<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
United Community Financial Corp.
------------------------------------------------
(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 the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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:
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
275 FEDERAL PLAZA WEST
YOUNGSTOWN, OHIO 44503-1203
(330) 742-0500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders of United
Community Financial Corp. (UCFC), will be held at Mr. Anthony's, 7440 South
Avenue, Boardman, Ohio, on July 12, 1999, at 10:00 a.m., Eastern Daylight Saving
Time (Special Meeting), for the following purposes, all of which are more
completely set forth in the accompanying Proxy Statement:
1. To approve the United Community Financial Corp. 1999 Long-Term
Incentive Plan, a copy of which is attached hereto as Exhibit A;
2. To approve the United Community Financial Corp. Recognition and
Retention Plan and Trust Agreement, a copy of which is attached hereto
as Exhibit B; and
3. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Only shareholders of UCFC of record at the close of business on May 28,
1999, will be entitled to receive notice of and to vote at the Special Meeting
and at any adjournments thereof. Whether or not you expect to attend the
Special Meeting, we urge you to consider the accompanying Proxy Statement
carefully and to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM
AT THE SPECIAL MEETING MAY BE ASSURED. The giving of a proxy does not affect
your right to vote in person in the event you attend the Special Meeting.
By Order of the Board of Directors
Youngstown, Ohio Douglas M. McKay,
June 7, 1999 President and Chairman of the Board
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
275 FEDERAL PLAZA WEST
YOUNGSTOWN, OHIO 44503-1203
(330) 742-0500
PROXY STATEMENT
PROXIES
The enclosed proxy is being solicited by the Board of Directors of United
Community Financial Corp., an Ohio corporation (UCFC), for use at a Special
Meeting of Shareholders of UCFC to be held at Mr. Anthony's, 7440 South Avenue,
Boardman, Ohio, on July 12, 1999, at 10:00 a.m., Eastern Daylight Saving Time,
and at any adjournments thereof (Special Meeting). Without affecting any vote
previously taken, the proxy may be revoked by a shareholder by executing a later
dated proxy which is received by UCFC before the proxy is exercised or by giving
notice of revocation to UCFC in writing or in open meeting before the proxy is
exercised. Attendance at the Special Meeting will not, of itself, revoke a
proxy.
Each properly executed proxy received prior to the Special Meeting and not
revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted:
FOR the approval of the United Community Financial Corp. 1999 Long-Term
Incentive Plan (Incentive Plan), a copy of which is attached hereto as
Exhibit A; and
FOR the approval of the United Community Financial Corp. Recognition and
Retention Plan and Trust Agreement (RRP), a copy of which is attached
hereto as Exhibit B.
Proxies may be solicited by the directors, officers and other employees of
UCFC and The Home Savings and Loan Company of Youngstown, Ohio (Home Savings),
in person or by telephone, telecopy, telegraph or mail, only for use at the
Special Meeting. UCFC has retained Corporate Investor Communications, Inc., a
professional proxy solicitation firm, to assist in the solicitation of proxies.
UCFC will pay Corporate Investor Communications, Inc. a fee of approximately
$6,000, plus reimbursement for out-of-pocket expenses. Proxies will not be used
for any other meeting. All costs of soliciting proxies will be borne by UCFC.
Only shareholders of record as of the close of business on May 28, 1999
(Voting Record Date), are entitled to vote at the Special Meeting. Each such
shareholder will be entitled to cast one vote for each share owned. UCFC's
records disclose that, as of the Voting Record Date, there were 34,715,625 votes
entitled to be cast at the Special Meeting.
This Proxy Statement is first being mailed to the shareholders of UCFC on
or about June 7, 1999.
<PAGE>
VOTE REQUIRED
A majority of the votes eligible to be cast at the Special Meeting must be
present in person or by proxy to establish a quorum. Abstentions and shares
held by a nominee for a beneficial owner and which are represented in person or
by proxy at the Annual Meeting but not voted with respect to one or more
proposals (Non-votes) will be counted as present for purposes of establishing a
quorum. The affirmative vote of the holders of at least a majority of the
shares of UCFC present in person or by proxy at the Special Meeting is necessary
to approve the Incentive Plan and the RRP. Abstentions and Non-votes will have
the same effect as a vote against the approval of the Incentive Plan and the
RRP. If, however, a shareholder has signed and dated a proxy in the form of the
enclosed Proxy but has not voted on the approval of the Incentive Plan or the
RRP by checking the appropriate block on the Proxy, such person's shares will be
voted FOR the adoption of the Incentive Plan or the RRP and will not be
considered Non-votes.
If you hold your shares in a broker or bank "street" account and wish to
vote in person at the Special Meeting, you must obtain the appropriate
documentation from your broker or bank custodian. Please read the back of the
voting instruction form you received from ADP Proxy Services to learn how you
can obtain authorization to vote in person at the Special Meeting.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the only
person known to UCFC to own beneficially more than five percent of the
outstanding common shares of UCFC as of May 1, 1999:
<TABLE>
<CAPTION>
Amount and nature of Percent of
Name and address beneficial ownership shares outstanding
---------------- -------------------- ------------------
<S> <C> <C>
United Community Financial
Corp. Employee Stock
Ownership Plan 2,677,250 (1) 7.71%
5700 RiverTech Court
Riverdale, Maryland 20737
</TABLE>
- -------------------------
(1) Includes 2,586,161 unallocated shares with respect to which Riggs Bank
N.A., as the Trustee for the United Community Financial Corp. Employee
Stock Ownership Plan (ESOP), has shared voting power.
2
<PAGE>
The following table sets forth certain information with respect to the
number of common shares of UCFC beneficially owned by each director of UCFC and
by all directors and executive officers of UCFC as a group as of May 1, 1999:
<TABLE>
<CAPTION>
Amount and nature of
beneficial ownership
--------------------------------------------
Sole voting and Shared voting and Percent of
Name and address (1) investment power investment power shares outstanding
-------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C>
Richard M. Barrett 17,770 17,529 0.11%
Douglas M. McKay 35,007 78,764 0.33
Herbert F. Schuler, Sr. 9,684 40,860 0.15
Donald J. Varner 17,164 32,838 0.14
John F. Zimmerman, Jr. 590 11,480 0.03
All directors and executive
officers as a group (6 persons) 109,997 204,000 0.90
</TABLE>
- --------------------------
(1) Each of the persons listed in this table may be contacted at the address of
UCFC.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table presents certain information regarding the compensation
paid to the chief executive officer of UCFC and each executive officer of UCFC
who received cash and cash equivalent compensation in excess of $100,000 from
UCFC and Home Savings for services rendered to UCFC and Home Savings during
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Annual compensation
--------------------------
Name and principal Year Salary ($)(1) Bonus ($) All other
position compensation ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Douglas M. McKay 1998 $300,000 $185,481 $41,717 (2)
President 1997 239,934 120,614 28,455 (3)
Donald J. Varner 1998 $135,800 $76,671 $41,795 (4)
Secretary 1997 126,588 56,418 24,823 (5)
Patrick A. Kelly 1998 $133,700 $76,057 $41,738 (6)
Treasurer 1997 115,184 54,859 24,412 (7)
- --------------------------------------------------------------------------------------------
</TABLE>
(footnotes on following page)
3
<PAGE>
(1) Does not include amounts attributable to other miscellaneous benefits
received by executive officers. The cost to Home Savings of providing such
benefits to each named executive officer was less than 10% of his cash
compensation.
(2) Consists of directors' fees of $16,800, a matching contribution of $2,500
paid by Home Savings to Mr. McKay's account in The Home Savings and Loan
Company 401(k) Savings Plan (401(k) Plan) and the $22,417 value at December
31, 1998, of 1,507 shares allocated to Mr. McKay's ESOP account.
(3) Consists of directors' fees of $16,000, a matching contribution of $9,595
and a discretionary contribution of $2,860 paid by Home Savings to Mr.
McKay's account in the 401(k) Plan.
(4) Consists of directors' fees of $17,200, a matching contribution of $2,178
paid by Home Savings to Mr. Varner's account in the 401(k) Plan and the
$22,417 value at December 31, 1998, of 1,507 shares allocated to Mr.
Varner's ESOP account.
(5) Consists of directors' fees of $15,600, a matching contribution of $7,777
and a discretionary contribution of $1,446 paid by Home Savings to Mr.
Varner's account in the 401(k) Plan.
(6) Consists of directors' fees of $17,200, a matching contribution of $2,121
paid by Home Savings to Mr. Kelly's account in the 401(k) Plan and the
$22,417 value at December 31, 1998, of 1,507 shares allocated to Mr.
Kelly's ESOP account.
(7) Consists of directors' fees of $16,000, a matching contribution of $7,127
and a discretionary contribution of $1,285 paid by Home Savings to Mr.
Kelly's account in the 401(k) Plan.
EMPLOYMENT AGREEMENTS
On December 17, 1998, Home Savings entered into employment agreements with
Douglas M. McKay, Donald J. Varner and Patrick A. Kelly (collectively,
Employment Agreements). Each of the Employment Agreements provide for a term of
three years and performance reviews by the Board of Directors not less often
than annually at which time the Employment Agreement may be extended for a
period of one year. The Employment Agreements also provide for the inclusion of
the officers in any formally established employee benefit, bonus, pension, and
profit-sharing plans for which senior management personnel are eligible and for
vacation and sick leave in accordance with Home Savings' prevailing policies.
The Employment Agreements are terminable by Home Savings at any time. In
the event of termination by Home Savings for "cause," as defined in the
Employment Agreements, the employee has no right to receive any compensation or
other benefits for any period after such termination. In the event of
termination by Home Savings other than for cause or in connection with a "change
of control," as defined in the Employment Agreements, the employee is entitled
to a continuation of salary payments for a period of time equal to the remaining
term of the Employment Agreement, a continuation of benefits substantially equal
to those being provided at the date of termination of his employment until the
earliest to occur of the end of the term of the Employment Agreement or the date
on which the employee becomes employed full-time by another employer, and a cash
bonus equal to the cash bonus, if any, paid to the employee in the twelve-month
period prior to the termination of his employment.
