ADVANCED FINANCIAL, INC.
5425 Martindale
Shawnee, Kansas 66218
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 6, 1996
----------------------------------------
THE ANNUAL MEETING of Shareholders of Advanced Financial, Inc. (the
"Company") will be held at 1:00 p.m. on September 6, 1996, at 5425 Martindale,
Shawnee, Kansas 66218 for the following purposes:
1. To elect a Board of Directors consisting of five persons to serve a term
of one year (until the next annual Shareholder's Meeting) or until their
respective successors are elected and have been qualified;
2. To consider and vote upon a proposal to ratify and approve to Company's
1996 Stock Plan;
3. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
The Board of Directors has fixed July 26, 1996, as the record date for
determining the shareholders of the Company entitled to notice of and to vote at
the meeting and any adjournment of the meeting. The transfer books for the
Company will not be closed, but only common stock shareholders of the Company of
record at the close of business on the record date will be entitled to notice of
and to vote at the meeting or any adjournment thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THIS MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE IF MAILED
IN THE UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING AND WILL ASSURE THAT YOUR SHARES ARE VOTED
IF YOU ARE UNABLE TO ATTEND.
BY ORDER OF THE BOARD OF DIRECTORS
August 5, 1996 Norman L. Peterson
Shawnee, Kansas President
<PAGE>
ADVANCED FINANCIAL, INC.
5425 Martindale
Shawnee, Kansas 66218
- - --------------------------------------------------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To be held on September 6, 1996
- - --------------------------------------------------------------------------------
INTRODUCTION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Advanced Financial, Inc., a Delaware corporation (the "Company"), to be voted
at the Annual Meeting of Shareholders to be held at 5425 Martindale, Shawnee,
Kansas 66218 at 1:00 p.m. on September 6, 1996 and at any and all adjournments
of the meeting. The enclosed materials will be mailed to Shareholders on or
about August 5, 1996.
The matters listed below will be considered and voted upon at the meeting:
1. To elect a Board of Directors consisting of five persons to serve a term
of one year (until the next annual Shareholder's Meeting) or until their
respective successors are elected and have been qualified;
2. To consider and vote upon a proposal to ratify and approve the 1996
Stock Plan.
3. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
Shares of common stock as to which Proxies have been executed will be voted
as specified in the Proxies. If no specifications are made, the shares will be
voted "For" Management's nominees for Directors and "For" proposals (2) and (3).
A Proxy may be revoked at any time before it is voted by filing with the
Secretary of the Company either a written revocation or a duly executed Proxy
bearing a later date. Additionally, attendance at the meeting and voting shares
in person will revoke any prior proxy relating to such shares.
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock of the Company is necessary to constitute a quorum at
the meeting. Votes cast by proxy or in person at the Annual Meeting will be
counted by a person appointed by the Company to act as the election inspector
for the meeting. The election inspector will treat shares represented by proxies
that reflect abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum.
<PAGE>
All of the officers and directors and their affiliates (who own in the
aggregate approximately 1,360,477 of the shares outstanding) have informed the
Company that they intend to vote in favor of each of the matters set forth
herein.
VOTING SECURITIES
The total number of outstanding shares of the Company's $.001 par value
Common Stock entitled to vote at the meeting, based upon the shares of record at
the close of business on July 26, 1996 (the "Record Date") is 3,875,476. As of
the Record Date, the only outstanding voting securities of the Company were
shares of Common Stock, each of which is entitled to one vote on each matter to
come before the meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The current Board of Directors of the Company consists of Norman L.
Peterson, William B. Morris, Mark J. Peterson, Thomas S. Lilley, James L. Mullin
II, Patrick E. Elgert, Steven J. Peterson and Thomas G. Schleich. Mr. Norman L.
Peterson and Mr. Thomas G. Schleich have agreed to stand for re-election to the
position of director at the annual shareholders meeting. In addition, William E.
Moffat, Daniel Starozewski and Steven A. White have also been nominated to stand
for election to the position of director. If one or more of the nominees is
unable to serve or for good cause will not serve at the time of the meeting, the
shares represented by the proxies solicited by the Board of Directors will be
voted for the other nominees and for any substitute nominee(s) designated by the
Board of Directors. A quorum being present, a favorable vote of a majority of
shares present and voting, either in person or by proxy, is required for the
election of any Director. Under applicable Delaware law, in tabulating the vote,
abstentions and broker non-votes will be disregarded and will have no effect on
the outcome of the vote. The Company currently has a standing audit committee of
its Board of Directors. During the year ended March 31, 1996 the Company's Board
of Directors held 10 meetings. All persons who were directors during the year
ended March 31, 1996, attended at least 75% of all the meetings held.
Set forth below is information regarding the directors and executive
officers as well as all nominees for Director:
2
<PAGE>
NAME AGE POSITION
---- --- --------
Norman L. Peterson 55 President, Treasurer,
Director
William B. Morris 38 Secretary, Director
Steven J. Peterson 29 Sr. Vice President,
Director
Mark J. Peterson 33 Vice President,
Director
William E. Moffatt 44 President of AFI
Mortgage Corp.,
Nominee for Director
James L. Mullin, II 31 Director
Thomas G. Schleich 35 Director
Daniel Starozewski 49 Nominee for Director
Steven A. White 51 Nominee for Director
Norman L. Peterson. Mr. Peterson has been an officer and director of the
Company since June, 1988. Mr. Peterson is, and has been since 1984, president of
Peterson and Sons Holding Company, a financial consulting company. From 1982 to
1984, he invested in and operated several small businesses in Lincoln, Nebraska.
From 1979 to 1980 he founded, operated and then sold a company that collected
accounts receivables. From 1974 to 1979, he was a senior officer, director and
stockholder of the holding company that owned Platte Valley Bank and Trust
Company as well as a director and shareholder of the Bank. From 1963 to 1973, he
was employed by Lincoln Production Credit Association where he was a branch
manager from 1966 to 1973.
William B. Morris. From 1991 to the present, Mr. Morris has been Secretary,
Treasurer and a Director of the Company and has also been involved in a
partnership with Mr. Norman L. Peterson, under the name Lancaster Partners, to
consult with small to mid- sized companies on raising capital and becoming
publicly traded. From 1984 to 1989, Mr. Morris was an account executive at the
investment banking firm of Stuart James & Company, and from 1983 to 1984 Mr.
Morris was an account executive at the venture capital brokerage firm R.B.
Marich, Inc. in Denver, Colorado.
Steven J. Peterson. Mr. Peterson attended Rice University where he received
a Master of Business Administration in May, 1992. In 1989, he graduated Magna
Cum Laude from Nebraska Wesleyan University with a bachelor of Science degree in
3
<PAGE>
finance. From 1989 to the present, he has served as secretary/treasurer for
Peterson & Sons Holding Company, a family owned company. In 1990, Mr. Peterson
was the principal director of a small retail brokerage operation. Mr. Peterson
has been a director of Continental Mortgage, Inc. since graduating from Rice. He
is the son of Norman L. Peterson.
Mark J. Peterson. Mr. Peterson attended law school at the University of
Nebraska where he graduated with a Juris Doctorate in May, 1988. He earned a
Bachelor of Science degree from Nebraska Wesleyan University in 1985. Mr.
Peterson worked parti-time as a law clerk and is now an associate with the law
firm of Erickson & Sederstrom, P.C. in Omaha, Nebraska. Mr. Peterson is the son
of Norman L. Peterson.
