UNION ACCEPTANCE CORP, DEF 14A, 1999-10-19

UNION ACCEPTANCE CORP
DEF 14A, 1999-10-19
PERSONAL CREDIT INSTITUTIONS

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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 November 16, 1999

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 Tuesday, November 16, 1999, at 10:00 A.M.,
Indianapolis time.

The Annual Meeting will be held for the following purposes:

1. Election of Directors. Election of seven directors of the
Company for terms to expire in 2000.

2. Ratification of Auditors. Ratification of the appointment of
Deloitte & Touche LLP as auditors for the Company for the
fiscal year 2000.

3. Approval of Incentive Stock Plan. Approval of the adoption of
the Union Acceptance Corporation 1999 Incentive Stock Plan
reserving 300,000 shares of Class A Common Stock.

4. 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 10, 1999,
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, 1999, 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
October 18, 1999

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
November 16, 1999

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 November 16, 1999, 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 October 18, 1999.

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 10,
1999 (the "Voting Record Date"), will be entitled to vote at the Annual Meeting.
On the Voting Record Date, there were 5,101,616 shares of the Class A Common
Stock and 8,150,266 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 to be 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.

Number of Shares Number of~Shares of Percentage
of Class A Common Percentage of Class B Common Percentage of of
Name and Address Stock Beneficially Class A Stock Beneficially Class B Voting
of Beneficial Owner Owned Common Stock (1) Owned Common Stock (2) Power (3)
- -------------------------------- ------------------ ---------------- ------------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Elizabeth W. Chapman (4) (5) (6) 10,777 0.16% 1,410,885 17.31% (3)
c/o Barrett & McNagny
215 East Berry Street, P.O. Box 2263
Fort Wayne, Indiana 46801-2263

Frances W. LeMay Trust (7) --- --- 488,658 6.00% 5.33%
c/o Fort Wayne National Bank
110 West Berry Street
Fort Wayne, Indiana 46802

Rhinehart Family Partnership, L.P. (8) --- --- 1,719,851 21.10% (3)
11409 Creekwood Drive
Fort Wayne, Indiana 46804-9051

Richard D. Waterfield (5)(9)(10)(11) 62,910 1.23% 7,203,008 88.38% 78.68%
Waterfield Mortgage Company, Incorporated
7500 W. Jefferson
Fort Wayne, Indiana 46804

Monarch Capital Management, Inc. (12) 633,057 13.24% --- --- 1.47%
127 W. Berry Street, Suite 402
Fort Wayne, IN 46802

Fifth Third Bancorp (12) 513,400 10.06% --- --- 1.12%
38 Fountain Square Plaza
Cincinnati, OH 45263

Susan Lee Hanzel (12) 331,857 6.50% --- --- 0.72%
4612 Craftsbury Circle
Fort Wayne, IN 46818

John M. Eggemeyer, III (12) (13) 695,400 13.63% --- --- ---
6051 El Tordo Rancho
Santa Fe, CA 92067

William J. Ruh (12) (13) (14) 700,650 13.73% --- --- ---
6051 El Tordo Rancho
Santa Fe, CA 92067

Michael G. & Shelley L. Stout (12) 375,770 7.37% --- --- ---
609 Hampshire Court
Carmel, IN 46032
- --------------------
</TABLE>

(1) Based upon 5,101,616 shares of Class A Common Stock outstanding.

(2) Based upon 8,150,266 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 5,101,616 shares of Class A Common
Stock outstanding and five votes per share for each of the 8,150,266
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 1,410,885 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 8,210 shares of Class A Common
Stock owned of record by Howard L. Chapman, her husband, but disclaims
beneficial ownership of such shares.

(5) Includes 8,210 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 disclaims beneficial ownership.

(7) Fort Wayne National Bank is the trustee of the Frances W. LeMay Trust.

(8) Held of record by the Voting Trust described below in note 9.

(9) 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 3,926,635
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 Mr. Waterfield and the foregoing persons.
The term of the Voting Trust expires in June 2004.

(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) 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.

(12) Based solely on the shareholder's report on Form 13G or Form 13D received
by the Company.

(13) Per Form 13D filing received by the Company, 695,400 shares of Class A
Common Stock held of record by various entities in which Mr. Eggemeyer
and Mr. Ruh are partners or officers.

(14) Includes 5,250 shares of Class A Common Stock owned by members of Mr.
Ruh's family.

<PAGE>

PROPOSAL I - ELECTION OF DIRECTORS

The Board of Directors has seven members. In June 1999, the Board of
Directors reduced the number of directors from eight to seven upon the
resignation of Howard L. Chapman from the board. 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 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 2000 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
certain executive officers of the Company and by all directors and certain
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>
John M. Davis (3) 1994 14,873 0.29% --- ---
Fred M. Fehsenfeld (3) 1994 11,710 0.23% --- ---
Donald A. Sherman (3) 1994 218,210 4.28% 50,000 0.61%
John M. Stainbrook (6) 1994 116,037 2.25% --- ---
Jerry D. Von Deylen (4)(6) 1994 97,812 1.89% 155,790 1.91%
Richard D. Waterfield (3)(5)(7)(8) 1994 62,910 1.23% 7,203,008 88.38%
Thomas M. West (3) 1994 36,210 0.71% --- ---

Other Executive Officers:
David S. Nash (6) 20,700 0.40% --- ---
Chief Credit Officer
and Vice President

Rick A. Brown (6) 23,500 0.46% --- ---
Chief Financial Officer,
Treasurer and Secretary

Maureen A. Schoch (6) 18,580 0.36% --- ---
Chief Operations Officer
and Assistant Secretary

All directors and executive
officers as a group 620,542 11.77% 7,408,798 90.90%
(10 persons)
- -------------------------
</TABLE>

(1) Based upon 5,101,616 shares of Class A Common Stock outstanding and
options exercisable by above officers and directors within 60 days.

(2) Based upon 8,150,266 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 8,210 shares of restricted Class A Common Stock issued to
non-employee directors pursuant to the Incentive Stock Plan.

(4) 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.

(5) 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 3,926,635
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 Mr. Waterfield and the foregoing persons.
The term of the Voting Trust expires in June 2004.

(6) Includes options for 77,812, 54,000, 13,500, 13,500 and 13,500 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.

(7) 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.

(8) 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 57) was appointed Chairman of the Board of the
Company upon its formation. He has served as President of Union Federal Savings
Bank of Indianapolis ("Union Federal") since 1987 and was recently appointed
Chairman of the Board. 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, Incorporated ("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. Stainbrook (age 51) 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. 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 54) served as Chairman of Union Federal from
September 1984 to May 1999. Mr. Waterfield also served as Chairman of WMC, a
mortgage banking company and parent of Union Federal, from 1980 to May 1999. Mr.
Waterfield now serves as Vice Chairman of WMC, is a director of Union Federal,
and also holds positions with various affiliates of those entities. He has been
a director of the Company since its formation.

Mr. Davis (age 47) 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 NISOURCE,
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 (now KPMG LLP), Indianapolis, from June 1974 to
June 1993. He has been a director of the Company since June 1994.

Mr. Fehsenfeld (age 48) 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 interests in road construction,
environmental management, oil refining and aggregate production.

Mr. Sherman (age 48) 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, has served on its board of directors since September 1984 and
was recently appointed Vice Chairman. Mr. Sherman is President and was recently
appointed CEO and Chairman of WMC. He holds positions with various other
affiliates of Union Federal and WMC and also serves as a director for Pursell
Industries, Inc., a manufacturer and distributor of lawn and garden fertilizers.

Mr. West (age 59) 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. In March
1999, Mr. West was appointed Chairman, CEO and President of the General &
Cologne Life RE of America. From September 1997 through March 1999, Mr. West was
a director and officer of the funding and securitization subsidiaries of the
Company.

