SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 materials pursuant to Rule 14a-11(c) or Rule 14a-12.
UNITED BANCORP, INC.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check 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 security to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
______________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
(3) Filing Party:
______________________________________________________________________
(4) Date Filed:
UNITED BANCORP, INC.
201 S. FOURTH
MARTINS FERRY, OHIO 43935
March 20, 2008
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of the
Shareholders to be held on Wednesday April 16, 2008, at 2:00 p.m. local time, at
The Citizens Savings Bank's main office, 201 South Fourth Street, Martins Ferry,
Ohio.
The Annual Certified Audit of United Bancorp, Inc. is enclosed for
your review prior to attending our Annual Meeting.
Payment of our regular first quarter cash dividend was made by
separate mailing on March 15h. Whether or not you received your dividend check
in a separate mailing is dependent upon your level of participation in our
Dividend Reinvestment Plan, Direct Deposit Program or whether your stock is
being held for you in a broker name. NO PAYMENT HAS BEEN INCLUDED WITH THIS
MAILING OF OUR PROXY MATERIALS.
It is important that your shares are voted, and we hope that you will
attend the Annual Meeting. Please vote by executing and returning the enclosed
form of Proxy or follow the instructions to vote electronically on the Internet
or by phone.
Very truly yours,
/s/ James W. Everson
----------------------------------------
James W. Everson
Chairman, President and Chief Executive
Officer
Enclosures
UNITED BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 2008
TO THE SHAREHOLDERS OF
UNITED BANCORP, INC. March 20, 2008
The Annual Meeting of Shareholders of United Bancorp, Inc. will be
held at 201 South 4th, Martins Ferry, Ohio, April 16, 2008, at 2:00 p.m. local
time for the purpose of considering and voting upon the following matters as
more fully described in the Proxy Statement.
PROPOSALS:
1. ELECTION OF DIRECTORS - To elect THREE directors.
2. APPROVE THE UNITED BANCORP, INC. 2008 STOCK INCENTIVE PLAN - To
provide the Corporation with the flexibility to implement competitive
compensation programs.
3. AMEND SECTION 8 OF THE AMENDED CODE OF REGULATIONS - To eliminate the
classified board structure to require all directors to stand for
election to the Board of Directors annually.
4. AMEND SECTION 34 OF THE AMENDED CODE OF REGULATIONS - To eliminate
certain shareholder supervoting requirements regarding the number and
classification of directors, and to authorize the Board of Directors
to amend the Regulations as permitted by the Ohio Revised Code.
5. OTHER BUSINESS - To transact any other business which may properly
come before the meeting or any adjournment of it.
Shareholders of record at the close of business on March 7, 2008 will
be entitled to vote the number of shares held of record in their names on that
date.
We urge you to sign and return the enclosed proxy as promptly as
possible or vote via the phone or Internet, whether or not you plan to attend
the meeting in person. This proxy may be revoked prior to its exercise.
By Order of the Board of Directors
/s/ Randall M. Greenwood
----------------------------------------
Randall M. Greenwood
Secretary
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY
FORM(S) WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. YOU MAY ALSO VOTE AT HOME BY PHONE OR
INTERNET. PLEASE SEE ENCLOSED INFORMATION ON HOW TO TAKE ADVANTAGE OF THIS
CONVENIENT WAY TO VOTE.
UNITED BANCORP, INC.
201 SOUTH 4TH STREET
MARTINS FERRY, OHIO 43935
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 16, 2008
INTRODUCTION
This Proxy Statement is being furnished to shareholders of United
Bancorp, Inc. ("United Bancorp" or the "Corporation") in connection with the
solicitation of proxies by the Board of Directors of the Corporation to be used
at the Annual Meeting of Shareholders, and any adjournment thereof, to be held
at the time and place set forth in the accompanying notice ("Annual Meeting").
This Proxy Statement and the enclosed proxy are first being sent to shareholders
on or about March 20, 2008.
At the Annual Meeting, shareholders of the Corporation will be asked
to:
- Elect three nominees to the Corporation's Board of Directors;
- Approve the United Bancorp, Inc. 2008 Stock Incentive Plan;
- Amend Section 8 of the Amended Code of Regulations to require the
annual election of the Corporation's entire Board of Directors;
and
- Amend Section 34 of the Amended Code of Regulations to eliminate
certain shareholder supervoting requirements and authorize the
Board of Directors to amend the Regulations under certain limited
circumstances.
VOTING AND REVOCATION OF PROXIES
Just indicate on the enclosed proxy card how you want to vote, and
sign, date and return it as soon as possible in the enclosed envelope or submit
a proxy over the Internet or by telephone by following the instructions on the
enclosed proxy card. Where properly executed proxy cards are returned but no
such instructions are given, the shares will be voted "For" the election to the
Board of Directors of each of the persons nominated by the Board of Directors of
the Corporation, and "For" each of Proposals 2, 3 and 4.
The presence of a shareholder at the Annual Meeting will not
automatically revoke such shareholder's proxy. However, shareholders may revoke
a proxy at any time prior to its exercise by filing with the Secretary of the
Corporation a written notice of revocation, by delivering to the Corporation a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Written notices of revoked proxies may be directed to Randall
M. Greenwood, Secretary, 201 South 4th Street, Martins Ferry, Ohio 43935.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Corporation. In
addition to the solicitation of proxies by mail, the Corporation, through its
directors, officers and regular
employees, may also solicit proxies personally or by telephone, e-mail or
telecopy without additional compensation. The Corporation will also request
persons, firms and corporations holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy material
to and obtain proxies from the beneficial owners and will reimburse the holders
for their reasonable expenses in doing so.
2
MEETING INFORMATION
DATE, PLACE AND TIME
The Annual Meeting of Shareholders of the Corporation will be held on
Wednesday, April 16, 2008, at 2:00 p.m., local time, at The Citizens Savings
Bank, 201 South 4th Street, Martins Ferry, Ohio.
RECORD DATE, VOTING RIGHTS
Only the Corporation's common shares can be voted at the Annual
Meeting. Each share entitles its owner to one vote on all matters.
The close of business on March 7, 2008 (the "Record Date"), has been
fixed as the record date for the determination of shareholders entitled to vote
at the Annual Meeting. There were approximately 2,000 shareholders (including
both record holders and beneficial owners holding their shares in street name)
of the Corporation's common shares and 4,988,606 of the Corporation's common
shares outstanding as of the Record Date.
The presence in person or by proxy of a majority of the outstanding
common shares of the Corporation entitled to vote at the meeting constitutes a
quorum at the Annual Meeting. Abstentions and broker non-votes will be counted
for purposes of determining the presence of a quorum.
OWNERSHIP OF VOTING SHARES
As of the Record Date, the following entity was the only shareholder
known to the Corporation to be the beneficial owner of more than 5% of the
Corporation's outstanding common shares:
Shares of Common Percent
Person Stock Owned of Class
------ ---------------- --------
United Bancorp, Inc. Employee 354,551 7.0%
Stock Ownership Plan (1)
201 South Fourth Street,
Martins Ferry, OH 43935
1. Under the terms of the ESOP, the ESOP trustee will vote shares allocated to
participants' accounts in the manner directed by the participants. As a
general matter, the ESOP trustee is required to vote unallocated shares in
the same manner as the trustee has been directed to vote allocated shares
by participants holding a majority of the allocated shares voted in
connection with the meeting. As of the Record Date, 23,637 shares had been
allocated to participants' accounts and 330,914 shares remain unallocated
under the ESOP.
The following table sets forth the beneficial ownership of the
Corporation's common shares by each of the Corporation's directors and the
Corporation's named executive officers, and the directors and executive officers
as a group, as of December 31, 2007.
3
COMMON SHARES
NAME OF BENEFICIAL OWNER OWNED(1) PERCENT OF CLASS
------------------------ ------------- ----------------
Michael J. Arciello 13,206 *
James W. Everson (2) 180,899 3.6%
John M. Hoopingarner 5,790 *
Terry A. McGhee 21,781 *
Samuel J. Jones 18,335 *
Richard L. Riesbeck (3) 41,065 *
Matthew C. Thomas 39,633 *
Scott A. Everson 11,825 *
Randall M. Greenwood 9,067 *
James A. Lodes 11,441 *
Norman F. Assenza, Jr. 6,740 *
All Directors and Executive 448,036 9.0%
Officers as a Group
(19 in group)
----------
* Ownership is less than 1% of the class.
1. Except as otherwise noted, none of the named individuals shares with
another person either voting or investment power as to the shares reported.
2. Includes 66,535 shares subject to shared voting and investment power.
3. Includes 17,651 shares subject to shared voting and investment power.
In the aggregate, shares beneficially owned by all insiders of the
Corporation (as reflected in the table above) and all other employees through
the Corporation's 401(k) and ESOP employee benefit plans, totaled 862,071
Shares, or 17.3% of all outstanding shares of the Corporation, as of December
31, 2007.
PROPOSAL # 1
ELECTION OF DIRECTORS
The Code of Regulations of the Corporation currently provides that the
Board of Directors of the Corporation shall be divided into classes. Ohio law
requires that there be at least three directors in each class. Each class shall
hold office for a term of two years. At the Annual Meeting, three directors will
be elected to a two-year term expiring in 2010. However, if Proposal 3 (the
proposed amendment to the Regulations eliminating the classified board
structure) is approved, all directors would be elected to one-year terms
commencing with next year's Annual Meeting. In order to facilitate the
transition from classified multi-year terms to non-classified one-year terms,
each director whose term would not otherwise expire at the 2009 Annual Meeting
has agreed to tender his or her resignation effective immediately prior to the
2009 Annual Meeting. If Proposal 3 is not approved, the classified board
structure will remain in place, and the term of the three directors elected at
this Annual Meeting will expire in 2010.
The nominees for election at the Annual Meeting are Michael J.
Arciello, Terry A. McGhee, and Samuel J. Jones, each of whom is currently a
director of the Corporation.
4
The Board of Directors has determined that all Directors have met the
independence standards of Rule 4200(a)(15) of the National Association of
Securities Dealers listing standards with the exception of James W. Everson, who
is the Chief Executive Officer of the Corporation. Directors deemed independent
by the Board of Directors include Michael J. Arciello, John M. Hoopingarner,
Terry A. McGhee, Samuel J. Jones, Richard L. Riesbeck and Matthew C. Thomas. In
making its determination regarding the independence of all directors and
nominees for director, the Nominating and Governance Committee and the Board of
Directors reviewed and the board considered the following related party
transaction.
Director Riesbeck: On April 1, 1998, United Bancorp, through its
subsidiary, The Citizens Savings Bank, entered into a lease agreement with
Riesbeck Food Markets, Inc. for space used as an in-store banking location in
St. Clairsville, Ohio. Pursuant to the terms of the lease, the Corporation paid
Riesbeck Food Markets, Inc. $30,000 in 2007. Over the current 5-year fixed term
of the lease, which began on April 1, 2007 and is set to expire on April 1,
2012, lease payments will total approximately $150,000. Mr. Riesbeck is an
officer, director and shareholder of Riesbeck Food Markets, Inc. Management
believes the lease between Riesbeck Food Markets, Inc. and the Corporation was
made on an arms-length basis. Management employed a third party consulting firm
that specializes in grocery store banking facilities to establish the terms of
the lease.
The Nominating and Governance Committee of the Board of Directors
recommends director candidates to the Board of Directors for nomination, in
accordance with the Corporation's Amended Code of Regulations. The Committee
will investigate and assess the background and skills of potential candidates.
The Nominating and Governance Committee is empowered to engage a third party
search firm to assist it in identifying candidates, but the Committee currently
believes that the existing directors and executive management of the Corporation
and its subsidiaries have sufficient networks of business contacts to identify
candidates. Upon identifying a candidate for serious consideration, one or more
members of the Nominating and Governance Committee would initially interview
such candidate. If a candidate merited further consideration, the candidate
would subsequently interview with all other Nominating and Governance Committee
members (individually or as a group), meet the Corporation's Chief Executive
Officer and other executive officers and ultimately meet many of the other
Directors. The Nominating and Governance Committee would elicit feedback from
all persons who met the candidate and then determine whether or not to recommend
the candidate to the Board of Directors for nomination.
United Bancorp's Corporate Governance Guidelines and Code of Ethics
and Business Conduct set forth the following criteria for Directors:
independence (a majority of the Directors must be independent); honesty and
integrity; willingness to devote sufficient time to fulfilling duties as a
Director; particular experience, skills or expertise relevant to the
Corporation's business; depth and breadth of business and civic experience in
leadership positions; and ties to United Bancorp's geographic markets. United
Bancorp's Corporate Governance Guidelines provide that shareholders may propose
nominees by submitting the names and qualifications of such persons to the
Chairman of the Nominating and Governance Committee. Submissions are to be
addressed to the Chairman of the Nominating and Governance Committee at the
Corporation's executive offices, which submissions will then be forwarded to the
Chairman. The Nominating and Governance Committee would then evaluate the
possible nominee using the criteria outlined above and would consider such
person in comparison to all other candidates. The submission should be made no
later than December 31st of each year for consideration in regard to the next
annual meeting of shareholders. The Nominating and Governance Committee is not
obligated to recommend to the Board, nor the Board to nominate any such
individual for election.
5
The Nominating and Governance Committee did not engage any director
search firm in 2007 and, accordingly, paid no fees to any such company. As
indicated above, however, the Nominating and Governance Committee may do so in
the future if necessary.
Neither the Board nor the Nominating and Governance Committee has
implemented a formal policy regarding director attendance at the Annual Meeting.
Typically, the Board holds its annual organizational meeting directly following
the Annual Meeting, which results in most directors being able to attend the
Annual Meeting. In 2007, all United Bancorp, Inc. Directors attended the Annual
Meeting.
NOMINEES
CLASS "II" DIRECTORS. The following table sets forth-certain information with
respect to the three nominees as Class "II" Directors of the Corporation who
will be voted upon at the Annual Meeting. There were no arrangements or
understandings pursuant to which the persons listed below were selected as
directors or nominees for director.
POSITIONS AND OFFICES DIRECTOR
NAME AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS HELD WITH UNITED BANCORP SINCE
---- --- ---------------------------------------- ------------------------ -------
Michael J. Arciello 73 Retired Vice President Finance, Director 1992
Nickles Bakeries, Inc.
Terry A. McGhee 58 President and Chief Executive Officer, Director 2001
Westerman, Inc., a manufacturing company
Samuel J. Jones 67 Business Owner, Athletic Club Director 2007
----------
If elected, these directors will serve a two-year term expiring in 2010, unless
Proposal 3 is approved, in which case the entire Board of Directors will stand
for election commencing with next year's Annual Meeting. If Proposal 3 is not
approved, the classified board structure will remain in place, and the term of
the three directors elected at this Annual Meeting will expire in 2010.
CONTINUING DIRECTORS
CLASS "I" DIRECTORS. The following table sets forth certain information with
respect to Class "I" Directors of United Bancorp, whose terms expire in 2009.
PRINCIPAL OCCUPATION FOR PAST POSITIONS AND OFFICES DIRECTOR
NAME AGE FIVE YEARS HELD WITH UNITED BANCORP SINCE
---- --- ------------------------------------------- ------------------------------------------ --------
James W. Everson 69 Chairman, President and Chief Executive Chairman, President and Chief Executive 1983
Officer, United Bancorp; Chairman and Chief Officer, United Bancorp; Chairman, The
Executive Officer, The Citizens Savings Citizens Savings Bank.* Chairman, Interim
Bank* until Nov. 1, 2004. Chairman, The President and Chief Executive Officer, The
Community Bank * Community Bank*
John M. Hoopingarner 53 General Manager and Secretary-Treasurer, Director 1992
Muskingum Watershed Conservancy District
Richard L. Riesbeck 58 President, Riesbeck Food Market, Inc., Director 1984
a regional grocery store chain
Matthew C. Thomas 51 President, M. C. Thomas Insurance Agency, Director 1988
Inc.
* Subsidiaries of United Bancorp. The Community Bank was merged with and into
The Citizens Savings Bank effective July 1, 2007.
6
There were no agreements or understandings pursuant to which any of
the persons listed above was selected as a director. Mr. James W. Everson,
Director, Chairman, President and Chief Executive Officer of the Corporation, is
the father of Mr. Scott A. Everson, Senior Vice President & Chief Operating
Officer of the Corporation.
The Board of Directors of United Bancorp met 4 times in 2007. In 2007,
each director attended at least 75% of the combined total of meetings of the
Board of Directors and meetings of each committee on which such director served.
The Board of Directors has adopted the United Bancorp, Inc. Corporate
Governance Guidelines, which you may find on United Bancorp's website at
www.unitedbancorp.com. The Board has also adopted the United Bancorp, Inc. Code
of Ethics and Business Conduct, which you may find on United Bancorp's website
at www.unitedbancorp.com.
Shareholders may communicate directly to the Board of Directors in
writing by sending a letter to the Board at: United Bancorp Board of Directors,
201 South Fourth Street, Martins Ferry, Ohio 43935. All letters directed to the
Board of Directors will be received and processed by the Corporate Secretary and
will be forwarded to the Chairman of the Nominating and Governance Committee
without any editing or screening.
VOTE REQUIRED TO ELECT CLASS II NOMINEES
Directors are elected by a plurality of the vote. Consequently, the
three nominees for director who receive the largest number of votes cast "For"
will be elected as directors. Shares represented at the Annual Meeting in person
or by proxy but withheld or otherwise not cast for the election of directors
will have no impact on the outcome of the election of directors. Where properly
executed proxy cards are returned but no such instructions are given, the shares
will be voted "For" the election to the Board of Directors of the persons
nominated by the Board of Directors of the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE CLASS II NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board of Directors of United Bancorp has standing Executive,
Audit, Compensation, and Nominating and Governance Committees. The Audit
Committee has been established in accordance with section 3(a)(58)(A) of the
Exchange Act. The membership of these committees is noted below.
EXECUTIVE COMMITTEE. Mr. James W. Everson, Chairman, and Messrs.
Hoopingarner, McGhee and Riesbeck are the members of the Corporation's Executive
Committee. The Executive Committee met 4 times during 2007. The functions of
this committee are to act in the stead of the board between meetings, to receive
formal vendor presentations and to review with management and set the agenda for
each board meeting. The Executive Committee members also serve as advisory
trustees to the Corporation's defined benefit pension plan and as trustees to
the Corporation's 401(k) and ESOP plans.
7
AUDIT COMMITTEE. Mr. Arciello, Chairman, and Messrs. McGhee and
Riesbeck are the members of the Audit Committee. The Audit Committee met 4 times
during 2007. The functions of this Committee include the engagement of
independent auditors, reviewing with those independent auditors the plans and
results of the audit engagement of the Corporation, approving the annual audit
plan and reviewing the results of the procedures for internal auditing,
reviewing the independence of the independent auditors, reviewing the
Corporation's financial results and Securities and Exchange Commission filings,
reviewing the effectiveness of the Corporation's internal controls and similar
functions and approving all auditing and non-auditing services performed by its
independent auditors. The Board of Directors has adopted a written charter for
the Audit Committee which may be found on the Corporation's website at
www.unitedbancorp.com. All members of the Audit Committee meet the independence
standards of Rule 4200(a)(15) and the audit committee qualifications of Rule
4350(d)(2) of the National Association of Securities Dealers listing standards.