William E. Moffatt. William E. Moffatt is President of the Company's
wholly-owned subsidiary AFI Mortgage Corp. He received a BBA degree in
accounting/marketing from the University of Texas at Austin in 1975. From 1989
to 1995 he was Executive Vice- President/Capital Markets of Plaza Home Mortgage
Corporation in Santa Ana, California where he was responsible for all functions
of secondary marketing, shipping and product development. He has also been
employed with numerous other mortgage companies, including First Northern Bank
in Garden City, New York from 1988 to 1989 (Senior Vice President/Secondary
Marketing), Liberty Mortgage Company in Oklahoma City, Oklahoma from 1987 to
1988 (Senior Vice President/Loan Production), Commonwealth Mortgage Corp. of
America in Houston, Texas from 1986 to 1987 (Vice President/Secondary Marketing
and National Refinance), and Colwell Financial Corp. in Los Angeles, California
from 1984 to 1986 (Senior Vice President/Administration).
James L. (Lenny) Mullin, II. Mr. Mullin graduated from Emporia State
University with a degree in speech communication in 1986. Since 1986 he has been
continuously involved in real estate in Kansas City. He is a land developer,
home builder and real estate broker. He has extensive holdings in residential
rental property that he also manages. He is a member of the National Association
of Realtors, Kansas Association of Realtors, Johnson County Board of Realtors,
National Association of Homebuilders, and the Greater Kansas Homebuilders
Association.
Thomas G. Schleich. Mr. Schleich graduated from Nebraska Wesleyan
University in 1985 with a B.S. degree in Business Administration. He graduated
from the University of Nebraska law school in 1988 with a J.D. degree. From 1989
to 1993 he was president of Commercial Investment Properties in Lincoln,
Nebraska. From 1993 to the present he has been the Chief Operating Officer of
Home Real Estate in Lincoln, Nebraska. In addition to being a member of the
Nebraska State Bar Association, he is also licensed by the State of Nebraska as
a Real Estate Broker.
4
<PAGE>
Daniel Starozewski. Mr. Starozewski has been president of Investor Resource
Services, a public and investor relations firm since 1993. After working for
several years as an office manager, Mr. Starozewski started an accounting
partnership in Winston-Salem, North Carolina in 1975. Currently he serves on the
Board of Directors of both Atlantic Group, Inc. and Tollgate, Inc.
Steven A. White. Mr. White has served as the President and Chief Executive
Officer of The Boston Financial Corporation, an Arizona corporation involved
with financing and syndication of residential and commercial projects throughout
the Southwest since 1974. Mr. White has also been a major shareholder and
director of Claridge Corporation, a real estate, development, and construction
firm located in Los Angeles, California since 1977. Over $100,000,000 of
construction projects have been developed and constructed under both The Boston
Financial and Claridge Corporation banners. Mr. White was a co-founder of ILX, a
public corporation, located in Phoenix, Arizona in 1986. That company is in the
business of developing, operating, and marketing ownership interests in resort
properties throughout the United States.
PROPOSAL II - TO RATIFY AND
APPROVE THE 1996 STOCK PLAN
General
- - -------
The Company's Board of Directors is submitting the 1996 Stock Plan (the
"Plan") for shareholder adoption and approval at the Annual Meeting. The Plan
sets aside 1,000,000 shares of the Company's Common Stock for the granting of
options and awards to officers, employees, directors and outside consultants of
the Company as an inducement to them to advance the Company's interests and to
remain involved with the affairs of the Company.
The Plan is designed to satisfy the requirements for incentive stock option
plans under the Economic Recovery Tax Act of 1981 as modified by the Tax Reform
Act of 1986. Incentive stock options (i.e., qualified for favorable tax
treatment) are options which the Board, acting through an employee-benefit plan
committee, is authorized to grant to employees of the Company or any subsidiary.
The Plan provides flexibility by also providing for non-qualified stock options,
stock appreciation rights and stock grants that do not qualify for the favorable
tax treatment that are offered to incentive stock options.
Approval of the Plan by the shareholders will obviate the applicability of
section 16 (b) of the Securities Exchange Act of 1934 (which restricts insider
trading of securities) to the grant of options of Officers and Directors.
Shareholder approval is also necessary to permit the Plan to qualify as an
incentive stock option of Officers and Directors. Shareholder approvals is
necessary to permit the Plan to qualify as an incentive stock option plan under
applicable provisions of the Internal Revenue Code. The affirmative vote of the
holders of a majority of the shares present at the meeting (in person or by
proxy) is required for approval.
5
<PAGE>
Principal Provisions of the Plan
- - --------------------------------
The Plan grants authority to the Company's Board of Directors to grant
options, awards, grants and other stock rights for up to 1,000,000 shares of the
Company's Common Stock to Directors, employees, officers, eligible employees of
the Company and its subsidiaries and outside consultants and advisors.
The Board of Directors is authorized to appoint an employee Benefit Plan
committee, which shall consist of not less than three members, which will have
the discretion to determine from time to time the eligible optionees or
recipients to whom options or other stock rights shall be granted, the amount of
stock to be optioned to each, the time when such options or stock rights shall
become exercisable, and the conditions, if any, which must be met before
exercise. The price of the Common Stock offered to optionees may be set by the
committee that grants the option but must be at least 100% of the fair market
value of such stock on the date of grant. If at the time an incentive option is
granted the optionee owns more than 10% of the total combined voting power of
all classes of the Company's stock, or of the stock of an affiliate, the option
price for any incentive stock option must be at least 110% of fair market value.
For all options, the Plan provides that the committee that grants the
option may determine the term of each option, which may not exceed ten years
from the date of grant. If at the time an incentive option is granted, the
optionee owns more than 10% of the total combined voting power of all classes of
the Company's stock, the term of the option may not exceed five years.
An incentive option may not be exercised prior to the expiration of six
months after its grant for up to 100% of the total shares included, except that
the committee which granted the option may impose any restriction that it
chooses on the time of exercise if the committee believes that such restrictions
are in the best interests of the Company. No incentive stock option granted
under the Plan may be exercised until all incentive stock options previously
granted to the optionee (under the Plan or any former plan) to purchase shares
of the Company or an affiliate have been exercised in full or have expired.
No employee eligible to participate in the Plan shall be granted Options to
purchase Common Shares which are exercisable during any one calendar year to the
extent that the fair market value of such shares (determined at the time of the
grant of the Option) exceeds $100,000. No employee shall be given the
opportunity to exercise Options granted under the Plan with respect to shares
valued in excess of $100,000 in any calendar year except and to the extent that
the Options shall have accumulated over a period in excess of one year.
6
<PAGE>
No shares of Common Stock will be issued or delivered to an optionee until
the Company receives full payment of the option exercise price.
Except in cases of death or permanent and total disability of the optionee,
options are exercisable only by the optionee. Options may not be assigned or
pledged, or be subject to execution, or be transferred in any manner except by
will or the laws of descent and distribution.
If an optionee is an employee of the Company and the optionee's employment
terminates for any reason other than retirement or death, any unexercised
options granted to the optionee remain exercisable ( to the extent vested on the
effective date of the optionee's termination of employment) for a period of
three months after the effective date of the termination of employment provided
that they are exercised within the term prescribed in the option agreement but
in any event not more than five years after the date upon which such Option was
granted. In the event of the optionee's termination of employment because of
death any option held by him becomes exercisable in full on the date of death.