Mr. Nash (age 36) 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. He also served as
Assistant Vice President-Dealer Banking and Vice President-Dealer Banking.
Between 1986 and 1988, Mr. Nash worked as a field/sales representative for Pat
Ryan & Associates, in which capacity he worked with retail automobile dealers to
improve sales techniques and profitability, especially in their finance and
insurance departments.

Mr. Brown (age 36) was named Treasurer and Chief Financial Officer of
the Company upon its formation. He was appointed Secretary in 1998 and also
serves as a Vice President of the Company. A certified public accountant, Mr.
Brown 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.

Ms. Schoch (age 38) was named Vice President of Operations and
Servicing of the Company upon its formation, was named Assistant Secretary
during 1994, and was appointed Chief Operations Officer in 1998. In May 1986 she
joined Union Federal 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 and Trust Company of Indianapolis, Indiana
(now National City Bank, Indiana) in their indirect lending area.

Mr. Timothy I. Shaw (age 35) was named Vice President of Management
Information Systems ("MIS") of the Company upon its formation. He was appointed
Chief Information Officer of the Company in 1998. Mr. Shaw joined Union Federal
in December 1990 as a Systems Developer. He also served as Assistant Vice
President of MIS for Union Federal responsible for company-wide MIS operations.
Mr. Shaw was the head of Systems Design for DNA Software Company from 1989 to
1990 and worked for Kimmerling, Myers & Co. from 1986 to 1989, where he was
responsible for their MIS division beginning in 1987.

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, 1999, 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 1999, 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 six times, including teleconferences,
during fiscal 1999.

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 ("1994 Plan") and 1999 Incentive Stock Plan ("1999 Plan")
and has certain responsibilities for the Company's bonus plan for senior
officers of the Company. During fiscal 1999, the Compensation Committee held two
meetings and took other actions by written consent.

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 interests 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.

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 WMC
and affiliated entities. In determining base salaries, including Mr.
Stainbrook's, the Compensation Committee also takes into account individual
performance and experience.

Bonus Plan. Prior to fiscal 1998, the Company's bonus plan for
executive officers (other than Mr. Von Deylen) provided for bonuses payable
quarterly if return on equity was equal to or exceeded 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. Rather than offset such payments against future bonuses to which the
officers will become entitled, the Compensation Committee

<PAGE>

determined to offset those 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. Each of those officers purchased
shares sufficient to satisfy the foregoing offset as of June 30, 1999.

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 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. At the end of the fiscal year, 100% of the officer's positive account
balance will be paid to the officer as a bonus. Any positive 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. Von Deylen is compensated by an annual bonus payment equal to 1.5%
of the Company's net earnings. Mr. Von Deylen did not receive any regular salary
nor any director compensation during fiscal 1999.

Stock Options and Restricted Stock. The Union Acceptance Corporation
1994 Incentive Stock Plan ("1994 Plan") is the Company's long-term incentive
plan for directors, executive officers and other key employees. The objectives
of the 1994 Plan are to align executive and shareholder long-term interests 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 1994 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.

In June 1999, the Board of Directors approved the Union Acceptance
Corporation 1999 Incentive Stock Plan ("1999 Plan"), subject to shareholder
approval, as hereinafter discussed.

A total of 500,000 shares of Class A Common Stock has been reserved for
issuance under the 1994 Plan, of which options for 415,015 shares of Class A
Common Stock were granted to senior officers and other management employees
through fiscal 1999 as follows: Mr. Von Deylen, 138,750; Mr. Stainbrook, 78,500;
Mr. Nash, 20,000; Mr. Brown, 20,000; Ms. Schoch, 20,000; and 90 other officers
and key employees as a group, 137,765. 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 a
total of 7,273 shares at the Company's subsequent Annual Meetings. Mr.
Stainbrook's and Mr. Von Deylen's stock option grants have been 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 1994 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, 1999, 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 1999, 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 sets forth for each of the Company's last three
fiscal years information with respect to the Company's Chief Executive Officer
and the four most highly compensated individuals serving as an executive officer
whose aggregate salary and bonus for fiscal year 1999 exceeded $100,000.

Summary Compensation Table
<TABLE>
<CAPTION>
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 1999 $325,000 205,000 - 7,418
Chief Executive Officer and President 1998 300,000 - 10,000 6,734
1997 200,000 - 6,000 2,375

David S. Nash 1999 195,000 55,000 - 7,418
Chief Credit Officer and Vice President 1998 170,000 - 5,000 6,573
1997 125,769 - 2,500 4,771

Rick A. Brown 1999 175,000 55,000 - 7,189
Chief Financial Officer, Treasurer, and 1998 150,000 - 5,000 6,274
Secretary 1997 93,077 - 2,500 3,526

Maureen A. Schoch 1999 150,000 55,000 - 6,084
Chief Operations Officer and 1998 125,000 - 5,000 3,620
Assistant Secretary 1997 87,064 - 2,500 -

Jerry D. Von Deylen 1999 - 214,860 25,000 -
Chairman 1998 50,000 - 10,000 -
1997 50,000 74,010 10,000 -
</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. In
accordance with the management incentive plan, such unearned payments
represented deficit balances in the executives' bonus accounts, subject
to offset to the extent the executive purchased UAC stock of equivalent
value. During fiscal 1999 the named executives effected stock purchases
sufficient to offset such deficit balances.

<PAGE>

Incentive Stock Plans

The Union Acceptance Corporation 1994 Incentive Stock Plan ("1994
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
1994 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, 1999, to each of the executive officers
identified in the summary compensation table above.
<TABLE>
<CAPTION>

Potential Realized
Value at Assumed
Individual Grants Annual Rates of
- -------------------------------------------------------------------------------------------- Stock Price
% of Total Appreciation
Options Granted Exercise Price for Option Term
Options To Employees Per Share Expiration --------------------------
Name Granted in Fiscal Year ($/Share) Date 5% 10%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry D. Von Deylen (1) 25,000 15.1% $ 5.3125 11/19/2003 $83,525 $ 211,669
John M. Stainbrook - n/a n/a n/a n/a n/a
David S. Nash - n/a n/a n/a n/a n/a
Rick A. Brown - n/a n/a n/a n/a n/a
Maureen A. Schoch - n/a n/a n/a n/a n/a

</TABLE>
(1) Mr. Von Deylen's option becomes exercisable in five annual installments.
Excluding repriced options granted to non-executive officers during
fiscal 1999, Mr. Von Deylen's option represented 51.3% of options granted
during the fiscal year.

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, 1999. 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> <C> <C>
Jerry D. Von Deylen 58,125 80,625 $ - $ 42,188
John M. Stainbrook 39,500 39,000 - -
David S. Nash 9,500 10,500 - -
Rick A. Brown 9,500 10,500 - -
Maureen A. Schoch 9,500 10,500 - -
</TABLE>

(1) One-half (52%) 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 $7.00 per share at
June 30, 1999.

<PAGE>

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 1994 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. The 1999 Plan also provides for such automatic grants to the
extent shares available under the 1994 Plan are exhausted. Shares so granted
under the 1994 Plan have a six-month period of restriction during which they may
not be transferred. Shares granted under the 1999 Plan will not be subject to
such restriction.

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 per 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 2, 1995 and ending
June 30, 1999, with the cumulative total return on the Nasdaq Stock Market(1)
and the Company's peer group(2) for the period beginning August 2, 1995 and
ending June 30, 1999, assuming the investment of $100 in the Company's Common
Stock, the Nasdaq Stock Market and the Company's peer group on August 2, 1995,
and reinvestment of all dividends.

[graph omitted]

8/2/95 6/28/96 6/30/97 6/30/98 6/30/99
------ ------- ------- ------- -------
UAC 100.00 96.88 65.33 50.00 43.75
Peer Group 100.00 124.32 73.46 44.47 62.29
NASDAQ Market 100.00 115.45 139.08 184.35 258.35

(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 $2.0 billion at June 30, 1999.
Jerry D. Von Deylen, Chairman of the Board of Directors of the Company, has
served as President of Union Federal since 1987 and was recently appointed
Chairman of the Board. Donald A. Sherman, a director of UAC, serves as Vice
Chairman of the Board. Union Federal is owned by WMC. Based in Fort Wayne,
Indiana, WMC is one of the largest privately-owned mortgage banking companies in
the United States. Donald A. Sherman, is President, CEO, Chairman and a
significant shareholder of WMC. Richard D. Waterfield and Jerry D. Von Deylen
are also directors and shareholders of WMC.

