UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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 ss.240.14a-12
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K-FED BANCORP
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(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:
[K-FED LOGO]
September 24, 2004
Dear Stockholder:
We cordially invite you to attend the 2004 Annual Meeting of Stockholders of
K-Fed Bancorp, the parent company of Kaiser Federal Bank. The annual meeting
will be held at the main office of Kaiser Federal Bank, located at 1359 North
Grand Avenue, Covina, California 91724, at 5:00 p.m., local time, on October 26,
2004.
The enclosed notice of annual meeting of stockholders and proxy statement
describes the formal business to be transacted at the annual meeting. During the
annual meeting we will also report on the operations of K-Fed Bancorp. Directors
and officers of K-Fed Bancorp will be present to respond to any questions that
stockholders may have.
The business to be conducted at the annual meeting includes the election of two
directors, the approval of the K-Fed Bancorp 2004 Stock Option Plan, the
approval of the K-Fed Bancorp 2004 Recognition and Retention Plan, and the
ratification of the appointment of Crowe Chizek and Company LLC as the
independent auditors for K-Fed Bancorp for the fiscal year ending June 30, 2005.
The board of directors of K-Fed Bancorp has determined that the matters to be
considered at the annual meeting are in the best interests of K-Fed Bancorp and
its stockholders. For the reasons set forth in the proxy statement, the board of
directors unanimously recommends a vote "FOR" each matter to be considered.
Also enclosed for your review is our 2004 Annual Report to Stockholders, which
contains detailed information concerning the activities and operating
performance of K-Fed Bancorp. On behalf of the board of directors, we urge you
to vote your shares of common stock as soon as possible even if you currently
plan to attend the annual meeting. You can vote your shares of common stock
prior to the annual meeting by telephone, on the Internet or by mail with the
enclosed proxy card, in each case, in accordance with the instructions on the
proxy card. This will not prevent you from voting in person, but will assure
that your vote is counted if you are unable to attend the annual meeting.
Sincerely,
/s/ K. M. Hoveland
K. M. Hoveland
President and Chief Executive Officer
K-FED BANCORP
1359 North Grand Avenue
Covina, California 91724
(800) 524-2274
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To be held on October 26, 2004
Notice is hereby given that the 2004 Annual Meeting of Stockholders of
K-Fed Bancorp will be held at the main office of Kaiser Federal Bank, located at
1359 North Grand Avenue, Covina, California 91724, on October 26, 2004, at 5:00
p.m., local time.
A proxy card and a proxy statement for the annual meeting are enclosed.
The annual meeting is for the purpose of considering and acting upon:
1. The election of two directors of K-Fed Bancorp;
2. The approval of the K-Fed Bancorp 2004 Stock Option Plan;
3. The approval of the K-Fed Bancorp 2004 Recognition and Retention
Plan;
4. The ratification of the appointment of Crowe Chizek and Company
LLC as the independent auditors for K-Fed Bancorp for the fiscal
year ending June 30, 2005; and
such other matters as may properly come before the annual meeting, or any
adjournments thereof. The board of directors of K-Fed Bancorp is not aware of
any other business to come before the annual meeting.
Any action may be taken on the foregoing proposals at the annual meeting
on the date specified above, or on any date or dates to which the annual meeting
may be adjourned. Stockholders of record at the close of business on August 31,
2004, are the stockholders entitled to vote at the annual meeting, and any
adjournments thereof.
EVEN IF YOU DO NOT PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR
SHARES OF COMMON STOCK WITHOUT DELAY. YOU CAN VOTE YOUR SHARES OF COMMON STOCK
PRIOR TO THE ANNUAL MEETING BY TELEPHONE, ON THE INTERNET OR BY MAIL WITH THE
ENCLOSED PROXY CARD, IN EACH CASE, IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
PROXY CARD. YOU MAY REVOKE A PROXY AT ANY TIME BEFORE WE VOTE AT THE ANNUAL
MEETING. YOU MAY DO SO BY EXECUTING AND RETURNING A PROXY CARD DATED LATER THAN
A PREVIOUSLY SUBMITTED PROXY, BY PROPERLY SUBMITTING A LATER DATED PROXY VIA
TELEPHONE OR THE INTERNET OR BY SUBMITTING A WRITTEN REVOCATION TO THE SECRETARY
OF K-FED BANCORP BEFORE THE VOTE IS TAKEN AT THE ANNUAL MEETING. IF YOU HOLD
SHARES OF COMMON STOCK THROUGH A BROKER, YOU SHOULD FOLLOW THE INSTRUCTIONS OF
YOUR BROKER REGARDING REVOCATION OF PROXIES. IF YOU ATTEND THE ANNUAL MEETING
YOU MAY REVOKE YOUR PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE
ANNUAL MEETING. HOWEVER, IF YOUR SHARES ARE NOT REGISTERED IN YOUR NAME, YOU
WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE PERSONALLY AT
THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Rita H. Zwern
Rita H. Zwern
Secretary
Covina, California
September 24, 2004
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A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
PROXY STATEMENT
K-FED BANCORP
1359 North Grand Avenue
Covina, California 91724
(800) 524-2274
ANNUAL MEETING OF STOCKHOLDERS
October 26, 2004
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the board of directors of K-Fed Bancorp to be used at the
2004 Annual Meeting of Stockholders of K-Fed Bancorp, which will be held at the
main office of Kaiser Federal Bank, located at 1359 North Grand Avenue, Covina,
California 91724, on October 26, 2004, at 5:00 p.m., local time, and all
adjournments of the annual meeting. The accompanying notice of annual meeting of
stockholders and this proxy statement are first being mailed to stockholders on
or about September 24, 2004.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the annual meeting and all
adjournments thereof. Proxies solicited on behalf of the board of directors of
K-Fed Bancorp will be voted in accordance with the directions given thereon. YOU
CAN VOTE YOUR SHARES OF K-FED BANCORP COMMON STOCK PRIOR TO THE ANNUAL MEETING
BY TELEPHONE, ON THE INTERNET OR BY SIGNING AND RETURNING THE ENCLOSED PROXY
CARD TO K-FED BANCORP, IN ACCORDANCE WITH INSTRUCTIONS SET FORTH ON THE PROXY
CARD. PROXIES RECEIVED BY K-FED BANCORP, WHICH ARE SIGNED, BUT CONTAIN NO
INSTRUCTIONS FOR VOTING, WILL BE VOTED "FOR" THE PROPOSALS SET FORTH IN THIS
PROXY STATEMENT FOR CONSIDERATION AT THE ANNUAL MEETING.
Proxies may be revoked by sending written notice of revocation to the
Secretary of K-Fed Bancorp, Rita H. Zwern, at the address of K-Fed Bancorp shown
above, or by returning a duly executed proxy bearing a later date by mail,
telephone or the Internet. The presence at the annual meeting of any stockholder
who had given a proxy shall not revoke such proxy unless the stockholder
delivers his or her ballot in person at the annual meeting or delivers a written
revocation to the Secretary of K-Fed Bancorp prior to the voting of such proxy.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Holders of record of K-Fed Bancorp's common stock, par value $0.01 per
share, as of the close of business on August 31, 2004 are entitled to one vote
for each share then held. As of August 31, 2004, there were 14,548,500 shares of
common stock issued and outstanding. The presence in person or by proxy of a
majority of the outstanding shares of common stock entitled to vote is necessary
to constitute a quorum at the annual meeting. Abstentions and broker non-votes
will be counted for purposes of determining that a quorum is present.
As to the election of directors, the proxy card being provided by the
board of directors enables a stockholder to vote FOR the election of the
nominees proposed by the board of directors, or to WITHHOLD authority to vote
for one or more of the nominees being proposed. Directors are elected by a
plurality of votes cast, without regard to either broker non-votes, or proxies
as to which the authority to vote for the nominees being proposed is withheld.
As to the approval of the K-Fed Bancorp 2004 Stock Option Plan, by
checking the appropriate box, a stockholder may: (i) vote FOR the approval; (ii)
vote AGAINST the approval; or (iii) ABSTAIN from voting on such approval. The
affirmative vote of holders of a majority of the votes eligible to be cast,
excluding votes eligible to be cast by K-Fed Mutual Holding Company, at the
annual meeting in person or by proxy, is required for the approval of the K-Fed
Bancorp 2004 Stock Option Plan. Shares as to which the "ABSTAIN" box has been
selected on the proxy card and broker non-votes will be counted as shares
present and entitled to vote and will have the same effect as a vote against the
matter.
As to the approval of the K-Fed Bancorp 2004 Recognition and Retention
Plan, by checking the appropriate box, a stockholder may: (i) vote FOR the
approval; (ii) vote AGAINST the approval; or (iii) ABSTAIN from voting on such
approval. The affirmative vote of holders of a majority of the votes eligible to
be cast, excluding votes eligible to be cast by K-Fed Mutual Holding Company, at
the annual meeting in person or by proxy, is required for the approval of the
K-Fed Bancorp 2004 Recognition and Retention Plan. Shares as to which the
"ABSTAIN" box has been selected on the proxy card and broker non-votes will be
counted as shares present and entitled to vote and will have the same effect as
a vote against the matter.
As to the ratification of Crowe Chizek and Company LLC as K-Fed
Bancorp's independent auditor, by checking the appropriate box, a stockholder
may: (i) vote FOR the ratification; (ii) vote AGAINST the ratification; or (iii)
ABSTAIN from voting on such ratification. The affirmative vote of holders of a
majority of the votes cast at the annual meeting in person or by proxy is
required for the ratification of Crowe Chizek and Company LLC as the independent
auditor for the fiscal year ending June 30, 2005. The ratification of this
matter shall be determined by a majority of the votes cast at the annual
meeting, without regard to broker non-votes or proxies marked "ABSTAIN".
Management of K-Fed Bancorp anticipates that K-Fed Mutual Holding
Company, the majority stockholder of K-Fed Bancorp, will vote all of its shares
of common stock in favor of all the matters set forth above. If K-Fed Mutual
Holding Company votes all of its shares in favor of each proposal, the approval
of the election of the director nominees and the ratification of Crowe Chizek
and Company LLC would be assured. Pursuant to the regulations of the Office of
Thrift Supervision, the affirmative vote of the holders of a majority of the
votes eligible to be cast, excluding the votes eligible to be cast by K-Fed
Mutual Holding Company, is required for the approval of the K-Fed Bancorp 2004
Stock Option Plan and the K-Fed Bancorp 2004 Recognition and Retention Plan. As
of August 31, 2004, K-Fed Mutual Holding Company held 8,861,750 shares of common
stock and persons other than K-Fed Mutual Holding Company held 5,686,750 shares
of common stock.
Persons and groups who beneficially own in excess of 5% of the common
stock of K-Fed Bancorp are required to file certain reports with the Securities
and Exchange Commission regarding such ownership pursuant to the Securities
Exchange Act of 1934, as amended. The following table sets forth, as of August
31, 2004, the shares of common stock beneficially owned by each person who was
the beneficial owner of more than 5% of the outstanding shares of common stock
of K-Fed Bancorp, as well as shares beneficially owned in the aggregate by K-Fed
Mutual Holding Company and all directors and executive officers as a group.
AMOUNT OF SHARES
OWNED AND NATURE PERCENT OF SHARES
NAME AND ADDRESS OF OF BENEFICIAL OF COMMON STOCK
BENEFICIAL OWNERS OWNERSHIP (1) OUTSTANDING
- -------------------- ------------------ -----------------
K-Fed Mutual Holding Company 8,861,750 60.91%
1359 North Grand Avenue
Covina, California 91724
K-Fed Mutual Holding Company, 9,082,021 62.43%
and all of K-Fed Bancorp's and
Kaiser Federal Bank's directors and
executive officers as a group
(10 directors and officers) (2)
- ----------------------------
(1) 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, of any shares of common stock if he has shared voting or
investment power with respect to such security, or has a right to
acquire beneficial ownership at any time within 60 days from the date as
of which beneficial ownership is being determined. 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, and includes all shares held directly as well as by spouses and
minor children, in trust and other indirect ownership, over which shares
the named individuals effectively exercise sole or shared voting or
investment power.
2
(2) Includes shares of common stock held by K-Fed Mutual Holding Company, of
which K-Fed Bancorp's and Kaiser Federal Bank's directors and two of its
executive officers are also executive officers and directors. K-Fed
Bancorp's and Kaiser Federal Bank's executive officers and directors
beneficially owned 220,271 shares of common stock, or 1.51% of the
outstanding shares of common stock.
PROPOSAL I - ELECTION OF DIRECTORS
K-Fed Bancorp's board of directors consists of seven members. K-Fed
Bancorp's bylaws provide that approximately one-third of the directors are to be
elected annually. Directors of K-Fed Bancorp are generally elected to serve for
a three-year period, or a shorter period if the director is elected to fill a
vacancy, and until their respective successors shall have been elected and shall
qualify. Two directors will be elected at the annual meeting and will serve
until their successors have been elected and qualified. The
governance/nominating committee of K-Fed Bancorp has nominated James L. Breeden
and Frank G. Nicewicz to serve as directors for three-year terms. All of the
nominees are currently members of the board of directors.
The table below sets forth certain information regarding the composition
of K-Fed Bancorp's board of directors as of August 31, 2004, including the terms
of office of board members. It is intended that the proxies solicited on behalf
of the board of directors (other than proxies in which the vote is withheld as
to the nominee) will be voted at the annual meeting for the election of the
nominees identified below. If the nominees are unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the board of directors may recommend. At this time, the board of
directors knows of no reason why the nominees might be unable to serve, if
elected. Except as indicated herein, there are no arrangements or understandings
between the nominees and any other person pursuant to which such nominees were
selected.
SHARES OF
COMMON STOCK
POSITIONS HELD WITH DIRECTOR CURRENT TERM BENEFICIALLY PERCENT
NAME (1) AGE(2) K-FED BANCORP SINCE (3) TO EXPIRE OWNED (4) OF CLASS
- ----------------------- -------- ----------------------------- ------------ -------------- --------------- -------------
NOMINEES
James L. Breeden 61 Chairman of the Board 1987 2004 16,887 (5) *
Frank G. Nicewicz 48 Director 1995 2004 15,000 *
DIRECTORS CONTINUING IN OFFICE
Marilyn T. Owsley 45 Director 2000 2005 30,000 (6) *
Rita H. Zwern 56 Director and Secretary 1987 2005 15,000 *
Kay M. Hoveland 57 Director, President 2000 2006 30,100 (7) *
and Chief Executive
Officer
Gerald A. Murbach 56 Director 2000 2006 30,000 (8) *
Robert C. Steinbach 51 Director 2000 2006 30,000 (9) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Daniel A. Cano 49 Chief Financial Officer N/A N/A 30,000 (10) *
Nancy J. Huber** 41 Chief Credit Officer N/A N/A 15,000 *
Jeanne R. Thompson** 57 Chief Operating Officer N/A N/A 5,966 (11) *
All directors and
executive officers as a
group (10 persons) 220,271(12) 1.51%
3
- -----------------------------
* Less than 1%.
** Ms. Huber and Ms. Thompson are officers of Kaiser Federal Bank only.
(1) The mailing address for each person listed is 1359 North Grand Avenue,
Covina, California 91724.
(2) As of August 31, 2004.
(3) Reflects initial appointment to the board of directors of Kaiser
Permanente Federal Credit Union, the predecessor to Kaiser Federal Bank,
with the exception of Directors Steinbach, Murbach, Hoveland and Owsley.
Each director of K-Fed Bancorp is also a director of Kaiser Federal Bank
and K-Fed Mutual Holding Company, which owns the majority of the issued
and outstanding shares of common stock of K-Fed Bancorp.
