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
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held On December 7, 1998
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 Monday, December 7, 1998, at 10:00A.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 1999.
2. 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 September 30, 1998,
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, 1998, 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 and
Chief Executive Officer
Indianapolis, Indiana
November 2, 1998
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
December 7, 1998
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 December 7, 1998, 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 November 2, 1998.
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 (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 September 30,
1998 (the "Voting Record Date"), will be entitled to vote at the Annual Meeting.
On the Voting Record Date, there were 4,376,446 shares of the Class A Common
Stock and 8,855,036 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) (6) 7,814 0.18% 1,410,885 15.93% (3)
c/o Barrett & McNagny
215 East Berry Street,
P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Howard L. Chapman (4) (5) (6) 7,814 0.18% 1,410,885 15.93% (3)
c/o Barrett & McNagny
215 East Berry Street,
P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Frances W. LeMay (7) --- --- 717,312 8.10% (3)
c/o Barrett & McNagny
215 East Berry Street,
P.O. Box 2263
Fort Wayne, Indiana 46801-2263
Frances W. LeMay Trust (8) --- --- 788,658 8.91% 8.11%
c/o Fort Wayne National Bank
110 West Berry Street
Fort Wayne, Indiana 46802
Rhinehart Family Partnership, L.P.(9) --- --- 1,719,851 19.42% (3)
11409 Creekwood Drive
Fort Wayne, Indiana 46804-9051
Richard D. Waterfield (5)(10)(11)(12) 29,947 0.68% 7,607,778 85.91% 78.25%
Waterfield Mortgage Company, Inc.
7500 W. Jefferson
Fort Wayne, Indiana 46804-9051
Monarch Capital Management, Inc. (13) 653,057 14.92% --- --- 1.34%
127 W. Berry Street, Suite 402
Fort Wayne, IN 46802
Fifth Third Bancorp (13) 513,400 11.73% --- --- 1.06%
38 Fountain Square Plaza
Cincinnati, OH 45263
Susan Lee Hanzel (13)
4612 Craftsbury Circle 346,857 7.93% --- --- 0.71%
Fort Wayne, IN 46818
- ----------------
</TABLE>
<PAGE>
(1) Based upon 4,376,446 shares of Class A Common Stock outstanding.
(2) Based upon 8,855,036 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 4,376,446 shares of Class A Common
Stock outstanding and five votes per share for each of the 8,855,036
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 10.
(4) Ms. Chapman owns indirectly all 1,410,885 shares of Class B Common
Stock held of record by the Voting Trust described below in note 10.
Ms. Chapman may also be deemed to own beneficially 5,247 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 5,247 shares of restricted Class A Common Stock issued to
non-employee directors pursuant to the Incentive Stock Plan.
(6) Includes 2,567 shares of Class A Common Stock controlled by Ms. Chapman
and held of record by the Waterfield Foundation Inc., of which shares
Ms. Chapman and Mr. Chapman disclaim beneficial ownership.
(7) Includes 56,622 shares of Class B Common Stock owned by Frances W.
LeMay as custodian for Barbara Lorene LeMay. Held of record by the
Voting Trust described below in note 10, of which shares Frances W.
LeMay disclaims beneficial ownership.
(8) Fort Wayne National Bank is the trustee of the Frances W. LeMay Trust.
(9) Held of record by the Voting Trust described below in note 10.
(10) Includes 3,269,573 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"),
of which 433,821 shares are owned beneficially by a limited partnership
of which Mr. Waterfield is General Partner. Also includes 4,331,405
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, Rhinehart
Family Partnership, L.P., Linco & Co., Jerry D. Von Deylen, Donald A.
Sherman, and certain family members of the foregoing persons.
(11) 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.
(12) Includes 2,567, 2,567 and 10,566 shares of Class A Common Stock
controlled by Frances W. LeMay, Elizabeth W. Chapman and Richard D.
Waterfield, respectively, which are held of record by Waterfield
Foundation, Inc., of which Mr. Waterfield is an officer and director.
Mr. Waterfield disclaims beneficial ownership of such shares.