Any option held by the optionee who at the time of his death is employed by the
Company will be transferred as provided in his will or as determined by the laws
of descent and distribution, and may be exercised, in whole or in part, by the
estate of the optionee, or by any person who acquired the option by bequest or
inheritance from the optionee, at any time or from time to time within the
earlier of one year after the date of death but not more than five years after
the Option was granted.
The number of shares of Common Stock deliverable with respect to each
payment of the option exercise price is subject to appropriate adjustment upon
any stock split or combination of shares, or upon any stock dividend. Upon the
occurrence of any corporate merger, consolidation, sale of all or substantially
all of the Company's assets, or other reorganization, or a liquidation, any
optionee holding an outstanding option, regardless of the current status of its
exercisability, is entitled to exercise his option in whole or in part and to
receive upon exercise those shares, securities, assets, or payments which the
optionee would have received if the optionee had exercised the option prior to
such occurrence and had been a shareholder of the Company with respect to such
Common Stock.
7
<PAGE>
Federal Income Tax Matters
- - --------------------------
With regard to incentive stock options, the optionee does not incur income
tax liability either at the time the option is granted or at the time it is
exercised. When the optionee sells stock acquired under an incentive stock
option, however, the optionee will be taxed at long-term capital gains rates.
Any excess of the sales price over the option price will be taxable to the
optionee as ordinary income and the Company will be entitled to a deduction
equal to such excess.
Indemnification
- - ---------------
Members of the Board of Directors are indemnified for any act or omission
in connection with the Plan or any option granted thereunder.
Stock Appreciation Rights
- - -------------------------
Stock appreciation right may be granted under the Plan. A "stock
appreciation right" means a right to receive the excess of the fair market value
of a share of the Company's Common Stock on the date on which an appreciation
right is exercised over the option price provided for in the related option
right and which is issued in consideration of services preformed for the Company
or for its benefit by the Optionee. An appreciation right only exists along with
an option right and is immediately forfeited if the related option right is
exercised. The Committee reserves the right to determine whether the Optionee's
stock appreciation rights are to be paid in cash or Common Stock or some
combination thereof.
The Committee also retains the right to determine, including at the time of
exercise, the maximum amount of cash or stock which may be given upon exercise
of any stock appreciation right in any year, provided, however, that all such
amounts shall be paid in full no later than the end of the year immediately
following the year in which the Optionee exercise such stock appreciation
rights.
Federal Income Tax Matters with respect to Non-Qualified Options
- - ----------------------------------------------------------------
A nonstatutory stock option, for federal income tax purposes, is a
compensatory option that does not satisfy the statutory stock option
requirements. A nonstatutory stock option is therefore any stock option other
than an incentive stock option or an option issued under an employee stock
purchase plan.
The employee realizes compensation income when the option is granted if the
option has a readily ascertainable fair market value at that time, or upon
transfer of stock pursuant to the exercise of the option if the option cannot be
valued at the time of grant. The employer can take a corresponding compensation
deduction in the same tax year (i.e., the year of grant or exercise) but the
employee must include the compensation income in his gross income.
8
<PAGE>
Vote Required
- - -------------
A favorable vote of a majority of the shares issued and outstanding, either
in person or by proxy, is required to approve this proposal. A copy of the 1996
Stock Plan is attached to this Proxy Statement as Exhibit A and by this
reference made a part hereof.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of July 15, 1996 by: (i) each director; (ii)
each executive officer named in the Summary Compensation Table; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five percent of its
Common Stock.
Beneficial Ownership (1)
------------------------
Number of Percent of
Beneficial Owner Shares Total
- - ---------------- ---------- ----------
Peterson & Sons
5425 Martindale
Shawnee, KS 66218 887,462(2) 22.9%
William B. Morris
5425 Martindale
Shawnee, KS 66218 756,263(3) 18.8%
Mark J. Peterson
770 N. Cotner, #402
Lincoln, NE 68505 887,462(4) 22.9%
Norman L. Peterson
5425 Martindale
Shawnee, KS 66218 1,073,010(5) 26.7%
Lancaster Partners
5425 Martindale
Shawnee, KS 66218 267,600(6) 6.9%
Steven J. Peterson
5425 Martindale
Shawnee, KS 66218 1,026,016(7) 25.6%
9
<PAGE>
Thomas S. Lilley
5425 Martindale
Shawnee, KS 66218 32,500(8) less than
one percent
James L. Mullin, II
5425 Martindale
Shawnee, KS 66218 12,500 less than
one percent
Patrick E. Elgert
5425 Martindale
Shawnee, KS 66218 10,000(9) less than
one percent
Thomas G. Schleich
225 N. Cotner #107
Lincoln, NE 68505 75,000(10) 1.9%
All Executive officers
and directors as a group (7 persons) 1,360,477(11) 35.1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities and
Exchange Commission (the "Commission"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where applicable,
each of the stockholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
(2) Includes 267,600 shares controlled by Peterson & Sons Holding Company as 50%
partners of Lancaster Partners, which owns 267,600 shares. Peterson & Sons
Holding Company is 76% controlled by Mark J. Peterson, an officer and director
of the Company, his brother, Steven J. Peterson, and Norman L. Peterson, the
President and a director of the Company, and the father of Mark J. Peterson and
Steven J. Peterson.
(3) Includes 351,163 shares owned personally and 267,600 shares controlled by
William B. Morris as 50% partner of Lancaster Partners which owns 267,600. Also
includes an option to purchase 137,500 shares of common stock.
(4) Consists of 887,462 shares controlled by Peterson & Sons Holding Company.
Peterson & Sons Holding company is 24% owned by Mark J. Peterson.
(5) Includes 887,462 shares controlled by Peterson & Sons Holding Company.
Norman L. Peterson disclaims all beneficial ownership in such shares. Also
includes option to acquire 137,500 shares.
(6) Lancaster Partners is 50% owned by William B. Morris and 50% owned by
Peterson & Sons Holding Company.
(7) Includes 887,462 shares controlled by Peterson & Sons Holding Co. Also
includes and option to purchase 137,500 shares of common stock. Peterson & Sons
Holding Company is 24% owned by Steven J. Peterson.
(8) Includes an option to purchase 22,500 shares of common stock.
(9) Consists entirely of options to purchase common stock.
(10) Includes 62,500 shares of common stock held by Home Real Estate Service of
Lincoln, Inc., a private corporation controlled by the family of Mr. Schleich.
Also includes options to purchase 12,500 shares of common stock.
(11) Includes only shares actually issued and outstanding.
Section 16(a) of the Securities Exchange Act of 1934 and the related
regulations require the Company's directors, executive officers and persons who
own more than ten percent of the Company's Common Stock to file with the
Securities and Exchange Commission and the American Stock Exchange initial
reports of their beneficial ownership of the Company's Common Stock and other
equity securities of the Company. In addition, such persons are required to
furnish the Company with copies of all such filings.
10
<PAGE>
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended March 31, 1996, all Section
16(a) filing requirements applicable to its directors, executive officers and
ten percent beneficial owners were complied with except that Mr. Schleich was
late in filing his Form 3.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid by
the Company in each of the last three years to the Chief Executive Officer. No
executive officer had total compensation in excess of $100,000, except Mr.
