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                        Form of PALFED, Inc./Palmetto Federal
                                           
                   Salary Continuation and Noncompetition Agreement

                  (Amended and Restated Effective as of May 1, 1997) 






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                               PALFED/PALMETTO FEDERAL
                   SALARY CONTINUATION AND NONCOMPETITION AGREEMENT


         THIS IS A SALARY CONTINUATION AND NONCOMPETITION AGREEMENT (this
"Agreement") effective as of May 1, 1997, by and among PALFED, Inc., a South
Carolina corporation (the "Company"), Palmetto Federal Savings Bank of South
Carolina, a wholly-owned subsidiary of the Company ("Palmetto Federal" or the
"Bank"), and ___________________ (the "Officer").
 
    Background Statement

         The Company considers the establishment and maintenance of a sound and
effective group of management personnel for the Company and its subsidiaries to
be essential to protecting and enhancing the best interests of the Company and
its shareholders.  In this connection, the Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a change in
control of the Company may exist and that such possibility, and the uncertainty
and concerns which it may raise among management personnel, may result in the
departure or distraction of management personnel to the detriment of the Company
and its shareholders.  Accordingly, the Company's and the Bank's Boards of
Directors have determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of key management members
of the Company and its subsidiaries, including the Officer, to their assigned
duties without distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Company, and to assure fair treatment of management of the Company and the Bank
in the event of a change in control.

         The Company further considers that certain restrictions on the
Officer's ability to solicit employees and customers of the Company and its
subsidiaries (including the Bank) following the Officer's termination of
employment with the Company are reasonable, appropriate and advisable, would be
beneficial to the Company and the Bank, could increase the potential franchise
value of the Company to a future acquiror of the Company and are in the best
interests of the Company and its shareholders.

         In connection therewith and to induce the Officer to remain in his
present employment with the Bank and the Company and possible future employment
with other subsidiaries of the Company, to retain the Officer's services during
any actual or threatened change in control, and in consideration of the
Officer's agreement to continue such employment and to certain restrictions on
the Officer's activities following termination of employment, this Agreement
sets forth the severance and other benefits which the Company and the Bank agree
shall be provided to the Officer in the event of a "Change in Control" as
defined in Section 3 and a termination of employment or a "Change in Duties or
Salary" of the Officer as defined in Section 4 .
                                           


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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 2

    Agreement

    1.   Term.  This Agreement shall commence as of May 1, 1997 and shall
continue for a three (3) year term unless extended as provided herein.  On each
monthly anniversary date beginning with the first month following the date of
this Agreement, the term of this Agreement shall automatically be extended for
one additional month, unless prior to any monthly anniversary date, the Company
shall give written notice to the Officer to fix the term of this Agreement to a
definite three (3) year term from the date of such notice and no further
automatic monthly extensions shall occur.  This Agreement shall not be extended
beyond the first month on which the Officer attains age sixty-five (65). 
Notwithstanding any notice by the Company not to extend this Agreement or the
expiration of the term of this Agreement, this Agreement shall continue in
effect for a period of twenty-four (24) months beyond the expiration of this
Agreement if a Change in Control of the Company or the Bank shall have occurred
during the term of this Agreement.  If the Officer voluntarily terminates his
employment with the Company or the Bank prior to a Change in Control, then this
Agreement shall terminate.

    2.   Payments.  No salary continuation payments or noncompetition payments
(as hereinafter defined) shall be paid to or provided for the Officer pursuant
to this Agreement unless the following shall have occurred during the term of
this Agreement:  (a) a "Change in Control" of the Company or the Bank, and (b) a
termination of employment or a "Change in Duties or Salary" of the Officer.  Any
payments made to the Officer pursuant to this Agreement are subject to and
conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder.

