United Community Financial Corp. DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Section 240.14a-12
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United Community Financial Corp.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the appropriate box):
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þ
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1) |
Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) |
Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
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(1) |
Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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UNITED
COMMUNITY FINANCIAL CORP.
275 West Federal Street
Youngstown, Ohio
44503-1203
(330) 742-0500
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
The 2007 Annual Meeting of Shareholders of United Community
Financial Corp. (UCFC) will be held at Mr. Anthonys,
7440 South Avenue, Boardman, Ohio, on April 26, 2007, at
10:00 a.m., Eastern Time (Annual Meeting), for the
following purposes, all of which are more completely set forth
in the accompanying proxy statement:
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1. T
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o re-elect three directors of UCFC for terms expiring in 2010;
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2.
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To approve the UCFC 2007 Long-Term Incentive Plan;
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3. To ratify the selection of Crowe Chizek and Company LLC
as the auditors of UCFC for the current fiscal year; and
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4.
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To transact such other business as may properly come before the
Annual Meeting.
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Only shareholders of record at the close of business on
March 9, 2007, will be entitled to vote at the Annual
Meeting. Whether or not you expect to attend the Annual Meeting,
we urge you to consider the accompanying proxy statement
carefully and to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH
YOUR WISHES AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING
MAY BE ASSURED. Submitting a proxy does not affect your right to
vote in person in the event you attend the Annual Meeting.
By Order of the Board of Directors
Douglas M. McKay
Chairman of the Board and
Chief Executive Officer
Youngstown, Ohio
March 23, 2007
United
Community Financial Corp.
275 West Federal Street
Youngstown, Ohio
44503-1203
(330) 742-0500
PROXY
STATEMENT
PROXIES
The Board of Directors of United Community Financial Corp., an
Ohio corporation (UCFC or the Company), is soliciting the
enclosed proxy for use at the 2007 Annual Meeting of
Shareholders of UCFC to be held at Mr. Anthonys, 7440
South Avenue, Boardman, Ohio, on April 26, 2007, at
10:00 a.m., Eastern Time, and at any adjournments thereof
(Annual Meeting).
Each properly executed proxy received prior to the Annual
Meeting and not revoked will be voted as specified thereon or,
in the absence of specific instructions to the contrary, will be
voted:
FOR the re-election of Eugenia C. Atkinson, David G.
Lodge and Clarence R. Smith, Jr. as directors of UCFC for
terms expiring in 2010.
FOR the approval of the UCFC 2007 Long-Term Incentive
Plan (2007 Plan).
FOR the ratification of the selection of Crowe Chizek and
Company LLC (Crowe Chizek) as the auditors of UCFC for the
current fiscal year.
Proxies may be revoked by (a) delivering a written notice
expressly revoking the proxy to the Secretary of UCFC at the
above address prior to the Annual Meeting, (b) delivering a
later dated proxy to UCFC at the above address prior to the
Annual Meeting, or (c) attending the Annual Meeting and
voting in person. Proxies may be solicited by the directors,
officers and other employees of UCFC and The Home Savings and
Loan Company of Youngstown, Ohio, a wholly-owned subsidiary
of UCFC (Home Savings), in person or by telephone, telecopy,
telegraph or mail, only for use at the Annual Meeting. UCFC has
retained The Altman Group, a professional proxy solicitation
firm, to assist in the solicitation of proxies. UCFC will pay
The Altman Group a fee of $6,500, plus reimbursement for
out-of-pocket
expenses. All solicitation costs will be borne by UCFC.
In some cases, UCFC has multiple shareholders of record at a
single address. UCFC sends a single annual report and proxy
statement to that address unless it receives instructions to the
contrary. However, each shareholder of record will continue to
receive a separate proxy card. This practice, known as
householding, is designed to reduce printing and
postage costs. If you wish to receive a separate copy of this
years annual report or proxy statement, you may request it
by writing to UCFC at the above address. If you wish to
discontinue householding entirely, you may contact Registrar and
Transfer Company by telephone at
1-800-368-5948,
by e-mail at
info@rtco.com, or by written instructions sent to Registrar and
Transfer Company, 10 Commerce Drive, Cranford, New Jersey
07016-3572.
If you receive multiple copies of the annual report and proxy
statement, you may request householding by contacting Registrar
and Transfer as noted above. If your shares are held in street
name through a bank, broker or other holder of record, you may
request householding by contacting that bank, broker or other
holder of record.
This proxy statement is first being mailed to the shareholders
of UCFC on or about March 23, 2007.
VOTING
RIGHTS
Only shareholders of record as of the close of business on
March 9, 2007 (Voting Record Date), are entitled to vote at
the Annual Meeting. As of the Voting Record Date, there were
30,895,961 votes entitled to be cast at the Annual Meeting. Each
share is entitled to one vote at the Annual Meeting on all
matters properly presented at the meeting.
Shares represented by properly executed proxies returned to UCFC
prior to the Annual Meeting, will be counted toward the
establishment of a quorum for the Annual Meeting even though
they are marked ABSTAIN or AGAINST or to
withhold authority on any or all matters or are not marked at
all. Broker non-votes are shares
held of record by brokers or other nominees which are present in
person or by proxy at the meeting, but which are not voted
because instructions have not been received from the beneficial
owner with respect to a particular matter over which the broker
or nominee does not have discretionary authority to vote. Broker
non-votes are counted toward the establishment of a quorum. If
you do not return a proxy card and your shares are held in
street name, your broker may be permitted, under the
applicable rules of the self regulatory organizations of which
it is a member, to vote your shares in its discretion on certain
matters that are deemed to be routine.
Those shares represented by properly executed proxies received
prior to the Annual Meeting and not revoked, will be voted as
directed by the shareholder. All valid proxies received prior to
the Annual Meeting that do not specify how shares should be
voted will be voted FOR the Boards nominees, FOR the
approval of the 2007 Plan, and FOR the ratification of the
selection of Crowe Chizek, unless the proxy represents a broker
non-vote.
Directors are elected by a plurality of the votes cast with a
quorum present. No shareholder may cumulate votes in the
election of directors. The affirmative vote of the holders of a
majority of the shares of UCFC represented in person or by proxy
at the Annual Meeting is necessary to approve the 2007 Plan and
to ratify the selection of Crowe Chizek as the auditors of UCFC
for the current fiscal year.
ELECTION
OF DIRECTORS
The Board of Directors has nominated the following directors for
re-election for terms expiring in 2010:
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Director of
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Name
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Age
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Positions Held
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UCFC Since
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Eugenia C. Atkinson
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64
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Director
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2005
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David G. Lodge
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67
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Director and President
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2005
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Clarence R. Smith, Jr.
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78
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Director
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2005
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Eugenia C. Atkinson. Mrs. Atkinson
currently serves as the Executive Director of Youngstown
Metropolitan Housing Authority, a position she has held since
2000. She became a director of Home Savings in 1999.
David G. Lodge. Mr. Lodge is the
President of UCFC, a position he was appointed to in January
2007. In February 2007, Mr. Lodge was appointed Director of
Strategic Planning for Home Savings. Previously, Mr. Lodge
served as the President, Chief Operating Officer and a director
of Home Savings, positions he held since 2000. Prior to joining
Home Savings, Mr. Lodge was the President, Chief Operating
Officer and a director of Metropolitan Bank and Trust and its
holding company, Metropolitan Financial Corp., located in
Highland Hills, Ohio.
Clarence R. Smith, Jr. Mr. Smith
serves as Chairman of S-P Company located in Columbiana, Ohio, a
position he has held since 1971. S-P Company is the holding
company for Compco Industries and Diamond Steel Construction
Company. Mr. Smith has been a director of Home Savings
since 1976.
If any nominee is unable to stand for election, any proxies
granting authority to vote for such nominee will be voted for
such substitute as the Board of Directors recommends.
In accordance with UCFCs Code of Regulations
(Regulations), nominees for election as directors may be
proposed only by the directors or by a shareholder entitled to
vote for directors in a written nomination received by the
Secretary of UCFC by the
60th day
before the first anniversary of the most recent annual meeting
of shareholders held for the election of directors. If the
annual meeting for the election of directors in any year is not
held on or before the
31st day
following such anniversary, then the written notice shall be
received by the Secretary within a reasonable time prior to the
date of the annual meeting. Each written nomination must state
the name, age, business or residence address of the nominee, the
principal occupation or employment of the nominee, the number of
common shares of UCFC owned either beneficially or of record by
each nominee and the length of time the UCFC shares have been so
owned. No nominations were received from any shareholders of
UCFC for the Annual Meeting.
UCFCs Board of Directors consists of nine members. The
death of Richard Barrett created a vacancy on the Board in the
class of directors whose terms expire in 2009. In February 2007,
the Board approved the election of Mr. Donald J. Varner to
fill that vacancy. Mr. Varners appointment was
effective March 15, 2007.
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UCFC encourages all directors to attend the Annual Meeting. All
of UCFCs directors attended the 2006 annual meeting of
shareholders, except Mr. Schiraldi.
INCUMBENT
DIRECTORS
The following directors will continue to serve after the Annual
Meeting for the terms indicated:
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Director of
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Term
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Name
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Age
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Positions Held
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UCFC Since
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Expiring In
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Richard J. Buoncore
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50
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Director
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2007
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2008
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Richard J. Schiraldi
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52
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Director
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2002
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2008
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David C. Sweet
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67
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Director
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2004
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2008
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Thomas J. Cavalier
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54
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Director
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2000
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2009
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Douglas M. McKay
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Director, Chairman
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1998
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2009
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of the Board and CEO
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Donald J. Varner
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75
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Director
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2007
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2009
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Richard J. Buoncore. Mr. Buoncore is a
Certified Public Accountant and a managing partner of MAI Wealth
Advisors, LLC, Cleveland, Ohio, a position he has held since
December 2006. Previously, Mr. Buoncore was Managing
Partner of BC Investment Partners LLC, which merged into MAI
Wealth Advisors, a position he had held since 2005. From 1999
until 2005, he was the Chief Executive Officer of Victory
Capital Management, Cleveland, Ohio, and served as its President
and Chief Operating Officer from 1995 until 1999.
