SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Yes.
Filed by a Party other than the Registrant: No.
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
UNION ACCEPTANCE CORPORATION
(Name Of Registrant As Specified In Its Charter)
UNION ACCEPTANCE CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[UAC LOGO]
250 North Shadeland Avenue
Indianapolis, Indiana 46219
(317) 231-6400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On October 29, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Union
Acceptance Corporation (the "Company") will be held at 250 North Shadeland
Avenue, Indianapolis, Indiana, on Wednesday, October 29, 1997 at 10:00 A.M.,
Indianapolis time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of eight directors of the
Company for terms to expire in 1998.
2. Ratification of Auditors. Ratification of the appointment of
KPMG Peat Marwick, LLP as auditors for the Company for the
fiscal year ending June 30, 1998.
3. Other Business. Such other matters as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on August 28, 1997, are
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you
may be informed about the business to come before the meeting, or any
adjournment thereof. At your earliest convenience, please sign and return the
accompanying proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended June 30, 1997, is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ John M. Stainbrook
John M. Stainbrook, President
Indianapolis, Indiana
September 26, 1997
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE
SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
[UAC LOGO]
250 North Shadeland Avenue
Indianapolis, Indiana 46219
(317) 231-6400
---------------
PROXY STATEMENT
---------------
FOR
ANNUAL MEETING OF SHAREHOLDERS
October 29, 1997
This Proxy Statement is being furnished to the holders of Class A
Common Stock, without par value (the "Class A Common Stock"), and to the holders
of Class B Common Stock, without par value (the "Class B Common Stock") of Union
Acceptance Corporation (the "Company"), an Indiana corporation, in connection
with the solicitation of proxies by the Board of Directors of the Company to be
voted at the Annual Meeting of Shareholders to be held at 10:00 A.M.,
Indianapolis time, on October 29, 1997, at the Company's headquarters located at
250 North Shadeland Avenue, Indianapolis, Indiana, and at any adjournment of
such meeting. This Proxy Statement is expected to be mailed to shareholders on
or about September 26, 1997.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company (Cynthia
F. Whitaker, 250 North Shadeland Avenue, Indianapolis, Indiana 46219) written
notice thereof, (ii) submitting a duly executed proxy bearing a later date, or
(iii) by appearing at the Annual Meeting and giving the Secretary notice of his
or her intention to vote in person. Proxies solicited hereby may be exercised
only at the Annual Meeting and any adjournment thereof and will not be used for
any other meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on August 28, 1997
(the "Voting Record Date"), will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 4,016,788 shares of the Class A Common Stock
and 9,200,000 shares of Class B Common Stock issued and outstanding, and the
Company had no other class of equity securities outstanding. Each share of Class
A Common Stock is entitled to one vote and each share of Class B Common Stock is
entitled to five votes at the Annual Meeting in respect of the election of
directors. On all other matters properly presented at the Annual Meeting, each
share is entitled to one vote.
The following table sets forth certain information regarding the
beneficial ownership of the Class A Common Stock and Class B Common Stock as of
the Voting Record Date, by each person who is known by the Company to own
beneficially 5% or more of either Class A Common Stock or Class B Common Stock.
Unless otherwise indicated, based on information furnished by such owners, the
named beneficial owners have sole voting and dispositive power with respect to
the shares reported, subject to community property laws where applicable.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares of
of Class A Common Percentage of Class B Common Percentage of
Name and Address Stock Beneficially Class A Stock Beneficially Class B Percentage of
of Beneficial Owner Owned Common Stock (1) Owned Common Stock (2) Voting Power (3)
- ------------------- ----- ---------------- ----- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Elizabeth W. Chapman (4) 2,798 (11) 1,510,885 16.42% (3)
c/o Barrett & McNagny
215 East Berry Street, P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Howard L. Chapman (4) (5) 2,798 (11) 1,510,885 16.42% (3)
Barrett & McNagny
215 East BerryStreet, P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Frances W. LeMay (6) --- --- 729,812 7.93% (3)
c/o Barrett & McNagny
215 East Berry Street, P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Frances W. LeMay Trust (7) --- --- 788,658 8.57% 7.88%
c/o Fort Wayne National Bank
110 West Berry Street
Fort Wayne, Indiana 46802
John R. Rhinehart --- --- 1,719,851 18.69% (3)
Ruth N. Rhinehart (8)
c/o Barrett & McNagny
215 East Berry Street, P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Richard D. Waterfield (5) (9) (10) 3,798 (11) 7,607,778 82.69% 76.06%
Waterfield Mortgage Company, Inc.
7500 W. Jefferson
Fort Wayne, Indiana 46804
Mercury Asset Mangement plc (12) 211,000 5.25% --- --- 0.42%
33 King William Street
London EC4R 9AS England
Montgomery Asset Management, L.P. (12) 448,000 11.15% --- --- 0.90%
101 California Street
San Fransisco, CA 94111
John Hancock Advisers, Inc. (12)
John Hancock Place 299,000 7.44% --- --- 0.60%
P.O. Box 111
Boston, Massachusetts 02117
</TABLE>
- --------------------------------
(1) Based upon 4,016,788 shares of Class A Common Stock outstanding.