The Board of Directors has determined that Michael J. Arciello is an audit
committee financial expert for the Corporation and is independent as described
in the preceding sentence. The report of the Audit Committee for 2007 appears
under the caption "Report of the Audit Committee".
COMPENSATION COMMITTEE. Mr. Thomas, Chairman, and Messrs. Hoopingarner
and McGhee are the members of the Compensation Committee. The Board of Directors
has a Compensation Committee comprised entirely of independent Directors.
Director and executive officer compensation are determined by this Committee of
the Board of Directors. The Board of Directors has adopted a Compensation
Committee Charter which may be found on the Corporation's website at
www.unitedbancorp.com. This Committee met once during 2007. The Compensation
Committee's report on executive compensation matters for 2007 appears under the
caption "Compensation Committee Report on Executive Compensation".
NOMINATING AND GOVERNANCE COMMITTEE. The Nominating and Governance
Committee is comprised entirely of independent Directors. Mr. Riesbeck,
Chairman, and Messrs. Hoopingarner and McGhee are the members of the Nominating
and Governance Committee. This Committee develops and recommends to the Board
corporate governance policies and guidelines for the Corporation and for the
identification and nomination of Director and committee member candidates and
recommends to the Board for nomination by the Board in accordance with the
Corporation's Amended Code of Regulations, nominees for election to the Board
and appointment to committee membership.
The Board of Directors has adopted a Nominating and Governance
Committee Charter which may be found on the Corporation's website at
www.unitedbancorp.com. This Committee met once in 2007.
AUDIT COMMITTEE REPORT
The Audit Committee of the United Bancorp Board of Directors (the
"Committee") is composed of three directors, each of whom is independent as
defined by the National Association of Securities Dealers' listing standards,
and operates under a written charter adopted by the Board of Directors.
Management is responsible for the Corporation's internal controls and
the financial reporting process. The independent auditors are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America, and to issue a report thereon. The Committee's
responsibility is to monitor and oversee the processes. In this context, the
Committee has met and
8
held discussions with management and the independent auditors. In discharging
its oversight responsibility as to the audit process, the Committee obtained
from the independent auditors a formal written statement describing all
relationships between the auditors and the Corporation that might bear on the
auditors' independence consistent with Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees," discussed with the auditors
any relationships that may impact their objectivity and independence and
satisfied itself as to the auditors' independence. The Committee also discussed
with management, the internal auditors and the independent auditors the quality
and adequacy of United Bancorp's internal controls and the internal audit
function's organization, responsibilities, budget and staffing. The Committee
reviewed both with the independent and internal auditors their audit plans,
audit scope and identification of audit risks.
The Committee also discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Committee reviewed the audited consolidated financial statements
of United Bancorp as of and for the year ended December 31, 2007, with
management and the independent auditors. Based on the aforementioned review and
discussions with management and the independent auditors, the Committee
recommended to the Board that United Bancorp's audited consolidated financial
statements be included in its Annual Report on Form 10-K for the year ended
December 31, 2007, for filing with the Securities and Exchange Commission. The
Committee also appointed the independent auditors.
AUDIT COMMITTEE
Michael J. Arciello, Chairman
Terry A. McGhee
Richard L. Riesbeck
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to United
Bancorp for the fiscal year ended December 31, 2006 by Grant Thornton LLP, and
for the fiscal year ended December 31, 2007 by both Grant Thornton LLP and BKD,
LLP. Effective July 10, 2007, BKD, LLP replaced Grant Thornton as the
Corporation's principal accounting firm. The change in accounting firm was due
to BKD acquiring Grant Thornton's Cincinnati Ohio financial services practices
in 2007.
2006 2007
-------- --------
Audit Fees $ 77,630 $ 90,200
Audit-Related Fees 17,700(a) 23,100(a)
Tax Fees 4,395(b) 9,880(b)
All Other Fees 2,000(c) 525(c)
-------- --------
Total $101,725 $123,705
======== ========
----------
(a) Includes fees for services related to benefit plan audits.
(b) Includes fees for services related to tax compliance and tax planning.
(c) Consent for public filings.
9
The Audit Committee is responsible for pre-approving all auditing
services and permitted non-audit services to be performed by its independent
auditors, except as described below. The Audit Committee will establish general
guidelines for the permissible scope and nature of any permitted non-audit
services in connection with its annual review of the audit plan and will review
such guidelines with the Board of Directors. Pre-approval may be granted by
action of the full Audit Committee or, in the absence of such Audit Committee
action, by the Audit Committee Chair whose action shall be considered to be that
of the entire Committee. Pre-approval shall not be required for the provision of
non-audit services if (1) the aggregate amount of all such non-audit services
constitute no more than 5% of the total amount of revenues paid by the
Corporation to the auditors during the fiscal year in which the non-audit
services are provided, (2) such services were not recognized by the Corporation
at the time of engagement to be non-audit services, and (3) such services are
promptly brought to the attention of the Audit Committee and approved prior to
the completion of the audit. No services were provided during 2007 by either
BKD, LLP or by Grant Thornton LLP pursuant to these exceptions.
PROPOSAL # 2
TO APPROVE THE UNITED BANCORP, INC.
2008 STOCK INCENTIVE PLAN
The Board of Directors of the Corporation has adopted the United
Bancorp, Inc. 2008 Stock Incentive Plan (the "Plan") upon the recommendation of
the Corporation's Compensation Committee and recommends that shareholders
approve the Plan at the Annual Meeting.
The Board believes the Plan is an integral part of its compensation
programs and strategies. It believes the Plan provides the Corporation the
flexibility to implement competitive compensation programs and will be an
effective tool for recruiting, motivating, and retaining the quality of
employees and directors key to the achievement of the Corporation's success.
The Plan permits the grant of incentive awards in the form of options,
stock appreciation rights, restricted share and share unit awards, and
performance share awards. Under the terms of the Plan a portion of a
participant's compensation otherwise payable in cash may be paid in common
shares of the Corporation. A summary of the principal provisions of the Plan
appears below. The summary is qualified in its entirety by reference to the
complete text of the Plan that is attached to this proxy statement as Exhibit A.
SUMMARY OF THE PLAN
Administration: The Plan provides that it will be administered by a committee of
the Board of Directors that is comprised of at least three non-employee
Directors. The committee must be comprised of "Outside Directors" within the
definitions of the terms "outside director" set forth in Section 162(m) of the
Internal Revenue Code (the "Code"), "independent director" set forth in The
Nasdaq Stock Market rules, and "non-employee director" set forth in Rule 16b-3,
or any successor definitions adopted by the Internal Revenue Service, The Nasdaq
Stock Market and Securities and Exchange Commission, respectively, and similar
requirements under any other applicable laws and regulations. The Board's
Compensation Committee (the "Committee"), which meets all of the foregoing
criteria, has been appointed to administer the Plan.
The Committee selects participants from among eligible persons and, subject to
the terms of the Plan, determines the type, size and time of grant of stock
incentive awards, determines the terms
10
and conditions of awards and makes all other determinations necessary or
advisable for the administration of the Plan. Each award under the Plan will be
evidenced by a written award agreement approved by the Committee (the "Award
Agreement").
Eligibility: The Committee may make awards to any person who is an officer,
director or key employee of the Corporation or a Subsidiary.
Shares Available for Awards: No more than 500,000 shares of the Corporation's
common stock may be issued under the Plan. The shares that may be issued may be
authorized but unissued shares or treasury shares. If there is a stock split,
stock dividend or other relevant change affecting the common shares, the
Committee will make appropriate adjustments in the maximum number of shares
issuable under the Plan and subject to outstanding incentive awards. Shares that
were subject to an incentive award under the Plan but were not issued for any
reason and are no longer subject to award or were issued and reacquired by the
Corporation because of a participant's failure to comply with the terms of an
award are again available for award under the Plan.
Types of Awards and Annual Award Limits: Share incentives that may be issued
under the Plan consist of options, shares appreciation rights, restricted share
and share unit awards, and performance share awards. In addition, under the
terms of the Plan, a portion of a participant's compensation otherwise payable
in cash may be paid in common shares of the Corporation. The Plan contains
annual limits on certain types of awards to individual participants. In any
calendar year, no participant may be granted awards covering more than 25,000
shares.
Options. A stock option provides for the purchase of shares in the future at an
exercise price per share that may not be less than 100% of the fair market value
of a share on the date the option is granted. Stock options may be either
nonqualified options or incentive stock options, which meet the requirements of
Section 422 of the Code. The term of an option may not exceed ten years. Subject
to the provisions of the Plan and approval of the Committee, and in the case of
incentive stock options the limitations imposed by the applicable provisions of
the Code, the exercise price may be paid (i) in cash, (ii) shares of Corporation
common stock (iii) any combination of cash and shares of Corporation common
stock; and (iv) by any other method permitted by law and affirmatively approved
by the Committee which assures full and immediate payment or satisfaction of the
exercise price, which may include broker assisted cashless exercise.
Stock Appreciation Rights. Awards may be made of stock appreciation rights
("SAR") which may include awards that are settled solely in shares of the
Corporation known as "stock only stock appreciation rights" ("SOSARs"). The
exercise price of a SAR will never be less than the fair market value of the
shares on the date of the award. Upon exercise, the holder of a SAR is entitled
to receive shares or other property as set forth in the award.
Restricted Share and Share Unit Awards. A restricted share or share unit award
is an award of shares (or in the case of units convertible into shares) that may
not be sold, transferred, pledged, or otherwise transferred until the
restrictions established by the Committee at the time of grant are satisfied.
The award agreement sets forth the restrictions applicable to an individual
award and may include time vesting restrictions, noncompetition restrictions,
and performance restrictions.
Performance Share Awards. The Committee may grant performance share awards under
which payment is made, in the Committee's discretion, in shares upon the
attainment of specified performance objectives selected by the Committee. At the
time of grant of a Performance Share Award, the Committee will specify the
performance objectives which, depending on the extent to which they are met,
will determine the number of Shares that will be distributed to the participant.
11
Shareholder approval of the Plan will also permit the granting of
performance-based awards to qualify for deductibility under Section 162(m) of
the Code, as discussed below.
Stock Awards. The Committee may grant eligible persons awards of shares of the
Corporation's common stock for services in lieu of bonus or other cash
compensation, or for any other valid purpose determined by the Committee. Stock
awards are free of any restrictions on transfer and upon issuance of the shares,
the holder has all of the rights of a shareholder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal United States Federal income
tax consequences of awards under the Plan and is based on Federal income tax
laws currently in effect.
Limitation on Corporate Deductions for Certain Executives' Compensation: Under
Section 162(m) of the Code, the Corporation may not deduct compensation of more
than $1,000,000 that is paid to an individual who, on the last day of the
taxable year, is either the Corporation's chief executive officer or is among
one of the four most highly-compensated officers for that taxable year as
reported in the Corporation's proxy statement ("Section 162(m) Persons"). The
limitation on deductions does not apply to certain types of compensation,
including "performance-based compensation" if approved by shareholders. Under
the Plan, options will qualify as performance-based compensation and restricted
stock awards and performance share awards may also qualify if the Committee so
designates these awards (herein called "Section 162(m) Awards") as
performance-based compensation and administers the Plan with respect to these
designated awards in compliance with Section 162(m) of the Code.
Under the Plan, the Committee is authorized to grant awards that qualify as
performance-based compensation under Section 162(m) of the Code. The Corporation
may not be entitled to any deduction if the individual in question is a Section
162(m) Person, the amount in question does not qualify as performance-based
compensation, and the amount in question, when added to the covered employee's
other taxable compensation that is not performance-based in the same taxable
year, exceeds $1 million. With respect to Section 162(m) Awards the Committee
will also specify the time period or periods (the "Performance Period") during
which the performance objectives must be met. The Committee may use performance
objectives based on one or more of the following: earnings per share, total
revenue, net interest income, non-interest income, net income, net income before
tax, non-interest expense, efficiency ratio, return on equity, return on assets,
economic profit added, loans, deposits, tangible equity, assets, net
charge-offs, new market growth, product line developments, and nonperforming
assets. The Committee may designate a single goal criterion or multiple goal
criteria for performance measurement purposes. Performance measurement may be
described in terms of objectives that are related to the performance by the
Corporation, by any Subsidiary, or by any employee or group of employees in
connection with services performed by that employee or those employees for the
Corporation, a Subsidiary, or one or more subunits of the Corporation or of any
Subsidiary. The performance objectives may be made relative to the performance
of other companies. The performance objectives and periods need not be the same
for each participant or for each Award. The Committee may modify, amend or
otherwise adjust the performance objectives specified for outstanding
Performance Share Awards if it determines that an adjustment would be consistent
with the objectives of this Plan and taking into account the interests of the
participants and the public shareholders of the Corporation and such adjustment
complies with the requirements of Section 162(m) of the Code for Section 162(m)
Persons, to the extent applicable, unless the Committee indicates a contrary
intention. The types of events which could cause an adjustment in the
performance objectives include, without limitation,
12
accounting changes which substantially affect the determination of performance
objectives, changes in applicable laws or regulations which affect the
performance objectives, and divisive corporate reorganizations, including
spin-offs and other distributions of property or stock.
Stock Options: There are no Federal income tax consequences either to the
optionee or the Corporation upon the grant of an incentive stock option or a
nonqualified option. If shares are purchased under an incentive stock option
(i.e., an incentive option is exercised) during employment or within three
months thereafter, the optionee will not recognize any income and the
Corporation will not be entitled to a deduction in respect of the option
exercise. However, the excess of the fair market value of the shares on the date
of such exercise over the purchase price of the shares under the option will be
includible in the optionee's alternative minimum taxable income. Generally, if
the optionee disposes of shares purchased under an incentive stock option within
two years of the date of grant or one year of the date of exercise of the
incentive stock option, the optionee will recognize ordinary income, and the
Corporation will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise (or, if less, the amount
realized by the optionee on the disposition of the shares) over the purchase
price of such shares. Any gain after the date on which the optionee purchased
the shares will be treated as capital gain to the optionee and will not be
deductible by the Corporation. If the shares are disposed of after the two-year
and one-year periods mentioned above, the Corporation will not be entitled to
any deduction, and the entire gain or loss realized by the optionee will be
treated as capital gain or loss. When shares are purchased under a nonqualified
option, the excess of the fair market value of the shares on the date of
purchase over the purchase price of such shares under the option will generally
be taxable to the optionee as ordinary income and deductible by the Corporation.
The disposition of shares purchased under a nonqualified option will generally
result in a capital gain or loss for the optionee, but will have no tax
consequences for the Corporation.
Other Awards: An employee who receives cash or shares of company stock pursuant
to an award other than an option will generally recognize ordinary income equal
to the sum of the cash and the fair market value of the shares received when
vested and no longer subject to a substantial risk of forfeiture and the
Corporation will generally be entitled to a corresponding deduction from its
income. A participant who receives an award of Corporation shares that is not
yet vested may make a special election in accordance with applicable Treasury
regulations to be taxed (at ordinary income rates) on the fair market value of
the shares at that time (with fair market value determined for this purpose
without regard to any restrictions other than restrictions, if any, which by
their terms will never lapse), in which case the Corporation would be entitled
to a deduction at the same time equal to the amount of income realized by the
employee but would not be entitled to deduct any dividends thereafter paid on
the shares. Absent such an election, an employee who has been awarded such
restricted stock will not recognize taxable income until the shares become
transferable or cease to be subject to a substantial risk of forfeiture, at
which time the recipient will recognize ordinary income and the Corporation will
be entitled to a corresponding deduction equal to the excess of the fair market
value of the shares at that time over the amount (if any) paid by the recipient
for the shares. Dividends paid to the recipient on the restricted shares prior
to that time will be ordinary compensation income to the recipient and
deductible by the Corporation.
OTHER PROVISIONS
Vesting: All awards are subject to such time and performance vesting conditions
as the Committee may determine and are set forth in the Award Agreement. Unless
otherwise set forth in the Award Agreement all Awards immediately vest upon
death, disability or Change in Control as defined under the terms of the Plan.
The Plan defines a change in control as any transaction that is a: (i)
13
Change in Ownership, ii) Change in Effective Control, or iii) Change in
Ownership of a Substantial Portion of Assets.
Change in Ownership. A change in ownership of the corporation occurs when one
person or a group acquires stock that, when combined with stock previously
owned, controls more than 50% of the value or voting power of the stock of the
corporation.
Change in Effective Control. A change in effective control occurs on the date
that, during any 12-month period, either (x) any person or group acquires stock
possessing 35% of the voting power of the corporation, or (y) the majority of
the board is replaced by persons whose appointment or election is not endorsed
by a majority of the board.
Change in Ownership of a Substantial Portion of Assets. A change in ownership of
a substantial portion of the assets occurs on the date that a person or a group
acquires, during any 12-month period, assets of the corporation having a total
gross fair market value equal to 40% or more of the total gross fair market
value of all of the corporation's assets.
IRC 409A Compliance: Unless an Award Agreement approved by the Committee
provides otherwise, each Award granted under the Plan is intended to meet the
requirements for exclusion from coverage under Code Section 409A.
Plan Amendments: The Board of Directors may amend, alter, or discontinue the
Plan at any time, provided that no amendment, alteration, or discontinuance may
be made that materially and adversely affects the rights of a participant under
any award granted prior to the date such action is adopted by the Board of
Directors without the participant's written consent. In addition no amendment
may be made without shareholder approval, if shareholder approval is required
under applicable laws, regulations or exchange requirements (including Section
422 of the Code with respect to ISOs, and for the purpose of qualification as
"performance-based compensation" under Section 162(m) of the Code), unless the
required to: (i) comply with any law; (ii) preserve any intended favorable tax
effects for the Corporation, the Plan or participants; or (iii) avoid any
unintended unfavorable tax effects for the Corporation, the Plan or
participants.
Term of the Plan: Unless earlier terminated by the Board, the Plan would
terminate on the day immediately preceding the tenth anniversary date of its
approval by shareholders of the Corporation. Termination of the Plan does not
affect any outstanding awards granted prior to the termination of the Plan.
Forfeiture upon Termination for Cause: Subject to the provisions of the Award
Agreement to which such award relates, upon the termination of employment of an
employee for cause the employee forfeits all benefits associated with any award
including all unexercised Options whether or not previously vested, all
unexercised SARs whether or not previously vested and all Restricted Shares,
Restricted Share Units and Performance Shares for which the delivery of Shares
has not yet occurred.
VOTE REQUIRED
The United Bancorp, Inc. 2008 Stock Incentive Plan attached to this
Proxy Statement as Exhibit A will be submitted for adoption at the Annual
Meeting. Approval of the Plan requires the affirmative vote of a majority of the
votes cast at the Annual Meeting. Proxies will be voted in favor of the Plan
unless otherwise instructed by the Shareholder. Abstentions and shares not voted
14
by brokers and other entities holding shares on behalf of the beneficial owners
will have the same effect as votes cast against the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE
UNITED BANCORP, INC. 2008 STOCK INCENTIVE PLAN
PROPOSAL # 3
TO AMEND THE CODE OF REGULATIONS TO PROVIDE FOR
THE ANNUAL ELECTION OF ALL DIRECTORS
The Board of Directors, after careful consideration and recommendation by
shareholders, management and outside advisors, has adopted and now recommends
shareholder approval of a proposal to amend Section 8 of the Corporation's Code
of Regulations, as amended (the "Regulations"), to eliminate the classification
of the Board of Directors. Section 8 currently provides that the Board of
Directors shall be divided into two classes, with the directors in each class
standing for election at every other annual meeting of shareholders. The
provision also provides that in the event the total number of directors is
increased to nine or greater the board will be divided into three classes. The
Board of Directors has determined that this provision should be amended to
provide instead for the annual election of all directors. The Board has
unanimously adopted a resolution approving a declassification amendment to the
Regulations, which will provide for the annual election of all directors, and is
recommending that the Corporation's shareholders approve that amendment.
