<PAGE> 1
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNIFIED FINANCIAL SERVICES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
[Unified Financial Services, Inc. Letterhead]
April 30, 1998
Dear Fellow Stockholders:
Our Annual Meeting of Stockholders will be held at the offices of First
Lexington Trust Company, 2353 Alexandria Drive, Lexington, Kentucky, at 10:00
a.m., local time, on Wednesday, May 20, 1998. The Notice of Annual Meeting
of Stockholders, Proxy Statement and proxy that accompany this letter outline
fully matters on which action is expected to be taken at the Annual Meeting.
We cordially invite you to attend the Annual Meeting. Even if you plan
to be present at the meeting, you are requested to date, sign and return the
enclosed proxy in the envelope provided so that your shares will be
represented. The mailing of an executed proxy will not affect your right to
vote in person should you later decide to attend the Annual Meeting.
Sincerely,
/s/ Timothy L. Ashburn
TIMOTHY L. ASHBURN
Chairman, President and
Chief Executive Officer
<PAGE> 3
UNIFIED FINANCIAL SERVICES, INC.
431 NORTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204-1873
(800) 862-7283
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 20, 1998
To the Holders of the Common Stock of
Unified Financial Services, Inc.:
The Annual Meeting of Stockholders of Unified Financial Services, Inc.,
a Delaware corporation (the "Company"), will be held at the offices of First
Lexington Trust Company, 2353 Alexandria Drive, Lexington, Kentucky, on
Wednesday, May 20, 1998 at 10:00 a.m., local time, for the following
purposes:
1. To elect two (2) Class I directors to hold office for a term of
three years or until their successors shall have been duly
elected and qualified;
2. To consider and act upon a proposal to adopt the Unified
Financial Services, Inc. 1998 Stock Incentive Plan; and
3. To consider and act upon such other business as may properly come
before the meeting and any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
March 27, 1998 as the record date for the determination of stockholders
entitled to receive notice of and to vote at the meeting and any adjournment
thereof.
By Order of the Board of Directors,
Carol J. Highsmith, Secretary
April 30, 1998
Indianapolis, Indiana
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
<PAGE> 4
UNIFIED FINANCIAL SERVICES, INC.
431 NORTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204-1873
(800) 862-7283
PROXY STATEMENT
For Annual Meeting of Stockholders to be
Held on Wednesday, May 20, 1998
Approximate Date of Mailing: April 30, 1998
GENERAL
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Unified Financial
Services, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Wednesday, May 20, 1998 at 10:00 a.m.,
local time, at the offices of First Lexington Trust Company, 2353 Alexandria
Drive, Lexington, Kentucky, and any adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders.
All proxies will be voted in accordance with the instructions
contained in the proxy. If no choice is specified, proxies will be voted in
favor of the election of the nominees for director proposed by the Board of
Directors in Proposal I and in favor of the adoption of the Unified Financial
Services, Inc. 1998 Stock Incentive Plan (the "Plan") in Proposal II. A
stockholder who executes a proxy may revoke it at any time before it is
exercised by delivering to the Company another proxy bearing a later date, by
submitting written notice of such revocation to the Secretary of the Company
or by personally appearing at the Annual Meeting and casting a contrary vote.
This Proxy Statement, the Notice of Annual Meeting and the
accompanying proxy were first mailed to the stockholders of the Company on or
about April 30, 1998. The Company will bear the entire expense of soliciting
proxies. Proxies will be solicited by mail initially. The directors,
executive officers and employees of the Company also may solicit proxies
personally or by telephone or other means, but such persons will not be
specially compensated for such services. Certain holders of record, such as
brokers, custodians and nominees, may be requested to distribute proxy
materials to beneficial owners and will be reimbursed by the Company for
their reasonable expenses incurred in sending proxy materials to beneficial
owners.
A plurality of the votes cast is required for the election of
directors. Under the Delaware General Corporation Law, an abstaining vote is
not deemed to be a "vote cast." As a result, abstentions and broker
"non-votes" are not included in the tabulation of the voting results on the
election of directors and, therefore, do not have the effect of votes in
opposition. The adoption of the Plan requires the affirmative vote of a
majority of the votes cast on such proposal at the meeting; provided, that
the number of votes cast constitutes more than 50% of the shares entitled to
vote on the proposal. Abstentions on such matter will be counted, but broker
"non-votes" will not be counted, for the purpose of determining the number of
shares represented at the meeting for purposes of determining whether a
quorum of shares is present at the meeting. Neither abstentions nor broker
"non-votes" shall be deemed to be a vote cast in determining whether the 50%
or more requirement is met for purposes of the adoption of the Plan. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner.
<PAGE> 5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The close of business on March 27, 1998 has been fixed as the
record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. Each outstanding share of the common stock,
$0.01 par value, of the Company ("Common Stock") is entitled to one vote.
On March 27, 1998, there were outstanding and entitled to vote 1,046,976
shares of Common Stock.
Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the amount
of Common Stock beneficially owned, as of March 27, 1998, by each director of
the Company, each nominee for election as a director of the Company, the
executive officers named in the Summary Compensation Table, any person who is
known by the company to own beneficially more than 5% of the Common Stock and
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Number of Shares Percent of Outstanding
Name and Address<F1> Beneficially Owned Common Stock
-------------------- ------------------ ------------
<S> <C> <C>
Timothy L. Ashburn 577,449<F2><F3><F4> 55.2%
Jack R. Orben 18,000<F2> 1.7
Weaver H. Gaines 18,000<F2> 1.7
Thomas J. Napurano 68,351<F2><F4> 6.5
Lynn E. Wood 114,213<F2><F4><F5> 10.9
Dr. Gregory W. Kasten 355,167<F4><F6> 33.9
Directors and Executive Officers
as a Group (7 persons) 977,572<F2> 93.4
<FN>
- --------------------
<F1> Except as otherwise indicated, each individual has sole voting and
investment power over the shares listed beside his name. The
percentage calculations for beneficial ownership are based upon
1,046,976 shares of Common Stock that were issued and outstanding as
of March 27, 1998. The address for each person is 431 North
Pennsylvania Street, Indianapolis, Indiana 46204-1873.
<F2> Includes 63,656, 18,000, 18,000, 62,949, 64,213 and 261,888 shares of
Common Stock beneficially owned by Messrs. Ashburn, Orben, Gaines,
Napurano and Wood, and all directors and executive officers as a
group, respectively, subject to the terms of that certain Voting Trust
Agreement (the "Voting Trust"), dated as of October 10, 1997, by and
between Mr. Ashburn, as voting trustee, and the Company. No person
has voting power over such shares except Mr. Ashburn, the voting
trustee. Each of Messrs. Ashburn, Orben, Gaines, Napurano and Wood,
and all executive directors and officers as a group, may be deemed to
be the beneficial owner(s) of the shares contributed to the Voting
Trust because such holder(s) retain sole investment power over such
shares. The Voting Trust terminates on October 31, 1998.
<F3> Includes 572,768 shares of Common Stock of which Mr. Ashburn may be
deemed to be the beneficial owner as voting trustee of the Voting
Trust. Mr. Ashburn disclaims beneficial ownership of all shares
subject to the Voting Trust except 63,656 shares.
<F4> Includes 4,680.613, 5,401.973, 4,562.641, 363.013 and 3,132,212.24
shares of Common Stock beneficially owned by Messrs. Ashburn,
Napurano, Wood and Kasten, and all directors and executive officers as
a group, respectively, and held by the Company's profit sharing plan.
No person has voting power over such shares except Mr. Wood, the
voting trustee. Each of Messrs. Ashburn, Napurano, Wood and Kasten,
and all directors and executive officers as a group, may be deemed to
be the beneficial owner(s) of the shares held by the profit sharing
plan because such holder(s) retain sole investment power over such
shares.
<F5> Includes 50,000 shares of Common Stock of which Mr. Wood may be deemed
to be the beneficial owner as voting trustee of the profit sharing
plan. Mr. Wood disclaims beneficial ownership of all shares held
subject to the profit sharing plan except 4,562.641 shares.
<F6> Includes 869 shares of Common Stock owned by Dr. Kasten's spouse, of
which Dr. Kasten disclaims beneficial ownership.
</TABLE>
-2-
<PAGE> 6
PROPOSAL I: ELECTION OF DIRECTORS
In accordance with the by-laws of the Company, the Board of
Directors has fixed the number of directors at six, divided into three
classes, with the terms of office of each class ending in successive years.
