SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
First Federal Bancorp, Inc.
-----------------------------------------------
Name of Registrant as Specified In Its Charter)
First Federal Bancorp, Inc.
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
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was determined)
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[ ] 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:
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4) Date Filed:
FIRST FEDERAL BANCORP, INC.
505 Market Street
Zanesville, Ohio 43701
(740) 588-2222
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the 2002 Annual Meeting of Shareholders
of First Federal Bancorp, Inc. ("Bancorp"), will be held at the Holiday
Inn, 4645 East Pike, Zanesville, Ohio, on February 21, 2002, at 2:00 p.m.,
Eastern Standard Time (the "Annual Meeting"), for the following purposes,
all of which are more completely set forth in the accompanying Proxy
Statement:
1. To re-elect John C. Matesich, III, Don R. Parkhill and J.
William Plummer as directors of Bancorp for terms expiring in
2004;
2. To approve the First Federal Bancorp, Inc. 2002, Stock Option
and Incentive Plan, a copy of which is attached hereto as
Exhibit A;
3. To ratify the selection of BKD LLP ("BKD") as the auditors of
Bancorp for the current fiscal year; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of Bancorp of record at the close of business on
December 24, 2001, will be entitled to receive notice of and to vote at the
Annual Meeting. Whether or not you expect to attend the Annual Meeting, we
urge you to consider the accompanying Proxy Statement carefully and to
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY
BE VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY BE
ASSURED. The giving of a Proxy does not affect your right to vote in
person in the event you attend the Annual Meeting.
Zanesville, Ohio J. William Plummer, President and
January 9, 2002 Chief Executive Officer
Ward D. Coffman, III, Secretary
FIRST FEDERAL BANCORP, INC.
505 Market Street
Zanesville, Ohio 43701
(740) 588-2222
PROXY STATEMENT
PROXIES
The enclosed Proxy is being solicited by the Board of Directors of
First Federal Bancorp, Inc. ("Bancorp"), for use at the 2002 Annual Meeting
of Shareholders of Bancorp to be held at the Holiday Inn, 4645 East Pike,
Zanesville, Ohio, on February 21, 2002, at 2:00 p.m., Eastern Standard
Time, and at any adjournments thereof (the "Annual Meeting"). Without
affecting any vote previously taken, the Proxy may be revoked by a
shareholder before exercise by giving notice of revocation to Bancorp in
writing or in open meeting. Attendance at the Annual Meeting will not, of
itself, revoke a Proxy.
Each properly executed Proxy received prior to the Annual Meeting and
not revoked will be voted as specified thereon or, in the absence of
specific instructions to the contrary, will be voted:
FOR the re-election of John C. Matesich, III, Don R. Parkhill
and J. William Plummer as directors of Bancorp for terms
expiring in 2004;
FOR the approval of the First Federal Bancorp, Inc., 2002 Stock
Option and Incentive Plan (the "2002 Stock Option Plan"); and
FOR the ratification of the selection of BKD LLP ("BKD") as the
auditors of Bancorp for the current fiscal year.
Proxies may be solicited by the directors, officers and other
employees of Bancorp in person or by telephone, telecopy, telegraph or
mail, only for use at the Annual Meeting and will not be used for any other
meeting. The cost of soliciting Proxies will be borne by Bancorp.
Only shareholders of record as of the close of business on December
24, 2001 (the "Voting Record Date"), are eligible to vote at the Annual
Meeting. Bancorp's records disclose that, as of the Voting Record Date,
there were 3,161,401 common shares of Bancorp (the "Shares") outstanding.
On all matters, shareholders are entitled to one vote for each Share held.
This Proxy Statement is first being mailed to the shareholders of
Bancorp on or about January 9, 2002.
1
VOTE REQUIRED
Quorum
A majority of the votes eligible to be cast at the Annual Meeting
must be present in person or by proxy to establish a quorum. Abstentions
and shares held by a nominee for a beneficial owner and which are
represented in person or by proxy at the Annual Meeting but not voted with
respect to one or more proposals ("Non-votes") will be counted as present
for purposes of establishing a quorum.
Election of Directors
Under Ohio law and Bancorp's Code of Regulations (the "Regulations"),
the three nominees receiving the greatest number of votes will be elected
as directors. Shares as to which the authority to vote is withheld are not
counted toward the election of directors or toward the election of the
individual nominees specified on the Proxy.
Approval of the 2002 Stock Option Plan
The affirmative vote of the holders of a majority of the Shares
represented in person or by proxy at the Annual Meeting is necessary to
approve the 2002 Stock Option Plan. Abstentions and Non-votes have the
same effect as a vote against the approval of the 2002 Stock Option Plan.
If, however, a shareholder has signed and dated a proxy in the form of the
enclosed Proxy but has not voted on the approval of the 2002 Stock Option
Plan by marking the appropriate box on the Proxy, such person's Shares will
be voted FOR the approval of the 2002 Stock Option Plan.
Ratification of Selection of Auditors
The affirmative vote of the holders of a majority of the Shares
represented in person or by proxy at the Annual Meeting is necessary to
ratify the selection of BKD LLP (formerly known as Olive LLP) as the
auditors of Bancorp for the current fiscal year. The effect of an
abstention is the same as an "against" vote. If, however, a shareholder
has signed and dated a proxy in the form of the enclosed Proxy but has not
voted on the ratification of the selection of BKD as the auditors by
marking the appropriate box on the Proxy, such person's Shares will be
voted FOR the ratification of the selection of BKD as the auditors.
VOTING SECURITIES AND OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the only persons known to Bancorp to own beneficially more than five
percent (5%) of the outstanding Shares as of December 15, 2001:
Amount and Nature of
Beneficial Ownership (2)
------------------------ Percent of
Name and Address (1) Sole Shared Shares Outstanding
- -------------------- ---- ------ ------------------
<s> <c> <c> <c>
Ward D. Coffman, III 174,320(3) 14,000 5.88%
Connie Ayres LaPlante 84,199(4) 142,048 7.05%
J. William Plummer 146,109(5) 75,170 6.82%
MacNealy Hoover Investment
Management Inc.
4580 Stephen Circle, Suite 201
Canton, OH 44718 248,600(6) -0- 7.86%
<FN>
- --------------------
<F1> Each of the individuals listed in this table may be contacted at the
address of Bancorp, 505 Market Street, Zanesville, Ohio 43701.
<F2> Includes Shares with respect to which the shareholder has sole or
shared voting or investment power as a fiduciary for a trust or
another person and Shares held by certain family members.
</FN>
(Footnotes continued on next page.)
2
(3) Includes 41,124 Shares subject to currently exercisable options
granted under the First Federal Bancorp, Inc., 1992 Stock Option Plan
for Non-Employee Directors (the "1992 Non-qualified Plan"), the First
Federal Bancorp, Inc., 1994 Stock Option Plan for Non-Employee
Directors (the "1994 Non-qualified Plan") and the First Federal
Bancorp, Inc., 1997 Performance Stock Option Plan for Senior
Executive Officers and Outside Directors (the "1997 Plan").
(4) Includes 47,759 Shares subject to currently exercisable options
granted under the First Federal Bancorp, Inc., 1992 Incentive Stock
Option Plan for Officers and Key Employees (the "1992 ISO Plan"), the
First Federal Bancorp, Inc., 1994 Stock Option Plan for Officers and
Key Employees (the "1994 ISO Plan") and the 1997 Plan.
