-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UfjLWM8ZB4k+BHvtlDNJRFDXy3rOVdT2l6aD8sGgGVBcI+wRGdhuaUBWQMKqB7+r 2V9F3CuAoWLglN1QYFzinA== 0000950168-97-000593.txt : 19970317 0000950168-97-000593.hdr.sgml : 19970317 ACCESSION NUMBER: 0000950168-97-000593 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970415 FILED AS OF DATE: 19970314 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALMETTO BANCSHARES INC CENTRAL INDEX KEY: 0000706874 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 742235055 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26016 FILM NUMBER: 97556285 BUSINESS ADDRESS: STREET 1: 301 HILLCREST DR STREET 2: P O BOX 49 CITY: LAURENS STATE: SC ZIP: 29360 BUSINESS PHONE: 8649844551 DEF 14A 1 PALMETTO BANCSHARES, INC. DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant (X) Filed by a Party other than the Registrant ( ) Check the appropriate box: ( ) Preliminary Proxy Statement ( ) Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) (X) Definitive Proxy Statement ( ) Definitive Additional Materials ( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 PALMETTO BANCSHARES, INC. (Name of Registrant as Specified in its Charter) (Name of Person(s) Filing Proxy Statement, if other than Registrant) Payment of Filing Fee (Check the appropriate box): (X) No fee required ( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(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: [PALMETTO BANCSHARES LETTERHEAD] To Our Shareholders: You are cordially invited to attend the Annual Meeting of Shareholders of Palmetto Bancshares, Inc. to be held on April 15, 1997, at 3:00 p.m. at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina. The attached Notice of the Annual Meeting and Proxy Statement describe the formal business to be transacted at the Annual Meeting. Directors and officers of Palmetto Bancshares, Inc., as well as representatives of KPMG Peat Marwick LLP, our independent auditors, will be present to respond to any questions shareholders may have. To ensure proper representation of your shares at the Annual Meeting, please sign, date and return the enclosed proxy card as soon as possible, even if you currently plan to attend the Annual Meeting. This will not prevent you from voting in person, but will ensure that your vote will be counted if you are unable to attend. Sincerely, /s/ L. Leon Patterson L. Leon Patterson Chairman and Chief Executive Officer PALMETTO BANCSHARES, INC. 301 HILLCREST DRIVE P. O. BOX 49 LAURENS, SOUTH CAROLINA 29360 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 15, 1997 To the Shareholders of Palmetto Bancshares, Inc.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Palmetto Bancshares, Inc. (the "Company") will be held on April 15, 1997, at 3:00 p.m. at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina, for the following purposes: 1. To elect three Directors to hold office until their respective terms expire or until their successors are duly elected and qualified; and 2. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. Shareholders of record at the close of business on March 3, 1997 will be entitled to vote at the Annual Meeting. By Order of the Board of Directors /s/ L. Leon Patterson L. Leon Patterson Chairman Laurens, South Carolina March 14, 1997 PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU WISH, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT THE ANNUAL MEETING. PALMETTO BANCSHARES, INC. 301 HILLCREST DRIVE P. O. BOX 49 LAURENS, SOUTH CAROLINA 29360 PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 15, 1997 This Notice of Annual Meeting, Proxy Statement and Proxy (these "Proxy Materials") are being furnished to shareholders in connection with a solicitation of proxies by the Board of Directors of Palmetto Bancshares, Inc. (the "Company"). This solicitation is being made in connection with the Annual Meeting of Shareholders (the "Annual Meeting") to be held on April 15, 1997, at 3:00 p.m. at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina. These Proxy Materials are being mailed to shareholders on approximately March 14, 1997. VOTING MATTERS Shareholders of record as of the close of business on March 3, 1997 will be entitled to vote at the Annual Meeting. At the close of business on that day, there were 3,041,952 shares of the Company's $5.00 par value common stock ("Common Stock") outstanding. All share amounts set forth in this Proxy Statement have been restated to give effect to the three-for-one stock split, effected in the form of a 200% stock dividend, of the Company, which became effective on October 16, 1996 (the "Stock Split"). Holders of Common Stock are entitled to one vote per share on each of the matters presented at the Annual Meeting or any adjournments thereof. Shares may be voted in person or by proxy. The presence, either in person or by proxy, of holders of shares representing fifty-one percent of the outstanding shares of stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. REVOCABILITY OF PROXY