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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 0-22629
UNIFIED FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 35-1797759
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
431 North Pennsylvania Street, Indianapolis, Indiana 46204-1873
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 634-3301
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act
Common Stock, $.01 par value
Preferred Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
For the fiscal year ended December 31, 1999, revenues
totaled: $25,617,592.
As of March 30, 2000, the aggregate market value of the
voting stock held by non-affiliates of the Registrant was approximately
$58,402,160.
As of March 30, 2000, there were 2,878,462 shares of the
Registrant's Common Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference into
the indicated Part of this Report:
Document Part of Form 10-KSB
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Proxy Statement for the 2000
Annual Meeting of Stockholders III
Transitional Small Business Disclosure Format: Yes ; No X
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UNIFIED FINANCIAL SERVICES, INC.
FORM 10-KSB
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Description of Business 1
Item 2. Description of Property 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 4A. Executive Officers of the Registrant 12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 7. Financial Statements 20
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 45
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act 45
Item 10. Executive Compensation 45
Item 11. Security Ownership of Certain Beneficial Owners and
Management 45
Item 12. Certain Relationships and Related Transactions 45
Item 13. Exhibits and Reports on Form 8-K 46
SIGNATURES 47
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on
Form 10-KSB are or may constitute forward-looking statements
(as such term is defined in the Private Securities Litigation
Reform Act of 1995). Such forward-looking statements are based
on current expectations, estimates and projections about
Unified Financial Services' industries, management's beliefs
and assumptions made by management. For example, a down turn in
economic conditions generally and in particular those affecting
bond and securities markets could lead to an exit of investors
from mutual funds. Similarly, an increase in Federal and state
regulations of the mutual fund, insurance or banking industries
or the imposition of regulatory penalties could have an effect
on our operating results. These uncertainties, as well as
others, are present in the financial services industry and
stockholders are cautioned that management's view of the future
on which we price and distribute our products and estimate
costs of operations and regulations may prove to be other than
as anticipated. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements
are not guarantees of future performance and are subject to
certain risks, uncertainties and assumptions that are difficult
to predict; therefore, actual results and outcomes may differ
materially from what is expressed or forecasted in any such
forward-looking statements. Such risks and uncertainties
include those set forth herein under "Risk Factors." Unless
required by law, we undertake no obligation to update publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise.
GENERAL
Unified Financial Services, Inc., a Delaware holding
company for various financial services companies that also does
business as Unified.com, was organized on December 7, 1989. We
distribute a vertically integrated financial services platform
via the Internet and via the traditional industry channels of
our subsidiaries. As of December 31, 1999, we maintained in
excess of $1.5 billion of assets under management and $5.0
billion of assets under service.
Our principal business is: (1) to provide and maintain
vertical integration in the financial services industry for our
subsidiaries, a platform that creates synergy and revenues
among our subsidiaries from the fees associated with gathering,
managing, maintaining and servicing assets under management;
(2) to distribute our products and services platform via the
Internet through a "plug in" marketing and distribution
strategy to a number of compatible Internet channels via
Unified.com; and (3) to distribute our platform through the
traditional industry outlets of our subsidiaries' retail and
institutional customers. Our subsidiaries concentrate their
services over the following six business lines: investment
advisory, trust and retirement services; administrative and
back office support services; brokerage and brokerage services;
finance; insurance brokerage; and corporate and start-up. We
provide management services, working capital, systems support
and development and equipment for our subsidiaries.
Maintaining the vertically integrated platform is
primarily accomplished through three strategies:
(1) consolidating financial services companies that expand or
deepen the integration by eliminating cost centers, increasing
distribution and/or increasing products and services by means
of tax-free, stock-for-stock transactions (This particular
consolidation strategy is driven by our goal to protect,
maintain, nurture and advance the entrepreneurial spirit of
small businesses by providing capital, synergy and vertical
integration in an "autonomous" subsidiary environment.);
(2) the formation of new subsidiaries to
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develop proprietary products and services that deepen the
integration by eliminating cost centers, increasing
distribution and/or increasing products and services that
enhance and advance the synergy and revenues among our
subsidiaries; and (3) consolidating small mutual funds into our
mutual fund families by means of tax-free reorganizations (The
mutual fund consolidation strategy is assisted by our mutual
fund services capabilities and a highly qualified systems staff
which provides innovative and flexible programming options,
alternatives and solutions required by small mutual funds to
compete against the larger capitalized mutual fund families.)
Once a component of our vertically integrated network,
each subsidiary then implements its individual business plan in
an autonomous environment and achieves its growth and thereby
increases earnings predominantly by: (1) distributing our
products and services through the Internet and through its
traditional retail and institutional "industry" outlets;
(2) leveraging the existing infrastructure and utilizing the
vertically integrated platform to fully realize and affect the
synergy and the related earnings impact to our stock;
(3) acquisitions by the subsidiary, using our stock and/or
capital, to obtain important and critical business components
that complement and enhance its operations; (4) utilizing our
capital for necessary expansion; (5) traditional advertising,
marketing and selling of the subsidiary's products and
services; and (6) networking with our subsidiaries.
Our principal executive offices are located at 431 North
Pennsylvania Street, Indianapolis, Indiana 46204, and our
telephone number is (317) 917-7001. We also maintain
administrative offices at 2353 Alexandria Drive, Suite 100,
Lexington, Kentucky 40504, telephone number (606) 296-4407; 220
Lexington Green Circle, Suite 600, Lexington, Kentucky 40512,
telephone number (606) 245-2500; 1793 Kingswood Drive,
Southlake, Texas 76092, telephone number (817) 431-2197; and at
36 West 44th Street, The Bar Association Building, Suite 1310,
New York, New York 10036, telephone number (212) 852-8852; 36
East Fourth Street, Cincinnati, Ohio 45202, telephone number
(513) 345-6800; and One Firstar Plaza, Suite 2605, St. Louis,
Missouri 63101, telephone number (314) 552-6440.
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ACQUISITIONS AND ASSET PURCHASES
The following table lists the acquisitions and asset
purchases completed by us during the years ended December 31,
1999, 1998 and 1997. No acquisitions or asset purchases were
completed in 1996.
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CONSIDERATION
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SHARES OF ACCOUNTING
ACQUISITIONS AND ASSET PURCHASES COMPLETED DATE CASH COMMON STOCK METHOD
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<S> <C> <C> <C> <C>
Health Financial, Inc. 06/01/97 325,000 Pooling
First Lexington Trust Company 12/31/97 80,008 Pooling
Resource Benefit Planners, Inc. 03/10/98 12,000 Pooling
Unified Investment Advisers, Inc. 03/31/98 <F1> <F1>
Fiduciary Counsel, Inc. 08/21/98 $800,835 36,110 Purchase
EMCO Estate Management Company, Inc.<F2> 08/21/98 11,000 Pooling
Equity Underwriting Group, Inc.<F3> 12/17/98 241,745 Pooling
Commonwealth Premium Finance Corporation 12/17/98 12,800 Pooling
Strategic Fund Services, Inc. 12/22/98 7,500 Pooling
AmeriPrime Financial Services, Inc.<F4> 12/31/98 410,000 Pooling
M. Wilson & Associates, Inc. 01/01/99 3,636 Pooling
First Insight Securities, Ltd.<F5> 05/06/99 $ 51,700 Purchase
Commonwealth Investment Services, Inc. 06/01/99 27,500 Pooling
Fully Armed Productions, Inc. 06/01/99 18,182 Pooling
<FN>
<F1> Unified Investment Advisers became our wholly owned subsidiary
upon the surrender to Unified Investment Advisers by all of
its stockholders (other than us) of their capital stock.
<F2> We purchased certain of the assets and business and assumed
certain of the obligations of The Patty Corporation (f/k/a
EMCO Estate Management Company, Inc.). The acquisition
company used by us to acquire such assets and obligations
changed its name after the acquisition to EMCO Estate Management
Company, Inc.
<F3> Equity Underwriting Group, Inc. is a 100% shareholder of Equity
Insurance Managers, Inc., 21st Century Claims Service, Inc. and
Equity Insurance Administrators, Inc. Equity Insurance Managers
is the sole member of Equity Insurance Managers of Illinois,
L.L.C. (d/b/a/ Irland & Rogers).
<F4> AmeriPrime Financial Services, Inc. is a 100% shareholder of
AmeriPrime Financial Securities, Inc.
<F5> We, through our wholly owned subsidiary, Archer Trading, Inc.,
purchased certain of the assets and assumed certain of
the liabilities of First Insight Securities, Ltd. In connection
with such acquisition we assumed liabilities of approximately
$22,000 and paid an additional $51,700 in cash.
</TABLE>
RECENT DEVELOPMENTS AND PENDING TRANSACTIONS
On November 1, 1999, we received a charter from the
Office of Thrift Supervision to operate Unified Banking
Company, a Federal savings bank. Unified Banking Company is
located at 2353 Alexandria Drive, Lexington, Kentucky and its
accounts are insured by the Federal Deposit Insurance
Corporation to the maximum limit permitted under Federal law.
In connection with the organization of Unified Banking Company
we contributed $7.3 million to Unified Banking Company as
capital in exchange for all of the capital stock of Unified
Banking Company. Unified Banking Company offers various bank
products and services (including, but not limited to,
certificates of deposit, residential mortgage loans and secured
personal loans) to its banking customer base and to our
subsidiaries' customer bases, including investors in the mutual
funds managed, advised or administered by our subsidiaries.
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On February 10, 2000, First Lexington Trust Company, a
subsidiary of our company, filed applications with the Office
of the Comptroller of the Currency to convert to a limited
purpose national banking association. Upon consummation of the
proposed conversion, First Lexington Trust Company would be
renamed "Unified Trust Company, National Association." We
believe that a national charter will more easily allow First
Lexington Trust Company to pursue its business strategy of
expanding its business outside of the Commonwealth of Kentucky.
Subject to our receipt of the required regulatory approvals, we
anticipate consummating the conversion during the second
quarter of 2000.
OUR AFFILIATED MUTUAL FUNDS
As of December 31, 1999, the Unified Funds maintained
approximately $54.3 million in total net assets, predominantly
in its money market portfolio. The AmeriPrime Advisers Trust
maintained approximately $167.8 in total net assets, and the
AmeriPrime Funds maintained approximately $148.9 million in
total net assets.
The Unified Funds features its proprietary property, V.O.I.C.E.
(Vision for Ongoing Investment in Charity and Education).(SM)
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The Unified Funds' mission, largely due to its relationship
with Unified Investment Advisers, is to capture existing small
fund assets via: tax-free reorganizations; acquisitions;
asset mergers; construction of portfolios for certain registered
investment advisers; and the marketing of its V.O.I.C.E.(SM) concept.
One of the three Unified Fund's equity portfolios is a fund-of-funds.
Each of the AmeriPrime Funds and AmeriPrime Advisers
Trust are administered by AmeriPrime Financial Services and
distributed by AmeriPrime Financial Securities.
The board of trustees of the Unified Funds consists of
five disinterested trustees and one interested trustee, Timothy
L. Ashburn, our chairman, president and chief executive
officer. The board of trustees of each of the AmeriPrime Funds
and AmeriPrime Advisers Trust consists of two disinterested
trustees and one interested trustee, Kenneth D. Trumpfheller, a
director and the president and secretary of AmeriPrime
Financial Services and AmeriPrime Financial Securities.
REGULATION OF OUR SECURITIES, PREMIUM FINANCE AND INSURANCE
BROKERAGE BUSINESSES
Under the Investment Company Act of 1940, as amended, the
advisory, subadvisory shareholder servicing and distribution
agreements between our subsidiaries and various mutual funds
are subject to annual review by each fund's board of directors
and the agreements must be approved annually to remain in
effect. There are no assurances that the funds' boards of
directors will renew each agreement with these funds. The non-
renewal of those agreements by a fund's board of directors
could have a material adverse effect on our business. We have
no reason to believe that such approvals will not be granted
and that the various mutual fund agreements will not be
renewed.
The securities industry, including broker-dealer,
investment advisory and transfer agency firms in the United
States, are subject to extensive regulation under Federal and
state laws. Much of the regulation of broker-dealers has been
delegated to self-regulatory organizations, principally the
National Association of Securities Dealers, Inc. The
regulations to which broker-dealers are subjected cover all
aspects of the securities business, including sales methods,
trade practices, capital structure of securities firms,
recordkeeping and the conduct of directors, officers and
employees. Additional state and Federal legislation, changes
in rules promulgated by the Securities and Exchange Commission
and by self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules often
directly affect the methods of operation and profitability of
money managers, broker-dealers and transfer agents. Subject to
certain preemptive Federal law, investment-related firms also
are subject to regulation
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and licensing by state securities commissions in the states in
which they transact business. The Securities and Exchange
Commission, state securities administrators and the self-
regulatory organizations may conduct administrative proceedings
that can result in censure, fine, suspension or expulsion of an
investment adviser or broker-dealer, its officers or employees.
The principal purpose of regulation and discipline of broker-
dealers, investment advisers and transfer agents is the
protection of customers and the securities markets rather than
protection of creditors and shareholders of such firms. We
also are subject to extensive regulation as to our duties,
affiliations, conduct and limitations on fees.
The insurance industry is highly regulated by state law.
Our subsidiary, Commonwealth Premium Finance Corporation, must
be licensed as a premium finance company in the states of
Kentucky, Tennessee, Illinois and Ohio. Although Commonwealth
Premium Finance Corporation, also conducts business in the
states of West Virginia and Indiana, such states presently do
not require premium finance licensure. Applicable regulations
in all states in which Commonwealth Premium Finance Corporation
conducts business require the approval of service charges,
forms and applications used by Commonwealth Premium Finance
Corporation in its business and also require compliance with
certain recordkeeping and record inspection requirements.
Our other insurance-related subsidiaries also are subject
to state regulation. 21st Century Claims Service must be
licensed as a claims adjusting company in all states in which
it conducts business or, in the alternative, must employ
licensed claims adjusters. Equity Insurance Managers, Inc.
must be licensed as a managing general agent or broker in most
states in which it conducts business and, in some instances,
must employ licensed agents. Most insurance programs written
by such companies are subject to some degree of regulation by
state insurance departments. Violations of state regulations
may subject these companies to civil and criminal penalties,
including fines.
DEPOSITORY INSTITUTION REGULATION
GENERAL. Unified Banking Company is a Federally chartered
savings institution, a member of the Federal Home Loan Bank of
Cincinnati and its deposits are insured by the Federal Deposit
Insurance Corporation through the Savings Association Insurance
Fund. As a Federal savings institution, Unified Banking
Company is subject to regulation and supervision by the Office
of Thrift Supervision and the Federal Deposit Insurance
Corporation and to Office of Thrift Supervision regulations
governing such matters as capital standards, mergers,
establishment of branch offices and activities and general
investment authority. The Office of Thrift Supervision
periodically will examine Unified Banking Company for
compliance with various regulatory requirements and for safe
and sound operations. The Federal Deposit Insurance
Corporation also has the authority to conduct special
examinations of Unified Banking Company because its deposits
are insured by the Savings Association Insurance Fund. Unified
Banking Company must file reports with the Office of Thrift
Supervision describing its activities and financial condition
and must obtain the approval of the Office of Thrift
Supervision prior to entering into certain transactions.
REGULATORY CAPITAL REQUIREMENTS. Under the Office of
Thrift Supervision's regulatory capital requirements, savings
associations must maintain "tangible" capital equal to 1.5% of
adjusted total assets, "core" capital equal to at least 4.0% or
3.0% (if the institution is rated composite 1 CAMELS under the
Office of Thrift Supervision's examination rating system) of
adjusted total assets and "total" capital (a combination of
"core" and "supplementary" capital) equal to 8.0% of risk-
weighted assets. In addition, the Office of Thrift Supervision
has adopted regulations that impose certain restrictions on
savings associations that have a total risk-based capital ratio
that is less than 8.0%, a ratio of Tier 1 capital to risk-
weighted assets of less than 4.0% or a ratio of Tier 1 capital
to adjusted total assets of less than 4.0% (or 3.0% if the
institution is rated composite 1 CAMELS under the Office of
Thrift Supervision's
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examination rating system). As of December 31, 1999, Unified
Banking Company had a total risk-based capital ratio of
128.32%, a ratio of Tier 1 capital to risk-weighted assets of
127.73% and a ratio of Tier 1 capital to adjusted total assets
of 49.26%.
QUALIFIED THRIFT LENDER TEST. A savings institution that
does not meet the Qualified Thrift Lender (QTL) test must
either convert to a bank charter or comply with the following
restrictions on its operations: (i) the institution may not
engage in any new activity or make any new investment, directly
or indirectly, unless such activity or investment is
permissible for both a national bank and a savings institution;
(ii) the branching powers of the institution shall be
restricted to those of a national bank; (iii) the institution
shall not be eligible to obtain any advances from its Federal
Home Loan Bank; and (iv) payment of dividends by the
institution shall be subject to the rules regarding payment of
dividends by a national bank. In addition, any company that
controls a savings institution that fails to qualify as a QTL
will be required to register as, and to be deemed, a bank
holding company subject to all of the provisions of the Bank
Holding Company Act of 1956, as amended, and other statutes
applicable to bank holding companies. To meet the QTL test, an
institution's "Qualified Thrift Investments" must total at
least 65% of "portfolio assets." Under Office of Thrift
Supervision regulations, portfolio assets are defined as total
assets less intangibles, property used by a savings institution
in its business and liquidity investments in an amount not
exceeding 20% of assets. At December 31, 1999, the percentage
of Unified Banking Company's portfolio assets invested in
Qualified Thrift Investments was in excess of the percentage
required to qualify Unified Banking Company under the QTL test.
PROMPT CORRECTIVE REGULATORY ACTION. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991, the
Federal banking regulators are required to take prompt
corrective action if an insured depository institution fails to
satisfy certain minimum capital requirements, including a
leverage limit, a risk-based capital requirement and any other
measure of capital deemed appropriate by the Federal banking
regulators for measuring the capital adequacy of an insured
depository institution. All institutions, regardless of their
capital levels, are restricted from making any capital
distribution or paying any management fees if the institution
would thereafter fail to satisfy the minimum levels for any of
its capital requirements. An institution that fails to meet
the minimum level for any relevant capital measure (an
"undercapitalized institution") may be: (i) subject to
increased monitoring by the appropriate Federal banking
regulator; (ii) required to submit an acceptable capital
restoration plan within 45 days; (iii) subject to asset growth
limits; and (iv) required to obtain prior regulatory approval
for acquisitions, branching and new lines of businesses. The
capital restoration plan must include a guarantee by the
institution's holding company that the institution will comply
with the plan until it has been adequately capitalized on
average for four consecutive quarters, under which the holding
company would be liable up to the lesser of 5% of the
institution's total assets or the amount necessary to bring the
institution into capital compliance as of the date it failed to
comply with its capital restoration plan. Any company
controlling the institution could also be required to divest
the institution or the institution could be required to divest
subsidiaries. If an institution's ratio of tangible capital to
total assets falls below a "critical capital level," the
institution will be subject to conservatorship or receivership
within 90 days unless periodic determinations are made that
forbearance from such action would better protect the deposit
insurance fund. The Federal banking regulators will generally
measure a depository institution's capital adequacy on the
basis of the institution's total risk-based capital ratio (the
ratio of its total capital to risk-weighted assets),Tier 1
risk-based capital ratio (the ratio of its core capital to
risk-weighted assets) and leverage ratio (the ratio of its core
capital to adjusted total assets). Under the regulations, a
savings institution that is not subject to an order or written
directive to meet or maintain a specific capital level will be
deemed "well capitalized" if it also has: (i) a total risk-
based capital ratio of 10% or greater; (ii) a Tier 1 risk-based
capital ratio of 6.0% or greater; and (iii) a leverage ratio of
5.0% or greater. The Office of Thrift Supervision may
reclassify a well capitalized savings institution as adequately
capitalized and may require an adequately capitalized or
undercapitalized institution to comply with the supervisory
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actions applicable to institutions in the next lower capital
category if the Office of Thrift Supervision determines, after
notice and an opportunity for a hearing, that the savings
institution is in an unsafe or unsound condition or that the
institution has received and not corrected a less-than-
satisfactory rating for any CAMEL rating category. As of
December 31, 1999, Unified Banking Company was classified as
"well-capitalized" under these prompt corrective action
regulations.
TRANSACTIONS WITH RELATED PARTIES. Generally,
transactions between a savings bank or its subsidiaries and its
affiliates must be on terms as favorable to the bank as
transactions with non-affiliates. In addition, certain of these
transactions are restricted to a percentage of the bank's
capital. Affiliates of Unified Banking Company include Unified
Financial Services and each of our other subsidiaries. Unified
Banking Company's authority to extend credit to executive
officers, trustees and 10% stockholders, as well as entities
under such persons control, currently are governed by Sections
22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Board of Governors of the Federal Reserve
System. Among other things, these regulations require such
loans to be made on terms substantially similar to those
offered to unaffiliated individuals, place limits on the amount
of loans Unified Banking Company may make to such persons
based, in part, on the bank's capital position, and require
certain approval procedures to be followed.
RECENTLY ENACTED LEGISLATIVE AND REGULATORY CHANGES. On
November 12, 1999, President Clinton signed legislation that
could have a far-reaching impact on the financial services
industry. The Gramm-Leach-Bliley Financial Services
Modernization Act authorizes affiliations between banking,
securities and insurance firms and authorizes bank holding
companies and national banks to engage in a variety of new
financial activities. Among the new activities that will be
permitted to bank holding companies are securities and
insurance brokerage, securities underwriting, insurance
underwriting and merchant banking. The Federal Reserve Board,
in consultation with the Department of Treasury, may approve
additional financial activities. National bank subsidiaries
will be permitted to engage in similar financial activities but
only on an agency basis unless they are one of the 50 largest
banks in the country. National bank subsidiaries will be
prohibited from insurance underwriting, real estate development
and merchant banking. The Gramm-Leach-Bliley Act, however,
prohibits future acquisitions of existing unitary savings and
loan holding companies, like Unified Financial Services, by
firms that are engaged in commercial activities and prohibits
the formation of new unitary holding companies. We are unable
to predict the impact of the Gramm-Leach-Bliley Act on our
operations at this time. Although the Gramm-Leach-Bliley Act
reduces the range of companies with which we may affiliate, it
may facilitate affiliations with companies in the financial
services industry.
INDUSTRY REGULATIONS
Our broker-dealer subsidiaries, Unified Management
Corporation, Unified Investment Advisers, Inc. and AmeriPrime
Financial Securities, Inc., are National Association of
Securities Dealers members. The National Association of
Securities Dealers is a self-regulatory organization that has
prescribed rules with respect to maximum commissions, charges
and fees related to sales of shares in any open-end investment
company registered under the Investment Company Act.
Each of Unified Investment Advisers, Health Financial and
Fiduciary Counsel is an investment adviser registered with the
Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended. Unified Investment Advisers
serves as the adviser to the Unified Funds. Under the
Investment Advisers Act, it is unlawful for any investment
adviser to: (1) employ any device, scheme or artifice to
defraud any client or prospective client; (2) engage in any
transaction, practice or course of business that operates as a
fraud or deceit upon any client or prospective client; or
(3) engage in any act, practice or course of business that is
fraudulent, deceptive or manipulative.
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We pursue a strategy of acquiring investment advisers to
mutual funds. Once an investment adviser is acquired, its
advisory agreement is assigned to us and automatically
terminates under the Investment Company Act. Unified
Investment Advisers' assumption of an advisory agreement must
be approved by a majority of the fund's board of directors and
a majority of its outstanding voting securities. An investment
adviser purchased by us may not benefit from the sale of its
advisory business to Unified Investment Adviser which results
in the assignment of an advisory contract with a mutual fund
unless, for a period of three years after the sale, at least
75% of the board of directors of the fund are not interested
persons of the new adviser or the predecessor adviser, and no
unfair burden is imposed on the fund as a result of the sale.
This 75% requirement is stricter than the general requirement
that only two-thirds of mutual fund's board of directors must
be "disinterested" under the Investment Company Act. The
effect of such transfer results in the assignment of the old
investment advisory agreement, which requires the new agreement
to be approved by the boards of trustees and the acquired
fund's shareholders. There can be no assurances that a fund's
board or its shareholders will approve an advisory agreement
with Unified Investment Advisers after Unified Investment
Advisers has acquired the former adviser to the fund. In
addition, Unified Investment Advisers may be required to assume
an advisory contract previously entered into under
disadvantageous terms in order to convince the fund's board or
its shareholders to approve Unified Investment Advisers'
assumption of the agreement.
Mutual fund directors and investment advisers to mutual
funds are deemed to be "fiduciaries" of the fund. The
Securities and Exchange Commission is authorized to initiate an
action to enjoin a breach of fiduciary duties involving
personal misconduct by any officers, directors, investment
advisers and principal underwriters of a fund. Shareholders or
the Securities and Exchange Commission also may bring an action
against the officers, directors, investment adviser or
principal underwriters for breach of fiduciary duty in
establishing the compensation paid to the investment adviser or
underwriter. An investment adviser or underwriter to a fund,
its principals and its employees, also may be subject to
proceedings initiated by the Securities and Exchange Commission
to impose remedial sanctions for violation of any provision of
the Federal securities laws and the regulations adopted
thereunder, and the Securities and Exchange Commission may
preclude a firm that has been sanctioned from continuing to act
in such capacity. Investment companies such as the Unified
Funds, the AmeriPrime Funds and AmeriPrime Insurance Trust are
subject to substantive regulation under the Investment Company
Act. Such companies must comply with periodic reporting
requirements. Proxy solicitations are subject to the general
proxy rules as well as to special proxy rules applicable only
to investment companies. Shares of investment companies can
only be offered at the next-determined net asset value plus any
sales load. A fund's management agreement initially must be
approved by the fund's board of directors and a majority of the
outstanding shares and, after two years, must be annually
approved, either by the board or by the outstanding voting
shares. A fund's management agreement must automatically
terminate in the event of assignment and typically is subject
to termination upon 60-days' notice by the board or by a vote
of the majority of the outstanding voting shares. The
underwriting or distribution agreement also must be annually
approved by the board or by a vote of a majority of the
outstanding voting shares, and must provide for automatic
termination in event of assignment. Transactions between the
investment company and an affiliate are prohibited.
REGULATORY PENALTIES FOR FAILURE TO MAINTAIN MINIMUM NET
CAPITAL REQUIREMENTS
The Securities Exchange Act imposes minimum net capital
requirements for broker-dealer firms. A decrease below the
minimum level of net capital required to be maintained by
Unified Management Corporation, Unified Investment Services and
AmeriPrime Financial Securities under the Securities Exchange
Act could force Unified Management Corporation, Unified
Investment Services and AmeriPrime Financial Securities to
suspend activities pending recovery of net capital. Factors
that may
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affect Unified Management Corporation's, Unified Investment
Services' and AmeriPrime Financial Securities' net capital
include the general investment climate as well as our ability
to obtain any assets necessary to contribute equity capital to
Unified Management Corporation, Unified Investment Services and
AmeriPrime Financial Securities. Information regarding
regulatory minimum net capital is set forth in Note 11 of our
consolidated financial statements included in this Annual
Report on Form 10-KSB.
RISKS OF BUSINESS
Our investment advisory, banking, transfer agent,
shareholder servicing and broker-dealer businesses are subject
to various risks and contingencies, many of which are beyond
our ability to control. These risks include: economic
conditions generally and, in particular, those affecting the
bond and securities markets; fluctuations in interest rates;
discretionary income available for investment; customer
inability to meet payment or delivery commitments; customer
fraud; and employee fraud, misconduct and error.
COMPLIANCE REQUIREMENTS AND REGULATORY PENALTIES FOR
NONCOMPLIANCE
Various aspects of our business are subject to Federal
and state regulation as well as to oversight by self-regulatory
organizations that, depending on the nature of any failure to
comply with an applicable entity's rules, may result in the
suspension or revocation of licenses or registration, including
broker-dealer, investment adviser, transfer agent, premium
finance and managing general agent licenses and registrations,
as well as the imposition of civil fines and criminal
penalties. Failure by us or any of our employees to comply
with such regulations or with any of the laws, rules or
regulations of Federal, state or industry authorities
(principally the National Association of Securities Dealers,
Securities and Exchange Commission, Kentucky Department of
Financial Institutions, Office of Thrift Supervision and state
insurance departments) could result in censure, imposition of
fines or other sanctions, including revocation of our right to
do business or in suspension or expulsion from the National
Association of Securities Dealers. Any of the foregoing could
have a material adverse effect upon us. Such National
Association of Securities Dealers, Securities and Exchange
Commission and Office of Thrift Supervision regulations are
designed primarily for the protection of the investing
customers of securities firms and financial institutions and
not our stockholders. Finally, there is no assurance that we,
along with other fund distributors, administrators and managers
will not be subjected to additional stringent regulation and
publicity that may adversely affect our business.
COMPETITION
Since inception, we have encountered substantial
competition in the businesses in which we compete. Our
principal competitors include mutual finds, investment
advisers, investment counsel firms and financial institutions
such as banks, savings and loan institutions and credit unions.
Competition is influenced by various factors, including
breadth, quality of service and price. All aspects of our
business are competitive. Large national firms have much
greater marketing capabilities, offer a broader range of
financial services and compete not only with us and among
themselves but also with commercial banks, insurance companies
and others for retail and institutional clients. Our
affiliated mutual funds are subject to competition from
nationally and regionally distributed funds offering equivalent
financial products with returns equal to or greater than those
offered by the Unified Funds, the AmeriPrime Funds or
AmeriPrime Insurance Trust. Competition for assets under
management is intense from both national and regional based
firms. Access to local investment and the population of the
region by modern communication systems is so efficient that our
geographical position cannot be deemed an advantage. Our
investment management operations compete with a large number of
other investment management firms, commercial banks, insurance
companies, broker-dealers and other financial service firms.
Most of
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these firms are larger and have access to greater resources
than us. The investment advisory industry is characterized by
relatively low cost of entry and the formation of new
investment advisory entities that may compete directly with us
is a frequent occurrence. We directly compete with as many as
several hundred firms that are of similar or larger size. Our
ability to increase and retain clients' assets could be
materially adversely affected if client accounts under-perform
the market. The ability of our investment management
subsidiaries to compete with other investment management firms
also is dependent, in part, on the relative attractiveness of
their investment philosophies and methods under prevailing
market conditions. A large number of mutual funds are sold to
the public by investment management firms, broker-dealers,
insurance companies and banks in competition with the Unified
Funds, the AmeriPrime Funds and AmeriPrime Insurance Trust.
Many of our competitors apply substantial resources to
advertising and marketing their mutual funds, which may
adversely affect the ability of the Unified Funds, the
AmeriPrime Funds and AmeriPrime Insurance Trust to attract new
assets. We expect that there will be increasing pressures
among mutual fund sponsors to obtain and hold market share.
Although we may expand the financial services we provide to our
customers, we do not now offer as broad a range of financial
services as national stock exchange member firms, commercial
banks, insurance companies and others.
Recent regulatory actions, which reduced certain
restrictions on bank affiliates engaging in securities
activities, increased competition from commercial banks and
their affiliates for securities brokerage services. In
addition, legislative proposals, calling for further reductions
on restrictions for brokerage service, may lead to increased
competition from commercial banks and their affiliates.
DEPENDENCE ON KEY CLIENTS
As of December 31, 1999, we provided mutual fund
services, transfer agency, fund accounting, administration and
distribution services to 25 mutual fund families consisting of
136 portfolios. Four of those portfolios, the Unified Funds,
originally were organized and are sponsored by Unified
Investment Advisers. The Unified Funds and those of the
remaining parties, have entered into contracts with us that
typically expire within one to three years. No assurance can
be given that any of these third party funds will remain our
clients upon expiration or termination of the various
administration and distribution agreements. The loss by us of
such mutual fund clients could have a material adverse effect
on us.
Additionally, Unified Management Corporation has entered
into clearing agreements with its introduced broker-dealer
clients that represent a substantial portion of the assets in
the Unified Funds through the use of the Unified Taxable Money
Market Funds as their brokerage sweep facility. The introduced
broker-dealer relationships also represent a significant
portion of Unified Management Corporation's revenues from
trading commissions. The loss of clearing clients could have a
material adverse effect on the Unified Funds and us.
Unified Investment Advisers receives management fees from
the Unified Funds. As the Unified Funds' manager and adviser,
Unified Investment Advisers, and, therefore, Unified, are
economically dependent on the Unified Funds for a portion of
their revenue.
Contracts for portfolio management performed by Unified
Investment Advisers in the case of the Unified Funds are
awarded annually by review and approval of the independent
Boards of Trustee of the various Unified Funds. The boards of
trustee consist of six trustees, five of whom are independent,
and Timothy L. Ashburn who is affiliated with us. These Boards
also are responsible for awarding our subsidiaries the various
service agreements for the Unified Funds.
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DEPENDENCE ON KEY PERSONNEL
We are dependent in a large part on Timothy L. Ashburn,
our president, chief executive officer and chairman, as well as
a group of senior management personnel. The loss or
unavailability of any of these persons could have a material
adverse effect on us. Our success also will depend on our
ability to attract and retain highly skilled personnel in all
areas of our business. There can be no assurance that we will
be able to attract and retain personnel on acceptable terms in
the future. Other than a $1 million policy on the life of each
of Timothy L. Ashburn and Dr. Gregory W. Kasten, the president
of Health Financial and First Lexington Trust Company, each a
wholly owned subsidiary of our company, we do not presently own
insurance covering the lives of our senior management. There
can be no assurance that the services of our senior management
will continue to be available.
EMPLOYEES
As of December 31, 1999, we and our subsidiaries
had 216 employees, of which 208 were full-time employees. None
of our employees or the employees of our subsidiaries are
subject to a collective bargaining agreement. We consider our
relationship with our employees and those of our subsidiaries
to be good.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
We, through our subsidiary, Unified Management
Corporation, lease our corporate headquarters and
administrative office facilities located at 431 North
Pennsylvania Street, Indianapolis, Indiana. This facility is
comprised of approximately 10,820 square feet and is subject to
a lease expiring in 2007. Unified Management Corporation also
leases approximately 872 square feet at 2353 Alexandria Drive,
Lexington, Kentucky pursuant to a lease expiring in 2002.
Health Financial's, First Lexington Trust Company's and Unified
Banking Company's administrative offices are located at 2353
Alexandria Drive, Lexington, Kentucky. The operating lease for
Health Financial's and First Lexington Trust Company's offices
expires in 2002 and such offices have approximately 4,500
square feet. We also lease a portion of such property for
corporate offices. First Lexington Trust Company also leases
approximately 1,530 square feet at 100 Browenton Place,
Louisville, Kentucky pursuant to a lease expiring in 2005.
Fiduciary Counsel's and EMCO Estate Management Company's
administrative offices are located at 36 West 44th Street, New
York, New York. The operating lease for such offices expires
in 2002 and such offices have approximately 3,231 square feet.
Equity Underwriting Group's administrative offices are located
at 220 Lexington Green Circle, Suite 600, Lexington, Kentucky.
The operating lease for Equity Underwriting Group expires in
2001 and such offices have approximately 20,080 square feet.
AmeriPrime Financial Services' administrative offices are
located at 175 Westwood Drive, Suite 500, Southlake, Texas.
The operating lease for AmeriPrime Financial Services expires
in 2000 and such offices have approximately 700 square feet.
Our current offices are considered adequate to serve our
foreseeable needs. Other than the administrative offices
leases, we have no other significant property holdings.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Various claims and lawsuits, incidental to our
ordinary course of business, are pending against us and our
subsidiaries. In the opinion of management, after consultation
with legal counsel, resolution of these matters is not expected
to have a material effect on our financial condition or results
of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted during the quarter
ended December 31, 1999 to a vote of our stockholders, through
the solicitation of proxies or otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The name, age and position with respect to each of
our executive officers are set forth below:
TIMOTHY L. ASHBURN, 49, has served as our chairman
of the board since 1989, as our chief executive officer from
1989 to 1992 and 1994 to present, and as our president since
November 1997. Mr. Ashburn was employed by Vine Street Trust
Company, Lexington, Kentucky, a wholly owned subsidiary of
Cardinal Bancshares, Inc., a Kentucky bank holding company, for
the two-year period from April 1992 through March 1994.
Mr. Ashburn also is a member of the executive committee of our
board of directors.
THOMAS G. NAPURANO, 58, a certified public
accountant and a certified management accountant, has served as
a director, our chief financial officer and an executive vice
president since 1989. Mr. Napurano also is a member of the
executive committee of our board of directors.
JOHN S. PENN, 48, has served as a director since
September 1999. Mr. Penn also has served as an executive vice
president and our chief operating officer since July 1999.
Mr. Penn served as a director and executive vice president of
Area Bancshares Corporation, a bank holding company located in
Owensboro, Kentucky from September 1997 to July 1999. Prior
thereto, Mr. Penn served as the president, chief executive
officer and a director of Cardinal Bancshares, Inc., a bank
holding company located in Lexington, Kentucky.
CHARLES H. BINGER, 43, has served as an executive
vice president and our general counsel since December 1999.
Prior thereto, Mr. Binger was a partner in the law firm of
Thompson Coburn LLP, St. Louis, Missouri.
ANTHONY J. GHOSTON, 40, has served as a senior vice
president and our chief information officer since November
1997. Mr. Ghoston has been employed by us in various
management positions since 1989.
DAVID F. MORRIS, 38, has served as a senior vice
president and our associate general counsel since
December 1999. Prior thereto, Mr. Morris was an associate in
the law firm of Thompson Coburn LLP, St. Louis, Missouri.
The name, age and position of executive officers of
certain of our subsidiaries are set forth below:
DR. GREGORY W. KASTEN, 45, has served as a director
since 1997. Dr. Kasten has served as a director and president
and chief executive officer of Health Financial, Inc. and First
Lexington Trust Company, each a wholly owned subsidiary of our
company, since 1986 and 1994, respectively. Dr. Kasten has been
awarded certified financial planner and certified pension
consultant designations and received a Master of Business
Administration degree with an emphasis on finance and
investment management. Dr. Kasten also received a medical
degree but has retired from medical practice.
JACK R. ORBEN, 60, has served as a director since
1989. Mr. Orben also is a director and the chairman of the
board, chief executive officer and treasurer of each of
Fiduciary Counsel, Inc. and EMCO
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Estate Management Company, Inc., each a wholly owned subsidiary
of our company. For various periods during the past five
years, Mr. Orben served as the chairman of the board, chief
executive officer and treasurer of each of Venvestech Corp.,
Seward, Groves, Richards & Wells, Starwood Corporation,
Fiduciary Alliance Inc., NUSTAR Inc., Intellectronic Management
Systems Inc., Economic Analysts Inc., Ra X Productions Inc. and
EMCO Nominees Inc. Mr. Orben also is a member of the audit,
nominating and compensation committee of our board of
directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDER MATTERS
-------------------
There currently is no established public trading
market for our common stock. We have not had any stock splits
or paid any stock dividends during the periods presented.
SALES PRICE
------------------
HIGH LOW
------ ------
1998
----
First Quarter $25.00 $25.00
Second Quarter 27.50 25.00
Third Quarter 27.50 25.00
Fourth Quarter 27.50 27.50
1999
----
First Quarter $40.00 $40.00
Second Quarter 40.00 40.00
Third Quarter 40.00 40.00
Fourth Quarter 40.00 40.00
Because of our closely held nature, no representation
is made that the foregoing prices are or are not reflective of a
"market price." As of March 30, 2000, we reported approximately
350 stockholders of record holding our common stock.
We have not paid any cash dividends with respect to
our common stock during the disclosed time periods.
For the three months ended December 31, 1999, the
only sales of our securities were 24,720 shares of our common
stock issued in connection with private offerings of our common
stock at a price of $40.00 per share. All shares of our common
stock issued by us during such period were issued pursuant to
the exemption provided by Rule 506, as promulgated by the
Securities and Exchange Commission.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following presents management's discussion and
analysis of our consolidated financial condition and results of
operations as of the dates and for the periods indicated. This
discussion should be read in conjunction with the other
information set forth in this Annual Report on Form 10-KSB,
including our audited, consolidated financial statements and
the accompanying notes thereto.
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues for the year ended December 31, 1999 as
compared to the prior year increased $2,169,000, or 9.3%, from
$23,449,000 to $25,618,000. For such periods, investment
advisory, trust and retirement services revenue increased
$1,601,000, or 34.2%, administrative and back office support
services revenue increased $1,191,000, or 38.4%, brokerage and
brokerage services revenue decreased
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$1,030,000, or 20.2%, finance revenue increased $229,000, or
57.9%, insurance brokerage revenue decreased $489,000, or 5.0%,
and corporate and start-up revenue increased $667,000, or
141.7%.
Investment advisory, trust and retirement services
revenue increased principally due to the addition of a
significant number of mutual fund clients, and an increase in
the market value of assets being managed. Additionally,
revenue reported for the year ended December 31, 1998 reflects
only nine months of activity for Unified Investment Advisers,
control of which was acquired by us on March 31, 1998.
Administrative and back office support services revenue
increased principally due to a growth in the number of mutual
fund clients serviced, additional fees associated with assets
under service and growth in assets under service. Mutual fund
clients served increased to 183 at year-end 1999, up from 64 at
year-end 1998. A component of administrative and back office
support services revenue, claim service revenue, increased by
$129,000 principally due to our acquisition of M. Wilson &
Associates on January 1, 1999 and growth in claims services
offered. The decrease in brokerage and brokerage services
revenue principally was due to a decrease in trail commissions
partially offset by $902,000 in commissions received by
Unified Management Corporation and Unified Investment
Services in connection with our private placement, as compared
to $785,000 in commissions for 1998. Total trades processed by
Unified Management Corporation increased by 2000 from 1998 due
to our Internet brokerage website. Additionally, the number of
registered representatives at Commonwealth Investment Services
increased to 25 at year-end 1999 from nine at year-end 1998.
Finance income increased due to an increase in commercial
insurance contracts financed in 1999. Insurance brokerage
revenue declined due to a reduction in insurance premiums
written. Although commercial line insurance premiums rose
$2,698,000, or 11.1%, to $27,035,000, overall insurance related
revenues declined due to a decrease in personal line sales
volume, which fell from $10,507,000 for 1999 to $7,350,000 for
1998. A new personal lines non-standard auto program was
introduced during 1999, but did not perform as expected in the
intensely competitive market. Corporate and start-up revenue
increased primarily due to the $839,000 in revenues generated
by certain companies that we started during 1999, $60,000 in
consulting revenues earned by Unified Capital Resources during
1999, the acquisition of Fully Armed Productions, which
contributed $313,000 of revenues during 1999 as compared to
$191,000 during 1998, and interest income which totaled
$352,000 during 1999 as compared to $245,000 during 1998.
Gross profit for the year ended December 31, 1999
as compared to 1998 increased $3,397,000, or 22.7%, from
$14,940,000 to $18,337,000. For such periods, gross profit as
a percentage of revenue increased to 71.6% from 63.7%.
Investment advisory, trust and retirement services gross profit
increased to $5,908,000 for 1999 from $4,440,000 for 1998.
The increase was due to the addition of mutual fund clients, an
increase in the market value of assets and an increase in the
number of retirement plans administrated and the amount of
assets under management. Administrative and back office
support services gross profit increased to $3,531,000 for 1999
from $2,536,000 for 1998 due to an increase in assets under
service, additional fees for services performed and an increase
in the number of mutual fund and trust clients served.
Brokerage and brokerage service gross profit increased by
$269,000 for the year ended December 31, 1999 from $1,995,000
for the prior year, which increase was due to an increase in
private placement commissions, Internet trading fees and trail
and underwriter dealer commissions and a decrease in costs of
sales largely attributable to a decrease in intro-firm
commissions. Finance gross profit increased from $395,000 to
$484,000 due to a growth in the number of commercial insurance
contracts financed during 1999. Insurance brokerage gross
profit of $5,012,000 for 1999 was $91,000 less than 1998. The
insurance brokerage gross profit decrease primarily was
attributable to a decline in the personal line sales volume.
Corporate and start-up gross profit increased by $667,000
during 1999 as compared to 1998. The increase was primarily
due to $305,000 in gross profit contributed by certain
companies that we started during 1999 as well as to an increase
in interest income and consulting revenues and a growth in
Fully Armed Production's business.
