<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10 - Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
----------------------
Commission File Number 2-81060-S
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UNITED BANCORP
(Exact name of Registrant as specified in its Charter)
OREGON
(State or other jurisdiction of incorporation or organization)
555 S.E. KANE STREET
ROSEBURG, OREGON
(Address of principal executive offices)
93-0612062
(IRS Employer Identification Number)
97470
(Zip Code)
(541) 440-2629
(Registrants' telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days
YES X NO
----- -----
The number of shares of common stock, par value $2.50, outstanding at March 31,
1996, was 440,481
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UNITED BANCORP AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1: Financial Statements
--------------------
Consolidated Balance Sheets at March 31, 1996 and
December 31, 1995.............................................. 3
Consolidated Statements of Income for the three months ended
March 31, 1996 and March 31, 1995.............................. 5
Consolidated Statements of Changes in Cash Flows for the three
months ended March 31, 1996 and March 31, 1995................. 7
Computation of Earnings per Share for the three months ended
March 31, 1996 and March 31, 1995.............................. 9
Notes to Condensed Consolidated Financial Statements,
March 31, 1996................................................. 10
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operation....................................... 11
Part II OTHER INFORMATION.............................................. 13
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes In Securities.......................................... 13
Item 3. Defaults upon Senior Securities................................ 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 5. Other Information.............................................. 13
Item 6. Exhibits and Reports on Form 8-K
EX-10.12 Third Amendment to United Bancorp Restricted Stock
Bonus Plan............................................ 13
EX-10.13 United Bancorp Stock Option Plan...................... 13
EX-27 Financial Data Schedule (Filed electronically only)... 13
Signatures............................................................... 14
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents:
Cash and due from banks..................... $ 3,981 $ 3,899
Interest bearing deposits with bank......... -0- -0-
---------- -----------
Total cash and cash equivalents......... 3,981 3,899
Securities:
Held-To-Maturity............................ -0- -0-
Available-For-Sale ......................... 51,503 46,669
---------- -----------
Total Securities........................ 51,503 46,669
Loans .......................................... 39,314 39,985
Less allowance for loan losses.............. (507) (476)
---------- -----------
Net loans............................... 38,807 39,509
Bank premises, furniture and equipment........... 2,718 2,769
Accrued interest receivable and other assets..... 1,064 1,013
Deferred tax assets.............................. -0- -0-
---------- -----------
Total Assets..................................... $ 98,073 $ 93,859
========== ===========
LIABILITIES:
- -----------
Deposits:
Demand...................................... $ 11,437 $ 10,947
Interest bearing............................ 25,474 27,057
Savings..................................... 11,857 12,684
Time Certificates:
Certificates of $100m or Larger......... 679 874
Certificates less than $100m............ 13,218 12,547
---------- -----------
Total Deposits.............................. 62,665 64,109
</TABLE>
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands of Dollars)
(Continued)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Federal funds purchased and securities sold under
agreements to repurchase......................... 12,427 10,467
Bank Line of Credit.............................. 2,060 2,646
Notes Payable.................................... 8,695 4,103
Debt of Employee Stock Ownership Plan............ 211 233
Other liabilities................................ 722 658
Deferred Tax Liability........................... 2 182
---------- -----------
Total Liabilities........................... 86,782 82,398
STOCKHOLDERS' EQUITY:
Common stock $2.50 par value, 5,000,000 shares
authorized; 440,481 and 440,441 issued and
outstanding at March 31, 1996 and December
31, 1995 respectively....................... 1,101 1,101
Additional paid-in capital....................... 3,514 3,515
Retained Earnings................................ 6,998 6,899
Deferred compensation under Employee Stock
Ownership Plan................................... (211) (233)
Net unrealized gains (losses) on securities
Available-For-Sale, net of $182 and $112 of
income tax liability, respectively............... (111) 179
---------- -----------
Total stockholders' equity................... 11,291 11,461
---------- -----------
Total Liabilities and Stockholders' Equity....... $ 98,073 $ 93,859
========= ==========
</TABLE>
See notes to condensed consolidated financial statements.