    3.   Change in Control.  For purposes of this Agreement, a "Change in
Control" shall mean a change in control of either the Company or the Bank, or
the execution of a definitive agreement or the acceptance of an offer by the
Company contemplating a change in control of either the Company or the Bank
(other than the acquisition of the Bank by the Company), (i) within the meaning
of Office of Thrift Supervision ("OTS") Regulations Part 574, or any successor
regulations, or (ii) of a nature that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, a Change in Control shall be deemed to have occurred if any
of the following events occur:  (a) any person, entity or group of persons (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act) together
with any affiliates, is or becomes the "beneficial owner" (as defined in Rule
l3d-3 under the Exchange Act), directly or indirectly, of securities of the
Company or the Bank representing 15 percent or more of the combined voting power
of the Company's or the Bank's then outstanding voting securities; or (b) during
the term of this Agreement as a result of a tender or exchange offer, proxy
contest, merger or consolidation, or as a result of any combination of the
foregoing, 



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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 3

individuals who at the beginning of any two-year period constitute the Board of
Directors of the Company (the "Incumbent Directors") cease for any reason during
such two-year period to constitute at least two-thirds of the members of the
Board of Directors, unless the election or the nomination for election by the
Company's shareholders of each new director is approved by vote of at least
two-thirds of the Incumbent Directors then still in office other than in
connection with an actual or threatened proxy contest; or (c) the shareholders
of the Company approve a plan of complete liquidation or winding-up of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of its assets; or (d) any other event not specified above
which the Company's Board of Directors determines in its sole discretion should
constitute a Change in Control.

    4.   Change in Duties or Salary.  For purposes of this Agreement, "Change
in Duties or Salary" of the Officer shall mean any one of the following:  (a) a
change in the nature or scope of the duties, authority, supervision, status,
title or responsibilities of the Officer, which change results in the diminution
in any respect of the Officer's then current duties, authority, status or
responsibilities to those duties, authority, status and responsibilities of the
Officer immediately prior to the time such Change in Control occurs; (b) a
reduction in the overall level of the Officer's current compensation and
benefits, including bonuses, or exclusion from participation in the Company's or
the Bank's employee benefit plans, or the Company's or the Bank's failure to
increase (within 12 months of the Officer's last increase in base salary) the
Officer's base salary in an amount which at least equals, on a percentage basis,
the average percentage increase in base salary for all executives entitled to
participate in the Bank's or the Company's executive incentive plans for which
the Officer was eligible during the preceding 12 months; (c) a change in the
place of the Officer assignment of the Officer from Aiken, South Carolina, to
any other city or geographical location that is located further than 25 miles
from the principal office of the Company in Aiken, South Carolina; (d) any
purported termination of the employment of the Officer by the Company or the
Bank which is not effected in accordance with this Agreement; or (e) the failure
of the Company to comply with and satisfy Section 7 of this Agreement. 
Notwithstanding any provision of this Agreement to the contrary, a Change in
Duties or Salary shall be deemed to have occurred in the event of:  a merger or
combination of the Company with any other corporation or entity (regardless of
which entity is the survivor) or the acquisition by any other corporation or
entity of more than eighty percent (80%) of the outstanding voting securities of
the Bank or the Company; except that the preceding provision shall not apply in
the event of a merger, combination or acquisition of voting securities of the
Company or the Bank pursuant to which, immediately following such transaction,
the Company's voting securities outstanding immediately prior to such
transaction continue to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least fifty-one 
percent (51%) of the combined voting power of the voting securities of the
Company or surviving entity.
                                           


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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 4

    5.   Salary Continuation Payment.  In the event that:  (i) a Change in
Control and Change in Duties or Salary occur during the term of this Agreement,
but before the Officer reaches the age of 65, or (ii) the Officer's employment
is terminated except for cause at any time within twenty-four (24) months
following a Change in Control, but before the Officer reaches the age of 65,
then the Officer shall be entitled to receive, in addition to any other benefits
payable to the Officer under any other agreements or arrangements (or any other
provisions of this Agreement), an aggregate amount equal to two (2) times the
Officer's average annual taxable compensation from the Company and the Bank (and
their affiliates determined pursuant to Section 280G(d)(5) of the Internal
Revenue Code of 1986, as amended (the "Code")) for the most recent five taxable
years ending before the Change in Duties or Salary or the termination of the
Officer's employment (or for the period during which the Employee was employed
by the Bank if the Officer has been employed by the Bank for less than five (5)
years) less one dollar ($1.00) (such amount is hereinafter referred to as the
"Salary Continuation Payment").