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Income from operations for the year ended December
31, 1999 reflected a loss of $1,579,000, as compared to income
from operations of $969,000 for the previous year. The increase
in gross profit of $3,397,000 from year-end 1998 to year-end
1999 was more than offset by the increase in operating expenses
of $5,945,000. Total expenses for the year ended December 31,
1999 were $19,916,000, or 77.7%, of total revenue, as compared
to $13,971,000, or 59.6%, of total revenue for the prior year.
For the year ended December 31, 1999, Fiduciary Counsel and
Unified Investment Advisers, each of which was acquired by
us during 1998, accounted for $929,000 of the increased expenses
for 1999 when compared to 1998 ($614,000 of which was related to
employee compensation and benefits). Expenses during the year
ended December 31, 1999 were up significantly due to the following:
(i) additional staffing at our administrative and back office support
services and investment advisory operations, which have experienced
significant growth in new clients and assets under services and
assets under management, coupled with an increased marketing effort
(represented a $1,059,000 increase for 1999 as compared to 1998);
(ii) the re-engineering of trust services with the hiring of
additional technical personnel and additional spending to improve
recordkeeping and computer systems to provide clients with the highest
quality services (represented $200,000 of total expenses for 1999 as
compared to $30,000 for 1998); (iii) start-up of our Internet online
brokerage service, which required additional staff, website development
and other website cost (represented $106,000 of the total expenses for
1999 as compared to $30,000 for 1998); (iv) the ability for clients to
view their accounts via the Internet and the development of Websites
for us and each of our subsidiaries (represented $354,000 of total
expenses for 1999 compared to $204,000 in 1998); (v) our management
expansion program which started in late 1998 and which has resulted
in the hiring of numerous individuals who should contribute
significantly to our future results (represented an increase of
$300,000 of the total expenses for 1999 as compared to 1998); and
(vi) professional and legal fees related to our expansion program
(represented an increase of $687,000 for 1999 as compared to 1998).
Our start-up companies, VSX Technologies, Archer Trading, Unified
Banking Company, Unified Capital Resources and Unified Employee
Services added $1,716,000 in expenses to 1999 without comparable
expenses in 1998.
For the year ended December 31, 1999, we incurred a
loss before income taxes of $1,743,000 as compared to income
before income taxes of $1,063,000 for 1998. The loss in 1999
was due to the items summarized above as well as a $102,000
estimated loss on the closing of a location of the insurance
brokerage business, a $12,000 realized loss on securities and
a $24,000 loss incurred in connection with the write-off of a
building lease. Net loss was $1,773,000 for the year ended
December 31, 1999 as compared to net income of $912,000 for
1998.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity historically have
been and continue to be cash flow from operating activities,
available borrowing capacity from capitalized leases and a loan
from a regional bank to finance capital equipment. The net
decrease in cash and cash equivalents at December 31, 1999 from
December 31, 1998 was $4,687,000. The net decrease reflects
the repayment of borrowings, the purchase of fixed assets and
bond investments and our $7,300,000 capital contribution to
Unified Banking Company in October 1999. We received
$9,530,800 from the issuance of 238,270 shares of common
stock in our private placement during the year ended
December 31, 1999.
In connection with the organization of Unified
Banking Company, we contributed $7,300,000 as capital to
Unified Banking Company on October 20, 1999. The source of
funds for the capital contribution to Unified Banking Company
was funds received by us in our private placement.
Subject to the receipt of the required regulatory
approvals, management anticipates that Phase I of the VSX.com
business model will be completed by the end of the fourth
quarter of 2000. We will begin taking the necessary actions to
complete Phase II and Phase III of the business model upon
completion of Phase I. We currently estimate that we will
incur approximately $3.0-$5.0 million of costs (expenses and
capital expenditures) in connection with Phase I of the
project. Management estimates that an additional
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$5.0-$10.0 million of costs will be incurred with Phase II and
Phase III of the project. The anticipated costs to build the
VSX.com "brand" are not part of the estimated expenditures of
Phases I, II and III. Management currently is negotiating to
obtain third-party financing with respect to Phase I of the
project. Management believes that Phase II and Phase III will
be funded from revenues generated by VSX.com upon completion of
Phase I. There can be no assurance that we will be successful
in securing the required financing, in launching any phase of
the VSX.com project or that the project will be a commercial
success.
We believe that anticipated revenues from
operations should be adequate for the working capital
requirements of our existing core businesses over the next
twelve months. In the event that our plans or assumptions
change, or if our resources available to meet unanticipated
changes in business conditions prove to be insufficient to fund
operations, we could be required to seek additional financing
prior to that time.
IMPACT OF YEAR 2000
In prior years, we discussed the nature and progress of
our plans to become Year 2000 ready. In late 1999, we
completed our remediation and testing of systems. As a result
of those planning and implementation efforts, we experienced no
significant disruptions in mission critical information
technology and non-information technology systems and believe
those systems successfully responded to the Year 2000 date
change. We expensed approximately $80,000 during 1999 in
connection with remediating our systems. We are not aware
of any material problems resulting from Year 2000 issues,
either with our products, our internal systems, or the products
and services of third parties. We will continue to monitor our
mission critical computer applications and those of our
suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed
promptly.
RISK FACTORS
You should carefully consider the risks described
below before making a decision to invest in Unified Financial
Services. The risks and uncertainties described below are not
the only risks that we face.
If any of the following risks actually occur, our
business, financial condition or results of future operations
could be materially adversely affected. In such case, the
trading price of our common stock could decline, and you may
lose all or part of your investment.
NEED FOR ADDITIONAL CAPITAL; RISK RELATING TO
ACQUISITIONS. Our pending and proposed projects have required
and will continue to require substantial capital for
investments in and development of such projects. There can be
no assurance that we will be able to raise the capital
necessary to fund our projects. The failure to raise or
generate such funds may require us to delay or abandon some of
our planned future expansion or expenditures, which could have
a material adverse effect on our growth.
To expand our markets and take advantage of the
consolidation trend in the financial services industry, our
business strategy includes growth through acquisitions.
Although we believe that the operations of the companies we
have acquired since June 1, 1997 are being successfully
integrated with our operations, there can be no assurance that
such integration will continue to be successful, that future
acquisitions can be consummated on acceptable terms or that any
acquired companies can be successfully integrated into our
operations. We also are continually investigating
opportunities for acquisitions. In connection with future
acquisitions, we may incur additional indebtedness or may issue
additional equity.
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Our ability to make future acquisitions may be constrained by
our ability to obtain such additional financing. To the extent
we use equity to finance future acquisitions, there is a risk
of dilution to holders of our common stock.
In addition, acquisitions may involve a number of
special risks, including: initial reductions in our reported
operating results; diversion of management's attention;
unanticipated problems or legal liabilities; and a possible
reduction in reported earnings due to amortization of acquired
intangible assets in the event that such acquisitions are made
at levels that exceed the fair market value of net tangible
assets. Some or all of these items could have a material
adverse effect on us. There can be no assurance that
businesses acquired in the future will achieve sales and
profitability that justify the investment therein. In
addition, to the extent that consolidation becomes more
prevalent in the industry, the prices for attractive
acquisition candidates may increase to unacceptable levels.
ANTICIPATE TO INCUR OPERATING LOSSES FOR THE
FORESEEABLE FUTURE. In connection with our shift from
traditional distribution channels to an Internet distribution
strategy and the development of new distribution channels, we
anticipate that we will incur operating losses for the
foreseeable future. We believe that our revenues will continue
to increase but that operating expenses will increase
significantly due to the costs associated with the
implementation of our business plan. In addition, we will
incur non-recurring costs in connection with exiting certain
businesses that are not now part of our business strategy.
REVENUE GROWTH FROM ELECTRONIC COMMERCE MAY NOT
DEVELOP. Our growth strategy is based upon a shift from
traditional distribution channels to distribution via the
Internet. If we do not generate increased revenues from
electronic commerce, our business, financial condition and
operating results could be materially adversely affected. To
generate significant electronic revenues, we will have to
successfully implement our business plan.
DEVELOPMENT OF THE ELECTRONIC COMMERCE MARKET IS
UNCERTAIN. If electronic commerce does not grow or grows
slower than expected, our business may suffer. Our Internet
distribution strategy depends upon widespread market acceptance
of electronic commerce. A number of factors could prevent such
acceptance, including the following:
* electronic commerce is at an early stage and
buyers may be unwilling to shift their
purchasing from traditional vendors to
online vendors;
* the necessary network infrastructure for
substantial growth in usage of the Internet
may not be adequately developed;
* increased government regulation or taxation may
adversely affect the viability of electronic
commerce;
* insufficient availability of telecommunication
services or changes in telecommunication services
could result in slower response times; and
* adverse publicity and consumer concern about the
security of electronic commerce transactions could
discourage its acceptance and growth.
THERE IS INTENSE COMPETITION FOR INTERNET PRODUCTS
AND SERVICES, ADVERTISING AND SALES OF GOODS AND SERVICES.
Competition for Internet products and services, advertising and
electronic commerce is intense. We expect that competition
will continue to intensify. Barriers to entry are minimal, and
competitors can launch new Web sites at a relatively low cost.
Our competitors may develop Internet products and services that
are superior to, or have greater market acceptance than, our
solutions. If we are unable to compete successfully against
our competitors, our business, financial
- 17 -
<PAGE>
<PAGE>
condition and operating results will be adversely affected.
Many of our competitors have greater brand recognition and
greater financial, marketing and other resources than us. This
may place us at a disadvantage in responding to our
competitors' pricing strategies, technological advances,
advertising campaigns, strategic partnerships and other
initiatives.
RISKS ASSOCIATED WITH RAPID GROWTH. We have
experienced rapid growth in net revenues and expansion of our
operations and anticipate that further significant expansion
will be required to address potential growth in our customer
base and market opportunities. Such growth has placed, and, if
sustained, will continue to place, strain on our management,
information systems, operation and resources. Our ability to
manage any future growth will continue to depend upon the
successful expansion of our sales, marketing, customer support,
administrative infrastructure and the ongoing implementation
and improvement of a variety of internal management systems,
procedures and controls. Continued growth also will require us
to hire more personnel, and expand management information
systems. Recruiting qualified personnel is an intensely
competitive and time-consuming process. There can be no
assurance that we will be able to attract and retain the
necessary personnel to accomplish our growth strategies or that
we will not experience constraints that will adversely affect
our ability to support satisfactorily our clients and
operations. There can be no assurance that we will be able to
attract, manage and retain additional personnel to support any
future growth, if any, or will not experience significant
problems with respect to any infrastructure expansion or the
attempted implementation of systems, procedures and controls.
If our management is unable to manage growth effectively, our
business, financial condition and results of operations could
be materially adversely affected.
DEPENDENCE UPON TECHNOLOGY; PROPRIETARY RIGHTS.
Our success and ability to compete is dependent in part upon
our technology, although we believe that our success is more
dependent upon our technical expertise than our proprietary
rights. We principally rely upon a combination of copyright,
trademark and trade secret laws and contractual restrictions to
protect our proprietary technology. It may be possible for a
third party to copy or otherwise obtain and use our products or
technology without authorization or to develop similar
technology independently, and there can be no assurance that
such measures have been, or will be, adequate to protect our
proprietary technology or that our competitors will not
independently develop technologies that are substantially
equivalent or superior to our technology. We propose to
operate a substantial portion of our business over the
Internet, which is subject to a variety of risks. Such risks
include, but are not limited to, the substantial uncertainties
that exist regarding the system for assigning domain names and
the status of private rules for resolution of disputes
regarding rights to domain names. There can be no assurance
that we will continue to be able to employ our current domain
names in the future or that the loss of rights to one or more
domain names will not have a material adverse effect on our
business and results of operations.
Although we do not believe that we infringe the
proprietary rights of any third parties, there can be no
assurance that third parties will not assert such claims
against us in the future or that such claims will not be
successful. We could incur substantial costs and diversion of
management resources with respect to the defense of any claims
relating to proprietary rights, which could have a material
adverse effect on our business, financial condition and results
of operations. In addition, we may become obligated under
certain agreements to indemnify another party in connection
with infringement by us of the proprietary rights of third
parties. In the event we are required to indemnify parties
under these agreements, it could have a material adverse effect
on our business, financial condition and results of operations.
In the event a claim relating to proprietary technology or
information is asserted against us, we may seek licenses to
such intellectual property. There can be no assurance,
however, that licenses could be obtained on commercially
reasonable terms, if at all, or that the terms of any offered
licenses would be acceptable to us. The failure to obtain the
necessary licenses or other rights could have a material
adverse effect on our business, financial condition and results
of operations.
- 18 -
<PAGE>
<PAGE>
RISKS TO PHYSICAL NETWORK; RISKS TO INTEGRITY OF
DATA ON NETWORK. Our operations are partially dependent upon
our ability to protect our network infrastructure against
damage from fire, earthquakes, severe flooding, mudslides,
power loss, telecommunications failures and similar events or
to construct networks that are not vulnerable to the effects of
these events. The occurrence of a natural disaster or other
unanticipated problems at our network in the future could cause
additional major interruptions in the services provided by us.
In addition, some networks may experience
interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former
employees or others. Unauthorized use of our network could
jeopardize the security of confidential information stored in
our computer systems, which may result in liability to our
customers or deter potential customers.
Our failure to adequately manage service
disruptions resulting from physical damage to our network or
breaches of the network's integrity, could have a material
adverse effect on our business, financial condition and results
of operations.
SECURITY RISKS. Despite the implementation of
network security measures by us, such as limiting physical and
network access to our routers, our Internet access systems and
information services are vulnerable to computer viruses, break-
ins and similar disruptive problems caused by our customers or
other Internet users. Such problems caused by third parties
could lead to interruption, delays or cessation in service to
our customers. Furthermore, such inappropriate use of the
Internet by third parties also could potentially jeopardize the
security of confidential information stored in the computer
systems of our customers and other parties connected to the
Internet, which may deter potential subscribers. Persistent
security problems continue to plague public and private data
networks. Recent break-ins reported in the press and otherwise
have reached computers connected to the Internet at major
corporations and Internet access providers and have involved
the theft of information, including incidents in which hackers
bypassed firewalls by posing as trusted computers. Alleviating
problems caused by computer viruses, break-ins or other
problems caused by third parties may require significant
expenditures of capital and resources by us, which could have a
material adverse effect on us. Until more comprehensive
security technologies are developed, the security and privacy
concerns of existing and potential customers may inhibit the
growth of the Internet service industry in general and our
customer base and revenues in particular. Moreover, if we
experience a breach of network security or privacy, there can
be no assurance that our customers will not assert or threaten
claims against us based on or arising out of such breach, or
that any such claims will not be upheld, which could have a
material adverse effect on our business, financial condition
and results of operation.
NO ASSURANCE OF FUTURE GROWTH. There can be no
assurance that we will continue to achieve growth in assets or
earnings. Our ability to achieve such growth will be dependent
upon numerous factors including, but not limited to, general
economic conditions, our ability to recruit qualified
personnel, our ability to promptly and successfully integrate
acquired businesses with our existing operations and our
ability to execute our business plan.
COMPETITION. We encounter substantial competition
in the businesses in which we compete. Our principal
competitors include mutual funds, investment advisers,
investment counsel firms and financial institutions such as
banks, savings and loan institutions and credit unions. Many
of the institutions with which we compete are larger and have
substantially greater financial resources than us.
- 19 -
<PAGE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
--------------------
To the Board of Directors and
Stockholders of Unified Financial Services, Inc.
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated statements of
financial condition of Unified Financial Services, Inc. and
subsidiaries at December 31, 1999 and 1998, and the related
consolidated statements of operations, comprehensive income,
cash flows and changes in stockholders' equity for the years
then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Unified Financial Services, Inc. and subsidiaries at
December 31, 1999 and 1998, and the results of their
operations, and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Larry E. Nunn & Associates, LLC
Columbus, Indiana
February 2, 2000
- 20 -
<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
--------------------------
<CAPTION>
ASSETS
------
1999 1998
---- ----
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 5,709,082 $10,395,843
Due from banks 314,815 --
Federal funds sold 4,922,000 --
Bond investments 5,515,156 --
Investment in affiliated mutual funds 577,668 494,403
Investment in securities and non-affiliated
mutual funds 639,295 231,728
Accounts receivable (net of allowance for
doubtful accounts of $38,326 for 1999
and $2,041 for 1998) 9,138,688 8,910,623
Loans receivable (net of allowance for loan
losses of $33,000 for 1999 and $0 for 1998) 2,810,876 --
Deferred tax asset 5,707 --
Prepaid assets and deposits 899,867 230,006
----------- -----------
Total current assets 30,533,154 20,262,603
----------- -----------
Fixed Assets, at cost
Equipment and furniture (net of accumulated
depreciation of $2,913,498 for 1999 and
$2,472,022 for 1998) 2,944,610 1,590,081
----------- -----------
Non-Current Assets
Investment in debt securities 1,073,621 994,211
Equity investment in affiliates -- 565,566
Organization cost (net of accumulated
amortization of $32,019 for 1999 and
$6,900 for 1998) 641,688 562,776
Goodwill (net of accumulated amortization of
$139,093 for 1999 and $34,773 for 1998) 1,214,701 1,902,691
Other non-current assets 341,220 620,649
----------- -----------
Total non-current assets 3,271,230 4,645,893
----------- -----------
TOTAL ASSETS $36,748,994 $26,498,577
=========== ===========
(Continued on next page)
See independent auditors' report and accompanying notes.
- 21 -
<PAGE>
<PAGE>
<CAPTION>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1999 1998
---- ----
<S> <C> <C>
Current Liabilities:
Current portion of capital lease obligations $ 30,073 $ 53,125
Current portion of long-term debt 2,343,965 --
Current portion of bank line-of-credit 1,727,003 3,886,612
Customer deposits 7,331,853 --
Accounts payable and accrued expenses 2,731,970 1,880,745
Accrued compensation and benefits 549,093 329,643
Payable to insurance companies 5,670,974 6,456,511
Payable to broker-dealers 255,158 596,509
Income taxes payable, current 136,630 1,857
Income taxes payable, deferred 83,157 90,318
Unearned fee income 330,692 --
Repurchase agreements 4,952 --
Other liabilities 262,002 1,218,855
----------- -----------
Total current liabilities 21,457,522 14,514,175
----------- -----------
Long-Term Liabilities
Long-term portion of capital lease obligation 8,933 84,742
Long-term portion of debt 514,031 2,024,579
Other long-term liabilities 104,742 385,886
Deferred income taxes 85,779 33,361
----------- -----------
Total long-term liabilities 713,485 2,528,568
----------- -----------
Total liabilities 22,171,007 17,042,743
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity
Common stock, par value $.01 per share 33,294 27,668
Preferred stock Series C -- 1,672
Additional paid-in capital 16,050,189 8,345,555
Retained earnings (1,292,794) 1,080,939
Accumulated other comprehensive income (35,463) --
----------- -----------
14,755,226 9,455,834
Less: treasury stock, at cost (177,239) --
----------- -----------
Total stockholders' equity 14,577,987 9,455,834
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $36,748,994 $26,498,577
=========== ===========
See independent auditors' report and accompanying notes.
</TABLE>
- 22 -
<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES $25,617,592 $23,448,483
COST OF SALES 7,280,386 8,508,651
----------- -----------
GROSS PROFIT 18,337,206 14,939,832
----------- -----------
OPERATING EXPENSES
Employee compensation and benefits 11,435,539 6,803,739
Brokerage operating charges 733,439 415,665
Investment administration expenses 233,008 537,879
Occupancy 1,044,066 718,904
Telephone 438,399 264,269
Depreciation and amortization 830,606 949,349
Mail and courier 425,967 500,327
Equipment rental and maintenance 500,752 159,189
Professional fee 1,711,186 730,797
Travel and entertainment 925,630 378,276
Business development cost 637,765 504,924
All other 1,000,122 2,007,249
----------- -----------
Total operating expenses 19,916,479 13,970,567
----------- -----------
Income (loss) from operations (1,579,273) 969,265
OTHER INCOME (LOSS)
Unrealized gain on securities 16,023 23,947
Realized gain (loss) on securities (11,826) 13,496
Loss on sale/disposal of fixed assets (24,093) (8,752)
All other (144,016) 65,313
----------- -----------
Income (loss) before income taxes (1,743,185) 1,063,269
Income taxes 29,730 151,108
----------- -----------
NET INCOME (LOSS) $(1,772,915) $ 912,161
=========== ===========
Per share earnings (loss)
Basic $ (.62) $ .39
Basic common shares outstanding 2,869,862 2,316,767
Fully diluted $ (.60) $ .35
Fully diluted common shares outstanding 2,975,823 2,580,013
See independent auditors' report and accompanying notes.
</TABLE>
- 23 -
<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
<S> <C>
1998
- ----
Net income $ 912,161
Other comprehensive income, net of tax
Unrealized gain on securities,
net of reclassification adjustment 99
-----------
Comprehensive income $ 912,260
===========
1999
- ----
Net loss $(1,772,915)
Other comprehensive income, net of tax
Unrealized loss on securities,
net of reclassification adjustment (35,463)
-----------
Comprehensive loss $(1,808,378)
===========
See independent auditors' report and accompanying notes.
</TABLE>
- 24 -
<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ (1,772,915) $ 912,161
Adjustments to reconcile net income to cash
provided by (used) in operating activities:
Deferred income taxes 214,905 125,343
Provision for depreciation and amortization 830,606 949,349
Net appreciation on investments (7,783) (23,946)
Results of affiliated company -- (59,197)
Loss on disposal of fixed assets 342 22,832
Cash value of officers' life insurance -- (12,500)
Deferred startup cost (105,622) (643,169)
Loss on disposal of business segment 129,487 --
(Increase) decrease in operating assets
Due from banks (314,815) --
Receivables (694,912) (2,317,320)
Net loans receivable (2,605,676) --
Prepaid and sundry assets (648,163) 28,824
Increase (decrease) in operating liabilities
Customer deposits 7,331,853 --
Accounts payable and accrued expenses 99,266 1,069,207
Other liabilities (1,181,429) (253,929)
Accrued income taxes 118,766 47,788
------------ -----------
Net cash provided (used) by operating activities 1,393,910 (154,557)
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (2,027,635) (512,023)
Proceeds from sale of fixed assets -- 9,220
Investment in securities and mutual funds (97,874) 224,634
Investment in debt securities (33,148) (21,034)
Federal Funds sold (4,922,000) --
Bond investments (5,515,156) --
Repayment of note receivable -- 4,502
Investment in other assets (57,480) --
Appreciation of debt securities -- (531)
------------ -----------
Net cash used by investing activities (12,653,293) (295,232)
------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 7,012,656 10,222,635
Proceeds from issuance of Preferred C stock 100,900 210,000
Redemption of Preferred A and B stock -- (1,706,900)
Dividends on common and preferred stock (35,252) (352,107)
Repurchase of common stock (873,000) (2,921,024)
Proceeds from reissuance of treasury stock 1,501,800 --
Acquisition of subsidiaries -- (413,026)
Proceeds from borrowings 2,667,450 3,373,770
Repayment of borrowings (3,753,457) (81,537)
Repayment of capital lease obligations (48,475) (92,755)
------------ -----------
Net cash provided by financing activities 6,572,622 8,239,056
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,686,761) 7,789,267
CASH AND CASH EQUIVALENTS - Beginning of the year 10,395,843 2,606,576
------------ -----------
CASH AND CASH EQUIVALENTS - End of the year $ 5,709,082 $10,395,843
============ ===========
See independent auditors' report and accompanying notes.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PREFERRED PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK STOCK CAPITAL EARNINGS INCOME STOCK TOTAL
----- ----- ------- -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $21,728 $ 17,069 $ 2,199,921 $ 603,749 $ (99) $ -- $ 2,842,368
1998 net income 912,161 912,161
Other comprehensive income 99 99
Redemption of preferred stock (17,069) (1,689,831) (1,706,900)
Issuance of preferred stock 2,100 207,900 210,000
Issuance of common stock 4,507 10,218,128 10,222,635
Conversion of preferred stock
to common stock 578 (428) (150) --
Acquisition of Unified Investment
Advisers (683,210) (31,387) (714,597)
Acquisition of Fiduciary Counsel 361 902,389 902,750
Acquisition of Fully Armed
Productions 183 1,743 1,461 3,387
Acquisition of Commonwealth
Investment Services 275 109,725 (52,937) 57,063
Acquisition of M. Wilson
& Associates 36 (36) --
Repurchase of common shares at
Equity Underwriting Group (2,921,024) (2,921,024)
Dividends to stockholders (286,264) (286,264)
Dividends on preferred stock (65,844) (65,844)
------- -------- ----------- ----------- -------- --------- -----------
Balance at December 31, 1998 27,668 1,672 8,345,555 1,080,939 -- -- 9,455,834
1999 net loss (1,772,915) (1,772,915)
Other comprehensive loss (35,463) (35,463)
Issuance of common stock 2,007 7,010,649 7,012,656
Sale of preferred stock 1,009 99,891 100,900
Repurchase of stock for treasury (873,000) (873,000)
Reissuance of treasury stock 806,039 695,761 1,501,800
Reduction of goodwill (211,007) (211,007)
Conversion of preferred stock
to common stock 3,619 (2,681) (938) --
Acquisition of minority interest (565,566) (565,566)
Dividends to stockholders (35,252) (35,252)
------- -------- ----------- ----------- -------- --------- -----------
Balance at December 31, 1999 $33,294 $ - $16,050,189 $(1,292,794) $(35,463) $(177,239) $14,577,987
======= ======== =========== =========== ======== ========= ===========
See independent auditors' report and accompanying notes.
</TABLE>
- 26 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 1 - NATURE OF OPERATIONS
Unified Financial Services, Inc. (the "Company" or
"Unified"), a Delaware holding company for various
financial services companies that also does
business as Unified.com, was organized on
December 7, 1989. The Company distributes a
vertically integrated financial services platform
via the Internet and via the traditional industry
channels of its subsidiaries. As of December 31,
1999, the Company maintained in excess of $1.5
billion of assets under management and $5 billion
of assets under service. Through its subsidiaries,
all of which are wholly owned, the Company provides
services primarily in six lines of business:
investment advisory, trust and retirement services;
administrative and back office support services;
brokerage and brokerage services; finance;
insurance brokerage; and corporate and start-up.
The investment advisory, trust and retirement
services operations, which are conducted through the
Company's registered investment advisory firms and
trust company, provide professional financial
management to individuals, institutions, including
private pension plans and foundations, and the
Unified Mutual family of funds. Such operations
also provide professional investment management to
individuals and institutions on a customized basis.
The Company's non-bank trust subsidiary specializes
in retirement plans and is regulated by the
Kentucky Commissioner of Banking under the
Department of Financial Institutions, Commonwealth
of Kentucky. The Company's third party
professional services firm provides consulting,
recordkeeping and trust accounting services for
qualified retirement and cafeteria plans.
The Company, through its subsidiaries, provides
administrative and back office support services to
mutual funds, qualified retirement and cafeteria
plans, wealth management service providers and
property and casualty insurance carriers and also
provides claim adjusting services for insurance
companies. The mutual fund administrative
subsidiaries provide services such as: transfer
agency; fund accounting; and administrative,
regulatory, compliance and start-up services for
mutual funds, investment advisors, banks and other
money managers in their proprietary mutual fund
efforts. In addition, such subsidiaries provide
all of the mutual fund services for the Unified
Funds portfolios, and perform other clerical
functions to the Unified Funds in addition to
typical mutual fund services. Other subsidiaries
provide administrative claims services on a
contractual basis for property and casualty
insurance carriers and claims adjusting services
for various insurance companies in the private
passenger and commercial trucking lines. The
professional staff at our wealth management
subsidiary based in New York City assists clients
in a variety of disciplines, including the
following: financial, tax and estate planning;
family office services such as budgeting, bill
paying and payroll administration; trust
administration; and income tax return preparation
and filing for individuals, trusts, partnerships
and small businesses.
The brokerage and brokerage services operations
consist of registered broker-dealers under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that also are members of the National
Association of Securities Dealers, Inc. ("NASD").
- 27 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 1 - NATURE OF OPERATIONS (continued)
Our finance operation is headquartered in Lexington,
Kentucky. The operation is a premium finance
company that is governed by the laws under Subtitle
30 of the Commonwealth of Kentucky Insurance Code,
is licensed under applicable governing regulations
in the states of Kentucky, Tennessee, Illinois and
Ohio and conducts business in the states of West
Virginia and Indiana, which do not require
licensing of premium finance companies. The
finance company provides financing for the payment
of premiums on insurance coverage placed by the
Company's insurance brokerage operation.
The Company's insurance brokerage subsidiaries are
headquartered in Lexington, Kentucky and provide
specialty insurance products as a general agent or
a broker in the states of Kentucky, Tennessee, West
Virginia, Ohio, Indiana and Illinois. The
operations write insurance products for primarily
niche areas in the insurance marketplace that are
considered more "non-standard," representing a
higher risk of insured. The insurance brokerage
operations are licensed managing general agencies
operating as a wholesaler/broker of property and
casualty insurance products in the states of
Kentucky, Illinois, Tennessee, Virginia, West
Virginia, Ohio and Indiana. The Company, through
its subsidiaries, operates as managing general
agents between a number of admitted as well as
excess and surplus line insurance companies.
The Company's corporate and start-up operations
provide management services, working capital, systems
support and equipment and development for its
subsidiaries. The Company organized Unified
Internet Services, Inc. in February 1998 to develop
the Company's websites and its proprietary search
engine for the financial services industry. On
November 1, 1999, Unified Banking Company, a
Federal savings bank, commenced operations.
Unified Banking Company is located in Lexington,
Kentucky and its accounts are insured by the
Federal Deposit Insurance Corporation to the
maximum limit permitted under federal law. In
connection with the organization of Unified Banking
Company, the Company contributed $7.3 million to
Unified Banking Company as capital in exchange for
all of the capital stock of Unified Banking
Company. On May 6, 1999, the Company acquired
from First Insight Securities, Ltd. assets for cash
and assumed certain liabilities through the
Company's wholly owned subsidiary, Archer Trading,
Inc. Archer Trading provides stock trading
services and has the staff to assist in the
training of various financial service firms that
could increase volume and vertical integration. On
June 1, 1999, the Company acquired Fully Armed
Productions, Inc. Fully Armed Productions, Inc.
provides creative and technological services for
the television, radio and Internet industries
through its specialty production capabilities and
performs programming and production services for
numerous cable, satellite and television stations.
Effective in January 1998, Unified Holdings, Inc.'s
name was changed to Unified Financial Services,
Inc.; Unified Advisers, Inc.'s name was changed to
Unified Fund Services, Inc.; and Vintage Advisers
Inc.'s name was changed to Unified Investment
Advisers, Inc.
- 28 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The Consolidated Financial Statements include the
accounts of the Unified Financial Services, Inc. and
its subsidiaries after elimination of all material
intercompany accounts and transactions.
The Consolidated Financial Statements give
retroactive effect to the Company's pooling-of-interest
transactions. As a result, the Consolidated
Statements of Financial Condition, Statements of
Operations, Statements of Comprehensive Income,
Statements of Cash Flows and Statements of Changes
in Stockholders' Equity are consolidated for all
periods presented. As required by generally
accepted accounting principles, the Consolidated
Financial Statements become the historical
consolidated financial statements upon issuance of
the financial statements for the periods that
include the date of the transaction. The
Consolidated Statements of Changes in Stockholders'
Equity reflect the accounts for the Company as if
the shares of common stock, $0.01 per value, of the
Company (the "Common Stock") issued in the pooling-
of-interests transactions had been outstanding
during all periods presented. The Consolidated
Financial Statements, including the notes thereto,
should be read in conjunction with the historical
consolidated financial statements of the Company.
Fees and Commissions
--------------------
The Company records revenue on the accrual basis
of accounting. For the brokerage operations,
commissions and clearing revenue are recorded on
the settlement date of the related security
transactions. This does not materially differ from
recording commissions based upon trade date. The
investment administration business revenue, as well
as the investment adviser fees earned by third
party advisers, is recorded on the accrual basis.
The fees earned by the operation and paid to the
sub-advisers are based on established fee schedules
and contracts. Generally, fees may be collected
from the invested assets. Thus, collection of the
fees is reasonably certain. The financial services
portion of the investment administration operation
provides administrative services to investment
companies and separate accounts. Revenue is
recorded as it is earned each month based upon
accounts and account balances. In connection with
this, the Company earns income on the accounts
established to transfer these funds for customers.
For the insurance operations, commission income and
expense are recorded on the effective date of each
policy; return commissions are recorded when a
policy cancellation occurs. All other revenue is
recorded as earned.
Property and Equipment
----------------------
Property and equipment is stated at cost.
Depreciation, including the depreciation of capital
leased equipment, is provided on the straight-line or
accelerated methods over the estimated useful life
of the assets for financial statement purposes.
Investments and Investment in Debt Securities
---------------------------------------------
Investments, which consist primarily of an investment
in mutual funds (affiliated or non-affiliated), are
recorded and adjusted to the fair market value as
of the date of the financial statements and
reported on the Statement of Operations as
unrealized gain or loss on
- 29 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
securities. Investment in debt securities are
recorded at cost and amortized over the period to
maturity for the premium or discount from par value
under generally accepted accounting principles.
Income Taxes
------------
The Company files consolidated Federal and state
income tax returns with its subsidiaries.
Subsequent to its acquisition by the Company, each
of M. Wilson & Associates, Commonwealth Investment
Services and Fully Armed Productions will be
included in the consolidated tax returns of the
Company, which uses the accrual method of tax and
accounting reporting.
The Company has adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires use of the liability
method of accounting for deferred income taxes.
Other Non-Current Assets
------------------------
Included in other non-current assets are intangible
assets for non-compete covenants, the value of
acquired companies' names and the present value of
building leases below fair market value. For
financial reporting basis, these assets are
amortized on a straight-line basis over a three-,
eight- or fifteen- year period.
Goodwill
--------
The Company, in acquiring certain businesses,
acquired goodwill. The Company has determined the
value of the goodwill, which is amortized over the
estimated economic lives on a straight-line basis
over a period of 10 to 15 years for financial
reporting basis. For tax purposes, goodwill is
amortized on a straight-line basis over 15 years.
Organization Cost
-----------------
Cost related to the organization of the various
operations have been capitalized and amortized over
a sixty-month period on a straight-line basis. As
required by Statement of Position 98-6, the
Company, in 1999, adopted an accounting policy to
expense certain costs incurred in start-up
activities as defined by SOP 98-5. The accounting
change was retroactively applied to 1998. The
effect on the net income for 1998 was $335,251.
Use of Estimates
----------------
The presentation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenue and
expenses during the reporting period. Actual
results could differ from those estimates.
- 30 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Statement of Cash Flows
-----------------------
For purposes of the Statements of Cash Flows, the
Company considers all liquid investments with an
original maturity of three months or less to be
cash equivalents. The Company maintains money
market investments that are not insured by the
Federal Deposit Insurance Corporation (the "FDIC")
and bank accounts that periodically exceed the FDIC
insurance limit during the year.
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes new accounting and reporting
standards for companies to report information about
derivative instruments, including certain
derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for
hedging activities. In June 1999, the Financial
Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 "Accounting
for Derivative Instruments and Hedging Activities
Deferral of the Effective Date of SFAS 133." This
statement amended the effective date of SFAS 133,
which will now be effective for financial
statements issued for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company
does not expect that this statement will have a
material impact on the Company's results of
operations, financial position or liquidity.
Financial Statement Presentation
--------------------------------
Certain amounts in the 1998 financial statements
have been reclassified to conform to the 1999
presentation.
Note 3 - ACQUISITIONS, DISPOSALS AND SALES
On March 31, 1998, Unified Investment Advisers,
Inc. became a wholly owned subsidiary of the
Company upon surrender to Unified Investment
Advisers of all the capital stock of Unified
Investment Advisers by all stockholders of Unified
Investment Adviser (other than the Company). Prior
to the surrender of the capital stock to Unified
Investment Advisers, the Company accounted for its
33.3% ownership in Unified Investment Advisers
pursuant to the equity method of accounting.
Unified Investment Advisers reported gross revenue
for the four months (Unified Investment Adviser's
fiscal year end was November 30) ended March 31,
1998 of $146,519 and a loss for the period of
$195,967. Unified Investment Advisers reported
total assets as of March 31, 1998 of $617,773 and
shareholders' equity of $(469,548).
On March 10, 1998, the Company acquired Resource Benefit
Planners, Inc. in a transaction accounted for under
the pooling-of-interests method of accounting. The
Company issued 12,000 shares of Common Stock in
exchange for all the outstanding capital stock of
Resource Benefit Planners. As of March 10, 1998,
Resource Benefit Planners reported total assets of
$282,724 and shareholder's equity of $37,543.
- 31 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 3 - ACQUISITIONS, DISPOSALS AND SALES (continued)
On August 21, 1998, the Company acquired EMCO
Estate Management Company, Inc. in a transaction
accounted for under the pooling-of-interests method
of accounting. The Company issued 11,000 shares of
Common Stock in exchange for all of the assets and
certain of the liabilities of EMCO Estate
Management Company. As of August 21, 1998, EMCO
Estate Management Company reported total assets of
$67,230 and stockholder's equity of $(110,212).
On August 21, 1998, the Company acquired Fiduciary
Counsel, Inc. in a transaction accounted for under the
purchase method of accounting. In connection with
such acquisition, the Company issued 36,110 shares
of Common Stock and paid $800,835 in cash. The
results of operations of Fiduciary Counsel have
been included in the Company's consolidated
financial statements since its date of acquisition.
On December 17, 1998, the Company acquired Equity
Underwriting Group, Inc. in a transaction accounted
for under the pooling-of-interests method of
accounting. The Company issued 241,745 shares of
Common Stock in exchange for all of the outstanding
capital stock of Equity Underwriting Group.
On December 17, 1998, the Company acquired Commonwealth
Premium Finance Corporation in a transaction
accounted for under the pooling-of-interests method
of accounting. The Company issued 12,800 shares of
Common Stock in exchange for all of the outstanding
capital stock of Commonwealth Premium Finance
Corporation.
On December 22, 1998, the Company acquired Strategic Fund
Services, Inc in a transaction accounted for under
the pooling-of-interests method of accounting. The
Company issued 7,500 shares of Common Stock in
exchange for all of the outstanding capital stock
of Strategic Fund Services.
On December 31, 1998, the Company acquired AmeriPrime
Financial Services, Inc in a transaction accounted
for under the pooling-of-interests method of
accounting. The Company issued 410,000 shares of
Common Stock in exchange for all of the outstanding
capital stock of AmeriPrime Financial Services.
On January 1, 1999, the Company acquired M. Wilson &
Associates, Inc. in a transaction accounted for
under the pooling-of-interests method of
accounting. The Company issued 3,636 shares of
Common Stock in exchange for all of the outstanding
capital stock of M. Wilson & Associates. As of
December 31, 1998, M. Wilson & Associates reported
total assets of $3,308 and shareholder's equity of
$3,308.
On May 6, 1999, the Company, via its subsidiary, Archer
Trading, Inc., purchased certain of the assets and
assumed certain of the liabilities of First Insight
Securities, Ltd. In connection with such
acquisition, the Company assumed liabilities of
approximately $22,000 and paid an additional
$51,700 in cash. This transaction is accounted for
under the purchase method of accounting.
- 32 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 3 - ACQUISITIONS, DISPOSALS AND SALES (continued)
On June 1, 1999, the Company acquired Fully Armed
Productions, Inc. in a transaction accounted for
under the pooling-of-interests method of
accounting. The Company issued 18,182 share of
Common Stock in exchange for all of the outstanding
capital stock of Fully Armed Productions. As of
June 1, 1999, Fully Armed Productions reported
total assets of $77,200 and shareholder's equity of
$28,813.
On June 1, 1999, the Company acquired Commonwealth
Investment Services, Inc in a transaction accounted
for under the pooling-of-interests method of
accounting. The Company issued 27,500 shares of
Common Stock in exchange for all of the outstanding
capital stock of Commonwealth Investment Services.
As of June 1, 1999, Commonwealth Investment
Services reported total assets of $56,240 and
shareholder's equity of $28,980.
At year-end 1999, the Company agreed to sell an insurance
contract segment of business of Equity Insurance
Mangers of Illinois, L.L.C. (d/b/a/ Irland and
Rogers). The sale price is determined on continued
contract revenue and the Company anticipates
receiving payment for the sale of the contracts
over a two-year period. The Company has recorded
this transaction in 1999 based upon the estimated
revenue and costs to the Company of closing the
location where the business was conducted:
Sale price $205,200
Value of fixed assets and goodwill $192,205
Costs to close the location 142,482 (334,687)
-------- ---------
Loss on the sale $(129,487)
=========
Equity Insurance Managers of Illinois, L.L.C.
was formed to acquire insurance contracts from an
existing business in 1996. A subsidiary of Equity
Underwriting Group owned 55% of this new limited
liability company. The transaction was reported
under the purchase method of accounting and this
continued with the Company's acquisition of Equity
Underwriting Group in December 1998. In 1999, the
seller agreed to a reduction of the unpaid balance
of the note resulting from the sale in the amount
of $255,628. The reduction of this price reduced
the goodwill reported under the original purchase.
The minority owner of the new limited liability
company turned in stock certificates and gave up
all rights to ownership during 1999. The receivable
from the minority owner of $565,566, due to its share
of operating losses, has been adjusted and recorded
as a reduction of retained earnings in 1999.
Note 4 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
First Lexington Trust Company, a subsidiary of the
Company, was required by the Kentucky Department of
Financial Institutions to maintain a minimum of
$800,000 capital while trust assets under
management did not exceed $100,000,000. When trust
assets under management exceeded $100,000,000, the
capital requirement increased by $350,000. Each
incremental increase of $25,000,000 in assets under
management over $100,000,000 requires the capital
requirement to increase by $90,000. First
Lexington Trust Company's capital requirement as of
December 31, 1999 and 1998 was $1,510,000 and
$800,000, respectively.
- 33 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 4 - INVESTMENTS IN DEBT AND EQUITY SECURITIES (continued)
It is the Company's intention to hold the required
capital in debt securities and cash accounts to conform to
this requirement.