Prior Securitizations. In connection with Union Federal's transfer of
certain assets to the Company and the Company's assumption of certain related
liabilities (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).
Through fiscal 1999, Union Federal continued to serve as master servicer on
securitization transactions entered into prior to the Business Transfer. The
Company entered into a General Subservicing Agreement with Union Federal
pursuant to which Union Federal delegated to the Company the responsibilities
for servicing outstanding securitizations effective with the Business Transfer
on January 1, 1995. The Company received all regular servicing fees and excess
servicing cash flows from Union Federal's prior securitizations. None of such
prior securitizations remains outstanding.

Certain Lease Arrangements. The Company's principal offices are located
at 250 North Shadeland Avenue, Indianapolis, Indiana (the "Office Building").
The Office Building is owned by Shadeland Properties, LP, which is controlled by
Richard D. Waterfield and members of his family. The Company has a lease for the
above-referenced property. The lease term is seven years and six months, and
commenced on November 1, 1995 (the "UAC Lease"). The UAC Lease was originally
entered into with WMC. WMC assigned the Office Building and the UAC Lease to
Shadeland Properties, LP during 1999. 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.

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 $650,000 for the fiscal year ended June
30, 1999. 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 $820,000 at June 30, 1999.

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 1999 by the Company were approximately $461,000. Mr. Chapman, one
of the Company's directors until June 1999, 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 Deloitte & Touche
LLP ("Deloitte & Touche") as independent auditors for the fiscal year ended June
30, 2000.

On February 25, 1999, the Company notified KPMG LLP that such firm was
dismissed as its independent auditors as of such date. The audit reports of KPMG
LLP on the Company's financial statements for the fiscal years ended June 30,
1998 and 1997 did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope, or accounting
principles. The decision to change accountants was approved by the Audit
Committee of the Company's Board of Directors. In connection with the audits of
the Company's financial statements for the fiscal years ended June 30, 1998 and
1997, and in the subsequent interim period through February 25, 1999, there were
no disagreements with KPMG LLP on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
which, if not resolved to the satisfaction of KPMG LLP, would have caused KPMG
LLP to make reference to the matter in its report.

On March 12, 1999, the Company engaged Deloitte & Touche to audit the
Company's financial statements as of, and for the year ended June 30, 1999. The
decision to appoint Deloitte & Touche was approved by the Audit Committee of the
Board of Directors. Deloitte & Touche was not consulted by the Company as to the
application of accounting principles to a specific completed or proposed
transaction or the type of audit opinion that might be rendered on the Company's
financial statements during the last two fiscal years or subsequent interim
period through March 12, 1999.

A representative of Deloitte & Touche 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.

PROPOSAL III - APPROVAL OF THE 1999 INCENTIVE STOCK PLAN

Shareholders are being asked to approve the Union Acceptance Corporation
1999 Incentive Stock Plan (the "1999 Plan") at the 1999 Annual Meeting. The
essential features of the 1999 Plan are summarized below, but the full text is
set forth in Exhibit A to this Proxy Statement, and all statements made in the
summary are qualified by reference to the full text of the 1999 Plan.

Purpose
The purpose of the 1999 Plan is to provide to directors, officers and other
key employees of the Company and its subsidiaries who are materially responsible
for the management or operation of the Company and its subsidiaries and have
provided valuable service to the Company, a favorable opportunity to acquire
Class A Common Stock of the Company, thereby providing them with an increased
incentive to work for the success of the Company and its subsidiaries and better
enabling each entity to attract and retain capable executive personnel.

Administration
The 1999 Plan is administered by the Compensation Committee of the Board of
Directors. The members of the Committee are designated from time to time by the
Board of Directors. The 1999 Plan also empowers the full Board of Directors and
a Special Option Committee to take action to grant options and awards under the
Plan. The Special Option Committee is a committee of one or more directors
designated by the Board of Directors which may include the Chairman or Chief
Executive Officer; provided that such committee is not empowered to make grants
exceeding 1000 shares nor grants to any person subject to reporting under
Section 16(a) of the Securities Exchange Act of 1934.

<PAGE>

For purposes of determining options and awards under the 1999 Plan, the
Compensation Committee, the full Board of Directors, or the Special Option
Committee are referred to as the "Committee". Consistent with the terms of the
1999 Plan, the Committee selects the individuals to whom options or cash awards
will be granted, determines the time of grant, the number of shares or amount of
any cash awards, the option price, the period during which an option may be
exercised, the extent to which an option is an incentive stock option or a
non-qualified stock option, and any other terms or conditions applicable to
options granted. The Committee has full power to construe and interpret the 1999
Plan, to establish, amend, waive or rescind rules and regulations relating
thereto, to accelerate the vesting of any stock options or cash awards made
under the 1999 Plan, and to amend the terms and conditions of outstanding awards
to the extent such terms and conditions are within the discretion of the
Committee.

Shares Subject to the 1999 Plan

The Company has reserved 300,000 shares of its Class A Common Stock for
issuance upon exercise of options and restricted share awards granted under the
1999 Plan. Shares issued under the 1999 Plan may be authorized but unissued
shares or treasury shares of the Company. In the event of corporate changes
affecting the Company's Class A Common Stock, such as reorganizations,
recapitalizations, stock splits, stock dividends, mergers, consolidations and
liquidations, the Committee may make appropriate adjustments in the number and
kind of shares reserved under the 1999 Plan and in the option price under, and
the number and kind of shares covered by, outstanding options granted under the
1999 Plan. To date, 25,000 options have been granted under the 1999 Plan to
officers and other key employees of the Company. If any option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares will (unless the 1999 Plan shall have terminated) become available for
issuance under the 1999 Plan.

Eligibility

Awards may be granted under the 1999 Plan to directors, officers and other
key employees of the Company or a subsidiary who, in the opinion of the
Committee, are from time to time materially responsible for the management or
operation of the business of the Company or a subsidiary and have provided
valuable services to the Company or a subsidiary.

Terms of the Options
Stock Option Price. At the time it grants an option, the Committee sets the
price at which the shares may be purchased upon exercise of the option. The
purchase price to be paid for shares of Class A Common Stock subject to an
incentive stock option must not be less than the fair market value of such
shares on the date on which the option is granted, as determined by the
Committee consistent with the requirements of the Internal Revenue Code of 1986,
as amended (the "Code"). The Committee may not award non-qualified stock options
to eligible employees at a price less than 85% of the fair market value of such
shares on the date of the grant. The option price is subject to adjustment by
the Committee for corporate changes affecting the Company's outstanding shares
of Class A Common Stock.

Option Term. An option shall not be exercisable after the expiration of
such period as shall be fixed by the Committee at the time of the grant thereof,
but such period in no event shall exceed ten years and one day from the date on
which such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten years. Options are subject to
earlier termination. Incentive stock options granted to holders of more than 10%
of the combined voting power of all classes of stock of the Company may be
granted at an option price no less than 110% of the market value of the stock on
the date of grant and cannot be exercised beyond five years from the date of
grant.

Exercise of Option. The option price of each share of stock is to be paid in
full at the time of such exercise. Payment may be made in cash. Under certain
circumstances, the 1999 Plan permits optionees to deliver a notice to their
broker to deliver to the Company the total option price in cash and the amount
of any taxes to be withheld from the optionee's compensation as a result of any
withholding tax obligations of the Company. Subject to prior approval by the
Committee, payment of the option price may also be effected by tendering whole
shares of the Company's Class A Common Stock owned by the optionee and cash
having a fair market value equal to the cash exercise price of the shares with
respect to which the option is being exercised. Options may be exercisable in
full

<PAGE>

at any time during their term or in such installments, on a cumulative
basis, as the Committee may determine, except that no option may be exercised at
any time as to fewer than 100 shares unless the exercise is with respect to an
entire residue of fewer than 100 shares.