If the proposed amendment is approved, all directors would be elected to
one-year terms commencing with the 2009 Annual Meeting. In order to facilitate
the transition from classified multi-year terms to non-classified one-year
terms, each director whose term would not otherwise expire at the 2009 Annual
Meeting has agreed to tender his or her resignation effective immediately prior
to the 2009 Annual Meeting.
The Board believes that the election of directors is a primary means for
shareholders to influence corporate governance policies and hold management
accountable for implementing those policies. Although proponents of classified
boards believe that they provide continuity and stability to the board,
facilitate a long-term outlook by the board and enhance the independence of
non-employee directors, an increasing number of investors have come to believe
that classified boards reduce accountability of directors because they limit the
ability of shareholders to evaluate and elect all directors on an annual basis.
Accordingly, an increasing number of companies have been taking actions to
provide for the annual election of all directors.
The Corporation is committed to good corporate governance. Accordingly, the
Board considered the various positions for and against a classified Board,
particularly in light of evolving corporate governance practices and investor
sentiment. The Board recognizes that annual elections are emerging as a "best
practice" in the area of corporate governance, as it provides shareholders the
opportunity to hold every member of the Board accountable for performance every
year. The Board consulted management and the Corporation's outside advisors when
it considered the various positions for and against a classified Board. The
Board has determined that adopting a resolution approving an amendment to the
Regulations that provides for the annual election of all directors is in the
best interests of the Corporation and its shareholders.
15
CODE OF REGULATIONS
If the amendment to Section 8 of the Regulations is adopted pursuant to
proposal #2, that section would read as follows:
SECTION 8. ELECTION AND TERM OF OFFICE OF DIRECTORS.
The directors shall be elected annually to serve until the next
annual meeting of shareholders and until their successors shall have been
elected, or until their earlier death, resignation, or removal from office.
VOTE REQUIRED
The resolutions attached to this Proxy Statement as Exhibit B will be
submitted for adoption at the Annual Meeting. As provided by Section 34 of the
Regulations, the affirmative vote of a majority of the common shares of the
Corporation is required to approve the amendment to provide for the annual
election of all directors. Proxies will be voted in favor of the resolution
unless otherwise instructed by the Shareholder. Abstentions and shares not voted
by brokers and other entities holding shares on behalf of the beneficial owners
will have the same effect as votes cast against the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AMENDMENT TO THE COMPANY'S CODE OF REGULATIONS TO PROVIDE FOR THE ANNUAL
ELECTION OF ALL DIRECTORS
PROPOSAL #4
TO AMEND CODE OF REGULATIONS TO PROVIDE FOR
THE ELIMINATION OF CERTAIN SHAREHOLDER
SUPERVOTING REQUIREMENTS RELATED TO THE CLASSIFIED BOARD
AND PROVIDE FOR THE AUTHORITY OF DIRECTORS TO AMEND THE REGULATIONS
CONSISTENT WITH THE OHIO REVISED CODE
The Board has considered and unanimously recommended amending the
Regulations to eliminate supermajority voting requirements applicable to the
shareholders' right to amend the Regulations in certain instances. The
Regulations presently provide that, absent recommendation by at least two-thirds
of the Board of Directors, the vote of eighty percent (80%) of the voting power
of the Corporation is required to amend each of the following sections: Section
6 regarding the number of directors; Section 8 regarding the classification
system for the election of directors; Section 9 regarding the vote required for
removal of directors; Section 33 regarding the election of the Corporation to
opt out of the control share acquisition statute and Section 34 regarding the
amendment of the forgoing sections.
In the proposed amendment to Section 34, this supermajority vote of
eighty percent (80%) required to amend Section 6 related to the number of
directors and Section 8 related to the classification of the election of
directors are eliminated. The board believes this proposed amendment is
consistent with and complimentary to the elimination of the classification
system for the election of directors and good corporate governance principles.
This Proposal #3 also eliminates the requirement of a supervote to amend those
same sections in the future.
16
As proposed, the amendment to Section 34 would also provide directors
with the authority to amend the Regulations consistent with the General
Corporation Law of the Ohio Revised Code (the "GCL"). In 2006, the GCL was
amended to permit directors to amend the code of regulations if authorized by
the shareholders in the articles of incorporation or the code of regulations.
The GCL reserves to Shareholders the power to authorize any amendments to the
Regulations that:
- Specify the percentage of shares a shareholder must hold in order
to call a shareholders' meeting.
- Specify the length of the time period required for notice of a
shareholders' meeting.
- Specify that shares that have not yet been fully paid can have
voting rights.
- Specify requirements for a quorum at a shareholders' meeting
- Prohibit shareholder or director actions from being authorized or
taken without a meeting.
- Define terms of office for directors or provide for
classification of directors.
- Require greater than a majority vote of shareholders to remove
directors without cause.
- Establish requirements for a quorum at directors' meetings, or
specify the required vote for an action of the directors.
- Delegate authority to committees of the board to adopt, amend, or
repeal regulations.
- Remove the requirement that a control share acquisition of an
issuing public corporation be approved by shareholders of the
acquired corporation.
In no event can directors make changes to regulations to restrict the
shareholders' authority to adopt, amend, or repeal regulations.
If the amendment to Section 34 of the Regulations is adopted pursuant to
proposal #3, that section would read as follows:
SECTION 34. AMENDMENTS.
These Regulations may be amended or repealed in following manner.
(a) At any meeting of shareholders called for that purpose by the
affirmative vote of the holders of record of shares entitling them to
exercise a majority of the voting power on such proposal; or
(b) by the directors unless with respect to any such amendment a
provision of the Ohio Revised Code reserves such authority to the
shareholders.
(c) Notwithstanding the provisions of this Section 34(a) and
notwithstanding the fact that a lesser percentage may be specified by law
or any other provision of these Regulations, the amendment, alteration,
change or repeal of, or adoption of any provisions inconsistent with,
Sections 9, 33 or 34(c) of these Regulations shall require the affirmative
vote of holders of shares representing at least eighty percent (80%) of the
voting power of
17
the Corporation, unless such amendment, alteration, change, repeal or
adoption has been recommended by at least two-thirds of the members of
the Board of Directors of the Corporation then in office, in which
event the provisions of Section 34(a) hereof shall apply.
Exhibit B shows the changes to the relevant portions of Section 34 of the
Regulations resulting from the proposed amendment, with deletions indicated by
strike-outs and additions indicated by underlining. If approved, this Proposal
will become immediately effective at the conclusion of the Annual Meeting.
VOTE REQUIRED
The resolution attached to this Proxy Statement as Exhibit C will be
submitted for adoption at the Annual Meeting. As provided by Section 34 of the
Regulations, the affirmative vote of a majority of the common shares of the
Corporation is required to approve the amendment to the provision providing for
the method of approving amendments to the Regulations. Proxies will be voted in
favor of the resolution unless otherwise instructed by the Shareholder.
Abstentions and shares not voted by brokers and other entities holding shares on
behalf of the beneficial owners will have the same effect as votes cast against
the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE AMENDMENT TO THE
COMPANY'S CODE OF REGULATIONS TO PROVIDE FOR THE ELIMINATION OF SHAREHOLDER
SUPERVOTING REQUIREMENTS TO AMEND THE CODE OF REGULATIONS RELATED TO THE NUMBER
OF DIRECTORS AND THE CLASSIFICATION OF THE BOARD AND TO PROVIDE FOR THE
AUTHORITY OF DIRECTORS TO AMEND THE CODE OF REGULATIONS CONSISTENT WITH THE OHIO
REVISED CODE.
18
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
The following information relates to compensation of management for
the year ended December 31, 2007, unless otherwise noted below. Mr. J. Everson
presently serves as Chairman of the Board of Directors of The Citizens Bank, of
Martins Ferry, Ohio, which is the wholly-owned subsidiary of the Corporation.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction. The Compensation Committee administers our executive
compensation program. The committee, which is composed entirely of independent
directors, is responsible for reviewing and determining executive officer
compensation, for evaluating the President and Chief Executive Officer, for
overseeing the evaluation of all other officers and employees, for administering
our incentive compensation programs, for approving and overseeing the
administration of our employee benefits programs, for providing insight and
guidance to management with respect to employee compensation generally, and for
reviewing and making recommendations to the board with respect to director
compensation. The President and Chief Executive Officer participates with
respect to decisions concerning other executive officers of the Corporation.
The Compensation Committee operates under a charter adopted by the
board of directors. The Compensation Committee annually reviews the adequacy of
its charter and recommends changes to the board for approval. The charter grants
the Committee the authority to retain and terminate advisors, including
compensation consultants, accountants and legal counsel, to assist in
discharging its duties. The Compensation Committee meets at scheduled times
during the year and also acts upon occasion by written consent. The chair of the
committee reports on committee activities and makes committee recommendations at
meetings of the board of directors.
Compensation Philosophy. Our executive compensation programs seek to
achieve and maintain equity with respect to balancing the interests of
shareholders and executive officers, while supporting our need to attract and
retain competent executive management. Toward this end, the management
compensation committee has developed an executive compensation policy, along
with supporting executive compensation plans and programs, which are intended to
attain the following objectives:
- Support a pay-for-performance policy that rewards Executive Officers
for corporate performance.
- Motivate Executive Officers to achieve strategic business goals.
- Provide competitive compensation opportunities critical to the
Corporation's long-term success.
The committee collects and analyzes comparative executive compensation
information from relevant peer groups, approves executive salary adjustments.
Additionally, from time to time, the committee reviews other human resource
issues, including qualified and non-qualified benefits, management performance
appraisals, and succession planning.
The Committee uses comparisons of competitive executive pay practices
taken from banking industry compensation surveys and, from time-to-time,
consultation with independent executive compensation advisors. Peer groups and
competitive compensation practices are
19
determined using executive compensation packages at bank holding companies and
subsidiaries of comparable size to the Corporation and its subsidiaries.
There are two principal components of the compensation program for all
Executive Officers of the Corporation and its commercial bank subsidiaries; a
base salary component and a cash bonus incentive component. Until 2006, the
Corporation also had a long-term incentive compensation component in the form of
a stock option plan. Awards can no longer be made under the plan, but the final
grants that were made under the plan will not expire until 2015. The Corporation
also has a 401(k) and employee stock ownership plan and a defined benefit
pension plan.
In making its decisions regarding annual salary adjustments, the
committee reviews quantitative and qualitative performance factors as part of an
annual performance appraisal. These are established for each executive position
and the performance of the incumbent executive is evaluated annually against
these standards. This appraisal is then integrated with market-based adjustments
to salary ranges to determine if a base salary increase is merited.
The accounting and tax treatment of particular forms of compensation
materially do not affect the committee's compensation decisions. However, the
committee evaluates the effect of such accounting and tax treatment on an
ongoing basis and will make appropriate modifications to its compensation
policies where appropriate.
Components of Compensation. The elements of total compensation paid by the
Corporation to its senior officers, including the President and Chief Executive
Officer (the "CEO") and the other executive officers identified in the Summary
Compensation Table which appears following this Compensation Discussion and
Analysis (the CEO and the other executive officers identified in that Table are
sometimes referred to collectively as the "Named Executive Officers"), include
the following:
- Base salary;
- Awards under our cash-based incentive compensation program;
- Awards under our 401(k) and employee stock ownership plan;
- Benefits pursuant to our defined benefit pension plan; and
- Benefits under our life, health and disability plans.
Base Salary. The base salaries of the Named Executive Officers are reviewed by
the Committee annually as well as at the time of any promotion or significant
change in job responsibilities. The committee reviews peer group data to
establish a market-competitive executive base salary program, combined with a
formal performance appraisal system that focuses on awards that are integrated
with strategic corporate objectives. Salary income for each Named Executive
Officer for calendar year 2007 is reported in "Salary" column of the Summary
Compensation Table, which appears following this Compensation Discussion and
Analysis. The base salary amounts shown in the Summary Compensation Table
include directors fees paid in 2007 for service as a director of United Bancorp
or one or more of its subsidiary banks* in the following amounts for these
executive officers:
Mr. James W. Everson $35,089
Mr. Scott A. Everson $14,008
* United Bancorp, Inc. currently operates one bank subsidiary; The Citizens
Savings Bank. The Community Bank was merged with and into The Citizens
Savings Bank effective July 1, 2007.
20
Effective January 1, 2008, James W. Everson's annual base salary was
reduced by $50,400, or approximately 24%, to reflect the decrease in his
responsibilities resulting from the merger during 2007 of The Community Bank
with and into The Citizens Bank. All other executive officers of the Corporation
received a cost of living increase for 2008 of 3% over their previous year's
base salary, which increase also went into effect on January 1, 2008.
Incentive Cash Compensation. United Bancorp has established a short-term
incentive compensation plan that provides for cash awards upon the achievement
of performance targets established for each executive officer. The cash-based
plan is designed to reward achievement of short-term performance goals. For
2007, the Compensation Committee selected goals based on United Bancorp's
earnings per share. At the bank level, the Committee selected goals based on
growth in loans and deposits, return on assets and return on equity. Threshold,
target and maximum performance goals were set.
The amount of the annual cash bonus that may be earned by an executive
officer is based on his or her base salary and is weighted to reflect each
participant's ability to affect the performance of United Bancorp, with the
Chief Executive Officer having the largest weighting. Awards under the
Corporation's cash incentive compensation plan are based on the Corporation's
earnings per share for the year and the satisfaction of bank performance
benchmarks. The exact weighting and mix of these goals varies among the
executive officers. For more information regarding the structure of this plan,
see the section of this proxy statement captioned "Grants of Plan Based Awards."
Additionally, the Chief Executive Officer may earn a cash bonus based on
acquisitions by United Bancorp and the resulting growth in assets of the
Corporation.
United Bancorp earnings per share increased 27% from 2006 to 2007,
therefore the incentive award portion of each executive that related to earnings
per share growth was at the 200% level for 2007. United Bancorp did not make any
acquisitions in 2007. The Citizens Savings Bank met target goals for return on
assets, return on equity, loan and deposit growth.
401(k) and Employee Stock Ownership Plan. The Corporation also offers a 401(k)
plan, which covers all employees who have attained the age of 21 and have
completed one year of service. Eligible employees may contribute up to $15,000
in 2007 and employees who have attained the age of 50 years or older may
contribute an additional $5,000 in 2007. The Corporation may make a
discretionary matching contribution equal to a percentage of each participant's
elective deferral not to exceed 6% of the participant's annual compensation.
Employer contributions are invested in the common stock of United Bancorp, Inc.
under the Corporation's stock ownership plan. Employee contributions are always
vested. Employer contributions become 100% vested after 3 years of service. The
Corporation's contributions to the plan made on behalf of the Named Executive
Officers is included in the "all other compensation" column in the summary
compensation table.
Defined Benefit Pension Plan. The Corporation has a defined benefit pension plan
which covers all fulltime employees 21 or over who have completed 1,000 hours of
service during an anniversary year, measured from date of hire. The plan calls
for benefits to be paid to eligible employees at retirement, based primarily
upon years of service and compensation rates near retirement. Benefits at
retirement or vested termination of employment are based on years of credited
service, and the average of the highest five consecutive years of compensation.
Group Life, Health and Disability Benefits. The Corporation provides healthcare,
life and disability insurance and other employee benefits programs to its
employees, including its senior officers, except that life insurance is not
provided under the group plan to executive officers that participate in the
split-dollar life insurance arrangements discussed more thoroughly below. The
committee is
21
responsible for overseeing the administration of these programs and believes
that its employee benefits programs should be comparable to those maintained by
other members of the relevant peer groups so as to assure that the Corporation
is able to maintain a competitive position in terms of attracting and retaining
officers and other employees. Except for United Bancorp's split dollar life
insurance arrangements with its executive officers and certain directors our
employee benefits plans are provided on a non-discriminatory basis to all
employees.
United Bancorp has split-dollar life insurance arrangements with its
executive officers and certain directors that provide certain death benefits to
the executive's beneficiaries upon his or her death. The agreements provide a
pre- and post-retirement death benefit payable to the beneficiaries of the
executive in the event of the executive's death. The Corporation has purchased
life insurance policies on the lives of all participants covered by these
agreements in amounts sufficient to provide the sums necessary to pay the
beneficiaries, and the Corporation pays all premiums due on the policies. Under
the arrangements, directors have the right to designate beneficiaries of death
proceeds up to $100,000, subject to forfeiture of that right upon the occurrence
of certain events. The named executive officers have the right to designate
beneficiaries of death proceeds up to four times the named executive officer's
annual base salary, subject to forfeiture of that right upon the occurrence of
certain events. The actual gross death benefit amounts payable under this plan
are disclosed under Payments and Benefits in Connection with Termination or
Change-in-Control. The economic benefit (the imputed income amount of this
insurance) for the year 2007 to the named executive officers is included in the
amounts for each of these executive officers set forth in the Summary
Compensation Table under the column "All Other Compensation." The economic
benefit (the imputed income amount of this insurance) for the year 2007 to the
directors is set forth in the Director Compensation Table under the column "All
Other Compensation."
2007 Executive Officer Compensation. For 2007 the executive officers named
in the Summary Compensation Table received salaries that were intended to
maintain their compensation at a competitive level. Adjustments in 2007 base
salary were based upon each Named Executive's annual performance review, an
annual review of peer compensation, and the overall performance of the company.
These adjustments are consistent with the company's salary budget which is
approved by the compensation committee and becomes part of the overall budget
approved annually by the board of directors.
The Corporation provides a reasonable level of personal benefits, and
perquisites to one or more named executive officers to support the business
interests of the bank, provide competitive compensation, and to recognize the
substantial commitment both professionally and personally expected from
executive officers. The aggregate value of perquisites and personal benefits, as
defined under SEC rules, provided to each named executive officer is less than
the reporting threshold value of $10,000.
As part of its compensation program the Corporation has entered into
agreements with each of the Named Executive Officers pursuant to which they will
be entitled to receive severance benefits upon the occurrence of certain
enumerated events following a change in control. The events that trigger payment
are generally those related to termination of employment without cause or
detrimental changes in the executive's terms and conditions of employment. See
Employment Contracts and Payments Upon Termination or "Change in Control" below
for a more detailed description of these events. the Corporation believes that
this structure will help: (i) assure the executives' full attention and
dedication to the company, free from distractions caused by personal
uncertainties and risks related to a pending or threatened change in control,
(ii) assure the executives' objectivity for shareholders' interests, (iii)
assure the executives of fair treatment in
22
case of involuntary termination following a change in control, and (iv) attract
and retain key talent during uncertain times.
COMPENSATION COMMITTEE REPORT
The management compensation committee has reviewed and discussed with
management the compensation discussion and analysis set forth above. Based on
such review and discussions, the management compensation committee has
recommended to the board of directors that the compensation discussion and
analysis be included in this proxy statement and in the Annual Report on Form
10-K for the year ended December 31, 2007, filed by us with the Securities and
Exchange Commission.