(2) Based upon 9,200,000 shares of Class B Common Stock outstanding. Shares
of Class B Common Stock convert automatically on a share for share
basis into shares of Class A Common Stock upon transfer.
(3) Based upon one vote for each of the 4,016,788 shares of Class A Common
Stock outstanding and five votes per share for each of the 9,200,000
shares of Class B Common Stock outstanding. Shares beneficially owned
by persons for whom no voting power is indicated are held in the Voting
Trust described below in note 9.
(4) Ms. Chapman owns indirectly all 1,510,885 shares of Class B Common
Stock held of record by the Voting Trust described below in note 9. Ms.
Chapman may also be deemed to own beneficially 2,798 shares of Class A
Common Stock owned of record by Howard L. Chapman, her husband, but
disclaims beneficial ownership of such shares. Mr. Chapman, a Company
director and nominee, may be deemed to own beneficially the shares of
Class B Common Stock beneficially owned by Elizabeth W. Chapman, his
wife, but disclaims beneficial ownership of such shares.
(5) Includes 2,798 shares of restricted Class A Common Stock issued to
non-employee directors pursuant to the Incentive Stock Plan.
(6) Includes 56,622 shares of Class B Common Stock owned by Frances W.
LeMay as custodian for Barbara Lorene LeMay and held of record by the
Voting Trust described below in note 9, of which shares Frances W.
LeMay disclaims beneficial ownership.
(7) Fort Wayne National Bank and Anne K. Waterfield are co-trustees of the
Frances W. LeMay Trust.
(8) Owned as joint tenants and held of record by the Voting Trust described
below in note 9.
(9) Includes 3,164,960 shares of Class B Common Stock beneficially owned by
Mr. Waterfield and held of record by a voting trust created under
agreement dated as of June 10, 1994, as amended (the "Voting Trust")
and 4,436,018 additional shares of Class B Common Stock held by Mr.
Waterfield as trustee of the Voting Trust, which additional shares are
owned beneficially by Elizabeth W. Chapman, Frances W. LeMay, John R.
and Ruth N. Rhinehart, Linco & Co., Richard R. Waterfield, John R.
Waterfield, Jill L. Waterfield, Barbara Lorene LeMay, Cynthia F.
Whitaker, and Anne K. Menefee.
(10) Includes 1,000 shares of Class A Common Stock and 6,800 shares of Class
B Common Stock held in a limited partnership of which Mr. Waterfield is
General Partner.
(11) Less than 0.1%.
(12) Based solely on the shareholder's report on Form 13G or Form 13D
received by the Company.
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors has eight members. The Company's Articles of
Incorporation provide that members of the Board of Directors are to be elected
for a term of one year and until their successors are elected and qualified. The
nominees for director are Howard L. Chapman, John M. Davis, Fred M. Fehsenfeld,
Jr., Donald A. Sherman, John M. Stainbrook, Jerry D. Von Deylen, Richard D.
Waterfield, and Thomas M. West. Each of the nominees is a current director of
the Company. If elected by the shareholders at the Annual Meeting, the terms of
the nominees will expire at the 1998 Annual Meeting of Shareholders.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election at
the time of the Annual Meeting, the proxy holders will nominate and vote for a
replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected.
The following table sets forth certain information regarding the
nominees for election as a director, including the number and percent of shares
of Class A Common Stock and Class B Common Stock beneficially owned by such
persons as of the Voting Record Date. The table also sets forth the number of
shares of Class A Common Stock and Class B Common Stock beneficially owned by
each executive officer of the Company and by all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Number of Shares of
of Class A Common Percentage of Class B Common Percentage of
Name and Address Director of Stock Beneficially Class A Stock Beneficially Class B
of Beneficial Owner Company Since Owned Common Stock (1) Owned Common Stock (2)
- ------------------- ------------- ----- ---------------- ----- ----------------
Nominee:
<S> <C> <C> <C> <C> <C>
Howard L. Chapman (3)(4) 1994 2,798 (9) 1,510,885 16.42%
John M. Davis (3) 1994 3,461 (9) --- ---
Fred M. Fehsenfeld (3) 1994 3,298 (9) --- ---
Donald A. Sherman (3) 1994 2,798 (9) 344,964 3.75%
John M. Stainbrook (8) 1994 27,950 0.69% --- ---
Jerry D. Von Deylen (5)(8) 1994 48,438 1.19% 105,790 1.15%
Richard D. Waterfield (3)(6)(10) 1994 3,798 (9) 7,607,778 82.69%
Thomas G. West (3) 1994 6,798 0.17% --- ---
Other Executive Officers:
Rick A. Brown (8) 6,700 0.17% --- ---
Vice President, Treasurer and
Chief Financial Officer
David S. Nash (8) 6,350 0.16% --- ---
Vice President
Cynthia F. Whitaker (7)(8) 9,424 0.23% 50,607 (11) 0.55%
Vice President and Secretary
All directors and executive
officers as a group 121,813 2.97% 8,058,532 87.59%
(11 persons)
- --------------------------------
</TABLE>
(1) Based upon 4,016,788 shares of Class A Common Stock outstanding and
options exercisable by above officers and directors within 60 days.