Peterson.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation(1)(2) Awards Payouts
------------------------- --------------- -------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name
and
Princi- Other
pal Annual Restricted All Other
Posi- Compen- Stock Options/ LTIP Compen-
tion Salary($) Bonus($) sations($) Award(s)($) SARs(#) Payouts($) sation($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended
Norman L. March 31,
Peterson 1996 $120,000 -0- 2,500 -0- 25,000 -0- -0-
Chairman
of the Year Ended
Board March 31,
President 1995 $120,000 -0- -0- -0- -0- -0- -0-
and Chief
Executive
Officer Year Ended
March 31,
1994 $120,000 -0- 16,000(3) -0- 25,000 -0- -0-
(1) Amounts shown set forth all cash compensation earned by each of the named individual in the years shown.
(2) While the named individual received perquisites or other personal benefits in the years shown, in accordance with applicable
regulations, the value of these benefits are not indicated since he did not exceed in the aggregate the lesser of $25,000 or 25%
of the individual's salary and bonus in any year.
(3) Paid in the form of consulting fee to Peterson & Sons Holding Company.
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN YEAR ENDED MARCH 31, 1996
(a) (b) (c) (d) (e)
% of Total
Options/
SARs
Granted to
Options/SARs Employees Exercise or Base
Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date
- - ---- ------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
W. Ray Bell 25,000 8.80% 0.81 06/30/96
James L. Mullin II 25,000 8.80% 0.81 12/01/00
Thomas Schleich 25,000 8.80% 0.81 12/01/00
Thomas Lilley 25,000 8.80% 0.81 12/01/00
Mark J. Peterson 25,000 8.80% 0.81 12/01/00
Steven J. Peterson 25,000 8.80% 0.81 12/01/00
Norman Peterson 25,000 8.80% 0.88 12/01/00
William B. Morris 25,000 8.80% 0.88 12/01/00
Patrick E. Elgert 25,000 8.80% 0.81 12/01/00
Patrick E. Elgert 9,000 3.17% 1.12 09/01/06
Deborah K. Towery 2,500 0.88% 1.25 06/30/06
Deborah K. Towery 2,500 0.88% 0.81 01/01/07
------ -----
239,000
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISED IN YEAR ENDED MARCH 31, 1996
AND OPTION/SAR VALUES AS OF MARCH 31, 1996
(a) (b) (c) (d) (e)
Values of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#) at FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable
- - ---- -------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Norman L.
Peterson -0- -0- 137,500/12,500 $7,062.50
William B.
Morris -0- -0- 137,500/12,500 $7,062.50
Steven J.
Peterson -0- -0- 137,500/12,500 $7,062.50
Thomas S.
Lilley -0- -0- 22,500/12,500 $7,062.50
Patrick E.
Elgert -0- -0- 31,500/12,500 $9,357.50
James L.
Mullin -0- -0- 12,500/12,500 $7,062.50
Deborah
Towery -0- -0- 5,000/2,500 $7,062.50
Thomas G.
Schleich -0- -0- 12,500/12,500 $7,062.50
W. Ray Bell -0- -0- 12,500/12,500 $7,062.50
</TABLE>
Compensation of Directors
- - -------------------------
Directors receive a fee of $250 for board meetings attended and are
reimbursed for expenses incurred in attending such meetings.
12
<PAGE>
Employment Contracts and Termination of Employment and Change-in- Control
Arrangements
The Company has not entered into any employment contracts with any
executive officer of the Company, nor has the Company entered into any contract
with any executive officer with respect to the resignation, retirement or any
other termination of such executive officers employment with the Company or its
subsidiary or from a change-in-control of the Company or a change in any
executive officer's responsibility following a change-in-control.
CERTAIN TRANSACTIONS
On September 30, 1993 the Company entered into a contractual arrangement
known as a participation agreement with Peterson & Sons Holding Company to
participate in approximately $38,000,000 of servicing rights originated by
Continental Mortgage, Inc. prior to September 30, 1993. The transaction was
valued at $290,000 and was paid for by exchanging 51,627 shares of Advanced
Financial, Inc. common stock. Peterson & Sons Holding Company is 50% controlled
by Mark J. Peterson and 50% by Steven J. Peterson, both of whom are directors of
the Company and sons of Norman L. Peterson, President and Director of the
Company. Under the terms of these agreements, the participants received a
portion (generally 75%) of the underlying cash flows resulting from the
Company's servicing of certain identified mortgage loans. For purposes of the
agreements, cash flow is defined as gross revenues (service fees and ancillary
income) less a contractually pre-determined cost to service the loans. If the
underlying servicing is sold by the Company, the participants receive their
pro-rata portion of the sale proceeds. The Company does not guarantee the
participants a rate of return on their investment, and the Company has no
contractual obligation to repurchase the participant's interest.
These participation agreements are recorded as obligations. To determine an
interest rate on the obligation, the Company estimates the future cash flows to
be paid to the participants and discounts those estimated future cash flows at a
rate so that their present value equals the amount paid by the participant.
Interest expense is recorded on the accrual method, and actual payments to the
participants are applied to reduce the Company's recorded obligation. If
estimates of future cash flows to be paid to participants change, the effective
interest rate is revised and interest expense is adjusted, as necessary, on a
prospective basis.
During fiscal 1995 and 1994, the Company repaid obligations under
participation agreements by either selling the underlying servicing and
remitting the participant's portion of the proceeds from sale, or by settling
the remaining obligation with Company funds. The underlying servicing relating
to Peterson & Sons participation agreements was sold for $243,000, with $163,000
being remitted and the remaining $80,000 was recorded as a non-interest bearing
payable on the financial statements of the Company as of March 31, 1995.
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The underlying servicing relating to Lancaster Partners participation was
sold for $178,600 with $49,500 being remitted during the year and the remaining
balance of $128,100 being recorded as a non-interest bearing payable on the
financial statements of the Company at March 31, 1995.
On August 1, 1994, the Company purchased Century Real Estate Central, Inc.
("Century") of Lincoln, Nebraska from Patrick E. Elgert, an officer and director
of the Company, and his brother, for Twenty Dollars. In addition the Company
borrowed $211,685 from an unaffiliated bank and used to pay liabilities of
Century that had been guaranteed by Mr. Elgert in the approximate amount of
$250,000.
On December 20, 1994, the Company sold its Century Realty Central, Inc.
Lincoln, Nebraska subsidiary to Home Real Estate Service of Lincoln, Inc.
("Home") for $250,000, consisting of $50,000 cash and a non-interest bearing
promissory note for $200,000. The promissory note is payable in 36 monthly
installments with the entire balance due January 1, 1998. The note is unsecured
but is guaranteed by Austin Realty, Inc., whose vice president is Mr. Schleich.
The Company owns 10% of the issued and outstanding common stock of Home. The
family of Thomas G. Schleich, a director of the Company, controls Home. In
addition, the Company pays to Home monthly rental of $4,000 for the use of three
offices in the Lincoln, Nebraska area.
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting Proxies. In addition to the
solicitation of Proxies by mail, Directors, officers, or employees of the
Company may, without additional compensation, solicit Proxies personally or by
telephone or telegraph.
Arrangements also may be made with brokerage houses and other custodians,
nominees, and fiduciaries to forward solicitation material to beneficial owners
of the shares held of record by such persons and the Company may reimburse such
persons for reasonable out-of-pocket expenses incurred by them.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
A proposal submitted by a shareholder for the next Annual Meeting of
Shareholders of the Company must be received by the Secretary of the Company,
Advanced Financial, Inc., 5425 Martindale, Shawnee, Kansas 66218 by March 1,
1997 in order to be eligible to be included in the Proxy Statement of the
Company for that meeting.