COMPENSATION COMMITTEE
Matthew C. Thomas, Chairman
John M. Hoopingarner
Terry A. McGhee
23
EXECUTIVE COMPENSATION. The following table sets forth the annual and long-term
compensation for United Bancorp's Chief Executive Officer and its four other
highest paid executive officers, as well as the total compensation paid to each
individual during United Bancorp's last completed fiscal year.
SUMMARY COMPENSATION TABLE
CHANGE IN
PENSION
VALUE
AND
NONQUALIFIED
NON-EQUITY DEFERRED
STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
POSITION YEAR ($) ($) ($) ($) ($) ($)(1) ($) (2) ($)
------------------ ----- ------- ----- ------ ------ -------------- ------------ ------------ -------
James W. Everson 2007 250,541 -- -- -- 108,000 29,584 23,790 411,915
Chairman President & 2006 247,799 -- -- -- 0 482 19,313 267,594
Chief Executive Officer,
United Bancorp, Inc
Principal Position CEO
United Bancorp, Inc.
Scott A. Everson 2007 183,461 -- -- -- 73,711 13,281 12,209 282,662
Senior Vice President & 2006 168,280 -- -- -- 8,789 9,526 6,361 192,956
Chief Operating Officer
United Bancorp, Inc.
Principal Position CEO
The Citizens Savings Bank
Randall M. Greenwood 2007 114,000 -- -- -- 39,048 6,969 4,678 164,695
Senior Vice President, 2006 108,000 -- -- -- 4,604 3,041 3,797 119,442
Chief Financial Officer
& Treasurer, United
Bancorp, Inc.
Principal Position, CFO,
United Bancorp, Inc.
James A. Lodes 2007 105,000 -- -- -- 29,768 32,071 4,424 171,263
Vice President, 2006 98,000 -- -- -- 8,423 16,289 4,333 127,045
Chief Lending Officer,
United Bancorp, Inc,
Principal Position, CLO,
the Citizens Savings Bank
Norman F. Assenza, Jr. 2007 97,000 27,500 43,723 5,998 174,221
Vice President 2006 94,000 -- -- -- 8,079 28,533 5,493 136,105
Compliance United
Bancorp, Inc.
Principal Position,
Compliance and Internal
Auditor, The Citizens
Savings Bank
----------
(1) Reports increase in present value of the Defined Benefit Plan accrual from
2006 to 2007. Refer to Pension Benefits table for explanation of benefit
and disclosure of present value of accumulated benefit as of 12/31/07.
(2) The amounts shown in this column for the most recently completed fiscal
year were derived from the following figures: (1) contributions by United
Bancorp to its 401(k) Plan: Mr. James W. Everson, $6,480; Mr. Scott A.
Everson $5,374; Mr. Greenwood $3,420; Mr. Lodes, $3,403; and Mr. Assenza
$2,910 (2) the economic benefit of life insurance coverage provided for the
named executive officers: Mr. James W. Everson, $14,619; Mr. Scott A.
Everson $728; Mr. Greenwood $638; Mr. Lodes, $1,021 and Mr. Assenza $3,088.
24
GRANTS OF PLAN-BASED AWARDS
ALL
OTHER ALL GRANT
STOCK OTHER DATE
AWARDS: STOCK FAIR
NUMBER AWARDS: VALUE
ESTIMATED FUTURE ESTIMATED FUTURE OF NUMBER EXERCISE OF
PAYOUTS UNDER NON-EQUITY PAYOUTS UNDER EQUITY SHARES OF OR BASE STOCK
INCENTIVE PLAN AWARDS INCENTIVE PLAN AWARDS OF STOCK SECURITIES PRICE OF &
-------------------------- -------------------------- OR STOCK UNDERLYING OPTION EQUITY
GRANT THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM UNITS OPTIONS AWARDS AWARDS
NAME DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SHARE) $
---- ----- --------- ------ ------- --------- ------ ------- -------- ---------- --------- ------
James W. Everson 40,500 54,000 108,000
Scott A. Everson 31,875 42,500 85,000
Randall M. Greenwood 17,100 22,800 45,600
James A. Lodes 15,750 21,000 42,000
Norman F. Assenza, Jr. 14,550 19,400 38,800
The Corporation maintains a cash-based incentive compensation plan.
The amount of the annual cash bonus that may be earned by an executive officer
under this plan is based on his or her base salary and is weighted to reflect
each participant's ability to affect the performance of United Bancorp, with the
Chief Executive Officer having the largest weighting. The multiple by which the
bonus of the Chief Executive Officer is determined under the plan is set at 25%
of his base salary for the year (the "Base Multiple"). The Base Multiple for the
Corporations Senior Vice President and Chief Operating Officer S. Everson is
25%. The Base Multiples for the Corporation's Senior Vice President (Messrs.
Greenwood) and Vice Presidents (Messrs. Lodes and Assenza) are set at 20% of
their respective base salaries for the year.
Awards under the Corporation's cash incentive compensation plan are
based on two general and independent criteria: (1) the Corporation's earnings
per share; and (2) the performance of The Citizens Bank in the following
categories: loan and deposit growth; return on average assets; and return on
average equity. Under the plan, the entire potential bonus of the Corporation's
Chief Executive Officer for the year is dependent upon the Corporation meeting
or exceeding its earnings per share from the previous year, while 75% and 50%,
respectively, of the Senior Vice Presidents' and Vice Presidents' potential
bonuses are determined by reference to earnings per share. The balance of their
incentive compensation is based upon their individual bank's financial
performance. Under the Corporation's cash incentive compensation plan, each
executive officer is entitled to receive earnings per share bonuses as follows:
- Earnings per share equal to previous year: 75% of Base Multiple
- 05% Increase in earnings per share over previous year: 100% of Base
Multiple
- 10% Increase in earnings per share over previous year: 125% of Base
Multiple
- 15% Increase in earnings per share over previous year: 150% of Base
Multiple
- 17% Increase in earnings per share over previous year: 175% of Base
Multiple
- 20% Increase in earnings per share over previous year: 200% of Base
Multiple
25
The Corporation's earnings per share for 2007 increased 27% over
earnings per share for 2006, therefore incentive award payments for the officers
listed above are based on the formula listed above.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards(1) Stock Awards
------------------------------------------------------------- -------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market
Market Awards: or
Equity Number Value Number Payout
Incentive of of of Value
Plan Shares Shares Unearned of
Awards: or or Shares, Unearned
Number Units Units Units Shares, Units
Number of of of or or Other
of Number Securities Stock Stock Other Rights Rights
Securities of Securities Underlying That That That That
Underlying Underlying Unexercised Option Have Have Have Have
Unexercised Unexercised Unearned Exercise Option Not Not Not Not
Options (#) Options (#) Options Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable (#) ($) Date (#) ($) (#) ($)
---- ----------- ------------- ----------- -------- ---------- ------ ------ ------------ -------------
James W. Everson -- 1,815 -- $10.15 1/16/2015 -- -- -- --
Randall M. Greenwood -- -- -- 11.65 3/1/2007 -- -- -- --
-- 13,245 -- 9.63 5/15/2015 -- -- -- --
Scott A. Everson -- 13,245 -- 9.63 5/15/2015 -- -- -- --
-- 12,100 -- 12.15 8/23/2014 -- -- -- --
James A. Lodes -- -- -- -- -- -- -- -- --
Norman F. Assenza, Jr -- -- -- -- -- -- -- -- --
----------
1. All outstanding options were awarded under the Corporations stock option
plan, which expired in 2005.
PENSION BENEFITS
PRESENT
NUMBER OF YEARS VALUE OF
CREDITED SERVICE ACCUMULATED PAYMENTS DURING LAST
NAME PLAN NAME (#) BENEFIT ($) FISCAL YEAR ($)
---- ------------------------------------------- ---------------- ----------- --------------------
James W. Everson United Bancorp, Inc. of Martins Ferry, Ohio
Employers' Pension Plan and Trust 3 53,862 --
Scott A. Everson United Bancorp, Inc. of Martins Ferry, Ohio
Employers' Pension Plan and Trust 17 50,636 --
Randall M. Greenwood United Bancorp, Inc. of Martins Ferry, Ohio
Employers' Pension Plan and Trust 10 28,756 --
James A. Lodes United Bancorp, Inc. of Martins Ferry, Ohio
Employers' Pension Plan and Trust 14 165,022 --
Norman F. Assenza United Bancorp, Inc. of Martins Ferry, Ohio
Employers' Pension Plan and Trust 29 324,338 --
The Corporation has a defined benefit pension plan which covers all
fulltime employees 21 or over who have completed 1,000 hours of service during
an anniversary year, measured from date of hire. The plan calls for benefits to
be paid to eligible employees at retirement, based primarily upon years of
service and compensation rates near retirement. It may provide monthly benefits
commencing as early as age 50, but not later than age 70, for employees who
terminate employment or retire with 5 or more years of credited service.
Benefits at retirement or vested termination of employment are based on years of
credited service, and the average of the highest
26
five consecutive years of compensation. The plan is integrated with social
security covered compensation. In connection with his retirement as Chief
Executive Officer of the Citizens Savings Bank subsidiary of United Bancorp on
November 1, 2004, Mr. James Everson elected a lump sum distribution from the
plan in 2004 reflecting his then 43 years of credited service under the plan.
The present values of accumulated benefits were calculated in
accordance with Statement of Financial Accounting Standards No. 35. Key
actuarial assumptions used in the calculations include: (1) assumed long-term
investment return of 8.0% annually; (2) the RP-2000 Mortality Table; (3) a table
of probabilities of termination of employment before retirement, and (4) an
assumed retirement age of 65.
NONQUALIFIED DEFERRED COMPENSATION
EXECUTIVE REGISTRANT AGGREGATE AGGREGATE AGGREGATE
COMPENSATION IN CONTRIBUTIONS EARNINGS WITHDRAWALS/ BALANCE AT
NAME LAST FY ($)(1) IN LAST FY ($) IN LAST FY ($) DISTRIBUTIONS ($) LAST FY ($)(2)
---- --------------- -------------- -------------- ----------------- --------------
James W. Everson 35,089 0 13,499 0 383,377
Scott A. Everson 14,008 0 2,541 0 75,597
----------
(1) This amount represents deferred director fees reported as Salary in the
Summary Compensation Table.
(2) Aggregate balances include amounts of contributions and earnings since the
plan's inception in 1996. Contributions by each of the named executive
officers were previously disclosed as compensation for the year earned.
United Bancorp, Inc. has established a deferred compensation plan for
the benefit of its directors and the directors of its subsidiary bank. Both
James and Scott Everson participate in this plan in their capacity as directors,
along with directors Hoopingarner, McGhee and Thomas. For more information
regarding this plan, see the section of this proxy statement captioned "Director
Compensation."
EMPLOYMENT CONTRACTS AND PAYMENTS UPON
TERMINATION OR "CHANGE IN CONTROL"
AMOUNT PAID ON PAYMENT ON DEATH OR DISABILITY UNDER
NAME OF EXECUTIVE CHANGE IN CONTROL SPLIT-DOLLAR LIFE INSURANCE ARRANGEMENTS
----------------- ----------------- ----------------------------------------
James W. Everson $768,493 $864,000
Scott A. Everson $395,248 $680,000
Randall M. Greenwood $244,048 $456,000
James A. Lodes $116,825 $420,000
The Corporation has entered into change-in-control agreements with
Messrs. James W. Everson, Scott A. Everson, Greenwood, Lodes and Assenza. The
agreements provide that Mr. James W. Everson, Mr. Scott A. Everson, Mr.
Greenwood, Mr. Lodes and Mr. Assenza will be entitled to a lump sum severance
benefit in the event of their involuntary termination of employment (other than
for cause) following a "change in control" of the Corporation, as defined in the
Agreements. In the event of a change in control and the involuntary termination
of employment, the agreements provide that: Mr. James W. Everson will receive a
lump sum cash
27
payment equal to 2.99 times his annual compensation; Mr. Scott A. Everson will
receive a lump sum cash payment equal to 2.0 times his annual compensation; Mr.
Greenwood will receive a lump sum cash payment equal to 2.0 times his annual
compensation; Mr. Lodes will receive a lump sum cash payment equal to 1.0 times
his annual compensation; and Mr. Assenza will receive a lump sum cash payment
equal to 1.0 times his annual compensation. If a change in control had occurred
as of December 31, 2007, this would have resulted in payments to the executives
as shown on the above table. Also included in the table are amounts that would
be payable to the executive or their estate pursuant to the Corporation's
split-dollar life insurance arrangements. Benefits accrued as of December 31,
2007 for the Named Executive Officers under the Corporation's defined benefit
pension and nonqualified deferred compensation plans are disclosed above under
the applicable tables.
DIRECTOR COMPENSATION
CHANGE IN
PENSION
VALUE AND
FEES NONQUALIFIED
EARNED OR NON-EQUITY DEFERRED ALL OTHER
PAID IN STOCK INCENTIVE PLAN COMPENSATION COMPENSATION
NAME CASH ($) AWARDS ($) COMPENSATION ($) EARNINGS ($) ($) TOTAL ($)
---- --------- ---------- ---------------- ------------ ------------ ---------
Michael J. Arciello 26,333 0 0 0 0 26,333
John M. Hoopingarner 27,591 0 0 0 320 27,911
Terry A. McGhee 22,113 0 0 0 520 22,633
Samuel J. Jones 15,007 0 0 0 376 15,383
Richard L. Riesbeck 30,368 0 0 0 566 30,934
Matthew C. Thomas 28,146 0 0 0 252 28,398
United Bancorp compensates each director for services as a director in
the following manner: each director receives an annual retainer fee of $7,500
regardless of board meeting attendance and $592 per meeting attended. Each
member of the Executive Committee and Compensation Committee receives $237 for
each meeting attended. The Chairman of the Audit Committee receives a annual
retainer of $1,000 and $443 per Audit Committee meeting attended, while all
other members of the Audit Committee receive $276 per Audit Committee meeting
attended (other than those held in connection with a full meeting of the Board
of Directors). Amounts indicated under the "All Other Compensation" column
represent the annual economic benefit imputed to each of the respective
directors under the Corporation's split dollar life insurance arrangement for
the year 2007.
United Bancorp, Inc. has also established a deferred compensation plan
for the benefit of its corporate directors and the directors of its subsidiary
bank. The Plan is an unfunded deferred compensation plan for tax purposes and
for purposes of Title I of ERISA. Amounts deferred by directors under the Plan
shall remain unrestricted assets of the Corporation, and participants have the
status of general unsecured creditors of the Corporation. Any member of the
Board of Directors who desires to participate in the Plan may elect for any
year, on or before the 31st day of December of the preceding year, to defer all
or a specified part of the fees which thereafter shall be payable to him for
services in the succeeding year. Additionally, such an election may be made at
28
any time within thirty (30) days following the date on which a person is elected
to the Board of Directors if such person was not a member of the Board on the
preceding December 31st, provided that such election shall apply only for fees
earned for services performed subsequent to the election for such calendar year.
A Director may also make such an election within thirty (30) days following
adoption of the Plan by such subsidiary of United Bancorp, Inc. which had not
previously participated in the Plan, provided that such election shall apply
only for fees earned for services performed subsequent to the election for such
calendar year. At least annually a Director's account balances or credits shall
be deemed to be invested in United Bancorp, Inc. Common Stock and the Director's
account shall be credited with any subsequent dividends with respect to the
Common Stock credited to his or her account.
When a participating Director ceases to be a member of the Board, the
Corporation shall pay him or her in equal annual installments or at his
irrevocable election, in one lump sum, the aggregate number of shares of United
Bancorp, Inc. Common Stock, (including, without limitation shares deemed to be
acquired through reinvested dividends) that are credited to his or her account
as of the close of business on the date of the termination of his membership on
the Board, together with any cash account balance which has not yet been deemed
invested in United Bancorp, Inc. Common Stock. The annual installment payment
option shall be over a period not to exceed ten years.
Amounts deferred by participating non officer directors during 2007
are indicated in the table below.
NAME DIRECTOR COMPENSATION IN LAST FY ($)
---- ------------------------------------
John M. Hoopingarner 5,518
Samuel J. Jones 3,752
Terry A. McGhee 11,056
Matthew C. Thomas 5,629
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS.
In 2007 the Compensation Committee members were Matthew C. Thomas,
Chairman, John M. Hoopingarner and Terry A. McGhee. All members of the
compensation committee are independent directors, and none of them are present
or past employees or officers of the Corporation or any of its subsidiaries. No
member of the compensation committee has had any relationship with the
Corporation requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act. During the past year, certain directors and officers, including
members of the Compensation Committee, and one or more of their associates may
have been customers of and had business transactions with United Bancorp's
subsidiary banks. All loans included in such transactions were made in the
ordinary course of business and on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve more than normal
risk of collectibility or present other unfavorable features. It is expected
that similar transactions will occur in the future. Mr. James W. Everson, Chief
Executive Officer of the Corporation, does not participate in any deliberations
or decisions regarding his own compensation. During 2007, no executive officers
of the Corporation served on any board or compensation committee of any other
entity that has an executive officer which serves on our board or compensation
committee.
29
CERTAIN TRANSACTIONS
United Bancorp has engaged and intends to continue to engage in the
lending of money through its subsidiary bank to several of its Directors,
executive officers and corporations or other entities in which they may own a
controlling interest. The loans to such persons (i) were made in the ordinary
course of business, (ii) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and (iii) did not involve more than a normal
risk of collectibility or present other unfavorable features. Except for the
specific transactions described above no director, executive officer or
beneficial owner of more than five percent of the Corporation's outstanding
voting securities (or any member of their immediate families) engaged in any
transaction with the Corporation during 2007 in which the amount involved
exceeded $120,000.
It is customary and routine for directors, officers and employees of
community banks and their spouses, family members and associates to do business
with their community bank. Such a relationship, including routine banking
business, is viewed as beneficial to the Corporation and is encouraged, so long
as such relationships are fair and reasonable to the Corporation and are entered
into upon terms and conditions generally available to the public, or similar to
that which could be obtained from an independent third party. In that regard,
pursuant to the Corporation's Code of Ethics and business Conduct, United
Bancorp may do business and have financial dealings with directors, officers and
employees and their respective spouses, family members and associates provided
either of the following criteria are satisfied:
- such business or financial dealings involve United Bancorp's
subsidiary bank or any other financial services subsidiary
providing banking or financial services to such person in the
ordinary course of business upon terms and conditions generally
available to the public, to the extent such arrangements are made
in compliance with all applicable banking and securities laws and
regulations; or
- the terms and conditions of such relationship have been presented
to and approved by the Audit Committee of United Bancorp's Board
of Directors, including any "related party transaction" requiring
disclosure in United Bancorp's annual meeting proxy statement. In
the event any member of the Audit Committee, any entity
controlled by such member, or any associate or family member of
such member, proposes to provide products or services to the
Corporation, such member must recuse him or herself from the
discussion and decision about the appropriateness of such
arrangement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires United
Bancorp's executive officers, directors and more than ten percent shareholders
("Insiders") to file with the Securities and Exchange Commission and United
Bancorp reports of their ownership of United Bancorp securities. During 2007,
Norman F. Assenza, a Vice President of the Corporation, was late in filing one
Section 16 report regarding one sale transaction. Based upon written
representations and copies of reports furnished to United Bancorp by Insiders,
all other Section 16 reporting requirements applicable to Insiders during 2007
were satisfied on a timely basis.
