<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
FIRSTFED BANCORP, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
___________________________________________________________________________
4. Proposed maximum aggregate value of transaction:
___________________________________________________________________________
5. Total Fee Paid:
___________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
_______________________________
2. Form, Schedule or Registration Statement No.:
_______________________________
3. Filing Party:
_______________________________
4. Date Filed:
_______________________________
<PAGE>
June 19, 1996
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders (the "Meeting") of
FirstFed Bancorp, Inc. (the "Company") to be held at the main office of the
Company located at 1630 Fourth Avenue North, Bessemer, Alabama, on Tuesday, July
23, 1996 at 4:30 p.m., local time.
The attached Notice of Meeting and Proxy Statement describe the formal business
to be transacted at the Meeting. During the Meeting, we will also report on the
operations of the Company's two financial institution subsidiaries, First
Federal Savings Bank and First State Bank of Bibb County. Directors and
officers of the Company as well as representatives of Arthur Andersen LLP, the
Company's independent auditors, will be present to respond to any questions the
stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE
MEETING. Your vote is important, regardless of the number of shares you own.
this will not prevent you from voting in person but will assure that your vote
is counted if you are unable to attend the Meeting.
Sincerely,
/s/ B.K. Goodwin, III
B. K. Goodwin, III
Chairman of the Board, Chief Executive
Officer and President
<PAGE>
FIRSTFED BANCORP, INC.
1630 FOURTH AVENUE NORTH
BESSEMER, ALABAMA 35020
(205) 428-8472
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 23, 1996
- - --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of FirstFed Bancorp, Inc. (the "Company") will be held at the main office of the
Company located at 1630 Fourth Avenue North, Bessemer, Alabama, on Tuesday, July
23, 1996 at 4:30 p.m., local time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon the following
matters:
(i) The election of three directors of the Company for terms of
three years;
(ii) The approval of the FirstFed Bancorp, Inc. 1995 Stock Option and
Incentive Plan; and
(iii) The transaction of such other matters as may properly come
before the Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come before the
Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the date
specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Stockholders of record at the close
of business on June 7, 1996, are the stockholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lynn J. Joyce
Lynn J. Joyce
Secretary
Bessemer, Alabama
June 19, 1996
- - --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
- - --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
OF
FIRSTFED BANCORP, INC.
1630 FOURTH AVENUE NORTH
BESSEMER, ALABAMA 35020
ANNUAL MEETING OF STOCKHOLDERS
JULY 23, 1996
- - --------------------------------------------------------------------------------
GENERAL
- - --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FirstFed Bancorp, Inc. (the "Company") to
be used at the Annual Meeting of Stockholders of the Company (the "Meeting")
which will be held at the main office of the Company located at 1630 Fourth
Avenue North, Bessemer, Alabama, on Tuesday, July 23, 1996 at 4:30 p.m., local
time. The accompanying Notice of Meeting and this Proxy Statement are being
first mailed to stockholders on or about June 19, 1996.
- - --------------------------------------------------------------------------------
VOTING AND REVOCABILITY OF PROXIES
- - --------------------------------------------------------------------------------
Proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR SET FORTH BELOW
AND IN FAVOR OF EACH OF THE OTHER PROPOSALS SET FORTH IN THIS PROXY STATEMENT
FOR CONSIDERATION AT THE MEETING. The proxy confers discretionary authority on
the persons named therein to vote with respect to the election of any person as
a director where the nominee is unable to serve or for good cause will not
serve, and with respect to matters incident to the conduct of the Meeting. if
any other business is presented at the Meeting, proxies will be voted by those
named therein in accordance with the determination of a majority of the Board of
Directors. Proxies marked as abstentions will not be counted as votes cast. In
addition, shares held in street name which have been designated by brokers on
proxy cards as not voted will not be counted as votes cast. Proxies marked as
abstentions or as broker no votes, however, will be treated as shares present
for purposes of determining whether a quorum is present.
Stockholders who execute proxies retain the right to revoke them at any time.
Unless so revoked, the shares represented by such proxies will be voted at the
Meeting and all adjournments thereof. Proxies may be revoked by written notice
to Lynn J. Joyce, Secretary of the Company, at the address shown above, by
filing of a later dated proxy prior to a vote being taken on a particular
proposal at the Meeting or by attending the Meeting and voting in person. A
proxy will not be voted if a stockholder attends the Meeting and votes in
person. However, the mere presence of a stockholder at the Meeting will not, by
itself, revoke such stockholder's proxy.
2
<PAGE>
- - --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- - --------------------------------------------------------------------------------
Stockholders of record as of the close of business on June 7, 1996 (the
"Record Date"), are entitled to one vote for each share of the Company's common
stock, par value $0.01 per share (the "Common Stock"), then held, except that
pursuant to the Company's Restated Certificate of Incorporation, beneficial
owners of shares of Common Stock exceeding 10% of the then-outstanding shares of
Common Stock are not permitted to vote such excess shares. As of the Record
Date, the Company had 732,414 shares of Common Stock issued, of which 612,740
shares were outstanding. The presence, in person or by proxy, of at least a
majority of the total number of shares of Common Stock outstanding and entitled
to vote is necessary to constitute a quorum at the Meeting.
The following table sets forth information as of the Record Date with respect
to any person, including any group of persons, known by the Company to be the
beneficial owner of more than 5% of the issued and outstanding Common Stock. For
information with respect to beneficial ownership of the Common Stock by
individual directors, certain executive officers and all directors and executive
officers of the Company as a group, see "Proposal I -- Election of Directors --
Security Ownership of Management."
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER SHARES (1) OF CLASS
- - ------------------- ----------- ---------
<S> <C> <C>
First Federal Savings Bank
Employee Stock Ownership Plan and Trust
1630 Fourth Avenue North
Bessemer, Alabama 35020 40,885 (2) 6.67%
Wellington Management Company (3)
75 State Street
Boston, Massachusetts 02109 63,000 10.28%
SoGen International Fund, Inc.
50 Rockefeller Plaza
New York, NY 10020 43,967 7.18%
- - ------------------
</TABLE>
(1) Based on information furnished by the respective beneficial owners. In
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner, for purposes of this table, if
that person either has or shares voting or investment power with respect to
such Common Stock or has a right to acquire beneficial ownership at any
time within 60 days from the Record Date. As used herein, "voting power"
is the power to vote or direct the voting of shares, and "investment power"
is the power to dispose or direct the disposition of shares. Except as
otherwise noted, ownership is direct, and the named individuals exercise
sole voting and investment power over the shares of the Common Stock.
(2) Shares of Common Stock were acquired by the Employee Stock Ownership Plan
and Trust ("ESOP") in connection with the mutual-to-stock conversion (the
"Conversion") of First Federal Savings Bank ("First Federal"), the
Company's wholly owned savings bank subsidiary. A committee consisting of
all directors of the Company administers the ESOP. An unrelated corporate
trustee for the ESOP (the "ESOP Trustee") has been appointed by the Board
of Directors, which may instruct the ESOP Trustee regarding investment of
funds contributed to the
(Footnotes continued on following page)
3
<PAGE>
(Footnotes continued from preceding page)
ESOP. Shares held by the ESOP and allocated to participating employees must
be voted in accordance with the instructions received from the
participating employees. Unallocated shares, and allocated shares for which
no instruction has been received, will be voted in the same proportion as
the allocated shares for which instruction has been received. As of the
Record Date, 26,960 shares of Common Stock in the ESOP had been allocated
to participating employees, and, therefore, the ESOP Trustee will vote the
remaining 13,925 unallocated shares in the same proportion as allocated
shares.
(3) Includes First Financial Fund, a mutual fund.
Based solely on the Company's review of the copies of ownership reports which
it has received in the past fiscal year, or written representations from
officers, from directors or from persons who own more than 10% of the Common
Stock that no annual report of change in beneficial ownership was required, and
other than Director Koikos and James E. Smith, Vice President, who each reported
transactions on year-end Form 5's rather than Form 4's due earlier, the Company
believes that during the fiscal year ended March 31, 1996 ("fiscal 1996"), all
the filing requirements applicable to such persons have been timely met.
- - --------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
- - --------------------------------------------------------------------------------
The Company's Board of Directors currently is composed of nine members. The
Company's Certificate of Incorporation requires that directors be divided into
three classes, as nearly equal in number as possible, each class to serve for a
three year period and until their successors are elected and qualified, with
approximately one-third of the directors elected each year. The Board of
Directors has nominated for election as directors James E. Mulkin, E. H. Moore,
Jr. and James B. Koikos, all of whom are currently members of the Board, to each
serve as directors for three-year terms and until their successors are elected
and qualified. Under Delaware law, directors are elected by a plurality of the
votes present in person or by proxy and entitled to vote on the election of
directors.