(2) Based upon 9,200,000 shares of Class B Common Stock outstanding. Shares
of Class B Common Stock convert automatically on a share for share
basis into shares of Class A Common Stock upon transfer.
(3) Includes 2,798 shares of restricted Class A Common Stock issued to
non-employee directors pursuant to the Incentive Stock Plan.
(4) Mr. Chapman may be deemed to own benefically the shares of Class B
Common Stock owned indirectly by Elizabeth W. Chapman, his wife, and
held of record by the Voting Trust, but disclaims beneficial ownership
of such shares.
(5) Includes 47,468 shares of Class B Common Stock held by Union Federal
Savings Bank of Indianapolis as custodian for Mr. Von Deylen's
individual retirement account.
(6) Includes 3,164,960 shares of Class B Common Stock beneficially owned by
Mr. Waterfield and held of record by the Voting Trust and 4,436,018
additional shares of Class B Common Stock held by Mr. Waterfield as
trustee of the Voting Trust, which additional shares are owned
beneficially by Elizabeth W. Chapman, Frances W. LeMay, John R. and
Ruth N. Rhinehart, Linco & Co., Richard R. Waterfield, John R.
Waterfield, Jill L. Waterfield, Barbara Lorene LeMay, Cynthia F.
Whitaker, and Anne K. Menefee.
(7) Includes 4,424 shares of Class A Common Stock held by Ms. Whitaker as
custodian for her minor children under the Uniform Gift to Minors Act.
Ms. Whitaker is the niece of Richard D. Waterfield and Howard L.
Chapman.
(8) Includes options for 38,438, 25,000, 5,500, 5,500 and 5,000 shares of
Class A Common Stock granted to Mr. Von Deylen, Mr. Stainbrook, Mr.
Brown, Mr. Nash and Ms. Whitaker, respectively, under the Incentive
Stock Plan which are currently exercisable in accordance with their
terms. Does not include shares of Class A Common Stock reserved for
issuance upon exercise of other options granted to such individuals
which are not currently exercisable.
(9) Less than 0.1%.
(10) Includes 1,000 shares of Class A Common Stock and 6,800 shares of Class
B Common Stock held in a limited partnership of which Mr. Waterfield is
General Partner.
(11) Held of record by the Voting Trust.
<PAGE>
Mr. Von Deylen (age 55) was appointed Chairman of the Board of the
Company upon its formation and has served as President of Union Federal Savings
Bank of Indianapolis ("Union Federal") since 1987. Mr. Von Deylen joined Union
Federal as a Director and Executive Vice President in 1984, after participating
in the acquisition of Union Federal Savings and Loan Association by an affiliate
of Waterfield Mortgage Company, Inc. ("WMC"), for which he served as Controller
from 1983-1984. Between 1963 and 1983, Mr. Von Deylen held positions with First
Federal Savings and Loan of Ft. Wayne, Indiana, including Vice President and
Treasurer. Mr. Von Deylen also holds positions with various affiliates of Union
Federal and WMC. Mr. Von Deylen served on the Board of Directors of Federal Home
Loan Bank of Indianapolis for a one-year term ending 1996.
Mr. Stainbrook (age 49) was named President of the Company upon its
formation and was appointed to the Board of Directors in May 1994. Beginning
January 1986, he served as the Senior Vice President of Union Federal's Consumer
Lending Department, where he held primary management and budgetary authority
with respect to the indirect retail automobile financing operations of Union
Federal (the "Union Division"). Before coming to Union Federal in 1986, Mr.
Stainbrook was Vice President of Indirect Lending for Merchants National Bank
and Trust Company of Indianapolis, Indiana (now National City Bank, Indiana) for
fifteen years, working primarily in the area of indirect consumer lending.
Mr. Waterfield (age 52) has served as Chairman of Union Federal since
September, 1984. Mr. Waterfield has been Chairman of WMC, a mortgage banking
company and an affiliate of Union Federal, since 1980. Mr. Waterfield also holds
positions with various affiliates of Union Federal and WMC. He has been a
director of the Company since its formation.
Mr. Chapman (age 63) has served on the Board of Directors since the
Company's formation. Mr. Chapman has been a partner in the law firm of Barrett
and McNagny in Fort Wayne, Indiana since 1986. Mr. Chapman is the husband of
Elizabeth Chapman, Richard D. Waterfield's sister. Barrett & McNagny form time
to time provides legal services to the Company, Union Federal and their
affiliates, in connection with their respective operations. Mr. Chapman is a
director of WMC.
Mr. Davis (age 45) has served as Vice President, General Counsel and
Secretary of IWC Resources Corporation ("IWC") and its subsidiary, the
Indianapolis Water Company since July 1993. IWC is a subsidiary of NIPSCO
Industries, Inc., a publicly traded utility holding company. He also serves as a
director of Waterway Holdings, Inc., another subsidiary of IWC, and the Indiana
Railroad Company, a subsidiary of CSX Transportation Company. He was previously
a tax partner at KPMG Peat Marwick LLP Indianapolis, from June 1974 to June
1993. He has been a director of the Company since June 1994.
Mr. Fehsenfeld (age 46) was named to the Company's Board of Directors
in June 1994. Since 1989, he has served as managing trustee of the Heritage
Group, a family-owned holding company with interest in road construction,
environmental management, oil refining and aggregate production.