(5) Includes 84,199 Shares subject to currently exercisable options
granted under the 1992 ISO Plan, the 1994 ISO Plan and the 1997 Plan.
(6) Based upon written notification from the shareholder.
The following table sets forth certain information with respect to
the number of Shares beneficially owned by each director of Bancorp and by
all directors and executive officers of Bancorp as a group as of December
15, 2001:
Amount and Nature of
Beneficial Ownership (2)
------------------------ Percent of
Name and Address (1) Sole Shared Shares Outstanding
- -------------------- ---- ------ ------------------
<s> <c> <c> <c>
Ward D. Coffman, III 174,320(3) 14,000 5.88%
Robert D. Goodrich, II 81,080(4) - 2.55%
Patrick L. Hennessey 133,480(5) 14,000 4.64%
Connie Ayres LaPlante 84,199(6) 142,048 7.05%
John C. Matesich, III 81,480(7) 14,000 2.98%
Don R. Parkhill 45,234(8) 12,290 1.80%
J. William Plummer 146,109(9) 75,170 6.82%
All directors and executive officers
of Bancorp as a group (7 people) 745,902 229,508 28.21%
<FN>
- --------------------
<F1> Each of the individuals listed in this table may be contacted at the
address of Bancorp, 505 Market Street, Zanesville, Ohio 43701.
<F2> Includes Shares with respect to which the shareholder has sole or
shared voting or investment power as a fiduciary for a trust or
another person and Shares held by certain family members.
<F3> See footnote 3 to the preceding table for a description of Mr.
Coffman's beneficial ownership.
<F4> Includes 23,644 Shares subject to currently exercisable options
granted under the 1992 Non-qualified Plan, the 1994 Non-qualified
Plan and the 1997 Plan.
<F5> Includes 15,644 Shares subject to currently exercisable options
granted under the 1992 Non-qualified Plan, the 1994 Non-qualified
Plan and the 1997 Plan.
<F6> See footnote 4 to the preceding table for a description of Ms.
LaPlante's beneficial ownership.
<F7> Includes 41,124 Shares subject to currently exercisable options
granted under the 1992 Non-qualified Plan, the 1994 Non-qualified
Plan and the 1997 Plan.
<F8> Includes 41,124 Shares subject to currently exercisable options
granted under the 1992 Non-qualified Plan, the 1994 Non-qualified
Plan and the 1997 Plan.
<F9> See footnote 5 to the preceding table for a description of Mr.
Plummer's beneficial ownership.
<F10> Messrs. Coffman, Hennessey, Matesich and Plummer share control as
Trustees over 14,000 shares held in the First Federal Savings Bank of
Eastern Ohio Defined Benefit Plan. The 14,000 shares are included in
each of their numbers of shares beneficially owned but are included
only once in the total number of shares held by all directors and
executive officers of Bancorp as a group.
</FN>
3
PROPOSAL ONE: ELECTION OF DIRECTORS
In accordance with Article Two of the Code of Regulations of Bancorp
(the "Regulations"), three directors are to be elected at the Annual
Meeting, each for a term of two years and until their successors are
elected. Each holder of Shares is entitled to one vote for each director
position for each Share held. No shareholder may cumulate votes in the
election of directors.
In accordance with Section 2.03 of the Regulations, nominees for
election as a director may be proposed only by the directors or by a
shareholder entitled to vote for directors. The directors will consider
shareholder nominations in selecting nominees. A shareholder who wishes to
make a nomination must follow the procedures set forth in the Regulations.
Such procedures require the submission of a written nomination by the
shareholder to the Secretary of Bancorp by the later of the November 15th
immediately preceding the annual meeting of shareholders or the sixtieth
day before the first anniversary of the most recent annual meeting of
shareholders held for the election of directors. Each such written
nomination must state the name, age, business or residence address of the
nominee, the principal occupation or employment of the nominee, the number
of Shares owned either beneficially or of record by each such nominee and
the length of time such Shares have been so owned.
Unless otherwise directed, Proxies received pursuant to this
solicitation will be voted for the nominees listed below, each of whom has
been designated by the directors. In the event that any nominee listed
below fails to stand for election at the Annual Meeting, Proxies will be
voted for such other person as may be designated by the directors.
Management does not anticipate that any of the nominees listed below will
fail to stand for election at the Annual Meeting.
The Board of Directors proposes the re-election of the following
persons to terms which will expire in 2004:
Name Age Position(s) Held Director Since (1)
- ---- --- ---------------- ------------------
<s> <c> <c> <c>
John C. Matesich, III 58 Chairman and Director 1992
Don R. Parkhill 43 Director 1995
J. William Plummer 56 President, Chief Executive Officer
and Director 1992
<FN>
- --------------------
<F1> Messrs. Matesich and Plummer became directors of Bancorp in
connection with the conversion of First Federal Savings Bank of
Eastern Ohio, Inc. ("First Federal"), from mutual to stock form (the
"Conversion") and the formation of Bancorp as the holding company of
First Federal. Each director also serves as a director of First
Federal.
</FN>
The following directors will continue to serve after the Annual
Meeting for the terms indicated:
Name Age Position(s) Held Director Since (1) Term Expires
- ---- --- ---------------- ------------------ ------------
<s> <c> <c> <c> <c>
Ward D. Coffman, III 48 Secretary and Director 1992 2003
Robert D. Goodrich, II 55 Director 1992 2003
Patrick L. Hennessey 51 Director 1992 2003
Connie Ayres LaPlante 45 Treasurer and Director 1992 2003
<FN>
- --------------------
<F1> Each of such directors became a director of Bancorp in connection with
the Conversion and the formation of Bancorp as the holding company of
First Federal. Each director nominee also serves as a director of
First Federal.
</FN>
John C. Matesich, III, is the President of Matesich Distributing Co.,
a beer distributor in Southeastern Ohio. Mr. Matesich has been the
President of Matesich Distributing Co. since 1990 and has been employed by
Matesich Distributing Co. since 1972.
Don R. Parkhill has been the President of Blackson-Parkhill Agency,
Inc., doing business as Parkhill Sedanko Insurance Agency, Inc., in
Coshocton, Ohio, since 1987. Mr. Parkhill is also the owner of Parkhill
Business and Estate Planning, which has sold life insurance and assisted
with other financial planning needs since 1987.
J. William Plummer is currently the President and Chief Executive
Officer of First Federal. Mr. Plummer has been employed by First Federal
since 1970 and has served as the President and the Chief Executive Officer
since 1979.
4
Ward D. Coffman, III, is an attorney who has been engaged in private
practice in the Zanesville area since 1978.
Robert D. Goodrich, II, is the Chairman of the Board and Chief
Executive Officer of Wendy's Management Group, Inc., a position he has held
since 1986.
Patrick L. Hennessey is currently the President of P & D
Transportation. Mr. Hennessey has been employed by P & D Transportation
since 1985.
Connie Ayres LaPlante is a Senior Vice President and the Treasurer of
First Federal. Ms. LaPlante commenced employment with First Federal in
1978.
Meetings of Directors
The Board of Directors of Bancorp met 15 times for regularly
scheduled and special meetings during the fiscal year ended September 30,
2001. Each director attended at least 75% of the aggregate of such
meetings and all meetings of the committees of the Board of Directors of
which such director is a member.
The Board of Directors of First Federal met 24 times for regularly
scheduled and special meetings during the fiscal year ended September 30,
2001.