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Interest Income
Loans....................................... $ 1,049 $ 926
Federal funds sold and interest bearing
deposits with bank.......................... 3 34
Securities
Taxable................................... 617 869
Exempt from Federal Income Taxes.......... 125 95
---------- -----------
Total Interest Income................... 1,794 1,924
Interest Expense
Deposits.................................... 343 303
Federal funds purchased and securities sold
under agreements to repurchase.............. 173 152
Notes Payable............................... 82 194
---------- -----------
Total Interest Expense................... 598 649
Net Interest Income................... 1,196 1,275
Provision for loan losses................... 30 0
---------- -----------
Net Interest Income after provision
for loan losses....................... 1,166 1,275
Non-Interest Income
Service charges on deposit accounts......... 117 122
Other service charges, commissions and fees. 50 44
Other Income................................ 3 5
---------- -----------
Total Non-Interest Income................ 170 171
Non-Interest Expense
Salaries and employee benefits.............. 527 554
Net Occupancy and Equipment................. 140 159
Losses (Gains) on sale of securities........ (30) (58)
Other....................................... 280 365
---------- -----------
Total Non-Interest Expense............... 917 1,020
---------- -----------
</TABLE>
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands of Dollars)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Income Before Income Taxes.................. 419 426
Provision for Income Taxes............... 128 136
--------- ----------
NET INCOME............................ $ 291 $ 290
========= ==========
</TABLE>
See notes to condensed consolidated financial statements.
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- -------------------------------------------------
Cash flows from operating activities:
Net Income..................................... $ 291 $ 290
Reconciliation of net income to net cash
provided by operating activities:
Loss on disposal of furniture and equipment.. -0- -0-
Depreciation and Amortization................ 74 76
Provision (Credit) for Loan Losses........... 30 -0-
Provision (Credit) for Deferred Income Taxes. -0- -0-
Compensation paid in stock................... -0- -0-
Stock dividend received on FHLB stock........ (25) (19)
Amortization of securities' discounts and
premiums..................................... 8 (19)
Net realized (Gains) Losses on sale of
securities Available for Sale................ (30) (59)
Decrease (Increase) in accrued interest
receivable and other assets.................. (51) 94
Increase (Decrease) in other liabilities..... 64 115
---------- -----------
Net cash provided by operating activities.. 361 478
Cash flows from investing activities:
Securities:
Available For Sale:
Maturities............................... 3,779 614
Purchase................................. (9,338) -0-
Proceeds from sales of securities........ 300 10,627
Held-to-Maturity:
Maturities............................... -0- 134
Purchase................................. -0- (81)
Net (Increase) decrease in loans............. 672 (681)
Purchase of furniture and equipment.......... (23) (23)
---------- -----------
Net cash provided by (used in) investing
activities................................. (4,610) 10,590
</TABLE>
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UNITED BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase (Decrease) in demand deposits,
interest bearing transaction, & savings
accounts................................. (1,920) (4,798)
Proceeds from sales of certificates of
deposit greater (less) than payments for
maturing time deposits................... 476 1,714
Proceeds from issuance of ESOP Debt.......... 25 68
Stock purchase for ESOP...................... (25) (68)
Net increase (Decrease) in federal funds
purchased and securities sold under
repurchase agreements.................... 1,960 (9,531)
Net borrowings from bank line of credit...... (586) -0-
Net advances from FHLB of Seattle............ 4,739 5,000
Repayment of debt............................ (147) (147)
Retirement of stock.......................... (37) -0-
Proceeds from issuance of stock.............. 38 35
Cash dividends paid.......................... (193) (185)
---------- -----------
Net cash provided by (used in) financing
activities................................ 4,331 (7,912)
Net increase (Decrease) in cash and cash
equivalents...................................... 82 3,156
Cash and cash equivalents at beginning of the year. 3,899 7,068
---------- -----------
Cash and cash equivalents at the end of the period. $ 3,981 $ 10,224
========== ===========
NON CASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized gains (losses) on securities
available-for-sale, net deferred income tax.... $ (290) $ 405
CASH PAID DURING THE YEAR FOR:
Interest....................................... $ 448 $ 485
Income Taxes................................... $ 37 $ -0-
</TABLE>
See notes to condensed consolidated financial statements.