It is intended that the persons named in the proxies solicited by the Board of
Directors will be voted for the election of the named nominees. If any nominee
is unable to serve, the shares represented by all properly executed proxies that
have not been revoked will be voted for the election of such substitute as the
Board of Directors may recommend, or the size of the Board of Directors may be
reduced to eliminate the vacancy. At this time, the Board knows of no reason
why any nominee might be unavailable to serve.
The following table sets forth the names of the Board of Directors' nominees
for election as directors and of those directors who will continue to serve as
such after the Meeting. Also set forth is each person's age, the year he first
became a director of First Federal and the expiration of his term as a director.
Each director of the Company is also a member of the Board of Directors of First
Federal, its wholly owned savings bank subsidiary. In addition, B. K. Goodwin,
III, who serves as Chairman of the Board of Directors of the Company, also
serves as Chairman of the Board of Directors of First State Bank of Bibb County
("First State"), which is wholly owned by First State Corporation, a wholly
owned subsidiary of the Company. No other director of the Company serves as a
director of First State.
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
AGE AT ELECTED AS CURRENT
RECORD DIRECTOR OF TERM
NAME DATE FIRST FEDERAL (1) TO EXPIRE
- - ---- ------ ----------------- ---------
<S> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 1999
James E. Mulkin 66 1992 1996
E. H. Moore, Jr. 62 1991 1996
James B. Koikos 58 1995 1996
DIRECTORS CONTINUING IN OFFICE
Fred T. Blair 68 1968 1997
Malcolm E. Lewis 86 1968 1997
G. Larry Russell 45 1990 1997
B. K. Goodwin, III 44 1995 1998
A. W. Kuhn 74 1979 1998
Robert E. Paden 65 1992 1998
</TABLE>
- - ---------------
(1) With the exception of Messrs. Mulkin and Paden, who were appointed as
directors of the Company in 1992, and Messrs. Goodwin and Koikos, who were
appointed as directors of the Company in 1995, all directors were initially
appointed in May 1991 in connection with the incorporation and organization
of the Company.
Unless otherwise stated, the principal occupation of each director of the
Company for the last five years is set forth below.
JAMES E. MULKIN - Mr. Mulkin is the President of Mulkin Enterprises,
Bessemer, Alabama, a diversified business operation.
E. H. MOORE, JR. - Mr. Moore retired in 1992 from his position as President
of Deaton, Inc., a trucking company in Ensley, Alabama.
JAMES B. KOIKOS - Mr. Koikos is a restaurateur. He is owner/partner of the
Bright Star Restaurant, Bessemer, Alabama, and the Merritt House, Birmingham,
Alabama.
FRED T. BLAIR - Mr. Blair is retired. On January 1, 1996, Mr. Blair
retired from his positions as Chairman of the Board, President and Chief
Executive Officer of the Company and First Federal. He had served as President
and Chief Executive Officer of the Company since its inception in 1991 and with
First Federal since 1968 and Chairman since 1995.
MALCOLM E. LEWIS - Mr. Lewis is retired.
G. LARRY RUSSELL - Mr. Russell is a self-employed Certified Public
Accountant in Bessemer, Alabama.
B. K. GOODWIN, III - Mr. Goodwin is the Chairman of the Board, Chief
Executive Officer and President of the Company and First Federal, positions he
has occupied since January 1, 1996. He has also served as Chairman of the Board
of First State since January 1996. He had previously served as Senior Executive
Vice
5
<PAGE>
President of the Company and First Federal since February 1995. Prior to
that time, Mr. Goodwin served as Chairman of the Board, Chief Executive Officer
and President of Steiner Bank in Birmingham, Alabama and as President, Chief
Operating Officer and Director of Secor Bank, Federal Savings Bank, in
Birmingham, Alabama.
A. W. KUHN - Mr. Kuhn retired as the Executive Director of Bessemer Housing
Authority, a public housing program, in 1994.
ROBERT E. PADEN - Mr. Paden is a self-employed Attorney in Bessemer,
Alabama.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1996, the Board of Directors of the Company held twelve
regular meetings and four special meetings. During fiscal year 1996, no
director of the Company attended fewer than 75% of the aggregate of the total
number of meetings of the Board of Directors of the Company and the total number
of meetings held by all committees of the Board on which he served. The Board
of Directors of the Company maintains committees, the nature and composition of
which are described below. Commencing in January 1995, the Board of Directors
determined that all committees would consist of the full Board of Directors,
except that only non-employee directors may serve on the Audit Committee.
The Audit Committee of the Company meets periodically to examine and
approve the audit report prepared by the independent auditors of the Company, to
review and recommend the independent auditors to be engaged by the Company, to
review the internal audit function and internal accounting controls, and to
review and approve conflict of interest and audit policies. During fiscal 1996,
the Audit Committee, which consists of all non-employee directors of the
Company, met twice.
The Company's Compensation Committee, which consists of all the directors
of the Company, meets periodically to evaluate the compensation and fringe
benefits of the directors, officers and employees and to recommend changes and
to monitor and evaluate employee morale. The Compensation Committee met once
during fiscal 1996.
The Company's Nominating Committee, which consists of all directors of the
Company, meets periodically for the purpose of nominating candidates for
director of the Company. While the Board of Directors will consider nominees
recommended by stockholders, it has not actively solicited recommendations from
the Company's stockholders for nominees, nor has it established any procedures
for this purpose. During fiscal 1996, the Board met three times as the
Nominating Committee. Stockholders who make nominations of candidates for
directors must make such nominations in accordance with the procedures set forth
in the Company's Bylaws. For a description of such procedures, see "Stockholder
Proposals."
EXECUTIVE COMPENSATION AND OTHER BENEFITS
Summary Compensation Table. The following table sets forth the cash and
noncash compensation for fiscal 1996, 1995 and 1994 awarded to or earned by the
two individuals who during fiscal 1996 served as Chief Executive Officer and by
the other executive officer of the Company who earned salary and bonus in fiscal
1996 exceeding $100,000 for services rendered in all capacities to the Company
and its subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- --------------------------- ---------
RESTRICTED SECURITIES
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) (2) OPTIONS PAYOUTS COMPENSATION
- - ------------------ -------- -------- ------------ ------------- --------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fred T. Blair (1) 1996 $ 80,867 $20,864 $ -- $ 3,528 (3) 735 $ -- $27,544 (7)
1995 94,504 8,822 -- 1,672 (3) 380 -- 21,247
1994 91,025 7,585 -- -- (3) -- -- 20,018
B. K. Goodwin, III 1996 (1) 101,250 $19,685 $ -- $14,568 (4) 639 $ -- $23,188 (7)
Chairman of the Board, 1995 (1) 15,000 -- -- -- 5,000 -- --
Chief Executive Officer
and President of the
Company and First
Federal; Chairman of
the Board of First State
C. Larry Seale 1996 $ 92,239 $18,090 $ -- $ 3,048 (5)(6) 635 $ -- $ 4,927 (7)
Executive Vice President 1995 85,566 7,649 -- 1,452 (6) 330 -- 5,673
of the Company and 1994 78,923 6,577 -- -- (6) 2,500 -- 5,070
First Federal
</TABLE>
- - ------------------
(1) Mr. Blair served as Chairman of the Board, President and Chief Executive
Officer of the Company and First Federal until his retirement from those
positions effective January 1, 1996, at which time Mr. Goodwin was
appointed Chairman of the Board, Chief Executive Officer and President of
the Company and First Federal. Upon his retirement, Mr. Blair's employment
contract with the Company and First Federal expired. Mr. Blair's contract
was comparable to the current contract with Mr. Seale. See "-- Employment
Agreements." Amounts paid to Mr. Goodwin in fiscal 1995 reflect
compensation paid from February 1995, when Mr. Goodwin joined the Company
and First Federal, through March 31, 1995.
(2) Calculated by multiplying the number of shares awarded pursuant to the
Company's Incentive Compensation Plan ("Incentive Plan") by the most recent
sale price ($24.00 per share) of the Common Stock on or before May 31, 1996
known to the Company. See " -- Directors' Compensation." Mr. Goodwin's
award includes an award pursuant to First Federal's Recognition and
Retention Plan ("RRP").
