<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
Filed by the Registrant[X]
Filed by other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec 240.14a-11(c) or Sec. 240.14a-12
UNICO, INC.
(Name of Registrant)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
2. Aggregate number of securities to which transaction applies:
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):
4. Proposed maximum aggregate value of transaction:
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.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
1
<PAGE>
UNICO, INC.
SCHEDULE 14A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Statement as to expected date distribution of proxy
materials to shareholders 3
Preliminary Notice of Annual Meeting of Shareholders 4
Preliminary Proxy Statement 6
Preliminary Form of Proxy 51
Appendices
A. Statement as to expected date of registration of shares to be issued in 54
Conjunction with the Stock Option Plan and the Incentive Equity Plan
to be acted on at the meeting
B. Incentive Equity Plan 56
C. Stock Option Plan for Non-Employee Directors 78
D. Financial Statements and Additional Information of Intermountain
Refining Co., Inc. 92
E. Restated Articles of Incorporation of the Company 104
</TABLE>
2
<PAGE>
UNICO, INC.
STATEMENT AS TO EXPECTED DATE
OF
PROVIDING DEFINITIVE PROXY MATERIALS
TO SHAREHOLDERS
In conjunction with the solicitation of proxies by the Registrant for
the annual meeting of shareholders to be held on March 5, 1999, it is
anticipated that definitive proxy statements, along with all other materials
to be provided with the proxy statements, will be mailed to shareholders on
February 23, 1999.
Unico, Inc.
By: Henry Tang, Secretary
3
<PAGE>
PRELIMINARY DRAFT
UNICO, INC.
2925 Bayview Drive
Fremont, California 94538
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held March 5, 1999
To the Shareholders of
Unico, Inc.:
The Annual Meeting of Shareholders of Unico, Inc. will be held at the
Company's corporate offices at 2925 Bayview Drive, Fremont, CA on Friday,
March 5, 1999 at 10:00 A.M. PST for the purpose of considering and acting upon
the following matters:
(1) To elect a Board of 5 directors; and
(2) To authorize the Company and to ratify its actions in
implementing a stock option plan for non-employee directors;
and
(3) To authorize the Company and to ratify its actions in
implementing an incentive equity plan for the benefit of
executives and other employees; and
(4) To ratify the appointment of the accounting firm of Weinbaum
& Yalamanchi as the Company's independent auditors; and
(5) To authorize the Company to change its name to Paradise
Innovations Technology Corporation; and
(6) To authorize the Company to reverse split the common stock
of the Company if such is determined to be necessary and
appropriate for compliance with listing requirements; and
(7) To authorize and approve the recommendation of the Board of
Directors that the Company adopt, amend and restate its
Articles of Incorporation; and
(8) To authorize the Company and to ratify its actions, with
respect to closing and consummating the purchase of the
stock of Multiwave Innovation Pte. Ltd., a Singapore
corporation; and
4
<PAGE>
(9) To approve and ratify granting the Board of Directors powers
to negotiate and consummate the proposed spin-off of the
shares of stock of Intermountain Refining Co., Inc. on such
terms and conditions as are acceptable to the Board of
Directors; and
(10) To transact such other business as may properly come before
the meeting or any adjournment of the meeting.
The Board of Directors has fixed February 12, 1999 as the Record Date
for the Annual Meeting, and only shareholders of record at the close of
business on that date are entitled to notice of and to vote at the Annual
meeting or any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING
IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE, IF MAILED WITHIN THE UNITED
STATES. YOUR PROXY WILL NOT BE USED IF YOU ARE PRESENT AT THE ANNUAL MEETING
AND DESIRE TO VOTE YOUR SHARES PERSONALLY.
BY ORDER OF
THE BOARD OF DIRECTORS
Henry Tang
Secretary
February 23, 1999
Fremont, California
Unico, Inc.
5
<PAGE>
PRELIMINARY DRAFT
UNICO, INC.
2925 Bayview Drive
Fremont, California 94538
ANNUAL MEETING OF SHAREHOLDERS
To Be Held March 5, 1999
PROXY STATEMENT
This Proxy Statement and accompanying Proxy are being furnished in
connection with the solicitation by the Board of Directors of Unico, Inc.
("Unico" or the "Company") of proxies to be voted at the Annual Meeting of
Shareholders of the Company to be held on March 5, 1999 at 10:00 A.M. PST at
the Company's corporate offices located at 2925 Bayview Drive, Fremont, CA,
and at any adjournment or postponement thereof (the "Annual Meeting"), for
purposes set forth in the Proxy Statement and the accompanying Notice of
Annual Meeting. This Proxy Statement and accompanying Proxy are being mailed
to the shareholders of the Company on or about February 23, 1999.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING, TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE.
Your executed proxy may be revoked at any time before it is exercised
by filing with the Secretary of the Company, at the Company's principal
executive office, a written notice of revocation or a duly executed Proxy
bearing a later date. The execution of the enclosed Proxy will not affect your
right to vote in person, should you find it convenient to attend the Annual
Meeting and desire to vote in person. Attendance at the Annual Meeting will
not in and of itself constitute the revocation of a Proxy. Abstentions are
included in the determination of the number of shares present at the meeting
for quorum purposes. An abstention will have the same effect as a negative
vote.
The principal executive office of the Company is located at 2925
Bayview Drive, Fremont, California 94538.
The purpose of the Annual Meeting is to elect 5 directors to serve
one-year terms until the next Annual Meeting and until their respective
successors shall be elected and qualified. Unless otherwise directed in the
accompanying Proxy, the proxyholders will vote FOR the election of the 5
management nominees listed under "Election of Directors." The shareholders are
also requested to vote on the proposal presented by the Company to approve and
ratify the selection of Independent Auditors. The shareholders are also
requested to vote on the proposal presented by the Company to implement a
6
<PAGE>
stock option plan for the benefit of non-employee directors and an incentive
equity plan for the benefit of executive officers and other employees. In
addition, the shareholders are also requested to vote on a proposal by the
Company to change the name of the Company to "Paradise Innovations Technology
Corporation". In addition, the shareholders are also requested to vote on the
recommendation by the Company to adopt and restate its Articles of
Incorporation. The Company further seeks the authority to reverse split its
common stock in the event that such is determined to be necessary and
appropriate to comply with listing maintenance requirements on The Stock
Market. In addition, the shareholders are also requested to authorize the
Company to close and consummate the transaction with Multiwave Innovation Pte.
Ltd. and to grant the Board of Directors authority with respect to a
"spin-off" of Intermountain Refining Co., Inc. As to any other business that
may properly come before the Annual Meeting, the proxyholders will vote in
accordance with their best judgment. Management of the Company does not
presently know of any other such business.
The Company intends to solicit proxies principally by the use of the
mails and will bear all expenses in connection with such solicitations. In
addition, some of the directors, officers and regular employees of the Company
may, without extra compensation, solicit proxies by telephone, facsimile and
personal interview. Arrangements have been made with banks, brokerage houses
and other custodians and nominees to forward copies of the Proxy Statement and
the 1998 Annual Report on Form 10-KSB to persons for whom they hold stock of
the Company and to request authority for the execution of proxies. The Company
will reimburse the foregoing persons for their reasonable expenses, upon
request.
VOTING SECURITIES
On February 12, 1999, the Record Date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting,
7,229,428 shares of the Company's common stock ("common stock") were
outstanding. Shareholders of common stock are entitled to one vote per share
on all matters to be considered at the meeting including one vote for each
Director to be elected. Cumulative voting is not permitted. On the Record
Date, 5,474 shares of the Company's convertible preferred stock ("preferred
stock") were outstanding. Shareholders of preferred stock are entitled to one
vote per share on all matters to be considered at the meeting including one
vote for each Director to be elected. Cumulative voting is not permitted.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table sets forth the specified information, as of
December 21,1998, with respect to persons or groups of beneficially owning
more than 5% of the common
7
<PAGE>
stock, to the extent it is known to the Company, either from Securities
Exchange Act filings, Company records or information supplied by the persons
named in the table.
<TABLE>
<CAPTION>
Name and Address Of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership (1)
- -------------------------- --------------------------- -----------------
<S> <C> <C>
William N. Hagler 560, 397 shares common 9.02%
603 Merino Kraal 111,125 warrants
Farmington, NM 87401 of record and beneficially(2)
John Hwang 600,000 shares common 8.19%
2925 Bayview Drive 580 shares preferred
Fremont, CA 94538 of record and beneficially(3)
Kelvin Li 600,000 shares common 8.19%
1803 Napa Court 580 shares preferred
Fremont, CA 94539 of record and beneficially(4)
Maurer Trust & Carol Maurer 915,240 shares common 12.49%
264 S. La Cienega Blvd. 895 shares preferred
Beverly Hills, CA 90221 of record and beneficially(5)
Starlicon Group, Inc. 750,000 shares common 10.24%
1601 N. Sepulveda Blvd. 1,000 shares preferred
Suite 243 of record and beneficially(6)
Manhattan Beach, CA 90266
Ike Suri 1,147,619 shares common 15.66%
1601 N. Sepulveda Blvd. 580 shares preferred
Suite 243 of record and beneficially(7)
Manhattan Beach, CA 90266
</TABLE>
(1) Percentage of ownership based on voting rights associated with
7,229,428 (excluding 3,699 shares held by the Company for resale)
common shares and 5,474 Series A Preferred shares issued and
outstanding.
(2) Mr. Hagler's holdings include warrants to purchase 111,125 shares of
common stock at an exercise price of $1.40 per share of which, 11,125
are exercisable at any time before December 31, 1999 and 100,000 are
exercisable at any time before December 31, 2006. The warrants are
assumed to have been exercised for calculation of the ownership
percentage shown in this table. The Company is, as of the record
date, negotiating with Mr. Hagler for termination of the warrants.
(3) Excludes up to 97,500 common shares and 130 preferred shares that may
be distributed to Mr. Hwang as a shareholder of Starlicon Group, Inc.
from its holdings of the Company's securities. (6).
8
<PAGE>
(4) Excludes up to 97,500 common shares and 130 preferred shares that may
be distributed to Mr. Li as a shareholder of Starlicon Group, Inc.
from its holdings of the Company's securities (6).
(5) Holdings attributed to the Maurer Trust and Ms. Maurer include
315,240 common shares and 340 Series A Preferred shares issued to Ms.
Maurer directly and 600,000 common shares and 580 Series A Preferred
shares issued to the Maurer Trust, of which Ms. Maurer is the
trustee. Excludes a combined total of up to 150,000 common shares and
200 preferred shares that may be distributed to Ms. Maurer and the
Maurer Trust as shareholders of Starlicon Group, Inc. from its
holdings of the Company's securities (6).
(6) Shares held by Starlicon Group, Inc. ("SGI") are voted at the
discretion of Mr. Ike Suri (7), its sole director. SGI, may, at some
future date, elect to distribute to its shareholders (in accordance
with their respective holdings of SGI) some or all of the shares of
the Company's securities (3)(4)(5)(7).
(7) Holdings attributed to Mr. Suri consist of shares issued to two
companies of which Mr. Suri is the owner or holds a controlling
interest. Shares issued include 600,000 common shares and 580 Series
A Preferred shares issued to Corinthian Partners, and 547,619 common
shares issued to Azemuth, Inc. Both companies list the same address
as that shown for Mr. Suri. Excludes up to 97,500 common shares and
130 preferred shares that may be distributed to Corinthian Partners
as shareholders of Starlicon Group, Inc. from its holdings of the
Company's securities (6).
SECURITY OWNERSHIP OF MANAGEMENT
The following table lists the beneficial ownership, as of December 21,
1998, of the Company's common stock with respect to all directors and officers
as a group.
<TABLE>
<CAPTION>
Name and Address Of Beneficial Amount and Nature of Percent of Class
Owner Beneficial Ownership (1)
- ------------------------------ --------------------------- ----------------
<S> <C> <C>
John Hwang 600,000 shares common 8.19%
2925 Bayview Drive 580 shares preferred
Fremont, CA 94538 of record and beneficially (3)
William N. Hagler 560,397 shares common 9.02%
603 Merino Kraal 111,125 warrants
Farmington, NM 87401 of record and beneficially (2)
All directors and officers as 1,237,301 shares common 18.93%
a group, including the persons 580 shares preferred
named above (4 Persons) 161,125 warrants
of record and beneficially
</TABLE>
9
<PAGE>
(1) Percentage of ownership based on voting rights associated with
7,229,428 (excluding 3,699 shares held by the Company for resale)
common shares and 5,474 Series A Preferred shares issued and
outstanding.
(2) Mr. Hagler was President and a director of Unico until June 1998. Mr.
Hagler holds warrants to purchase 111,125 shares of common stock at
an exercise price of $1.40 per share of which, 11,125 are exercisable
at any time before December 31, 1999 and 100,000 are exercisable at
any time before December 1, 2006. The warrants are assumed to be
exercised for purposes of the ownership percentage shown in this
table. The Company is, as of the record date, negotiating with Mr.
Hagler for termination of the warrants.
(3) Excludes up to 97,500 common shares and 130 preferred shares that may
be distributed to Mr. Hwang as a shareholder of Starlicon Group, Inc.
from its holdings of the Company's securities (4).
(4) Starlicon Group, Inc. ("SGI") presently holds 750,000 common shares
and 1,000 Series A Preferred shares, representing 10.24% of the
outstanding voting shares of Unico. SGI, may, in the future,
distribute to its shareholders (in accordance with their respective
holdings of SGI) all or a portion of the shares of the Company's
securities. Except for Mr. Hwang (3), no present officer or director
of Unico would receive any future distribution of shares held by SGI.
CHANGES IN CONTROL
Effective as of June 30, 1998 in accordance with the Stock Purchase
Agreement dated November 30, 1997 and as amended by the Novation Agreement
dated June 26, 1998 (collectively hereafter "Acquisition Agreement"), Unico
acquired all of the outstanding stock of Paradise Innovations, Inc.,
("Paradise") (formerly Starlicon International Corporation), from SGI which
resulted in a change in control of Unico (the "Acquisition"). In conjunction
with the Acquisition, the Company issued 5,476,200 shares of common stock and
5,474 shares of Series A convertible preferred shares to SGI. SGI subsequently
distributed 4,726,200 of the common shares, and 4,474 of the preferred shares,
to its shareholders. Under the Acquisition Agreement, the directors and
officers of Unico at the time of the Acquisition resigned upon the appointment
of new directors and officers as designated by SGI.
The operating assets and investments held by Unico prior to the
acquisition of Paradise have been transferred to Intermountain Refining Co.,
Inc. ("IRC"), a wholly owned subsidiary of Unico. In accordance with the
Acquisition Agreement, the management and control of all assets and operations
now held by IRC is at the sole
10
<PAGE>
discretion of William N. Hagler, the President of IRC and a significant
shareholder of Unico.
ELECTION OF DIRECTORS
The Board of Directors proposes the election of 5 directors, each to
hold office for a term of one year until the next Annual Meeting and until
their respective successors are elected and qualified. Although it is not
anticipated that any of the nominees will decline or be unable to serve, if
that should occur, the proxyholders may, in their discretion, vote for
substitute nominees.
The following table sets forth the name, principal occupation, age
and the year in which the individual first became a director for each nominee,
and all persons nominated or chosen to become directors, together with all
positions and the office with the Company held by each such person and term or
period during which each has served, for election as a director at the annual
meeting of stockholders.
<TABLE>
<CAPTION>
Served as a
Name and Principal Occupation Age Director Since
<S> <C> <C>
John Hwang (1) 37 1998
Rodger Sykes (2) 42 1998
James Cunningham Sargent (3) 82 --
Ike Suri (4) 30 --
Henry Tang (5) 49 1998
</TABLE>
(1) Mr. John Hwang was employed by Samsung America Inc. as a manager and
Vice President of Sales and Marketing for computer and monitor
products from 1984 to 1991. Mr. Hwang served as Vice President of
Sales and Marketing for Relialogic Technology Corporation (RTC). In
1995, Mr. Hwang also served as the Vice President of Sales and
Marketing of Builders Warehouse Association, Inc. ("Builders"), as a
result of its acquisition of RTC. He was appointed the executive-
in-charge of the Commercial and International Sales divisions after
Builders merged with Osicom Technologies, Inc. Mr. Hwang was
appointed as President and to Unico's board of directors and to its
Audit Committee in June 1998.
(2) Dr. Rodger W. Sykes received his BSEE and Ph.D. in Device Physics
from Durham University. He is currently Marketing and Business
Development Director for the Windows Systems IC business unit of
Philips Semiconductors in Mountain View, California. He moved to
Philips Semiconductors in 1994 initially as Strategic Product
Marketing Director for the standard IC division, and later as General
Manager of the Paradise Multimedia business unit. Prior to joining
Philips, Dr. Sykes was worldwide ASIC business manager at Texas.
11
<PAGE>
Instruments Ltd. in Dallas, Texas. Dr. Sykes was appointed to Unico's
board of directors and to its Audit Committee in June 1998.
(3) James Cunningham Sargent received a B.A. degree in 1938 and an L.L.B.
degree in 1940 from the University of Virginia. Mr. Sargent was
admitted to the bar in both New York State in 1940 and the District
of Columbia in 1961. From 1955 to 1956, he was the Regional
Administrator of the Securities and Exchange Commission in New York
City. From 1956 to 1960, he was appointed by President Eisenhower,
with the advice and consent of the United States Senate, to serve as
a Commissioner of the Securities and Exchange Commission. Throughout
Mr. Sargent's career, he has held positions in legal firms, such as
partner with Spence and Hotchkiss (1954-1955), a New York law firm;
in government, such as assistant attorney general for the State of
New York (1948); and in corporations, such as associate general
counsel for CIT Finance Corp. (1960-1964). He was also a guest
lecturer at many law schools throughout the country. Mr. Sargent
served in the armed forces as Captain in the United States Air Force
(1942-1946). He is currently on the faculty at the Practicing Law
Institute and of counsel to Opton, Handler, Gottlieb, Feiler & Katz
in New York City.
