SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement [ ]Confidential, for Use of the
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
FIRST FEDERAL BANCORPORATION
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(Name of Registrant as Specified in Its Charger)
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(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)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:_____________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
[LETTERHEAD]
December 18, 2000
Dear Stockholder:
We invite you to attend the annual meeting of stockholders of First
Federal Bancorporation to be held at the main office of First Federal Bank, 214
5th Street, Bemidji, Minnesota on Tuesday, January 16, 2001 at 2:30 p.m.
The accompanying notice and proxy statement describe the formal
business to be transacted at the meeting. During the meeting, we will also
report on the operations of the Company's subsidiary, First Federal Bank.
Directors and officers of the Company will be present to respond to any
questions the stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND
RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY
PLAN TO ATTEND THE ANNUAL MEETING. Your vote is important, regardless of the
number of shares you own. This will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ William R. Belford
William R. Belford
President
<PAGE>
FIRST FEDERAL BANCORPORATION
214 5TH STREET
BEMIDJI, MINNESOTA 56601
(218) 751-5120
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 16, 2001
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of First Federal Bancorporation (the "Company") will be held at the
main office of First Federal Bank, 214 5th Street, Bemidji, Minnesota on
Tuesday, January 16, 2001 at 2:30 p.m.
A Proxy Statement and form of proxy for the Annual Meeting accompany this
notice.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Company; and
2. The transaction of such other matters as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on December 1, 2000 are the stockholders
entitled to vote at the Annual Meeting and any adjournments thereof.
You are requested to fill in and sign the accompanying form of proxy which
is solicited by the Board of Directors and to mail it promptly in the
accompanying envelope. The proxy will not be used if you attend and vote at the
Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Karen Jacobson
KAREN JACOBSON
SECRETARY
Bemidji, Minnesota
December 18, 2000
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. THE ACCOMPANYING
FORM OF PROXY IS ACCOMPANIED BY A SELF-ADDRESSED ENVELOPE FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
FIRST FEDERAL BANCORPORATION
214 5TH STREET
BEMIDJI, MINNESOTA 56619
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ANNUAL MEETING OF STOCKHOLDERS
JANUARY 16, 2001
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GENERAL
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This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of First Federal Bancorporation (the
"Company") to be used at the annual meeting of stockholders (the "Annual
Meeting") which will be held at the main office of First Federal Bank (the
"Bank"), 214 5th Street, Bemidji, Minnesota on Tuesday, January 16, 2001 at 2:30
p.m. This proxy statement and the accompanying notice and form of proxy are
being first mailed to stockholders on or about December 18, 2000.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to Karen Jacobson, Secretary of the Company, at the
address shown above, by filing a later dated proxy prior to a vote being taken
on a particular proposal at the Annual Meeting or by attending the Annual
Meeting and voting in person. The presence of a stockholder at the Annual
Meeting will not revoke such stockholder's proxy.
Proxies solicited by the Board of Directors of the Company will be
voted in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS SET FORTH BELOW
AND IN FAVOR OF EACH OF THE OTHER PROPOSALS SET FORTH IN THIS PROXY STATEMENT
FOR CONSIDERATION AT THE ANNUAL MEETING. The proxy confers discretionary
authority on the persons named therein to vote with respect to the election of
any person as a director where the nominee is unable to serve or for good cause
will not serve, and matters incident to the conduct of the Annual Meeting. If
any other business is presented at the Annual Meeting, proxies will be voted by
those named therein in accordance with the determination of a majority of the
Board of Directors. Proxies marked as abstentions will not be counted as votes
cast. In addition, shares held in street name which have been designated by
brokers on proxies as not voted will not be counted as votes cast. Proxies
marked as abstentions or as broker non-votes, however, will be treated as shares
present for purposes of determining whether a quorum is present.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
AND SECURITY OWNERSHIP OF MANAGEMENT
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The securities entitled to vote at the Annual Meeting consist of the
Company's common stock, $.01 par value per share (the "Common Stock").