Shares represented by a properly executed proxy in the accompanying form and given by a shareholder, and not revoked, will be voted in accordance with such instructions. As stated in the Proxy, if a returned Proxy does not specify otherwise, the shares represented thereby will be voted in favor of the proposals set forth herein. Proxies may be revoked at any time prior to their being voted at the Annual Meeting by oral or written notice to Palmetto Bancshares, Inc., 301 Hillcrest Drive, P. O. Box 49, Laurens, South Carolina 29360, Attn: Teresa M. Crabtree, Corporate Secretary, (864) 984-8321, or by execution and delivery of a subsequent proxy or by attendance and voting in person at the Annual Meeting. SOLICITATION OF PROXIES This solicitation of proxies is made by the Company, and the Company will bear the cost of this proxy solicitation, including the cost of preparing, handling, printing and mailing these Proxy Materials. Proxies will be solicited principally through these Proxy Materials. Proxies may also be solicited by telephone or through personal solicitation conducted by regular employees of the Company. Banks, brokers and other custodians are requested to forward proxy solicitation material to their customers where appropriate, and the Company will reimburse such banks, brokers and custodians for their reasonable out-of-pocket expenses in sending the proxy material to beneficial owners of the shares. ELECTION OF DIRECTORS ITEM 1 ON THE PROXY NOMINATIONS FOR ELECTION OF DIRECTORS The Company's Board of Directors is currently comprised of nine persons. The Board of Directors is divided into three classes of Directors with each class being elected for staggered three-year terms. Directors will be elected by a plurality of votes cast at the Annual Meeting. Abstentions and broker non-votes with respect to Nominees (as defined below) will not be considered to be either affirmative or negative votes. IDENTIFICATION OF NOMINEES Management proposes to nominate to the Board of Directors the three persons listed as nominees (the "Nominees") in the table below. Each of the Nominees is currently serving as a Company Director. Each Nominee, if elected, will serve until the expiration of his respective term and until such Nominee's successor is duly qualified. Unless authority to vote with respect to the election of one or more Nominees is "WITHHELD," it is the intention of the persons named in the accompanying Proxy to vote such Proxy for the election of these Nominees. Management believes that all such Nominees will be available and able to serve as Directors. However, should any Nominee become unable to accept nomination or election, it is the intention of the person named in the Proxy, unless otherwise specifically instructed in the Proxy, to vote for the election of such other persons as management may recommend. The following table sets forth the names and ages of the three Nominees for Directors and the Directors continuing in office, the positions and offices with the Company held by each such person, and the period that each such person has served as a Director of the Company.
POSITION OR DIRECTOR NAME AGE OFFICE WITH THE COMPANY SINCE NOMINEES FOR DIRECTORS TERMS EXPIRING IN 1997 James A. Cannon 68 Director 1975 L. Leon Patterson 55 Director, Chairman of the Board and 1971 Chief Executive Officer J. David Wasson, Jr. 51 Director 1979 DIRECTORS CONTINUING IN OFFICE TERMS EXPIRING IN 1998 W. Fred Davis, Jr. 53 Director 1978 David P. George, Jr. 56 Director 1974 Michael D. Glenn 56 Director 1994 TERMS EXPIRING IN 1999 John T. Gramling, II 55 Director 1984 James M. Shoemaker, Jr. 64 Director 1984 Paul W. Stringer 53 Director, President and Chief Operating Officer 1986
2 BUSINESS EXPERIENCE OF NOMINEES AND DIRECTORS Mr. Cannon has been a consultant to Cannon Funeral Home since 1989. Mr. Patterson has served as Chairman of the Board and Chief Executive Officer of the Company since April 1990 and as Chairman of the Board and Chief Executive Officer of The Palmetto Bank, a wholly-owned subsidiary of the Company ("The Palmetto Bank"), since March 1986. From April 1990 to April 1994, he served as Chairman of the Board and President of the Company, and from 1982 to April 1990 he served as President of the Company. Mr. Patterson also served as Chairman and President of The Palmetto Bank from January 1978 to February 1986, and as President in 1977. Mr. Wasson has been President and Chief Executive Officer of Laurens Electric Cooperative, Inc. since 1975. He was first employed at Laurens Electric Cooperative in 1974. Mr. Davis was owner and President of Palmetto Spinning Corporation ("PSC"), where he was employed from 1969 to 1995. Mr. Davis sold PSC to Martin Color-fi, Inc. in 1994 and retired in 1995. Mr. Davis is currently a director of Martin Color-fi, Inc. Mr. George has been General Manager of George Motor Company, an automobile dealership, since 1964. Mr. Glenn has been a partner with the law firm of Glenn, Haigler & Maddox since 1992. From 1983 