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OTHER INFORMATION
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-KSB for the fiscal year ended March 31, 1996 is available
without charge upon written request to William B. Morris, Advanced Financial,
Inc., 5425 Martindale, Shawnee, Kansas 66218.
OTHER MATTERS
The Board of Directors is not aware of any business not described above to
be presented to the meeting. If any other matter does properly come before the
meeting, the person named in the enclosed Proxy will vote the same in accordance
with his best judgment on such matters.
BY ORDER of the Board of Directors
William B. Morris
Corporate Secretary
August 5, 1996
15
EHXIBIT A
1996
STOCK PLAN
1. Purpose and Eligibility. This Stock Plan (the "Plan") is intended to
advance the interests of Advanced Financial, Inc. (the "Company") and its
Related Corporations, as defined bellow by enhancing the ability of the Company
to attract and retain qualified employees, consultants, officers and directors
by creating incentives and rewards for their contributions to the success of the
Company. This Plan will provide to: (a) officers and other employees of the
Company and its Related Corporations opportunities to purchase stock in the
Company pursuant to Options granted hereunder which qualify as incentive stock
Options ("ISOs") under Section 422A(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) directors, officers, employees and consultants of the
Company and Related Corporations opportunities to purchase stock in the Company
pursuant to Options granted hereunder which do not qualify as ISOs ("Non-
Qualified Options") and to receive stock appreciation rights ("SARs") pursuant
to such Non-Qualified Options; (c) directors, officers, employees and
consultants of the Company and Related Corporations awards of stock in the
Company ("Awards"); (d) directors, officers, employees and consultants of the
Company and Related Corporations opportunities to make direct purchases of stock
in the Company ("Purchases"); and (e) directors of the Company and Related
Corporations who are not officers or employees of the Company or Related
Corporations with the opportunities to purchase stock in the Company pursuant to
Options granted hereunder ("Non-Discretionary Options"). ISOs, Non-Discretionary
Options, Non-Qualified Options and Stock Appreciation Rights are referred to
hereafter as "Options". Options, Awards and authorizations to make Purchases are
referred to hereafter collectively as "Stock Rights". For purposes of the Plan,
the term "Related Corporations" shall mean a corporation which is a subsidiary
corporation with respect to the Company within the meaning of Section 425 (f) of
the Code.
2. Administration of the Plan
----------------------------
a. The Plan shall be administered by the board of directors of the
Company (the "Board"). The Board may, in its discretion, delegate its powers
with respect to the Plan to an employee benefit plan committee or any other
committee (the "Committee"). The Committee shall consist of not fewer than three
members. Each of the members must be a "disinterested person" as that term is
defined in Rule 16b-3 adopted pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). A majority of the members of any such Committee shall
constitute a quorum, and all determinations of the Committee shall be made by
the majority of its members present at a meeting. Any determination of the
Committee under the Plan may be made without notice or meeting of the Committee
by a writing signed by all of the Committee members. Subject to ratification of
the grant or authorization of each Stock Right by the Board (but only if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine the employees of the Company
and Related Corporations (from among the class of employees eligible under
<PAGE>
Paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine (from
among the class of individuals and entities eligible under Paragraph 3 to
receive Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options or Awards may be
granted or Purchases made; (iii) determine the exercise price of shares subject
to each Option which price for any ISO shall not be less than the minimum price
specified in Paragraph 7, and the purchase price of shares subject to each
Purchase; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 9) the time or times
when each Option, except for non-discretionary Options, shall become
exercisable, the duration of the exercise period and when each Option shall
vest; (vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the nature of
such restrictions, if any, and (vii) interpret the Plan and promulgate and
rescind the rules and regulations relating to it. The interpretation and
construction by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final, binding and conclusive unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best.
b. The Committee may select one of its members as its chairman and shall
hold meetings at such time and places as it may determine. All references in the
Plan to the Committee shall mean the Board if no Committee has been appointed.
From time to time the Board may increase the size of the Committee and appoint
additional member thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused or remove
all members of the Committee and thereafter directly administer the Plan.
c. Stock rights may be granted to members of the Board, whether such
grants are in their capacity as directors, officers, or consultants, but no
discretionary Stock Rights shall be granted to any person who is, at the time of
the proposed grant, a member of the Board unless such grant has been approved as
provided in paragraph 2d. All grants of Stock Rights to members of the Board
shall in all other respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the Board who are either
(i) eligible for Stock Rights pursuant to the Plan or (ii) have been granted
Stock Rights may vote on any matters affecting the administration of the Plan or
the grant of any Stock Rights pursuant to the Plan, except that no such member
shall act upon the granting to himself of discretionary Stock Rights but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to him of Stock Rights.
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<PAGE>
d. Notwithstanding any other provision of Paragraph 2, any discretionary
grants to a person who is a member of the Board shall be made only by the Board
provided, however, that if a majority of the Board is eligible to participate in
the Plan or in any other stock option or other stock plan of the Company or any
of its Related Corporations, or has been so eligible at any time within the
preceding year, any grant to directors of Stock Rights must be made by, or only
in accordance with the recommendation of a Committee consisting of three or more
persons, who shall be directors of the Company, appointed by the Board but
having full authority to act on the matter, none of whom is eligible to
participate in this Plan or any other stock option or other stock plan of the
Company or any of its affiliates, or has been eligible at any time within the
preceding year. The requirements imposed by this subparagraph 2d shall also
apply with respect to grants to officers who are also directors. Once appointed,
such Committee shall continue to serve until otherwise directed by the Board.
e. In addition to such other rights of indemnification as he may have as
a member of the Board, and with respect to administration of the Plan and the
granting of Options under it, each member of the Board and of the Committee
shall be entitled without further act on his part to indemnification from the
Company for all expenses (including advances in litigation expenses, the amount
of judgment and the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by him in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he may be involved by reason of his being
or having been a member of the Board or the Committee, whether or not he
continues to be such member of the Board or the Committee at the time of the
incurring of such expenses. A person shall only be indemnified if (i) he
conducted himself in good faith, (ii) he reasonably believed that his conduct
was for a purpose he reasonably believed to be in the interests of the
participants or beneficiaries of this Plan and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe that his conduct was unlawful.
Provided however, a director shall not be entitled to indemnification in
connection with a proceeding by or on behalf of the Company in which the
director is adjudged liable to the Company or in connection with any proceeding
charging improper personal benefit to the director in which the director is
found to be personally liable on the basis that personal benefit was improperly
received by him. Provided further that no right of indemnification under the
provisions set forth herein shall be available to any such member of the Board
or the Committee unless within 10 days after the later of institution of or
learning of any such action, suit or proceeding he shall have offered the
Company in writing the opportunity to handle and defend such action, suit or
proceeding at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Board or the Committee and shall be in addition to all other
rights to which such member of the Board or the Committee would be entitled to
as a matter of law, contract or otherwise. The indemnification provided by this
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<PAGE>
Section 2e shall only be made after the requirements of Section 145(d) of the
Delaware General Corporation Law (the "Law") have been complied with except that
the Company may pay for or reimburse reasonable expenses incurred by a director
who is a party to a proceeding in advance of the final disposition of the
proceeding in accordance with the requirement of Section 145(e) of the Law.
