definitive agreement (the "Agreement") to merge or consolidate
with or into another corporation pursuant to which the Company will not survive
or will survive only as a subsidiary of another corporation or to sell or
otherwise dispose of all or substantially all of its assets; or (iii) any
person, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (excluding for purposes of this section any employee benefit
plan of the Company which acquires
2
<PAGE>
beneficial ownership of voting securities of the Company) becomes the holder of
twenty-five percent (25%) or more of the outstanding shares of Stock. Upon the
lapse of such restrictions, certificates of shares of Restricted Stock free of
any restrictive legend shall be delivered to the Recipient or his legal
representative.
6. FORFEITURE OF AWARDS. If a Recipient terminates employment for
any reason (including, but not limited to, termination by the Company, with or
without cause) other than by reason of death or disability, then all shares of
Restricted Stock which are then held by the Recipient shall thereupon
automatically be forfeited to the Company. For purposes of this section 6, a
Recipient shall not be considered to have terminated employment if he or she is
employed by the Company or any of its subsidiaries or if the Recipient is on a
leave of absence under circumstances which the Committee or the Board of
Directors determines should not result in a forfeiture under this Plan.
7. CHANGES IN CAPITALIZATION. In the event of any change in the
outstanding shares of Common Stock that occurs after ratification of the Plan by
the shareholders of the Company by reason of a stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Restricted
Stock subject to each outstanding Award shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
8. AMENDMENTS, MODIFICATIONS AND TERMINATION OF PLAN. The Board or
the Committee may terminate the Plan, in whole or in part, may suspend the Plan,
in whole or in part from time to time, and may amend the Plan from time to time,
including the adoption of amendments deemed necessary or desirable to qualify
the Awards under the laws of various states (including tax laws) and under laws
and regulations promulgated by the SEC with respect to employees who are subject
to the provisions of Section 16 of the Exchange Act, or to correct any defect or
supply an omission or reconcile any inconsistency in the Plan or in any Award
granted thereunder, without the approval of the shareholders of the Company;
provided, however, that no action shall be taken without the approval of the
shareholders of the Company which may increase the number of shares of Common
Stock available for Awards or withdraw administration from the Committee, or
permit any person while a member of the Committee to be eligible to receive an
Award. Without limiting the foregoing, the Board of Directors or the Committee
may make amendments applicable or inapplicable only to Recipients who are
subject to Section 16 of the Exchange Act. No amendment or termination or
modification of the Plan shall in any manner affect Awards theretofore granted
without the consent of the Recipient unless the Committee has made a
determination that an amendment or modification is in the best interest of all
Recipients to whom Awards previously have been granted. The Board or the
Committee may modify or remove restrictions on an Award or the Awards as a whole
which have been previously granted. Unless earlier terminated by the Board or
the Committee, the Plan shall terminate when (a) all Awards authorized under the
Plan have been granted, and (b) all shares of Restricted Stock subject to Awards
under the Plan have been issued and are no longer subject to forfeiture.
9. MISCELLANEOUS.
--------------
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right
to be granted an Award, and the grant of an Award shall not be construed as
giving any Recipient the right to continued employment. Nothing contained in
the Plan or in any Award granted under the Plan shall confer upon any Recipient
any right with respect to the continuation of his or her employment by the
Company or a subsidiary corporation or interfere in any way with the right of
the Company or a subsidiary corporation, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the Recipient from the rate in
existence at the time of the grant of an Award.
(b) WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under this Plan or to issue shares free
of restrictions in accordance with section 5(f), the Company shall have the
right to require the Recipient to remit to the Company an amount sufficient to
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<PAGE>
satisfy any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares.
(c) NO FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued under the Plan and cash shall be paid in lieu of any fractional shares
in settlement of Awards granted under the Plan.
(d) GOVERNING LAW. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of the State of South Carolina.
4
<PAGE>
PALFED, INC.