Termination of Options. Except as provided below or as otherwise provided
by the Committee in an option agreement, upon termination of an optionee's
employment by the Company, all rights under any options granted to him but not
yet exercised terminate thirty days after the optionee ceases to be an employee
of the Company or any of its subsidiaries. If an optionee retires pursuant to
any then existing pension plan of the Company, he may exercise any option
granted to him in whole or in part within three months after his retirement
whether or not the option was otherwise exercisable by him at his date of
retirement. If an optionee's employment by the Company terminates by reason of
permanent and total disability, he may exercise any option granted to him in
whole or in part within one year after such termination of employment, whether
or not the option was otherwise exercisable by him at the time of such
termination of employment. If the optionee dies while employed by the Company or
its subsidiaries, within three months after his retirement, or within one year
after his termination of employment because of permanent and total disability,
his option may be exercised by his estate or by the person or persons entitled
thereto by will or by the applicable laws of descent or distribution at any time
within one year after the date of such death, whether or not the option was
otherwise exercisable by the optionee at the date of his death. Notwithstanding
the foregoing, in no event may any option be exercised after the expiration of
the option term set by the Committee.

In the case of an option granted to a non-employee director, unless an
earlier or later date of termination is specified by the Committee, such option
will expire and terminate on the date one year following the optionee's
resignation or removal or other discontinuance of service as a director
(including discontinuance by reason of death); provided that in the event of the
death of such optionee during the one year period following such date, the
option shall be further extended and shall expire and terminate on the first
anniversary of the optionee's date of death.

Nontransferability of Option. Generally, an optionee may not transfer any
options except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined under the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder. During the lifetime of an optionee, only the optionee or
his guardian or legal representative may exercise any options granted to him.
Non-qualified stock options may be transferred to members of the optionee's
immediate family, to trusts for the benefit of such immediate family members,
and to trusts for the benefit of the optionee, to the extent permitted by the
stock option agreement between the optionee and the Company.

Maximum Stock Options. The aggregate fair market value of stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year may not exceed $100,000. For purposes of
these computations, the fair market value of the shares is to be determined as
of the date the option is granted and computed in the manner determined by the
Committee consistent with the requirements of the Code. This limitation does not
apply to non-qualified stock options granted under the 1999 Plan. In no event
may any person be awarded more than 200,000 shares under the 1999 Plan.

Replacement and Extension of the Terms of Options and Cash Awards
Surrender. The Committee from time to time may permit an optionee under the
1999 Plan or any other stock option plan adopted by the Company or any of its
subsidiaries to surrender for cancellation any unexercised outstanding stock
option and receive in exchange therefor an option for such number of shares of
Class A Common Stock as may be designated by the Committee. Such optionees may
also be granted related cash awards as described in the next paragraph.

Cash Awards. The Committee may, at any time and in its sole discretion,
grant to any optionee who is granted a non-qualified stock option the right to
receive, at such times and in such amounts as determined by the Committee in its
discretion, a cash amount (cash award) which is intended to reimburse the
optionee for all or a portion of the federal, state and local income taxes
imposed upon such optionee as a consequence of the exercise of a non-qualified
stock option and the receipt of a cash award.

<PAGE>

Restricted Share Awards

The Committee may also grant restricted share awards of Class A Common
Stock which entitle awardees to receive shares of Class A Common Stock. Each
restricted share award will be subject to terms and conditions established by
the Committee consistent with the provisions of the 1999 Plan.

At the time of an award of restricted shares, the Committee may establish
for each awardee a period during which, or at the expiration of which, the
restricted shares shall vest. During this "restricted period," the restricted
shares may not be sold, assigned, transferred, pledged or otherwise encumbered
by the awardee, except as otherwise set forth in the 1999 Plan. Subject to the
restrictions set forth in the 1999 Plan, a holder of restricted shares generally
has all the rights of a shareholder including, without limitation, dividend and
voting rights. The Committee has the authority, in its discretion and when
appropriate in light of changes in circumstances or tax law or other laws, to
accelerate the time at which any or all of the restrictions will lapse prior to
the expiration of the restricted period.

If an awardee ceases to be an employee of the Company or ceases to be a
non-employee director of the Company for any reason other than permanent and
total disability or death, unless otherwise determined by the Committee and
except as provided in any restricted share agreement evidencing the award, all
restricted shares awarded to such awardee which remain subject to restrictions
at the time of the cessation of employment or service shall be forfeited and
returned to the Company. However, if an awardee ceases to be an employee of the
Company or a non-employee director by reason of retirement pursuant to Company
plans or policies, the Committee, in its sole discretion, may lift all or a
portion of the restrictions on the restricted shares. Furthermore, unless the
Committee shall have provided in the restricted share agreement evidencing the
award for a ratable lapse of restrictions with respect to the shares during the
restricted period, if the awardee ceases to be an employee of the Company or a
non-employee director by reason of permanent or total disability or death, such
portion of the restricted shares awarded to the awardee which is equal to the
elapsed portion of the restricted period at the time of such cessation of
employment or service shall be free of restrictions and shall not be forfeited.

Restricted share awards may be evidenced by a restricted share agreement
between the awardee and the Company. The certificate evidencing shares subject
to a period of restriction must bear a restrictive legend set forth in the 1999
Plan and must be deposited with the Company until the lapse of the restrictions.
At the time of an award of restricted shares, the Committee may, in its
discretion, determine that the payment of dividends on such shares to the
awardee shall be deferred (and held by the Company for the account of the
awardee) until the earlier of the lapse of the restrictions on the shares or the
forfeiture of the shares. In this event, interest shall be credited at the end
of the year on the amount of the account existing at the beginning of the year
at a rate determined by the Committee.

The 1999 Plan also continues provision for the automatic grant of shares of
Class A Common Stock to each non-employee director of the Company with a fair
market value of $15,000 upon each non-employee director's re-election at each
annual meeting of shareholders (valued at the fair market value price on the
date of such annual meeeting.) Such grants will continue to be made
automatically under the 1999 Plan to the extent shares are no longer available
for such purpose under the 1994 Plan.

Other Provisions. The Committee may provide for such other terms,
provisions and conditions of an option as are not inconsistent with the 1999
Plan. The Committee may also prescribe, amend, waive and rescind rules and
regulations relating to the 1999 Plan, accelerate the vesting of stock options
under the 1999 Plan, and make all other determinations necessary or advisable in
the administration of the 1999 Plan.

Amendment and Termination

The Company's Board of Directors may terminate the 1999 Plan at any time
and no award shall be granted thereafter. Such termination, however, shall not
affect the validity of any award theretofore granted under the 1999 Plan. In any
event, no incentive stock option may be granted under the 1999 Plan after July
1, 2009.

<PAGE>

The Company's Board of Directors may amend or modify the 1999 Plan from
time to time, and, with the consent of the optionee, may amend the terms and
provisions of his or her options, or cash awards, except that without the
ratification of the holders of at least a majority of the shares of the Company
voting in person or by proxy at a duly constituted meeting, or adjournment
thereof: (1) the number of shares of stock which may be reserved for issuance
under the 1999 Plan may not be increased except for certain adjustments made in
response to corporate changes (such as recapitalization, stock splits or stock
dividends) that affect the nature of the shares of the Company; and (2) the
class of persons to whom options, restricted shares, or cash awards may be
granted under the 1999 Plan may not be expanded materially. No amendment of the
1999 Plan, however, may, without the consent of the awardees, make any changes
in any outstanding options, restricted shares, or cash awards previously granted
under the 1999 Plan which would adversely affect the rights of such awardees.