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In the event of termination in connection with a "change in control," the
employee is entitled to payment of an amount equal to 2.99 times the employee's
annual compensation immediately preceding the termination of his employment. In
addition, the employee is entitled to continued coverage under benefit plans
until the earliest of the end of the term of his Employment Agreement or the
date on which he is included in another employer's benefit plans as a full-time
employee. The maximum which the employee may receive, however, is limited to an
amount which will not result in the imposition of a penalty tax pursuant to
Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (Code).
"Control," as defined in the Employment Agreements, generally refers to the
acquisition by any person or entity of the ownership or power to vote 10% or
more of the voting stock of Home Savings or UCFC, the control of the election of
a majority of the directors of Home Savings or UCFC, or the exercise of a
controlling influence over the management or policies of Home Savings or UCFC.
The aggregate payments that would have been made to Messrs. McKay, Varner
and Kelly pursuant to the Employment Agreements, assuming their termination at
January 1, 1999, following a change of control, would have been approximately
$923,910, $418,223 and $411,756, respectively.
PENSION PLAN
Home Savings maintains and currently administers a defined benefit
retirement plan (Pension Plan). Prior to December 31, 1998, employees became
eligible to participate in the Pension Plan on the first day of the plan year
coincident with or next following the later of the date the employee (i)
attained age 20, or (ii) completed six months of continuous employment with Home
Savings. In May 1999, the Board of Directors adopted a resolution terminating
the Pension Plan due to the implementation of the ESOP.
Participants become 100% vested in the Pension Plan upon completion of five
years of service or upon termination of the Pension Plan. Upon retirement at
age 65, vested participants are entitled to annual benefits equal to the sum of:
(i) .95% of the average of a participant's highest five of the last ten
consecutive years of service (the Final Average Compensation), multiplied by the
number of years of credited service, not to exceed 35 years; plus (ii) .65% of
the Final Average Compensation in excess of the Social Security taxable wage
bases multiplied by the participant's credited service, not to exceed 35 years;
plus (iii) 1.5% of the Final Average Compensation multiplied by the
participant's credited service in excess of 35 years, but not to exceed five
years. The Pension Plan permits early retirement after age 60 with 15 or more
years of service at a reduced benefit level.
Home Savings funding policy is to contribute amounts to the Pension Plan
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional amounts as Home
Savings may determine to be appropriate from time to time. Contributions are
intended to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future.
5
<PAGE>
The following table indicates the annual retirement benefit that would be
payable under the Pension Plan upon retirement at age 65 to a participant
electing to receive his retirement benefit in the standard form of benefit:
<TABLE>
<CAPTION>
Years of credited service
Average compensation ---------------------------------------------------
(highest 5 years) (1) 15 20 25 30 35
--------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$20,000 $ 2,545 $ 3,393 $ 4,242 $ 5,090 $ 5,938
35,000 3,818 5,090 6,363 7,635 8,908
40,000 5,538 7,384 9,230 11,076 12,922
50,000 7,681 10,242 12,802 15,363 17,923
60,000 9,824 13,099 16,374 19,649 22,924
70,000 11,968 15,957 19,946 23,935 27,925
100,000 18,398 24,530 30,663 36,795 42,928
150,000 29,114 38,818 48,523 58,227 67,932
</TABLE>
- ------------------------
(1) The maximum amount of annual compensation which can be considered in
computing benefits under Section 401(a)(17) of the Code is $160,000.
Mr. McKay, Mr. Kelly and Mr. Varner have approximately 26, 16 and 42 years
of credited service under the Pension Plan, respectively. Their base salary and
bonuses are reported above in the Summary Compensation Table.
COMPENSATION COMMITTEE REPORT
The business of UCFC consists principally of holding the stock of Home
Savings. The functions of the executive officers of UCFC, who are also
executive officers of Home Savings, pertain primarily to the operations of Home
Savings. The executive officers receive their compensation, therefore, from
Home Savings, rather than from UCFC. The Salary Committee of the Home Savings
Board of Directors has furnished the following report concerning executive
compensation.
PROCESS FOR DETERMINING COMPENSATION
The compensation of the executive officers is reviewed annually by the
Salary Committee. The Salary Committee utilizes industry survey data and takes
into consideration asset bases and geographic location. In addition, the Salary
Committee assesses each executive officer's contribution to UCFC and Home
Savings, the skills and experiences required for each officer's position and
potential contributions of the officer to the future of UCFC and Home Savings.
Based on these assessments, the Salary Committee makes a recommendation to the
Board of Directors of Home Savings. The Board reviews the recommendations of
the Salary Committee, except that the executive officers that also serve as
Board members do not participate in discussions or decisions relative to their
own compensation.
COMPENSATION POLICIES
The executive compensation program of UCFC and Home Savings is designed to
attract and retain key executives by providing comparable compensation
opportunities to those offered by peer
6
<PAGE>
group companies. The program includes a pay-for-performance component that
is intended to provide rewards to executive officers for corporate
performance and to motivate the officers to reach specific strategic business
objectives.
DETERMINATION OF CEO'S COMPENSATION
The Salary Committee recommended and the Board approved the 1998
compensation of Mr. McKay, the President and Chief Executive Officer of UCFC and
Home Savings, pursuant to the policies described above for executive officers.
The increase in Mr. McKay's compensation was based on comparative salary data
gathered from various industry compensation surveys, as well as the Salary
Committee's assessment of the performance of Mr. McKay, Home Savings and UCFC
during 1998.
Submitted by the Salary Committee of Home Savings' Board of Directors:
<TABLE>
<S> <C> <C> <C>
Richard M. Barrett Charles B. Cushwa, III Herbert F. Schuler, Sr. John F. Zimmerman, Jr.
James E. Bennett Donald R. Inglis Clarence R. Smith, Jr.
</TABLE>
DIRECTOR COMPENSATION
No fees are paid for service as a director of UCFC. Each director of Home
Savings currently receives a retainer of $10,000 per year and $400 per meeting
of the full Board attended. Non-employee directors of Home Savings receive an
additional fee of $400 per committee meeting attended or $600, per committee
meeting attended, if they serve as chairman of the committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, no member of the Salary Committee was a current or former
executive officer or employee of UCFC or Home Savings or had a reportable
business relationship with UCFC or Home Savings.
7
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on UCFC's common
shares during 1998 with the total return of an index of companies whose shares
are traded on The Nasdaq Stock Market and an index of savings and loan
associations and savings and loan holding companies. The graph assumes that 100
UCFC shares were purchased on July 9, 1998, at a purchase price of $15 per
share, the closing price on that date, and not $10 per share, the initial public
offering price of UCFC shares.
CERTAIN TRANSACTIONS
Home Savings makes loans to executive officers and directors of Home
Savings and UCFC in the ordinary course of business and on the same terms and
conditions, including interest rates and collateral, as those of comparable
loans to other persons. All outstanding loans to executive officers and
directors were made pursuant to such policy, do not involve more than the normal
risk of collectibility or present other unfavorable features and are current in
their payments.
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<PAGE>
PROPOSAL ONE - APPROVAL OF THE UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
GENERAL. The following is a summary of the terms of the Incentive Plan and
is qualified in its entirety by reference to the full text of the Incentive
Plan, a copy of which is attached hereto as Exhibit A.
PURPOSE. The purpose of the Incentive Plan is to promote and advance the
interests of UCFC and its shareholders by enabling UCFC to attract, retain and
reward directors, directors emeritus and managerial and other key employees of
UCFC and any subsidiary, including Home Savings, by facilitating their purchase
of an ownership interest in UCFC. Pursuant to the Incentive Plan, the maximum
number of UCFC shares that may be issued pursuant to awards of stock options,
stock appreciation rights (SARs), restricted shares, performance awards or other
forms of stock-based incentive awards will be 3,471,562. If all shares reserved
for issuance pursuant to the awards granted under the Incentive Plan are issued,
the voting power of existing shareholders will be diluted by approximately 9.1%,
and the influence of directors and officers of UCFC over the outcome of the vote
on any matters submitted to UCFC shareholders, including changes in control,
will increase.
ADMINISTRATION AND ELIGIBILITY. The Incentive Plan will be administered by
a committee of directors composed of two or more directors of UCFC who are not
employees of UCFC or Home Savings (Benefit Committee). The Benefit Committee
may grant options under the Incentive Plan at such times as it deems most
beneficial to UCFC and Home Savings on the basis of the individual participant's
position and duties and the value of the individual's services and
responsibilities to Home Savings and UCFC.
Without further approval of the shareholders, the Board of Directors may at
any time terminate the Incentive Plan or may amend it from time to time as the
Board of Directors may deem advisable, except that the Board of Directors may
not, without the approval of the shareholders, make any amendment which would
(a) increase the aggregate number of common shares that may be issued under the
Incentive Plan (except for adjustments to reflect certain changes in the
capitalization of UCFC), (b) materially modify the requirements as to
eligibility for participation in the Incentive Plan, or (c) materially increase
the benefits accruing to participants under the Incentive Plan. Notwithstanding
the foregoing, the Board of Directors may amend the Incentive Plan to take into
account changes in applicable securities, federal income tax and other
applicable laws.
OPTION TERMS. Options granted to the officers and employees under the
Incentive Plan may be "incentive stock options" (ISOs) within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (Code), or may be
options which do not qualify under Section 422 of the Code (Non-qualified Stock
Options). Options granted under the Incentive Plan to directors or director
emeritus who are not employees of UCFC or Home Savings will be Non-qualified
Stock Options. No individual may be granted options to purchase more than 25%
of the shares that may be issued pursuant to the Incentive Plan.
The exercise price of each option granted under the Incentive Plan will be
determined by the Benefit Committee at the time the option is granted; provided,
however, that the exercise price of an option may not be less than 100% of the
fair market value of the shares on the date of the grant. In addition, the
exercise price of an ISO may not be less than 110% of the fair market value of
the shares
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<PAGE>
on the date of the grant if the recipient owns more than 10% of the
outstanding common shares of UCFC. The Benefit Committee will fix the term
of each option, except that an ISO will not be exercisable after the
expiration of ten years from the date it is granted; provided, however, that
if a recipient of an ISO owns a number of shares representing more than 10%
of UCFC shares outstanding at the time the ISO is granted, the term of the
ISO will not exceed five years. If the fair market value of shares awarded
pursuant to ISOs that are exercisable for the first time during any calendar
year by a participant under the Incentive Plan exceeds $100,000, the ISOs
will be Non-qualified Stock Options to the extent of such excess.