Mr. Sherman (age 46) has served on the Company's Board of Directors
since its formation. He has served as Executive Vice President of Union Federal
since July 1990 and has served on its board of directors since September 1984.
Mr. Sherman is also President and director of WMC and holds positions with
various other affiliates of Union Federal and WMC. He is a director of the
Scotts Company, Inc.
Mr. West (age 57) was named to the Company's Board of Directors in June
1994 and has been a member of the board of directors of Union Federal since
April 1992. Mr. West served for over thirty years in various management and
executive positions with Lincoln National Reinsurance Cos. and its affiliates,
most recently serving as President and Chief Executive Officer of Lincoln
National Reinsurance Cos. until late 1994. Mr. West serves as President of West
Consult Corp., a privately-owned investment and consulting company. Commencing
in September 1997, Mr. West has been appointed as a director and officer of the
funding and securitization subsidiaries of the Company.
Mr. Nash (age 34) was named Vice President-Lending Operations of the
Company upon its formation. Mr. Nash joined Union Federal in 1988 as a sales
representative. In 1990 he became Assistant Vice President-Dealer Banking and
has served as Vice President-Dealer Banking for Union Federal since October
1993. In his current capacity with the Company, Mr. Nash is responsible for the
management of the Company's national sales staff, supervises day-to-day credit
operations and is principally involved in planning the Company's expansion
program. Between 1986 and 1988, Mr. Nash worked as a field/sales representative
for Pat Ryan & Associates, in which capacity he assisted retail automobile
dealers improve sales techniques and profitability, especially in their finance
and insurance departments.
Ms. Whitaker (age 35) was named Secretary of the Company upon its
formation and was appointed Vice President--Legal/Securitization in March 1994.
She has served Union Federal in various capacities since 1990, including that of
Assistant Vice President--Legal Securitization since 1991. From 1988 to 1989,
Ms. Whitaker served as Senior Internal Auditor for Boise Cascade Corporation,
where she conducted operational audits for company plants and departments. Ms.
Whitaker worked in residential and consumer lending for WMC and Union Federal
between 1981 and 1988 and worked in clerical capacities for WMC in insurance
servicing from 1977 to 1980. She received her Master's Degree in Business
Administration from Indiana University, with a concentration in finance. Ms.
Whitaker is Richard D. Waterfield's niece. Ms. Whitaker was on leave of absence
from the Company during the summer of 1996 and began working full-time in
January 1997. In her current capacity, she serves as Vice President--Strategic
Planning.
Mr. Brown (age 33) was named Treasurer and Chief Financial Officer of
the company upon its formation. A certified public accountant, Mr. Brown has
served as Assistant Controller for Union Federal since coming to the bank in
1990. From 1988 to 1990, he was a senior auditor for Greenwalt Sponsel & Co.,
Inc., an accounting firm in Indianapolis, Indiana. Mr. Brown worked for Ernst
and Young, LLP, formerly Arthur Young & Co., from 1986 to 1988 as both a staff
assistant and a senior auditor. Mr. Brown also serves as a Vice President of the
Company.
THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES
CAST AT THE ANNUAL SHAREHOLDER MEETING.
<PAGE>
Meetings and Committees of the Board of Directors
During the fiscal year ended June 30, 1997, the Board of Directors of
the Company met four times, including teleconferences, in addition to taking a
number of actions by unanimous written consent. During fiscal 1997, no incumbent
director of the Company attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he served.
The Company's Audit Committee is responsible for: recommending the
appointment of the Company's independent accountants; meeting with the
independent accountants to outline the scope and review the results of the
annual audit; and reviewing with the internal auditor the systems of internal
control and audit reports. The current members of this committee are Messrs.
Davis, Sherman and West. The Committee met twice during fiscal 1997.
The Compensation Committee of the Board of Directors is comprised of
Messrs. Davis, Fehsenfeld and Waterfield. The Committee recommends employee
compensation, benefits and personnel policies to the Board of Directors and
establishes for Board approval salary and cash bonuses for senior officers. The
Compensation Committee also administers the Union Acceptance Corporation 1994
Incentive Stock Plan and has certain responsibilities for the Company's bonus
plan for senior officers of the Company. During fiscal 1997, the Compensation
Committee held one meeting.
MANAGEMENT REMUNERATION AND RELATED TRANSACTIONS
Report of the Compensation Committee:
The objectives of the Compensation Committee with respect to executive
compensation are the following:
(1) provide compensation opportunities generally comparable to
those offered by other similarly situated companies to ensure
the Company's ability to attract and retain talented
executives who are essential to the Company's long-term
success;
(2) reward executive officers based upon their ability to achieve
short-term and long-term strategic goals and objectives and to
enhance shareholder value; and
(3) align the interest of the executive officer with the long-term
interests of shareholders by granting stock options which will
become more valuable to the executives as the value of the
Company's shares increase.