Federal Income Tax Consequences

The grant of incentive and a non-qualified stock option under the 1999 Plan
will have no immediate tax consequence to the Company or the optionee. Moreover,
if an incentive stock option is exercised (a) while the employee is employed by
the Company or its subsidiaries, (b) within three months after the optionee
ceases to be an employee of the Company or its subsidiaries, (c) after the
optionee's death, or (d) within one year after the optionee ceases to be an
employee of the Company or its subsidiaries if the optionee's employment is
terminated because of permanent and total disability, the exercise of the
incentive stock option will ordinarily have no federal income tax consequences
to the Company or the optionee. However, the amount by which the fair market
value of the shares at the time of exercise exceeds the option price of the
option will, along with other specified items, be considered taxable income in
the taxable year of the optionee in which the option was exercised for purposes
of determining the applicability of the alternative minimum tax. As a result,
the exercise of an incentive stock option may subject an optionee to an
alternative minimum tax depending on the optionee's particular circumstances.

On the other hand, the recipient of a non-qualified stock option generally
will realize taxable ordinary income at the time of exercise of his option in an
amount equal to the excess of the fair market value of the shares acquired at
the time of such exercise over the option price. A like amount is generally
deductible by the Company for federal income tax purposes as of that date, as
long as the Company includes the amount in the recipient's gross income. The
1999 Plan permits, under certain circumstances, holders of non-qualified stock
options to satisfy their withholding obligation by having shares equal in value
to the applicable withholding taxes withheld from the shares which they would
otherwise receive upon the exercise of a non-qualified stock option.

Upon the sale of the shares acquired upon the exercise of an incentive
stock option no sooner than two years after the grant of an option and no sooner
than one year after receipt of the shares by the optionee, any capital gain
recognized would be taxed to the optionee at long-term rates. Upon the sale of
shares acquired upon the exercise of an incentive stock option prior to two
years after the grant of an option or prior to one year after receipt of the
shares by the optionee, the optionee will generally recognize, in the year of
disposition, ordinary income equal to the lesser of (a) the spread between the
fair market value of the shares on the date of exercise and the exercise price,
and (b) the gain realized upon the disposition of those shares. The Company will
be entitled to a deduction equal to the amount of income recognized as ordinary
income by the optionee, so long as the Company includes the amount in the
recipient's gross income. If the aforementioned spread is the basis for
determining the amount of ordinary income realized by the optionee, there will
be additional long-term or short-term capital gain realized if the proceeds of
such sale exceed such spread.

Upon the subsequent sale of shares acquired upon exercise of a
non-qualified stock option, the optionholder will recognize long-term capital
gain or loss if the shares are deemed to have been held for more than 12 months,
and short-term capital gain or loss in all other cases. Long-term capital gains
are currently subject to a maximum rate of 20%.

An award of restricted shares under the 1999 Plan would not normally be included
in a optionee's gross income or be deductible by the Company for federal income
tax purposes, as long as the shares granted are subject to forfeiture in the
event a optionee terminates his employment during a period of restriction and
assuming the optionee does not file a special election under Section 83(b) of
the Code to have the shares taxed to him as of the date of grant. At the time
the transfer restrictions lapse, the optionee would be deemed to have received

<PAGE>

ordinary income measured by the fair market value of the shares received at the
time of lapse. The Company would be entitled to a federal income tax deduction
at that time in the same amount. Income reporting is required as though cash
compensation has been paid. If the payment of dividends has been deferred,
holders of restricted shares will also recognize ordinary income equal to their
dividends when such payments are received. Except for dividends on shares as to
which a Section 83(b) election has been made, such dividends should also be
deductible by the Company.

Upon a sale of shares after the restrictions lapse, the optionee will
recognize long-term capital gain or loss if the shares are deemed to have been
held for more than 12 months, and short-term capital gain or loss in other
cases.

Recommendation of the Board of Directors
The Board of Directors determined to adopt the 1999 Plan to provide means
to grant additional stock options and awards to directors, officers and other
key employees. The Board of Directors continues to believe that such
equity-based awards provide the most direct link between management's
performance incentive and the interests of shareholders. Of the 500,000 shares
authorized under the existing 1994 Plan, options or awards for 499,275 shares
have been granted and are outstanding. The Board of Directors believes adoption
of the 1999 Plan is necessary and appropriate to provide for the Company's
ongoing management compensation objectives.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE 1999
PLAN. ADOPTION OF THE 1999 PLAN REQUIRES THE FAVORABLE VOTE OF AT LEAST A
MAJORITY OF THE VOTING POWER OF THE HOLDERS OF THE COMPANY'S COMMON STOCK VOTING
IN PERSON OR BY PROXY AT THE ANNUAL MEETING, OR ANY ADJOURNMENT THEREOF.

<PAGE>

SHAREHOLDER PROPOSALS

Any proposal that a shareholder wishes to have presented at the next
Annual Meeting of the Company to be held in 2000 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 October 18, 2000. 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").
Such persons are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms that they file.

Based solely on its review of copies of such filings received by the
Company, and certain representations of executive officers and directors
respecting such matters, the Company believes that, for the fiscal year ended
June 30, 1999, the Company's officers, directors and greater than 10% beneficial
owners timely filed all required reports with the SEC pursuant to Section 16(a)
of the 1934 Act.

OTHER MATTERS

Abstentions, broker non-votes (i.e. where brokers or nominees indicate
they have not received instructions from the beneficial owner or other person
entitled to vote shares with respect to a particular matter) and votes withheld
will be included in the calculation of the presence of a quorum. Abstentions and
broker non-votes are not counted for purposes of the election of directors or
for purposes of approving other actions.

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

October 18, 1999

<PAGE>

Exhibit A

UNION ACCEPTANCE CORPORATION

1999 INCENTIVE STOCK PLAN

I. Purpose. The purpose of the Union Acceptance Corporation 1999 Stock
Option and Incentive Plan (the "Plan") is to provide to directors, officers and
other key employees of Union Acceptance Corporation (the "Company") and its
majority-owned and wholly-owned subsidiaries (individually a "Subsidiary" and
collectively the "Subsidiaries"), including, but not limited to, Union
Acceptance Funding Corporation, UAC Securitization Corporation, Performance
Funding Corporation, Performance Securitization Corporation, UAC Finance
Corporation, UAC Boat Funding Corp. and Circle City Car Company, who are
materially responsible for the management or operation of the business of the
Company or a Subsidiary and have provided valuable service to the Company or a
Subsidiary, a favorable opportunity to acquire Class A Common Stock, without par
value (the "Common Stock"), of the Company, thereby providing them with an
increased incentive to work for the success of the Company and its Subsidiaries
and better enabling each such entity to attract and retain capable executive
personnel.

II. Administration of the Plan.

(a) The Committee. The Plan shall be administered, construed
and interpreted by a committee consisting of at least two members of
the Board of Directors of the Company, each of whom is a disinterested
person within the meaning of the definition of that term contained in
Reg. ss. 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "1934 Act") and an outside director under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The members of the Committee shall be designated from time to time by
the Board of Directors of the Company. ("Committee" as used herein
refers to the committee so designated, and, as the context requires,
may also refer to the full Board of Directors or the Special Option
Committee acting under Section 2(c).) In the absence of such
designation, the Committee shall be the Compensation Committee of the
Corporation as long as such committee shall consist solely of
non-employee directors. The decision of a majority of the members of
the Committee shall constitute the decision of the Committee, and the
Committee may act either at a meeting at which a majority of the
members of the Committee is present or by a written consent signed by
all members of the Committee.