An option recipient cannot transfer or assign an option other than by will
or in accordance with the laws of descent and distribution. Termination of an
option recipient's employment for cause, as defined in the Incentive Plan, will
result in the annulment of any outstanding exercisable options. Any outstanding
options that have not yet been exercised will terminate upon the resignation,
removal or retirement of a director or director emeritus of UCFC or Home
Savings, or upon the termination of employment of an officer or employee of
UCFC or Home Savings, except in the case of death, disability or retirement
between ages 60 and 64 with 15 years of service to UCFC or a subsidiary, or
retirement at or after age 65, of the recipient or a change in control of UCFC
or Home Savings, as defined in the Incentive Plan.
UCFC will receive no monetary consideration for the granting of options
under the Incentive Plan. Upon the exercise of options, UCFC will receive
payment of cash or, if acceptable to the Benefit Committee, common shares of
UCFC or the surrender of outstanding stock options. The market value of the
common shares underlying the options reserved for the Incentive Plan is
approximately $42.7 million, based upon the 3,471,562 shares reserved,
multiplied by the $12.31 per share closing sales price of shares of UCFC on June
1, 1999, as quoted on the Nasdaq National Market.
TAX TREATMENT OF INCENTIVE STOCK OPTIONS. An optionee who is granted an
ISO will not recognize taxable income either on the date of grant or on the date
of exercise, although the difference between the fair market value of the shares
at the time of exercise and the exercise price may be subject to the alternative
minimum tax. Upon disposition of shares acquired from the exercise of an ISO,
capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the optionee disposes of the shares within two
years of the date of grant or within one year from the date of the issuance of
the shares to the optionee (Disqualifying Disposition), then the optionee will
recognize ordinary income, as opposed to capital gain, at the time of
disposition. In general, the amount of ordinary income recognized will be equal
to the lesser of (i) the amount of gain realized on the disposition, or (ii) the
difference between the fair market value of the shares received on the date of
exercise and the exercise price. Any remaining gain or loss is treated as a
short-term or long-term capital gain or loss, depending upon the period of time
the shares have been held.
UCFC will not be entitled to a tax deduction upon either the exercise of an
ISO or the disposition of shares acquired pursuant to such exercise, except to
the extent that the optionee recognizes ordinary income in a Disqualifying
Disposition that satisfies the limitations of Section 162(m) of the Code.
Section 162(m) provides that a publicly held company may not deduct "applicable
employee remuneration" to the extent that such remuneration paid to an employee
for a taxable year exceeds $1.0 million; provided, however, that if the
compensation is paid solely on the basis of specified performance goals, its
does not count towards the $1.0 million limit. Ordinary income from a
Disqualifying
10
<PAGE>
Disposition will constitute compensation but will not be subject to tax
withholding, nor will it be considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part, with
previously acquired shares, the exchange should not affect the ISO tax treatment
of the exercise. Upon such exchange, and except for Disqualifying Dispositions,
no gain or loss is recognized by the optionee upon delivering previously
acquired shares to UCFC. Shares received by the optionee equal in number to the
previously acquired common shares exchanged therefor will have the same basis
and holding period for capital gain purposes as the previously acquired shares.
(The optionee, however, will not be able to utilize the prior holding period for
the purpose of satisfying the ISO statutory holding period requirements for
avoidance of a Disqualifying Disposition.) Shares received by the optionee in
excess of the number of shares previously acquired will have a basis of zero and
a holding period which commences as of the date the shares are transferred to
the optionee upon exercise of the ISO. If the exercise of an ISO is effected
using shares previously acquired through the exercise of an ISO, the exchange of
such previously acquired shares will be considered a disposition of such shares
for the purpose of determining whether a Disqualifying Disposition has occurred.
TAX TREATMENT OF NON-QUALIFIED STOCK OPTIONS. A recipient of a
Non-qualified Stock Option does not recognize taxable income on the date of
grant of the option, provided that the option does not have a readily
ascertainable fair market value at the time it is granted. In general, the
optionee must recognize ordinary income at the time of exercise of a
Non-qualified Stock Option in the amount of the difference between the fair
market value of the shares on the date of exercise and the option exercise
price. The ordinary income recognized will constitute compensation for which
tax withholding by UCFC generally will be required. The amount of ordinary
income recognized by an optionee will be deductible by UCFC in the year that
the optionee recognizes the income if UCFC complies with any applicable
withholding requirement and the limitations of Section 162(m) of the Code
discussed above.
If, at the time of exercise, the sale of the shares could subject the
optionee to short-swing profit liability under Section 16(b) of the Securities
Exchange Act of 1934 (Exchange Act), the optionee generally will recognize
ordinary income only on the date that the optionee is no longer subject to
Section 16(b) liability in an amount equal to the fair market value of the
shares on the date the optionee is no longer subject to liability less the
option exercise price. Nevertheless, the optionee may elect under Section 83(b)
of the Code, within 30 days of the date of exercise, to recognize ordinary
income as of the date of exercise, without regard to the restriction of Section
16(b).
Shares acquired upon the exercise of a Non-qualified Stock Option will have
a tax basis equal to their fair market value on the exercise date or other
relevant date on which ordinary income is recognized, and the holding period for
the shares generally will begin on the date of exercise or such other relevant
date. Upon subsequent disposition of the shares, the optionee will recognize
long-term capital gain or loss if the optionee has held the shares for more than
twelve months prior to disposition or short-term capital gain or loss if the
optionee has held the shares for one year or less prior to disposition.
If an optionee with a Non-qualified Stock Option pays the exercise price,
in whole or in part, with previously acquired shares, the optionee will
recognize ordinary income in the amount by which the fair market value of the
shares received exceeds the exercise price. The optionee will not recognize
gain or loss upon delivering such previously acquired shares to UCFC. Shares
received by an optionee equal
11
<PAGE>
in number to the previously acquired shares exchanged therefor will have the
same basis and holding period as such previously acquired shares. Shares
received by an optionee in excess of the number of such previously acquired
shares will have a basis equal to the fair market value of such additional
shares as of the date ordinary income is recognized. The holding period for
such additional shares will commence as of the date of exercise or such other
relevant date.
STOCK APPRECIATION RIGHTS. The Benefits Committee may include SARs as a
component of an option or independent of an option. The SAR would entitle the
recipient to receive an amount of cash equal to the amount by which the fair
market value of the shares subject to the SAR exceeds the exercise price of the
SAR.
TAX TREATMENT OF SARS. A participant in the Incentive Plan is not taxed
upon the grant of SARs. Instead, participants will generally be taxed on the
exercise date, at ordinary income rates, on the amount of cash received and the
fair market value of any common shares received. However, if the sale of common
shares could subject a participant to liability under Section 16(b) of the
Exchange Act, such participant generally will not recognize ordinary income with
respect to such common shares until the participant is no longer subject to such
liability, at which time the participant will recognize ordinary income in an
amount equal to the fair market value of common shares on such date.
PERFORMANCE AWARDS. The Benefit Committee may grant an award of cash,
shares, restricted shares or other securities to be paid to an individual upon
the achievement of certain performance goals.
RESTRICTED SHARES. The Benefit Committee may grant awards of shares that
are subject to restrictions on transfer and other restrictions on incidents of
ownership, including vesting.
TAX TREATMENT OF PERFORMANCE AWARDS AND RESTRICTED SHARE AWARDS.
Persons receiving performance awards and restricted shares under the
Incentive Plan generally will not recognize income upon the award of such
shares, but will recognize ordinary income when and to the extent the
performance goals are achieved or the restrictions on such shares lapse, in
an amount equal to the fair market value of the shares at the time the goals
are achieved or restrictions lapse plus the amount of any dividends
distributed to the participant with respect to such shares. If applicable
withholding requirements are satisfied, Home Savings or UCFC will be entitled
to a deduction each year in an amount equal to the income, if any, recognized
by participants for such year.
THE BOARD OF DIRECTORS OF UCFC RECOMMENDS THAT THE SHAREHOLDERS OF UCFC
APPROVE THE INCENTIVE PLAN.
PROPOSAL TWO - APPROVAL OF THE UNITED COMMUNITY FINANCIAL CORP.
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
GENERAL. The following is a summary of the terms of the RRP and is
qualified in its entirety by reference to the full text of the RRP, a copy of
which is attached hereto as Exhibit B.
PURPOSE. UCFC has proposed the RRP to reward and retain directors,
directors emeritus, officers and employees of UCFC and Home Savings who are in
key positions of responsibility by providing them with an ownership interest in
UCFC. UCFC expects to contribute sufficient funds to
12
<PAGE>
enable the RRP to purchase up to 1,388,625 common shares of UCFC. The
Trustee of the RRP may buy additional shares with earnings or other
distributions on common shares held by the RRP.
ADMINISTRATION AND ELIGIBILITY. The RRP will be administered by the Board
of Directors of UCFC or by a committee of directors. The board will determine
which directors, directors emeritus and employees of UCFC and Home Savings will
be awarded shares under the RRP and the number of shares awarded. At May 1,
1999, approximately 55 persons were eligible to receive awards under the RRP.
The shares to be awarded pursuant to the RRP may be purchased by UCFC on
the open market or may consist of authorized but unissued shares of UCFC.
Management expects that the shares will be purchased on the open market. In the
event that all 1,388,625 shares that may be awarded under the RRP consist of
authorized but unissued shares of UCFC, the interests of current shareholders
will be diluted by approximately 3.85%. No individual may be granted over the
term of the RRP awards for more than 25% of the total number of shares subject
to the RRP.