(4) See definition of "beneficial ownership" in the table in "Voting
Securities and Principal Holders Thereof."
(5) Includes 1,887 shares of common stock held by Mr. Breeden's spouse.
(6) Includes 15,000 shares of common stock held by Ms. Owsley's spouse.
(7) Includes 15,000 shares of common stock held in a trust for Ms. Hoveland,
15,000 shares of common stock held in a trust for Ms. Hoveland's spouse
and 100 shares of common stock held in a Keogh plan for Ms. Hoveland's
spouse.
(8) Includes 15,000 shares of common stock held by Mr. Murbach's spouse.
(9) Includes 15,000 shares of common stock held by Mr. Steinbach's spouse.
(10) Includes 15,000 shares of common stock held by Mr. Cano's spouse.
(11) Includes 1,172 shares of common stock held by Ms. Thompson's spouse and
1,400 shares of common stock held in a trust for Ms. Thompson.
(12) Includes 2,318 shares of common stock allocated to the accounts of
executive officers under the K-Fed Bancorp employee stock ownership plan
and excludes the remaining 452,622 shares of common stock, or 3.1% of
the common stock outstanding, owned by the employee stock ownership plan
for the benefit of employees. Under the terms of the employee stock
ownership plan, shares of common stock allocated to the account of
employees are voted in accordance with instructions of the respective
employees. Unallocated shares of common stock are voted by the trustee
of the employee stock ownership plan.
The principal occupation during the past five years of each director of
K-Fed Bancorp is set forth below. All directors have held their present
positions for five years unless otherwise stated.
JAMES L. BREEDEN. Mr. Breeden has served as chairman of the board of
directors since November 2000. He is a retired hospital administrator for the
Kaiser Foundation Hospitals where he worked for 14 years.
FRANK G. NICEWICZ. Mr. Nicewicz has been employed by Kaiser Foundation
Health Plan since 1995 and currently holds the position of financial manager in
Oakland, California.
MARILYN T. OWSLEY. Ms. Owsley has served as a financial executive with
the Kaiser Permanente Medical Care Program since 1994.
RITA H. ZWERN. Ms. Zwern has been employed by Kaiser Foundation Health
Plan since 1984 and currently is the manager of State Programs, located in
Pasadena, California. Ms. Zwern has served as secretary of K-Fed Bancorp since
its formation in July 2003.
KAY M. HOVELAND. Ms. Hoveland has served as president and chief
executive officer of Kaiser Federal Bank since 1987. Ms. Hoveland has served as
president and chief executive officer of K-Fed Bancorp since its formation in
July 2003.
GERALD A. MURBACH. Mr. Murbach is currently retired. He previously
served as a human resources consultant for the Universal Music Group during 2001
and the Times Mirror newspapers from 1992 to 2001.
ROBERT C. STEINBACH. Mr. Steinbach has served as the chief inspector for
the Building and Safety Department of the City of Los Angeles since 2002 and has
been with the Department since 1985. Mr. Steinbach is the brother-in-law of
Daniel A. Cano, the Chief Financial Officer of K-Fed Bancorp and Kaiser Federal
Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The business experience for at least the past five years for each of
three executive officers of Kaiser Federal Bank, including service with Kaiser
Permanente Federal Credit Union, who do not serve as directors, is set forth
below.
4
DANIEL A. CANO. Mr. Cano has served as chief financial officer of Kaiser
Federal Bank since 1998, and K-Fed Bancorp since its formation in July 2003. Mr.
Cano is also responsible for the information technology function of Kaiser
Federal Bank.
NANCY J. HUBER. Ms. Huber has served as chief credit officer of Kaiser
Federal Bank since 1999 and Community Reinvestment Act officer since 2002. From
1995 until 1999, she served as vice president of credit.
JEANNE R. THOMPSON. Ms. Thompson has served as chief operating officer
of Kaiser Federal Bank since 2001. She served as senior vice president for
branch operations of IndyMacBank, located in Pasadena, California from 1983
until 2001.
BOARD INDEPENDENCE
The board of directors consists of a majority of "independent directors"
within the meaning of the Nasdaq corporate governance listing standards. The
board of directors of K-Fed Bancorp has determined that directors Breeden,
Murbach, Nicewicz, Owsley and Zwern are each "independent" within the meaning of
the Nasdaq corporate governance listing standards. The board of directors has
adopted a policy that the independent directors of the board shall meet in
executive sessions periodically, which meetings may be held in conjunction with
regularly scheduled board meetings.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of K-Fed Bancorp is conducted at regular and special
meetings of the full board of directors and its standing committees. The
standing committees consist of the executive, audit, compensation and
governance/nominating committees. During the fiscal year ended June 30, 2004,
the board of directors met at twelve regular meetings and no special meetings
were called. No director attended fewer than 75% in the aggregate of the total
number of board meetings held and the total number of committee meetings on
which he or she served during fiscal 2004.
EXECUTIVE COMMITTEE. The executive committee consists of directors
Breeden, who serves as chairman, Hoveland, Zwern and Steinbach. The executive
committee meets monthly or more frequently as needed. The executive committee is
generally authorized to act on behalf of the full board of directors when
certain business matters require prompt action. The executive committee met
eight times during the fiscal year ended June 30, 2004.
AUDIT COMMITTEE. The audit committee consists of directors Nicewicz, who
serves as chairman, Owsley and Zwern. The audit committee meets as needed. The
audit committee meets with the internal auditor to review audit programs and the
results of audits of specific areas as well as other regulatory compliance
issues. In addition, the audit committee meets with the independent certified
public accountants on a quarterly basis to discuss the results of operations and
on an annual basis to review the results of the annual audit and other related
matters. Each member of the audit committee is "independent" as defined in the
Nasdaq corporate governance listing standards. The board of directors has
determined that director Nicewicz qualifies as an "audit committee financial
expert" as that term is used in the rules and regulations of the Securities and
Exchange Commission. K-Fed Bancorp's board of directors has adopted a written
charter for the audit committee. The audit committee met five times during the
fiscal year ended June 30, 2004.
COMPENSATION COMMITTEE. The compensation committee is responsible for
recommending to the full board the compensation of the chief executive officer
and senior management, reviewing and administering overall compensation policy,
including setting performance measures and goals, approving benefit programs,
establishing compensation of the board of directors and other matters of
personnel policy and practice and coordinating such actions with the human
resources committee of Kaiser Federal Bank. The compensation committee of K-Fed
Bancorp is comprised of directors Breeden (Chairman), Murbach, Nicewicz, Owsley
and Zwern. Each member of the compensation committee is considered "independent"
as defined in the Nasdaq corporate governance listing standards. The report of
the compensation committee of K-Fed Bancorp is included elsewhere in this proxy
statement. The compensation committee of K-Fed Bancorp met one time during 2004.
5
GOVERNANCE/NOMINATING COMMITTEE. The governance/nominating committee of
K-Fed Bancorp consists of directors Murbach, Owsley and Zwern. Each member of
the governance/nominating committee is considered "independent" as defined in
the Nasdaq corporate governance listing standards. The board of directors of
K-Fed Bancorp has adopted a written charter for the governance/nominating
committee, which is available on K-Fed Bancorp's website at www.k-fed.com.
The functions of the governance/nominating committee include the
following:
o leading the search for individuals qualified to become members
of the board of directors and to select director nominees to be
presented for stockholder approval;
o developing and recommending to the board of directors other
specific criteria not specified in its charter for the selection
of individuals to be considered for election or re-election to
the board of directors;
o adopting procedures for the submission of recommendations by
stockholders for nominees for the board of directors; and
o annually reviewing the adequacy of its charter and recommending
any proposed changes to the board of directors.
The governance/nominating committee identifies nominees by first
evaluating the current members of the board of directors willing to continue in
service. Current members of the board of directors with skills and experience
that are relevant to K-Fed Bancorp's business and who are willing to continue in
service are first considered for re-nomination, balancing the value of
continuity of service by existing members of the board of directors with that of
obtaining a new perspective. In addition, the governance/nominating committee is
authorized by its charter to engage a third party to assist in the
identification of director nominees. The governance/nominating committee would
seek to identify a candidate who, at a minimum, satisfies the following
criteria:
o the highest personal and professional ethics and integrity and
whose values are compatible with the K-Fed Bancorp's values;
o experience and achievements that have given them the ability to
exercise and develop good business judgment;
o a willingness to devote the necessary time to the work of the
board of directors and its committees, which includes being
available for board and committee meetings;
o a familiarity with the communities in which K-Fed Bancorp
operates and/or is actively engaged in community activities;
o involvement in other activities or interests that do not create
a conflict with their responsibilities to K-Fed Bancorp and its
stockholders; and
o the capacity and desire to represent the balanced, best
interests of the stockholders of K-Fed Bancorp as a group, and
not primarily a special interest group or constituency.
The governance/nominating committee will also take into account whether
a candidate satisfies the criteria for "independence" under the Nasdaq corporate
governance listing standards.
PROCEDURES FOR THE NOMINATION OF DIRECTORS BY STOCKHOLDERS. The
governance/nominating committee has adopted procedures for the submission of
director nominees by stockholders of K-Fed Bancorp. If a determination is made
that an additional candidate is needed for the board of directors, the
governance/nominating committee will consider candidates submitted by K-Fed
Bancorp's stockholders. Stockholders can submit the names of qualified
candidates for director by writing to the chairman of the governance/nominating
committee at 1359 North Grand
6
Avenue, Covina, California 91724. The chairman must receive a submission not
less than one hundred and twenty (120) days prior to the date of K-Fed Bancorp's
proxy materials for the preceding year's annual meeting. The submission must
include the following information:
o a statement that the writer is a stockholder of K-Fed Bancorp
and is proposing a candidate for consideration by the
governance/nominating committee;
o the name and address of the stockholder as they appear on K-Fed
Bancorp's books, and number of shares of K-Fed Bancorp's common
stock that are owned beneficially by such stockholder (if the
stockholder is not a holder of record, appropriate evidence of
the stockholder's ownership will be required);
o the name, address and contact information for the candidate, and
the number of shares of common stock of K-Fed Bancorp that are
owned by the candidate (if the candidate is not a holder of
record, appropriate evidence of the stockholder's ownership
should be provided);
o a statement of the candidate's business and educational
experience;
o such other information regarding the candidate as would be
required to be included in the proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934;
o a statement detailing any relationship between the candidate and
any customer, supplier or competitor of K-Fed Bancorp or its
affiliates;
o detailed information about any relationship or understanding
between the proposing stockholder and the candidate; and
o a statement of the candidate that the candidate is willing to be
considered and willing to serve as a director of K-Fed Bancorp
if nominated and elected.
A nomination submitted by a stockholder for presentation by the
stockholder at an annual meeting of stockholders of K-Fed Bancorp must comply
with the procedural and informational requirements described in K-Fed Bancorp's
bylaws.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS. A stockholder of
K-Fed Bancorp who wants to communicate with the board of directors or with any
individual director can write to K-Fed Bancorp at 1359 North Grand Avenue,
Covina, California 91724, attention: chairman of the governance/nominating
committee. The letter should indicate that the author is a stockholder of K-Fed
Bancorp and, if shares are not held of record, should include appropriate
evidence of stock ownership. Depending on the subject matter, management will:
o forward the communication to the director or directors to whom
it is addressed;
o attempt to handle the inquiry directly, or forward the
communication for response by another employee of K-Fed Bancorp.
For example, a request for information about K-Fed Bancorp as a
stock-related matter may be forwarded to K-Fed Bancorp's
stockholder relations officer; or
o not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is unduly
hostile, threatening, illegal or otherwise inappropriate.
At each board of directors meeting, management shall present a summary
of all communications received since the last meeting that were not forwarded
and make those communications available to the directors.
7
CODE OF ETHICS
The board of directors has adopted a Code of Business Conduct and Ethics
that applies to all of K-Fed Bancorp's officers, directors and employees, and a
Code of Ethics for the Chief Executive Officer and Senior Financial Officers
(collectively the "Codes"). The Codes are intended to promote honest and ethical
conduct, full and accurate reporting and compliance with laws. The Codes are
available on K-Fed Bancorp's website at www.k-fed.com. Amendments to and waivers
from the Code of Ethics will also be disclosed on K-Fed Bancorp's website.
AUDIT COMMITTEE REPORT
The audit committee of K-Fed Bancorp operates under a written charter
adopted by the board of directors which is attached as Exhibit A to this proxy
statement. The audit committee charter is also available on K-Fed Bancorp's
website at www.k-fed.com. The audit committee of K-Fed Bancorp has issued a
report which states that it has:
o reviewed and discussed with management and K-Fed Bancorp's
independent auditors, K-Fed Bancorp's audited consolidated
financial statements for the fiscal year ended June 30, 2004;
o discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61,
COMMUNICATIONS WITH AUDIT COMMITTEES, as amended; and
o received the written disclosures and the letter from the
independent accountants required by Independence Standards Board
Standard No. 1, INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES,
and have discussed with the independent accountants their
independence from K-Fed Bancorp.
Based on the review and discussions referred to above, the audit
committee recommended to the board of directors of K-Fed Bancorp that the
audited consolidated financial statements be included in K-Fed Bancorp's annual
report on Form 10-K for the fiscal year ended June 30, 2004 and to be filed with
the Securities and Exchange Commission. In addition, the audit committee
approved the appointment of Crowe Chizek and Company LLC as the independent
auditors for K-Fed Bancorp for the fiscal year ending June 30, 2005, subject to
the ratification of this appointment by the stockholders of K-Fed Bancorp.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that K-Fed Bancorp specifically incorporates
this report by reference, and shall not otherwise be deemed filed with the
Securities and Exchange Commission.
This report has been provided by the audit committee.
Frank G. Nicewicz, Chairman
Marilyn T. Owsley
Rita H. Zwern
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The common stock of K-Fed Bancorp is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended. The officers and
directors of K-Fed Bancorp and beneficial owners of greater than 10% of the
common stock of K-Fed Bancorp ("10% beneficial owners") are required to file
reports on Forms 3, 4 and 5 with the Securities and Exchange Commission
disclosing beneficial ownership and changes in beneficial ownership of the
common stock of K-Fed Bancorp. Securities and Exchange Commission rules require
disclosure in a company's annual proxy statement and annual report on Form 10-K
of the failure of an officer, director or 10% beneficial owner of the common
stock to file a Form 3, 4 or 5 on a timely basis. Based on K-Fed Bancorp's
review of such ownership reports, except for K-Fed Mutual Holding Company's
initial statement of beneficial ownership on Form 3, no officer, director or 10%
beneficial owner of K-Fed Bancorp failed to file such ownership reports on a
timely basis for the fiscal year ended June 30, 2004.
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is composed of independent directors within
the meaning of the Nasdaq corporate governance listing standards. The
compensation committee consists of directors Breeden, who serves as chairman,
Murbach, Nicewicz, Owsley and Zwern. Under the board's policies, Ms. Hoveland,
and any other director who is also an executive officer of K-Fed Bancorp and
Kaiser Federal Bank, will not participate in the board of directors
determination of compensation for their respective offices.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Under rules established by the Securities and Exchange Commission, K-Fed
Bancorp is required to provide certain data and information regarding
compensation and benefits provided to its chief executive officer and other
executive officers. The disclosure requirements for the chief executive officer
and other executive officers include a report explaining the factors and
criteria that led to fundamental executive compensation decisions affecting
those individuals. In fulfillment of this requirement, the compensation
committee of the board of directors of K-Fed Bancorp has prepared the following
report for inclusion in this proxy statement. K-Fed Bancorp does not
independently compensate its directors or executive officers.