At present, the Company's executive compensation program is comprised
of base salary, annual incentive bonuses and long-term incentive opportunities
provided in the form of stock options. Annual incentive bonuses are tied to the
Company's financial performance during the fiscal year and the executive's
individual performance, and stock options have a direct relation to long-term
enhancement of shareholder value. In years in which the Company's performance
goals are met or exceeded, executive compensation should tend to be higher than
in years in which performance is below expectations.
Base Salary. The base salary levels of the Company's executive
officers, including Mr. Stainbrook's, are intended to be generally comparable to
those offered to executives with similar talent and experience by other
similarly situated finance companies, with a particular view to parameters of
salaries paid to executives holding similar positions in companies within the
Waterfield group. In determining base salaries, including Mr. Stainbrook's, the
Compensation Committee also takes into account individual performance and
experience.
Bonus Plan. The Company's bonus plan for executive officers (other than
Mr. Von Deylen) provides for bonuses payable quarterly if return on equity
equals or exceeds a threshold level established by the Compensation Committee. A
targeted bonus factor is established for each executive officer each year by the
Compensation Committee to be applied to the amount by which return on equity
exceeds the targeted level to determine the officer's bonus. The targeted return
on equity was not reached for fiscal 1997 due to a significant fourth quarter
charge for estimated credit losses. The named executive officers had received
quarterly bonus payments for the first three quarters of the year. Such payments
were not earned after giving effect to the Company's results for the full year,
however, so the Compensation Committee has determined that such payments will be
offset against future bonus payments to which such officers will become
entitled.
For fiscal 1998 the Compensation Committee has authorized a modified
bonus plan for the executive officers (other than Mr. Von Deylen). Such plan
will continue to provide for a bonus factor for each officer to be applied to
the amount by which return on equity exceeds a targeted level. The Company will
keep an accounting of each officer's earned bonus amount (after offset for the
excess quarterly payments made in 1997). After each fiscal quarter, 25% of the
officer's positive account balance will be paid to the officer as bonus and the
balance will be deferred on an unfunded basis with interest. Any remaining
balance will be paid if the officer leaves the Company, but is subject to
forfeiture if the officer is employed by a competitor or is terminated for
cause. The Committee believes this modified arrangement will serve the objective
of retaining senior management, as well as help avoid the need for a future
offset for negative adjustments such as that encountered in the current year.
Mr. Von Deylen is compensated by the Company under a separate
arrangement through Union Federal. Mr. Von Deylen receives a base salary from
the Company and an annual bonus payment equal to 1% of the Company's net income.
Stock Options and Restricted Stock. The Union Acceptance Corporation
1994 Incentive Stock Plan ("Incentive Stock Plan") is the Company's long-term
incentive plan for directors, executive officers and other key employees. The
objectives of the Plan are to align executive and shareholder long-term interest
by creating a strong and direct link between executive compensation and
shareholder return, and to enable executive officers and other key employees to
develop and maintain a significant long-term ownership position in the Company's
Class A Common Stock. The Incentive Stock Plan authorizes the Compensation
Committee to award executive officers and other key employees incentive and
non-qualified stock options and restricted shares of Class A Common Stock.
A total of 500,000 shares of Class A Common Stock has been reserved for
issuance under the Incentive Stock Plan, of which options for 314,485 shares of
Class A Common Stock were granted to senior officers through fiscal 1997 as
follows: Mr. Von Deylen, 103,750; Mr. Stainbrook, 68,500; Mr. Nash, 15,000; Ms.
Whitaker, 12,500; Mr. Brown, 15,000; and 27 other officers and key employees as
a group, 99,735. In addition, each of the non-employee directors of the Company
was awarded 937 shares of restricted Class A Common Stock under the Incentive
Stock Plan upon consummation of the Offering, and 956 and 905 shares were issued
at the 1995 and 1996 Annual Meetings, respectively. Mr. Stainbrook's and Mr. Von
Deylen's stock option grants were determined in order to create a substantial
incentive of both executives to work toward the continued success of the Company
and in recognition of the important leadership role each has played and will
continue to play in the establishment and development of the Company.
To date, the Compensation Committee has not taken steps to cause the
Company's executive compensation arrangements to accommodate the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended, which limit the
deductibility of an executive's compensation to $1 million annually, because it
does not presently anticipate that any executive officer's remuneration will
exceed $1 million per year. The Stock Incentive Plan has been structured so that
option awards should qualify as performance-based compensation excluded from the
$1 million limit.
The Compensation Committee believes that linking executive compensation
generally to corporate performance results in better alignment of compensation
with corporate goals and the interest of the Company's shareholders. As
performance goals are met or exceeded, most probably resulting in increased
value to shareholders, executives are appropriately rewarded. The Committee
believes that compensation levels for the year ended June 30, 1997, for
executives, and for Mr. Stainbrook in particular, adequately reflect the
Company's compensation goals and policies.
<PAGE>
Compensation
Committee Members
John M. Davis
Fred M. Fehsenfeld, Jr.