Mr. Buoncore was elected by the UCFC Board of Directors in
January 2007 to fill the vacancy created by the retirement of
Herbert F. Schuler, Sr. Mr. Buoncore also serves as a
director of Home Savings.
Richard J. Schiraldi. Mr. Schiraldi has
been a partner at Cohen & Company, Certified Public
Accountants, Youngstown, Ohio, since 1990. Mr. Schiraldi
served as Director of Tax Operations at Cohen from 1983 until
2003. Mr. Schiraldi also serves as a director of Home
Savings.
David C. Sweet. Dr. Sweet is the
President of Youngstown State University, a position he has held
since July 2000. Dr. Sweet also serves as a director of
Home Savings.
Thomas J. Cavalier. Mr. Cavalier is the
Chairman of the Board, Chief Executive Officer and President of
Butler Wick Corp., a subsidiary of UCFC (Butler Wick), positions
which he has held since 1985. Mr. Cavalier joined Butler
Wick in 1975.
Douglas M. McKay. Mr. McKay joined Home
Savings in 1971. Mr. McKay has been the Chairman of the
UCFC Board since 1998. He also served as President of UCFC from
1998 until January 2007 when he became Chief Executive Officer
of UCFC. Since 1995, Mr. McKay has served as Chief
Executive Officer and Chairman of the Board of Home Savings and,
from 1996 until March 2000, also served as President of Home
Savings.
Donald J. Varner. Mr. Varner, an
attorney, was Senior Vice President of Home Savings from 1995
until his retirement in 2004. Prior to that time,
Mr. Varner served as Home Savings Vice President and
Corporate Counsel from 1976 to 1995. Mr. Varner has served
as a director of Home Savings since 1987. He was appointed to
the UCFC Board effective March 15, 2007.
BOARD
MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors has determined that
Messrs. Buoncore, Schiraldi, Smith, Sweet, Varner and
Ms. Atkinson are each considered independent as
set forth in (a) section 10A(m)(3) of the Securities
Exchange Act of 1934 (15 U.S.C. 78f(m)(3)),
(b) Securities and Exchange Commission (SEC)
Rule 10A-3(b)
(17CFR 240.10A-3(b)), and (c) Rule 4200(a) of the
National Association of Securities Dealers, Inc. (NASD). The
Board of Directors also determined that, at the time they served
during 2006, Messrs. Schuler and Barrett were considered
independent under the above standards.
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The Board of Directors of UCFC met four times for regularly
scheduled meetings during 2006. The Board of Directors of UCFC
has an Audit Committee, a Compensation Committee and a
Nominating and Governance Committee. The Charters of the Audit
Committee and the Nominating and Governance Committee are
available at www.ucfconline.com. The Compensation
Committee does not have a charter.
The Audit Committee of UCFC is responsible for overseeing
UCFCs accounting functions and controls, as well as hiring
an accounting firm to audit UCFCs financial statements.
The current members of the Audit Committee are Eugenia C.
Atkinson, Richard J. Buoncore, Richard J. Schiraldi and David C.
Sweet, all of whom are considered independent under
the listing standards of Nasdaq. The Board of Directors has
determined that Richard J. Schiraldi and Richard J. Buoncore
qualify as financial experts. The Audit Committee met four times
during 2006.
The role of the Compensation Committee of UCFC is described
under Compensation Discussion and Analysis below.
The current members of the Compensation Committee are Eugenia C.
Atkinson, Richard J. Schiraldi and Clarence R. Smith, Jr.
The Compensation Committee met four times during 2006.
The Nominating and Governance Committee of UCFC is responsible
for receiving and evaluating recommendations for potential Board
members from directors and shareholders and recommending to the
Board of Directors a slate of director nominees to be elected by
shareholders. In selecting nominees, the Nominating and
Governance Committee considers the skills and experience desired
in a director, such as community involvement, business
development expertise and financial expertise. Any nominee for
election to the Board of Directors should possess the highest
personal values, judgment and integrity and have an
understanding of the regulatory and policy environment in which
UCFC operates. The Nominating and Governance Committee evaluates
nominations properly submitted by shareholders on the same basis
that it considers nominations submitted by directors. The
current members of the Nominating and Governance Committee, all
of whom are independent, are Eugenia C. Atkinson, Richard J.
Buoncore, Richard J. Schiraldi, Clarence R. Smith, Jr. and
David C. Sweet.
Each director attended at least 75% of the aggregate of the
meetings of the Board of Directors and the committees on which
he or she serves.
DIRECTOR
COMPENSATION
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Fees Earned or
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Paid in Cash
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Total
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Name
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($)
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($)
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Eugenia C. Atkinson
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$
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20,400
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$
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20,400
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Richard M. Barrett
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13,500
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13,500
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Richard J. Schiraldi
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21,200
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21,200
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Herbert F. Schuler
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19,600
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19,600
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Clarence R. Smith, Jr.
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18,800
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18,800
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David C. Sweet
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20,400
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20,400
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Donald J. Varner
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16,000
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16,000
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Mr. Buoncore did not receive any 2006 director
compensation because he joined the Board in 2007. All of the
compensation reported for Mr. Varner was paid for his
service on the Home Savings Board since his appointment to the
UCFC Board was not effective until 2007. Further, because they
are employees of UCFC and its subsidiaries,
Messrs. Cavalier, Lodge, and McKays director fees are
included in the All Other Compensation column of the
Summary Compensation Table below.
Each director of UCFC who is also a director of Home Savings
receives a $10,000 retainer from Home Savings, and each UCFC
director who is not a Home Savings director receives a $10,000
retainer from UCFC. Each director also receives a fee of
$400 per UCFC board meeting attended, and each non-employee
director receives a fee of $400 per committee meeting
attended if
he/she is a
committee member, or $600 per committee meeting attended if
he/she is
the committee chairperson.
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EXECUTIVE
OFFICERS
The following information is supplied for certain executive
officers of UCFC and Home Savings who do not serve on
UCFCs Board of Directors:
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Name
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Age
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Position Held
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Patrick W. Bevack
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60
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President and COO of Home Savings
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Patrick A. Kelly
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48
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CFO and Treasurer of UCFC and Home
Savings
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Patrick W. Bevack. Mr. Bevack was
appointed President and Chief Operating Officer of Home Savings
in January 2007. Previously, Mr. Bevack was Executive Vice
President and Chief Financial Officer of Home Savings, positions
he had held since June 2003. Mr. Bevack joined Home Savings
in June 2000 and served as Senior Vice President of Mortgage
Lending until June 2003. Prior to joining Home Savings, he was
Executive Vice President and Assistant Secretary of Metropolitan
Bank and Trust.
Patrick A. Kelly. Mr. Kelly was appointed
Treasurer of Home Savings in April 1992 and Chief Financial
Officer of Home Savings in January 2007. Previously, he served
as Senior Vice President of Home Savings from November 1995
until January 2007. Mr. Kelly was appointed Treasurer of
UCFC in 1998 and Chief Financial Officer of UCFC in June 2003.
Mr. Kelly has been employed by Home Savings since 1983 and
has been a director of Home Savings since 1996.
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Objectives
The Companys compensation philosophy is based on the
principles that executive compensation should be aligned with
shareholder value and determined primarily by overall Company
performance. The Compensation Committee has adopted a
pay-for-performance
approach that ties bonuses for the Named Executive Officers (as
defined under Compensation of Executive Officers
below), except Mr. Cavalier, directly to specific
performance targets which are established by the Compensation
Committee based on the Companys business plan and
operating budget.
The Companys executive compensation program for 2006 was
designed to achieve the following primary objectives:
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Drive performance relative to the Companys financial
goals, balancing short-term and intermediate operational
objectives with long-term strategic goals;
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Align executives interests with those of shareholders;
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Attract and retain highly-qualified executives and maintain a
stable executive management group; and
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Place a significant portion of total compensation at risk,
contingent on Company performance.
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The Company has employment agreements with each of the Named
Executive Officers. These agreements are described under the
headings Employment Agreements and Termination
and Change of Control Payments below.
Role of
the Compensation Committee and Management
The Compensation Committee has the primary responsibility to
assist the Board in discharging the Boards
responsibilities relating to the compensation of the
Companys executive officers. The Compensation Committee is
responsible for recommending to the Board of Directors for its
approval on an annual basis the compensation package for each of
the Named Executive Officers.
The Compensation Committee frequently invites Mr. McKay,
the Chief Executive Officer, to attend Committee meetings to
discuss the performance of the Company and other items affecting
the compensation of each of the Named Executive Officers.
Mr. McKay makes recommendations to the Committee regarding
base salary,
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incentive compensation and performance targets for bonuses for
each of the Named Executive Officers other than himself. The
Compensation Committee discusses Mr. McKays prior
years performance and goals with him, but all decisions
regarding his compensation are made in executive session,
without his presence.
Occasionally, other executives may attend a Committee meeting to
provide pertinent financial, tax, accounting, or operational
information. Executives in attendance may provide their insights
and suggestions, but they do not vote on decisions regarding
executive compensation.