The Board of Directors has nominated Timothy L. Ashburn and Dr. Gregory W.
Kasten for election as Class I directors to hold office until the 2001 Annual
Meeting of Stockholders, until their respective successors are elected and
qualified, or until their earlier death, resignation or removal. There is no
cumulative voting in the election of directors.
The persons named as proxies on the accompanying proxy intend to
vote all duly executed proxies received by the Board of Directors for the
election of Timothy L. Ashburn and Dr. Gregory W. Kasten as Class I
directors, except as otherwise directed by the stockholder on the proxy.
Messrs. Ashburn and Kasten currently are directors of the Company. If for
any reason Messrs. Ashburn or Kasten become unavailable for election, which
is not now anticipated, the persons named in the accompanying proxy will vote
for such substitute nominee as is designated by the Board of Directors. The
Board of Directors recommends a vote "FOR" the election of Timothy L. Ashburn
and Dr. Gregory W. Kasten as Class I directors.
The name, age, principal occupation or position and other
directorships with respect to Messrs. Ashburn and Kasten and the other
directors whose terms of office will continue after the Annual Meeting is set
forth below, including any positions they hold with the Company and its
subsidiaries, Unified Management Corporation ("UMC"), Unified Fund Services,
Inc. ("UFSI"), First Lexington Trust Company ("First Lexington"), Health
Financial, Inc. ("Health Financial"), Resource Benefit Planners, Inc. ("RBP")
and Unified Internet Services, Inc. ("Unified Internet Services").
Class I Nominees To Be Elected For a Term of
Three Years Expiring in 2001
Class I:
-------
Timothy L. Ashburn, 47, has served as Chairman of the Board of
the Company since 1989, as Chief Executive Officer from 1989 to 1992 and 1994
to present, and as President since November 1997. Mr. Ashburn was employed
by Vine Street Trust Company, Lexington, Kentucky, a wholly owned subsidiary
of Cardinal Bancshares, a Kentucky bank holding company, for the two-year
period from April 1992 through March 1994. Mr. Ashburn also is a director of
each of UMC, UFSI, First Lexington, Health Financial, RBP and Unified
Internet Services, and is Chairman of the Board of Trustees, President and
Chief Executive Officer of the Unified Funds, a family of four no-load mutual
funds sponsored by UFSI.
Dr. Gregory W. Kasten, 43, has served as a director of the
Company since 1997. Dr. Kasten has served as President and Chief Executive
Officer of Health Financial and First Lexington since 1986 and 1994,
respectively. Dr. Kasten also is a director of each of Health Financial,
First Lexington and RBP.
-3-
<PAGE> 7
Class II - To Continue in Office Until 1999
Thomas G. Napurano, 56, a certified public accountant and a
certified management accountant, has served as a director, the Chief
Financial Officer and Executive Vice President of the Company since 1989.
Mr. Napurano also is a director and the Chief Financial Officer of UFSI, a
director and the Chief Financial Officer of UMC, a director and the Chief
Financial Officer of Unified Internet Services and the Chief Financial
Officer and the Treasurer for Unified Funds.
Lynn E. Wood, 51, has served as a director of the Company since
1992 and as Chief Operating Officer and President from 1993 through November
1997. Mr. Wood also is a director and the President and Chief Operating
Officer of UFSI, a director and the President of UMC, a director of Unified
Internet Services and the assistant secretary to the Unified Funds.
Class III - To Continue in Office Until 2000
Weaver H. Gaines, 54, has served as a director of the Company
from 1990 to 1992 and 1993 to present. Since 1993, Mr. Gaines has been
Chairman and Chief Executive Officer for Ixion Biotechnology, Inc., founding
and managing the development-stage biotechnology company. From 1985 until
1992, Mr. Gaines held various executive positions at the Mutual Life
Insurance Company of New York (MONY), including Executive Vice President and
General Counsel, and was a member of its executive and compensation
committees and management of MONY's investment services subsidiaries. Mr.
Gaines is a director of Voyeta Technologies, Inc., First ING Life Insurance
Company of New York and AquaGene, Inc. and Chairman of Bio + Florida,
Florida's biotechnology trade association.
Jack R. Orben, 58, has served as a director of the Company since
1989. Mr. Orben has been the Chairman and an executive officer of Fiduciary
Counsel, an investment adviser firm, since 1979. Fiduciary Counsel is a
sub-adviser for several portfolios of the Company's affiliated mutual funds,
the Unified Funds. Mr. Orben also is Chairman and an executive officer of AFS
Group, a 53% owner of Fiduciary Counsel, which owns 100% of Starwood Company,
an investment adviser firm. Starwood is a sub-adviser for the Starwood
Strategic portfolio of the Company's affiliated mutual funds, the Unified
Funds. Mr. Orben is a director of UFSI and chairs its investment committee,
and is on the Board of Trustees and is a member of the executive committee
for the Unified Funds.
BOARD OF DIRECTORS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors
of the Company met four times, including both regularly scheduled and special
meetings. During such year, all of the incumbent directors attended at least
75% of all meetings held by the Board of Directors and all committees on
which they serve.
The standing committees of the Board of Directors are the
Executive Compensation Committee, Acquisition Committee and Plan Committee.
Executive Compensation Committee. Messrs. Ashburn (Chairman),
Orben and Gaines are the current members of the Executive Compensation
Committee. The functions of the Executive Compensation Committee are to
recommend salary and bonus levels for the senior officers of the Company and
its subsidiaries. The Executive Compensation Committee met one time during
the year ended December 31, 1997.
-4-
<PAGE> 8
Acquisition Committee. Messrs. Ashburn (Chairman) and Napurano
are the current members of the Acquisition Committee. The functions of the
Acquisition Committee are to identify, evaluate and select potential
acquisition partners. The Acquisition Committee did not meet during the year
ended December 31, 1997.
Plan Committee. Messrs. Ashburn (Chairman), Orben and Gaines are
the current members of the Plan Committee. The functions of the Plan
Committee are to oversee and govern the Company's 401(k) Plan. The Plan
Committee met three times during the year ended December 31, 1997.
Directors currently are not compensated for attending meetings of
the Board, except for reimbursements for reasonable expenses related to
attendance at such meetings. Regularly scheduled board meetings are
conducted quarterly on the third Wednesday in January, April, July and
October of each year, unless otherwise changed, and the annual meeting of the
Company's stockholders will be conducted in May of each year beginning in
1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Kasten, a director of the Company, is the President and Chief
Financial Officer of Health Financial, a registered investment adviser, and
the President and Chief Financial Officer of First Lexington, a non-bank
affiliated trust company. All of the outstanding capital stock of each of
Health Financial and First Lexington was acquired by the Company on June 1,
1997 and December 31, 1997, respectively. Dr. Kasten was the sole
shareholder of Health Financial on June 1, 1997 and received an aggregate of
325,000 shares of the Company pursuant to the Company's acquisition of Health
Financial. Dr. Kasten and his spouse were also shareholders of First
Lexington on December 31, 1997 and received an aggregate of 28,935 shares and
869 shares, respectively, of the Company pursuant to the Company's
acquisition of First Lexington. During 1997, Health Financial received
payment of approximately $113,500 from First Lexington for certain employee
management services rendered to First Lexington by Health Financial.
-5-
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the Company's
Chief Executive Officer and each other executive officer whose base salary
and bonus exceeded $100,000 in 1997.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Other Annual Restricted Securities All Other
Bonus Compensation Stock Underlying Compensation
Name and Principal Position Year Salary ($) ($) ($) Awards ($) Options/SARs(#) ($)
- --------------------------- ---- ---------- --- --- ---------- --------------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Timothy L. Ashburn 1997 122,885 13,941 -- -- 63,656<F1> 3,610<F2>
Chairman, President and 1996 100,000 100 -- -- -- --
Chief Executive Officer 1995 100,000 500 -- -- -- --
Dr. Gregory W. Kasten<F3> 1997 250,000 12,000 -- -- -- 5,341<F4>
President and Chief 1996 -- -- -- -- -- --
Executive Officer of Health 1995 -- -- -- -- -- --
Financial and First Lexington
Thomas G. Napurano 1997 92,077 13,786 -- -- 62,949<F1> 3,247<F5>
Executive Vice President and 1996 92,077 100 -- -- -- --
Chief Financial Officer 1995 92,077 500 -- -- -- --
<FN>
- --------------------
<F1> Gives effect to the July 25, 1997 amendment to the original option
grants, which amendment gave effect to the stock dividend declared and
paid by the Company on July 15, 1997.