(4) Mr. Ike Suri is a Director of Starlicon Group, Inc., the former
parent of Paradise Innovations, Inc., an operating subsidiary of the
Company. Mr. Suri is also the Director of Azemuth, Inc., a firm
engaged in private and public company investments, and of Corinthian
Partners Capital, Inc. From 1994 to 1996, he was a Director of
Pacific Rim Entertainment, Inc. a publicly traded company in the film
animation industry. Mr. Suri did his undergraduate studies in
Commerce at Delhi University with continuing studies at Rutgers
University. Mr. Suri joined the Company on February 1, 1999 as
Chairman of the Board and Chief Executive Officer, bringing his
experience in managing many technology companies.
(5) Mr. Henry Tang received an A.B. degree in Economics and Political
Science from the University of California at Berkeley in 1972 and a
MBA in finance from the Stern School of Business at New York
University in 1982. From 1984 to 1991, he worked for Citibank in both
treasury management consulting and in Capital Markets, where he
originated auction preferred stock. He was the CFO of a startup
managed health care company, Preferred Health Care of California. He
joined the Company in August of 1998 and was appointed Corporate
Secretary on September 24, 1998. He is also the Vice President of
Finance and Operations.
VOTE REQUIRED
Election of Directors requires the affirmative vote of the holders of
a majority of the shares entitled to vote.
12
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
Attendance at Board Meetings. The present Board of Directors has met,
via teleconference, on various occasions since its appointment in June 1998.
The previous Board of Directors, which resigned as of June 30, 1998 in
conjunction with the Acquisition, met 3 times during the last fiscal year.
Attendance at such meetings of the Board was 100%. During the last fiscal
year, each director attended 100% of (a) all meetings of the Board; and (b)
all meetings of the committees of the Board on which such director served.
Standing Committees. The Company has certain standing committees,
each of which is described below.
The Audit Committee presently consists of Messrs. Tang and
Sargent and Dr. Sykes. Mr. Tang serves as the Chairman of the
committee. The committee is responsible for reviewing the results of
independent audits, the accounting policies of management, and
recommends to the Board the appointment of the Company's outside
auditors. The committee held one meeting during the last fiscal year.
The previous Audit Committee consisted of Messrs. Hagler, and Hickey.
The previous committee held one meeting during the last fiscal year.
The Compensation Committee consists of Messrs. Hwang and
Sargent and Dr. Sykes. The committee reviews and makes
recommendations to the Board of Directors regarding compensation for
the Company's officers and employees. In addition to compensation
matters, the committee determines, develops, and makes
recommendations to the Board regarding employee benefits packages,
and special stock option and stock bonus plans. This committee held
one meeting since its formation in June 1998. The previous
Compensation Committee consisted of Messrs. Hagler, Watson and
Hickey. The previous committee did not meet during the last fiscal
year.
EXECUTIVE OFFICERS
The executive officers of Unico, together with the years in which
such officers were named to their present offices, are as follows:
<TABLE>
<CAPTION>
Present Position
Name Position with Company Held Since
- ------------------- ----------------------------------- -----------------
<S> <C> <C>
Ike Suri Chairman of Board, Chief Executive Feb 1999
Officer & Director
John S. Hwang President & Director Jun 1998
Henry Tang Vice President Finance & Operations; Aug 1998
Corporate Secretary & Director
</TABLE>
13
<PAGE>
SUMMARY COMPENSATION TABLES
COMPENSATION OF OFFICERS
The following table contains information concerning the most highly
compensated current and former executive officers of the Company, for the
three fiscal years ended June 30, 1998, whose cash compensation, on an annual
basis, exceeded $100,000.
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus Other
---- -------- -------- ----------
<S> <C> <C> <C> <C>
Ike Suri, Chairman of the Board 1998 $ 0 $ 0 $ 0(1)
1997 0 0 0(1)
1996 0 0 0(1)
John Hwang, President 1998 $ 0 $ 0 $ 0(2)
1997 0 0 0(2)
1996 0 0 0(2)
William N. Hagler, President IRC 1998 $101,163 $ 0 $ 0
1997 99,827 0 0
1996 96,740 0 1,441(3)
</TABLE>
(1) Mr. Suri joined the Company as Chairman of the Board and Chief
Executive Officer on February 1, 1999 and therefore did not receive
any compensation from the Company during the periods required to be
reported under this caption. His compensation is yet to be
determined.
(2) Mr. Hwang joined the Company as President on July 1, 1998 and
therefore did not receive any compensation from the Company during
the periods required to be reported under this caption. Mr. Hwang's
base salary, exclusive of any bonus and other compensation yet to be
determined, has been established at $102,000 for the 1999 fiscal
year. On January 27th, 1999, he was granted options to buy 60,000
shares at $1 1/8.
(3) Includes discretionary employer 401(k) contributions totaling $2,222
for all officers including $1,441 for Mr. Hagler during 1996. There
were no 401(k) contributions during 1997 and 1998.
COMPENSATION OF DIRECTORS
Non-employee Directors of the Company were awarded options to
purchase 10,000 the Company's common stock.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has been involved in various related party transactions
with certain Directors, Officers of the Company, beneficial owners of 10% or
more of the outstanding stock of the Company, and/or entities controlled or
affiliated with such individuals. The following sets forth the relationship,
through the ownership of securities, between Unico or its subsidiaries and the
following individuals and entities involved in transactions exceeding $60,000
during the last two fiscal years:
(1) In July 1997, Paradise acquired the business and certain assets of
Paradise Multimedia from Relialogic Technologies Corporation ("RTC"),
a subsidiary of Osicom Technologies, Inc. ("Osicom"). John Hwang was
an officer of RTC prior to his appointment as President and director
of Unico in June 1998. For a period of approximately nine months
prior to the acquisition, Paradise sold approximately $393,000 of
products to RTC. (2) During the nine month period prior to July 1997,
Paradise purchased approximately $323,000 of products from Luna
International, Inc. ("Luna"), a company owned and controlled by John
Hwang.
(3) In conjunction with the acquisition of Paradise Multimedia in June
1997, Paradise assumed a $100,000 note payable by John Hwang to RTC.
In November 1997, Luna contributed $100,000 to the Paradise's
capital.
(4) In November 1997, Starlicon Group Inc. assumed $588,000 of debt owed
to RTC by Paradise as a contribution of capital to Paradise.
(5) In February 1998, William N. Hagler, President and a Director of IRC,
offered to convert $178,000 face value 10.5% convertible subordinated
debentures into common stock of Unico at a conversion price of $1.40
per share. In addition, Mr. Hagler requested that accrued interest on
the debentures be paid to him by the issuance of common stock priced
at $1.40 per share and that warrants to purchase 11,125 shares of
common stock, which were attached to the debentures, be amended to
reflect an exercise price of $1.40 per share and the expiration date
extended to December 31, 1999. Unico accepted Mr. Hagler's offer and
on February 28, 1998 issued 142,718 shares of common stock to Mr.
Hagler in exchange for cancellation of the $178,000 face value
debentures and accrued interest of $21,805.
(6) On November 1, 1996 IRC, a wholly owned subsidiary of Unico, issued
an 8% $325,000 revolving line of credit to Red Hills Manufacturing,
Inc. ("RHMCO"), a New Mexico Corporation, which is collectively
controlled by William N. Hagler and Rick L. Hurt who are both
previous officers and directors of Unico and are
15
<PAGE>
presently officers and directors of IRC. The line of credit was
issued to RHMCO for the purpose of purchasing certain equipment and
for start-up working capital requirements of RHMCO. During calendar
1997, the maximum balance under the credit line was $433,000 and the
balance due to IRC as of June 30, 1998 was $84,000. The note is
secured by cash, accounts receivable, inventories and equipment owned
by RHMCO. To date, neither Mr. Hagler nor Mr. Hurt has received any
payments in the form of compensation or dividends from RHMCO.
(7) In conjunction with the acquisition of Paradise by Unico in June
1998, Unico issued 547,169 shares of common stock to Azemuth Inc., a
company owned by Mr. Ike Suri who is major shareholder of Paradise,
in connection with consulting services performed in conjunction with
the acquisition.
(8) In conjunction with the acquisition of Paradise by Unico in June
1998, Unico issued 100,000 and 50,000 warrants to purchase Unico
common stock to Mr. William N. Hagler and Mr. Rick L. Hurt,
respectively. The exercise price of the warrants is $1.40 per share
and the warrants are exercisable at any time until December 1, 2006.
SECTION 16 COMPLIANCE
Based upon a review of the original and amended Forms 3 and 4
furnished to the Company during its last fiscal year and the original and
amended Forms 5 furnished to the Company with regard to its last fiscal year,
the Company does not know of any person who failed to file on a timely basis
any reports required by Section 16(a) of the Securities Exchange Act of 1934,
as amended.
APPROVAL AND SELECTION OF INDEPENDANT ACCOUNTANTS
The Board of Directors has appointed the firm of Weinbaum &
Yalamanchi, independent auditors, as the Company's auditors for the fiscal
year ending June 30, 1999, subject to approval of and ratification by the
shareholders. Weinbaum & Yalamanchi, located in Los Angeles, California, has
had an ongoing relationship with Paradise and is knowledgeable of the business
affairs of the Company.
The Company expects one or more representative of Weinbaum &
Yalamanchi to attend the annual meeting in order to respond to any appropriate
questions.
The Board of Directors recommends a vote "For" the approval and
ratification of the appointment of Weinbaum & Yalamanchi.
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VOTE REQUIRED
Approval of the appointment of Weinbaum & Yalamanchi as the Company
auditors requires the affirmative vote of the holders of a majority of the
shares entitled to vote.
CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On August 24, 1998, the Company's Board of Directors voted to engage
Weinbaum & Yalamanchi of Los Angeles, California, to act as the Company's
independent certified public accountants. In view of the stock transaction
dated June 30, 1998 which in effect represented a change in control of the
Company, its management determined it best to conform its accountants to its
own accountants with whom it has an ongoing relationship. As a result, the
Company dismissed and replaced Atkinson & Co. Ltd., the former independent
certified public accountant. The former accountant's reports for the Company's
last two fiscal years did not contain any adverse opinion, nor disclaimer of
opinion, nor were any such reports modified as to uncertainty, audit scope or
accounting principles. There were no disagreements between the Company and the
former accountants with regard to any matters which would have caused such
accountants to make reference to the subject matter thereof with their report.
The former accountants did not advise the Company regarding any of
the following: the inadequacy of internal controls, the unreliability of
management representations, and the need to expand the scope of audits, the
fairness or reliability of previous audits. The Company, nor anyone on its
behalf, consulted Weinbaum & Yalamanchi regarding its views on the application
of accounting principles to a specified transaction before it was retained.
The management of IRC has indicated that it intends to engage
Atkinson & Co., Ltd., to perform the audit of IRC's financial statements for
its current year ending February 28, 1999.
RATIFICATION AND APPROVAL OF STOCK OPTION AND INCENTIVE PLANS
The Board of Directors has approved the implementation of the Stock
Option Plan for Non-Employee Directors and the Incentive Equity Plan for the
benefit of executive officers and other employees and seeks the ratification
and approval of the plans by shareholders.
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APPROVAL OF THE INCENTIVE EQUITY PLAN
The Board of Directors adopted the Incentive Equity Plan of the
Company (the "Incentive Plan") on December 18, 1998, subject to approval by
the stockholders of the Company at the Annual Meeting.
PRIOR HISTORY OF EMPLOYEE STOCK OPTION PLANS
The Company has never provided a stock option plan for the benefit of
any of its employees. In 1989, the Company implemented the Unico, Inc.
Employee Stock Ownership Plan and Trust ("ESOP"), for the benefit of all of
its full time employees, including corporate officers and officers and
employees of wholly owned subsidiaries. Contributions of Company stock were
made to the ESOP from time to time at the discretion of the Company. Due to a
declining employee base and escalating costs associated with administration of
the ESOP, the Company elected to terminate the ESOP in February 1998. All of
the shares previously held by the ESOP have been distributed to the
beneficiaries.
PURPOSE OF THE INCENTIVE PLAN
The purpose of the Incentive Plan is to enable the Company to attract
officers and other employees and consultants and to provide them with
appropriate incentives and rewards for superior performance. The Incentive
Plan affords the Company the ability to respond to changes in the competitive
and legal environments by providing the Company with greater flexibility in
employee and executive compensation. This plan is designed to be an omnibus
plan allowing the Company to grant a wide range of compensatory awards
including stock options, stock appreciation rights, restricted stock, deferred
stock and performance shares or units. The Incentive Plan is intended to
encourage stock ownership by recipients by providing for or increasing their
proprietary interests in the Company, thereby encouraging them to remain in
the Company's employment. The Incentive Plan has been prepared to comply with
all applicable tax and securities laws, including Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and state
and federal tax laws.
DESCRIPTION OF THE INCENTIVE PLAN
General
The following general description of certain features of the
Incentive Plan is qualified in its entirety by reference to the Incentive
Plan. Subject to adjustment as provided in the Incentive Plan, the number of
shares of Common Stock that may be issued or transferred, plus the amount of
shares of Common Stock covered by outstanding awards granted under the
Incentive Plan, shall not in the aggregate exceed 500,000. The number of
Performance Units granted under the Incentive Plan shall not in the aggregate
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exceed 100,000. The number of shares of Common Stock granted under the
Incentive Plan to any individual in any calendar year shall not in the
aggregate exceed 100,000.
Eligibility
Officers, including officers who are members of the Board of
Directors, and other employees of and consultants to the Company may be
selected by the Committee (as defined below) to receive benefits under the
Incentive Plan. Currently there are 21 employees of which 3 are officers. The
Company is finalizing the acquisition of Multiwave Innovation Pte. Ltd. Upon
closing, an additional 59 employees will become eligible under the Incentive
Equity Plan.
Terms of Options and Other Possible Awards
The Incentive Plan authorizes the granting of options to purchase
shares of Common Stock ("Option Rights"), stock appreciation rights
("Appreciation Rights"), restricted shares ("Restricted Shares"), deferred
shares ("Deferred Shares"), performance shares ("Performance Shares") and
performance units ("Performance Units"). The terms applicable to these various
types of awards, including those terms that may be established by the
Committee when making or administering particular awards, are set forth in
detail in the Incentive Plan.
Option Rights. The Committee may grant Option Rights that entitle the
optionee to purchase shares of Common Stock at a price less than, equal to or
greater than market value on the date of grant. The option price is payable at
the time of exercise (i) in cash or cash equivalent, (ii) by the transfer to
the Company of shares of Common Stock that are already owned by the optionee
and have a value at the time of exercise equal to the option price, (iii) with
any other legal consideration the Committee may deem appropriate or (iv) by
any combination of the foregoing methods of payment. Any grant may provide for
deferred payment of the option price from the proceeds of sale through a
broker on the date of exercise of some or all of the shares of Common Stock to
which the exercise relates. The Committee has the authority to specify at any
time that Restricted Shares or other shares of Common Stock which are subject
to risk of forfeiture or restrictions on transfer will be accepted for part or
all of the option price. In such event, the Committee may provide that the
shares of Common Stock received upon exercise of the stock option will not be
subject to the same risks of forfeiture or restrictions on transfer which
applied to the shares used as payment for the option price. The Committee may
also provide that additional Option Rights will automatically be granted to an
optionee upon the exercise of Option Rights.
Option Rights granted under the Incentive Plan may be Option Rights
that are intended to qualify as incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986 ("Code") or Option
Rights that are not intended to so qualify. The Incentive Plan permits the
granting of incentive stock options or
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non-qualified stock options at the discretion of the Committee. The exercise
price for nonqualified stock options granted may not be less than 85% of the
fair market value per share of Common Stock on the date of grant. The exercise
price for ISOs may not be less than the fair market value per share of Common
Stock on the date of grant, and ISOs granted to persons owning more than 10%
of the Company's voting stock must have an exercise price of not less than
110% of the fair market value per share of Common Stock on the date of grant.
All options granted must be exercised within ten years of grant, except that
ISOs granted to 10% or more stockholders must be exercised within five years
of grant. The aggregate market value (as determined as of the date of grant)
of the Common Stock for which any optionee may be awarded ISOs which are first
exercisable by such optionee during any calendar year may not exceed $100,000.
At or after the date of grant of any non-qualified Option Rights, the
Committee may provide for the payment of dividend equivalents to the optionee
on a current, deferred or contingent basis or may provide that dividend
equivalents be credited against the option price.
Each grant must specify the conditions, including as and to the
extent determined by the Committee, the period or periods of continuous
employment or continuous engagement of consulting services of the optionee by
the Company or any subsidiary, or the achievement of Management Objectives (as
defined in the Incentive Plan), that are necessary before the Option Rights
will become exercisable, and may provide for the earlier exercise of the
Option Rights, including, without limitation, in the event of a change in
control of the Company or other similar transaction or event. Successive
grants may be made to the same optionee regardless of whether Option Rights
previously granted to him or her remain unexercised.
Appreciation Rights. Appreciation Rights granted under the Incentive
Plan may be either free-standing or granted in tandem with Option Rights. An
Appreciation Right represents the right to receive from the Company the
difference ("Spread"), or a percentage thereof not in excess of 100 percent,
between the base price per share of Common Stock in the case of a
free-standing Appreciation Right, or the option price of the related Option
Right in the case of a tandem Appreciation Right, and the market value of the
Common Stock on the date of exercise of the Appreciation Right. Tandem
Appreciation Rights may only be exercised at a time when the related Option
Right is exercisable and the Spread is positive, and the exercise of a tandem
Appreciation Right requires the surrender of the related Option Right for
cancellation.
A free-standing Appreciation Right must have a base price that is at
least equal to the fair market value of a share of Common Stock on the date of
grant, must specify the conditions, including as and to the extent determined
by the Committee, the period of continuous employment or continuous engagement
of consulting services, or the achievement of Management Objectives, that are
necessary before the Appreciation Right becomes exercisable (except that it
may provide for its earlier exercise, including, without limitation, in the
event of a change in control of the Company or other similar transaction or
event) and may not be exercised more than 10 years from the date of grant. Any
grant
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of Appreciation Rights may specify that the amount payable by the Company upon
exercise may be paid in cash, shares of Common Stock or a combination thereof,
and the Committee may either reserve or grant to the recipient the right to
elect among those alternatives. The Committee may provide with respect to any
grant of Appreciation Rights for the payment of dividend equivalents thereon
in cash or Common Stock on a current, deferred or contingent basis.