30
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
PROPOSALS FOR INCLUSION IN PROXY MATERIALS
Shareholders may submit proposals appropriate for shareholder action
at the Corporation's Annual Meeting consistent with the regulations of the
Securities and Exchange Commission. For proposals to be considered for inclusion
in the Proxy Statement for the 2009 Annual Meeting, they must be received by the
Corporation no later than November 20, 2008. Such proposals should be directed
to United Bancorp, Inc., Attention: Chief Executive Officer, 201 South Fourth
Street, Martins Ferry, Ohio 43935.
PROPOSALS OTHER THAN FOR INCLUSION IN PROXY MATERIALS
Pursuant to the Corporation's Code of Regulations, if the Corporation
provides less than 25 days' prior notice of the 2009 Annual Meeting date, the
latest possible cut-off for any shareholder to propose any matter to be acted
upon at the 2009 Annual Meeting of Shareholders is the close of business on the
10th day following the day on which such notice of the date of the meeting is
mailed. Otherwise, in order to be timely, a shareholder's notice must be
delivered to the principal executive officers of the Corporation not less than
25 days prior to the meeting date. If notice has not been provided by these
respective dates, the business may not be considered at the Annual Meeting. The
proxy cards delivered in connection with next year's Annual Meeting will confer
discretionary voting authority, to be exercised in the judgment of the
Corporation's Board of Directors, with respect to any shareholder proposal
received less than 45 days prior to the anniversary of the mailing date of this
year's proxy materials, which deadline will fall on or around February 4, 2008.
The Corporation also retains its authority to discretionarily vote proxies with
respect to shareholder proposals received after November 27, 2007 but prior to
February 4, 2008, unless the proposing shareholder takes the necessary steps
outlined in Rule 14a-4(c)(2) under the Securities Exchange Act of 1934 to ensure
the proper delivery of proxy materials related to the proposal.
DIRECTOR NOMINATIONS
In order to make a director nomination at a shareholder meeting, it is
necessary that you notify United Bancorp not less than 40 days nor more than 60
days prior to the date of the meeting. In addition, the notice must meet all
other requirements contained in the Corporation's Code of Regulations.
SELECTION OF AUDITORS
For the fiscal year ended December 31, 2007, BKD, LLP ("BKD") served
the Corporation as independent auditor. On July 10, 2007, the Audit Committee of
the Corporation's Board of Directors, upon authority delegated to it by the
Board of Directors, engaged BKD to replace Grant Thornton as the Corporation's
independent registered public accountant. The change in accounting firm was due
to BKD acquiring Grant Thornton's Cincinnati Ohio financial services practice in
2007. Grant Thornton's reports on the consolidated financial statements of the
Corporation for each of the fiscal years ended December 31, 2005 and December
31, 2006, contained no adverse opinions or disclaimers of opinion, and none were
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2005 and December 31, 2006, and the
subsequent interim period through July 10, 2007, there were no disagreements
between the Corporation and Grant Thornton on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if
31
not resolved to the satisfaction of Grant Thornton, would have caused it to make
reference to the subject matter of the disagreement in connection with its
reports. During the fiscal years ended December 31, 2004, December 31, 2005 and
December 31, 2006, and the subsequent interim period through July 10, 2007,
there were no reportable events as defined in Item 304 (a)(1)(v) of SEC
Regulation S-K.
The Audit Committee has retained BKD as United Bancorp's independent
auditor for fiscal year 2008. We expect representatives of BKD to be present at
the Annual Meeting with the opportunity to make statements if they so desire and
to be available to respond to appropriate questions raised at the Annual
Meeting.
OTHER BUSINESS
Management is not aware of any other matter which may be presented for
action at the meeting other than the matters set forth herein. Should any matter
other than those set forth herein be presented for a vote of the shareholders,
the proxy in the enclosed form directs the persons voting such proxy to vote in
accordance with their judgment.
ANNUAL REPORT TO SHAREHOLDERS
United Bancorp's Annual Report for its fiscal year ended December 31,
2007 accompanies this Proxy Statement but is not part of our proxy soliciting
material. Shareholders may obtain a copy of the Corporation's annual report on
Form 10-K, including financial statements and the notes thereto, required to be
filed with the Commission pursuant to SEC Rule 13a-1 for the Corporation's most
recent fiscal year by submitting a written request to Randall M. Greenwood,
Corporate Secretary, United Bancorp, Inc., 201 South 4th Street, Martins Ferry,
Ohio. You may also request additional copies of our most recent Annual Report to
Shareholders by submitting a written request to Mr. Greenwood's attention. A
library of United Bancorp's annual reports can be accessed on the Corporation's
website at www.unitedbancorp.com.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
The Securities and Exchange Commission has adopted rules that allow us
to deliver a single annual report, proxy statement, proxy statement combined
with a prospectus, or any information statement to any household at which two or
more shareholders reside who share the same last name or whom we believe to be
members of the same family. This is known as "householding."
If you share the same last name and address with one or more
shareholders, from now on, unless we receive contrary instructions from you (or
from one of these other shareholders), you and all other shareholders who share
your home address will receive only one copy of any of our annual report, proxy
statement for our Annual Meeting of Stockholders, proxy statement we file and
deliver in connection with any other meeting of shareholders, proxy statement
combined with a prospectus or information statement. We will include with the
household materials for our annual meetings, or any other shareholders' meeting,
a separate proxy card for each registered shareholder located at your home
address.
If you do not wish to participate in the householding program, please
contact our transfer agent, American Stock Transfer & Trust Company, at
1-800-937-5449 to "opt-out" or revoke your consent. If you "opt-out" or revoke
your consent to householding, each primary account holder
32
residing at your address will receive individual copies of the Corporation's
proxy statement, annual report and other future shareholder mailings.
If you do not object to householding, (1) you are agreeing that your
household will only receive one copy of future Corporation shareholder mailings,
and (2) your consent will be implied and householding will start 60 days after
the mailing of this notice, to the extent you have not previously consented to
participation in the householding program. Your affirmative or implied consent
to householding will remain in effect until you revoke it. The Corporation shall
begin sending individual copies of applicable shareholder communications subject
to householding rules to a security holder within 30 days after revocation by
the shareholder of prior affirmative or implied consent. Your participation in
the householding program is encouraged. It will reduce the volume of duplicate
information received at your household as well as the cost to us of preparing
and mailing duplicate materials.
Additionally, any shareholders sharing an address who continue to
receive, for whatever reason, multiple copies of shareholder materials, and who
would like to receive a single copy of such materials in the future, may do so
by directing their request to our transfer agent in the manner provided above.
Most banks and brokers are delivering only one copy of the annual
report and proxy statement to consenting street-name stockholders (you own
shares in the name of a bank, broker or other holder of record on the books of
our transfer agent) who share the same address. Those street-name stockholders
who wish to receive separate copies may do so by contacting their bank or broker
or other holder of record.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY FORM AS PROMPTLY AS
POSSIBLE OR VOTE VIA PHONE OR INTERNET WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON.
33
EXHIBIT A
UNITED BANCORP, INC.
2008 STOCK INCENTIVE PLAN
ARTICLE 1
General Purpose of Plan; Definitions
1.1 Name and Purposes. The name of this Plan is the United Bancorp, Inc. 2008
Stock Incentive Plan. The purpose of this Plan is to enable United Bancorp,
Inc. and its Affiliates to: (i) attract and retain skilled and qualified
directors, officers and key employees who are expected to contribute to the
Company's success by providing long-term incentive compensation
opportunities competitive with those made available by other companies;
(ii) motivate participants to achieve the long-term success and growth of
the Company; (iii) facilitate ownership of shares of the Company; and (iv)
align the interests of the participants with those of the Company's
shareholders.
1.2 Certain Definitions. Unless the context otherwise indicates, the following
words used herein shall have the following meanings whenever used in this
instrument:
(a) "Affiliate" means any corporation, partnership, joint venture or
other entity, directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with the Company, as
determined by the Board of Directors in its discretion.
(b) "Award" means any grant under this Plan of a Stock Option, Stock
Appreciation Right, Restricted Share, Restricted Share Unit or Performance Share
to any Plan participant.
(c) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(d) "Cause" with respect to an employee of the Company or any
affiliate of the Company means and is limited to (a) criminal dishonesty, (b)
refusal to perform duties on an exclusive and substantially full-time basis, (c)
refusal to act in accordance with any specific substantive instructions given by
the Company or any affiliate of the Company with respect to performance of
duties normally associated with such employee's position, or (d) engaging in
conduct which could be materially damaging to the Company or any affiliate of
the Company without a reasonable good faith belief that such conduct was in the
best interest of the Company or any affiliate of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
any lawful regulations or guidance promulgated thereunder. Whenever reference is
made to a specific Internal Revenue Code section, such reference shall be deemed
to be a reference to any successor Internal Revenue Code section or sections
with the same or similar purpose.
(f) "Committee" means the committee administering this Plan as
provided in Section 2.1.
(g) "Common Shares" mean the common shares no par value per share, of
the Company.
(h) "Company" means United Bancorp, Inc., a corporation organized
under the laws of the State of Ohio and, except for purposes of determining
whether a Change in Control has occurred,
any corporation or entity that is a successor to United Bancorp, Inc. or
substantially all of the assets of United Bancorp, Inc. and that assumes the
obligations of United Bancorp, Inc. under this Plan by operation of law or
otherwise.
(i) "Date of Grant" means the date on which the Committee grants an
Award.
(j) "Director" means a member of the Board of Directors.
(k)"Disability" means the person (a) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, (b) is, by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not
less than 3 months under an accident and health plan of the Company or an
affiliate covering the person, or (c) has been determined to be totally disabled
by the United States Social Security Administration.
(l) "Eligible Participant" is defined in Article 4.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any lawful regulations or guidance promulgated thereunder.
(n) "Exercise Price" means the purchase price of a Share pursuant to a
Stock Option, or the exercise price per Share related to a Stock Appreciation
Right.
(o) "Fair Market Value" means the closing price of a Share as reported
on The Nasdaq Stock Market, or, if applicable, on any national securities
exchange or automated quotation system on which the Common Shares are
principally traded: (i) on the date for which the determination of Fair Market
Value is made, or (ii) if the closing price is not yet known as of such date
then the date prior to that, or, (iii) if there are no sales of Common Shares on
such date, then on the most recent immediately preceding date on which there
were any sales of Common Shares. If the Common Shares are not, or cease to be,
traded on The Nasdaq Stock Market or any national securities exchange or
automated quotation system, the "Fair Market Value" of Common Shares shall be
determined pursuant to a reasonable valuation method prescribed by the
Committee. Notwithstanding the foregoing, as of any date, the "Fair Market
Value" of Common Shares shall be determined in a manner consistent with Code
Section 409A and the guidance then-existing thereunder. In addition, "Fair
Market Value" with respect to ISOs and related SARs shall be determined in
accordance with Section 6.2(f).
(p) "Incentive Stock Option" and "ISO" mean a Stock Option that is
identified as such and which is intended to meet the requirements of Section 422
of the Code.
(q) "Non-Qualified Stock Option" and "NQSO" mean a Stock Option that:
(i) is governed by Section 83 of the Code; and (ii) is not intended to meet the
requirements of Section 422 of the Code.
(r) "Outside Director" means a nonemployee Director. In addition, at
all times during which the Company is subject to the reporting requirements of
the Exchange Act, "Outside Director means a nonemployee Director who meets the
definitions of the terms "outside director" set forth in Section 162(m) of the
Code, "independent director" set forth in The Nasdaq Stock Market rules,
35
and "non-employee director" set forth in Rule 16b-3, or any successor
definitions adopted by the Internal Revenue Service, The Nasdaq Stock Market and
Securities and Exchange Commission, respectively, and similar requirements under
any other applicable laws and regulations.
(s) "Parent" means any corporation which qualifies as a "parent
corporation" of the Company under Section 424(e) of the Code.
(t) "Performance Shares" is defined in Article 9.
(u) "Performance Period" is defined in Section 9.2.
(v) "Plan" means this United Bancorp, Inc. 2008 Stock Incentive Plan,
as amended from time to time.
(w) "Restricted Share Units" is defined in Article 8.
(x) "Restricted Shares" is defined in Article 8.
(y) "Rule 16b-3" is defined in Article 16.
(z) "Section 162(m) Person" means, for any taxable year, a person who
is a "covered employee" within the meaning of Section 162(m)(3) of the Code.
(aa) "Share" or "Shares" mean one or more of the Common Shares.
(bb) "Shareholder" means an individual or entity that owns one or more
Shares.
(cc) "Stock Appreciation Rights" and "SARs" mean any right to receive
the appreciation in Fair Market Value of a specified number of Shares over a
specified Exercise Price pursuant to an Award granted under Article 7.
(dd) "Stock Option" means any right to purchase a specified number of
Shares at a specified price which is granted pursuant to Article 5 and may be an
Incentive Stock Option or a Non-Qualified Stock Option.
(ee) "Stock Power" means a power of attorney executed by a participant
and delivered to the Company which authorizes the Company to transfer ownership
of Restricted Shares, Performance Shares or Common Shares from the participant
to the Company or a third party.
(ff) "Subsidiary" means any corporation which qualifies as a
"subsidiary corporation" of the Company under Section 424(f) of the Code.
(gg) "Vested" means, with respect to a Stock Option, that the time has
been reached when the option to purchase Shares first becomes exercisable; and
with respect to a Stock Appreciation Right, when the Stock Appreciation Right
first becomes exercisable for payment; with respect to Restricted Shares, when
the Shares are no longer subject to forfeiture and restrictions on
transferability; with respect to Restricted Share Units and Performance Shares,
when the units or Shares are no longer subject to forfeiture and are converted
to Shares. The words "Vest" and "Vesting" have meanings correlative to the
foregoing.
36
ARTICLE 2
Administration
2.1 Authority and Duties of the Committee.
(a) The Plan shall be administered by a Committee of at least three
Directors who are appointed by the Board of Directors. Unless
otherwise determined by the Board of Directors, the Compensation
Committee of the Board of Directors (or any subcommittee thereof)
shall serve as the Committee, and all of the members of the
Committee shall be Outside Directors. Notwithstanding the
requirement that the Committee consist exclusively of Outside
Directors, no action or determination by the Committee or an
individual then considered to be an Outside Director shall be
deemed void because a member of the Committee or such individual
fails to satisfy the requirements for being an Outside Director,
except to the extent required by applicable law.
(b) The Committee has the power and authority to grant Awards
pursuant to the terms of this Plan to Eligible Participants. The
Committee may, at any time and from time to time, at the request
of a Participant or at the discretion of the Committee, designate
that a portion of such Participant's compensation otherwise
payable in cash be payable in Common Shares, Options or SARs. The
Committee shall have the sole discretion to determine the value
of the Common Shares, Options, or SARs so payable and the terms
and conditions under which such Common Shares shall be issued or
such Options or SARs shall be granted.
(c) The Committee has the sole and exclusive authority, subject to
any limitations specifically set forth in this Plan, to:
(i) select the Eligible Participants to whom Awards are granted;
(ii) determine the types of Awards granted and the timing of such Awards;
(iii) determine the number of Shares to be covered by each Award granted
hereunder;
(iv) determine whether an Award is, or is intended to be,
"performance-based compensation" within the meaning of Section 162(m)
of the Code;
(v) determine the other terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder; such terms and
conditions include, but are not limited to, the Exercise Price, the
time or times when Options or Stock Appreciation Rights may be
exercised (which may be based on performance objectives), any Vesting,
acceleration or waiver of forfeiture restrictions, any performance
criteria (including any performance criteria as described in Section
162(m)(4)(C) of the Code) applicable to an Award, and any restriction
or limitation regarding any Option or Stock Appreciation Right or the
Common Shares relating thereto, based in each case on such factors as
the Committee, in its sole discretion, shall determine;
(vi) determine whether any conditions or objectives related to Awards have
been met, including any such determination required for compliance
with Section 162(m) of
37
the Code;
(vii) subsequently modify or waive any terms and conditions of Awards, not
inconsistent with the terms of this Plan;
(viii) adopt, alter and repeal such administrative rules, guidelines and
practices governing this Plan as it deems advisable from time to time;
(ix) promulgate such administrative forms as it from time to time deems
necessary or appropriate for administration of the Plan;
(x) construe, interpret, administer and implement the terms and provisions
of this Plan, any Award and any related agreements;
(xi) correct any defect, supply any omission and reconcile any
inconsistency in or between the Plan, any Award and any related
agreements;
(xii) prescribe any legends to be affixed to certificates representing
Shares or other interests granted or issued under the Plan; and
(xii) otherwise supervise the administration of this Plan.
(d) All decisions made by the Committee pursuant to the provisions of
this Plan are final and binding on all persons, including the
Company, its shareholders and participants, but may be made by
their terms subject to ratification or approval by, the Board of
Directors, another committee of the Board of Directors or
shareholders.
(e) The Company shall furnish the Committee with such clerical and
other assistance as is necessary for the performance of the
Committee's duties under the Plan.
2.2 Delegation of Duties. The Committee may delegate ministerial duties to any
other person or persons, and it may employ attorneys, consultants,
accountants or other professional advisers for purposes of plan
administration at the expense of the Company. The power to delegate
provided for herein does not include the power to grant an Award.
2.3 Limitation of Liability. Members of the Board of Directors, members of the
Committee and Company employees who are their designees acting under this
Plan shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for gross or willful misconduct
in the performance of their duties hereunder.
ARTICLE 3
Stock Subject to Plan
3.1 Total Shares Limitation. Subject to the provisions of this Article, the
maximum number of Shares that may be issued or transferred under this Plan,
shall not exceed in the aggregate 500,000 Common Shares, which may be treasury
or authorized but unissued Shares.
3.2 Participant Limitation. The aggregate number of Shares underlying
Awards granted under this Plan to any participant in any fiscal year (including
but not limited to Awards of Stock Options
38
and SARs), regardless of whether such Awards are thereafter canceled, forfeited
or terminated, shall not exceed 25,000 Shares. The foregoing annual limitation
is intended to include the grant of all Awards, including but not limited to,
Awards representing "performance-based compensation" as described in Section
162(m)(4)(C) of the Code.
3.3 Awards Not Exercised; Effect of Receipt of Shares. If any outstanding
Award, or portion thereof, expires, or is terminated, canceled or
forfeited, the Shares that would otherwise be issuable or released
from restrictions with respect to the unexercised or non-Vested
portion of such expired, terminated, canceled or forfeited Award shall
be available for subsequent Awards under this Plan. If the Exercise
Price of an Award is paid in Shares, the Shares received by the
Company in connection therewith shall not be added to the maximum
aggregate number of Shares which may be issued under Section 3.1.