<F2> Includes the following: $3,000 in matching contributions to the
Company's Section 401(k) Plan; $505 the Company contributed to the
Company's profit sharing plan; and $105 for premiums paid by the
Company on an insurance policy for the benefit of Mr. Ashburn.
<F3> Dr. Kasten has been employed by the Company since the acquisition of
Health Financial by the Company on June 1, 1997.
<F4> Includes the following: $4,750 in matching contributions to the
Company's Section 401(k) Plan; and $591 the Company contributed to the
Company's profit sharing plan.
<F5> Includes the following: $2,751 in matching contributions to the
Company's Section 401(k) Plan; $391 the Company contributed to the
Company's profit sharing plan; and $105 for premiums paid by the
Company on an insurance policy for the benefit of Mr. Napurano.
</TABLE>
Employment Agreements
Dr. Gregory W. Kasten is the only executive officer of the
Company who has an employment agreement (the "Agreement") with the Company.
The initial term of the Agreement with Dr. Kasten is a two year period
beginning on June 1, 1997, the effective date of the Agreement. Commencing
on the first anniversary of the effective date, and continuing at each
anniversary date thereafter, the Agreement will automatically renew for an
additional year unless prior written notice is provided to Dr. Kasten.
During the initial two-year term of the Agreement, Dr. Kasten will be paid an
annual base salary of $500,000. In addition, he is eligible to be awarded an
incentive bonus on a basis commensurate with those provided to other peer
executive officers.
If the Company terminates Dr. Kasten's Agreement during the term
of employment without "cause" (generally, willful failure to perform duties,
willful misconduct injurious to the Company or a material breach of the
Agreement), or if Dr. Kasten terminates his employment with "good reason"
(generally, the assignment of duties inconsistent with the employee's
position, a material diminution in authority or responsibilities, a reduction
in any benefit specified in the Agreement, or any material breach of the
Agreement by the Company), the Company will be required to pay severance
benefits to Dr. Kasten in an amount equal to Dr. Kasten's then-current annual
salary for the remainder of the initial two-year period.
-6-
<PAGE> 10
Additionally, Dr. Kasten would be entitled to the continuation of annual
noncompete payments, and other benefits to which he otherwise would have been
entitled, as provided for in the Agreement.
OPTION/SAR GRANTS IN LAST YEAR
The following table sets forth information concerning stock
option grants made in 1997 to the individuals named in the Summary
Compensation Table. No SARs were granted to the named individuals in 1997.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------
Number of
Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#)<F1> Fiscal Year ($/Sh)<F1> Date
---- ------------ ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Timothy L. Ashburn 63,656 11.1% $0.1314 February 5, 2007
Thomas G. Napurano 62,949 11.0 0.1314 February 5, 2007
<FN>
- --------------------
<F1> Gives effect to the July 25, 1997 amendment to original option grant,
which amendment gave effect to the stock dividend declared and paid by
the Company on July 15, 1997.
</TABLE>
The following presents certain information concerning stock
option exercises in the fiscal year ended December 31, 1997. No options
remained unexercised at December 31, 1997 by the individuals named in the
Summary Compensation Table.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR
YEAR-END OPTION/SAR VALUES
<CAPTION>
Shares
Acquired on
Exercise Value Realized
Name (#) ($)<F1>
---- ----------- --------------
<S> <C> <C>
Timothy L. Ashburn 63,656 $24,100
Thomas G. Napurano 62,949 23,832
<FN>
- --------------------
<F1> Based on the fair market value of the Common Stock on July 25, 1997 of
approximately $0.51 per share.
</TABLE>
PROPOSAL II: ADOPTION OF THE UNIFIED FINANCIAL SERVICES, INC.
1998 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to approval by the
stockholders of the Company, the Plan, which provides for the granting of
stock options and other stock-based awards.
The total number of shares of Common Stock issuable under the
Plan is not to exceed
-7-
<PAGE> 11
1,500,000 shares, subject to adjustment in the event of any change in the
outstanding shares of such stock by reason of a stock dividend, stock split,
recapitalization, merger, consolidation or other similar changes generally
affecting stockholders of the Company. Of these 1,500,000 shares of stock,
no more than 250,000 shares may be issued to participants in the Plan in any
plan year.
The Board of Directors believes that the Plan will advance the
interests of the Company and its stockholders by providing additional
incentives and motivation toward superior performance and by enabling the
Company and its subsidiaries to attract and retain the services of key
employees and directors, upon whose judgment, talents and special efforts,
the successful conduct of its operations is largely dependent. The vote
required to approve the Plan is a majority of the shares of Common Stock cast
on such proposal at the Annual Meeting; provided, that the number of votes
cast constitutes more than 50% of the shares entitled to vote on the
proposal.
The Plan is administered by the Administrator. The Administrator
may be the Board of Directors or, if the Board of Directors so designates,
the Executive Compensation Committee of the Board of Directors. The
Committee, by majority action thereof, is authorized in its sole discretion
to construe and interpret the Plan, to make, amend and rescind rules and
regulations regarding the Plan and its administration, to determine the terms
and provisions of the respective Stock Option, Restricted Stock, Restricted
Stock Unit and Performance Award agreements (which need not be identical),
and to take whatever action is necessary to carry out the purposes of the
Plan; provided, however, that the Administrator shall take no action which
will impair any award previously granted under the Plan or cause the Plan not
to meet the requirements of Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the "Act").
The complete text of the Plan is set forth in Appendix A to this
proxy statement. The following summary of certain provisions of the Plan is
qualified in its entirety by reference to the full text of the Plan.
Description of the Plan
Under the terms of the Plan, employees, directors, advisors and
consultants of the Company and its subsidiaries (as determined by the
Administrator in its sole discretion) will be eligible to receive (a)
Incentive Stock Options; (b) Nonqualified Stock Options; (c) Stock
Appreciation Rights ("SARs"); (d) Restricted Stock; (e) Restricted Stock
Units; and (f) Performance Awards.
Incentive Stock Options. Incentive Stock Options granted under
the Plan shall entitle the holder thereof to purchase shares of Common Stock
at the base price established by the Administrator, which price shall not be
less than 100% of the "Fair Market Value" (as defined in the Plan) of Common
Stock on the date the option is granted. Such Incentive Stock Options are
exercisable not later than ten years after the date of the grant, and except
as provided below, will terminate not later than three months after
termination of employment for any reason other than death or disability.
Incentive Stock Options outstanding and unexercised at the time of the death
or disability of the participant generally shall terminate on the first to
occur of either the expiration date thereof or the expiration of twelve
months after the date of such event.
Under the Plan, no more than 1,500,000 shares may be issued in
the form of Incentive Stock Options.
Nonqualified Stock Options. Nonqualified Stock Options shall
consist of nonqualified options to purchase shares of stock at purchase
prices determined by the Administrator. Nonqualified
-8-
<PAGE> 12
Stock Options shall be exercisable not later than ten years after the date
they are granted, and will terminate not later than three months after
termination of employment for any reason other than death, retirement or
disability. The Administrator shall have the right to determine at the time
the option is granted whether shares issued upon exercise of a Nonqualified
Stock Option shall be subject to restrictions and, if so, the nature of the
restrictions.
Stock Appreciation Rights. Stock Appreciation Rights may be
granted which, in the discretion of the Administrator, may be exercised (1)
in lieu of exercise of an option, (2) in conjunction with the exercise of an
option, (3) upon lapse of an option, (4) independent of an option or (5) each
of the above in connection with a previously awarded option. The
Administrator may establish, in its sole discretion, a maximum amount per
share that will be payable upon exercise of a SAR, and may impose such
conditions on exercise of a SAR as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule) under the Act.
Restricted Stock and Restricted Stock Units. Restricted Stock
shall consist of stock or stock units issued under the Plan at any purchase
price less than the Fair Market Value thereof on the date of issuance, or as
a bonus. In the case of any Restricted Stock or Restricted Stock Units:
(a) The purchase price, if any, will be determined by the
Administrator.
(b) Restricted Stock or Restricted Stock Units may be subject
to: (i) restrictions on the sale or other disposition thereof; (ii)
rights of the Company to reacquire such Restricted Stock or Restricted
Stock Units at the purchase price, if any, originally paid therefor
upon the occurrence of specified events within specified periods;
(iii) representation by the participant that he or she intends to
acquire Restricted Stock or Restricted Stock Units for investment and
not for resale; and (iv) such other restrictions, conditions and terms
as the Administrator deems appropriate.