The role of the compensation committee is to annually review the
compensation levels of the executive officers and recommend compensation changes
to the board of directors. The committee is composed entirely of outside,
non-employee directors. It is intended that the executive compensation program
will enable K-Fed Bancorp and Kaiser Federal Bank to attract, develop and retain
talented executive officers who are capable of maximizing K-Fed Bancorp's
performance for the benefit of the stockholders. The committee has adopted a
compensation strategy that seeks to provide competitive, performance-based
compensation strongly aligned with the financial and stock performance of K-Fed
Bancorp. The compensation program has three key elements of total direct
compensation: base salary, annual incentive compensation and long term
incentives. Another element of the compensation program is benefits, such as
stock-based incentive plans.
While the committee does not use strict numerical formulas to determine
changes in compensation for the chief executive officer and other executive
officers, and while it weighs a variety of different factors in its
deliberations, it has emphasized and expects to continue to emphasize the
profitability and scope of K-Fed Bancorp's operations, the experience, expertise
and management skills of the executive officers and their roles in the future
success of K-Fed Bancorp, as well as compensation surveys prepared by
professional firms to determine compensation paid to executives performing
similar duties for similarly-sized institutions. While each of the quantitative
and non-quantitative factors described above was considered by the committee,
such factors were not assigned a specific weight in evaluating the performance
of the chief executive officer and other executive officers. Rather, all factors
were considered.
BASE SALARIES. Base salary and changes to base salary reflect a variety
of factors including the results of the independent review of the
competitiveness of the total compensation program, the individual's performance
and contribution to the long-term goals of K-Fed Bancorp, performance targets,
K-Fed Bancorp's financial performance and other relevant factors.
ANNUAL INCENTIVES. Payouts under Kaiser Federal Bank's annual incentive
compensation program are based on the attainment of annual performance
objectives. Individual payouts are a function of Kaiser Federal Bank's financial
performance and the performance of the individual executive based upon goals
established by the individual and approved by the committee. The committee
believes that this funding formula provides a direct link between financial
performance and actual compensation.
LONG-TERM INCENTIVES. Kaiser Federal Bank had an existing long-term
incentive plan consisting of awards that are based on performance over a longer
time period consisting of the previous three fiscal years. The committee
believes that such a program helped to minimize achieving short-term performance
to the detriment of long-term growth.
9
In addition, the committee believes that long-term incentives,
specifically stock options and stock awards, which will replace the long-term
incentive plan, should be a key element in the executive compensation program.
These incentives strongly align the rewards provided to executives with the
value created for stockholders through stock price appreciation.
K-Fed Bancorp intends to make initial stock option and stock award
program grants to executives and a broader employee population in the future.
The K-Fed Bancorp 2004 Stock Option Plan and the K-Fed Bancorp 2004 Recognition
and Retention Plan are being submitted for stockholder approval for such
purposes. Assuming stockholder approval of these plans, awards thereunder will
consider performance, competitive market practices, and other relevant factors.
CHIEF EXECUTIVE OFFICER. In August 2004, as effective July 1, 2004, the
compensation committee increased the base salary level of the chief executive
officer by approximately 6% based upon the same criteria used for other
executive officers. For the year ended June 30, 2004, the chief executive
officer earned an annual incentive award of $82,500 under the annual incentive
plan, based on the committee's review of the goals established for the chief
executive officer and approved by the committee. For the year ended June 30,
2004, the chief executive officer received a long-term incentive award of
$123,750, based upon financial and non-financial goals achieved over the
previous three fiscal years. The committee intends to provide the chief
executive officer with stock option and stock awards consistent with the
approach discussed for other executives assuming awards are available for
issuance.
This report has been provided by the compensation committee:
James L. Breeden, Chairman Gerald A. Murbach
Frank G. Nicewicz Marilyn T. Owsley Rita H. Zwern
10
STOCK PERFORMANCE GRAPH
Set forth hereunder is a stock performance graph comparing (a) the
cumulative total return on the common stock of K-Fed Bancorp between March 31,
2004, the day the common stock commenced trading, and June 30, 2004, (b) the
cumulative total return on stocks included in the Total Return Index for the
Nasdaq Composite over such period, and (c) the cumulative total return on stocks
included in the SNL Thrift Index over such period. Cumulative return assumes the
reinvestment of dividends, and is expressed in dollars based on an assumed
investment of $100.
There can be no assurance that K-Fed Bancorp stock performance will
continue in the future with the same or similar trend depicted in the graph.
K-Fed Bancorp will not make or endorse any predictions as to future stock
performance.
K-FED BANCORP
TOTAL RETURN PERFORMANCE
[PERFORMANCE GRAPH]
PERIOD ENDING
--------------------------------------------
INDEX 03/31/04 04/31/04 05/31/04 06/30/04
- --------------------------------------------------------------------------------
K-Fed Bancorp 100.00 85.92 94.29 94.51
NASDAQ Composite 100.00 96.31 103.52 103.11
SNL Thrift Index 100.00 90.95 95.65 91.29
11
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended June 30, 2004
and 2003, certain information as to the total remuneration paid by Kaiser
Federal Bank to Ms. Hoveland, who serves as President and Chief Executive
Officer, and certain information as to the total remuneration paid by Kaiser
Federal Bank to the three most highly compensated executive officers of Kaiser
Federal Bank, other than Ms. Hoveland, who received annual compensation in
excess of $100,000. Summary compensation information is excluded for the year
ended June 30, 2002, as K-Fed Bancorp was not a public company. Each of the
individuals listed in the table below are referred to as a named executive
officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ----------------------------------
AWARDS PAYOUTS
---------------------- -----------
OTHER ALL
YEAR ANNUAL RESTRICTED OTHER
NAME AND ENDED SALARY COMPENSATION STOCK OPTION/ LTIP COMPENSATION
PRINCIPAL POSITION 6/30 ($)(1) BONUS ($) (2) AWARDS (#) SARS (#) PAYOUTS ($) (3)
- -------------------- -------- ---------- ---------- ------------- ------------ --------- ----------- ---------------
K. M. Hoveland 2004 $268,537 $82,500 -- -- -- $123,750 $19,766
President and Chief 2003 220,000 79,200 -- -- -- -- 16,880
Executive Officer
Daniel A. Cano
Chief Financial 2004 144,557 28,400 -- -- -- 42,600 6,244
Officer 2003 137,119 27,500 -- -- -- -- 8,115
Jeanne R. Thompson
Chief Operating 2004 126,988 19,200 -- -- -- 38,400 4,953
Officer 2003 123,600 18,525 -- -- -- -- 4,842
Nancy J. Huber 2004 123,160 25,000 -- -- -- 37,500 6,510
Chief Credit Officer 2003 97,500 7,050 -- -- -- -- 5,275
- -------------------------------------------
(1) Includes deferred compensation in the sum of $184,448 for Ms. Hoveland.
See "Benefits-Kaiser Federal Bank Executive Non-Qualified Retirement
Plan.
(2) For the fiscal years ended June 30, 2004 and 2003, there were no
perquisites exceeding the lesser of $50,000 or 10% of the individual's
total salary and bonus for the year.
(3) Amount represents matching contributions under Kaiser Federal Bank's
401(k) Plan for Ms. Hoveland in the amount of $7,466 for fiscal year
2004 and $3,380 for fiscal year 2003 and director fees for Ms. Hoveland
in the amount of $12,300 for fiscal year 2004 and $13,500 for fiscal
year 2003 for her service on the board of directors and the executive
committee. The amounts reported for Mr. Cano, Ms. Thompson and Ms. Huber
consist of employer matching contributions.
DIRECTORS COMPENSATION
Members of the board of directors and the committees of K-Fed Bancorp do
not receive separate compensation for their service on the board of directors or
the committees of K-Fed Bancorp.
For the fiscal year ended June 30, 2004, members of Kaiser Federal
Bank's board of directors received a fee of $500 per regular board meeting
attended and the chairman of the board of directors received a fee of $700 per
meeting attended. Members of Kaiser Federal Bank's executive committee received
a fee of $400 per meeting attended and the chairman of the executive committee
received a fee of $550 per meeting attended. Members of all other committees of
Kaiser Federal Bank received $300 per meeting attended and the chairman received
$400 per committee meeting attended. Members of the board of directors of Kaiser
Federal Bank also received $2,000 per full day planning session attended.
Attendance by telephone was compensated at a rate lower than in-person
attendance.
For the fiscal year ending June 30, 2005, members of the board of
directors of Kaiser Federal Bank will receive an annual stipend of $10,000 plus
an annual fee of $7,500 for board of directors meetings. The chairman of the
board of directors will receive an annual stipend of $25,000 plus an annual fee
of $7,500 for board of directors meetings. Each member of Kaiser Federal Bank's
executive committee will receive an annual fee of $4,800. Each member of Kaiser
Federal Bank's other committee's will receive an annual fee of $1,200 with the
committee chairman to receive $1,600.
12
BENEFITS
GENERAL. Kaiser Federal Bank currently provides health and welfare
benefits to its employees, including hospitalization and comprehensive medical
insurance, life insurance, subject to deductibles and co-payments by employees.
KAISER FEDERAL BANK EXECUTIVE NON-QUALIFIED RETIREMENT PLAN. Kaiser
Federal Bank also maintains an executive deferral program for the benefit of
certain senior executives that have been designated to participate in the
program. The program allows an additional opportunity for key executives to
defer a portion of their compensation into a non-qualified deferral program to
supplement their retirement earnings. Ms. Hoveland, currently the only
participant in the program, had $184,448 in compensation deferred pursuant to
this program for the fiscal year ended June 30, 2004.
401(K) PLAN. Kaiser Federal Bank provides its employees with a qualified
profit sharing plan under the applicable provisions of the Internal Revenue Code
of 1986, as amended.
Employees who are age 21 or older are eligible to begin making salary
deferral contributions beginning in the first calendar quarter on or after they
become an employee. This is their earliest entry date. Employees are eligible to
receive contributions other than salary deferral contributions beginning in the
first calendar quarter on or after they are an employee, are age 21 or older,
and have completed one year of entry service.
Eligible employees may contribute up to 15% of their compensation each
pay period to the 401(k) Plan on a pre-tax basis, not to exceed $13,000 for the
calendar year 2004. The maximum deferral percentage and/or dollar amount may
also be limited by Internal Revenue Service regulations. For eligible employees,
we currently match 50% of the first 10% of the compensation an employee defers
each pay period.
Employees are always 100% vested in the contributions they choose to
defer, whereas vesting in Kaiser Federal Bank contributions is based on years of
vesting service in which an employee works at least 1,000 hours. Vesting in
Kaiser Federal Bank contributions begins after two years of vesting service and
increases for each year of vesting service until an employee becomes fully
vested after six years of vesting service.
Employees may receive money from their vested accounts at retirement
(age 65), early retirement (age 55 and ten years of vesting service), age 59 1/2
and still working, death, disability, or termination of employment. Employees
may obtain loans from their vested account balances or withdraw all or part of
their vested accounts (not earnings) if they can prove financial hardship and
are unable to meet their financial needs another way. Kaiser Federal Bank may
amend the 401(k) Plan at any time, except that no amendment may be made which
would reduce the interest of any participant in or beneficiary of the 401(k)
Plan trust fund or divert any of the assets of the 401(k) Plan trust fund to
purposes other than the benefit of participants or their beneficiaries unless
necessary to comply with any law or regulation issued by any governmental agency
to which the 401(k) Plan is subject.
EMPLOYEE STOCK OWNERSHIP PLAN. In connection with its stock offering,
K-Fed Bancorp adopted the K-Fed Bancorp Employee Stock Ownership Plan ("ESOP")
for eligible employees of K-Fed Bancorp and any subsidiary, including Kaiser
Federal Bank. Employees of K-Fed Bancorp and Kaiser Federal Bank who have been
credited with at least 1,000 hours of service during a twelve month period are
eligible to participate in the ESOP.
The ESOP borrowed funds from K-Fed Bancorp to purchase 454,940 shares of
the common stock sold in K-Fed Bancorp's stock offering. The shares of common
stock were purchased with proceeds of a $4.5 million loan from K-Fed Bancorp.
The loan to the ESOP bears interest at 4.0% and will be repaid principally from
Kaiser Federal Bank's contributions to the ESOP over a period of ten years. The
collateral for the loan is the shares of common stock of K-Fed Bancorp purchased
by the ESOP. Shares purchased by the ESOP are held in a suspense account and are
released to participants' accounts as debt service payments are made. Shares
released from the ESOP are allocated to each eligible participant's ESOP account
based on the ratio of each such participant's compensation to the total
compensation of all eligible participants. Forfeitures are reallocated among
remaining participating employees and may reduce any amount K-Fed Bancorp might
otherwise have contributed to the ESOP. A participant vests in 100% of his or
her account balance after six years of credited service. In the case of a
"change in control," as defined in the ESOP, which triggers a termination of the
ESOP, participants will become immediately
13
fully vested in their account balances. Benefits are payable upon retirement or
other separation from service. K-Fed Bancorp's contributions to the ESOP are not
fixed, so benefits payable under the ESOP cannot be estimated.
STAFF BONUS PLAN. Kaiser Federal Bank maintains an Annual Incentive Plan
and a Long-Term Incentive Plan for our key employees. Participants are awarded a
percentage of their base salary, based upon their position with Kaiser Federal
Bank, that is tied to financial goals established by Kaiser Federal Bank and the
attainment of personal performance goals established by the employee and his or
her supervisor.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Kaiser Federal Bank has a policy of granting loans to officers and
directors, which fully complies with all applicable federal regulations. Loans
to directors and executive officers are made in the ordinary course of business
and on the same terms and conditions as those of comparable transactions with
unaffiliated third parties prevailing at the time, in accordance with our
underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features. In addition, all loans to
directors and executive officers are approved by at least a majority of the
independent, disinterested members of the board.
All loans Kaiser Federal Bank makes to its directors and executive
officers are subject to regulations restricting loans and other transactions
with affiliated persons of Kaiser Federal Bank. Loans to all directors and
executive officers and their associates totaled approximately $754,000 at June
30, 2004, which was 0.85% of our stockholders' equity at that date. All loans to
directors and executive officers were performing in accordance with their terms
at June 30, 2004.
EQUITY COMPENSATION PLAN INFORMATION
As of June 30, 2004, K-Fed Bancorp did not have any equity compensation
plans under which K-Fed Bancorp's common stock was authorized for issuance.
PROPOSAL II - APPROVAL OF THE K-FED BANCORP 2004 STOCK OPTION PLAN
GENERAL
Subject to stockholder approval at the annual meeting of stockholders,
K-Fed Bancorp has established the K-Fed Bancorp 2004 Stock Option Plan (the
"Stock Option Plan"). Pursuant to the Stock Option Plan, options to purchase up
to 568,675 shares of common stock may be granted to Kaiser Federal Bank's and
K-Fed Bancorp's employees and directors. As of August 31, 2004, the market value
of the common stock was $13.08 per share. The board of directors of K-Fed
Bancorp believes that it is appropriate to adopt a flexible and comprehensive
stock option plan that permits the granting of a variety of long-term incentive
awards to directors and employees as a means of enhancing and encouraging the
recruitment and retention of those individuals on whom the continued success of
Kaiser Federal Bank and K-Fed Bancorp most depends. Attached as Exhibit B to
this proxy statement is the complete text of the form of the Stock Option Plan.
The principal features of the Stock Option Plan are summarized below.
The Stock Option Plan complies with the requirements of the Office of
Thrift Supervision and the Office of Thrift Supervision does not endorse or
approve the Stock Option Plan in any manner.