TERMS. Unless the RRP Committee specifies a longer period of time at the
time an award is granted, one-fifth of the number of shares awarded to an
individual will become earned and non-forfeitable on the date of grant and on
each of the first four anniversaries of the date of such award. Compensation
expense in the amount of the fair market value of the RRP shares will be
recognized as the shares are earned. Until shares awarded are earned by the
participant, such shares will be forfeited in the event that the participant
ceases to be either a director or director emeritus of UCFC or Home Savings or
an employee of UCFC or Home Savings, except that in the event of the death,
disability or retirement between ages 60 and 64 with 15 years of service to UCFC
or a subsidiary, or retirement at or after age 65 of a participant or of a
"change in control" or "imminent change in control" of UCFC or Home Savings, the
participant's shares will be deemed to be earned and non-forfeitable. In the
event death or of a change in control, the shares will be released to the
participant immediately, but in the event of disability or retirement, the
shares will remain subject to the vesting schedule set forth in the award
agreement. A "change in control" means (i) the execution of an agreement for
the sale of all, or a material portion, of the assets of UCFC or Home Savings;
(ii) the execution of an agreement for a merger or recapitalization of UCFC or
Home Savings or any merger or recapitalization whereby UCFC or Home Savings is
not the surviving entity; (iii) a change of control of UCFC or Home Savings, as
defined or determined by the OTS; or (iv) the acquisition, directly or
indirectly, of the beneficial ownership (within the meaning of "beneficial
ownership" as defined under Section 13(d) of the Securities Exchange Act of 1934
and the rules promulgated thereunder) of twenty-five percent or more of the
outstanding voting securities of UCFC or Home Savings by any person, trust,
entity or group. An "imminent change in control" means any offer or
announcement, oral or written, by any party, to acquire control of UCFC or Home
Savings as to which an application or notice has been filed with the OTS and
such application has been approved or such notice has not been disapproved, if
such acquisition has not been approved by the Board of Directors.
The shares, together with any cash dividends or distributions paid thereon,
will be distributed as soon as practicable after they are earned. A participant
may direct the voting of all shares awarded to him or her, whether or not they
have been earned. Shares that have been awarded but not earned may not be
transferred.
TAX TREATMENT OF SHARES AWARDED UNDER THE RRP. Persons receiving shares
under the RRP generally will not recognize income upon the award of such shares,
but will recognize ordinary income
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<PAGE>
when and to the extent the restrictions on such shares lapse, in an amount
equal to the fair market value of the shares at the time such restrictions
lapse plus the amount of any dividends distributed to the participant with
respect to such shares. If applicable withholding requirements are
satisfied, Home Savings will be entitled to a deduction each year in an
amount equal to the income, if any, recognized by participants for such year.
THE BOARD OF DIRECTORS OF UCFC RECOMMENDS THAT THE SHAREHOLDERS OF UCFC
APPROVE THE RRP.
PROPOSALS OF SHAREHOLDERS AND OTHER MATTERS
Any proposals of shareholders intended to be included in the proxy
statement for the 2000 Annual Meeting of Shareholders of UCFC should be sent to
UCFC by certified mail and must be received by UCFC not later than November 25,
1999. In addition, if a shareholder intends to present a proposal at the 2000
Annual Meeting without including the proposal in the proxy materials related to
that meeting, and if the proposal is not received by February 8, 2000, then the
proxies designated by the Board of Directors of UCFC for the 2000 Annual Meeting
of Shareholders of UCFC may vote in their discretion on any such proposal any
shares for which they have been appointed proxies without mention of such matter
in the proxy statement or on the proxy card for such meeting.
Management knows of no other business that may be brought before the
Special Meeting. It is the intention of the persons named in the enclosed Proxy
to vote such Proxy in accordance with their best judgment on any other matters
that may be brought before the Special Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN AND
RETURN THE PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
Youngstown, Ohio Douglas M. McKay,
June 7, 1999 President and Chairman of the Board
14
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
INDEX
<TABLE>
<CAPTION>
SECTION DESCRIPTION
- ------- -----------
<S> <C>
1 Purpose of the Plan
2 Definitions
3 Types of Awards Covered
4 Administration
5 Eligibility
6 Shares Subject to the Plan
7 Stock Options
8 Stock Appreciation Rights
9 Restricted Stock
10 Performance Awards
11 Other Stock-Based Incentive Awards
12 Exercise of Options
13 Rights in Event of Death,
Disability or Retirement
14 Award Agreements
15 Tax Withholding
16 Change of Control
17 Dilution or Other Adjustment
18 Transferability
19 Amendment or Termination
20 General Provisions
21 Plan Effective Date
22 Plan Termination
23 Governing Law
</TABLE>
<PAGE>
EXHIBIT A
UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
SECTION 1
PURPOSE OF THE PLAN
1.1 The purpose of the United Community Financial Corp. 1999 Long-Term
Incentive Plan is to attract and retain qualified directors, directors
emeritus and employees and to strengthen the mutuality of interests
between such directors, directors emeritus and employees and the
Corporation's shareholders by providing directors, directors emeritus
and employees with a proprietary interest in pursuing the long-term
growth, profitability and financial success of the Corporation.
SECTION 2
DEFINITIONS
2.1 Unless the context indicates otherwise, the following terms, when used
in this Plan, shall have the meanings set forth in this Section:
a) "AFFILIATE" means (i) a member of a controlled group of
corporations of which the Corporation is a member or (ii) an
unincorporated trade or business which is under common control
with the Corporation as determined in accordance with Section
414(c) of the Code, and the regulations issued thereunder. For
purposes hereof, a "controlled group of corporations" shall have
the meaning set forth in Section 1563(a) of the Code determined
without regard to Sections 1563(a)(4) and (e)(3)(c) of the Code.
b) "AWARD" means a grant or award under this Plan in the form of an
Option, an SAR, Restricted Shares, a Performance Award or any
other stock-based incentive award.
c) "BOARD" means the Board of Directors of the Corporation.
d) "CHANGE OF CONTROL" means an event defined in Section 16 of this
Plan.
e) "CODE" means the Internal Revenue Code of 1986, as amended, and
related Treasury Regulations.
f) "COMMITTEE" means any Committee comprised of two or more Outside
Directors designated by the Board to administer the Plan in
accordance with Section 4 of this Plan.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
g) "COMMON SHARES" means the common shares, without par value, of
the Corporation.
h) "CORPORATION" means UCFC.
i) "DEFERRED SHARES" means an award made pursuant to Section 11 of
this Plan of the right to receive Common Shares in lieu of cash
thereof at the end of a specified time period.
j) "DIRECTOR" means any member of the Board of Directors of the
Corporation or the Board of Directors of a Subsidiary.
k) "DIRECTOR EMERITUS" means any director emeritus of the
Corporation or a Subsidiary.
l) "DISABILITY" means permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
m) "EFFECTIVE DATE" means the date defined in Section 21.1 of this
Plan.
n) "EMPLOYEE" means any full-time employee of the Corporation or any
of its Subsidiaries (including Directors or Directors Emeritus
who are employed on a full-time basis by the Corporation or any
of its Subsidiaries).
o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
p) "FAIR MARKET VALUE" of a Common Share on a given date shall be
based upon the last sales price or, if unavailable, the average
of the closing bid and asked prices of a Common Share on such
date (or, if there was no trading or quotation in the Common
Shares on such date, on the next preceding date on which there
was trading or quotation) if the Common Shares are listed on a
national securities exchange or quoted on an interdealer
quotation system. If the Common Shares are not listed on a
national securities exchange or quoted on an interdealer
quotation system, the Fair Market Value of a Common Share shall
be determined by the Committee in good faith based upon the best
available facts and circumstances at the time.
q) "GRANTEE" means a person granted an Award under this Plan.
r) "IMMEDIATE FAMILY" means, with respect to a given Grantee, that
Grantee's spouse, children or grandchildren (including adopted
children or grandchildren).
s) "ISO" means an Award that is intended to qualify as an incentive
stock option under Section 422 of the Code, as now or hereafter
constituted.
t) "NON-EMPLOYEE DIRECTOR" means a Director or Director Emeritus of
the Corporation or a Subsidiary who is not an Employee nor has
been an Employee at any time during the prior one-year period.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
u) "NQSO" means an Award that is not intended to qualify as an
incentive stock option under Section 422 of the Code, as now or
hereafter constituted.
v) "OPTIONS" refers collectively to NQSOs and ISOs issued under this
Plan.
w) "OTS" means the Office of Thrift Supervision, Department of the
Treasury.
x) "OUTSIDE DIRECTOR" means a non-employee Director or Director
Emeritus within the meaning of Rule 16b-3(b)(3) under the
Exchange Act, or any successor thereto, who is also an "outside
director" within the meaning of Section 162(m) of the Code and
the regulations thereunder.
y) "PERFORMANCE AWARD" means an Award under the Plan, payable in
cash, Common Shares, other securities or other awards which
confers on the holder thereof the right to receive payments upon
the achievement of certain performance goals during the
performance periods established by the Committee.
z) "PERMITTED TRANSFEREE" means any individual or entity as defined
in Section 18.2 of this Plan.
aa) "PLAN" means this 1999 Long-Term Incentive Plan as set forth
herein and as amended from time to time.
bb) "RESTRICTED SHARES" means an Award of Common Shares subject to
restrictions on transfer and/or any other restrictions on
incidents of ownership as the Committee may determine.
cc) "RETIREMENT" means the retirement of a Grantee between ages 60
and 64 with 15 or more years of service to the Corporation or a
Subsidiary, or the retirement of a Grantee at or after age 65.
dd) "RULES" means Rule 16(b)(3) and any successor provisions
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
ee) "SAR" means an Award constituting the right to receive, upon
surrender of the right, but without payment, an amount payable in
cash.
ff) "SUBSIDIARY OR SUBSIDIARIES" means any entity or entities in
which the Corporation owns a majority of the voting power.
gg) "TEN PERCENT SHAREHOLDER" means any Grantee who owns more than
10% of the combined voting power of all classes of stock of the
Corporation, within the meaning of Section 422 of the Code.
hh) "TERMINATED FOR CAUSE" means any removal of a Director or
discharge of an employee for the personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties, willful violation of a material provision of any law,
rule or regulation
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
(other than traffic violations or similar offenses) or a material
violation of a final cease-and-desist order or for any other
action of a director or employee which results in a substantial
financial loss to the Corporation or a Subsidiary.
SECTION 3
TYPES OF AWARDS COVERED
3.1 Awards granted under this Plan may be:
a) Options which may be designated as:
(i) NQSOs; or
(ii) ISOs;
b) SARs;
c) Restricted Shares;
d) Performance Awards; or
e) other forms of stock-based incentive awards.