(c) The participant or a permitted transferee, as the case may
be, shall be entitled to all dividends paid with respect to Restricted
Stock, and shall be entitled to vote Restricted Stock, during the
"Period of Restriction" (as defined in the Plan).
Performance Awards. The Administrator may grant Performance
Awards which may consist of shares of Common Stock, Stock Options, Restricted
Stock, Restricted Stock Units or a combination thereof. In the event that
performance goals are achieved over a designated time period, the Performance
Awards will be made in a predesignated form in a single or in periodic
installments as the Administrator determines in its sole discretion. The
goals established by the Administrator shall be based on one or more
financial measures of the Company: (i) return on average assets; (ii)
earnings per share; (iii) return on stockholders' equity; and/or (iv) revenue
growth. The Administrator may also provide for additional opportunities
based upon the attainment of specific business objectives and other measures
of individual, business unit or company performance, and such other goals or
a combination thereof as may be established by the Administrator. In the
event the goal is not achieved at the conclusion of the designated
performance period, no payment shall be made to a participant. However,
goals may include standards for partial achievement and provide for a partial
award for partial achievement. The participant shall have no right to vote
any shares of Common Stock subject to a Performance Award, nor shall such
participant have any right to receive dividends on such shares until the
performance goals are achieved and the shares issued. No Performance Award
shall entitle any individual to receive more than 300,000 shares of Common
Stock.
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<PAGE> 13
Change of Control. If the terms of an agreement under which the
Administrator has granted an award under the Plan shall so provide, upon a
"Change of Control" (as defined in the Plan) outstanding awards shall become
immediately and fully exercisable or payable according to the terms set forth
in the Plan.
Duration, Amendment and Termination. No award shall be granted
more than ten years after the effective date of the Plan; provided, however,
that the terms and conditions applicable to any award granted within such
period may thereafter be amended or modified by mutual agreement between the
Company and the participant or such other person as may then have in interest
therein (notwithstanding the fact that an amendment or modification may cause
an option to no longer qualify as an Incentive Stock Option). Also, by
mutual agreement between the Company and a participant hereunder, Stock
Options or other awards may be granted to such participant in substitution
and exchange for, and in cancellation of, any awards previously granted such
participant under this Plan. The Board of Directors may amend the Plan from
time to time or terminate the Plan at any time. However, no action
authorized by this paragraph shall reduce the amount of any existing award or
change the terms and conditions thereof without the participant's consent.
No amendment of the Plan shall, without approval of the stockholders of the
Company: (a) increase the total number of shares which may be issued under
the Plan or increase the amount or type of awards that may be granted under
the Plan; (b) change the minimum purchase price, if any, of shares of stock
or stock units which may be made subject to awards under the Plan; (c) modify
the requirements as to eligibility for awards under the Plan; or (d) cause
the Plan not to comply with either Rule 16b-3, or any successor rule, under
the Act or Section 162(m) of the Internal Revenue Code of 1986, as amended.
Taxes. The Company shall be entitled to withhold the amount of
any tax attributable to any amounts payable or shares deliverable under the
Plan after giving the person entitled to receive such payment or delivery
notice as far in advance as practicable, and the Company may defer making
payment or delivery as to any award if any such tax is payable until
indemnified to its satisfaction. The person entitled to any such delivery
may, by notice to the Company at the time the requirement for such delivery
is first established, elect to have such withholding satisfied by a reduction
of the number of shares otherwise so deliverable, such reduction to be
calculated based on the Fair Market Value on the date of such notice;
provided, however, that with respect to reporting persons, such withholding
shall be satisfied by a reduction of the number of shares otherwise so
deliverable. A participant shall remain subject to withholding taxes upon
the exercise of a Nonqualified Stock Option by a permitted transferee or upon
the lapse of any forfeiture restrictions applicable to any shares of
Restricted Stock or Restricted Stock Units transferred to a permitted
transferee.
The Board of Directors recommends a vote "FOR" the adoption of
the Unified Financial Services, Inc. 1998 Stock Incentive Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires that the Company's executive officers and
directors, and persons who own more than ten percent of the Company's
outstanding stock, file reports of ownership and changes in ownership with
the Securities and Exchange Commission. During 1997, to the knowledge of the
Company, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with
except that each of Timothy L. Ashburn, Thomas G. Napurano, Lynn E. Wood,
Weaver H. Gaines and Jack R. Orben filed a late Form 3 report.
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INDEPENDENT ACCOUNTANTS
Larry E. Nunn & Associates, L.L.C. served as the Company's
independent accountants for the year ended December 31, 1997 and has been
selected by the Board of Directors to continue in such capacity during 1998.
Representatives of Larry E. Nunn & Associates, L.L.C. are expected to be
present at the Annual Meeting and to respond to appropriate questions from
stockholders. Such representatives will have the opportunity to make
statements if they so desire.
FUTURE STOCKHOLDER PROPOSALS
Under applicable regulations of the Securities and Exchange
Commission, all proposals of stockholders to be considered for inclusion in
the proxy statement for, and to be considered at, the 1999 Annual Meeting of
Stockholders must be received at the offices of the Company, c/o Secretary,
431 North Pennsylvania Street, Indianapolis, Indiana, 46204-1873 by not
later than December 30, 1998. The Company's By-laws also prescribe certain
time limitations and procedures regarding prior written notice to the Company
by stockholders, which limitations and procedures must be complied with for
proposals of stockholders to be included in the Company's proxy statement
for, and to be considered at, such annual meeting. Any stockholder who
wishes to make such a proposal should request a copy of the applicable
provisions of the Company's By-laws from the Secretary of the Company.
ANNUAL REPORT
The Annual Report to Stockholders of the Company for the year
ended December 31, 1997 has been mailed simultaneously to the stockholders of
the Company. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission
(excluding exhibits), is included in the Company's Annual Report to
Stockholders.
OTHER BUSINESS
The Board of Directors, at the date hereof, is not aware of any
business to be presented at the Annual Meeting other than that referred to in
the Notice of Annual Meeting of Stockholders and discussed herein. If any
other matter should properly come before the Annual Meeting, the persons
named on the enclosed form of proxy will have discretionary authority to vote
the shares of Common Stock represented by proxies in accordance with their
discretion and judgment as to the best interests of the Company.
TIMOTHY L. ASHBURN
Chairman of the Board, President
and Chief Executive Officer
April 30, 1998
Indianapolis, Indiana
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<PAGE> 15
Appendix A
----------
UNIFIED FINANCIAL SERVICES, INC.
1998 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of this Plan is to encourage certain Employees and
Directors of the Company, and of such Subsidiaries of the Company as the
Administrator designates, to acquire Stock or to receive monetary payments
based on the value of such Stock or based upon achieving certain goals on a
basis mutually advantageous to such Employees and Directors of the Company
and thus to provide an incentive for continuation of the efforts of Employees
and Directors for the success of the Company and aid the Company and its
Subsidiaries in competing with other enterprises for the services of new
Employees and Directors. Compensation relating to Awards under the Plan is
generally intended to qualify as "performance-based compensation" under
Section 162(m) of the Code.
Section 2. Definitions
Whenever used herein, the following terms shall have the
respective meanings set forth below:
(a) Act means the Securities Exchange Act of 1934, as amended
from time to time.
(b) Administrator means the Board or, if the Board so
designates, the Committee.
(c) Award means any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit or Performance
Award granted under the Plan.
(d) Base Price means, in the case of an Option or a Stock
Appreciation Right, a price fixed by the Administrator at
which the Option or the Stock Appreciation Right may be
exercised, which in the case of an Incentive Stock Option
or a Stock Appreciation Right shall not be less than 100%
of the Fair Market Value of a share of Common Stock on the
date of grant of such Incentive Stock Option or Stock
Appreciation Right.
(e) Board means the Board of Directors of the Company.
(f) Change of Control is defined in Section 14.
(g) Code means the Internal Revenue Code of 1986, as amended
and in effect from time to time.
(h) Committee means those members of the Compensation Committee
of the Board each of whom is both (1) qualified to
administer this Plan as contemplated by Rule 16b-3 and (2)
considered to be an "outside director" as contemplated by
Section 162(m) of the Code.
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(i) Common Stock means the common stock, $.01 par value, of the
Company.
(j) Company means Unified Financial Services, Inc., a Delaware
corporation.
(k) Covered Employee means a covered employee as that term is
defined in Section 162(m) of the Code.
(l) Director means a member of the Board (including members who
are also Employees) of the Company or any Subsidiary of the
Company.