The number of shares to be awarded as a percentage of the shares not
held by K-Fed Mutual Holding Company ("Minority Shares") and as a percentage of
all outstanding shares is as follows:
% OF TOTAL
NUMBER OF SHARES % OF MINORITY SHARES OUTSTANDING SHARES
---------------- -------------------- ------------------
568,675 10.0% 3.91%
14
PRINCIPAL FEATURES OF THE STOCK OPTION PLAN
The Stock Option Plan provides for awards in the form of stock options
and/or limited stock appreciation rights ("Limited Rights"). Each award shall be
on such terms and conditions, consistent with the Stock Option Plan and
applicable Office of Thrift Supervision regulations, as the committee
administering the Stock Option Plan may determine.
The term of stock options generally will not exceed ten years from the
date of grant. Stock options granted under the Stock Option Plan may be either
"Incentive Stock Options" as defined under Section 422 of the Internal Revenue
Code or stock options not intended to qualify as such. No stock option awards
have been granted to date under the Stock Option Plan.
Shares issued upon the exercise of a stock option may be either
authorized but unissued shares, treasury shares, or shares acquired by K-Fed
Bancorp in open market purchases. Any shares of K-Fed Bancorp common stock
subject to an award that expires or is terminated unexercised will again be
available for issuance under the Stock Option Plan. Generally, in the discretion
of the board of directors, all or any vested non-qualified stock options granted
under the Stock Option Plan may be transferable by the participant but only to
the persons or classes of persons determined by the board of directors. No other
award or any right or interest therein is assignable or transferable except
under certain limited exceptions set forth in the Stock Option Plan.
The Stock Option Plan will be administered by a committee (the
"Committee") consisting of either (i) at least two "non-employee directors" (as
defined in the Stock Option Plan) of K-Fed Bancorp, or (ii) the entire board of
directors of K-Fed Bancorp. The members of the Committee shall be appointed by
the board of directors of K-Fed Bancorp. Pursuant to the terms of the Stock
Option Plan, outside directors and key employees of Kaiser Federal Bank, K-Fed
Bancorp or their affiliates are eligible to participate. As of August 31, 2004,
there were six non-employee directors eligible to participate in the Stock
Option Plan. Subject to the provisions of the Stock Option Plan and Office of
Thrift Supervision regulations and policy, the Committee will determine to whom
the awards will be granted, in what amounts, and the period over which such
awards will vest. Under Office of Thrift Supervision regulations the vesting
amount may not be more than 20% per year. In addition, the aggregate amount of
the awards granted to the directors may not exceed 30% of the shares in the
plan, no individual director may receive more than 5% of the shares in the plan
and no employee may receive more than 25% of the shares in the plan. The
Committee may accelerate the time period for exercising options subject to
Office of Thrift Supervision regulations.
In granting awards under the Stock Option Plan, the Committee will
consider, among other things, position and years of service, and the value of
the individual's services to Kaiser Federal Bank and K-Fed Bancorp. The exercise
price of stock options will be at least the fair market value of the underlying
common stock at the time of the grant. Once granted, stock options may not be
re-priced (i.e., the exercise price may not be changed other than adjustments
for stock splits, stock dividends and similar events). The exercise price may be
paid in cash, common stock, or via a broker-assisted "cashless exercise" (as
defined in the Stock Option Plan).
STOCK OPTIONS. Incentive stock options can only be granted to employees
of Kaiser Federal Bank, K-Fed Bancorp or an "affiliate" (i.e., a parent or
subsidiary corporation of Kaiser Federal Bank and K-Fed Bancorp). Outside
directors will be granted non-qualified stock options. No option granted to an
officer in connection with the Stock Option Plan will be exercisable as an
incentive stock option subject to incentive tax treatment if exercised more than
three months after the date on which the optionee terminates employment with
Kaiser Federal Bank and/or K-Fed Bancorp, except as set forth below. In the
event a participant ceases to maintain continuous service with K-Fed Bancorp or
an affiliate by reason of death, disability or following a change in control,
options still subject to restrictions will vest and be free of these
restrictions and can be exercised for up to one year after cessation of service
but in no event beyond the expiration of the options' original term. In the
event a participant ceases to maintain continuous service for any other reason,
the participant will forfeit all nonvested options. The participant's vested
options will remain exercisable for up to three months in the case of incentive
stock options, and one year in the case of non-qualified stock options. If an
optionee terminates employment with Kaiser Federal Bank, K-Fed Bancorp or an
affiliate, any incentive stock options exercised more than three months
following the date the optionee terminates employment shall be treated as a
non-qualified stock option; provided, however, that in the event of death or
disability, incentive stock options may be exercised and receive incentive tax
treatment for up to at least one year following termination of employment,
subject to the requirements of the Internal Revenue Code.
15
In the event of death or disability of an optionee, K-Fed Bancorp, if
requested by the optionee or beneficiary, may elect, in exchange for the option,
to pay the optionee or beneficiary the amount by which the fair market value of
the common stock exceeds the exercise price of the option on the date of the
optionee's termination of service for death or disability.
LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant Limited
Rights (as defined in the Stock Option Plan) to employees simultaneously with
the grant of any option. A Limited Right gives the option holder the right, upon
a change in control of K-Fed Bancorp or Kaiser Federal Bank, to receive the
excess of the market value of the shares represented by the Limited Rights on
the date exercised over the exercise price. Limited Rights generally will be
subject to the same terms and conditions and exercisable to the same extent as
stock options, as described above. Payment upon exercise of a Limited Right will
be in cash.
Limited Rights may be granted at the time of, and must be related to,
the grant of a stock option. The exercise of one will reduce to that extent the
number of shares represented by the other. If a Limited Right is granted with
and related to an incentive stock option, the Limited Right must satisfy all the
restrictions and limitations to which the related incentive stock option is
subject.
EFFECT OF ADJUSTMENTS. Shares as to which awards may be granted under
the Stock Option Plan, and shares then subject to awards, will be adjusted by
the Committee in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of K-Fed Bancorp without receipt of
payment or consideration by K-Fed Bancorp.
In the case of any merger, consolidation or combination of K-Fed Bancorp
with or into another holding company or other entity, whereby holders of common
stock will receive a cash payment (the "Merger Price") for each share of common
stock exchanged in the transaction, any individual with exercisable options will
receive an amount equal to the difference between the Merger Price times the
number of shares of common stock subject to such options and the aggregate
exercise price of all surrendered options.
AMENDMENT AND TERMINATION. The board of directors of K-Fed Bancorp may
at any time amend, suspend or terminate the Stock Option Plan or any portion
thereof, provided, however, that no such amendment, suspension or termination
shall impair the rights of any individual, without his consent, in any award
made pursuant to the plan. Unless previously terminated, the Stock Option Plan
shall continue in effect for a term of ten years, after which no further awards
may be granted under the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES. The following brief description of the
tax consequences of stock option grants under the Stock Option Plan is based on
federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
The exercise of a stock option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Internal Revenue Code will generally
not, by itself, result in the recognition of taxable income to the individual
nor entitle K-Fed Bancorp to a deduction at the time of such exercise. However,
the difference between the exercise price and the fair market value of the
option shares on the date of exercise is an adjustment to alternative minimum
taxable income which may, in certain situations, trigger the alternative minimum
tax. The alternative minimum tax is incurred only when it exceeds the regular
income tax. The disposition of an Incentive Stock Option share prior to the end
of the applicable holding period (i.e., the longer of two years from the date of
grant or one year from the date of exercise) will cause any gain to be taxed at
ordinary income tax rates, with respect to the spread between the exercise price
and the fair market value of the share on the date of exercise and at applicable
capital gains rates with respect to any post exercise appreciation in the value
of the share.
The exercise of a non-qualified stock option will result in the
recognition of ordinary income on the date of exercise in an amount equal to the
difference between the exercise price and the fair market value of the shares on
the date of exercise.
The exercise of a Limited Right will result in the recognition of
ordinary income by the individual on the date of exercise equal to the amount of
cash acquired pursuant to the exercise.
16
K-Fed Bancorp will be allowed a deduction at the time, and in the amount
of, any ordinary income recognized by the individual under the various
circumstances described above, provided that K-Fed Bancorp meets its federal
withholding tax obligations.
The affirmative vote of a majority of the total votes eligible to be
cast at the annual meeting of stockholders, excluding votes eligible to be cast
by K-Fed Mutual Holding Company, is required for approval of the Stock Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE STOCK
OPTION PLAN.
PROPOSAL III - APPROVAL OF THE K-FED BANCORP
2004 RECOGNITION AND RETENTION PLAN
GENERAL
Subject to stockholder approval at the annual meeting of stockholders,
K-Fed Bancorp has established the K-Fed Bancorp 2004 Recognition and Retention
Plan (the "Recognition Plan") as a method of providing certain key employees and
outside directors of K-Fed Bancorp and Kaiser Federal Bank with a proprietary
interest in K-Fed Bancorp in a manner designed to encourage such persons to
remain with K-Fed Bancorp and/or Kaiser Federal Bank, and to provide further
incentives to achieve corporate objectives. The following discussion is
qualified in its entirety by reference to the Recognition Plan, the text of
which is attached hereto as Exhibit C.
K-Fed Bancorp intends to contribute stock or sufficient funds for the
Recognition Plan to acquire 227,470 shares of common stock of K-Fed Bancorp,
which will be available to be awarded to key employees and outside directors of
K-Fed Bancorp. It is expected that such shares will be purchased in the open
market, although authorized but unissued shares and treasury shares may be used.
No stock awards have been granted to date under the Recognition Plan.
The Recognition Plan complies with the requirements of the Office of
Thrift Supervision and the Office of Thrift Supervision does not endorse or
approve the Plan in any manner.
The number of shares to be awarded as a percentage of the Minority
Shares and as a percentage of all outstanding shares is as follows:
% OF TOTAL
NUMBER OF SHARES % OF MINORITY SHARES OUTSTANDING SHARES
---------------- -------------------- ------------------
227,470 4.0% 1.57%
PRINCIPAL FEATURES OF THE RECOGNITION PLAN
The Recognition Plan provides for the award of shares of common stock
("Recognition Plan Shares") subject to the restrictions described below. As of
August 31, 2004, the market value of the common stock was $13.08 per share. Each
award under the Recognition Plan will be made on terms and conditions consistent
with the Recognition Plan.
The Recognition Plan will be administered by a committee (the
"Committee"), which shall be appointed by the board of directors of K-Fed
Bancorp and shall consist of either (i) at least two "non-employee directors"
(as defined in the Recognition Plan) of K-Fed Bancorp or (ii) the entire board
of directors of K-Fed Bancorp. The Committee will select the recipients and
terms of awards pursuant to the Recognition Plan. Pursuant to the terms of the
Recognition Plan, any director or key employee of Kaiser Federal Bank, K-Fed
Bancorp or its affiliates may be selected by the Committee to participate in the
Recognition Plan. In determining to whom and in what amount to grant awards, the
Committee will consider the position and responsibilities of eligible persons,
the value of their services to K-Fed Bancorp and Kaiser Federal Bank and other
factors it deems relevant. As of August 31, 2004, there were six non-employee
directors eligible to participate in the Recognition Plan.
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The Committee will determine the period during which or at the
expiration of which the shares awarded as restricted stock vest. Under Office of
Thrift Supervision regulations the vesting amount may not be more than 20% per
year. In addition, the aggregate amount of the awards granted to the directors
may not exceed 30% of the shares in the plan, no individual director may receive
more than 5% of the shares in the plan and no employee may receive more than 25%
of the shares in the plan. In its discretion, the Committee may accelerate the
time at which any or all of the restrictions will lapse, or to remove any or all
of such restrictions, whenever it may determine that such action is appropriate
by reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such restricted period.
Subject to the above restrictions, in the event a recipient ceases to maintain
continuous service with K-Fed Bancorp or Kaiser Federal Bank by reason of death
or disability or following a change in control, the Recognition Plan Shares
still subject to restrictions ("restricted stock") will vest and be free of
these restrictions. In the event of termination for any other reason, all
nonvested restricted stock will be forfeited. Prior to vesting of the nonvested
restricted stock, a recipient will have the right to vote the nonvested
restricted stock, which has been awarded to the recipient and will receive any
dividends declared on such nonvested restricted stock. Nonvested restricted
stock is subject to forfeiture if the recipient fails to remain in the
continuous service (as defined in the Recognition Plan) as an employee, officer,
or director of K-Fed Bancorp or Kaiser Federal Bank for the restricted period.
EFFECT OF ADJUSTMENTS. Restricted stock awarded under the Recognition
Plan will be adjusted by the Committee in the event of a reorganization,
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or other change in corporate structure.
FEDERAL INCOME TAX CONSEQUENCES. Holders of restricted stock will
recognize ordinary income on the date that the shares of restricted stock are no
longer subject to a substantial risk of forfeiture, in an amount equal to the
fair market value of the shares on that date. In certain circumstances, a holder
may elect to recognize ordinary income and determine such fair market value on
the date of the grant of the restricted stock. Holders of restricted stock will
also recognize compensation income (or in the case of non-employee directors,
self employment income) equal to their dividend payments when such payments are
received. Generally, the amount of income recognized by individuals will be a
deductible expense for tax purposes by K-Fed Bancorp.
AMENDMENT TO THE RECOGNITION PLAN. The board of directors of K-Fed
Bancorp may at any time amend, suspend or terminate the Recognition Plan or any
portion thereof, provided, however, that no such amendment, suspension or
termination shall impair the rights of any award recipient, without his consent,
in any award therefore made pursuant to the Recognition Plan.
The affirmative vote of a majority of the total votes eligible to be
cast at the annual meeting of stockholders, excluding votes eligible to be cast
by K-Fed Mutual Holding Company, is required to approve the Recognition Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
RECOGNITION PLAN.
PROPOSAL IV - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
K-Fed Bancorp's independent auditor for the year ended June 30, 2004 was
McGladrey & Pullen, LLP. The audit committee of K-Fed Bancorp has approved the
engagement of Crowe Chizek and Company LLC to be K-Fed Bancorp's independent
auditor for the fiscal year ending June 30, 2005, subject to the ratification of
the engagement by K-Fed Bancorp's stockholders. At the annual meeting, the
stockholders of K-Fed Bancorp will consider and vote on the ratification of the
engagement of Crowe Chizek and Company LLC for K-Fed Bancorp's fiscal year
ending June 30, 2005. Neither representatives of McGladrey & Pullen, LLP nor
Crowe Chizek and Company LLC are expected to attend the annual meeting.
On September 16, 2004, the audit committee of K-Fed Bancorp met and
decided to dismiss McGladrey & Pullen, LLP as K-Fed Bancorp's independent
auditor. K-Fed Bancorp's financial statements in recent years, including the
years ended June 30, 2004 and 2003, were audited by McGladrey & Pullen, LLP. On
18
September 16, 2004, the audit committee also approved the engagement of Crowe
Chizek and Company LLC as K-Fed Bancorp's independent auditor for the fiscal
year ending June 30, 2005.
The reports of McGladrey & Pullen, LLP on the financial statements of
K-Fed Bancorp for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with its audits for the two
most recent fiscal years and through September 16, 2004, there were no
disagreements with McGladrey & Pullen, LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of McGladrey
& Pullen, LLP would have caused McGladrey & Pullen, LLP to make reference
thereto in its report on K-Fed Bancorp's financial statements. During the two
most recent fiscal years and through September 16, 2004, there were no
reportable events (as set forth in Regulation S-K Item 304(a)(1)(v)) with
McGladrey & Pullen, LLP.