Committees of Directors
The Board of Directors of Bancorp has a Stock Option Committee, which
administers Bancorp's stock option plans. The Stock Option Committee is
comprised of Messrs. Coffman, Hennessey, Matesich, Parkhill, Goodrich and
Plummer and Ms. LaPlante. The Stock Option Committee met one time during
the fiscal year ended September 30, 2001.
The Board of Directors of Bancorp does not have a Nominating
Committee. Nominations for election to the Board of Directors of Bancorp
are determined by the entire Board of Directors of Bancorp. In addition,
the Regulations provide a procedure for shareholders to nominate persons
for election to the Board of Directors of Bancorp. See "PROPOSAL ONE:
ELECTION OF DIRECTORS."
The Audit Committee and the Compensation Committee of the Board of
Directors of Bancorp meet in conjunction with the Audit Committee and the
Compensation Committee of the Board of Directors of First Federal. The
Audit Committee is comprised of Messrs. Coffman, Hennessey, Goodrich,
Matesich and Parkhill. See "AUDIT COMMITTEE REPORT" for a description of
the Audit Committee's responsibilities. The Audit Committee met two times
during the fiscal year ended September 30, 2001.
Messrs. Coffman, Hennessey and Matesich are the members of the
Compensation Committee. The Compensation Committee reviews and recommends
to the full Board of Directors salary levels for the executive officers of
First Federal and, in conjunction with management, for the other employees
of First Federal. The Compensation Committee met one time during the
fiscal year ended September 30, 2001.
The Board of Directors of First Federal also has a Loan Committee.
The function of the Loan Committee is to approve loans for amounts greater
than $275,000. Messrs. Plummer, Coffman and Hennessey are the members of
the Loan Committee. The Loan Committee met 11 times by telephone during
the fiscal year ended September 30, 2001.
5
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation
The following Summary Compensation Table sets forth certain
information with respect to the compensation paid by First Federal to the
chief executive officer of Bancorp and the only other officer of Bancorp to
receive cash compensation in excess of $100,000 during fiscal year 2001.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
Name and Principal ----------------------- ----------------------
Position Year Salary ($)(1) Bonus ($)Options/ SARs (#)
------------------ ---- ------------- ----- ---------------------
<s> <c> <c> <c> <c>
J. William Plummer 2001 $154,607 $47,009 15,000(2)
President and Chief 2000 151,328 44,313 -
Executive Officer 1999 144,611 38,519 -
Connie Ayres LaPlante 2001 102,936 26,312 15,000(2)
Treasurer 2000 97,758 24,331 -
1999 92,698 21,146 -
<FN>
- --------------------
<F1> Does not include amounts attributable to other miscellaneous
benefits, the cost of which was less than 10% of the officer's cash
compensation.
<F2> Represents the number of Shares underlying options granted under the
1992, 1994 and 1997 Plans. Bancorp does not have a stock benefit
plan which provides for the grant of "SARs," an abbreviation for
"Stock Appreciation Rights."
</FN>
Employment Agreements
In November 2001, First Federal entered into employment agreements
with Mr. Plummer and Ms. LaPlante, each with a term of three years. The
agreements provide for a salary review by the Board of Directors not less
often than annually and the inclusion of the employee in any formally
established employee benefit, bonus pension and profit-sharing plans for
which senior management personnel are eligible. Each employment agreement
may be terminated by First Federal at any time. In the event of
termination for "just cause," as defined in the employment agreement, the
employee will have no right to receive any compensation or other benefits
for any period after such termination. In the event of termination within
one year of any change in "control" (as defined below) of First Federal or
Bancorp, each employee will be entitled to receive (a) a payment in an
amount equal to the sum of (i) the amount of compensation to which the
employee is entitled for the remainder of the term of the agreement, plus
(ii) the difference between (x) the product of three multiplied by the
total compensation paid to the employee for the immediately preceding
calendar year less (y) the amount paid to the employee pursuant to (i); and
(b) continued health, life and disability insurance and other benefits
substantially equal to those which the employee was receiving at the time
the agreement was terminated until the earliest to occur of the end of the
term of the agreement, or the date the employee becomes employed by another
employer. "Control," as defined in the employment agreements, generally
refers to the acquisition by any person or entity of the ownership or power
to vote ten percent (10%) or more of the shares of either First Federal or
Bancorp, the control of the election of a majority of the directors of
either First Federal or Bancorp or the exercise of a controlling influence
over the management or policies of either First Federal or Bancorp.
In the event of termination other than for "just cause" (as defined
in the employment agreement) or in connection with a change of control, the
employee will be entitled to a continuation of salary payments for a period
of time equal to the term of the employment agreement, as well as a
continuation of benefits substantially equal to those being provided at the
date of termination of employment until the earlier to occur of the end of
the employment agreement term or the date the employee becomes employed
full-time by another employer.
6
Compensation of Directors
Each non-employee director of Bancorp receives a fee of $350 per
month and $50 for each meeting of the Board of Directors attended, with
payment for two excused absences per year. Each non-employee director of
First Federal receives a fee of $500 per month and $250 for each meeting of
the Board of Directors attended, with payment for four excused absences per
year. In addition to regular fees paid to the directors of First Federal,
members of the Compensation Committee and members of the Benefits Committee
who are not employees receive $150 for each meeting attended. Members of
the Loan Committee, other than the executive officers, receive $50 for each
meeting attended in person, although no fees were paid during the fiscal
year ended September 30, 2001, because only telephonic meetings were held
during the year. No committee fees are paid to members of the Audit
Committee.
Certain Transactions with First Federal
All loans by First Federal to executive officers and directors of
First Federal and Bancorp with outstanding balances during the two fiscal
years ended September 30, 2001, were made in the ordinary course of
business and on the same terms and conditions, including interest rates and
collateral, as those of comparable loans to other persons. None of such
loans involve more than the normal risk of collectibility or present other
unfavorable features and are current in their payments.
During the fiscal year ended September 30, 2001, First Federal
retained the services of Ward D. Coffman, III, an attorney engaged in
private practice in the Zanesville area. Mr. Coffman is the secretary and
a director of Bancorp and serves as general counsel to First Federal. From
time to time, Mr. Coffman will serve as general counsel to First Federal
during the fiscal year beginning October 1, 2001.
Stock Option Plans
The shareholders of Bancorp approved stock option plans for employees
(the "ISO Plans") and non-employee directors (the "Non-qualified Plans") in
1993 and in 1995. The purposes of the ISO Plans and the Non-qualified Plans
include attracting and retaining the best available personnel as officers,
employees and directors of Bancorp and First Federal and providing
incentives to the officers, employees and directors of Bancorp and First
Federal by facilitating their purchases of an ownership interest in
Bancorp.
Bancorp currently has reserved 624,015 common shares for issuance
under the ISO Plans and the Non-qualified Plans, of which 508,066 were
subject to outstanding options on December 15, 2001. Options granted under
the ISO Plans are intended to qualify as "incentive stock options" ("ISOs")
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), which, if certain conditions are met, permits the optionees to
delay the recognition of federal taxable income on the Shares received upon
the exercise of options.
The Stock Option Committee of the Board of Directors may grant
options under the ISO Plans at such times as it deems most beneficial to
Bancorp and First Federal. The option exercise price for ISOs is
determined by the Stock Option Committee at the time of option grant. The
exercise price must not be less than 100% of the fair market value of the
Shares on the date of the grant.