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UNITED BANCORP AND SUBSIDIARIES
Computation of earnings per share
(000.'s omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Primary:
Average shares outstanding.................. 439,427 439,806
Net Income.................................. $ 291 $ 290
Per share amount............................ $ 0.66 $ 0.66
========= ==========
</TABLE>
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UNITED BANCORP AND SUBSIDIARIES
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
Note A ---- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 - 01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
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UNITED BANCORP AND SUBSIDIARIES
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Total assets at March 31, 1996 equaled $98,073 million, representing an
increase from December 31, 1995 of $4,214 million or 4.5%. This was due
primarily to the Company's increase in short term borrowings to purchase
investment securities. Investment securities increased to $51,503 in March 31,
1996 compared to $46,669 in December 31, 1995. Interest income from
investments decreased however by $222,000 when compared to the three month
period ending March 31, 1995. This is a result of the average book yield on
the investment portfolio decreasing from 7.28 percent at March 31, 1995
compared to 6.54 percent at March 31, 1996, and the increase in investment
securities from 1995. The reduction of interest income from investment
securities has been offset somewhat by the shifting of the investment portfolio
to tax exempt securities, which had an increase of $30,000, or a tax equivalent
income equal to $40,000. The Company had a U.S. Agency called by the issuer
which resulted in a gain of $30,000.
Gross loans decreased from December 31, 1995 by $671,000 to $39,314 million
which represents a 1.7% decrease. The average balance of loans increased by
$4.9 million, from $35,288 million for the period ended March 31, 1995,
compared to $40,219 million for the period ended March 31, 1996. The average
yield on loans decreased from 10.49% in 1995 to 10.25% in 1996. This
combination accounts for the increase in loan interest income of $123,000 for
the three month period ending March 31, 1996, compared to the same period
ending March 31, 1995. At December 31, 1995, the loan loss reserve was
$476,000 which represented 1.19% of outstanding gross loans. The Company
recognized a provision for loan losses during the first quarter of 1996 for
$30,000 and had net recoveries of loans of $1,000 which brought the loan loss
reserve to $507,000 at March 31, 1996 which represents 1.29% of outstanding
gross loans. The Company will continue to increase its' loan loss reserve in
the second quarter of 1996 in order to reflect the Company's historical rate
of loan losses.
Demand and Interest Bearing Deposits decreased $1.1 million to $36.9 million
at March 31, 1996, (a 2.9% decrease), while Savings Deposits decreased $827,000
to $11.9 million at March 31, 1996, (a 6.5% decrease). The Company continues
to see deposits running off into stocks, bonds, mutual funds or other
investments which provide higher returns to customers. Part of the run off
went into Time Certificates of Deposit which increased from $13,421 million at
December 31, 1995 to $13,897 million at March 31, 1996. Other borrowings for
the first three months of 1996 increased by $6.0 million to $23.1 million. The
contributing factors for this increase are Federal Funds Purchased and
Securities Sold under Agreements to Repurchase, and Bank Line of Credit
increased $1.4 million, and notes payable increased $4.6 million for the period
ending March 31, 1996. The increase in Notes Payable was used to purchase
certain investment securities.
Total interest income fell $130,000 for the three months ended March 31, 1996
compared to the three months ended March 31, 1995. This was due in part to
interest yields on taxable securities decreasing from 6.55% in 1995 to 6.5% in
1996 and a reduction in the amount of earnings from federal funds sold.
Interest expense on deposits and other funding liabilities decreased $51,000 to
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$598,000 for the three months ended March 31, 1996, compared to the three
months ended March 31, 1995. Net interest income decreased $109,000, from
$1,275 million for the three months ended March 31, 1995, compared to $1,166
million for the three months ended March 31, 1996.
Non interest expense decreased $103,000 to $917,000 at March 31, 1996 compared
to $1,020 million at March 31, 1995. Salaries decreased $27,000 as a result of
staff reductions, unfilled positions and a reduction in hours worked. In 1995
the Company invested in major building repairs which accounts for the $19,000
reduction of occupancy expense for the period ending March 31, 1996.
Other expenses decreased by $85,000 due primarily by reductions in FDIC and
Comptroller's assessments, accounting fees and credit services fees. These
expenses were offset by a gain on the call of certain investment securities of
$30,000, compared to a gain of $58,000 for the same period during 1995. Total
net income for the three months of 1996 increased over the same period of 1995
by $1,000 or three-tenths of one percent to a total of $291,000.