(3) Does not include $17,363, $14,080 and $13,520 of restricted stock which
vested during fiscal 1996, 1995 and 1994, respectively, but was granted
prior to fiscal 1994. As of March 31, 1996, Mr. Blair no longer held any
shares of restricted Common Stock.
(4) As of March 31, 1996, Mr. Goodwin held 503 shares of restricted stock with
an aggregate value of $12,072, based on the most recent sale price of the
Common Stock on or before May 31, 1996 ($24.00 per share) known to the
Company. Of this amount, 133 shares will vest in 1996, 133 shares will
vest in 1997, 133 shares will vest in 1998 and 104 shares will vest in
1999. Pursuant to the Incentive Plan and the RRP, Mr. Goodwin is entitled
to receive dividends and other distributions made with respect to such
shares.
(5) As of March 31, 1996, Mr. Seale held 171 shares of restricted stock with an
aggregate value of $4,104, based on the most recent sale price of the
Common Stock on or before May 31, 1996 ($24.00 per share) known to the
Company. Of this amount, 64 shares will vest in 1996, 64 shares will vest
in 1997 and 43 shares will vest in 1998. Pursuant to the Incentive Plan
and the RRP, Mr. Seale is entitled to receive dividends and other
distributions made with respect to such shares.
(6) Does not include $4,800, $4,400 and $4,225 of restricted stock which vested
during fiscal years 1996, 1995 and 1994, respectively, but was granted
prior to fiscal year 1994.
(7) Includes director's fees of $15,000 paid to Mr. Blair and $15,400
(including $400 received as a director of First State) paid to Mr. Goodwin.
See " -- Directors' Compensation." Also includes $12,544, $7,788, and
$4,927 paid to Messrs. Blair, Goodwin, and Seale, respectively, for unused
vacation and sick leave. Executive officers of the Company receive
indirect compensation in the form of certain perquisites and other personal
benefits. The amount of such benefits received by the named executive
officer in fiscal 1996 did not exceed 10% of the executive officer's salary
and bonus.
6
<PAGE>
Option Grants in Fiscal Year 1996. The following table contains information
concerning the grant of stock options during fiscal year 1996 to the executive
officers named in the Summary Compensation Table, above. Options were granted
pursuant to the Incentive Plan or to the 1991 Stock Option Plan. Neither plan
provides for the grant of stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME (# OF SHARES)(1) IN FISCAL YEAR ($ PER SHARE) DATE
- - ---- ----------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Fred T. Blair 735 17.9% $23.75 12/19/05
B.K. Goodwin, III 639 15.6 23.75 12/19/05
C. Larry Seale 635 15.5 23.75 12/19/05
</TABLE>
- - ------------------
(1) See " -- Directors' Compensation."
Aggregate Fiscal 1996 Option Exercises and Fiscal Year-End Option Values.
The following table sets forth information concerning options exercised during
fiscal 1996 and the value of options held by the named executive officers at the
end of the fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Fred T. Blair 5,750 $81,938 1,115/ -- $1,324 / --
B. K. Goodwin, III -- -- 3,139/2,500 $7,660 /$ 7,500
C. Larry Seale 500 $ 7,125 3,700/2,300 $40,675/$15,513
</TABLE>
- - ------------------
(1) Calculated based on the product of: (a) the number of shares subject to
options and (b) the difference between the fair market value of underlying
Common Stock ($24.00 per share) based on the most recent sale of the Common
Stock on or before May 31, 1996 known to the Company, and the exercise
price of the options.
Employment Agreements. Effective January 1, 1996, the Company and First
Federal entered into employment agreements with Mr. Goodwin as Chief Executive
Officer and President of the Company and First Federal and with Mr. Seale as
Executive Vice President of First Federal (collectively, the "Employment
Agreements"). The Employment Agreements are intended to enable the Company and
its banking subsidiaries to maintain a stable and competent management base.
The Employment Agreements provide for three-year terms and may be extended
each year for an additional year so that the remaining term shall be three
years. The base salaries of Messrs. Goodwin and Seale are $135,000 and $91,500,
respectively, and will be reviewed annually. In addition, the Employment
Agreements provide for, among other things, a discretionary cash bonus,
participation in all employee benefit plans, death benefits and reimbursement of
reasonable out-of-pocket business expenses. In the event of the executive's
death, the Employment Agreements provide for payment of the remaining
compensation due thereunder, plus medical insurance for the executive's spouse
for six months thereafter.
7
<PAGE>
The Employment Agreements provide for termination for cause at any time.
In the event termination is other than for cause, the executive would be
entitled to receive his base salary for the remaining term of the Employment
Agreement, plus, in the case of Mr. Goodwin, his salary for an additional 12-
month period. In addition, Mr. Goodwin would be entitled, at his election, to
continued insurance benefits coverage through the expiration of the term of his
Employment Agreement or a cash payment in an amount equal to the cost of
obtaining substantially equal benefits, while Mr. Seale would be entitled to
continued coverage for a period of six months following termination.
In the event of a change in control of the Company or First Federal that
results in either the dismissal of the executive or the executive's resignation
upon the occurrence of certain specified events, the executive would be entitled
to a severance payment equal to the excess of (i) 2.99 times his "base amount,"
as defined in Section 280G(b)(3) of the Internal Revenue Code, over (ii) the sum
of any other parachute payments, as defined under Section 280G(b)(2) of the
Internal Revenue Code, that the executive receives on account of the change in
control. Subject to the foregoing, the Company and First Federal also would
continue the executive's life, health, accident, and disability coverage for six
months following termination and, in the event of executive's death, pay death
benefits and health insurance (for the remainder of the six month period, if
any) to the executive's surviving spouse, if any. In addition, during the first
year following a change in control, Mr. Goodwin would receive such severance
payment if he voluntarily terminates employment within 90 days of the occurrence
of certain specified events (for example, a required move of his personal
residence or a material reduction in his base compensation) which had not been
agreed to in advance.
In addition, all directors of the Company and Mr. Seale have entered into
Indemnification Agreements with the Company. For a description of the terms of
such Indemnification Agreements, see " -- Directors' Compensation --
Indemnification Agreements."
DIRECTORS' COMPENSATION
Fees. Through January 1996, the directors of the Company received $250 per
month in connection with their service on the Board of Directors of the Company
and $1,000 per month in connection with their service on the Board of Directors
of First Federal. Beginning in February 1996, the directors of the Company
receive $750 per month in connection with their service on the Board of
Directors of the Company and $500 per month in connection with their service on
the Board of Directors of First Federal. In addition, Mr. Goodwin receives $200
per month in connection with his service as Chairman of the Board of Directors
of First State.
Incentive Compensation Plan. Employees and directors of the Company are
eligible to participate in the Incentive Plan, the purpose of which is to
provide incentive compensation for employees and directors in the event the
Company achieves certain performance goals indicative of its profitability and
stability. A mathematical formula set forth in the Incentive Plan determines
three forms of incentive compensation that participants may receive: (i) annual
cash bonuses ("Bonuses"), (ii) restricted stock awards ("Restricted Stock"), and
(iii) stock options ("Options"). For each year in which the Incentive Plan is
in effect, the Company will pay each participant a Bonus equal to the product of
(i) 8% of the participant's annual base salary or director's fees, and (ii) a
"Multiplier," defined as the sum of (a) the percentage by which the Company's
and First Federal's return-on-assets ("ROA") exceeds the median ROA of other
members of a peer group of other thrift institutions headquartered in the
Southeast, plus (b) one-half of the percentage by which the percentage of
nonperforming assets ("NPA") of other companies in the peer group exceeds the
percentage of the Company's and First Federal's NPA.
For each Incentive Plan year, each participating key employee and director
will receive a Restricted Stock award in the form of a right, conditioned on the
participant's future performance of services, to shares of Common Stock. On a
per capita basis, non-employee directors receive in the aggregate, shares of
Restricted Stock having an aggregate fair market value equal to 7% of the total
Bonuses paid to directors and key employees
8
<PAGE>
for such year. On a pro rata basis, key employees receive a Restricted Stock
award based on their relative compensation equal to 14% of the total Bonuses
paid to directors and key employees for such year. Vesting of Restricted Stock
awards will generally occur at the rate of 33-1/3% per year of a participant's
service after the date of the Restricted Stock award. Vesting will be
accelerated to 100% upon a participant's retirement at or after age 65, death,
discharge from service for any reason other than cause, or a change in control
of the Company.