3. Eligible Employees and Others.
------------------------------
a. ISOs may be granted to any employee of the Company or any Related
Corporation. Those officers and directors of the Company who are not employees
may not be granted ISOs under the Plan. Subject to compliance with Rule 16b-3
and other applicable securities laws, Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any director (whether or not
an employee), officer, employee or consultant of the Company or any Related
Corporation. The Committee may take into consideration a recipient's individual
circumstances in determining whether to grant an ISO, a Non-Qualified Option or
an authorization to make a Purchase. Granting of any Stock Right to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify him from participation in any other grant of Stock Rights.
b. All directors of the Company who are not employees of the Company or
Related Corporations shall automatically receive Non-Qualified Options (i) upon
election or appointment to the Board if not a member of the Board at the time
this Plan is adopted by the Board; and (ii) upon election to the Board after all
stock grants and Options previously granted have vested. The amount and terms of
such Non-Qualified Options shall be determined by the Board in full compliance
with the terms of the Plan.
(1) The exercise price of the Options shall be fair market value on the
date of grant as defined by Paragraph 7.
(2) The Options granted to each Director pursuant to this subparagraph b
shall vest in equal increments of 50% on September 30 and March 31 of each year,
provided that the director is still serving as a director on the Company. To the
extent that any Options which have not been exercised do not vest, the Options
shall lapse and no longer be exercisable
c. The Options shall be exercisable for a period of 5 years from the
date of grant.
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<PAGE>
4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common stock or shares of Common Stock
reacquired by the Company in any manner. The aggregate number of shares of
Common Stock which may be issued pursuant to the Plan is 1,000,000, subject to
adjustment as provided in Paragraph 15. Any such shares may be issued as ISOs,
Non-Qualified Options or Awards, or to persons or entities making Purchases, so
long as the number of shares so issued does not exceed such number, as adjusted.
If any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Company shall reacquire any unvested
shares issued pursuant to Awards or Purchases, the unpurchased shares subject to
such Options and any unvested shares so reacquired by the Company shall again be
available for grants of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time on and after July 15, 1996, provided however that no ISO shall be
granted more than 10 years after the effective date of this Plan. The date of
grant of a Stock Right under the Plan will be the date of grant by the Committee
unless otherwise specified at the time it grants the Stock Right; provided,
however, that such date shall not be prior to the date on which the Committee
acts to approve the grant. The Committee shall have the right with the consent
of the optionee, to convert an ISO granted under the Plan to a Non-Qualified
Option pursuant to Paragraph 18.
6. Sale of Shares. Any shares of the Company's Common Stock granted
pursuant to an Award or acquired pursuant to a Purchase as set forth herein,
cannot be sold for at least six months after acquisition except in case of death
or disability. Nothing in this paragraph 6 shall be deemed to reduce the holding
period set forth under the applicable securities laws.
7. ISO Minimum Option Price and Other Limitations.
--------------------------------------------------
a. The exercise price per share specified in the stock option agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock which represents more than 10
percent of the total combined voting power of all classes of stock of the
Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than 110 percent of the fair
market value per share of Common Stock on the date of grant and such ISO shall
not be exercisable after the expiration of five years from the date of grant.
b. In no event shall the aggregate fair market value (determined at the
time an ISO is granted) of Common Stock for which ISOs granted to any employee
are exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company and any Related Corporation) exceed
$100,000.
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<PAGE>
c. If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean:
(1) the average closing price of the Company's shares appearing on
the American Stock Exchange if such shares are listed on such exchange or if not
listed, appearing on the National Associates of Securities Dealers, Inc.'s
electronic bulletin board; or
(2) If the Company's shares are not listed on the National
Association of Securities Dealers, Inc's electronic bulletin board, then the
average bid and asked price for the Company's shares as listed in the National
Quotation Bureau's "pink sheets", or
(3) if there are no listed bid and asked prices published in the
pink sheets, then the fair market value shall be based upon the average closing
bid and asked price as determined following a polling of all dealers making a
market in the Company's shares.
8. Stock Appreciation Rights.
--------------------------
a. Stock appreciation rights may be granted by the Company under this
Plan upon such terms and conditions as the Committee may prescribe. A stock
appreciation right may be granted only in connection with a Non-Qualified Option
right previously granted or to be granted under this Plan. Each stock
appreciation right shall contain a provision that it shall become nonexercisable
and be forfeited if the related option right is exercised. "Stock Appreciation
right" as used in this Plan means a right to receive the excess of the fair
market value of a share of the Company's Common Stock on the date on which an
appreciation right is exercised over the option price provided for in the
related stock option and which is issued in consideration of services performed
for the Company or for its benefit by the optionee. Such excess is hereafter
called "the differential". "Option right" means the right to purchase shares of
the Company's Common Stock under a Non-Qualified Option granted under this Plan.
b. Stock appreciation rights shall be exercisable and be payable in the
following manner:
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<PAGE>
(1) A stock appreciation right shall be exercisable by the optionee
at any time the option to which it relates could be exercised. An optionee
wishing to exercise a stock option appreciation right shall give written notice
of such exercise to the Company addressed to the Company's Secretary, which such
notice shall be forwarded by the Company's Secretary to the Committee. Upon
receipt of such notice, the Committee shall determine whether the optionee's
stock appreciation rights shall be paid in cash or Common Stock or a combination
of cash and shares. Upon receipt of such notice, the Company shall, without
transfer or issue tax to the optionee or other person entitled to exercise the
stock appreciation rights, deliver to the person exercising such right a
certificate or certificates for shares of the Common Stock which are issuable
upon exercise of the stock appreciation right or cash or a combination thereof
as the case may be. The date the Company's Secretary receives the written notice
of exercise hereunder is referred to herein as the exercise date.
(2) The exercise of a stock appreciation right shall automatically
result in the surrender of the related stock option right by the grantee on a
share for share basis to the extent shares under such related stock option are
used to calculate the shares or cash or combination thereof to be received by
such grantee upon the exercise of such stock appreciation right. Shares covered
by such surrendered option rights shall not be available for granting further
options under this Plan.
(3) The Committee may impose any other conditions it prescribes upon
the exercise of a stock appreciation right, which conditions may include a
condition that the stock appreciation right may only be exercised in accordance
with rules and regulations adopted by the Committee from time to time.
(4) Upon the exercise of a stock appreciation right and surrender of
the related option right, the Company shall give to the person surrendering the
related option right an amount equivalent to the differential, in cash or shares
of the Company's Common Stock or any combination thereof as determined in
accordance with subdivision b (1) of this paragraph 8. The shares to be issued
upon the exercise of a stock appreciation right may consist either in whole or
in part of shares of the Company's authorized and issued Common Stock reacquired
by the Company and held in its treasury. No fractional share of Common Stock
shall be issued and the Committee shall determine whether cash shall be given in
lieu of such fractional share or whether such fractional share shall be
eliminated.
c. Notwithstanding any other provision of this Plan, the Committee may
from time to time determine, including at the time of exercise, the maximum
amount of cash or stock which may be given upon exercise of any stock
appreciation right in any year provided, however, that all such amounts shall be
paid in full no later than the end of the year immediately following the year in
which the optionee exercised such stock appreciation rights. Any determination
under this paragraph may be changed by the Committee from time to time provided
7
<PAGE>
that no such change shall require the holder to return to the Company any amount
theretofore received or to extend the period within which the Company is
required to make full payment of the amount due as the result of the exercise of
the optionee's stock appreciation right.
d. Stock appreciation rights granted pursuant to this paragraph shall
terminate or expire as follows:
(1) Each stock appreciation right and all rights and obligations
thereunder shall expire on a date to be determined by the Committee, such date,
however, in no event to be later than ten years from the date on which the
related option right was granted.