Stockholders of record as of the close of business on December 1, 2000 (the
"Record Date") are entitled to one vote for each share of Common Stock then
held. At the Record Date, the Company had 1,280,152 shares of Common Stock
issued and outstanding (as adjusted to reflect all previous stock splits in the
form of stock dividends paid by the Company). The presence, in person or by
proxy, of at least a majority of the total number of shares of Common Stock
outstanding and entitled to vote will be necessary to constitute a quorum at the
Annual Meeting.
1
<PAGE>
Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file certain reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
following table sets forth, as of the Record Date, certain information as to the
Common Stock believed by management to be beneficially owned by persons owning
in excess of 5% of the Common Stock, by each of the Company's Directors and by
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF SHARES OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) COMMON STOCK OUTSTANDING
------------------- ------------------------ ------------------------
<S> <C> <C>
William R. Belford
214 5th Street
Bemidji, Minnesota 56601 183,223 (2) 13.34%
Ralph T. Smith
214 5th Street
Bemidji, Minnesota 56601 97,740 (3) 7.49%
Walter R. Fankhanel
214 5th Street
Bemidji, Minnesota 56601 98,086 (4) 7.52%
James R. Sharp
214 5th Street
Bemidji, Minnesota 56601 68,737 (5) 5.27%
Martin R. Sathre
214 5th Street
Bemidji, Minnesota 56601 64,452 (6) 4.94%
Dean J. Thompson
214 5th Street
Bemidji, Minnesota 56601 60,372 (7) 4.62%
First Federal Bancorporation
Employee Stock Ownership Plan ("ESOP")
214 5th Street
Bemidji, Minnesota 56601 150,199 (8) 11.73%
First Federal Bancorporation
Stock Option and Incentive Plan Trust
214 5th Street
Bemidji, Minnesota 56601 238,529 (9) 18.63%
All directors and executive
officers as a group (10 persons) 680,471 (10) 44.07%
(footnotes on following page)
2
<PAGE>
(footnotes for table on previous page)
<FN>
__________
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has or shares voting or investment power with
respect to such Common Stock or has a right to acquire beneficial ownership
at any time within 60 days from the Record Date. As used herein, "voting
power" is the power to vote or direct the voting of shares and "investment
power" is the power to dispose or direct the disposition of shares. Except
as otherwise noted, ownership is direct, and the named individuals and
group exercise sole voting and investment power over the shares of the
Common Stock. The beneficial ownership figures for Messrs. Smith,
Fankhanel, Sharp and Sathre do not include shares held by the ESOP for
which they act as trustee and as to which shares they disclaim beneficial
ownership.
(2) Includes 93,517 shares which may be received pursuant to the exercise of
stock options which are exercisable within 60 days of the Record Date,
17,263 shares of Common Stock held in the ESOP and allocated to Mr. Belford
and 11,925 shares of Common Stock held for the benefit of Mr. Belford in
the Employee's Retirement Plan. Also includes 13,940 shares held in the
Grantor Trust, as to which Mr. Belford has shared voting power with the
other Directors.
(3) Includes 2,250 shares held in family trusts, 23,562 shares owned by Mr.
Smith's spouse, 24,704 shares pursuant to vested options exercisable within
60 days of the Record Date, and 14,175 shares held in Mr. Smith's IRA. Also
includes 6,669 shares held in the Grantor Trust, as to which Mr. Smith has
shared voting power with the other Directors.
(4) Includes 24,704 shares pursuant to vested options exercisable within 60
days of the Record Date, 12,673 shares owned by Mr. Fankhanel's spouse, and
16,335 shares held in Mr. Fankhanel's IRA account. Also includes 22,164
shares held in the Grantor Trust, as to which Mr. Fankhanel has shared
voting power with the other Directors.
(5) Includes 24,704 shares pursuant to vested options exercisable within 60
days of the Record Date, 5,562 shares held in Mr. Sharp's IRA and 5,625
shares held by Mr. Sharp's spouse. Also includes 22,164 shares held in the
Grantor Trust as to which Mr. Sharp has shared voting power with the other
Directors.
(6) Includes 24,704 shares pursuant to vested options exercisable within 60
days of the Record Date. Also includes 1,042 shares held in the Grantor
Trust as to which Mr. Sathre has shared voting power with the other
Directors.
(7) Includes 24,704 shares pursuant to vested options exercisable within 60
days of the Record Date and 2,250 shares held by Mr. Thompson's spouse.