Restricted Shares. An award of Restricted Shares involves the
immediate transfer by the Company to a participant of ownership of a specific
number of shares of Common Stock in consideration of the performance of
services or, as and to the extent determined by the Committee, the achievement
of Management Objectives. The participant is entitled immediately to voting,
dividend and other ownership rights in the shares. The transfer may be made
without additional consideration from the participant or in consideration of a
payment by the participant that is less than the market value of the shares on
the date of grant, as the Committee may determine.
Restricted Shares must be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Committee. An example would be a provision that the
Restricted Shares would be forfeited if the participant ceased to serve the
Company as an officer or other employee during a specified period of years. In
order to enforce these forfeiture provisions, the transferability of
Restricted Shares will be prohibited or restricted in a manner and to the
extent prescribed by the Committee for the period during which the forfeiture
provisions are to continue. The Committee may provide for a shorter period
during which the forfeiture provisions are to apply, including, without
limitation, in the event of a change in control of the Company or other
similar transaction or event.
Deferred Shares. An award of Deferred Shares constitutes an agreement
by the Company to deliver shares of Common Stock to the participant in the
future in consideration of the performance of services, subject to the
fulfillment of such conditions during the Deferral Period (as defined in the
Incentive Plan) as the Committee may specify. During the Deferral Period, the
participant has no right to transfer any rights under the award and no right
to vote the shares covered by the award. On or after the date of any grant of
Deferred Shares, the Committee may authorize the payment of dividend
equivalents thereon on a current, deferred or contingent basis in either cash
or additional shares of Common Stock. Grants of Deferred Shares may be made
without additional consideration from the participant or for consideration in
an amount that is less than the market value of the shares on the date of
grant. Deferred Shares must be subject to a Deferral Period, as determined by
the Committee on the date of grant, except that the Committee may provide for
a shorter Deferral Period, including, without limitation, in the event of a
change in control of the Company or other similar transaction or event.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one share of Common Stock, and a Performance Unit is the
equivalent of
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$1.00. A participant may be granted any number of Performance Shares or
Performance Units. The participant will be given one or more Management
Objectives to meet within a specified period ("Performance Period") which may
be subject to earlier termination, including, without limitation, in the event
of a change in control of the Company or other similar transaction or event. A
minimum level of acceptable achievement will also be established by the
Committee. If by the end of the Performance Period the participant has
achieved the specified Management Objectives, he or she will be deemed to have
fully earned the Performance Shares or Performance Units. If the participant
has not achieved the Management Objectives but has attained or exceeded the
predetermined minimum level of acceptable achievement, he or she will be
deemed to have partly earned the Performance Shares or Performance Units in
accordance with a predetermined formula. To the extent earned, the Performance
Shares or Performance Units will be paid to the participant at the time and in
the manner determined by the committee in cash, shares of Common Stock or any
combination thereof, and the Committee may either grant to the recipient or
retain the right to elect among these alternatives. At or after the date of
grant of any Performance Shares, the Committee may provide for the payment of
dividend equivalents to the optionee on a current, deferred or contingent
basis.
Management Objectives
Management Objectives mean the achievement of performance objectives
established pursuant to the Incentive Plan. The Committee may adjust
Management Objectives and related minimum acceptable levels of achievement if
events or transactions have occurred after the date an award was granted that
are unrelated to the performance of the participant and result in distortion
of the Management Objectives or the related minimum levels. Management
Objectives may be described in terms of either Company-wide objectives or
objectives that are related to the performance of the individual participant
or the division, subsidiary, department or function within the Company or a
subsidiary in which the participant is employed or with respect to which the
participant provides consulting services.
Transferability
No Option Right, or other "derivative security" within the meaning of
Rule 16b-3 under the Exchange Act, is transferable by a participant except by
will or the laws of descent and distribution. Option Rights and Appreciation
Rights may not be exercised during a participant's lifetime except by the
participant or, in the event of his or her incapacity, by his or her guardian
or legal representative acting in a fiduciary capacity on behalf of the
participant under state law and court supervision.
Adjustments
The maximum number of shares of Common Stock that may be issued or
transferred under the Incentive Plan, the number of shares covered by
outstanding awards
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and the option prices or base prices per share applicable thereto, are subject
to adjustment in the event of stock dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs,
reorganizations, liquidations, issuances of rights or warrants, and similar
transactions or events. In the event of any such transaction or event, the
Committee may in its discretion provide in substitution for any or all
outstanding awards under the Incentive Plan such alternative consideration as
it may in good faith determine to be equitable in the circumstances and may
require the surrender of all awards so replaced.
Administration and Amendments
The Incentive Plan is to be administered by a committee ("Committee")
of the Board of Directors which shall consist of not less than two directors,
each of whom is a "non-employee director" within the meaning of Rule 16b-3
under the Exchange Act. In connection with its administration of the Incentive
Plan, the Committee is authorized to interpret the Incentive Plan and related
agreements and other documents. The Committee may make grants to participants
under any or a combination of all of the various categories of awards that are
authorized under the Incentive Plan. The Committee may with the concurrence of
the affected participant cancel any agreement evidencing an award granted
under the Incentive Plan. In the event of any such cancellation, the Committee
may authorize the granting of a new award under the Incentive Plan in such
manner, at such price and subject to such other terms, conditions and
discretion as would have been applicable under the Incentive Plan had the
canceled award not been granted. The Committee may also grant any award or
combination of awards authorized under the Incentive Plan, including without
limitation an award that as granted prior to the adoption of the Incentive
Plan, and any such award or combination of awards so granted under the
Incentive Plan may or may not cover he same number of shares of Common Stock
as had been covered by the canceled award and will be subject to such other
terms, conditions and discretion as would have been permitted under the
Incentive Plan had the canceled award not been granted.
The Incentive Plan may be amended from time to time by the Committee,
but without further approval by the Stockholders of the Company no such
amendment (unless expressly allowed pursuant to the adjustment provisions
described above) may (i) increase the aggregate number of shares that may be
issued or transferred plus the amount of shares covered by outstanding awards,
or increase the aggregate number of Performance Units that may be granted
thereunder or (ii) otherwise cause Rule 16b-3 under the Exchange Act to cease
to be applicable to the Incentive Plan.
Federal Income Tax Consequences to Participants in Plan
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Incentive Plan. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences.
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Non-qualified Option Rights. In general: (i) no income will be
recognized by an optionee at the time a non-qualified Option Right is granted;
(ii) at the time of exercise of a non-qualified Option Right, ordinary income
will be recognized by the optionee in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares if they are nonrestricted on the date of exercise; and (iii) at the
time of sale of shares acquired pursuant to the exercise of a non-qualified
Option Right, any appreciation (or depreciation) in the value of the shares
after the date of exercise will be treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive stock option. If shares of
Common Stock are issued to an optionee pursuant to the exercise of an
incentive stock option and no disqualifying disposition of the shares is made
by the optionee within two years after the date of grant or within one year
after the transfer of the shares to the optionee, then upon the sale of the
shares any amount realized in excess of the option price will be taxed to the
optionee as long-term capital gain and any loss sustained will be a long-term
capital loss.
If shares of Common Stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to any excess of the fair market value
of the shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid
for the shares. Any further gain (or loss) realized by the optionee generally
will be taxed as short-term or long-term capital gain (or loss) depending on
the holding period.
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of an Appreciation Right. When the Appreciation
Right is exercised, the participant normally will be required to include as
taxable ordinary income in the year of exercise an amount of cash, and the
fair market value of any nonrestricted shares of Common Stock, received
pursuant to the exercise. In limited circumstances, however, the Internal
Revenue Service ("IRS") may contend that the holder of a free-standing
appreciation right is in constructive receipt of ordinary income before the
Appreciation Right is actually exercised if (i) a maximum limitation on the
amount payable upon exercise of the Appreciation Right at a time when the
Appreciation Right is imposed and (ii) the maximum limitation is reached prior
to the exercise of the Appreciation Right at a time when the Appreciation
Right is exercisable.
Restricted Shares. A recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares reduced by any amount paid by the recipient at such time as
the shares are no longer subject to a risk of
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forfeiture or restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code ("the Code"). However, a recipient who so elects under
Section 83(b) of the Code within 30 days of the date of transfer of the shares
will have taxable ordinary income on the date of transfer of the shares equal
to the excess of the fair market value of the share (determined without regard
to the risk of forfeiture or restrictions on transfer) over any purchase price
paid for the shares. If a Section 83(b) election has not been made, any
non-restricted dividends received with respect to Restricted Shares that are
subject at that time to a risk of forfeiture or restrictions on transfer
generally will be treated as compensation that is taxable as ordinary income
to the recipient.
Deferred Shares. No income generally will be recognized upon the
grant of Deferred Shares. The recipient of a grant of Deferred Shares
generally will be subject to tax at ordinary income rates on the fair market
value of nonrestricted shares of Common Stock on the date that the Deferred
Shares are transferred to the recipient, reduced by any amount paid by the
recipient, and the capital gain or loss holding periods for the Deferred
Shares will also commence on that date.
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performances Units. Upon
payment in respect of the earn-out of Performance Shares or Performance Units,
the recipient generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any nonrestricted shares of Common Stock received.
Special Rules Applicable to Officers and Directors
In limited circumstances where the sale of stock that is received as
the result of a grant of an award could subject an officer or director to suit
under Section 16(b) of the Exchange Act, the tax consequences to the officer
or director may differ from the tax consequences described above. In these
circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the stock
received so long as the sale of stock received could subject the officer or
director to suit under Section 16(b) of the Exchange Act, but no longer than
six months.
Tax Consequences to the Company
To the extent that a participant recognizes ordinary income in the
circumstance described above, the Company will be entitled to a corresponding
deduction provided that, among other things, (i) the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not subject
to the annual compensation limitation set forth in Section 162(m) of the Code
and is not an "excess parachute payment" within the meaning of Section 280G of
the Code and (ii) any applicable withholding obligations are satisfied.
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VOTE REQUIRED
Approval and ratification of the Incentive Equity Plan requires the
affirmative vote of the holders of a majority of the shares entitled to vote.
If this plan is adopted, employee Directors Ike Suri, John Hwang, and Henry
Tang may receive additional shares of common stock. The Company's Board of
Directors recommends a vote FOR approval and ratification of the Incentive
Equity Plan.
APPROVAL OF THE STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
The Board of Directors adopted the Stock Option Plan for Non-Employee
Directors of the Company (the "Directors Plan") on December 18, 1998, subject
to approval by the stockholders of the Company at the Annual Meeting.
PRIOR HISTORY OF DIRECTORS STOCK OPTION PLANS
The Company, in the past, has never provided a Stock Option Plan or
Plan of Compensation for non-employee directors.
DESCRIPTION OF THE DIRECTORS PLAN
General
The following general description of certain features of the
Directors Plan is qualified in its entirety by reference to the Directors
Plan. The Directors Plan is intended to encourage outside Directors of the
Company to own shares of the Company's stock and thereby to align their
interests more closely with the interests of the other stockholders of the
Company, to encourage the highest level of outside Director performance by
providing such Directors with a direct interest in the Company's attainment of
its financial goals, and to provide financial incentives that will help
attract and retain the most qualified outside Directors.
Administration and Eligibility
The Directors Plan will be administered by a committee ("Committee")
of the Board of Directors, consisting of not less than two members of the
Board. Only members of the Board of Directors who are not employees of the
Company (each a "Director") will be eligible to participate in the Directors
Plan. For purposes of the Directors Plan, an "employee" is a person whose
compensation from the Company is subject to withholding under the Internal
Revenue Code ("the Code"). Currently, of the five Directors and
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nominees for Director, Messrs. Sykes and Sargent would qualify for the
issuance of options under the Directors Plan.
Maximum Shares
Subject to adjustment as described below, the number of shares issued
or transferred, plus the number of shares covered by outstanding options under
the Directors Plan shall not exceed 250,000 shares of Common Stock. Shares of
Common Stock covered by an option, which is canceled or terminated, will again
be available to be issued or to be the subject of a stock option granted under
the Directors Plan.
Initial Options
Each nonemployee Director of the Company, who is a Director on the
effective date of the Directors Plan is granted an immediate option to
purchase 10,000 shares of Common Stock, and will also receive automatic grants
of additional options to purchase 10,000 shares of Common Stock on the first
day after each succeeding annual meeting thereafter for so long as he or she
continues to serve as a Director. Individuals becoming Directors after the
effective date of the Directors Plan receive an immediate option to purchase
10,000 shares of Common Stock, and will also receive automatic grants of
additional options to purchase 10,000 shares of Common Stock on the first day
following the next annual stockholder's meeting thereafter, for so long as he
or she continues to serve as a Director, provided that he or she has served as
a Director for at least six months prior thereto.
The exercise price of the options granted is equal to the fair market
value per share of Common Stock on the date of grant. Options granted under
the Directors Plan shall become exercisable to the extent of 20% of the Common
Shares subject thereto on the Date of Grant and to the extent of an additional
20% of the Common Shares subject thereto after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as
a member of the Board. To the extent exercisable, each Nonqualified Option
shall be exercisable in whole or in part from time to time.
In the event a grantee ceases to be a Director of the Company, vested
options granted to nonemployee Directors must be exercised within three months
after the Director's termination (in the event that termination was due to
other than death or disability), or one year after termination (in the event
that termination was due to death or disability), or by the tenth anniversary
of the date of grant, whichever occurs first. All awards under the Directors
Plan may be only non-qualified stock options.
Purchase Price
The purchase price of stock options granted under the Directors Plan
may be paid in cash, shares of Common Stock held by the optionee for at least
six months, or a
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combination thereof. Shares of Common Stock issued pursuant to the Directors
Plan may be authorized but unissued shares or treasury shares. Fractional
shares will not be issued in connection with the exercise of a stock option,
and cash in lieu thereof will be paid by the Company.
Change in Control
Upon a Change in Control, all Option Rights that would become
exercisable through the Company's next annual stockholders' meeting following
a Change in Control will become immediately exercisable in full. If any event
or series of events constituting a Change in Control is abandoned, the effect
thereof will be null and the exercisability of Option Rights will be governed
by the provisions of the Directors Plan described above. The Directors Plan
defines a Change in Control as the occurrence of any of the following events:
(i) execution by the Company of an agreement for the merger, consolidation or
reorganization into or with another corporation or other legal person, unless
as a result of such transaction not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by holders of
securities entitled to vote generally in the election of Directors of the
Company ("Voting Securities") immediately prior to such transaction; (ii)
execution by the Company of an agreement for the sale or other transfer of all
or substantially all of its assets to another corporation or legal person,
unless as a result of such transaction not less than a majority of the
combined voting power of the then-outstanding securities of such corporation
or legal person immediately after such transaction is held in the aggregate by
the holders of Voting Securities of the Company immediately prior to such
transaction; (iii) a report is filed on Schedule 13D or Schedule 14D-1
disclosing that any person (other than a person who holds more than 10% of the
Common Stock on the date of consummation of the Offering) has or intends to
become the beneficial owner of a majority or more of the combined voting power
of the then-outstanding Voting Securities; (iv) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute at least a majority thereof (each Director first elected or first
nominated for election by a vote of at least two-thirds of the Directors then
in office who were Directors of the Company at the beginning of any such
period being deemed to have been a Director of the Company at the beginning of
such period); or (v) the Company adopts a plan for the liquidation or
dissolution of the Company other than pursuant to a merger, consolidation or
reorganization which would not constitute a Change in Control, as described in
clause (i) above.
Adjustment
The Committee will make or provide for adjustments to the maximum
number of shares issuable pursuant to the Directors Plan, the number and kind
of shares of Common Stock or other securities that are covered by outstanding
options, and the option price applicable to outstanding options as the
Committee will in good faith determine to be equitably required to prevent
dilution or expansion of the rights of optionees which would
28
<PAGE>
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, any
merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of
assets, issuance of warrants or other rights to purchase securities or any
other corporate transaction or event having an effect similar to any of the
foregoing.
Amendment or Termination
The Board may at any time amend or terminate the Directors Plan.
Notwithstanding the foregoing, (i) except for the adjustments described above,
without the approval of the stockholders of the Company, no such amendment
will increase the maximum number of shares covered by the Directors Plan,
materially modify the requirements as to eligibility for participation in the
Directors Plan, or otherwise cause the Director Plan or any grant, award or
election made pursuant thereto to cease to satisfy any applicable condition of
Rule 16b-3 promulgated under the Exchange Act, (ii) no such amendment will
cause any Director to fail to qualify as a "non-employee director" within the
meaning of Rule 16b-3, (iii) provisions relating to the amount and price of
securities to be awarded ant the timing of awards under the Director Plan will
not be amended more than once every six months, other than to comport with
changes in the Code, the Employment Retirement Income Security Act, or the
rules promulgated thereunder and (iv) no amendment or termination will
adversely affect any outstanding award without the consent of the Director
holding such award.
Other Provisions
No Option Rights may be granted under the Directors Plan more than
ten years after the date of approval of the Directors Plan by the Company's
stockholders.
Federal Income Tax Consequences
A Director who receives Initial Options should be taxed under the
rules described below. In general (i) no income will be recognized by an
optionee at the time an Option Right is granted and (ii) at the time of
exercise of an Option Right, ordinary income will be recognized by the
optionee in an amount equal to the difference between the option price paid
for the shares and the fair market value of the shares on the date of
exercise. The IRS has indicated that it may take the position that, where an
option's exercise price is set at an amount less than fair market value on the
date of grant, the optionee should recognize income at an earlier date than
indicated above.
Tax Consequences to the Company
To the extent that an optionee recognizes ordinary income in the
circumstance described above, the Company will be entitled to a corresponding
deduction provided
29
<PAGE>
that, among other things, the income meets the test of reasonableness, is an
ordinary and necessary business expense and is not an "excess parachute
payment" within the meaning of Section 280G of the Code.