Compensation
Components
The Companys executive compensation program included the
following components in 2006:
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Salary fixed base pay that reflects each
executives position, individual performance, experience,
and expertise;
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Annual Cash Incentive pay that varies based on
Company and individual performance against annual business
objectives; and
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Other Compensation perquisites consistent with
industry practices in comparable financial institutions, as well
as broad-based employee benefits such as medical, dental,
disability, and life insurance coverage.
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The Company desires to motivate and reward executives to drive
superior future performance, so the Company does not currently
consider prior stock compensation gains as a factor in
determining compensation levels.
Salary. The Company pays its executives cash
salaries intended to be competitive and take into account the
individuals experience, performance, responsibilities, and
past and potential contribution to the Company. The Compensation
Committee met with Mr. McKay and discussed his
recommendations. On January 17, 2006, the Companys
Board approved the compensation for all executive officers for
2006, except Mr. Cavalier, based on recommendations from
the Compensation Committee. In establishing base salaries, the
Compensation Committee considered Mr. McKays
recommendations, UCFCs 2005 performance, peer group
compensation data compiled by Watson Wyatt Survey and SNL
Securities, and individual performance.
Mr. Cavaliers compensation is established separately
because of the nature of Butler Wick. Mr. Cavalier entered
into an employment agreement with Butler Wick on August 12,
1999, the terms of which are discussed under Employment
Agreements and Termination and Change of Control
Payments below. Mr. Cavaliers employment
agreement is reviewed annually by the Compensation Committee of
Butler Wick, of which Mr. McKay is Chairman. The
Compensation Committee has not increased
Mr. Cavaliers base salary as set forth in his
employment agreement since 2003.
The Named Executive Officers 2006 base salaries are set
forth in the Salary column of the Summary
Compensation Table.
Annual Cash Bonus. Executive officers other
than Mr. Cavalier receive an annual cash bonus that is
primarily determined using a formula based on attainment by Home
Savings of specified levels of after-tax net income (adding back
cash bonus accruals). The Compensation Committee, however, may
use other factors such as the following qualitative measures in
setting final bonus amounts: credit quality, efficiency ratio,
capital adequacy, and interest rate risk. The performance goals
for net income and EPS are established each year by the
Compensation Committee based upon the recommendation of
management and performance of UCFCs peers. The following
four bonus levels were established for 2006:
Bank
Performance Goals
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Performance Levels
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Net Income
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Maximum +
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³$25.5M
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Maximum
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$25.0M to <$25.5M
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Target
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$24.5M to <$25.0M
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Threshold
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$20.5M to <$24.5M
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<Threshold
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<$20.5M
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Generally, bonuses are not awarded for performance below the
threshold level, although the Compensation Committee retains the
discretion to award bonuses based upon the facts and
circumstances related to the EPS and net income levels reached
by UCFC in any year.
The Compensation Committee also recommends to the Board the
bonus opportunity for each of the participating Named Executive
Officers (other than Mr. McKay) at each performance level.
The incentive opportunities for 2006 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Opportunity
|
|
|
|
as a Percentage of Salary
|
|
Executive
|
|
Threshold
|
|
|
Target
|
|
|
Max
|
|
|
Max+
|
|
|
Patrick A. Kelly
|
|
|
35
|
%
|
|
|
45
|
%
|
|
|
55
|
%
|
|
|
60
|
%
|
David G. Lodge
|
|
|
45
|
%
|
|
|
55
|
%
|
|
|
65
|
%
|
|
|
70
|
%
|
Patrick V. Bevack
|
|
|
40
|
%
|
|
|
50
|
%
|
|
|
60
|
%
|
|
|
65
|
%
|
The percentage of base salary awarded to Mr. McKay as a
bonus is determined in the Compensation Committees
discretion and is generally established after the completion of
the fiscal year at a percentage slightly higher than the other
Named Executive Officers.
In January 2007, the Compensation Committee reviewed Home
Savings performance as well as the qualitative factors
discussed above. Home Savings net income and EPS fell in
the Maximum level. The Compensation Committee also reviewed the
peer group analysis prepared by its compensation consultants
(discussed below) to analyze whether the bonuses derived from
the net income and EPS results put the executive officers
total compensation in line with the peer group. The Committee
met with Mr. McKay and discussed his recommendations for
2006 bonus awards for each of the executive officers, other than
himself.
Because, Mr. Lodge was on medical leave for five months
during 2006, Mr. Lodges bonus was reduced and the
bonuses of certain other executive officers, including
Mr. Kelly and Mr. Bevack were increased to compensate
them for additional responsibilities acquired during
Mr. Lodges leave. The cash bonuses awarded pursuant
to the 2006 performance goals are included in the
Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table, while the additional bonuses awarded
to Mr. Kelly and Mr. Bevack as a result of
Mr. Lodges medical leave are reflected in the
Bonus column.
Mr. Cavalier received a bonus in an amount recommended by
Mr. McKay to the Butler Wick Compensation Committee. The
Butler Wick Compensation Committee reviewed and approved
Mr. McKays recommendation. Mr. Cavaliers
bonus for 2006 is set forth under the Bonus column
of the Summary Compensation Table.
Other Compensation. The Named Executive
Officers participate in the Companys broad-based employee
benefit plans, such as medical, dental, supplemental disability
and term life insurance programs. In 2006, the Board approved
certain perquisites for the Named Executive Officers. All of the
Named Executive Officers other than Mr. Cavalier had use of
a company car and received fees for country club memberships.
Mr. Cavalier participates in a non-qualified deferred
compensation plan, which is discussed under the 2006
Non-qualified Deferred Compensation Table below.
Tax and
Accounting Considerations
Section 162(m) of the Internal Revenue Code places a limit
on the tax deduction for compensation in excess of
$1 million paid to the Named Executive Officers in a
taxable year. All of the compensation the Company paid in 2006
to the Named Executive Officers is expected to be deductible
under Section 162(m). The Committee retains the
flexibility, however, to pay non-deductible compensation if it
believes doing so is in the best interests of the Company.
7
Future
Compensation
The Company has engaged compensation consultants and advisors
from time to time to provide input on both Board and executive
compensation issues. Although the Compensation Committee has
utilized the annual cash bonus to drive executives to increase
UCFC performance, the Committee believed that the Company should
consider adopting another equity plan in order to better align
executive and shareholder interests. In 2006, UCFCs
Compensation Committee hired Clark Consulting to conduct a
compensation review, including a peer group analysis, and to
review equity compensation practices in general and within the
banking industry. Working with both the Compensation Committee
and management, Clark Consulting identified several factors to
be used to establish a peer group of financial institutions for
UCFC, those factors included size, asset growth of the
institution, number of branches, and annual and long-term
performance. Utilizing these factors, Clark Consulting developed
the following group of sixteen companies as a peer group (Peer
Group):
PEER
GROUP
|
|
|
Company Name (Ticker)
|
|
Company Name (Ticker)
|
|
WesBanco, Inc (WSBC)
|
|
ESB Financial Corp. (ESBF)
|
Chemical Financial Corp. (CHFC)
|
|
Citizens First Bancorp, Inc. (CTZN)
|
First Financial Bancorp (FFBC)
|
|
MainSource Financial Group, Inc.
(MSFG)
|
Independent Bank Corp. (IBCP)
|
|
First Defiance Financial Corp.
(FDEF)
|
Harleysville National Corp. (HNBC)
|
|
CFS Bancorp, Inc. (CITZ)
|
KNBT Bancorp, Inc. (KNBT)
|
|
Parkvale Financial Corp. (PVSA)
|
Community Trust Bancorp, Inc.
(CTBI)
|
|
First Indiana Corp. (FINB)
|
Integra Bank Corp. (IBNK)
|
|
First Place Financial Corp. (FPFC)
|
Clark Consulting studied the executive compensation practices of
each of the companies in the Peer Group and provided reports to
the Compensation Committee regarding the analysis. The Peer
Group analysis will enable the Compensation Committee, Board of
Directors and management to assess UCFCs executive
compensation practices against banking industry peers when
making future compensation decisions. The Compensation Committee
intends to utilize a peer group for benchmarking each year and
will annually review the Peer Group to identify any necessary
changes to its composition. Further, based upon the analysis of
Clark Consulting, the Company is seeking approval from the
shareholders to implement a new long term incentive plan at the
Annual Meeting. The Compensation Committee and the Board believe
that adopting the 2007 Plan is essential to continue to award
executives for performance in a manner that links shareholder
and executives interests.
COMPENSATION
COMMITTEE REPORT
In performing its oversight role, the Compensation Committee has
considered and discussed the Compensation Discussion and
Analysis (CD&A) with executive management. On March 1,
2007, the Compensation Committee recommended to the Board of
Directors that the CD&A be included in this Proxy Statement
for the fiscal year ended December 31, 2006.
Respectfully submitted by the members of the Compensation
Committee of the Board of Directors:
Eugenia Atkinson (Chairperson)
Clarence R. Smith, Jr.