Also includes 7,813 shares held in the Grantor Trust as to which Mr.
Thompson has shared voting power with the other Directors.
(8) These shares are held in a suspense account for future allocation among
participating employees as the loan used to purchase the shares is repaid.
The ESOP trustees, currently Directors Smith, Sathre, Fankhanel and Sharp,
vote all allocated shares in accordance with instructions of the
participants. Unallocated shares and shares for which no instructions have
been received are voted by the ESOP trustees in the same ratio as
participants direct the voting of allocated shares or, in the absence of
such direction, the Company's Board of Directors shall direct the voting of
such stock, or in the absence of such direction from the Company's Board of
Directors, the trustees shall direct the voting of such stock in their
discretion. As of the Record Date, 88,099 shares had been allocated, and
62,100 were unallocated.
(9) These shares are held in a trust account for future issuance to option
holders upon their exercise of stock options for Company Common Stock under
the First Federal Bancorporation Stock Option and Incentive Plan (the
"Option Plan"). The trustees for this trust are the same as the ESOP
trustees. The shares held in the Option Plan trust are voted in the same
way that unallocated ESOP shares are voted.
(10) Includes 99,840 shares held by the First Federal Banking & Savings, FSB
Grantor Trust (the "Grantor Trust"), the beneficiaries of which are certain
directors and executive officers. The beneficiaries have neither voting nor
dispositive power with respect to these shares. Includes 263,813 shares
pursuant to vested options exercisable within 60 days of the Record Date
and held by the individuals included in the group. Does not include the
unallocated shares held by the ESOP trust or the shares held by the Option
Plan Trust. For more information, see the footnotes above.
</FN>
</TABLE>
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PROPOSAL I -- ELECTION OF DIRECTORS
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GENERAL
The Company's Board of Directors consists of six members. The Company's
Articles of Incorporation require that directors be divided into three classes,
as nearly equal in number as possible, with approximately one-third of the
directors elected each year. At the Annual Meeting, two directors will be
elected for a term expiring in 2003. The Board of Directors has nominated Ralph
T. Smith and William R. Belford to serve as directors for a three-year period.
Both nominees are currently members of the Board. Under Minnesota law and the
Company's
3
<PAGE>
Articles of Incorporation, directors are elected by a majority of the votes cast
at a meeting at which a quorum is present.
It is intended that the persons named in the proxies solicited by the Board
of Directors will vote for the election of the named nominees. If any nominee is
unable to serve, the shares represented by all valid proxies will be voted for
the election of such substitute as the Board of Directors may recommend or the
size of the Board may be reduced to eliminate the vacancy. At this time, the
Board knows of no reason why either nominee might be unavailable to serve.
The following table sets forth, for each nominee for director and
continuing director of the Company, his age, the year he first became a director
of the Bank, which is the Company's principal operating subsidiary, and the
expiration of his term as a director. All such persons were appointed as
directors in 1994 in connection with the incorporation and organization of the
Company. Each director of the Company also is a member of the Board of Directors
of the Bank.
<TABLE>
<CAPTION>
YEAR FIRST
AGE AT ELECTED CURRENT
SEPTEMBER 30, AS DIRECTOR TERM
NAME 2000 OF THE BANK TO EXPIRE
---- -------- ----------- ---------
<S> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2004
Ralph T. Smith 66 1966 2001
William R. Belford 52 1987 2001
DIRECTORS CONTINUING IN OFFICE
Martin R. Sathre 75 1962 2002
Dean J. Thompson 44 1994 2002
Walter R. Fankhanel 63 1975 2003
James R. Sharp 65 1980 2003
</TABLE>
Set forth below is information concerning the Company's directors for at
least the past five years, unless otherwise stated.
RALPH T. SMITH is a life long resident of Bemidji and has been associated
with Smith Law Firm P.A. of Bemidji for over 40 years. He has been a Director of
First Federal since 1966 and the Chair of its Board of Directors since 1987.
WILLIAM R. BELFORD has been President and Chief Executive Officer of the
Bank since 1987. Mr. Belford has served as chairman of the Board of Directors
and as Campaign Chairman of the United Way of Bemidji, as President and board
member for the Joint Economic Development Commission, as Chairman and Secretary
of the Savings League of Minnesota, on the Board of Directors of the Chamber of
Commerce, as Treasurer and on the Board of the Visitors and Convention Bureau.