(2) A stock appreciation right shall terminate and may no longer be
exercised upon the termination of the related option right.
9. Duration of Stock Rights. Subject to earlier termination as provided in
Paragraph 11 and 12, each Stock Right shall expire on the date specified in the
original instrument granting such Stock Right, (except with respect to any part
of an ISO that is converted into a Non-Qualified Option pursuant to Paragraph
18) provided, however, that such instrument must comply with Section 422A of the
Code with regard to ISOs granted to all employees and Rule 16b-3 of the Exchange
Act with regard to all Stock Rights granted to executive officers, directors and
10% stockholders of the Company.
10. Exercise of Options. Subject to the provisions of Paragraphs 3b and 11
through 15, each Option granted under the Plan shall be exercisable as follow:
a. The Options shall either be fully exercisable from the date of grant
or shall become exercisable thereafter in such installments as the Committee may
specify.
b. Once an installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified by the
Committee.
c. Each Option or installment, once it becomes exercisable, may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
d. The Committee shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Committee shall not
accelerate the exercise date of any installment of any Option granted to any
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<PAGE>
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 18) if such acceleration would violate the annual vesting
limitation contained in Section 422A(d) of the Code as described in Paragraph
7(b). The date of exercise of all Options shall accelerate in the event of any
of the following: (i) the Company is to merge or consolidate with or into any
other corporation or entity except a transaction where the Company is the
surviving corporation or change of domicile merger or similar transaction exempt
from registration under the Securities Act of 1933, (ii) the sale of all or
substantially all of the Company's assets, (iii) the sale of at least 90% of the
outstanding Common Stock of the Company to a third party (subparagraphs (i),(ii)
and (iii) collectively referred to as an "Acquisition"); or (iv) the Company is
dissolved. Upon a minimum of 20 days prior written notice to the optionees, the
exercisability of such Options shall commence two business days prior to the
earlier of the scheduled closing of an Acquisition or proposed dissolution or
the actual closing of an Acquisition or proposed dissolution.
e. All Options and stock grants shall be subject to any vesting
requirements imposed by the Committee. In the event of any Acquisition or
dissolution of the Company, all unvested Options and stock grants shall
immediately vest two business days prior to the earlier of the scheduled closing
of the Acquisition or proposed dissolution or the actual closing of the
Acquisition or proposed dissolution and a minimum of 20 days notice of such
vesting shall be give to the holders of such Options and unvested shares of
Common Stock.
11. Termination of Employment. Subject to any greater restrictions or
limitations as may be imposed by the Committee upon the granting of any ISO, if
an ISO optionee ceases to be employed by the Company and all Related
Corporations other than by reason of death or disability as defined in Paragraph
12, no further installments of his ISOs shall become exercisable or vest, and
his ISOs shall terminate on the day three months after the day of the
termination of his employment, but in no event later than on their specified
expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
Paragraph 18. Employment shall be considered as continuing uninterpreted during
any bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such optionee's right
to re-employment is guaranteed by statute. A leave of absence with the written
approval of the Company's Board shall not be considered an interruption of
employment under the Plan, provided that such written approval contractually
obligates the Company or any Related Corporation to continue employment of the
optionee after the approved period of absence. ISOs granted under the Plan shall
not be affected by any change of employment within or among the Company and
Related Corporations so long as the optionee continues to be an employee of the
Company or any Related Corporation.
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<PAGE>
12. Death or Disability. Subject to any greater restrictions or limitations
as may be imposed by the Committee upon the granting of any ISO:
a. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his death, any ISO of his may be exercised to
the extent of the number of shares with respect to which he could have exercised
it on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the ISO's specified expiration
date or three months from the date of the optionee's death.
b. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his disability, he shall have the right to
exercise any ISO held by him on the date of termination of employment to the
extent of the number of shares with respect to which he could on the earlier of
the ISO's specified expiration date or one year from the date of the termination
of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22 (e)(3) of the Code or successor statute.
13. Assignability. No Option granted to an executive officer or director of
the Company or beneficial owner of 10% or more of the Company's equity
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 and no ISO shall be assignable or transferable by the grantee except by
will or by laws of descent and distribution and during the lifetime of the
grantee each Option shall be exercisable only by him, his guardian or legal
representative.
14. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in Paragraph 7 through 13 hereof and may contain such other
provisions as the Committee deems advisable which are not inconsistent with the
Plan, including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and cancellation
provisions as the Committee may determine. The Committee may from time to time
confer authority and responsibility on one or more of its own members and/or one
or more officers of the Company to execute and deliver such instruments.
10
<PAGE>
The proper officers of the Company are authorized and directed to take any and
all action necessary or advisable from time to time to carry out the terms of
such instruments.
15. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
a. If the shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
b. If the Company is to be consolidated with or acquired by another
entity pursuant to an Acquisition, the Committee or the board of directors of
any entity assuming the obligations of the Company hereunder (the "Successor
Board") shall, as to outstanding Options not exercised pursuant to Paragraph 9,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
the consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; or (ii) terminate all Options in exchange
for a cash payment equal to the excess of the fair market value of the shares
subject to such Options over the exercise price thereof.
c. In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph b above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior or such
recapitalization or reorganization.
d. Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs a,b or c with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425(h) of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs it may refrain from making such adjustments.
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e. Except as expressly provided herein, no issuance by the Company of
shares of Common Stock of any class or securities convertible into shares of
Common Stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares subject to Options.
No adjustments shall be made for dividends or other distributions paid in cash
or in property other than securities of the Company.
f. No fractional share shall be issued under the Plan and the optionee
shall receive from the Company cash in lieu of such fractional shares.
g. Upon the happening of any of the foregoing events described in
subparagraphs a, b or c above, the class and aggregate number of shares set
forth in Paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this Paragraph 15 and, subject to Paragraph 2, its determination
shall be conclusive. If any person or entity owning restricted Common Stock
obtained by exercise of a Stock Right made hereunder receives shares or
securities or cash in connection with a corporate transaction described in
subparagraphs a, b and c above as a result owning such restricted Common Stock,
such shares or securities or cash shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to which
such shares or securities or cash were issued, unless otherwise determined by
the Committee or the Successor Board.