Richard D. Waterfield
Compensation Committee Interlocks and Insider Participation. During
fiscal 1997, the directors named above were the members of the Compensation
Committee of the Board of Directors. No members of the Compensation Committee
have any interlocks required to be reported.
Remuneration of Named Executive Officers.
The following table set forth for each of the Company's last three
fiscal years information with respect to Mr. Stainbrook and the other executive
officers of the Company whose aggregate salary and bonus for fiscal 1997
exceeded $100,000.
Summary of Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Fiscal Awards All Other
Name and Principal Position Year Salary Bonus (2) Options/SARS Compensation (1)
- --------------------------- ---- ------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
John M. Stainbrook 1997 $200,000 --- 6,000 $2,375
President 1996 200,000 527,115 62,500 3,415
1995 200,000 100,000 --- ---
David S. Nash 1997 125,769 --- 2,500 ---
Vice President 1996 104,615 55,600 12,500 ---
1995 88,846 49,825 --- ---
Rick A. Brown 1997 93,077 --- 2,500 3,526
Vice President, Treasurer 1996 75,769 63,750 12,500 6,331
and Chief Financial Officer 1995 60,192 9,750 --- 1,654
Cynthia F. Whitaker (4) 1997 58,269 --- --- ---
Vice President and Secretary 1996 88,654 86,311 12,500 ---
1995 73,654 13,650 --- ---
Jerry D. Von Deylen 1997 50,000 74,010 10,000 ---
Chairman (3) 1996 --- --- 93,750 ---
1995 --- --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the Company's 25% match up to 6% of in 1996 and 1997, and up
to 4% in 1995 of employee deferrals of currently earned income into the
Waterfield Plan, and any discretionary profit sharing contributions
made by the Company to the Waterfield Plan.
(2) No bonus was earned for 1997 because the Company did not reach targeted
return on equity. Unearned quarterly payments were made to the
executive officers in 1997 aggregating $412,934, $56,250, $42,000 and
$11,875 for Mr. Stainbrook, Mr. Nash, Mr. Brown and Ms. Whitaker,
respectively, are subject to offset for bonus amounts earned in
subsequent years.
(3) No specific cash compensation was paid to Mr. Von Deylen by the Company
in fiscal 1996 and 1995. Mr. Von Deylen was compensated by Union
Federal in such years.
(4) Ms. Whitaker was on leave of absence during a part of fiscal 1997.
<PAGE>
Incentive Stock Plan
The Incentive Stock Plan was approved by Union Federal as the Company's
sole shareholder in June, 1994, prior to the Company's initial public offering
(the "Offering"). Options or other grants to be received by executive officers
or other employees in the future are within the discretion of the Compensation
Committee and are not determinable. Stock options granted under the Incentive
Stock Plan are exercisable at such times (not after ten years and one day from
the date of the grant) and at such exercise prices (not less than 85% of the
fair market value of the Class A Common Stock at date of grant) as the Committee
determines and will, except in limited circumstances, terminate if the grantee's
employment terminates prior to exercise.
The following table set forth information related to options granted upon
consummation of the Offering to each of the executive officers identified in the
summary compensation table above.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized
Individual Grants Value at Assumed
Annual Rates of
% of Total Stock Price Appreciation
Options Granted Exercise or for Option Term
Options to Employees in Base Price Expiration -------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
- ------- ------- ----------- --------- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry D. Von Deylen 10,000 25.2% $16.00 8/16/06 $ 78,226 $219,335
John M. Stainbrook 6,000 15.1 16.00 8/16/06 46,936 131,601
David S. Nash 2,500 6.3 16.00 8/16/06 19,556 54,834
Rick A. Brown 2,500 6.3 16.00 8/16/06 19,556 54,834
</TABLE>
The following table includes the number of shares covered by both
exercisable and unexercisable stock options held by the individuals named above
as of June 30, 1997. Also reported are the values for "in-the-money" options
(options whose exercise price is lower than the market value of the shares as of
such date) which represent the spread between the exercise price of any such
existing stock options and the market value of such stock as of such date.
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of Shares Underlying Value of Unexercised
Unexercised Options (1) In-the-Money Options (2)
---------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C>
Jerry D. Von Deylen 18,750 85,000 --- ---
John M. Stainbrook 12,500 56,000 --- ---
David S. Nash 2,500 12,500 --- ---
Cynthia F. Whitaker 2,500 10,000 --- ---
Rick A. Brown 2,500 12,500 --- ---
</TABLE>
(1) Options for 18,750, 12,500, 2,500, 2,500 and 2,500 shares became
exercisable by Mr. Von Deylen, Mr. Stainbrook, Mr. Nash, Ms. Whitaker and
Mr. Brown, respectively, in August 1996 under the terms of their respective
stock option agreements with the Company. Such options, together with the
balance of the options shown, vest over a period of five years, with
one-fifth becoming exercisable on each anniversary of the option grant.
Two-thirds of Mr. Von Deylen's options and one-half of Mr. Stainbrook's
options are non-qualified stock options.