Richard J. Schiraldi
8
COMPENSATION
OF EXECUTIVE OFFICERS
The following table presents certain information regarding the
compensation earned by Mr. McKay and Mr. Kelly and the
three highest compensated executive officers of UCFC and its
subsidiaries (Named Executive Officers) who received cash and
cash equivalent compensation in excess of $100,000 from UCFC or
one of its subsidiaries for services rendered during 2006:
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Douglas M. McKay Chairman and CEO,
UCFC
|
|
|
2006
|
|
|
$
|
367,157
|
|
|
|
|
|
|
$
|
275,368
|
|
|
|
|
|
|
$
|
68,612
|
|
|
$
|
711,137
|
|
David G. Lodge President and COO,
UCFC
|
|
|
2006
|
|
|
|
272,454
|
|
|
|
|
|
|
|
139,146
|
|
|
|
|
|
|
|
86,398
|
|
|
|
497,998
|
|
Thomas J. Cavalier Chairman and
CEO, Butler Wick
|
|
|
2006
|
|
|
|
301,313
|
|
|
$
|
181,152
|
|
|
|
|
|
|
$
|
1,447
|
|
|
|
21,698
|
(2)
|
|
|
505,610
|
|
Patrick W. Bevack President and
COO, Home Savings
|
|
|
2006
|
|
|
|
196,716
|
|
|
|
29,507
|
|
|
|
118,030
|
|
|
|
|
|
|
|
58,299
|
|
|
|
402,552
|
|
Patrick A. Kelly Treasurer and
CFO, UCFC and Home Savings
|
|
|
2006
|
|
|
|
182,496
|
|
|
|
18,249
|
|
|
|
100,373
|
|
|
|
|
|
|
|
58,377
|
(2)
|
|
|
359,495
|
|
|
|
|
(1) |
|
The values represent the annual cash bonus earned in fiscal 2006
and paid in early 2007. |
|
(2) |
|
Does not include amounts attributable to other miscellaneous
benefits because the cost to UCFC of providing such benefits was
less than $10,000. |
The amounts listed in the All Other Compensation
column include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k)
|
|
|
ESOP
|
|
|
Profit
|
|
|
Company
|
|
|
Club
|
|
|
|
|
|
Spousal
|
|
|
Director
|
|
|
|
|
Name
|
|
Match
|
|
|
Allocation
|
|
|
Sharing
|
|
|
Car
|
|
|
Dues
|
|
|
Parking
|
|
|
Travel
|
|
|
Fees
|
|
|
Total
|
|
|
Douglas M. McKay
|
|
$
|
6,600
|
|
|
$
|
36,977
|
|
|
|
|
|
|
$
|
1,922
|
|
|
$
|
7,054
|
|
|
$
|
420
|
|
|
$
|
839
|
|
|
$
|
14,800
|
|
|
$
|
68,612
|
|
David G. Lodge
|
|
|
6,600
|
|
|
|
36,977
|
|
|
|
|
|
|
|
2,626
|
|
|
|
25,605
|
|
|
|
420
|
|
|
|
970
|
|
|
|
13,200
|
|
|
|
86,398
|
|
Thomas J. Cavalier
|
|
|
3,300
|
|
|
|
|
|
|
$
|
6,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,600
|
|
|
|
21,698
|
|
Patrick W. Bevack
|
|
|
6,600
|
|
|
|
36,977
|
|
|
|
|
|
|
|
1,160
|
|
|
|
12,886
|
|
|
|
506
|
|
|
|
170
|
|
|
|
|
|
|
|
58,299
|
|
Patrick A. Kelly
|
|
|
6,600
|
|
|
|
36,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,800
|
|
|
|
58,377
|
|
Employment
Agreements
Home Savings has employment agreements with each of
Mr. McKay, Mr. Lodge, Mr. Bevack and
Mr. Kelly, and Butler Wick has an employment agreement with
Mr. Cavalier (collectively, Employment Agreements). Each of
the Employment Agreements has a term ending on December 31,
2009 and is terminable by Home Savings or Butler Wick, as
applicable, at any time. Each of the executives rights
upon termination is discussed under Termination and Change
of Control Payments below.
9
2006
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
|
|
|
|
Under Non-Equity Incentive Plan Awards(1)
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum +
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
David G. Lodge
|
|
|
1/17/2007
|
|
|
$
|
113,847
|
|
|
$
|
139,146
|
|
|
$
|
177,095
|
|
Patrick W. Bevack
|
|
|
1/17/2007
|
|
|
|
78,686
|
|
|
|
98,358
|
|
|
|
127,865
|
|
Patrick A. Kelly
|
|
|
1/17/2007
|
|
|
|
63,874
|
|
|
|
82,123
|
|
|
|
109,498
|
|
|
|
|
(1) |
|
The amounts represent the 2006 potential awards under the annual
cash bonus plan. |
Outstanding
Equity Awards at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Option Exercise
|
|
|
|
|
|
|
(#)
|
|
|
Price
|
|
|
Option Expiration
|
|
Name
|
|
Exercisable
|
|
|
($)
|
|
|
Date
|
|
|
Douglas M. McKay
|
|
|
14,347
|
|
|
$
|
6.97
|
|
|
|
3/23/2010
|
|
|
|
|
15,024
|
|
|
|
6.656
|
|
|
|
3/22/2011
|
|
|
|
|
136,752
|
|
|
|
7.40
|
|
|
|
3/20/2012
|
|
|
|
|
136,752
|
|
|
|
8.97
|
|
|
|
3/19/2013
|
|
|
|
|
136,752
|
|
|
|
12.73
|
|
|
|
3/17/2014
|
|
David G. Lodge
|
|
|
66,583
|
|
|
|
7.40
|
|
|
|
3/20/2012
|
|
|
|
|
80,096
|
|
|
|
8.97
|
|
|
|
3/19/2013
|
|
|
|
|
80,096
|
|
|
|
12.73
|
|
|
|
3/17/2014
|
|
Thomas J. Cavalier
|
|
|
5,960
|
|
|
|
6.97
|
|
|
|
3/23/2010
|
|
|
|
|
6,043
|
|
|
|
6.656
|
|
|
|
3/22/2011
|
|
|
|
|
5,316
|
|
|
|
7.40
|
|
|
|
3/20/2012
|
|
|
|
|
6,315
|
|
|
|
8.97
|
|
|
|
3/19/2013
|
|
|
|
|
6,553
|
|
|
|
12.73
|
|
|
|
3/17/2014
|
|
Patrick W. Bevack
|
|
|
32,416
|
|
|
|
7.40
|
|
|
|
3/20/2012
|
|
|
|
|
52,444
|
|
|
|
8.97
|
|
|
|
3/19/2013
|
|
|
|
|
52,444
|
|
|
|
12.73
|
|
|
|
3/17/2014
|
|
Patrick A. Kelly
|
|
|
33,626
|
|
|
|
6.97
|
|
|
|
3/23/2010
|
|
|
|
|
20,336
|
|
|
|
6.656
|
|
|
|
3/22/2011
|
|
|
|
|
57,777
|
|
|
|
7.40
|
|
|
|
3/20/2012
|
|
|
|
|
57,777
|
|
|
|
8.97
|
|
|
|
3/19/2013
|
|
|
|
|
57,777
|
|
|
|
12.73
|
|
|
|
3/17/2014
|
|
All of the options were granted under the UCFC 1999 Long-Term
Incentive Plan (1999 Plan) and were 100% vested on the date of
grant. None of the Named Executive Officers exercised options
during 2006.
2006
Non-qualified Deferred Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Earnings in Last
|
|
|
Balance at Last
|
|
Name
|
|
Last Fiscal Year
|
|
|
Fiscal Year
|
|
|
Fiscal Year End
|
|
|
Thomas J. Cavalier
|
|
$
|
15,169
|
|
|
$
|
1,447
|
|
|
$
|
16,616
|
|
10
Mr. Cavalier is a participant in the Butler Wick Deferred
Compensation Plan under which he may elect to defer annually
until his retirement up to 80% of his salary and commissions,
and 100% of his bonus. The plan provides a variety of mutual
funds into which deferrals may be invested at
Mr. Cavaliers election, including a money market
fund, an intermediate bond fund and various equity funds. The
earnings that accrued in 2006 on Mr. Cavaliers plan
account balance are provided above. Butler Wick does not make
any contributions to Mr. Cavaliers deferred account
and he has not received a withdrawal or distribution from his
account.
Termination
and Change in Control Payments
The discussion and table below reflect the amount of
compensation that would be paid to each of the Named Executive
Officers in the specified event of termination of such
executives employment. The amounts shown are estimates and
assume a termination date of December 31, 2006. Amounts do
not include compensation and benefits available generally to all
of UCFCs salaried employees on a non-discriminatory basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Control
|
|
|
Death
|
|
|
Disability
|
|
|
Termination
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Douglas M.
McKay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Amount
|
|
$
|
1,101,470
|
|
|
$
|
84,729
|
|
|
$
|
141,214
|
|
|
$
|
1,101,471
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,368
|
|
Health Insurance
|
|
|
29,750
|
|
|
|
|
|
|
|
19,833
|
|
|
|
|
|
Life Insurance
|
|
|
76,845
|
|
|
|
|
|
|
|
51,230
|
|
|
|
|
|
Disability Insurance
|
|
|
26,043
|
|
|
|
|
|
|
|
17,362
|
|
|
|
|
|
Non-Compete
|
|
|
225,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,460,050
|
|
|
$
|
84,729
|
|
|
$
|
229,639
|
|
|
$
|
1,376,839
|
|
David G.
Lodge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Amount
|
|
$
|
758,978
|
|
|
$
|
58,383
|
|
|
$
|
97,305
|
|
|
$
|
758,979
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,146
|
|
Health Insurance
|
|
|
21,869
|
|
|
|
|
|
|
|
14,579
|
|
|
|
|
|
Life Insurance
|
|
|
3,188
|
|
|
|
|
|
|
|
2,125
|
|
|
|
|
|
Disability Insurance
|
|
|
3,248
|
|
|
|
|
|
|
|
2,166
|
|
|
|
|
|
Non-Compete
|
|
|
155,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
942,971
|
|
|
$
|
58,383
|
|
|
$
|
116,175
|
|
|
$
|
898,125
|
|
Thomas J.
Cavalier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Amount
|
|
$
|
630,890
|
|
|
|
|
|
|
|
|
|
|
$
|
633,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,152
|
|
Health Insurance
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
Life Insurance
|
|
|
4,680
|
|
|
|
|
|
|
|
|
|
|
|
4,680
|
|
Commission
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
635,629
|
|
|
|
|
|
|
|
|
|
|
$
|
909,205
|
|
Patrick W.