(m) Disability means a physical and/or mental condition that
renders a Participant unable to perform the duties of the
Participant's position on a full-time basis for a period of
one hundred eighty (180) consecutive business days.
Disability shall be deemed to exist when certified by a
physician selected by the Company or its insurers and
acceptable to the Participant or the Participant's legal
representative (such agreement as to acceptability not to
be withheld unreasonably). The Participant will submit to
such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability
determination.
(n) Employee means any employee, consultant or advisor
(including officers and Directors who are also Employees)
of the Company or any Subsidiary of the Company; provided,
however, that bonafide services are rendered by any such
consultant or advisor and such services are not rendered in
connection with the offer or sale of securities in a
capital-raising transaction.
(o) Fair Market Value means, for any particular date, (i) for
any period during which Common Stock shall be listed for
trading on a national securities exchange, the closing
price per share of Common Stock on such exchange as of the
close of such trading day, (ii) for any period during which
Common Stock shall not be listed for trading on a national
securities exchange, but when Common Stock is authorized as
a Nasdaq National Market security, the last transaction
price per share as quoted by The Nasdaq Stock Market (the
"Nasdaq"), (iii) for any period during which Common Stock
shall not be listed for trading on a national securities
exchange or authorized as a Nasdaq National Market
security, but when Common Stock shall be authorized as a
Nasdaq SmallCap Market security, the closing bid price as
reported by the Nasdaq, or (iv) the market price per share
of Common Stock as determined by an investment banking firm
or certified public accountant selected by the
Administrator in the event neither (i), (ii) nor (iii)
above shall be applicable. If Fair Market Value is to be
determined as of a day when the securities markets are not
open, the Fair Market Value on that day shall be the Fair
Market Value on the preceding day when the markets were
open.
(p) Final Award means the Award earned by each Participant at
the end of the Performance Period.
(q) Option means the right to purchase Stock at the Base Price
for a specified period of time. For purposes of the Plan,
an Option may be an incentive stock
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option ("Incentive Stock Option") within the meaning of
Section 422 of the Code, a nonqualified stock option
("Nonqualified Stock Option") or any other type of option.
(r) Participant means any Employee or Director designated by
the Administrator to participate in the Plan.
(s) Performance Award means a right to receive a payment equal
to the value of a unit or other measure, and includes
shares of Stock (which may be granted pursuant to an Option
or as Restricted Stock) and Restricted Stock Units, as
determined by the Administrator based on performance during
a Performance Period.
(t) Performance Period means a period of not more than ten
years established by the Administrator during which certain
performance goals set by the Administrator are to be met.
(u) Period of Restriction means the period during which a grant
of shares of Restricted Stock is restricted pursuant to
Section 11 of the Plan.
(v) Permitted Transferee means either (i) the spouse, children
or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit
of the Participant and/or one or more Immediate Family
Members or (iii) one or more partnerships (general or
limited), corporations, limited liability companies or
other entities in which the aggregate interests of the
Participant and/or one or more Immediate Family Members
exceed 80% of all interests in such entity.
(w) Plan means the Unified Financial Services, Inc. 1998 Stock
Incentive Plan.
(x) Plan Year means the Company's fiscal year commencing
January 1 and ending December 31.
(y) Program means an Award program established by the
Administrator which designates the Participants, the
Covered Employees, a Performance Period, performance goals
and formulas or standards for determining the amounts of
Awards payable under the Plan.
(z) Reporting Person means a person subject to Section 16 of
the Act.
(aa) Restricted Stock means Stock granted pursuant to Section 11
or 12 of the Plan, but a share of such Stock shall cease to
be Restricted Stock when the conditions to and restrictions
thereon under Section 11 have been satisfied or have
expired, respectively.
(bb) Restricted Stock Unit means a unit equivalent in value to a
share of Stock granted pursuant to Section 11 or 12 of the
Plan, but a Stock Unit shall cease to
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be a Restricted Stock Unit when the conditions to and
restrictions thereon under Section 11 have been satisfied
or have expired, respectively.
(cc) Retirement (including Normal, Early and Disability
Retirement) means termination of employment with
eligibility for normal, early or disability retirement
benefits under the terms of the Company's Pension Plan, as
amended and in effect at the time of such termination of
employment.
(dd) Rule 16b-3 means Rule 16b-3 under the Act as amended from
time to time or any successor rule thereto.
(ee) Stock means the authorized and unissued shares of Common
Stock or reacquired shares of Common Stock held in
treasury.
(ff) Stock Units means units equivalent in value to shares of
Stock.
(gg) Stock Appreciation Right or SAR means the right to receive
a payment from the Company equal to the excess of the Fair
Market Value of a share of Stock at the date of exercise
over the Base Price. In the case of a Stock Appreciation
Right which is granted in conjunction with an Option, the
Base Price shall be the Option exercise price.
(hh) Subsidiary means a subsidiary corporation as defined in
Section 424 of the Code.
Section 3. Administration
The Plan will be administered by the Administrator. The
determinations of the Administrator shall be made in accordance with its
judgment as to the best interests of the Company and its stockholders and in
accordance with the purpose of the Plan. In the event the Board designates
the Committee to serve as the Administrator, a majority of members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. In addition, any determination
of the Committee under the Plan may be made without notice or meeting of the
Committee, by a writing signed by a majority of the Committee members.
Determinations, interpretations or other actions made or taken by the
Administrator pursuant to the provisions of the Plan shall be final and
binding and conclusive for all purposes and upon all persons whomsoever.
Subject to the express provisions of the Plan, the Administrator shall have
plenary authority to construe and interpret the Plan, to make, amend and
rescind rules and regulations regarding the Plan and its administration, to
determine the terms and provisions of the respective Stock Option, Restricted
Stock, Restricted Stock Unit and Performance Award agreements (which need not
be identical), and to take whatever action is necessary to carry out the
purposes of the Plan; provided, however, that the Administrator shall take no
action which will impair any Award previously granted under the Plan or cause
the Plan not to meet the requirements of Rule 16b-3.
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Section 4. Shares Reserved Under the Plan
Subject to Sections 10, 12 and 13 hereof, there are hereby
reserved for issuance under the Plan an aggregate of 1,500,000 shares of
Stock, which may be authorized but unissued shares or treasury shares. Of
these shares of Stock, no more than 250,000 shares may be issued to
Participants in any Plan Year and no more than an aggregate of 1,500,000
shares may be issued to Participants pursuant to Incentive Stock Options, in
each case subject to adjustment as set forth in the Plan. In addition, the
amount of shares representing forfeited or tendered shares shall be available
for Award only to persons not subject to Section 16 of the Act.
Except as provided in Section 13, in no event may more than
300,000 shares of Stock be issued in connection with the award of Restricted
Stock or Restricted Stock Units pursuant to Section 11 or 12, unless such
Stock or Stock Units were awarded as the payment for grants or rights under
any other employee or compensation plan of the Company. Additionally, the
maximum number of shares of Stock, which may be awarded in the form of
Options or SARs to any one individual under the Plan shall be limited to
300,000 Shares.
Stock underlying outstanding Options or Performance Awards will
be counted against the Plan maximum while such Options or Awards are
outstanding. Shares of Stock underlying expired, canceled or forfeited
Options or Awards (except Restricted Stock or Restricted Stock Units) may be
added back to the Plan maximum. When the exercise price of Options is paid
by delivery of shares of Stock, the number of shares available for issuance
under the Plan shall continue to be reduced by the gross (rather than the
net) number of shares issued pursuant to such exercise, regardless of the
number of shares surrendered in payment. Restricted Stock and Restricted
Stock Units issued pursuant to the Plan will be counted against the Plan
maximum while outstanding even while subject to restrictions. Shares of
Restricted Stock and Restricted Stock Units may not be added back to the Plan
maximum if such Restricted Stock or Restricted Stock Units are forfeited.
Section 5. Participants
Participants will consist of such officers, Directors and
Employees of the Company or any designated Subsidiary as the Administrator in
its sole discretion determines have a major impact on the success and future
growth and profitability of the Company. Designation of a Participant in any
Plan Year shall not require the Administrator to designate such person to
receive an Award in any other Plan Year or to receive the same type or amount
of Award as granted to the Participant in any other Plan Year or as granted
to any other Participant in any Plan Year. The Administrator shall consider
such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Awards.