to 1992 he was a sole practitioner in Anderson, South Carolina. Mr. Gramling has served as Vice President and Secretary of Gramling Bros., Inc., a diversified orchard business, since 1965, and has been the President of Gramling Bros., Inc. Real Estate, a real estate sales and development company, since 1970. Mr. Shoemaker has been a member with the law firm of Wyche, Burgess, Freeman and Parham, P.A. since 1965. Mr. Shoemaker also serves as a director of One Price Clothing Stores, Inc., Ryan's Family Steak Houses, Inc., and Span-America Medical Systems, Inc. Mr. Stringer has served as President and Chief Operating Officer of the Company since April 1994 and as President and Chief Operating Officer of The Palmetto Bank, since March 1986. From April 1990 to April 1994, he served as Executive Vice President of the Company, and from 1982 to April 1990 he served as Vice President of the Company. Mr. Stringer also has served as Executive Vice President of The Palmetto Bank from May 1981 to February 1986, as Senior Vice President from July 1978 to April 1981, and as Vice President from January 1977 to June 1978. Mr. Stringer also serves as Chairman of the South Carolina Bankers Association, a director of the South Carolina Student Loan Corporation and a trustee of the South Carolina Bankers Employee Benefit Trust. MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors held eleven meetings in 1996. The Board of Directors has an Audit and Examining Committee which reviews the audit plan, the results of the audit engagement of the Company's accountants, the scope and results of the Company's procedures for internal auditing and internal control, and the internal audit reports of the Company. The Audit Committee is currently comprised of Messrs. Davis and Shoemaker. Mr. Davis serves as Chairman. The Audit Committee formally met once during 1996. 3 The Board of Directors has a Compensation Committee which reviews the Company's compensation policies and benefit plans and makes recommendations regarding senior management compensation. Its report is set forth herein. The Compensation Committee is currently comprised of Messrs. Cannon and Shoemaker. Mr. Shoemaker serves as Chairman. The Compensation Committee met three times during 1996. No members of the Compensation Committee are officers or employees of the Company. The Board of Directors has a Trust Committee, which reviews the operation of the Company's Trust Department. The Trust Committee is currently comprised of Messrs. Cannon, Davis and George. Mr. Cannon serves as Chairman. The Trust Committee met eleven times during 1996. The Board of Directors has a Credit Committee, which reviews certain loan applications and other credit matters. The Credit Committee is currently comprised of Messrs. Wasson, Gramling, Stringer, and Glenn. Mr. Wasson serves as Chairman. The Credit Committee met eleven times during 1996. The Company does not have a Nominating Committee. The functions typically performed by a Nominating Committee were performed by the entire Board of Directors. Mr. Patterson serves ex officio on all committees. Throughout the 1996 fiscal year, Mr. Russell B. Emerson, a director of the Company since 1990, served as a member of the Compensation Committee. Mr. Emerson resigned from the Board of Directors on January 14, 1997, because of an overseas relocation with his employer. His seats on the Board of Directors and the Compensation Committee have not been filled. The Company regretfully reports the death of Mr. Francis L. Willis, who served as a director of the Company since 1988. Mr. Willis served as member of the Audit Committee until his death in April 1996. Mr. Willis's seats on the Board of Directors and the Audit Committee have not been filled. EXECUTIVE OFFICERS The Company's executive officers are appointed by the Board of Directors and serve at the pleasure of the Board. The following persons serve as executive officers of the Company. COMPANY OFFICES COMPANY NAME AGE CURRENTLY HELD OFFICER SINCE - ------------------ --- ----------------------- ------------- L. Leon Patterson 55 Chief Executive Officer 1982 Paul W. Stringer 53 President and Chief Operating Officer 1982 Philip A. Betette 57 Vice President 1985 Ralph M. Burns, III 46 Vice President 1982 David E. Burgess 51 Vice President 1985 4 BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS Mr. Patterson's business experience is set forth above under "Business Experience of Nominees and Directors." Mr. Stringer's business experience is set forth above under "Business Experience of Nominees and Directors." Mr. Betette has served as a Vice President of the Company since April 1990 and as Senior Vice President and Senior Trust Officer of The Palmetto Bank since January 1995. Mr. Betette has also served as Senior Vice President, Trust and Investments of The Palmetto Bank from January 1987 to December 1994, and as Senior Vice President and Trust Officer of The Palmetto Bank from July 1985 to December 1986. He served as Vice President