AMENDED AND RESTATED
DIRECTORS STOCK PLAN
--------------------
(As amended as of March 1, 1996)
1. PURPOSE OF THE PLAN. The purpose of the PALFED, Inc. Directors
Stock Plan (the "Plan") is to advance the interests of PALFED, Inc. (the
"Company") by encouraging and providing an opportunity for directors, consulting
directors and advisory directors of the Company who are not employees of the
Company or any of its subsidiaries to acquire shares of common stock, $1.00 par
value, of the Company ("Common Stock"), and to provide an additional incentive
for such directors to continue service to the Company. It is anticipated that
the Plan will assist the Company in attracting and retaining directors capable
of making valuable contributions to the long-term success of the Company.
The Plan provides for the grant of stock options ("Options") and
shares of Company Common Stock, subject to certain restrictions. Common Stock
granted pursuant to this Plan is hereinafter referred to as "Restricted Stock."
Grants of Options and Restricted Stock under this Plan are referred to as an
"Award" or collectively as "Awards."
2. SHARES RESERVED FOR THE PLAN. Subject to adjustment as provided
in section 10 of this Plan, the maximum number of shares of Common Stock that
may be issued under Awards granted under the Plan shall be a total of 250,000
shares of Common Stock. If (a) an Award expires, is cancelled, terminates for
any reason, without being exercised in full or is satisfied without the issuance
of Common Stock, or (b) Common Stock distributed pursuant to an Award is
forfeited or reacquired by the Company, or is surrendered upon the exercise of
an Award, the shares of Common Stock subject to such an Award or so forfeited,
reacquired or surrendered shall again be available for future Awards under the
Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors consisting of not less than three (3)
directors who are "disinterested persons" within the meaning of Rule 16b-3
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used
herein, the term "Committee" refers to such committee. Subject to the
provisions of the Plan, the Committee shall have full and conclusive authority
to interpret and construe the terms and intent of the Plan; to determine the
terms and provisions of Awards to consulting directors and advisory directors,
to prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of Restricted Stock or Option agreements, and
to make all other determinations necessary or advisable for the proper
administration of the Plan; provided that the Committee shall have no discretion
with respect to the selection of directors to receive Awards under the Plan, the
number of shares of Common Stock subject to such Awards, or the timing of the
issuance of Awards under the Plan, but may exercise such discretion with respect
to consulting and advisory directors. No member of the Committee shall be
liable for any determination, decision or action made in good faith with respect
to the Plan or any Awards under the Plan. The Committee may delegate any of
such responsibilities to one or more agents and may retain advisors to advise
it.
4. ELIGIBILITY. Each director of the Company who is not employed by
the Company or any of its subsidiaries within the one (1) year immediately
preceding the Company's Annual Meeting of Shareholders (individually an
"Eligible Director" and collectively, the "Eligible Directors") shall be
eligible to receive Awards under this Plan. No employee of the Company or any
of its subsidiaries shall be eligible to receive Awards under this Plan.
<PAGE>
Consulting and advisory directors of the Company who are not
employees of the Company or any of its subsidiaries shall constitute "Eligible
Directors" and shall be eligible for Awards under this Plan. Notwithstanding
any provision of the Plan to the contrary, the selection of consulting and
advisory directors to receive Awards, the timing and amount of such Awards, and
the performance criteria for Awards to consulting and advisory shall be solely
at the discretion of the Committee; provided that Awards to consulting and
advisory directions shall be subject to the limitations set forth in this Plan.
5. RESTRICTED STOCK GRANTS. Upon election by the shareholders of
the Company as a director of the Company, each Eligible Director who has not
previously received an Award of Restricted Stock under this Plan shall
automatically receive on the first business day following such election by the
shareholders an Award for 1,000 shares of Restricted Stock. Directors who have
received an Award of Restricted Stock under this Plan shall not receive future
awards of Restricted Stock under this Plan, and No Eligible Director shall
receive an Award of Restricted Stock pursuant to this Section 5 upon becoming an
advisory, consulting or honorary director.