The marketable investments in debt securities are classified
as "Held to Maturity" and the amortized cost and fair market
value of the investments as of December 31, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
MATURITY AMORTIZED UNREALIZED MARKET
DEBT SECURITY DATE FACE VALUE COST GAIN (LOSS) VALUE
------------- ---- ---------- ---- ----------- -----
<S> <C> <C> <C> <C> <C>
December 31, 1999
-----------------
Federal Home Loan Mortgage:
REMIC 1675-P 10 15 2023 $ 100,000 $ 71,609 $ (4,301) $ 67,308
REMIC 1646-N 03 15 2023 200,000 190,824 (2,556) 188,268
REMIC 1681-B 10 15 2023 220,000 212,024 (1,768) 210,256
REMIC 1663-L 08 15 2023 40,000 39,208 (1,486) 37,722
Note 06 30 2014 50,000 50,899 (3,633) 47,266
Federal National Mortgage Association:
REMIC 94-23-0 10 25 2007 97,000 89,733 807 90,540
Note 11 10 2005 125,000 128,948 (7,932) 121,016
Note 07 28 2008 75,000 75,414 (5,102) 70,312
Note 07 02 2000 75,000 74,660 (4,983) 69,677
Cleveland Electric
Illumination Company 07 01 2013 60,000 64,833 (4,571) 60,252
Wells Fargo Capital Bonds 12 01 2026 50,000 50,469 (3,625) 46,844
TVA Subordinated Debenture 04 24 2002 25,000 25,000 (2,000) 23,000
---------- ---------- -------- ----------
Totals $1,117,000 $1,073,621 $(41,150) $1,032,471
========== ========== ======== ==========
December 31, 1998
-----------------
Federal Home Loan Mortgage:
REMIC 1675-P 10 15 2023 $ 100,000 $ 94,472 $ 534 $ 95,006
REMIC 1646-N 03 15 2023 200,000 189,653 11,661 201,314
REMIC 1681-B 10 15 2023 220,000 211,690 5,329 217,019
REMIC 1663-L 08 15 2023 40,000 39,174 (676) 38,498
Federal National Mortgage Association:
REMIC 94-23-0 10 25 2007 97,000 89,426 6,074 95,500
Note 11 10 2005 125,000 129,615 (1,803) 127,812
U.S. Treasury Note 02 28 1999 100,000 99,655 470 100,125
Cleveland Electric
Illumination Co. 07 01 2013 60,000 65,040 980 66,020
Wells Fargo Capital Bonds 12 01 2026 50,000 50,486 3,993 54,479
TVA, Subordinated Debenture 04 24 2002 25,000 25,000 813 25,813
---------- ---------- -------- ----------
Totals $1,017,000 $ 994,211 $ 27,375 $1,021,586
========== ========== ======== ==========
</TABLE>
- 34 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 4 - INVESTMENTS IN DEBT AND EQUITY SECURITIES (continued)
Marketable investments in mutual funds as of December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
MARKET MARKET
COST VALUE COST VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Globalt Growth Fund $ 52,174 $ 57,815 $ 31,287 $ 51,677
AIT Vision Fund -- -- 35,346 50,922
Carl Domino Equity Income Fund 51,124 41,017 28,771 42,190
Newcap Contarian Fund -- -- 25,526 10,637
Shepherd Values Fixed Income Fund 1,001 1,001 -- --
Shepherd Values International Fund 1,001 1,001 -- --
Shepherd Values Small Cap Fund 1,000 1,000 -- --
Shepherd Values Growth Fund 1,750 1,904 -- --
Shepherd Values Market Neutral Fund 1,000 1,017 -- --
Shepherd Values VIF Equity Fund 251 251 -- --
Wescott Nothing But Net Fund I 1,000 985 -- --
King Fountainhead Kaliedoscope Fund 1,000 1,380 -- --
Vanguard Municipal Bond Fund--
Long-term Portfolio 7,519 7,268 7,132 7,533
Vanguard Tax Managed Fund--
Balanced Portfolio 12,150 21,684 11,663 18,776
Vanguard Wellesley Income Fund 5,422 5,331 4,806 5,561
Vanguard Wellington Fund 39,533 46,038 35,484 44,096
Vanguard Equity Income Fund 4,961 7,596 4,486 7,611
Vanguard Index Trust 500
Portfolio 15,170 54,057 14,221 44,650
Vanguard Windsor Fund 6,086 7,554 5,224 8,020
Vanguard Horizon Fund Global
Asset Allocation Portfolio 7,848 8,251 6,987 7,378
Vanguard Horizon Fund Global
Equity Portfolio 6,701 8,997 6,097 7,143
Vanguard International
Growth Fund 4,234 6,689 3,907 5,294
Vanguard Index Trust
Extended Market Portfolio 7,849 11,577 6,714 8,496
Vanguard Explorer Fund 42,048 66,355 35,007 48,344
-------- -------- -------- --------
$270,822 $358,768 $262,658 $368,328
======== ======== ======== ========
</TABLE>
- 35 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 5 - OPTIONS
On May 20, 1998, the stockholders of the Company
adopted the Unified Financial Services, Inc. 1998
Stock Incentive Plan, which plan subsequently was
amended by the stockholders on May 27, 1999. The
Stock Incentive Plan provides for the granting of
stock options and other stock-based awards. The
total number of shares of Common Stock issuable
under the Stock Incentive Plan is not to exceed
500,000 shares, subject to adjustment in the event
of any change in the Company's outstanding shares
by reason of a stock dividend, stock split,
capitalization, merger, consolidation or other
similar changes generally affecting stockholders of
the Company. Of these 500,000 shares of stock, no
more than 250,000 shares may be issued to
participants in the Stock Incentive Plan in any
plan year.
Under the terms of the Stock Incentive Plan,
employees, directors, advisors and consultants of
the Company and its subsidiaries will be eligible
to receive the following: (a) Incentive Stock
Options; (b) Nonqualified Stock Options; (c) Stock
Appreciation Rights ("SAR"); (d) Restricted Stock;
(e) Restricted Stock Units; and (f) Performance
Awards.
As of December 31, 1999 and 1998, the Board of
Directors of the Company had granted options to
acquire 105,961 and 37,526 shares, respectively, of
Common Stock to certain employees, directors and
advisers of the Company. Such options have
exercise prices as follows:
For the year ended December 31, 1999:
6,400 share at $25.00 per share
19,551 share at $27.50 per share
500 share at $30.25 per share
79,010 share at $40.00 per share
500 share at $44.00 per share
For the year ended December 31, 1998:
6,800 shares at $25.00 per share
20,051 shares at $27.50 per share
10,675 shares at $40.00 per share
As of December 31, 1999 and 1998, 103,661 and 36,226,
respectively, of such options, were intended to
qualify as incentive stock options pursuant to
Section 422 of the Internal Revenue Code of 1986,
as amended.
- 36 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 6 - DEBT AND RELATED MATTERS
Debt at December 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Bank notes payable:
------------------
Payable in monthly installments including interest at
prime plus .5%, final payment due December 31, 2001,
collaterized by communication and computer hardware
and software $ 183,418 $ 321,576
Payable in monthly installments including interest at
8.5%, final payment due June 30, 2000, secured by
assignment of receivables 2,293,750 --
Payable at maturity, June 30, 2000, interest at
prime, secured by assignment of receivables 1,710,000 1,350,000
Payable in monthly installments including interest at
8.25%, final payment due March 31, 2014, collateralized
by equipment 364,827 --
Payable in monthly installments including interest at
10.4%, final payment due April 26, 2002, collateralized
by equipment 16,001 21,922
Payable in monthly installments including interest at
10.576%, final payment due September 24, 2002,
collateralized by equipment 17,003 23,749
Payable at maturity, June 30, 1999, interest at
prime, secured by certain company assets -- 400,000
Payable at maturity, January 30, 1999, interest at
prime secured by certain company assets -- 1,800,000
Payable at maturity, January 30, 2001, interest at
prime secured by certain company assets -- 1,250,000
Note payable, individual,
Payable in six annual installments of $150,952,
interest at prime plus 1%, final payment due
January 1, 2004, unsecured -- 743,944
---------- ----------
4,584,999 5,911,191
Less current maturities 4,070,968 3,886,612
---------- ----------
Long-term portion $ 514,031 $2,024,579
========== ==========
</TABLE>
The maturities of long-term debt maturity for each of the
succeeding five years subsequent to December 31, 1999, are as
follows: 2000--$4,070,968; 2001--$53,085; 2002--$49,838;
2003--$48,731; 2004 and beyond--$362,377.
- 37 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 7 - CAPITAL LEASE OBLIGATIONS
The Company leases both computer and office equipment
under capital leases. The lease obligations are
payable over a 60-month period. The following is a
summary of future minimum lease payments under
capitalized lease obligations as of December 31,
1999:
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
2000 $32,385
2001 8,355
2002 724
2003 483
-------
41,947
Less: amount representing interest 2,941
-------
Total $39,006
=======
Note 8 - RENTAL AND LEASE INFORMATION
The Company leases certain office facilities and
equipment. Rental expense for the years ended
December 31, 1999 and 1998 was $973,820 and
$704,977, respectively.
At December 31, 1999, the Company was committed to
minimal rental payments under certain noncancellable
operating leases. Generally, these leases include
cancellation clauses. As of December 31, 1999, the
minimum future rental commitments for each of the
succeeding five years subsequent to December 31, 1999
were as follows: 2000--$1,704,894; 2001--$1,647,897;
2002--$968,159; 2003--$564,013; and 2004 and
thereafter--$1,651,346.
Note 9 - COMMITMENTS AND CONTINGENCIES
The Company is a party to various lawsuits, claims
and other legal actions arising in the ordinary
course of business. In the opinion of management,
all such matters are without merit or are of such
kind, or involve such amounts, that unfavorable
disposition would not have a material adverse
effect on the Company's financial position or
results of operations for the years ended
December 31, 1999 and 1998.
Note 10 - EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries provide a defined
contribution retirement plan that covers
substantially all employees. The Company's Board
of Directors determines contributions to the plan.
For 1999 and 1998, the Board of Directors made
contributions to the plan in the amount of $-0- and
$10,851, respectively.
The Company also maintains a section 401(k) plan as
part of the defined contribution retirement plan.
The plan includes a matching for funds contributed into
the Unified family of mutual funds. The Company will
match the employee's contribution up to fifty
percent of the first six percent of the employee's
pre-tax contribution.
- 38 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 11 - CASH SEGREGATED UNDER FEDERAL REGULATION AND NET
CAPITAL REQUIREMENTS
Unified Management Corporation, Commonwealth Investment
Services and AmeriPrime Financial Securities are
subject to the Securities and Exchange Commission's
Uniform Net Capital Rule ("Rule 15c3-1"), which
requires the maintenance of minimum net capital, as
defined, of the greater of (i) 6-2/3% of aggregate
indebtedness or (ii) $50,000 for Unified Management
Corporation, and $5,000 for Commonwealth Investment
Services and AmeriPrime Financial Securities,
whichever is greater, and a ratio of aggregate
indebtedness to net capital of not more than 15 to
1. At December 31, 1999 and 1998, the net capital
and ratio of aggregate indebtedness for each of
these entities was as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net Capital:
Unified Management Corporation $ 424,177 $ 548,703
Commonwealth Investment Services 54,946 34,928
AmeriPrime Financial Securities 268,551 160,895
Ratio of Aggregate Indebtedness:
Unified Management Corporation 1.19 to 1 .506 to 1
Commonwealth Investment Services .65 to 1 .75 to 1
AmeriPrime Financial Securities .18 to 1 0 to 1
</TABLE>
Pursuant to Rule 15c3-3 as promulgated by the
Securities and Exchange Commission, Unified Management
Corporation, Commonwealth Investment Services and
AmeriPrime Financial Securities calculate their
reserve requirement and segregate cash and/or
securities for the exclusive benefit of their
customers on a periodic basis. The reserve
requirement for Unified Management Corporation,
Commonwealth Investment Services and AmeriPrime
Financial Securities was $-0- at December 31, 1999
and 1998. Balances segregated in excess of reserve
requirements are not restricted.
Note 12 - COMMON AND PREFERRED STOCK
Common Stock:
Acquisitions
------------
The Company has 20,000,000 authorized shares of Common
Stock. In connection with the acquisitions consummated
during 1999 and 1998, the Company issued shares of Common
Stock as follows:
<TABLE>
<CAPTION>
COMPANY ACQUIRED DATE ACQUIRED SHARES ISSUED
---------------- ------------- -------------
<S> <C> <C>
1999
----
M. Wilson & Associates January 1, 1999 3,636
Commonwealth Investment Services June 1, 1999 27,500
Fully Armed Productions June 1, 1999 18,182
1998
----
Resource Benefit Planners March 10, 1998 12,000
EMCO Estate Management Company August 21, 1998 11,000
Fiduciary Counsel August 21, 1998 36,110
Equity Underwriters Group December 17, 1998 241,745
Commonwealth Premium
Finance Corporation December 17, 1998 12,800
Strategic Fund Services December 22, 1998 7,500
AmeriPrime Financial Services December 31, 1998 410,000
</TABLE>
- 39 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 12 - COMMON AND PREFERRED STOCK (continued)
Private Placement Offerings
---------------------------
Effective December 10, 1998, the Company commenced
a private placement offering to sell a maximum of
1,750,000 shares of Common Stock. Effective
September 27, 1999, the size of the offering was
reduced to 750,000 shares of Common Stock, which
shares are being offered at a price of $40.00 per
share. The offering will terminate on the earlier
occurrence of (1) subscriptions for 750,000 shares
having been accepted or (2) March 31 2000;
provided, however, the Company reserves the right
to terminate the offering at any time, without
notice. As of December 31, 1999, the Company had
issued 238,270 shares of Common Stock. For the
year ended December 31, 1999, aggregate brokerage
fees of $901,780 were paid to Unified Management
Corporation and Commonwealth Investment Services in
connection with this private placement offering,
which amount is inclusive of $2,400 paid to
external brokerage firms.
Effective January 22, 1998, the Company commenced a
private placement offering to sell a maximum of 600,000
shares of Common Stock. The first 400,000 shares
offered were offered at a price of $25.00 per share
and, upon acceptance by the Company of subscriptions
for such 400,000 shares, the remaining 200,000 shares
in the private placement were offered at a price of
$27.50 for share. The offering terminated on June 30,
1998. As of December 31, 1998, the Company issued
450,738 shares of Common Stock pursuant to such offering.
For the year ended December 31, 1998, aggregate
brokerage fees of $772,000 were paid to Unified
Management Corporation in connection with the
private placement offering, which amount is
inclusive of $140,000 paid to external brokerage
firms.
In the Company's two private placements, all shares of
Common Stock were offered by the Company on a best
efforts basis. There is no public market for any
of the Company's securities and there can be no
assurance that a market will develop in the future.
The securities offered and sold by the Company in
its private placements will not be and have not
been registered under the Securities Act of 1933,
as amended, and may not be offered or sold in the
United States absent registration or an applicable
exemption from registration requirements.
Preferred Stock:
As of December 31, 1999 and 1998, the total
preferred shares authorized for the Company was
1,000,000 with a par value of $.01 per share, of
which 200,000 and 102,100 shares, respectively,
were designated at December 31, 1999 and 1998 as
follows:
<TABLE>
<CAPTION>
PREFERRED SHARES SHARES SHARES STATED PAR
STOCK DESIGNATED ISSUED OUTSTANDING VALUE VALUE
----- ---------- ------ ----------- ----- -----
<S> <C> <C> <C> <C> <C>
1999:
Series D 200,000 -- -- $200 $0.01
1998:
Series C 2,100 2,100 1,672 100 0.01
Series D 100,000 -- -- 200 0.01
</TABLE>
- 40 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 12 - COMMON AND PREFERRED STOCK (continued)
Series C Preferred Stock
------------------------
In 1999 and 1998, the Company issued 1,009 and 2,100
shares, respectively, of Series C 6.75% Cumulative
Convertible Preferred Stock to certain directors,
executive officers and agents of the Company for
total consideration of $310,900. Each share of
Series C Preferred Stock was convertible, at any
time at the option of the holder thereof and
without the payment of any additional consideration
with respect thereto, into 135 shares of Common
Stock. During the years ended December 31, 1999
and 1998, 2,681 and 428 shares of Series C
Preferred Stock were converted into 361,935 and
57,780 shares, respectively, of Common Stock. As
of November 30, 1999, all outstanding shares of
Series C Preferred Stock had been converted to
Common Stock and, on December 23, 1999, the Company
filed a Certificate of Elimination with respect to
the Series C Preferred Stock with the Office of the
Delaware Secretary of State.
Series D Preferred Stock Authorized
-----------------------------------
In July 1998, the Company authorized 100,000 shares
of Series D Convertible Junior Participating
Preferred Stock. This amount was increased to
200,000 in May 1999. The Company has reserved all
of the shares of Series D Preferred Stock for
issuance under a Rights Agreement dated August 26,
1998 between the Company and Unified Fund Services,
as rights agent. On August 26, 1998, the Board of
Directors of the Company declared a dividend
distribution of one Preferred Stock Purchase Right
for each outstanding share of Common Stock. The
dividend distribution was payable to the
stockholders of record at the close of business on
August 26, 1998. Generally, each Preferred Stock
purchase right, when exercisable, entitles the
registered holder to purchase from the Company one
one-hundredth of a share of Series D Preferred
Stock at a price of $200.00 per one one-hundredth
of a share.
Series A and Series B Preferred Stock Redemption
------------------------------------------------
On April 25, 1998, the Company redeemed the
outstanding Series A and Series B Preferred Stock
of the Company. Total consideration of $1,738,326,
consisting of principal and accrued interest, was
paid to the holders of the Series A and Series B
Preferred Stock in connection with the redemption
of such shares. On September 14, 1998, the Company
filed Certificates of Elimination with respect to
the Series A and Series B preferred Stock with the
Office of the Delaware Secretary of State.
Note 13 - RELATED PARTY TRANSACTIONS
Commonwealth Premium Finance Corporation employees
are paid through the Equity Insurance Managers
payroll system, which serves as a common paymaster.
Commonwealth Premium Finance Corporation's
employees are eligible for all benefits that Equity
Insurance Managers offers, although these benefits
are paid for by Commonwealth Premium Finance
Corporation. As of December 31, 1999 and 1998,
Commonwealth Premium Finance Corporation's balance
in unfunded contracts payable of $171,746 and
$448,040, respectively, was owed to Equity
Insurance Managers for the amount due on the
insurance policy premiums that Equity Insurance
Managers and Equity Insurance Managers of Illinois
sold and Commonwealth Premium Finance Corporation
financed. At December 31, 1999
- 41 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 13 - RELATED PARTY TRANSACTIONS (continued)
and 1998, Equity Underwriting Group had $0 and $421,992,
respectively, receivable from Commonwealth Premium
Finance Corporation. Commonwealth Premium Finance
Corporation also owed Equity Insurance Managers $0
and $21,911 for various expenses paid by Equity
Insurance Managers in 1999 and 1998, respectively.
Equity Underwriting Group paid various expenditures
on behalf of 21st Century Claims Service throughout
1999 and 1998. Equity Underwriting Group had
$845,603 and $318,129 due from 21st Century Claims
Service as of December 31, 1999 and 1998,
respectively. Equity Underwriting Group paid
various expenditures on behalf of Equity Insurance
Administrators throughout 1999 and 1998. Equity
Underwriting Group had $52,409 and $202,728 due
from Equity Insurance Administrators as of
December 31, 1999 and 1998, respectively. Equity
Underwriting Group had $362,046 and $0 due from
Equity Insurance Managers as of December 31, 1999
and 1998, respectively.
Note 14 - INCOME TAXES
Consolidated net operating loss carryforwards at
December 31, 1999 amounted to approximately
$13,700,000, expiring through 2008.
Consolidated State of Indiana net operating loss
carryforwards at December 31, 1999 amounted to
approximately $13,000,000, expiring through 2008.
The Company (increased) utilized approximately
$(1,600,000) and $800,000 of net operating loss
carryforwards during 1999 and 1998, respectively,
to reduce current consolidated income tax expense
to zero.
The Company records deferred income taxes in
accordance with Financial Accounting Standard
("FAS") No. 109. The deferred tax assets and
liability in the consolidated financial statements
as of December 31, 1999 and 1998 were as follows:
1999 1998
---- ----
Deferred tax assets $(5,707) $(51,062)
Deferred tax liability 83,157 90,318
------- --------
Net deferred tax liability $77,450 $ 39,256
======= ========
The components of income tax expense for the years ended
December 31, 1999 and 1998 were as follows:
1999 1998
---- ----
Current income tax:
Federal $ 48,083 $ 62,848
State and local 32,470 7,433
-------- --------
Total current income tax $ 80,553 $ 70,281
======== ========
Deferred income tax:
Federal (37,863) 19,080
State and local (12,960) 61,097
-------- --------
Total deferred (50,823) 80,177
-------- --------
Total income tax $ 29,730 $150,458
======== ========
- 42 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Note 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and
estimated fair value of the Company's financial
instruments at December 31, 1999 and 1998.
Financial Accounting Standards Board Statement
No. 107, "Disclosures about Fair Value of Financial
Instruments," defines the fair value of a financial
instrument as the amount at which the instrument
could be exchanged in a current transaction between
willing parties.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1999 1998
----------------------- ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Financial assets:
Cash and cash equivalents $5,709.1 $ 5,709.1 $10,395.8 $10,395.8
Investment in:
Debt securities
Mutual funds 1,216.9 1,216.9 726.1 726.1
Notes receivable 2,810.9 2,810.9 -- --
Receivables (trade) 9,138.7 9,138.7 8,910.6 8,910.6
Prepaid and sundry 899.9 899.9 230.0 230.0
Financial liabilities:
Current liabilities 17,356.5 17,356.5 10,574.5 10,574.5
Capital lease obligation 39.0 39.0 137.9 137.9
Long-term debt 4,585.0 4,585.0 5,911.2 5,911.2
</TABLE>
Note 16 - DISCLOSURES ABOUT REPORTING SEGMENTS
The Company has six reportable segments: investment
advisory, trust and retirement services;
administrative and back office support services,
brokerage and brokerage services; finance;
insurance brokerage; and corporate and start-up.
The accounting policies of the segments are the same as
those described in the summary of significant
accounting policies. The Company evaluates
performance based on profit or loss from operations
before income taxes, not including recurring gains
and losses.
The Company's reportable segments are strategic business
units that offer different products and services.
They are managed separately because each business
requires different technology and marketing
strategies. Most of the businesses were acquired
as a unit and the management at the time of the
acquisition was retained. Reportable segment
revenues, gross margin, total assets, capital
expenditures and depreciation and amortization were
as follows for the years ended December 31, 1999
and 1998:
- 43 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------
Note 16 - DISCLOSURES ABOUT REPORTING SEGMENTS (continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
(IN THOUSANDS)
Revenues:
Investment advisory, trust and retirement services $ 6,286.9 $ 4,686.0
Administrative and back office support services 4,292.1 3,100.9
Brokerage and brokerage services 4,074.0 5,103.8
Finance 623.7 395.0
Insurance brokerage 9,202.8 9,691.9
Corporate and start-up 1,138.1 470.9
--------- ---------
Total $25,617.6 $23,448.5
========= =========
Gross margin:
Investment advisory, trust and retirement services $ 5,907.6 $ 4,439.9
Administrative and back office support services 3,531.4 2,536.0
Brokerage and brokerage services 2,263.7 1,994.9
Finance 484.1 395.0
Insurance brokerage 5,012.3 5,103.1
Corporate and start-up 1,138.1 470.9
--------- ---------
Total $18,337.2 $14,939.8
========= =========
Total assets
Investment advisory, trust and retirement services $ 5,982.9 $ 5,226.2
Administrative and back office support services 2,148.0 1,256.7
Brokerage and brokerage services 1,641.5 1,311.2
Finance 2,173.4 1,914.4
Insurance brokerage 7,642.3 9,144.5
Corporate and start-up 16,949.4 7,645.6
--------- ---------
Total $36,537.5 $26,498.6
========= =========
Capital expenditures:
Investment advisory, trust and retirement services $ 108.5 $ 92.7
Administrative and back office support services 97.5 244.9
Brokerage and brokerage services 27.6 42.6
Finance 40.3 54.2
Insurance brokerage 131.7 --
Corporate and start-up 1,622.0 77.6
--------- ---------
Total $ 2,027.6 $ 512.0
========= =========
Depreciation and amortization:
Investment advisory, trust and retirement services $ 204.8 $ 431.1
Administrative and back office support services 76.2 130.9
Brokerage and brokerage services 36.1 26.4
Finance 69.8 69.6
Insurance brokerage 227.1 199.9
Corporate and start-up 216.6 91.4
--------- ---------
Total $ 830.6 $ 949.3
========= =========
</TABLE>
- 44 -
<PAGE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
----------------------------------------------------
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
----------------------------------------------------------
Information regarding our directors is contained in our
Proxy Statement for the 2000 Annual Meeting of Stockholders
under the caption "Proposal 1: Election of Directors" and is
incorporated herein by reference. Information regarding our
executive officers is contained in this report under Item
4A--"Executive Officers of the Registrant" and is incorporated
herein by reference.
Information regarding compliance with Section 16(a)
of the Securities Exchange Act of 1934, as amended, is included
in our Proxy Statement for the 2000 Annual Meeting of
Stockholders under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance," and is incorporated herein by
reference.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
Information regarding executive compensation is
contained in our Proxy Statement for the 2000 Annual Meeting of
Stockholders under the captions "Board of Directors and
Committees" and "Compensation of Executive Officers," and is
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
Information regarding security ownership of certain
beneficial owners and management is contained in our Proxy
Statement for the 2000 Annual Meeting of Stockholders under the
caption "Security Ownership of Certain Beneficial Owners and
Management," and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information regarding certain relationships and
related transactions is contained in our Proxy Statement for
the 2000 Annual Meeting of Stockholders under the captions
"Certain Relationships and Related Transactions" and "Board of
Directors and Committees," and is incorporated herein by
reference.
- 45 -
<PAGE>
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
See Exhibit Index on pages 49-52 hereto.
(b) Reports on Form 8-K.
During the three months ended December 31,
1999, we did not file any Current Reports on
Form 8-K.
- 46 -
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized as of the 13th day of
April 2000.
UNIFIED FINANCIAL SERVICES, INC.
(Registrant)
By /s/ Timothy L. Ashburn
-------------------------------------------
Timothy L. Ashburn, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of
Unified Financial Services, Inc., hereby severally and
individually constitute and appoint Timothy L. Ashburn and
Thomas G. Napurano, and each of them, the true and lawful
attorneys and agents of each of us to execute in the name,
place and stead of each of us (individually and in any capacity
stated below) any and all amendments to this Annual Report on
Form 10-KSB and all instruments necessary or advisable in
connection therewith and to file the same with the Securities
and Exchange Commission, each of said attorneys and agents to
have the power to act with or without the others and to have
full power and authority to do and perform in the name and on
behalf of each of the undersigned every act whatsoever
necessary or advisable to be done in the premises as fully and
to all intents and purposes as any of the undersigned might or
could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys and
agents or each of them to any and all such amendments and
instruments.
In accordance with the Securities Exchange Act of
1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Timothy L. Ashburn Chairman of the Board, President April 13, 2000
- ------------------------------ and Chief Executive Officer
Timothy L. Ashburn
/s/ Thomas G. Napurano Executive Vice President, April 13, 2000
- ------------------------------ Chief Financial Officer
Thomas G. Napurano and Director
- 47 -
<PAGE>
<PAGE>
/s/ John S. Penn Executive Vice President, April 13, 2000
- ------------------------------ Chief Operating Officer
John S. Penn and Director
/s/ Weaver H. Gaines Director April 13, 2000
- ------------------------------
Weaver H. Gaines
/s/ Jack R. Orben Director March 29, 2000
- ------------------------------
Jack R. Orben
/s/ Dr. Gregory W. Kasten Director April 13, 2000
- ------------------------------
Dr. Gregory W. Kasten
</TABLE>
- 48 -
<PAGE>
<PAGE>
EXHIBIT INDEX
Ex. No. Description
- ------- -----------
3.1(a) Amended and Restated Certificate of Incorporation of
the Company, filed as Exhibit 4.1(a) to the Company's
Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1997, is incorporated herein by
reference.
3.1(b) Certificate of Amendment of Certificate of Incorporation
of the Company, filed as Exhibit 3.1 to the Company's
Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1999, is incorporated by reference
herein.
3.2 By-laws of the Company, filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997, is incorporated
herein by reference.
4.1 Certificate of Designations, Preferences and Rights
of Series D Junior Participating Preferred Stock of
the Company, filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1998, is incorporated herein by
reference.
4.2 Rights Agreement, dated as of August 26, 1998, between
the Company and Unified Fund Services, Inc., filed as
Exhibit 1 to the Company's Registration Statement
on Form 8-A dated September 3, 1998, is
incorporated herein by reference.
10.1 Employment Agreement dated as of June 1, 1997 by and
between Health Financial, Inc. and Dr. Gregory W. Kasten,
filed as Exhibit 10.1 to Amendment No. 1 to the
Company's Registration Statement on Form 10-SB, is
incorporated herein by reference.<F*>
10.2 Employment Agreement dated as of December 16, 1998 by
and between Equity Underwriting Group, Inc. and
John R. Owens, filed as Exhibit 10.8 to the Company's
Annual Report on Form 10-KSB for the year ended
December 31, 1998, is incorporated herein by
reference.<F*>
10.3 Agreement and Plan of Merger, dated as of July 10, 1998,
by and among the Company, Fiduciary Acquisition
Corporation, Fiduciary Counsel, Inc., Associated
Family Services, Inc., Intellectronic Management
Systems, Inc., Jack R. Orben, Andrew E. Beer and
Charles C. Hickox, filed as Exhibit 2 to the
Company's Current Report on Form 8-K dated
August 21, 1998, is incorporated herein by
reference.
10.4 Agreement and Plan of Merger, dated as of October 16,
1998, by and among the Company, AmeriPrime Acquisition
Corporation, AmeriPrime Financial Services, Inc.
and Kenneth D. Trumpfheller, filed as Exhibit 2.1
to the Company's Current Report on Form 8-K dated
October 16, 1998, is incorporated herein by
reference.
- 49 -
<PAGE>
<PAGE>
10.5 Agreement and Plan of Merger, dated as of
October 16, 1998, by and among the Company, Equity
Acquisition Corporation, Equity Underwriting Group, Inc.,
John R. Owens and D. Richard Meyer, filed as Exhibit 2.2
to the Company's Current Report on Form 8-K dated
October 16, 1998, is incorporated herein by
reference.
10.6 First Amendment to Agreement and Plan of Merger, dated
as of December 14, 1998, by and among the Company, Equity
Acquisition Corporation, Equity Underwriting Group,
Inc., John R. Owens and D. Richard Meyer, filed as
Exhibit 2.2 to the Company's Current Report on Form
8-K dated December 17, 1998, is incorporated herein
by reference.
10.7 Amended and Restated Unified Financial Services, Inc.
1998 Stock Incentive Plan, filed as Annex A to the
Company's Proxy Statement for the Company's 1999
Annual Meeting, is incorporated herein by
reference.<F*>
10.08 Third Amendment to Loan Agreement, dated as of July
23, 1998, by and among Commonwealth Premium Finance
Corporation, John R. Owens, D. Richard Meyer and
Bank One, Kentucky, NA, filed as Exhibit 10.21 to
the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1998, is incorporated
herein by reference.
10.09 Renewed Revolving Credit Note, dated as of June 18,
1998, issued by Commonwealth Premium Finance
Corporation in favor of Bank One, Kentucky, NA, filed
as Exhibit 10.22 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998,
is incorporated herein by reference.
10.10 Fourth Amendment to Loan Agreement, dated as of
February 25, 1999, by and among Commonwealth
Premium Finance Corporation, the Company and Bank
One, Kentucky, NA, filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.11 Guaranty of Payment and Performance, dated
February 25, 1999, by the Company, filed as Exhibit
10.24 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1998, is incorporated
herein by reference.
10.12 Stock Pledge and Security Agreement, dated as of
February 25, 1999, by and among the Company and
Bank One, Kentucky, NA, filed as Exhibit 10.25 to
the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1998, is incorporated
herein by reference.
10.13 First Amendment to Loan Agreement, dated as of July 23,
1998, by and among Equity Underwriting Group, Inc.,
Equity Insurance Managers, Inc., 21st Century Claim
Service, Inc., John R. Owens, D. Richard Meyer and
Bank One, Kentucky, NA, filed as Exhibit 10.31 to
the Company's Annual
- 50 -
<PAGE>
<PAGE>
Report on Form 10-KSB for the year ended
December 31, 1998, is incorporated herein by
reference.
10.14 Amended and Restated Revolving Credit Note, dated
as of July 23, 1998, issued by Equity Insurance Managers,
Inc. in favor of Bank One, Kentucky, NA, filed as
Exhibit 10.32 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998,
is incorporated herein by reference.
10.15 Second Amendment to Loan Agreement, dated as of February
25, 1999, by and among Equity Underwriting Group, Inc.,
Equity Insurance Managers, Inc., 21st Century Claim
Service, Inc., the Company and Bank One, Kentucky,
NA, filed as Exhibit 10.33 to the Company's Annual
Report on Form 10-KSB for the year ended December 31,
1998, is incorporated herein by reference.
10.16 Amended and Restated Term Note, dated as of February 25,
1999, issued by Equity Underwriting Group, Inc. and
Equity Insurance Managers, Inc. in favor of Bank
One, Kentucky, NA, filed as Exhibit 10.34 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.17 Term Note, dated as of February 25, 1999, issued by
Equity Underwriting Group, Inc. and Equity Insurance
Managers, Inc. in favor of Bank One, Kentucky, NA,
filed as Exhibit 10.35 to the Company's Annual
Report on Form 10-KSB for the year ended
December 31, 1998, is incorporated herein by
reference.
10.18 Renewal Term Note, dated as of January 30, 1999,
issued by 21st Century Claim Service, Inc. in favor of
Bank One, Kentucky, NA, filed as Exhibit 10.36 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.19 429 Pennsylvania Building Office Lease, dated as of
November 7, 1997, by and between 429 Penn Partners
and the Company, filed as Exhibit 10.37 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.20 First Addendum to Lease, dated as of June 25, 1998,
by and between 429 Penn Partners and the Company, filed
as Exhibit 10.38 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998,
is incorporated herein by reference.
10.21 Office Lease Agreement, dated as of November 4,
1996, by and between MIF Realty L.P. and Equity
Insurance Managers, Inc., filed as Exhibit 10.39 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.22 Addendum, dated as of November 4, 1996, by and
between MIF Realty L.P. and Equity Insurance Managers,
Inc, filed as Exhibit 10.40 to the
- 51 -
<PAGE>
<PAGE>
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, is incorporated herein by
reference.
10.23 Amendment and Extension of Lease, dated as of
March 1, 1999, by and between Equity Insurance Managers,
Inc. and Nashville Mini Storage, L.P., filed as
Exhibit 10.41 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998,
is incorporated herein by reference.
10.24 Employment Agreement, dated as of December 31,
1998, by and between the Company and Charles H. Binger,
is filed herewith.<F*>
10.25 Employment Agreement, dated as of December 31, 1998, by
and between the Company and David F. Morris, is filed
herewith.<F*>
10.26 Loan Agreement, dated as of December 28, 1999, by and
between Bank One Kentucky, NA, the Company and
Commonwealth Premium Finance Corporation, is filed
herewith.
10.27 Security Agreement, dated as of December 28, 1999, by and
between Commonwealth Premium Finance Corporation
and Bank One Kentucky, NA, is filed herewith.
10.28 Stock Pledge and Security Agreement, dated as of
December 29, 1999, by and between the Company and
Bank One Kentucky, NA, is filed herewith.
10.29 Guaranty of Payment and Performance, dated as of
December 28, 1999, by the Company in favor of Bank
One Kentucky, NA, is filed herewith.
10.30 Renewal Revolving Credit Note, dated as of December 28,
1999, by Commonwealth Premium Finance Corporation
in favor of Bank One Kentucky, NA, is filed
herewith.
10.31 Term Note, dated as of December 28, 1999, by the
Company in favor of Bank One Kentucky, NA, is filed
herewith.
11.1 Computations of Earnings per Share, is filed herewith.
21.1 List of Subsidiaries is filed herewith.
23.1 Consent of Larry E. Nunn & Associates, LLC with
respect to its report dated February 2, 2000 regarding
the consolidated financial statements of the Company as
of and for the years ended December 31, 1999 and
1998 is filed herewith.
24.1 Power of Attorney (included on signature page hereto).
27.1 Financial Data Schedule (December 31, 1999) is filed
herewith.
27.2 Restated Financial Data Schedule (December 31, 1998) is
filed herewith.
[FN]
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<F*> Management contract or compensatory plan or arrangement.
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EMPLOYMENT AGREEMENT
This agreement ("Agreement") has been entered into as of this 31st
day of December, 1999, by and between Unified Financial Services, Inc.,
a Delaware corporation ("Unified"), and Charles H. Binger, an individual
("Executive").
RECITALS
The Executive, various members of the Board of Directors of
Unified (the "Board"), and various senior executives of Unified
negotiated the terms of Executive's employment and this Agreement over a
period of five months. Executive has and is representing Unified on
significant portions of its legal matters other than the negotiation,
drafting and execution of this Agreement. Unified acknowledges that it
is aware of Executive's representation of himself in connection with
this Agreement, and it is aware that Executive has not represented
Unified in connection with this Agreement. Unified acknowledges that
the Executive encouraged Unified to consult with legal counsel in
connection with this Agreement, and Unified represents that it has done
so.
The Executive has represented Unified for a number of years, and
both the Board and Unified's senior executives are very familiar with
the Executive's talents. Unified offered the terms in this Agreement in
order to entice Executive to accept employment with Unified, which
acceptance will require that Executive resign his current position as an
equity partner of his law firm. Unified and Executive acknowledge that
Executive's acceptance of the terms of this Agreement and resignation
from his law firm will result in a disposition of Executive's current
law practice without compensation from those who succeed to such
practice, and Executive acknowledges that Unified is not purchasing such
practice. Unified acknowledges that Executive has been a partner in a
large and respected law firm, has advanced rapidly while there, and has
achieved a substantial amount of economic and employment security.
Unified acknowledges that Executive would not have accepted employment
with Unified and surrendered his current law practice but for the
protections and enticements provided in this Agreement, including
certain mandatory salary increases and certain payments upon termination
or a Change in Control (as defined below). Executive acknowledges that
the protections and enticements provided in this Agreement, including
certain mandatory salary increases, certain payments upon termination or
a Change of Control and certain stock benefits, are adequate, acceptable
and sufficient for Executive to resign from his current position and
accept the position and terms and conditions provided herein.
The Executive Committee of the Board of Directors of Unified (the
"Committee") desires to provide for the employment of the Executive on
the terms hereof, and the Executive is willing to commit himself to
serve Unified. The Executive Committee has determined that it is in
the best interests of Unified and its stockholders to reinforce and
encourage the attention and dedication of the Executive to Unified as a
member of Unified's management and to assure that Unified will have the
continuing dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change in Control of Unified. Additionally,
the Executive Committee believes it is imperative to encourage the
Executive's attention and dedication to Unified currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon certain
breaches of this Agreement by Unified or upon a termination of
employment after a Change in Control, which ensure that the compensation
and benefits expectations of the Executive will be satisfied. Because
of the Executive's high position at Unified and his access to
information pertaining to the business of Unified (as conducted by its
affiliates), Unified believes it is imperative that the Executive
neither compete against Unified and any of its affiliates or
subsidiaries nor share certain confidential information of either during
the Executive's employment and for the three-year period thereafter, as
provided below. Therefore, in
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exchange for the mutual promises and covenants set forth herein, and in
order to accomplish these objectives, the Committee has caused Unified
to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different
meaning. Terms not set forth in this Section 1.1 but defined elsewhere
in this Agreement shall for all purposes of this Agreement have such
defined meaning, whether or not capitalized, unless the context plainly
requires a different result.
1.1(a) "BOARD" means the Board of Directors of Unified.
1.1(b) "CHANGE IN CONTROL" means a change in control of
Unified 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 Exchange Act; provided that, for purposes of
this Agreement, a Change in Control shall be deemed to have
occurred if: (i) any Person (other than Unified or any wholly
owned subsidiary of Unified) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Unified that represent 20% or more of
the combined voting power of Unified's then outstanding
securities; (ii) during any period of two (2) consecutive years
beginning on or after March 1, 2000, 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 Unified'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 Exchange 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 Unified in which
Unified is not the continuing or surviving corporation or pursuant
to which shares of Unified's Common Stock are converted into cash,
securities or other property, other than a merger of Unified in
which the holders of Unified's 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 Unified in
which Unified is the continuing or surviving corporation in which
the holders of Unified's Common Stock immediately prior to the
merger do not own fifty percent (50%) 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 transactions) of all or substantially
all of the assets of Unified (provided, however, that for purposes
of this subsection (v) any sale lease, exchange or other transfer
between subsidiaries that are directly or indirectly wholly owned
by Unified shall not be deemed a Change of Control); (vi) Timothy
L. Ashburn ceases to serve as the Chairman of the Board or as the
Chief Executive Officer of Unified; or (vii) the stockholders of
Unified approve any plan or proposal for the liquidation or
dissolution of Unified.
1.1(c) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
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1.1(d) "CODE" shall mean the Internal Revenue Code of
1986, as amended, including all regulations proposed or
promulgated thereunder, and administrative interpretations and
judicial precedents relating thereto. All citations to the Code
shall include any amendments or any substitute or successor
provisions thereto.
1.1(e) "COMMON STOCK" shall mean the common stock, $0.01
par value, of Unified.
1.1(f) "CUSTOMER" shall mean any Person from which or from
dealings with which any member of the Unified Group is earning or
has earned revenue in the ordinary course of its business.
Dealings shall include, for example and without limitation,
distribution arrangements, revenue or income sharing arrangements,
commission arrangements and any other arrangement or contract.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 2000.
1.1(h) "EMPLOYMENT PERIOD" shall mean the period that
begins on the Effective Date and ends on the earlier of: (i)
twelve (12) months after the date on which Unified shall have
delivered to Executive written notice (in accordance with the
provisions of Section 9.3 hereof) of termination of the Employment
Period, which notice shall not be delivered prior to the fourth
anniversary of the Effective Date (and the parties agree that the
term described in this clause (i) shall be for a period of not
less than sixty (60) months); or (ii) the Date of Employment
Termination (as defined in Section 3.6 hereof).
1.1(i) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended. All citations to the Exchange Act shall include
any amendments or any substitute or successor provisions thereto.
1.1(j) "EXPECTED EMPLOYMENT PERIOD" shall mean the period
of time beginning on the Effective Date and ending on the date
described in Section 1.1(h)(i). If no written notice terminating
the Employment Period (as required in Section 1.1(h)(i)) shall
have been delivered to Executive on or before the Date of
Employment Termination (as defined in Section 3.6 hereof) or such
notice is delivered prior to the fourth anniversary of the
Effective Date, then for all purposes of this Agreement such
notice shall be deemed to have been delivered on the later of such
Date of Employment Termination and the fourth anniversary of the
Effective Date. For example and without limitation: (i) if
Unified were to terminate the Executive without Cause (as defined
in Section 3.3 hereof) at the end of the eighteenth (18th) month
of the Employment Period, the Expected Employment Period for
purposes of Section 4.1 would end on the fifth (5th) anniversary
of the Effective Date; (ii) if Unified were to terminate the
Executive without Cause on the fourth (4th) anniversary of the
Effective Date and no written notice of termination of the
Employment Period had previously been delivered, such notice would
be deemed delivered on such fourth (4th) anniversary, and the
Expected Employment Period for purposes of Section 4.1 would end
on the fifth (5th) anniversary of the Effective Date; and (iii) if
Unified were to deliver written notice of termination of the
Employment Period on the fourth (4th) anniversary of the Effective
Date, and thereafter Executive's employment is terminated by
Unified or Executive (whether without Cause, for Good Reason or
otherwise), the Expected Employment Period for purposes of Section
4.1 would end on the fifth (5th) anniversary of the Effective
Date.
1.1(k) "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
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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; (iv) for any period during which the Common Stock shall be
listed for trading on an electronic communications network (an
"ECN"), an alternative trading system (an "ATS") and/or on-line
order matching system or auction system, the closing bid price as
reported by such ECN, ATS and/or on-line order matching system or
auction system; or (v) the market price per share of Common Stock
as determined by an investment banking firm or certified public
accountant selected by the Board in the event neither (i), (ii),
(iii) nor (iv) 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.
1.1(l) "PERSON" shall include an individual, firm, trust,
estate, association, joint venture, partnership, corporation,
limited liability company, organization or other entity.
1.1(m) "UNIFIED" shall mean Unified Financial Services,
Inc., a Delaware corporation.
1.1(n) "UNIFIED GROUP" means, jointly and severally,
Unified and any Person more than twenty percent (20%) of which (by
value and not by voting power) is directly or indirectly owned by
Unified at any time during the Employment Period, and any
successors or assigns of Unified or any other Person included in
the Unified Group.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender,
words in the singular include the plural, and words in the plural
include the singular.
1.3 HEADINGS. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of
the text. Accordingly, as used in this Agreement and except where
expressly provided to the contrary, the term "Section" means the text
that accompanies the specified Section of this Agreement. For example
and without limitation, a reference to "Section 3" would mean all the
text under the headings numbered 3.1 through 3.6.
1.4 INCORPORATION OF RECITALS; WAIVER OF DEFENSES. The Recitals
set forth on the first page of this Agreement are hereby incorporated in
this Section 1.4 as if fully set forth herein and are binding upon the
parties to this Agreement. Unified shall not, directly or indirectly,
raise as a defense to enforcement or excuse for any nonperformance under
this Agreement Executive's prior representation of Unified, Executive's
representation of himself in connection with this Agreement, or any
failure on the part of Unified to secure adequate legal representation
in connection with this Agreement. Moreover, Unified represents and
warrants that this Agreement is duly authorized and binding upon Unified
in accordance with its terms; and Unified shall take no action
inconsistent with, and shall raise no objections or defenses to the
enforcement of this Agreement based in whole or part upon, those
grounds. Executive shall not, directly or indirectly, raise as a
defense to enforcement or excuse for any nonperformance under this
Agreement Executive's representation of himself in connection with this
Agreement. No provision of this Agreement shall be construed against
any party on the ground that such party drafted the provision or caused
it to be drafted or the provision contains a covenant of such party.