VOTE REQUIRED
The Board of Directors recommends a vote FOR approval and
ratification of the Stock Option Plan for Non-Employee Directors, which
requires the affirmative vote of the holders of a majority of the shares
entitled to vote. If the Plan is adopted, non-employee directors will be
awarded options to purchase common stock of the Company.
APPROVAL OF A CHANGE IN COMPANY NAME
The Board of Directors of the Company believes that the current name
of the Company does not clearly reflect the association of its present
business operations with the computer technology industry. Accordingly, the
Board of Directors proposes a change in the name of the Company to PARADISE
INNOVATIONS TECHNOLOGY CORPORATION to provide enhanced name recognition and
association with the industry.
VOTE REQUIRED
The Board of Directors recommends a vote FOR approval of a change in
the name of the Company, which requires the affirmative vote of the holders of
a majority of the issued and outstanding voting shares of the Company entitled
to vote.
AUTHORIZATION OF REVERSE SPLIT OF COMMON STOCK
Under the present rules promulgated by The Stock Market, Companies
listed are required to maintain certain minimum stock prices. In the event
that the Company's stock price falls below the minimum required for an
extended period of time, it may become necessary for the Company to reverse
split its common stock in order to comply with requirements. Accordingly, the
Board of Directors of the Company seeks the authorization of the shareholders
to implement such reverse split at such time and in such manner as may be
appropriate as determined by the Board of Directors. In the event that a
reverse split is implemented in the future, pro-rata adjustments will be made
to conversion ratios of preferred stock, warrants and options outstanding at
that time.
The Company has no obligation to consummate a reverse split of its
common stock.
30
<PAGE>
VOTE REQUIRED
The Board of Directors recommends a vote FOR approval of a change in
the authorized capital of the Company, which requires the affirmative vote of
the holders of a majority of the issued and outstanding voting shares of the
Company entitled to vote.
AUTHORIZATION TO ADOPT, AMEND AND RESTATE ARTICLES OF INCORPORATION
The Articles of Incorporation for the Company were originally filed
on April 26, 1979. The Articles were subject to amendment on December 3, 1981;
August 1, 1983; April 3, 1985; August 12, 1994; and July 6, 1998.
Contemporaneously with the proposed name change of the Company, the Board of
Directors determined that adoption, amendment and restatement of the Articles
of Incorporation into one document is appropriate to simplify reference to the
Articles of Incorporation. The proposed amendment and restatement is attached
to this Proxy Statement as an Exhibit. No material changes to the rights of
shareholders are intended by the amendment and restatement.
VOTE REQUIRED
The Board of Directors recommends a vote "For" the approval and
ratification of the adoption, amendment and restatement of the Articles of
Incorporation. Approval of these changes requires the affirmative vote of the
holders of a majority of the voting shares entitled to vote.
31
<PAGE>
AUTHORIZATION TO ACQUIRE THE SHARES OF
MULTIWAVE INNOVATION PTE. LTD.
Multiwave Innovation Pte. Ltd. is headquartered at 25 Serangoon North Ave 5,
6th Floor, Uraco Building, Singapore, 554914. Telephone: 65/481-2633
Multiwave is a design and engineering firm based in Singapore with
sales offices in Europe and China. It sells internet based communication
products, such as internet set-top boxes; computer components, such as audio
and video cards, and modems; and retail electronics.
THE ACQUISITION
On October 27th, 1998, the Company signed a definitive agreement to
purchase all outstanding common shares of Multiwave for 2,388,792 shares of
the Company's "restricted" common stock as that term is defined in Rule 144
and Regulation S promulgated under the Securities Act of 1933. The number of
shares were calculated by dividing US$ 5 million by the weighted average of
the bid and offer prices of the Company's common shares as listed on NASDAQ
from the date of the signing of the Letter of Intent (July 7, 1998) until the
date immediately preceding the signing of the definitive agreement (October
26th, 1998).
Multiwave's U.S. operations were absorbed by the Company on October
31, 1998. For accounting purposes, the transaction was considered effective as
of that date.
The closing of the transaction is contingent on the approval by the
Company's shareholders at the Annual Meeting. The holders of 56% of the shares
have granted proxies to representatives of the Company's management to vote on
their behalf. The Company's management is in favor of the acquisition. The
proxies are revocable and the granters of the proxies may revoke these proxies
any time during or before the actual voting takes place.
Both the Company and Multiwave believe that the acquisition advances
their strategic intents. Both are players in the same high tech industry with
complementary strengths. The Company can benefit from Multiwave's design and
engineering capabilities in order to more rapidly bring proprietary, branded
products to market. In the highly competitive market of high tech products,
speed to market provides significant advantages in market share and profit
margins.
Multiwave can benefit from the Company's globally recognized Paradise
brand with its lifetime limited guarantee. In the highly price competitive
Asian high tech market, a recognized brand can provide protection against
margin erosion by commanding a premium price.
32
<PAGE>
In terms of distribution channels, the Company has global
distribution agreements with premier companies such as Ingram Micro, Tech
Data, Almo Distributing, Comark, SED and D&H Distributing. Multiwave could
benefit from these distribution agreements as well as enter into new
agreements of its own with the strength of the Paradise brand.
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Disclaimer
The discussion and analysis below contains trend analysis and other
forward looking statements within the meaning of Section 27A of the Securities
Exchange Act of 1934 and Section 21E of the Securities Exchange Act of 1934.
Actual results could differ materially from those projected in the forward
looking statements as a result of the risk factors set forth under " Certain
Factors Than May Affect Future Performance" and elsewhere in this report.
Discussion
Multiwave's net sales for the four months ended Oct 31st 1998 were
$9.1mil yielding a gross margin of $997,000 or 10.9%. This represents a
significant growth over the previous 12 months ended June 30 1998 of $8.5mil
with a gross margin of 8.5%. This significant growth is due to several
factors. First, Multiwave is gradually and consciously focusing its activities
on the higher margin and greater volume generating products. Multiwave has
since moved away from the lower margin audio business into and focused its
resources into the higher value & volume communications sector, i.e. modems.
Multiwave has over the years built strategic relationships with key
technology partners like Lucent, PCTel and Rockwell. These partnerships have
allowed Multiwave to be invited to design products based on new platforms that
these technology companies are promoting. Multiwave was among the first to
design, manufacture and distribute modems based on the latest Lucent platform
and was able to capture a substantial market share and enjoy the margins
associated with a quick time to market approach.
Currently, efforts are underway to promote the Paradise brand in Asia
and in Europe through which Multiwave expects to reap higher margins. Also
Multiwave has developed several unique product lines among which are the
Internet set-top- box, a modem cum answering machine cum fax machine and a
unique personal digital assistant. Theses products were exhibited at Comdex 98
and were well received by the industry. This augurs well for Multiwave in the
current fiscal year.
The Company is also discussing with the local government bodies to
obtain grants for certain of its R&D projects.
33
<PAGE>
Operating Results
The table below compares the Company's operating results for the 12
months ended 30 June 1998 against the 4 months ended October 31st 1998.
- ------------------------------------------------------------------------------
Four Months Year Nine Months
Ended Ended Ended
Oct 31, 98 Jun 30, 98 Jun 30, 97
$000 $000 $000
- ------------------------------------------------------------------------------
Net sales $9,153 100.0% $8,571 100.0% $7,497 100.0%
Cost of sales (8,156) -89.1 (7,842) -91.5 (7,066) 94.3
- ------------------------------------------------------------------------------
Gross profit 997 10.9 729 5.7 431 5.7
- ------------------------------------------------------------------------------
R&D expenses (117) -1.3 (312) -3.6 (273) -3.6
Selling, general (1,058) -11.6 (2,094) -24.4 (2,924) -39.0
& admin expenses
- ------------------------------------------------------------------------------
Total operating (1,175) -12.8 (2,406) -28.1 (3,197) -42.6
Expenses
- ------------------------------------------------------------------------------
Operating loss (178) -1.9 (1,677) -19.6 (2,766) -36.9
- ------------------------------------------------------------------------------
Other income/exp 492 5.9 (352) -4.1 (140) -1.9
- ------------------------------------------------------------------------------
Net income (loss) 314 3.4 (2,029) -23.7 (2,906) -38.8
==============================================================================
On an annualized basis sales has increased almost $19mil or by 220%.
The bulk of this amount is due to the successful launch of Multiwave's Lucent
based communication products. Gross margins as a percentage of sales increased
by 2.4%. This was mainly due to the quick time to market of the Company's
products in this period. This period also reflects the higher margins that are
earned from the early stages of a products life cycle.
Research and development expenses increased by $39,000 or by 13% on
an annualized basis. Multiwave makes conscious efforts to constantly monitor
and assess its R&D spending. Through such measures, Multiwave has managed to
maintain its R&D cost while growing its revenue base.
Selling, general & admin. expenses have increased by 52% on an
annualized basis to reflect the additional cost involved in supporting the
growth in sales. Additional headcount was added to the Product and Marketing
functions to support the Paradise brand.
The major element in the other income/expense category is the
exchange gain or loss. During the current period Multiwave encountered
turbulent exchange rate
34
<PAGE>
fluctuations in some of the Asian economies. The figures being reported in
US$ has led to this exchange gain. This turbulence has since subsided
somewhat.
There were no other individually significant items, which increased
from 1997 to 1998.
Working Capital, Liquidity and Capital Resources
Multiwave maintains strong working relationships with its current
suppliers who provide the bulk of Multiwave's working capital. Multiwave has
commitments from them for continued support in its growth.
Multiwave has approached several banks to obtain additional credit
facilities either asset based or contract based. With the significant growth
in business volume and with the higher value added products being developed,
Multiwave anticipates it will require financing above normal operating
requirements. Multiwave is taking steps to ensure that this financing will be
available for the growth envisioned.
Multiwave has also approached several government agencies to obtain
funding in the form of R&D grants to fund its working capital requirement.
These discussions are progressing well and the Company anticipates that it
will secure several grants for its projects.
Multiwave believes that its cash balances and available credit
facilities are sufficient to meet anticipated operating requirements for the
foreseeable future. There can be no assurance that additional capital beyond
the amounts currently forecasted by Multiwave would not be required or that
any such required additional capital will be available on reasonable terms, if
at all.
Certain Factors That May Affect Future Performance
Multiwave's future performance may be affected by a number of factors
described below which should be considered in evaluating Multiwave and its
business.
Multiwave 's future operating results may vary significantly from
period to period as a result of these factors. Multiwave 's revenues depend on
products sold, customer satisfaction and support, timing of sales, timing of
new product introductions by Multiwave and by its competitors, product cycle
maturation, price competition and decline, availability of components, design
of new products, changes in product or distribution channel mix, the level of
inventory carried by Multiwave and its distributors and retail customers,
product returns, co-op advertising programs and price protection agreements
with its customers.
Gross margins depend on the same factors as revenues, as well as some
other factors: the availability and cost of components, component price
change, end-of-life
35
<PAGE>
inventory write-downs and distribution channel mix. Technology content is also
a major factor influencing gross margins. Margins typically are higher for
products with high technology content than products with lower technology.
Thus, design and new product introduction are critical factors impacting
Multiwave's gross margins.
Perhaps most importantly, Multiwave 's revenues and gross margins are
highly impacted by product life cycles, where margins are higher for newer
products and decline with increased competition, diminishing market excitement
and changes in technology.
Frequent new product introductions and rapid product obsolescence
characterize Multiwave's hi-tech market. Multiwave depends on new product
introduction in short time frames. Despite its strategy to enable a short time
frame to market, there is no assurance that Multiwave will be successful in
its execution or that successful execution will assure high margins.
Accounting Treatment and Impact on Shareholders
The transaction will be accounted for as a purchase. Because of prior
acquisitions, the Company is precluded from using pooling of interest
accounting until July 1999 at the earliest. Since the purchase price exceeds
the adjusted book value of Multiwave, the Company will record goodwill.
The Company, based on financial and legal advice, believes that the
transaction will not result in Federal tax liabilities to the Company, to
Multiwave, or to either company's stockholders.
As a result of the acquisition, all the Company's shareholders will
suffer dilution of their shares equally. Immediately prior to the acquisition,
there were 7,233,127 shares of common stock issued and outstanding (including
3,699 shares held in treasury), and 5,474 shares of Series A preferred stock,
each of which can be converted to 1,000 shares of common stock. After the
acquisition, assuming, for the purposes of this calculation, that all the
Series A preferred stock is converted to common shares, a total of 15,092,220
shares will be outstanding. The dilution will be 1 : 1.1877 or 16%.
The Company does not believe that there are any material changes to
the rights of its security holders as a result of the acquisition. Neither the
Company nor Multiwave is in default nor in arrears as to dividend payments,
principal or interest. The Company does not believe the acquisition will have
any impact on commitments of its securities.
Multiwave Selected Financial DataFinancial DataData
The following table sets forth certain financial data relating to
Multiwave prepared in accordance with U.S. GAAP and stated in U.S. dollars.
The financial data should be read in conjunction with (i) the Multiwave
financial statements, attached, (ii) the unaudited Pro Forma Condensed
Consolidated Financial Statements which are included elsewhere in this Proxy
Statement.
36
<PAGE>
(In U.S. Dollars)
(Tabular dollar amounts are in thousands, except per share amounts)
(Prepared in accordance with U.S. GAAP)
Summary Statements of Operations and Comprehensive Operations
<TABLE>
<CAPTION>
Four Months Year Nine Months
Ended Ended Ended
October 98 June 98 June 97
---------- ------- -------
<S> <C> <C> <C>
Revenues 9,153 8,571 7,497
Net income (loss) 314 (2,029) (2,997)
Foreign currency adjustments (39) (26) 91
Comprehensive income 275 (2,055) (2,906)
Net income (loss) per share $0.1314 ($0.8494) ($1.2546)
------- -------- --------
</TABLE>
Summary Balance Sheets
<TABLE>
<CAPTION>
October 31 June 30 June 30
1998 1998 1997
------- ------- --------
<S> <C> <C> <C>
ASSETS
Current Assets 10,231 4,494 3,271
Property, plant and equip., net 222 211 210
TOTAL ASSETS 10,453 4,705 3,481
------- ------- -------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities 11,351 5,876 2,615
Long Term Liabilities 16 18
TOTAL LIABILITIES 11,367 5,894 2,615
SHAREHOLDERS' EQUITY (DEFICIENCY) (914) (1,189) 866
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) 10,453 4,705 3,481
------- ------- -------
</TABLE>
37
<PAGE>
UNICO SELECTED FINANCIAL DATA
The following table sets forth certain financial data relating to
Unico. The financial data should be read in conjunction with (i) the Unico
financial statements, (ii) the unaudited pro forma condensed consolidated
financial statements which are included elsewhere in this Proxy Statement. The
data for the four months ended October 31, 1998 is derived from unaudited
data.
(In U.S. Dollars)
(Tabular dollar amounts are in thousands, except per share amounts)
(Prepared in accordance with U.S. GAAP)
Summary Statements of Operations
<TABLE>
<CAPTION>
Four Months Year Nine Months
Ended Ended Ended
October 98 June 98 June 97
----------- ------- -----------
<S> <C> <C> <C>
Revenues 5,468 24,638 15,058
Net income (loss) (225) (536) 4
Net income (loss) per share ($0.0178) ($0.0489) $0.0004
-------- -------- ---------
</TABLE>
Summary Balance Sheets
<TABLE>
<CAPTION>
October 31 June 30 June 30
1998 1998 1997
---------- ------- -------
<S> <C> <C> <C>
ASSETS
Current assets 1,323 1,502 743
Property, plant and equip., net 68 52 18
Other assets 325 253 -
Old Unico Investment 3,163 3,163 -
TOTAL ASSETS 4,879 4,970 761
----- ----- ---
LIABILITIES & SHAREHOLDERS' EQUITY
TOTAL LIABILITIES 1,162 1,011 157
SHAREHOLDERS' EQUITY 3,717 3,959 604
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 4,879 4,970 761
----- ----- ---
</TABLE>
38
<PAGE>
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
(Tabular dollar amounts are in thousands of US dollars,
except per share amounts)
(Prepared in accordance with U.S. GAAP)
This table presents Unico's unaudited pro forma selected financial
data giving effect to the acquisition and accounting for it as a purchase. The
pro forma financial data do not purport to represent what the combined
financial position or results of operations would actually have been if the
acquisition had occurred at the beginning of the periods or to project the
combined financial position or results of operations for any future date or
period.
The information below should be read in conjunction with (I) the
Multiwave Financial Statements and the Unico Consolidated Financial
Statements, including the notes thereto, (ii) the Unaudited Pro Forma
Condensed Consolidated Financial Statements, which are included elsewhere
herein.
($000, except per share data)
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
September 30, 1998 June 30, 1998
------------------ -------------
<S> <C> <C>
Revenues $ 11,940 $ 33,209
Net income (loss) 69 (2,748)
Basic income (loss) per share ($0.0046) ($0.2060)
-------- --------
</TABLE>
($000)
<TABLE>
<CAPTION>
As of
September 30, 1998
------------------
<S> <C>
Total assets $16,181
Shareholders' equity 5,838
-------
</TABLE>
COMPARATIVE PER SHARE DATA
This table presents Unico's and Multiwave's historical per share data
and Unico's pro forma per share data for the three months ended September 30,
1998 and for the year ended June 30, 1998. The pro forma data gives effect to
the acquisition and accounts for it as a purchase, based upon the Multiwave
Financial Statements, the Unico Consolidated Financial Statements and the
Unaudited Pro Forma Condensed Consolidated Financial Statements.
The information presented below should be read in conjunction with
(i) the Multiwave Financial Statements, including the notes thereto, attached
hereto, (ii) the Unico Consolidated Financial Statements, including the notes
thereto, attached hereto, and (iii) the Unaudited Pro Forma Condensed
Consolidated Financial Statements, elsewhere herein.