16. Means of Exercising Stock Rights.
---------------------------------
a. A Stock Right (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal office address. Such
notice shall identify the Stock Right being exercised and specify the number of
shares as to which such Stock Right is being exercised, accompanied by full
payment of the purchase or exercise price therefor either (i) in United States
dollars in cash or by check; (ii) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal as of the
date of the exercise to the cash exercise price of the Stock Right; (iii) at the
discretion of the Committee, by delivery of the grantee's personal recourse note
bearing interest payable not less than annually at no less than 100% of the
lowest applicable federal rate, as defined in Section 1275(d) of the Code, or
(iv) at the discretion of the Committee, by any combination of (i), (ii) and
(iii) above. If the Committee exercises its discretion to permit payment of the
exercise price of an ISO by means of the methods set forth in clauses (ii),
12
<PAGE>
(iii) or (iv) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of Stock
right shall not have the rights of a shareholder with respect to the shares
covered by his Stock Right until the date of issuance of a stock certificate to
him for such shares. Except as expressly provided above in Paragraph 15 with
respect to changes in capitalization and stock dividends, no adjustment shall be
made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.
b. Each notice of exercise shall, unless the Option shares are covered
by a then current registration statement under the Securities Act of 1933, as
amended (the "Act"), contain the optionee's acknowledgment in form and substance
satisfactory to the Company that (i) such Option shares are being purchased for
investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provision of the Act), (ii) the optionee has
been advised and understands that (1) the Option shares have not been registered
under the Act and are "restricted securities" within the meaning of Rule 144
under the Act and are subject to restrictions on transfer and (2) the Company is
under no obligation to register the Option shares under the Act or to take any
action which would make available to the optionee any exemption from such
registration, and (iii) such Option shares may not by transferred without
compliance with all applicable federal and state securities laws. Not
withstanding the above, should the Company be advised by counsel that issuance
of shares should be delayed pending registration under federal or state
securities laws or the receipt of an opinion than an appropriate exemption
therefrom is available, the Company may defer exercise of any option granted
hereunder until either such event has occurred.
17. Terms and Amendment of Plan. This Plan was adopted by the Board on
July 15, 1996 and if not approved by the holders of at least a majority of all
shares present in person and by proxy and entitled to vote therein at a meeting
of the stockholders of the Company within 12 months from the date of the Plan's
adoption by the Board, no ISOs may be granted pursuant to the Plan. Nor shall
the Plan in such event conform to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. This Plan shall have no expiration date, provided however
that no ISOs shall be granted more than 10 years after the Plan's effective
date. The Board may terminate or amend the Plan in any respect at any time.
However, if not approved by the stockholders on or before July 15, 1997,
approval of the stockholders must be obtained within 12 months before or after
the Board adopts a resolution authorizing any of the following actions: (a)
increase of the total number of shares that may be issued under the Plan (except
by adjustment pursuant to Paragraph 15); (b) modification of the provisions of
Paragraph 3 regarding eligibility for grants of ISOs; and (c) any other act
requiring stockholder approval under Rule 16b-3 (or successor rule) promulgated
under the Securities Exchange Act of 1934. Except as provided herein or as
specified in the original instrument granting such Stock Right, no action of the
Board or stockholders may alter or impair the rights of a grantee, without his
consent, under any Stock Right previously granted to him.
13
<PAGE>
18. Conversion of ISOs into Non-Qualified Options; Termination of ISOs. The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise period of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
condition shall not be inconsistent with this Plan. Nothing in the Plan shall be
deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
19. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
20. Government Regulations. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
21. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the granting or vesting of an Award, the Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in Paragraph 22) the Company, in accordance with Section
3402(a) of the Code may require the optionee, award recipient or purchaser to
pay additional withholding taxes in respect of the amount that is considered
compensation includable in such person's gross income. The Committee in its
discretion may condition (i) the exercise of any Option; (ii) the granting or
vesting of an award; or (iii) the making of a purchase of Common Stock for less
than its fair market value on the payment of such withholding taxes.
14
<PAGE>
To the extent that the Company is required to withhold taxes for federal
income tax purposes in connection with the exercise of any Option, the optionee
shall have the right to elect to satisfy such withholding requirement by (i)
paying the amount of the requires withholding tax to the Company; (ii)
delivering to the Company shares of its Common Stock previously owned by the
optionee; or (iii) having the Company retain a portion of the shares covered by
the Option exercise. The number of shares to be delivered to or withheld by the
Company times the fair market value of such shares shall equal the cash of
required to be withheld. To the extent that the Participant elects to either
deliver or have withheld shares of the Company's Common Stock, the Board, or the
Committee, may require him to make such election only during certain periods of
time as may be necessary to comply with appropriate exemptive procedures
regarding the "short-swing" profit provisions of Section 16(b) of the Securities
Exchange Act of 1934 or to meet certain Code requirements.
22. Notice of Company of Disqualifying Disposition. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (i)
two years after the date of employee was granted the ISO or (ii) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
23. Continued Employment. The grant of an Option pursuant to the Plan shall
not be construed to imply or to constitute evidence of any agreement, express or
implied, on the part of the Company or any Related Corporation to retain the
optionee in the employ of the Company or Related Corporation, as a member of the
Company's board of directors or in any other capacity, whichever the case may
be.
24. Bonuses or Loans to Exercise Options. If requested by any person to
whom a grant of a Stock Right has been made, the Company or any Related
Corporation may loan such person or guarantee a bank loan to such person for the
purpose of paying for the shares of the Common Stock. If requested by any person
to whom a grant of a Stock Right has been made, the Company or any Related
Corporation may loan such person, guarantee a bank loan to such person, or pay
such person additional compensation equal to the amount of money necessary to
pay the federal income taxes incurred as a result of the grant of the Stock
Rights or the Exercise of any Options, assuming that such person is in the
maximum federal income tax bracket six months from the time of grant or exercise
and assuming that such person has no deductions which would reduce the amount of
such tax owed. The tax loan shall be made or tax offset bonus paid on or before
April 15th of the year following the year in which the amount of tax is
determined, and any loan shall be made on such terms as the Company or lending
bank determines.
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25. Governing Law; Construction.The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Kansas. In construing this Plan, the singular shall include the plural
and the masculine gender shall include the feminine and neuter, unless the
context otherwise requires.
16
ADVANCED FINANCIAL, INC.
5425 Martindale
Shawnee, Kansas 66218
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF ADVANCED FINANCIAL, INC.
The undersigned having received the Notice of Annual Meeting of
Stockholders and Proxy Statement dated August 5, 1996, hereby appoints Norman L.
Peterson or his designee with full power of substitution and revocation to
represent the undersigned and to vote all the shares of the common stock of
Advanced Financial, Inc. (the "Company") which the undersigned is entitled to
vote at the annual meeting of the Shareholders of the Company to be held on
September 6, 1996 and any postponement or adjournment thereof.
(1) ELECTION OF For all nominees below WITHHOLD
DIRECTORS: (except as marked to AUTHORITY
the contrary) to vote for
---------- all nominees
below
----------
NORMAN L. PETERSON, DANIEL STAROZEWSKI, THOMAS G. SCHLEICH,
STEVEN A. WHITE and WILLIAM E. MOFFATT.
INSTRUCTION: To withhold authority to vote for any individual nominee,
draw a line through or otherwise strike out his name. If
authority is not withheld, the execution of this Proxy shall
be deemed to grant such authority.
(2) PROPOSAL TO RATIFY AND APPROVE 1996 STOCK PLAN.
For Against Abstain
------- ------- -------
(3) IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
For Against Abstain
------- ------- -------
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned Shareholder. If no direction is made, this Proxy will
be voted for all nominated Directors and for proposals 2 and 3.
The undersigned hereby revokes any proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorneys and
proxies may lawfully do by virtue hereof.
<PAGE>
THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN
OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement furnished therewith.
Dated:
--------------------------
-------------------------------------
-------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the
name(s) appearing hereon. Executors,
administrators, trustees, guardians
and attorneys should indicate when
signing. Attorneys should submit
powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ADVANCED
FINANCIAL, INC. PLEASE SIGN AND RETURN THIS PROXY TO ADVANCED FINANCIAL, INC.,
5425 MARTINDALE, SHAWNEE, KANSAS 66218. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THIS MEETING.