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1.5 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky,
without reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 PERIOD OF EMPLOYMENT. Throughout the Employment Period, the
Executive shall serve in the employ of Unified in accordance with the
terms and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Throughout the Employment Period, the Executive
shall be the General Counsel and an Executive Vice President of
Unified. The Executive shall render legal and administrative
services to Unified as are customarily performed by persons
situated in similar executive legal positions including, among
other things, retention and oversight of inside and outside legal
counsel for Unified and the other members of the Unified Group,
and may have such other powers or authority as may from time to
time be prescribed by the Board or any other executive officer of
Unified or any other member of the Unified Group (collectively,
"Positions and Duties"). The Executive shall report to the Chief
Executive Officer of Unified.
2.2(b) Throughout the Employment Period (but excluding any
periods of vacation and sick leave to which he is entitled), the
Executive shall devote reasonable attention and time during normal
business hours to the business and affairs of Unified and shall
use his reasonable best efforts to perform faithfully and
efficiently such responsibilities as are assigned to him under or
in accordance with this Agreement; provided that, it shall not be
a violation of this paragraph for the Executive to: (i) serve on
corporate, civic or charitable boards or committees; (ii) deliver
lectures or fulfill speaking engagements; (iii) manage personal
investments for the Executive's own account or those of family
members; or (iv) render legal services in an "of counsel" or
similar role to or for the benefit of Persons who are not members
of the Unified Group, so long as such activities described in
clauses (i) through (iv) do not materially interfere with the
performance of the Executive's responsibilities as a senior
executive officer of Unified in accordance with this Agreement.
The parties agree that an "of counsel" or similar relationship
will be beneficial to Unified and will not conflict with
Executive's Positions or Duties and will not present a conflict of
interest to Executive or Unified.
2.3 COMPENSATION. The Executive's annual compensation and other
benefits described in this Section 2.3 shall be provided by Unified.
2.3(a) ANNUAL BASE SALARY. From the Effective Date, the
Executive shall receive an annual base salary of $250,000.00,
which shall be due and paid in equal or substantially equal
installments, to be paid at the same frequency as other employees
of Unified but no less often than monthly. The Annual Base Salary
(as hereinafter defined) payable to the Executive shall be
increased on each January 1 occurring during the Employment Period
by no less than an amount equal to the Annual Base Salary for the
immediately preceding calendar year multiplied by the Adjustment
Percentage. The Adjustment Percentage shall equal the sum of (A)
the CPI Percentage, plus (B) if such January 1 falls during the
first sixty (60) months of the Employment Period, fifteen percent
(15%), or if such January 1 falls after the first sixty (60)
months of the Employment Period, seven percent (7%). The CPI
Percentage shall mean the greater of (i) zero and (ii) the
remainder of (x) the quotient of the CPI-U for September of the
year preceding such January 1 divided by the CPI-U for the
immediately preceding September, minus (y) one (1), and any such
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remainder shall be expressed as a percentage. By way of example
and not limitation, the CPI Percentage for January 1, 2002 shall
be (assuming such amount exceeds zero) the remainder of (x) the
quotient of the September 2001 CPI-U divided by the September 2000
CPI-U, minus (y) one (1); in addition, had this Agreement been in
effect on January 1, 1999, the actual CPI Percentage for 1999
would have been the quotient of 163.6 (the September 1998 CPI-U)
divided by 161.2 (the September 1997 CPI-U) minus one (1), the
remainder of which is 1.488 percent (0.01488). The CPI-U shall
mean the United States Department of Labor's Consumer Price Index,
All Items, All Urban Consumers (CPI-U) (1982-84=100), All Cities
(or the successor of such CPI-U, should such index be no longer
published by the Department of Labor). The Annual Base Salary
shall never be reduced during the Employment Period. "Annual Base
Salary" as used herein shall mean the annual base salary in
respect of a calendar year in the Employment Period, as increased
from time to time hereunder, and in respect of 2000 shall mean
$250,000.00.
2.3(b) INCENTIVE BONUSES. In addition to Annual Base
Salary, the Executive shall be awarded incentive bonuses on a
basis commensurate with those provided through the incentive
compensation plans available to other senior executive officers of
Unified.
2.3(c) SAVINGS AND RETIREMENT PLANS. Throughout the
Employment Period, the Executive shall be entitled to participate
in and receive cash and/or stock-based benefits commensurate with
the savings and retirement plans available to other senior
executive officers of Unified. In addition, Executive shall be
granted on the Effective Date, and on each January 1 during the
first sixty (60) months of the Expected Employment Period an
option, which option shall be fully vested on the date of grant,
to acquire such number of shares of Common Stock as shall equal
one-half of the Annual Base Salary (after giving effect to the
annual increase required by Section 2.3(a) hereof) divided by the
Fair Market Value of the Common Stock on the date of grant, at an
exercise price per share equal to the Fair Market Value of the
Common Stock on the date of grant.
2.3(d) FRINGE BENEFITS. Throughout the Employment Period,
the Executive shall be entitled to such fringe benefits as are
provided to other senior executive officers of Unified or shall
receive cash benefits commensurate therewith.
2.3(e) WELFARE BENEFIT PLANS. Throughout the Employment
Period (and thereafter, subject to Section 4.1(c) hereof), the
Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits
under, or receive cash benefits commensurate with, all welfare
benefit plans, practices, policies and programs provided by
Unified (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent available to other senior executive officers of
Unified.
2.3(f) EXPENSES. Throughout the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures
applicable to other senior executive officers of Unified.
2.3(g) OFFICE AND SUPPORT STAFF. Throughout the
Employment Period, Unified shall provide the Executive with
reasonable office space and equipment (including furnishings,
books and reasonable access to research services) no less than
equal to those generally provided to other senior executive
officers of Unified, and to personal secretarial and other
assistance; provided, that
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the parties contemplate that the Executive and David Morris (while
he is employed by Unified) will share secretarial and other staff
assistance to the extent feasible.
2.3(h) VACATION. Throughout the Employment Period, the
Executive shall be entitled to four (4) weeks paid vacation per
year.
2.3(i) LICENSES AND LEGAL EDUCATION. Throughout the
Employment Period, Unified shall pay any and all state licensing
fees required to be paid by Executive to practice law in any state
in which Executive currently is licensed as a practicing attorney
and in any state in which Executive is required to be licensed in
order to represent Unified and its subsidiaries as a practicing
attorney. In addition, throughout the Employment Period,
Executive shall be entitled to attend two (2) national continuing
legal education seminars annually, and Unified shall pay any and
all fees, including, among other things, registration, travel and
lodging, related thereto.
2.3(j) EXECUTIVE'S RIGHTS NONASSIGNABLE. The right to
receive the Annual Base Salary (as further provided in Section 4)
and other benefits hereunder shall be a personal right of the
Executive and shall not be extinguished by the death of the
Executive. Such right shall not be transferable by the Executive
other than pursuant to the laws of descent and distribution.
2.4 SITUS OF EMPLOYMENT. The Executive's services shall be
performed in St. Louis, Missouri during the Employment Period, except to
the extent (and under the terms and conditions) that each of the
Executive, Unified and (if he shall then be employed by Unified) David
Morris shall agree to a different location. During the Employment
Period, each of the Executive and the Associate General Counsel shall be
located at the same office.
SECTION 3: TERMINATION OF EMPLOYMENT. Unified may only terminate
Executive's employment for reasons constituting Disability (as defined
in Section 3.2 hereof) or Cause (as defined in Section 3.3 hereof). Any
termination by Unified for reasons failing to constitute Cause or
Disability is a breach of this Agreement having the remedies set forth
herein. Executive may terminate his employment by reason of death or
Good Reason (as defined in Section 3.4 below). Any termination by
Executive during his life for reasons failing to constitute Good Reason
is a breach of this Agreement having the remedies set forth herein. In
the case of any breach of the provisions of this Agreement that does not
entitle the aggrieved party to terminate Executive's employment, the
aggrieved party shall remain entitled to any other remedy or monetary
damages as elsewhere provided in this Agreement (see, for example,
Section 5.7 and Section 8).
3.1 DEATH. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
3.2 DISABILITY. If Unified determines in good faith that the
Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give
to the Executive written notice in accordance with Section 9.3 of its
intent to terminate the Executive's employment. In such event, the
Executive's employment with Unified shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the thirty (30) days
after such receipt, the Executive shall not have returned to full-time
performance of his duties. For purposes of this Agreement, "Disability"
shall mean that the Executive has been unable to perform the services
required of the Executive hereunder on a full-time basis for a period of
one hundred eighty (180) consecutive business days by reason of a
physical and/or mental condition. "Disability" shall be deemed to exist
when certified by a physician selected by Unified or its insurers and
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acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withheld unreasonably).
The Executive shall submit to such examinations and tests as such
physician deems reasonably necessary to make any such Disability
determination.
3.3 TERMINATION FOR CAUSE. Unified may terminate the
Executive's employment during the Employment Period for "Cause," which
for purposes of this Agreement shall mean termination based upon, and
only upon: (i) the continued failure of the Executive to perform
substantially, during the Employment Period, the Executive's Positions
and Duties with Unified (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Board
or the Chief Executive Officer of Unified which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive's Positions
and Duties, or (ii) the willful engaging by the Executive during the
Employment Period in gross misconduct that directly causes material
injury to Unified, or (iii) conviction of the Executive of a felony (or
a guilty or nolo contendere plea by the Executive with respect thereto)
willfully committed by the Executive in the course of performance of his
Positions and Duties with Unified during the Employment Period. For
purposes of this paragraph, no course of conduct, action or omission on
the Executive's part shall be considered to be grounds for Cause unless
such course of conduct, action or omission (x) was done without
reasonable belief that the course of conduct, action or omission was in
the best interests of Unified, and (y) is inconsistent with standards of
conduct consistently applied to other senior executive officers of the
Unified Group. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board, or based upon the
instructions of the Chief Executive Officer or any other senior officer
of Unified or any other member of the Unified Group, or based upon the
advice of counsel for Unified shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best
interests of Unified.
Termination for Cause may be effected by, and only by, written notice to
Executive in accordance with the provisions of Section 9.3 hereof
stating with particularity each action or condition constituting Cause,
sufficient in detail such that the corrective measures necessary to cure
such action(s) or condition(s) may be readily inferred from the face of
the notice. During the ninety-day period following receipt of such
notice by Executive, Unified shall use its best efforts to cooperate
with Executive to cure the action(s) or condition(s) set forth in
Unified's notice. If a cure is commercially reasonable and the
Executive fails to take sufficient steps within such ninety-day period
to effectuate a cure, then and only then may Unified terminate his
employment for Cause. Failure of Unified to set forth in such notice
any material fact or circumstance (then known or that should be then
known by Unified) that contributes to a showing of Cause shall waive any
right of Unified to assert such fact or circumstance in enforcing its
rights under this Agreement in connection with such notice, but shall
not waive Unified's right pursuant to any subsequent notice to terminate
the Executive on grounds of any then unknown material fact or
circumstance.
3.4 GOOD REASON. The Executive may terminate his employment
with Unified for "Good Reason," which shall mean termination based upon,
and only upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's Positions and
Duties (including status, offices, titles and reporting
requirements), as contemplated by Section 2.2 or any other action
by Unified that results in a material diminution in such Positions
and Duties, excluding for this purpose any action not taken in bad
faith and which is remedied by Unified promptly after receipt of
notice thereof given by the Executive in accordance with the
provisions of Section 9.3 hereof; or
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(ii) (a) the failure by Unified to provide any of the
benefits enumerated in Section 2.3 hereof; or (b) the taking of
any action by Unified that would adversely affect the Executive's
participation in, or materially reduce the Executive's benefits
under, any plans described in Section 2.3(e) hereof; or
(iii) Unified requiring the Executive to be based at any
office or location other than that described in Section 2.4
hereof; or
(iv) (a) (1) an attempt by Unified or any other member
of the Unified Group to cause the Executive to engage in conduct
that could result in the suspension of his license to practice
law, or (2) the taking of any course of conduct by Unified and/or
any member of the Unified Group that would require the Executive
to resign his employment with Unified under the ethical rules of
any jurisdiction in which the Executive is licensed to practice
law; in each case based upon the determination or written advice
of the agency or other body having authority to suspend such
license, or (b) the refusal of Unified to submit or permit the
submission of facts and/or other statements to such agency or
other body for purposes of obtaining such determination or written
advice pursuant to subsection (a) hereof; or
(v) any purported termination by Unified of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(vi) any failure by Unified to comply with and satisfy
the provisions of Section 7.2; or
(vii) within a period ending at the close of business on
the date three (3) years after the Change in Control Date, the
Executive, in his sole and absolute discretion, determines and
notifies Unified in writing, that he does not wish to continue his
employment with Unified.
Other than a Termination for Good Reason pursuant to Section 3.4(v),
3.4(vi) or 3.4(vii), Termination for Good Reason may be effected by, and
only by, written notice to Unified in accordance with the provisions of
Section 9.3 stating with particularity each action or condition
constituting Good Reason, sufficient in detail such that the corrective
measures necessary to cure such action(s) or condition(s) may be readily
inferred from the face of the notice. During the ninety-day period
following receipt of such notice by Unified, the Executive shall use his
best efforts to cooperate with Unified to cure the action(s) or
condition(s) set forth in the Executive's notice. If a cure is
commercially reasonable and Unified fails to take sufficient steps
within such ninety-day period to effectuate a cure, then and only then
may the Executive terminate his employment for Good Reason. Failure of
Executive to set forth in such notice any material fact or circumstance
(then known or that should be then known by Executive) that contributes
to a showing of Good Reason shall waive any right of Executive to assert
such fact or circumstance in enforcing his rights under this Agreement
in connection with such notice, but shall not waive Executive's right
pursuant to any subsequent notice to terminate his employment on grounds
of any then unknown material fact or circumstance.
3.5 NOTICE OF TERMINATION. Any termination by Unified or by the
Executive (including terminations in breach of this Agreement) shall be
communicated by Notice of Termination to the other party. For purposes
of this Agreement, a "Notice of Termination" means a written notice
given in accordance with Section 9.3 that: (i) indicates the specific
termination provision in this Agreement relied upon (including reliance
upon Section 1.1(h)(i), if the Notice of Termination is delivered to
terminate the Employment Period); (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated;
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and (iii) if the Date of Employment Termination (as defined below) is
other than the date such notice is given, specifies the Date of
Employment Termination (which date shall be not more than ninety (90)
days after the giving of such notice), provided that no such date need
be specified if such notice relates to a termination for Cause or Good
Reason. The failure by the Executive or Unified to set forth in the
Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall waive any right of the Executive
or Unified to assert such fact or circumstance in enforcing the
Executive's or Unified's, as the case may be, rights hereunder.
3.6 DATE OF EMPLOYMENT TERMINATION. "Date of Employment
Termination" means: (i) if the Executive's employment is terminated by
Unified for Cause or by the Executive for Good Reason, the later of the
day specified in the Notice of Termination and the last day of the cure
period specified in Section 3.3 or 3.4; (ii) if the Executive's
employment is terminated by reason of death or Disability, the date of
death of the Executive or the Disability Effective Date, as the case may
be; (iii) if the Executive's employment is terminated by Unified other
than for Cause or Disability, the date the Notice of Termination is
given or any later date (within the ninety-day limit provided in Section
3.5) specified therein, as the case may be; (iv) if the Executive shall
terminate employment with Unified for any reason other than for Good
Reason, the date the Executive shall terminate his employment with
Unified or, if not more than ninety (90) days later, the date specified
in the Notice of Termination; and (v) in any other case, the date on
which the Expected Employment Period ends.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION.
4.1 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If during the
Employment Period (i) Unified shall terminate the Executive's employment
without Cause or (ii) the Executive shall terminate employment with
Unified for Good Reason, the Executive shall be entitled to the benefits
provided below:
4.1(a) "ACCRUED OBLIGATIONS": On or before the fifth
(5th) business day following the Date of Employment Termination,
Unified shall pay to the Executive the sum of: (1) the Executive's
Annual Base Salary through the Date of Employment Termination to
the extent not previously paid; (2) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon); and (3) any accrued vacation pay; in each case
to the extent not previously paid.
4.1(b) "ANNUAL BASE SALARY CONTINUATION": For the
remainder of the Expected Employment Period that occurs after the
Date of Employment Termination, Unified shall pay to the Executive
the same Annual Base Salary as would have been paid to the
Executive had the Executive remained in Unified's employ during
the remainder of the Expected Employment Period. Unified at any
time may elect to pay the balance of such payments then remaining
in a lump sum, in which case the total of such payments shall be
discounted to present value as determined according to Code
Section 280G(d)(4); provided, however, in the event of termination
of employment by Executive pursuant to the provisions of Section
3.4(vi) or (vii) hereof, Unified shall pay on the Date of
Employment Termination to the Executive all amounts due pursuant
to this Section 4.1 and Section 4.5.
4.1(c) "OTHER BENEFITS": To the extent not previously
paid or provided, Unified shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided which the Executive
and/or the Executive's family is eligible to receive pursuant to
this Agreement or under any plan, program, policy or practice or
agreement of Unified provided to other senior executive officers
and their families during the ninety-day period
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immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally after the Effective Date
to other senior executive officers of Unified and their families.
Over the remainder of the Expected Employment Period, the
Executive also shall receive health insurance benefits as
maintained by Unified for the benefit of its senior executive
officers.
4.2 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than for timely
payment of Accrued Obligations (as provided in Section 4.1(a)).
4.3 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for timely payment of Accrued Obligations (as provided in
Section 4.1(a)).
4.4 TERMINATION FOR CAUSE; TERMINATION OTHER THAN FOR GOOD
REASON. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than for timely payment of
Accrued Obligations (as provided in Section 4.1(a)). If the Executive
terminates employment with Unified during the Employment Period
(excluding a termination for death or Good Reason), this Agreement shall
terminate without further obligations to the Executive, other than for
timely payment of Accrued Obligations (as provided in Section 4.1(a)).
4.5 ANNUAL NONCOMPETE AND SEVERANCE PAYMENTS. Except in the
case of a termination of the Executive's employment by Unified for
Cause, by Executive without Good Reason or upon the death or Disability
of the Executive, on or before the thirtieth (30th) day following the
Date of Employment Termination (as defined in Section 3.6 hereof), and
on each of the first and second anniversary dates of the Date of
Employment Termination, Unified shall pay to the Executive an amount
equal to the Annual Base Salary as was (or would have been) determined
for the final calendar year of the Expected Employment Period, and if
the termination or purported termination shall be by Unified without
Cause or by Executive for Good Reason pursuant to Section 3.4(v), each
such payment shall be increased by one-half as liquidated damages (and
not as a penalty) in recognition of damage to Executive's reputation and
the enhanced difficulties inherent in finding replacement employment
while being removed from the marketplace. The payments and arrangements
in this Section 4.5 constitute further consideration for the Executive's
covenants set forth in Section 5, and the Executive agrees that he shall
abide by the terms of Section 5 in their entirety and acknowledges that
Section 5 continues to apply after any termination of employment (other
than a termination described in Section 4.2).
4.6 EXCISE TAXES. The parties recognize that termination of
Executive's employment in connection with any change of control or other
payments made in connection with any change in control could result in
excise taxes to the Executive, and the parties provide for payment of
such taxes as follows.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event: (A) it shall be determined
that any payment or distribution by Unified to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would be subject to
the excise tax imposed by Code Section 4999; or (B) any
interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with
any interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall
be entitled to receive an
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additional payment (a "Gross-Up Payment") in an amount equal
to the Excise Tax imposed on the Payment and on the Gross-Up
Payment as well as any additional income tax, employment tax
and Excise Tax payable with respect to such additional
payment (including any interest or penalties imposed with
respect to such excise tax). The Gross-Up Payment shall not
include any amount for the payment of any income or
employment taxes imposed on the Payment, but shall include
any income or employment taxes payable with respect to any
Gross-Up Payment (and any interest and penalties imposed
with respect thereto).
(ii) Subject to the provisions of Section
4.6(iii), all determinations required to be made under this
Section, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by an independent accountant
jointly selected by Unified and the Executive which shall
provide detailed supporting calculations both to Unified and
the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by Unified.
All fees and expenses of the independent accountant shall be
borne solely by Unified. Any Gross-Up Payment, as
determined pursuant to this Section 4.6, shall be paid by
Unified to the Executive within five (5) days of the receipt
of the independent accountant's determination. If the
independent accountant determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive
with a written opinion that failure to report the Excise Tax
on the Executive's applicable Federal income tax return
would not result in the imposition of a negligence or
similar penalty. Any determination by the independent
accountant shall be binding upon Unified and the Executive.
As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial determination by the
independent accountant hereunder, it is possible that Gross-
Up Payments which will not have been made by Unified should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that Unified exhausts its remedies pursuant to Section
4.6(iii) and the Executive thereafter is required to make a
payment of any Excise Tax, the independent accountant shall
determine the amount of the Underpayment that has occurred
and any such Underpayment, as well as any interest and
penalties imposed thereon, shall be promptly paid by Unified
to or for the benefit of the Executive.
(iii) The Executive shall notify Unified in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by Unified of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days
after the Executive is informed in writing of such claim and
shall apprise Unified of the nature of such claim and the
date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration
of the thirty (30) day period following the date on which
the Executive gives such notice to Unified (or such shorter
period ending on the date that any payment of taxes with
respect to such claim is due). If Unified notifies the
Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(a) give Unified any information reasonably
requested by Unified relating to such claim;
(b) take such action in connection with
contesting such claim as Unified shall reasonably
request in writing from time to time, including,
without limitation,
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accepting legal representation with respect to such
claim by an attorney reasonably selected by
Unified;
(c) cooperate with Unified in good faith in
order to effectively contest such claim; and
(d) permit Unified to participate in any
proceedings relating to such claim; provided,
however, that Unified shall bear and pay directly
all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result
of such representation and payment of costs and
expenses. Without limitation on the foregoing
provisions of this Section 4.6, Unified shall
control all proceedings taken in connection with
such contest and, at its sole option, may pursue or
forego any and all administrative appeals,
proceedings, hearings and conferences with the
taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal,
in a court of initial jurisdiction and in one or
more appellate courts, as Unified shall determine;
provided, however, that if Unified directs the
Executive to pay such claim and sue for a refund,
Unified shall advance the amount of such payment to
the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect
thereto) imposed with respect to such advance or
with respect to any imputed income with respect to
such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the
Executive with respect to which such contested
amount is claimed to be due is limited solely to
such contested amount. Furthermore, Unified's
control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue
Service or any other taxing authority.
(iv) If, after the receipt by the Executive of
an amount advanced by Unified pursuant to Section 4.6(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to
Unified's compliance with the requirements of Section
4.6(iii)) promptly pay to Unified the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by Unified pursuant to
Section 4.6(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such
claim and Unified does not notify the Executive in writing
of its intent to contest such denial or refund prior to the
expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
4.7 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by Unified and for which
the Executive
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may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any other contract or agreement
with Unified. Vested benefits which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of, or any
contract or agreement with, Unified at or subsequent to the Date of
Employment Termination, shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
4.8 FULL SETTLEMENT; EXECUTIVE HAS NO DUTY OF MITIGATION.
Unified's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected
by any set-off, counterclaim, recoupment, defense or other claim, right
or action which Unified may have against the Executive or others, other
than any set-off for monies improperly taken by Executive (including any
funds embezzled). In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 4.1(c), such amounts shall
not be reduced whether or not the Executive obtains other employment.
Unified agrees to pay promptly as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by
Unified, the Executive or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A). The
payments and arrangements in this Section 4 constitute further
consideration for the Executive's covenants set forth in Section 5, and
the Executive agrees that he shall abide by the terms of Section 5 in
their entirety and acknowledges that Section 5 continues to apply after
any termination of employment (other than a termination described in
Section 4.2).
SECTION 5: NON-COMPETITION.
5.1 NON-COMPETE AGREEMENT. It is agreed that during the
Employment Period and until the date three (3) years after the Date of
Employment Termination (such period of time, the "Restricted Period"),
the Executive shall not, directly or indirectly, render services of any
nature within the Relevant Market Area (as defined herein) as an
employee, agent, representative, consultant, partner or otherwise, to or
for the direct or indirect benefit of any business that competes with
any member of the Unified Group; provided however, nothing in this
Section 5 shall prohibit Executive from engaging in the private practice
of law. The Relevant Market Area is the area within the fifty-mile
radius of: (i) each office maintained by Unified at any time during the
Employment Period; and (ii) each office maintained by any other member
of the Unified Group at any time during the Employment Period. In
addition, during the Restricted Period, the Executive shall not,
directly or indirectly, either as an individual, partner or a joint
venturer, or in any other capacity, invest in, own or have any
arrangement to acquire (whether by option or otherwise) an interest in
any Person or business that is competitive with any member of the
Unified Group, excluding any interest in a publicly traded company which
constitutes not more than one percent (1%) by value of the equity
securities of such company.
5.2 NON-SOLICITATION OF EMPLOYEES. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit: (i) any Person employed by Unified at any time
during the Employment Period; and (ii) any Person employed by any other
member of the Unified Group at any time during the Employment Period,
with a view towards enticing such Person to work for the Executive or
any other Person.
5.3 NON-SOLICITATION OF CUSTOMERS. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit: (i) any Person who was a Customer of Unified at
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any time during the Employment Period; and (ii) any Person who was a
Customer of any other member of the Unified Group at any time during the
Employment Period and in respect of which the Executive had direct or
indirect contact or gained Confidential Information during such period,
if such direct or indirect approach or solicitation (x) is made with a
view towards diverting or attempting to divert business from Unified or
any other member of the Unified Group; or (y) consists of any action or
communication that disparages or depreciates, or tends to disparage or
depreciate, the reputation, business practices, future business
prospects, policies or personnel (including officers, directors and
employees) of any member of the Unified Group.
5.4 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
"Confidential Information" shall mean any communication disclosed to the
Executive or known by the Executive as a consequence of or through his
past, present or prospective employment or business relationship with
the Unified Group, not generally known and available in the Unified
Group's industries, which constitutes the Unified Group's (including
Unified's) proprietary and non-public method(s) of doing business,
including, but not limited to, any information related to trade secrets,
pricing formulas, know-how, test data, Customer lists, vendor lists,
training and operating manuals, software and reporting systems. Unified
and the Executive acknowledge that during the Executive's period of
employment by Unified, the Unified Group will furnish the Executive with
Confidential Information. The Executive agrees both during his
employment with Unified, whether under this Agreement or otherwise, and
at all times thereafter, that the Executive, his officers, directors,
partners, employees, affiliates, agents, representatives or assigns
(collectively "Representatives") shall keep all Confidential Information
in the strictest confidence and shall not discuss, publish, communicate,
transmit, reproduce or otherwise disclose such Confidential Information,
in any manner whatsoever, in whole or in part, without the prior written
consent of Unified, unless and until such time as the Confidential
Information becomes generally known in the Unified Group's industries
other than through breach of this Agreement. Any written consent by
Unified to the Executive's disclosure of Confidential Information, if
given, shall in no way operate as a waiver of the Executive's obligation
to maintain the confidential nature of the material disclosed or to
protect and preserve that Confidential Information from disclosure so
that it will receive confidential treatment thereafter. The Executive
agrees to reimburse Unified for any damages sustained and costs and
expenses, including attorneys' fees, incurred in connection with an
unauthorized disclosure of Confidential Information by the Executive,
his Representatives or any other person or persons to whom the Executive
or his Representatives previously had disclosed Confidential
Information.
5.5 REASONABLENESS OF COVENANTS. The Executive acknowledges and
agrees that the covenants and agreements contained in this Section 5 are
reasonable, and the Executive agrees he shall not raise any issue of
their reasonableness in any proceeding to enforce such covenants and
agreements.
5.6 BLUE PENCILLING. In the event any court or other body having
appropriate jurisdiction (including any panel of arbitrators) shall
determine that the area where competition is prohibited, the time period
during which competition is prohibited, the nature or duration of
prohibitions on solicitation of Customers or employees, or any other
term of this Section 5 is overbroad, then the area or time or other term
shall be reduced appropriately as the court or other body may determine
is necessary to make this Section 5 enforceable. The parties
acknowledge that the purpose of this Section 5 is to protect the
goodwill and going concern value of Unified and the Unified Group, and
the parties intend that this Section 5 shall be enforced to the maximum
extent allowed by law.
5.7 SPECIFIC ENFORCEMENT. The Executive agrees that any
violation or breach by the Executive and/or his Representatives of any
provision of this Section 5 would cause immediate and irreparable harm
to the Unified Group, the exact amount of which will be impossible to
ascertain, and for that reason further agrees that the Unified Group
shall be entitled, as a matter of right, to an injunction out of the
appropriate
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court of competent jurisdiction (as set forth below), restraining any
further violation or breach of this Agreement by Executive and/or his
Representatives, either directly or indirectly, such right to an
injunction being cumulative and in addition to whatever remedies the
Unified Group may have under applicable law and/or this Agreement. The
Unified Group and the Executive hereby irrevocably consent to the
jurisdiction of the Circuit Court of Fayette County, Kentucky or, if
there is federal jurisdiction, the United States District Court for the
Eastern District of Kentucky. The Unified Group and the Executive waive
any defense of an inconvenient forum to the maintenance of any action or
proceeding brought in such courts in connection with this Agreement, any
objection to venue with respect to any such action, and any right of
jurisdiction on account of the place of residence or domicile of any
party to such action. The remedies of the Unified Group under this
Section 5.7 are not exclusive, and shall not prejudice any other rights
under this Agreement or otherwise.
SECTION 6: OWNERSHIP OF PAPERS AND INTELLECTUAL PROPERTY RIGHTS.
6.1 PAPERS AND PROPERTY. Executive acknowledges the Unified
Group's (including Unified's) exclusive right to ownership, possession
and title to all papers, documents, tapes, drawings, notebooks,
formulas, Customer lists, software, hardware, trademarks, trade names,
service marks, processes, data, intellectual property, or other records,
information or products prepared by the Executive during the Employment
Period or provided by Unified, or which otherwise come into the
Executive's possession by reason of employment with Unified. Executive
agrees not to make or permit to be made, except in pursuit of
Executive's Position and Duties hereunder, any copies of such items.
Executive further agrees to deliver to Unified upon request all such
items in Executive's possession and without request to immediately
deliver such items upon the termination, voluntarily or involuntarily,
of Executive's employment.
6.2 INVENTIONS. The term "Inventions" means all ideas,
inventions and discoveries, whether patentable, copyrightable or not,
made or conceived by the Executive, whether or not during the hours of
his employment or with the use of Unified Group's facilities, materials
or personnel, either solely or jointly with others, during the term of
his employment (past, present or future) with any member of the Unified
Group that relates to any present or prospective business of Unified or
any other member of the Unified Group, including, but not limited to,
software, algorithms, designs, devices, processes, methods, formulae,
techniques, data storage systems, networks, servers and any improvements
to the foregoing.
6.2(a) REPORT. Executive agrees to promptly disclose all
Inventions to Unified. Executive shall inform Unified promptly
and fully of such Inventions by a written report, setting forth in
detail the structures, procedures and methodology employed and the
results achieved. A report also shall be submitted by the
Executive upon completion of any study or research project
undertaken on behalf of Unified or any other member of the Unified
Group, whether or not in the Executive's opinion a given study or
project has resulted in an Invention.
6.2(b) ASSIGNMENT AND PATENT. Executive hereby assigns
and agrees to assign to Unified all of his rights to such
Inventions and to all proprietary rights therein, based thereon or
related thereto, including, but not limited to, applications for
United States and foreign letters patent and resulting letters
patent. Upon Unified's request and at Unified's expense, the
Executive shall execute such documents and provide such assistance
as may be deemed necessary by Unified to apply for, prosecute,
obtain, defend or enforce any United States and foreign letters
patent based on or related to such Inventions. The Executive
agrees to execute all documents reasonably requested by Unified to
assist Unified in perfecting or protecting any or all of its
rights in the Inventions.
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6.2(c) COPYRIGHT. Executive acknowledges that all
copyrightable Inventions are "works made for hire" and
consequently that Unified owns all copyrights thereto, including,
but not limited to, 17 U.S.C. Sections 101 and 210. Unified and
its successors and assigns shall have the sole and exclusive right
to register the copyright(s) in all such work in its name as the
owner and author of such work and shall have the exclusive rights
conveyed under 17 U.S.C. Sections 106 and 106A, including, but not
limited to, the right to make all uses of the works in which
attribution or integrity rights may be implicated. Additionally,
without in any way limiting the foregoing, the Executive hereby
assigns, transfers and conveys to Unified, and its successors and
assigns, all right, title or interest that Executive may now have,
or may acquire in the future, to the work including, but not
limited to, all ownership, patent (United States and foreign
letters patent), trade secret, trade names and trademarks,
copyright moral, attribution and/or integrity rights. The
Executive hereby expressly and forever waives any and all rights
that Executive may have arising under 17 U.S.C. Section 106A, and
any rights arising under any federal, state, territorial or
foreign laws that convey rights which are similar in nature to
those conveyed under 17 U.S.C. Section 106A. Notwithstanding any
provision of the Copyright Act, any and all copyrightable works
constituting Inventions or prepared either in whole or in part by
the Executive in connection with his employment are, shall be, or
shall become, owned by Unified.
SECTION 7: SUCCESSORS.
7.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive, and without the prior written consent of Unified, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
7.2 SUCCESSORS OF UNIFIED. Unified shall require any Person(s)
that acquires (whether directly or indirectly, in one or more
transactions, whether by purchase, merger, consolidation or otherwise)
all or substantially all of the business and/or assets of Unified to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that Unified would be required to perform it if
no such transaction had taken place. Failure of Unified to obtain such
agreement on or before thirty (30) days prior to the effectiveness of
any such transaction shall be a breach of this Agreement and such breach
(i) shall entitle the Executive to terminate this Agreement at his
option at any time during or after such thirty (30) day period for Good
Reason, and (ii) shall entitle Executive to immediate payment of all
amounts that are then or that would become due from Unified hereunder.
As used in this Agreement, "Unified" shall mean Unified as hereinbefore
defined and any Person that assumes and agrees to perform (or is
required to assume and perform) this Agreement by operation of law, the
provisions of this Section 7.2 or otherwise.
SECTION 8: ARBITRATION. Notwithstanding any other provision of this
Agreement to the contrary, and excluding the rights of the Unified Group
to pursue injunctive relief pursuant to Section 5.7, any controversy or
claim regarding, arising under or pertaining to this Agreement which
cannot be resolved among the parties themselves shall be resolved solely
by binding arbitration in Lexington, Kentucky. The arbitration panel
shall consist of three arbitrators selected from list(s) of candidates
provided by the American Arbitration Association. Unified shall be
entitled to appoint one arbitrator and the Executive shall be entitled
to appoint one arbitrator. The third arbitrator, who shall be an
attorney in good standing who is licensed to practice law in the
Commonwealth of Kentucky and devotes more than one-half of his or her
professional time to the practice of employment law, shall be chosen by
the two arbitrators so appointed. If any Person fails to appoint its
arbitrator or to notify the other Person of such appointment within
thirty (30) days after the institution of arbitration proceedings, such
other Person may request the President of the American Arbitration
Association to appoint such arbitrator on behalf of the Person who so
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failed. If the two arbitrators appointed by (or on behalf of) the
parties fail to appoint such third arbitrator, or fail to notify the
parties to such proceedings of such appointment, within thirty (30) days
after the appointment of the later of such two arbitrators to be
appointed by (or on behalf of) the parties, any party may request such
President to appoint such third arbitrator. The President of the
American Arbitration Association shall appoint such arbitrator or such
third arbitrator, as the case may be, within thirty (30) days after the
making of such request. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (which rules may be modified by a majority of
the arbitrators serving), except that the parties shall be allowed to
take depositions as provided under applicable state and federal laws,
and the arbitration award, decree and/or order may grant any remedy or
relief that is in accordance with the provisions of this Agreement and
applicable Kentucky law. No awards of punitive damages shall be made.
The arbitration award, decree and/or order shall be final and binding on
all parties to such arbitration. Judgment and/or decree shall be
entered (in conformity with such award, decree and/or order) in the
Circuit Court of Fayette County, Kentucky or, if there is federal
jurisdiction, the United States District Court for the Eastern District
of Kentucky. The Executive and each member of the Unified Group
irrevocably submit to the exclusive jurisdiction of the Circuit Court of
Fayette County, Kentucky or, if there is federal jurisdiction, the
United States District Court for the Eastern District of Kentucky, for
the purpose of (a) entry of any such judgment and/or decree; or (b)
entry of an order to proceed with arbitration. Any such judgment,
decree and/or order entered by the Circuit Court of Fayette County,
Kentucky, or the United States District Court for the Eastern District
of Kentucky and any related order(s) of such court, may be endorsed as
any other judgment, decree or order of such court.
SECTION 9: MISCELLANEOUS.
9.1 ABILITY TO PERFORM. The Executive warrants that the
Executive's execution and performance of this Agreement is not
restricted or prohibited by any agreement to which the Executive is
subject.
9.2 TIME PERIODS. Any period of time measured under this
Agreement by days shall refer to calendar days and not business days,
unless otherwise provided. If the last day of any such period falls on
a Saturday, Sunday or holiday observed by commercial banks in the city
of Lexington, Kentucky, the last day of such period, for all purposes of
this Agreement (including the determination of the first day of each
succeeding period of time measured by days), shall be deemed to be the
next succeeding business day after such Saturday, Sunday or holiday.
Any period of time measured under this Agreement shall end at midnight,
Lexington, Kentucky time, on the last day of such period.
9.3 NOTICE. For all purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given and received when (i)
delivered; or (ii) mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses as set forth below, or to such other address as may have been
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
Notice to Executive:
-------------------
Charles H. Binger
8 Danfield Road
St. Louis, Missouri 63124
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Notice to Unified:
-----------------
Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
Attention: Chairman, President and Chief Executive
Officer
9.4 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
9.5 WITHHOLDING. Unified may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
9.6 WAIVER. The Executive's or Unified's failure to insist upon
strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or
Unified may have hereunder, including, without limitation, the right of
the Executive to terminate employment for Good Reason pursuant to
Section 3.4, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
9.7 ENTIRE AGREEMENT. All prior negotiations and agreements
between the parties hereto regarding Executive's employment are
superseded by this Agreement, and there are no representations,
warranties, understandings or agreements other than those expressly set
forth herein, except as modified in writing concurrently herewith or
subsequent hereto.
9.8 AMENDMENT. This Agreement may be amended or modified in
whole or in part only by an agreement in writing executed by all parties
hereto and making specific reference to this Agreement.
9.9 PRIORITY OF AGREEMENT. In case of any conflict or ambiguity
in connection with or between this Agreement and any policy manuals,
including, but not limited to, any employee manuals, employment
applications, management instructions or promises, etc., this Agreement
shall control.
9.10 ASSIGNMENT. Subject to the provisions of Section 7.2,
Unified shall have the right to assign this Agreement to its successors
or assigns (collectively, "Permitted Assignees"). The terms
"successors" and "assigns" shall include for all purposes of this
Agreement (except Sections 1.1(d) and 2.3(a)), any Person that acquires
all or substantially all of Unified's assets or of Unified's stock, or
with which or into which Unified merges or consolidates.
9.11 INTENDED BENEFICIARIES. This Agreement shall be binding
upon the Executive, Unified and their respective successors and assigns,
and shall inure to the benefit of the Executive, Unified, each member of
the Unified Group, their respective successors and assigns and Permitted
Assignees. Nothing herein expressed or implied is intended to confer
upon any Person not named or described in the preceding sentence any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one
instrument. A signature transmitted by facsimile shall be deemed a
delivery of an original, manually executed counterpart.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the Executive and Unified, pursuant to the
authorization from its Executive Committee of the Board, have executed
or caused this Agreement to be executed in its name, all as of the day
and year first above written.
THIS CONTRACT IS GOVERNED BY KENTUCKY LAW AND CONTAINS A BINDING
ARBITRATION PROVISION. ALL DISPUTES ARISING IN CONNECTION WITH THIS
AGREEMENT ARE SUBJECT TO BINDING ARBITRATION IN LEXINGTON, KENTUCKY.
EACH OF THE EXECUTIVE AND UNIFIED HAS REVIEWED THESE AND THE OTHER
PROVISIONS OF THIS AGREEMENT WITH LEGAL COUNSEL OF HIS OR ITS,
RESPECTIVELY, OWN CHOOSING.
"EXECUTIVE"
/s/ Charles H. Binger
----------------------------------------
Charles H. Binger
UNIFIED FINANCIAL SERVICES, INC.
By: /s/ Timothy L. Ashburn
-------------------------------------
Timothy L. Ashburn, Chairman,
President and Chief Executive Officer
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EMPLOYMENT AGREEMENT
This agreement ("Agreement") has been entered into as of this 31st
day of December, 1999, by and between Unified Financial Services, Inc.,
a Delaware corporation ("Unified"), and David F. Morris, an individual
("Executive").
RECITALS
The Executive, various members of the Board of Directors of
Unified (the "Board"), and various senior executives of Unified
negotiated the terms of Executive's employment and this Agreement over a
period of five months. Executive has and is representing Unified on
significant portions of its legal matters other than the negotiation,
drafting and execution of this Agreement. Unified acknowledges that it
is aware of Executive's representation of himself in connection with
this Agreement, and it is aware that Executive has not represented
Unified in connection with this Agreement. Unified acknowledges that
the Executive encouraged Unified to consult with legal counsel in
connection with this Agreement, and Unified represents that it has done
so.
The Executive has represented Unified for a number of years, and
both the Board and Unified's senior executives are very familiar with
the Executive's talents. Unified offered the terms in this Agreement in
order to entice Executive to accept employment with Unified, which
acceptance will require that Executive resign his current legal
position. Unified and Executive acknowledge that Executive's acceptance
of the terms of this Agreement and resignation from his current legal
position will result in a disposition of Executive's current law
practice. Unified acknowledges that Executive has been in a large and
respected law firm, has advanced rapidly while there, and has achieved a
substantial amount of economic and employment security, with the
expectation of being elected a partner of such firm. Unified
acknowledges that Executive would not have accepted employment with
Unified and surrendered his current legal position but for the
protections and enticements provided in this Agreement, including
certain mandatory salary increases and certain payments upon termination
or a Change in Control (as defined below). Executive acknowledges that
the protections and enticements provided in this Agreement, including
certain mandatory salary increases, certain payments upon termination or
a Change of Control and certain stock benefits, are adequate, acceptable
and sufficient for Executive to resign from his current position and
accept the position and terms and conditions provided herein.
The Executive Committee of the Board of Directors of Unified (the
"Committee") desires to provide for the employment of the Executive on
the terms hereof, and the Executive is willing to commit himself to
serve Unified. The Executive Committee has determined that it is in
the best interests of Unified and its stockholders to reinforce and
encourage the attention and dedication of the Executive to Unified as a
member of Unified's management and to assure that Unified will have the
continuing dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change in Control of Unified. Additionally,
the Executive Committee believes it is imperative to encourage the
Executive's attention and dedication to Unified currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon certain
breaches of this Agreement by Unified or upon a termination of
employment after a Change in Control, which ensure that the compensation
and benefits expectations of the Executive will be satisfied. Because
of the Executive's high position at Unified and his access to
information pertaining to the business of Unified (as conducted by its
affiliates), Unified believes it is imperative that the Executive
neither compete against Unified and any of its affiliates or
subsidiaries nor share certain confidential information of either during
the Executive's employment and for the three-year period thereafter, as
provided below. Therefore, in exchange for the mutual promises and
covenants set forth herein, and in order to accomplish these objectives,
the Committee has caused Unified to enter into this Agreement.
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IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different
meaning. Terms not set forth in this Section 1.1 but defined elsewhere
in this Agreement shall for all purposes of this Agreement have such
defined meaning, whether or not capitalized, unless the context plainly
requires a different result.
1.1(a) "BOARD" means the Board of Directors of Unified.
1.1(b) "CHANGE IN CONTROL" means a change in control of
Unified 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 Exchange Act; provided that, for purposes of
this Agreement, a Change in Control shall be deemed to have
occurred if: (i) any Person (other than Unified or any wholly
owned subsidiary of Unified) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Unified that represent 20% or more of
the combined voting power of Unified's then outstanding
securities; (ii) during any period of two (2) consecutive years
beginning on or after March 1, 2000, 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 Unified'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 Exchange 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 Unified in which
Unified is not the continuing or surviving corporation or pursuant
to which shares of Unified's Common Stock are converted into cash,
securities or other property, other than a merger of Unified in
which the holders of Unified's 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 Unified in
which Unified is the continuing or surviving corporation in which
the holders of Unified's Common Stock immediately prior to the
merger do not own fifty percent (50%) 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 transactions) of all or substantially
all of the assets of Unified (provided, however, that for purposes
of this subsection (v) any sale lease, exchange or other transfer
between subsidiaries that are directly or indirectly wholly owned
by Unified shall not be deemed a Change of Control); (vi) Timothy
L. Ashburn ceases to serve as the Chairman of the Board or as the
Chief Executive Officer of Unified; or (vii) the stockholders of
Unified approve any plan or proposal for the liquidation or
dissolution of Unified.