In addition, for each Incentive Plan year, each participating key employee
and director will receive Options to purchase five times the number of shares
subject to a Restricted Stock award granted to the participant for such year.
1991 Stock Option Plan. Pursuant to the FirstFed Bancorp, Inc. 1991 Stock
Option Plan for Outside Directors, non-employee directors first elected to the
Board of Directors subsequent to the Conversion automatically are awarded
options to acquire 1,000 shares of Common Stock, provided sufficient options are
available for grant under such plan. In addition, pursuant to the RRPs, such
newly elected non-employee directors automatically are awarded 500 shares of
restricted Common Stock, provided shares are available for grant under such
plan.
Directors' Retirement Plan. In their capacity as directors of First
Federal, directors of the Company participate in First Federal's Directors'
Retirement Plan (the "Directors' Plan"), which was approved by the Company's
stockholders in 1992 and amended effective January 1, 1994. Each director of
First Federal, whenever elected or appointed and whether or not also employed by
First Federal, is entitled to participate in the Directors' Plan, and thereby to
receive an annual retirement benefit for ten years in an amount per year equal
to $9,600 times the director's "applicable percentage." A director's
"applicable percentage" is based on his or her overall years of service as a
director of First Federal and increases from 0% for less than three years of
service, to 50% for between three and five years of service, to 75% for between
six and nine years of service, to 100% for 10 or more years of service.
Retirement benefits become payable upon a director's termination of service on
the Board of Directors for any reason. If a Participant dies prior to
collecting his entire vested benefit under the Directors' Plan, First Federal
will pay the present value of such vested but unpaid benefit to the director's
designated beneficiary (if living), and otherwise to the director's estate
(unless the director had elected to have said death benefit paid in
installments). First Federal's Board of Directors may amend or terminate the
Directors' Plan at any time, provided that such action may not affect the rights
of directors to receive their vested interest. The Directors' Plan is an
unfunded plan for federal income tax and labor law purposes, although First
Federal has established a grantor trust, the assets of which remain subject to
the claims of First Federal's creditors. First Federal expects to regularly
contribute amounts to the trust equal to the accrued expense for plan benefits.
Deferred Compensation Plans. First Federal and the Company maintain
separate but similar deferred compensation plans pursuant to which directors,
officers and select employees may annually elect to defer the receipt of Board
fees and up to 25% of their salary. Associated with each plan is a separate
grantor trust to which all fee and salary deferrals may be contributed. The
assets of these trusts will be used to pay benefits to participants, but are
subject to the claims of general creditors until distributed from the trusts.
Subject to the guidelines under each plan, each participant may elect (i) the
time and manner under which his or her plan benefit will be paid, and (ii) the
measure of the deemed investment return on his or her deferred compensation
account. Such return may be based in whole or part on either the rate of return
on Common Stock or First Federal's highest yielding certificate of deposit. A
participant's interest in the plans is at all times nonforfeitable, nonalienable
and nontransferable, although the interest of a deceased participant will be
paid to his or her designated beneficiary. The Boards of Directors of First
Federal and the Company are responsible for management of the operation and
administration of the respective plans and have the discretion to amend these
plans and the related trust agreements (subject to participant consent as to
vested benefits).
Indemnification Agreements. The Company has entered into Indemnification
Agreements (the "Indemnification Agreements") with each of the Company's
directors and with certain officers of the Company
9
<PAGE>
and First Federal. The Indemnification Agreements provide for retroactive as
well as prospective indemnification to the fullest extent permitted by law
against any and all expenses (including attorneys' fees and all other costs and
obligations), judgments, fines, penalties and amounts paid in settlement in
connection with any claim or proceeding arising out of that person's service as
an officer or director of the Company or First Federal. The Indemnification
Agreements also provide for the prompt advancement of expenses to the director
or officer in connection with investigating, defending or being a witness or
participating in any proceeding. The Indemnification Agreements further provide
a mechanism through which the director or officer may seek court relief in the
event the Company's Board of Directors (or other person appointed by such Board)
determines that the director or officer would not be permitted to be indemnified
under applicable law. The Indemnification Agreements impose on the Company the
burden of proving that the director or officer is not entitled to
indemnification in any particular case.
The Indemnification Agreements provide that a Change in Control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing 25% or more of the total voting power represented by the Company's
then outstanding Voting Securities, or (ii) during any 24-consecutive-month-
period, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the total power represented by the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or (iv) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions) of
all or substantially all the Company's assets. In the event of a potential
Change of Control, the director or officer may require the Company to establish
a trust in an amount sufficient to cover the anticipated claims under the
agreement. Following a Change in Control, all determinations regarding a right
to indemnity and a right to advancement of expenses shall be made by independent
legal counsel to be selected by the director or officer and approved by the
Board.
While not requiring the maintenance of directors' and officers' liability
insurance, the Indemnification Agreements require that the directors and
officers be provided with maximum coverage if there is such a policy. Further,
the Indemnification Agreements provide that if the Company pays a director or
officer pursuant to an Indemnification Agreement, the Company will be subrogated
to such director's or officer's rights to recover from third parties.
Other Benefit Plan. Subject to receipt of stockholder approval at this
Meeting, the Company will implement a stock option and incentive plan for the
benefit of selected employees. For information regarding the terms of this
plan, see Proposal II below.
TRANSACTIONS WITH MANAGEMENT
First Federal and First State each offer loans to officers and directors of
First Federal, First State and the Company in the ordinary course of business.
Such loans to directors and executive officers were made in the ordinary course
of business, were made on substantially the same terms, including interest rates
and collateral, as
10
<PAGE>
those prevailing for comparable transactions with non-affiliates and do not
involve more than the normal risk of collectibility or present other unfavorable
features.
- - --------------------------------------------------------------------------------
PROPOSAL II -- APPROVAL OF 1995 STOCK OPTION AND INCENTIVE PLAN
- - --------------------------------------------------------------------------------
GENERAL
The Board of Directors (the "Board") of the Company has adopted the FirstFed
Bancorp, Inc. 1995 Stock Option and Incentive Plan (the "Option Plan"), subject
to its approval by the Company's stockholders. The Option Plan is attached
hereto as Exhibit A and should be consulted for additional information. All
statements made herein regarding the Option Plan, which are intended only to
summarize the Option Plan, are qualified in their entirety by reference to the
Option Plan.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests of the Company by
providing directors and selected employees of the Company and its affiliates,
including the Bank, with the opportunity to acquire shares of Common Stock. By
encouraging such stock ownership, the Company seeks to attract, retain, and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to directors and employees of
the Company and its affiliates to promote the success of the business of the
Company.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan became effective on the date of its approval
by the Company's Board of Directors (the "Effective Date"). However, the
effectiveness of the Option Plan and any awards granted hereunder is subject to
stockholder approval.
Administration. The Option Plan is administered by a committee (the
"Committee") appointed by the Board of Directors, consisting of at least three
directors of the Company who are "disinterested persons" within the meaning of
the federal securities laws. The Committee has discretionary authority to select
participants and grant awards, to determine the form and content of any awards
made under the Option Plan, to interpret the Option Plan, to prescribe, amend,
and rescind rules and regulations relating to the Option Plan, and to make other
decisions necessary or advisable in connection with administering the Option
Plan. All decisions, determinations, and interpretations of the Committee are
final and conclusive on all persons affected thereby. Members of the Committee
will be indemnified to the full extent permissible under the Company's governing
instruments in connection with any claims or other actions relating to any
action taken under the Option Plan. The Committee currently consists of all non-
employee directors of the Company.
Eligible Persons; Types of Awards. Under the Option Plan, the Committee may
grant stock options ("Options") and stock appreciation rights ("SARs")
(collectively, "Awards") to such employees as the Committee shall designate.
Directors who are not employees will receive the automatic grants described
below (see "Automatic Grants"), but will otherwise be ineligible to receive
Awards under the Option Plan. As of the Record Date, the Company and its
subsidiaries had 66 employees and eight non-employee directors who were eligible
to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves 30,000 shares of Common
Stock for issuance upon the exercise of Options or SARs. Such shares may be
authorized but unissued shares, shares held in treasury, or shares held in a
grantor trust created by the Company. In the event of any merger,
consolidation, recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event
11
<PAGE>
in which the number or kind of shares is changed without receipt or payment of
consideration by the Company, the Plan provides for a proportionate adjustment
in the number and kind of shares reserved for issuance under the Option Plan,
the number and kind of shares subject to outstanding Awards, and the exercise
prices of such Awards. Generally, the number of shares as to which SARs are
granted are charged against the aggregate number of shares available for grant
under the Option Plan, provided that, in the case of an SAR granted in
conjunction with an Option, under circumstances in which the exercise of the SAR
results in termination of the Option and vice versa, only the number of shares
of Common Stock subject to the Option shall be charged against the aggregate
number of shares of Common Stock remaining available under the Option Plan. If
Awards should expire, become unexercisable or be forfeited for any reason
without having been exercised, the shares of Common Stock subject to such Awards
shall, unless the Option Plan shall have been terminated, be available for the
grant of additional Awards under the Option Plan.