Section 6. Types of Awards
The following Awards may be granted under the Plan: (a)
Incentive Stock Options; (b) Nonqualified Stock Options; (c) Stock
Appreciation Rights; (d) Restricted Stock; (e) Restricted Stock Units; and
(f) Performance Awards, all as described below. Except as specifically
limited herein, the Administrator shall have complete discretion in
determining the type and number of Awards to be
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granted to any Participant, and the terms and conditions that attach to each
Award, which terms and conditions need not be uniform as between different
Participants. All Awards shall be in writing.
Section 7. Date of Granting Awards
All Awards granted under the Plan shall be granted as of an award
date. Promptly after each award date, the Company shall notify the
Participant of the grant of the Award, and shall hand deliver or mail to the
Participant an Award Agreement, duly executed by and on behalf of the
Company, with the request that the Participant execute and return such
agreement within thirty days after the date of mailing or delivery by the
Company of the Award Agreement to the Participant. If the Participant shall
fail to execute and return the written Award Agreement within the thirty-day
period, the Participant's Award shall be automatically terminated, except
that if the Participant dies within the thirty-day period such Award
Agreement shall be effective notwithstanding the fact that it has not been
signed prior to death.
Section 8. Incentive Stock Options
Incentive Stock Options shall consist of Options to purchase
shares of Stock at purchase prices not less than 100% of the Fair Market
Value of the shares on the date the Option is granted. The purchase price
may be paid by check or, in the discretion of the Administrator, by the
delivery of shares of Common Stock then owned by the Participant, which
shares must have been owned for at least six (6) months. Subject to Section
14 hereof, Incentive Stock Options shall be exercisable not later than ten
years after the date they are granted and, except as provided below, will
terminate not later than three months after termination of employment for any
reason other than death or Disability. In the event termination of
employment occurs as a result of death or Disability, such an Option will be
exercisable for 12 months after such termination. If the optionee dies
within 12 months after termination of employment by reason of Disability,
then the period of exercise following death shall be the remainder of the
12-month period, or three months, whichever is longer. If the optionee dies
within three months after termination of employment for any other reason,
then the period of exercise following death shall be three months. In no
event shall any Incentive Stock Option be exercised more than ten years after
its grant. Leaves of absence granted by the Company or any Subsidiary of the
Company for military service, illness and transfers of employment between the
Company and any Subsidiary of the Company shall not constitute termination of
employment. The aggregate Fair Market Value (determined as of the time an
Option is granted) of the stock with respect to which an Incentive Stock
Option is exercisable for the first time during any calendar year (under all
option plans of the Company and its Subsidiaries) shall not exceed $100,000,
or such other amounts and limitations as may be provided from time to time by
the Code and any regulations promulgated thereunder. The Fair Market Value
of Stock shall be determined without regard to any restriction, other than a
restriction which, by its terms, will never lapse.
Section 9. Nonqualified Stock Options
Nonqualified Stock Options shall consist of nonqualified Options
to purchase shares of Stock at purchase prices determined by the
Administrator. The purchase price may be paid by check or, in the discretion
of the Administrator, by the delivery of shares of Common Stock then owned by
the Participant or the Permitted Transferee, as the case may be, which shares
must have been owned for at
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least six (6) months. Subject to Section 14 hereof, Nonqualified Stock
Options shall be exercisable not later than ten years after the date they are
granted, and will terminate not later than three months after termination of
employment for any reason other than death, Retirement or Disability. Leaves
of absence granted by the Company or any Subsidiary of the Company for
military service, illness and transfers of employment between the Company and
any Subsidiary of the Company shall not constitute termination of employment.
The Administrator shall have the right to determine at the time the Option is
granted whether Shares issued upon exercise of a Nonqualified Stock Option
shall be subject to restrictions and, if so, the nature of the restrictions.
Section 10. Stock Appreciation Rights
Stock Appreciation Rights may be granted which, in the discretion
of the Administrator, may be exercised (1) in lieu of exercise of an Option,
(2) in conjunction with the exercise of an Option, (3) upon lapse of an
Option, (4) independent of an Option or (5) each of the above in connection
with a previously awarded Option under the Plan. If the Option referred to
in (1), (2) or (3) above qualified as an Incentive Stock Option pursuant to
Section 422 of the Code, the related SAR shall comply with the applicable
provisions of the Code and the regulations issued thereunder. At the time of
grant, the Administrator may establish, in its sole discretion, a maximum
amount per share which will be payable upon exercise of a SAR, and may impose
such conditions on exercise of a SAR as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule) under the Act. At the
discretion of the Administrator, payment for SARs may be made in cash or
Common Stock, or in a combination thereof. The following will apply upon
exercise of a SAR:
(a) Exercise of SARs in Lieu of Exercise of Options.
-----------------------------------------------
SARs exercisable in lieu of Options may be exercised for all or
part of the shares of Stock subject to the related Option upon
the exercise of the right to exercise an equivalent number of
Options. A SAR may be exercised only with respect to the shares
of Stock for which its related Option is then exercisable. Upon
exercise of a SAR in lieu of exercise of an Option, shares of
Stock equal to the number of SARs exercised shall no longer be
available for Awards under the Plan, provided that if SARs are
exercised for cash, shares of stock equal to the number of SARs
exercised shall be restored to the number of shares available for
issuance under the Plan.
(b) Exercise of SARs in Conjunction with Exercise of
------------------------------------------------
Options. SARs exercisable in conjunction with the exercise of
-------
Options shall be deemed to be exercised upon the exercise of the
related Options, and shares of Stock equal to the sum of the
number of shares acquired by exercise of the Option plus the
number of SARs exercised shall no longer be available for Awards
under the Plan, provided that if SARs are exercised for cash,
shares of stock equal to the number of SARs exercised shall be
restored to the number of shares available for issuance under the
Plan.
(c) Exercise of SARs Upon Lapse of Options. SARs
--------------------------------------
exercisable upon lapse of Options shall be deemed to have been
exercised upon the lapse of the related Options as to the number
of shares of Stock subject to the Options. Shares of Stock equal
to the number of SARs deemed to have been exercised shall not be
available again for Awards under the Plan, provided that if SARs
are exercised for cash, shares of stock equal to the
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number of SARs exercised shall be restored to the number of shares
available for issuance under the Plan.
(d) Exercise of SARs Independent of Options. SARs
---------------------------------------
exercisable independent of Options may be exercised upon whatever
terms and conditions the Administrator, in its sole discretion,
imposes upon the SARs, and shares of Stock equal to the number of
SARs exercised shall no longer be available for Awards under the
Plan, provided that if SARs are exercised for cash, shares of
stock equal to the number of SARs exercised shall be restored to
the number of shares available for issuance under the Plan.
Section 11. Restricted Stock and Restricted Stock Units
Restricted Stock shall consist of Stock or Stock Units issued
under the Plan at any purchase price less than the Fair Market Value thereof
on the date of issuance, or as a bonus. In the case of any Restricted Stock
or Restricted Stock Units:
(a) The purchase price, if any, will be determined by the
Administrator.
(b) Restricted Stock or Restricted Stock Units may be
subject to: (i) restrictions on the sale or other disposition
thereof; (ii) rights of the Company to reacquire such Restricted
Stock or Restricted Stock Units at the purchase price, if any,
originally paid therefor upon termination of the employee's
employment within specified periods; (iii) representation by the
Participant that he or she intends to acquire Restricted Stock or
Restricted Stock Units for investment and not for resale; and
(iv) such other restrictions, conditions and terms as the
Administrator deems appropriate.
(c) The Participant or a Permitted Transferee, as the
case may be, shall be entitled to all dividends paid with respect
to Restricted Stock during the Period of Restriction and shall
not be required to return any such dividends to the Company in
the event of the forfeiture of the Restricted Stock.
(d) The Participant or a Permitted Transferee, as the
case may be, shall be entitled to vote Restricted Stock during
the Period of Restriction.
(e) The Administrator shall determine whether Restricted
Stock is to be delivered to the Participant with an appropriate
legend imprinted on the certificate or if the shares are to be
deposited in escrow pending removal of the restrictions.
Section 12. Performance Awards
(a) Performance Period. For each Program, the
------------------
Administrator shall set forth a Performance Period over which
performance will be measured to determine whether and in what
amounts to pay Awards to Participants. Each Program must be
established in writing prior to the expiration of any prescribed
time period for the pre-establishment of performance goals under
Section 162(m) of the Code. Each Program also shall set
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forth those individuals the Administrator believes may be or may
become Covered Employees for the applicable Performance Period.