1.1(c) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
1.1(d) "CODE" shall mean the Internal Revenue Code of
1986, as amended, including all regulations proposed or promulgated
thereunder, and administrative interpretations and judicial precedents
relating thereto. All citations to the Code shall include any
amendments or any substitute or successor provisions thereto.
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1.1(e) "COMMON STOCK" shall mean the common stock, $0.01
par value, of Unified.
1.1(f) "CUSTOMER" shall mean any Person from which or from
dealings with which any member of the Unified Group is earning or
has earned revenue in the ordinary course of its business.
Dealings shall include, for example and without limitation,
distribution arrangements, revenue or income sharing arrangements,
commission arrangements and any other arrangement or contract.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 2000.
1.1(h) "EMPLOYMENT PERIOD" shall mean the period that
begins on the Effective Date and ends on the earlier of: (i)
twelve (12) months after the date on which Unified shall have
delivered to Executive written notice (in accordance with the
provisions of Section 9.3 hereof) of termination of the Employment
Period, which notice shall not be delivered prior to the fourth
anniversary of the Effective Date (and the parties agree that the
term described in this clause (i) shall be for a period of not
less than sixty (60) months); or (ii) the Date of Employment
Termination (as defined in Section 3.6 hereof).
1.1(i) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended. All citations to the Exchange Act shall include
any amendments or any substitute or successor provisions thereto.
1.1(j) "EXPECTED EMPLOYMENT PERIOD" shall mean the period
of time beginning on the Effective Date and ending on the date
described in Section 1.1(h)(i). If no written notice terminating
the Employment Period (as required in Section 1.1(h)(i)) shall
have been delivered to Executive on or before the Date of
Employment Termination (as defined in Section 3.6 hereof) or such
notice is delivered prior to the fourth anniversary of the
Effective Date, then for all purposes of this Agreement such
notice shall be deemed to have been delivered on the later of such
Date of Employment Termination and the fourth anniversary of the
Effective Date. For example and without limitation: (i) if
Unified were to terminate the Executive without Cause (as defined
in Section 3.3 hereof) at the end of the eighteenth (18th) month
of the Employment Period, the Expected Employment Period for
purposes of Section 4.1 would end on the fifth (5th) anniversary
of the Effective Date; (ii) if Unified were to terminate the
Executive without Cause on the fourth (4th) anniversary of the
Effective Date and no written notice of termination of the
Employment Period had previously been delivered, such notice would
be deemed delivered on such fourth (4th) anniversary, and the
Expected Employment Period for purposes of Section 4.1 would end
on the fifth (5th) anniversary of the Effective Date; and (iii) if
Unified were to deliver written notice of termination of the
Employment Period on the fourth (4th) anniversary of the Effective
Date, and thereafter Executive's employment is terminated by
Unified or Executive (whether without Cause, for Good Reason or
otherwise), the Expected Employment Period for purposes of Section
4.1 would end on the fifth (5th) anniversary of the Effective
Date.
1.1(k) "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; (iv) for any period during which the Common Stock shall be
listed for trading on an electronic communications network (an
"ECN"), an alternative trading system
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(an "ATS") and/or on-line order matching system or auction system,
the closing bid price as reported by such ECN, ATS and/or on-line
order matching system or auction system; or (v) the market price
per share of Common Stock as determined by an investment banking
firm or certified public accountant selected by the Board in the
event neither (i), (ii), (iii) nor (iv) 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.
1.1(l) "PERSON" shall include an individual, firm, trust,
estate, association, joint venture, partnership, corporation,
limited liability company, organization or other entity.
1.1(m) "UNIFIED" shall mean Unified Financial Services,
Inc., a Delaware corporation.
1.1(n) "UNIFIED GROUP" means, jointly and severally,
Unified and any Person more than twenty percent (20%) of which (by
value and not by voting power) is directly or indirectly owned by
Unified at any time during the Employment Period, and any
successors or assigns of Unified or any other Person included in
the Unified Group.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender,
words in the singular include the plural, and words in the plural
include the singular.
1.3 HEADINGS. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of
the text. Accordingly, as used in this Agreement and except where
expressly provided to the contrary, the term "Section" means the text
that accompanies the specified Section of this Agreement. For example
and without limitation, a reference to "Section 3" would mean all the
text under the headings numbered 3.1 through 3.6.
1.4 INCORPORATION OF RECITALS; WAIVER OF DEFENSES. The Recitals
set forth on the first page of this Agreement are hereby incorporated in
this Section 1.4 as if fully set forth herein and are binding upon the
parties to this Agreement. Unified shall not, directly or indirectly,
raise as a defense to enforcement or excuse for any nonperformance under
this Agreement Executive's prior representation of Unified, Executive's
representation of himself in connection with this Agreement, or any
failure on the part of Unified to secure adequate legal representation
in connection with this Agreement. Moreover, Unified represents and
warrants that this Agreement is duly authorized and binding upon Unified
in accordance with its terms; and Unified shall take no action
inconsistent with, and shall raise no objections or defenses to the
enforcement of this Agreement based in whole or part upon, those
grounds. Executive shall not, directly or indirectly, raise as a
defense to enforcement or excuse for any nonperformance under this
Agreement Executive's representation of himself in connection with this
Agreement. No provision of this Agreement shall be construed against
any party on the ground that such party drafted the provision or caused
it to be drafted or the provision contains a covenant of such party.
1.5 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky,
without reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 PERIOD OF EMPLOYMENT. Throughout the Employment Period, the
Executive shall serve in the employ of Unified in accordance with the
terms and provisions of this Agreement.
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2.2 POSITIONS AND DUTIES.
2.2(a) Throughout the Employment Period, the Executive
shall be the Associate General Counsel and a Senior Vice President
of Unified. The Executive shall render legal and administrative
services to Unified as are customarily performed by persons
situated in similar executive legal positions including, among
other things, retention and oversight of inside and outside legal
counsel for Unified and the other members of the Unified Group,
and may have such other powers or authority as may from time to
time be prescribed by the Board or any other executive officer of
Unified or any other member of the Unified Group (collectively,
"Positions and Duties"). The Executive shall report to the
General Counsel of Unified.
2.2(b) Throughout the Employment Period (but excluding any
periods of vacation and sick leave to which he is entitled), the
Executive shall devote reasonable attention and time during normal
business hours to the business and affairs of Unified and shall
use his reasonable best efforts to perform faithfully and
efficiently such responsibilities as are assigned to him under or
in accordance with this Agreement; provided that, it shall not be
a violation of this paragraph for the Executive to: (i) serve on
corporate, civic or charitable boards or committees; (ii) deliver
lectures or fulfill speaking engagements; (iii) manage personal
investments for the Executive's own account or those of family
members; or (iv) render legal services in an "of counsel" or
similar role to or for the benefit of Persons who are not members
of the Unified Group, so long as such activities described in
clauses (i) through (iv) do not materially interfere with the
performance of the Executive's responsibilities as a senior
executive officer of Unified in accordance with this Agreement.
The parties agree that an "of counsel" or similar relationship
will be beneficial to Unified and will not conflict with
Executive's Positions or Duties and will not present a conflict of
interest to Executive or Unified.
2.3 COMPENSATION. The Executive's annual compensation and other
benefits described in this Section 2.3 shall be provided by Unified.
2.3(a) ANNUAL BASE SALARY. From the Effective Date, the
Executive shall receive an annual base salary of $160,000, which
shall be due and paid in equal or substantially equal
installments, to be paid at the same frequency as other employees
of Unified but no less often than monthly. The Annual Base Salary
(as hereinafter defined) payable to the Executive shall be
increased on each January 1 occurring during the Employment Period
by no less than an amount equal to the Annual Base Salary for the
immediately preceding calendar year multiplied by the Adjustment
Percentage. The Adjustment Percentage shall equal the sum of (A)
the CPI Percentage, plus (B) eight percent (8%). The CPI
Percentage shall mean the greater of (i) zero and (ii) the
remainder of (x) the quotient of the CPI-U for September of the
year preceding such January 1 divided by the CPI-U for the
immediately preceding September, minus (y) one (1), and any such
remainder shall be expressed as a percentage. By way of example
and not limitation, the CPI Percentage for January 1, 2002 shall
be (assuming such amount exceeds zero) the remainder of (x) the
quotient of the September 2001 CPI-U divided by the September 2000
CPI-U, minus (y) one (1); in addition, had this Agreement been in
effect on January 1, 1999, the actual CPI Percentage for 1999
would have been the quotient of 163.6 (the September 1998 CPI-U)
divided by 161.2 (the September 1997 CPI-U) minus one (1), the
remainder of which is 1.488 percent (0.01488). The CPI-U shall
mean the United States Department of Labor's Consumer Price Index,
All Items, All Urban Consumers (CPI-U) (1982-84=100), All Cities
(or the successor of such CPI-U, should such index be no longer
published by the Department of Labor). The Annual Base Salary
shall never be reduced during the Employment Period. "Annual Base
Salary" as used herein shall mean the annual
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base salary in respect of a calendar year in the Employment
Period, as increased from time to time hereunder, and in respect
of 2000 shall mean $160,000.
2.3(b) INCENTIVE BONUSES. In addition to Annual Base
Salary, the Executive shall be awarded incentive bonuses on a
basis commensurate with those provided through the incentive
compensation plans available to other senior executive officers of
Unified.
2.3(c) SAVINGS AND RETIREMENT PLANS. Throughout the
Employment Period, the Executive shall be entitled to participate
in and receive cash and/or stock-based benefits commensurate with
the savings and retirement plans available to other senior
executive officers of Unified. In addition, Executive shall be
granted on the Effective Date, and on each January 1 during the
first sixty (60) months of the Expected Employment Period an
option, which option shall be fully vested on the date of grant,
to acquire such number of shares of Common Stock as shall equal
one-half of the Annual Base Salary (after giving effect to the
annual increase required by Section 2.3(a) hereof) divided by the
Fair Market Value of the Common Stock on the date of grant, at an
exercise price per share equal to the Fair Market Value of the
Common Stock on the date of grant.
2.3(d) FRINGE BENEFITS. Throughout the Employment Period,
the Executive shall be entitled to such fringe benefits as are
provided to other senior executive officers of Unified or shall
receive cash benefits commensurate therewith.
2.3(e) WELFARE BENEFIT PLANS. Throughout the Employment
Period (and thereafter, subject to Section 4.1(c) hereof), the
Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits
under, or receive cash benefits commensurate with, all welfare
benefit plans, practices, policies and programs provided by
Unified (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent available to other senior executive officers of
Unified.
2.3(f) EXPENSES. Throughout the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures
applicable to other senior executive officers of Unified.
2.3(g) OFFICE AND SUPPORT STAFF. Throughout the
Employment Period, Unified shall provide the Executive with
reasonable office space and equipment (including furnishings,
books and reasonable access to research services) no less than
equal to those generally provided to other senior executive
officers of Unified, and to personal secretarial and other
assistance; provided, that the parties contemplate that the
Executive and Charles H. Binger (while he is employed by Unified)
will share secretarial and other staff assistance to the extent
feasible.
2.3(h) VACATION. Throughout the Employment Period, the
Executive shall be entitled to four (4) weeks paid vacation per
year.
2.3(i) LICENSES AND LEGAL EDUCATION. Throughout the
Employment Period, Unified shall pay any and all state licensing
fees required to be paid by Executive to practice law in any state
in which Executive currently is licensed as a practicing attorney
and in any state in which Executive is required to be licensed in
order to represent Unified and its subsidiaries as a practicing
attorney. In addition, throughout the Employment Period,
Executive shall be entitled to attend two (2) national continuing
legal
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education seminars annually, and Unified shall pay any and all
fees, including, among other things, registration, travel and
lodging, related thereto.
2.3(j) EXECUTIVE'S RIGHTS NONASSIGNABLE. The right to
receive the Annual Base Salary (as further provided in Section 4)
and other benefits hereunder shall be a personal right of the
Executive and shall not be extinguished by the death of the
Executive. Such right shall not be transferable by the Executive
other than pursuant to the laws of descent and distribution.
2.4 SITUS OF EMPLOYMENT. The Executive's services shall be
performed in St. Louis, Missouri during the Employment Period, except to
the extent (and under the terms and conditions) that each of the
Executive, Unified and (if he shall then be employed by Unified) Charles
H. Binger shall agree to a different location. During the Employment
Period, each of the Executive and the General Counsel of Unified shall
be located at the same office.
SECTION 3: TERMINATION OF EMPLOYMENT. Unified may only terminate
Executive's employment for reasons constituting Disability (as defined
in Section 3.2 hereof) or Cause (as defined in Section 3.3 hereof). Any
termination by Unified for reasons failing to constitute Cause or
Disability is a breach of this Agreement having the remedies set forth
herein. Executive may terminate his employment by reason of death or
Good Reason (as defined in Section 3.4 below). Any termination by
Executive during his life for reasons failing to constitute Good Reason
is a breach of this Agreement having the remedies set forth herein. In
the case of any breach of the provisions of this Agreement that does not
entitle the aggrieved party to terminate Executive's employment, the
aggrieved party shall remain entitled to any other remedy or monetary
damages as elsewhere provided in this Agreement (see, for example,
Section 5.7 and Section 8).
3.1 DEATH. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
3.2 DISABILITY. If Unified determines in good faith that the
Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give
to the Executive written notice in accordance with Section 9.3 of its
intent to terminate the Executive's employment. In such event, the
Executive's employment with Unified shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the thirty (30) days
after such receipt, the Executive shall not have returned to full-time
performance of his duties. For purposes of this Agreement, "Disability"
shall mean that the Executive has been unable to perform the services
required of the Executive hereunder on a full-time basis for a period of
one hundred eighty (180) consecutive business days by reason of a
physical and/or mental condition. "Disability" shall be deemed to exist
when certified by a physician selected by Unified or its insurers and
acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withheld unreasonably).
The Executive shall submit to such examinations and tests as such
physician deems reasonably necessary to make any such Disability
determination.
3.3 TERMINATION FOR CAUSE. Unified may terminate the
Executive's employment during the Employment Period for "Cause," which
for purposes of this Agreement shall mean termination based upon, and
only upon: (i) the continued failure of the Executive to perform
substantially, during the Employment Period, the Executive's Positions
and Duties with Unified (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Board
or the Chief Executive Officer of Unified which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially
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performed the Executive's Positions and Duties, or (ii) the willful
engaging by the Executive during the Employment Period in gross
misconduct that directly causes material injury to Unified, or (iii)
conviction of the Executive of a felony (or a guilty or nolo contendere
plea by the Executive with respect thereto) willfully committed by the
Executive in the course of performance of his Positions and Duties with
Unified during the Employment Period. For purposes of this paragraph,
no course of conduct, action or omission on the Executive's part shall
be considered to be grounds for Cause unless such course of conduct,
action or omission (x) was done without reasonable belief that the
course of conduct, action or omission was in the best interests of
Unified, and (y) is inconsistent with standards of conduct consistently
applied to other senior executive officers of the Unified Group. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board, or based upon the instructions of
the Chief Executive Officer or any other senior officer of Unified or
any other member of the Unified Group, or based upon the advice of
counsel for Unified shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best
interests of Unified.
Termination for Cause may be effected by, and only by, written notice to
Executive in accordance with the provisions of Section 9.3 hereof
stating with particularity each action or condition constituting Cause,
sufficient in detail such that the corrective measures necessary to cure
such action(s) or condition(s) may be readily inferred from the face of
the notice. During the ninety-day period following receipt of such
notice by Executive, Unified shall use its best efforts to cooperate
with Executive to cure the action(s) or condition(s) set forth in
Unified's notice. If a cure is commercially reasonable and the
Executive fails to take sufficient steps within such ninety-day period
to effectuate a cure, then and only then may Unified terminate his
employment for Cause. Failure of Unified to set forth in such notice
any material fact or circumstance (then known or that should be then
known by Unified) that contributes to a showing of Cause shall waive any
right of Unified to assert such fact or circumstance in enforcing its
rights under this Agreement in connection with such notice, but shall
not waive Unified's right pursuant to any subsequent notice to terminate
the Executive on grounds of any then unknown material fact or
circumstance.
3.4 GOOD REASON. The Executive may terminate his employment
with Unified for "Good Reason," which shall mean termination based upon,
and only upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's Positions and
Duties (including status, offices, titles and reporting
requirements), as contemplated by Section 2.2 or any other action
by Unified that results in a material diminution in such Positions
and Duties, excluding for this purpose any action not taken in bad
faith and which is remedied by Unified promptly after receipt of
notice thereof given by the Executive in accordance with the
provisions of Section 9.3 hereof; or
(ii) (a) the failure by Unified to provide any of the
benefits enumerated in Section 2.3 hereof; or (b) the taking of
any action by Unified that would adversely affect the Executive's
participation in, or materially reduce the Executive's benefits
under, any plans described in Section 2.3(e) hereof; or
(iii) Unified requiring the Executive to be based at any
office or location other than that described in Section 2.4
hereof; or
(iv) (a) (1) an attempt by Unified or any other member
of the Unified Group to cause the Executive to engage in conduct
that could result in the suspension of his license to practice
law, or (2) the taking of any course of conduct by Unified and/or
any member of the Unified Group that would require the Executive
to resign his employment with Unified under the ethical rules of
any jurisdiction in
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which the Executive is licensed to practice law; in each case
based upon the determination or written advice of the agency or
other body having authority to suspend such license, or (b) the
refusal of Unified to submit or permit the submission of facts
and/or other statements to such agency or other body for purposes
of obtaining such determination or written advice pursuant to
subsection (a) hereof; or
(v) any purported termination by Unified of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(vi) any failure by Unified to comply with and satisfy
the provisions of Section 7.2; or
(vii) within a period ending at the close of business on
the date three (3) years after the Change in Control Date, the
Executive, in his sole and absolute discretion, determines and
notifies Unified in writing, that he does not wish to continue his
employment with Unified.
Other than a Termination for Good Reason pursuant to Section 3.4(v),
3.4(vi) or 3.4(vii), Termination for Good Reason may be effected by, and
only by, written notice to Unified in accordance with the provisions of
Section 9.3 stating with particularity each action or condition
constituting Good Reason, sufficient in detail such that the corrective
measures necessary to cure such action(s) or condition(s) may be readily
inferred from the face of the notice. During the ninety-day period
following receipt of such notice by Unified, the Executive shall use his
best efforts to cooperate with Unified to cure the action(s) or
condition(s) set forth in the Executive's notice. If a cure is
commercially reasonable and Unified fails to take sufficient steps
within such ninety-day period to effectuate a cure, then and only then
may the Executive terminate his employment for Good Reason. Failure of
Executive to set forth in such notice any material fact or circumstance
(then known or that should be then known by Executive) that contributes
to a showing of Good Reason shall waive any right of Executive to assert
such fact or circumstance in enforcing his rights under this Agreement
in connection with such notice, but shall not waive Executive's right
pursuant to any subsequent notice to terminate his employment on grounds
of any then unknown material fact or circumstance.
3.5 NOTICE OF TERMINATION. Any termination by Unified or by the
Executive (including terminations in breach of this Agreement) shall be
communicated by Notice of Termination to the other party. For purposes
of this Agreement, a "Notice of Termination" means a written notice
given in accordance with Section 9.3 that: (i) indicates the specific
termination provision in this Agreement relied upon (including reliance
upon Section 1.1(h)(i), if the Notice of Termination is delivered to
terminate the Employment Period); (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated; and (iii) if the Date of Employment Termination
(as defined below) is other than the date such notice is given,
specifies the Date of Employment Termination (which date shall be not
more than ninety (90) days after the giving of such notice), provided
that no such date need be specified if such notice relates to a
termination for Cause or Good Reason. The failure by the Executive or
Unified to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall
waive any right of the Executive or Unified to assert such fact or
circumstance in enforcing the Executive's or Unified's, as the case may
be, rights hereunder.
3.6 DATE OF EMPLOYMENT TERMINATION. "Date of Employment
Termination" means: (i) if the Executive's employment is terminated by
Unified for Cause or by the Executive for Good Reason, the later of the
day specified in the Notice of Termination and the last day of the cure
period specified in Section 3.3 or 3.4; (ii) if the Executive's
employment is terminated by reason of death or Disability, the date of
death of the Executive or the Disability Effective Date, as the case may
be; (iii) if the Executive's employment is terminated by Unified
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other than for Cause or Disability, the date the Notice of Termination
is given or any later date (within the ninety-day limit provided in
Section 3.5) specified therein, as the case may be; (iv) if the
Executive shall terminate employment with Unified for any reason other
than for Good Reason, the date the Executive shall terminate his
employment with Unified or, if not more than ninety (90) days later, the
date specified in the Notice of Termination; and (v) in any other case,
the date on which the Expected Employment Period ends.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION.
4.1 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If during the
Employment Period (i) Unified shall terminate the Executive's employment
without Cause or (ii) the Executive shall terminate employment with
Unified for Good Reason, the Executive shall be entitled to the benefits
provided below:
4.1(a) "ACCRUED OBLIGATIONS": On or before the fifth
(5th) business day following the Date of Employment Termination,
Unified shall pay to the Executive the sum of: (1) the Executive's
Annual Base Salary through the Date of Employment Termination to
the extent not previously paid; (2) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon); and (3) any accrued vacation pay; in each case
to the extent not previously paid.
4.1(b) "ANNUAL BASE SALARY CONTINUATION": For the
remainder of the Expected Employment Period that occurs after the
Date of Employment Termination, Unified shall pay to the Executive
the same Annual Base Salary as would have been paid to the
Executive had the Executive remained in Unified's employ during
the remainder of the Expected Employment Period. Unified at any
time may elect to pay the balance of such payments then remaining
in a lump sum, in which case the total of such payments shall be
discounted to present value as determined according to Code
Section 280G(d)(4); provided, however, in the event of termination
of employment by Executive pursuant to the provisions of Section
3.4(vi) or (vii) hereof, Unified shall pay on the Date of
Employment Termination to the Executive all amounts due pursuant
to this Section 4.1 and Section 4.5.
4.1(c) "OTHER BENEFITS": To the extent not previously
paid or provided, Unified shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided which the Executive
and/or the Executive's family is eligible to receive pursuant to
this Agreement or under any plan, program, policy or practice or
agreement of Unified provided to other senior executive officers
and their families during the ninety-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally after the Effective Date to
other senior executive officers of Unified and their families.
Over the remainder of the Expected Employment Period, the
Executive also shall receive health insurance benefits as
maintained by Unified for the benefit of its senior executive
officers.
4.2 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than for timely
payment of Accrued Obligations (as provided in Section 4.1(a)).
4.3 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for timely payment of Accrued Obligations (as provided in
Section 4.1(a)).
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4.4 TERMINATION FOR CAUSE; TERMINATION OTHER THAN FOR GOOD
REASON. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than for timely payment of
Accrued Obligations (as provided in Section 4.1(a)). If the Executive
terminates employment with Unified during the Employment Period
(excluding a termination for death or Good Reason), this Agreement shall
terminate without further obligations to the Executive, other than for
timely payment of Accrued Obligations (as provided in Section 4.1(a)).
4.5 ANNUAL NONCOMPETE AND SEVERANCE PAYMENTS. Except in the
case of a termination of the Executive's employment by Unified for
Cause, by Executive without Good Reason or upon the death or Disability
of the Executive, on or before the thirtieth (30th) day following the
Date of Employment Termination (as defined in Section 3.6 hereof), and
on each of the first and second anniversary dates of the Date of
Employment Termination, Unified shall pay to the Executive an amount
equal to the Annual Base Salary as was (or would have been) determined
for the final calendar year of the Expected Employment Period, and if
the termination or purported termination shall be by Unified without
Cause or by Executive for Good Reason pursuant to Section 3.4(v), each
such payment shall be increased by one-half as liquidated damages (and
not as a penalty) in recognition of damage to Executive's reputation and
the enhanced difficulties inherent in finding replacement employment
while being removed from the marketplace. The payments and arrangements
in this Section 4.5 constitute further consideration for the Executive's
covenants set forth in Section 5, and the Executive agrees that he shall
abide by the terms of Section 5 in their entirety and acknowledges that
Section 5 continues to apply after any termination of employment (other
than a termination described in Section 4.2).
4.6 EXCISE TAXES. The parties recognize that termination of
Executive's employment in connection with any change of control or other
payments made in connection with any change in control could result in
excise taxes to the Executive, and the parties provide for payment of
such taxes as follows.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event: (A) it shall be determined that any
payment or distribution by Unified to or for the benefit of the
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be subject to the excise tax imposed by Code
Section 4999; or (B) any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,
together with any interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed on the
Payment and on the Gross-Up Payment as well as any additional
income tax, employment tax and Excise Tax payable with respect to
such additional payment (including any interest or penalties
imposed with respect to such excise tax). The Gross-Up Payment
shall not include any amount for the payment of any income or
employment taxes imposed on the Payment, but shall include any
income or employment taxes payable with respect to any Gross-Up
Payment (and any interest and penalties imposed with respect
thereto).
(ii) Subject to the provisions of Section 4.6(iii), all
determinations required to be made under this Section, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent
accountant jointly selected by Unified and the Executive which
shall provide detailed supporting calculations both to Unified and
the Executive within fifteen (15) business days of the receipt of
notice from the Executive that there has been a Payment, or such
earlier time as is requested by Unified. All fees and expenses of
the
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independent accountant shall be borne solely by Unified. Any
Gross-Up Payment, as determined pursuant to this Section 4.6,
shall be paid by Unified to the Executive within five (5) days of
the receipt of the independent accountant's determination. If the
independent accountant determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written
opinion that failure to report the Excise Tax on the Executive's
applicable Federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination
by the independent accountant shall be binding upon Unified and
the Executive. As a result of the uncertainty in the application
of Code Section 4999 at the time of the initial determination by
the independent accountant hereunder, it is possible that Gross-Up
Payments which will not have been made by Unified should have been
made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that Unified exhausts its
remedies pursuant to Section 4.6(iii) and the Executive thereafter
is required to make a payment of any Excise Tax, the independent
accountant shall determine the amount of the Underpayment that has
occurred and any such Underpayment, as well as any interest and
penalties imposed thereon, shall be promptly paid by Unified to or
for the benefit of the Executive.
(iii) The Executive shall notify Unified in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by Unified of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed
in writing of such claim and shall apprise Unified of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on
which the Executive gives such notice to Unified (or such shorter
period ending on the date that any payment of taxes with respect
to such claim is due). If Unified notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(a) give Unified any information reasonably requested
by Unified relating to such claim;
(b) take such action in connection with contesting such
claim as Unified shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by Unified;
(c) cooperate with Unified in good faith in order to
effectively contest such claim; and
(d) permit Unified to participate in any proceedings
relating to such claim; provided, however, that Unified shall
bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 4.6, Unified shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and
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the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Unified
shall determine; provided, however, that if Unified directs the
Executive to pay such claim and sue for a refund, Unified shall
advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, Unified's
control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by Unified pursuant to Section 4.6(iii), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to Unified's compliance with the
requirements of Section 4.6(iii)) promptly pay to Unified the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by Unified pursuant to Section
4.6(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and Unified does
not notify the Executive in writing of its intent to contest such
denial or refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
4.7 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by Unified and for which
the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with Unified. Vested benefits which the Executive is
otherwise entitled to receive under any plan, policy, practice or
program of, or any contract or agreement with, Unified at or subsequent
to the Date of Employment Termination, shall be payable in accordance
with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
4.8 FULL SETTLEMENT; EXECUTIVE HAS NO DUTY OF MITIGATION.
Unified's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected
by any set-off, counterclaim, recoupment, defense or other claim, right
or action which Unified may have against the Executive or others, other
than any set-off for monies improperly taken by Executive (including any
funds embezzled). In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 4.1(c), such amounts shall
not be reduced whether or not the Executive obtains other employment.
Unified agrees to pay promptly as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by
Unified, the Executive or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A). The
payments and arrangements in this Section 4
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constitute further consideration for the Executive's covenants set forth
in Section 5, and the Executive agrees that he shall abide by the terms
of Section 5 in their entirety and acknowledges that Section 5 continues
to apply after any termination of employment (other than a termination
described in Section 4.2).
SECTION 5: NON-COMPETITION.
5.1 NON-COMPETE AGREEMENT. It is agreed that during the
Employment Period and until the date three (3) years after the Date of
Employment Termination (such period of time, the "Restricted Period"),
the Executive shall not, directly or indirectly, render services of any
nature within the Relevant Market Area (as defined herein) as an
employee, agent, representative, consultant, partner or otherwise, to or
for the direct or indirect benefit of any business that competes with
any member of the Unified Group; provided however, nothing in this
Section 5 shall prohibit Executive from engaging in the private practice
of law. The Relevant Market Area is the area within the fifty-mile
radius of: (i) each office maintained by Unified at any time during the
Employment Period; and (ii) each office maintained by any other member
of the Unified Group at any time during the Employment Period. In
addition, during the Restricted Period, the Executive shall not,
directly or indirectly, either as an individual, partner or a joint
venturer, or in any other capacity, invest in, own or have any
arrangement to acquire (whether by option or otherwise) an interest in
any Person or business that is competitive with any member of the
Unified Group, excluding any interest in a publicly traded company which
constitutes not more than one percent (1%) by value of the equity
securities of such company.
5.2 NON-SOLICITATION OF EMPLOYEES. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit: (i) any Person employed by Unified at any time
during the Employment Period; and (ii) any Person employed by any other
member of the Unified Group at any time during the Employment Period,
with a view towards enticing such Person to work for the Executive or
any other Person.
5.3 NON-SOLICITATION OF CUSTOMERS. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit: (i) any Person who was a Customer of Unified at any
time during the Employment Period; and (ii) any Person who was a
Customer of any other member of the Unified Group at any time during the
Employment Period and in respect of which the Executive had direct or
indirect contact or gained Confidential Information during such period,
if such direct or indirect approach or solicitation (x) is made with a
view towards diverting or attempting to divert business from Unified or
any other member of the Unified Group; or (y) consists of any action or
communication that disparages or depreciates, or tends to disparage or
depreciate, the reputation, business practices, future business
prospects, policies or personnel (including officers, directors and
employees) of any member of the Unified Group.
5.4 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
"Confidential Information" shall mean any communication disclosed to the
Executive or known by the Executive as a consequence of or through his
past, present or prospective employment or business relationship with
the Unified Group, not generally known and available in the Unified
Group's industries, which constitutes the Unified Group's (including
Unified's) proprietary and non-public method(s) of doing business,
including, but not limited to, any information related to trade secrets,
pricing formulas, know-how, test data, Customer lists, vendor lists,
training and operating manuals, software and reporting systems. Unified
and the Executive acknowledge that during the Executive's period of
employment by Unified, the Unified Group will furnish the Executive with
Confidential Information. The Executive agrees both during his
employment with Unified, whether under this Agreement or otherwise, and
at all times thereafter, that the Executive, his officers, directors,
partners, employees, affiliates, agents, representatives or assigns
(collectively "Representatives") shall keep all Confidential Information
in the strictest confidence and shall not discuss, publish, communicate,
transmit, reproduce or otherwise disclose such Confidential Information,
in any manner whatsoever, in whole or in part, without the prior written
consent of Unified, unless and until such time
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as the Confidential Information becomes generally known in the Unified
Group's industries other than through breach of this Agreement. Any
written consent by Unified to the Executive's disclosure of Confidential
Information, if given, shall in no way operate as a waiver of the
Executive's obligation to maintain the confidential nature of the
material disclosed or to protect and preserve that Confidential
Information from disclosure so that it will receive confidential
treatment thereafter. The Executive agrees to reimburse Unified for any
damages sustained and costs and expenses, including attorneys' fees,
incurred in connection with an unauthorized disclosure of Confidential
Information by the Executive, his Representatives or any other person or
persons to whom the Executive or his Representatives previously had
disclosed Confidential Information.
5.5 REASONABLENESS OF COVENANTS. The Executive acknowledges and
agrees that the covenants and agreements contained in this Section 5 are
reasonable, and the Executive agrees he shall not raise any issue of
their reasonableness in any proceeding to enforce such covenants and
agreements.
5.6 BLUE PENCILLING. In the event any court or other body having
appropriate jurisdiction (including any panel of arbitrators) shall
determine that the area where competition is prohibited, the time period
during which competition is prohibited, the nature or duration of
prohibitions on solicitation of Customers or employees, or any other
term of this Section 5 is overbroad, then the area or time or other term
shall be reduced appropriately as the court or other body may determine
is necessary to make this Section 5 enforceable. The parties
acknowledge that the purpose of this Section 5 is to protect the
goodwill and going concern value of Unified and the Unified Group, and
the parties intend that this Section 5 shall be enforced to the maximum
extent allowed by law.
5.7 SPECIFIC ENFORCEMENT. The Executive agrees that any
violation or breach by the Executive and/or his Representatives of any
provision of this Section 5 would cause immediate and irreparable harm
to the Unified Group, the exact amount of which will be impossible to
ascertain, and for that reason further agrees that the Unified Group
shall be entitled, as a matter of right, to an injunction out of the
appropriate court of competent jurisdiction (as set forth below),
restraining any further violation or breach of this Agreement by
Executive and/or his Representatives, either directly or indirectly,
such right to an injunction being cumulative and in addition to whatever
remedies the Unified Group may have under applicable law and/or this
Agreement. The Unified Group and the Executive hereby irrevocably
consent to the jurisdiction of the Circuit Court of Fayette County,
Kentucky or, if there is federal jurisdiction, the United States
District Court for the Eastern District of Kentucky. The Unified Group
and the Executive waive any defense of an inconvenient forum to the
maintenance of any action or proceeding brought in such courts in
connection with this Agreement, any objection to venue with respect to
any such action, and any right of jurisdiction on account of the place
of residence or domicile of any party to such action. The remedies of
the Unified Group under this Section 5.7 are not exclusive, and shall
not prejudice any other rights under this Agreement or otherwise.
SECTION 6: OWNERSHIP OF PAPERS AND INTELLECTUAL PROPERTY RIGHTS.
6.1 PAPERS AND PROPERTY. Executive acknowledges the Unified
Group's (including Unified's) exclusive right to ownership, possession
and title to all papers, documents, tapes, drawings, notebooks,
formulas, Customer lists, software, hardware, trademarks, trade names,
service marks, processes, data, intellectual property, or other records,
information or products prepared by the Executive during the Employment
Period or provided by Unified, or which otherwise come into the
Executive's possession by reason of employment with Unified. Executive
agrees not to make or permit to be made, except in pursuit of
Executive's Position and Duties hereunder, any copies of such items.
Executive further agrees to deliver to Unified upon request all such
items in Executive's possession and without request to immediately
deliver such items upon the termination, voluntarily or involuntarily,
of Executive's employment.
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<PAGE>
<PAGE>
6.2 INVENTIONS. The term "Inventions" means all ideas,
inventions and discoveries, whether patentable, copyrightable or not,
made or conceived by the Executive, whether or not during the hours of
his employment or with the use of Unified Group's facilities, materials
or personnel, either solely or jointly with others, during the term of
his employment (past, present or future) with any member of the Unified
Group that relates to any present or prospective business of Unified or
any other member of the Unified Group, including, but not limited to,
software, algorithms, designs, devices, processes, methods, formulae,
techniques, data storage systems, networks, servers and any improvements
to the foregoing.
6.2(a) REPORT. Executive agrees to promptly disclose all
Inventions to Unified. Executive shall inform Unified promptly
and fully of such Inventions by a written report, setting forth in
detail the structures, procedures and methodology employed and the
results achieved. A report also shall be submitted by the
Executive upon completion of any study or research project
undertaken on behalf of Unified or any other member of the Unified
Group, whether or not in the Executive's opinion a given study or
project has resulted in an Invention.
6.2(b) ASSIGNMENT AND PATENT. Executive hereby assigns
and agrees to assign to Unified all of his rights to such
Inventions and to all proprietary rights therein, based thereon or
related thereto, including, but not limited to, applications for
United States and foreign letters patent and resulting letters
patent. Upon Unified's request and at Unified's expense, the
Executive shall execute such documents and provide such assistance
as may be deemed necessary by Unified to apply for, prosecute,
obtain, defend or enforce any United States and foreign letters
patent based on or related to such Inventions. The Executive
agrees to execute all documents reasonably requested by Unified to
assist Unified in perfecting or protecting any or all of its
rights in the Inventions.
6.2(c) COPYRIGHT. Executive acknowledges that all
copyrightable Inventions are "works made for hire" and
consequently that Unified owns all copyrights thereto, including,
but not limited to, 17 U.S.C. Sections 101 and 210. Unified and
its successors and assigns shall have the sole and exclusive right
to register the copyright(s) in all such work in its name as the
owner and author of such work and shall have the exclusive rights
conveyed under 17 U.S.C. Sections 106 and 106A, including, but not
limited to, the right to make all uses of the works in which
attribution or integrity rights may be implicated. Additionally,
without in any way limiting the foregoing, the Executive hereby
assigns, transfers and conveys to Unified, and its successors and
assigns, all right, title or interest that Executive may now have,
or may acquire in the future, to the work including, but not
limited to, all ownership, patent (United States and foreign
letters patent), trade secret, trade names and trademarks,
copyright moral, attribution and/or integrity rights. The
Executive hereby expressly and forever waives any and all rights
that Executive may have arising under 17 U.S.C. Section 106A, and
any rights arising under any federal, state, territorial or
foreign laws that convey rights which are similar in nature to
those conveyed under 17 U.S.C. Section 106A. Notwithstanding any
provision of the Copyright Act, any and all copyrightable works
constituting Inventions or prepared either in whole or in part by
the Executive in connection with his employment are, shall be, or
shall become, owned by Unified.
SECTION 7: SUCCESSORS.
7.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive, and without the prior written consent of Unified, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
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<PAGE>
<PAGE>
7.2 SUCCESSORS OF UNIFIED. Unified shall require any Person(s)
that acquires (whether directly or indirectly, in one or more
transactions, whether by purchase, merger, consolidation or otherwise)
all or substantially all of the business and/or assets of Unified to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that Unified would be required to perform it if
no such transaction had taken place. Failure of Unified to obtain such
agreement on or before thirty (30) days prior to the effectiveness of
any such transaction shall be a breach of this Agreement and such breach
(i) shall entitle the Executive to terminate this Agreement at his
option at any time during or after such thirty (30) day period for Good
Reason, and (ii) shall entitle Executive to immediate payment of all
amounts that are then or that would become due from Unified hereunder.
As used in this Agreement, "Unified" shall mean Unified as hereinbefore
defined and any Person that assumes and agrees to perform (or is
required to assume and perform) this Agreement by operation of law, the
provisions of this Section 7.2 or otherwise.
SECTION 8: ARBITRATION. Notwithstanding any other provision of this
Agreement to the contrary, and excluding the rights of the Unified Group
to pursue injunctive relief pursuant to Section 5.7, any controversy or
claim regarding, arising under or pertaining to this Agreement which
cannot be resolved among the parties themselves shall be resolved solely
by binding arbitration in Lexington, Kentucky. The arbitration panel
shall consist of three arbitrators selected from list(s) of candidates
provided by the American Arbitration Association. Unified shall be
entitled to appoint one arbitrator and the Executive shall be entitled
to appoint one arbitrator. The third arbitrator, who shall be an
attorney in good standing who is licensed to practice law in the
Commonwealth of Kentucky and devotes more than one-half of his or her
professional time to the practice of employment law, shall be chosen by
the two arbitrators so appointed. If any Person fails to appoint its
arbitrator or to notify the other Person of such appointment within
thirty (30) days after the institution of arbitration proceedings, such
other Person may request the President of the American Arbitration
Association to appoint such arbitrator on behalf of the Person who so
failed. If the two arbitrators appointed by (or on behalf of) the
parties fail to appoint such third arbitrator, or fail to notify the
parties to such proceedings of such appointment, within thirty (30) days
after the appointment of the later of such two arbitrators to be
appointed by (or on behalf of) the parties, any party may request such
President to appoint such third arbitrator. The President of the
American Arbitration Association shall appoint such arbitrator or such
third arbitrator, as the case may be, within thirty (30) days after the
making of such request. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (which rules may be modified by a majority of
the arbitrators serving), except that the parties shall be allowed to
take depositions as provided under applicable state and federal laws,
and the arbitration award, decree and/or order may grant any remedy or
relief that is in accordance with the provisions of this Agreement and
applicable Kentucky law. No awards of punitive damages shall be made.
The arbitration award, decree and/or order shall be final and binding on
all parties to such arbitration. Judgment and/or decree shall be
entered (in conformity with such award, decree and/or order) in the
Circuit Court of Fayette County, Kentucky or, if there is federal
jurisdiction, the United States District Court for the Eastern District
of Kentucky. The Executive and each member of the Unified Group
irrevocably submit to the exclusive jurisdiction of the Circuit Court of
Fayette County, Kentucky or, if there is federal jurisdiction, the
United States District Court for the Eastern District of Kentucky, for
the purpose of (a) entry of any such judgment and/or decree; or (b)
entry of an order to proceed with arbitration. Any such judgment,
decree and/or order entered by the Circuit Court of Fayette County,
Kentucky, or the United States District Court for the Eastern District
of Kentucky and any related order(s) of such court, may be endorsed as
any other judgment, decree or order of such court.
SECTION 9: MISCELLANEOUS.
9.1 ABILITY TO PERFORM. The Executive warrants that the
Executive's execution and performance of this Agreement is not
restricted or prohibited by any agreement to which the Executive is
subject.
-17-
<PAGE>
<PAGE>
9.2 TIME PERIODS. Any period of time measured under this
Agreement by days shall refer to calendar days and not business days,
unless otherwise provided. If the last day of any such period falls on
a Saturday, Sunday or holiday observed by commercial banks in the city
of Lexington, Kentucky, the last day of such period, for all purposes of
this Agreement (including the determination of the first day of each
succeeding period of time measured by days), shall be deemed to be the
next succeeding business day after such Saturday, Sunday or holiday.
Any period of time measured under this Agreement shall end at midnight,
Lexington, Kentucky time, on the last day of such period.
9.3 NOTICE. For all purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given and received when (i)
delivered; or (ii) mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses as set forth below, or to such other address as may have been
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
Notice to Executive:
-------------------
David F. Morris
2741A Park Avenue
St. Louis, Missouri 63104
Notice to Unified:
-----------------
Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
Attention: Chairman, President and Chief Executive
Officer
9.4 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
9.5 WITHHOLDING. Unified may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
9.6 WAIVER. The Executive's or Unified's failure to insist upon
strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or
Unified may have hereunder, including, without limitation, the right of
the Executive to terminate employment for Good Reason pursuant to
Section 3.4, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
9.7 ENTIRE AGREEMENT. All prior negotiations and agreements
between the parties hereto regarding Executive's employment are
superseded by this Agreement, and there are no representations,
warranties, understandings or agreements other than those expressly set
forth herein, except as modified in writing concurrently herewith or
subsequent hereto.
9.8 AMENDMENT. This Agreement may be amended or modified in
whole or in part only by an agreement in writing executed by all parties
hereto and making specific reference to this Agreement.
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<PAGE>
<PAGE>
9.9 PRIORITY OF AGREEMENT. In case of any conflict or ambiguity
in connection with or between this Agreement and any policy manuals,
including, but not limited to, any employee manuals, employment
applications, management instructions or promises, etc., this Agreement
shall control.
9.10 ASSIGNMENT. Subject to the provisions of Section 7.2,
Unified shall have the right to assign this Agreement to its successors
or assigns (collectively, "Permitted Assignees"). The terms
"successors" and "assigns" shall include for all purposes of this
Agreement (except Sections 1.1(d) and 2.3(a)), any Person that acquires
all or substantially all of Unified's assets or of Unified's stock, or
with which or into which Unified merges or consolidates.