Bevack
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Amount
|
|
$
|
590,147
|
|
|
$
|
45,396
|
|
|
$
|
75,660
|
|
|
$
|
590,148
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,537
|
|
Health Insurance
|
|
|
21,869
|
|
|
|
|
|
|
|
14,579
|
|
|
|
|
|
Life Insurance
|
|
|
2,482
|
|
|
|
|
|
|
|
1,655
|
|
|
|
|
|
Disability Insurance
|
|
|
2,526
|
|
|
|
|
|
|
|
1,684
|
|
|
|
|
|
Non-Compete
|
|
|
121,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
738,080
|
|
|
$
|
45,396
|
|
|
$
|
93,578
|
|
|
$
|
737,685
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Control
|
|
|
Death
|
|
|
Disability
|
|
|
Termination
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Patrick A.
Kelly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Amount
|
|
$
|
547,487
|
|
|
$
|
42,114
|
|
|
$
|
70,191
|
|
|
$
|
547,488
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,622
|
|
Health Insurance
|
|
|
29,750
|
|
|
|
|
|
|
|
19,833
|
|
|
|
|
|
Life Insurance
|
|
|
6,303
|
|
|
|
|
|
|
|
4,202
|
|
|
|
|
|
Disability Insurance
|
|
|
6,471
|
|
|
|
|
|
|
|
4,314
|
|
|
|
|
|
Non-Compete
|
|
|
112,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
702,316
|
|
|
$
|
42,114
|
|
|
$
|
98,540
|
|
|
$
|
666,110
|
|
Termination upon Change of Control. Each of
the Employment Agreements provides that the executive is
entitled to certain benefits if his employment is terminated
within one year before or after a Change of Control: (i) by
his employer, or (ii) by the executive because his
employment is materially adversely changed (including, for
example, a material reduction in responsibilities, change of
title, a requirement that the executive perform his functions
more than 35 miles from his primary office location, or a
non-company wide reduction in benefits). Any benefits to be
received by the executives will be reduced to the maximum amount
payable under Section 280G without penalty.
Under these circumstances, each of Messrs. McKay, Lodge,
Bevack and Kelly are entitled to an amount equal to three times
his base amount (as defined in Section 280G of
the Internal Revenue Code) less $1.00, and continued coverage at
Home Savings expense under all health and welfare benefit
plans until the earlier of the expiration of the term of the
Employment Agreement or the date on which he is included in
another employers benefit plans as a full-time employee.
Upon a termination in connection with a Change of Control,
Mr. Cavalier is entitled to 2.99 times his base
amount (as defined in Section 280G) and continued
coverage at Butler Wicks expense under all health, life
and disability plans of Butler Wick until the earlier of the
expiration of the term of the Employment Agreement or the date
on which he is included in another employers benefit plans
as a full-time employee.
In addition, if Messrs. McKay, Lodge, Bevack or
Kellys employment is terminated pursuant to a Change of
Control, he is subject to a non-compete that prohibits him from
engaging in the financial institutions business for a period of
eight months in Mahoning, Trumbull or Columbiana Counties, Ohio,
or any other geographic area in which Home Savings or UCFC is
doing business. In exchange for this non-compete, he is entitled
to receive an additional eight months of his base salary.
Under each of the Employment Agreement of Messrs. McKay,
Lodge, Bevack and Kelly, Change of Control is
defined as:
|
|
|
|
|
the acquisition of the power to vote more than 20% of the shares
of Home Savings or UCFC;
|
|
|
|
the acquisition of the ability to control the election of a
majority of the directors of Home Savings or UCFC;
|
|
|
|
such time when, during any period of three or less consecutive
years, individuals who at the beginning of that period
constituted the Board of Directors of Home Savings or UCFC cease
to constitute at least a majority of the Board; provided that
any person whose election as a director was approved by a vote
of at least 2/3 of the directors then in office will be
considered to have continued to be a director of Home Savings or
UCFC;
|
|
|
|
the acquisition by any person or entity of control of Home
Savings as defined in 12 C.F.R § 303.81(c); or
|
|
|
|
an event that would be required to be reported under
Item 5.01 of Form
8-K or
Item 6(e) of Schedule 14A.
|
Under Mr. Cavaliers Employment Agreement,
Change of Control is defined as:
|
|
|
|
|
the acquisition of the power to vote more than 25% of the shares
of Butler Wick or UCFC;
|
12
|
|
|
|
|
the acquisition of the ability to control the election of a
majority of the directors of Butler Wick or UCFC; or
|
|
|
|
an event that would be required to be reported under
Item 5.01 of Form
8-K or
Item 6(e) of Schedule 14A.
|
Termination upon Death. Upon
Messrs. McKay, Lodge, Bevack or Kellys death, his
estate is entitled to receive a continuation of his base salary
for 90 days. Upon Mr. Cavaliers death, his
estate is entitled to receive the compensation due to him
through the last day of the calendar month in which he died.
Termination upon Disability. If
Messrs. McKay, Lodge, Bevack or Kelly is unable to perform
his duties due to illness or incapacity for a period of up to
150 consecutive days, Home Savings can terminate the Employment
Agreement. After the Employment Agreement is terminated, if the
executive is eligible for long term disability benefits under
Home Savings disability plan, then he will be entitled to
continued coverage under health and life insurance plans for a
period of two years. Mr. Cavaliers employment
agreement does not provide for benefits upon termination due to
disability.
Termination for Cause. None of the executives
are entitled to receive any benefits following termination for
Cause. Cause is defined in the Employment Agreements
as personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure
or refusal to perform the duties and responsibilities, willful
violation of any final
cease-and-desist
order, law, rule or regulation (other than traffic violations or
other minor offenses), or material breach of the Employment
Agreement.
Other Termination. If the executive is
terminated before the expiration of his Employment Agreement for
any reason other than death, disability, Cause, or Change of
Control, then he is entitled to receive the total compensation
in effect at the time of termination until the expiration of the
term of the Employment Agreement and continued coverage under
all health and welfare benefit plans until the earlier of the
expiration of the term or the date on which he is included in
another employers benefit plans as a full-time employee.
Messrs. McKay, Lodge, Bevack and Kelly are also entitled to
receive a cash bonus equal to the cash bonus, if any, he
received in the 12 month period prior to termination
In the event Mr. Cavalier terminates his employment without
Butler Wicks consent (other than in connection with a
Change of Control), he shall be subject to a non-compete for the
unexpired term of his Employment Agreement. The non-compete
prohibits him from engaging in any manner in any business that
competes with Butler Wick or UCFC within Mahoning, Trumbull,
Columbiana, Portage, Cuyahoga, Medina or Stark Counties, Ohio;
or Mercer or Venango Counties, Pennsylvania.
Compensation
Committee Interlocks and Insider Participation
At various times during 2006, Ms. Atkinson and
Messrs. Barrett, Schiraldi, Schuler, Smith and
Dr. Sweet served on the UCFC Compensation Committee. None
of these individuals is a current or former executive officer or
employee of UCFC, Home Savings or Butler Wick or had a
reportable business relationship with UCFC, Home Savings or
Butler Wick.
Related
Person Transactions
Home Savings makes loans to executive officers and directors of
UCFC and its subsidiaries 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.
UCFC does not have any related person transactions as defined in
Regulation S-K
Item 404(a) and currently does not permit any such
transactions. This policy is not evidenced in writing, but has
been clearly communicated to the Board.
13
OWNERSHIP
OF UCFC SHARES
The following table sets forth information about the only
persons known to UCFC to own beneficially more than 5% of the
outstanding UCFC common shares as of the Voting Record Date:
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
Percent of
|
|
Name and Address
|
|
Beneficial Ownership
|
|
|
Shares Outstanding
|
|
|
United Community Financial
Corp.
|
|
|
3,876,172 (1
|
)
|
|
|
12.6
|
%
|
Employee Stock Ownership Plan
2321 Kochs Lane
Quincy, IL 62301
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors,
Inc.