3.4 Dilution and Other Adjustments. In the event that the Committee
determines that any dividend or other distribution (whether in the
form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
redesignation, reclassification, merger, consolidation, liquidation,
split-up, reverse split, spin-off, combination, repurchase or exchange
of Shares or other securities of the Company, issuance of warrants or
other rights to purchase Shares or other securities of the Company or
other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under this Plan, then the
Committee shall, in such manner as it deems equitable, adjust any or
all of (i) the number and type of Shares (or other securities or other
property) which thereafter may be made the subject of Awards, (ii) the
number and type of Shares (or other securities or other property)
subject to outstanding Awards, (iii) the limitations set forth above
and (iv) the purchase or exercise price or any performance objective
with respect to any Award; provided, however, that the number of
Shares or other securities covered by any Award or to which such Award
relates is always a whole number. Notwithstanding the foregoing, the
foregoing adjustments shall be made in compliance with: (i) Sections
422 and 424 of the Code with respect to ISOs; (ii) Treasury Department
Regulation Section 1.424-1 (and any successor) with respect to NQSOs,
applied as if the NQSOs were ISOs; (iii) Section 409 A of the Code, to
the extent necessary to avoid its application or avoid adverse tax
consequences thereunder; and (iv) Section 162(m) of the Code with
respect to Awards granted to Section 162(m) Persons that are intended
to be "performance-based compensation," unless specifically determined
otherwise by the Committee. In applying the provisions of this Section
3.4, the Committee shall lack discretion with respect to any
adjustment which is required to prevent enlargement or dilution of
rights under any Award and shall promptly make such adjustments as are
required to prevent an enlargement or dilution of rights.
ARTICLE 4
Participants
4.1 Eligibility. Directors, Officers and all other key employees of the
Company or any of its Affiliates (each an "Eligible Participant") who are
selected by the Committee in its sole discretion are eligible to participate in
this Plan.
39
4.2 Award Agreements. Awards shall be evidenced by a written agreement in a
form prescribed by the Committee (hereinafter "Award Agreement"). Execution of
an Award Agreement shall constitute the participant's irrevocable agreement to,
and acceptance of, the terms and conditions of the Award set forth in such
agreement and of the terms and conditions of the Plan applicable to such Award.
Award Agreements may differ from time to time and from participant to
participant.
ARTICLE 5
Stock Option Awards
5.1 Option Grant. Each Stock Option granted under this Plan will be
evidenced by minutes of a meeting, or by a unanimous written consent without a
meeting, of the Committee and by an Award Agreement dated as of the Date of
Grant and executed by the Company and by the appropriate participant.
5.2 Terms and Conditions of Grants. Stock Options granted under this Plan
are subject to the following terms and conditions and may contain such
additional terms, conditions, restrictions and contingencies with respect to
exercisability and/or with respect to the Shares acquired upon exercise as may
be provided in the relevant agreement evidencing the Stock Options, so long as
such terms and conditions are not inconsistent with the terms of this Plan, as
the Committee deems desirable:
(a) Exercise Price. Subject to Section 3.4, the Exercise Price shall never
be less than 100% of the Fair Market Value of the Shares on the Date of Grant.
If a variable Exercise Price is specified at the time of grant, the Exercise
Price may vary pursuant to a formula or other method established by the
Committee; provided, however, that such formula or method will provide for a
minimum Exercise Price equal to the Fair Market Value of the Shares on the Date
of Grant. Except as otherwise provided in Section 3.4, no subsequent amendment
of an outstanding Stock Option may reduce the Exercise Price to less than 100%
of the Fair Market Value of the Shares on the Date of Grant. Nothing in this
Section 5.2(a) shall be construed as limiting the Committee's authority to grant
premium price Stock Options which do not become exercisable until the Fair
Market Value of the underlying Shares exceeds a specified percentage (e.g.,
110%) of the Exercise Price; provided, however, that such percentage will never
be less than 100%.
(b) Option Term. Any unexercised portion of a Stock Option granted
hereunder shall expire at the end of the stated term of the Stock
Option. The Committee shall determine the term of each Stock Option at
the time of grant, which term shall not exceed 10 years from the Date
of Grant. The Committee may extend the term of a Stock Option, in its
discretion, but not beyond the date immediately prior to the tenth
anniversary of the original Date of Grant. If a definite term is not
specified by the Committee at the time of grant, then the term is
deemed to be 10 years. Nothing in this Section 5.2(b) shall be
construed as limiting the Committee's authority to grant Stock Options
with a term shorter than 10 years.
(c) Vesting. Stock Options, or portions thereof, are exercisable at such
time or times as determined by the Committee in its discretion at or
after grant. The Committee may provide that a vesting schedule shall
be specified in an Award Agreement. If the Committee provides that any
Stock Option becomes Vested over a period of time or upon performance
events, in full or in installments, the Committee may waive or
accelerate such Vesting provisions at any time. Unless otherwise
determined by the Committee in connection with the grant and set forth
in the Award Agreement, all unvested Stock Options shall immediately
vest upon the
40
Death or Disability of the holder.
(d) Method of Exercise. Vested portions of any Stock Option may be
exercised in whole or in part at any time during the option term by
giving written notice of exercise to the Company specifying the number
of Shares to be purchased. The notice must be given by or on behalf of
a person entitled to exercise the Stock Option, accompanied by payment
in full of the Exercise Price, along with any tax withholding pursuant
to Article 15. Subject to the approval of the Committee, the Exercise
Price may be paid:
(i) in cash in any manner satisfactory to the Committee;
(ii) by tendering (by either actual delivery of Shares or by attestation)
unrestricted Shares that have been owned for at least six months on
the date of exercise by the person entitled to exercise the Stock
Option having an aggregate Fair Market Value on the date of exercise
equal to the Exercise Price applicable to such Stock Option exercise,
and, with respect to the exercise of NQSOs, including restricted
Shares;
(iii) by a combination of cash and unrestricted Shares that are owned on
the date of exercise by the person entitled to exercise the Stock
Option; and
(iv) by another method permitted by law and affirmatively approved by the
Committee which assures full and immediate payment or satisfaction of
the Exercise Price, which may include broker assisted cashless
exercise.
The Committee may withhold its approval for any method of payment for any
reason, in its sole discretion, including but not limited to concerns that the
proposed method of payment will result in adverse financial accounting
treatment, adverse tax treatment for the Company or a participant or a violation
of any law applicable to the Company from time to time, and related regulations
and guidance.
If the Exercise Price of an NQSO is paid by tendering Restricted Shares,
then the Shares received upon the exercise will contain restrictions that are no
less restrictive then the Restricted Shares so tendered.
(e) Form. Unless the grant of a Stock Option is expressly designated at the
time of grant as an ISO, it is deemed to be an NQSO. ISOs are subject to the
additional terms and conditions in Article 6.
(f) Special Limitations on Stock Option Awards. Unless an Award Agreement
approved by the Committee provides otherwise, Stock Options awarded
under this Plan are intended to meet the requirements for exclusion
from coverage under Code Section 409A and applicable Treasury
regulations and all Stock Option Awards shall be construed and
administered accordingly.
5.3 Termination of Grants Prior to Expiration. Subject to Article 6 with
respect to ISOs, if the employment of an optionee with the Company or its
Affiliates terminates for any reason, all unexercised Stock Options may be
exercised only in accordance with rules established by the Committee or as
specified in the relevant agreement evidencing the Stock Options. Such rules may
provide, as the Committee deems appropriate, for the expiration, continuation
(but only to the
41
originally scheduled expiration date), or acceleration of the vesting of all or
part of the Stock Options.
ARTICLE 6
Special Rules Applicable to Incentive Stock Options
6.1 Eligibility. Notwithstanding any other provision of this Plan to the
contrary, an ISO may only be granted to full or part-time employees (including
officers) of the Company or of an Affiliate, provided that the Affiliate is a
Parent or Subsidiary.
6.2 Special ISO Rules.
(a) Term. No ISO may be exercisable on or after the tenth anniversary
of the Date of Grant, and no ISO may be granted under this Plan on or after the
tenth anniversary of the effective date of this Plan.
(b) Ten Percent Shareholder. No grantee may receive an ISO under this
Plan if such grantee, at the time the Award is granted, owns (after application
of the rules contained in Section 424(d) of the Code) equity securities
possessing more than 10% of the total combined voting power of all classes of
equity securities of the Company, its Parent or any Subsidiary, unless (i) the
option price for such ISO is at least 110% of the Fair Market Value of the
Shares as of the Date of Grant, and (ii) such ISO is not exercisable on or after
the fifth anniversary of the Date of Grant.
(c) Limitation on Grants. The aggregate Fair Market Value (determined
with respect to each ISO at the time of grant) of the Shares with respect to
which ISOs are exercisable for the first time by a grantee during any calendar
year (under this Plan or any other plan adopted by the Company or its Parent or
its Subsidiary) shall not exceed $100,000. Unless otherwise set forth in an
Award Agreement, if such aggregate Fair Market Value shall exceed $100,000, such
number of ISOs as shall have an aggregate Fair Market Value equal to the amount
in excess of $100,000 shall be treated as NQSOs.
(d) Non-Transferability. Notwithstanding any other provision herein to
the contrary, no ISO granted hereunder (and, if applicable, related Stock
Appreciation Right) may be transferred except by will or by the laws of descent
and distribution, nor may such ISO (or related Stock Appreciation Right) be
exercisable during a grantee's lifetime other than by him (or his guardian or
legal representative to the extent permitted by applicable law).
(e) Termination of Employment. No ISO may be exercised more than three
months following termination of employment for any reason (including retirement)
other than death or Disability, nor more than one year following termination of
employment for the reason of death or Disability (as defined in Section 422 of
the Code). If the Award Agreement for an ISO permits exercise after such date
such option will no longer qualify as an ISO and shall thereafter be, and
receive the tax treatment applicable to, an NQSO. For this purpose, a
termination of employment is cessation of employment such that no employment
relationship exists between the participant and the Company, a Parent or a
Subsidiary.
(f) Fair Market Value. For purposes of any ISO granted hereunder (or,
if applicable, related Stock Appreciation Right), the Fair Market Value of
Shares shall be determined in the manner required by Section 422 of the Code and
any Treasury regulations thereunder.
42
6.3 Subject to Code Amendments. The foregoing limitations are designed
to comply with the requirements of Section 422 of the Code and shall be
automatically amended or modified to comply with amendments or modifications to
Section 422 of the Code. Any ISO which fails to comply with Section 422 of the
Code is automatically treated as an NQSO appropriately granted under this Plan
provided it otherwise meets the Plan's requirements for NQSOs.
ARTICLE 7
Stock Appreciation Rights
7.1 SAR Grant and Agreement. Stock Appreciation Rights (including SOSARs
with the meaning set forth below) may be granted under this Plan and each SAR
granted under this Plan will be evidenced by minutes of a meeting, or by a
unanimous written consent without a meeting, of the Committee and by an Award
Agreement dated as of the Date of Grant and executed by the Company and by the
appropriate participant.
(a) Term. Any unexercised portion of a Stock Appreciation Right
granted hereunder shall expire at the end of the stated term of the Stock
Appreciation Right. The Committee shall determine the term of each Stock
Appreciation Right at the time of grant, which term shall not exceed ten years
from the Date of Grant. The Committee may extend the term of a Stock
Appreciation Right, in its discretion, but not beyond the date immediately prior
to the tenth anniversary of the original Date of Grant. If a definite term is
not specified by the Committee at the time of grant, then the term is deemed to
be ten years.
(b) Vesting. A Stock Appreciation Right is exercisable, in whole or in
part, at such time or times as determined by the Committee at or after the time
of grant. Unless otherwise determined by the Committee in connection with the
grant and set forth in the Award Agreement, all unvested Stock Appreciation
Rights shall immediately vest upon the Death or Disability of the holder.
(c) Exercise Price. Subject to Section 3.4, the Exercise Price of a
Stock Appreciation Right will never be less than 100% of the Fair Market Value
of the related Shares on the Date of Grant. If a variable Exercise Price is
specified at the time of grant, the Exercise Price may vary pursuant to a
formula or other method established by the Committee; provided, however, that
such formula or method will provide for a minimum Exercise Price equal to the
Fair Market Value of the Shares on the Date of Grant. Except as otherwise
provided in Section 3.4, no subsequent amendment of an outstanding Stock
Appreciation Right may reduce the Exercise Price to less than 100% of the Fair
Market Value of the Shares on the Date of Grant. Nothing in this Section 7.3(c)
shall be construed as limiting the Committee's authority to grant premium price
Stock Appreciation Rights which do not become exercisable until the Fair Market
Value of the related Shares exceeds a specified percentage (e.g., 110%) of the
Exercise Price; provided, however, that such percentage will never be less than
100%.
(d) Method of Exercise. A Stock Appreciation Right may be exercised in
whole or in part during the term by giving written notice of exercise to the
Company specifying the number of Shares in respect of which the Stock
Appreciation Right is being exercised. The notice must be given by or on behalf
of a person entitled to exercise the Stock Appreciation Right. Upon the exercise
of a Stock Appreciation Right, subject to satisfaction of the tax withholding
requirements pursuant to Article 15, the holder of the Stock Appreciation Right
is entitled to receive Shares or cash as specified in the original Award
Agreement (as set forth below) equal in value to the excess of the Fair Market
Value of a Share on the exercise date over the Exercise Price of the SAR
multiplied by the number of Stock Appreciation Rights being exercised. At any
time the Fair Market
43
Value of a Share on a proposed exercise date does not exceed the Exercise Price
of the SAR, the holder of the Stock Appreciation Right shall not be permitted to
exercise such right.
(i) Stock Appreciation Right designated as a Stock Only Stock Appreciation
Right ("SOSAR") in the original Award Agreement. With respect to an
Award designated by the Company in the original Award Agreement as a
SOSAR, the holder shall be entitled to receive only Shares of the
Company upon exercise.
(ii) All Other Stock Appreciation Rights. With respect to all other Awards
the holder shall be entitled to the cash or other property set forth
in the Award Agreement.
(e) Early Termination Prior to Expiration. If the employment of an
optionee with the Company or its Affiliates terminates for any reason, all
unexercised Stock Appreciation Rights may be exercised only in accordance with
rules established by the Committee or as specified in the relevant agreement
evidencing such Stock Appreciation Rights. Such rules may provide, as the
Committee deems appropriate, for the expiration, continuation (but only to the
originally scheduled expiration date), or acceleration of the vesting of all or
part of such Stock Appreciation Rights.
7.2 Other Terms and Conditions of SAR Grants. Stock Appreciation Rights are
subject to such other terms and conditions, not inconsistent with the provisions
of this Plan, as are determined from time to time by the Committee.
7.3 Special Limitations on SAR Awards. Unless an Award Agreement approved
by the Committee provides otherwise, Stock Appreciation Rights awarded under
this Plan are intended to meet the requirements for exclusion from coverage
under Code Section 409A and applicable Treasury regulations and all Stock
Appreciation Rights Awards shall be construed and administered accordingly.
ARTICLE 8
Restricted Share and Restricted Share Unit Awards
8.1 Restricted Share Grants and Agreements. Restricted Share Awards consist
of Shares which are issued by the Company to a participant at no cost or at a
purchase price determined by the Committee which may be below their Fair Market
Value but which are subject to forfeiture and restrictions on their sale or
other transfer by the participant. Each Restricted Share Award granted under
this Plan will be evidenced by minutes of a meeting, or by a unanimous written
consent without a meeting, of the Committee and by an Award Agreement dated as
of the Date of Grant and executed by the Company and by the participant. The
timing of Restricted Share Awards and the number of Shares to be issued (subject
to Section 3.2) are to be determined by the Committee in its discretion. By
accepting a grant of Restricted Shares, the participant consents to any tax
withholding as provided in Article 15.
8.2 Terms and Conditions of Restricted Share Grants. Restricted Shares
granted under this Plan are subject to the following terms and conditions,
which, except as otherwise provided herein, need not be the same for each
participant, and may contain such additional terms, conditions, restrictions and
contingencies not inconsistent with the terms of this Plan and any operative
employment or other agreement, as the Committee deems desirable:
(a) Purchase Price. The Committee shall determine the prices, if any,
at which Restricted Shares are to be issued to a participant, which may vary
from time to time and from participant to
44
participant and which may be below the Fair Market Value of such Restricted
Shares at the Date of Grant.
(b) Restrictions. All Restricted Shares issued under this Plan will be
subject to such restrictions as the Committee may determine, which may include,
without limitation, the following:
(i) a prohibition against the sale, transfer, pledge or other
encumbrance of the Restricted Shares, such prohibition to lapse
at such time or times as the Committee determines (whether in
installments or otherwise, but subject to the Change in Control
provisions in Article 11);
(ii) a requirement that the participant forfeit such Restricted Shares
in the event of termination of the participant's employment with
the Company or its Affiliates prior to Vesting;
(iii) a prohibition against employment or retention of the participant
by any competitor of the Company or its Affiliates, or against
dissemination by the participant of any secret or confidential
information belonging to the Company or an Affiliate;
(iv) any applicable requirements arising under the Securities Act of
1933, as amended, other securities laws, the rules and
regulations of The Nasdaq Stock Market or any other stock
exchange or transaction reporting system upon which such
Restricted Shares are then listed or quoted and any state laws,
rules and regulations, including "blue sky" laws;
(v) such additional restrictions as are required to avoid adverse tax
consequences under Code Section 409A; and
(vi) delivery of a valid election under Code Section 83(b).
The Committee may at any time waive such restrictions or accelerate the date or
dates on which the restrictions will lapse.
(c) Performance-Based Restrictions. The Committee may, in its sole
discretion, provide restrictions that lapse upon the attainment of specified
performance objectives. In such case, the provisions of Sections 9.2 and 9.3
will apply (including, but not limited to, the enumerated performance
objectives). If the Award Agreement governing an Award to a Section 162(m)
Person provides that such Award is intended to be "performance-based
compensation," the provisions of Section 9.4(d) will also apply.
(d) Delivery of Shares. Restricted Shares will be registered in the
name of the participant and the stock certificate deposited, together with a
Stock Power, with the Company or its designated officer or escrow agent. Each
such certificate will bear a legend in substantially the following form:
"The transferability of this certificate and the Common Shares represented
by it are subject to the terms and conditions (including conditions of
forfeiture) contained in the United Bancorp, Inc. 2008 Stock Incentive Plan
and an agreement entered into between the registered owner and the Company.
A copy of this Plan and agreement are on file in the office of the
Secretary of the Company."
45
At the end of any time period during which the Restricted Shares are subject to
forfeiture and restrictions on transfer, and after any tax withholding, such
Shares will be delivered free of all restrictions (except for any pursuant to
Article 14) to the participant or other appropriate person and with the
foregoing legend removed from the stock certificate.
(e) Forfeiture of Shares. If a participant who holds Restricted Shares
fails to satisfy the restrictions, vesting requirements and other conditions
relating to the Restricted Shares prior to the lapse, satisfaction or waiver of
such restrictions and conditions, except as may otherwise be determined by the
Committee, the participant shall forfeit the Shares and transfer them back to
the Company in exchange for a refund of any consideration paid by the
participant or such other amount which may be specifically set forth in the
Award Agreement. A participant shall execute and deliver to the Company one or
more Stock Powers with respect to Restricted Shares granted to such participant.
(f) Voting and Other Rights. Except as otherwise required for
compliance with Section 162(m) of the Code and the terms of the applicable
Restricted Share Agreement, during any period in which Restricted Shares are
subject to forfeiture and restrictions on transfer, the participant holding such
Restricted Shares shall have all the rights of a Shareholder with respect to
such Shares, including, without limitation, the right to vote such Shares and
the right to receive any dividends paid with respect to such Shares.