During the two most recent fiscal years and through September 16, 2004,
neither K-Fed Bancorp nor anyone on its behalf consulted with Crowe Chizek and
Company LLC regarding either (i) the application of accounting principles to a
specific completed or proposed transaction, or the type of audit opinion that
might be rendered on K-Fed Bancorp's financial statements; or (ii) any matter
that was the subject matter of a disagreement or reportable event with McGladrey
& Pullen, LLP (as set forth in Regulation S-K Item 304 (a)(1)(iv) or (v)).
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by McGladrey & Pullen, LLP and its affiliate,
RSM McGladrey, Inc., during the fiscal years ended June 30, 2003 and June 30,
2004.
The aggregate fees included in the audit category were fees billed for
the fiscal years for the audit of K-Fed Bancorp's annual financial statements
and the review of K-Fed Bancorp's quarterly financial statements. The aggregate
fees included in each of the other categories were fees billed in the noted
fiscal years.
2004 2003
---------- ---------
Audit Fees $200,000 $35,000
Audit-Related Fees -- $51,000
Tax Fees $ 17,000 $31,870
All Other Fees $ 22,000 $38,500
AUDIT FEES. Audit fees of $35,000 in fiscal year 2003 were for
professional services rendered for the audit of the financial statements of
Kaiser Federal Bank, a mutual savings association. Audit fees of $200,000 in
fiscal 2004 were for the audit of the consolidated financial statements of K-Fed
Bancorp. The audit fees for fiscal 2004 includes fees relating to K-Fed
Bancorp's initial public offering, review of the financial statements included
in K-Fed Bancorp's quarterly reports on Form 10-Q and the internal controls
attestation required under SEC regulations.
AUDIT-RELATED FEES. Audit-related fees of $51,000 in fiscal year 2003
were for internal audit assistance, which are reasonably related to the
performance of the audit of and review of the financial statements and that are
not reported in "Audit Fees," above.
TAX FEES. Tax fees of $31,870 in fiscal year 2004 and $11,900 in fiscal
year 2003 were for services related to tax compliance and tax planning.
ALL OTHER FEES. Other fees of $22,000 in fiscal 2004 were for
information technology consulting and other fees of $38,500 in fiscal year 2003
were for information technology consulting and other services.
The audit committee has considered whether the provision of non-audit
services, which relate primarily to tax consulting services rendered, is
compatible with maintaining the independence of McGladrey & Pullen, LLP. The
audit committee concluded that performing such services does not affect the
independence of McGladrey & Pullen, LLP in performing its function as auditor of
K-Fed Bancorp.
19
The audit committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. The audit
committee has delegated pre-approval authority to its chairman when expedition
of services is necessary. The independent auditors and management are required
to periodically report to the full audit committee regarding the extent of
services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. The tax fees paid
in fiscal year 2004 were for services commenced prior to the implementation of
the audit committee's pre-approval policies.
In order to ratify the selection of Crowe Chizek and Company LLC as the
auditors for the fiscal year ending June 30, 2005, the proposal must receive at
least a majority of the votes cast, without regard to broker non-votes, either
in person or by proxy, in favor of such ratification. The audit committee of the
board of directors recommends a vote "FOR" the ratification of Crowe Chizek and
Company LLC as the independent auditors for the fiscal year ending June 30,
2005.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
The bylaws of K-Fed Bancorp provide an advance notice procedure for
certain business, or nominations to the board of directors, to be brought before
an annual meeting. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of K-Fed Bancorp. To be timely a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of K-Fed Bancorp no later than five days before the date of the meeting. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting, (b) the name
and address, as they appear on K-Fed Bancorp's books, of the stockholder
proposing such business, (c) the class and number of shares of K-Fed Bancorp
which are beneficially owned by the stockholder, and (d) any material interest
of the stockholder in such business. The chairman of an annual meeting may, if
the facts warrant, determine and declare to the meeting that certain business
was not properly brought before the meeting in accordance with the provisions of
K-Fed Bancorp's bylaws, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted. This provision is not a limitation on any other applicable
laws and regulations. Accordingly, advance written notice of business or
nominations to the board of directors to be brought before the 2005 Annual
Meeting of Stockholders must be given to K-Fed Bancorp no later than five days
prior to the date of the meeting, as indicated above.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in K-Fed Bancorp's proxy materials
for K-Fed Bancorp's 2005 Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at K-Fed Bancorp's
executive office, 1359 North Grand Avenue, Covina, California 91724, no later
than May 28, 2005. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934, as amended.
OTHER MATTERS
The board of directors is not aware of any business to come before the
annual meeting other than the matters described above in the proxy statement.
However, if any matters should properly come before the annual meeting, it is
intended that the holders of the proxies will act in accordance with their best
judgment.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by K-Fed Bancorp.
K-Fed Bancorp 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. K-Fed Bancorp has retained Georgeson
Shareholder Communications, Inc., to assist in the solicitation of proxies and
will pay a fee up to $8,500 plus reimbursement of out of pocket expenses. In
addition to solicitations by mail, directors, officers and regular employees of
20
K-Fed Bancorp may solicit proxies personally or by telegraph or telephone
without additional compensation. K-Fed Bancorp's 2004 Annual Report to
Stockholders has been mailed to all stockholders of record as of August 31,
2004. Any stockholder who has not received a copy of such annual report may
obtain a copy by writing K-Fed Bancorp at the address below. Such annual report
is not to be treated as a part of the proxy solicitation material nor as having
been incorporated herein by reference.
HOUSEHOLDING OF PROXY STATEMENTS AND ANNUAL REPORTS
K-Fed Bancorp intends to deliver only one annual report and proxy
statement to multiple registered stockholders sharing the same address unless it
has received contrary instructions from one or more of the stockholders. If
individual stockholders wish to receive a separate copy of the annual report or
proxy statement they may call or write and request separate copies currently or
in the future as follows:
Stockholder Relations
K-Fed Bancorp
1359 North Grand Avenue
Covina, California 91724
Phone: (800) 524-2274
Fax: (626) 858-5745
Registered stockholders sharing the same address and receiving multiple copies
of annual reports or proxy statements may request the delivery of a single copy
by writing or calling the above address or phone number.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Rita H. Zwern
Rita H. Zwern
Secretary
Covina, California
September 24, 2004
21
EXHIBIT A
K-FED BANCORP
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
PREAMBLE
This Audit Committee Charter (the "Charter") has been adopted by the Board of
Directors of K-Fed Bancorp (the "Company"). The Audit Committee of the Board
shall review and reassess this charter annually and recommend any proposed
changes to the Board for approval.
OBJECTIVES OF COMMITTEE
o To provide assistance to the Board of Directors in fulfilling its
fiduciary responsibilities to oversee management's activities relating
to accounting, record keeping, financial reporting, internal controls,
disclosure controls and internal control over financial reporting.
o Provide a vehicle and establish a forum for the free and open
communication of views and information among the Company's directors,
independent public accounting firm, internal auditor and management.
o To review the independence of the Company's independent public
accounting firm and the objectivity of internal auditor.
o To review the adequacy and reliability of disclosures to stockholders.
o To perform the audit committee functions specified by the Securities and
Exchange Commission and the NASDAQ National Market.
o To establish and maintain a system for confidential complaints regarding
the Company's accounting, financial reporting, internal controls,
disclosure controls, and internal control over financial reporting.
o The committee's duties do not include planning or conducting external or
internal audits or determining that the Company's financial statements
are complete, accurate and in accordance with generally accepted
accounting principles. Nor is it the duty of the committee to assure
compliance with laws and regulations. These are the responsibilities of
management.
A-1
ROLES AND RESPONSIBILITIES
The responsibilities of the committee include the following:
INDEPENDENT AUDITORS:
o Appoint an independent public accounting firm for the purpose of
auditing the Company's financial statements and, if and when required,
attesting to its internal controls.
o Assess the qualifications of the Company's public auditing firm and its
lead engagement partner. Oversee and evaluate the performance of such
person and firm; if necessary, remove them.
o Obtain annually from the Company's independent public auditing firm a
formal written statement describing all relationships between the firm
and the Company, consistent with Independence Standards Board Standard
Number 1. Discuss with the Company's independent public auditing firm
any relationships that may impact the objectivity and independence of
such firm and take, or recommend that the Board take, appropriate
actions with respect to the independence of such firm from the Company.
o Resolve any disagreements between management and the Company's
independent public auditing firm regarding accounting, financial
reporting, disclosure controls, internal control over financial
reporting and similar matters.
o Approve, in advance, all audit and non-audit services to be performed
for the Company by its independent public auditing firm, subject to
applicable law and regulation. Negotiate and approve all fees and
engagement terms of the Company's independent public auditing firm for
audit and non-audit services.
o Obtain assurance from the Company's independent public auditing firm
that Section 10A(b) of the Exchange Act has not been implicated.
o Review with the Company's independent public auditing firm the plan,
procedures and scope of its annual audit of the Company's financial
statements.
FINANCIAL REPORTING REVIEW:
o Review at least annually critical accounting policies, alternate
treatments within GAAP and significant assumptions and estimates with
respect to the Company's financial statements with its management and
independent public auditing firm. In connection with such review, review
the financial accounting and reporting treatments preferred by the
Company's independent auditing firm.
o Review and discuss the Company's audited financial statements with
management and the Company's independent public auditing firm including
all of the matters indicated in
A-2
Statement of Auditing Standards Number 61. Based on such review,
recommend to the board whether such audited financial statements should
be included in the Company's Annual Report on Form 10-K and Annual
Report to Stockholders for the relevant fiscal year.
o Review material written communications between the Company's independent
public auditing firm and management including the management letter and
schedule of unadjusted differences.
o Review and discuss with management and Company's independent public
auditing firm on at least an annual basis the Company's disclosure of
off-balance sheet data and non-financial data.
o Review and discuss with management and the Company's independent public
auditing firm the appropriateness (and the reconciliation to GAAP) of
any pro forma data to be included in the Company's public financial
reports.
o Review and discuss with management and the Company's independent public
auditing firm prior to release any proposed earnings announcement or
financial press release.
o Review and discuss with management and the Company's independent public
auditing firm prior to filing the Company's Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and any other SEC disclosure filings.
o Monitor the efforts of management and the Company's independent public
auditors to resolve any deficiencies noted in its financial statements
or accounting process.
INTERNAL CONTROLS, DISCLOSURE CONTROLS AND INTERNAL CONTROL OVER FINANCIAL
REPORTING:
o Oversee the selection, compensation and performance of the Company's
internal auditor. Assess the qualifications and independence of the
Company's internal auditor.
o Discuss with the Company's management, independent public auditing firm
and internal auditor the organization, scope, objectivity, budget and
staffing of the Company's internal audit.
o Determine that no restrictions are placed upon the scope of the internal
audit. Assess reports regarding computer systems, facilities and backup
systems.
o Review regulatory examination reports and internal audit reports and
monitor management's compliance efforts.
o Review with the Company's independent public auditing firm, internal
auditor and management, the adequacy and effectiveness of the Company's
internal controls (including internal control over financial reporting)
and disclosure controls.
A-3
o Review reports of management and the Company's independent public
auditing firm on internal and quality controls including, if and when
required by applicable law or regulations, management's report and the
independent public auditing firm's attestation on internal control over
financial reporting.
o Discuss with management on a quarterly basis its review and conclusions
regarding the Company's disclosure controls and whether there has been
any changes in the Company's internal control over financial reporting.
OTHER:
o Discuss the Company's legal and regulatory compliance with the Company's
Chief Compliance Officer on at least an annual basis.
o Review and, to the extent required under applicable SEC and NASDAQ
rules, approve all transactions with related parties.
o Establish procedures for (a) the receipt, retention and treatment of any
complaints received by the Company on accounting, financial reporting,
internal control, internal control over financial reporting, or auditing
matters and (b) the confidential, anonymous submission by the Company's
employees of concerns regarding questionable accounting, financial
reporting, internal controls, internal control over financial reporting
and auditing matters.
o Reassess the adequacy of this Charter at least annually.
ORGANIZATION
o The committee shall consist of a minimum of three outside directors of
the Company. All members must be (i) financially literate, (ii) able to
read and understand financial statements and (iii) able to satisfy
applicable NASDAQ and SEC requirements with respect thereto. In
addition, at least one member of the committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in such member's financial sophistication,
(including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.)
o All members of the committee must be free from any relationship with the
Company which would interfere with their independent judgement. Other
than in his or her capacity as a member of the board of directors or any
committee thereof, no audit committee member shall accept directly or
indirectly any fee or other compensation from the Company or any
subsidiary and no audit committee member may be an affiliated person of
the Company. No audit committee member or any of his family members
shall have been employed by the Company, its independent public auditing
firm or any of their affiliates or, received any payments from the
Company (except as set forth above), its
A-4
independent public accounting firm or any of their affiliates over the
last three years. All audit committee members must comply with the
independence requirements of the NASDAQ and the SEC.
o Required Meetings. The committee shall meet at least four times a year
and more frequently as circumstances require. The timing of meetings
shall be determined by the committee. However, at least once per year,
the committee shall have private meetings with each of the Company's
independent public auditing firm, management and the internal auditor.
o One member of the committee shall be appointed as chairman. The chairman
shall be responsible for leadership of the committee, including
scheduling and presiding over meetings, preparing agendas, and making
regular reports to the board. The chairman will also maintain regular
liaison with the Company's CEO, CFO, the lead partner of its independent
public auditing firm, the internal auditor and the general counsel.
o The committee shall have the power to conduct or authorize
investigations into any matters within its scope of responsibilities.
The committee is empowered to engage independent counsel and such other
advisers as it determines necessary or appropriate to carry out its
duties. The Company shall pay all expenses of such advisers and any
other expenses that are necessary or appropriate for carrying out the
committee's duties.
A-5
EXHIBIT B
K-FED BANCORP
2004 STOCK OPTION PLAN
1. PURPOSE
The purpose of the K-Fed Bancorp 2004 Stock Option Plan (the "Plan") is
to advance the interests of K-Fed Bancorp (the "Company") and its stockholders
by providing Key Employees and Outside Directors of the Company and its
Affiliates, including Kaiser Federal Bank (the "Bank"), upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its Affiliates largely depends, with an additional incentive to perform in a
superior manner as well as to attract people of experience and ability.
2. DEFINITIONS
"AFFILIATE" means any "parent corporation" or "subsidiary corporation"
of the Company or the Bank, as such terms are defined in Section 424(e) or
424(f), respectively, of the Code, or a successor to a parent corporation or
subsidiary corporation.
"AWARD" means an Award of Non-Statutory Stock Options, Incentive Stock
Options and Limited Rights granted under the provisions of the Plan.
"BANK" means Kaiser Federal Bank, or a successor corporation.
"BENEFICIARY" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his/her estate.
"BOARD" or "BOARD OF DIRECTORS" means the board of directors of the
Company, unless otherwise noted herein.
"CAUSE" means personal dishonesty, incompetence, willful misconduct, any
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, or the willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or a final cease-and-desist
order, any of which results in a material loss to the Company or an Affiliate.
"CHANGE IN CONTROL" of the Bank or the Company means a change in control
of a nature that: (i) would be required to be reported in response to Item 5.01
of the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners' Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities, except for any
securities purchased by the Company's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least
B-1
a majority thereof, PROVIDED that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose nomination for
election by the Company's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he/she were a member of the Incumbent Board; or
(c) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Bank or the Company or similar transaction
occurs in which the Bank or Company is not the surviving institution; or (d) a
proxy statement soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the stockholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee consisting of either (i) at least two
Non-Employee Directors of the Company, or (ii) the entire Board of the Company.
"COMMON STOCK" means shares of the common stock of the Company, par
value $.01 per share.
"COMPANY" means K-Fed Bancorp, the stock holding company of the Bank, or
a successor corporation.