The Non-qualified Plans provide for the grant of options that are not
intended to qualify as "incentive stock options" under Section 422 of the
Code ("Non-qualified Options"). Grants of Non-qualified Options are made
automatically to each non-employee director at the time the Non-qualified
Plans became effective or upon a new director's election. Non-qualified
Options granted under the 1994 Non-qualified Plan are immediately
exercisable upon grant. Non-qualified Options granted under the 1992 Non-
qualified Plan are first exercisable one year after the date of grant. The
exercise price for Non-qualified Options is at least the fair market value
of the Shares on the date of the grant. Termination or removal of an
Option recipient for cause, as defined in the ISO Plans and the Non-
qualified Plans, will result in the annulment of any outstanding Options.
The shareholders of Bancorp approved at the 1997 Annual Meeting of
Shareholders the 1997 Plan. The Board of Directors of Bancorp has reserved
108,000 Shares for issuance upon the exercise of options granted pursuant
to the 1997 Plan. Unlike the ISO Plans and the Non-qualified Plans, the
1997 Plan provides for the automatic grant of options if, and only if, the
return on average equity ("ROE") of Bancorp for any fiscal year during the
five-year term of the 1997 Plan equals or exceeds the average of the
returns on equity of Bancorp for the five fiscal years preceding any such
fiscal year (the "Average"). When the ROE during any year of the five-year
term equals or exceeds the Average, then an option to purchase 4,000 common
shares will be granted to each of the five senior executive officers of
First Federal and the five non-employee directors of First Federal and
Bancorp on December 1 of such year. However, the maximum number of common
shares that may be subject to options granted to any participant under the
1997 Plan is 12,000. As a result, options under the 1997 Plan
7
may be granted in only three of the five years of the term. Options were
granted under the 1997 Plan in fiscal year 1998 and 2002 but not in fiscal
years 1999 or 2000.
The options granted to senior executive officers pursuant to the 1997
Plan are intended to qualify as ISOs, and the options granted to non-
employee directors will be Non-qualified Options. The exercise price of
the options granted pursuant to the 1997 Plan will be equal to the fair
market value of the Shares on the date of the grant, or 110% of the fair
market value of the Shares on the date of the grant to a participant who
owns more than 10% of Bancorp's outstanding Shares. Any option granted
pursuant to the 1997 Plan will, unless otherwise specified by the Stock
Option Committee at the time of grant, be exercisable immediately after the
date of grant of such option, provided that the optionee will have been a
senior executive officer or non-employee director of Bancorp or First
Federal at all times during the period beginning with the date of grant of
any such option and ending on the date which is three months before the
date of exercise of the option.
All ISOs and Non-qualified Options are immediately exercisable in the
event of a "change of control," as defined in the plans. A "change of
control" includes execution of an agreement for a merger or acquisition or
the acquisition of the beneficial ownership of 25% or more of the voting
shares of Bancorp by any person or entity.
Options were granted to Mr. Plummer and Ms. LaPlante on November 8,
2001. They each received 3,241 shares from the 1992 Non-qualified plan,
7,759 shares from the 1994 Non-qualified Plan and 4,000 shares from the
1997 Plan, totaling 15,000 shares each.
No options were granted to Mr. Plummer or Ms. LaPlante during the
fiscal year ended September 30, 2001. The following table sets forth
information regarding the number and value of unexercised options held by
the persons listed in the Summary Compensation Table:
Aggregated Option/SAR Exercises In Last Fiscal Year
---------------------------------------------------
and 9/30/01 Option/SAR Values
-----------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
9/30/01(#) 9/30/01(1)
--------------- ---------------
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- ---- --------------- -------------- ------------- -------------
<s> <c> <c> <c> <c>
J. William Plummer N/A N/A 72,440/0 $257,090/0
Connie Ayres LaPlante 12,140 $54,023 36,000/0 $ 84,000/0
<FN>
- --------------------
<F1> An option is "in-the-money" if the fair market value of the
underlying Shares exceeds the exercise price of the option. The
figure represents the value of such unexercised options, determined
by multiplying the number of Shares subject to unexercised options by
the difference between the exercise prices of such options and the
closing sale price for the Shares on September 30, 2001, as reported
by The Nasdaq Stock Market.
</FN>
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, Bancorp's directors and executive
officers and persons holding more than ten percent of the common shares of
Bancorp are required to report their ownership of common shares and changes
in such ownership to the Securities and Exchange Commission (the "SEC") and
Bancorp. The SEC has established specific due dates for such reports.
Based upon a review of such reports, Bancorp must disclose any failures to
file such reports timely in Proxy Statements used in connection with annual
meetings of shareholders. Bancorp is not aware of any failures to file
such reports timely.
8
PROPOSAL TWO: APPROVAL OF THE FIRST FEDERAL BANCORP, INC.,
2002 STOCK OPTION AND INCENTIVE PLAN
General. The following is a summary of the terms of the 2002 Stock
Option Plan and is qualified in its entirety by reference to the full text
of the 2002 Stock Option Plan, a copy of which is attached hereto as
Exhibit A. If the 2002 Stock Option Plan is approved by the Bancorp
shareholders, the Bancorp Board of Directors expects to adopt it
immediately after the Annual Meeting, at which time the 2002 Stock Option
Plan will become effective. Awards to be made under the 2002 Stock Option
Plan have not yet been determined.
Purpose. The purpose of the 2002 Stock Option Plan is to promote and
advance the interests of Bancorp and its shareholders by enabling Bancorp
to attract, retain and reward directors and managerial and other key
employees of Bancorp and any subsidiary, including First Federal, by
facilitating their purchase of an ownership interest in Bancorp. Pursuant
to the 2002 Stock Option Plan, 316,100 common shares have been reserved for
issuance by Bancorp upon the exercise of options to be granted from time to
time under the 2002 Stock Option Plan. At December 15, 2001, approximately
45 persons were eligible to receive options granted under the 2002 Stock
Option Plan. If all shares reserved for issuance pursuant to the exercise
of options granted under the 2002 Stock Option Plan are issued, the voting
power of existing shareholders will be diluted by approximately 9.1%, and
the influence of directors and officers of Bancorp over the outcome of the
vote on any matters submitted to Bancorp shareholders, including changes in
control, will increase.
Administration and Eligibility. The 2002 Stock Option Plan will be
administered by a committee of directors composed of at least three
directors of Bancorp (the "Stock Option Committee"). The Stock Option
Committee may grant options under the 2002 Stock Option Plan at such times
as they deem most beneficial to Bancorp and First Federal on the basis of
the individual participant's position and duties and the value of the
individual's services and responsibilities to First Federal and Bancorp.
Without further approval of the shareholders, the Board of Directors
may at any time terminate the 2002 Stock Option Plan or may amend it from
time to time in such respects as the Board of Directors may deem advisable,
except that the Board of Directors may not, without the approval of the
shareholders, make any amendment which would (a) increase the aggregate
number of common shares that may be issued under the 2002 Stock Option Plan
(except for adjustments to reflect certain changes in the capitalization of
Bancorp), (b) materially modify the requirements as to eligibility for
participation in the 2002 Stock Option Plan, or (c) materially increase the
benefits accruing to participants under the 2002 Stock Option Plan.
Notwithstanding the foregoing, the Board of Directors may amend the 2002
Stock Option Plan to take into account changes in applicable securities,
federal income tax and other applicable laws.
Option Terms. Options granted to the officers and employees under
the 2002 Stock Option Plan may be "incentive stock options" ("ISOs") within
the meaning of Section 422 of the Code, or may be options which do not
qualify under Section 422 of the Code ("Non-qualified Stock Options").