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UNITED BANCORP AND SUBSIDIARIES
- -------------------------------
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 23, 1996, at the annual meeting of the shareholders of the
Company, shareholders owning 318,601 shares of the common stock of the Company
voted in favor of the election of M. John Loosley, William C. Stiles, and
Lauren D. Young as Class 2 Directors of the Company, shareholders owning
223 shares voted against their election, and shareholders owning 0 shares
abstained from voting for or against them as Class 2 Directors and shareholders
owning 317,914 shares of the common stock of the Company voted in favor of the
election of Brian R. Pargeter and Clint Newell as Class 3 Directors,
shareholders owning 911 shares voted against them, and shareholders owning 0
abstained from voting for or against them as Class 3 Directors. Shareholders
owning 294,032 of the common stock of the Company voted in favor of the United
Bancorp Stock Option Plan, shareholders owning 5,782 shares voted against such
plan, and shareholders owning 19,010 shares abstained from voting for or
against the plan. Shareholders owning 314,405 shares voted for the
ratification for the appointment of Knight, Vale & Gregory, Inc., P.S. as the
auditors for the Company for the fiscal year ended December 31, 1996,
shareholders owning 811 shares voted against such appointment, and shareholders
owning 3,608 shares abstained from voting for or against such appointment.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
10.12 Third Amendment to United Bancorp Restricted Stock Bonus
Plan
10.13 United Bancorp Stock Option Plan
27 Financial Data Schedule (filed electronically only)
B. Reports on Form 8-k
On February 15, 1996, the Company filed a Current Report on Form
8-K to report the resignation of Joseph L. Taucher as a director of the Company
in November 1995, and the appointment of Brian R Pargeter to fill the vacancy
created thereby and to report to the resignation of Donna P. Wooley and David
L. Geddes in January 1996, as directors of the Company.
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UNITED BANCORP AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED BANCORP
(REGISTRANT)
Date 05/14/96 \s\By LINDA GANIM, TREASURER
---------------------------
Linda Ganim, Treasurer,
(Principal Accounting Officer)
Date 05/14/96 \s\By M. JOHN LOOSLEY
----------------------
M. JOHN LOOSLEY
President
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Third Amendment to
UNITED BANCORP RESTRICTED STOCK BONUS PLAN
The United Bancorp Restricted Stock Bonus Plan, originally effective January
31, 1983, as amended effective December 21, 1988, and May 28, 1991, and
February 18, 1994, is further amended as follows:
1. CHANGE IN BONUS FUNDS
Article III, Paragraph 3 is changed to read as follows:
3. Calculation of bonus fund. The Bonus Pool shall be calculated as
follows: There shall be deducted from the company's net earnings for
the taxable year, 2 1/2% of the net capital of the company as of the
last day of the preceding taxable year. There shall be allocated to
the Bonus Pool zero percent (0%) of the first $1,000,000; 8 percent of
the next $100,000; 9 percent of the next $100,000; 10 percent of the
next $100,000; 11 percent of the next $100,000; 12 percent of the next
$100,000; 13 percent of the next $100,000; 14 percent of the next
$100,000; and 15 percent on any additional remaining balance. The
Committee shall have the discretion to allocate in any year more to the
Bonus Pool, as deemed appropriate, to carry out the purpose of the plan.
2. EFFECTIVE DATE
2.1 This amendment shall be effective for awards granted for the 1996, 1997,
and 1998 incentive years.
2.2 Any awards granted for years before 1996 shall continue to vest and be
paid in accordance with the Plan provisions without regard to this
amendment.
2.3 All Provisions not expressly changed by this amendment shall remain the
same.
ADOPTED March 18, 1996.
EXECUTIVE COMMITTEE
\S\by John Loosley
----------------------
John Loosley, Chairman
Approved by the Board of Directors: March 26, 1996
\s\by David A Jackson
-----------------------
David Jackson, Chairman
\s\by Pete Nilsen
----------------------
Pete Nilsen, Secretary
<PAGE> 1
UNITED BANCORP STOCK OPTION PLAN
(Incentive Stock Options and Nonqualified Stock Options)
1. PURPOSE
1.1 The United Bancorp Stock Option Plan (the "Plan") is designed to
attract and retain key employees of United Bancorp, including
officers and directors. The Plan is intended to encourage capital
accumulation and stock ownership by key employees and outside
directors, in order to increase the proprietary interest of such
individuals in the success of United Bancorp. The term "Company"
shall mean United Bancorp and any subsidiary corporation in which the
Company may own, directly or indirectly, a majority of the voting
stock.