"CONTINUOUS SERVICE" means employment as a Key Employee and/or service
as an Outside Director without any interruption or termination of such
employment and/or service. Continuous Service shall also mean a continuation as
a member of the Board of Directors following a cessation of employment as a Key
Employee or continuation of service as a Director Emeritus following termination
of service as a Director. In the case of a Key Employee, employment shall not be
considered interrupted in the case of sick leave, military leave or any other
approved leave of absence or in the case of transfers between payroll locations
of the Company, its subsidiaries or its successor.
"DATE OF GRANT" means the actual date on which an Award is granted by
the Committee.
"DIRECTOR" means a member of the Board.
"DIRECTOR EMERITUS" means a former member of the Board who has been
appointed to a Director Emeritus position.
"DISABILITY" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said employee's
lifetime.
"EFFECTIVE DATE" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's stockholders.
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"FAIR MARKET VALUE" means, when used in connection with the Common Stock
on a certain date, the reported closing price of the Common Stock as reported on
the Nasdaq stock market (as published in THE WALL STREET Journal, if published)
on the day prior to such date, or if the Common Stock was not traded on the day
prior to such date then, on the next preceding day on which the Common Stock was
traded; PROVIDED, HOWEVER, that if the Common Stock is not reported on the
Nasdaq stock market, Fair Market Value shall mean the average sale price of all
shares of Common Stock sold during the 30-day period immediately preceding the
date on which such stock option was granted, and if no shares of stock have been
sold within such 30-day period, the average sale price of the last three sales
of Common Stock sold during the 90-day period immediately preceding the date on
which such stock option was granted. In the event Fair Market Value cannot be
determined in the manner described above, then Fair Market Value shall be
determined by the Committee. The Committee is authorized, but is not required,
to obtain an independent appraisal to determine the Fair Market Value of the
Common Stock.
"INCENTIVE STOCK OPTION" means an Option granted by the Committee to a
Key Employee, which Option is designated as an Incentive Stock Option pursuant
to Section 9.
"KEY EMPLOYEE" means any person who is currently employed by the Company
or an Affiliate who is chosen by the Committee to participate in the Plan.
"LIMITED RIGHT" means the right to receive an amount of cash based upon
the terms set forth in Section 10.
"NON-EMPLOYEE DIRECTOR" means, for purposes of the Plan, a Director who
(a) is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"NON-STATUTORY STOCK OPTION" means an Option granted by the Committee to
(i) an Outside Director or (ii) any other Participant and such Option is either
(a) not designated by the Committee as an Incentive Stock Option, or (b) fails
to satisfy the requirements of an Incentive Stock Option as set forth in Section
422 of the Code and the regulations thereunder.
"OTS" means the Office of Thrift Supervision.
"OPTION" means an Award granted under Section 8 or Section 9.
"OUTSIDE DIRECTOR" means a Director of the Company or an Affiliate who
is not an employee of the Company or an Affiliate.
"PARTICIPANT" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an Award under the Plan.
"RIGHT" means a Limited Right.
"TERMINATION FOR CAUSE" means the termination of employment or
termination of service on the Board caused by the individual's personal
dishonesty, willful misconduct, any breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or the willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses), or a final cease-and-desist order, any of which results in material
loss to the Company or one of its Affiliates.
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3. ADMINISTRATION OF THE PLAN
(a) ROLE OF THE COMMITTEE. The Plan shall be administered by the
Committee. The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted hereunder shall be final and
binding. The Committee shall act by vote or written consent of a majority of its
members. Subject to the express provisions and limitations of the Plan and
subject to OTS regulations and policy, the Committee may adopt such rules and
procedures as it deems appropriate for the conduct of its affairs. The Committee
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year.
(b) ROLE OF THE BOARD. The members of the Committee shall be
appointed or approved by, and will serve at the pleasure of, the Board of
Directors of the Company. The Board may in its discretion from time to time
remove members from, or add members to, the Committee. The Board shall have all
of the powers allocated to it in the Plan, may take any action under or with
respect to the Plan that the Committee is authorized to take, and may reverse or
override any action taken or decision made by the Committee under or with
respect to the Plan.
(c) PLAN ADMINISTRATION RESTRICTIONS. All transactions involving a
grant, award or other acquisitions from the Company shall:
(i) be approved by the Company's full Board or by the
Committee;
(ii) be approved, or ratified, in compliance with Section 14
of the Exchange Act, by either: the affirmative vote of
the holders of a majority of the shares present, or
represented and entitled to vote at a meeting duly held
in accordance with the laws under which the Company is
incorporated; or the written consent of the holders of a
majority of the securities of the issuer entitled to
vote, provided that such ratification occurs no later
than the date of the next annual meeting of
stockholders; or
(iii) result in the acquisition of Common Stock that is held
by the Recipient for a period of six months following
the date of such acquisition.
(d) LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Awards granted under it. If a member of the Board or the Committee
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank or the Company shall indemnify such
member against expense (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he/she acted in good faith and in a manner
he/she reasonably believed to be in the best interests of the Bank and the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his/her conduct was unlawful.
Notwithstanding anything herein to the contrary, and subject to any
adjustment that may be made pursuant to Section 18 hereof, once an Option has
been awarded at Fair Market Value, the Committee shall not have authority to
reprice such Option so that the exercise price of the Option shall be less than
the exercise price on the Date of Grant.
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4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options, and (c) Limited
Rights.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 18, the maximum number of
shares reserved for issuance under the Plan is 568,675 shares. Shares issued
under the Plan may be issued by the Company from authorized but unissued shares,
treasury shares, or acquired by the Company in open market purchases. The
maximum number of Options that may be awarded to a Key Employee is 142,169. To
the extent that Options or Rights granted under the Plan are exercised, the
shares covered will be unavailable for future grants under the Plan; to the
extent that Options together with any related Rights granted under the Plan
terminate, expire or are forfeited without having been exercised or, in the case
of Limited Rights exercised for cash, new Awards may be made with respect to
these shares.
Any shares that are issued by the Company, and any Awards that are
granted by, or become obligations of, the Company, through the assumption by the
Company or an affiliate thereof, or in substitution for, outstanding Awards
previously granted by an acquired company, shall not be counted against the
shares available for issuance under the Plan.
6. ELIGIBILITY
Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non-Statutory Stock Options, and Limited Rights
under the Plan. Outside Directors shall be eligible to receive Non-Statutory
Stock Options under the Plan.
7. GENERAL TERMS AND CONDITIONS OF OPTIONS AND RIGHTS
(a) The Committee shall have full and complete authority and
discretion, subject to OTS regulations and policy and except as expressly
limited by the Plan, to grant Options and/or Rights and to provide the terms and
conditions (which need not be identical among Participants) thereof. In
particular, the Committee shall prescribe the following terms and conditions:
(i) the Exercise Price of any Option or Right, which shall not be less than the
Fair Market Value per share on the Date of Grant, (ii) the number of shares of
Common Stock subject to, and the expiration date of, any Option or Right, which
expiration date shall not exceed ten years from the Date of Grant, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option or
Right, and (iv) the restrictions, if any, to be placed upon such Option or Right
or upon shares of Common Stock which may be issued upon exercise of such Option
or Right.
(b) The following provisions shall apply to all Awards made under
this Plan: no individual officer shall be granted Awards with respect to more
than 25% of the total shares (or 142,169 shares) subject to the Plan; no Outside
Director shall be granted Awards with respect to more than 5% of the total
shares of Common Stock subject to the Plan; all Outside Directors in the
aggregate may not be granted Awards with respect to more than 30% of the total
shares of Common Stock subject to the Plan; no Awards shall begin vesting
earlier than one year from the date the Plan is approved by stockholders of the
Company; and no Awards shall vest at a rate in excess of 20% per year beginning
one year from the Date of Grant.
(c) Notwithstanding any provision of this Plan to the contrary, all
executive officers or directors must exercise or forfeit their Awards in the
event that the Bank becomes critically
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undercapitalized (as defined in 12 C.F.R. section 565.4), becomes subject to
enforcement action by the OTS, or receives a capital direction from the OTS
pursuant to 12 C.F.R. section 565.7.
8. NON-STATUTORY STOCK OPTIONS
The Committee may, from time to time, grant Non-Statutory Stock Options
to eligible Key Employees and Outside Directors. Non-Statutory Stock Options
granted under the Plan, including Non-Statutory Stock Options granted in
exchange for and upon surrender of previously granted Awards, are subject to the
terms and conditions set forth in this Section.
(a) OPTION AGREEMENT. Each Option shall be evidenced by a written
option agreement between the Company and the Participant specifying the number
of shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions that are not inconsistent with the
terms of the Plan.
(b) PRICE. The purchase price per share of Common Stock deliverable
upon the exercise of each Non-Statutory Stock Option shall be the Fair Market
Value of the Common Stock of the Company on the Date of Grant. Shares may be
purchased only upon full payment of the purchase price in one or more of the
manners set forth in Section 14 hereof, as determined by the Committee.
(c) VESTING. Subject to Section 7(b) hereof, a Non-Statutory Stock
Option granted under the Plan shall vest in a Participant at the rate or rates
determined by the Committee. No Options shall become vested in a Participant
unless the Participant maintains Continuous Service until the vesting date of
such Option, except as set forth herein. The Committee may, subject to OTS
regulations and policy, accelerate the time at which any Non-Statutory Stock
Option may be exercised in whole or in part.
(d) EXERCISE OF OPTIONS. A vested Option may be exercised from time
to time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his/her designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) AMOUNT OF AWARDS. Subject to Section 7(b) hereof, Non-Statutory
Stock Options may be granted to any Key Employee or Outside Director in such
amounts as determined by the Committee. In granting Non-Statutory Stock Options,
the Committee shall consider such factors as it deems relevant, which factors
may include, among others, the position and responsibility of the Key Employee
or Outside Director, the length and value of his/her service to the Bank, the
Company or the Affiliate, the compensation paid to the Key Employee or Outside
Director, and the Committee's evaluation of the performance of the Bank, the
Company or the Affiliate, according to measurements that may include, among
others, key financial ratios, level of classified assets and independent audit
findings.
(f) TERM OF OPTIONS. Unless the Committee determines otherwise, the
term during which Non-Statutory Stock Options may be exercised shall not exceed
ten years from the Date of Grant. In no event shall a Non-Statutory Stock Option
be exercisable in whole or in part more than ten years from the Date of Grant.
(g) TERMINATION OF CONTINUOUS SERVICE. Upon the termination of a Key
Employee's or Outside Director's Continuous Service, for any reason other than
death, Disability, Termination for Cause, termination following a Change in
Control (other than for Cause following a Change in Control), the Participant's
Non-Statutory Stock Options shall be exercisable only as to those shares that
were vested
B-6
on the date of termination and only for one year following termination. In the
event of Termination for Cause, all rights under a Participant's Non-Statutory
Stock Options shall expire upon termination. In the event of the Participant's
termination of Continuous Service due to death, Disability, or following a
Change in Control, all Non-Statutory Stock Options held by the Participant,
whether or not vested at such time, shall vest and become exercisable by the
Participant or his/her legal representative or beneficiaries for one year
following the date of such termination, death or cessation of employment or
service, PROVIDED that in no event shall the period extend beyond the expiration
of the Non-Statutory Stock Option term.
(h) TRANSFERABILITY. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.
9. INCENTIVE STOCK OPTIONS
The Committee may, from time to time, grant Incentive Stock Options to
Key Employees. Incentive Stock Options granted pursuant to the Plan shall be
subject to the following terms and conditions:
(a) OPTION AGREEMENT. Each Option shall be evidenced by a written
option agreement between the Company and the Key Employee specifying the number
of shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions that are consistent with the terms of
the Plan.
(b) PRICE. Subject to Section 18 hereof and Section 422 of the Code,
the purchase price per share of Common Stock deliverable upon the exercise of
each Incentive Stock Option shall be not less than 100% of the Fair Market Value
of the Company's Common Stock on the date the Incentive Stock Option is granted.
However, if a Key Employee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
(or under Section 424(d) of the Code is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Affiliates by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such Key Employee, or by or for any corporation,
partnership, estate or trust of which such Key Employee is a stockholder,
partner or Beneficiary), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Company's Common Stock on the date the
Incentive Stock Option is granted. Shares may be purchased only upon payment of
the full purchase price. Payment of the purchase price may be made, in whole or
in part, through the surrender of shares of the Common Stock of the Company at
the Fair Market Value of such shares determined on the exercise date.
(c) VESTING. Subject to Section 7(b) hereof, Incentive Stock Options
awarded to Key Employees shall vest at the rate or rates determined by the
Committee. No Incentive Stock Option shall become vested in a Participant unless
the Participant maintains Continuous Service until the vesting date of such
Option, except as set forth herein.
(d) EXERCISE OF OPTIONS. Vested Options may be exercised from time
to time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his/her designee. Such
notice is irrevocable and must be accompanied by full payment of the exercise
price in cash or shares of Common Stock at the Fair Market Value of such shares
determined on the exercise date.
B-7
The Options comprising each installment may be exercised in whole or in
part at any time after such installment becomes vested, PROVIDED that the amount
able to be first exercised in a given year is consistent with the terms of
Section 422 of the Code. To the extent required by Section 422 of the Code, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Common Stock for which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year (under all plans of the Company
and its Affiliates) shall not exceed $100,000.
The Committee may, in its sole discretion and subject to OTS regulations
and policy, accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part, PROVIDED that it is consistent with the terms of
Section 422 of the Code. Notwithstanding the above, in the event of a Change in
Control of the Company, all Incentive Stock Options that have been awarded shall
become immediately exercisable, PROVIDED, HOWEVER, that if the aggregate Fair
Market Value (determined at the time the Option is granted) of Common Stock for
which Options are exercisable as a result of a Change in Control, together with
the aggregate Fair Market Value (determined at the time the Option is granted)
of all other Common Stock for which Incentive Stock Options become exercisable
during such year, exceeds $100,000, then the first $100,000 of Incentive Stock
Options (determined as of the Date of Grant) shall be exercisable as Incentive
Stock Options and any excess shall be exercisable as Non-Statutory Stock Options
(but shall remain subject to the provisions of this Section to the extent
permitted).
(e) AMOUNTS OF AWARDS. Subject to Section 7(b) hereof, Incentive
Stock Options may be granted to any eligible Key Employee in such amounts as
determined by the Committee; PROVIDED that the amount granted is consistent with
the terms of Section 422 of the Code. In granting Incentive Stock Options, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employee,
the length and value of his/her service to the Bank, the Company, or the
Affiliate, the compensation paid to the Key Employee and the Committee's
evaluation of the performance of the Bank, the Company, or the Affiliate,
according to measurements that may include, among others, key financial ratios,
levels of classified assets, and independent audit findings. The provisions of
this subsection (e) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any, promulgated thereunder.
(f) TERMS OF OPTIONS. The term during which each Incentive Stock
Option may be exercised shall be determined by the Committee, provided, however,
in no event shall an Incentive Stock Option be exercisable in whole or in part
more than 10 years from the Date of Grant. If any Key Employee, at the time an
Incentive Stock Option is granted to him, owns stock representing more than 10%
of the total combined voting power of all classes of stock of the Company or its
Affiliate (or, under Section 424(d) of the Code, is deemed to own stock
representing more than 10% of the total combined voting power of all classes of
stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent
of such Key Employee, or by or for any corporation, partnership, estate or trust
of which such Key Employee is a stockholder, partner or Beneficiary), the
Incentive Stock Option granted to him shall not be exercisable after the
expiration of five years from the Date of Grant.