         The Salary Continuation Payment shall be payable either in a lump sum
or, at the Officer's written election filed with the Company on or before 30
days following the effective date of this Agreement (the "Election") in monthly
or quarterly installments, the aggregate amount of which has a total present
value (determined by using a discount rate equal to 120% of the "applicable
federal rate" determined under section 1274(d) of the Code, compounded
semi-annually) equal to the aggregate amount calculated for determining a lump
sum payment.  The Officer may modify the Election at any time prior to the
Salary Continuation Payment becoming due and payable, provided that any such
modification is consistent with the terms of this Agreement and provided further
that any such modification shall not become effective and binding on the Company
until the calendar year following the year in which such modified Election is
delivered to the Company.  Some or all of the Salary Continuation Payment may,
at the Officer's election, be applied to the cost of group-term life insurance
and long-term disability benefits for the Officer on the basis that such
benefits are being provided by the Bank and the Company for the Officer
immediately prior to any Change in Control, and any balance of the Salary
Continuation Payment shall be paid to the Officer in cash in accordance with the
Election. 

    6.   Noncompetition.  In the event that:  (a) a Change in Control and
Change in Duties or Salary occur during the term of this Agreement, but before
the Officer reaches the age of 65, or (b) the Officer's employment is terminated
except for cause at any time within twenty-four (24) months following a Change
in Control, but before the Officer reaches the age of 65, then the Officer shall
not for a period of eighteen (18) months following his resignation or
termination of employment (i) solicit, attempt to solicit, divert or take away
the banking customers of the Bank, or encourage or solicit the Bank's customers
to discontinue their banking relationships with Bank and its affiliates, or
attempt or seek to cause any of the Bank's customers to refrain from doing
business with the Bank and its affiliates, or (ii) request, induce or solicit
any employee of 




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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 5

Company and its subsidiaries to terminate his or her employment with the Company
and its subsidiaries.  Nothing in this Section shall be construed as preventing
the Officer from accepting employment with a competitor of the Company and the
Bank, provided that the Officer does not breach the covenants set forth in this
Section 6 not to solicit customers or employees of the Company and the Bank to
terminate their business or employment relationships with the Company or the
Bank.  In consideration of the foregoing covenants and agreements not to solicit
the employees and customers of the Company following the Officer's resignation
or termination of employment, if the events specified in subsections 6(a) or
6(b) occur, the Officer shall be entitled to receive an aggregate payment equal
to one (1) times the Officer's average annual taxable compensation from the
Company and the Bank (and their affiliates determined pursuant to Section
280G(d)(5) of the Code) for the most recent five taxable years ending before the
Change in Duties or Salary or the termination of the Officer's employment (or
for the period during which the Employee was employed by the Bank if the Officer
has been employed by the Bank for less than five (5) years)  (such amount is
hereinafter referred to as the "Noncompetition Payment").  The Noncompetition
Payment shall be payable in addition to and in the same time and manner as the
Salary Continuation Payment, and shall be due and payable whether or not the
Officer's employment is terminated or the officers resigns following a Change in
Control and a Change in Duties or Salary.

    7.   Transfer of Employment to Other Subsidiaries.  The  Company hereby
agrees that in the event that the Officer should, at any time or from time to
time, hereafter become an Officer of any subsidiary of the Company, the Company
will cause such subsidiary to promptly become an obligor of the Agreement with
respect to such employment.  In addition, as agent of its subsidiaries, the
Company, on behalf of its subsidiaries, hereby obligates such subsidiaries with
respect to the terms hereof as to any such employment of the Officer.  Further,
the Company hereby unconditionally guarantees the performance by any of its
subsidiaries of such subsidiary's obligations under this Agreement.  Any
business entity succeeding to substantially all of the business of the Company
or the Bank by purchase, merger, consolidation, sale or assets or otherwise,
shall be bound by and shall adopt and assume this Agreement and the Company and
the Bank shall obtain the assumption of this Agreement by such successor.