Most recently, he is also serving on the Board of Directors of the Minnesota
League of Savings and Community Bankers.
MARTIN R. SATHRE is a retired Abstracter and Title Insurance Agent for
Sathre Abstracters Incorporated of Bemidji, Minnesota. Mr. Sathre is Secretary
of Bemidji Development Corporation, a non-profit corporation that owns and
operates a local industrial park, and was past President of the Rotary Club of
Bemidji.
DEAN J. THOMPSON is an owner of Ken K. Thompson Jewelry, a retail jeweler
located in Bemidji, Minnesota. Mr. Thompson was previously on the Board of
Directors of the Bemidji Area Chamber of Commerce,
4
<PAGE>
former Chairman of the Downtown Bemidji Business and Professional Association,
and is a member of the Bemidji Jaycees, Headwaters Chapter/Ducks Unlimited,
Bemidji Elks Lodge #1052, the Bemidji State University President's Club and the
Bemidji Downtown Development Authority.
WALTER R. FANKHANEL has served as General Manager of Dave Walters, Inc., a
dealer of manufactured housing and also a developer of multi-family housing and
has been since 1957.
JAMES R. SHARP retired in 1993 after 34 years as a High School Teacher,
Counselor and Administrator in Bemidji, Minnesota. Mr. Sharp has served as
President of the Headwaters Shrine Club, is a member of the Bemidji Town &
Country Club, the AAD Temple Shrine, the Scottish Rite, the Masonic Lodge and
the American Legion Club.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth information regarding the executive officers
of the Company who do not serve on the Board of Directors.
<TABLE>
<CAPTION>
AGE AT
SEPTEMBER 30,
NAME 2000 TITLE
---- ------------- -----
<S> <C> <C>
Dennis M. Vorgert 53 Treasurer
Karen Jacobson 58 Secretary
Warren Meissner 50 Vice President
Mike Sherwood 46 Vice President
</TABLE>
The principal occupation of each executive officer of the Company for the
last five years, unless otherwise stated, is set forth below.
DENNIS M. VORGERT has served as Treasurer of the Company since its
incorporation in 1994 and of the Bank since 1978. He is a member of the Bemidji
Curling Club, the Bemidji Rotary Club, the Knights of Columbus, as well as Past
member of Church Council.
KAREN JACOBSON has served as Secretary of the Company since its
incorporation in 1994, and of the Bank since 1990. Ms. Jacobson is Treasurer of
the local American Heart Association.
WARREN MEISSNER is Vice President/Consumer Banking Division of the Bank.
Mr. Meissner is President of the Bemidji Youth Baseball, and a member of the
Bemidji Sunrise Rotary, Bemidji Youth Council, American Heritage River
Committee, Beltrami County Historical Society, Downtown Development Authority
and DDA liaison with the Bemidji Area Arts Council.
MIKE SHERWOOD is Vice President/Real Estate Division of the Bank. Mr.
Sherwood is a member of the Headwaters Builders Association, Bemidji Board of
Realtors and Girls Softball League.
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company holds regular monthly meetings and
holds special meetings as needed. During the year ended September 30, 2000, the
Board met 12 times. No director attended fewer than 75% in the aggregate of the
total number of Board meetings held while he was a member during the year ended
September 30, 2000 and the total number of meetings held by committees on which
he served during such fiscal year. The Board of Directors has standing Audit,
Loan and Investment Committees. The full Board of Directors serves as the
Compensation Committee.
The Audit Committee consists of Directors Smith (Chairman), Sathre and
Thompson. The members of the Audit Committee are "independent," as "independent"
is defined in Rule 4200(a)(15) of the National Association of Securities Dealers
listing standards. The Audit Committee met three times during fiscal year 2000
to examine and approve the independent audit report prepared by the independent
auditors, to review and recommend the independent auditors to be engaged by the
Company and to review the internal audit function and internal audit controls.
The Company's Board of Directors has adopted a written charter for the Audit
Committee. A copy of the Audit Committee's charter is attached to this Proxy
Statement as Exhibit A.