39
<PAGE>
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
Per Share Unico Common Stock Sept 30, 1998 June 30, 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Historical:
Book value (1) $0.3040 $0.3136
Cash dividends Nil Nil
Net income (loss) (2) ($0.0096) ($0.0489)
Pro Forma:
Book value (1) $0.3888 $0.3969
Cash dividends Nil Nil
Net income (loss) (2) $0.0046 ($0.2060)
</TABLE>
NOTES: (1) Book value per share is shareholders' equity divided by
common shares outstanding assuming all preferred shares
were converted at September 30, 1998 and June 30, 1998.
(2) Basic earnings (loss) per share.
FEDERAL AND STATE REGULATORY REQUIREMENTS AND APPROVALS
With respect to federal and state regulatory requirements and
approvals in connection with the acquisition, the Company intends to seek the
approval of its shareholders prior to consummating the acquisition. It does
not believe there are other requirements it must satisfy or approvals it must
obtain.
VALUATION OF THE COMPANY'S RESTRICTED COMMON SHARES
The Company retained Cronkite & Kissell, Inc. (CKI), an unrelated Los
Angeles based firm, to appraise the fair market value of the restricted stock
the Company issued to the former shareholders of Multiwave to consummate the
acquisition. CKI is a financial advisory services firm specializing in the
valuation of businesses and business interests. The principals of the firm are
accredited senior appraisers of the American Society of Appraisers and each
has more than ten years of experience in the valuation consulting profession.
CKI was selected after conversations were held with it and with one
other investment banking firm. Based on the conversations, the qualifications
of both firms were evaluated and considered to be excellent. The selection of
CKI was based in part on the Company's previous relationship with it. Members
of the firm had assisted the Company with a previous transaction which did not
materialize and for which no remuneration was paid.
As the previous transaction was not consummated, no material
consideration was paid. For this appraisal, the Company paid CKI $7,500. The
fee negotiated was not dependent on
40
<PAGE>
any of the results of the appraisal. No future material relationship between
the Company and CKI is contemplated. However, given the professionalism with
which the services were delivered, the Company may well engage CKI for future
engagements.
CKI was engaged after the signing of the Stock Purchase Agreement and
therefore had no input into the determination of the consideration paid to the
shareholders of Multiwave for the acquisition. The methodology employed by CKI
included:
- interviews with the Company's management,
- analysis of the Company's future prospects,
- review of the Multiwave acquisition materials,
- review of the Novation Agreement, a contract signed by the Company
in June 1998,
- review of empirical studies which quantify the lack of control
discounts,
- review of empirical studies which quantify the lack of marketability
discounts, and
- conducting such other studies, analyses and inquiries as it deemed
appropriate.
CKI applied discounts to the market value of the Company's stock to
account for lack of marketability due to Rule 144 restrictions and for the
contractual restrictions imposed by the Novation Agreement, signed by the
Company in June of 1998.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma balance sheet presents the effects of the
Multiwave acquisition as if it occurred on September 30, 1998. The pro forma
Balance sheet is not necessarily indicative of the financial position which
will be attained in the future. The pro forma information should be read in
conjunction with the historical financial statements of Unico as reported on
Form 10-KSB for the years ended June 30, 1997 and 1998 and on Form 10-QSB for
the three months ended September 30, 1998.
41
<PAGE>
Unico, Inc.
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1998
(US$ 000)
<TABLE>
<CAPTION>
Unico
Before Pro Forma Pro Forma
Assets Acquisition Multiwave Adjustments Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 30 $ 1,360 $ $ 1,390
Accounts Receivable 805 3,128 (320)(d) 3,613
Inventories 348 5,075 5,423
Prepaid Expenses 91 128 219
Property and equip. - net 69 222 291
Goodwill (1,086)(c)
2,000 (a) 914
Hwang note 135 135
Old Unico investment 3,163 3,163
Other Assets 173 540 713
- ------------------------------------------------------------------------------
$ 4,814 $ 10,453 $ 594 $ 15,861
==============================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Bank overdrafts $ 58 $ 193 $ $ 251
Accounts Payable 738 8,267 (320)(d) 8,685
Due Affiliates 2,235 (2,000)(b) 235
Other Liabilities 672 672
Deferred revenues 180 180
- ------------------------------------------------------------------------------
Total liabilities 976 11,367 (2,000) 10,343
- ------------------------------------------------------------------------------
2,000 (b)
2,000 (a)
Stockholders' Equity 3,838 (914) (1,086)(c)
(Deficiency)
- ------------------------------------------------------------------------------
$ 4,814 $ 10,453 $ 594 $ 15,861
==============================================================================
</TABLE>
NOTES: (a) To reflect fair market value of stock issued to effect
acquisition.
(b) To record capital contribution by Uraco Holdings to Multiwave.
(c) To eliminate investment.
(d) To eliminate inter-company payable and receivable.
42
<PAGE>
Unico, Inc.
Pro Forma Statement of Operations (Unaudited)
These pro-forma consolidated statements of operations present the
effects of the Multiwave acquisition as if it occurred on July 1,
1997.
Year Ended June 30, 1998 (US$ 000)
<TABLE>
<CAPTION>
Unico
Before Pro Forma Pro Forma
Acquisition Multiwave Adjustments Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $24,638 $8,571 $ $33,209
Cost of sales 24,229 7,842 32,071
- ------------------------------------------------------------------------------
Gross profit 409 729 1,138
Operating expenses 953 2,406 3,359
- ------------------------------------------------------------------------------
Operating (loss) (544) (1,677)
(2,221)
Other income (charges) 8 (352) (183)(a)
(527)
- ------------------------------------------------------------------------------
Net (loss) $(536) $(2,029) $(183)
$(2,748)
==============================================================================
Basic (loss) per share $(0.0489) $(0.8494) $(0.2060)
==============================================================================
Weighted average
shares outstanding 10,952,190 2,388,792 13,340,982
</TABLE>
NOTE: (a) To amortize goodwill over five years.
43
<PAGE>
Unico, Inc.
Pro Forma Statement of Operations (Unaudited, continued)
Three Months Ended September 30, 1998 (US$ 000)
<TABLE>
<CAPTION>
Unico
Before Pro Forma Pro Forma
Acquisition Multiwave Adjustments Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 5,075 $6,865 $(381)(b) $11,559
Cost of sales 4,795 6,117 (381)(b) 10,531
- ------------------------------------------------------------------------------
Gross profit 280 748 1,028
Operating expenses 403 881 1,284
- ------------------------------------------------------------------------------
Operating (loss) (123) (133)
(256)
Other income (charges) 2 369 (46)(a) 325
- ------------------------------------------------------------------------------
Net (loss) $(121) $ 236 $ (46) $ 69
==============================================================================
Basic (loss) per share $(0.0489) $(0.8494) $(0.2060)
==============================================================================
Weighted average
shares outstanding 12,624,968 2,388,792 15,013,760
</TABLE>
NOTE: (a) To amortize goodwill over five years.
(b) To eliminate inter-company sales.
PAST MATERIAL RELATIONSHIPS BETWEEN THE COMPANY AND MULTIWAVE
Prior to the acquisition, the Company purchased goods from Multiwave
for sale to its customers. Such purchases were based on purchase orders
issued. No contracts covering such transactions existed. On July 7th, 1998, a
Letter of Intent between the Company and Unico was signed, indicating their
interest in the acquisition.
COMPANY'S SHARE PRICES PRIOR TO LETTER OF INTENT AND DEFINITIVE AGREEMENT
The high and the low prices of the Company's shares on the date
preceding the announcement of the Letter of Intent and on the date preceding
the announcement of the definitive agreement.
<TABLE>
<CAPTION>
Date Preceding: High Price Low Price
- --------------- ---------- ---------
<S> <C> <C>
Letter of Intent 2 1/4 2 1/4
Definitive Agreement 1 3/4 1 5/8
</TABLE>
44
<PAGE>
VOTE REQUIRED
The Board of Directors recommends a vote FOR approval of acquisition
of Multiwave, which requires the affirmative vote of the holders of a majority
of the issued and outstanding shares of the Company entitled to vote.
AUTHORIZATION TO DISTRIBUTE THE SHARES OF
INTERMOUNTAIN REFINING CO., INC.
TO CERTAIN SHAREHOLDERS OF THE COMPANY
INTRODUCTION
In accordance with the Stock Purchase Agreement dated November 30,
1997 and as amended by the Novation Agreement dated June 26, 1998,
(collectively hereafter the "Acquisition Agreement"), the management of
Intermountain Refining Co., Inc., ("IRC") may have certain rights to elect to
distribute the Company's holdings of IRC common stock to holders of Unico
common stock as of the Record Date established below, except those
shareholders acquiring shares through and as a result of the Acquisition
Agreement, and holders of shares issued by the Company between June 1, 1998
and the Record Date ("IRC Stock Recipients"). IRC management and Company
management are now actively negotiating the terms, conditions and consequences
of any proposed distribution. Assuming such negotiations are consummated
successfully, the Board of Directors requests authority from the Company
shareholders to proceed with the IRC stock distribution on such terms and
conditions as the Board of Directors deems appropriate.
HISTORY
The Company's principal business activity is presently focused on the
computer technology industry. Prior to the acquisition of all of the
outstanding stock of Paradise effective as of June 30, 1998, the Company was
principally involved in energy-related activities which included production of
natural gas, petroleum products refining and electric power generation.
Effective as of the date of the Acquisition Agreement, all of the assets of
the Company, except it's investment in Paradise, were transferred to it's
wholly owned subsidiary IRC for the purpose of consolidating these
non-strategic assets under the control of the management of IRC.
TERMS OF THE SPIN OFF
Each IRC Stock Recipient is entitled to receive one share of IRC
common stock for each share of the Company's common stock held as of the
Record Date. The number of shares of the Company's common stock issued,
outstanding and eligible for participation in the spin off transaction is
1,125,609. The total number of shares of the Company's common stock currently
issued and outstanding is 7,229,428.
45
<PAGE>
ACCOUNTING TREATMENT OF THE SPIN OFF
The investment in IRC common stock is recorded on the books and
records of the Company using the cost method. Accordingly, the investment in
IRC stock will be charged against paid in capital with no gain or loss
recognized on the spin off.
INCOME TAX TREATMENT
For income tax purposes, IRC management intends the distribution as a
"spin off" intended to qualify as "tax-free" in compliance with Internal
Revenue Code Section 355 wherein no gain or loss will be recognized by the
Company or the IRC Stock Recipients. The IRC Stock Recipients would be
required to allocate their current basis in the Company's common stock between
the shares of the Company's common stock and their newly issued IRC common
stock. Tax advisors are currently researching specific issues relating to the
tax treatment of this proposed spin off and the results of such research are
expected to be available at the time that the spin off is executed.
DESCRIPTION OF SECURITIES TO BE ISSUED
IRC management has informed the Company as to the following: IRC
management intends that IRC Stock Recipients receive shares of IRC no par
value, fully paid and non-assessable, common stock. Under IRC's articles of
incorporation, there are presently 100,000 shares of common stock authorized.
Prior to the spin off, IRC intends to file an amendment to its articles of
incorporation to increase the authorized number of common shares to
10,000,000. There are presently no other classes of common or preferred stock
authorized under IRC's articles of incorporation. Holders of IRC common stock
would be entitled to receive dividends if such are declared by the board of
directors of IRC. The board of directors of IRC has never declared any
dividends and there are presently no plans to declare dividends in the future.
Holders of IRC common stock would have voting rights equal to one vote for
each share of IRC common stock held. Voting rights are non-cumulative. There
are no preemptive rights associated with the IRC common stock.
PRO FORMA FINANCIAL INFORMATION
IRC management has informed the Company as to the following: The
transaction contemplated herein involves the spin off of the Company's entire
holdings of IRC common stock to certain shareholders of the Company. As the
Company's investment in IRC has been accounted for on a cost basis, there is
no impact of the spin off on the results of operations of the Company.
Accordingly, the presentation herein of pro forma statements of results of
operations and earnings per share data is not considered necessary. The
investment in IRC, or "Old Unico" as shown on the Company's balance sheet,
will be charged against paid in capital. The following condensed pro forma
balance sheet of the Company as of September 30, 1998 reflects the adjustments
that will result from the spin off.
46
<PAGE>
Unico, Inc.
Pro Forma Balance Sheet
September 30, 1998
<TABLE>
<CAPTION>
September 30, 1998 Pro Forma Pro Forma
(Unaudited) Adjustment Balance
----------- ---------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 30 $ 30
Accounts receivable (net) 805 805
Inventories 348 348
Prepaid expenses 91 91
------- ------- -------
Total Current Assets 1,274 1,274
------- ------- -------
Property and Equipment:
Furniture and equipment 73 73
Leasehold improvements 8 8
------- ------- -------
81 81
Accumulated depreciation (12) (12)
------- ------- -------
69 69
Other Assets:
Trademark ( net) 100 100
Due from Luna 14 14
Due from Hwang 135 135
Other 59 59
Investment in Old Unico 3,163 (3,163) 0
------- ------- -------
3,471 (3,163) 308
------- ------- -------
$ 4,814 $(3,163) $1,651
======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdrafts $ 58 $ 58
Accounts payable 738 738
Deferred revenues 180 180
------- ------- -------
Total Current Liabilities 976 976
Stockholders' Equity 3,838 (3,163) 675
------- ------- -------
$ 4,814 $(3,163) $1,651
======= ======= =======
</TABLE>
47
<PAGE>
FEDERAL AND STATE REGULATORY REQUIREMENTS
To the knowledge of the Company, there are no federal or state
regulatory requirements to be complied with in conjunction with this
transaction. IRC's management has informed the Company informally that it is
IRC's intent to register all of its common shares outstanding with the
Securities and Exchange Commission upon completion of the proposed spin off,
to seek a listing on the OTC Bulletin Board, and to register or seek
exemptions under the "Blue Sky" laws of various states on a case by case
basis.
SHARE PRICES
IRC shares are not publicly traded as they are owned entirely by the
Company. Share prices and recent changes are not available. Recent prices of
publicly traded shares of the Company are shown above, under the section of
Multiwave Acquisition.
AVAILABILITY OF PRINCIPAL ACCOUNTANTS AT SHAREHOLDER MEETING
It is contemplated that representatives of the Company's principal
accountants will be present at the meeting.
ADDITIONAL INFORMATION PROVIDED WITH THIS PROXY STATEMENT
Additional information regarding the Company and IRC is contained
within the Company's Form 10-KSB for the year ended June 30, 1998, and Form
10-QSB for the quarter ended September 30, 1998, copies of which are being
provided to each shareholder along with this proxy statement.
INFORMATION RELATIVE TO IRC
IRC management has informed the Company as to the following: as the
acquisition of Starlicon by Unico was accounted for as a reverse acquisition,
the financial statements of IRC, the successor to the assets and operations of
Unico prior to the acquisition, are essentially the same financial statements
as have been filed by Unico prior to the Starlicon acquisition effective on
June 30, 1998 with the exception of the allocation of items contained within
the stockholders' equity section. Accordingly, financial statements of IRC as
of the end of its last fiscal year are essentially identical to those of the
Company on pages 11 through 32 of its Annual Report to Shareholders as filed
as Exhibit 13 to its Form 10-K405 for the year ended February 28, 1998
incorporated herein by reference.
Quarterly financial information for IRC as of its third quarter ended
November 30, 1998 is shown as Exhibit D to this Proxy Statement. It is
entitled IRC Financial Statements and Additional Information Provided In
Accordance with Regulation 14(a), Item 14(b)(3)(ii), and
48
<PAGE>
RECORD DATE
The Company has established February 12, 1999, as the Record Date.
VOTE REQUIRED
The Board of Directors recommends approval and ratification by the
shareholders be granted to the Board of Directors to negotiate and consummate
the proposed spinoff of IRC on such terms and conditions as are acceptable to
the Board of Directors. The Board of Directors recommends a vote "For" the
approval and ratification of this recommendation. Approval and ratification of
the recommendation requires the affirmative vote of the holders of a majority
of the voting shares entitled to vote. Proxies to vote on this spin off
representing 84.7% of the outstanding common stock of the Company were granted
under the Novation Agreement. Such proxies expire the earlier of certain
events taking place or on April 1, 1999. The approval of the shareholders
hereunder is intended to act as approval of the sale, transfer, or disposition
of assets as may be required under New Mexico corporate law.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
From time to time the shareholders of the Company submit proposals
which they believe should be voted upon by the shareholders. The Securities
and Exchange Commission has adopted regulations that govern the inclusion of
such proposals in the Company's annual proxy materials. All such proposals
must be submitted to the Corporate Secretary not later than July 31, 1999, in
order to be considered for inclusion in the Company's proxy materials for its
next annual meeting.
OTHER BUSINESS
The Company does not intend to present any other business for action
at the Annual Meeting and does not know of any other business intended to be
presented by others. Should any other matter come before the meeting, the
Proxies will be voted by the persons authorized therein, or their substitutes,
in accordance with their best judgment on such matters.
ANNUAL REPORT ON FORM 10-KSB AND
QUARTERLY REPORT ON FORM 10-QSB
The Company's Annual Report on Form 10-KSB, for the fiscal year ended
June 30, 1998, and the Quarterly Report on Form 10-QSB, for the fiscal quarter
ended September 30, 1998, as filed with the Securities and Exchange
Commission, are being mailed concurrently with the mailing of this Proxy
Statement to shareholders of record on or about February 23, 1998. The cost of
furnishing such Reports on Form 10-KSB and 10QSB, and of making this proxy
solicitation will be borne by the Company. Copies of exhibits to the Annual
Report on Form 10-KSB, the Incentive Equity Plan and the Stock Option Plan for
Non-employee Directors are available, but a reasonable handling fee will be
charged to the requesting shareholder. Each
49
<PAGE>
written request must set forth a good faith representation that, as of the
record date, the person making the request is a beneficial owner of the
Company's Common or Preferred Stock and is entitled to vote at the Annual
Meeting. Shareholders should direct their written request to the Company,
Attention: Corporate Secretary, 2925 Bayview Drive, Fremont, CA 94538.
BY ORDER OF THE BOARD OF DIRECTORS
-----------------------------------
Henry Tang, Secretary
50
<PAGE>
UNICO, INC.
PRELIMINARY FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
UNICO, INC.