(g) TERMINATION OF CONTINUOUS SERVICE. Upon the termination of a Key
Employee's Continuous Service for any reason other than death, Disability,
Termination for Cause or termination following a Change in Control (other than
for Cause following a Change in Control) the Key Employee's Incentive Stock
Options shall be exercisable only as to those shares that were vested by such
Key Employee at the date of termination for a period of three months following
termination. Upon termination of a Key Employee's Continuous Service due to
death or Disability or following a Change in Control, all Incentive Options held
by a Key Employee, whether or not vested at such time, shall vest and become
exercisable by the Participant or his/her legal representative or beneficiaries
for one year following the date of such termination, death or cessation of
Continuous Service, PROVIDED that in no event shall the period extend beyond the
expiration of the Stock Option term, and PROVIDED, FURTHER, that,
B-8
except in the event of death or Disability, such Option shall not be eligible
for treatment as an Incentive Stock Option in the event such Option is exercised
more than three months following termination. In the event of Termination for
Cause, all rights under the Incentive Stock Options shall expire upon
termination.
In order to obtain Incentive Stock Option treatment for Options
exercised by heirs or devisees of an Optionee, the Optionee's death must have
occurred while employed or within three months of termination of Continuous
Service.
(h) TRANSFERABILITY. No Incentive Stock Option granted under the
Plan is transferable except by will or the laws of descent and distribution and
is exercisable during his/her lifetime only by the Key Employee to which it is
granted.
(i) COMPLIANCE WITH CODE. The options granted under this Section are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.
10. LIMITED RIGHTS
The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee of the Bank or the Company, with respect to all
or some of the shares covered by such Option. Limited Rights granted under the
Plan are subject to the following terms and conditions:
(a) TERMS OF RIGHTS. In no event shall a Limited Right be
exercisable in whole or in part before the expiration of six months from the
date of grant of the Limited Right. A Limited Right may be exercised only in the
event of a Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, PROVIDED that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) PAYMENT. Upon exercise of a Limited Right, the holder shall
promptly receive from the Company an amount of cash equal to the difference
between the Fair Market Value on the Date of Grant of the related Option and the
Fair Market Value of the underlying shares on the date the Limited Right is
exercised, multiplied by the number of shares with respect to which such Limited
Right is being exercised.
11. SURRENDER OF OPTION
In the event of a Participant's termination of employment or termination
of service as a result of death or Disability, the Participant (or his/her
personal representative(s), heir(s), or devisee(s)) may, in a form acceptable to
the Committee, make application to surrender all or part of the Options held by
such Participant in exchange for a cash payment from the Company of an amount
equal to the difference
B-9
between the Fair Market Value of the Common Stock on the date of termination of
employment or the date of termination of service on the Board and the exercise
price per share of the Option. Whether the Company accepts such application or
determines to make payment, in whole or part, is within its absolute and sole
discretion, it being expressly understood that the Company is under no
obligation to any Participant whatsoever to make such payments. In the event
that the Company accepts such application and determines to make payment, such
payment shall be in lieu of the exercise of the underlying Option and such
Option shall cease to be exercisable.
12. ALTERNATE OPTION PAYMENT MECHANISM
The Committee has sole discretion to determine what form of payment it
will accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options or may reserve
its decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee or its agent.
(a) CASH PAYMENT. The exercise price may be paid in cash or by
certified check. To the extent permitted by law, the Committee may permit all or
a portion of the exercise price of an Option to be paid through borrowed funds.
(b) CASHLESS EXERCISE. Subject to vesting requirements, if
applicable, a Participant may engage in a "cashless exercise" of the Option.
Upon a cashless exercise, the Participant shall give the Company written notice
of the exercise of the Option together with an order to a registered
broker-dealer or equivalent third party, to sell part or all of the Common Stock
subject to the Option and to deliver enough of the proceeds to the Company to
pay the Option exercise price and any applicable withholding taxes. If the
Participant does not sell the Common Stock subject to the Option through a
registered broker-dealer or equivalent third party, the Participant may give the
Company written notice of the exercise of the Option and the third party
purchaser of the Common Stock subject to the Option shall pay the Option
exercise price plus applicable withholding taxes to the Company.
(c) EXCHANGE OF COMMON STOCK. The Committee may permit payment of
the Option exercise price by the tendering (or constructively tendering) of
previously acquired shares of Common Stock. All shares of Common Stock tendered
in payment of the exercise price of an Option shall be valued at the Fair Market
Value of the Common Stock. No tendered shares of Common Stock which were
acquired by the Participant upon the previous exercise of an Option or as awards
under a stock award plan (such as the Company's Recognition and Retention Plan)
shall be accepted for exchange unless the Participant has held such shares
(without restrictions imposed by said plan or award) for at least six months
prior to the exchange.
13. RIGHTS OF A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his/her services as an officer, director or employee at
any time.
14. AGREEMENT WITH PARTICIPANTS
Each Award of Options and Limited Rights will be evidenced by a written
agreement, executed by the Participant and the Company or its Affiliates that
describes the conditions for receiving the
B-10
Awards, including the date of Award, the purchase price, applicable periods, and
any other terms and conditions as may be required by the Board or applicable
securities laws.
15. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a person
or persons to receive, in the event of death, any Option or Limited Rights to
which he/she would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Company and may be revoked in writing. If a
Participant fails effectively to designate a Beneficiary, then his/her estate
will be deemed to be the Beneficiary.
16. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, pro rata return of capital to all
stockholders, recapitalization, or any merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, or other increase or decrease in such shares, without receipt or payment
of consideration by the Company, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common
Stock that may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common
Stock covered by Awards already made under the Plan; or
(c) adjustments in the purchase price of outstanding Incentive
and/or Non-Statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of
benefits available to a Participant under a previously granted Award. With
respect to Incentive Stock Options, no such adjustment shall be made if it would
be deemed a "modification" of the Award under Section 424 of the Code.
17. EFFECT OF A CHANGE IN CONTROL ON OPTION AWARDS
In the event of a Change in Control, the Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control:
(a) provide that such Options shall be assumed, or equivalent
options shall be substituted ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (1) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (2) the shares of stock issuable
upon the exercise of such Substitute Options shall be registered in accordance
with the Securities Act of 1933, as amended ("1933 Act") or such securities
shall be exempt from such registration in accordance with Sections 3(a)(2) or
3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or in the
alternative, if the securities issuable upon the exercise of such Substitute
Options shall not constitute Registered Securities, then the Participant will
receive upon consummation of the Change in Control a cash payment for each
Option surrendered equal to the difference between the (1) fair market value of
the consideration to be received for each share of Common Stock in the Change in
Control times the number of shares of Common Stock subject to such surrendered
Options, and (2) the aggregate exercise price of all such surrendered Options;
or
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(b) in the event of a transaction under the terms of which the
holders of Common Stock will receive upon consummation thereof a cash payment
(the "Merger Price") for each share of Common Stock exchanged in the Change in
Control transaction, make or provide for a cash payment to the Participants
equal to the difference between (1) the Merger Price times the number of shares
of Common Stock subject to such Options held by each Participant (to the extent
then exercisable at prices not in excess of the Merger Price), and (2) the
aggregate exercise price of all such surrendered Options.
18. WITHHOLDING
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the minimum amount of any federal or state taxes, including
payroll taxes, that are applicable to such supplemental taxable income and that
are required by any governmental authority to be withheld. Shares of Common
Stock will be withheld where required from any distribution of Common Stock.
19. AMENDMENT OF THE PLAN
The Board may at any time, and from time to time, modify or amend the
Plan in any respect, or modify or amend an Award received by Key Employees
and/or Outside Directors; PROVIDED, HOWEVER, that no such termination,
modification or amendment may affect the rights of a Participant, without
his/her consent, under an outstanding Award.
20. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the date of approval of the Plan by
the Company's stockholders.
21. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the earlier
of (i) 10 years after the Effective Date, or (ii) the date on which the exercise
of Options or related rights equaling the maximum number of shares reserved
under the Plan occurs. The Board may suspend or terminate the Plan at any time,
PROVIDED that no such action will, without the consent of a Participant,
adversely affect his/her rights under a previously granted Award.
22. APPLICABLE LAW
(a) This Plan, the Awards, all documents evidencing Awards and all
other related documents shall be governed by, and will be construed and
administered in accordance with the laws of the State of California, except to
the extent that federal law shall apply.
(b) This Plan is subject to the requirements of 12 C.F.R. Part 575,
including the requirements of section 575.8 and the applicable requirements of
section 563b.500. Notwithstanding any other provision in this Plan, no shares of
Common Stock shall be issued with respect to any Award to the extent that such
issuance would cause Kaiser Federal, MHC to fail to qualify as a mutual holding
company under applicable federal regulations.
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EXHIBIT C
K-FED BANCORP
2004 RECOGNITION AND RETENTION PLAN
1. ESTABLISHMENT OF THE PLAN; CREATION OF SEPARATE TRUST
(a) K-Fed Bancorp (the "Company") hereby establishes the K-Fed
Bancorp 2004 Recognition and Retention Plan (the "Plan") upon the terms and
conditions hereinafter stated in the Plan.
(b) A separate trust or trusts may be established to purchase shares
of the Common Stock that will be awarded hereunder (the "Trust"). If a trust is
established and a Recipient hereunder fails to satisfy the conditions of the
Plan and forfeits all or any portion of the Common Stock awarded to him/her,
such forfeited shares will be returned to said Trust. If no trust is
established, forfeited shares shall be cancelled or held in treasury as
determined by the Committee.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to advance the interests of Kaiser Federal
Bank (the "Bank") and the Company and the Company's stockholders by providing
Key Employees and Outside Directors of the Company and its Affiliates, including
the Bank, upon whose judgment, initiative and efforts the successful conduct of
the business of the Company and its Affiliates largely depends, with
compensation for their contributions to the Company and its Affiliates and an
additional incentive to perform in a superior manner, as well as to attract
people of experience and ability.
3. DEFINITIONS
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"AFFILIATE" means any "parent corporation" or "subsidiary corporation"
of the Company or the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"AWARD" means the grant by the Committee of Restricted Stock, as
provided in the Plan.
"BANK" means Kaiser Federal Bank, or a successor corporation.
"BENEFICIARY" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company, unless otherwise noted.
"CAUSE" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or
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regulation (other than traffic violations or similar offenses) or a final
cease-and-desist order, any of which results in a material loss to the Company
or an Affiliate.
"CHANGE IN CONTROL" of the Bank or the Company means a change in control
of a nature that: (i) would be required to be reported in response to Item 5.01
of the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners' Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities except for any
securities purchased by the Company's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, PROVIDED
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he/she were a member of the Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction occurs in which the Bank or Company is not
the surviving institution; or (d) a proxy statement soliciting proxies from
stockholders of the Company, by someone other than the current management of the
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the Plan are to be exchanged for or converted into
cash or property or securities not issued by the Company; or (e) a tender offer
is made for 25% or more of the voting securities of the Company and the
stockholders owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their shares pursuant
to such tender offer and such tendered shares have been accepted by the tender
offer or.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee of the Board of the Company consisting
of either (i) at least two Non-Employee Directors of the Company, or (ii) the
entire Board of the Company.
"COMMON STOCK" means shares of the common stock of the Company, par
value $.01 per share.
"COMPANY" means K-Fed Bancorp, the stock holding company of the Bank, or
a successor corporation.
"CONTINUOUS SERVICE" means employment as a Key Employee and/or service
as an Outside Director without any interruption or termination of such
employment and/or service. Continuous Service shall also mean a continuation as
a member of the Board of Directors following a cessation of employment as a Key
Employee or continuation of service as a Director Emeritus following termination
of service as a Director. In the case of a Key Employee, employment shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Bank or in the case of transfers between
payroll locations of the Bank or between the Bank, its parent, its subsidiaries
or its successor.
"DIRECTOR" means a member of the Board.
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"DIRECTOR EMERITUS" means a former member of the Board who has been
appointed by the Board to a Director Emeritus position.
"DISABILITY" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him/her, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of such employee's
lifetime.
"EFFECTIVE DATE" means the date of, or a date determined by the Board
following, approval of the Plan by the Company's stockholders.
"KEY EMPLOYEE" means any person who is currently employed by the Company
or an Affiliate who is chosen by the Committee to participate in the Plan.
"NON-EMPLOYEE DIRECTOR" means, for purposes of the Plan, a Director who
(a) is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"OTS" means the Office of Thrift Supervision.
"OUTSIDE DIRECTOR" means a Director of the Company or an Affiliate who
is not an employee of the Company or an Affiliate.
"RECIPIENT" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an Award under the Plan.
"RESTRICTED PERIOD" means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 6
with respect to Restricted Stock awarded under the Plan.
"RESTRICTED STOCK" means shares of Common Stock that have been
contingently awarded to a Recipient by the Committee subject to the restrictions
referred to in Section 6, so long as such restrictions are in effect.
4. ADMINISTRATION OF THE PLAN
(a) ROLE OF THE COMMITTEE. The Plan shall be administered by the
Committee. The interpretation and construction by the Committee of any
provisions of the Plan or of any Award granted hereunder shall be final and
binding. The Committee shall act by vote or written consent of a majority of its
members. Subject to the express provisions and limitations of the Plan and
subject to OTS regulations and policy, the Committee may adopt such rules and
procedures as it deems appropriate for the conduct of its affairs. The Committee
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year.
(b) ROLE OF THE BOARD. The members of the Committee shall be
appointed or approved by, and will serve at the pleasure of, the Board of
Directors of the Company. The Board may in its discretion from time to time
remove members from, or add members to, the Committee. The Board shall have all
of
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the powers allocated to it in the Plan, may take any action under or with
respect to the Plan that the Committee is authorized to take, and may reverse or
override any action taken or decision made by the Committee under or with
respect to the Plan, PROVIDED, HOWEVER, that except as provided in Section 6(b),
the Board may not revoke any Award except in the event of revocation for Cause.
(c) PLAN ADMINISTRATION RESTRICTIONS. All transactions involving a
grant, award or other acquisitions from the Company shall:
(i) be approved by the Company's full Board or by the
Committee;
(ii) be approved, or ratified, in compliance with Section 14
of the Exchange Act, by either: the affirmative vote of
the holders of a majority of the shares present, or
represented and entitled to vote at a meeting duly held
in accordance with the laws under which the Company is
incorporated; or the written consent of the holders of a
majority of the securities of the issuer entitled to
vote, provided that such ratification occurs no later
than the date of the next annual meeting of
stockholders; or
(iii) result in the acquisition of Common Stock that is held
by the Recipient for a period of six months following
the date of such acquisition.
(d) LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Awards granted under it. If a member of the Board or the Committee
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him/her in such
capacity under or with respect to the Plan, the Bank or the Company shall
indemnify such member against expense (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him/her
in connection with such action, suit or proceeding if he/she acted in good faith
and in a manner he/she reasonably believed to be in the best interests of the
Bank and the Company and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
5. ELIGIBILITY; AWARDS
(a) ELIGIBILITY. Key Employees and Outside Directors are eligible to
receive Awards.
(b) AWARDS TO KEY EMPLOYEES AND OUTSIDE DIRECTORS. The Committee may
determine which of the Key Employees and Outside Directors referenced in Section
5(a) will be granted Awards and the number of shares covered by each Award;
provided, HOWEVER, that in no event shall any Awards be made that will violate
the Bank's Charter and Bylaws, the Company's Charter and Bylaws, or any
applicable federal or state law or regulation. Shares of Restricted Stock that
are awarded by the Committee shall, on the date of the Award, be registered in
the name of the Recipient and transferred to the Recipient, in accordance with
the terms and conditions established under the Plan. The aggregate number of
shares that shall be issued under the Plan is 227,470. Awards issued under the
Plan may be issued by the Company from authorized but unissued shares, treasury
shares or shares acquired by the Company in open market purchases.