SECTION 4
ADMINISTRATION
4.1 This Plan shall be administered by the Committee. The members of the
Committee shall be appointed from time to time by the Board. Members
of the Committee shall serve at the pleasure of the Board, and the
Board may from time to time remove members from, or add members to,
the Committee. Subject to the provisions of this Plan and applicable
law, the Committee shall have full discretion and the exclusive power:
a) to select the Employees, Directors and Directors Emeritus who
will participate in the Plan and to make Awards to such Employees
and Directors;
b) to determine the times at which Awards shall be granted and any
terms and conditions with respect to Awards as shall not be
inconsistent with the provisions of this Plan; and
c) to resolve all questions relating to the administration of this
Plan and applicable law.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
4.2 The interpretation of, and application by, the Committee of any
provision of this Plan shall be final and conclusive. The Committee,
in its sole discretion, may establish rules and guidelines relating to
this Plan as it may deem appropriate.
4.3 A majority of the members of the Committee shall constitute a quorum
for the transaction of business. An action in writing by all members
of the Committee then serving shall be fully as effective as if the
action had been taken by unanimous vote at a meeting duly called and
held.
4.3 The Committee may employ such legal counsel, consultants, and agents
as it may deem desirable for the administration of this Plan and may
rely upon any opinion received from any retained counsel or consultant
and any computation received from any retained consultant or agent.
The Committee shall keep minutes of its actions under this Plan.
4.4 No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to this Plan or any
Awards. If a member of the Board or of the Committee is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by such member
in such capacity under or with respect to this Plan, the Corporation
shall indemnify such member against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such member in connection with such action,
suit or proceeding if such member acted in good faith and in a manner
such member reasonably believed to be in or not opposed to the best
interests of the Corporation and its Subsidiaries and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
such member's conduct was unlawful.
SECTION 5
ELIGIBILITY
5.1 The individuals who shall be eligible to participate in this Plan
shall be Directors, Directors Emeritus, officers, management, and such
other key Employees of the Corporation and the Subsidiaries as the
Committee may from time to time determine.
SECTION 6
SHARES OF STOCK SUBJECT TO THE PLAN
6.1 Awards may be granted with respect to the Common Shares.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
6.2 Shares delivered upon exercise of an Award, at the election of the
Board, may be Common Shares that are authorized but previously
unissued, or Common Shares reacquired by the Corporation, or both.
6.3 The maximum number of Common Shares that may be issued pursuant to
Awards granted under this Plan, subject to adjustment as provided in
Section 17 of this Plan, shall be 3,471,562 Common Shares. For the
purpose of computing the total number of Common Shares available for
Awards under this Plan, there shall be counted against the foregoing
limitation the number of Common Shares subject to issuance upon
exercise of Awards as of the dates on which such Awards are granted.
If any Awards are forfeited, terminated or exchanged for other Awards,
or expire unexercised, the Common Shares which were theretofore
subject to such Awards shall again be available for Awards under this
Plan to the extent of such forfeiture, termination or expiration of
such Awards.
6.4 Notwithstanding any other provision of this Plan to the contrary,
subject to adjustment as provided in Section 17 of this Plan, the
maximum number of Common Shares that may be issued to any individual
during the term of this Plan pursuant to Options granted under this
Plan shall be 25% of the number of Common Shares that may be issued
pursuant to this Plan.
6.5 Any Common Shares subject to an Award which, for any reason, expires
or is terminated unexercised, shall again be available for the grant
of other Awards under this Plan; provided, however, that forfeited
shares or other securities shall not be available for further Awards
if the Grantee has realized any benefits of ownership from such
shares.
SECTION 7
STOCK OPTIONS
7.1 The Committee may grant Options, as follows, which shall be evidenced
by a stock option agreement and may be designated as NQSOs or ISOs:
a) NQSOS
(i) A NQSO is a right to purchase a specified number of Common
Shares during a period determined by the Committee, not to
exceed ten years, at a price determined by the Committee
that is not less than the Fair Market Value of the Common
Shares on the date the Option is granted.
(ii) The exercise price of the NQSO may be paid in cash. At
the discretion of the Committee, the exercise price may
also be paid by the tender of Common Shares to the
Corporation or through a combination of Common Shares and
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
cash or through such other means as the Committee
determines are consistent with the purpose of this Plan
and applicable law. No fractional Common Shares will be
issued or accepted by the Corporation.
(iii) No NQSO may be exercised more than ten years after the
date the NQSO is granted.
(iv) The Committee may permit the person exercising the NQSO,
either on a selective or an aggregate basis, to
simultaneously exercise the NQSO and sell the Common
Shares acquired, pursuant to a brokerage or similar
arrangement approved in advance by the Committee, and use
the proceeds from the sale as payment of the exercise
price of the NQSO.
(b) ISOS
(i) No ISO may be granted under this Plan to a Non-Employee
Director.
(ii) To the extent the aggregate Fair Market Value (determined
at the time of the grant of the Award) of the number of
Common Shares with respect to which ISOs are exercisable
under all plans of the Corporation or a Subsidiary for the
first time by a Grantee during any calendar year exceeds
$100,000, or such other limit as may be required by the
Code, such ISOs shall be treated as NQSOs to the extent of
such excess.
(iii) No ISO may be exercisable more than:
A) ten years after the date the ISO is granted in the
case of a Grantee who is not a Ten Percent
Shareholder on the date the ISO is granted; and
B) five years after the date the ISO is granted in
the case of a Grantee who is a Ten Percent
Shareholder on the date the ISO is granted.
(iv) The exercise price of any ISO shall be determined by the
Committee and shall not be less than:
A) the Fair Market Value of the Common Shares subject
to the ISO on the date of grant in the case of a
Grantee who is not a Ten Percent Shareholder on
the date the ISO is granted; and
B) not less than 110 percent of the Fair Market Value
of the Common Shares subject to the ISO on the
date of grant in the case of a Grantee who is a
Ten Percent Shareholder on the date the ISO is
granted.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
(v) The Committee may provide that the exercise price under an
ISO may be paid by one or more of the methods available
for paying the exercise price of an NQSO under Section
7.1(a)(iv) of this Plan.
SECTION 8
STOCK APPRECIATION RIGHTS
8.1 The amount payable with respect to each SAR shall be equal in value to
the applicable percentage of the excess, if any, of the Fair Market
Value of a Common Share on the exercise date over the exercise price
of the SAR. The exercise price of the SAR shall be determined by the
Committee and shall not be less than the Fair Market Value of a Common
Share on the date the SAR is granted. SARs may be granted in tandem
with an Option in which event the Grantee has the right to elect to
exercise either the SAR or the Option. Upon the election to exercise
one of these Awards, the other Award is subsequently terminated. An
SAR may also be granted as an independent Award.
8.2 In the case of an SAR granted in tandem with an ISO to an Employee who
is a Ten Percent Shareholder on the date of such grant, the amount
payable with respect to each SAR shall be equal in value to the
applicable percentage of the excess, if any, of the Fair Market Value
of a Common Share on the exercise date over the exercise price of the
SAR, which exercise price shall not be less than 110 percent of the
Fair Market Value of a Common Share on the date the SAR is granted.
8.3 The applicable percentage, exercise price and exercise period of a SAR
shall be established by the Committee at the time the SAR is granted.
SECTION 9
RESTRICTED STOCK
9.1 Restricted Shares are Common Shares that are issued to a Grantee at a
price determined by the Committee, which price may be zero, and is
subject to restrictions on transfer and/or such other restrictions on
incidents of ownership as the Committee may determine.
9.2 The Committee shall specify in the restricted share award agreement
the terms upon which Restricted Shares shall vest; provided, however
that the Grantee continues to be employed by the Corporation on the
vesting date.
9.3 The Committee may, in its discretion, provide for accelerated vesting
of Restricted Shares upon the achievement of specified performance
goals to be determined by the Committee.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
9.4 A Grantee may make the election under Section 83(b) of the Code.
SECTION 10
PERFORMANCE AWARDS
10.1 A Performance Award granted under this Plan:
a) may be denominated or payable in cash, Common Shares, Restricted
Shares, other securities or other Awards; and
b) shall confer on the holder thereof the right to receive payments,
in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee shall
establish.
10.2 Subject to the terms of this Plan and any applicable Award agreement,
the performance goals to be achieved during any performance period,
the length of any performance period, the amount of any Performance
Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the
Committee.
SECTION 11
OTHER STOCK-BASED INCENTIVE AWARDS
11.1 The Committee may from time to time grant Awards under this Plan that
provide a Grantee the right to purchase Common Shares or units that
are valued by reference to the Fair Market Value of the Common Shares
(including, but not limited to, phantom securities or dividend
equivalents) or to receive Deferred Shares. Such Awards shall be in a
form determined by the Committee (and may include terms contingent
upon a Change of Control); provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan.
SECTION 12
EXERCISE OF OPTIONS
12.1 The Committee may provide for the exercise of Options in installments
and upon such terms, conditions and restrictions as it may determine
subject to applicable law and the other requirements of this Plan.
12.2 Except in the event of the death, Disability or Retirement of a
Grantee, upon the resignation or removal from the board of directors
of any Grantee who is a Director or upon the termination of employment
of a Grantee who is not a Director, any Option
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
which has not yet become exercisable shall thereupon terminate and be
of no further force or effect, and, unless the Committee shall
specifically state otherwise at the time an Option is granted, any
Option which has become exercisable shall terminate if it is not
exercised within three months of such resignation, removal or
termination of employment or directorship.
12.3 Unless the Committee shall specifically state otherwise at the time an
Option is granted, in the event the employment or the directorship of
a Grantee is Terminated for Cause, any Option that has not been
exercised shall thereupon terminate and be of no further force or
effect.
12.4 An Option granted hereunder shall be exercisable, in whole or in part,
only by written notice delivered in person or by mail to the Secretary
of the Corporation at its principal office, specifying the number of
Common Shares to be purchased and accompanied by payment thereof and
otherwise in accordance with the stock option award agreement pursuant
to which the Option was granted.
SECTION 13
RIGHTS IN EVENT OF DEATH, DISABILITY OR RETIREMENT
13.1 If a Grantee dies, becomes subject to a Disability or enters
Retirement prior to termination of his or her right to exercise an
Option in accordance with the provisions of his or her stock option
award agreement without having totally exercised the Option, the stock
option award agreement may provide that the Option shall become
exercisable in full on the date of the Grantee's death, Disability or
Retirement, (i) in the event of the Grantee's death, by the Grantee's
estate or by the person who acquired the right to exercise the Option
by bequest or inheritance (ii) in the event of the Grantee's
Disability, by the Grantee or his or her personal representative or
(iii) in the event of a Grantee's Retirement, by the Grantee.