and Investment Officer of The Palmetto Bank from January 1979 to June 1985, and as Assistant Vice President and Investment Officer of The Palmetto Bank from January 1977 to December 1978. Mr. Burns has served as a Vice President of the Company since April 1990. Mr. Burns also has served as Senior Vice President and Cashier of The Palmetto Bank since January 1982. From January 1978 to December 1981, he served as Assistant Vice President and Cashier of The Palmetto Bank, and from January 1976 to December 1977, he served as Assistant Cashier of The Palmetto Bank. Mr. Burgess has served as a Vice President of the Company since April 1990 and as Executive Vice President and Chief Credit Officer of The Palmetto Bank since July 1993. He has also served as Senior Vice President and Chief Credit Officer of The Palmetto Bank from July 1987 to June 1993, as Senior Vice President and Loan Administrator of The Palmetto Bank from July 1985 to June 1987, and as Vice President and Loan Administrator of The Palmetto Bank from August 1982 to June 1985. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS COMPENSATION OF DIRECTORS During 1996 directors received an annual fee of $9,000, which includes a retainer fee of $3,000. However, if a director misses more than one directors' meeting and such absence(s) is not excused by the Company, the Company reduces such fee by $500 for each unexcused absence. Mr. Willis was paid $5,000 for his service as a director in 1996, which in the Company's view is an appropriate reflection of his service as a director and the number of directors' meetings held prior to his death. Except as discussed in the preceding sentence, all directors received the full annual fee. SEE Election of Directors -- Meetings and Committees of the Board of Directors. 5 SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION TO EXECUTIVE OFFICERS The following table shows the cash compensation paid by the Company, as well as certain other compensation paid or accrued, to the Company's Chief Executive Officer and to the executive officers of the Company who earned in excess of $100,000 per year in compensation (in all capacities) (collectively, the "Named Executive Officers") for the years ending December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE Long-Term Compensation Name and Other Annual Securities All Other Principal Position Salary Bonus Compensation Underlying Compensation during 1996 Year ($) ($) ($) Options (#) ($) - --------------------------- --------- ------------ ---------- -------------- --------------- -------------- L. Leon Patterson, 1996 179,000 54,740 (1) -0- 65,059(2) Chairman of the Board and Chief Executive Officer 1995 167,700 51,842 (1) -0- 63,204 1994 158,100 30,600 (1) -0- 38,190 Paul W. Stringer, 1996 148,000 44,758 (1) -0- 38,293(3) Director, President and Chief Operating Officer 1995 138,700 42,504 (1) -0- 37,645 1994 130,500 25,080 (1) -0- 25,420 David E. Burgess, 1996 92,000 29,624 (1) 3,000 6,541(4) Vice President 1995 88,000 28,336 (1) -0- 4,941 1994 84,000 16,800 (1) -0- 9,260 Philip A. Betette, 1996 85,000 27,370 (1) -0- 6,253(5) Vice President 1995 81,500 26,243 (1) -0- 4,807 1994 78,375 15,675 (1) -0- 9,012 Ralph M. Burns, III, 1996 80,750 26,002 (1) -0- 5,841(6) Vice President 1995 77,000 24,794 (1) -0- 4,452 1994 73,500 14,700 (1) -0- 8,409
- ------------------------- (1) Certain amounts may have been expended by the Company which may have had value as a personal benefit to the executive officer. However, the total value of such benefits did not exceed the lesser of $50,000 or 10% of the annual salary and bonus of such executive officer. (2) This amount is comprised of $10,078 allocated to Mr. Patterson for the 1995 fiscal year pursuant to the Company's Employee Stock Ownership Plan (the "ESOP"), and $54,981 in premiums paid by the Company on behalf of Mr. Patterson with respect to life insurance not generally available to all Company employees. 6 (3) This amount is comprised of $9,359 allocated to Mr. Stringer for the 1995 fiscal year pursuant to the ESOP, and $28,934 in premiums paid by the Company on behalf of Mr. Stringer with respect to life insurance not generally available to all Company employees. (4) This amount is comprised of $6,541 contributed to the ESOP on behalf of Mr. Burgess. (5) This amount is comprised of $6,253 contributed to the ESOP on behalf of Mr. Betette. (6) This amount is comprised of $5,841 contributed to the ESOP on behalf of Mr. Burns. STOCK OPTIONS The following table sets forth information regarding option grants with respect to Common Stock made by the Company to the Named Executive Officers during 1996. OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants --------------------------------------------------------------------- % of Total Number of Options/ Securities SARs Underlying Granted to Grant Date Options Employees Exercise Price Expiration Present Value Name Granted (#) in 1996 ($/Sh) Date(1) ($)(2) ---- ------------- --------- ---------------- -------- ------- David E. Burgess 3,000 100% 11.67 12/31/06 4.12