(b) Performance Criteria and Goals. All Awards shall be
------------------------------
based upon any one or more of the following financial measures of
the Company: (i) return on average assets; (ii) earnings per
share; (iii) return on stockholders' equity; and/or (iv) revenue
growth. The Administrator may also provide for additional
opportunities based upon the attainment of specific business
objectives and other measures of individual, business unit or
Company performance, and such other goals or a combination
thereof as may be established by the Administrator. For each
Program and for each Participant, the Administrator shall
designate one or more objective performance goals based upon one
or more of the criteria listed above. No Award shall be paid if
the applicable performance goals are not satisfied; provided,
however, performance goals may include standards for partial
achievement and provide for a partial award for partial
achievement.
(c) Performance Awards. Performance Awards may consist
------------------
of Options, Stock, Restricted Stock, Restricted Stock Units or a
combination thereof, to be issued with or without any payment
therefor, in the event the performance goals established by the
Administrator are achieved during the Performance Period. For
each Program, the Administrator shall designate an objective
formula or standard for determining each Participant's Award.
Except with respect to Awards payable to Covered Employees, and
notwithstanding the failure to satisfy the applicable performance
goal(s), the Administrator shall have the discretion to increase
or reduce the amount of any Participant's Award above or below
the standard or formula amount to reflect individual performance
and/or unanticipated factors; the Administrator may only reduce
the amount of an Award payable to Covered Employees below the
standard or formula amount to reflect individual performance
and/or unanticipated factors. Actual payment of the Award earned
shall be in Stock, Restricted Stock, Restricted Stock Units or in
a combination thereof, in a single sum or in periodic
installments, all as the Administrator in its sole discretion
determines. If Stock or Restricted Stock is used, the
Participant shall not have the right to vote and receive
dividends until the goals are achieved and the actual shares are
issued. No Performance Award shall entitle any individual to
receive more than 300,000 shares of Stock.
(d) Payment of Awards. After the close of each
-----------------
Performance Period, the Administrator shall certify in writing
the achievement of the applicable performance goal(s) and the
amounts of any Awards payable to the Participants under the
applicable formula(s) or standard(s). All or part of the Awards
payable to Participants who are not Covered Employees may be paid
prior to the end of a Performance Period on an estimated basis,
subject to adjustment in the discretion of the Administrator.
All or part of the Awards payable to Covered Employees may be
paid prior to the end of a Performance Period only if such
earlier payment does not result in such Award failing to
constitute qualified performance-based compensation under Section
162(m) of the Code (e.g., if achievement of the applicable
performance goal(s) can be certified prior to the end of the
Performance Period). Subject to the foregoing, the timing of
payment of all Awards to both Covered Employees and Participants
who are not Covered Employees shall be within the discretion of
the Administrator.
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<PAGE> 24
Section 13. Adjustment Provisions
(a) If the Company shall at any time change the number of
issued shares of Common Stock without new consideration to the
Company (such as by stock dividends or stock splits), the total
number of shares reserved for issuance under this Plan, the
number of shares that may be granted in the form of Options,
SARs, Restricted Stock, Restricted Stock Units or Performance
Awards, the maximum number of shares available to a particular
Participant, and the number of shares covered by each outstanding
Award, shall be adjusted so that the aggregate consideration
payable to the Company, if any, and the value of each such Award
shall not be changed. Awards shall be deemed to contain
provisions for their continuation or for other equitable
adjustments after changes in Common Stock resulting from
reorganization, sale, merger, consolidation, issuance of stock
rights or warrants, or similar occurrence.
(b) Notwithstanding any other provision of this Plan or
in any Award, and without affecting the number of shares reserved
or available hereunder, the Board may authorize the equitable
adjustment of benefits in connection with any merger,
consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem
appropriate.
Section 14. Change of Control
Notwithstanding any other provision of this Plan, if the terms of
an agreement under which the Administrator has granted an award under this
Plan shall provide for an acceleration of benefits upon a Change of Control,
outstanding Awards shall become immediately and fully exercisable or payable
according to the following terms:
(a) Any outstanding and unexercised Option shall become
immediately and fully exercisable, and shall remain exercisable
until it would otherwise expire by reason of lapse of time.
(b) During the six month and seven day period from and
after a Change of Control (the "Exercise Period"), unless the
Administrator shall determine otherwise at the time of grant, a
Participant or Permitted Transferee, as the case may be, shall
have the right, in lieu of the payment of the Base Price of the
shares of Stock being purchased under an Option and by giving
notice to the Administrator, to elect (within the Exercise
Period) in lieu of exercise thereof, provided that if such Option
is held by a Reporting Person either (i) such grant was approved
by either the Board or the Administrator or (ii) more than six
(6) months have elapsed from the grant thereof, to surrender all
or part of the Option to the Company and to receive in cash,
within 30 days of such notice, an amount equal to the amount by
which the Change in Control Price per share of Common Stock on
the date of such election shall exceed the Base Price per share
of Stock under the Option multiplied by the number of shares of
Stock granted under the Option as to which the right granted
under this subsection 14(b) shall have been exercised. Change in
Control Price shall mean the higher of (i) (A) for any period
during which Common Stock shall be listed for trading on a
national securities exchange, the highest closing
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<PAGE> 25
price per share of Common Stock on such exchange as of the close
of such trading day, (B) for any period during which Common Stock
shall not be listed for trading on a national securities
exchange, but when Common Stock shall be authorized as a Nasdaq
National Market security, the highest price per share as quoted
by the Nasdaq, (C) for any period during which Common Stock shall
not be listed for trading on a national securities exchange or
authorized as a Nasdaq National Market security, but when Common
Stock shall be authorized as a Nasdaq SmallCap Market security,
the highest average of the high bid and low asked prices as
reported by the Nasdaq, or (D) the highest market price per share
of Common Stock as determined by an investment banking firm or
certified public accountant selected by the Administrator in the
event neither (A), (B) nor (C) above shall be applicable, in each
case during the 60-day period prior to and ending on the date of
the Change of Control, and (ii) if the Change of Control is the
result of a transaction or series of transactions described in
subsections 14(f)(i), (iii), (iv) or (v) hereof, the highest
price per share of Common Stock paid in such transaction or
series of transactions (which in the case of paragraph (i) shall
be the highest price per share of Common Stock as reflected in a
Schedule 13D by the person having made the acquisition);
provided, however, that with respect to any Incentive Stock
Option, the Change of Control Price shall not exceed the market
price of a share of Common Stock (to the extent required pursuant
to Section 422 of the Code) on the date of surrender thereof.
(c) Any outstanding and unexercised Stock Appreciation
Rights (other than such rights which arise pursuant to subsection
14(b) hereof) shall become exercisable as follows:
(i) Any SAR described in subsections 10(a) or (b)
shall continue to be treated as provided in those
subsections, except that SARs exercised by Reporting
Persons for cash shall have been either (i) approved by the
Board or the Administrator or (ii) held for six months
prior to exercise.
(ii) Any SAR described in subsection 10(c) shall be
deemed to have been exercised if and when the Participant
advises the Administrator in writing that the Participant
elects to have Options with respect to which the SAR was
granted treated as having lapsed, except that SARs
exercised by Reporting Persons for cash shall have been
either (i) approved by the Board or the Administrator or
(ii) held for six months prior to exercise.
(iii) Any SAR described in subsection 10(d) shall be
exercisable immediately, without regard to limitations
imposed upon such exercise which are related to the passage
of time, except that SARs exercised by Reporting Persons
for cash shall have been either (i) approved by the Board
or the Administrator or (ii) held for six months prior to
exercise.
(d) Any Restricted Stock or Restricted Stock Units
granted pursuant to Section 11 shall become immediately and fully
transferable, and the Administrator shall be deemed to have
exercised its discretion to waive any automatic forfeitures
provided with respect to such Restricted Stock or Restricted
Stock Units. Any shares held in escrow shall be delivered to the
Participant or a Permitted Transferee, as the case may
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<PAGE> 26
be, and any share certificates shall not contain the legend
specified by subsection 11(e). Unless such award of Restricted
Stock or Restricted Stock Units shall have been approved by
either the Board and/or the Administrator, Reporting Persons
shall not dispose of any Restricted Stock or Restricted Stock
Units until six (6) months following the date of award of such
Restricted Stock or Restricted Stock Units.
(e) Any Performance Award granted pursuant to Section 12
that has not expired or been forfeited shall be deemed to have
been earned on the assumption that all performance goals have
been achieved to the fullest extent scheduled in the Award. All
payments shall be made promptly in a lump sum, notwithstanding
any other provision for installment or deferred payment
prescribed in the Award.