If the aggregate number of shares of Common Stock subject to
Awards exceeds the remaining number of shares reserved for issuance under the
Plan in that year, the number of shares of Restricted Stock awarded to each
Eligible Director to whom Awards are granted on such date shall be reduced pro
rata so that the aggregate number of shares awarded equals the number of
reserved shares of Common Stock remaining under the Plan for that year.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Subject to the
following terms and conditions, Awards of Restricted Stock shall be evidenced by
Restricted Stock agreements ("Agreements") executed by the Company and the
Eligible Director receiving the Award in such form and not inconsistent with the
Plan as the Committee shall approve from time to time.
(a) RESTRICTED PERIOD. Shares of Restricted Stock awarded
pursuant to an Award shall be subject to restrictions for one (1) year from the
date of the Award. In the event that an Eligible Director resigns or is removed
as a director for any reason during such one (1) year restriction period, the
Restricted Stock shall be forfeited.
(b) RESTRICTIONS ON TRANSFER. Shares of Restricted Stock
awarded, and the right to vote such shares and to receive dividends thereon, may
not be sold, assigned, transferred, pledged or otherwise encumbered, during the
restriction period applicable to such shares. Notwithstanding the foregoing,
and except as otherwise provided in this Plan or an Agreement, the holder of
Restricted Stock shall have all other rights of a shareholder.
(c) CERTIFICATES. Each certificate issued in respect of shares
of Restricted Stock awarded to an Eligible Director shall be registered in the
name of such director and deposited with the Company, or its designee, and shall
bear the following legend:
"This certificate and the shares of common stock represented
hereby are subject to the terms and conditions (including
forfeiture and restrictions against transfer) contained in the
PALFED, Inc. Directors Stock Plan and an Agreement entered into
between PALFED, Inc. and the registered owner. Release from such
terms and conditions shall be obtained only in accordance with
the provisions of the Plan and Agreement, copies of which are on
file in the office of the Secretary of PALFED, Inc., Aiken, South
Carolina."
(d) APPLICABILITY OF RESTRICTIONS TO ADDITIONAL SECURITIES. Any
shares of Restricted Stock or other securities of the Company or any other
entity which are issued as a distribution on, or in exchange for, Restricted
Stock or into which Restricted Stock is converted as a result of a
recapitalization, stock dividend, distribution of securities, stock split or
combination of shares or a merger,
2
<PAGE>
consolidation or sale of substantially all of the assets of the Company shall be
subject to the restrictions set forth in the Agreement, which shall inure to the
benefit of any surviving or successor corporation that is the issuer of such
securities. The certificates representing any such shares or other securities
shall bear a legend substantially in the form prescribed in section 6(c) with
such changes as may be appropriate in the context.
7. STOCK OPTIONS GRANTS. On the first business day following each
Annual Meeting of Shareholders, each Eligible Director shall automatically be
granted Options to acquire the number of shares of Common Stock determined in
accordance with the following schedule: (i) Options to acquire 3,000 shares of
Common Stock if the Company's Net Income (as defined below) exceeds $4 million;
(ii) Options to acquire 2,000 shares of Common Stock if the Company's Net Income
exceeds $3 million; and (iii) Options to acquire 1,000 shares of Common Stock if
the Company's Net Income exceeds $2 million. No Options may be granted if the
Company did not have Net Income for its latest fiscal year of at least $2
million. For purposes of this section, "Net Income" shall mean the Company's
net income after taxes for its latest fiscal year determined in accordance with
generally accepted accounting principles, but exclusive of accounting
adjustments, loan loss provisions and extraordinary items.
If the aggregate number of shares of Common Stock subject to
Awards exceeds the remaining number of shares reserved for issuance under the
Plan in that year, the number of Options awarded to each Eligible Director to
whom Options are granted on such date shall be reduced pro rata so that the
aggregate number of Options awarded equals the number of reserved shares of
Common Stock remaining under the Plan for that year.
8. TERMS AND CONDITIONS OF OPTIONS. Subject to the following terms
and conditions, all Options granted under this Plan shall be evidenced by a
written Option agreement in such form and upon such terms and conditions, not
inconsistent with this Plan, as the Committee shall from time to time determine.