(c) The following provisions shall apply to all Awards made under
this plan: no individual officer shall be granted Awards with respect to more
than 25% of the total shares subject to the Plan; no Outside Director shall be
granted Awards of more than 5% of the total shares of Common Stock subject to
the Plan; all Outside Directors in the aggregate may not be granted Awards with
respect to more than
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30% of the total shares of Common Stock subject to the Plan; no Awards shall
begin vesting earlier than one year from the date the Plan is approved by
stockholders of the Company; and no Awards shall vest at a rate in excess of 20%
per year beginning one year from the Date of Grant.
(d) In the event Restricted Stock is forfeited for any reason, the
Committee, from time to time, may determine which of the Key Employees and
Outside Directors will be granted additional Awards to be awarded from forfeited
Restricted Stock.
(e) In selecting those Key Employees and Outside Directors to whom
Awards will be granted and the amount of Restricted Stock covered by such
Awards, the Committee shall consider such factors as it deems relevant,
including among others, the position and responsibilities of the Key Employees
and Outside Directors, the length and value of their services to the Company and
its Affiliates, the compensation paid to the Key Employees or fees paid to the
Outside Directors, and the Committee may request the written recommendation of
the Chief Executive Officer and other senior executive officers of the Bank, the
Company and its Affiliates or the recommendation of the full Board. All
allocations by the Committee shall be subject to review, and approval or
rejection, by the Board.
No Restricted Stock shall be vested unless the Recipient maintains
Continuous Service with the Company or an Affiliate until the restrictions
lapse.
(f) MANNER OF AWARD. As promptly as practicable after a
determination is made pursuant to Section 5(b) to grant an Award, the Committee
shall notify the Recipient in writing of the grant of the Award, the number of
shares of Restricted Stock covered by the Award, and the terms upon which the
Restricted Stock subject to the Award may be vested. Upon notification of an
Award of Restricted Stock, the Recipient shall execute and return to the Company
a restricted stock agreement (the "Restricted Stock Agreement") setting forth
the terms and conditions under which the Recipient shall earn the Restricted
Stock, together with a stock power or stock powers endorsed in blank.
Thereafter, the Recipient's Restricted Stock and stock power shall be deposited
with an escrow agent specified by the Company ("Escrow Agent") who shall hold
such Restricted Stock under the terms and conditions set forth in the Restricted
Stock Agreement. Each certificate in respect of shares of Restricted Stock
Awarded under the Plan shall be registered in the name of the Recipient.
(g) TREATMENT OF FORFEITED SHARES. In the event shares of Restricted
Stock are forfeited by a Recipient, such shares shall be returned to the Company
and shall be held and accounted for pursuant to the terms of the Plan until such
time as the Restricted Stock is re-awarded to another Recipient, in accordance
with the terms of the Plan and the applicable state and federal laws, rules and
regulations.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK
The Committee shall have full and complete authority, subject to Section
5(c) and the other limitations of the Plan, to grant awards of Restricted Stock
to Key Employees and Outside Directors and, in addition to the terms and
conditions contained in Sections 6(a) through 6(h), to provide such other terms
and conditions (which need not be identical among Recipients) in respect of such
Awards, and the vesting thereof, as the Committee shall determine.
(a) GENERAL RULES. Subject to Section 5(c) hereof, and to OTS
regulations and policy, Restricted Stock shall be vested by a Recipient at the
rate or rates determined by the Committee, provided that such Recipient
maintains Continuous Service. No shares shall vest in any year in which the Bank
is not meeting all of its fully phased-in capital requirements. Subject to any
such other terms and conditions as the Committee shall provide with respect to
Awards, shares of Restricted Stock may not be sold,
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assigned, transferred (within the meaning of Code Section 83), pledged or
otherwise encumbered by the Recipient, except as hereinafter provided, during
the Restricted Period.
(b) CONTINUOUS SERVICE; FORFEITURE. Except as provided in Section
6(c), if a Recipient ceases to maintain Continuous Service for any reason,
unless the Committee shall otherwise determine, all shares of Restricted Stock
theretofore awarded to such Recipient and which at the time of such termination
of Continuous Service are subject to the restrictions imposed by Section 6(a)
shall upon such termination of Continuous Service be forfeited. Any stock
dividends or declared but unpaid cash dividends attributable to such shares of
Restricted Stock shall also be forfeited.
(c) EXCEPTION FOR TERMINATION DUE TO DEATH OR DISABILITY, AND
FOLLOWING A CHANGE IN CONTROL. Notwithstanding the general rule contained in
Section 6(a), Restricted Stock awarded to a Recipient whose Continuous Service
with the Company or an Affiliate terminates due to death, Disability, or
following a Change in Control, shall be deemed earned as of the Recipient's last
day of Continuous Service with the Company or an Affiliate.
(d) REVOCATION FOR CAUSE. Notwithstanding anything hereinafter to
the contrary, the Board may by resolution immediately revoke, rescind and
terminate any Award, or portion thereof, previously awarded under the Plan, to
the extent Restricted Stock has not been redelivered by the Escrow Agent to the
Recipient, whether or not yet vested, in the case of a Key Employee whose
employment is terminated by the Company or an Affiliate or an Outside Director
whose service is terminated by the Company or an Affiliate for Cause or who is
discovered after termination of employment or service on the Board to have
engaged in conduct that would have justified termination for Cause.
(e) RESTRICTED STOCK LEGEND. Each certificate in respect of shares
of Restricted Stock awarded under the Plan shall be registered in the name of
the Recipient and deposited by the Recipient, together with a stock power
endorsed in blank, with the Escrow Agent, and shall bear the following (or a
similar) legend:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) contained in the K-Fed Bancorp
2004 Recognition and Retention Plan. Copies of such Plan are on
file in the offices of the Secretary of K-Fed Bancorp, 1359
North Grand Avenue, Covina, California 91724-1016."
(f) PAYMENT OF DIVIDENDS AND RETURN OF CAPITAL. After an Award has
been granted but before such Award has been vested, the Recipient shall receive
any cash dividends paid with respect to such shares, or shall share in any
pro-rata return of capital to all stockholders with respect to the Common Stock.
Stock dividends declared by the Company and paid on Awards that have not yet
been vested shall be subject to the same restrictions as the Restricted Stock
and the certificate(s) or other instruments representing or evidencing such
shares shall be legended in the manner provided in Section 6(e) and shall be
delivered to the Escrow Agent for distribution to the Recipient when the
Restricted Stock upon which such dividends were paid are vested. Unless the
Recipient has made an election under Section 83(b) of the Code, cash dividends
or other amounts so paid on shares that have not yet been vested by the
Recipient shall be treated as compensation income to the Recipient when paid. If
dividends are paid with respect to shares of Restricted Stock under the Plan
that have been forfeited and returned to the Company or to a trust established
to hold issued and unawarded or forfeited shares, the Committee can determine to
award such dividends to any Recipient or Recipients under the Plan, to any other
employee or director of the Company or the Bank, or can return such dividends to
the Company.
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(g) VOTING OF RESTRICTED SHARES. After an Award has been granted,
the Recipient as conditional owner of the Restricted Stock shall have the right
to vote such shares.
(h) DELIVERY OF VESTED SHARES. At the expiration of the restrictions
imposed by Section 6(a), the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6(c) applies in the case of a deceased
Recipient, to his Beneficiary) the certificate(s) and any remaining stock power
deposited with it pursuant to Section 5(f) and the shares represented by such
certificate(s) shall be free of the restrictions referred to in Section 6(a).
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding shares subsequent to the
Effective Date by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, or any merger, consolidation
or any change in the corporate structure or shares of the Company, without
receipt or payment of consideration by the Company, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive. Any shares of stock or other securities received, as a result of any
of the foregoing, by a Recipient with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6(e).
8. ASSIGNMENTS AND TRANSFERS
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred (within the meaning of Code Section 83) except, in the event of the
death of a Recipient, by will or the laws of descent and distribution until such
Award is vested.
9. KEY EMPLOYEE RIGHTS UNDER THE PLAN
No Key Employee shall have a right to be selected as a Recipient nor,
having been so selected, to be selected again as a Recipient and no Key Employee
or other person shall have any claim or right to be granted an Award under the
Plan or under any other incentive or similar plan of the Company or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any Key Employee any right to be retained in the employ of the Company
or any Affiliate.
10. OUTSIDE DIRECTOR RIGHTS UNDER THE PLAN
Neither the Plan nor any action taken thereunder shall be construed as
giving any Outside Director any right to be retained in the service of the
Company or any Affiliate.
11. WITHHOLDING TAX
Upon the termination of the Restricted Period with respect to any shares
of Restricted Stock (or at any such earlier time that an election is made by the
Recipient under Section 83(b) of the Code, or any successor provision thereto,
to include the value of such shares in taxable income), the Bank or the Company
shall have the right to require the Recipient or other person receiving such
shares to pay the Bank or the Company the minimum amount of any federal or state
taxes, including payroll taxes, that are applicable to such supplemental income
and that the Bank or the Company is required to withhold with respect to such
shares, or, in lieu thereof, to retain or sell without notice, a sufficient
number of shares held by it to cover the amount required to be withheld. The
Bank or the Company shall have the right to
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deduct from all dividends paid with respect to shares of Restricted Stock the
amount of any taxes which the Bank or the Company is required to withhold with
respect to such dividend payments.
12. AMENDMENT OR TERMINATION
The Board of the Company may amend, suspend or terminate the Plan or any
portion thereof at any time, PROVIDED, HOWEVER, that no such amendment,
suspension or termination shall impair the rights of any Recipient, without his
consent, in any Award theretofore made pursuant to the Plan. Any amendment or
modification of the Plan or an outstanding Award under the Plan, shall be
approved by the Committee, or the full Board of the Company.
13. GOVERNING LAW
(a) This Plan, the Awards, all documents evidencing Awards and all
other related documents shall be governed by, and will be construed and
administered in accordance with the laws of the State of California, except to
the extent that federal law shall apply.
(b) This Plan is subject to the requirements of 12 C.F.R. Part 575,
including the requirements of section 575.8 and the applicable requirements of
section 563b.500. Notwithstanding any other provision in this Plan, no shares of
Common Stock shall be issued with respect to any Award to the extent that such
issuance would cause Kaiser Federal, MHC to fail to qualify as a mutual holding
company under applicable federal regulations.
14. TERM OF PLAN
The Plan shall become effective on the date of, or a date determined by
the Board of Directors following, approval of the Plan by the Company's
stockholders. It shall continue in effect until the earlier of (i) ten years
from the Effective Date unless sooner terminated under Section 12 hereof, or
(ii) the date on which all shares of Common Stock available for award hereunder,
have vested in the Recipients of such Awards.
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REVOCABLE PROXY
K-FED BANCORP
2004 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 26, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the proxy committee of the board of
directors of K-Fed Bancorp (the "Company"), with full powers of substitution to
act as attorneys and proxies for the undersigned to vote all shares of common
stock of the Company that the undersigned is entitled to vote at the 2004 Annual
Meeting of Stockholders of the Company ("Meeting") to be held at the main office
of Kaiser Federal Bank, 1359 North Grand Avenue, Covina, California, at 5:00
p.m., (local time) on Tuesday, October 26, 2004. The proxy committee is
authorized to cast all votes to which the undersigned is entitled.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR PROVIDE YOUR VOTING INSTRUCTIONS VIA THE INTERNET OR
BY TELEPHONE.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
^ FOLD AND DETACH HERE ^
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K-FED BANCORP -- ANNUAL MEETING OF STOCKHOLDERS, TO BE HELD ON OCTOBER 26, 2004
YOUR VOTE IS IMPORTANT!
PROXY MATERIALS ARE AVAILABLE ON-LINE AT:
HTTP://WWW.K-FED.COM
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Call TOLL FREE AT 1-866-239-6405 and vote via Touch-Tone Phone. There is NO
CHARGE to you for this call.
OR
2. Via the Internet at HTTPS://WWW.PROXYVOTENOW.COM/KFED and follow the voting
instructions.
OR
3. Mark, date and sign your proxy card and return it promptly in the enclosed
envelope.
PLEASE SEE REVERSE SIDE FOR VOTING INSTRUCTIONS.
REVOCABLE PROXY PLEASE MARK AS
K-FED BANCORP INDICATED IN THIS [X]
ANNUAL MEETING OF STOCKHOLDERS EXAMPLE
OCTOBER 26, 2004
WITH
FOR HOLD FOR AGAINIST ABSTAIN
1.The election as directors of the 2. The approval of the K-Fed Bancorp [ ] [ ] [ ]
nominees listed below (except as [ ] [ ] 2004 Stock Option Plan.
marked to the contrary below) for
a three-year term: 3. The approval of the K-Fed Bancorp
2004 Recognition and Retention
Plan. [ ] [ ] [ ]
4. The ratification of the
appointment of Crowe Chizek and
NOMINEES: Company LLC as independent auditors
(01) JAMES L. BREEDEN (02) FRANK G. NICEWICZ for the Company for the fiscal year
ending June 30, 2005. [ ] [ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S),
MARK "WITHHOLD" AND WRITE THE NAME(S) OF THE NOMINEE(S) OR THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
NUMBER(S) IN THE SPACE PROVIDED BELOW. LISTED PROPOSALS.
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- --------------------------------------------------------------- THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR
EACH OF THE PROPOSALS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY
WILL BE VOTED BY THE MAJORITY OF THE BOARD OF DIRECTORS.
AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
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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. This proxy may also be revoked by sending
written notice to the Secretary of the Company at the
address set forth on the Notice of Annual Meeting of
Stockholders, or by the filing of a later dated proxy
card prior to a vote being taken on a particular
proposal at the Meeting.
CHECK BOX IF YOU PLAN TO ATTEND MEETING OF STOCKHOLDERS [ ]
The undersigned acknowledges receipt from the Company
prior to the execution of this proxy card of notice of
Please be sure to date and --------------------------- the Meeting, a proxy statement dated September 24, 2004,
sign this proxy card in the Date and audited financial statements of the Company.
box below.
- --------------------------------------------------------------- Please sign exactly as your name appears on this proxy
card. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If
shares of Company common stock are held jointly, each
- --- Sign above ------------------------------------------------ stockholder should sign. stock are held jointly, each
stockholder should sign.
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x x x IF YOU WISH TO PROVIDE YOUR VOTING INSTRUCTIONS BY TELEPHONE OR INTERNET, PLEASE READ THE INSTRUCTIONS BELOW x x x
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE VOTING BY MAIL
^ ^
PROXY VOTING INSTRUCTIONS
Stockholders of record have three ways to vote:
1. By mail;
2. By telephone (using a Touch-Tone Phone); or
3. By the Internet.
A telephone or Internet vote authorizes the named proxies to vote your shares of Company common stock in the same manner as if you
marked, dated, signed and returned this proxy card by mail. Please note telephone and Internet votes must be cast prior to 3:00
a.m., on October 26, 2004. It is not necessary to return this proxy card if you vote by telephone or Internet.
- ------------------------------------------------------------------ -----------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
Call Toll-Free on a Touch-Tone Phone anytime prior to 3:00 anytime prior to
a.m., on October 26, 2004. 3:00 a.m., on October 26, 2004 go to:
1-866-239-6405 HTTPS://WWW.PROXYVOTENOW.COM/KFED
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Please note that the last vote received, whether by telephone, Internet or by mail, will be the vote that is counted at the
Meeting.
ON-LINE PROXY MATERIALS : HTTP://WWW.K-FED.COM
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YOUR VOTE IS IMPORTANT!
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