Options granted under the 2002 Stock Option Plan to directors who are not
employees of Bancorp or First Federal will be Non-qualified Stock Options.
No individual may be granted options to purchase more than 25% of the
shares that may be issued pursuant to the 2002 Stock Option Plan.
The exercise price of each option granted under the 2002 Stock Option
Plan will be determined by the Stock Option Committee at the time the
option is granted; provided, however, that the exercise price of an option
may not be less than 100% of the fair market value of the shares on the
date of the grant. In addition, the exercise price of an ISO may not be
less than 110% of the fair market value of the shares on the date of the
grant if the recipient owns more than 10% of the outstanding common shares
of Bancorp. The Stock Option Committee will fix the term of each option,
except that an ISO will not be exercisable after the expiration of ten
years from the date it is granted; provided, however, that if a recipient
of an ISO owns a number of shares representing more than 10% of Bancorp
shares outstanding at the time the ISO is granted, the term of the ISO will
not exceed five years. If the fair market value of shares awarded pursuant
to ISOs that are exercisable for the first time during any calendar year by
a participant under the 2002 Stock Option Plan exceeds $100,000, the ISOs
will be Non-qualified Stock Options to the extent of such excess.
An option recipient cannot transfer or assign an option other than by
will or in accordance with the laws of descent and distribution.
Termination of an option recipient's employment for cause, as defined in
the 2002 Stock Option Plan, will result in the annulment of any outstanding
exercisable options. Any outstanding options that have not yet been
exercised will terminate upon the resignation, removal or retirement of a
director of Bancorp or First Federal, or upon the termination of employment
of an officer or employee of Bancorp or First Federal, except in the case
of death or disability of the recipient or a change in control of Bancorp
or First Federal.
9
Bancorp will receive no monetary consideration for the granting of
options under the 2002 Stock Option Plan. Upon the exercise of options,
Bancorp will receive payment of cash or, if acceptable to the Stock Option
Committee, common shares of Bancorp or the surrender of outstanding stock
options. The market value of the common shares underlying the options
reserved for the 2002 Stock Option Plan is approximately $1,991,400, based
upon the number of shares reserved, multiplied by the $6.30 per share
closing sales price of shares of Bancorp on December 14, 2001, as quoted on
the Nasdaq SmallCap Market.
Federal Income Tax Treatment of Incentive Stock Options. An optionee
who is granted an ISO will not recognize taxable income either on the date
of grant or on the date of exercise, although the difference between the
fair market value of the shares at the time of exercise and the exercise
price may be subject to the alternative minimum tax. Upon disposition of
shares acquired from the exercise of an ISO, capital gain or loss is
generally recognized in an amount equal to the difference between the
amount realized on the sale or disposition and the exercise price.
However, if the optionee disposes of the shares within two years of the
date of grant or within one year from the date of the issuance of the
shares to the optionee (a "Disqualifying Disposition"), then the optionee
will recognize ordinary income, as opposed to capital gain, at the time of
disposition. In general, the amount of ordinary income recognized will be
equal to the lesser of (i) the amount of gain realized on the disposition,
or (ii) the difference between the fair market value of the shares received
on the date of exercise and the exercise price. Any remaining gain or loss
is treated as a short-term or long-term capital gain or loss, depending
upon the period of time the shares have been held.
Bancorp will not be entitled to a tax deduction upon either the
exercise of an ISO or the disposition of shares acquired pursuant to such
exercise, except to the extent that the optionee recognizes ordinary income
in a Disqualifying Disposition. Ordinary income from a Disqualifying
Disposition will constitute compensation but will not be subject to tax
withholding, nor will it be considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part,
with previously acquired shares, the exchange should not affect the ISO tax
treatment of the exercise. Upon such exchange, and except for
Disqualifying Dispositions, no gain or loss is recognized by the optionee
upon delivering previously acquired shares to Bancorp. Shares received by
the optionee equal in number to the previously acquired common shares
exchanged therefor will have the same basis and holding period for capital
gain purposes as the previously acquired shares. (The optionee, however,
will not be able to utilize the prior holding period for the purpose of
satisfying the ISO statutory holding period requirements for avoidance of a
Disqualifying Disposition.) Shares received by the optionee in excess of
the number of shares previously acquired will have a basis of zero and a
holding period which commences as of the date the shares are transferred to
the optionee upon exercise of the ISO. If the exercise of an ISO is
effected using shares previously acquired through the exercise of an ISO,
the exchange of such previously acquired shares will be considered a
disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
Federal Income Tax Treatment of Non-qualified Stock Options. A
recipient of a Non-qualified Stock Option does not recognize taxable income
on the date of grant of the option, provided that the option does not have
a readily ascertainable fair market value at the time it is granted. In
general, the optionee must recognize ordinary income at the time of
exercise of a Non-qualified Stock Option in the amount of the difference
between the fair market value of the shares on the date of exercise and the
option exercise price. The ordinary income recognized will constitute
compensation for which tax withholding by Bancorp generally will be
required. The amount of ordinary income recognized by an optionee will be
deductible by Bancorp in the year that the optionee recognizes the income
if Bancorp complies with any applicable withholding requirement.
If, at the time of exercise, the sale of the shares could subject the
optionee to short-swing profit liability under Section 16(b) of the
Securities Exchange Act of 1934, the optionee generally will recognize
ordinary income only on the date that the optionee is no longer subject to
Section 16(b) liability in an amount equal to the fair market value of the
shares on the date the optionee is no longer subject to liability less the
option exercise price. Nevertheless, the optionee may elect under Section
83(b) of the Code, within 30 days of the date of exercise, to recognize
ordinary income as of the date of exercise, without regard to the
restriction of Section 16(b).
Shares acquired upon the exercise of a Non-qualified Stock Option
will have a tax basis equal to their fair market value on the exercise date
or other relevant date on which ordinary income is recognized, and the
holding period for the shares generally will begin on the date of exercise
or such other relevant date. Upon subsequent disposition of the shares,
the optionee will recognize long-term capital gain or loss if the optionee
has held the shares for more than twelve months prior to disposition or
short-term capital gain or loss if the optionee has held the shares for one
year or less prior to disposition.
10
If an optionee with a Non-qualified Stock Option pays the exercise
price, in whole or in part, with previously acquired shares, the optionee
will recognize ordinary income in the amount by which the fair market value
of the shares received exceeds the exercise price. The optionee will not
recognize gain or loss upon delivering such previously acquired shares to
Bancorp. Shares received by an optionee equal in number to the previously
acquired shares exchanged therefor will have the same basis and holding
period as such previously acquired shares. Shares received by an optionee
in excess of the number of such previously acquired shares will have a
basis equal to the fair market value of such additional shares as of the
date ordinary income is recognized. The holding period for such additional
shares will commence as of the date of exercise or such other relevant
date.
THE BOARD OF DIRECTORS OF BANCORP RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE 2002 STOCK OPTION PLAN.
Accordingly, the shareholders of Bancorp will be asked to approve the
following resolution at the Annual Meeting:
RESOLVED, that the First Federal Bancorp, Inc., 2002 Stock Option and
Incentive Plan be, and it hereby is, approved.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Bancorp is comprised
of five directors, all of whom are considered "independent" under Rule
4200(a)(14) of the National Association of Securities Dealers' listing
standards. The Audit Committee is responsible for overseeing Bancorp's
accounting functions and controls, as well as recommending to the Board of
Directors an accounting firm to audit Bancorp's financial statements. The
Audit Committee has adopted a charter to set forth its responsibilities
(the "Charter").