9.11 INTENDED BENEFICIARIES. This Agreement shall be binding
upon the Executive, Unified and their respective successors and assigns,
and shall inure to the benefit of the Executive, Unified, each member of
the Unified Group, their respective successors and assigns and Permitted
Assignees. Nothing herein expressed or implied is intended to confer
upon any Person not named or described in the preceding sentence any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one
instrument. A signature transmitted by facsimile shall be deemed a
delivery of an original, manually executed counterpart.
[remainder of this page intentionally left blank]
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive and Unified, pursuant to the
authorization from its Executive Committee of the Board, have executed
or caused this Agreement to be executed in its name, all as of the day
and year first above written.
THIS CONTRACT IS GOVERNED BY KENTUCKY LAW AND CONTAINS A BINDING
ARBITRATION PROVISION. ALL DISPUTES ARISING IN CONNECTION WITH THIS
AGREEMENT ARE SUBJECT TO BINDING ARBITRATION IN LEXINGTON, KENTUCKY.
EACH OF THE EXECUTIVE AND UNIFIED HAS REVIEWED THESE AND THE OTHER
PROVISIONS OF THIS AGREEMENT WITH LEGAL COUNSEL OF HIS OR ITS,
RESPECTIVELY, OWN CHOOSING.
"EXECUTIVE"
/s/ David F. Morris
-----------------------------------------
David F. Morris
UNIFIED FINANCIAL SERVICES, INC.
By: /s/ Timothy L. Ashburn
--------------------------------------
Timothy L. Ashburn, Chairman,
President and Chief Executive Officer
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<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (the "Agreement") is made and entered into
effective as of the 28th day of December, 1999, by and among BANK ONE,
KENTUCKY, NA, a national banking association and its successors and
assigns, whose address is 416 West Jefferson Street, Louisville,
Kentucky 40202 (the "Bank"); UNIFIED FINANCIAL SERVICES, INC., a
Delaware corporation whose address is 220 Lexington Green Circle, Suite
600, Lexington, Kentucky 40503 ("Unified"); and COMMONWEALTH PREMIUM
FINANCE CORPORATION, a Kentucky corporation whose address is 220
Lexington Green Circle, Suite 600, Lexington, Kentucky 40503
("Commonwealth") (Unified and Commonwealth are hereinafter collectively
referred to as "Borrowers").
RECITALS
--------
WHEREAS, Unified has applied to Bank for a loan in the amount of
Two Million Two Hundred Ninety-Three Thousand Seven Hundred Fifty and
00/100 Dollars ($2,293,750.00) (the "Term Loan"), which loan shall be
secured by certain assets of Unified.
WHEREAS, Commonwealth has applied to Bank to renew an existing
revolving line of credit loan in an amount not to exceed the maximum
principal sum of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) (the "Renewal Revolving Credit Loan"), which loan shall
be secured by certain assets of Commonwealth and guaranteed by Unified.
WHEREAS, one of the conditions to the making of the Term Loan and
the Renewal Revolving Credit Loan by Bank is that Unified and
Commonwealth must enter into this Agreement setting forth the terms and
conditions of the Term Loan and the Renewal Revolving Credit Loan, all
of which terms and conditions Unified and Commonwealth acknowledge are
supported by good, valuable and sufficient consideration.
NOW, THEREFORE, in consideration of the mutual covenants, the
financial accommodations extended to Borrowers, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree to and affirm the foregoing
recitals and further agree as follows:
ARTICLE I
---------
CERTAIN DEFINITIONS
1.01 "ADVANCE" means any disbursement of funds to Unified under
the Term Note pursuant to Section 2.01 hereof or to Commonwealth under
the Renewal Revolving Credit Note pursuant to Section 2.02 hereof.
1.02 "AGREEMENT" means this Loan Agreement, as amended,
supplemented or modified from time to time.
<PAGE>
<PAGE>
1.03 "BUSINESS DAY" means any Domestic Business Day on which Bank
is open for business.
1.04 "BORROWING BASE" means the computation of Eligible Net
Premiums as calculated in the Borrowing Base Certificate and Advance
Request attached hereto as EXHIBIT 1.04.
------------
1.05 "COLLATERAL" means all property which is subject to,
becomes subject to, or is to be subject to the Liens granted by the
Security Agreements or which otherwise becomes security for the Loan.
1.06 "DEFAULT" OR "EVENT OF DEFAULT" means any of the events
specified in Article VII herein, whether or not any requirement for the
giving of notice, the lapse of time, or both, or any other condition,
has been satisfied.
1.07 "DOMESTIC BUSINESS DAY" means any day other than a Saturday,
Sunday or other day on which commercial banks in Lexington, Kentucky,
are authorized or required to close under the laws of the Commonwealth
of Kentucky or of the United States.
1.08 "GUARANTY" means the guaranty dated of even date of the
Renewal Revolving Credit Loan and all of Commonwealth's obligations
under the Loan Documents made, executed and delivered by Unified.
1.09 "INTEREST COVERAGE RATIO" means a ratio calculated as
follows: net income for the applicable period plus interest expenses
for such period plus income tax expenses for such period divided by
total interest expenses for such period.
1.10 "INSURANCE PREMIUM FINANCING AGREEMENT ("IPFA")" means the
contract among Commonwealth, the insurance agent and the insured/
borrower in which the insured/borrower grants to Commonwealth a
security interest in all unearned premiums which may be payable under
the insurance policies.
1.11 "LIEN" means any mortgage, deed of trust, pledge, security
interest, hypothecation, conditional assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority, or
other security agreement, or preferential arrangement, charge, or
encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having a similar economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of
the foregoing), but excluding leases of operating equipment or furniture
in the ordinary course of business.
1.12 "LOAN DOCUMENTS" means this Agreement, the Notes, the
Guaranty, the Security Agreements, the UCC-1's, and any additional
documents required to be delivered by Unified or
Page 2 of 26
<PAGE>
<PAGE>
Commonwealth under this Agreement, or otherwise evidencing, securing
and/or relating to the Loans.
1.13 "LOANS" means the Term Loan extended by Bank to Unified and
the Renewal Revolving Credit Loan extended by Bank to Commonwealth.
1.14 "NET PREMIUMS" means the total premiums on IPFA plus all
accrued interest and other finance charges derived thereunder less all
initial premium payments made by insured/borrower thereunder.
1.15 "NOTES" means the Term Note evidencing the Term Loan
extended by Bank to Unified and the Renewal Revolving Credit Note
evidencing the Renewal Revolving Credit Loan extended by Bank to
Commonwealth.
1.16 "OBLIGATIONS" means the indebtedness evidenced by the Notes
and all obligations relating to any of the other Loan Documents.
1.17 "PERSON" means any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other entity of whatever
nature.
1.18 "PRIME RATE" means the variable prime, or primary index,
rate of Bank as announced from time to time by Bank at its principal
office, whether or not such rate is published and which rate may not
necessarily be Bank's lowest or best rate.
1.19 "RENEWAL REVOLVING CREDIT LOAN" shall have the meaning
assigned to such term in Section 2.02.
1.20 "RENEWAL REVOLVING CREDIT NOTE" means the note executed by
Commonwealth evidencing the renewal of a revolving line of credit loan
extended by Bank to Commonwealth in an amount not to exceed the maximum
principal sum of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00).
1.21 "SECURITY AGREEMENTS" means the Stock Pledge and Security
Agreement from Unified to Bank dated of even date in which Unified
pledges to Bank a first and prior lien on certain securities of Unified
described in Schedule "A" attached thereto, and a Security Agreement
from Commonwealth to Bank dated of even date whereby Commonwealth
assigns and pledges to Bank a first and prior lien on certain assets of
Commonwealth described in Exhibit "A" attached thereto.
1.22 "TERM LOAN" means shall have the meaning assigned to such
term in Section 2.01.
Page 3 of 26
<PAGE>
<PAGE>
1.23 "TERM NOTE" means the note executed by Unified evidencing
the loan extended by Bank to Unified in the amount of Two Million Two
Hundred Ninety-Three Thousand Seven Hundred Fifty and 00/100 Dollars
($2,293,750.00).
The definitions set forth above in this Article I are in addition
to, and not in lieu of, any other definitions set forth elsewhere in
this Agreement or the other Loan Documents.
ARTICLE II
----------
AMOUNT AND TERMS OF THE LOANS,
THE COLLATERAL, THE GUARANTY, ETC.
2.01 The Term Loan.
-------------
a. Terms and Amount. Bank will enter into the Term Loan
----------------
as evidenced by the Term Note in the amount of TWO MILLION TWO HUNDRED
NINETY-THREE THOUSAND SEVEN HUNDRED FIFTY AND 00/100 DOLLARS
($2,293,750.00). The interest rate per annum on the outstanding
principal balance of the Term Loan throughout the term of the Term Loan
shall be equal to the Prime Rate. Interest on the Term Note shall be
computed by applying the ratio of the annual interest rate over a year
of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding.
Under no circumstances will the interest rate on the Term Note be more
than the maximum rate allowed by applicable law. Unified shall make
monthly payments of principal in the amount of $100,000 plus all accrued
but unpaid interest beginning on January 28, 2000, and continuing
thereafter on the 28th day of each month until June 30, 2000 (the
"Maturity Date"), at which time all outstanding principal, all accrued
but unpaid interest and all other fees, charges and expenses payable
under the Term Note and the other Loan Documents shall be due and
payable.
b. Purpose of the Loan. The purpose of the Term Loan
-------------------
is to refinance preexisting debt of subsidiary companies and begin the
payment and amortization of the same.
c. No Prepayment Premium. Unified may prepay the Term
---------------------
Note, in whole or in part, without premium or penalty.
d. Collateral. As security for the payment of the Term
----------
Loan and in order to secure Unified's obligations to Bank, as well as
all other sums as are recoverable by Bank under the Term Loan and any of
the other Loan Documents, Unified shall execute and deliver to Bank a
Stock Pledge and Security Agreement whereby Unified pledges and conveys
to Bank a security interest in all of Unified's shares of stock in
Equity Underwriting Group, Inc.
e. Renewal. Unified acknowledges that Bank has not
-------
committed to any renewals or extensions of the Term Loan.
Page 4 of 26
<PAGE>
<PAGE>
2.02 The Renewal Revolving Credit Loan.
---------------------------------
a. Terms and Amount. Bank will enter into the Renewal
----------------
Revolving Credit Loan as evidenced by the Renewal Revolving Credit Note
in the amount of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($2,500,000.00). The interest rate per annum on the outstanding
principal balance of the Renewal Revolving Credit Loan throughout the
term of the Renewal Revolving Credit Loan shall be equal to the Prime
Rate. Interest on the Renewal Revolving Credit Note shall be computed
by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Under no
circumstances will the interest rate on the Renewal Revolving Credit
Note be more than the maximum rate allowed by applicable law.
Commonwealth shall make monthly payments of all accrued but unpaid
interest beginning on January 28, 2000, and continuing thereafter on the
28th day of each month until June 30, 2000 (the "Maturity Date"), at
which time all outstanding principal, all accrued but unpaid interest
and all other fees, charges and expenses payable under the Renewal
Revolving Credit Note and the other Loan Documents shall be due and
payable.
b. Purpose of the Loan. The purpose of the Renewal
-------------------
Revolving Credit Loan is solely to provide Commonwealth with working
capital for the financing and/or acquisition of IPFAs and the payments
of premiums to insurance companies.
c. Notice and Manner of Borrowing. On the last day of
------------------------------
each calendar month and on each such Business Day that Commonwealth
requests an Advance, Commonwealth shall submit to Bank a Borrowing Base
Certificate and Advance Request substantially in the form attached
hereto as EXHIBIT 1.04. Provided that (i) all of the applicable
------------
conditions set forth in Article III hereof have been fulfilled to
Banks's satisfaction and (ii) Commonwealth has provided Bank with the
Borrowing Base Certificate and Advance Request by 10:00 a.m., Bank will
make Advances under the Renewal Revolving Credit Loan available to
Commonwealth in immediately available funds by crediting the amount
thereof to Commonwealth's account with Bank on the same Business Day.
d. No Prepayment Premium. Commonwealth may prepay the
---------------------
Renewal Revolving Credit Note, in whole or in part, without premium or
penalty.
e. Guaranty of Unified. Unified shall guarantee the
-------------------
payment of the Renewal Revolving Credit Loan and all of Commonwealth's
obligations under the Renewal Revolving Credit Note and any of the other
Loan Documents pursuant to the terms of the Guaranty.
f. Collateral. As security for the payment of the
----------
Renewal Revolving Credit Loan and in order to secure Commonwealth's
obligations to Bank, as well as all other sums as are recoverable by
Bank under the Renewal Revolving Credit Loan and any of the other Loan
Documents, Commonwealth shall execute and deliver to Bank a Security
Agreement whereby Commonwealth assigns, pledges and conveys to Bank a
security interest in all of Commonwealth's assets including, but not
limited to, the IPFAs. As further security for the payment of the
Renewal Revolving Credit Loan and in order to secure Commonwealth's
obligations to Bank, as well as all other sums as are recoverable by
Bank under the Guaranty, the Renewal Revolving Credit Loan and
Page 5 of 26
<PAGE>
<PAGE>
any of the other Loan Documents, Unified shall execute and deliver to
Bank a Stock Pledge and Security Agreement whereby Unified pledges and
conveys to Bank a security interest in all of Unified's shares of stock
in Equity Underwriting Group, Inc.
g. Renewal. Commonwealth acknowledges that Bank has
-------
not committed to any further renewals or extensions of the Renewal
Revolving Credit Loan.
h. Readvances of Principal Amounts Paid Prior to
---------------------------------------------
Maturity. Any amounts of principal paid to Bank prior to the Maturity
- --------
Date set forth in Section 2.02(a) hereof shall be available for any
subsequent Advance or borrowing by Commonwealth hereunder.
2.03 Provisions Applicable to Both Loans.
-----------------------------------
a. Method of Payment. Borrowers shall make each
-----------------
payment under this Agreement and under the Notes in lawful money of the
United States, to Bank at its Lexington office or such other place as
may be designated by Bank, in immediately available funds during normal
business hours of Bank. Whenever any payment to be made under this
Agreement or under the Notes shall be stated to be due on a Saturday,
Sunday or a public holiday or banking holiday, such payment shall be
made on the next succeeding Business Day and such extension of time
shall in such case be included in the computation of the payment of
interest.
b. Costs and Fees. Borrowers shall pay to Bank its
--------------
costs and expenses (including, without limitation, its attorneys' fees,
court costs, litigation and other expenses) incurred or paid by Bank in
negotiating, documenting, administering and enforcing this Agreement and
the Loan Documents and in establishing, maintaining, protecting,
perfecting or enforcing any of Bank's rights or Borrowers' obligations
including, without limitation, any and all such costs and expenses
incurred or paid by Bank in defending Bank's title or right to the
Collateral or in collecting or enforcing payment of the Obligations and
the liquidation of the Collateral, and all costs of filing financing,
continuation or termination statements with respect to the Collateral.
c. Late Payments and Late Charges. If any payment
------------------------------
required under either of the Notes is not paid within ten (10) days
after such payment is due, then, at the option of Bank, Unified or
Commonwealth, as applicable, shall pay a late charge equal to five
percent (5.0%) of the amount of such payment or $25.00, whichever is
greater, up to the maximum amount of $750.00 per late charge to
compensate Bank for administrative expenses and other costs of
delinquent payments. This late charge may be assessed without notice,
shall be immediately due and payable and shall be in addition to all
other rights and remedies available to Bank.
d. Default Interest Rate. Upon the occurrence of any
---------------------
Event of Default and during the continuation thereof, and after
maturity, including maturity upon acceleration, Bank, at its option,
may, if permitted under applicable law, do one or both of the following:
(i) increase the interest rate under the Term Note or the Renewal
Revolving Credit Note, as applicable, to the rate that is three percent
(3.0%) above the rate that would otherwise be payable thereunder, and
(ii) add any unpaid accrued interest to principal and such sum shall
bear interest therefrom until paid at the rate provided
Page 6 of 26
<PAGE>
<PAGE>
in the Term Note or the Renewal Revolving Credit Note, as applicable,
(including any increased rate). The interest rate under the Notes shall
not exceed the maximum rate permitted by applicable law under any
circumstances.
ARTICLE III
-----------
CONDITIONS PRECEDENT
The obligation of Bank to make the initial Advance and any
subsequent Advances under either the Term Note or the Renewal Revolving
Credit Note are subject to (1) the performance of the respective
obligations of Unified and Commonwealth to be performed hereunder at,
prior to or subsequent to the making the Loans, and (2) the satisfaction
of all of the following conditions:
3.01 Loan Documents. All of the Loan Documents shall be duly
--------------
executed by Borrowers and delivered to Bank, all of which shall be in
form and substance reasonably satisfactory to Bank and to counsel for
Bank.
3.02 Lien Report. At the sole cost of Borrowers, Bank shall
-----------
receive a lien report confirming that Bank has a first and prior lien on
all of the property pledged to Bank as Collateral. Said lien report
shall include a summary of all liens and encumbrances against any of the
property pledged to Bank by either Unified or Commonwealth as
Collateral.
3.03 Certificate of Borrowers. Each of the Borrowers shall
------------------------
deliver to Bank a Certificate for Borrower, substantially in the form of
EXHIBIT 3.03 hereto with all attachments thereto.
- ------------
3.04 Opinions of Counsel. At the sole cost of Borrowers, Bank
-------------------
shall receive separate opinions of each of Borrowers' counsel,
substantially in the form of EXHIBIT 3.04 hereto.
------------
3.05 Representations and Warranties. Each and every
------------------------------
representation and warranty made by Borrowers contained in Article IV
hereof and in any of the Loan Documents shall be substantially true,
complete and accurate as of the making of the Loans.
3.06 Delivery of Financial Information. Bank shall receive, on
---------------------------------
or before the making of the Loans, all available financial information
of Borrowers as set forth in Section 5.02 hereof.
3.07 No Defaults. No Event of Default shall exist as of the
-----------
making of the Loans which has not been cured to Bank's satisfaction.
3.08 No Change in Condition. There shall have been no material
----------------------
adverse change in the condition, financial or otherwise, of any of the
Borrowers since the date of the most recent financial statement that has
been furnished to Bank.
3.09 Compliance with Applicable Laws. Each of the Borrowers is
-------------------------------
in compliance, in all material respects, with any and all laws
applicable to their respective businesses.
Page 7 of 26
<PAGE>
<PAGE>
3.10 Additional Closing Deliveries and Payments. Borrowers
------------------------------------------
shall deliver the following to Bank at the Closing, all of which shall
be in form and substance satisfactory to Bank:
(i) all appropriate financing statements (Form UCC-1)
covering the Collateral;
(ii) executed copies of all documents set forth on Bank's
document checklist for this transaction including, but not limited to,
the Loan Documents; and
(iii) payment by Borrowers of all of Bank's fees and
expenses incurred in connection with the Loans including, but not
limited to, all reasonable fees and expenses of Bank's counsel and all
recording fees and taxes, if any.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
Borrowers jointly and severally represent and warrant to Bank, as
of the date hereof and as of the date of each subsequent Advance, as
follows:
4.01 Organization and Qualification. Unified is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of
the State of Delaware, Commonwealth is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Kentucky, and each has the lawful power to engage in the business each
presently conducts; and each is duly licensed or qualified and in good
standing in each jurisdiction where the nature of the business
transacted by it makes such licensing or qualification necessary.
4.02 Power and Authority. Each of the Borrowers has the power
-------------------
and authority to enter into and carry out the Loan Documents delivered
by it in connection herewith, to execute and deliver such Loan
Documents, and to perform each of its obligations under the Loan
Documents. Each of the Borrowers has the power and authority to make
the borrowings contemplated hereby and all such actions have been fully
authorized by all necessary proceedings on the part of such Borrower.
4.03 Validity and Binding Effect. This Agreement and the other
---------------------------
Loan Documents have been duly and validly executed and delivered by the
Borrowers and each of the Borrowers' performance under such Loan
Documents has been duly authorized. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of the
Borrowers enforceable in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization
or other laws affecting creditors' remedies. No authorization,
approval, exemption or consent by any governmental or public body or
other authority is required in connection with the authorization,
execution, delivery and carrying out of the terms of the Loan Documents
by any of the Borrowers.
4.04 No Conflict. Neither the execution and delivery of the
-----------
Loan Documents nor the Borrowers' consummation of the transactions
herein or therein contemplated or compliance with the terms and
provisions hereof or thereof will conflict with or result in any default
under or breach or
Page 8 of 26
<PAGE>
<PAGE>
violation of (a) the terms and conditions of the Certificate or Articles
of Incorporation, as the case may be, or the By-Laws of either of the
Borrowers; (b) any state or federal law or regulation or any order,
writ, injunction or decree of any court or governmental instrumentality
applicable to either of the Borrowers; or (c) any agreement or
instrument to which either of the Borrowers is a party or to which
either of the Borrowers is subject or which will constitute a default
thereunder or which will result in the creation or enforcement of any
lien, charge or encumbrance whatsoever upon any of the Collateral.
4.05 Ownership of Collateral. Each of the Borrowers has good
------------------------
and marketable title to all of the personal property serving as
Collateral pledged to Bank by such Borrower as security for the Loans.
Unified has good and marketable title to all of the Collateral pledged
to Bank by Unified as security for the Renewal Revolving Credit Loan.
4.06 Litigation. Except as disclosed in writing to Bank prior
----------
to the date of this Agreement, there are no actions, suits, proceedings
or investigations pending or threatened against either of the Borrowers
at law or in equity before any court or before any federal, state,
municipal or any governmental department, commission, board, agency or
instrumentality, whether or not covered by insurance, which,
individually or in the aggregate, may result in any materially adverse
effect on the business, property or assets or the condition, financial
or otherwise, of either of the Borrowers or impair either of the
Borrowers' ability to perform their obligations under the Loan
Documents. Neither of the Borrowers is in violation of or in default
with respect to any order, writ, injunction or any decree of any court
or any federal, state, municipal or other governmental department,
commission or bureau, agency or instrumentality which may result in any
such impairment.
4.07 No Liens and Encumbrances on Collateral. Other than those
---------------------------------------
Liens which have been previously disclosed to Bank in writing, there are
no security interests, liens, claims, mortgages, or encumbrances upon or
against the Collateral pledged to Bank by Borrowers except the liens in
favor of Bank granted herein. Assuming Bank receives all of the Loan
Documents which have been properly executed, duly authorized and
properly recorded, Bank shall possess a valid and first priority lien in
the Collateral pledged to Bank by Borrowers.
4.08 Tax Returns and Taxes. Each of the Borrowers has filed,
---------------------
in a timely fashion and will in the future file in a timely fashion, all
tax returns or reports (federal, state and local) required to be filed
and has paid, and will pay in the future, all taxes, assessments, fees
and governmental charges and levies shown or required to be shown
thereon to be due, including interest and penalties. Each of the
Borrowers will pay in the future, all real estate and personal property
taxes, license fees and/or assessments due with respect to the
Collateral. Each of the Borrowers knows of no material additional
assessments for which adequate reserves have not been established, and
each of the Borrowers has made adequate provisions for all current real
estate and personal property taxes relating to the Collateral.
4.09 General Validity. No representation or warranty by either
----------------
of the Borrowers contained herein or made by either of the Borrowers in
any other Loan Document contains any untrue statement of material fact
or omits to state a material fact necessary in order to make such
representation or
Page 9 of 26
<PAGE>
<PAGE>
warranty not misleading in light of the circumstances under which it was
made. There are no facts which materially and adversely affect the
business, operations, affairs or condition of either of the Borrowers
other than those facts disclosed to Bank in writing prior to the time of
closing or as set forth herein.
4.10 Financial Statements; No Adverse Change. The financial
---------------------------------------
statements and other documents of the Borrowers previously furnished to
Bank are true, complete and accurate and are not misleading in any
material respect. There have been no material adverse changes in the
financial condition of either of the Borrowers since the date of the
most recent financial statements that have been furnished to Bank. All
financial statements and other financial information furnished to Bank
accurately represent the financial condition of the Borrowers as of
their respective dates in all material respects. Neither of the
Borrowers has any material liabilities, direct or contingent, except as
disclosed in its respective financial statements.
4.11 Accuracy of Information. All factual information
-----------------------
furnished by Borrowers in writing to Bank for purposes of, or in
connection with, this Agreement or the other Loan Documents is true,
complete and accurate in every material respect on the date that such
information was provided to Bank and as of the date of execution and
delivery of this Agreement to Bank.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
5.01 Affirmative Covenants Other Than Reporting Requirements for
-----------------------------------------------------------
Both Borrowers. Borrowers jointly and severally covenant that, so long
- --------------
as either of the Borrowers may borrow or request Advances hereunder and
until payment in full of the Notes and all accrued but unpaid interest
thereon or unless otherwise consented to in writing by Bank, each will
do the following:
a. Preservation of Company Existence, etc. Each of the
---------------------------------------
Borrowers shall maintain its existence as a corporation, and its
respective licenses or qualifications and good standing in each
jurisdiction in which its ownership, use or lease of property or the
nature of its business or both makes such licenses or qualifications
necessary.
b. Payment of Liabilities, Including Taxes, etc. Each
---------------------------------------------
of the Borrowers shall duly pay and discharge all obligations to which
they are subject or which are asserted against them, promptly as and
when the same shall become due and payable, including all taxes,
assessments and governmental charges upon them or any of their
properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such obligations,
including taxes, assessments or charges, are being contested in good
faith by appropriate proceedings diligently conducted and for which such
reserve or other appropriate provisions, if any, has been made as
required by Bank.
c. Compliance with Loan Documents, etc. Each of the
------------------------------------
Borrowers shall substantially comply in all material respects with the
terms and conditions of the Loan Documents and all other related
agreements to which any is a party.
Page 10 of 26
<PAGE>
<PAGE>
d. Collateral Maintenance. At Borrowers' sole cost,
----------------------
each of the Borrowers shall maintain, keep and preserve all tangible
Collateral pledged to Bank in good working order and condition (ordinary
wear and tear and insured casualty damages excepted).
e. Keeping of Records and Books of Account. Each of
---------------------------------------
the Borrowers shall maintain and keep proper books of record and account
in accordance with sound accounting practices applied on a consistent
basis and in which full, true and correct entries shall be made of all
of its dealings and business and financial affairs.
f. Operation of Business. Each of the Borrowers shall
---------------------
maintain, conduct and operate its business in substantially the same
manner as it has been heretofore maintained, conducted and operated.
g. Insurance. At Borrowers' sole cost, each of the
---------
Borrowers shall maintain, or cause to be maintained, insurance with
financially sound and reputable insurance companies reasonably
acceptable to Bank and in such amounts and covering such risks as are
reasonably acceptable to Bank including, without limitation, liability,
property, business interruption, and errors and omissions coverage.
All insurance policies shall (i) provide that Bank is to receive
thirty (30) days written notice prior to non-renewal or cancellation,
and (ii) be evidenced by a certificate of insurance to be held by Bank.
In the event Borrower fails to provide, maintain and keep in force
the policies of insurance required by this Agreement, Bank may procure
such insurance for such risks covering Bank's interest, and Borrowers
shall pay all premiums, with interest, promptly upon demand by Bank.
h. Compliance with Laws. Each of the Borrowers has at
--------------------
all times heretofore and will hereafter comply in all material respects
with all applicable laws, rules, regulations and orders including,
without limitation, all applicable covenants and restrictions of record
and all valid laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, certificates,
franchises, permits, licenses, authorizations, directions and
requirements including, without limitation, the Americans with
Disabilities Act and regulations thereunder and all laws, ordinances,
rules and regulations of all federal, states, county, municipal and
other governments, departments, commissions, boards, courts,
authorities, officials and officers.
i. Right of Inspection. At any reasonable time and
-------------------
from time to time, each of the Borrowers shall permit Bank and any agent
or representative thereof to examine and make copies of and abstracts
from either of the Borrowers' records and books of account, and visit
its properties and to discuss its affairs, finances, and accounts with
any of its respective officers and directors and its independent
accountants. Without limiting the foregoing rights of Bank, each of the
Borrowers agrees that without any prior notice to either of the
Borrowers and not more frequently than two (2) times per calendar year,
Bank and its agents and employees may, at Borrowers' sole cost, conduct
Page 11 of 26
<PAGE>
<PAGE>
an audit of each of the Borrowers' records and books to determine each
of the Borrowers' compliance with this Agreement and the other Loan
Documents.
5.02 Reporting Requirements for Commonwealth. Commonwealth
---------------------------------------
covenants that, so long as either of the Borrowers may borrow or request
Advances hereunder and until payment in full of the Notes and all
accrued but unpaid interest thereon or unless otherwise consented to in
writing by Bank, Commonwealth will furnish, or cause to be furnished, to
Bank the following:
a. Annual Audited Financial Statements. Within one
-----------------------------------
hundred twenty (120) days after the end of each fiscal year, audited
financial statements for Commonwealth prepared and certified by a firm
of independent public accountants of recognized standing acceptable to
Bank, in form and content acceptable to Bank in its reasonable
discretion, which shall include an unqualified annual audit report
consisting of a balance sheet, statement of income, statement of
shareholders' equity, statement of cash flows and notes to financial
statements. All of the foregoing shall be in reasonable detail and
stating in comparative form the respective amounts for the corresponding
date and period in the prior fiscal year and all such financial
statements shall be prepared in accordance with generally accepted
accounting principles and certified as correct by the chief financial
officer or president of Commonwealth.
b. Quarterly Financial Statements. Within sixty (60)
------------------------------
days after the end of each fiscal quarter, company prepared financial
statements for Commonwealth, in form and content acceptable to Bank in
its reasonable discretion, which shall include a balance sheet as of the
end of each such period and an income statement for the period from the
beginning of the current fiscal year to the end of such period. The
statement shall be certified as correct by the chief financial officer
or president of Commonwealth.
c. Covenant Compliance Certificate. Within sixty (60)
-------------------------------
days after the end of each fiscal quarter, a Covenant Compliance
Certificate, in the same form as attached hereto as EXHIBIT 5.02 C.,
---------------
prepared by Commonwealth and certified as correct by the chief financial
officer or president of Commonwealth.
d. Company Activity Summary. Within sixty (60) days
------------------------
after the end of each fiscal quarter, company prepared schedules
summarizing the business activities of Commonwealth and certified as
correct by the chief financial officer or president of Commonwealth.
e. Schedule of Cash Receivables from Contracts. Within
-------------------------------------------
sixty (60) days after the end of each fiscal quarter, company prepared
schedules of cash receivables from contracts with insureds certified as
correct by the chief financial officer or president of Commonwealth.
f. Schedule of Past Due Accounts. Within sixty (60)
-----------------------------
days after the end of each fiscal quarter, company prepared account
receivable aging summaries for all accounts that are more than ninety
(90) days past due certified as correct by the chief financial officer
or president of Commonwealth.
Page 12 of 26
<PAGE>
<PAGE>
g. Monthly Borrowing Base Certificate. Within fifteen
----------------------------------
(15) days after the end of each month or simultaneously with any request
for an Advance, a Borrowing Base Certificate and Advance Request
substantially in the form attached hereto as EXHIBIT 1.04.
------------
h. Notice of Litigation. Promptly after the commencement
--------------------
thereof but in any event within thirty (30) days after the service
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting any of the Borrowers
which, if determined adversely, could reasonably be expected to have a
material and adverse effect on any of the Borrowers' respective
financial conditions, properties, or operations.
i. Notice of Events of Default. As soon as possible
---------------------------
and in any event within ten (10) days after the occurrence of any Event
of Default, a written notice setting forth the details of such Event of
Default and the action which is proposed to be taken by Commonwealth
with respect thereto.
5.03 Reporting Requirements for Unified. Unified covenants
----------------------------------
that, so long as either of the Borrowers may borrow or request Advances
hereunder and until payment in full of the Notes and all accrued but
unpaid interest thereon or unless otherwise consented to in writing by
Bank, Unified will furnish, or cause to be furnished, to Bank the
following:
a. Annual Audited Financial Statements. Within one
-----------------------------------
hundred twenty (120) days after the end of each fiscal year, audited
financial statements for Unified prepared and certified by a firm of
independent public accountants of recognized standing acceptable to
Bank, in form and content acceptable to Bank in its reasonable
discretion, which shall include an unqualified annual audit report
consisting of a balance sheet, statement of income, statement of
shareholders' equity, statement of cash flows and notes to financial
statements. All of the foregoing shall be in reasonable detail and
stating in comparative form the respective amounts for the corresponding
date and period in the prior fiscal year and all such financial
statements shall be prepared in accordance with generally accepted
accounting principles and certified as correct by the chief financial
officer or president of Unified.
b. Quarterly Financial Statements. Within sixty (60)
------------------------------
days after the end of each fiscal quarter, company prepared financial
statements for Unified, in form and content acceptable to Bank in its
reasonable discretion, which shall include a balance sheet as of the end
of each such period and an income statement for the period from the
beginning of the current fiscal year to the end of such period. The
statement shall be certified as correct by the chief financial officer
or president of Unified.
5.04 Minimum Interest Coverage Ratio for Commonwealth. Commonwealth
------------------------------------------------
shall maintain a minimum Interest Coverage Ratio (as defined herein)
of 1.75:1.0, which shall be calculated and reported on a calendar
quarter basis.
Page 13 of 26
<PAGE>
<PAGE>
ARTICLE VI
----------
NEGATIVE COVENANTS
Borrowers jointly and severally covenant that, so long as either
of the Borrowers may borrow or request Advances hereunder and until
payment in full of the Notes and all accrued but unpaid interest thereon
or unless otherwise consented to in writing by Bank, which consent shall
not be unreasonably withheld, neither of the Borrowers shall permit or
cause any of the following:
6.01 Liens. Create, incur, assume or suffer to exist any
-----
mortgage, security interest, lien or encumbrance whatsoever on any of
the Collateral or assign all or any part of the Collateral to any party
other than Bank, except:
a. Bank Liens. Liens in favor of Bank;
----------
b. Tax Liens and Contested Liens. Liens for taxes or
-----------------------------
assessments or other government charges or levies if not yet due and
payable or, if due and payable, if they are being contested in good
faith by appropriate proceedings diligently conducted;
c. Statutory Liens. Liens imposed by law, such as
---------------
mechanics, materialmen, landlords, warehousemen and carrier Liens, and
other similar Liens, securing obligations incurred in the ordinary
course of business which are not past due or which are being contested
in good faith by appropriate proceedings diligently conducted and for
which appropriate reserve or other appropriate provisions, if any, have
been established as required by Bank;
d. Liens Not Due and Payable. Liens under workers'
-------------------------
compensation, unemployment insurance, social security, or similar
legislation for sums which are not past due;
e. Certain Judgment Liens. Liens consisting of judgment
----------------------
or judicial attachment liens (including prejudgment attachment) in
existence less than sixty (60) days after the entry thereof or the
enforcement of which is effectively stayed or payment of which is
covered in full (subject to deductible) by insurance; and
f. Ordinary Course Liens. Liens, deposits, or pledges
---------------------
to secure the performance of public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business.
6.02 Liquidation, Merger or Sale of Assets. (a) Liquidate,
-------------------------------------
merge or consolidate with or into any other Person or take any action in
furtherance of any thereof; (b) permit any other Person to consolidate
with or merge into either of the Borrowers; (c) sell, convey, assign,
lease or otherwise transfer or dispose of, in a single transaction or a
series of related transactions, a material part of either of the
Borrowers' assets; (d) change either of the Borrowers' name; or (e)
sell, convey or otherwise transfer any of the Collateral other than in
the ordinary course of business.
Page 14 of 26
<PAGE>
<PAGE>
6.03 Debt Limitations of Commonwealth. Commonwealth shall not
--------------------------------
create, incur, assume or suffer to exist any additional indebtedness in
excess of $50,000, without the prior written consent of Bank, except:
a. Bank Debt. Debt payable to Bank under this
---------
Agreement and the Revolving Credit Note; or
b. Accounts Payable, etc. Accounts payable to trade
----------------------
creditors in accordance with prior practice including, without
limitation, amounts payable under service contracts and for goods or
services incurred in the ordinary course of business that are paid
within the specified time, unless contested in good faith and by
appropriate proceedings diligently conducted.
6.04 No Dividends by Commonwealth. Commonwealth shall not
----------------------------
declare or pay any dividends, payable in cash, property, stock or
otherwise, with respect to Commonwealth's outstanding common stock
throughout the term of this Agreement without the prior written consent
of Bank.
ARTICLE VII
-----------
EVENTS OF DEFAULT
Each of the following shall be an Event of Default under this
Agreement:
7.01 Payment Default. Either of the Borrowers fails to pay any
---------------
installment of interest on the Notes after its due date without notice
from Bank, or any other sum due to Bank under any of the Loan Documents,
within ten (10) days following notice that the same is due and payable.
7.02 Default in Other Obligations to Bank. The occurrence of a
------------------------------------
material default and the expiration of the applicable cure period, if
any, under any of the Loan Documents or any other obligation of either
of the Borrowers to or with Bank, whether now or hereafter arising.
7.03 Breach of Representation or Warranty. Any representation
------------------------------------
or warranty made or deemed made by any of the Borrowers in this
Agreement, the Loan Documents, or in any certificate, document, opinion,
or financial or other statement furnished at any time under or in
connection with any Loan Document proves to have been incorrect in any
material respect on or as of the date made or deemed made.
7.04 Breach of Covenant. Any of the Borrowers fails to perform
------------------
or observe any term, covenant or agreement on their part to be performed
or observed in any of the Loan Documents (other than a failure to pay
any sum to Bank when due) to which any of them is a party and such
failure shall continue for a period of thirty (30) days after written
notice to Unified or Commonwealth, as applicable, from Bank describing
the nature of the failure; provided, however, that an Event of Default
shall occur immediately and without the thirty (30) day cure period if
any such failures relate to the provisions contained in Sections 6.02 or
9.21 of this Agreement.
Page 15 of 26
<PAGE>
<PAGE>
7.05 Insolvency. Either of the Borrowers (i) is unable to, or
----------
admits in writing its inability to, pay its debts as such debts become
due; (ii) makes an assignment for the benefit of creditors, petitions or
applies to any tribunal for the appointment of a custodian, receiver or
trustee for them or a substantial part of its assets; (iii) commences
any proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction whether now or hereafter in effect; (iv) has any such
petition or application filed or any such proceeding commenced against
it in which an order for relief is entered or adjudication or
appointment is made and which remains undismissed for a period of sixty
(60) days or more; (v) by any act or omission, indicates its consent to,
approval of, or acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian,
receiver, or trustee for all or any substantial part of its properties;
(vi) suffers any such custodianship, receivership, or trusteeship to
continue undischarged for a period of sixty (60) days or more; or (vii)
becomes insolvent in that its total assets are in the aggregate less
than all of its liabilities.
7.06 Unpaid Judgments. One or more final judgments, decrees,
----------------
or orders for the payment of money in excess of Fifty Thousand Dollars
($50,000.00) in the aggregate shall be rendered against any of the
Borrowers and such judgments, decrees or orders shall continue
unsatisfied and in effect for a period of thirty (30) consecutive days
without being vacated, discharged, satisfied or stayed or bonded pending
appeal.
7.07 Invalid Documents. Any of the Loan Documents shall at any
-----------------
time after their execution and delivery and for any reason, other than
payment in full of the obligations so secured, cease (i) to create a
valid and perfected first priority security interest in and to the
Collateral; or (ii) to be in full force and effect, and such matter is
not fully corrected or resolved to Bank's satisfaction within thirty
(30) days after written notice with respect thereto from Bank.
7.08 Sale of Collateral. Any of the Borrowers sells, transfers
------------------
or conveys any interest whatsoever in any of the Collateral (unless such
Collateral is replaced in the ordinary course of business or is
obsolete) without the prior written consent of Bank.
7.09 Unauthorized Liens on Collateral. Any further Lien is
--------------------------------
placed on any of the Collateral which is the subject of the Loan
Documents (except to the extent and in the manner provided for in this
Agreement), without the prior written consent of Bank.
7.10 Termination of Borrower. If either of the Borrowers takes
-----------------------
any action that is intended to result in such Borrower's termination,
dissolution or liquidation.
ARTICLE VIII
------------
REMEDIES OF BANK IN THE EVENT OF DEFAULT
8.01 Acceleration, etc. Upon the occurrence of any Event of
------------------
Default set forth above and without further notice to Borrowers, Bank
may (i) declare its obligation to make Advances under the Notes and this
Agreement to be terminated, whereupon the same shall forthwith
terminate; (ii) declare the outstanding principal balance owing under
the Notes, all accrued but unpaid interest
Page 16 of 26
<PAGE>
<PAGE>
thereon, and all other amounts payable under any of the Loan Documents
or otherwise to be forthwith due and payable, whereupon the Notes, all
such interest, and all such amounts shall become and be immediately due
and payable without presentment, demand, protest, or further notice of
any kind, all of which are hereby expressly waived by Borrowers, without
any action on the part of Bank; (iii) avail itself of any and all
remedies available to it in any of the Loan Documents including, without
limitation, the appointment of receivers for the Collateral; and (iv)
avail itself of any and all other or additional remedies available by
law or in equity.
8.02 Enforcement of Rights. Upon the occurrence of any Event
---------------------
of Default, Bank shall have the right to proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate
proceedings either for specific performance of any covenant or condition
contained in this Agreement or in any of the other Loan Documents, or in
aid of the exercise of any power granted in this Agreement or any of the
other Loan Documents.
8.03 Foreclosure, Repossession and Sale of Collateral. Bank
------------------------------------------------
shall have full power and authority to proceed to exercise any one or
more of the rights accorded to it by the Uniform Commercial Code of the
Commonwealth of Kentucky or otherwise accorded to it by law, including
the foreclosure and repossession of the Collateral. Upon the occurrence
of any Event of Default, the rights of either of the Borrowers to use,
sell, substitute, exchange or exercise any other rights relating to the
Collateral and all proceeds thereof and income therefrom shall
automatically terminate without notice and Bank shall thereafter be
entitled to foreclose, take possession of, receive, sell and collect the
same. The Collateral and the proceeds of any sale thereof may be
applied by Bank, in its sole discretion, against the Notes or any other
liabilities or obligations owed to Bank, and Bank may first apply the
proceeds of such disposition to any and all expenses including, without
limitation, advertising and storage costs and reasonable attorneys' fees
and legal costs, incurred by Bank in connection with or arising out of
such disposition. Bank may send any written notice required by this
Section 8.03 in the manner set forth in Section 9.04 hereof. Borrowers
agree that ten (10) days notice by Bank to such Borrower is reasonable
notice of any sale of Collateral consisting of personal property. Bank
shall have the right to sell that portion of the Collateral which is
personal property at either public or private sale and shall have the
right to bid upon and purchase any of the Collateral at any sale.
8.04 Right to Proceed in Any Order. Upon the occurrence of any
-----------------------------
Event of Default, Bank shall be entitled to exercise any and all of its
rights and remedies in any order against the Borrowers and the
Collateral as Bank determines in its sole discretion.
8.05 Waiver of Marshaling of Assets. Borrowers waive any
------------------------------
requirement of marshaling of assets and all other legal or equitable
doctrines which might otherwise require Bank to proceed against any
Persons or any Collateral in any particular order.
8.06 Remedies Cumulative; No Waiver of Rights by Bank. Upon
------------------------------------------------
the occurrence of any Event of Default, Bank may choose to exercise and
enforce any of its rights or remedies, or decline to exercise and
enforce any of its rights or remedies, in Bank's sole discretion. The
failure of Bank to exercise and enforce any rights or remedies shall not
prevent Bank from thereafter exercising or
Page 17 of 26
<PAGE>
<PAGE>
enforcing any such rights or remedies, nor shall such failure release
any Person or property with respect to which Bank has any rights or
remedies or in any way limit or diminish Bank's rights with respect to
any such property or Person. All of Bank's rights and remedies shall be
cumulative to the greatest extent permitted by law, may be exercised
successively or concurrently, at any time and from time to time, and
shall be in addition to all of those rights and remedies afforded Bank
at law, in equity, or in bankruptcy. Any exercise of any right or
remedy shall not be deemed to be an election of that right or remedy to
the exclusion of any other right or remedy. Bank shall be entitled to
recover from the cumulative exercise of all remedies the sum of: (a) the
outstanding principal amount of the Notes; (b) all accrued but unpaid
interest with respect to the principal amount of the Notes; (c) any
other amounts that either of the Borrowers are required by the Loan
Documents to pay to Bank (for example and without limitation, the
reimbursement of all reasonable expenses, legal fees and late charges);
and (d) any costs, expenses or damages which Bank is otherwise permitted
to recover under the terms of the Loan Documents, or at law or in
equity.