2. ADMINISTRATION
The Plan shall be administered by the Executive Committee of the
Board of Directors of the Company (the "Committee"). The Committee
of not less than two members of the Board of Directors of the Company
(the "Board") shall be appointed by the Board, and the Board, from
time to time, may remove members from or name new members to the
Committee. Subject to the provisions of the Plan, the Committee is
authorized to grant options under the Plan, including determining the
employees to whom options will be granted and the amount and terms of
such grants, to interpret the Plan and each option granted
thereunder, to prescribe, amend, and rescind rules and regulations
relating to the Plan, and to any options granted thereunder, and to
make all other determinations necessary or advisable for the
administration of the Plan; provided, however, that only the Board
may amend or terminate the Plan as provided in Section 11.
3. ELIGIBILITY FOR PARTICIPATION
The Committee shall determine and designate, from time to time, those
"eligible individuals" to whom options are to be granted and who
thereby become participants in the Plan. An "eligible individual"
means an employee of the Company, either part-time or full-time (and
officers and directors, including directors who are not otherwise
employees by the Company, who, in the judgment of the Committee, is in
a position to contribute substantially to the success of the Company.
4. STOCK SUBJECT TO THE PLAN
4.1 The stock subject to the options to be granted under the Plan shall be
made available either from the Company's $2.50 par value common
stock (referred to hereinafter as "stock" or "shares") authorized but
unissued or from shares reacquired by the Company. Subject to the
adjustment as provided in Section 6.11, the total number of shares
with respect to which the Committee may grant stock options under the
Plan shall not exceed 92,000 shares, of which 42,000 shares shall be
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<PAGE> 2
reserved for issuance to the Company's directors and 50,000 shares
will be reserved for issuance to key employees.
4.2 If any outstanding stock option granted under the Plan is terminated
or expires unexercised, in whole or in part, for any reason before the
end of the term of the Plan, the shares released from the expired or
terminated option may be made the subject of new additional options
granted under the Plan.
5. AWARD OF OPTIONS
The Committee, at any time, may authorize the granting of options
under the Plan to any "eligible individual". The options may be
(a) incentive stock options within the meaning of Section 422(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), (b)
options which will not be treated as incentive stock options under
Section 422(a) of the Code ("nonqualified stock options"), and (c) any
other stock options which are or may become permitted by any
applicable law. The Committee shall have the authority, subject to
the terms of the Plan, to determine the date of grant, the types of
options to be granted, the number of shares, the exercise price, and
the other terms and conditions of each option under the Plan;
provided, however, that directors who are not otherwise employed by
the Company are not eligible to receive incentive stock options under
current law.
6. TERMS AND CONDITIONS OF STOCK OPTION AGREEMENTS
Stock options granted under the Plan shall be evidenced by stock
option agreements executed by an authorized representative of the
Committee and signed by the participant. Stock options granted
hereunder shall be subject to the following terms and conditions:
6.1 PAYMENT FOR SHARES. Upon exercise of any option, in whole or in part,
the option price for shares to which the exercise relates shall be
paid in cash or by certified check, bank draft, or money order payable
to the order of the Company (or in property if agreed to in writing by
the Committee in connection with a particular option) at the time of
exercise. No shares for which a purchase price is due shall be
issued until full payment has been made, and a participant shall have
none of the rights of a shareholder with respect to optioned shares
until such shares are issued to the participant. Notwithstanding the
foregoing and subject to the provisions of Sections 6.5, 6.8, and 9
(vesting), a participant who is otherwise entitled to exercise an
option hereunder, may elect to receive a cash payment from the Company
in exchange for the cancellation and surrender of the vested option
rights. (The cancelled option rights shall then be returned to the
share reserve and the employee shall have no further option rights
with respect to those shares.) The election for cash can be made only
by written notice delivered to the Company prior to the end of each
calendar year with the cash amount determined by the difference
between the grant price of the option and the fair market value of the
shares as of the last trading day of the calendar year. The Committee
shall have the right to determine the fair market value for these
purposes and it shall take into account any trades or sales of the
stock during the last trading days of the calendar year.
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<PAGE> 3
6.2 NUMBER OF SHARES. Each stock option agreement shall state the total
number of shares subject to the option. In the case of any incentive
stock option granted hereunder, in no event shall the aggregate "fair
market value" of the stock exercisable for the first time by an
employee during any calendar year exceed $100,000. For purposes
hereof, the "fair market value" of the stock shall be determined by
the Committee in good faith at the time of the grant of the option.