(a) OPTION TERM AND DATE. No Option shall be exercisable after
the expiration of three (3) years from the date the Option is granted or more
than twelve (12) months after the holder ceases to be an Eligible Director. The
date an Option is granted shall be as of the first business day following the
Company's Annual Meeting of Shareholders.
(b) OPTION PRICE. The option price per share of Common Stock
purchasable under an Option granted under this Plan shall be the fair market
value of a share of Common Stock as of the date of the grant.
(c) PAYMENT. Payment for all shares purchased pursuant to
exercise of an Option shall be made in cash, or by delivery of Common Stock at
its fair market value on the date of delivery. Such payment shall be made at
the time that the Option or any part thereof is exercised, and no shares shall
be issued or delivered until full payment therefor has been made. Prior to the
exercise of an Option, the holder of an Option shall have none of the rights of
a shareholder.
(d) CONDITIONS TO EXERCISE OF AN OPTION; FORFEITURE. Subject to
the provisions of section 9 below, each Option granted under the Plan shall be
exercisable no earlier than one (1) year from the date of the grant, except that
no Option may be exercised to any extent for at least six (6) months from the
date of the grant.
(e) NONTRANSFERABILITY OF OPTION. An Option shall not be
assignable or transferable except by will or by the laws of descent and
distribution, and shall be exercisable, during the holder's lifetime, only by
the holder. Any distributee by will or by the laws of descent and distribution
shall be bound by the provisions of this Plan. Any attempt to assign, pledge,
transfer, hypothecate or otherwise dispose of an Option, and any levy of
execution, attachment or similar process on an Option shall be null and void.
3
<PAGE>
(f) TERMINATION OF OPTIONS. In the event that a holder of an
Option shall cease to be an Eligible Director of the Company for any reason
other than for "cause", such Option shall be exercisable only to the extent it
was exercisable at the date such director ceased to be an Eligible Director and
only for a period of twelve (12) months after such date. No Option shall be
exercised in the event the holder is removed as a director for "cause" (as
defined in the Option agreement between the holder and the Company). If the
holder of an Option dies, such Option may be exercised (to the extent that the
holder shall have been entitled to do so at the date of his death) by a legatee
or legatees of the holder under his last will, or by his personal
representatives or distributees, at any time within the twelve (12) month period
following the holder's death. For purposes of this paragraph (f), an Eligible
Director shall not be deemed terminated for purposes of this Plan (i) so long as
the director remains an advisory or consulting director of the Company or
another corporation (or a parent or subsidiary corporation of such other
corporation) which has assumed the Option of the holder, or (ii) such director
is employed by or serves as a consultant to the Company or any of its
subsidiaries.
9. ACCELERATION OF RIGHT OF EXERCISE; LAPSE OF RESTRICTIONS.
Notwithstanding the vesting provisions of sections 6(a) or 8(d) of this Plan,
(but subject to the provisions of section 8(f) above) an Option may be
exercised in any amount up to the full number of shares covered by the Option
without regard to the date of grant of the Option and all restrictions on any
Restricted Stock granted under this Plan shall lapse if: (a) a tender offer
or exchange offer has been made for at least twenty-five percent (25%) of the
outstanding shares of Common Stock, other than one made by the Company,
provided that the corporation, person or other entity making such offer
purchases or otherwise acquires shares of Common Stock pursuant to such
offer; or (b) the shareholders of the Company have approved a definitive
agreement (the "Agreement") to merge or consolidate with or into another
corporation pursuant to which the Company will not survive or will survive
only as a subsidiary of another corporation or to sell or otherwise dispose
of all or substantially all of its assets; or (c) any person, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(excluding for purposes of this section any employee benefit plan of the
Company which acquires beneficial ownership of voting securities of the
Company) becomes the holder of twenty-five percent (25%) or more of the
outstanding shares of Stock. If any of the events specified in this section
9 have occurred, the Option shall be fully exercisable: (i) in the event of
(a) above, within a 30-day period commencing on the date of expiration of the
tender offer or exchange offer; or (ii) in the event of (b) above, within a
30-day period commencing on the date of approval by the shareholders of the
Agreement; or (iii) in the event of (c) above, within a 30-day period
commencing on the date upon which the Company is provided a copy of Schedule
13D (filed pursuant to Section 13(d) of the Exchange Act and rules and
regulations promulgated thereunder) indicating that any person or group has
become the holder of twenty-five percent (25%) or more of the outstanding
shares of Common Stock or, if the Company is not subject to Section 13(d) of
the Exchange Act, within a 30-day period commencing on the date upon which
the Company receives written notice that any person or group has become the
holder of twenty-five percent (25%) or more of the outstanding shares of
Common Stock.
10. CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION. The number of
shares of Common Stock as to which Awards may be granted, the number of shares
covered by each outstanding Award, and the price per share of each outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a subdivision or
combination of shares, the payment of a stock dividend, or other combination or
reclassification of the Common Stock effected without receipt of consideration
by the Company. If the Company shall be the surviving entity in any merger or
consolidation, recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Option shall be entitled to
purchase upon any exercise of an Option, at the same times and upon the same
terms and conditions as are then provided in the Option, the number and class of
shares of Common Stock or other securities to which a holder of the same number
of shares of Common Stock at the time of such transaction would have been
entitled to receive as a result of such transaction. Any such adjustment may
provide for the elimination of any fractional shares which might otherwise
become subject to any Option without payment therefor. Comparable rights shall
accrue to each holder in the event of successive mergers or consolidations. In
the event of such changes in capitalization of the Company, the Committee or the
Board
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<PAGE>
of Directors may make such additional adjustments in the number and class of
shares of Common Stock or other securities with respect to which outstanding
Awards are exercisable and with respect to which future Awards may be granted as
the Committee in its sole discretion shall deem equitable or appropriate,
subject to the provisions of section 14. In the event of a dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation or in which the Company survives only as a
subsidiary of another corporation, provision shall be made for each outstanding
Option to become exercisable prior to such dissolution, liquidation, merger or
consolidation, except to the extent that another corporation or other legal
entity assumes such Option or substitutes another option therefor. In the event
of a change of the Company's shares of Common Stock into the same number of
shares with a different par value or without par value, the shares resulting
from any such change shall be deemed to be Common Stock within the meaning of
the Plan.
Except as expressly provided in this section 10, the holder of an
Award shall have no rights by reason of any subdivision or combination of shares
of Common Stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of Common Stock of any class or by
reason of any dissolution, liquidation, merger, consolidation or distribution to
the Company's shareholders of assets or stock of another corporation, and any
issuance by the Company of shares of Common Stock of any class, or securities
convertible into shares of Common Stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Award. The existence of the Plan and
the Awards granted pursuant to the Plan shall not affect in any way the right or
power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Common Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or proceeding.
11. RESTRICTION ON ISSUANCE OF SHARES. The Company shall not be
obligated to sell or issue any shares of Common Stock pursuant to any Option if
such issuance would result in the violation of any laws, including the
Securities Act of 1933, as amended (the "1933 Act") or any rules and regulations
promulgated by the Office of Thrift Supervision ("OTS") or Federal Deposit
Insurance Corporation ("FDIC") or any successor agency of the OTS or FDIC. In
the event that the offering of shares with respect to which an Award is issued
is not registered under the 1933 Act, but an exemption is available which
requires an investment representation or other representation, each Eligible
Director receiving shares under this Plan shall be required to represent that
such shares are being acquired for investment and not with a view to the sale or
distribution thereof, and to make such other representations as are deemed
necessary by counsel to the Company.
12. TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors or
the Committee may terminate the Plan, in whole or in part, may suspend the Plan,
in whole or in part from time to time, and may amend the Plan from time to time,
including the adoption of amendments deemed necessary or desirable under laws
and regulations promulgated by the SEC with respect to the provisions of Section
16 of the Exchange Act, or to correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Option granted thereunder,
without the approval of the shareholders of the Company. Any modification or
amendment that would (i) materially increase the aggregate number of shares of
Common Stock that may be issued under the Plan (other than an increase
reflecting a change in capitalization such as a stock dividend or stock split),
(ii) materially modify the designation of individuals eligible to receive Awards
under the Plan, or (iii) materially increase the benefits accruing to holders of
any Award granted or to be granted under the Plan, within the meaning of SEC
Rule 16b-3, as amended, shall be effective only if it is approved by the
shareholders of the Company at the next Annual Meeting of Shareholders after the
date of adoption by the Board of Directors of such modification or amendment;
provided that no shareholder approval shall be required if such approval is not
required for the continued qualification of the Plan under Rule 16b-3 of the
Exchange Act.
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Notwithstanding the foregoing, this Plan shall not be amended
more often than once every six (6) months, other than to comply with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
13. MISCELLANEOUS.
--------------
(a) CONSTRUCTION. This Plan and all Awards granted or
transactions under this Plan are intended to comply with all applicable
provisions of SEC Rule 16b-3 or any successor provision under the Exchange Act,
and all provisions of this Plan shall be construed in such manner as to effect
that intent. To the extent any provision of the Plan or any action by the
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee. In administering this
Plan, the Committee may adopt such requirements as it deems appropriate to
comply with SEC Rule 16b-3 or any successor provision, and the Board of
Directors or the Committee may amend this Plan to the extent necessary to comply
with such provisions, subject to section 12 of this Plan.
(b) NO RIGHT TO SERVICE AS A DIRECTOR. Nothing contained in the
Plan or in any Award granted under the Plan shall confer upon any Eligible
Director any right with respect to the continuation of service as a director,
consulting director or advisory director of the Company or any of its
subsidiaries, or interfere in any way with the right of the Company or its
shareholders, subject to the Company's Articles of Incorporation, Bylaws and
applicable law, to terminate such director's services as a director, consulting
director or advisory director of the Company.
(c) WITHHOLDING. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under this Plan, the Company shall
have the right to withhold from amounts or shares due the recipient or to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state or local withholding tax requirements prior to the delivery
of any certificate or certificates or the payment of any dividends with respect
to such shares.
(d) NO FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued under the Plan, and cash shall be paid in lieu of any fractional
shares in settlement of Options granted under the Plan.
14. GOVERNING LAW. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of the State of South Carolina.
6
<PAGE>
PALFED, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996
The undersigned hereby appoints Howard M. Hickey, Jr. and John C.
Troutman, or either of them, each with full power of substitution, acting
jointly or by any one of them if only one be present and acting, attorneys and
proxies to vote in the manner specified below (according to the number of shares
which the undersigned would be entitled to cast if then personally present) at
the Annual Meeting of PALFED, Inc. ("PALFED") to be held on April 23, 1996,
including adjournments thereof:
1. Election of Directors
/ / FOR all nominees / / WITHHOLD AUTHORITY / / ABSTAIN
listed below (except to vote for nominees
as marked to the listed below
contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
R. Bruce McBratney Albert H. Peters, Jr. Ambrose L. Schwallie
2. To approve amendments to the PALFED 1993 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve amendments to the PALFED 1993 Restricted Stock Incentive Award
Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. To approve amendments to the PALFED Amended and Restated Directors Stock
Plan.
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion upon such other business as may properly come before
the meeting.
<PAGE>
This proxy shall be voted as directed. IF NO DIRECTION TO THE
CONTRARY IS INDICATED, IT WILL BE VOTED "FOR" THE ELECTION OF THE THREE NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, AND "FOR" PROPOSALS 2, 3 AND 4
AS INDICATED IN THE ENCLOSED PROXY STATEMENT. DISCRETIONARY AUTHORITY IS HEREBY
CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
WITNESS my hand and seal this day of , 1996.
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PLEASE SIGN this proxy exactly as your name
or names appear hereon. If shares are held
jointly, signatures should appear for both
names. When signing as attorney, executor,
administrator, trustee, guardian or
custodian, please indicate the capacity in
which you are acting.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE.