The Company does not have a standing Nominating Committee. Under the
Company's current Bylaws, the full Board acts as a Nominating Committee for
selecting the management nominees for election as directors. The Nominating
Committee met one time during fiscal 2000.
EXECUTIVE COMPENSATION
The following table sets forth cash and noncash compensation for the fiscal
year ended September 30, 2000 awarded to or earned by the Company's Chief
Executive Officer for services rendered in all capacities to the Company and its
subsidiaries during fiscal 2000.
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
--------------------------- ---- ------ ----- ----------------
<S> <C> <C> <C> <C>
William R. Belford 2000 $ 205,061 $ 51,281 $ 17,967
Chief Executive Officer 1999 122,750 30,681 20,179
1998 118,000 35,601 18,581
<FN>
___________
(1) For 2000, includes a car allowance of $911, life insurance policy
payments of $934, a profit sharing contribution of $7,422, and a
supplemental executive retirement plan payment of $9,600 for 1999,
includes a car allowance of $1,036, life insurance policy payments of
$1,009, a profit sharing contribution of $8,535, and a supplemental
executive retirement plan payment of $9,600; for 1998, includes a car
allowance of $776, life insurance policy payments of $895, a profit
sharing contribution of $7,310, and a supplemental executive retirement
plan payment of $9,600.
</FN>
</TABLE>
Employment Agreements. The Company and the Bank, effective April 3, 1995,
entered into separate employment agreements (the "Employment Agreements") with
Mr. William R. Belford (the "Executive"), President and Chief Executive Officer
of the Bank and of the Company. In such capacities, the Executive is responsible
for overseeing all operations of the Bank and the Company, and for implementing
the policies adopted by the Boards of Directors. Such Boards believe that the
Employment Agreements assure fair treatment of the Executive in relation to his
career with the Company and the Bank by assuring him of some financial security.
The Employment Agreements provide for a term of three years, with an annual
base salary of $124,000 from the Bank, and with the Company guaranteeing the
Bank's obligations. On each anniversary date from the date of commencement of
the Employment Agreements, the Executive's term of employment will be extended
for an additional one-year period beyond the then effective expiration date,
upon a determination by the Boards of Directors that the performance of the
Executive has met the required performance standards and that such Employment
Agreements should be extended. The Employment Agreements provide the Executive
with a salary review by the Boards of Directors not less often than annually, as
well as with inclusion in any discretionary bonus
6
<PAGE>
plans, retirement and medical plans, customary fringe benefits and vacation and
sick leave. The Employment Agreements will terminate upon the Executive's death
and may terminate due to the Executive's disability. The Employment Agreements
are also terminable for "just cause" as defined in the Employment Agreements. In
the event of termination for just cause, no severance benefits are available. If
the Company or the Bank terminates the Executive without just cause, the
Executive will be entitled to a continuation of his salary and benefits from the
date of termination through the remaining term of the Employment Agreements,
plus an additional 12-month period. Severance benefits payable to the Executive
will be paid in a lump sum, or in installments, as he elects. If either
Employment Agreement is terminated due to the Executive's "disability" (as
defined in the Employment Agreements), the Executive will not be entitled to a
continuation of his salary and benefits. In the event of the Executive's death
during the term of either Employment Agreement, his estate will be entitled to
receive the Executive's salary through the last day of the calendar month in
which his death occurred. The Executive is able to voluntarily terminate his
employment by providing 60 days' written notice to the Boards of Directors of
the Bank and the Company, in which case the Executive is entitled to receive
only his compensation, vested rights and benefits up to the date of termination.