6.3 PURCHASE PRICE. The purchase price (exercise price) for shares
granted hereunder shall be determined by the Committee but, except as
otherwise provided in Section 8, shall in no instance be less than one
hundred percent (100%) of the "fair market value" of the shares on the
date the option is granted, as determined in good faith by the
Committee. In the case of an incentive stock option granted to any
participant owning more than ten percent (10%) of the voting power of
all classes of common stock on the date of grant of the option, the
option price per share of the stock subject to option shall be not
less than one hundred ten percent (110%) of the "fair market value" of
the stock on the date the option is granted, as determined in good
faith by the Committee.
6.4 TERM OF OPTIONS. In the case of incentive stock options and except as
otherwise provided in Sections 6.8 and 6.9, any option granted to a
participant then owning more than ten percent (10%) of the voting
power of all classes of common stock shall, by its terms, expire at
such time as the Committee may determine in granting it, but not later
than five (5) years from the date the option is granted. Any other
option granted hereunder shall by its terms expire at such time as the
Committee may determine in granting it, but not later than ten (10)
years from the date the option is granted.
6.5 VESTING SCHEDULES. Subject to the provisions of Section 9 below,
in the case of all options hereunder, twenty-five percent (25%) of
each option granted shall be exercisable upon the date of grant; but
the remaining portion of each option hereunder shall be exercisable by
the participant at the rate of twenty-five percent (25%) after each
succeeding twelve (12) months of continuous service to the Company
immediately following the date the option is granted, provided,
however, that if a participant dies prior to the completion of this
three-year vesting period, the option may nonetheless be exercised in
full in accordance with Section 6.8 below. Vesting may also be
accelerated in accordance with the provisions of Section 9 below
(change of control). Notwithstanding the foregoing, in the case of
options granted to directors hereunder, directors shall be credited
for prior service so that for each twelve (12) months of service to
the Company as a director schedule is accelerated by twenty-five
percent (25%) prior to the effective date of the option grant, the
vesting.
6.6 EMPLOYMENT AS CONDITION TO EXERCISE. No incentive stock options
eligible for exercise hereunder may be exercised, unless the
participant holding such option has been employed by the Company for
the entire time from the effective date of the grant of the option
until sixty (60) days before the date of exercise (or up to ninety
(90) days if employment ceases due to death or disability).
-3-
<PAGE> 4
6.7 DIRECTORS WHO RETIRE. Any nonqualified stock option granted to a
participant who is a director of the Company and who retires after
reaching the age of 70 and after not less than three (3) full years of
service as a director, shall have a full ten (10) years from the date
of the option grant in which to exercise such nonqualified option,
notwithstanding the provisions of Section 6.9 below.
6.8 DEATH. Any option granted hereunder which has not expired and which
is held by a participant at the time of death may be exercised by the
person or persons entitled thereto at any time or from time to time
within ninety (90) days after date of death, but in no event later
than ten (10) years from the date the option is granted.
6.9 TERMINATION OF EMPLOYMENT. In all cases of termination of employment
of a participant other than as described in Section 6.7 and 6.8, the
option shall be exercised within sixty (60) days after the date the
participant ceases to be an employee of the Company, but in no event
later than ten (10) years from the date the option is granted. To the
extent set forth in an agreement entered into under a Prior Plan,
express provisions relating to the exercise of a stock option upon
termination of employment shall continue to apply unless modified by
the Committee.
6.10 EXERCISE SUBJECT TO LIMITATIONS. Each option shall be exercisable for
the full amount or for any part thereof, from time to time, subject to
such limitations thereon as may be established by the Plan or by the
Committee at the time the grant is authorized.