8.07 Application of Payments and Proceeds of Sale. All payments
--------------------------------------------
from Borrowers to Bank under the Notes or any of the other Loan
Documents, and all payments to Bank from the sale or other disposition
of Collateral, shall be applied by Bank in its discretion as follows:
(a) to the payment of the costs and expenses of Bank and the reasonable
fees and expenses of its counsel in connection with the administration
or enforcement of Bank's rights and remedies against either of the
Borrowers, the Collateral and sale or collection thereof; (b) to the
payment in full of all loan obligations referred to under the Loan
Documents applying such amounts first to accrued but unpaid interest and
then to principal; and (c) the balance, if any, to Borrowers or to any
third party entitled thereto.
8.08 No Obligation to Preserve Collateral. Upon the occurrence
------------------------------------
of any Event of Default, Bank may, at its option, demand, sue for,
collect, preserve or make any compromise or settlement it deems
desirable with reference to the Collateral. Bank shall not be bound to
take any steps necessary to preserve the Collateral against other
parties, which steps each of the Borrowers expressly agree to undertake.
8.09 Right of Set Off. Upon the occurrence and during the
----------------
continuance of any Event of Default, Bank is hereby authorized, at any
time and from time to time, without notice to any of the Borrowers (any
such notice being expressly waived), to set off and apply any and all
deposit balances (other than trust, restricted or fiduciary accounts) at
any time held and other indebtedness at any time owing by Bank to or for
the credit or the account of any Borrower against any and all of the
obligations of any Borrower now or hereafter existing under this
Agreement, the Notes or any other Loan Document, irrespective of whether
or not Bank shall have made any demand under this Agreement or the Notes
or such other Loan Document and although such obligations may be
unmatured. Bank agrees to promptly notify such Borrower after any such
set off and application, provided that the failure to give such notice
shall not affect the validity of such set off and application. The
rights of Bank under this section are in addition to other rights and
remedies (including, without limitation, other rights of set off) which
Bank may have.
Page 18 of 26
<PAGE>
<PAGE>
8.10 Cash Collateral. All income and proceeds from any of the
---------------
Collateral shall be considered "cash collateral" as defined under the
terms of the United States Bankruptcy Code and Borrowers shall not have
the right to use any of the cash collateral without first receiving
leave from a bankruptcy court of competent jurisdiction and venue.
ARTICLE IX
----------
MISCELLANEOUS
9.01 No Implied Waiver; Cumulative Remedies; Writing Required.
--------------------------------------------------------
No delay or failure of Bank in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps
to enforce such a right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
The rights and remedies provided hereunder are cumulative and not
exclusive of any rights or remedies (including, without limitation, the
right of specific performance) which Bank would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part
of Bank of any breach or default under this Agreement, the Notes or any
other Loan Documents or any such waiver of any provision or condition
hereof or thereof must be in writing and shall be effective only to the
extent specifically set forth in such writing. Borrowers acknowledge
that with respect to this Agreement and its terms, Borrowers are neither
authorized nor entitled to rely on any representations, modifications or
assurances in any form or as to any subject from any officer of Bank
unless and until such representation, modification or assurance is set
forth in writing and signed by such officer of Bank.
9.02 Taxes. Borrowers agree to pay or cause to be paid any and
-----
all stamp, document, transfer or recording taxes, and similar
impositions payable or hereafter determined to be payable in connection
with this Agreement and any other Loan Document or other documents,
instruments or transactions pursuant to or in connection herewith, and
agree to save Bank harmless from and against any and all present or
future claims or liabilities with respect to or resulting from any delay
in paying or omission to pay, any such taxes or similar impositions.
9.03 Holidays. Whenever any payment or action to be made or
--------
taken hereunder or under the Notes shall be stated to be due on a day
which is not a Business Day, such payment or action shall be made or
taken on the next succeeding Business Day.
9.04 Notices. All notices and other communications given to or
-------
made upon any party hereto in connection with this Agreement or any of
the other Loan Documents shall, except as herein or therein otherwise
expressly provided, be in writing and mailed, faxed or delivered to the
addresses set forth below the signatures of the parties hereto or at
such other address as shall be specifically designated by any such
party. All such notices or other communications shall be effective, if
mailed, when deposited in the U.S. mail, first class postage prepaid; if
faxed, when faxed; or if delivered, when delivered.
9.05 [intentionally omitted]
Page 19 of 26
<PAGE>
<PAGE>
9.06 Time of Essence. Time shall be of the essence as to all
---------------
provisions of this Agreement.
9.07 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision of this Agreement shall be
held invalid or unenforceable in whole or in part, then such clause or
provision shall be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability or the remaining provisions hereof.
9.08 Governing Law. This Agreement, the Notes and the other
-------------
Loan Documents and the rights and obligations of the parties hereto and
thereto shall be governed by and construed and enforced in accordance
with the substantive law of the Commonwealth of Kentucky.
9.09 Survival. All representations, warranties, covenants and
--------
agreements contained herein, in the Loan Documents or any other
agreement, certificate or instrument delivered pursuant hereto or made
in writing in connection herewith or therewith shall survive the
execution and delivery hereof and thereof, the making of the Loan
hereunder and the issuance of the Notes and shall continue in full force
and effect so long as Borrowers may borrow or request Advances and until
payment in full of Borrowers' obligations hereunder and under the Notes.
Provided, however, those provisions contained in Sections 9.11, 9.12,
9.18 and 9.20 shall survive the payment of the Notes.
9.10 Benefit and Binding Effect of Agreement. This Agreement
---------------------------------------
shall be binding upon and inure to the benefit of Bank, Borrowers and
their respective successors and assigns, except that Borrowers may not
assign or transfer their rights hereunder or any interest herein without
the prior written consent of Bank.
9.11 JURY WAIVER. BORROWERS AND BANK HEREBY VOLUNTARILY,
-----------
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DOCUMENT, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP
BETWEEN BANK AND BORROWERS. THIS PROVISION IS A MATERIAL INDUCEMENT TO
BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN
DOCUMENTS.
9.12 Jurisdiction and Venue; Service. Subject to Section 9.20,
-------------------------------
the parties agree that the sole proper venue for the determination of
any litigation commenced by Bank against any Borrower or any Borrower
against Bank on any basis shall be in a court of competent jurisdiction
which is located in Fayette County, Kentucky, and the parties hereby
expressly declare that any other venue shall be improper and Borrowers
expressly waive any right to a determination of any such litigation
against Bank by a court in any other venue. Each Borrower further
agrees that service of process by any judicial officer or by registered
or certified U.S. mail shall establish personal jurisdiction over
Borrowers and Borrowers waive any rights under the laws of any state to
object to jurisdiction within the Commonwealth of Kentucky. Provided,
however, nothing contained in this section shall prevent Bank from
bringing an action within another state in order to enforce its rights
in the Collateral which may be located in another state. Initiating
such proceedings or taking such action in any other
Page 20 of 26
<PAGE>
<PAGE>
state shall in no event constitute a waiver of the agreement contained
herein that the laws of the Commonwealth of Kentucky shall govern the
rights and obligations of the parties hereunder or of the submission
herein made by each Borrower to personal jurisdiction within the
Commonwealth of Kentucky. The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended to be
exclusive, but are cumulative and in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the Commonwealth of Kentucky or by any
other state in an action brought by Bank in such state.
9.13 No Third Party Beneficiaries. All conditions on the
----------------------------
obligations of any party hereunder, including the obligation of Bank to
make Advances, are imposed solely and exclusively for the benefit of the
other parties to this Agreement and Bank's successors and assigns. No
other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that
Bank will refuse or decline to make Advances in the absence of strict
compliance with any or all thereof, and no other Person shall, under any
circumstances, be deemed to be a beneficiary of such conditions, any and
all of which may be freely waived in whole or in part by the respective
party to whom the performance of any such condition shall run at any
time if, in the sole discretion of such party, it deems it desirable to
do so, or if it fails to do so for any other reason.
9.14 Relationship of the Parties. All of the parties herein
---------------------------
intend that the relationship between them be solely that of creditor and
debtor. Nothing contained in the Loan Documents shall be deemed or
construed to create a partnership, fiduciary relationship, joint venture
or co-ownership by or between the parties herein. Bank shall not in
anyway be responsible or liable for the debts, losses, obligations or
duties of either of the Borrowers. All obligations to pay property or
other taxes, assessments, insurance on the Collateral and all other fees
and charges arising from the ownership and operation of the assets of
Borrowers shall be the sole responsibility of Borrowers.
9.15 Bank's Performance of Borrowers' Covenants and Duties.
-----------------------------------------------------
Should Borrowers fail to perform any of their covenants, duties and
agreements in accordance with the terms hereof and an Event of Default
shall thereby result, Bank may, at its election and at Borrowers' sole
expense, perform or attempt to perform such covenant, duty or agreement
on behalf of Borrowers, but in no event shall Bank have any obligation
to do so. Borrowers shall, at the request of Bank, promptly pay, upon
demand, any reasonable amount expended by Bank in such performance or
attempted performance to Bank, together with interest thereon at the
default rate under the Notes from the date such amount was requested by
Bank to be paid until paid; provided that Bank does not assume and shall
never have, except by a subsequent, express written undertaking by Bank,
any liability for the performance of any duties of Borrowers under or in
connection with all or any part of the Collateral. Bank shall be
subrogated to all rights, titles, liens and security interests securing
the payment of any debt, claim, tax or assessment for the payment of
which Bank may make an advance or that Bank may pay.
9.16 Course of Dealing; Waiver. No course of dealing in
-------------------------
respect of, or any omission or delay in the exercise of, any right,
power, remedy or privilege by Bank shall operate as a waiver
Page 21 of 26
<PAGE>
<PAGE>
thereof, nor shall any right, power, remedy or privilege of Bank be
exclusive of any other right, power, remedy or privilege referred to
herein or in any related document or now or hereafter available at law,
in equity, in bankruptcy, by statute or otherwise. No waiver or consent
granted by Bank with respect to any of the Loan Documents or related
writing shall be binding upon Bank, unless specifically granted in
writing by a duly authorized officer of Bank, which writing shall be
strictly construed.
9.17 Absence of Oral Representations. Each of the Borrowers
-------------------------------
represents and warrants that no promises, assurances or commitments have
been made to either of them by Bank or have been relied on by either of
them regarding any extension, renewal or future financing. Each of the
Borrowers understands and agrees that Bank is entitled to enforce all of
the Loan Documents strictly in accordance with their terms, and any
commitment or obligation to extend or renew any financing or provide
additional financing shall not be binding on Bank, except to the extent
contained in a writing signed by every Person who is to be bound
thereby. Borrowers further acknowledge that (i) Bank does not presently
anticipate renewing, extending or further modifying the financing
referenced in this Agreement, and (ii) Bank anticipates the Notes will
be fully paid in accordance with its terms on or before maturity.
Borrowers each agree and represent to Bank (which representation
Borrowers acknowledge Bank is relying on in executing this Agreement)
that they will not rely on any (i) commitment or representation from
Bank with respect to any future financing including, but not limited to,
renewals, extensions and modifications, unless signed in writing by
Bank, and (ii) waiver of any right existing at any time, and from time
to time, either now or in the future, except to the extent evidenced by
a writing signed by the person affecting such waiver.
9.18 Indemnity. Borrowers shall indemnify and hold Bank
---------
harmless against any loss suffered or liability incurred by Bank on
account of any damage to the person or property of the parties hereto or
to third parties by reason of the operation of Borrowers' businesses, or
otherwise arising out of or connected to the conduct of any Borrower or
their officers, managers, directors, employees or agents, in connection
with any matters which are the subject of this Agreement.
9.19 References. Any and all references in this Agreement to
----------
any document or documents shall be references to such document or
documents as the same may from time to time be modified, amended,
renewed, consolidated or extended, with the consent of Bank.
9.20 Arbitration. Borrowers and the Bank agree that, upon the
-----------
written demand of either party, whether made before or after the
institution of any legal proceedings but prior to the rendering of any
judgment in that proceeding, all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising
from any of the Loan Documents or otherwise including, without
limitation, contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American
Arbitration Association. Any arbitration proceeding held pursuant to
this arbitration provision shall be conducted at the city nearest
Commonwealth's address having a AAA office or at any other location
selected by mutual agreement of the parties. No act to take or dispose
of any Collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This
arbitration provision shall not limit the right of either party during
any dispute, claim or controversy to seek, use and employ ancillary, or
preliminary
Page 22 of 26
<PAGE>
<PAGE>
rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding
under forcible entry and detainer for possession of, any real or
personal property, and any such action shall not be deemed an election
of remedies. Such remedies include, without limitation, obtaining
injunctive relief or a temporary restraining order, invoking power of
sale under any deed of trust or mortgage, obtaining a writ of attachment
or imposition of a receivership, or exercising any rights relating to
personal property, including exercising the right of set-off, or taking
or disposing of such property with or without judicial process pursuant
to Article 9 of the Uniform Commercial Code or when applicable, a
judgment by confession of judgment. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of an act, or
exercise of any right or remedy concerning any Collateral, including any
claim to rescind, reform or otherwise modify any agreement relating to
the Collateral, shall also be arbitrated; provided, however, that no
arbitrator shall have the right or the power to enjoin or restrain any
act of any party. Judgment upon any award rendered by any arbitrator
may be entered in any court having jurisdiction. Nothing in this
arbitration provision shall preclude any party from seeking equitable
relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in a legal action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of a legal
action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
9.21 Assignments. Borrowers may not assign their respective
-----------
rights under any of the Loan Documents to any other party. Any
attempted assignment shall be a default under this Agreement and shall
be null and void. The Bank shall have the right and ability, upon not
less than fifteen (15) days prior written notice to (but without the
requirement for any consent from) Borrower, to sell, assign or transfer
all or any part of its rights and/or obligations under this Agreement,
and/or to participate its rights and obligations under this Agreement
with other institutional lenders, and/or to sell participation or
participating interests in its rights and/or obligations under this
Agreement to other institutional lenders. In furtherance thereof, the
Bank shall have the right to provide to any Person who expresses an
interest in becoming such a buyer, assignee, transferee, participant
and/or purchaser, or who actually does become such a buyer, assignee,
transferee, participant and/or purchaser, such information concerning
the financial condition, business and other affairs of the Borrowers as
the Bank may deem appropriate in the circumstances. Borrowers hereby
authorize all such disclosures.
9.22 Waivers by Borrowers. Borrowers hereby waive, to the
--------------------
extent permitted by applicable law, (a) all presentments, demands for
performance, notices of nonperformance (except to the extent
specifically required by the Loan Documents), protests, notices of
protest and notices of dishonor in connection with the Notes; and (b)
any requirement of diligence or promptness on the part of Bank in
enforcement of its rights under the provisions of any of the Loan
Documents.
9.23 Incorporation by Reference. All schedules, annexes or
--------------------------
other attachments to this Agreement are incorporated into this Agreement
as if set out in full at the first place in this Agreement that
reference is made thereto.
Page 23 of 26
<PAGE>
<PAGE>
9.24 Headings. The headings used in this Agreement are
--------
included for ease of reference only and shall not be considered in the
interpretation or construction of this Agreement.
9.25 Counterpart Execution. This Agreement may be signed by
---------------------
each party upon a separate copy, and in such case one counterpart of
this Agreement shall consist of enough of such copies to reflect the
signature of each party. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement or the terms thereof
to produce or account for more than one of such counterparts.
9.26 Acknowledgment. Borrowers acknowledge that Borrowers have
--------------
received a copy of each of the Loan Documents, as fully executed by the
parties thereto. Borrowers acknowledge that Borrowers (a) have READ THE
LOAN DOCUMENTS OR HAVE CAUSED SUCH DOCUMENTS TO BE EXAMINED BY THE
BORROWERS' REPRESENTATIVES OR ADVISORS; (b) are thoroughly familiar with
the transactions contemplated in this Agreement and the other Loan
Documents; and (c) have had the opportunity to ask such questions to
representatives of the Bank, and receive answers thereto, concerning the
terms and conditions of the transactions contemplated in the Loan
Documents as the Borrowers deem necessary in connection with their
decision to enter into this Agreement.
9.27 Year 2000 Compliance.
--------------------
(a) Representation and Warranties. Borrowers represent
-----------------------------
and warrant to Bank as follows: (i) as of the date of any request for an
Advance under the Loan Documents; (ii) as of the date of any renewal,
extension or modification of the Loan Documents; and (iii) at all times
that the Loan Documents or Bank's commitment to make advances under the
Loan Documents is outstanding all devices, systems, machinery,
information technology, computer software and hardware, and other date
sensitive technology (jointly and severally the "Systems") necessary for
them to carry on their businesses as presently conducted and as
contemplated to be conducted in the future are Year 2000 Compliant or
will be Year 2000 Compliant with a period of time calculated to result
in no material disruption of any of their business operations. For
purposes of these provisions, "Year 2000 Compliant" means that such
Systems are designed to be used prior to, during and after the Gregorian
calendar year 2000 A.D. and will operate during such time period without
error relating to date data, specifically including any error relating
to, or the product of, date data which represents or referenced
different centuries or more than on century.
(b) Affirmative Covenants. Borrowers covenant and agree
---------------------
with Bank that, while any Loan Document is in effect, Borrowers will:
i. Furnish such additional information, statements
and other reports with respect to their activities, course of action and
progress towards becoming Year 2000 Compliant as Bank may request from
time to time;
ii. In the event of any change in circumstances that
causes or will likely cause any of their representations and warranties
with respect to either of them being or becoming Year 2000 Compliant to
no longer be true (hereinafter referred to as a "Change in
Circumstances")
Page 24 of 26
<PAGE>
<PAGE>
promptly, and in any event within ten (10) days of receipt of
information regarding a Change in Circumstances, provide Bank with
written notice (the "Notice") that describes in reasonable detail the
Change in Circumstances and how such Change in Circumstances caused or
will likely cause Borrowers' representations and warranties with respect
to being or becoming Year 2000 Compliant to no longer be true.
Borrowers shall, within ten (10) days of a request, also provide Bank
with any additional information that Bank requests in connection with
the Notice and/or Change of Circumstances; and
iii. Give any representative of the Bank access
during all business hours, and permit such representative to examine,
copy or make excerpts from, any and all books, records and documents in
the possession of any Borrower and relating to its affairs, and to
inspect any of the properties and Systems and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of Bank.
9.28 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and the understanding between and among the parties with
respect to the subject matter hereof and this Agreement supersedes all
previous and contemporaneous negotiations and agreements between the
parties and no parole evidence of any prior or other agreements shall be
permitted to contradict or vary the terms hereof. Borrowers acknowledge
that there have been no promises for additional extensions of time for
payment of the Notes nor have there been any agreements made to provide
additional funding to any party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first set forth above.
BANK ONE, KENTUCKY, NA,
a national banking association
BY: /s/ Mark Boison
--------------------------------------
TITLE: First Vice President
-----------------------------------
"BANK"
UNIFIED FINANCIAL SERVICES, INC.,
a Delaware corporation
BY: /s/ John S. Penn
--------------------------------------
TITLE: Executive Vice President
-----------------------------------
"UNIFIED"
Page 25 of 26
<PAGE>
<PAGE>
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ John R. Owens
--------------------------------------
TITLE: Vice President
-----------------------------------
"COMMONWEALTH"
Page 26 of 26
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into effective as of
the 28th day of December, 1999, by COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation whose address is 220 Lexington Green
Circle, Suite 600, Lexington, Kentucky 40503 (hereinafter referred to
as "Debtor"), and BANK ONE, KENTUCKY, NA, a national banking association
and its successors and assigns, whose address is 416 West Jefferson
Street, Louisville, Kentucky 40202 (hereinafter referred to as "Secured
Party").
IT IS AGREED BY THE PARTIES AS FOLLOWS:
1. For value received, Debtor does hereby grant unto Secured Party a
security interest in and to all the collateral described in
numerical Paragraph 2 hereof to secure all the indebtedness
referred to in numerical Paragraph 3 hereof.
2. The collateral covered by this Security Agreement is (a) all of
Debtor's property described in EXHIBIT "A" hereto and any
-----------
supplemental exhibits thereto, and (b) all proceeds and products
thereof (all of which collateral is hereinafter collectively
referred to as the "Collateral").
3. This Security Agreement is made as collateral security for:
a. the Renewal Revolving Credit Note dated December 28, 1999,
made by Debtor payable to the order of Secured Party in the
original principal amount of $2,500,000.00; and
b. all other liabilities and obligations of whatever kind or
type of Debtor to Secured Party, including any other
guarantees of the Debtor to Secured Party, whether created
directly or acquired by Secured Party by assignment or
otherwise, whether now existing or hereafter created,
arising or acquired, absolute or contingent, joint or
several, due or to become due (the foregoing obligations are
herein collectively referred to as the "Indebtedness").
4. Debtor represents and warrants to Secured Party that:
a. All of the Collateral is used or will be used for business
purposes.
b. (i) Debtor is the absolute owner of the legal and
beneficial title to the Collateral, (exclusive of hereafter
acquired, replacement or hereafter created items), and is in
full possession thereof; and
(ii) except as previously disclosed to Secured Party in
writing, the collateral is free and clear of all liens,
encumbrances and adverse claims whatsoever.
c. Debtor has the right to enter into this Security Agreement.
<PAGE>
<PAGE>
5. Debtor covenants and agrees that:
a. Debtor shall defend the Collateral against all claims and
demands of all persons.
b. Debtor shall not:
(i) permit any loan or security interest (other than
Secured Party's security interest granted herein and those
liens previously disclosed in writing to Secured Party) to
attach to any of the Collateral;
(ii) permit any of the Collateral to be levied upon under
any legal process; or
(iii) dispose of or enter or agree to enter into any sale of
any of the Collateral, without the prior written consent of
Secured Party.
c. Debtor shall insure or have insured the Collateral for the
benefit of Secured Party (who shall be the loss payee) in
such amounts, for such risks and with such company as
Secured Party may request, and promptly deliver all policies
with respect thereto to Secured Party, or in the event
Debtor at any time has not maintained and delivered to
Secured Party such requested policies of insurance, Secured
Party may, in its sole and absolute discretion and whether
or not any Event of Default (as defined in this Security
Agreement) has occurred, place and affect such insurance as
Secured Party deems appropriate, at the Debtor's sole
expense, and in the event Secured Party elects to pay for
such insurance coverage, Debtor shall reimburse Secured
Party for the amount(s) so paid plus interest thereon at the
highest rate charged on any of the Indebtedness mentioned in
Paragraph 3 of this Security Agreement.
d. Debtor shall preserve the value of the Collateral and
maintain the Collateral in good condition, ordinary wear and
tear excepted.
e. Debtor shall advise Secured Party in writing, at least
thirty (30) days prior thereto, of any change in Debtor's
place of business or mailing address, or any changes in the
locations of the Collateral or new locations at which any of
the Collateral is to be located.
f. Debtor shall not conduct business under any other name than
that given above nor change or reorganize the type of
business entity under which it does business except upon
prior written approval of Secured Party which approval shall
not be unreasonably withheld. If such approval is given,
Debtor guarantees that all documents, instruments and
agreements demanded by Secured Party shall be prepared and
filed at Debtor's expense before such change of name or
business entity occurs.
Page -2-
<PAGE>
<PAGE>
g. Debtor shall execute and deliver to Secured Party, upon
request, new UCC-1 Financing Statements describing the same
Collateral specified herein for recordation, where necessary
in Secured Party's sole discretion, to perfect Secured
Party's security interest in the Collateral, and Debtor
shall pay all filing and recording fees and filing and
recording taxes in connection with the filing and/or
recordation of such Financing Statements and, if paid by the
Secured Party, Debtor will reimburse Secured Party therefor
upon demand by Secured Party.
h. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to do all acts and things which Secured
Party may deem necessary or appropriate to perfect and
continue perfected the security interest created by this
Security Agreement and to protect and, in case of an Event
of Default hereunder, collect and sell the Collateral
including, but not limited to, the execution of the
following in Debtor's name as Debtor's irrevocable attorney-
in-fact:
(i) notifications and agreements to sell, where sale is
permitted;
(ii) any documents or papers necessary or helpful to comply
with the terms of any agreements relative to any of the
collateral; and
(iii) UCC-1 (and other) Financing Statements covering the
Collateral, and the filing and recordation of same wherever
Secured Party deems appropriate, with Debtor to reimburse
Secured Party for all filing and recording fees, taxes and
other expenses in connection therewith upon demand of
Secured Party; provided, however, the power of attorney
granted hereby shall survive the disability of the principal
but when all the Indebtedness is fully paid and performed
and Debtor has no obligations to or commitments for loan(s)
from Secured Party, this power of attorney shall become null
and void.
i. The Indebtedness shall be paid to Secured Party in
accordance with the terms of the Renewal Revolving Credit
Note.
j. Debtor shall comply in all respects with any other agreement
between Debtor and Secured Party.
k. Debtor shall permit Secured Party and/or its agents to
inspect and appraise the Collateral and inspect the books
and records of Debtor, at all reasonable times and from time
to time, and shall pay all reasonable expenses Secured Party
may incur in connection with any such inspection(s) and
appraisal(s).
6. Events of Default. The occurrence of any Event of Default as
-----------------
defined in the Loan Agreement or the other Loan Documents (as
defined in the Loan Agreement) shall constitute an Event of
Default hereunder.
Page -3-
<PAGE>
<PAGE>
7. Remedies Upon Occurrence of Default. Upon the occurrence of any
-----------------------------------
Event of Default as defined in Section 6 hereof, Secured Party
shall have the following rights and remedies, in addition to all
other rights and remedies provided by law, at equity or in the
Loan Agreement and any other document or instrument relating to,
securing or evidencing the Indebtedness, all of which shall be
cumulative and may be exercised from time to time, either
successively or concurrently:
a. To notify each account debtor or lessee of the Debtor who
owes receivables or rents to Debtor and direct that all such
receivables or rents be paid directly to Secured Party and
applied to the Indebtedness;
b. To sell all or any of the Collateral in one (1) or more
lots, and from time to time, upon ten (10) days prior
written notice to Debtor of the time and place of sale
(which notice Debtor hereby agrees is commercially
reasonable), for cash or upon credit or for future delivery,
Debtor hereby waiving all rights, if any, of marshaling the
Collateral and any other security for the payment of the
Indebtedness, and at the option and in the complete
discretion of Secured Party, either:
(i) at a public sale or sales, and in one (1) or more
lots; or
(ii) at a private sale or sales, and in one (1) or more
lots.
Secured Party may bid for and acquire the Collateral or any portion
thereof at any public sale, free from any redemption rights of Debtor,
all of which are hereby waived by Debtor.
c. To exercise all rights of a secured party under the Uniform
Commercial Code of Kentucky and all other applicable law.
From time to time, Secured Party may, but shall not be obligated to,
postpone the time of any proposed sale of any of the Collateral, which
has been subject of a notice as provided above, and also, upon ten (10)
days prior written notice to Debtor (which notice Debtor hereby agrees
is commercially reasonable), may change the time and/or place of such
sale.
(i) In the case of any sale by Secured Party of the
Collateral or any portion thereof on credit or for
future delivery, which may be elected at the option
and in the complete discretion of Secured Party, the
Collateral so sold may, at Secured Party's option,
either be transferred and/or delivered to the
purchaser or retained by Secured Party until the
selling price therefor is paid by the purchaser, but
in either event Secured Party shall not incur any
liability to Debtor in case of failure of the
purchaser to pay for the Collateral so sold. In case
of any such failure, such Collateral may be again sold
by Secured Party in the manner provided in this
Paragraph 7.
(ii) After deducting all of Secured Party's costs and
expenses of every kind including, without limitation,
reasonable legal fees and registration fees and
Page -4-
<PAGE>
<PAGE>
expenses, if any, in connection with the sale of the
Collateral, Secured Party shall apply the remainder of
the proceeds of any sale or sales of the Collateral to
the Indebtedness in such order Secured Party may
select in its sole and absolute discretion. All sales
of Collateral shall be made in a commercially
reasonable manner. Secured Party shall not incur any
liability as a result of the sale of the Collateral or
any part thereof at any private sale or sales, and
Debtor hereby waives any claim arising by reason of
(1) the fact that the price or prices for which the
Collateral or any portion thereof is sold at any
private sale or sales is less than the price which
would have been obtained at a public sale or sales or
is less than the Indebtedness, even if Secured Party
accepts the first offer received and does not offer
the Collateral or any portion thereof to more than one
offeree; (2) any delay by Secured Party in selling the
Collateral following an Event of Default hereunder,
even if the price of the Collateral thereafter
declines; or (3) the immediate sale of the Collateral
upon the occurrence of an Event of Default hereunder,
even if the price of the Collateral should thereafter
increase.
8. Miscellaneous.
-------------
a. Secured Party shall be under no duty or obligation to give
Debtor notice of any rights or privileges relating to or
affecting any Collateral held by Secured Party other than
those notices required under the Loan Agreement.
b. All advances, charges, costs and expenses, including
reasonable attorneys' fees to the extent allowed by law,
incurred or paid by Secured Party in exercising any right,
power or remedy conferred by the Renewal Revolving Credit
Note, this Security Agreement or the Loan Agreement, or in
the enforcement thereof, shall become a part of the
Indebtedness secured hereunder and shall be paid to Secured
Party by Debtor immediately and without demand, with
interest thereon at the Default Rate charged on the
Indebtedness.
c. Debtor waives any right to require Secured Party to (a)
proceed against any person, (b) proceed against or exhaust
any Collateral, or (c) pursue any other remedy in Secured
Party's power.
d. Secured Party may, at any time, deliver the Collateral or
any part thereof to Debtor and the receipt of Debtor shall
be a complete and full acquittance for the Collateral so
delivered and Secured Party shall thereafter be discharged
from any liability or responsibility therefor.
e. This is a continuing Security Agreement and all the rights,
powers and remedies hereunder shall apply to all past,
present and future Indebtedness of Debtor to Secured Party,
including that arising under successive transactions which
shall either continue, increase or decrease the
Indebtedness, or from time to time create new Indebtedness
after all or any prior Indebtedness has been satisfied.
Page -5-
<PAGE>
<PAGE>
f. Until all of the Indebtedness shall have been paid in full,
the power of sale and all other rights, powers and remedies
granted to Secured Party hereunder shall continue to exist
and may be exercised by Secured Party at any time.
g. The rights, powers and remedies given to Secured Party by
this Security Agreement shall be in addition to all rights,
powers and remedies given to Secured Party by virtue of the
Loan Agreement, any other prior Security Agreements, any
other agreement relating to the Indebtedness, and any
statute or rule of law. Secured Party may exercise its
right of setoff with respect to the Indebtedness in the same
manner as if the Indebtedness were unsecured. Any
forbearance or failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and
any single or partial exercise of any right, power or remedy
hereunder shall not preclude the further exercise thereof;
and every right, power and remedy of Secured Party shall
continue in full force and effect until such right, power or
remedy is specifically waived by an instrument in writing
executed by Secured Party.
h. In all cases where more than one party executes this
Security Agreement, all words used herein in the singular
shall be deemed to have been used in the plural where the
context and construction so require, and the obligations and
undertakings hereunder are joint and several.
i. The law of the Commonwealth of Kentucky applies to this
Agreement and its construction and interpretation.
j. This Security Agreement shall bind Debtor and its successors
and assigns and shall inure to the benefit of Secured Party
and its successors and assigns.
k. Time shall be of the essence in the performance of each and
every one of the obligations hereunder.
l. All covenants, representations, warranties, remedies and
other terms provided in the Loan Agreement are incorporated
herein by reference.
m. All notices and other communications given to or made upon
any party hereto in connection with this Security Agreement,
the Renewal Revolving Credit Note or any of the other Loan
Documents shall, except as herein or therein otherwise
expressly provided, be in writing, sent by certified or
registered U.S. mail return receipt requested, as follows:
(i) if to Debtor, at the address set forth hereinabove or at
such other address as shall be designated by Debtor and (ii)
if to Secured Party, at the address set forth hereinabove or
at such other address as shall be specifically designated by
Secured Party with a copy to Charles H. Binger, Thompson
Coburn LLP, One Mercantile Center, Suite 3400, St. Louis,
Missouri 63101.
Page -6-
<PAGE>
<PAGE>
n. In the event that any one or more of the provisions
contained herein shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provision hereof, shall not in any way impair or preclude
enforcement of rights or remedies of Secured Party under
Chapter 355 of the Kentucky Revised Statutes, or other
applicable law and this Security Agreement shall be
construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
9. This Security Agreement may, in the sole discretion of Secured
Party, be filed as a financing statement and Debtor agrees to also
execute any additional financing statements with respect hereto
which may be requested by Secured Party. Secured Party may, in
its sole discretion, provide this Security Agreement or any other
document executed pursuant hereto or in connection herewith to any
person or organization which is in any manner involved with any or
all of the Collateral. Secured Party shall be entitled to notify
the person in possession of the Collateral, or any other person
Secured Party deems appropriate, of the security interest herein
granted and to notify such person or entity to forward all
documents and payments with respect to the Collateral to Secured
Party and otherwise, as Secured Party deems appropriate.
IN TESTIMONY WHEREOF, witness the signature of the parties hereto,
to be effective the day, month and year first above written.
BANK ONE, KENTUCKY, NA,
a national banking association
BY: /s/ Mark Boison
--------------------------------------
TITLE: First Vice President
-----------------------------------
"SECURED PARTY"
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ John R. Owens
--------------------------------------
TITLE: Vice President
-----------------------------------
"DEBTOR"
Page -7-
<PAGE>
<PAGE>
EXHIBIT "A" TO FINANCING STATEMENT AND/OR SECURITY AGREEMENT
------------------------------------------------------------
This property covered by this Financing Statement and/or Security
Agreement includes all of the Debtor's right, title and interest in, to
and under the following described property, whether now owned or
hereafter acquired by the Debtor, and whether now existing or hereafter
created, arising, accruing, incurred or entered into (all of which
hereinafter collectively called the "Collateral"):
1. Each and every "Account", as such term is defined in the Uniform
Commercial Code of the State of Kentucky, and in any event shall
include, but not be limited to, all of the Debtor's rights to payment
for goods sold or leased or services performed by the Debtor whether now
in existence or arising from time to time hereafter, including, without
limitation, rights evidenced by an account, accounts receivables, note,
contract, security agreement, chattel paper, or other evidence of
indebtedness or security, whether or not such right(s) to payment has
been earned by performance, and whether or not such right(s) to payment
is evidenced by any document, instrument or chattel paper, together with
(a) all security pledged, assigned, hypothecated or granted to or held
by the Debtor to secure the foregoing, (b) all of the Debtor's right,
title and interest in and to any goods, the sale of which gave rise
thereto, (c) all guarantees, endorsements and indemnifications on, or
of, any of the foregoing, (d) all powers of attorney for the execution
of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, correspondence, credit files,
records, ledger cards, invoices, and other papers relating thereto,
including, without limitation, all tapes, cards, computer runs and other
papers and documents in the possession or under the control of the
Debtor or any computer bureau from time to time acting for the Debtor,
(f) all evidences of the filing of financing statement and other
statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured
parties, and certificates from filing or other registration officers,
(g) all credit information, reports and memoranda relating thereto, and
(h) all other writings related in any way to the foregoing.
2. All "Chattel Paper", as such term is defined in the Uniform
Commercial Code in the state of Kentucky, in which Debtor now has or
hereafter acquires any rights and wherever located and, in any event,
shall include a writing or writings which evidence both a monetary
obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or
writings and all proceeds (in any form including, without limitation,
accounts, contract rights, documents, chattel paper, instruments and
general intangibles) of such returned, rejected or repossessed goods.
3. All of the inventory of the Debtor of every type or description,
now owned or hereafter acquired and wherever located, whether raw, in
process or finished, all materials usable in processing the same and all
documents of title covering any inventory, including, but not limited
to, work in process, materials used or consumed in the Debtor's
business, now owned or hereafter acquired or manufactured by the Debtor
and held for sale or lease or to be furnished under a contract of
service in the ordinary course of its business; all present and future
substitutions therefor, parts and accessories thereof and all additions
thereto; all proceeds thereof and products of such inventory in
Page -1-
<PAGE>
<PAGE>
any form whatsoever; specifically including all "inventory", as such
term is defined in the Uniform Commercial Code of the State of Kentucky.
4. All "Instruments" of Debtor, as such term is defined in the
Uniform Commercial Code of the State of Kentucky and in Kentucky Revised
Statutes Subsection 355.9-105(1)(g), and shall include but not be
limited to any and all negotiable instruments (defined in Kentucky
Revised Statutes Subsection 355.3-104) or certified securities (defined
in Kentucky Revised Statutes 355.8-102) or any other writings which
evidence a right to payment of money and are not themselves security
agreements or leases and are of the type which are in the ordinary
course of business transferred by delivery with any necessary
endorsement or assignment.
5. All "Equipment", as such term is defined in the Uniform Commercial
Code of the State of Kentucky, now or hereafter owned or leased by the
Debtor and, in any event, shall include, but shall not be limited to,
all machinery, tools, equipment, office equipment, furniture,
furnishings, fixtures, trade fixtures, goods which are to become
fixtures, and any materials, instructions, blueprints, computer software
and similar items which relate to the above, and any and all additions,
substitutions and replacements of any of the foregoing, wherever
located, together with all improvements thereon and all attachments,
components, parts, equipment and accessories installed thereon or
affixed thereto (all of the foregoing in this section collectively, the
"Equipment").
6. All "General Intangibles", as such term is defined in the Uniform
Commercial Code of Kentucky and in Kentucky Revised Statutes Subsection
355.9-106, now or hereafter owned by the Debtor and shall include, but
not be limited to, all (a) Marks, Patents and Copyrights (as such terms
are hereinafter defined), (b) goodwill of the Debtor's business
symbolized by any of the foregoing, (c) license rights, license
agreements, leases, permits, franchises, patents, computer software and
customer lists, and (d) any rights to tax refunds to which the Debtor is
now or hereafter may be entitled.
7. All trademarks, trademark registrations and trademark applications
pending, now held or hereafter acquired by the Debtor, including,
without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or any similar governmental
agency in any foreign country (which the Debtor has adopted and used and
is using or hereafter acquires or under which the Debtor is licensed),
as well as all other trademarks, trade names, fictitious business names,
business names, company names, business identifiers, prints, labels,
trade styles and service marks not registered, and trade dress,
including logos and/or designs (all of the foregoing in this section
collectively, the "Marks") together with the registrations and right to
all renewals, reissues and extensions thereof, the goodwill of the
business of the Debtor symbolized by the Marks, and any and all causes
of action which may exist by reason of infringement or dilution thereof,
or injury to the associated goodwill with the right to sue for and
collect said damages and the right to collect all royalties under any
license agreements with respect to any such Marks.
8. All copyrights, copyright registrations and copyright applications
now held or hereafter acquired by the Debtor including, without
limitation, any United States copyright to which the Debtor now or
hereafter has an interest as well as any application for a United States
copyright made
Page -2-
<PAGE>
<PAGE>
by the Debtor (all of the foregoing in this section collectively, the
"Copyrights"), together with any renewals, reissues and extensions
thereof, and any and all causes of action which may exist by reason of
infringement thereof with the right to sue for and collect said damages
and the right to collect all royalties under any license agreements with
respect to any such Copyrights.
9. All letters patent and any patent registrations, and any patent
applications pending, including, without limitation, registrations,
recordings and applications registered or recorded in the United States
Patent and Trademark Office or any similar governmental agency in any
foreign country (all of the foregoing in this section collectively, the
"Patents"), in respect of which the Debtor possesses any rights
whatsoever, together with any renewals, reissues, continuations and
extensions thereof, any and all causes of action which may exist by
reason of infringement thereof with the right to sue for and collect
said damages and the right to collect all royalties under any license
agreements with respect to any such Patents.
10. Each and every contract to which the Debtor is a party, is bound
or is a beneficiary or assignee, and all exhibits to such contracts and
all other instruments, agreements and documents executed and delivered
with respect to such contracts and all revenues, rentals, Proceeds (as
hereinafter defined) and other sums of money due and to become due
thereunder from any of the foregoing, as the same may be modified,
supplemented or amended from time to time in accordance with its terms,
as well as all contracts to which the Debtor may hereafter from time to
time become a party, become bound, or become a beneficiary or assignee
(all of the foregoing in this section collectively the "Contracts")
including, without limitation, (a) any leases relating to the Inventory,
the Equipment, any licenses, any personal property and assets in the
nature of personal property wheresoever situated to which the Debtor is
a party or is bound, as well as all renewals, substitutions and
replacements therefor and all other leases to which the Debtor may
hereafter from time to time become a party or become bound
(collectively, the "Leases"); (b) (1) all payments due and to become due
under any Contract, whether as contractual obligations, damages or
otherwise; (2) all of the Debtor's claims, rights, powers, or privileges
and remedies under any Contract and under any Lease and, to the extent
permitted by the lessor under any such Lease, the right to cure a
default by Debtor under any such Lease; and (3) all of its rights under
any Contract or under any Lease to make determinations, to exercise any
election (including, but not limited to, election of remedies) or option
or to give or receive any notice, consent, waiver or approval together
with full power and authority with respect to any Contract to demand,
receive, enforce, collect or receipt for any of the foregoing rights or
any property the subject of any of the Contracts, to enforce or execute
any checks, or other instruments or orders, to file any claims and to
take any action which may be necessary or advisable in connection with
any of the foregoing; (c) all of Debtor's right, title and interest in,
to and under each and every IPFA (as defined in the Loan Agreement) and
all rights and privileges thereunder; and (d) all contract rights under
any of the foregoing.
11. All amounts from time to time held in any checking, savings,
deposit or other account of the Debtor, which amounts are "cash
collateral" as defined in the U.S. Bankruptcy Code, 11 U.S.C. Section
363.
Page -3-
<PAGE>
<PAGE>
12. All licenses and permits issued by any federal, state, municipal,
or other governmental department, commission, board, bureau, agency,
court, tribunal or other instrumentality, domestic or foreign, and any
arbitrator.
13. All computer programs of the Debtor, and all intellectual property
rights therein and all other proprietary information of the Debtor
including, but not limited to, trade secrets.
14. All books, records, ledger cards, data processing records,
computer software and other property at any time evidencing or relating
to any of the foregoing.
15. Without limiting the generality of the foregoing, all other
personal property, goods (including without limitation consumer goods),
"farm products","documents" (as such terms are defined in the Uniform
Commercial Code of the State of Kentucky), credits, claims, demands and
assets of the Debtor, whether now existing or hereafter acquired from
time to time.
16. All "Proceeds", as such term is defined in the Uniform Commercial
Code of the State of Kentucky, and in any event shall include, but not
be limited to, (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Secured Party or the Debtor, from time
to time, and claims for insurance, indemnity, warranty or guaranty
effected or held for the benefit of the Debtor, with respect to any of
the Collateral (as hereinafter defined), (b) any and all payments (in
any form whatsoever) made or due and payable to the Debtor, from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority) and (c) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral (all of the
foregoing in this section 16, collectively, the "Proceeds").
17. Any and all additions and accessions to any of the foregoing, all
improvements thereto, all substitutions and replacements thereof and all
products and Proceeds thereof.
The undersigned confirms that this
Exhibit is part of a security
agreement and financing statement
signed by it:
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ John R. Owens
--------------------------------------
TITLE: Vice President
-----------------------------------
Page -4-
<PAGE>
STOCK PLEDGE AND SECURITY AGREEMENT
-----------------------------------
THIS STOCK PLEDGE AND SECURITY AGREEMENT is made and entered into
effective as of December 28, 1999, by and between UNIFIED FINANCIAL
SERVICES, INC., a Delaware corporation, whose address is 220 Lexington
Green Circle, Suite 600, Lexington, Kentucky 40503 (hereinafter called
"Obligor"), and BANK ONE, KENTUCKY, NA, a national banking association,
whose address is 416 West Jefferson Street, Louisville, KY 40202
(hereinafter called "Secured Party").