(1) The plan pursuant to which the options were granted and the option agreement set forth certain earlier expiration dates. (2) The present value of these options was calculated using the Black-Scholes option pricing model and assuming volatility of 15.6%, a risk free return rate of 6.16%, dividend yield of 1.48% and an average expected option life of 10 years. These assumptions are the same assumptions used in the Company's 1996 pro forma disclosures of stock option compensation expense in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The ultimate values of the options will depend on the future market price of the Common Stock. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of the Common Stock over the exercise price on the date the option is exercised. 7 OPTION EXERCISES The following table sets forth information with respect to the Executive Officers concerning the exercise of options during the last fiscal year and unexercised options held as of the end of the fiscal year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE- OPTIONS AT 1996 FISCAL MONEY OPTIONS AT 1996 FISCAL SHARES YEAR-END (#) YEAR-END ($) (1) ACQUIRED VALUE ------------ ---------------- ON REALIZED EXERCISABLE\ EXERCISABLE\ NAME EXERCISE (#) ($)(1) UNEXERCISABLE(2) UNEXERCISABLE - ---- ---------- -------- --------------- ---------- L. Leon Patterson 0 7.17 12,000/0 $ 86,040 Paul W. Stringer 0 7.17 15,000/0 $107,550 David E. Burgess 0 7.17 12,000/0 $ 64,530 Philip A. Betette 0 7.17 9,000/0 $ 64,530 Ralph M. Burns III 0 7.17 9,000/0 $ 64,530
(1) Based on the difference between the option exercise price and the value assigned to the Company's Common Stock by The Bank Advisory Group, Inc. for purposes of allocating shares of Common Stock contributed by the Company to The Palmetto Bank Employee Stock Ownership Plan and Trust for fiscal year 1995. The fiscal year 1996 allocations and valuation have not been completed. (2) As restated to give effect to the Stock Split. 8 PENSION PLAN The following table sets forth the estimated annual benefits (in single-life annuity amounts) payable upon normal retirement in fiscal year 1996 to participants whose highest average five-year earnings and years of service are as listed. The table assumes integration at the current wage base of $60,600. At the end of 1996, the individuals named in the Summary Compensation Table above will have had the following final average compensation credited for purposes of the Pension Plan and number of years of service: Mr. Patterson, $179,530, 29 years; Mr. Stringer, $147,870, 27 years; Mr. Burgess, $98,369, 14 years; Mr. Betette, $92,931, 22 years; and Mr. Burns, $87,465, 21 years. PENSION PLAN TABLE Years of Service Remuneration 5 10 20 30 35 - --------------------- -------------------- -------------------- -------------- $ 10,000 $ 575 $ 1,150 $ 2,300 $ 3,450 $ 4,025 20,000 1,150 2,300 4,600 6,900 8,050 40,000 2,300 4,600 9,200 13,800 16,100 60,000 3,600 7,139 14,385 21,578 25,174 80,000 5,397 10,793 21,585 32,377 37,777 100,000 7,196 14,393 28,785 43,178 50,374 120,000 8,996 17,993 45,985 53,978 62,974 140,000 10,796 21,593 43,185 64,778 75,574 160,000 12,596 25,193 50,385 75,578 88,174 180,000 14,396 28,793 57,585 86,378 100,774 The base compensation and any bonuses are covered by the Pension Plan. There is no variation between the compensation covered by the Pension Plan and the amounts listed in the Summary Compensation Table. The benefits of the Pension Plan are based on straight-life annuity amounts, and are not subject to any deduction for Social Security or other offset amounts. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Decisions with respect to the compensation of the Company's executive officers are made by the Compensation Committee of the Board. Each member of the Compensation Committee is a non-employee director. All decisions of the Compensation Committee relating to the compensation matters are reviewed by the full Board of Directors. Set forth below is a report submitted by the Compensation Committee which addresses the Company's compensation policies for 1996 with respect to Mr. Patterson as CEO, and Messrs. Stringer, Burgess, Betette and Burns, who represent all executive officers of the Company who earned in excess of $100,000 during 1996. 