Options. Options may be either incentive stock options ("ISOs") as defined in
Section 422 of the Internal Revenue Code, or options that are not ISOs ("Non-
ISOs"). The exercise price as to any Option may not be less than the fair
market value (determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than 10% of the
outstanding Common Stock on the date of grant, such exercise price may not be
less than 110% of fair market value of the shares. As required by federal tax
laws, to the extent that the aggregate fair market value (determined when an ISO
is granted) of the Common Stock with respect to which ISOs are exercisable by an
optionee for the first time during any calendar year (under all plans of the
Company and of any subsidiary) exceeds $100,000, the Options granted in excess
of $100,000 will be treated as Non-ISOs.
Automatic Grants. On the Effective Date, non-employee directors of the Company
or the Bank received a one-time grant of an Option to purchase 1,125 shares of
Common Stock at an exercise price per share equal to its fair market value on
the Effective Date. In addition, each non-employee director who joins the Board
of Directors of the Company or an affiliate (including the Bank) after the
Effective Date will receive, on the date of joining the Board, Non-ISOs to
purchase 1,000 shares of Common Stock (or such lesser number of shares as are
then available under the Option Plan), at an exercise price per share equal to
the fair market value of the Common Stock on the date of grant. Options granted
to non-employee directors have a term of ten years, and expire one year after a
director terminates service on the Board for any reason (two years in the event
of the director's death during the term of his directorship), but in no event
later than the date on which such Options would otherwise expire.
SARs. An SAR may be granted in tandem with all or part of any Option granted
under the Option Plan, or without any relationship to any Option. An SAR
granted in tandem with an ISO must expire no later than the ISO, must have the
same exercise price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject to the ISO
exceeds the exercise price of the ISO. For SARs granted in tandem with Options,
the optionee's exercise of the SAR cancels his or her right to exercise the
Option, and vice versa. Regardless of whether an SAR is granted in tandem with
an Option, exercise of the SAR will entitle the optionee to receive, as the
Committee prescribes in the grant, all or a percentage of the difference between
(i) the fair market value of the shares of Common Stock subject to the SAR at
the time of its exercise, and (ii) the fair market value of such shares at the
time the SAR was granted (or, in the case of SARs granted in tandem with
Options, the exercise price). The exercise price as to any particular SAR may
not be less than the fair market value of the optioned shares on the date of
grant.
Exercise of Options and SARs. The exercise of Options and SARs will be subject
to such terms and conditions as are established by the Committee in a written
agreement between the Committee and the optionee, provided that each Option is
fully exercisable on the date of its grant, but not before the Option Plan
receives stockholder approval. In the absence of Committee action to the
contrary, an otherwise unexpired Option shall cease to be exercisable upon (i)
an optionee's termination of employment for just cause, (ii) the date one year
after an optionee terminates service due to disability, (iii) the date two years
after an optionee terminates service due to
12
<PAGE>
death, or (iv) the date three months after an optionee terminates service for a
reason other than just cause, death, or disability.
An optionee may exercise Options or SARs, subject to provisions relative to
their termination and any limitations on their exercise, only by (i) written
notice of intent to exercise the Option or SAR with respect to a specified
number of shares of Common Stock, and (ii) in the case of Options, payment to
the Company (contemporaneously with delivery of such notice) in cash, in Common
Stock, or a combination of cash and Common Stock, of the amount of the exercise
price for the number of shares with respect to which the Option is then being
exercised. Common Stock utilized in full or partial payment of the exercise
price for Options shall be valued at its market value at the date of exercise
and may consist of shares subject to the Option being exercised.
Conditions on Issuance of Shares. The Committee will have the discretionary
authority to impose, in agreements, such restrictions on shares of Common Stock
issued pursuant to the Option Plan as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of first refusal or
to establish repurchase rights or both of these restrictions. In addition, the
Committee may not issue shares unless the issuance complies with applicable
securities laws, and to that end may require that a participant make certain
representations or warranties.
Nontransferability. Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution. Limited transfers, principally to family members, is
allowable to the extent permitted by federal securities laws and regulations.
Effect of Dissolution and Related Transactions. In the event of (i) the
liquidation or dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale or disposition
of all or substantially all of the Company's assets (any of the foregoing to be
referred to herein as a "Transaction"), all outstanding Awards, together with
the exercise prices thereof, will be equitably adjusted for any change or
exchange of shares for a different number or kind of shares which results from
the Transaction. However, any such adjustment will be made in such a manner as
to not constitute a modification, within the meaning of Section 424(h) of the
Internal Revenue Code, of outstanding ISOs.
Duration of the Option Plan and Grants. The Option Plan has a term of 10 years
from the Effective Date, after which date no Awards may be granted. The maximum
term for an Award is 10 years from the date of grant, except that the maximum
term of an ISO (and an SAR granted in tandem with an ISO) may not exceed five
years if the participant owns more than 10% of the Common Stock on the date of
grant. The expiration of the Option Plan, or its termination by the Committee,
will not affect any Award previously granted.
Amendment and Termination of the Option Plan. The Board of Directors of the
Company may from time to time amend the terms of the Option Plan and, with
respect to any shares at the time not subject to Awards, suspend or terminate
the Option Plan. No amendment, suspension, or termination of the Option Plan
will, without the consent of any affected optionees, alter or impair any rights
or obligations under any Award previously granted.
Financial Effects of Awards. The Company will receive no monetary
consideration for the granting of Awards under the Option Plan. It will receive
no monetary consideration, other than the exercise price, for shares of Common
Stock issued to optionees upon the exercise of their Options, and will receive
no monetary consideration upon the exercise of SARs. Under current accounting
standards, recognition of compensation expense is not required when Options are
granted at an exercise price equal to or exceeding the fair market value of the
Common Stock on the date the Option is granted.
After SARs are granted, the Company must recognize compensation expense to the
extent of the appreciation, if any, in the market price of the Common Stock to
which the SARs relate over the exercise price of
13
<PAGE>
those shares for the particular income period. If the market value of the Common
Stock subsequently declines, the Company may recognize income or reverse the
prior expense (but not by more than the aggregate of such prior expenses).
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the grant of ISOs.
However, upon exercise of the ISO, the difference between the fair market value
of the Common Stock on the date of exercise and the exercise price of the ISO
must be treated by the optionee as an item of tax preference in the year of
exercise for purposes of the alternative minimum tax.
If the optionee holds the shares purchased upon exercise of an ISO for at
least two years from the date the ISO is granted, and for at least one year from
the date the ISO is exercised, any gain realized on the sale of the shares
received upon exercise of the ISO is taxed as long-term capital gain. If an
optionee disposes of the shares before the expiration of either of these two
special holding periods (a "disqualifying disposition"), the optionee must
recognize ordinary income in an amount equal to the lesser of the gain realized
or the difference between the exercise price and the fair market value of the
Common Stock at the date of exercise, with the remainder of the gain, if any,
treated as capital gain.
The Company will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of whether
or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee recognizes ordinary income
because of a disqualifying disposition, the Company may deduct an equivalent
amount as compensation expense.
Non-ISOs. Generally, an optionee recognizes no income upon the grant of a Non-
ISO. An optionee must recognize ordinary income upon the exercise of the Non-ISO
in an amount equal to the difference between the fair market value of the shares
on the date of exercise and the option price. In the alternative, the holder of
a Non-ISO may elect, within 30 days after the Non-ISO is granted, to recognize
such income immediately upon the date of grant. An officer or director who is
subject to the six-month short-swing profits rule under the federal securities
laws will not be required to recognize income upon the exercise of a Non-ISO
until at least six months after the grant date of the Non-ISO's (if later)
unless the officer or director elects to recognize such income upon exercise.