The Employment Agreements contain provisions stating that in the event
of the Executive's involuntary termination of employment in connection with, or
within one year after, any change in control of the Bank or the Company, other
than for "just cause," the Executive will be paid within 10 days of such
termination an amount equal to the difference between (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) the sum of any other parachute payments, as
defined under Section 280G(b)(2) of the Code, that the Executive receives on
account of the change in control (including but not limited to parachute
payments the Employee receives pursuant to his employment agreement with the
Company). "Control" generally refers to the acquisition, by any person or
entity, of the ownership or power to vote more than 25% of the Bank's or
Company's voting stock, the control of the election of a majority of the Bank's
or the Company's directors, or the exercise of a controlling influence over the
management or policies of the Bank or the Company. In addition, under the
Employment Agreements, a change in control occurs when, during any consecutive
two-year period, directors of the Company or the Bank at the beginning of such
period cease to constitute two-thirds of the Board of Directors of the Company
or the Bank, unless the election of replacement directors was approved by a
two-thirds vote of the initial directors then in office. The Employment
Agreement with the Bank provides that within five business days of a change in
control, the Bank shall fund, or cause to be funded, a trust in the amount of
2.99 times the Executive's base amount, that will be used to pay the Executive
amounts owed to him upon termination, other than for just cause, within one year
of the change in control. The amount to be paid to the Executive from this trust
upon his termination is determined according to the procedures outlined in the
Employment Agreement with the Bank, and any money not paid to the Executive is
returned to the Bank. The Employment Agreement also provides for a similar lump
sum payment to be made in the event of the Executive's voluntary termination of
employment within one year following a change in control, upon the occurrence,
or within 90 days thereafter, of certain specified events following the change
in control, which have not been consented to in writing by the Executive,
including (i) the requirement that the Executive move his personal residence or
perform his principal executive functions more than 35 miles from the Bank's
current primary office, (ii) a material reduction in the Executive's base
compensation as in effect on the date of the change in control, (iii) the
failure of the Company or the Bank to maintain existing or substantially similar
employee benefit plans, including material vacation, fringe benefits, stock
option and retirement plans, (iv) the assignment to the Executive of duties and
responsibilities which are materially different from those normally associated
with his position with the Bank, (v) a material reduction in the Executive's
authority and responsibility, and (vi) the failure to re-elect the Executive to
the Company's or the Bank's Board of Directors. The aggregate payments that
would be made to Mr. Belford, assuming his termination of employment under the
foregoing circumstances and based on Mr. Belford's salary through the year ended
September 30, 2000, would have been approximately $467,528. In the event that
the Executive prevails over the Company or the Bank in a legal dispute as to the
Employment Agreements, he will be reimbursed for his legal and other expenses.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the 2000 fiscal year-end value of
unexercised in-the-money options held by the Company's Chief Executive Officer.
Options for 45,000 shares with an exercise price of $8.58 were granted to Mr.
Belford during fiscal 1999. These options were not "in-the-money" at September
30, 2000. No options were exercised in fiscal 2000.
<TABLE>
<CAPTION>
VALUE OF SECURITIES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(1) AT FISCAL YEAR-END (1)
----------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William R. Belford 93,516.75 -- $156,173 $ --
<FN>
__________
(1) Consists of options granted under the Option Plan. Option grant
included in the above table was effective as of October 17, 1995, upon
stockholder approval of the Option Plan. Exercise price is the market
price of the Common Stock of $6.08 per share as of the date of the
grant. At September 30, 2000, the fair market value of the Common Stock
was $7.75 per share based on the market price of the Common Stock on
that date.
</FN>
</TABLE>
DIRECTOR COMPENSATION
The Company's directors receive fees of $1,000 per monthly meeting
attended. This fee includes any Executive Committee meetings. During fiscal
2000, the Company's directors' fees totaled $72,000.
Director Retirement Plan. The Bank's Board of Directors has adopted the
First Federal Banking & Savings, FSB Retirement Plan for Non-Employee Directors
(the "Directors' Plan"), effective October 1, 1993, for its directors (i) who
are members of the Bank's Board of Directors on or after October 1, 1993, and
(ii) who are not employees on the date of being both nominated and elected (or
re-elected) to the Board. A participant in the Directors' Plan will receive, on
each of the three annual anniversary dates of his retirement, an amount equal to
one-third of the product of his "Benefit Percentage," times his "Vested
Percentage," times $6,000. A participant's "Benefit Percentage" is based on his
overall years of service on the Board of Directors of the Bank, and increases in
increments of 33-1/3% from 0% for less than six years of service, to 33-1/3% for
six to eleven years of service, to 66-2/3% for twelve to seventeen years of
service, to 100% for eighteen or more years of service. A participant's "Vested
Percentage" equals 33-1/3% if the participant serves on the Board as a
non-employee director for one or fewer years of service after the effective date
of the Directors' Plan, increases to 66-2/3% if the participant completes two
years of service following the plan's effective date, and becomes 100% if the
participant completes three or more years of service following the plan's
effective date. However, in the event a participant terminates service on the
Board at or after his attainment of age 70, or due to "disability", or in the
event of a "change in control" (as such terms are defined in the Directors'
Plan), the participant's Vested Percentage becomes 100% regardless of his years
of service. A participant's "Vested Percentage" will also accelerate to 100%
upon such participant's termination of service on the Board due to his death.