(13) 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 1999 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 Class A Common Percentage of 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) (5) 1994 7,814 0.18% 1,410,885 15.93%
John M. Davis (3) 1994 11,910 0.27% --- ---
Fred M. Fehsenfeld (3) 1994 8,747 0.20% --- ---
Donald A. Sherman (3) 1994 215,247 4.92% 50,000 0.56%
John M. Stainbrook (7) 1994 43,450 0.98% --- ---
Jerry D. Von Deylen (6)(8) 1994 80,126 1.81% 155,790 1.76%
Richard D. Waterfield (3)(7)(9) (10) 1994 29,947 0.68% 7,607,778 85.91%
Thomas G. West (3) 1994 33,247 0.76% --- ---
Other Executive Officers:
- -------------------------
Rick A. Brown (8) 10,700 0.24% --- ---
Treasurer and Chief Financial Officer
David S. Nash (8) 19,500 0.44% --- ---
Chief Credit Officer
Maureen A. Schoch (8) 9,800 0.22% --- ---
Chief Operations Officer
All directors and executive officers 470,488 10.44% 7,813,568 88.24%
as a group (11 persons)
- -----------------
</TABLE>
<PAGE>
(1) Based upon 4,376,446 shares of Class A Common Stock outstanding and
options exercisable by above officers and directors within 60 days.
(2) Based upon 8,855,036 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 5,247 shares of restricted Class A Common Stock issued to
non-employee directors pursuant to the Incentive Stock Plan. Class B
Common Stock held of record by the Voting Trust.
(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 2,567 shares of Class A Common Stock controlled by Ms. Chapman
and held of record by the Waterfield Foundation Inc., of which shares
Mr. Chapman disclaims beneficial ownership.
(6) Includes 97,468 shares of Class B Common Stock held by Union Federal
Savings Bank of Indianapolis as custodian for Mr. Von Deylen's
individual retirement account, of which 50,000 shares are held of
record by the Voting Trust.
(7) Includes 3,269,573 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"),
of which 433,821 shares are owned beneficially by a limited partnership
of which Mr. Waterfield is General Partner. Also includes 4,331,405
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, Rhinehart
Family Partnership, L.P., Linco & Co., Jerry D. Von Deylen, Donald A.
Sherman, and certain family members of the forgoing persons.
(8) Includes options for 60,126, 39,500, 9,500, 9,500 and 9,500 shares of
Class A Common Stock granted to Mr. Von Deylen, Mr. Stainbrook, Mr.
Brown, Mr. Nash and Ms. Schoch, 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 exercisable within 60 days.
(9) 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.
(10) Includes 2,567, 2,567 and 10,566 shares of Class A Common Stock
controlled by Frances W. LeMay, Elizabeth W. Chapman and Richard D.
Waterfield, respectively, which are held of record by Waterfield
Foundation, Inc., of which Mr. Waterfield is an officer and director.
Mr. Waterfield disclaims beneficial ownership of such shares.
<PAGE>
Mr. Von Deylen (age 56) 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 two year term ending 1998.
Mr. Stainbrook (age 50) was named President of the Company upon its
formation, was appointed to the Board of Directors in May 1994 and was appointed
Chief Executive Officer in 1998. 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 53) 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 64) 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 from 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 46) 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 47) 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.
<PAGE>
Mr. Sherman (age 47) 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.
Mr. West (age 58) 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 35) was named Vice President-Lending Operations of the
Company upon its formation and was appointed Chief Credit Officer in 1998. 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.
Mr. Brown (age 35) 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.
Ms. Schoch (age 37) was named Vice President of Operations and
Servicing of UAC upon its formation, was named Assistant Secretary during 1994,
and was appointed Chief Operations Officer in 1998. In May 1986 she joined Union
Federal Savings Bank as Senior Operations Assistant. She also served as
Assistant Manager of Direct Lending, Internal Loan Review Manager and Assistant
Vice President of Operations and Servicing. From 1984 until 1986, she was
employed at Merchants National Bank in their indirect lending area.
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, 1998, the Board of Directors of
the Company met five times, including teleconferences, in addition to taking a
number of actions by unanimous written consent. During fiscal 1998, 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 four times, including
teleconferences, during fiscal 1998.
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 1998, 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
increases.
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.
<PAGE>
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) provided prior to fiscal 1998, for bonuses payable quarterly if
return on equity equals or exceeds a threshold level established by the
Compensation Committee. A targeted bonus factor was established for each
executive officer each year by the Compensation Committee to be applied to the
amount by which return on equity exceeded the targeted level to determine the
officer's bonus. The targeted return on equity was not reached for fiscal 1997.