Upon a subsequent disposition of such shares, any amount received by the
optionee in excess of the fair market value of the shares as of the exercise
will be taxed as capital gain. The Company will be entitled to a deduction for
federal income tax purposes at the same time and in the same amount as the
ordinary income recognized by the optionee in connection with the exercise of a
Non-ISO.
SARs. The grant of an SAR has no tax effect on the optionee or the Company.
Upon exercise of the SARs, however, any cash or Common Stock received by the
optionee in connection with the surrender of his or her SAR will be treated as
compensation income to the optionee, and the Company will be entitled to a
business expense deduction for the amounts treated as compensation income.
14
<PAGE>
STOCK OPTIONS GRANTED
Set forth below is certain information relating to all Awards that would
become effective upon stockholder approval of the Option Plan. All such Options
(i) are subject to the terms and conditions described above, and (ii) will
automatically expire ten years after the date of their grant. The exercise price
for these Options equals the fair market value of the Common Stock on the date
of grant ($23.75 per share). As of the date hereof, the Option grants disclosed
below were the only Awards that had been made under the Option Plan, although
future Awards are anticipated.
<TABLE>
<CAPTION>
Value of Shares Number of Shares
Participant (or Group) Underlying Options ($)(1) Subject to Options (2)
- - ---------------------- ------------------------- ----------------------
<S> <C> <C>
B. K. Goodwin, III, Chief $1,875 7,500
Executive Officer and President
Lynn J. Joyce, Vice President, $ 875 3,500
Secretary and Treasurer
C. Larry Seale, Executive $ 625 2,500
Vice President
Fred T. Blair, Director $ 281 1,125
James B. Koikos, Director $ 281 1,125
A. W. Kuhn, Director $ 281 1,125
Malcolm E. Lewis, Director $ 281 1,125
E. H. Moore, Jr., Director $ 281 1,125
James E. Mulkin, Director $ 281 1,125
Robert E. Paden, Director $ 281 1,125
G. Larry Russell, Director $ 281 1,125
All executive officers, as a group $3,500 14,000
(4 persons)
All directors who are not $2,250 9,000
executive officers, as a group
(8 persons)
All employees, including all $ 750 3,000
current officers who are not
executive officers, as
a group (6 persons)
</TABLE>
__________________
(1) Represents the extent to which the fair market value of the Common Stock
underlying each Option ($24.00 per share, based upon the most recent sale
on or before May 31, 1996 known to the Company) exceeds the exercise price
for such shares ($23.75 per share, which equaled its fair market value on
the date of the grant).
(2) Represents the right to purchase the number of shares of the Company's
common stock that is listed opposite the name of each optionee.
15
<PAGE>
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is desirable,
cost effective, and produces incentives which will benefit the Company and its
stockholders. The Board of Directors is seeking stockholder approval of the
Option Plan to satisfy both the requirements of the Internal Revenue Code for
favorable tax treatment of ISOs and to exempt certain option transactions from
the six-month short-swing trading rules of the Securities and Exchange
Commission. The Option Plan must be approved by a majority of the votes cast
for tax purposes and by a majority of the votes present, or represented, at the
Meeting for purposes of the six-month short-swing trading rules.
Stockholder approval of the Option Plan by a favorable vote of a majority
of the votes present or represented and entitled to vote at the Meeting
(assuming a quorum of a majority of the outstanding shares of Common Stock is
present) will be deemed to satisfy the foregoing tax and securities law
requirements. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OPTION PLAN.
- - -------------------------------------------------------------------------------
NEW PLAN BENEFITS
- - -------------------------------------------------------------------------------
The following table sets forth certain information regarding the benefits
to be received under the Option Plan.
1995 Stock Option and Incentive Plan
------------------------------------
<TABLE>
<CAPTION>
Dollar Number
Name and Position Value ($)(1) of Units (2)
- - ---------------------------------------- ------------ ------------
<S> <C> <C>
Fred T. Blair $ -- --
B. K. Goodwin, III $1,875 7,500
C. Larry Seale $ 875 2,500
All executive officers, as a group (4 $3,500 14,000
persons)
All directors who are not executive $2,250 9,000
officers, as a group (8 persons)
All employees who are not executive $ 750 3,000
officers, as a group (6 persons)
- - --------------------
</TABLE>
(1) Determined by reference to the market value of the Common Stock ($24.00 per
share), based on the most recent sale of the Common Stock on or before May
31, 1996 known to the Company.
(2) All Options listed herein will be granted on the date that the Company's
stockholders approve the Option Plan. In addition to the Option grants
shown herein, the Option Plan provides for future grants of Awards pursuant
to the terms of the Option Plan summarized above. See "Proposal II --
Approval of 1995 Stock Option and Incentive Plan."
16
<PAGE>
- - -------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT
- - -------------------------------------------------------------------------------
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock by each of the Company's directors and
nominees, the executive officers named in the Summary Compensation Table and by
all executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
BENEFICIAL COMMON STOCK
NAME OWNERSHIP(1) OUTSTANDING
------- ------------- -------------
<S> <C> <C>
Fred T. Blair 12,164(2)(3) 1.99 %
B. K. Goodwin, III 5,752 0.94
James B. Koikos 10,054(4) 1.64
A. W. Kuhn 26,731 4.36
Malcolm E. Lewis 20,894(5) 3.41
E. H. Moore, Jr. 19,368(6) 3.16
James E. Mulkin 16,433 2.68
Robert E. Paden 16,103 2.63
G. Larry Russell 15,148(7) 2.47
C. Larry Seale 10,539(8)(2) 1.72
All Executive Officers and 157,370(2) 25.68
Directors as a Group
(12 Persons)
</TABLE>
- - -------------------
(1) For the definition of beneficial ownership, see footnote 1 to the table in
"Voting Securities and Principal Holders Thereof." Includes certain shares
of Common Stock owned by businesses in which the director is an officer or
major stockholder or by spouses, by immediate family members, or as a
custodian or trustee for minor children, over which shares the director
effectively exercises sole or shared voting and/or investment power, unless
otherwise indicated. Includes 416, 400, 100, 100, and 1,016 shares of
Common Stock owned by the RRPs and awarded to Directors Goodwin, Koikos,
Mulkin and Paden and to all executive officers and directors as a group,
respectively, as to which shares such directors have voting power.
Includes 1,115, 3,139, 1,000, 390, 390, 4,640, 390, 6,140, 4,665 and 23,784
shares of Common Stock, as to which shares Directors Blair, Goodwin,
Koikos, Kuhn, Lewis, Moore, Paden, Russell, Seale and all executive
officers and directors as a group, respectively, have the right to purchase
pursuant to stock options exercisable within 60 days after the Record Date.
Such shares are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares of Common Stock beneficially owned by each
director and the group. Includes 87, 71, 71, 71, 71, 71, 71, 171 and 882
shares of Common Stock which vest over a three year period for Directors
Goodwin, Kuhn, Lewis, Moore, Mulkin, Paden, Russell and Seale and for all
executive officers and directors as a group, respectively, pursuant to the
Incentive Plan. See " -- Directors' Compensation -- Incentive Compensation
Plan." Includes 1,920, 100, 1,920, 300, 1,920, 600 and 6,760 shares of
Common Stock vested from the RRP and held by a Deferred Compensation Plan
trust for the benefit of Directors Blair, Koikos, Moore, Mulkin, Russell
and Seale and all executive officers and directors as a group,
respectively. See "-- Directors' Compensation."
(2) Includes 2,626, 2,156 and 6,728 shares of Common Stock owned by the ESOP
and allocated to the account of Mr. Blair, Mr. Seale and all executive
officers.
[footnotes continued on following page]
17
<PAGE>
[footnotes continued from following page]
(3) Includes 6,503 shares of Common Stock owned by Mr. Blair's wife.
(4) Includes 3,000 shares held in a trust of which Mr. Koikos is a trustee.
(5) Includes 391 shares of Common Stock owned by Mr. Lewis's wife.
(6) Includes 1,000 shares of Common Stock owned by Mr. Moore's wife.
(7) Includes 1,010 shares of Common Stock owned jointly by Mr. Russell's wife
and minor children. Also includes 1,000 shares of Common Stock owned by
Mr. Russell's brother's political campaign fund, of which fund Mr. Russell
is Chairman and as to which shares Mr. Russell has voting power.
(8) Includes 100 shares of Common Stock owned by Mr. Seale as custodian for
grandchildren. Also includes 25 shares of Common Stock owned by Mr.
Seale's wife and son.