2925 Bayview Drive
Fremont, California 94538
PROXY
The undersigned hereby appoints ______________________ as Proxies, each with
the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated below, all of the shares of common stock
of Unico, Inc. held on record by the undersigned on February 12, 1999, at the
annual meeting of shareholders to be held on March 5, 1999 or any adjournment
thereof.
1. Election of Directors
_______FOR all nominees listed below
_______WITHHOLD AUTHORITY
(except as marked to the contrary below)
to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee mark
the line next to the nominees name below.)
_______John Hwang
_______Rodger Sykes
_______James Cunningham Sargent
_______Ike Suri
_______Henry Tang
2. PROPOSAL TO APPROVE THE APPOINTMENT OF WEINBAUM & YALAMANCHI as the
independent public accountants of the corporation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE AND RATIFY THE INCENTIVE EQUITY PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
51
<PAGE>
4. PROPOSAL TO APPROVE AND RATIFY THE STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO APPROVE THE CHANGE IN COMPANY NAME TO PARADISE
INNOVATIONS TECHNOLOGY CORP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. PROPOSAL TO APPROVE AND IMPLEMENT SUCH REVERSE SPLIT at such time and
manner as may be appropriate as determined by the Board of Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. PROPOSAL TO AUTHORIZE AND APPROVE THE RECOMMENDATION OF THE BOARD OF
DIRECTORS TO ADOPT, AMEND AND RESTATE THE ARTICLES OF INCORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. PROPOSAL TO AUTHORIZE THE COMPANY AND TO RATIFY ITS ACTIONS WITH
RESPECT TO CLOSING AND CONSUMMATING THE PURCHASE OF STOCK OF
MULTIWAVE INNOVATION PTE. LTD., A SINGAPORE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
9. PROPOSAL TO AUTHORIZE AND APPROVE THE PROPOSED SPIN-OFF OF THE SHARES
OF STOCK OF INTERMOUNTAIN REFINING CO., INC. ON TERMS AND CONDITIONS
AS DETERMINED BY THE BOARD OF DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
10. At their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting. This proxy
when properly executed will be voted in the manner directed herein by
the undersigned stockholder.
If no direction is made, this proxy will be voted for Proposals 1, 2,
3, 4, 5, 6, 7, 8, and 9. Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign. When signing as attorney,
as executor, administrator, trustee or guardian, please give full title as
such. If a corporation , please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
52
<PAGE>
DATED: _______________________________, 1999
________________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
________________________________________
Signature if held jointly
53
<PAGE>
UNICO, INC.
SCHEDULE 14A
APPENDIX A
54
<PAGE>
UNICO, INC.
SCHEDULE 14A
APPENDIX A
STATEMENT AS TO EXPECTED DATE
OF
REGISTRATION OF SECURITIES TO BE ISSUED
IN CONJUNCTION WITH
THE INCENTIVE EQUITY PLAN
AND
THE STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Incentive Equity Plan
The Company anticipates filing a Registration Statement for the
Shares underlying the options in the Incentive Equity Plan within the next
calendar year, if the Incentive Equity Plan is approved by the Company's
shareholders. Additionally, the Company plans to rely on exemption from
registration, if available, for some of the grants under the Plan.
Stock Option Plan for Non-Employee Directors
The Company anticipates filing a Registration Statement for the
Shares underlying the options in the Director's Plan within the next calendar
year, if the Director's Plan is approved by the Company's shareholders.
55
<PAGE>
UNICO, INC.
SCHEDULE 14A
APPENDIX B
INCENTIVE EQUITY PLAN
56
<PAGE>
UNICO, INC.
INCENTIVE EQUITY PLAN
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purpose...........................................................1
2. Definitions.......................................................1
3. Shares and Performance Units Available under the Plan.............3
4. Option Rights.....................................................4
5. Appreciation Rights...............................................6
6. Restricted Shares.................................................8
7. Deferred Shares...................................................9
8. Performance Shares and Performance Units..........................9
9. Transferability..................................................10
10. Adjustments......................................................10
11. FractionalShares.................................................11
12. Withholding Taxes................................................11
13. Certain Terminations of Employment or Consulting
Services, Hardship and Approved Leaves of Absence................12
14. Administration of the Plan.......................................12
15. Amendments and Other Matters.....................................12
16. Termination of the Plan..........................................13
17. Effective Date...................................................13
18. Nontransferability...............................................13
</TABLE>
57
<PAGE>
UNICO, INC.
INCENTIVE EQUITY PLAN
1. Purpose. The purpose this Plan is to attract and retain officers
and other employees of and consultants to UNICO, INC. (the "Corporation") and
its Subsidiaries and to provide such persons with incentives and rewards for
superior performance.
2. Definitions. As used in this Plan,
"APPRECIATION RIGHT" means a right granted Pursuant to Section 5 of
this Plan, including a Free-standing Appreciation Right and a Tandem
Appreciation Right.
"BASE PRICE" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-standing Appreciation Right.
"BOARD" means the Board of Directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the committee described in Section 14(a) of this
Plan.
"COMMON SHARES" means (i) shares of the Common Stock, no par value,
of the Corporation and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 10 of this Plan.
"DATE OF GRANT" means the date specified by the Committee on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective, which shall not be earlier than the date on which the Committee
takes action with respect thereto.
"DEFERRAL PERIOD" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 7 of this Plan.
"DEFERRED SHARES" means an award pursuant to Section 7 of this Plan
of the right to receive Common Shares at the end of a specified Deferral
Period.
"EFFECTIVE DATE" shall have the meaning set forth in Section 17.
"FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is not granted in tandem with
an Option Right or similar right.
58
<PAGE>
"INCENTIVE STOCK OPTION" means an Option Right that is intended to
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision thereto. "Management Objectives" means the achievement of
performance objectives established pursuant to this Plan, which may be
described in terms of Corporation-wide objectives or objectives that are
related to the performance of the individual Participant, or the Subsidiary,
division, department or function within the corporation or Subsidiary in which
the Participant is employed or with respect to which the Participant provides
consulting services. The Committee may adjust Management Objectives and the
related minimum acceptable level of achievement if, in the sole judgment of
the Committee, events or transactions have occurred after the Date of Grant
that are unrelated to the performance of the Participant and result in
distortion of the Management Objectives or the related minimum acceptable
level of achievement.
"MARKET VALUE PER SHARE" means the fair market value of the Common
Shares as determined by the Committee from time to time.
"NONQUALIFIED OPTION" means an Option Right that is not intended to
qualify as an Incentive Stock Option.
"OPTIONEE" means the person so designated in an agreement evidencing
an outstanding Option Right or the Successor of an Optionee, as the context so
requires.
"OPTION PRICE" means the purchase price payable upon the exercise of
an Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or an Incentive Stock
Option granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time an officer, including
without limitation an officer who may also be a member of the Board, or other
employee of or a consultant to the Corporation or any Subsidiary or (ii) has
agreed to commence serving in any such capacity, or the Successor of a
Participant, as the context requires.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating thereto are to be
achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
59
<PAGE>
"RELOAD OPTION RIGHTS" means additional Option Rights automatically
granted to an Optionee upon the exercise of Option Rights pursuant to Section
4(f) of this Plan.
"RESTRICTED SHARES" means Common Shares granted or sold pursuant to
Section 6 of this Plan as to which neither the substantial risk of forfeiture
nor the restrictions on transfer referred to in Section 6 hereof has expired.
"RULE 16B-3" means Rule 16b-3, as promulgated and amended from time
to time by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, or any successor rule to the same effect.
"SPREAD" means, in the case of a Free-standing Appreciation Right,
the amount by which the Market Value per Share on the date when the
Appreciation Right is exercised exceeds the Base Price specified therein or,
in the case of a Tandem Appreciation Right, the amount by which the Market
Value per Share on the date when the Appreciation Right is exercised exceeds
the Option Price specified in the related Option Right.
"SUBSIDIARY" means any corporation in which the Corporation owns or
controls directly or indirectly more than 50 percent of the total combined
voting power represented by all classes of stock issued by such corporation at
the time of the grant.
"SUCCESSOR" of a Participant means the legal representative of the
estate of a deceased Participant or the person or persons who shall acquire
the right to exercise an award hereunder by bequest or inheritance or by
reason of death of the Participant.
"TANDEM APPRECIATION RIGHT" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right or any similar right granted under any other plan of the Corporation.
3. Shares and Performance Units Available under the Plan. (a) Subject
to adjustment as provided in Section 10 of this Plan, the number of Common
Shares issued or transferred, plus the number of Common Shares covered by
outstanding awards granted under this Plan, shall not in the aggregate exceed
500,000 Shares, which may be Common Shares of original issuance or Common
Shares held in treasury or a combination thereof. For the purposes of this
Section 3(a):
(1) Upon payment in cash of the benefit provided by any award
granted under this Plan, any Common Shares that were covered
by that award shall again be available for issuance or
transfer hereunder.
(ii) Common Shares covered by any award granted under this Plan
shall be deemed to have been issued or transferred, and
shall cease to be available for future issuance or transfer
in respect of any other award granted hereunder, at the
earlier of the time when they are actually issued or
transferred or the time when dividends or dividend
equivalents are paid thereon; provided, however, that
Restricted Shares shall be deemed to have been issued or
transferred at the earlier of the time when
60
<PAGE>
they cease to be subject to a substantial risk of forfeiture
or the time when dividends are paid thereon.
(b) The number of Performance Units that may be granted under this
Plan shall not in the aggregate exceed 100,000. Performance Units that are
granted under this Plan, but are paid in Common Shares or are not earned by
the Participant at the end of the Performance Period, shall be available for
future grants of Performance Units hereunder.
4. Option Rights. The Committee may from time to time authorize
grants to Participants of options to purchase Common Shares upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains; provided, however, that no participant shall be granted
Option Rights for more than 100,000 Common Shares in any one fiscal year of
the Corporation, subject to adjustment as provided in Section 10 of this Plan.
(b) Each grant shall specify an Option Price per Common
Share, which may be less than, equal to or greater than the Market Value per
Share on the Date of Grant; provided, however, (i) the Option Price shall
equal at least 85% of the Market Value per Share on the Date of Grant, or (ii)
the Option Price with respect to each Incentive Stock Option shall not be less
than 100% (or 110%, in the case of an individual described in Section
422(b)(6) of the Code (relating to certain 10% owners)) of the Market Value
per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalents acceptable to the Committee, (ii) subject to Section
4(d), nonforfeitable, unrestricted Common Shares, which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Committee may deem
appropriate, including without limitation any form of consideration authorized
under Section 4(d) below, on such basis as the Committee may determine in
accordance with this Plan and (iv) any combination of the foregoing.
(d) On or after the Date of Grant of any Nonqualified
Option, the Committee may determine that payment of the Option Price may also
be made in whole or in part in the form of Restricted Shares or other Common
Shares that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Committee on or after the Date of Grant,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 4(d), the Common Shares
received by the Optionee upon the exercise of the Nonqualified Option shall be
subject to the same risks of forfeiture or restrictions on transfer as those
that applied to the consideration surrendered by the Optionee; provided,
however, that such risks of forfeiture and restrictions on transfer shall
apply only to the same number of Common Shares received by the Optionee as
applied to the forfeitable or restricted Common Shares surrendered by the
Optionee.
61
<PAGE>
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on the date of exercise of
some or all of the Common Shares to which the exercise relates.
(f) On or after the Date of Grant of any Option Rights, the
Committee may provide for the automatic grant to the Optionee of Reload Option
Rights upon the exercise of Option Rights, including Reload Option Rights for
Common Shares or any other noncash consideration authorized under Sections
4(c) and (d) above.
(g) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to the Participant
remain unexercised.
(h) Each grant shall specify the conditions, including as
and to the extent determined by the Committee, the period or periods of
continuous employment, or continuous engagement of the consulting services, of
the Optionee by the Corporation or any Subsidiary, or the achievement of
Management Objectives, that are necessary before the Option Rights or
installments thereof shall become exercisable, and any grant may provide for
the earlier exercise of the Option Rights, including, without limitation, in
the event of a change in control of the Corporation or other similar
transaction or event.
(i) Option Rights granted pursuant to this Section 4 may be
Nonqualified Options or Incentive Stock Options or combinations thereof, as
set forth in the award agreement.
(j) On or after the Date of Grant of any Nonqualified
Option, the Committee may provide for the payment to the Optionee of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis, or the Committee may provide that any dividend equivalents
shall be credited against the Option Price.
(k) No Option Right granted pursuant to this Section 4 may
be exercised more than 10 years from the Date of Grant (except that, in the
case of an individual described in Section 422(b)(6) of the Code (relating to
certain 10% owners) who is granted an Incentive Stock Option, the term of such
Option Right shall be no more than five years from the Date of Grant).
(l) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Optionee and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
(m) The aggregate Market Value per Share, determined as of
the Date of Grant, of the Common Shares for which any Optionee may be awarded
Incentive Stock Options which are first exercisable by the Optionee during any
calendar year under this Plan (or any other stock option plan required to be
taken into account under Section 422(d) of the Code) shall not exceed
$100,000.
(n) If and to the extent otherwise advisable herein or under
the applicable option agreement, upon and after the death of an Optionee, such
Optionee's Option Rights, to the extent exercisable after death may be
exercised by the Successors of the Optionee. An Option
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Right may be exercised, and payment in full of the aggregate Option Price
made, by the Successors of an Optionee only by written notice (in the form
prescribed by the Committee) to the Corporation specifying the number of
Common Shares to be purchased. Such notice shall state that the aggregate
Option Price will be paid in full, or that the Option Right will be exercised
as otherwise provided hereunder, in the discretion of the Corporation or the
Committee, if and as applicable.
5. Appreciation Rights. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed an a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of an
Appreciation Right. Any grant of Appreciation Rights under this Plan shall be
upon such terms and conditions as the Committee may determine in accordance
with the following provisions:
(a) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right may be paid by the Corporation in cash,
Common Shares or any combination thereof and may (i) either grant to the
Participant or reserve to the Committee the right to elect among those
alternatives or (ii) preclude the right of the Participant to receive and the
Corporation to issue Common Shares or other equity securities in lieu of cash;
provided, however, that no form of consideration or manner of payment that
would cause Rule 16b-3 to cease to apply to this Plan shall be permitted.
(b) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right shall not exceed a maximum specified by the
Committee on the Date of Grant.
(c) Any grant may specify (i) a waiting period or periods
before Appreciation Rights shall become exercisable and (ii) permissible dates
or periods an or during which Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right may be
exercised only in the event of a change in control of the Corporation or other
similar transaction or event.
(e) On or after the Date of Grant of any Appreciation
Rights, the Committee may provide for the payment to the Participant of
dividend equivalents thereon in cash or Common Shares on a current, deferred
or contingent basis.
(f) Each grant shall be evidenced by an agreement, which
shall be executed an behalf of the Corporation by any officer thereof and
delivered to and accepted by the Optionee and shall contain such other terms
and provisions an the Committee may determine consistent with this Plan.
(g) Regarding Tandem Appreciation Rights only: Each grant
shall provide that a Tandem Appreciation Right may be exercised only (i) at a
time when the related Option Right (or any similar right granted under any
other plan of the Corporation) is also exercisable and the Spread is positive
and (ii) by surrender of the related Option Right (or such other right) for
cancellation.
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(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of
each Free-standing Appreciation Right a
Base Price per Common Share, which shall
be equal to or greater than the Market
Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any
Free-standing Appreciation Rights
previously granted to the Participant
remain unexercised; provided, however,
that no participant shall be granted more
than 100,000 Freestanding Appreciation
Rights in any one fiscal year of the
Corporation, subject to adjustment as
provided in Section 10 of this Plan;
(iii) Each grant shall specify the conditions,
including as and to the extent determined
by the Committee, the period or periods of
continuous employment, or continuous
engagement of the consulting services, of
the Participant by the Corporation or any
Subsidiary, or the achievement of
Management Objectives, that are necessary
before the Free-standing Appreciation
Rights or installments thereof shall
become exercisable, and any grant may
provide for the earlier exercise of the
Free-standing Appreciation Rights,
including, without limitation, in the
event of a change in control of the
Corporation or other similar transaction
or event; and
(iv) No Free-standing Appreciation Right
granted under this Plan may be exercised
more than 10 years from the Date of Grant.
6. Restricted Shares. The Committee may also authorize grants or
sales to Participants of Restricted Shares upon such terms and conditions as
the Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate
transfer of the ownership of Common Shares to the Participant in consideration
of the performance of services, or as and to the extent determined by the
Committee, the achievement of Management Objectives, entitling such
Participant to dividend, voting and other ownership rights, subject to the
substantial risk of forfeiture and restrictions on transfer hereinafter
referred to.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Restricted
Shares covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Committee on the Date of Grant, and any grant or sale may
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provide for the earlier termination of such period, including without
limitation, in the event of a change in control of the Corporation or other
similar transaction or event.
(d) Each grant or sale shall provide that, during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Committee on the Date of Grant.
Such restrictions may include, without limitation, rights of repurchase or
first refusal in the Corporation or provisions subjecting the Restricted
Shares to a continuing substantial risk of forfeiture in the hands of any
transferee.
(e) Any grant or sale may require that any or all dividends
or other distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the same
restrictions as the underlying award or such other restrictions as the
Committee may determine.
(f) Each grant or sale shall be evidenced by an agreement,
which shall be executed an behalf of the Corporation by any officer thereof
and delivered to and accepted by the Participant and shall contain such terms
and provisions as the Committee may determine consistent with this Plan.
Unless otherwise directed by the Committee, all certificates representing
Restricted Shares, together with a stock power that shall be endorsed in blank
by the Participant with respect to the Restricted Shares, shall be held in
custody by the Corporation until all restrictions thereon lapse.
7. Deferred Shares. The Committee may also authorize grants or sales
of Deferred Shares to Participants upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Corporation to issue or transfer Common Shares to the Participant in the
future in consideration of the performance of services rendered, subject to
the fulfillment during the Deferral Period of such conditions as the Committee
may specify.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Deferred
Shares covered thereby shall be subject to a Deferral Period, which shall be
fixed by the Committee on the Date of Grant, and any grant or sale may provide
for the earlier termination of the Deferral Period, including without
limitation, in the event of a change in control of the Corporation or other
similar transaction or event.