As required by the Charter, the Audit Committee received and reviewed
the report of BKD LLP ("BKD") regarding the results of their audit, as well
as the written disclosures and the letter from BKD required by Independence
Standards Board Standard No. 1. The Audit Committee reviewed the audited
financial statements with the management of Bancorp. A representative of
BKD also discussed with the Audit Committee the independence of BKD from
Bancorp, as well as the matters required to be discussed by Statement of
Auditing Standards 61. Discussions between the Audit Committee and the
representative of BKD included the following:
* BKD's responsibilities in accordance with generally accepted
auditing standards
* The initial selection of, and whether there were any changes
in, significant accounting policies or their application
* Management's judgments and accounting estimates
* Whether there were any significant audit adjustments
* Whether there were any disagreements with management
* Whether there was any consultation with other accountants
* Whether there were any major issues discussed with management
prior to BKD's retention
* Whether BKD encountered any difficulties in performing the
audit
* BKD's judgments about the quality of Bancorp's accounting
principles
* BKD's responsibilities for information prepared by management
that is included in documents containing audited financial
statements
Based on its review of the financial statements and its discussions
with management and the representative of BKD, the Audit Committee did not
become aware of any material misstatements or omissions in the financial
statements. Accordingly, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual
Report on Form 10-KSB for the year ended September 30, 2001, to be filed
with the SEC.
Ward D. Coffman, III
Robert D. Goodrich, II
Patrick L. Hennessey
John C. Matesich, III
Don R. Parkhill
11
Audit Fees
During the year ended September 30, 2001, BKD billed Bancorp $43,870
for professional services in connection with the audit of Bancorp's annual
financial statements and the review of financial statements included in
Bancorp's Forms 10-QSB.
Financial Information Systems Design and Implementation Fees
During the 2001 fiscal year, BKD did not perform professional
accounting services to design, implement or manage, hardware or software
that collects or generates information significant to BKD's financial
statements.
All Other Fees
During fiscal year 2001, Bancorp and First Federal were not billed
fees for services rendered by BKD other than for accounting services
discussed in "Audit Fees" or "Financial Information Systems Design and
Implementation Fees."
PROPOSAL THREE: RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of Bancorp has selected BKD LLP ("BKD")
(formerly known as Olive LLP) as the auditors of Bancorp and its subsidiary
for the current fiscal year and recommends that the shareholders ratify
such selection. Management expects that a representative of BKD will be
present at the Annual Meeting, will have the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.
Upon the recommendation of the Audit Committee and the approval of
the Board of Directors of Bancorp, Crowe Chizek and Company LLP ("Crowe
Chizek") was dismissed as Bancorp's independent public auditors on December
17, 1999. On the same date, Olive LLP was engaged to audit Bancorp's
financial statements for the fiscal year ended September 30, 2001. The
decision to change auditors was based upon a belief that Olive LLP could
serve Bancorp's needs more efficiently and responsively than Crowe Chizek.
The report of Crowe Chizek on the financial statements for the fiscal
year ended September 30, 1999 contained no adverse opinion or disclaimer of
opinion, nor was it modified as to uncertainty, audit scope or accounting
principles. There has not been any disagreement between Bancorp and Crowe
Chizek on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE SELECTION OF BKD AS THE AUDITORS OF BANCORP FOR THE
CURRENT FISCAL YEAR.
PROPOSALS OF SECURITY HOLDERS AND OTHER MATTERS
Any proposals of security holders intended to be included in
Bancorp's Proxy Statement for the 2003 Annual Meeting of Shareholders
should be sent to Bancorp by certified mail and must be received by Bancorp
not later than September 11, 2002. In addition, if a shareholder intends
to present a proposal at the 2003 Annual Meeting and the proposal is not
received by November 25, 2002, then the proxies designated by the Board of
Directors of Bancorp for the 2002 Annual Meeting of Shareholders of Bancorp
may vote in their discretion on any such proposal any shares for which they
have been appointed proxies without mention of such matter in the proxy
statement or on the proxy card for such meeting.
Management knows of no other business that may be brought before the
Annual Meeting, including matters incident to the conduct of the Annual
Meeting. If, however, other matters are brought before the Annual Meeting,
the persons named in the enclosed Proxy intend to vote such Proxy in
accordance with their best judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN
AND RETURN THE PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
Zanesville, Ohio J. William Plummer, President and
December 15, 2001 Chief Executive Officer
Ward D. Coffman, III, Secretary
12
EXHIBIT A
FIRST FEDERAL BANCORP, INC.
2002 STOCK OPTION AND INCENTIVE PLAN
1. Purpose. The purpose of the First Federal Bancorp, Inc., 2002
Stock Option and Incentive Plan (this "Plan") is to promote and advance the
interests of First Federal Bancorp, Inc. (the "Company"), and its
shareholders by enabling the Company to attract, retain and reward
directors, managerial and other key employees of the Company and any
Subsidiary (hereinafter defined), and to strengthen the mutuality of
interests between such directors and employees and the Company's
shareholders by providing such persons with a proprietary interest in
pursuing the long-term growth, profitability and financial success of the
Company.
2. Definitions. For purposes of this Plan, the following terms
shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended, or any successor thereto, together with rules, regulations
and interpretations promulgated thereunder.
(c) "Committee" means the Committee of the Board constituted
as provided in Section 3 of this Plan.
(d) "Common Shares" means the common shares, without par
value, of the Company or any security of the Company issued in
substitution, in exchange or in lieu thereof.
(e) "Company" means First Federal Bancorp, Inc., an Ohio
corporation, or any successor corporation.
(f) "Employment" means regular employment with the Company or
a Subsidiary and does not include service as a director only.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any successor statute.
(h) "Fair Market Value" shall be determined as follows:
(i) If the Common Shares are traded on a national
securities exchange at the time of grant of the Stock Option,
then the Fair Market Value shall be the average of the highest
and the lowest selling price on such exchange on the date such
Stock Option is granted or, if there were no sales on such
date, then on the next prior business day on which there was a
sale.
(ii) If the Common Shares are quoted on The Nasdaq Stock
Market at the time of the grant of the Stock Option, then the
Fair Market Value shall be the mean between the closing bid and
closing asked quotation with respect to a Common Share on such
date on The Nasdaq Stock Market.
(iii) If the Common Shares are not traded on a national
securities exchange or quoted on The Nasdaq Stock Market, then
the Fair Market Value shall be as determined by the Committee.
(i) "Incentive Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of this Plan that is intended
to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
(j) "Non-Qualified Stock Option" means any Stock Option
granted pursuant to the provisions of Section 6 of this Plan that is
not an Incentive Stock Option.
(k) "Participant" means an employee or director of the
Company or a Subsidiary who is granted a Stock Option under this
Plan. Notwithstanding the foregoing, for the purposes of the
granting of any Incentive Stock Option under this Plan, the term
"Participant" shall include only employees of the Company or a
Subsidiary.
13
(l) "Plan" means the First Federal Bancorp, Inc., 2002 Stock
Option and Incentive Plan, as set forth herein and as it may be
hereafter amended from time to time.
(m) "Stock Option" means an award to purchase Common Shares
granted pursuant to the provisions of Section 6 of this Plan.