(b) Authority of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and
subject to the provisions of the Plan:

(i) the individuals ("Optionees or Awardees") to whom
options or successive options, cash awards or shares
(collectively, "Awards") shall be granted under the Plan;

(ii) the time when Awards shall be granted hereunder;

(iii) the number of shares of Common Stock to be
covered under each option and the amount of any cash awards;

(iv) the number of shares to be subject to awards of
restricted shares;

(v) the option price to be paid upon the exercise of
each option;

(vi) the period within which each such option may be
exercised and the period of restriction for restricted share
grants;

(vii) the extent to which an option is an incentive
stock option or a non-qualified stock option;

(viii) the terms and conditions upon which awards of
restricted shares may be granted; and

(ix) the terms and conditions of the respective
agreements by which Awards shall be evidenced.

The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options or cash awards made hereunder, to amend the restrictions imposed
on Awards of restricted shares made hereunder, and to make all other
determinations necessary or advisable in the administration of the Plan.

(i) The full Board of Directors shall have the
special authority from time to time to grant awards and to
make the determinations described in paragraph 2(b)(i)-(viii)
with respect to such grants.

(ii) A special option committee of the Board (the
"Special Option Committee") shall have the special authority
from time to time to grant options and to make the
determinations described in paragraph 2(b)(i)-(viii) with
respect to such options where the number of shares of Common
Stock to be covered under the option is less than one thousand
(1000) and the Optionee is a person not subject to Section 16
of the 1934 Act. Such special committee shall consist of at
least two (2) members of the Board of Directors of the
Company. The member(s) of the special committee may be
designated from time to time by the Board of Directors of the
Company and may include the President or Chief Executive
Officer of the Company.
<PAGE>

III. Eligibility. The Committee may, consistent with the purposes of
the Plan, grant Awards to directors, officers and other key employees of the
Company or of a Subsidiary who in the opinion of the Committee are from time to
time materially responsible for the management or operation of the business of
the Company or of a Subsidiary and have provided valuable services to the
Company or a Subsidiary; provided, however, that in no event may any employee
who owns (after application of the ownership rules in ss. 425(d) of the Code)
shares of stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries be
granted an incentive stock option hereunder unless at the time such option is
granted the option price is at least 110% of the fair market value of the stock
subject to the option and such option by its terms is not exercisable after the
expiration of five (5) years from the date such option is granted. Subject to
the foregoing and the provisions of Section 8 hereof, an Optionee, if he is
otherwise eligible, may be granted additional Awards if the Committee shall so
determine.

IV. Stock Subject to the Plan. A total of 300,000 shares of Common
Stock of the Company shall be reserved for issuance pursuant to Awards granted
under the Plan. Such reserved shares may be authorized but unissued shares or
treasury shares of the Company. Subject to Section 8 hereof, the shares for
which options may be granted under the Plan shall not exceed that number. If any
option shall expire or terminate or be surrendered for any reason without having
been exercised in full, or if an award of restricted shares shall be forfeited,
the unpurchased shares subject thereto shall (unless the Plan shall have
terminated) become available for other options under the Plan. Notwithstanding
the forgoing, no Awardee shall be granted more than 200,000 shares of Common
Stock under the Plan.

V. Terms of Options. Each option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:

(a) Option Price. The price to be paid for shares of stock
upon the exercise of each option shall be determined by the Committee
at the time such option is granted, but such price in the case of an
incentive stock option shall not be less than the fair market value, as
determined by the Committee consistent with Treas. Reg. ss. 20.2031-2
and any requirements of ss. 422A of the Code, of such stock on the date
on which such option is granted; and provided, further, that the
Committee may in no event award non-qualified stock options at a price
less than 85% of the fair market value of the Common Stock on the date
of grant, as determined by the Committee consistent with Treas. Reg.
ss. 20.2031-2.

(b) Period for Exercise of Option. An option shall not be
exercisable after the expiration of such period as shall be fixed by
the Committee at the time of the grant thereof, but such period in no
event shall exceed ten (10) years and one day from the date on which
such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten (10) years. Options
shall be subject to earlier termination as hereinafter provided.

(c) Exercise of Options. The option price of each share of
stock purchased upon exercise of an option shall be paid in full at the
time of such exercise. Payment may be made:

(i) in cash;

(ii) if the Optionee may do so in conformity with
Regulation T (12 C.F.R. ss. 220.3(e)(4)) without violating ss.
16(b) or ss. 16(c) of the 1934 Act, pursuant to a broker's
cashless exercise procedure, by delivering a properly executed
exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the total option
price in cash and, if desired, the amount of any taxes to be
withheld from the Optionee's compensation as a result of any
withholding tax obligation of the Company or any of its
Subsidiaries, as specified in such notice; or

(iii) with the approval of the Committee, by
tendering whole shares of the Company's Common Stock owned by
the Optionee and cash having a fair market value equal to the
cash exercise price of the shares with respect to which the
option is being exercised. For this purpose, any shares so
tendered by an Optionee shall be deemed to have a fair market
value equal to the mean between the highest and lowest quoted
selling prices for the shares on the date of exercise of the
option (or if there were no sales on such date the weighted
average of the means between the highest and lowest quoted
selling prices on the nearest date before and the nearest date
after the date of exercise of the option as prescribed by
Treas. Reg. ss. 20.2031-2), provided if there were no sales
during a reasonable period before and after the exercise date,
the fair market value shall be determined by taking the mean
between the bid and asked prices on the exercise date (or, if
none, the weighted average of the means between the bid and
asked prices on the nearest trading date before and the
nearest trading date after the exercise date on which bid and
asked quotations exist) as reported in The Wall Street Journal
or a similar publication selected by the Committee.

<PAGE>

The Committee shall have the authority to grant options exercisable in full at
any time during their term, or exercisable in such installments at such times
during their term as the Committee may determine. Installments not purchased in
earlier periods shall be cumulated and be available for purchase in later
periods. The Committee shall have the authority, in its discretion, to
accelerate the time at which any or all of an option shall become exercisable,
whenever it may determine that such action is appropriate by reason of changes
in applicable tax or other laws or other changes in circumstances occurring
after the grant of an option. Subject to the other provisions of this Plan, an
option may be exercised at any time or from time to time during the term of the
option as to any or all whole shares which have become subject to purchase
pursuant to the terms of the option or the Plan, but not at any time as to fewer
than one hundred (100) shares unless the remaining shares which have become
subject to purchase are fewer than one hundred (100) shares. An option may be
exercised only by written notice to the Company, mailed to the attention of its
Secretary, signed by the Optionee (or such other person or persons as shall
demonstrate to the Company his or their right to exercise the option),
specifying the number of shares in respect of which it is being exercised, and
accompanied by payment in full in either cash or by check in the amount of the
aggregate purchase price therefor, by delivery of the irrevocable broker
instructions referred to above, or, if the Committee has approved the use of the
stock swap feature provided for above, followed as soon as practicable by the
delivery of the option price for such shares.

(d) Certificates. The certificate or certificates for the
shares issuable upon an exercise of an option shall be issued as
promptly as practicable after such exercise. An Optionee shall not have
any rights of a shareholder in respect to the shares of stock subject
to an option until the date of issuance of a stock certificate to him
for such shares. In no case may a fraction of a share be purchased or
issued under the Plan, but if, upon the exercise of an option, a
fractional share would otherwise be issuable, the Company shall pay
cash in lieu thereof.

(e) Termination of Option.

(i) In the case of an Optionee who is an Employee,
unless an earlier or later date of termination is specified by
the Committee, any option granted to an Optionee shall expire
and terminate on the date thirty (30) days following
Optionee's termination of employment for any reason other than
retirement, disability or death. In the event of Optionee's
termination of employment due to retirement, disability or
death, any outstanding options shall become exercisable,
whether or not the option was otherwise exercisable at the
date of the Optionee's termination but shall expire as
indicated in the following table.

- -------------------------------------------------------------------------------
Circumstance of Expiration Date
Termination
- -------------------------------------------------------------------------------
Retirement 3 months after termination of employment

- -------------------------------------------------------------------------------
Disability or death 1 year after termination of employment
while employed
- -------------------------------------------------------------------------------
Death within 3 months after 1 year after date of death
retirement OR within one year after
termination due to disability
- -------------------------------------------------------------------------------

(ii) For purposes of this Plan,

(x) "Disability" means permanent and total
disability as defined in ss. 22(e)(3) of the Code.