    8.   No Obligation of Continued Employment.  While it is the intent of this
Agreement to induce the Officer to continue employment with the Bank and the
Company at the pleasure of the Company during the term of this Agreement, this
Agreement does not in any way obligate either the Company or the Bank to
continue the Officer's employment or any specific level of salary or benefits in
connection therewith except as specifically provided herein, and the Officer
shall not be entitled to any benefits hereunder in the event of termination of
his employment prior to a Change in Control.  The Officer agrees, however, in
the event of exercise of his right to resign following a Change in Control and a
Change in Duties or Salary, that, at the request of the 



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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 6

Company or the Bank made within five (5) days of notice of resignation, the
Officer will enter into an employment contract to continue employment for a
specified period, up to six months, at the then existing compensation and
benefits and in accordance with historical working conditions, for the purpose
of maintaining the continuity of his job function during such period for the
benefit of the Company and its subsidiaries; it being acknowledged and agreed
that the Salary Continuation Payment and Noncompetition Payment and benefits set
forth in this Agreement shall be paid in the time and manner provided above and
without regard to the Officer's continued employment at the request of the
Company.
 
    9.   Termination for Cause.  Notwithstanding any other provision of this
Agreement:

         (a)  The Bank's Board of Directors may terminate the Officer's
employment at any time, but any termination by the Bank's Board of Directors
other than termination for "cause", shall not prejudice the Officer's right to
compensation or other benefits under this Agreement.  The Officer shall have no
right to receive compensation or other benefits for any period after termination
for "cause".  Termination for "cause" shall include termination because of the
Officer's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement.

         (b)  If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
section 8(e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. Section
1818(e)(3) and (g)(1)), the Bank's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. 
If the charges in the notice are dismissed, the Bank may in its discretion (i)
pay the Officer all or part of the compensation withheld while its contract
obligations were suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.

         (c)  If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

         (d)  If the Bank is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (b)(4) shall not affect
any vested rights of the contracting parties.


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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 7

         (e)  All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary for
the continued operation of the Bank:

              (i)  by the Director of the OTS or his or her designee, at the
         time the Federal Deposit Insurance Corporation or Resolution Trust
         Corporation enters into an agreement to provide assistance to or on
         behalf of the association under the authority contained in 13(c) of
         the Federal Deposit Insurance Act; or

              (ii) by the Director of the OTS or his or her designee, at the
         time the Director or his or her designee approves a supervisory merger
         to resolve problems related to operation of the association or when
         the association is determined by the Director to be in an unsafe or
         unsound condition.

         Any rights of the parties that have already vested, however, shall not
be affected by such action.

    10.  Tax Equalization Payment.  It is intended that the payments to be made
to the Officer hereunder shall not constitute "parachute payments" within the
meaning of Section 280G(b)(2)(A) of the Code and this Agreement shall be
construed to effect such intent.  Payments to the Officer pursuant to this
Agreement shall be in addition to any compensation due but not paid through the
date of the Officer's termination or resignation and all other benefits or
compensation to which the Officer is entitled under the Company's stock option,
restricted stock and other employee benefit plans. 

         Notwithstanding the foregoing, if Sections 280G or 4999 of the Code
apply to any of the payments to be made pursuant to this Agreement or to any
compensation received by the Officer under the Company's stock option,
restricted stock or other employee benefit plans as a result of a Change in
Control of the Company or the Bank, then in addition to any amounts payable to
the Officer in accordance with Sections 5 and 6 of this Agreement, the Company
also shall pay the Officer a tax equalization payment in an amount which, when
added together with any other amounts payable to the Officer, will place the
Officer in the same after-tax position as if the excise taxes imposed by Section
4999 of the Code, or any successor statute of similar import, had never been
enacted and, therefore, did not apply.  This Agreement shall apply and, if
necessary, the tax equalization payment shall be made regardless of whether or
not the Officer's employment is terminated by the Company.  The amount of this
tax equalization payment shall be determined by the Company's independent
accountants and shall be payable to the Officer at the same time and in the same
manner as amounts to which the payment relates are paid to the Officer.