This provision may have the effect of deferring a hostile change in control by
increasing the costs of acquiring control. If a participant dies before
collecting any retirement benefits, his surviving beneficiary (or, if no
surviving beneficiary, the participant's estate) will receive a lump sum payment
having a present value equal to 100% of the benefits that would have been paid
to the participant under the Directors' Plan if the participant had (i)
terminated service on the Board on the date of his death, (ii) survived to
collect the full benefits payable for retirement or disability, and (iii) a
Vested Percentage equal to 100%. In the event that a participant dies after
beginning to receive retirement benefits, the Bank shall pay to the
participant's surviving beneficiary (or, if none, to the participant's estate) a
lump sum payment having a present value equal to 100% of the aggregate remaining
payments that the participant would have received had he survived to collect all
retirement benefits payable under the Directors' Plan. Trust assets will be
subject to the claims of the Bank's general creditors.
8
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The Bank offers loans to its directors, officers, and employees. These
loans currently are made in the ordinary course of business with the same
collateral, interest rates and underwriting criteria as those of comparable
transactions prevailing at the time and to not involve more than the normal risk
of collectibility or present other unfavorable features. Under current law, the
Bank's loans to directors and executive officers are required to be made on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, loans above the
greater of $25,000 or 5% of the Bank's capital and surplus (i.e., up to
$564,764) to such persons must be approved in advance by a disinterested
majority of the Board of Directors. At September 30, 2000, the Bank's loans to
directors and executive officers totaled $1,339,536, or 11.86%, of the Bank's
retained earnings at that date.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the
Company's officers and directors and all persons who own more than ten percent
of the Common Stock ("Reporting Persons") are required to file reports detailing
their ownership and changes of ownership in the Common Stock and to furnish the
Company with copies of all such ownership reports that are filed. Based solely
on the Company's review of the copies of such ownership reports which it has
received in the past fiscal year or with respect to the past fiscal year, or
written representations that no annual report of changes in beneficial ownership
were required, the Company believes that during fiscal year 2000 and prior
fiscal years all Reporting Persons have complied with these reporting
requirements.
--------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
McGladrey & Pullen LLP, was the Company's independent certified public
accounting firm for the 2000 fiscal year. McGladrey & Pullen LLP have been
retained by the Board of Directors to be the Company's auditors for the 2001
fiscal year. McGladrey & Pullen LLP are expected to be present at the Annual
Meeting and will be available to answer any questions that stockholders may
have.
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
--------------------------------------------------------------------------------
The Audit Committee of First Federal Bancorporation adopted a formal written
charter in June 2000 which is included herein as Exhibit A. The Committee
reports that it has completed the following tasks:
o Reviewed and discussed the Company's audited financial statements
for the year ended September 30, 2000 with management.
o Discussed with the auditors, McGladrey & Pullen, LLP, the matters
required to be discussed by SAS No. 61 "Communication with Audit
Committee".
o Received from McGladrey & Pullen, LLP disclosures and a letter
regarding the firm's independence as required by Independent
Standards Board No. 1 and discussed with the auditor the
auditor's independence.
Based on the above, we recommended to the Board of Directors that the financial
statements for the year ended September 30, 2000 be included in the Annual
Report on Form 10-KSB of First Federal Bancorporation.