6.11 EFFECT OF CHANGE IN SHARES SUBJECT TO THE PLAN. In the event there is
any change in the shares of the Company through the declaration of
stock dividends or through merger, consolidation, or recapitalization
resulting in stock split-ups or combinations or exchanges of shares or
otherwise, the Committee shall appropriately adjust the number of
shares available for the granting of stock options under the Plan, the
number of shares subject to each outstanding stock option, and the
exercise price of each stock option. No adjustment to the exercise
price of any stock option under the Plan may reduce the exercise
price to an amount less than the par value of the shares subject to
the option. If the Company is the surviving or resulting corporation
in any merger, consolidation or share exchange, any outstanding option
granted under the Plan shall apply to those securities to which a
holder of the number of shares of common stock subject to the stock
option would have been entitled under the merger or consolidation. If
the Company is not the surviving or resulting corporation in any
merger, consolidation or share exchange, the surviving or resulting
corporation shall tender stock options to purchase its shares on terms
and conditions that substantially preserve the rights and benefits of
any stock option outstanding under the Plan at the time of the merger
or consolidation. The term "common stock" as used in the Plan shall
include the shares resulting from any change in the Company's common
stock, limited to a change in its designation to "capital stock" or
other similar designation, a change in the par value of the common
stock, or a change from par value to no par value, in each case
without any increase in the number of issued shares.
6.12 NONTRANSFERABILITY. No stock option granted under the Plan shall be
assignable or transferable except by will or by the laws of descent
-4-
<PAGE> 5
and distribution. During a participant's lifetime, any stock option
shall be exercisable only by the participant.
6.13 RESALE OF SHARES. In the event that a participant desires to dispose
of shares issued pursuant to options, any resales of such shares shall
be made by a participant only in compliance with applicable securities
laws and regulations.
6.14 RIGHTS AS A SHAREHOLDER. A participant shall have no rights as a
shareholder with respect to shares covered by his or her stock options
until the date of issuance of the shares to the participant and the
payment by the participant to the Company of the full purchase price
for the shares. No adjustment will be made for dividends or other
rights for which the record date is prior to the date of issuance of
the shares.
6.15 OTHER PROVISIONS. The stock option agreements authorized under the
Plan may contain such other and additional provisions, not
inconsistent with the terms of the Plan, which the Committee or legal
counsel to the Company deems necessary or advisable.
7. STOCK RESERVE
The Company shall, at all times during the term of the Plan, reserve
and keep available such number of shares of its common stock as will
be sufficient to satisfy the requirements of the Plan, and shall
pay all administrative fees and expenses necessarily incurred by the
Company in connection with the exercise of options granted hereunder.
8. SUBSTITUTION OF STOCK OPTIONS OF ACQUIRED CORPORATIONS
Notwithstanding any other contrary or inconsistent provision of the
Plan, the Company may, subject to the provisions of Section 4,
substitute an option issued under the Plan for an option issued under
another plan, or assume under the Plan an option issued under another
plan, if the other plan was the plan of another corporation (the
"acquired corporation") (or the parent of the acquired corporation)
and the new option is substituted, or the old option is assumed, by
reason of a corporate merger, consolidation, acquisition of property
or of stock, reorganization or liquidation within the meaning of
Section 424(a) of the Code, as amended, and provided that the
requirements of Code Sections 424(a)(1) and (2) are complied with.
In the event that a written agreement pursuant to which the
acquisition transaction is completed is approved by the Board, and
said agreement sets forth the terms and conditions of the substitution
for, or assumption of, outstanding stock options of the acquired
corporation, said terms and conditions shall be deemed to be the
action of the Committee hereunder without any further action by the
Committee, and the persons holding said option shall be deemed to meet
the eligibility requirements under the Plan. The terms and conditions
of any substituted or assumed options may vary from the terms and
conditions set forth in the Plan to the extent that the Board or
Committee deems appropriate.
9. CHANGE OF CONTROL
9.1 In the event of a "change of control" of the Company, any and all
-5-
<PAGE> 6
stock options (both incentive stock options and nonqualified stock
options) granted by the Company prior to such change of control shall
be fully vested and may be exercised in whole or in part immediately
prior to and after the following: (i) the Company terminates the
participant's employment relationship with the Company, (ii) the
Company reduces the participant's annual compensation (including base
salary, bonuses, and incentive compensation programs) from the
participant's annual compensation for the calendar year ended prior to
the change of control, (iii) the Company requires the participant to
transfer to a new job location which necessitates a change in
residence or increased travel, (iv) the Company materially alters the
participant's responsibilities to the Company, including a change in
title, status, or job description, or (v) any of the Company's
shareholders are entitled under Oregon law (ORS 60.554) to dissent
from and obtain payment of the fair value of any of the Company's
common shares.