13.2 In the event of the Grantee's death, Disability or Retirement the
Option, if it has become exercisable in full, shall not be exercisable
after the date of its expiration or more than twelve months from the
date of the Grantee's death, Disability or Retirement, whichever first
occurs.
13.3 The date of Disability of a Grantee shall be determined by the
Committee.
SECTION 14
AWARD AGREEMENTS
14.1 Each Award granted under this Plan shall be evidenced by an award
agreement, as the Committee may deem appropriate, between the Grantee
to whom the Award is granted
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
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and the Corporation, setting forth the number of Common Shares, SARs,
or units subject to the Award and such other terms and conditions
applicable to the Award not inconsistent with this Plan.
14.2 The award agreement for an Option shall also be referred to as a stock
option award agreement.
SECTION 15
TAX WITHHOLDING
15.1 The Committee may establish such rules and procedures as it considers
desirable in order to satisfy any obligation of the Corporation to
withhold federal income taxes or other taxes with respect to any Award
made under this Plan. Such rules and procedures may provide:
a) in the case of Awards paid in Common Shares, the Corporation may
withhold Common Shares otherwise issuable upon exercise of such
Award in order to satisfy withholding obligations, unless
otherwise instructed by the Grantee or unless the Committee
determines otherwise at the time of Grant; and
b) in the case of an Award paid in cash, that the withholding
obligation shall be satisfied by withholding the applicable
amount and paying the net amount in cash to the Grantee; provided
that the requirements of the Rules, to the extent applicable,
must be satisfied with regard to any withholding pursuant to
clause (a).
SECTION 16
CHANGE OF CONTROL
16.1 For the purpose of this Plan, a "Change of Control" of the Corporation
means a change of control of a nature that:
(i) would be required to be reported in response to Item 1(a) of the
current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Exchange Act; or
(ii) results in a Change of Control of the Corporation within the
meaning of the Home Owners' Loan Act of 1933, as amended, and
the Rules and Regulations promulgated by the OTS, as in effect
on the Effective Date (provided, that in applying the definition
of change of control as set forth under the rules and regulations
of the OTS, the Board shall substitute its judgment for that of
the OTS); or
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
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(iii) without limitation, such a Change of Control shall be deemed to
have occurred at such time as;
(a) any "person" (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the
Corporation's outstanding securities ordinarily having the
right to vote at the election of directors;
(b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof
whose election was approved by a vote of a least 75% of
the directors comprising the Incumbent Board, or whose
nomination for election by the Corporation's shareholders
was approved by the same Nominating Committee serving
under an Incumbent Board shall be, for purposes of this
clause (b), considered as though he were a member of the
Incumbent Board;
(c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the
Corporation or similar transaction occurs in which the
Corporation is not the resulting entity or;
(d) the approval by shareholders of a proxy statement
proposal soliciting proxies from shareholders of the
Corporation, by someone other than the current management
of the Corporation; seeking shareholder approval of a plan
of reorganization, merger or consolidation of the
Corporation or similar transaction with one or more
corporations as a result of which the outstanding shares
of the class of securities then subject to the plan or
transaction are exchanged for or converted into cash or
property or securities not issued by the Corporation; or
(e) a tender offer is made and completed for 20% or
more of the voting securities of the Corporation.
16.2 In the event of a Change of Control affecting the Corporation, then,
notwithstanding any provision of this Plan or of any provisions of any
Award agreements entered into between the Corporation and any Grantee
to the contrary, all Awards that have not expired and which are then
held by any Grantee (or the person or persons to whom any deceased
Grantee's rights have been transferred) shall, as of such Change of
Control, become fully and immediately vested and exercisable and may
be exercised for the remaining term of such Awards; provided, however,
that in the event that any exercise or receipt of an Award in
connection with a Change of Control alone, or in the
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
aggregate with other payments to a Grantee, would result in the
imposition of a penalty tax pursuant to Section 280G of the Code, such
exercise or receipt would remain subject to any vesting schedule set
forth in an Award.
SECTION 17
DILUTION OR OTHER ADJUSTMENT
17.1 If the Corporation is a party to any merger or consolidation, or
undergoes any merger, consolidation, separation, reorganization,
liquidation or the like, the Committee shall have the power to make
arrangements, which shall be binding upon the holders of unexpired
Awards, for the substitution of new Awards for, or the assumption by
another corporation of, any unexpired Awards then outstanding
hereunder.
17.2 In the event of any change in capitalization affecting the Common
Shares, such as a stock split, stock dividend, recapitalization,
merger, consolidation, spin-off, split-up, combination or exchange of
shares or other form of reorganization, or any other change affecting
the Common Shares, including a distribution (other than normal cash
dividends) of Corporation assets to shareholders, the Committee shall
conclusively determine the appropriate adjustment in the option prices
of outstanding Options, and the number and kind of shares or other
securities as to which outstanding Awards shall be exercisable, and
the aggregate number of shares with respect to which Awards may be
granted.
17.3 The existence of this Plan and the Options granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders of the Corporation to make or authorize the following:
any adjustment, recapitalization, reorganization or other change in
the Corporation's capital structure or its business; any merger,
acquisition or consolidation of the Corporation; any issuance of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Corporation's capital stock or the rights thereof; the
dissolution or liquidation of the Corporation or any sale or transfer
of all or any part of its assets or business; or any other corporate
act or proceeding, including any merger or acquisition which would
result in the exchange of cash, stock of another company or options to
purchase the stock of another company for any Option outstanding at
the time of such corporate transaction or which would involve the
termination of all Options outstanding at the time of such corporation
transaction.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
SECTION 18
TRANSFERABILITY
18.1 Except as set forth in Section 18.2 of this Plan, no Award shall be
sold, pledged, assigned, transferred, or encumbered by a Grantee other
than by will or by the laws of descent and distribution.
18.2 Only an NQSO may be pledged, assigned, or transferred by a Grantee to
another individual provided that the NQSO is pledged, assigned, or
transferred without consideration by a Grantee, subject to such rules
as the Committee may adopt, to (i) a member of the Grantee's immediate
family, (ii) a trust solely for the benefit of the Grantee and his or
her immediate family or (iii) a partnership or limited liability
company whose only partners or members are the Grantee and his or her
Immediate Family (hereinafter referred to as the Permitted
Transferee); provided that the Committee is notified in advance in
writing of the terms and conditions of any proposed pledge, assignment
or transfer and the Committee determines that such pledge, assignment
or transfer complies with the requirements of this Plan and the
applicable Award agreement.
18.3 Any pledge, assignment or transfer of an Award that does not comply
with the provisions of this Plan and the applicable Award agreement
shall be void and unenforceable against the Corporation.
18.4 All terms and conditions of a pledged, assigned or transferred Award
shall apply to the beneficiary, executor, administrator, and Permitted
Transferee, whether one or more, of the Grantee (including the
beneficiary, executor and administrator of a permitted transferee),
including the right to amend the applicable Award agreement; PROVIDED
that the permitted transferee shall not pledge, assign or transfer an
Award other than by will or by the laws of descent and distribution.
SECTION 19
AMENDMENT, TERMINATION OR MODIFICATION
19.1 Without further approval of the shareholders of the Corporation, the
Board may at any time terminate this Plan, or may amend it from time
to time in such respects as the Board may deem advisable, except that
the Board may not, without approval of the shareholders, make any
amendment which would (i) increase the aggregate number of Common
Shares that may be issued under this Plan, except for adjustments
pursuant to Section 17 of this Plan, (ii) materially modify the
requirements as to eligibility for participation in this Plan, or
(iii) materially increase the benefits accruing under this Plan. The
above notwithstanding, the Board may amend this Plan to take into
account changes in applicable securities, federal income tax and other
applicable laws.
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
- ------------------------------------------------
19.2 The Board may authorize the Committee to direct the execution of an
instrument providing for the modification of any outstanding Option
which the Board believes to be in the best interests of the
Corporation; provided, however, that no such modification, extension
or renewal shall confer on the holder of such Option any right or
benefit which could not be conferred on him by the grant of a new
Option at such time and shall not materially decrease the holder's
benefits under the Option without the consent of the holder of the
Option, except as otherwise permitted under this Plan.
SECTION 20
GENERAL PROVISIONS
20.1 No Awards may be exercised by a Grantee if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of
counsel selected by the Corporation, contrary to law or the
regulations of any duly constituted authority having jurisdiction over
this Plan.
20.2 A bona fide leave of absence approved by a duly constituted officer of
the Corporation shall not be considered interruption or termination of
service of any Grantee for any purposes of this Plan or Awards granted
thereunder, except that no Awards may be granted to an Employee while
he or she is on a bona fide leave of absence.
20.3 No Grantee shall have any rights as a shareholder with respect to any
shares subject to Awards granted to him or her under this Plan prior
to the date as of which he or she is actually recorded as the holder
of such shares upon the stock records of the Corporation.
20.4 Nothing contained in this Plan or in an Award agreement granted
thereunder shall confer upon any Grantee any right to (i) continue in
the employ of the Corporation or any of its Subsidiaries or continue
serving on the Board or (ii) interfere in any way with the right of
the Corporation or any of its Subsidiaries to terminate the Grantee's
employment at any time or service on the Board.
20.5 Any Award agreement may provide that shares issued upon exercise of
any Awards may be subject to such restrictions, including, without
limitation, restrictions as to transferability and restrictions
constituting substantial risks of forfeiture as the Committee may
determine at the time such Award is granted.
SECTION 21
PLAN EFFECTIVE DATE
21.1 This Plan shall become effective on the date of its adoption by the
Board subject to approval of this Plan by the shareholders of the
Corporation within twelve (12) months
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UNITED COMMUNITY FINANCIAL CORP.
1999 LONG-TERM INCENTIVE PLAN
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after the date of this Plan's adoption by the Board (the "Effective
Date"). In the event of the failure to obtain such shareholder
approval, this Plan and any Awards granted thereunder, shall be null
and void and the Corporation shall have no liability thereunder.
21.2 No Award granted under this Plan shall be exercisable until such
shareholder approval has been obtained.
SECTION 22
PLAN TERMINATION
22.1 No Award may be granted under this Plan on or after the date which is
ten years following the effective date specified in Section 21, but
Awards previously granted may be exercised in accordance with their
terms.