Defined Contribution Plan
Eligible employees of the Company, including its executive officers,
currently may participate in the Waterfield Group Savings and Investment Plan, a
401(k) profit-sharing plan ("Waterfield Plan"). Under the Waterfield Plan, each
participant is entitled to receive a matching contribution from the Company in
an amount equal to 25% of the first 6% of the participant's own pre-tax
contribution. In addition to the employer matching amounts, the Company may make
discretionary profit-sharing contributions to the Waterfield Plan from time to
time.
<PAGE>
Compensation of Directors
The Incentive Stock Plan provides that each director of the Company who
is not also an executive officer is automatically granted shares of Class A
Common Stock with a fair market value of $15,000 following each annual meeting
of shareholders. Shares so granted will have a six-month period of restriction
during which they may not be transferred.
In addition to the annual grants of shares, the Company's non-employee
directors are paid $8,000 per year plus $500 per board or committee meeting
($800 for meeting requiring out of town travel). They are also eligible for
reimbursement of travel and similar expenses.
Comparative Stock Performance
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the period beginning August 1, 1995 and ending
June 30, 1997, with the cumulative total return on the Nasdaq Stock Market(1),
the NASDAQ Financial composite index and the Company's peer group(2) for the
period beginning August 1, 1995 and ending June 30, 1997, assuming the
investment of $100 in the Company's Common Stock, the Nasdaq Stock Market, the
NASDAQ Financial composite index and the Company's peer group on August 1, 1995,
and reinvestment of all dividends. The Company has elected to provide
comparative stock performance information for both the peer group and the NASDAQ
Financial composite index. The Company's trading history (and the trading
history of certain members of its peer group) is fairly limited. It may conclude
that its stock performance in future periods is more comparable to that of the
peer group or NASDAQ Financial composite index and, in that event, provide
comparative data for only one or the other.
[CHART OMITTED]
<TABLE>
<CAPTION>
8/2/95 9/29/95 12/29/95 3/29/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97
------ ------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UAC 100.00 117.19 87.50 98.44 96.88 120.31 110.94 85.94 65.63
Peer Group 100.00 147.97 104.76 112.20 132.60 134.81 101.84 63.32 78.35
NASDAQ Average 100.00 105.51 106.80 111.78 120.90 125.20 131.35 124.24 147.02
NASDAQ Financial 100.00 109.00 116.93 121.62 124.48 134.93 149.89 156.05 181.72
</TABLE>
(1) The Broad Market Index is the NASDAQ Market Index.
(2) The Peer Group is made up of the following securities: Arcadia
Financial Ltd., ONYX Acceptance Corp., and WFS Financial, Inc.
<PAGE>
Certain Transactions With Related Persons
Union Federal is a federally chartered stock savings bank operating
through offices in Indiana, with total assets of $2.5 billion at June 30, 1997.
Jerry D. Von Deylen, Chairman of the Board of Directors of the Company, has
served as President of Union Federal since 1987. Union Federal is principally
owned by members of the Waterfield family and is controlled by Richard D.
Waterfield. Union Federal and its subsidiary, Waterfield Financial Corporation,
a mortgage originating company, together represent one of the largest
privately-owned mortgage originators in the United States.
Ongoing Securitizations. In connection with the Business Transfer, on
January 1, 1995, Union Federal assigned to the Company its rights to future cash
flows from Union Federal's then outstanding securitizations (Excess Servicing).
Union Federal will continue to serve as master servicer on securitization
transactions entered into prior to the Business Transfer. The Company has,
however, entered into a General Subservicing Agreement with Union Federal
pursuant to which Union Federal has delegated to the Company the
responsibilities for servicing outstanding securitizations effective with the
Business Transfer on January 1, 1995. The Company receives all regular servicing
fees and will receive excess servicing cash flows from Union Federal's
outstanding securitizations.
Certain Lease Arrangements. The Company's principal offices are located
at 250 North Shadeland Avenue, Indianapolis, Indiana (the "Office Building").
WMC, which is controlled by Richard D. Waterfield, a director and the Company's
controlling shareholder, owns the building. The Company has a lease with WMC for
the above referenced property. The lease term is seven years and six months, and
commenced on November 1, 1995 (the "UAC Lease"). Under the UAC Lease, the
Company is responsible for taxes, insurance and maintenance expenses and all
other responsibilities relating to the Office Building, as if it were the owner
of the Office Building during the term of the UAC Lease. The lease provides for
a monthly rental payment of $75,943. In connection with the purchase of the
Office Building, WMC assumed the rights of the prior owner, as lessor, in
connection with a certain lease with Allstate Insurance Company, as lessee. In
November, 1995, WMC assigned its rights as lessor to UAC with respect to such
lease.
The Company has entered into a sublease with Union Federal for 2,155
square feet of office space located at the Office Building. The sublease has a
term of six years and nine months commencing on August 1, 1996, and provides for
a monthly rental payment of $3,592. The Company remains responsible for all
costs associated with the Office Building under the sublease.
Ongoing Banking and Financial Services. Union Federal provides banking
and related financial services to the Company and its subsidiaries on
arm's-length terms. The Company is one of Union Federal's largest commercial
customers. Such services include, without limitation, checking account services,
lockbox services (including processing of checks and drafts drawn on the
Company's accounts), and wire transfer services. The cost to the Company of
these services, aggregated approximately $506,000 for the fiscal year ended June
30, 1997. In order to comply with Federal thrift regulations, Union Federal
provides such services on terms that are no less favorable to Union Federal than
arm's-length terms between independent parties.