Committee members: Martin R. Sathre, Ralph T. Smith and Dean J. Thompson
9
<PAGE>
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this proxy statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's 2000 Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary of the Company. Such
Annual Report is not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
Under the Company's Articles of Incorporation, stockholder proposals must
be submitted in writing to the Secretary of the Company at the address stated in
the following sentence no less than 30 days nor more than 60 days prior to the
date of such meeting; provided, however, that if less than forty days' notice of
the meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Company not later than the close
of business on the tenth day following the day on which notice of the meeting
was mailed to stockholders. For consideration at the Annual Meeting, a
stockholder proposal must be delivered or mailed to the Company's Secretary no
later than December 28, 2000. In order to be eligible for inclusion in the
Company's proxy materials for next year's Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be received at the
Company's main office at 214 5th Street, Bemidji, Minnesota 56601, no later than
August 20, 2001. Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Karen Jacobson
KAREN JACOBSON
SECRETARY
Bemidji, Minnesota
December 18, 2000
--------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-KSB
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB OR THE FISCAL YEAR
ENDED SEPTEMBER 30, 2000 AS FILED WITH THE SECURITIES EXCHANGE COMMISSION WILL
BE FURNISHED WITHOUT CHARGE TO EACH STOCKHOLDER AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO CORPORATE SECRETARY, FIRST FEDERAL BANCORPORATION, 214 5TH
STREET, BEMIDJI, MINNESOTA 56601.
--------------------------------------------------------------------------------
10
<PAGE>
EXHIBIT A
AUDIT COMMITTEE CHARTER
The audit committee is a committee of the board of directors. Its primary
function is to assist the board in fulfilling its oversight responsibilities by
reviewing the financial information which will be provided to the shareholders
and others, the systems of internal control which management and the board of
directors have established, and the audit process.
In carrying out these functions, the audit committee believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and to ensure to the directors and shareholders that the corporate accounting
and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
o Review and recommend to the directors the independent auditors to
be selected to audit the financial statements of the corporation
and its subsidiaries.
o Meet with the independent auditors and financial management of
the corporation to review the scope of the proposed audit for the
current year and the audit procedures to be utilized, and at the
conclusion thereof review such audit, including any comments or
recommendations of the independent auditors.
o Review with the independent auditors, the company's internal
compliance personnel, and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial
controls of the corporation, and elicit any recommendations for
the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are
desirable.
o Review the internal audit function of the corporation including
the independence and authority of its reporting obligations, the
proposed audit plans for the coming year, and the coordination of
such plans with the independent auditors.
o Receive prior to each committee meeting, a summary of findings
from completed internal audits and a progress report on the
proposed internal audit plan, with explanations for any
deviations from the original plan.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to
determine that the independent auditors are satisfied with the
disclosure and content of the financial statements to be
presented to the shareholders. Any changes in accounting
principles should be reviewed.
o Provide sufficient opportunity for the personnel of the internal
audit function and independent auditors to meet with the members
of the audit committee without members of management present.
Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
o Submit the minutes of all meetings of the audit committee to, or
discuss the matters discussed at each committee meeting with, the
board of directors.
Investigate any matter brought to its attention within the scope of its duties,
with the power to retain outside counsel for this purpose if, in its judgment,
that is appropriate.
<PAGE>
REVOCABLE PROXY
--------------------------------------------------------------------------------
FIRST FEDERAL BANCORPORATION
BEMIDJI, MINNESOTA
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 16, 2001
The undersigned hereby appoints Walter Fankhanel and Martin Sathre with
full powers of substitution, to act as proxies for the undersigned, to vote all
shares of Common Stock of First Federal Bancorporation (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders, to be
held at the main office of First Federal Bank, 214 5th Street, Bemidji,
Minnesota on Tuesday, January 16, 2001 at 2:30 p.m., and at any and all
adjournments thereof, as follows:
VOTE
FOR WTHHELD
--- -------
1. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Ralph T. Smith
William R. Belford
INSTRUCTION: TO WITHHOLD YOUR VOTE
FOR ANY INDIVIDUAL NOMINEE, INSERT
THAT NOMINEE'S NAME ON THE LINE PROVIDED
BELOW.
_______________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE LISTED
NOMINEES.
--------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH RESPECT TO THE ELECTION OF ANY
PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL
NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
--------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Company at the Annual Meeting of the stockholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of notice of the annual meeting, a Proxy Statement dated
December 18, 2000 and an Annual Report to Stockholders.
Dated:
---------------------------
-------------------------------------- ------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
-------------------------------------- ------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this
form of proxy was mailed. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If shares are held jointly,
each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PREPAID ENVELOPE.