SECTION 23
GOVERNING LAW
23.1 This Plan and all actions taken hereunder shall be governed by and
construed in accordance with the laws of the State of Ohio, except to
the extent federal law shall be deemed applicable.
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<PAGE>
EXHIBIT B
UNITED COMMUNITY FINANCIAL CORP.
RECOGNITION AND RETENTION PLAN
AND TRUST AGREEMENT
ARTICLE I
DEFINITIONS
The following words and phrases, when used in this Agreement with an
initial capital letter, shall have the meanings set forth below, unless the
context clearly indicates otherwise. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural:
1.01 "Agreement" means the United Community Financial Corp. Recognition
and Retention Plan and Trust Agreement.
1.02 "Award" means a right granted to a Director, a Director Emeritus or
an Employee under this Plan to receive Plan Shares.
1.03 "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under this Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Board and may be changed from time to time by similar
written notice to the Board. In the absence of a written designation, the
Beneficiary shall be the Recipient's estate.
1.04 "Board" means the Board of Directors of the Corporation.
1.05 "Code" means the Internal Revenue Code of 1986, as amended.
1.06 "Committee" means the Recognition and Retention Plan Committee, if
any, appointed by the Board pursuant to Article III hereof.
1.07 "Common Shares" means common shares of the Corporation.
1.08 "Company" means The Home Savings and Loan Company of Youngstown,
Ohio.
1.09 "Corporation" means United Community Financial Corp.
1.10 "Director" means any person who is a member of the Board of
Directors of the Corporation, the Company or a Subsidiary.
1.11 "Director Emeritus" means any person who is a director emeritus of
the Corporation, the Company or a subsidiary.
1.12 "Employee" means any person who is employed by the Corporation, the
Company or a Subsidiary.
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1.13 "OTS" means the Office of Thrift Supervision, Department of the
Treasury.
1.14 "Plan" means the Recognition and Retention Plan established by this
Agreement.
1.15 "Plan Shares" means the Common Shares held pursuant to the Trust
and which are awarded or issuable to a Recipient pursuant to the Plan.
1.16 "Plan Share Reserve" means the Common Shares held by the Trustee
pursuant to Sections 4.02 and 4.03 of this Agreement and not yet subject to
Awards.
1.17 "Recipient" means any Director, Director Emeritus or Employee who
receives an Award under the Plan.
1.18 "Retirement" means the retirement of an Employee, a Director or a
Director Emeritus between ages 60 and 64 with 15 or more years of service to the
Corporation, the Company or a Subsidiary, or the retirement of an Employee, a
Director or a Director Emeritus at or after age 65.
1.19 "Subsidiaries" means subsidiaries of the Corporation or the
Company.
1.20 "Trust" means the trust established by this Agreement.
1.21 "Trustee(s)" means the person(s) or entity approved by the Board to
hold legal title to the Plan assets for the purposes set forth herein.
ARTICLE II
ESTABLISHMENT OF THE PLAN AND TRUST
2.01 The Corporation hereby establishes a Recognition and Retention Plan
and Trust upon the terms and subject to the conditions set forth in this
Agreement.
2.02 The Trustee hereby accepts the Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions of this Agreement.
2.03 The purpose of the Plan is to reward and retain Directors,
Directors Emeritus and Employees who are in key positions of responsibility by
providing such Directors, Directors Emeritus and Employees with an equity
interest in the Corporation as reasonable compensation for their contributions
to the Corporation, the Company and the Subsidiaries.
ARTICLE III
ADMINISTRATION OF THE PLAN
3.01 ROLE OF THE BOARD. The interpretation and construction by the
Board of any provisions of this Agreement or of any Award granted hereunder
shall be final, conclusive and binding. The Board
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<PAGE>
may, in its discretion, appoint a Committee to administer this Plan. The
Committee shall report actions and decisions with respect to the Plan to the
Board upon request by the Board.
3.02 LIMITATION ON LIABILITY. No member of the Board shall be liable
for any determination made in good faith with respect to the Plan or any Plan
Shares or Awards granted under the Plan. If a member of the Board is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by such member in such capacity under or
with respect to this Plan, the Corporation shall indemnify such member against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such member in connection with
such action, suit or proceeding if such member acted in good faith and in a
manner such member reasonably believed to be in or not opposed to the best
interests of the Corporation, the Company and the Subsidiaries and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
member's conduct was unlawful.
ARTICLE IV
CONTRIBUTIONS; PLAN SHARE RESERVE
4.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Corporation to the Trust. No contributions to the Trust by Directors, Directors
Emeritus or Employees shall be permitted.
4.02 INVESTMENT OF TRUST ASSETS. Except as otherwise set forth in
Section 7.02 of this Agreement, the Trustee may invest all of the Trust's
assets, after providing for any required withholding as needed for tax purposes,
exclusively in Common Shares. Except as otherwise specified, the Trust shall
not purchase more than 1,388,625 Common Shares. The number of Plan Shares may
exceed 1,388,625 Common Shares, if earnings or other distributions on Common
Shares or other Plan assets are used to purchase additional Common Shares. Any
funds held by the Trust that are not used to purchase Common Shares shall be
invested by the Trustee in such interest-bearing account or accounts at the
Company or elsewhere or in such other instruments or investments as the Trustee
shall determine to be appropriate.
4.03 EFFECT OF FORFEITURES. Any Plan Shares subject to an Award that is
forfeited by the Recipient pursuant to Section 6.01 of this Agreement shall be
returned to the Plan Share Reserve.
ARTICLE V
ELIGIBILITY; ALLOCATIONS
5.01 ELIGIBILITY. Directors, Directors Emeritus and Employees are
eligible to receive Awards within the sole discretion of the Board.
5.02 ALLOCATIONS. The Board will determine which of the Directors,
Directors Emeritus and Employees will be granted Awards and the number of Plan
Shares covered by each Award; provided, however, that no Director, Director
Emeritus or Employee shall be granted Awards over the term of the Plan for more
than 25% of the total number of Common Shares subject to the Plan.
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No Award shall be granted if such grant would result in a violation or
possible violation of federal or state securities laws. In the event Plan
Shares are forfeited for any reason or additional Plan Shares are purchased by
the Trustee, the Board may, from time to time, determine which of the Directors,
Directors Emeritus and Employees will be granted additional Awards to be awarded
from forfeited or additional Plan Shares.
In selecting the Directors, Directors Emeritus and Employees to whom Awards
will be granted and the number of Plan Shares covered by such Awards, the Board
shall consider the position, duties and responsibilities of the eligible
Directors, Directors Emeritus and Employees, the value of their services to the
Corporation, the Company and the Subsidiaries and any other factors the Board
may deem relevant.
5.03 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Section 5.02 of this Agreement that an Award
is to be made, the Board shall notify the Recipient in writing of the grant of
the Award, the number of Plan Shares covered by the Award and the terms upon
which the Plan Shares subject to the Award may be earned. The date on which the
Board determines that an Award is to be made or a later date designated by the
Board shall be considered the date of grant of the Awards.
5.04 ALLOCATIONS NOT REQUIRED. None of the Directors, Directors
Emeritus or Employees, either individually or as a group, shall have any right
or entitlement to receive an Award under the Plan. The Trustee shall, if so
directed by the Board, return all Common Shares and other assets in the Plan
Share Reserve to the Corporation at any time.
ARTICLE VI
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
6.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Board shall specifically state a
different period of time over which Awards shall be earned and non-forfeitable
or that an Award is immediately earned and nonforfeitable at the time an Award
is granted, Plan Shares shall be earned and non-forfeitable by a Recipient over
a period of four years at the rate of one-fifth per year commencing on the date
of the grant of such Award. As Plan Shares become earned and non-forfeitable,
any cash dividends, returned capital and earnings thereon shall also be earned
and non-forfeitable.
(b) REVOCATION. Unless otherwise permitted by applicable laws
and regulations, any Plan Shares and any cash dividends, returned capital and
earnings thereon that have not been earned and are not non-forfeitable in
accordance with Section 6.01(a) of this Agreement shall be forfeited in the
event that (i) a Recipient who is a Director or a Director Emeritus at the time
of Award is no longer a Director or a Director Emeritus on at least one of the
Boards of Directors of the Corporation, the Company or a Subsidiary or (ii) a
Recipient who is not a Director or a Director Emeritus of the Corporation, the
Company or a Subsidiary ceases to be an Employee of the Corporation, the Company
or a Subsidiary, except as otherwise provided in subsections (c) and (d) of this
Section 6.01.
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(c) EXCEPTION FOR TERMINATIONS DUE TO DISABILITY OR RETIREMENT.
All Plan Shares and cash dividends, returned capital and earnings thereon
subject to an Award held by a Recipient whose service as a Director, Director
Emeritus or Employee terminates due to (i) disability (as determined by the
Board), or (ii) Retirement shall be deemed fully earned and non-forfeitable as
of the later of the Recipient's last day of service as a Director, Director
Emeritus or as an Employee, but shall be distributed in accordance with the
vesting schedule set forth in the Award agreement.
(d) EXCEPTION FOR TERMINATION DUE TO DEATH. All Plan Shares and
cash dividends, returned capital and earnings thereon subject to an Award held
by a Recipient whose service as a Director, Director Emeritus or Employee
terminates due to death shall be deemed fully earned and non-forfeitable as of
the later of the Recipient's last day of service as a Director, Director
Emeritus or as an Employee and shall be distributed as soon as practicable
thereafter.