8.3 Restricted Share Unit Awards and Agreements. Restricted Share Unit
Awards consist of Shares that will be issued to a participant at a future time
or times at no cost, or at a purchase price determined by the Committee which
purchase price may be below their Fair Market Value if continued employment
and/or other terms and conditions specified by the Committee are satisfied. Each
Restricted Share Unit Award granted under this Plan will be evidenced by minutes
of a meeting, or by a unanimous written consent without a meeting, of the
Committee and by an Award Agreement dated as of the Date of Grant and executed
by the Company and the Plan participant. The timing of Restricted Share Unit
Awards and the number of Restricted Share Units to be awarded (subject to
Section 3.2) are to be determined by the Committee in its sole discretion. By
accepting a Restricted Share Unit Award, the participant agrees to remit to the
Company when due any tax withholding as provided in Article 15.
8.4 Terms and Conditions of Restricted Share Unit Awards. Restricted Share
Unit Awards are subject to the following terms and conditions, which, except as
otherwise provided herein, need not be the same for each participant, and may
contain such additional terms, conditions, restrictions and contingencies not
inconsistent with the terms of this Plan and any operative employment or other
agreement, as the Committee deems desirable:
(a) Purchase Price. The Committee shall determine the prices, if any,
at which Shares are to be issued to a participant after Vesting of Restricted
Share Units, which may vary from time to time and among participants and which
may be below the Fair Market Value of Shares at the Date of Grant.
(b) Restrictions. All Restricted Share Units awarded under this Plan
will be subject to such restrictions as the Committee may determine, which may
include, without limitation, the following:
(i) a prohibition against the sale, transfer, pledge or other
encumbrance of the Restricted Share Unit;
46
(ii) a requirement that the participant forfeit such Restricted Share
Unit in the event of termination of the participant's employment
with the Company or its Affiliates prior to Vesting;
(iii) a prohibition against employment of the participant by, or
provision of services by the participant to, any competitor of
the Company or its Affiliates, or against dissemination by the
participant of any secret or confidential information belonging
to the Company or an Affiliate;
(iv) any applicable requirements arising under the Securities Act of
1933, as amended, other securities laws, the rules and
regulations of The Nasdaq Stock Market or any other stock
exchange or transaction reporting system upon which the Common
Shares are then listed or quoted and any state laws, rules and
interpretations, including "blue sky" laws; and
(v) such additional restrictions as are required to avoid adverse tax
consequences under Code Section 409A.
The Committee may at any time waive such restrictions or accelerate the date or
dates on which the restrictions will lapse.
(d) Performance-Based Restrictions. The Committee may, in its sole
discretion, provide restrictions that lapse upon the attainment of specified
performance objectives. In such case, the provisions of Sections 9.2 and 9.3
will apply (including, but not limited to, the enumerated performance
objectives). If the Award Agreement governing an Award to a Section 162(m)
Person provides that such Award is intended to be "performance-based
compensation," the provisions of Section 9.4(d) will also apply.
(e) Voting and Other Rights. A participant holding Restricted Share
Units shall not be deemed to be a Shareholder solely because of such units. Such
participant shall have no rights of a Shareholder with respect to such units;
provided, however, that an Award Agreement may provide for payment of an amount
of money (or Shares with a Fair Market Value equivalent to such amount) equal to
the dividends paid from time to time on the number of Common Shares that would
become payable upon vesting of a Restricted Share Unit Award.
(f) Lapse of Restrictions. If a participant who holds Restricted Share
Units satisfies the restrictions and other conditions relating to the Restricted
Share Units prior to the lapse or waiver of such restrictions and conditions,
the Restricted Share Units shall be converted to, or replaced with, Shares which
are free of all restrictions except for any restrictions pursuant to Article 14.
(g) Forfeiture of Restricted Share Units. If a participant who holds
Restricted Share Units fails to satisfy the restrictions, Vesting requirements
and other conditions relating to the Restricted Share Units (prior to the lapse,
satisfaction or waiver of such restrictions and conditions), except as may
otherwise be determined by the Committee, the participant shall forfeit the
Restricted Share Units.
(h) Termination. A Restricted Share Unit Award or unearned portion
thereof will terminate without the issuance of Shares on the termination date
specified on the Date of Grant or upon the termination of employment of the
participant during the time period or periods specified by the Committee during
which any performance objectives must be met (the "Performance Period"). If a
participant's employment with the Company or its Affiliates terminates by reason
of his or her
47
death, disability or retirement, the Committee in its discretion at or after the
Date of Grant may determine that the participant (or the heir, legatee or legal
representative of the participant's estate) will receive a distribution of
Shares in an amount which is not more than the number of Shares which would have
been earned by the participant if 100% of the performance objectives for the
current Performance Period had been achieved prorated based on the ratio of the
number of months of active employment in the Performance Period to the total
number of months in the Performance Period. However, with respect to Awards
intended to be performance-based compensation (as described in Section 9.4(d)),
distribution of the Shares shall not be made prior to attainment of the relevant
performance objectives.
(i) Special Limitations on Restricted Share Unit Awards. Unless an
Award Agreement approved by the Committee provides otherwise, Restricted Share
Units awarded under this Plan are intended to meet the requirements for
exclusion from coverage under Code Section 409A and all Restricted Share Unit
Awards shall be construed and administered accordingly.
8.5 Time Vesting of Restricted Share and Restricted Share Unit Awards.
Restricted Shares or Restricted Share Units, or portions thereof, are
exercisable at such time or times as determined by the Committee in its
discretion at or after grant, subject to the restrictions on time Vesting set
forth in this Section. If the Committee provides that any Restricted Shares or
Restricted Share Unit Awards become Vested over time (with or without a
performance component), the Committee may waive or accelerate such Vesting
provisions at any time, subject to the restrictions on time Vesting set forth in
this Section. Unless otherwise determined by the Committee in connection with
the grant and set forth in the Award Agreement, all unvested Restricted Share
and Restricted Share Unit Awards shall immediately Vest with respect to any
required time vesting upon the Death or Disability of the holder.
8.6 Special Limitations on Restricted Share and Restricted Stock Unit
Awards. Unless an Award Agreement approved by the Committee provides otherwise,
Restricted Share and Restricted Stock Units awarded under this Plan are intended
to meet the requirements for exclusion from coverage under Code Section 409A and
applicable Treasury regulations and all Awards shall be construed and
administered accordingly.
ARTICLE 9
Performance Share Awards
9.1 Performance Share Awards and Agreements. A Performance Share Award is a
right to receive Shares in the future conditioned upon the attainment of
specified performance objectives and such other conditions, restrictions and
contingencies as the Committee may determine. Each Performance Share Award
granted under this Plan will be evidenced by minutes of a meeting, or by a
unanimous written consent without a meeting, of the Committee and by an Award
Agreement dated as of the Date of Grant and executed by the Company and by the
Plan participant. The timing of Performance Share Awards and the number of
Shares covered by each Award (subject to Section 3.2) are to be determined by
the Committee in its discretion. By accepting a grant of Performance Shares, the
participant agrees to remit to the Company when due any tax withholding as
provided in Article 15.
9.2 Performance Objectives. At the time of grant of a Performance Share
Award, the Committee will specify the performance objectives which, depending on
the extent to which they are met, will determine the number of Shares that will
be distributed to the participant. The Committee will also specify the time
period or periods (the "Performance Period") during which
48
the performance objectives must be met. With respect to awards to Section 162(m)
Persons intended to be "performance based compensation," the Committee may use
performance objectives based on one or more of the following: earnings per
share, total revenue, net interest income, non-interest income, net income, net
income before tax, non-interest expense, efficiency ratio, return on equity,
return on assets, economic profit added, loans, deposits, tangible equity,
assets, net charge-offs, new market growth, product line developments, and
nonperforming assets. The Committee may designate a single goal criterion or
multiple goal criteria for performance measurement purposes. Performance
measurement may be described in terms of objectives that are related to the
performance by the Company, by any Subsidiary, or by any employee or group of
employees in connection with services performed by that employee or those
employees for the Company, a Subsidiary, or one or more subunits of the Company
or of any Subsidiary. The performance objectives may be made relative to the
performance of other companies. The performance objectives and periods need not
be the same for each participant nor for each Award.
9.3 Adjustment of Performance Objectives. The Committee may modify, amend
or otherwise adjust the performance objectives specified for outstanding
Performance Share Awards if it determines that an adjustment would be consistent
with the objectives of this Plan and taking into account the interests of the
participants and the public Shareholders of the Company and such adjustment
complies with the requirements of Section 162(m) of the Code for Section 162(m)
Persons, to the extent applicable, unless the Committee indicates a contrary
intention. The types of events which could cause an adjustment in the
performance objectives include, without limitation, accounting changes which
substantially affect the determination of performance objectives, changes in
applicable laws or regulations which affect the performance objectives, and
divisive corporate reorganizations, including spin-offs and other distributions
of property or stock.
9.4 Other Terms and Conditions. Performance Share Awards granted under this
Plan are subject to the following terms and conditions and may contain such
additional terms, conditions, restrictions and contingencies not inconsistent
with the terms of this Plan and any operative employment or other agreement as
the Committee deems desirable:
(a) Delivery of Shares. As soon as practicable after the applicable
Performance Period has ended, the participant will receive a distribution of the
number of Shares earned during the Performance Period, depending upon the extent
to which the applicable performance objectives were achieved. Such Shares will
be registered in the name of the participant and will be free of all
restrictions except for any restrictions pursuant to Article 14. Notwithstanding
the forgoing, the distribution of Shares provided for herein shall occur not
later than two and one-half months following the end of the calendar year in
which the Performance Period has ended.
(b) Termination. A Performance Share Award or unearned portion thereof
will terminate without the issuance of Shares on the termination date specified
at the time of grant or upon the termination of employment of the participant
during the Performance Period. If a participant's employment with the Company or
its Affiliates terminates by reason of his or her death, disability or
retirement (except with respect to Section 162(m) Persons), the Committee in its
discretion at or after the time of grant may determine, notwithstanding any
Vesting requirements, that the participant (or the heir, legatee or legal
representative of the participant's estate) will receive a distribution of a
portion of the participant's then-outstanding Performance Share Awards in an
amount which is not more than the number of shares which would have been earned
by the participant if 100% of the performance objectives for the current
Performance Period had been achieved prorated based on the ratio of the number
of months of active employment in the Performance Period to the total number of
months in the Performance Period. However, with respect to Awards intended to be
"performance-based compensation" (as described in Section
49
9.4(d)), distribution of the Shares shall not be made prior to attainment of the
relevant performance objective.
(c) Voting and Other Rights. Awards of Performance Shares do not
provide the participant with voting rights or rights to dividends prior to the
participant becoming the holder of record of Shares issued pursuant to an Award;
provided, however, that an Award Agreement may provide for payment of an amount
of money (or Shares with a Fair Market Value equivalent to such amount) equal to
the dividends paid from time to time on the number of Common Shares that would
become payable upon vesting of a Performance Share Award. Prior to the issuance
of Shares, Performance Share Awards may not be sold, transferred, pledged,
assigned or otherwise encumbered.
(d) Performance-Based Compensation. The Committee may designate
Performance Share Awards as being "remuneration payable solely on account of the
attainment of one or more performance goals" as described in Section 162(m)
(4)(C) of the Code. Such Awards shall be automatically amended or modified to
comply with amendments to Section 162 of the Code to the extent applicable,
unless the Committee indicates a contrary intention.
9.5 Time Vesting of Performance Share Awards. Performance Share Awards, or
portions thereof, are exercisable at such time or times as determined by the
Committee in its discretion at or after grant which may include time Vesting. If
the Committee provides that any Performance Shares become Vested over time
(accelerated by a performance component), the Committee may waive or accelerate
any performance Vesting provisions in favor of time Vesting provisions as
provided for herein. Unless otherwise determined by the Committee in connection
with the grant and set forth in the Award Agreement, all unvested Performance
Share Awards shall immediately vest with respect to any required time vesting
upon the Death or Disability of the holder.
9.6 Special Limitations on Performance Share Awards. Unless an Award
Agreement approved by the Committee provides otherwise, Performance Shares
awarded under this Plan are intended to meet the requirements for exclusion from
coverage under Code Section 409A and all Performance Share Awards shall be
construed and administered accordingly.
ARTICLE 10
Transfers and Leaves of Absence
10.1 Transfer of Participant. For purposes of this Plan, the transfer of a
participant among the Company and its Affiliates is deemed not to be a
termination of employment.
10.2 Effect of Leaves of Absence. For purposes of this Plan, the following
leaves of absence are deemed not to be a termination of employment:
(a) a leave of absence, approved in writing by the Company, for
military service, sickness or any other purpose approved by the Company, if the
period of such leave does not exceed 90 days;
(b) a leave of absence in excess of 90 days, approved in writing by
the Company, but only if the employee's right to reemployment is guaranteed
either by a statute or by contract, and provided that, in the case of any such
leave of absence, the employee returns to work within 30 days after the end of
such leave; and
50
(c) any other absence determined by the Committee in its discretion
not to constitute a termination of employment.
ARTICLE 11
Effect of Change in Control
11.1 Change in Control Defined. "Change in Control" shall mean a "Change in
Ownership" as defined in (a) hereof; a "Change in Effective Control" as defined
in (b), hereof; or a "Change in Ownership of a Substantial Portion of Assets" as
defined in (c) hereof.
(a) Change in Ownership. For purposes of this Agreement, a change in
the ownership of the Company occurs on the date that any one person, or more
than one person acting as a group (as defined in subsection (d) hereof),
acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of the Company. However, if any one
person, or more than one person acting as a group, is considered to own more
than 50 percent of the total fair market value or total voting power of the
stock of the Company, the acquisition of additional stock by the same person or
persons is not considered to cause a change in the ownership of the Company (or
to cause a change in the effective control of the Company within the meaning of
subsection (b) hereof). An increase in the percentage of stock owned by any one
person, or persons acting as a group, as a result of a transaction in which the
Company acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this section.
(b) Change in the Effective Control. For purposes of this Agreement, a
change in the effective control of the Company occurs on the date that either -
(i) Any one person, or more than one person acting as a group
(as determined under subsection (d) hereof), acquires (or
has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons)
ownership of stock of the Company possessing 35 percent or
more of the total voting power of the stock of the Company;
or
(ii) a majority of members of the Company's board of directors is
replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the
members of the Company's board of directors prior to the
date of the appointment or election.
In the absence of an event described in subsection (b)(i) or (ii) above, a
change in the effective control of a Company will not have occurred.
(c) Change in the Ownership of a Substantial Portion of the Company's
Assets. For purposes of this Agreement, a change in the ownership of a
substantial portion of the Company's assets occurs on the date that any one
person, or more than one person acting as a group (as determined in subsection
(d) hereof), acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more than 40
percent of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions. For this purpose, gross
fair market value means the value of the assets of the Company, or the value of
the assets being disposed of, determined without regard to any liabilities
associated with such assets.
51
There is no Change in Control Event under this subsection (c) when there is
a transfer to an entity that is controlled by the shareholders of the Company
immediately after the transfer, as provided in this paragraph. A transfer of
assets by the Company is not treated as a change in the ownership of such assets
if the assets are transferred to --
(i) A shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to its stock;
(ii) An entity, 50 percent or more of the total value or voting power
of which is owned, directly or indirectly, by the Company;
(iii) A person, or more than one person acting as a group, that owns,
directly or indirectly, 50 percent or more of the total value or
voting power of all the outstanding stock of the Company; or
(iv) An entity, at least 50 percent of the total value or voting power
of which is owned, directly or indirectly, by a person described
in section (iii) above.
For purposes of this subsection (c) and except as otherwise provided, a person's
status is determined immediately after the transfer of the assets. For example,
a transfer to a corporation in which the transferor corporation has no ownership
interest before the transaction, but which is a majority-owned subsidiary of the
transferor corporation after the transaction is not treated as a change in the
ownership of the assets of the transferor corporation.
(d) Persons Acting as a Group. Persons will not be considered to be
acting as a group solely because they purchase assets or purchase or own stock
of the same corporation at the same time, or as a result of the same public
offering. However, persons will be considered to be acting as a group if they
are owners of a corporation that enters into a merger, consolidation, purchase
or acquisition of stock, purchase or acquisition of assets, or similar business
transaction with the Company. If a person, including an entity shareholder, owns
stock in both corporations that enter into a merger, consolidation, purchase or
acquisition of stock, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only to the extent
of the ownership in that corporation prior to the transaction giving rise to the
change and not with the ownership interest in the other corporation.
11.2 Effect of Change in Control. Unless otherwise determined by the
Committee in connection with the grant and set forth in the Award Agreement, in
the event of a Change in Control of the Company:
(a) all Stock Options or SARs, notwithstanding any limitations set forth in
the Plan or Award Agreement shall become fully Vested;
(b) all Restricted Shares, notwithstanding any limitations set forth in the
Plan or Award Agreement shall become fully Vested; and
(c) all Restricted Share Units and Performance Shares, notwithstanding any
limitations set forth in the Plan or Award Agreement shall become fully Vested.
In addition, in connection with a Change in Control the Committee shall have the
right, in its sole discretion, to:
(d) cancel any or all outstanding Stock Options, SARs, Restricted Share
Units and Performance Shares in exchange for the kind and amount of shares of
the surviving or new corporation, cash, securities, evidences of indebtedness,
other property or any combination thereof
52
receivable in respect of one Share upon consummation of the transaction in
question (the "Acquisition Consideration") that the holder of the Stock Option,
SAR, Restricted Share Unit or Performance Share would have received had the
Stock Option, SAR, Restricted Share Unit or Performance Share been exercised or
converted into Shares, as applicable, prior to such transaction, less the
applicable exercise or purchase price therefor;
(e) cause the holders of any or all Stock Options, SARs, Restricted Share
Units and Performance Shares to have the right thereafter and during the term of
the Stock Option, SAR, Restricted Share Unit or Performance Share to receive
upon exercise thereof the Acquisition Consideration receivable upon the
consummation of such transaction by a holder of the number of Common Shares
which might have been obtained upon exercise or conversion of all or any portion
thereof, less the applicable exercise or purchase price therefor, or to convert
such Stock Option, SAR, Restricted Share Unit or Performance Share into a stock
option, appreciation right, restricted share unit or performance share relating
to the surviving or new corporation in the transaction; or
(f) take such other action as it deems appropriate to preserve the value of
the Award to the Participant, including the cancellation of such Award and the
payment of the value of the Acquisition Consideration attributable to the Award,
net of payments due from the holder thereof upon exercise if any, in cash.
The Committee may provide for any of the foregoing in an Award Agreement
governing an Award in advance, may provide for any of the foregoing in
connection with a Change in Control, or do both. Alternatively, the Committee
shall also have the right to require any purchaser of the Company's assets or
stock, as the case may be, to take any of the actions set forth in the preceding
sentence.
The manner of application and interpretation of the foregoing provisions of
this Section 11.2 shall be determined by the Committee in its sole and absolute
discretion.
11.3 Code Section 409A. Unless an Award Agreement approved by the Committee
provides otherwise, each Award granted under this Plan is intended to meet the
requirements for exclusion from coverage under Code Section 409A. If the
Committee provides than an Award shall be subject to Code Section 409A, then,
notwithstanding the other provisions of this Article 11, the Committee may
provide in the Award Agreement for such changes to the definition of Change in
Control from the definition set forth in this Article 11, and for such changes
to the Committee's rights upon a Change in Control, as the Committee may deem
necessary in order for such Award to comply with Code Section 409A.