W I T N E S S E T H :
-------------------
That, for and in consideration of credit extended by Secured
Party, the parties do hereby agree as follows:
1. Deposit and Pledge of Stock. As collateral security for:
---------------------------
(a) Obligor's Guaranty to Secured Party dated as of
December 28, 1999 whereby the Obligor guaranteed the payment of the
obligations provided for in Obligor's Guaranty dated of even date to the
maximum amount of $2,500,000.00, plus interest, fees, charges and costs
as provided therein;
(b) that certain Term Note dated as of December 28, 1999
made by Obligor payable to the order of Secured Party in the original
principal amount of $2,293,750.00; and
(c) all other liabilities and obligations of whatever kind
or type of Obligor to Secured Party, including any other guarantees of
Obligor to Secured Party, whether created directly or acquired by
Secured Party by assignment or otherwise, whether now existing or
hereafter created, arising or acquired, absolute or contingent, joint or
several, due or to become due (the foregoing obligations are herein
collectively referred to as the "Indebtedness")
Obligor, pursuant to the provisions of the Uniform Commercial Code of
the State of Kentucky, hereby grants to Secured Party a first and prior
security interest in and lien on all of the following (all of which is
hereinafter collectively called the "Collateral"):
(a) all property delivered to and deposited with Secured Party
or its designee/bailee, including all of the property specified on
SCHEDULE "A" attached hereto and incorporated herein by
------------
reference (the "Stock");
(b) all money and property heretofore delivered to, or which
shall hereafter be delivered by Obligor to or under the custody or
control of Secured Party in any manner or for any purpose whatever
during the existence of this Security Agreement, and whether held
in a general or special account or deposit or for safekeeping or
otherwise; and
(c) together with any and all stock rights, rights to subscribe,
liquidating dividends, stock dividends, dividends paid in stock,
new securities or other property to which Obligor is or may
hereafter become entitled to receive on account of any or all of
the Stock or such other
<PAGE>
<PAGE>
property, and in the event that Obligor hereafter receives any
such rights, dividends, new securities or other property, Obligor
will immediately deliver such property to Secured Party to be held
by Secured Party hereunder in the same manner as the property
originally delivered hereunder.
2. Delivery of Stock Power Agreements. Contemporaneously
----------------------------------
with the execution of this Security Agreement, the Obligor shall deliver
to Secured Party duly executed irrevocable stock power agreements with
respect to the aforementioned Stock, subject to the provisions contained
in this Agreement, to the extent same have not already been delivered to
Secured Party.
3. Voting. So long as there is no default in the payment and
------
performance of the Indebtedness or of any of the terms, provisions and
conditions of this Security Agreement, the Loan Agreement, or any other
agreement securing repayment of the Indebtedness, Obligor shall be
entitled to vote the Stock pledged, provided, however, upon the
occurrence of an Event of Default as defined in Section 7 hereof,
Secured Party shall be entitled to vote the Stock pledged hereunder.
4. Status of Stock. Obligor hereby represents and warrants
---------------
to Secured Party that (a) the Stock described on SCHEDULE "A" is
------------
validly issued and outstanding, is fully paid and nonassessable, and
Obligor is the registered, absolute, legal and beneficial owner of all
shares of the Stock, free and clear of all liens, charges, equities and
encumbrances, except for the lien and encumbrance created by this
Security Agreement; and (b) Obligor has the full power and authority to
pledge the Stock to Secured Party pursuant to this Security Agreement,
and, subject to the Securities Act of 1933, as amended, and state blue
sky laws, the Stock is not subject to any restrictions imposed by law,
regulation, agreement or otherwise against public or private sale.
5. Maintenance of Priority of Pledge. Obligor shall be
---------------------------------
liable for, and shall from time to time pay and discharge, all
intangible and other taxes, assessments and governmental charges imposed
upon any of the Stock by any federal, state or local authority, the
liens of which would or might be held prior to the security interest and
rights of Obligor in and to the Stock. Obligor shall not, at any time
while this Security Agreement is in effect, do or suffer any act or
thing whereby the rights of Secured Party in and to the Stock would or
might be impaired or diminished. Obligor shall execute and deliver such
further documents and instruments and take such further actions as may
be required to confirm the rights of Secured Party in and to the Stock
or otherwise to effectuate the intention of this Security Agreement.
6. Transfer of Encumbrance of the Stock. Obligor shall not
------------------------------------
transfer, sell, pledge, assign or further encumber the Stock or any part
thereof without the prior written consent of Secured Party, which
consent may be withheld by Secured Party for any reason whatsoever so
long as this Security Agreement is in effect. Obligor shall not vote
the Stock in favor of any merger, consolidation, share exchange
agreement, reorganization or other business combination involving,
relating to or affecting Equity Underwriting Group, Inc. ("EUG"), or in
favor of any amendment to the Articles or Incorporation of EUG whereby
EUG would be authorized to issue any additional capital stock or
securities convertible into or exchangeable for any capital stock of EUG
without the prior written consent of Secured Party.
Page -2-
<PAGE>
<PAGE>
7. Events of Default. The occurrence of any Event of Default
-----------------
as defined in the Loan Agreement shall constitute an Event of Default
hereunder.
8. Remedies Upon Occurrence of Default.
-----------------------------------
a. Upon the occurrence of any Event of Default as defined
in Section 7 hereof, Secured Party shall have the following rights and
remedies, in addition to all other rights and remedies provided by law
or at equity, the Loan Agreements and any other document or instrument
relating to, securing or evidencing the Indebtedness, all of which shall
be cumulative and may be exercised from time to time, either
successively or concurrently:
(i) To sell all or any of the Stock in one (1) or
more lots, and from time to time, upon ten (10) days prior written
notice to Obligor of the time and place of sale (which notice Obligor
hereby agrees is commercially reasonable), for cash or upon credit or
for future delivery, Obligor hereby waiving all rights, if any, of
marshaling the Stock and any other security for the payment of the
Indebtedness, and at the option and in the complete discretion of
Secured Party, either:
(a) at a public sale or sales, including a
sale at or over any broker's board or exchange, and in one (1) or more
lots; or
(b) at a private sale or sales, and in one (1)
or more lots.
Secured Party may bid for and acquire the Stock
or any portion thereof at any public sale, free from any redemption
rights of Obligor, all of which are hereby waived by Obligor.
(ii) To exercise all rights of a secured party under
the Uniform Commercial Code of Kentucky and all other applicable law.
From time to time, Secured Party may, but shall not be obligated
to, postpone the time of any proposed sale of any of the Stock, which
has been subject of a notice as provided above, and also, upon ten (10)
days prior written notice to Obligor (which notice Obligor hereby agrees
is commercially reasonable), may change the time and/or place of such
sale.
b. In the case of any sale by Secured Party of the Stock
or any portion thereof on credit or for future delivery, which may be
elected at the option and in the complete discretion of Secured Party,
the Stock so sold may, at Secured Party's option, either be transferred
and/or delivered to the purchaser or retained by Secured Party until the
selling price therefor is paid by the purchaser, but in either event
Secured Party shall not incur any liability to Obligor in case of
failure of the purchaser to pay for the Stock so sold. In case of any
such failure, such Stock may be again sold by Secured Party in the
manner provided in this Paragraph 8.
Page -3-
<PAGE>
<PAGE>
c. After deducting all of Secured Party's costs and
expenses of every kind including, without limitation, reasonable legal
fees and registration fees and expenses, if any, in connection with the
sale of the Stock, Secured Party shall apply the remainder of the
proceeds of any sale or sales of the Stock to the Indebtedness in such
order Secured Party may select in its sole and absolute discretion. All
sales of Stock shall be made in a commercially reasonable manner.
Secured Party shall not incur any liability as a result of the sale of
the Stock or any part thereof at any private sale or sales, and Obligor
hereby waives any claim arising by reason of (i) the fact that the price
or prices for which the Stock or any portion thereof is sold at any
private sale or sales is less than the price which would have been
obtained at a public sale or sales or is less than the Indebtedness,
even if Secured Party accepts the first offer received and does not
offer the Stock or any portion thereof to more than one offeree; (ii)
any delay by Secured Party in selling the Stock following an Event of
Default hereunder, even if the price of the Stock thereafter declines;
or (iii) the immediate sale of the Stock upon the occurrence of an Event
of Default hereunder, even if the price of the Stock should thereafter
increase.
9. Miscellaneous.
-------------
a. Secured Party shall be under no duty or obligation to
give Obligor notice of, or to exercise, any subscription rights or
privileges, any rights or privileges to exchange, convert or redeem or
any other rights or privileges relating to or affecting any Collateral
held by Secured Party other than those notices required under the Loan
Agreements.
b. All advances, charges, costs and expenses including
reasonable attorney's fees, to the extent allowed by law, incurred or
paid by Secured Party in exercising any right, power or remedy conferred
by the Notes, the Security Agreements or the Loan Agreement, or in the
enforcement thereof, shall become a part of the indebtedness secured
hereunder and shall be paid to Secured Party by Obligor immediately and
without demand, with interest thereon at twelve (12%) percent per annum,
or at the highest rate charged on any of the Indebtedness, whichever
rate is greater.
c. Obligor waives any right to require Secured Party to
(a) proceed against any person, (b) proceed against or exhaust any
Collateral, or (c) pursue any other remedy in Secured Party's power.
d. Secured Party may at any time deliver the Collateral
or any part thereof to Obligor and the receipt of Obligor shall be a
complete and full acquittance for the Collateral so delivered, and
Secured Party shall thereafter be discharged from any liability or
responsibility therefor.
e. This is a continuing Security Agreement and all the
rights, powers and remedies hereunder shall apply to all past, present
and future Indebtedness of Obligor to Secured Party, including that
arising under successive transactions which shall either continue,
increase or decrease the Indebtedness, or from time to time create new
Indebtedness after all or any prior Indebtedness has been satisfied.
Page -4-
<PAGE>
<PAGE>
f. Until all of the Indebtedness shall have been paid in
full the power of sale and all other rights, powers and remedies granted
to Secured Party hereunder shall continue to exist and may be exercised
by Secured Party at any time.
g. The rights, powers and remedies given to Secured Party
by this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of the Loan Agreement, any
other prior Security Agreements, any other agreement relating to the
indebtedness, and any statute or rule of law. Secured Party may
exercise its right of setoff with respect to the Indebtedness in the
same manner as if the Indebtedness were unsecured. Any forbearance or
failure or delay by Secured Party in exercising any right, power or
remedy hereunder shall not be deemed to be a waiver of such right, power
or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof; and
every right, power and remedy of Secured Party shall continue in full
force and effect until such right, power or remedy is specifically
waived by an instrument in writing executed by Secured Party.
h. In all cases where more than one party executes this
Security Agreement, all words used herein in the singular shall be
deemed to have been used in the plural where the context and
construction so require, and the obligations and undertakings hereunder
are joint and several.
i. The law of the Commonwealth of Kentucky applies to
this Agreement and its construction and interpretation.
j. This Security Agreement shall bind Obligor and its
successors and assigns and shall inure to the benefit of Secured Party
and its successors and assigns.
k. Time shall be of the essence in the performance of
each and every one of the obligations hereunder.
l. All notices and other communications given to or made
upon any party hereto in connection with this Security Agreement, the
Notes or any other Loan Documents shall, except as herein or therein
otherwise expressly provided, be in writing, sent by certified or
registered mail return receipt requested, as follows:
If to Obligor: Unified Financial Services, Inc.
220 Lexington Green Circle, Suite 600
Lexington, KY 40503
ATTN: Chief Operating Officer
with a copy to: Charles H. Binger
Thompson Coburn LLP
One Mercantile Ctr, Ste 3400
St. Louis, MO 63101
If to Secured Party: Bank One, Kentucky, NA
416 West Jefferson Street
Louisville, KY 40202
with a copy to: Mark Boison
Bank One, Kentucky, NA
201 East Main Street
Lexington, KY 40507
Page -5-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Security Agreement effective as of the 28th day of December, 1999.
BANK ONE, KENTUCKY, NA
BY: /s/ Mark Boison
-------------------------------------------
TITLE: First Vice President
----------------------------------------
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ John S. Penn
-------------------------------------------
TITLE: Executive Vice President
----------------------------------------
Page -6-
<PAGE>
<PAGE>
SCHEDULE "A"
------------
Certificate No. No. Of Shares
--------------- -------------
Equity Underwriting Group, Inc. 14 1,000
<PAGE>
GUARANTY OF PAYMENT AND PERFORMANCE
-----------------------------------
("Guaranty")
Dated as of December 28, 1999
1. FOR VALUE RECEIVED and in order to induce BANK ONE, KENTUCKY,
NA, a national banking association, and its successors and assigns, 416
West Jefferson Street, Louisville, Kentucky 40202 (the "Bank"), to enter
into that certain Loan Agreement of even date and to continue to extend
credit to COMMONWEALTH PREMIUM FINANCE CORPORATION (the "Borrower"), the
undersigned, UNIFIED FINANCIAL SERVICES, INC. (the "Guarantor") does
hereby personally and unconditionally guarantee to the holder of the
Renewal Revolving Credit Note dated as of December 28, 1999, and made by
Borrower payable to the order of Bank in the original principal amount
of $2,500,000.00 (the "Note") the due and punctual payment of all
installments of principal and interest now or in the future due under
the Note, as and when the same shall be due and payable thereunder in
accordance with its terms, and whether the same be declared due by the
holder of the Note prior to its stated maturity date by virtue of
default thereunder. The undersigned further guarantees the prompt
performance by Borrower of all non-monetary undertakings, covenants and
agreements to be performed by Borrower under the Note.
2. Guarantor consents and agrees that the whole or any part of
the security now or hereafter held for the Note may be exchanged,
compromised, surrendered or released from time to time; that the time or
place of payment of the Note or of any security therefor may be
exchanged or extended, in whole or in part, to a time certain or
otherwise, and the Note may be renewed or accelerated, in whole or in
part; that Borrower may be extended further loans and be granted
indulgences generally; that any of the provisions of the Note, or of any
instrument securing or pertaining to the security for the same, may be
modified or waived (either expressly or through tacit acquiescence);
that any party liable for the payment of the Note may be granted
indulgences or released; that neither the death, insolvency, bankruptcy,
dissolution, nor disability of Borrower or of Guarantor shall affect the
obligations hereunder of Guarantor; that no claim need be asserted
against the personal representatives, guardian, trustee in bankruptcy or
receiver of any deceased, incompetent, bankrupt or insolvent Borrower or
guarantor; that any deposit balance to the credit of Borrower, Guarantor
or any other party liable for payment of the Note or liable upon any
security therefor may be released from time to time in whole or in part,
at, before or after the stated, extended or accelerated maturity date of
the Note; and that the undersigned Guarantor shall remain bound
hereunder, notwithstanding any such exchange, compromise, surrender,
extension, renewal, acceleration, modification, waiver, indulgence,
release or other action, all of which may be affected without notice to
or further assent or agreement by Guarantor.
3. Guarantor expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment and demand for payment of the Note;
(c) Protest and notice of protest, dishonor or
default to Guarantor or to any other party with
respect to the Note or any security for the Note;
(d) Demand for payment under this Guaranty;
<PAGE>
<PAGE>
(e) Notice of disposition of any security for the
Note; and
(f) All rights of indemnity, exoneration,
reimbursement, contribution and/or subrogation
of Guarantor against Borrower.
4. This is a guaranty of payment as to monetary obligations and
not of collection. The liability of Guarantor under this Guaranty shall
be direct and immediate and not conditional or contingent upon the
pursuit of any remedies against Borrower or any other guarantor or other
person nor against the security or liens available to the holder for the
payment of the Note. Guarantor waives any claim to marshaling of assets
and waives any right to require that an action be brought against
Borrower or any other person prior to action against Guarantor hereunder
and waives any right to require that resort be had to any security for
the Note or to any balance of any deposit account or credit on the books
of the holder of the Note in favor of Borrower or any other party prior
to action by the holder of the Note against Guarantor hereunder. If the
Note is partially paid through the election of the holder thereof to
pursue any of the remedies mentioned in this literary paragraph or if
the Note is otherwise partially paid, Guarantor shall remain personally
liable for the entire unpaid principal balance of, and all accrued
interest on, the Note.
5. The Note shall constitute the primary independent and
continuing obligation of Guarantor, who shall be liable for payment of
the debt evidenced by the Note, notwithstanding the partial or total
invalidity of the Note.
6. The obligations of Guarantor under this Guaranty shall not be
subject to any counterclaim, set off, deduction or defense based upon
any claim Guarantor may have against Borrower or Bank, and the
obligations of Guarantor under this Guaranty shall remain in full force
and effect, without regard to, and shall not be released, discharged or
in any way modified or affected by, any circumstance or condition
(whether or not Guarantor shall have any knowledge or notice thereof)
including, but not limited to, any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceeding with respect to Borrower or its properties or its
creditors, or any action taken by any trustee or receiver or by any
court in any such proceeding.
7. In the event of any default by Borrower under the Note,
Guarantor shall pay to Bank, to the extent allowable by law, such
further amount as shall be sufficient to fully reimburse Bank for all of
its costs and expenses of enforcing its rights and remedies under the
Note including, without limitation, Bank's reasonable attorneys' fees
and court costs, and all of same shall be evidenced by the Note and this
Guaranty.
8. This Guaranty shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, without reference
to its principles of conflicts of laws.
9. GUARANTOR HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR
AMONG THEM ARISING OUT OF OR IN ANY WAY
Page -2-
<PAGE>
<PAGE>
RELATED TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP
BETWEEN BANK AND BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT TO
BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN
DOCUMENTS.
10. Guarantor agrees that the sole proper venue for the
determination of any litigation commenced by either Guarantor or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Guarantor expressly waives
any right to a determination of any such litigation against Guarantor by
a court in any other venue. Guarantor further agrees that service of
process by any judicial officer or by registered or certified U.S. mail
shall establish personal jurisdiction over Guarantor, and Guarantor
waives any rights under the laws of any state to object to jurisdiction
within the Commonwealth of Kentucky. The aforesaid means of obtaining
personal jurisdiction and perfecting service of process are not intended
to be exclusive, but are cumulative and in addition to all other means
of obtaining personal jurisdiction and perfecting service of process now
or hereafter provided by the laws of the Commonwealth of Kentucky or by
any other state in an action brought by Bank in such state. Provided,
however, nothing herein shall in any way be deemed to limit the ability
of Bank to serve any writs, process or summons in any other manner
permitted by applicable law or to obtain jurisdiction over Guarantor in
such other jurisdictions and in such manner as may be permitted by
applicable law.
11. The undersigned does hereby agree and acknowledge that the
maximum aggregate liability of Guarantor shall be the sum of Two Million
Five Hundred Thousand and 00/100 Dollars ($2,500,000.00), plus interest
accruing on said amount, plus fees, charges and costs of collecting the
guaranteed indebtedness (including reasonable attorneys' fees).
12. This Guaranty shall terminate on June 30, 2000. Provided,
however, the undersigned acknowledges and agrees that such termination
shall not affect its liability with respect to: (a) obligations created
or incurred prior to such date (which specifically includes the Note),
or (b) extensions or renewals of, interest accruing on, or fees, costs
or expenses incurred with respect to such obligations (which
specifically includes the Note), on or after such date.
13. If any payment made on the Note shall be required to be
repaid or refunded by Bank as a result of any bankruptcy or insolvency
of Borrower or of Guarantor or by virtue of any claim of preference,
invalidity, unenforceability or right of rescission, Guarantor hereby
acknowledges and agrees that Guarantor shall remain liable for the
amount of such payment refunded, to the extent provided herein, as if
such payment had never been made by Borrower or by Guarantor to Bank.
14. This Guaranty shall remain fully enforceable irrespective of
any claim, defense or counterclaim which Borrower may or could assert as
to the Note including, but not limited to, failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations,
fraud, bankruptcy, and usury, all of which Guarantor hereby waives along
with any standing by Guarantor to assert any said claim, defense or
counterclaim. This Guaranty is in addition to and not in lieu of, nor
does it supercede, any prior Guaranties signed by Guarantor.
Page -3-
<PAGE>
<PAGE>
15. Guarantor has, to its satisfaction, independently
investigated: (a) Borrower's credit history; (b) Borrower's payment
history with Bank; (c) Borrower's past, current and projected financial
condition; and (d) the sufficiency of any collateral supporting
Borrower's obligations under the Note. Guarantor represents and
warrants that it has relied exclusively on his own independent
investigation of Borrower for its decision to guarantee the Note.
Guarantor agrees that it has sufficient knowledge of Borrower to make an
informed decision about this Guaranty, and that Bank has no duty or
obligation to disclose any information in its possession or control
about Borrower to Guarantor.
16. In the event that any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this
Guaranty shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
17. The provisions of this Guaranty shall be binding upon
Guarantor and its, successors, and assigns and shall inure to the
benefit of the holder of the Note, and its successors, endorsees and
assigns.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty to be
effective as of the date and year first above written.
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ John S. Penn
--------------------------------------
TITLE: Executive Vice President
-----------------------------------
Page -4-
<PAGE>
RENEWAL REVOLVING CREDIT NOTE
-----------------------------
("Note")
COMMONWEALTH PREMIUM FINANCE CORPORATION
a Kentucky corporation
220 Lexington Green Circle, Suite 600
Lexington, Kentucky 40503
$2,500,000.00
DATE: December 28, 1999
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, COMMONWEALTH PREMIUM FINANCE CORPORATION
("Borrower"), promises to pay to the order of BANK ONE, KENTUCKY, NA, a
national banking association (the "Bank"), the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($2,500,000.00) or so
much thereof as may be advanced by Bank and outstanding from time to
time under this Note pursuant to the Loan Agreement between Borrower and
Bank dated as of December 28, 1999 (the "Loan Agreement") and to pay
interest from the date hereof on such principal amount from time to time
outstanding at the per annum rate equal to the Prime Rate of interest as
declared by Bank from time to time and adjusted daily, all of such
payments to be made in lawful money of the United States of America in
immediately available funds, without defalcation. "Prime Rate" of
interest as used herein means a variable rate of interest announced from
time to time by Bank as its prime rate whether or not such rate is
otherwise published, which rate may not be Bank's lowest or best rate;
provided, that in the event this Note is assigned to another holder
which is a commercial bank, Prime Rate shall mean the reference rate of
interest established by such subsequent holder from and after the date
of such assignment, as its prime rate from time to time. The Prime Rate
shall be adjusted each time and at the time the Bank's prime rate
changes.
2. This Note represents a renewal, and not a novation, of that
certain Renewal Revolving Credit Note dated June 20, 1999. All terms
not otherwise defined herein shall have the same meaning given to them
in the Loan Agreement. Advances under this Note shall only be made in
accordance with the terms and conditions set forth in the Loan Agreement
and provided that no Event of Default as defined herein or in the Loan
Agreement has occurred or then exists. This Note, the Loan Agreement and
any and all other documents referred to in the Loan Agreement or
instruments securing repayment of this Note or relating thereto, whether
made by Borrower or any other person(s) or entities, are hereinafter
referred to collectively as the "Loan Documents".
3. This Note evidences indebtedness of Borrower to Bank which
indebtedness may increase or decrease from time to time and the total
amount advanced pursuant hereto may exceed the face amount hereof;
provided, however, the aggregate principal amount outstanding hereunder
shall not exceed the face amount of this Note at any time. It is
further contemplated that, by reason
<PAGE>
<PAGE>
of payments hereon, there may be times when no indebtedness is owing
hereunder, but notwithstanding such occurrences, this Note shall remain
valid and shall continue to be in full force and effect as to Advances
made subsequent to each such occurrence.
4. Borrower shall repay this Note by paying all accrued interest
monthly beginning on January 28, 2000, and continuing on the 28th day of
each month until June 30, 2000 (the "Maturity Date") at which time all
outstanding principal and accrued interest shall be due and payable in
full. Interest on this Note shall be computed by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days
the principal balance is outstanding. Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by
applicable law. Borrower shall make each payment under this Note not
later than 12:00 p.m. (Noon), Lexington, Kentucky, Eastern time, on the
date when due, in lawful money of the United States of America, to Bank
at its Lexington Office, in immediately available funds. Borrower hereby
authorizes Bank to charge against any account of Borrower with Bank
containing unrestricted funds any amount so due. Whenever any payment to
be made under this Note shall be stated to be due on a Saturday, Sunday
or a public holiday or banking holiday, such payment shall be made on
the next succeeding Domestic Business Day, and such extension of time
shall be in such case be included in the computation of the payment of
interest.
5. The obligations evidenced by this Note or the Loan Agreement
are secured by the Security Agreement dated of even date from Borrower,
and a Stock Pledge and Security Agreement (as defined in the Loan
Agreement) dated of even date from UNIFIED FINANCIAL SERVICES, INC.,
which secures its Guaranty dated of even date, in favor of Bank.
6. If any payment required under the Note is not paid within ten
(10) days after such payment is due, then, at the option of Bank,
Borrower shall pay a late charge equal to five percent (5.0%) of the
amount of such payment or $25.00, whichever is greater, up to the
maximum amount of $750.00 per late charge to compensate Bank for
administrative expenses and other costs of delinquent payments. This
late charge may be assessed without notice, shall be immediately due and
payable and shall be in addition to all other rights and remedies
available to Bank. Upon the occurrence of any Event of Default and
during the continuation thereof, and after maturity, including maturity
upon acceleration, Bank, at its option, may, if permitted under
applicable law, do one or both of the following: (i) increase the
interest rate under this Note to the rate that is three percent (3.0%)
above the rate that would otherwise be payable thereunder, and (ii) add
any unpaid accrued interest to principal and such sum shall bear
interest therefrom until paid at the rate provided in this Note
(including any increased rate). The interest rate under this Note shall
not exceed the maximum rate permitted by applicable law under any
circumstances and if such increased rate of interest exceeds the maximum
amount permitted under applicable law in such circumstances, the amount
of the increased interest rate shall be increased by such lesser maximum
amount as legally may be allowed, and Bank's entitlement to such sum
shall be in addition to, and not in lieu of, all other rights and
remedies available to Bank as a result of such overdue payment. If a law
which applies to this Note is interpreted so that the interest collected
or to be collected hereunder exceeds the legal amount, then the interest
rate charged hereunder shall be reduced by the amount necessary to
reduce
Page -2-
<PAGE>
<PAGE>
the interest charged to the maximum legal amount and this Note and all
sums due hereunder shall immediately become due and payable in full at
the election of the holder hereof. It is agreed that all matured
interest installments outstanding shall also bear interest until paid at
the same rate that continues to accrue on the principal outstanding.
7. Bank and Borrower agree to binding arbitration as provided in
Section 9.20 of the Loan Agreement.
8. The occurrence of any Event of Default specified in the Loan
Agreement or in any of the other Loan Documents or in any other
agreement now or hereafter arising between Borrower and Bank shall
constitute an Event of Default hereunder.
9. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank.
10. All rights and remedies of Bank under this Note, any document
securing or relating thereto, and under any other applicable law or at
equity, are and shall be cumulative to the greatest extent permitted by
law. The delay or failure of Bank or the holder hereof to insist upon
strict performance of any of the terms of this Note, or to exercise any
rights herein confirmed shall not be construed as a waiver or
relinquishment to any extent of Bank's or the holder's right to assert
or rely upon such terms or rights at any subsequent time or in any other
instance.
11. Borrower and all endorsers, guarantors and all other parties
to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
(c) waive all exemptions to which they may now or
hereafter be entitled under the laws of this or any
other state or of the United States;
(d) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to
Page -3-
<PAGE>
<PAGE>
enforce and collect this note through whatever means
may otherwise be available at law or equity; and
(e) agree that Bank shall have the right, but not the
obligation, without notice to Borrower or any other
party, to renew this Note, grant the Borrower
extensions of time for, or changes in the amounts of,
payment of this Note or any other indulgence or
forbearance by Bank, and Bank may release any or all
of the security and collateral for this Note, and
modify the terms of any of the Loan Documents or any
other document securing or relating to this Note, and
may release any guarantors, endorsers or any party to
this Note, and otherwise deal in any way, at any time,
with Borrower, or any guarantor of this Note or with
any other party who may become primarily or
secondarily liable for any of the obligations of
Borrower under this Note, in every instance without
the consent of Borrower or any such other parties and
without in any way affecting the continuing liability
of the Borrower or any such other parties hereunder or
under any of the other Loan Documents.
12. Upon any Event of Default, Bank shall have the right to set
off, without notice to Borrower, and Borrower hereby grants Bank a
security interest in, any and all deposits, credits, accounts,
securities, certificates of deposit, cash, instruments, documents,
general intangibles and any other property or other sums of Borrower at
any time or times held by Bank or credited by or due from Bank to
Borrower, except those held by Bank in a restricted or fiduciary
capacity, and all products and proceeds thereof, as additional security
for all sums due hereunder and all other liabilities of Borrower to
Bank, whether now existing or hereafter arising or acquired and whether
absolute or contingent.
13. Borrower agrees that it will pay to Bank or the holder hereof
all costs and expenses including, without limitation, reasonable
attorneys' fees, incurred by Bank in connection with the preparation of
this Note and all related documentation, the enforcement thereof, and
the collection or attempted collection of the sums due hereunder or in
securing or attempting to secure or protecting and defending or
attempting to protect and defend holder's interest in any property
securing this Note.
14. BORROWER AND BANK HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY
AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE,
ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN BANK AND BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
15. Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction
Page -4-
<PAGE>
<PAGE>
which is located in Fayette County, Kentucky, and the parties hereby
expressly declare that any other venue shall be improper and Borrower
expressly waives any right to a determination of any such litigation
against Bank by a court in any other venue. Borrower further agrees
that service of process by any judicial officer or by registered or
certified U.S. mail shall establish personal jurisdiction over Borrower,
and Borrower waives any rights under the laws of any state to object to
jurisdiction within the Commonwealth of Kentucky. Borrower acknowledges
that this Note was executed and delivered in the Commonwealth of
Kentucky and shall be governed and construed in accordance with the laws
thereof. The aforesaid means of obtaining personal jurisdiction and
perfecting service of process are not intended to be exclusive, but are
cumulative and in addition to all other means of obtaining personal
jurisdiction and perfecting service of process now or hereafter provided
by the laws of the Commonwealth of Kentucky or by any other state in an
action brought by Bank in such state.
16. The substantive laws of the Commonwealth of Kentucky (without
regard to provisions governing conflicts of laws) shall govern the
construction of this Note and the rights and remedies of the parties
hereto.
17. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
18. This Note cannot be modified, altered or amended except by an
agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
19. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
20. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its rights
and obligations hereunder without Bank's prior written consent.
DATED as of the day and year first above written.
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ John R. Owens
---------------------------------------
TITLE: Vice President
------------------------------------
Page -5-
<PAGE>
TERM NOTE
---------
("Note")
UNIFIED FINANCIAL SERVICES, INC.
a Delaware corporation
220 Lexington Green Circle, Suite 600
Lexington, Kentucky 40503
$2,293,750.00
DATE: December 28, 1999
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, UNIFIED FINANCIAL SERVICES, INC. (the
"Borrower"), promises to pay to the order of BANK ONE, KENTUCKY, NA, a
national banking association (the "Bank"), the principal sum of Two
Million Two Hundred Ninety-Three Thousand Seven Hundred Fifty and 00/100
Dollars ($2,293,750.00) or so much thereof as may be advanced by Bank
and outstanding from time to time under this Note, and to pay interest
from the date hereof on such principal amount from time to time
outstanding at the per annum rate equal to the Prime Rate of interest as
declared by Bank from time to time and adjusted daily, all of such
payments to be made in lawful money of the United States of America in
immediately available funds, without defalcation. "Prime Rate" of
interest as used herein means a variable rate of interest announced from
time to time by Bank as its prime rate whether or not such rate is
otherwise published, which rate may not be Bank's lowest or best rate;
provided, that in the event this Note is assigned to another holder
which is a commercial bank, Prime Rate shall mean the reference rate of
interest established by such subsequent holder from and after the date
of such assignment, as its prime rate from time to time. The Prime Rate
shall be adjusted each time and at the time the Bank's prime rate
changes.
2. Borrower shall repay this Note by paying a fixed principal
payment of $100,000.00 per month plus accrued interest monthly beginning
on January 28, 2000 and continuing on the 28th day of each month
thereafter until June 30, 2000 (the "Maturity Date") at which time all
outstanding principal and accrued interest shall be due and payable in
full. Interest on this Note shall be computed by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days
the principal balance is outstanding. Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by
applicable law. Borrower shall make each payment under this Note not
later than 12:00 p.m. (Noon), Lexington, Kentucky, Eastern time, on the
date when due, in lawful money of the United States of America, to Bank
at its Lexington Office, in immediately available funds. Borrower hereby
authorizes Bank to charge against any account of Borrower with Bank
containing unrestricted funds any amount so due. Whenever any payment to
be made under this Note shall be stated to be due on a Saturday, Sunday
or a public holiday or banking holiday, such payment shall be made on
the next succeeding Domestic Business Day, and such extension of time
shall be in such case be included in the computation of the payment of
interest.
<PAGE>
<PAGE>
3. This Note is mentioned in a Loan Agreement dated December
28, 1999. This Note, the Loan Agreement and all other documents defined
in the Loan Agreement as Loan Documents shall be collectively referred
to herein as the "Loan Documents".
4. The obligations evidenced by this Note or the Loan Agreement
are secured by the Stock Pledge and Security Agreement dated of even
date from Borrower.
5. If any payment required under the Note is not paid within
ten (10) days after such payment is due, then, at the option of Bank,
Borrower shall pay a late charge equal to five percent (5.0%) of the
amount of such payment or $25.00, whichever is greater, up to the
maximum amount of $750.00 per late charge to compensate Bank for
administrative expenses and other costs of delinquent payments. This
late charge may be assessed without notice, shall be immediately due and
payable and shall be in addition to all other rights and remedies
available to Bank. Upon the occurrence of any Event of Default and
during the continuation thereof, and after maturity, including maturity
upon acceleration, Bank, at its option, may, if permitted under
applicable law, do one or both of the following: (i) increase the
interest rate under this Note to the rate that is three percent (3.0%)
above the rate that would otherwise be payable thereunder, and (ii) add
any unpaid accrued interest to principal and such sum shall bear
interest therefrom until paid at the rate provided in this Note
(including any increased rate). The interest rate under this Note shall
not exceed the maximum rate permitted by applicable law under any
circumstances and if such increased rate of interest exceeds the maximum
amount permitted under applicable law in such circumstances, the amount
of the increased interest rate shall be increased by such lesser maximum
amount as legally may be allowed, and Bank's entitlement to such sum
shall be in addition to, and not in lieu of, all other rights and
remedies available to Bank as a result of such overdue payment. If a law
which applies to this Note is interpreted so that the interest collected
or to be collected hereunder exceeds the legal amount, then the interest
rate charged hereunder shall be reduced by the amount necessary to
reduce the interest charged to the maximum legal amount and this Note
and all sums due hereunder shall immediately become due and payable in
full at the election of the holder hereof. It is agreed that all matured
interest installments outstanding shall also bear interest until paid at
the same rate that continues to accrue on the principal outstanding.
6. Bank and Borrower agree to binding arbitration as provided
in Section 9.20 of the Loan Agreement.
7. The occurrence of any Event of Default specified in the Loan
Agreement or in any of the other Loan Documents or in any other
agreement now or hereafter arising between Borrower and Bank shall
constitute an Event of Default hereunder.
8. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank.
Page -2-
<PAGE>
<PAGE>
9. All rights and remedies of Bank under this Note, any
document securing or relating thereto, and under any other applicable
law or at equity, are and shall be cumulative to the greatest extent
permitted by law. The delay or failure of Bank or the holder hereof to
insist upon strict performance of any of the terms of this Note, or to
exercise any rights herein confirmed shall not be construed as a waiver
or relinquishment to any extent of Bank's or the holder's right to
assert or rely upon such terms or rights at any subsequent time or in
any other instance.
10. Borrower and all endorsers, guarantors and all other parties
to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
(c) waive all exemptions to which they may now or
hereafter be entitled under the laws of this or any
other state or of the United States;
(d) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to enforce and collect this note
through whatever means may otherwise be available at
law or equity; and
(e) agree that Bank shall have the right, but not the
obligation, without notice to Borrower or any other
party, to renew this Note, grant the Borrower
extensions of time for, or changes in the amounts of,
payment of this Note or any other indulgence or
forbearance by Bank, and Bank may release any or all
of the security and collateral for this Note, and
modify the terms of any of the Loan Documents or any
other document securing or relating to this Note, and
may release any guarantors, endorsers or any party to
this Note, and otherwise deal in any way, at any time,
with Borrower, or any guarantor of this Note or with
any other party who may become primarily or
secondarily liable for any of the obligations of
Borrower under this Note, in every instance without
the consent of Borrower or any such other parties and
without in any way affecting the continuing liability
of the Borrower or any such other parties hereunder or
under any of the other Loan Documents.
Page -3-
<PAGE>
<PAGE>
11. Upon any Event of Default, Bank shall have the right to set
off, without notice to Borrower, and Borrower hereby grants Bank a
security interest in, any and all deposits, credits, accounts,
securities, certificates of deposit, cash, instruments, documents,
general intangibles and any other property or other sums of Borrower at
any time or times held by Bank or credited by or due from Bank to
Borrower, except those held by Bank in a restricted or fiduciary
capacity, and all products and proceeds thereof, as additional security
for all sums due hereunder and all other liabilities of Borrower to
Bank, whether now existing or hereafter arising or acquired and whether
absolute or contingent.
12. Borrower agrees that it will pay to Bank or the holder
hereof all costs and expenses including, without limitation, reasonable
attorneys' fees, incurred by Bank in connection with the preparation of
this Note and all related documentation, the enforcement thereof, and
the collection or attempted collection of the sums due hereunder or in
securing or attempting to secure or protecting and defending or
attempting to protect and defend holder's interest in any property
securing this Note.
13. BORROWER AND BANK HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY
AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE,
ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN BANK AND BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
14. Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Borrower expressly waives any
right to a determination of any such litigation against Bank by a court
in any other venue. Borrower further agrees that service of process by
any judicial officer or by registered or certified U.S. mail shall
establish personal jurisdiction over Borrower, and Borrower waives any
rights under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
15. The substantive laws of the Commonwealth of Kentucky
(without regard to provisions governing conflicts of laws) shall govern
the construction of this Note and the rights and remedies of the parties
hereto.
Page -4-
<PAGE>
<PAGE>
16. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
17. This Note cannot be modified, altered or amended except by
an agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
18. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
19. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its rights
and obligations hereunder without Bank's prior written consent.
20. This Note shall serve as a novation of (i) that certain
Renewal Term Note dated June 20, 1999 by Equity Underwriting Group, Inc.
("EUG") and Equity Insurance Managers, Inc. ("EIM") in favor of Bank in
the principal amount of $800,000.00; (ii) that certain Renewal Term Note
dated June 20, 1999 by EUG and EIM in favor of Bank in the principal
amount of $1,250,000.00; and (iii) that certain Renewal Revolving Credit
Note dated June 20, 1999 by EUG in favor of Bank in the principal amount
of $400,000.00.
DATED as of the day and year first above written.
UNIFIED FINANCIAL SERVICES, INC.,
a Delaware corporation
BY: /s/ John S. Penn
--------------------------------------
TITLE: Executive Vice President
-----------------------------------
Page -5-
<PAGE>
EXHIBIT 11.1
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
EARNINGS PER SHARE CALCULATION
<CAPTION>
Year Ended
December 31,
------------------------------
1999 1998
----------- ----------
<S> <C> <C>
INCOME AVAILABLE TO COMMON STOCKHOLDERS
Net income (loss) $(1,772,915) $ 912,161
Preferred dividends -- --
Income available to common
stockholders $(1,772,915) $ 912,161
=========== ==========
CALCULATION OF COMMON STOCK
Common shares outstanding at beginning
of period 2,316,767 1,722,821
Shares issued in connection with acquisition
of Fiduciary Counsel -- 36,110
Shares issued in connection with acquisition
of M. Wilson & Associates -- 3,636
Shares issued in connection with acquisition of
Commonwealth Investment Services -- 27,500
Shares issued in connection with acquisition of
Fully Armed Productions -- 18,182
Conversion of Series C Preferred Stock to
common stock 361,935 57,780
Shares issued in private placement during period 238,270 450,738
Repurchase of common stock for treasury (47,110) --
----------- ----------
Common shares used in basic calculation 2,869,862 2,316,767
----------- ----------
Common stock equivalent of options 105,961 37,526
Preferred stock Series C conversion into
common stock -- 225,720
----------- ----------
Common shares used in fully
diluted calculation 2,975,823 2,580,013
----------- ----------
EARNINGS PER SHARE
Basic $(0.62) $0.39
Fully diluted $(0.60) $0.35
</TABLE>
<PAGE>
Exhibit 21.1
<TABLE>
LIST OF SUBSIDIARIES
(as of March 30, 2000)
<CAPTION>
Corporation State
- ----------- -----
<S> <C>
Unified Management Corporation Indiana
Unified Fund Services, Inc. Indiana
First Lexington Trust Company Kentucky
Health Financial, Inc. Kentucky
Unified Internet Services, Inc. Indiana
Unified Investment Advisers, Inc. Delaware
Fiduciary Counsel, Inc. Delaware
EMCO Estate Management Company, Inc. Delaware
AmeriPrime Financial Services, Inc. Texas
AmeriPrime Financial Securities, Inc. Texas
Equity Underwriting Group, Inc. Kentucky
Equity Insurance Managers, Inc. Kentucky
Equity Insurance Managers of Illinois, L.L.C.
(d/b/a Irland & Rogers) Illinois
21st Century Claims Service, Inc. Kentucky
Equity Insurance Administrators, Inc. Kentucky
Commonwealth Premium Finance Corporation Kentucky
Strategic Fund Services, Inc. Delaware
Smart Associates, Inc. Delaware
Unified.com, Inc. Delaware
Archer Trading, Inc. Delaware
Unified Employee Services, Inc. Delaware
Fully Armed Productions, inc. Kentucky
VSX Technologies, Inc. New York
Unified Capital Resources, Inc. New York
Unified Investment Services, Inc. Kentucky
Unified Banking Company Federal
VSX.com, Inc. Delaware
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF LARRY E. NUNN & ASSOCIATES, LLC
We consent to the incorporation by reference in the
Registration Statement on Form S-8 (registration number 333-53863),
and in the related Prospectus, of Unified Financial Services, Inc.
of our report dated February 2, 2000, with respect to the
consolidated financial statements of the Company as of and for the
years ended December 31, 1999 and 1998, appearing in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
/s/ Larry E. Nunn & Associates, LLC
Columbus, Indiana
April 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of financial condition and the consolidated
statements of operation of Unified Financial Services, Inc. filed as
part of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999 and is qualified in its entirety by reference to such
report.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,709,082
<SECURITIES> 13,042,558
<RECEIVABLES> 12,020,890
<ALLOWANCES> 71,326
<INVENTORY> 0
<CURRENT-ASSETS> 30,533,154
<PP&E> 5,858,108
<DEPRECIATION> 2,913,498
<TOTAL-ASSETS> 36,748,994
<CURRENT-LIABILITIES> 21,457,522
<BONDS> 0
<COMMON> 33,294
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,748,994
<SALES> 25,617,592
<TOTAL-REVENUES> 25,617,592
<CGS> 7,280,386
<TOTAL-COSTS> 7,280,386
<OTHER-EXPENSES> 19,916,479
<LOSS-PROVISION> 33,000
<INTEREST-EXPENSE> 160,343
<INCOME-PRETAX> (1,743,185)
<INCOME-TAX> 29,730
<INCOME-CONTINUING> (1,772,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,772,915)
<EPS-BASIC> (.62)
<EPS-DILUTED> (.60)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of financial condition and the consolidated
statements of operation of Unified Financial Services, Inc. filed as
part of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999 and is qualified in its entirety by reference to such
report.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,395,843
<SECURITIES> 1,720,342
<RECEIVABLES> 8,912,664
<ALLOWANCES> 2,041
<INVENTORY> 0
<CURRENT-ASSETS> 20,262,603
<PP&E> 4,062,103
<DEPRECIATION> 2,472,022
<TOTAL-ASSETS> 26,498,577
<CURRENT-LIABILITIES> 14,514,175
<BONDS> 0
<COMMON> 27,668
0
1,672
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,498,577
<SALES> 23,448,483
<TOTAL-REVENUES> 23,448,483
<CGS> 8,508,651
<TOTAL-COSTS> 8,508,651
<OTHER-EXPENSES> 13,970,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361,926
<INCOME-PRETAX> 1,063,269
<INCOME-TAX> 151,108
<INCOME-CONTINUING> 912,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912,161
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.35
</TABLE>