(y) "Retirement" means such termination of
employment as shall entitle such individual to early
or normal retirement benefits under any then existing
pension plan of the Company or a Subsidiary.

(z) Leave of absence approved by the
Committee shall not constitute cessation of
employment.

(iii) In the case of an Optionee who is a
Non-employee Director, unless an earlier or later date of
termination is specified by the Committee, any option granted
to such an Optionee shall expire and terminate on the date one
year following the Optionee's resignation or removal or other
discontinuance of service as a director (including
discontinuance by reason of death); provided that in the event
of the death of such Optionee during the one year period
following such date, the Option shall be further extended and
shall expire and terminate on the first anniversary of the
Optionee's date of death.

<PAGE>

(iv) If the Optionee dies prior to expiration of the
Option in accordance with the foregoing provisions, the option
may be exercised by the executor or administrator of his
estate or by the person or persons entitled to the option by
will or by applicable laws of descent and distribution,
whether or not the option was otherwise exercisable at the
date of his death.

(v) In no circumstances, shall the Option be
exercisable later than the date on which it would otherwise
expire.

(f) Nontransferability of Option. No option may be transferred
by the Optionee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations
thereunder, and during the lifetime of the Optionee options shall be
exercisable only by the Optionee or his guardian or legal
representative; provided, however, that non-qualified stock options may
be transferred to members of the Optionee's immediate family, to trusts
for the benefit of such immediate family members, and to trusts for the
benefit of the Optionee, to the extent permitted by the stock option
agreement between the Optionee and the Company.

(g) No Right to Continued Service. Nothing in this Plan or in
any agreement entered into pursuant hereto shall confer on any person
any right to continue in the employ or service of the Company or its
Subsidiaries or affect any rights of the Company, a Subsidiary, or the
shareholders of the Company may have to terminate his service at any
time.

(h) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of ss. 422A of the Code) are exercisable for the first time
by an Optionee during any calendar year under the Plan or any other
plan of the Company or its Subsidiaries shall not exceed $100,000. For
this purpose, the fair market value of such shares shall be determined
as of the date the option is granted and shall be computed in such
manner as shall be determined by the Committee, consistent with the
requirements of ss. 422A of the Code.

(i) Agreement. Each option shall be evidenced by an agreement
between the Optionee and the Company which shall provide, among other
things, that, with respect to incentive stock options, the Optionee
will advise the Company immediately upon any sale or transfer of the
shares of Common Stock received upon exercise of the option to the
extent such sale or transfer takes place prior to the later of (a) two
(2) years from the date of grant or (b) one (1) year from the date of
exercise.

(j) Investment Representations. Unless the shares subject to
an option are registered under applicable federal and state securities
laws, each Optionee by accepting an option shall be deemed to agree for
himself and his legal representatives that any option granted to him
and any and all shares of Common Stock purchased upon the exercise of
the option shall be acquired for investment and not with a view to, or
for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an option shall be accompanied
by a representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common Stock
are being acquired in good faith for investment and not with a view to,
or for sale in connection with, any distribution thereof (except in
case of the Optionee's legal representatives for distribution, but not
for sale, to his legal heirs, legatees and other testamentary
beneficiaries). Any shares issued pursuant to an exercise of an option
may bear a legend evidencing such representations and restrictions.

VI. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under ss. 422A of the Code
or non-qualified stock options. All options granted hereunder will be clearly
identified as either incentive stock options or non-qualified stock options. In
no event will the exercise of an incentive stock option affect the right to
exercise any non-qualified stock option, nor shall the exercise of any
non-qualified stock option affect the right to exercise any incentive stock
option. Nothing in this Plan shall be construed to prohibit the grant of
incentive stock options and non-qualified stock options to the same person,
provided, further, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.

VII. Share Awards. The Committee shall have full and complete
authority, subject to the limitations of the Plan, to grant awards of shares
and, in addition to the terms and conditions contained in subsections (a)
through (f) of this Section 7, to provide such terms and conditions (which need
not be identical among Awardees) in respect of such Awards of shares, and the
vesting thereof, as the Committee shall determine and provide in the agreement
referred to in subsection (d) of this Section 7.

<PAGE>

(a) At the time of an award of shares, the Committee may
establish for each Awardee a period during which, or at the expiration
of which, as the Committee shall determine and provide in the agreement
referred to in subsection (d) of this Section 7, shares awarded as
restricted shares shall vest (the "Restricted Period"), and subject to
any such other terms and conditions as the Committee shall provide,
restricted shares may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Awardee, except as hereinafter provided,
during the Restricted Period. Except for such restrictions, and subject
to subsections (c), (d) and (e) of this Section 7 and Section 8 hereof,
the Awardee, as owner of such shares, shall have all the rights of a
shareholder, including but not limited to the right to receive all
dividends paid on such shares and the right to vote such shares. The
Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions shall lapse with
respect to any restricted shares prior to the expiration of the
Restricted Period with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate
by reason of changes in applicable tax or other laws or other changes
in circumstances occurring after the commencement of such Restricted
Period.

(b) If an Awardee ceases to be an employee of the Company and
the Subsidiaries or ceases to be a director who is not an employee of
the Company or any of the Subsidiaries (a "Non-employee Director") for
any reason other than permanent or total disability (within the meaning
of ss. 22(e)(3) of the Code), or death, unless the Committee shall
otherwise determine and provide in the agreement referred to in
subsection (d) of this Section 7, all restricted shares awarded to such
Awardee and which at the time of such cessation of employment or
service are subject to the restrictions imposed by subsection (a) of
this Section 7 shall upon such cessation of employment or service be
forfeited and returned to the Company; provided, however, that if an
Awardee ceases to be an employee of the Company or a Non-employee
Director by reason of retirement pursuant to Company plans or policies,
the Committee, in its sole discretion, may lift all or a portion of the
restrictions of the restricted shares. Unless the Committee shall have
provided in the agreement referred to in subsection (d) of this Section
7 for a ratable lapse of restrictions with respect to an Award of
restricted shares during the Restricted Period, if an Awardee ceases to
be an employee of the Company and the Subsidiaries or a Non-employee
Director by reason of permanent or total disability (within the meaning
of ss. 22(e)(3) of the Code), or death, such portion of such restricted
shares awarded to the Awardee, which at the time of such cessation of
employment or service are subject to the restrictions imposed by
subsection (a) of this Section 7 as shall be equal to the portion of
the Restricted Period with respect to such shares which shall have
elapsed at the time of such cessation of employment or service, shall
be free of restrictions and shall not be forfeited.

(c) Each certificate in respect of restricted shares awarded
under the Plan subject to restriction under Section 7(a) shall be
registered in the name of the Awardee and deposited by the Awardee,
together with a stock power endorsed in blank, with the Company and
shall bear the following (or a similar legend:

"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) contained in the Union
Acceptance Corporation Incentive Stock Plan, and an Agreement
entered into between the registered owner and Union Acceptance
Corporation. Copies of such Plan and Agreement are on file in
the offices of the Secretary of Union Acceptance Corporation,
45 North Pennsylvania Street, Indianapolis, Indiana 46204."

(d) At the time of an award of shares subject to restriction
under Section 7(a), the Awardee shall enter into an Agreement with the
Company in a form specified by the Committee, agreeing to the terms and
conditions of the award of restricted shares and such other matters as
the Committee shall in its sole discretion determine.

(e) At the time of an award of restricted shares, the
Committee may, in its discretion, determine that the payment to the
Awardee of dividends declared or paid on such shares, or a specified
portion thereof, by the Company shall be deferred until the earlier to
occur of (i) the lapsing of the restrictions imposed under subsection
(a) of this Section 7 or (ii) the forfeiture of such shares under
subsection (b) of this Section 7, and shall be held by the Company for
the account of the Awardee until such time. In the event of such
deferral, there shall be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may
determine. Payment of deferred dividends, together with interest
accrued thereon as aforesaid, shall be made upon the earlier to occur
of the events specified in (i) and (ii) of the immediately preceding
sentence.