- - --------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT AUDITORS
- - --------------------------------------------------------------------------------
Arthur Andersen LLP, which was the Company's independent auditors for the
1996 fiscal year, is expected to be retained by the Board of Directors to be the
Company's auditors for the 1997 fiscal year. A representative of Arthur
Andersen LLP is expected to be present at the Meeting to respond to
stockholders' questions and will have the opportunity to make a statement if he
or she so desires.
- - --------------------------------------------------------------------------------
OTHER MATTERS
- - --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the person or persons voting the proxies.
- - --------------------------------------------------------------------------------
MISCELLANEOUS
- - --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of common stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation. The
Company has retained Chemical Bank, a proxy soliciting firm, to assist in the
solicitation of proxies, for which they will receive a fee of $3,000 and
reimbursement of certain out-of-pocket expenses.
The Company's Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of
such Annual Report may obtain a copy by writing to the Secretary of the Company.
Such Annual Report is not to be treated as a part of the proxy solicitation
material nor as having been incorporated herein by reference.
18
<PAGE>
- - --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- - --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's main office at 1630
Fourth Avenue North, Bessemer, Alabama 35020, no later than February 19, 1997.
Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended.
The Bylaws of the Company provide an advance notice procedure for certain
business to be brought before an annual meeting of stockholders. In order for a
stockholder to properly bring business before an annual meeting of stockholders,
the stockholder must give written notice to the Secretary of the Company not
less than 90 days before the time originally fixed for such meeting; provided,
however, that in the event that less than 100 days notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the tenth day following the day on which such notice of the date of
an annual meeting was mailed or such public disclosure was made. The notice
must include the stockholder's name and address, as it appears on the Company's
record of stockholders, a brief description of the proposed business, the reason
for conducting such business at an annual meeting, the class and number of
shares of the Company's capital stock that are beneficially owned by such
stockholder and any material interest of such stockholder in the proposed
business. In the case of nominations to the Board, certain information
regarding the nominee must be provided.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lynn J. Joyce
Lynn J. Joyce
Secretary
Bessemer, Alabama
June 19, 1996
- - --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- - --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
MARCH 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO THE SECRETARY, FIRSTFED BANCORP, INC., 1630 FOURTH AVENUE NORTH,
BESSEMER, ALABAMA 35020.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
19
<PAGE>
EXHIBIT A
<PAGE>
FIRSTFED BANCORP, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of the Plan.
The purpose of this FirstFed Bancorp, Inc. 1995 Stock Option and
Incentive Plan (the "Plan") is to advance the interests of the Company through
providing select key Employees and Directors of the Bank, the Company, and their
Affiliates with the opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility and to provide additional
incentive to Directors and key Employees of the Company or any Affiliate to
promote the success of the business.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options
and SARs, unless the context clearly indicates a different meaning.
(d) "Bank" shall mean First Federal Savings Bank.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
(i) "Company" shall mean FirstFed Bancorp, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member of
the board of directors of any Affiliate that the Board has by resolution
designated as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in
the sole and absolute discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an Affiliate.
A-1
<PAGE>
(m) "Disinterested Person" shall mean any member of the Board who, at
the time discretion under the Plan is exercised, is a "disinterested person"
within the meaning of Rule 16b-3.
(n) "Effective Date" shall mean the date specified in Paragraph 14
hereof.
(o) "Employee" shall mean any person employed by the Company, the
Bank, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned Share at which
an Option or SAR may be exercised.
(q) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(r) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award pursuant
to the Plan.
(w) "Plan" shall mean this FirstFed Bancorp, Inc. 1995 Stock Option
and Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(y) "Share" shall mean one share of Common Stock.
(z) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.
(aa) "Year of Service" shall mean a full twelve-month period, measured
from the date of an Award and each annual anniversary of that date, during which
a Participant has continuously been an Employee or Director of the Company or an
Affiliate.
3. Term of the Plan and Awards.
(a) Term of the Plan. The Plan shall continue in effect for a term of
ten years from the Effective Date, unless sooner terminated pursuant to
Paragraph 16 hereof. No Award shall be granted under the Plan after ten years
from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.
A-2
<PAGE>
4. Shares Subject to the Plan.
(a) General Rule. The aggregate number of Shares deliverable
pursuant to Awards shall not exceed 30,000 Shares, as such number may be
adjusted on and after the Effective Date pursuant to Paragraph 11 hereof. Such
Shares may either be authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Company. If any Awards should
expire, become unexercisable, or be forfeited for any reason without having been
exercised, the Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to
which an SAR is granted, but not the number of Shares which the Company delivers
or could deliver to an Employee or individual upon exercise of an SAR, shall be
charged against the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in conjunction with
an Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of Shares subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by
the Committee, which shall consist of not less than three (3) members of the
Board who are Disinterested Persons. Members of the Committee shall serve at
the pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by those members of the Board who are
Disinterested Persons.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select Participants
and grant Awards, (ii) to determine the form and content of Awards to be issued
in the form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option or SAR, (ii) the number of Shares subject to, and the expiration date of,
the Award, (iii) the manner, time and rate (cumulative or otherwise) of exercise
or vesting of such Award, and (iv) the restrictions, if any, to be placed upon
such Award, or upon Shares which may be issued upon exercise of such Award.
The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
A-3
<PAGE>
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the indemnification of
Directors.
6. Grant of Options.
(a) General Rule. Only Employees shall be eligible to receive
Awards. In selecting those Employees to whom Awards will be granted and the
number of shares covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible Employees, the value of
their services to the Company and its Affiliates, and any other factors the
Committee may deem relevant. Notwithstanding the foregoing, the Committee shall
automatically make the Awards specified in Sections 6(b) and 9 hereof.
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below, at an Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective Date:
<TABLE>
<CAPTION>
Number of Shares
Participant Subject to Option
- - ----------- -----------------
<S> <C>
B. K. Goodwin, III 7,500
Lynn J. Joyce 3,500
C. Larry Seale 2,500
Cathy N. Ackerman 500
W. Max Adams 500
Brenda M. Baswell 500
Robert Nelson, III 500
Martha A. Peeples 500
James E. Smith, Jr. 500
Rhonda T. Wannemuehler 500
</TABLE>
With respect to each of the above-named Participants, the Option granted to
the Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 8(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date
the Option is granted, of the Shares with respect to which ISOs are exercisable
for the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case such Options granted in excess of such
limitation shall be Options which are Non-ISOs.
7. Exercise Price for Options.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
A-4
<PAGE>
Shares representing more than 10% of the Company's outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be the
mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be the mean between the bid and asked
price on such date, or, if there is no bid and asked price on such date, then on
the next prior business day on which there was a bid and asked price. If no
such bid and asked price is available, then the Market Value per Share shall be
its fair market value as determined by the Committee, in its sole and absolute
discretion. Notwithstanding the foregoing, in the event that either (i) the
Committee exercises its discretion to impose transfer (or other) restrictions on
the Shares subject to an Option, or (ii) the Plan requires specified transfer
restrictions, the Committee shall make an appropriate adjustment in determining
the Market Value of the Shares subject to such an Option (in order to take into
account that their fair market value may be less than the fair market value of
unrestricted Shares).
8. Exercise of Options.
(a) Generally. Unless otherwise provided by the Committee pursuant to
an applicable Agreement, each Option shall be fully (100%) exercisable
immediately upon the date of its grant, subject to Paragraph 13 hereof.
(b) Procedure for Exercise. A Participant may exercise Options,
subject to provisions relative to its termination and any limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the Exercise Price for
the number of Shares with respect to which the Option is then being exercised.
Each such notice (and payment where required) shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer of the Company
at the Company's executive offices. Common Stock utilized in full or partial
payment of the Exercise Price for Options shall be valued at its Market Value at
the date of exercise, and may consist of Shares subject to the Option being
exercised. A Participant who exercises Non-ISOs pursuant to this Paragraph may
satisfy all applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably electing to have
the Company withhold shares of Common Stock, or to deliver to the Company shares
of Common Stock that he already owns, having a value equal to the amount
required to be withheld; provided that to the extent not inconsistent herewith,
such election otherwise complies with those requirements of Paragraphs 8 and 19
hereof.