The named executive officers had received quarterly bonus payments for the first
three quarters of fiscal 1997. Such payments were not earned after giving effect
to the Company's results for the full fiscal 1997 year, however, so the
Compensation Committee determined that such payments will be offset against
future bonus payments to which such officers will become entitled. Commencing in
fiscal 1999, the Compensation Committee has determined to reduce the amount of
such offset against future bonuses to the extent that a participating Executive
Officer (other than Mr. Von Deylen) purchases shares of Company common stock in
the open market with his or her own funds.
Beginning in fiscal 1998, the Compensation Committee authorized a
modified bonus plan for the executive officers (other than Mr. Von Deylen). Such
plan continues 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 fiscal 1997. Mr.
Stainbrook did not receive a bonus payment for fiscal 1998.
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
earnings. Mr. Von Deylen did not receive a bonus for fiscal 1998. Mr. Von Deylen
did not receive director compensation during fiscal 1998.
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.
<PAGE>
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 368,675 shares of
Class A Common Stock were granted to senior officers and other management
employees through fiscal 1998 as follows: Mr. Von Deylen, 113,750; Mr.
Stainbrook, 78,500; Mr. Nash, 20,000; Mr. Brown, 20,000; Ms. Schoch, 20,000; and
44 other officers and key employees as a group, 116,425. 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, 905 and 2,449 shares were issued at the 1995, 1996 and 1997
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. None of the
executive officers has received option grants in fiscal 1999 in respect of
fiscal 1998, except for Mr. Von Deylen has been granted an additional option for
25,000 shares.
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, 1998, for
executives, and for Mr. Stainbrook in particular, adequately reflect the
Company's compensation goals and policies.
Compensation
Committee Members
-----------------
John M. Davis
Fred M. Fehsenfeld, Jr.
Richard D. Waterfield
Compensation Committee Interlocks and Insider Participation. During
fiscal 1998, 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.
<PAGE>
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 1998
exceeded $100,000.
<TABLE>
<CAPTION>
Summary of Compensation Table
ANNUAL COMPENSATION
-------------------
LONG TERM
FISCAL COMPENSATION AWARDS ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS (2) OPTIONS/SARS COMPENSATION (1)
- ------------------------- ---- ------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
John M. Stainbrook 1998 $ 300,000 --- 10,000 6,734
President and Chief Executive 1997 200,000 --- 6,000 2,375
Officer 1996 200,000 527,115 62,500 3,415
David S. Nash 1998 170,000 --- 5,000 6,573
Chief Credit Officer 1997 125,769 --- 2,500 4,771
1996 104,615 55,600 12,500 ---
Rick A. Brown 1998 150,000 --- 5,000 6,274
Treasurer and 1997 93,077 --- 2,500 3,526
Chief Financial Officer 1996 75,769 63,750 12,500 6,331
Maureen A. Schoch 1998 125,000 --- 5,000 3,620
Chief Operating Officer 1997 87,064 --- 2,500 ---
1996 68,213 35,748 12,500 ---
Jerry D. Von Deylen (3) 1998 50,000 --- 10,000 ---
Chairman 1997 50,000 74,010 10,000 ---
1996 --- --- 93,750 ---
</TABLE>
(1) Represents the Company's 25% match up to 6% 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 1998 or 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
$38,250 for Mr. Stainbrook, Mr. Nash, Mr. Brown and Ms. Schoch,
respectively, are subject to offset for bonus amounts earned in
subsequent years.
(3) Mr. Von Deylen was compensated by Union Federal in 1996 and did not
receive specific cash compensation by the Company.
<PAGE>
Incentive Stock Plan
The Incentive Stock Plan was approved by Union Federal as the Company's
sole shareholder in June, 1994, prior to the Company's initial public offering.
Options or other grants to be received by executive officers or other employees
in the future are within the discretion of the Compensation Committee. Stock
options granted under the Incentive Stock Plan are exercisable at such times
(not after ten years and one day from the date of the grant) and at such
exercise prices (not less than 85% of the fair market value of the Class A
Common Stock at date of grant) as the Committee determines and will, except in
limited circumstances, terminate if the grantee's employment terminates prior to
exercise.