(f) At the expiration of any restrictions imposed by
subsection (a) of this Section 7, the Company shall redeliver to the
Awardee (or where the relevant provision of subsection (b) of this
Section 7 applies in the case of a deceased Participant, to his legal
representative, beneficiary or heir) the certificate(s) and stock power
deposited with it pursuant to subsection (c) of this Section 7 and the
restricted shares represented by such certificate(s) shall be free of
the restrictions referred to in subsection (a) of this Section 7.

<PAGE>

(g) Each Non-employee Director who is elected as such at any
annual shareholder meeting of the Company subsequent to the Public
Offering or who continues to serve as a Non-employee Director following
any such annual meeting shall receive on the date of such shareholder
meeting an Award of shares equal to the number of shares of Common
Stock determined by dividing $15,000 by the fair market value of one
such share on the date of such annual meeting or the next preceding
trading date if such date was not a trading date (rounded down to the
nearest whole number); provided that each Award provided for by this
sentence shall be reduced by the number of shares awarded to such
Non-employee Director on such date under Section 7(g) of the Company's
1994 Incentive Stock Plan. If on any date in any given year the number
of shares of Common Stock available for Awards under the Plan is
insufficient to grant such Nonemployee Director entitled thereto such
an Award of restricted shares, the shares available for such Awards
shall be awarded ratably (to the nearest whole share) to each such
Non-employee Director on such date.

VIII. Adjustment of Shares. In the event of any change after the
effective date of the Plan in the outstanding stock of the Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation, or any
other change after the effective date of the Plan in the nature of the shares of
stock of the Company, the Committee shall determine what changes, if any, are
appropriate in the number and kind of shares reserved under the Plan, and the
Committee shall determine what changes, if any, are appropriate in the option
price and restricted share price under and the number and kind of shares covered
by outstanding Awards granted under the Plan. Any determination of the Committee
hereunder shall be conclusive.

IX. Cash Awards. The Committee may, at any time and in its discretion,
grant to any Optionee who is granted a non-qualified stock option the right to
receive, at such times and in such amounts as determined by the Committee in its
discretion, a cash amount (cash award) which is intended to reimburse the
Optionee for all or a portion of the federal, state and local income taxes
imposed upon such Optionee as a consequence of the exercise of a non-qualified
stock option and the receipt of a cash award.

X. Replacement and Extension of the Terms of Options and Cash Awards.
The Committee from time to time may permit an Optionee under the Plan or any
other stock option plan heretofore or hereafter adopted by the Company or any
Subsidiary to surrender for cancellation any unexercised outstanding stock
option and receive from his employing corporation in exchange therefor an option
for such number of shares of Common Stock as may be designated by the Committee.
Such Optionees also may be granted related cash awards as provided in Section 9
hereof.

XI. Tax Withholding. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require the Optionee or Awardee or his or her legal representative
to remit to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares, and whenever under the Plan
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee or Awardee may make a written election
to have shares of Common Stock having an aggregate fair market value, as
determined by the Committee, consistent with the requirements of Treas.
Reg.ss.20.2031-2 sufficient to satisfy the applicable withholding taxes,
withheld from the shares otherwise to be received upon the exercise of a
non-qualified option or vesting of a restricted share Award.

XII. Amendment. The Board of Directors of the Company may amend the
Plan from time to time and, with the consent of the Optionee or Awardee, the
terms and provisions of his or her Award, except that without the approval of
the holders of at least a majority of the shares of the Company voting in person
or by proxy at a duly constituted meeting or adjournment thereof:

(a) the number of shares of stock which may be reserved for
issuance under the Plan may not be increased except as provided in
Section 8 hereof; and

(b) the classes of persons to whom Awards may be granted under
the Plan shall not be expanded materially.

No amendment of the Plan, however, may, without the consent of the
Optionees or Awardees, make any changes in any outstanding Award theretofore
granted under the Plan which would adversely affect the rights of such persons.

XIII. Termination. The Board of Directors of the Company may terminate
the Plan at any time and no Award shall be granted thereafter. Such termination,
however, shall not affect the validity of any Award theretofore granted under
the Plan. In any event, no incentive stock option may be granted under the Plan
after the date which is ten (10) years from the effective date of the Plan or,
if earlier, the date the Plan is approved by the Company's shareholders.

XIV. Successors. This Plan shall be binding upon the successors and
assigns of the Company.

XV. Governing Law. The terms of any Awards granted hereunder and the
rights and obligations hereunder of the Company, the Optionees and Awardees and
their successors in interest shall, except to the extent governed by federal
law, be governed by Indiana law.

<PAGE>

XVI. Government and Other Regulations. The obligations of the Company
to issue or transfer and deliver shares under Awards granted under the Plan or
make cash awards shall be subject to compliance with all applicable laws,
governmental rules and regulations, and administrative action.

XVII. Effective Date. The Plan shall be effective as of July 1, 1999;
provided, however, that any grant of Awards pursuant to the Plan shall be
subject to the approval of the Plan by the holders of at least a majority of the
voting power of the shares of the Company entitled to vote thereon voting in
person or by proxy at a duly constituted meeting or adjournment thereof, and any
options granted pursuant to the Plan may not be exercised until the Board of
Directors of the Company has been advised by counsel that such approval has been
obtained and all other applicable legal requirements have been met.

<PAGE>

PROXY UNION ACCEPTANCE CORPORATION PROXY
Proxy Solicited on Behalf of the Board of Directors
For The Annual Meeting of Shareholders-November 16, 1999

The undersigned appoints Rick A. Brown and Melanie S. Otto, 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 November 16, 1999, 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 1999 [ ]

For Withhold For all
All All Except

1. Election of Directors

Nominees: J. Davis, F. Fehsenfeld, Jr., [ ] [ ] [ ]
J. Stainbrook, J. Von Deylen,
R. Waterfield, T. West

_________________________________
(Except nominee(s) written above
For Against Abstain

2. Ratification of DeLoitte & Touche LLP as [ ] [ ] [ ]
auditors for fiscal 2000.

3. Ratification of Union Acceptance Corporation [ ] [ ] [ ]
1999 Incentive Stock Plan

The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Shareholders and the Proxy Statement.

Dated: ___________________________, 1999

________________________________________
Signature

________________________________________
Please sign exactly as name appears.
Joint owners should each sign
personally. Where applicable, Indicate
your official position or representation
capacity.

- - - - - - - - - - - - - - - -
FOLD AND DETACH HERE

YOUR VOTE IS IMPORTANT!

PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

<PAGE>
PROXY UNION ACCEPTANCE CORPORATION PROXY
Proxy Solicited on Behalf of the Board of Directors
For The Annual Meeting of Shareholders-November 16, 1999

The undersigned appoints Rick A. Brown and Melanie S. Otto, 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 B 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 November 16, 1999, or at 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 1999 [ ]

For Withhold For all
All All Except

1. Election of Directors

Nominees: J. Davis, F. Fehsenfeld, Jr., [ ] [ ] [ ]
J. Stainbrook, J. Von Deylen,
R. Waterfield, T. West

_________________________________
(Except nominee(s) written above
For Against Abstain

2. Ratification of DeLoitte & Touche LLP as [ ] [ ] [ ]
auditors for fiscal 2000.

3. Ratification of Union Acceptance Corporation [ ] [ ] [ ]
1999 Incentive Stock Plan

The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Shareholders and the Proxy Statement.

Dated: ___________________________, 1999

________________________________________
Signature

________________________________________
Please sign exactly as name appears.
Joint owners should each sign
personally. Where applicable, Indicate
your official position or representation
capacity.

- - - - - - - - - - - - - - - -
FOLD AND DETACH HERE

YOUR VOTE IS IMPORTANT!

PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.