9 COMPENSATION COMMITTEE REPORT GENERAL COMPENSATION POLICIES AND SPECIFIC GUIDELINES. The Compensation Committee believes that compensation arrangements should be structured so as to provide competitive levels of compensation that integrate pay with the Company's performance goals. The Company has in place a Senior Management Incentive Plan (the "Bonus Plan"), which establishes a point system that determines incentive cash awards based on the extent to which the Company met certain performance goals adopted by the Compensation Committee. The Bonus Plan provides that the twelve members of senior management who are designated each year by the Compensation Committee (the "Senior Executives") will receive up to 35% of their base salary in incentive cash compensation if 100% of the performance goals were met and exceeded by specified amounts. For 1996, the Compensation Committee adopted seven performance goals, including return on assets, return on equity, net interest margin, net overhead ratio, net charge-off ratio, deposit growth and loan growth. All seven of the 1996 goals were met and exceeded. The purpose of the Bonus Plan is to allow management the opportunity to participate in the Company's process of building The Palmetto Bank. Base salaries were set by the Board, after recommendation by the Compensation Committee. They were intended to reflect individual performance and responsibility and to represent compensation believed by the Compensation Committee to be appropriate if the Senior Executives performed adequately. RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION. As described above, Company performance was an integral part in determining the compensation of Senior Executives. Assuming that 100% of the performance goals are met each year, approximately 35% of a Senior Executive's total compensation will consist of incentive payments made pursuant to the Bonus Plan. The Company's Common Stock is not publicly traded on any exchange. Accordingly, internal goals are its means of judging its performance. COMPENSATION PAID DURING 1996. Compensation paid the Company's executive officers in 1996 consisted of the following elements: base salary, bonus and payments made pursuant to the Company's ESOP. Payments under the Company's ESOP are made to all employees on a non-discriminatory basis. As noted above, the Company achieved and exceeded all of its seven performance goals for 1996. Based on Company performance, twelve executive officers, including the Senior Executives, received bonuses equal to 32.2% of their base salary pursuant to the Bonus Plan. OTHER COMPENSATION PLANS AND COMPENSATION. The Company has adopted certain broad-based employee benefit plans in which Senior Executives participate, as well as certain executive officer life insurance plans. The value of these items is set forth in the Summary Compensation Table above under the "All Other Compensation" heading. Executive officers also may have received perquisites in connection with their employment. However, such perquisites totaled less than 10% of their cash compensation in 1996. The foregoing benefits and compensation are not directly or indirectly tied to Company performance. MR. PATTERSON'S 1996 COMPENSATION. Mr. Patterson's 1996 compensation consisted of a base salary, cash bonus, payments under the Company's ESOP, split-dollar life insurance and supplemental life insurance policies, and certain perquisites (which did not exceed 10% of his base salary and bonus) and the various forms of other compensation set forth in the preceding paragraph that were available generally to all employees. Mr. Patterson's base salary was $170,000 in 1996, as recommended by the Compensation Committee to the Board of Directors. Mr. Patterson also received $9,000 in directors' fees, which is included in the Summary Compensation Table above under the "Salary" heading. Mr. Patterson's cash bonus was determined in accordance with the Bonus Plan and was 32.2% of his base salary, or $54,740, for 1996. COMPENSATION COMMITTEE: James M. Shoemaker, Jr., Chairman James A. Cannon Russell B. Emerson (for 1996) 10 PERFORMANCE GRAPH The following graph sets forth the performance of the Company's Common Stock for the period from December 31, 1991 through December 31, 1996 as compared to the NASDAQ Market Composite Index and an index comprised of all NASDAQ commercial banks and bank holding companies. All stock prices reflect the reinvestment of cash dividends and have been restated to give effect to the Stock Split. [Performance Graph] 11 PALMETTO BANCSHARES, INC. ANNUAL INCREASE OF $100 INVESTMENT December 31, 1991 to December 31, 1996 Palmetto Bancshares Stock Price Initial Price Price % Investment Investment Beginning End Increase End ------------- --------------- ------------------------- ------------ 12/31/91 100.00 12/31/92 100.00 8.33 9.48 13.80% 113.80 12/31/93 113.80 9.48 10.16 7.14% 120.94 12/31/94 120.94 10.16 11.84 16.57% 137.50 12/31/95 137.50 11.84 13.55 14.41% 151.91 12/31/96 151.91 13.55 20.28 49.67% 201.58 NASDAQ COMPOSITE MARKET INDEX ANNUAL INCREASE OF $100 INVESTMENT December 31, 1991 to December 31, 1996 NASDAQ Market Index Stock Price Initial Price Price % Investment Investment Beginning End Increase End ------------- --------------- ----------- --------------- ------------ 12/31/91 100.00 12/31/92 100.00 586.34 676.95 15.45% 115.45 12/31/93 115.45 676.95 776.80 14.75% 130.20 12/31/94 130.20 776.80 751.96 -3.20% 127.01 12/31/95 127.01 751.96 1052.13 39.92% 166.92 12/31/96 166.92 1052.13 1291.03 22.71% 189.63 NASDAQ BANK COMPOSITE INDEX ANNUAL INCREASE OF $100 INVESTMENT December 31, 1991 to December 31, 1996 NASDAQ Market Index Stock Price Initial