(d) During the Deferral Period, the Participant shall not
have any right to transfer any rights under the subject award, shall not have
any rights of ownership in the Deferred Shares and shall not have any right to
vote the Deferred Shares, but the Committee may on or
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after the Date of Grant authorize the payment of dividend equivalents on the
Deferred Shares in cash or additional Common Shares on a current, deferred or
contingent basis.
(e) Each grant or sale shall be evidenced by an agreement,
which shall be executed an behalf of the Corporation by any officer thereof
and delivered to and accepted by the Participant and shall contain such terms
and provisions as the Committee may determine consistent with this Plan.
8. Performance Shares and Performance Units. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall
become payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance
Shares or Performance Units to which it pertains, which may be subject to
adjustment to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be determined by the Committee on the Date of
Grant and may be subject to earlier termination, including, without
limitation, in the event of a change in control of the Corporation or other
similar transaction or event.
(c) Each grant shall specify the Management Objectives that
are to be achieved by the Participant.
(d) Each grant shall specify in respect of the specified
Management Objectives a minimum acceptable level of achievement below which no
payment will be made and shall set forth a formula for determining the amount
of any payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives.
(e) Each grant shall specify the time and manner of payment
of Performance Shares or Performance units that shall have been earned, and
any grant may specify that any such amount may be paid by the Corporation in
cash, Common Shares or any combination thereof and may either grant to the
Participant or reserve to the Committee the right to elect among those
alternatives; provided, however, that no form of consideration or manner of
payment that would cause Rule 16b-3 to cease to apply to this Plan shall be
permitted.
(f) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Committee on the Date of Grant. Any grant of Performance Units may specify
that the amount payable, or the number of Common Shares issued, with respect
thereto may not exceed maximums specified by the Committee on the Date of
Grant.
(g) On or after the Date of Grant of Performance Shares, the
Committee may provide for the payment to the Participant of dividend
equivalents thereon in cash or additional Common Shares on a current, deferred
or contingent basis.
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(h) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
9. Transferability. (a) No Option Right or other derivative security
(as that term is used in Rule 16b-3) granted under this Plan may be
transferred by a Participant except by will or the laws of descent and
distribution. Option Rights and Appreciation Rights granted under this Plan
may not be exercised during a Participant's lifetime except by the Participant
or, in the event of the Participant's legal incapacity, by his guardian or
legal representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision.
(b) Any grant made under this Plan may provide that all or
any part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or Appreciation Rights or upon
the termination of the Deferral Period applicable to Deferred Shares or in
payment of Performance Shares or Performance Units, or are no longer subject
to the substantial risk of forfeiture and restrictions on transfer referred to
in Section 6 of this Plan, shall be subject to further restrictions upon
transfer.
10. Adjustments. The Committee may make or provide for such
adjustments in the number of Common Shares covered by outstanding awards
granted hereunder, the Option Prices per Common Share or Base Prices per
Common Share applicable to any such awards, and the kind of shares (including
shares of another issuer) covered thereby, as the Committee may in good faith
determine to be equitably required in order to prevent dilution or expansion
of the rights of Participants that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Corporation or (b) any merger, consolidation,
spin-off, spin-out, split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of warrants or other
rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced. Moreover, the
Committee may on or after the Date of Grant provide in the agreement
evidencing any award under this Plan that the holder of the award may elect to
receive an equivalent award in respect of securities of the surviving entity
of any merger, consolidation or other transaction or event having a similar
effect, or the Committee may provide that the holder will automatically be
entitled to receive such an equivalent award. The Committee may also make or
provide for such adjustments in the maximum number of Common Shares specified
in Section 3(a) of this Plan, the maximum number of Performance Units
specified in Section 3(b), and the maximum number of Common Shares and
Free-standing Appreciation Rights specified in Sections 4(a) and 5(h)(ii) of
this Plan as the Committee may in good faith determine to be appropriate in
order to reflect any transaction or event described in this Section 10.
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11. Fractional Shares. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Committee may provide
for the elimination of fractions or for the settlement thereof in cash.
12. Withholding Taxes. To the extent that the Corporation is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or
the realization of any such benefit that the Participant or such other person
make arrangements satisfactory to the Corporation for payment of the balance
of any taxes required to be withheld. At the discretion of the Committee and
subject to the provisions of Rule 16b-3, any such arrangements may include
relinquishment of a portion of any such payment or benefit. The Corporation
and any Participant or such other person may also make similar arrangements
with respect to the payment of any taxes with respect to which withholding is
not required.
13. Certain Terminations of Employment or Consulting Services,
Hardship and Approved Leaves of Absence. Notwithstanding any other provision
of this Plan to the contrary, in the event of termination of employment or
consulting services by reason of death, disability, normal retirement, early
retirement, with the consent of the Corporation, termination of employment or
consulting services to enter public service with the consent of the
Corporation or leave of absence approved by the Corporation, or in the event
of hardship or other special circumstances, of a Participant who holds an
Option Right or Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any
Performance Shares or Performance Units that have not been fully earned, or
any Common Shares that are subject to any transfer restriction pursuant to
Section 9(b) of this Plan, the Committee may take any action that it deems to
be equitable under the circumstances or in the best interests of the
Corporation, including without limitation, waiving or modifying any limitation
or requirement with respect to any award under this Plan.
14. Administration of the Plan. (a) This Plan shall be administered
by a Committee of the Board, which shall be composed of not less than two
members of the Board, each of whom shall be a " non-employee director" within
the meaning of Rule 16b-3.
(b) The interpretation and construction by the Committee of
any provision of this Plan or any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares or Performance Units, and any
determination by the Committee pursuant to any provision of this Plan or any
such agreement, notification or document, shall be final and conclusive. No
member of the Committee shall be liable for any such action taken or
determination made in good faith.
15. Amendments and Other Matters. (a) This Plan may be amended from
time to time by the Committee; provided, however, that except as expressly
authorized by this Plan, no such amendment shall increase the number of Common
Shares specified in Section 3(a) hereof, increase the number of Performance
Units specified in Section 3(b) hereof, extend the time for granting awards
under paragraph 16, or otherwise cause this Plan to cease to satisfy any
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<PAGE>
applicable condition of Rule 16b-3, without further approval of the
stockholders of the Corporation.
(b) With the concurrence of the affected Participant, the
Committee may cancel any agreement evidencing Option Rights or any other award
granted under this Plan. In the event of any such cancellation, the Committee
may authorize the granting of new Option Rights or other awards hereunder,
which may or may not cover the same number of Common Shares or Performance
Units as had been covered by the cancelled Option Rights or other award, at
such Option Price, in such manner and subject to such other terms, conditions
and discretion as would have been permitted under this Plan had the cancelled
Option Rights or other award not been granted.
(c) The Committee may grant under this Plan any award or
combination of awards authorized under this Plan in exchange for the
cancellation of an award that was not granted under this Plan, including
without limitation any award that was granted prior to the adoption of this
Plan by the Board, and any such award or combination of awards so granted
under this Plan may or may not cover the same number of Common Shares as had
been covered by the cancelled award and shall be subject to such other terms,
conditions and discretion as would have been permitted under this Plan had the
cancelled award not been granted.
(d) This Plan shall not confer upon any Participant any
right with respect to continuance of employment or other service with the
Corporation or any Subsidiary and shall not interfere in any way with any
right that the Corporation or any Subsidiary would otherwise have to terminate
any Participant's employment or other service at any time.
(5) (i) To the extent that any provision of this Plan
would prevent any Option Right that was intended to
quality as an Incentive Stock Option from so
qualifying, any such provision shall be null and
void with respect to any such Option Right:
provided, however, that any such provision shall
remain in effect with respect to other Option
Rights, and there shall be no further effect on any
provision of this Plan.
(ii) Any award that may be made pursuant to an
amendment to this Plan that shall have been adopted
without the approval of the stockholders of the
Corporation shall be null and void if it is
subsequently determined that such approval was
required in order for this Plan to continue to
satisfy the applicable conditions of Rule 16b-3.
16. Termination of the Plan. No further awards shall be granted under
this Plan after the passage of 10 years from the date on which this Plan is
first approved by the stockholders of the Corporation.
17. Effective Date. The effective date of this Plan (the Effective
Date") shall be December 18, 1998, provided, however, that this Plan and each
award granted hereunder shall be void and of no force or effect until and
unless this Plan shall have been approved by a vote of the holders of the
majority of the Corporation present, or represented, and entitled to vote at a
meeting duly held in accordance with New Mexico law.
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18. Nontransferability. Each award granted under this Plan shall by
its terms be nontransferable by the Participant except by will or the laws of
decent and distribution of the state wherein the Participant is domiciled at
the time of his death; provided, however, that the Committee may (but need
not) permit other transfers, to the extent consistent with Rule 16b-3; where
the Committee concludes that such transferability does not result in
accelerated taxation and is otherwise appropriate and desirable.
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UNICO, INC.
INCENTIVE EQUITY PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of __________,
1999 (the "Agreement"), between _________________________________ (the
"Optionee") and Unico, Inc. a New Mexico corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee is an employee of the Company;
WHEREAS, the execution of a Nonqualified Stock Option
Agreement in the form hereof has been duly authorized by a resolution of the
Committee administering the Unico, Inc. Incentive Equity Plan (the "Plan"),
which Plan was approved by a resolution of the Board of Directors of the
Company duly adopted on December 18, 1998 and is incorporated herein as an
appendix; and
WHEREAS, the option granted hereby is intended as a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as
follows:
1. Option.
(a) Pursuant to the Plan, the Company hereby grants to the
Optionee an option (the "Option") to purchase_________ shares (the "Option
Shares") of Common Stock, ____ par value, of the Company (the "Common Stock")
at a purchase price per share of $_____ (the "Option Price") which is the fair
market value of the Option Shares as of the date hereof, and agrees to cause
certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Option Price in full, all subject, however, to
the terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
20% of the shares of Common Stock specified above before_________________
[insert date of agreement] and to the extent of an additional 20% of the
shares specified above after each of the first four anniversaries of such
date, for so long as the Optionee continues to be in the employ of the Company
or any Subsidiary. For purposes of this Agreement, the employment of the
Optionee with the Company with the Company or a Subsidiary shall not be deemed
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of his
employment among or between the Company or its Subsidiaries. For the purpose
of this paragraph, leaves of absence approved by the Board of Directors of the
Company, or any
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committee thereof, for illness, military or government service, or other
cause, shall be considered as employment.
(c) To the extent exercisable, the Option may be exercised
in whole, or in part from time to time, until expiration
as provided in Section 1(d).
(d) This Option shall terminate on the earliest of the
following dates:
(I) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases to
be such an employee in a manner described in (ii) or (iii)
below.
(ii) 60 days after the Optionee ceases to be an employee of
the Company or any Subsidiary if (I) Optionee retires from
employment with the Company or any Subsidiary after reaching
the age of 65 years, or (ii) Optionee's employment is
terminated under circumstances determined by the Committee
to be for the convenience of the Company.
(iii) 90 days after the date on which Optionee's employment
is terminated as a result of the Optionee's death or
Disability (as hereinafter defined).
(iv) Ten years from the date of this Agreement.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this
Option as set forth in Section 1(b) hereof, and at no time shall any right to
exercise this Option accrue to the Optionee unless and to the extent that the
conditions set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares
(a) This Option shall be exercised by Optionee by delivery
to the Company of (i) an Exercise Notice in the form attached to this
Agreement as Annex A, appropriately completed and duly executed and dated by
the Optionee, (ii) payment in full of the Option Price for the number of
shares which the Optionee is purchasing hereunder as required by Section 2(b),
and (iii) payment in full to the Company of any amounts required to be paid
pursuant to Section 2(c).
(b) The Option Price shall be payable (i) in cash or by
check (certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the optionee and have a value at the time of exercise
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that is equal to the Option Price, or (iii) a combination of the foregoing.
The requirement of payment in cash shall be deemed satisfied if the Optionee
shall have made arrangements satisfactory to the Company with a broker who is
a member of the National Association of Securities Dealers, Inc. to sell on
the exercise date a sufficient number of the shares being purchased so that
the net proceeds of the sale transaction will at least equal the option
exercise price and pursuant to which the broker undertakes to deliver the full
option exercise price to the Company not later than the date on which the sale
transaction will settle in t he ordinary course of business.
(c) If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with exercise of the
Option, it shall be a condition to such exercise that the Optionee pay or make
provision satisfactory to the Company for payment of all such taxes.
3. Change in Control, Adjustments.
(a) Upon a Change in Control (as hereinafter defined), the
Option shall, notwithstanding Section 1(b), become immediately exercisable in
full. If any event or series of events constituting a Change in Control shall
be abandoned, the effect thereof shall be null and of no further force and
effect and the provisions of Section 1(b) shall be reinstated but without
prejudice to any exercise of the Option that may have occurred prior to such
nullification.
(b) Notwithstanding the provisions of Section 3(a), to the
extent necessary for the Option, its exercise or the sale of Common Stock
acquired thereunder to be exempt from Section 16(b) of the Exchange Act of
1934, as amended, (i) except in the case of death or Disability, the Optionee
shall not be entitled to exercise the Option if granted within six months
prior to the occurrence of a Change in Control until the expiration of the
six-month period following the date of this Agreement, or (ii) at least six
months shall elapse from the date of this Agreement to the date of disposition
of the Option Shares acquired upon exercise of the Option.
(c) (I) The Committee may make or provide for such good
faith adjustments- in the number and kind of shares
of the Company's Common Stock covered by the Option
and in the Option Price, as the Committee may in
good faith determine to be equitably required in
order to prevent dilution or expansion of the
rights of the Optionee that otherwise would result
from (a) any stock dividend, stock split,
combination of shares, recapitalization or other
change in the capital structure of the Company, or
(b) any merger, consolidation, spinoff, spin-out,
split-off, split-up, reorganization, partial or
complete liquidation or other distribution of
assets, issuance of warrants or other rights to
purchase securities or any other corporate
transaction or event having an effect similar to
the foregoing.
(ii) In the event of any such transaction or event, the
Committee may provide in substitution for the
Option such alternative consideration as it may in
good faith determine to be equitable under the
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circumstances and may require in connection
therewith the surrender of this Option.
4. No Transfer Of Option.
The Option may not be transferred by the Optionee except by
will or the laws of descent and distribution. The Option may not be exercised
during the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in
a fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Limitations on Exercise of the Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities law and
unless under such laws at the time of exercise the shares purchasable upon
exercise are exempt, are the subject matter of an exempt transaction, are
registered by description or by qualification, or at such time are the subject
matter of a transaction which has been registered by description.
6. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
7. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for
the merger, consolidation or reorganization into or
with another corporation or other legal person;
provided, however, that no such merger,
consolidation or reorganization shall constitute a
Change in Control if as a result of such merger,
consolidation or reorganization not less than a
majority of the combined voting power of the
then-outstanding securities of such corporation or
person immediately after such transaction are held
in the aggregate by the holders of securities
entitled to vote generally in the election of
directors of the Company ("Voting Stock")
immediately prior to such transaction;
(ii) The execution by the Company of an agreement for
the sale or other transfer of all or substantially
all of its assets to another corporation or other
legal person; provided, however, that no such sale
or other transfer shall constitute a Change in
Control if as a result of such sale or transfer not
less than a majority of the combined voting power
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of the then outstanding securities of such
corporation or person immediately after such sale
or transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange
Act") disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) (other than any
person (or any of their affiliates) that owns
beneficially or of record more than ten percent of
the Common Stock on 1996) has or intends to become
the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the
Exchange Act) of securities representing a majority
or more of the combined voting power of the
then-outstanding Voting Stock, including, without
limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the directors of the Company cease for
any reason to constitute at least a majority
thereof; provided, however , that for purposes of
this subsection (iv) each director who is first
elected, or first nominated for election by the
Company's stockholders, by a vote of at least
two-thirds of the directors of the Company (or a
committee thereof) then still in office who were
directors of the Company at the beginning of any
such period shall be deemed to have been a director
of the Company at the beginning of such period; or
(v) except pursuant to a transaction described in the
proviso to subsection (i) of this definition, the
Company adopts a plan for the liquidation or
dissolution of the Company.
(b) "Disability" means, as of any date, the permanent
disability of the Optionee in accordance with the then applicable provisions
of the disability benefit program of the Company generally available to
employees of the Company or any Subsidiary.
8. Terms of Plan. This Agreement shall be subject to all of the terms
and conditions of the Plan which is incorporated herein by reference. All
capitalized terms used herein and not defined herein are used as defined in
the Plan.
EXECUTED at __________________, California this________ day
of__________________ 19___.
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UNICO, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
ACCEPTED AND AGREED
By:__________________________
Name:________________________
Optionee
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ANNEX A
to
NonQualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the NonQualified Stock Option Agreement dated as of
____________________, 199__ between the undersigned and Unico, Inc. (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:_______________________
(b) Total purchase price ((a) x Option Exercise Price): $___________
Please issue a single certificate for the shares being purchased in
the name of the undersigned. The registered address on such certificate should
be:
____________________________________________
____________________________________________
____________________________________________
The undersigned's social security number is:______________________
Date_____________________ __________________________
Optionee
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UNICO, INC.
SCHEDULE 14A
APENDIX C
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
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<PAGE>
UNICO, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purposes ...................................................................1
Definitions ................................................................1
Shares Available under the Plan.............................................2
Automatic Grants of Nonqualified Options to Nonemployee Directors ..........3
Adjustments ................................................................4
Fractional Shares ..........................................................5
Administration of the Plan .................................................5
Amendments and Other Matters................................................5
No Additional Rights .......................................................5
Securities Law Matters......................................................6
Change in Control ..........................................................6
Termination of the Plan ....................................................8
Effective Date .............................................................8
Nontransferability .........................................................8
</TABLE>
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UNICO, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Purposes. The purposes of this Plan are to encourage outside Directors of
Unico, Inc. (the "Corporation") to own shares of the Corporation's
stock and thereby to align their interests more closely with the
interests of the other stockholders of the Corporation, to encourage
the highest level of Director performance by providing the Directors
with a direct interest in the Corporation's attainment of its
financial goals, and to provide financial incentives that will help
attract and retain the most qualified Directors.