(e) EXCEPTION FOR CHANGE IN CONTROL. Notwithstanding any other
provision of this Agreement and subject to the determination of the Board at the
time of a change in control or imminent change in control, all Plan Shares
subject to an Award held by a Recipient shall be deemed to be immediately 100%
earned and non-forfeitable in the event of a change in control or imminent
change in control of the Corporation or the Company and shall be distributed as
soon as practicable thereafter; provided, however, that in the event that any
distribution of Plan Shares in connection with a change in control or imminent
change in control of the Corporation or the Company alone, or in the aggregate
with other payments to the Recipient, would result in the imposition of a
penalty tax pursuant to Section 280G of the Code, such distributions shall
remain subject to the vesting schedule set forth in the Award agreement. For
purposes of this Section 6.01(d), "change in control" shall mean: (i) the
execution of an agreement for the sale of all, or a material portion, of the
assets of the Corporation of the Company; (ii) the execution of an agreement for
a merger or recapitalization of the Corporation of the Company or any merger or
recapitalization whereby the Corporation of the Company is not the surviving
entity; (iii) a change of control of the Corporation of the Company, as defined
or determined by the OTS; or (iv) the acquisition, directly or indirectly, of
the beneficial ownership (within the meaning of the terms "beneficial ownership"
as defined under Section 13(d) of the Securities Exchange Act of 1934 and the
rules promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Corporation of the Company by any person,
trust, entity or group. For purposes of this Section 6.01(e), "imminent change
in control" shall refer to any offer or announcement, oral or written, by any
party, to acquire control of the Corporation or the Company as to which an
application or notice has been filed with the OTS and such application has been
approved or such notice has not been disapproved, if such acquisition of the
Corporation or the Company has not been approved by the Board.
6.02 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as otherwise
provided in this Agreement, Plan Shares shall be distributed to the Recipient or
his Beneficiary, as the case may be, as soon as practicable after they have been
earned, together with any cash dividends, returned capital and earnings thereon
with respect to Plan Shares that have been earned.
(b) FORM OF DISTRIBUTION. All distributions of Plan Shares,
together with any shares representing stock dividends, shall be distributed in
the form of Common Shares. No fractional shares shall be distributed. Payments
representing cash dividends, returned capital and earnings thereon shall be made
in cash.
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(c) WITHHOLDING. The Trustee may withhold from any cash payment
made under this Plan sufficient amounts to cover any applicable withholding and
employment taxes and, if the amount of such cash payment is not sufficient, the
Trustee may require the Recipient or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Corporation, the Company or the Subsidiary
which employs or employed such Recipient or which the Recipient serves or served
as a Director or as a Director Emeritus, any such amount withheld from or paid
by the Recipient or Beneficiary.
(d) REGULATORY EXCEPTIONS. Notwithstanding anything to the
contrary in this Agreement, no Plan Shares, upon becoming fully earned and
non-forfeitable, shall be distributed unless and until all of the
requirements of all applicable laws and regulations shall have been met.
6.03 VOTING OF PLAN SHARES. All Common Shares held by the Trustee in
the Plan Share Reserve that have not yet been awarded shall be voted by the
Trustee. A Recipient shall be entitled to direct the Trustee with respect to
the voting of Plan Shares that have been awarded to the Recipient but are still
held in the Trust, whether or not such awarded Plan Shares have been earned.
ARTICLE VII
TRUST
7.01 TRUST. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and the Trust and the applicable directions, rules,
regulations, procedures and policies established by the Board pursuant to this
Agreement.
7.02 MANAGEMENT OF TRUST. The Trustee shall have complete authority and
discretion with respect to the management, control and investment of the Trust
assets, except that the Trustee shall invest all assets of the Trust, except
those attributable to cash dividends or returned capital paid with respect to
Plan Shares subject to outstanding Awards and earnings thereon, in Common Shares
to the fullest extent practicable and permitted pursuant to Section 4.02 of this
Agreement, and except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. Subject to the foregoing and except as specifically set forth
elsewhere in this Agreement, the Trustee shall have the power to do all things
and execute such instruments as may be deemed necessary or proper, including the
following powers:
(a) To invest up to 100% of all Trust assets in Common Shares
without regard to any law now or hereafter in force limiting investments
for Trustees or other fiduciaries. The investment authorized herein may
constitute the only investment of the Trust, and, in making such
investment, the Trustee is authorized to purchase Common Shares from the
Corporation or from any other source. Such Common Shares so purchased may
be outstanding, newly issued or treasury shares;
(b) To invest any Trust assets not invested in Common Shares in
such deposit accounts and certificates of deposit (including those issued
by the Company), obligations of the
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United States government or its agencies or such other investments as
shall be considered the equivalent of cash;
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust;
(d) To cause stocks, bonds or other securities to be registered
in the name of a nominee, without the addition of words indicating that
such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust);
(e) To hold cash without interest in such amounts as may be
reasonable, in the opinion of the Trustee, for the proper operation of the
Plan and the Trust;
(f) To employ brokers, agents, custodians, consultants and
accountants;
(g) To hire counsel to render advice with respect to the
Trustee's rights, duties and obligations hereunder, and such other legal
services or representation as the Trustee may deem desirable; and
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee shall not
be required to make any inventory, appraisal or settlement or report to any
court, or to secure any order of court for the exercise of any power herein
contained, or to give bond.
7.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board.
7.04 EARNINGS. All earnings, gains and losses with respect to Trust
assets shall be allocated, in accordance with a reasonable procedure adopted by
the Board, to bookkeeping accounts for Recipients or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. Without limiting the generality of the foregoing,
any earnings on cash dividends or returned capital received with respect to
Common Shares shall be allocated (a) to accounts for Recipients, if such shares
are the subject of outstanding Awards, and shall become earned and be
distributed as specified in Article VI of this Agreement, or (b) otherwise to
the general account of the Trust if such Plan Shares are not the subject of
outstanding awards.
7.05 EXPENSES. All costs and expenses incurred in the operation and
administration of the Plan shall be paid by the Corporation.
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ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan
Shares available for issuance pursuant to the Awards and the number of Plan
Shares to which any Award relates shall be proportionately adjusted for any
increase or decrease in the total number of outstanding Common Shares issued
subsequent to the effective date of the Plan if such increase or decrease
resulted from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation.
8.02 AMENDMENT AND TERMINATION OF PLAN AND RETURN OF SHARES TO THE
CORPORATION. The Board may, by resolution, at any time amend or terminate the
Plan or direct the Trustee to return to the Corporation all or any part of the
assets of the Trust, including Common Shares held in the Plan Share Reserve, as
well as Common Shares and other assets subject to Awards which have not yet been
earned by the Recipients to whom they have been awarded; provided, however, that
the termination of the Trust shall not affect a Recipient's right to earn Awards
already granted and to the distribution of Common Shares and earnings relating
to such Awards in accordance with the terms of this Agreement and the grant by
the Board.
8.03 NONTRANSFERABLE. Awards shall not be transferable by a Recipient.
During the lifetime of the Recipient, an Award may only be earned by and paid to
the Recipient who was notified in writing of the Award by the Board pursuant to
Section 5.03 of this Agreement. No Recipient or Beneficiary shall have any
right in or claim to any assets of the Plan or the Trust, nor shall the
Corporation, the Company or any Subsidiary be subject to any claim for benefits
hereunder.
8.04 DIRECTORSHIP RIGHTS. Neither this Agreement nor any grant of an
Award hereunder nor any action taken by the Trustee, the Board or the Board in
connection with the Plan shall create any right, either express or implied, on
the part of any Director or Director Emeritus to continue to serve as a Director
or as a Director Emeritus of the Company or a Subsidiary.
8.05 EMPLOYMENT RIGHTS. Neither this Agreement nor any grant of an
Award hereunder nor any action taken by the Trustee, the Board or the Board in
connection with the Plan shall create any right, either express or implied, on
the part of any Employee to continue in the employ of the Corporation, the
Company or a Subsidiary.
8.06 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any voting or
dividend rights or other rights of a shareholder in respect of any Plan Shares
covered by an Award, except as expressly provided in Article VI of this
Agreement, prior to the time such Plan Shares are actually distributed to such
Recipient.
8.07 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Ohio.
8.08 EFFECTIVE DATE. This Agreement shall be effective as of the 12th
day of July, 1999.
8.09 TERM OF PLAN. The Plan shall remain in effect until the earlier of
(a) the termination of the Plan by the Board or (b) the distribution of all
assets from the Trust. The termination of the Plan
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shall not affect any Awards previously granted, and such Awards shall remain
valid and in effect until they have been earned and paid or by their terms
expire or are forfeited.
8.10 TAX STATUS OF TRUST. It is intended that the trust established
hereby be treated as a grantor trust of the Company under the provisions of
Section 671, ET SEQ., of the Internal Revenue Code of 1986, as amended (26
U.S.C. Section 671 ET SEQ.).
IN WITNESS WHEREOF, the following Trustee executes this Agreement,
accepting and binding itself to undertake and perform the obligations and duties
of the Trustee hereunder and consenting to the foregoing Agreement effective the
___ day of ____________, 1999.
By: (Trustee)
---------------------------
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer and duly attested, all as of the ___ day
of ____________, 1999
UNITED COMMUNITY FINANCIAL CORP.
By:
- --------------------------- ----------------------------------------
Donald J. Varner Douglas M. McKay
its Secretary its President and Chairman of the Board
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REVOCABLE PROXY
UNITED COMMUNITY FINANCIAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF UNITED COMMUNITY FINANCIAL CORP.
The undersigned shareholder of United Community Financial Corp. ("UCFC"),
hereby constitutes and appoints Donald J. Varner and Patrick A. Kelly, or either
of them, as the Proxy or Proxies of the undersigned with full power of
substitution and resubstitution, to vote at the Special Meeting of Shareholders
of UCFC to be held at Mr. Anthony's, 7440 South Avenue, Boardman, Ohio, on July
12, 1999, at 10:00 a.m., Eastern Daylight Saving Time (the "Special Meeting"),
all of the shares of UCFC which the undersigned is entitled to vote at the
Special Meeting, or at any adjournment thereof, on each of the following
proposals, all of which are described in the accompanying Proxy Statement:
1. The approval of the United Community Financial Corp. 1999 Long-Term
Incentive Plan;
/ / FOR / / AGAINST / / ABSTAIN
2. The approval of the United Community Financial Corp. Recognition and
Retention Plan and Trust Agreement.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, upon such other business as may properly come before
the Special Meeting or any adjournments thereof.
The Board of Directors recommends a vote "FOR" the nominees and the
proposals listed above.
IMPORTANT: PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
This Proxy, when properly executed and returned, will be voted in the
manner directed herein by the undersigned shareholder. If this Proxy is signed,
dated and returned but no boxes are marked, the shares will be voted FOR
proposals 1 and 2.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Special Meeting and of the accompanying Proxy
Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock Certificate(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should give
their full titles.
- --------------------------------- -----------------------------------
Signature Signature
- --------------------------------- -----------------------------------
Print or Type Name Print or Type Name
Dated: Dated:
-------------------------- ----------------------------
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.