(n) "Subsidiary" means any corporation or entity in which the
Company directly or indirectly controls 50% or more of the total
voting power of all classes of its stock having voting power and
includes, without limitation, First Federal Savings Bank of Eastern
Ohio, Inc.
(o) "Terminated for Cause" means any removal of a director or
discharge of an employee for the personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful
violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offenses) or a material
violation of a final cease-and-desist order or for any other action
of a director or employee which results in a substantial financial
loss to the Company or a Subsidiary.
3. Administration.
(a) This Plan shall be administered by the Committee to be
comprised of not fewer than three of the members of the Board. The
members of the Committee shall be appointed from time to time by the
Board. Members of the Committee shall serve at the pleasure of the
Board, and the Board may from time to time remove members from, or
add members to, the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business.
An action approved in writing by all of the members of the Committee
then serving shall be fully as effective as if the action had been
taken by unanimous vote at a meeting duly called and held.
(b) The Committee is authorized to construe and interpret
this Plan and to make all other determinations necessary or advisable
for the administration of this Plan. The Committee may designate
persons other than members of the Committee to carry out its
responsibilities under such conditions and limitations as it may
prescribe. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration or
application of this Plan shall be final, conclusive and binding upon
all persons participating in this Plan and any person validly
claiming under or through persons participating in this Plan. The
Company shall effect the granting of Stock Options under this Plan,
in accordance with the determinations made by the Committee, by
execution of instruments in writing in such form as approved by the
Committee.
4. Duration of, and Common Shares Subject to, this Plan.
(a) Term. This Plan shall terminate on the date that is ten
(10) years from the effective date of the Plan, except with respect
to Stock Options then outstanding. Notwithstanding the foregoing, no
Incentive Stock Option may be granted under this Plan after the date
which is ten (10) years from the date on which this Plan is adopted
by the Board or the date on which this Plan is approved by the
shareholders of the Company, whichever is earlier.
(b) Common Shares Subject to Plan. The maximum number of
Common Shares that may be issued pursuant to Stock Options granted
under this Plan, subject to adjustment as provided in Section 9 of
this Plan, shall be 312,400 Common Shares. For the purpose of
computing the total number of Common Shares available for Stock
Options under this Plan, there shall be counted against the foregoing
limitations the number of Common Shares subject to issuance upon
exercise of Stock Options as of the dates on which such Stock Options
are granted. If any Stock Options are forfeited, terminated or
exchanged for other Stock Options, or expire unexercised, the Common
Shares that were theretofore subject to such Stock Options shall
again be available for Stock Options under this Plan to the extent of
such forfeiture, termination or expiration of such Stock Options.
Common Shares that may be issued under this Plan may be either
authorized and unissued shares or issued shares which have been reacquired
by the Company. No fractional shares shall be issued under this Plan.
5. Eligibility and Grants. Persons eligible for Stock Options
under this Plan shall consist of directors and managerial and other key
employees of the Company or a Subsidiary who hold positions with
significant responsibilities or whose performance or potential
contribution, in the judgment of the Committee, will benefit the future
success of the Company or a Subsidiary. In selecting the directors and
employees to whom Stock Options will be awarded and the number
14
of shares subject to such Stock Options, the Committee shall consider the
position, duties and responsibilities of the eligible directors and
employees, the value of their services to the Company and the Subsidiaries
and any other factors the Committee may deem relevant.
6. Stock Options. Stock Options granted under this Plan may be in
the form of Incentive Stock Options or Non-Qualified Stock Options, and
such Stock Options shall be subject to the following terms and conditions
and in such form as the Committee may from time to time approve and shall
contain such additional terms and conditions as the Committee shall deem
desirable, not inconsistent with the express provisions of the Plan:
(a) Grant. Stock Options may be granted under this Plan on
terms and conditions not inconsistent with the provisions of this
Plan. Subject to adjustment as provided in Section 9 of this Plan,
the maximum number of Common Shares that may be issued to any
individual during the term of this Plan pursuant to Stock Options
granted under this Plan shall be 25% of the number of Common Shares
that may be issued pursuant to this Plan.
(b) Stock Option Price. The per share option exercise price
of a Stock Option shall be determined by the Committee at the time
of grant; provided, however, that in no event shall the exercise
price of a Stock Option be less than 100% of the Fair Market Value of
the Common Shares on the date of the grant of such Stock Option.
Notwithstanding the foregoing, in the case of a Participant who owns
Common Shares representing more than 10% of the outstanding Common
Shares at the time an Incentive Stock Option is granted, the option
exercise price shall in no event be less than 110% of the Fair Market
Value of the Common Shares at the time such Incentive Stock Option is
granted.
(c) Stock Option Terms. Subject to the right of the Company
to provide for earlier termination in the event of any merger,
acquisition or consolidation involving the Company, the term of each
Stock Option shall be fixed by the Committee; provided, however, that
the term of Incentive Stock Options will not exceed ten years after
the date the Incentive Stock Option is granted; provided further,
however, that in the case of a Participant who owns a number of
Common Shares representing more than 10% of the Common Shares
outstanding at the time the Incentive Stock Option is granted, the
term of the Incentive Stock Option shall not exceed five years.
(d) Exercisability. Except as set forth in Section 6(f) and
Section 7 of this Plan or as designated by the Committee at the time
of grant, Stock Options awarded under this Plan shall be immediately
exercisable in full.
(e) Method of Exercise. A Stock Option may be exercised, in
whole or in part, by giving written notice of exercise to the Company
specifying the number of Common Shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price in cash
or, if acceptable to the Committee in its sole discretion, in Common
Shares already owned by the Participant, or by surrendering
outstanding Stock Options. The Committee may also permit
Participants, either on a selective or aggregate basis,
simultaneously to exercise Stock Options and sell Common Shares
thereby acquired, pursuant to a brokerage or similar arrangement,
approved in advance by the Committee, and use the proceeds from such
sale as payment of the purchase price of such shares. In such event,
the Committee may permit the exercise price to be paid as soon as
practicable after exercise.
(f) Special Rule for Incentive Stock Options. With respect
to Incentive Stock Options granted under this Plan, to the extent the
aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the number of shares with respect to
which Incentive Stock Options are exercisable under all plans of the
Company or a Subsidiary for the first time by a Participant during
any calendar year exceeds $100,000, or such other limit as may be
required by the Code, such Stock Options shall be Non-Qualified Stock
Options to the extent of such excess.
7. Termination of Employment or Directorship.
(a) Except in the event of the death or disability of a
Participant, upon the resignation, removal or retirement from the
board of directors of any Participant who is a director of the
Company or a Subsidiary or upon the termination of Employment of a
Participant who is not a director of the Company or a Subsidiary, any
Stock Option which has not yet become exercisable shall thereupon
terminate and be of no further force or effect, and, unless the
Committee shall specifically state otherwise at the time a Stock
Option is granted, any Stock Option that has become exercisable shall
terminate if it is not exercised within three months of such
resignation, removal, retirement or termination of Employment.
15
(b) Unless the Committee shall specifically state otherwise
at the time a Stock Option is granted, all Stock Options granted
under this Plan shall become exercisable in full on the date of
termination of a Participant's employment or directorship with the
Company or a Subsidiary because of his death or disability, and,
subject to extension by the Committee at any time, all Stock Options
shall terminate if not exercised within 12 months of the
Participant's death or disability.