Price Price % Investment Investment Beginning End Increase End ------------- -------------------------- --------------- ----------- 12/31/91 100.00 12/31/92 100.00 350.56 532.93 52.02% 152.02 12/31/93 152.02 532.93 689.43 29.37% 181.39 12/31/94 181.39 689.43 697.07 1.11% 182.50 12/31/95 182.50 697.07 1009.41 44.81% 227.30 12/31/96 227.30 1009.41 1273.46 26.16% 253.46 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company knows of no person who, or group that, owns beneficially more than 5% of the outstanding shares of Common Stock of the Company as of March 3, 1997, except as set forth below: NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF OWNER BENEFICIAL OWNERSHIP CLASS - ------------------------------ --------------- ------- The Palmetto Bank 275,180 9.05% Trustee for the Employee Stock Ownership Plan 301 Hillcrest Drive Laurens, SC 29360 L. Leon Patterson 257,673 8.47% 301 Hillcrest Drive Laurens, SC 29360 D. Smith Patterson 168,093 5.53% 831 West Main Street Laurens, SC 29360 Dwight F. Patterson, Jr. 160,504 5.28% Post Office Box 5564 Spartanburg, SC 29304 The information below is furnished as of March 3, 1997 as to the Company's Common Stock owned beneficially or of record by each of the Directors individually, by certain named executive officers and by all Directors and executive officers of the Company as a group. Unless otherwise noted, each person has sole voting power and sole investment power with respect to shares listed. AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS DIRECTORS L. Leon Patterson 257,673(1) 8.47% Paul W. Stringer 30,205(2) (3) Russell B. Emerson 1,800 (3) James M. Shoemaker, Jr. 6,600 (3) John T. Gramling, II 6,000 (3) W. Fred Davis, Jr. 14,650(4) (3) David P. George, Jr. 2,100 (3) James A. Cannon 6,514 (3) J. David Wasson 3,900 (3) Michael D. Glenn 915 (3) 13 EXECUTIVE OFFICERS Ralph M. Burns, III 18,151(5) (3) Philip A. Betette 29,688(6) (3) David E. Burgess 21,594(7) (3) DIRECTORS AND EXECUTIVE 399,790 13.14 (8) OFFICERS AS A GROUP (14 persons) (1) Mr. Patterson is Chief Executive Officer of the Company. The number of shares shown as beneficially owned by Mr. Patterson includes approximately 14,672 shares allocated to his account per the latest report of the Company's ESOP for fiscal year 1995. The allocation to employees of the fiscal year 1996 contribution to the ESOP has not been completed. Mr. Patterson is fully vested in all shares allocated to his account pursuant to the ESOP. Also included are 21,000 shares owned by Mr. Patterson's wife, as to which shares Mr. Patterson disclaims beneficial ownership, and 12,000 unissued shares that can be acquired by the exercise of options. (2) Mr. Stringer is President of the Company. The number of shares shown as beneficially owned by Mr. Stringer includes approximately 11,925 shares allocated to his account per the latest report of the Company's ESOP for fiscal year 1995. The allocation to employees of the fiscal year 1996 contribution to the ESOP has not been completed. Mr. Stringer is fully vested in all shares allocated to his account pursuant to the ESOP. Also included are 15,000 unissued shares that can be acquired by the exercise of options. (3) Each of these persons owns less than one percent of the outstanding shares of Common Stock of the Company. (4) Mr. Davis is a Director of the Company. The number of shares shown as beneficially owned by Mr. Davis includes 700 shares held in a trust account for the benefit of Mr. Davis's daughter, as to which he acts as Custodian. Mr. Davis disclaims beneficial ownership of the trust account shares. (5) Mr. Burns is a Vice President of the Company. The number of shares shown as beneficially owned by Mr. Burns includes approximately 7,431 shares allocated to his account per the latest report of the Company's ESOP for fiscal year 1995. The allocation to employees of the fiscal year 1996 contribution to the ESOP has not been completed. Mr. Burns is fully vested in all shares allocated to his account pursuant to the ESOP. Also included are 9,000 unissued shares that can be acquired by the exercise of options. (6) Mr. Betette is a Vice President of the Company. The number of shares shown as beneficially owned by Mr. Betette includes approximately 8,136 shares allocated to his account per the latest report of the Company's ESOP for fiscal year 1995. The allocation to employees of the fiscal year 1996 contribution to the ESOP has not been completed. Mr. Betette is fully vested in all shares allocated to his account pursuant to the ESOP. (7) Mr. Burgess is a Vice President of the Company. The number of shares shown as beneficially owned by Mr. Burgess includes approximately 7,964 shares allocated to his account per the latest report of the Company's ESOP for fiscal year 1995. The allocation to employees of the fiscal year 1996 contribution to the ESOP has not been completed. Mr. Burgess is fully vested in all shares allocated to his account pursuant to the ESOP. Also included are 12,000 unissued shares that can be acquired by the exercise of options. (8) The beneficial ownership stated above represents sole voting and investment power, except as indicated in the footnotes above. 