|
|
|
2,613,766 (2
|
)
|
|
|
8.5
|
%
|
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
First Bankers Trust Services, Inc., as the Trustee for the
United Community Financial Corp. Employee Stock Ownership Plan
(the ESOP), has sole investment power over the ESOP shares. The
Trustee may be deemed to have voting power over the 1,826,555
unallocated shares, although the ESOP provides that unallocated
shares shall be voted by the Trustee in the same proportion as
participants direct the voting of allocated ESOP shares. |
|
(2) |
|
Based on Schedule 13G, dated February 1, 2007, in
which Dimensional Fund Advisors, Inc. reports sole voting power
and sole dispositive power over all of the shares reported. |
The following table sets forth information regarding the number
of UCFC common shares beneficially owned by each director and
Named Executive Officer as of the Voting Record Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
|
|
|
|
Sole Voting or
|
|
|
Shared Voting or
|
|
|
Percent of
|
|
Name and Address(1)
|
|
Investment Power
|
|
|
Investment Power
|
|
|
Shares Outstanding
|
|
|
Eugenia C. Atkinson
|
|
|
20,552
|
|
|
|
0
|
|
|
|
*
|
|
Patrick W. Bevack
|
|
|
178,931
|
(2)
|
|
|
0
|
|
|
|
*
|
|
Richard J. Buoncore
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Thomas J. Cavalier
|
|
|
75,887
|
(2)
|
|
|
0
|
|
|
|
*
|
|
Patrick A. Kelly
|
|
|
449,144
|
(2)
|
|
|
22,529
|
|
|
|
1.5
|
%
|
David G. Lodge
|
|
|
301,406
|
(2)
|
|
|
1,350
|
|
|
|
*
|
|
Douglas M. McKay
|
|
|
552,502
|
(2)
|
|
|
0
|
|
|
|
1.7
|
|
Richard J. Schiraldi
|
|
|
7,437
|
|
|
|
0
|
|
|
|
*
|
|
Clarence R. Smith
|
|
|
33,686
|
(2)
|
|
|
7,036
|
|
|
|
*
|
|
David C. Sweet
|
|
|
816
|
|
|
|
0
|
|
|
|
*
|
|
Donald J. Varner
|
|
|
145,269
|
|
|
|
32,838
|
|
|
|
|
|
All directors and executive
officers as a group (11 persons)
|
|
|
1,765,630
|
(2)
|
|
|
63,753
|
|
|
|
5.7
|
|
|
|
|
* |
|
Less than one percent of the total outstanding. |
|
|
|
(1) |
|
Each of the persons listed in this table may be contacted at the
address of UCFC. |
|
(2) |
|
Includes the following number of shares that may be acquired
upon the exercise of options awarded under the United Community
Financial Corp. 1999 Plan: Mr. Bevack 137,304;
Mr. Cavalier 30,187; Mr. Kelly
227,293; Mr. Lodge 226,775;
Mr. McKay 439,627; and directors and executive
officers as a group 1,061,186. Also, includes the
following number of shares that are pledged as security for a
loan from a lender not affiliated with UCFC:
Mr. Kelly 10,000; and
Mr. Smith 9,257. |
14
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires UCFCs executive officers and directors, and
persons who own more than ten percent of UCFCs common
shares, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange
Commission and to provide UCFC with a copy of such form. Based
on UCFCs review of the copies of such forms it has
received, UCFC believes that its executive officers and
directors complied with all filing requirements applicable to
them with respect to transactions during the fiscal year ended
December 31, 2006, except Mr. Barretts estate
filed a late Form 4 reporting one transaction.
AUDIT
COMMITTEE REPORT
The Audit Committee is responsible for overseeing UCFCs
accounting functions and controls, as well as hiring an
accounting firm to audit UCFCs financial statements. The
Audit Committee has adopted a charter to set forth its
responsibilities (the Charter).
As required by the Charter, the Audit Committee received and
reviewed the report of Crowe Chizek regarding the results of
their audit, as well as the written disclosures and the letter
from Crowe Chizek required by Independence Standards Board
Standard No. 1. The Audit Committee reviewed the audited
financial statements with the management of UCFC. A
representative of Crowe Chizek also discussed with the Audit
Committee the independence of Crowe Chizek from UCFC, as well as
the matters required to be discussed by Statement of Auditing
Standards 61, as may be amended from time to time. Discussions
between the Audit Committee and the representative of Crowe
Chizek included the following:
|
|
|
|
|
Crowe Chizeks responsibilities in accordance with
generally accepted auditing standards
|
|
|
|
The initial selection of, and whether there were any changes in,
significant accounting policies or their application
|
|
|
|
Managements judgments and accounting estimates
|
|
|
|
Whether there were any significant audit adjustments
|
|
|
|
Whether there were any disagreements with management
|
|
|
|
Whether there was any consultation with other accountants
|
|
|
|
Whether there were any major issues discussed with management
prior to Crowe Chizeks retention
|
|
|
|
Whether Crowe Chizek encountered any difficulties in performing
the audit
|
|
|
|
Crowe Chizeks judgments about the quality of UCFCs
accounting principles
|
|
|
|
Crowe Chizeks responsibilities for information prepared by
management that is included in documents containing audited
financial statements
|
Based on its review of the financial statements and its
discussions with management and the representative of Crowe
Chizek, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in
the Annual Report on
Form 10-K
for the year ended December 31, 2006.
|
|
|
|
Richard
J. Schiraldi |
Eugenia
C. Atkinson |
Richard
J. Buoncore |
David C.
Sweet Chair |
PROPOSAL TO
ADOPT THE UNITED COMMUNITY FINANCIAL CORP.
2007 LONG-TERM INCENTIVE PLAN
General
In 1999, UCFC shareholders adopted the 1999 Plan and UCFC
utilized these awards to create a link between executive and
shareholder interests. However, the last of the shares reserved
for issuance of awards under the 1999 Plan were awarded in 2004.
Since that time, the Compensation Committee has utilized the
annual cash bonus to drive executives to increase UCFC
performance. However, the Board of Directors believed that the
adoption of
15
another equity plan would assist the Compensation Committee to
better align executive and shareholder interests because it
aligns executive and shareholder interests by providing
directors and employees with a proprietary interest in pursuing
the long-term growth and financial success of the Company.
In 2006, UCFCs Compensation Committee hired Clark
Consulting to, among other things, review equity compensation
practices in general and within the banking industry. Based upon
the analysis of Clark Consulting, UCFC is seeking approval from
the shareholders to implement the 2007 Plan.
The maximum number of UCFC shares that may be issued pursuant to
awards of restricted shares, stock options, performance awards,
stock appreciation rights (SARs), or other forms of stock-based
incentive awards will be 2,000,000. Any shares issued under the
2007 Plan will be authorized but unissued shares or issued
shares that have been reacquired by UCFC.
The Board of Directors of UCFC recommends that the
shareholders vote FOR the 2007 Plan.
Purpose,
Administration and Eligibility
The purpose of the 2007 Plan is to promote and advance the
interests of UCFC and its shareholders by enabling UCFC to
attract, retain and reward managerial and other key employees
and directors and directors emeritus of UCFC and its
subsidiaries by facilitating their purchase of an ownership
interest in UCFC. Approximately 800 employees of UCFC and
its subsidiaries and all nine directors of UCFC may be eligible
to participate in the 2007 Plan.
The 2007 Plan will be administered by the Compensation
Committee. Awards will be granted under the 2007 Plan on the
basis of an individual participants position, duties and
responsibilities, the value of the individuals services to
UCFC and its subsidiaries and any other factor the Compensation
Committee deems relevant.
If approved, the 2007 Plan will terminate on April 26,
2017. Without further approval of the shareholders, the Board of
Directors may terminate the 2007 Plan prior to that date 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 2007 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 2007 Plan, or (c) materially
increase the benefits accruing to participants under the 2007
Plan. However, the Board of Directors may amend the 2007 Plan to
take into account changes in applicable securities, federal
income tax and other applicable laws.
Effect on
Existing Shareholders
As of the Voting Record Date, there were 30,895,961 shares
of UCFC common stock outstanding. As shares are issued under the
2007 Plan, the voting power of the directors and officers of
UCFC over the outcome of the vote on any matters submitted to
UCFCs shareholders, including changes of control, will
increase.
Restricted
Stock
Restricted stock may be issued to participants as determined by
the Compensation Committee. Restricted stock consists of UCFC
shares that are issued to a participant but which are subject to
restrictions on transfer and the risk of forfeiture if certain
specified conditions are not met. Restricted stock may not be
sold or otherwise transferred until the end of the restriction
period established by the Committee. The restrictions may
include time-based or performance-based restrictions. Restricted
stock will vest, and the associated restrictions on transfer
will lapse, if at the end of the restriction period,
pre-determined time-based or performance-based conditions have
been met.
Restricted stock will be forfeited (or if restricted stock was
issued for a cash payment, will be resold to UCFC for the amount
originally paid), if all conditions have not been met at the end
of the restriction period. Restricted stock that has been
forfeited will again become available under the 2007 Plan for
future awards.
16
Stock
Options
Options granted to the officers and employees under the 2007
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 that do not qualify
under Section 422 of the Code (Non-qualified Stock
Options). Options granted under the 2007 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 2007 Plan.
The exercise price of each option granted under the 2007 Plan
will be determined by the Compensation Committee at the time the
option is granted; provided, however, that the exercise price of
an option may not be less than 100% of the fair market value of
the shares on the date of the grant. In addition, the exercise
price of an ISO may not be less than 110% of the fair market
value of the shares on the date of the grant if the recipient
owns more than 10% of the outstanding common shares of UCFC. The
Compensation 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 2007 Plan exceeds $100,000, the ISOs will
be Non-qualified Stock Options to the extent of such excess.
UCFC will receive no monetary consideration for the granting of
options under the 2007 Plan. Upon the exercise of options, UCFC
will receive payment of cash or, if acceptable to the
Compensation 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 2007 Plan is
approximately $21.5 million, based upon the
2,000,000 shares reserved, multiplied by the
$10.74 per share closing price of shares of UCFC on the
Voting Record Date, as quoted on the Nasdaq Global Market.
Performance
Awards
The Compensation Committee may grant an award of options, cash,
shares, restricted shares or other securities to be paid to an
individual upon the achievement of certain performance goals.
Subject to the terms of the 2007 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.
Performance awards may be based upon performance criteria that
satisfy Section 162(m) of the Code. Section 162(m)
that limit the tax deduction for compensation expense in excess
of $1 million paid to each of certain executive officers.
However, performance-based compensation can be excluded from the
limit so long as it meets certain requirements. To the extent
that awards are intended to qualify as performance-based
compensation under Section 162(m), the performance
criteria will be based on certain factors, for example:
|
|
|
|
|
Cash flow;
|
|
|
|
Earnings (including gross margin, earnings before interest and
taxes and earnings before taxes and net earnings);
|
|
|
|
Earnings per share;
|
|
|
|
Growth in earnings or earnings per share;
|
|
|
|
Stock price;
|
|
|
|
Return on equity or average shareholders equity;
|
|
|
|
Return on shareholder equity, assets or investment; or
|
|
|
|
Revenue, income, net income, operating income or net operating
income.
|
17
Stock
Appreciation Rights
The Compensation Committee may include SARs as a component of an
option or independent of an option. The exercise price of an SAR
must be equal to or greater than the fair market value of
UCFCs shares on the date of grant. A participant
exercising an SAR receives an amount, payable in cash, shares or
a combination of cash and shares as determined by the Committee,
equal to the difference between the fair market value of a share
on the exercise date and the exercise price, multiplied by the
number of shares with respect to which the SAR is exercised.