ARTICLE 12
Transferability of Awards
12.1 Awards Are Non-Transferable. Except as provided in Sections 12.2 and
12.3, Awards are non-transferable and any attempts to assign, pledge,
hypothecate or otherwise alienate or encumber (whether by operation of law or
otherwise) any Award shall be null and void.
12.2 Inter-Vivos Exercise of Awards. During a participant's lifetime,
Awards are exercisable only by the participant or, as permitted by applicable
law and notwithstanding Section 12.1 to the contrary, the participant's guardian
or other legal representative.
12.3 Limited Transferability of Certain Awards. Notwithstanding Section
12.1 to the contrary,
53
Awards may be transferred by will and by the laws of descent and distribution.
Moreover, the Committee, in its discretion, may allow at or after the time of
grant the transferability of Awards which are Vested, provided that the
permitted transfer is made (a) if the Award is an Incentive Stock Option, the
transfer is consistent with Section 422 of the Code; (b) to the Company (for
example in the case of forfeiture of Restricted Shares), an Affiliate or a
person acting as the agent of the foregoing or which is otherwise determined by
the Committee to be in the interests of the Company; or (c) by the participant
for no consideration to Immediate Family Members or to a bona fide trust,
partnership or other entity controlled by and for the benefit of one or more
Immediate Family Members. "Immediate Family Members" means the participant's
spouse, children, stepchildren, parents, stepparents, siblings (including half
brothers and sisters), in-laws and other individuals who have a relationship to
the participant arising because of a legal adoption. No transfer may be made to
the extent that transferability would cause Form S-8 or any successor form
thereto not to be available to register Shares related to an Award. The
Committee in its discretion may impose additional terms and conditions upon
transferability.
ARTICLE 13
Amendment and Discontinuation
13.1 Amendment or Discontinuation of this Plan. The Board of Directors may
amend, alter, or discontinue this Plan at any time, provided that no amendment,
alteration, or discontinuance may be made:
(a) which would materially and adversely affect the rights of a
participant under any Award granted prior to the date such action is adopted by
the Board of Directors without the participant's written consent thereto; and
(b) without shareholder approval, if shareholder approval is required
under applicable laws, regulations or exchange requirements (including Section
422 of the Code with respect to ISOs, and for the purpose of qualification as
"performance-based compensation" under Section 162(m) of the Code).
Notwithstanding the foregoing, this Plan may be amended without
participants' consent to: (i) comply with any law; (ii) preserve any intended
favorable tax effects for the Company, the Plan or participants; or (iii) avoid
any unintended unfavorable tax effects for the Company, the Plan or
participants.
13.2 Amendment of Grants. The Committee may amend, prospectively or
retroactively, the terms of any outstanding Award, provided that no such
amendment may be inconsistent with the terms of this Plan (specifically
including the prohibition on granting Stock Options or SARs with an Exercise
Price less than 100% of the Fair Market Value of the Common Shares on the Date
of Grant) or would materially and adversely affect the rights of any holder
without his or her written consent.
ARTICLE 14
Issuance of Shares and Share Certificates
14.1 Issuance of Shares. The Company will issue or cause to be issued
Shares as soon as practicable upon exercise or conversion of an Award that is
payable in Shares. No certificates for Shares will be issued until full payment
has been made, to the extent payment is required. Until the
54
issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder will exist with respect to the Shares, notwithstanding
the exercise or conversion of the Award payable in shares.
14.2 Delivery of Share Certificates. The Company is not required to issue
or deliver any certificates for Shares issuable with respect to Awards under
this Plan prior to the fulfillment of all of the following conditions:
(a) payment in full for the Shares and for any tax withholding (See
Article 15);
(b) completion of any registration or other qualification of such
Shares under any Federal or state laws or under the rulings or
regulations of the Securities and Exchange Commission or any
other regulating body which the Committee in its discretion deems
necessary or advisable;
(c) admission of such Shares to listing on The Nasdaq Stock Market or
any stock exchange on which the Shares are listed;
(d) in the event the Shares are not registered under the Securities
Act of 1933, qualification as a private placement under said Act;
(e) obtaining of any approval or other clearance from any Federal or
state governmental agency which the Committee in its discretion
determines to be necessary or advisable; and
(f) the Committee is fully satisfied that the issuance and delivery
of Shares under this Plan is in compliance with applicable
Federal, state or local law, rule, regulation or ordinance or any
rule or regulation of any other regulating body, for which the
Committee may seek approval of counsel for the Company.
14.3 Applicable Restrictions on Shares. Shares issued with respect to
Awards may be subject to such stock transfer orders and other restrictions as
the Committee may determine necessary or advisable under any applicable Federal
or state securities law rules, regulations and other requirements, the rules,
regulations and other requirements of The Nasdaq Stock Market or any stock
exchange upon which the Shares are then-listed, and any other applicable Federal
or state law and will include any restrictive legends on stock certificates that
the Committee may deem appropriate to include.
14.4 Book Entry. In lieu of the issuance of stock certificates evidencing
Shares, the Company may use a "book entry" system in which a computerized or
manual entry is made in the records of the Company to evidence the issuance of
such Shares. Such Company records are, absent manifest error, binding on all
parties.
ARTICLE 15
Satisfaction of Tax Liabilities
15.1 In General. The Company shall withhold any taxes which the Committee
determines the Company is required by law or required by the terms of this Plan
to withhold in connection with any payments incident to this Plan. The
participant or other recipient shall provide the Committee with such additional
information or documentation as may be necessary for the Company to
55
discharge its obligations under this Section. The Company may withhold: (a)
cash, (b) subject to any limitations under Rule 16b-3, Common Shares to be
issued, or (c) any combination thereof, in an amount equal to the amount which
the Committee determines is necessary to satisfy the obligation of the Company,
a Subsidiary or a Parent to withhold federal, state and local income taxes or
other amounts incurred by reason of the grant or exercise of an Award, its
disposition, or the disposition of the underlying Common Shares. Alternatively,
the Company may require the holder to pay to the Company such amounts, in cash,
promptly upon demand.
15.2 Withholding from Share Distributions. With respect to a distribution
in Shares pursuant to Restricted Share, Restricted Share Unit or Performance
Share Award under the Plan, the Committee may cause the Company to sell the
fewest number of such Shares for the proceeds of such sale to equal (or exceed
by not more than that actual sale price of a single Share) the Company's
required tax withholding relating to such distribution. The Committee may
withhold the proceeds of such sale for purposes of satisfying such tax
withholding obligation.
15.3 Section 83(b) Election. The Committee may, where applicable, provide
in an Award Agreement the right of the participant to make an election pursuant
to Section 83(b) of the Code, or comparable provisions of any state tax law, to
include in the participant's gross income the fair market value as of the Award
as of the Date of Grant. The participant may make such an election only if,
prior to making any such election, the participant (a) notifies the Company of
participant's intention to make such election in accordance with any notice
requirements set forth in the Award Agreement, and (b) pays to the Company an
amount sufficient to satisfy any taxes or other amounts required by any
governmental authority to be withheld or paid over to such authority for
participant's account, or otherwise makes arrangements satisfactory to the
Company for the payment of such amounts through withholding or otherwise.
ARTICLE 16
General Provisions
16.1 No Implied Rights to Awards or Employment. No potential participant
has any claim or right to be granted an Award under this Plan, and there is no
obligation of uniformity of treatment of participants under this Plan. Neither
this Plan nor any Award thereunder shall be construed as giving any individual
any right to continued employment with the Company or any Affiliate. The Plan
does not constitute a contract of employment, and the Company and each Affiliate
expressly reserve the right at any time to terminate employees free from
liability, or any claim, under this Plan, except as may be specifically provided
in this Plan or in an Award Agreement.
16.2 Other Compensation Plans. Nothing contained in this Plan prevents the
Board of Directors from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required, and such
arrangements may be either generally applicable or applicable only in specific
cases.
16.3 Rule 16b-3 Compliance. The Plan is intended to comply with all
applicable conditions of Rule 16b-3 of the Exchange Act, as such rule may be
amended from time to time ("Rule 16b-3"). All transactions involving any
participant subject to Section 16(a) of the Exchange Act shall be subject to the
conditions set forth in Rule 16b-3, regardless of whether such conditions are
expressly set forth in this Plan. Any provision of this Plan that is contrary to
Rule 16b-3 does not apply to such participants.
16.4 Code Section 162(m) Compliance. The Plan is intended to comply with
all applicable
56
requirements of Section 162(m) of the Code with respect to "performance-based
compensation" for Section 162(m) Persons. Unless the Committee expressly
determines otherwise, any provision of this Plan that is contrary to such
requirements does not apply to such "performance-based compensation."
16.5 Successors. All obligations of the Company with respect to Awards
granted under this Plan are binding on any successor to the Company, whether as
a result of a direct or indirect purchase, merger, consolidation or otherwise of
all or substantially all of the business and/or assets of the Company.
16.6 Severability. In the event any provision of this Plan, or the
application thereof to any person or circumstances, is held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of this Plan, or other applications, and this Plan is to be construed and
enforced as if the illegal or invalid provision had not been included.
16.7 Governing Law. To the extent not preempted by Federal law, this Plan
and all Award Agreements pursuant thereto are construed in accordance with and
governed by the laws of the State of Ohio. This Plan is not intended to be
governed by the Employee Retirement Income Security Act and shall be so
construed and administered.
16.8 Legal Requirements. No Awards shall be granted and the Company shall
have no obligation to make any payment under the Plan, whether in Shares, cash,
or a combination thereof, unless such payment is, without further action by the
Committee, in compliance with all applicable Federal and state laws and
regulations, including, without limitation, the Code and Federal and state
securities laws.
16.9 Forfeiture by Employees in Connection with Termination for Cause.
Notwithstanding any other provision of this Plan, subject to the provisions of
the Award Agreement to which such Award relates, upon the termination of
employment of an employee Participant for Cause such employee Participant shall
forfeit all benefits associated with any Award as provided for herein. Pursuant
to this provision, an employee shall forfeit all unexercised Options whether or
not previously vested, all unexercised SARs whether or not previously vested and
all Restricted Shares, Restricted Share Units and Performance Shares for which
the delivery of Shares has not yet occurred.
ARTICLE 17
Effective Date and Term
17.1 Effective Date. The effective date of this United Bancorp, Inc. 2008
Stock Incentive Plan is the date on which the shareholders of the Company
approve it at a duly held shareholders' meeting.
17.2 Termination Date. This Plan will continue in effect until midnight on
the day before the tenth anniversary of the effective date specified in Section
17.1; provided, however, that Awards granted on or before that date may extend
beyond that date.
57
EXHIBIT B
PROPOSED AMENDMENT TO CODE OF REGULATIONS TO
PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS
RESOLVED, that Section 8 of the Code of Regulations of the Corporation,
as amended, be amended and replaced in its entirety with the following:
Section 8. Election and Term of Office of Directors.
[the following text was deleted]
The directors shall be divided into two (2) classes as nearly equal in number as
possible, with the term of office of one class expiring each year. At the first
meeting of shareholders held to elect directors after the point in time that the
Board of Directors has nine (9) or more members, the Board of Directors shall be
divided into three (3) classes, as nearly equal in number as possible, with the
term of office of one class expiring each year. At each annual meeting of
shareholders, the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the second
succeeding annual meeting or the third succeeding annual meeting after the Board
of Directors is comprised of nine (9) or more members. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of such class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and his successor shall be elected and shall qualify, subject,
however, to prior death, resignation, or removal from office. Election of
directors shall be by ballot whenever requested by any person entitled to vote
at the meeting; but unless so requested such election may be conducted in any
way approved at such meeting. [end of deleted text]
[the following text was added] The directors shall be elected annually to serve
until the next annual meeting of shareholders and until their successors shall
have been elected, or until their earlier death, resignation, or removal from
office.[end of added text]
EXHIBIT C
PROPOSED AMENDMENT TO CODE OF REGULATIONS TO PROVIDE FOR
THE ELIMINATION OF CERTAIN SHAREHOLDER
SUPERVOTING REQUIREMENTS RELATED TO THE CLASSIFIED BOARD
AND PROVIDE FOR THE AUTHORITY OF DIRECTORS TO AMEND THE REGULATIONS
CONSISTENT WITH THE OHIO REVISED CODE
These Regulations may be [the following text was deleted] altered, changed or
amended in any respect or superseded by new Regulations in whole or in part,
[end of deleted text] [the following text was added] amended or repealed
in following manner.
(a) At any meeting of shareholders called for that purpose [end of added
text] by the affirmative vote of the holders of [the following
text was added] record of [end of added text] shares entitling them to exercise
a majority of the voting power [the following text was deleted] of the
Corporation.[end of deleted text][the following text was added]on such proposal;
(b) by the directors unless with respect to any such amendment a provision
of the Ohio Revised Code reserves such authority to the shareholders.
[end of added text]
[the following text was deleted](b) [end of deleted text] [the following
text was added](c)[end of added text] Notwithstanding the
provisions of Section 34(a) hereof and notwithstanding the fact that a lesser
percentage may be specified by law or any other provision of these Regulations,
the amendment, alteration, change or repeal of, or adoption of any provisions
inconsistent with, Sections [the following text was deleted]6, 8, [end of
deleted text]9, 33 or 34[the following text was added](c)[end of added text] of
these Regulations shall require the affirmative vote of holders of shares
representing at least eighty percent (80%) of the voting power of the
Corporation, unless such amendment, alteration, change, repeal or adoption has
been recommended by at least two-thirds of the members of the Board of Directors
of the Corporation then in office, in which event the provisions of Section
34(a) hereof shall apply.
(GRAPHIC)
UNITED BANCORP, INC.
PROXY ANNUAL MEETING
APRIL 16, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoint Mr. John M. Hoopingarner, Mr. Terry A.
McGhee and Mr. Richard L. Riesbeck as Proxies, each with the power to appoint
his substitute, and hereby authorize each of them to represent and to vote, as
designated on the reverse side, all the common shares of United Bancorp, Inc.
held of record by the undersigned on March 7, 2008, at the Annual Meeting of
Shareholders to be held on April 16, 2008, or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
(GRAPHIC) 14475 (GRAPHIC)
ANNUAL MEETING OF SHAREHOLDERS OF
UNITED BANCORP, INC.
APRIL 16, 2008
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
(ARROW) Please detach along perforated line and mail in the envelope provided. (ARROW)
(GRAPHIC) 20333030000000000000 3 041608
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
FOR AGAINST ABSTAIN
1.To Elect as Directors the Nominees Set Forth at Below: 2. To approve the United Bancorp, Inc. 2008
Stock Incentive Plan. [ ] [ ] [ ]
NOMINEES:
[ ] FOR ALL NOMINEES - Michael Arciello 3. To amend Section 8 of the United Bancorp,
- Terry McGhee Inc. Amended Code of Regulations (the
[ ] WITHHOLD AUTHORITY - Samuel Jones "Code") to eliminate the classified board
FOR ALL NOMINEES structure to require all directors to
stand for election annually. [ ] [ ] [ ]
[ ] FOR ALL EXCEPT
(See instructions below) 4. To amend Section 34 of the Code to
eliminate certain shareholder supervoting
requirements regarding the number and
classification of directors, and to
authorize the Board to amend the Code as
permitted by the Ohio Revised Code. [ ] [ ] [ ]
5. Upon the direction of the Board of Directors, the proxy holders
are authorized to vote upon such other business as may properly
come before the Annual meeting.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
INDIVIDUAL NOMINEE(S), MARK "FOR ALL EXCEPT" ELECTION OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND A
AND FILL IN THE CIRCLE NEXT TO EACH NOMINEE YOU VOTE "FOR" EACH OF PROPOSALS 2, 3 AND 4. THIS PROXY WHEN PROPERLY
WISH TO WITHHOLD, AS SHOWN HERE: [X] EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED, THE PROXY WILL
BE VOTED "FOR" EACH OF THE PERSONS NOMINATED UNDER PROPOSAL 1, AND
"FOR" EACH OF PROPOSALS 2, 3 AND 4. THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE DIRECTION OF THE BOARD OF DIRECTORS ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENT THEREOF.
To change the address on your account, please check the YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
box at right and indicate your new address in the FORM WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN
address space above. Please note that changes to the ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
registered name(s) on the account may not be submitted
via this method. [ ]
Signature of Shareholder Date: Signature of Shareholder Date:
------------------- ------------ ------------------- -----------
(GRAPHIC) NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each (GRAPHIC)
holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please
give full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please sign in partnership
name by authorized person.
ANNUAL MEETING OF SHAREHOLDERS OF
UNITED BANCORP, INC.
APRIL 16, 2008
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope
provided as soon as possible.
-OR-
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in COMPANY NUMBER ___________________
the United States or 1-718-921-8500 from foreign countries
and follow the instructions. Have your proxy card available ACCOUNT NUMBER ___________________
when you call.
-OR-
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the
on-screen instructions. Have your proxy card available when
you access the web page.
-OR-
IN PERSON - You may vote your shares in person by attending
the Annual Meeting.
You may enter your voting instructions at 1-800-PROXIES in the United States or 1-718-921-8500 from foreign countries or
www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date.
(ARROW) Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone
or the Internet.(ARROW)
(GRAPHIC) 20333030000000000000 3 041608
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
FOR AGAINST ABSTAIN
1. To Elect as Directors the Nominees Set Forth at Below: 2.To approve the United Bancorp, Inc. 2008
Stock Incentive Plan. [ ] [ ] [ ]
NOMINEES:
[ ] FOR ALL NOMINEES - Michael Arciello 3. To amend Section 8 of the United Bancorp,
- Terry McGhee Inc. Amended Code of Regulations (the
[ ] WITHHOLD AUTHORITY - Samuel Jones "Code") to eliminate the classified board
FOR ALL NOMINEES structure to require all directors to
stand for election annually. [ ] [ ] [ ]
[ ] FOR ALL EXCEPT
(See instructions below) 4. To amend Section 34 of the Code to
eliminate certain shareholder supervoting
requirements regarding the number and
classification of directors, and to
authorize the Board to amend the Code as
permitted by the Ohio Revised Code. [ ] [ ] [ ]
5. Upon the direction of the Board of Directors, the proxy holders
are authorized to vote upon such other business as may properly
come before the Annual meeting.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
INDIVIDUAL NOMINEE(S), MARK "FOR ALL EXCEPT" ELECTION OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND A
AND FILL IN THE CIRCLE NEXT TO EACH NOMINEE YOU VOTE "FOR" EACH OF PROPOSALS 2, 3 AND 4. THIS PROXY WHEN PROPERLY
WISH TO WITHHOLD, AS SHOWN HERE: [ ] EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED, THE PROXY WILL
BE VOTED "FOR" EACH OF THE PERSONS NOMINATED UNDER PROPOSAL 1, AND
"FOR" EACH OF PROPOSALS 2, 3 AND 4. THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE DIRECTION OF THE BOARD OF DIRECTORS ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENT THEREOF.
To change the address on your account, please check the YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
box at right and indicate your new address in the FORM WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN
address space above. Please note that changes to the ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
registered name(s) on the account may not be submitted
via this method. [ ]
Signature of Shareholder Date: Signature of Shareholder Date:
------------------- ------------ ------------------- -----------
(GRAPHIC) NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each (GRAPHIC)
holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please
give full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please sign in partnership
name by authorized person.