(c) Unless the Committee shall specifically state otherwise
at the time a Stock Option is granted, in the event the Employment or
the directorship of a Participant is Terminated for Cause, any Stock
Option that has not been exercised shall thereupon terminate and be
of no further force or effect.
8. Non-transferability of Stock Options. No Stock Option under
this Plan, and no rights or interests therein, shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, Stock Options are
exercisable only by, and payments in settlement of Stock Options will be
payable only to, the Participant or his or her legal representative.
9. Adjustments Upon Changes in Capitalization.
(a) The existence of this Plan and the Stock Options granted
hereunder shall not affect or restrict in any way the right or power
of the Board or the shareholders of the Company to make or authorize
the following: any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business; any
merger, acquisition or consolidation of the Company; any issuance of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's capital stock or the rights thereof; the
dissolution or liquidation of the Company or any sale or transfer of
all or any part of its assets or business; or any other corporate act
or proceeding, including any merger or acquisition which would result
in the exchange of cash, stock of another company or options to
purchase the stock of another company for any Stock Option
outstanding at the time of such corporate transaction or which would
involve the termination of all Stock Options outstanding at the time
of such corporate transaction.
(b) In the event of any change in capitalization affecting
the Common Shares of the Company, such as a stock dividend, stock
split, recapitalization, merger, consolidation, spin-off, split-up,
combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Shares, including a
distribution (other than normal cash dividends) of company assets to
shareholders, such proportionate adjustments, if any, as the Board in
its discretion may deem appropriate to reflect such change shall be
made with respect to the aggregate number of Common Shares for which
Stock Options in respect thereof may be granted under this Plan, the
maximum number of Common Shares that may be sold or awarded to any
Participant, the number of Common Shares covered by each outstanding
Stock Option, and the exercise price per share in respect of
outstanding Stock Options.
10. Amendment and Termination of this Plan. Without further
approval of the shareholders, the Board may at any time terminate this
Plan, or may amend it from time to time in such respects as the Board may
deem advisable, except that the Board may not, without approval of the
shareholders, make any amendment that would (a) increase the aggregate
number of Common Shares that may be issued under this Plan (except for
adjustments pursuant to Section 9 of this Plan), (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c)
materially increase the benefits accruing to Participants under this Plan.
The above notwithstanding, the Board may amend this Plan to take into
account changes in applicable securities, federal income tax and other
applicable laws.
11. Modification of Options. The Board may authorize the Committee
to direct the execution of an instrument providing for the modification of
any outstanding Stock Option which the Board believes to be in the best
interests of the Company; provided, however, that no such modification,
extension or renewal shall confer on the holder of such Stock Option any
right or benefit which could not be conferred on him by the grant of a new
Stock Option at such time and shall not materially decrease the
Participant's benefits under the Stock Option without the consent of the
holder of the Stock Option, except as otherwise permitted under this Plan.
12. Miscellaneous.
(a) Tax Withholding. The Company shall have the right to
deduct from any settlement, including the delivery or vesting of
Common Shares, made under this Plan any federal, state or local taxes
of any kind required by law to be withheld with respect to such
payments or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of
such taxes. If Common Shares are used to satisfy tax
16
withholding, such shares shall be valued based on the Fair Market
Value when the tax withholding is required to be made.
(b) No Right to Employment. Neither the adoption of this
Plan nor the granting of any Stock Option shall confer upon any
employee of the Company or a Subsidiary any right to continued
Employment with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the Employment of any of its employees at any
time, with or without cause.
(c) Annulment of Stock Options. The grant of any Stock
Option payable in Common Shares is provisional until the Participant
becomes entitled to the certificate in settlement thereof. In the
event the Employment or the directorship of a Participant is
Terminated for Cause, any Stock Option which is provisional shall be
annulled as of the date of such termination.
(d) Other Company Benefit and Compensation Programs.
Payments and other benefits received by a Participant under a Stock
Option made pursuant to this Plan shall not be deemed a part of a
Participant's regular, recurring compensation for purposes of the
termination, indemnity or severance pay law of any country and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement
provided by the Company or a Subsidiary unless expressly so provided
by such other plan or arrangement, or except where the Committee
expressly determines that a Stock Option or portion of a Stock Option
should be included to accurately reflect competitive compensation
practices or to recognize that a Stock Option has been made in lieu
of a portion of competitive annual cash compensation. Stock Options
under this Plan may be made in combination with or in tandem with, or
as alternatives to, grants, stock options or payments under any other
plans of the Company or a Subsidiary. This Plan notwithstanding, the
Company or any Subsidiary may adopt such other compensation programs
and additional compensation arrangements as it deems necessary to
attract, retain and reward directors and employees for their service
with the Company and its Subsidiaries.
(e) Securities Law Restrictions. No Common Shares shall be
issued under this Plan unless counsel for the Company shall be
satisfied that such issuance will be in compliance with applicable
federal and state securities laws. Certificates for Common Shares
delivered under this Plan may be subject to such stop-transfer orders
and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Shares
are then listed, and any applicable federal or state securities law.
The Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(f) Stock Option Agreement. Each Participant receiving a
Stock Option under this Plan shall enter into an agreement with the
Company in a form specified by the Committee agreeing to the terms
and conditions of the Stock Option and such related matters as the
Committee shall, in its sole discretion, determine.
(g) Cost of Plan. The costs and expenses of administering
this Plan shall be borne by the Company.
(h) Governing Law. This Plan and all actions taken hereunder
shall be governed by and construed in accordance with the laws of the
State of Ohio, except to the extent that federal law shall be deemed
applicable.
(i) Effective Date. This Plan shall be effective upon the
later of adoption by the Board and approval by the Company's
shareholders. This Plan shall be submitted to the shareholders of
the Company for approval at an annual or special meeting of
shareholders to be held no later than twelve months after the date of
adoption by the Board.
17
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST FEDERAL BANCORP, INC.
THE FIRST FEDERAL BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 21, 2002
The undersigned shareholder of First Federal Bancorp, Inc.
("Bancorp") hereby constitutes and appoints Ward D. Coffman, III, Robert D.
Goodrich, II and Connie Ayres LaPlante, or any one of them, the Proxy or
Proxies of the undersigned with full power of substitution and
resubstitution, to vote at the Annual Meeting of Shareholders of Bancorp to
be held at the Holiday Inn, 4645 East Pike, Zanesville, Ohio, on February
21, 2002, at 2:00 p.m., Eastern Standard Time (the "Annual Meeting"), all
of the shares of Bancorp that the undersigned is entitled to vote at the
Annual Meeting, or at any adjournment thereof, on each of the following
proposals, all of which are described in the accompanying Proxy Statement:
1. To re-elect three directors of Bancorp for terms expiring in 2004;
[ ] FOR all nominees listed below [ ] WITHHOLD authority to vote for
(except as marked to the all nominees
contrary below): listed below:
John C. Matesich, III
Don R. Parkhill
J. William Plummer
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- ---------------------------------------------------------------------------
2. To approve the First Federal Bancorp, Inc. 2002, Stock Option and
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection of BKD LLP as the auditors of Bancorp for the
current fiscal year; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. Unless otherwise specified, the
shares will be voted FOR proposals 1, 2 and 3.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Annual Meeting of Shareholders of Bancorp and
of the accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock Certificates(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should
give their full titles.
---------------------- ----------------------
Signature Signature
---------------------- ----------------------
Print or Type Name Print or Type Name
---------------------- ----------------------
Date Date
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BANCORP.
PLEASE DATE, SIGN AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.