9.2 For purposes hereof, a "change of control" shall be defined as any
event or circumstance whereby an entity, an individual, or an
affiliated group acquires control, directly or indirectly, of fifty
percent (50%) or more of the Company's common stock.
9.3 In the event of any accelerated vesting hereunder, all options
granted to the participant may be exercised only in accordance with
Sections 6.1-6.4 and 6.6-6.15 of the Plan.
10. TERM OF PLAN AND EFFECTIVE DATE
The Effective Date of this Plan shall be April 1, 1996, and no further
options shall be granted under the Plan commencing on March 31, 2006.
11. AMENDMENTS AND DISCONTINUANCE
The Board, at any time, may alter, amend, suspend, discontinue, or
terminate the Plan and may alter or amend any stock option
agreement executed under the Plan, including a Prior Plan.
Additionally, the Board may amend the Plan or any agreement under the
Plan to provide for any amendment or revision of any possible
securities laws. The Board may not, however, without shareholder
approval, alter the provisions of the Plan so as to (i) materially
alter terms relating to the option price, (ii) materially increase the
number of shares which may be issued under the Plan, (iii) materially
modify the requirements as to eligibility for participation in the
Plan, or (iv) extend beyond ten (10) years the maximum term of stock
options under the Plan or the term of the Plan.
12. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of shares to
participants under the Plan will be used for general corporate
purposes.
13. CERTAIN TAX MATTERS
13.1 NOTIFICATION OF CERTAIN EVENTS. The stock option agreements executed
under the Plan shall require the holder of an option to notify the
Company within ten (10) days of the occurrence of either of the
-6-
<PAGE> 7
following events: (i) the making of an election under Section 83(b)
of the Code to include in gross income in the year of transfer the
amount specified in Section 83(b); or (ii) the disposition of any
stock issued on the exercise of an incentive stock option within two
(2) years of the granting of the incentive stock option or within one
(1) year of its exercise, and the amount that the participant will
recognize as compensation income due to the disqualifying disposition
of the underlying shares. Participants, at their option, may convert
an incentive stock option to a nonqualified stock option by disposing
of their stock within two (2) years from the date of grant or within
one (1) year after the option is exercised.
13.2 WITHHOLDING. Whenever, under the Plan, the exercise of a stock option
will result in the recognition of taxable income by the participant,
the Company shall be entitled to require, as a condition of delivery
to the participant of the certificate representing the shares, that
the participant remit to the Company an amount sufficient to satisfy
all applicable tax requirements, including, but not limited to, all
federal, state, and other withholding tax requirements related to the
income recognized by the participant. If a participant makes a
disqualifying disposition of stock acquired upon the exercise of an
incentive stock option as described in Section 13.1, subsection (ii),
the participant shall remit to the Company an amount sufficient to
satisfy all federal, state, and other withholding tax requirements
related to the compensation income realized by the participant on the
disqualifying disposition. In any case under this Section 13.2 where
withholding by the Company is required, the Company shall have the
right to withhold any such amounts from compensation otherwise due to
the participant.
14. MISCELLANEOUS PROVISIONS
14.1 NO OBLIGATION TO EXERCISE. Participants shall have no obligation
to exercise any stock option granted to them under the Plan.
14.2 NO ALIENATION OF BENEFITS. No benefit provided to participants under
the Plan shall be subject to alienation, assignment, attachment, or
other legal process. Any attempted alienation, assignment, or
attachment of benefits under the Plan shall be void. Stock
certificates and cash payments shall be delivered only to the
participants entitled to receive them or to their authorized legal
representatives.
14.3 NO EMPLOYMENT RIGHT. Participation in the Plan shall not confer any
right of continuation of employment with the Company.
14.4 FRACTIONAL SHARES. Any fractional shares resulting from the exercise
of stock options under the Plan shall be eliminated at the time of
exercise by rounding down for fractions less than one-half (1/2) and
rounding up for fractions equal to or greater than one-half (1/2). No
cash settlements shall be made with respect to fractional shares
eliminated by rounding.
14.5 GOVERNING LAW. All matters relating to the Plan or to stock options
granted under the Plan shall be governed by the laws of the State of
Oregon, without regard to the principles of conflict of laws adopted
by Oregon courts.
-7-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
BANCORP'S MARCH 31, 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000101032
<NAME> UNITED BANCORP
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<S> <C>
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<PERIOD-END> MAR-31-1996
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