Union Federal and its affiliates continue to originate automobile loans
directly with customers in the ordinary course of its business. The Company
services certain consumer loans for Union Federal and its affiliates for an
annual fee equal to one percent of the principal balance of the loans serviced.
The portfolio of Union Federal loans serviced by the Company consists of fixed
and variable rate loans on mobile homes, boats and autos, which portfolio was
approximately $2.3 million at June 30, 1997.
Legal Services. The law firm of Barrett & McNagny regularly provides
legal services to the Company. Fees for legal services paid to Barrett & McNagny
during fiscal 1997 by the Company were approximately $342,000. Mr. Chapman, one
of the Company's directors, is a partner in such firm. Mr. Chapman's wife,
Elizabeth Chapman, is the sister of Mr. Waterfield and a shareholder of the
Company.
<PAGE>
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors proposes the ratification by the shareholders at
the Annual Meeting the appointment of the accounting firm of KPMG Peat Marwick
LLP ("Peat Marwick") as independent auditors for the fiscal year ended June 30,
1998. Peat Marwick has served as auditors for the Company since its
incorporation in 1993 and served as auditors to Union Federal and the Union
Division for several years prior thereto. A representative of Peat Marwick is
expected to be present at the Annual Meeting with the opportunity to make a
statement if he so desires. He will also be available to respond to any
appropriate questions shareholders may have.
RATIFICATION OF THE APPOINTMENT OF AUDITORS REQUIRES THAT THE VOTES
CAST (IN PERSON OR BY PROXY) AT THE ANNUAL MEETING OR AT ANY ADJOURNMENT THEREOF
IN FAVOR OF RATIFICATION EXCEED THOSE CAST AGAINST.
SHAREHOLDER PROPOSALS
Any proposal that a shareholder wishes to have presented at the next
Annual Meeting of the Company to be held in 1998 must be received at the main
office of the Company for the inclusion in the proxy statement no later than 120
days in advance of September 21, 1998. Any such proposal should be sent to the
attention of the Secretary of the Company at 250 North Shadeland, Indianapolis,
Indiana 46219.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"1934 Act") requires that the Company's officers and directors and persons who
own more than 10% of the Company's Common Stock file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Effective August 1, 1995, officers, directors and greater than 10% shareholders
have been required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms that they file.
For the fiscal year ended June 30, 1997, the Company's officers,
directors and greater than 10% beneficial owners filed all required reports with
the SEC pursuant to Section 16(a) of the 1934 Act, except that Form 5 reports
for fiscal 1997 for Mssrs. Von Deylen, Stainbrook, Nash and Brown reporting
exempt option grants, and for Mr. Waterfield reporting an exempt change in
beneficial ownership, were filed approximately three weeks late.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than those matters described in the Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to the beneficial owners of Class A Common Stock and Class B Common Stock. In
addition to solicitation by mail, directors, officers, and employees of the
Company may solicit proxies personally or by telephone without additional
compensation.
Each Shareholder is urged to complete, date and sign the proxy and
return it promptly in the enclosed return envelope.
<PAGE>
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
relies upon information furnished by others for the accuracy and completeness
thereof.
By Order of the Board of Directors,
/s/ John M. Stainbrook
John M. Stainbrook, President
September 26, 1997
<PAGE>
[CLASS A PROXY CARD - FRONT]
PROXY PROXY
UNION ACCEPTANCE CORPORATION
Proxy Solicited on Behalf of the Board of Directors
For The Annual Meeting of Shareholders -- October 29, 1997
The undersigned appoints Rick A. Brown and Cynthia F. Whitaker, and
each of them, as proxies, with full power of substitution and revocation, to
vote, as designated on the reverse side hereof, all the shares of Class A Common
Stock of Union Acceptance Corporation which the undersigned has power to vote,
with all powers which the undersigned would possess if personally present, at
the Annual Meeting of Shareholders thereof to be held on October 29, 1997, or at
any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of
the nominees named, and FOR Proposal No. 2. In their discretion, the proxies are
authorized to vote on any other business that may properly come before the
Meeting or any adjournment thereof.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
-1-
<PAGE>
[CLASS A PROXY CARD - BACK]
Union Acceptance Corporation
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. Election of Directors--
Nominees: H. Chapman, J.Davis, F. Fehsenfeld, Jr.,
D. Sherman, J. Stainbrook, J. Von Deylen,
R. Waterfield, T. West
For All
For Withheld Except
[ ] [ ] [ ]
(Except nominee(s) written above.)
----------------------------------------------
2. Ratification of KPMG Peat Marwick LLP as auditors for fiscal year 1997.
For Against Abstain
[ ] [ ] [ ]
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and of the Proxy Statement.
Dated: , 1997
--------------------------------------------------------
Signature(s)
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name appears. Joint owners should each sign
personally. Where applicable, indicate your official position or representation
capacity.