Effects
of Termination, Death, Disability, Retirement and Change of
Control
An award recipient cannot transfer or assign an award other than
by will or in accordance with the laws of descent and
distribution. Termination of an award recipients
employment for cause, as defined in the 2007 Plan, will result
in the termination of any outstanding unexercised options or
unvested award. Any unexercised options or unvested awards will
terminate within the sooner of its expiration or three months of
resignation, removal or retirement of a director or director
emeritus of UCFC or its subsidiaries, or upon the termination of
employment (other than for cause) of an officer or employee of
UCFC or its subsidiaries. However, in the case of death,
disability or retirement of the recipient, or a change of
control of UCFC or Home Savings, as defined in the 2007 Plan, an
award will become fully and immediately vested and exercisable;
provided, however, that an option shall not be exercisable after
its expiration date or more than 12 months from the date of
the recipients death disability or retirement, whichever
comes first.
U.S. Federal
Tax Consequences
The following is a brief summary of the general
U.S. federal income and employment tax consequences
relating to the 2007 Plan. This summary is based on
U.S. federal tax laws and regulations in effect on the date
of this proxy statement and does not purport to be a complete
description of U.S. federal income or employment tax laws.
Participants in the 2007 Plan also may be subject to certain
U.S. state and local taxes and
non-U.S. taxes
that are not described below.
Restricted Shares. Generally, a participant
who has been granted restricted shares will not recognize
ordinary income at the time of grant, and UCFC will not be
entitled to a deduction at that time, if the shares are not
transferable and the restrictions on the shares create a
substantial risk of forfeiture for federal income
tax purposes. Generally, upon the vesting of restricted shares,
the participant will recognize ordinary income in an amount
equal to the then fair market value of the shares, less any
consideration paid for the shares, and UCFC will be entitled to
a corresponding deduction. Any gains or losses recognized by the
participant upon disposition of the shares will be treated as
capital gains or losses.
A participant may elect pursuant to Section 83(b) of the
Code to have income recognized at the date of grant of a
restricted share award equal to the fair market value of the
shares on the date of grant and to have the applicable capital
gain holding period commence as of that date. If a participant
makes this election, UCFC will be entitled to a corresponding
deduction in the year of grant.
ISOs. ISOs are intended to qualify for special
treatment available under Section 422 of the Code. Upon the
grant of an ISO, an optionee will not recognize ordinary income.
An optionee also will not recognize ordinary income upon the
exercise of an ISO if the optionee was, without a break in
service, an employee of UCFC or its subsidiaries during the
period beginning on the date the ISO is granted and ending on
the date three months prior to the exercise of the ISO (or one
year prior to the exercise if the optionees employment is
terminated due to disability).
Generally, upon the disposition of shares acquired from the
exercise of ISOs, any amount recognized in excess of the
exercise price will be taxed to the optionee as a capital gain.
The optionee generally will recognize a capital loss if the
amount recognized is less than 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
at the time of disposition. In general, the amount recognized
will equal the lesser of (1) the excess of the fair market
value of the shares on the date of exercise over the exercise
price or (2) the excess, if any, of the
18
amount recognized upon disposition of the shares over the
exercise price. In the case of a Disqualifying Disposition, UCFC
generally will be entitled to a corresponding deduction. Any
amount recognized in excess of the fair market value of the
shares on the date of exercise will be treated as a short-term
or long-term capital gain, depending upon the period of time the
shares have been held. If the amount recognized is less than the
exercise price, the optionee generally will recognize a capital
loss equal to the excess of the exercise price over the amount
recognized upon the disposition of the shares. Such loss will be
treated as a short-term or long-term capital loss depending upon
the period of time the shares have been held. Ordinary income
from a Disqualifying Disposition will not be subject to tax
withholding, nor will it be considered wages for payroll tax
purposes.
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 corporation may not deduct applicable
employee remuneration to the extent that such remuneration
paid to a covered employee for a taxable year
exceeds $1.0 million.
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. In general, shares received
by the optionee that are equal in number to the previously
acquired common shares used for the exchange 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 that
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 the previously acquired shares will
be considered a disposition of such shares for the purpose of
determining whether a Disqualifying Disposition has occurred.
The rules that generally apply to ISOs do not apply when
calculating any alternative minimum tax liability. The rules
affecting the application of the alternative minimum tax are
complex, and their effect depends on individual circumstances,
including whether an optionee has items of adjustment other than
those derived from ISOs.
Non-qualified Stock Options. An optionee
generally will not recognize ordinary income when a
non-qualified stock option is granted. When a non-qualified
stock option is exercised, an optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair
market value of the shares that the optionee purchased on the
date of exercise over the aggregate exercise price paid.
Shares acquired upon the exercise of a non-qualified stock
option generally 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 one year 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.
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 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.
In general, shares received by an optionee equal in number to
the previously acquired shares exchanged therefor will have the
same basis and holding period as such previously acquired
shares. Shares received by an optionee in excess of the number
of such previously acquired shares will have a basis equal to
the fair market value of such additional shares as of the date
ordinary income is recognized. The holding period for such
additional shares will commence as of the date of exercise or
such other relevant date.
19
Performance Awards and Other Stock-Based Incentive
Awards. In general, a participant will not
recognize ordinary income when performance awards or other
stock-based incentive awards are granted, and UCFC will not
receive a deduction at that time. However, if the participant
satisfies the conditions imposed on the award, the participant
will recognize ordinary income in an amount equal to the cash
and/or the
fair market value of the shares he or she receives when the
award is settled, and UCFC will be entitled to a corresponding
deduction.
Stock Appreciation Rights. A participant will
not recognize ordinary income when a SAR is granted, and UCFC
will not receive a deduction at that time. When a SAR is
exercised, a participant will recognize ordinary income equal to
the cash or the fair market value of shares the participant
receives, and UCFC will be entitled to a corresponding deduction.
Section 409A of the
Code. Section 409A of the Code, which became
effective January 1, 2005, imposes certain restrictions on
amounts deferred under non-qualified deferred compensation plans
and a 20% excise tax on amounts that are subject to, but do not
comply with, Section 409A of the Code. Section 409A of
the Code includes a broad definition of non-qualified deferred
compensation plans, which may extend to various types of awards
granted under the 2007 Plan. The Internal Revenue Service
(IRS) has not yet finalized regulations describing
the effect of Section 409A of the Code on the types of
awards that may be issued under the 2007 Plan. The Compensation
Committee intends to administer the 2007 Plan and any award
agreements to avoid or minimize any excise tax on awards and, if
necessary, the UCFC Board of Directors will amend the 2007 Plan
and any associated award agreements to comply with
Section 409A on or before December 31, 2007 (or a
later date specified by the IRS).
Other Taxes. Generally, a participant may be
subject to employment taxes, including Social Security and
Medicare taxes, upon the exercise, vesting or settlement of the
participants awards (other than ISOs) under the 2007 Plan.
Section 162(m) of the Code. Options
granted under the 2007 Plan may qualify as
performance-based compensation under
Section 162(m) of the Code to preserve certain federal
income tax deductions by UCFC related to covered
employees (within the meaning of Section 162(m)). To
qualify, awards must be granted under the 2007 Plan by a
committee consisting solely of two or more outside
directors (as defined under applicable tax regulations)
and satisfy the 2007 Plans limit on the total number of
shares that may be issued to a participant pursuant to Options
granted under the 2007 Plan. The Compensation Committee meets
the composition requirements of Section 162(m).
Previously
Approved Equity Plan Information
The 1999 Plan and the UCFC Recognition and Retention Plan and
Trust Agreement (RRP) were approved by
UCFCs shareholders at the 1999 Special Meeting of
Shareholders. The following table shows, as of December 31,
2006, the number of common shares issuable upon the exercise of
outstanding stock options, the weighted average exercise price
of those stock options, and the number of common shares
remaining for future issuance under the RRP.
Equity
Compensation Plan Information
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|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Number of Securities
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average
|
|
|
Remaining Available
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
for Future Issuance
|
|
Plan Category
|
|
Outstanding Options
|
|
|
Outstanding Options
|
|
|
Under the RRP
|
|
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Equity compensation plans approved
by shareholders
|
|
|
2,068,558
|
|
|
$
|
9.63
|
|
|
|
37,156
|
|
20
SELECTION
OF AUDITORS
The Audit Committee of the Board of Directors has selected Crowe
Chizek as the independent auditors for the 2007 fiscal year. The
Board is requesting that the shareholders ratify this selection.
If the shareholders do not ratify the selection of Crowe Chizek,
the selection of independent auditors may be reconsidered by the
Audit Committee.
Management expects that a representative from Crowe Chizek will
be present at the Annual Meeting, will have the opportunity to
make a statement if he or she desires to do so and will be
available to respond to appropriate questions from shareholders.