(c) Period of Exercisability. Except to the extent otherwise provided
in the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, or within three months after termination of such
Continuous Service (but not later than the date on which the Option would
otherwise expire), except if the Employee's Continuous Service terminates by
reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the Participant
and the Bank and/or the Company (and, in the absence of any such agreement,
shall mean termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order), then the Participant's rights to exercise such
Option shall expire on the date of such termination;
A-5
<PAGE>
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such Option of
the deceased Participant may be exercised within two years from the date of his
death (but not later than the date on which the Option would otherwise expire)
by the personal representatives of his estate or person or persons to whom his
rights under such Option shall have passed by will or by laws of descent and
distribution;
(3) Disability, then to the extent that the Participant would have
been entitled to exercise the Option immediately prior to his or her Disability,
such Option may be exercised within one year from the date of termination of
employment due to Disability, but not later than the date on which the Option
would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
9. Grants of Options to Non-employee Directors
(a) Automatic Grants. Notwithstanding any other provisions of this
Plan, each Director who is not an Employee but is a Director on the Effective
Date shall receive, on said date, Non-ISOs to purchase 1,125 of the Shares
reserved under Paragraph 4(a) hereof. Such Non-ISOs shall have an Exercise Price
per Share equal to the Market Value of a Share on the date of grant. Each
Director who joins the Board after the Effective Date and who is not then an
Employee shall receive, on the date of joining the Board, Non-ISOs to purchase
1,000 of the Shares reserved under Paragraph 4(a) of the Plan, at an Exercise
Price per Share equal to its Market Value on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph will become exercisable in accordance with the general rule set forth
in Paragraph 8(a) hereof, and may be exercised from time to time by (a) written
notice of intent to exercise the Option with respect to all or a specified
number of the Optioned Shares, and (b) payment to the Company (contemporaneously
with the delivery of such notice), in cash, in Common Stock, or a combination of
cash and Common Stock, of the amount of the Exercise Price for the number of the
Optioned Shares with respect to which the Option is then being exercised. Each
such notice and payment shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at the Company's
executive offices. A Director who exercises Options pursuant to this Paragraph
may satisfy all applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably electing to have
the Company withhold shares of Common Stock, or to deliver to the Company shares
of Common Stock that he already owns, having a value equal to the amount
required to be withheld; provided that to the extent not inconsistent herewith,
such election otherwise complies with those requirements of Paragraphs 8 and 19
hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board, but in
no event later than the date on which such Options would otherwise expire. In
the event of such Director's death during the term of his directorship, Options
granted under this Paragraph shall become immediately exercisable, and may be
exercised within two years from the date of his death by the personal
representatives of his estate or person or persons to whom his rights under such
Option shall have passed by will or by laws of descent and distribution, but in
no event later than the date on which such Options would otherwise expire. In
the event of such Director's Disability during his or her directorship, the
Director's Option shall become immediately exercisable, and such Option may be
exercised within one year of the termination of directorship due to Disability,
but not later than the date that the Option would otherwise expire. Unless
otherwise inapplicable or inconsistent with the provisions of this Paragraph,
the Options to be granted to Directors hereunder shall be subject to all other
provisions of this Plan.
A-6
<PAGE>
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
10. SARs (Stock Appreciation Rights)
(a) Granting of SARs. In its sole discretion, the Committee may from
time to time grant SARs to Employees either in conjunction with, or
independently of, any Options granted under the Plan. An SAR granted in
conjunction with an Option may be an alternative right wherein the exercise of
the Option terminates the SAR to the extent of the number of shares purchased
upon exercise of the Option and, correspondingly, the exercise of the SAR
terminates the Option to the extent of the number of Shares with respect to
which the SAR is exercised. Alternatively, an SAR granted in conjunction with an
Option may be an additional right wherein both the SAR and the Option may be
exercised. An SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right to exercise the
ISO or vice versa, unless the SAR, by its terms, meets all of the following
requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the
Exercise Price of the ISO and the Market Value of the Shares subject to the ISO
at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and
under the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares
subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR shall
not be less than the Market Value of the Optioned Shares on the date of grant.
(c) Timing of Exercise. Any election by a Participant to exercise SARs
shall be made during the period beginning on the 3rd business day following the
release for publication of quarterly or annual financial information and ending
on the 12th business day following such date. This condition shall be deemed to
be satisfied when the specified financial data is first made publicly available.
In no event, however, may an SAR be exercised within the six-month period
following the date of its grant.
The provisions of Paragraph 8(c) regarding the period of exercisability of
Options are incorporated by reference herein, and shall determine the period of
exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such conditions as shall be permissible under the terms of
the Plan and of the Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the Company except
for applicable withholding taxes, an amount equal to the excess of (or, in the
discretion of the Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the aggregate Exercise
Price of such number of Optioned Shares. This amount shall be payable by the
Company, in the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
A-7
<PAGE>
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
11. Effect of Changes in Common Stock Subject to the Plan.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of shares
subject to outstanding Awards, and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In
the event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional, or different
shares of stock or securities, such new, additional, or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
12. Non-Transferability of Awards.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding any other provision of this Plan to the contrary,
to the extent permissible under Rule 16b-3, a Participant who is granted Non-
ISOs pursuant to this Plan may transfer such Non-ISOs to his or her spouse,
lineal ascendants, lineal descendants, or to a duly established trust, provided
that Non-ISOs so transferred may not again be transferred other than (i) to the
Participant originally receiving the grant of Non-ISOs, or (ii) to an individual
or trust to whom such Participant could have transferred Non-ISOs pursuant to
this Paragraph 12. Non-ISOs which are transferred pursuant to this Paragraph 12
shall be exercisable by the transferee subject to the same terms and conditions
as would have applied to such Non-ISOs in the hands of the Participant
originally receiving the grant of such Non-ISOs.
13. Time of Granting Awards.
The date of grant of an Award shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Award, and
the Effective Date; provided that no Option shall be
A-8
<PAGE>
exercisable before the Plan receives stockholder approval in accordance with
Paragraph 14 hereof. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
14. Effective Date.
The Plan shall become effective immediately upon its approval by the Board,
provided that, only to the extent required for the Plan to be in conformity with
Rule 16b-3, the effectiveness of the Plan and any Awards shall be contingent
upon a favorable vote of stockholders owning at least a majority of the total
votes cast at a duly called meeting of the Company's stockholders held in
accordance with applicable laws.
15. Modification of Awards.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on him by the grant
of a new Award at such time, or impair the Award without the consent of the
holder of the Award.
16. Amendment and Termination of the Plan.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plans. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. Conditions Upon Issuance of Shares.
(a) Compliance with Securities Laws. Shares of Common Stock shall not
be issued with respect to any Award unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
18. Reservation of Shares.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
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<PAGE>
19. Withholding Tax.
The Company's obligation to deliver Shares upon exercise of Options and/or
SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations.
20. No Employment or Other Rights.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations. Except to the extent
provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have a right
to be granted an Award or, having received an Award, the right to again be
granted an Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.
21. Governing Law.
The Plan shall be governed by and construed in accordance with the laws of
the State of Alabama, except to the extent that federal law shall be deemed to
apply.
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<PAGE>
REVOCABLE PROXY
FIRSTFED BANCORP, INC.
BESSEMER, ALABAMA
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ANNUAL MEETING OF STOCKHOLDERS
JULY 23, 1996
- - --------------------------------------------------------------------------------
The undersigned hereby appoints Larry Russell, Robert E. Paden and Fred T.
Blair, or any of them, with full powers of substitution, to act as proxies for
the undersigned to vote all shares of the Company's common stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders (the
"Meeting"), to be held at the main office of the Company located at 1630 Fourth
Avenue North, Bessemer, Alabama, on Tuesday, July 23, 1996 at 4:30 p.m., local
time, and at any and all adjournments thereof, as follows:
FOR WITHHOLD
--- --------
1. The election as directors of the / / / /
nominees listed below.
James E. Mulkin
E. H. Moore, Jr.
James B. Koikos
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE BELOW.
--------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The Approval of the FirstFed Bancorp, Inc. / / / / / /
1995 Stock Option and Incentive Plan.
The Board of Directors recommends a vote "FOR" the listed propositions.
- - --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR ELECTION AS A DIRECTOR AND FOR
THE OTHER PROPOSAL. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DIRECTED BY THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH RESPECT TO THE ELECTION OF ANY
PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL
NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF THE 1996 ANNUAL MEETING.
- - --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of the Company at
the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from the Company prior to the execution
of this proxy of notice of the Meeting, a Proxy Statement dated June 19, 1996
and an annual report.
Dated: , 1996
------------------------
_____________________________________ ___________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_____________________________________ ___________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
- - --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- - --------------------------------------------------------------------------------