The following table sets forth information related to options granted during the
fiscal year ended June 30, 1998, to each of the executive officers identified in
the summary compensation table above.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------------------------
Potential Realized
Value at Assumed
Individual Grants Annual Rates of
- ------------------------------------------------------------------------------------------ Stock Price Appreciation
% of Total for Option Term
Options Granted Exercise Price ----------------------------------
Name Options Granted To Employees in Per Share Expiration 5% 10%
Fiscal Year ($/Share) Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry D. Von Deylen 10,000 13.5% $ 9.6875 8/4/07 $ 60,924 $ 154,394
John M. Stainbrook 10,000 13.5% 9.6875 8/4/07 60,924 154,394
David S. Nash 5,000 6.8% 9.6875 8/4/07 30,462 77,197
Rick A. Brown 5,000 6.8% 9.6875 8/4/07 30,462 77,197
Maureen A. Schoch 5,000 6.8% 9.6875 8/4/07 30,462 77,197
</TABLE>
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options held by the individuals named above
as of June 30, 1998. 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.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Option (1) In-the-Money Options (2)
---------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C>
Jerry D. Von Deylen 38,438 75,312 - -
John M. Stainbrook 25,000 53,500 - -
David S. Nash 5,500 14,500 - -
Rick A. Brown 5,500 14,500 - -
Maureen A. Schoch 5,500 14,500 - -
</TABLE>
<PAGE>
(1) Two-thirds (65%) of Mr. Von Deylen's options and one-half (49%) of Mr.
Stainbrook's options are non-qualified stock options.
(2) Based on market value of the Class A Common Stock of $8.00 per share at
June 30, 1998.
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.
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 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 and there is not a regular board
meeting). They are also eligible for reimbursement of travel and similar
expenses.
<PAGE>
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, 1998, with the cumulative total return on the Nasdaq Stock Market(1)
and the Company's peer group(2) for the period beginning August 1, 1995 and
ending June 30, 1998, assuming the investment of $100 in the Company's Common
Stock, the Nasdaq Stock Market and the Company's peer group on August 1, 1995,
and reinvestment of all dividends.
COMPENSATION OF CUMMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
[Graph omitted]
UNION NASDAQ
ACCEPTANCE PEER GROUP MARKET
---------- ---------- ------
BASE 8/2/1995 100.00 100.00 100.00
9/29/1995 117.19 147.97 103.57
12/29/1995 87.50 104.76 102.74
3/29/1996 98.44 112.20 107.49
6/28/1996 96.88 132.60 115.45
9/30/1996 120.31 134.81 118.63
12/31/1996 110.94 101.84 124.21
3/31/1997 85.94 63.32 117.90
6/30/1997 65.83 78.35 139.48
9/30/1997 64.06 98.40 162.62
12/31/1997 46.09 58.11 152.37
3/31/1998 55.47 54.52 178.58
6/30/1998 50.00 47.43 183.19
(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.
In previous years the Company elected to provide comparative stock
performance information for both the peer group and the NASDAQ Financial
composite index. The Company has concluded that its stock performance is more
comparative to that of the peer group and has elected not to present the
comparative stock information for the NASDAQ Financial composite index.
<PAGE>
Certain Transactions With Related Persons
Union Federal is a federally chartered stock savings bank operating
through offices in Indiana, with total assets of $2.0 billion at June 30, 1998.
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 (Retained Interest
in Securitized Assets). Union Federal continues 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. The
lease with Allstate Insurance Company terminated on August 31, 1998. 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 $711,000 for the fiscal year ended June
30, 1998. 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.
<PAGE>
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 $1.4 million at June 30, 1998.
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 1998 by the Company were approximately $472,000. 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.
SHAREHOLDER PROPOSALS
Any proposal that a shareholder wishes to have presented at the next
Annual Meeting of the Company to be held in 1999 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 24, 1999. 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, 1998, 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.
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 and
Chief Executive Officer
November 2, 1998
<PAGE>
PROXY PROXY
UNION ACCEPTANCE CORPORATION
Proxy Solicited on Behalf of the Board of Directors
For The Annual Meeting of Shareholders - December 7, 1998
The undersigned appoints Rick A. Brown and Maureen A. Schoch, 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 December 7, 1998, or at any
adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of
the nominees named. 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)
<PAGE>
Union Acceptance Corporation
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. Election of Directors-- For All
Nominees: H. Chapman, J. Davis, F. Fehsenfeld, Jr. For Withheld Except
D. Sherman, J. Stainbrook, J. Von Deylen, [ ] [ ] [ ]
R. Waterfield, T. West
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statemen.
Dated:__________________, 1998
- ------------------------------
Signature
- ------------------------------
Please sign exactly as your name appears. Joint owners should each sign
personally. Where applicable, indicate your official position or representation
capacity.
Union Acceptance Corporation
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