(f) For purposes of this Plan, Change of Control shall
mean a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Act; provided that, for
purposes of this Plan, a Change in Control shall be deemed to
have occurred if: (i) any Person (other than the Company, Dr.
Gregory W. Kasten or the voting trustee under that certain Voting
Trust Agreement dated October 10, 1997, as it may be amended from
time to time) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company that represent 30% or more of the combined voting
power of the Company's then outstanding securities; (ii) during
any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the
election, or the nomination for election, by the Company's
stockholders, of each new director is approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
were directors at the beginning of the period but excluding any
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such term
is used in Rule 14a-11 of Regulation 14A promulgated under the
Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; (iii)
there is consummated any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock are
converted into cash, securities or other property, other than a
merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (iv) there is consummated any
consolidation or merger of the Company in which the Company is
the continuing or surviving corporation in which the holders of
Common Stock immediately prior to the merger do not own at least
fifty percent (50%), or such greater percentage as shall be set
in any agreement with any Participant, or more of the stock of
the surviving corporation immediately after the merger; (v)
there is consummated any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or (vi) the
stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company.
A-12
<PAGE> 27
Section 15. Nontransferability
Each Award granted under the Plan to a Participant shall not be
transferable otherwise than by will or the laws of descent and distribution;
provided, however, that the Participant may, in his or her sole discretion,
transfer to a Permitted Transferee all or a portion of (i) a Nonqualified
Stock Option granted to such Participant or (ii) any Restricted Stock or
Restricted Stock Unit awarded to such Participant; provided further, however,
that, with respect to each of the foregoing, (x) subsequent transfers of
Nonqualified Stock Options, shares of Restricted Stock or Restricted Stock
Units shall be prohibited except those (1) by will or the laws of descent and
distribution or (2) to any other Permitted Transferee of the Participant, and
(y) the Participant shall remain subject to withholding taxes upon exercise
of the Nonqualified Stock Option by a Permitted Transferee or upon the
expiration of any forfeiture restrictions applicable to such shares of
Restricted Stock or Restricted Stock Units. Following transfer, any such
Nonqualified Stock Options, shares of Restricted Stock or Restricted Stock
Units shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. The Company shall have no
obligation to provide a Permitted Transferee with notice of the early
termination of a Nonqualified Stock Option or the forfeiture of any shares of
Restricted Stock or Restricted Stock Units. Awards granted under the Plan to
a Participant shall be exercisable, during the Participant's lifetime, only
by the Participant or a Permitted Transferee, as the case may be. In the
event of the death of a Participant, exercise or payment shall be made only:
(a) By or to the Permitted Transferee, the executor or
administrator of the estate of the deceased Participant or the
person or persons to whom the deceased Participant's rights under
the Award shall pass by will or the laws of descent and
distribution; and
(b) To the extent that the deceased Participant or the
Permitted Transferee, as the case may be, was entitled thereto at
the date of the Participant's death.
Section 16. Taxes
The Company shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares deliverable under the Plan
after giving the person entitled to receive such payment or delivery notice
as far in advance as practicable, and the Company may defer making payment or
delivery as to any Award if any such tax is payable until indemnified to its
satisfaction. The person entitled to any such delivery may, by notice to the
Company at the time the requirement for such delivery is first established,
elect to have such withholding satisfied by a reduction of the number of
shares otherwise so deliverable, such reduction to be calculated based on the
Fair Market Value on the date of such notice; provided, however, that with
respect to Reporting Persons, such withholding shall be satisfied by a
reduction of the number of shares otherwise so deliverable unless the
Reporting Person elects to pay all taxes in cash. A Participant shall remain
subject to withholding taxes upon the exercise of a Nonqualified Stock Option
by a Permitted Transferee or upon the lapse of any forfeiture restrictions
applicable to any shares of Restricted Stock or Restricted Stock Units
transferred to a Permitted Transferee.
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<PAGE> 28
Section 17. No Right to Employment
A Participant's right, if any, to continue to serve the Company
and its Subsidiaries as an officer, Director, Employee or otherwise shall not
be enlarged or otherwise affected by such individual's designation as a
Participant under the Plan.
Section 18. Duration, Amendment and Termination
No Award shall be granted more than ten years after the effective
date of this Plan; provided, however, that the terms and conditions
applicable to any Award granted within such period may thereafter be amended
or modified by mutual agreement between the Company and the Participant or
such other person as may then have an interest therein (notwithstanding the
fact that an amendment or modification may cause an Option to no longer
qualify as an Incentive Stock Option). Also, by mutual agreement between the
Company and a Participant hereunder, Stock Options or other Awards may be
granted to such Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted such Participant under this
Plan. To the extent that any Stock Options or other Awards which may be
granted within the terms of the Plan would qualify under present or future
laws for tax treatment that is beneficial to a recipient, then any such
beneficial treatment shall be considered within the intent, purpose and
operational purview of the Plan and the discretion of the Administrator, and
to the extent that any such Stock Options or other Awards would so qualify
within the terms of the Plan, the Administrator shall have full and complete
authority to grant Stock Options or other Awards that so qualify (including
the authority to grant, simultaneously or otherwise, Stock Options or other
Awards that do not so qualify) and to prescribe the terms and conditions
(which need not be identical as among recipients) in respect to the grant or
exercise of any such Stock Option or other Awards under the Plan. The Board
of Directors may amend the Plan from time to time or terminate the Plan at
any time. However, no action authorized by this paragraph shall reduce the
amount of any existing Award or change the terms and conditions thereof
without the Participant's consent. No amendment of the Plan shall, without
approval of the stockholders of the Company: (a) increase the total number
of shares that may be issued under the Plan or increase the amount or type of
Awards that may be granted under the Plan; (b) change the minimum purchase
price, if any, of shares of Stock or Stock Units which may be made subject to
Awards under the Plan; (c) modify the requirements as to eligibility for
Awards under the Plan; or (d) cause the Plan not to comply with either Rule
16b-3, or any successor rule, under the Act or Section 162(m) of the Code.
Section 19. Stockholder Approval; Registration Statement
The Plan shall be effective on February 25, 1998. The Plan shall
be submitted for approval by the Stockholders of the Company at the 1998
Annual Meeting of Stockholders and the Company shall file a registration
statement covering the shares of Stock to be issued under the Plan. If the
Stockholders do not approve the Plan or if such registration statement is not
filed or does not become effective, it, and any action taken hereunder, shall
be void and of no effect.
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<PAGE> 29
Section 20. Miscellaneous
(a) Governing Law. Subject to the provisions of applicable
-------------
federal law, the Plan shall be administered, construed and enforced according
to the internal laws of the State of Indiana excluding its conflict of law
rules, and applicable federal law and in courts situated in the State of
Indiana.
(b) Severability. The invalidity of any particular clause,
------------
provision or covenant herein shall not invalidate all or any part of the
remainder of the Plan, but such remainder shall be and remain valid in all
respects as fully as the law will permit.
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<PAGE> 30
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints David
A. Bogaert and Carol J. Highsmith (or such other person as is designated by
the Board of Directors of Unified Financial Services, Inc. (the "Company"))
(the "Proxies"), or either of them (with full power to act alone), true and
lawful attorney(s), with full power of substitution, for the undersigned and
in the name, place and stead of the undersigned to vote as designated below
all of the shares of Common Stock, $0.01 par value, of the Company entitled
to be voted by the undersigned at the Annual Meeting of Stockholders to be
held at the offices of First Lexington Trust Company, 2353 Alexandria Drive,
Lexington, Kentucky, at 10:00 a.m., local time, May 20, 1998, and at any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
1. ELECTION OF DIRECTORS:
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked below) all nominees listed below
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
For term expiring in 2001:
Timothy L. Ashburn
Dr. Gregory W. Kasten
2. PROPOSAL TO APPROVE THE ADOPTION OF THE UNIFIED FINANCIAL SERVICES,
INC. 1998 STOCK INCENTIVE PLAN:
/ / For / / Against / / Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment
thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted FOR both of the named nominees for director and for
Proposal 2.
The undersigned acknowledges receipt of the 1998 Annual Report to
Stockholders and the Notice of the Annual Meeting and the Proxy Statement.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
/ / PLEASE CHECK THIS BOX IF YOU PLAN TO
ATTEND THE MEETING IN PERSON.
SIGN HERE
---------------------------------------------
(Please sign exactly as name appears at left)
SIGN HERE
---------------------------------------------
Executors, administrators, trustees, etc.
should so indicate when signing
DATED
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