AUDIT
FEES
The aggregate fees billed by Crowe Chizek to UCFC for the years
ended December 31, 2006 and 2005 are as follows:
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2006
|
|
|
2005
|
|
|
Audit Fees
|
|
$
|
321,790
|
|
|
$
|
331,925
|
|
Audit-Related Fees
|
|
|
32,400
|
(1)
|
|
|
20,475
|
(1)
|
Tax Fees
|
|
|
62,500
|
(2)
|
|
|
48,500
|
(2)
|
All Other Fees
|
|
|
4,254
|
(3)
|
|
|
6,440
|
(3)
|
|
|
|
(1) |
|
Includes fees for services related to attestation on internal
controls, the audit of the 401(k) and ESOP and an evaluation of
managements assertions relative to U.S. Department of
Education reporting requirements for the student loan portfolio. |
|
(2) |
|
Includes fees for services related to the preparation of various
federal, state and local income tax returns and various
consulting services. |
|
(3) |
|
Includes fees for software licensing and maintenance agreements
relating to managements review and reporting on internal
controls for compliance with Section 404 of the
Sarbanes-Oxley Act. |
PROPOSALS OF
SHAREHOLDERS, COMMUNICATIONS WITH THE BOARD OF DIRECTORS AND
OTHER MATTERS
Any proposals of qualified shareholders intended to be included
in the proxy statement for the 2008 Annual Meeting of
Shareholders of UCFC should be sent to UCFC by certified mail
and must be received by UCFC not later than November 24,
2007. In addition, if a shareholder intends to present a
proposal at the 2008 Annual Meeting without including the
proposal in the proxy materials related to that meeting, and if
the proposal is not received by February 7, 2008, then the
proxies designated by the Board of Directors of UCFC for the
2008 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.
Shareholders may send written communications to the Board of
Directors or any of the directors c/o Secretary, United
Community Financial Corp., 275 West Federal Street,
Youngstown, Ohio
44503-1203.
All communications will be compiled by the Secretary of UCFC and
submitted to the Board of Directors or the individual directors.
Management knows of no other business which may be brought
before the Annual Meeting. It is the intention of the persons
named in the enclosed Proxy to vote the Proxy in accordance with
their best judgment on any other matters which may be brought
before the Annual Meeting.
21
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO
COMPLETE, SIGN AND RETURN THE PROXY IN THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
Douglas M. McKay
Chairman of the Board and
Chief Executive Officer
Youngstown, Ohio
March 23, 2007
22
EXHIBIT A
United
Community Financial Corp.
2007
LONG-TERM INCENTIVE PLAN
United
Community Financial Corp.
2007
LONG-TERM INCENTIVE PLAN
INDEX
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Section
|
|
Description
|
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1
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Purpose of the Plan
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2
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Definitions
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3
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|
Types of Awards Covered
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4
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|
Administration
|
5
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|
Eligibility
|
6
|
|
Shares of Stock Subject to the Plan
|
7
|
|
Stock Options
|
8
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|
Stock Appreciation Rights
|
9
|
|
Restricted Stock
|
10
|
|
Performance Awards
|
11
|
|
Other Stock-Based Incentive Awards
|
12
|
|
Rights in the Event of
Resignation, Removal or Termination
|
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, Termination or
Modification
|
20
|
|
General Provisions
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21
|
|
Plan Effective Date
|
22
|
|
Plan Termination
|
23
|
|
Governing Law
|
United
Community Financial Corp.
2007 LONG-TERM INCENTIVE PLAN
SECTION 1
Purpose of
the Plan
1.1 The purpose of the United Community Financial
Corp. 2007 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 Corporations
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.
g) Common Shares means the common
shares, without par value, of the Corporation.
h) Corporation means United Community
Financial Corp.
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
A-1
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 Grantees parents, spouse,
brothers, sisters, 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.
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 2007 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, or as such meaning may be modified
by the Committee or Board in the future.
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 stock or cash, as determined by
the Committee.
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 personal
dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of a material provision
of any law, rule or regulation (other than traffic violations or
similar offenses) or a material violation of a final
cease-and-desist
order or for any other action of a Director or Employee which
results in a substantial financial loss to the Corporation or a
Subsidiary.
A-2
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 to:
a) select the Employees, Directors and Directors Emeritus
who will participate in the Plan and to make Awards to such
Employees and Directors;
b) 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) resolve all questions relating to the administration of
this Plan and applicable law.
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 effective as if the action had been taken by unanimous
vote at a meeting duly called and held.
4.4 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.
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.
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SECTION 6
Shares of
Stock Subject to the Plan
6.1 Awards may be granted with respect to the Common
Shares.
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
2,000,000 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 subject to
such Awards shall again be available for Awards under this Plan
to the extent of such forfeiture, termination or expiration;
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.
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, all of which may be granted as ISOs.
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 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.
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.
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(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) 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.
(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)(ii) 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.
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 an 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 are 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.
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.
9.4 A Grantee may make an 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 or a majority of the Outside Directors, excluding
Directors Emeritus, shall establish.
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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
Rights in
the Event of Resignation, Removal or Termination
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 an Outside Director
or upon the termination of employment of a Grantee who is not an
Outside Director (unless Terminated for Cause), any Option which
has not yet become exercisable or any other Award which has not
yet vested 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 before
the earlier to occur of the date of its expiration or three
months after such resignation, removal or termination of
employment or directorship.
12.3 Unless the Committee shall specifically state
otherwise at the time an Award is granted, in the event the
employment or the directorship of a Grantee is Terminated for
Cause, any Option that has not been exercised and any other
Award that has not vested 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 Option will become
exercisable in full on the date of the Grantees death,
Disability or Retirement, (i) in the event of the
Grantees death, by the Grantees estate or by the
person who acquired the right to exercise the Option by bequest
or inheritance, (ii) in the event of the Grantees
Disability, by the Grantee or his or her personal representative
or (iii) in the event of a Grantees Retirement, by
the Grantee.
13.2 In the event of the Grantees death,
Disability or Retirement, the Option shall not be exercisable
after the date of its expiration or more than twelve months from
the date of the Grantees death, Disability or Retirement,
whichever first occurs.
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13.3 If a Grantee dies, becomes subject to a
Disability or enters Retirement prior to the vesting of any
other Award, all Awards that have not expired and which are then
held by any Grantee (or the person or persons to whom any
deceased Grantees rights have been transferred) shall
become fully and immediately vested and exercisable.
13.4 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
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:
(i) 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);
(ii) the time at which 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
Corporations outstanding securities ordinarily having the
right to vote at the election of directors;
(iii) the time at which 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 Corporations shareholders
was approved by the same Nominating Committee serving under an
Incumbent Board shall be, for purposes of this
clause (iii), considered as though he were a member of the
Incumbent Board;
(iv) the consummation of a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of
the Corporation or similar transaction in which the Corporation
is not the resulting entity;
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(v) the approval by shareholders of a proxy statement
proposal submitted by someone other than 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
(vi) a completed tender offer for 20% or more of the voting
securities of the Corporation by anyone other than 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
Grantees 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 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 terms
of outstanding Awards, including 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 Awards
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
Corporations 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 Corporations 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 Award
outstanding at the time of such corporate transaction or which
would involve the termination of all Awards outstanding at the
time of such corporation transaction.
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
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Committee may adopt, to (i) a member of the Grantees
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.
19.2 The Board may authorize the Committee to direct
the execution of an instrument providing for the modification of
any outstanding Award 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 Award any right or benefit which could not be conferred on
him by the grant of a new Award at such time and shall not
materially decrease the holders benefits under the Award
without the consent of the holder of the Award, 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 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 the
Board of Directors of a Subsidiary, or (ii) interfere in
any way with the right of the Corporation or any of its
Subsidiaries to terminate the Grantees employment or
service on the Board at any time.
20.4 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.
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SECTION 21
Plan
Effective Date
21.1 This Plan shall become effective on the date of
its adoption by the shareholders of the Corporation (the
Effective Date).
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,
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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REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNITED COMMUNITY FINANCIAL CORP.
UNITED COMMUNITY FINANCIAL CORP.
2007 ANNUAL MEETING OF SHAREHOLDERS
April 26, 2007
The undersigned shareholder of United Community Financial Corp. (UCFC) hereby constitutes
and appoints Patrick W. Bevack 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
Annual Meeting of Shareholders of UCFC to be held at Mr. Anthonys, 7440 South Avenue, Boardman,
Ohio , on April 26, 2007, at 10:00 a.m. Eastern Time (the Annual Meeting), all of the shares of
UCFC which the undersigned is entitled to vote at the Annual Meeting, or at any adjournment
thereof, on each of the following proposals, all of which are described in the accompanying Proxy
Statement:
1. The re-election of three directors for terms expiring in 2010:
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FOR all nominees
listed below
(except as marked to the
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WITHHOLD authority to
vote for all nominees
listed below: |
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contrary below): |
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Eugenia C. Atkinson
David G. Lodge
Clarence R. Smith, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominees name
in the space provided below).
2. The approval of the UCFC 2007 Long-Term Incentive Plan.
o FOR o AGAINST o ABSTAIN
3. The ratification of the selection of Crowe Chizek and Company LLC, certified public
accountants, as the auditors of UCFC for the current
fiscal year.
o FOR o AGAINST o ABSTAIN
IMPORTANT: Please sign and date this Proxy on the reverse side.
4. In their discretion, upon such other business as may properly come before the Annual Meeting
or any adjournments thereof.
The Board of Directors recommends a vote FOR the nominees and the proposals listed above.
This Proxy, when properly executed, will be voted in the manner directed herein by the
undersigned shareholder. Unless otherwise specified, the shares will be voted FOR proposals 1, 2
and 3.
All Proxies previously given by the undersigned are hereby revoked. Receipt of the Notice of
the 2007 Annual Meeting of Shareholders of UCFC and of the accompanying Proxy Statement is hereby
acknowledged.
o In order to accommodate all shareholders, please check if you plan on attending the
Annual Meeting.
Please sign exactly as your name appears on your Stock Certificate(s). Executors,
Administrators, Trustees, Guardians, Attorneys and Agents should give their full titles.
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PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
FOR MAILING IN THE USA.