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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 8

    11.  Notices.

         (a)  Notice of Termination.  Any termination of the Officer's
employment by the Bank or the Company or by resignation of the Officer shall be
communicated by a written notice of termination or resignation to the other
party, and shall specify the provision of this Agreement relied upon and shall
set forth in reasonable detail the circumstances claimed to provide a basis for
termination.  The date of termination shall be the date on which the notice of
termination is delivered if by the Officer or thirty (30) days after the date of
the notice of termination if given by the Bank or the Company.  If the Officer's
employment is terminated by death, disability or retirement, the date of
termination shall be the date provided in any other written contract or, in the
absence of any such contractual provision, by the policy of the Company or the
Bank at the time of the occurrence of such event.

         (b)  General.  All notices and other communications, including notice
of resignation or dismissal, shall be in writing and shall be deemed to have
been duly given when mailed by the United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth hereafter, provided that all notices to the Bank or the Company shall
be directed to the attention of the Boards of Directors of such corporate
entities with copies to both the Secretary of the Company and the Bank, or to
such other addresses as either party may have furnished the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.

    If to the Company or the Bank:     PALFED, Inc.
                                       107 Chesterfield Street South
                                       Aiken, SC 29801 
                                       Attn:  Chairman 
 
    If to the Officer:                 _____________________________
                                       _____________________________
                                       _____________________________
 
    12.  Miscellaneous.

         (a)  Reimbursement of Expenses; Interest.  The Company shall pay all
legal fees and expenses incurred by the Officer as a result of any contest
following any Change in Control (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof, including
any legal fees and expenses and other out-of-pocket expenses incurred by the
Officer relating to or as a result of the enforcement or contest by the Officer
of any provision of this 


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PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 9

Agreement.  Such reimbursement shall be paid within thirty (30) days of the
Officer furnishing to the Company or the Bank written evidence of any costs or
expenses incurred by the Officer.  In addition, the Company or the Bank shall
pay the Officer interest on any payments pursuant to this Agreement that are not
paid when due at a rate equal to the prime rate as announced by the Bank or its
successors from time to time.

         (b)  No Duty to Mitigate.  The Officer shall not be required to
mitigate the amount of any payments provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any Salary Continuation
Payment or Noncompetition Payment be reduced by any compensation earned by the
Officer as the result of employment by the Company and its subsidiaries or by
another employer after the date of the Officer's termination or resignation, or
otherwise.

         (c)  Other Benefits and Accrued Compensation.  Payments to the Officer
pursuant to this Agreement shall be in addition to any compensation due but not
yet paid through the date of the Officer's termination or resignation and all
other benefits or compensation to which the Officer is entitled under the
Company's stock option, restricted stock or other employee benefit plans.

         (d)  Successors; Severability.  All benefits of this Agreement shall
accrue to, and be payable to, the Officer's heirs, executors, administrators or
assigns.  Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid, but if any one or more
of the provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions of this Agreement shall not be in any way impaired. 

         (e)  Entire Agreement; Prior Agreements.  This Agreement constitutes
the entire understanding and agreement among the Company, the Bank and the
Officer with regard to all matters herein.  There are no other agreements,
conditions or representations, oral or written, express or implied, with regard
thereto.  This Agreement may be amended, modified or renewed only in writing
signed by both parties hereto.  Any and all executive salary continuation or
severance agreements or change of control agreements previously entered into
between the Officer and the Company or the Bank are hereby terminated and
canceled as of the date of this Agreement.

         (f)  Governing Law; Joint and Several.  This Agreement shall be
construed and enforced in accordance with the laws of the State of South
Carolina.  To the extent permitted by applicable law, all obligations of the
Company and the Bank shall be joint and several.


<PAGE>

PALFED/Palmetto Federal
Salary Continuation Agmt (May 1997)
page 10

         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written. 


                                       PALFED, INC.


Attest:                                By:______________________________
                                       Title:___________________________ 

_______________________                                 
Title:_________________                         

                                       PALMETTO FEDERAL SAVINGS BANK
                                          OF SOUTH CAROLINA


Attest:                                By:_____________________________ 
                                       Title:__________________________ 

________________________       
Title:__________________                       




                                                                                
                                       _________________________________
                                                    Officer


                                       Address:_________________________ 
                                               _________________________        



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