14 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain of the Company's directors and officers are also customers of the Company and have home mortgages, personal credit lines, credit cards, and other loans with the Company. All of these loans were made in the ordinary course of business, were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. The law firm of Wyche, Burgess, Freeman & Parham, P.A. serves as general counsel to the Company and receives legal fees from the Company. Mr. Shoemaker, a Director of the Company and Chairman of the Compensation Committee, is a member of such law firm. The Company believes that the terms of its relationship with the law firm are at least as favorable as could be obtained from a third party. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires the Company's Directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of changes in ownership of Common Stock of the Company. Executive officers, Directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms filed. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during 1996, all required Section 16(a) filings applicable to its executive officers, Directors and greater than 10% beneficial owners were made. INDEPENDENT PUBLIC ACCOUNTANTS Representatives of KPMG Peat Marwick LLP, the Company's independent auditor, will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions from shareholders. SHAREHOLDER PROPOSALS Proposals by shareholders for consideration at the 1998 Annual Meeting of Shareholders must be received at the Company's offices at 301 Hillcrest Drive, P. O. Box 49, Laurens, South Carolina 29360, no later than December 9, 1997, if any such proposal is to be eligible for inclusion in the Company's proxy materials for its 1998 Annual Meeting. Under the regulations of the Securities and Exchange Commission, the Company is not required to include shareholder proposals in its proxy materials unless certain other conditions specified in those regulations are satisfied. FINANCIAL INFORMATION THE COMPANY'S 1996 ANNUAL REPORT IS BEING MAILED TO SHAREHOLDERS CONTEMPORANEOUSLY WITH THESE PROXY MATERIALS. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY SHAREHOLDER OF RECORD AS OF APRIL 1, 1997, WHO SO REQUESTS IN WRITING, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST SHOULD BE DIRECTED TO PALMETTO BANCSHARES, INC., POST OFFICE BOX 49, LAURENS, SOUTH CAROLINA 29360 ATTENTION: CORPORATE SECRETARY. 15 OTHER MATTERS Management is not aware of any other matter to be brought before the Annual Meeting. If other matters are duly presented for action, it is the intention of the persons named in the enclosed proxy to vote on such matters in accordance with their judgment. By order of the Board of Directors, /s/ L. Leon Patterson L. LEON PATTERSON Chairman March 14, 1997 Laurens, South Carolina 16 - ------------------------------------------------------------------------------ APPENDIX P R O PALMETTO BANCSHARES, INC. X ANNUAL MEETING, APRIL 15, 1997 Y The undersigned shareholder of Palmetto Bancshares, Inc., hereby revoking all previous proxies, hereby appoints L. Leon Patterson and Teresa M. Crabtree and each of them, the attorneys of the undersigned, with power of substitution, to vote all stock of Palmetto Bancshares, Inc. standing in the name of the undersigned upon all matters at the Company's Annual Meeting to be held at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina on Tuesday, April 15, 1997 at 3:00 p.m. and at any adjournments thereof, with all powers the undersigned would possess if personally present, and without limiting the general authorization and power hereby given, directs said attorneys or either of them to cast the undersigned's vote as specified below. 1. ELECTION OF DIRECTORS. [ ] FOR ALL NOMINEES set forth below [ ] WITHHOLD AUTHORITY (except as to vote for all nominees below: marked to the contrary below [ ]): James A. Cannon L. Leon Patterson J. David Wasson, Jr. INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE. 2. At their discretion upon such other matters as may properly come before the meeting. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PALMETTO BANCSHARES, INC. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR APPROVAL OF EACH OF THE PROPOSALS ABOVE. Please sign this Proxy as your name or names appear hereon. If stock is held jointly, signature should appear for both names. When signing as attorney, administrator, trustee, guardian or agent, please indicate the capacity in which you are acting. If stock is held by a corporation, please sign in full corporate name by authorized officer and give title of office. Dated this ____ day of , 1997 ------------------ Print Name (and title if appropriate) Signature Print Name (and title if appropriate) Signature PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----