Definitions. As used in this Plan:
"Board" means the Board of Directors of the Corporation.
"Change in Control" has the meaning set forth in Section 11.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Committee described in Section 7 of this Plan.
"Common Shares" means (I) shares of the Common Stock, ______ par value, of the
Corporation and (ii) any security into which Common Shares may be converted by
reason of any transaction or event of the type referred to in Section 5 of
this Plan.
"Date of Grant" means the date on which a grant of Nonqualified Options shall
become effective as provided in Section 4(a).
"Director" means a member of the Board who is not an employee of the
Corporation. For purposes of this Plan, an employee is an individual whose
wages are subject to the withholding of federal income tax under Section 3401
and 3402 of the Code. A Director who becomes an employee (within the meaning
of this Section) shall not forfeit any Option Right granted hereunder solely
by reason of assuming employee status.
"Disability" means the inability to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than 12 months. A Director shall not
be considered to be subject to a Disability until he furnishes a certification
from a practicing physician in good standing to the effect that such Director
meets the criteria described in this Section.
"Effective Date" has the meaning set forth in Section 13.
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Market Value" as of a given date means (a) the closing sale price of the
Common Shares on the principal securities exchange on which such Common Shares
are then trading on such date, or (b) if the Common Shares are not listed on a
securities exchange, the closing sale price of the Common Shares as reported
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") on such date. If there are no Common Share transactions on such
date, the Market Value per Common Share shall be determined as of the
immediately preceding date on which there were Common Share transactions.
"Nonqualified Option" means an option to purchase shares of Common Stock that
is not intended to qualify as an incentive stock option under Section 422 of
the Code.
"Optionee" means the Director so designated in an agreement evidencing an
outstanding Option Right, or the Successor of an Optionee, as the context so
requires.
"Option Price" means the purchase price payable upon the exercise of an Option
Right.
"Option Right" means the right to purchase Cornmon Shares from the Corporation
upon the exercise of a Nonqualified Option granted pursuant to this Plan.
Option Rights shall be evidenced by written agreements containing terms and
conditions not inconsistent with this Plan.
"Plan" means the Unico, Inc. Stock Option Plan for Non Employee Directors, as
the same may be amended from time to time.
"Rule 16b-3" means Rule 16b-3, as promulgated and amended from time to time by
the Securities and Exchange Commission under the Exchange Act.
"Successor" of an Optionee means the legal representative of the estate of a
deceased Optionee or the person or persons who shall acquire the right to
exercise a Nonqualified Option by bequest or inheritance or by reason of the
death of the Optionee.
"Termination of Service" means the time at which the Optionee ceases to serve
as a member of the Board for any reason, with or without cause, which includes
termination by resignation, removal, death or retirement.
"Voting Stock" has the meaning set forth in Section 11(a).
3. Shares Available under the Plan. (a) Subject to Sections 3(b) and 5
of this Plan, the number of Common Shares issued or transferred, plus
the number of Common Shares covered by outstanding awards granted
under this Plan, shall not in the
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aggregate exceed 250,000 Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination
thereof.
(b) For the purposes of this Section 3, any Common Shares
subject to an Option Right that has been canceled or
terminated shall again be available for the grant of Option
Rights under this Plan.
4. Automatic Grants of Nonqualified Options to NonEmployee
Directors.
(a) The following Nonqualified Options shall be granted
under this Plan:
(i) As of the Effective Date, a Nonqualified Option to
purchase 10,000 Common Shares is granted to each person who on such date is an
incumbent Director, and a Nonqualified Option to purchase 10,000 Common Shares
shall be automatically granted to each such person on the day following the
annual shareholders' meeting of each year thereafter for so long as he or she
continues to serve as a Director.
(ii) With respect to each person who first becomes a
Director of the Corporation after the Effective Date of this Plan, an option
to purchase 10,000 Common Shares shall be automatically granted as of the date
such person first becomes a Director, and a Nonqualified Option to purchase
10,000 Common Shares shall be automatically granted to each such person on the
day following the annual shareholders' meeting of each year thereafter for so
long as he or she continues to serve as a Director and provided that he or she
has served as a Director for at least six months prior thereto.
(b) The Option Price per share of each Nonqualified Option shall be
the Market Value per Common Share as of the Date of Grant.
(c) (i) Subject to subsection (ii) of this Section 4(c) and Section
11 of this Plan, each Nonqualified Options, until terminated as provided in
Section 4(d), shall become exercisable to the extent of 20% of the Common
Shares subject thereto on the Date of Grant and to the extent of an additional
20% of the Common Shares subject thereto after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as
a member of the Board. To the extent exercisable, each Nonqualified Option
shall be exercisable in whole or in part from time to time.
(ii) If an Optionee ceases to be a Director by reason of
death or Disability, all Nonqualified Options held by such Optionee that would
have otherwise become exercisable had such Director continuously served as a
Director through the date of the Corporation's annual meeting of stockholders
immediately following such death or Disability shall, notwithstanding
subsection (I) of this Section 4(c), become immediately exercisable in full.
(d) Each Nonqualified Option shall terminate on the earliest of the
following dates:
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(i) Three (3) months following the effective date of the
Optionee's Termination of Service, if such Termination of Service results
other than from Optionee's death or Disability;
(ii) One (1) year following the effective date of the
Optionee's Termination of Service, if such Termination of Service results from
Optionee's death or Disability; or
(iii) Ten (10) years from the Date of Grant.
(e) The Option Price shall be payable (I) in cash or by check
acceptable to the Corporation, (ii) by transfer to the Corporation of Common
Shares which have been owned by the Optionee for more than six months prior to
the date of exercise and which have a Market Value on the date of exercise
equal to the Option Price, or (iii) by a combination of such methods of
payment. The requirement of payment in cash shall be deemed satisfied if the
Optionee shall have made arrangements satisfactory to the Corporation with a
broker who is a member of the National Association of Securities Dealers, Inc.
to sell on the exercise date a sufficient number of the shares being purchased
so that the net proceeds of the sale transaction will at least equal the
option exercise price and pursuant to which the broker undertakes to deliver
the full option exercise price to the Corporation not later than the date on
which the sale transaction will settle in the ordinary course of business.
(f) Nonqualified Options granted pursuant to this Section 4 shall be
options that are not intended to qualify under any particular provision of the
Code.
(g) If and to the extent otherwise advisable herein or under the
applicable option agreement, upon and after the death of an Optionee, such
Optionee's Nonqualified Options, to the extent exercisable after death may be
exercised by the Successors of the Optionee. A Nonqualified Option may be
exercised, and payment in full of the aggregate Option Price made, by the
Successors of an Optionee only by written notice (in the form prescribed by
the Committee) to the Corporation specifying the number of Common Shares to be
purchased. Such notice shall state that the aggregate Option Price will be
paid in full, or that the Nonqualified Option will be exercised as otherwise
provided hereunder, in the discretion of the Corporation or the Committee, if
and as applicable.
5. Adjustments. The Committee shall make or provide for such
adjustments in the number of Common Shares covered by awards made hereunder,
the Option Prices per Common Share applicable to any such awards, and the kind
of shares (including shares of another issuer) covered thereby, as the
Committee shall in good faith determine to be equitably required in order to
prevent dilution or expansion of the rights of Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation,
or (b) any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of
assets, issuance of warrants or other rights to purchase securities or any
other corporate transaction or event having an effect similar to any of the
foregoing. The Committee shall also make or provide for such adjustments in
the maximum number of Common Shares specified in
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<PAGE>
Section 3(a) of this Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 5.
6. Fractional Shares. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. Whenever under the terms
of this Plan a fractional Common Share would otherwise be required to be
issued, an amount in lieu thereof shall be paid in cash based upon the Market
Value of such fractional Common Share.
7. Administration of the Plan. This Plan shall be administered by a
committee of the Board, which shall be composed of not less than two members
of the Board ("Committee"). Notwithstanding the foregoing, grants of Option
Rights under this Plan shall be automatic as described in Section 4, and the
Committee shall have no authority, discretion or power to determine the terms
of the Option Rights to be granted pursuant to this Plan, the number of Common
Shares to be issued thereunder or the time at which such Option Rights are to
be granted, or establish the duration and nature of Option Rights, except in
the sense of administering the Plan subject to the provisions of this Plan.
8. Amendments and other Matters.
(a) This Plan may be terminated, and from time to time
amended, by the Board; provided, however, that except as expressly authorized
by this Plan, no such amendment shall (i) increase the number of Common Shares
specified in Section 3(a) hereof, materially modify the requirements as to
eligibility for participation in this Plan, or otherwise cause this Plan or
any grant, award or election made pursuant to this Plan to cease to satisfy
any applicable condition of Rule 16b-3, without further approval of the
stockholders of the Corporation, or (ii) cause any Optionee to fail to qualify
as a "non-employee director" within the meaning of Rule 16b-3; provided,
further, that Plan provisions relating to the amount and price of securities
to be awarded and the timing of awards under the Plan shall not be amended
more than once every six months, other than to comport with changes in the
Code, the Employees Retirement Income Security Act, as amended, or the rules
promulgated thereunder. No amendment or termination of this Plan shall
adversely affect any outstanding award theretofore granted under the Plan
without the consent of the Director holding such award.
(b) Any grant, award or election that may be made pursuant
to an amendment to this Plan shall be null and void if it is subsequently
determined that (i) stockholder approval of such amendment was required in
order for this Plan to continue to satisfy the applicable conditions of Rule
16b-3, or (ii) such grant, award, election or amendment disqualified any
optionee as a "non-employee director" within the meaning of Rule 16b-3.
9. No Additional Rights. Nothing contained in this Plan or in any
award granted under this Plan shall interfere with or limit in any way the
right of the stockholders of the Corporation to remove any Director from the
Board pursuant to state law or the Bylaws or Articles of Incorporation of the
Corporation, nor confer upon any Director any right to continue in the service
of the Corporation.
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<PAGE>
10. Securities Law Matters.
(a) The Corporation may require any Optionee, as a condition of
receiving Option Rights, to give written assurances in substance and form
satisfactory to the Corporation and its counsel to the effect that such person
is acquiring the Common Shares subject to the Option Rights for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Corporation
deems necessary or appropriate in order to comply with federal and applicable
state securities laws.
(b) Each award of Option Rights shall be subject to the requirement
that, if at any time counsel to the Corporation shall determine that the
listing, registration or qualification of the Common Shares subject to such
Option Rights upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance of shares
thereunder, such award of Option Rights may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to such
counsel. Nothing herein shall be deemed to require the Corporation to apply
for or to obtain such listing, registration or qualification.
(c) To the extent necessary for an Option Right, its exercise or the
sale of Common Shares acquired thereunder to be exempt from Section 16(b) of
the Exchange Act, such Option Right shall be held six months from the Date of
Grant, or at least six months shall elapse from the Date of Grant to the date
of disposition of the Common Shares acquired upon exercise of such Option
Right.
11. Change in Control. Upon a Change in Control (as hereinafter
defined), all Nonqualified Options held by an Optionee that would become
exercisable with respect to such Optionee's service as a Director through the
date of the Corporation's annual meeting of stockholders immediately following
such Change in Control shall, notwithstanding Section 4(c) of this Plan,
become immediately exercisable in full, If any event or series of events
constituting a Change in Control shall be abandoned, the effect thereof shall
be null and of no further force and effect and the provisions of section 4(c)
shall be reinstated but without prejudice to any exercise of any Option Right
that may have occurred prior to such nullification. For purposes of this Plan,
"Change in Control" means the occurrence of any of the following events:
(a) The execution by the Corporation of an agreement for the merger,
consolidation or reorganization into or with another corporation or other
legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the
combined voting power of the then-outstanding securities of such corporation
or person immediately after such transaction are held in the aggregate by the
holders of securities entitled to vote generally in the election of directors
of the Corporation ("Voting Stock") immediately prior to such transaction;
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<PAGE>
(b) The execution by the Corporation of an agreement for the sale or
other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or
other transfer shall constitute a Change in Control if as a result of such
sale or transfer not less than a majority of the combined voting power of the
then outstanding securities of such corporation or person immediately after
such sale or transfer is held in the aggregate by the holders of Voting Stock
of the Corporation immediately prior to such sale or transfer.
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Exchange Act disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than any
person (or any of their affiliates) that owns beneficially or of record more
than ten percent of the Common Shares on the Effective Date) has or intends to
become the beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing a majority or more of the combined voting
power of the then-outstanding Voting Stock, including, without limitation,
pursuant to a tender offer or exchange offer;
(d) If, during any period of two consecutive years, individuals who
at the beginning of any such period constitute the directors of the
Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (d) each director who
is first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the directors of the
Corporation (or a committee thereof) then still in office who were directors
of the Corporation at the beginning of any such period shall be deemed to have
been a director of the Corporation at the beginning of such period; or
(e) except pursuant to a transaction described in the proviso to
subsection (a) of this Section 11, the Corporation adopts a plan for the
liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, to the extent necessary for an Option
Right, its exercise or the sale of Common Shares acquired thereunder to be
exempt from Section 16(b) of the Exchange Act (I) except in the case of death
or Disability, an Optionee shall not be entitled to exercise any Option Rights
granted within six months prior to the occurrence of a Change in Control until
the expiration of the six-month period following the Date of Grant of such
Option Rights, or (ii) at least six months shall elapse from the Date of Grant
of such Option Rights to the date of disposition of the Common Shares acquired
upon exercise of such Option Rights.
12. Termination of the Plan. No further awards shall be granted under
this Plan after the passage of ten years from the date on which this Plan is
first approved by the stockholders of the Corporation.
13. Effective Date. The effective date of this Plan (the "Effective
Date") shall be December 18, 1998, provided, however, that this Plan and each
award granted hereunder shall
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be void and of no force or effect until and unless this Plan shall have been
approved by a vote of the holders of the majority of the Corporation present,
or represented, and entitled to vote at a meeting duly held in accordance with
New Mexico law.
14. Nontransferability. Each Option granted under this Plan shall by
its terms be nontransferable by the Optionee except by will or the laws of
decent and distribution of the state wherein the Optionee is domiciled at the
time of his death; provided, however, that the committee may (but need not)
permit other transfers, to the extent consistent with Rule 16b-3, where the
Committee concludes that such transferability does not result in accelerated
taxation and is otherwise appropriate and desirable.
* * *
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UNICO, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
NONQUALIFIED STOCK OPTION AGREEMENT
WHEREAS, __________________ (the "Optionee") is a Director
(as defined in the UNICO, INC. Stock Option Plan for Non-Employee Directors
(the "Plan")) of UNICO, INC., a New Mexico corporation (the "Corporation");
and
WHEREAS, the execution of an Agreement in the form hereof
has been duly authorized by a resolution of the Board of Directors of the
Corporation duly adopted on December 18, 1998.
NOW, THEREFORE, the Corporation hereby grants to the
Optionee a nonqualified option pursuant to the Plan to purchase _____ shares
of the Corporation's Common Stock, _____ par value per share ("Common Stock"),
at the price of $______ per share and agrees to cause certificates for any
shares purchased hereunder to be delivered to the Optionee upon payment of the
purchase price in full, all subject, however, to the terms and conditions
hereinafter set forth. Unless otherwise defined, capitalized terms used herein
shall have the meanings set forth in the Plan.
1 . This option (until terminated as hereafter provided) shall become
exercisable to the extent of 20% of the shares of Common Stock specified above
after [insert date of grant/effective date of Plan] and to the extent of an
additional 20% of the shares specified above after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as
a member of the Board of Directors. To the extent exercisable, the option
shall be exercisable in whole' or in part from time to time.
Notwithstanding the first sentence of this paragraph 1, if the
Optionee ceases to be a Director by reason of death or Disability (as defined
in Section 5 hereof), the option granted hereby shall become immediately
exercisable to the extent such option would have otherwise become exercisable
had the Optionee continuously served as a Director through the date of the
Corporation's annual meeting of stockholders immediately following such death
or Disability.
Upon a Change in Control (as hereinafter defined), the
option granted hereby shall, notwithstanding the first sentence of this
paragraph 1, become immediately exercisable to the extent the option would
have become exercisable with respect to the Optionee's service as a Director
through the date of the Corporation's annual meeting of stockholders
immediately following such Change in Control. If any event or series of events
constituting a Change in Control shall be abandoned, the effect thereof shall
be null and of no further force and effect and the provisions of the first
sentence of this paragraph 1 shall be reinstated but without prejudice to
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any exercise of this option that may have occurred prior to such
nullification. For purposes of this Agreement, "Change in Control" means the
occurrence of any of the following events:
(a) The execution by the Corporation of an agreement of the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization will constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the
combined voting power of the then-outstanding securities of such Corporation
or person immediately after such transaction are held in the aggregate by the
holders of securities entitled to vote generally in the election of directors
of the Corporation ("Voting Stock") immediately prior to such transaction;
(b) The execution by the Corporation of an agreement for the
sale or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such merger,
consolidation or reorganization will constitute a Change in Control if as a
result of such sale or transfer not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the
holders of Voting Stock of the Corporation immediately prior to such sale or
transfer;
(c) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is used Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than any person (or
any of their affiliates) that owns beneficially or of record more than ten
percent of the Common Stock on [insert effective date of plan] has or intends
to become the beneficial owner (as the term "beneficial owner" is defined
under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of securities representing a majority or more of the combined
voting power of the then outstanding Voting Stock, including, without
limitation, pursuant to a tender offer or exchange offer;
(d) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors
of the Corporation cease for any reason to constitute at least a majority
thereof; provided, however, that for purposes of this subsection (d) each
director who is first elected, or first nominated for election by the
Corporation's stockholders, by a vote of at least two-thirds of the directors
of the Corporation (or a committee thereof) then still in office who were
directors of the Corporation at the beginning of any such period will be
deemed to have been a director of the Corporation at the beginning of such
period; or
(e) except pursuant to a transaction described in the
proviso to clause (a) of this paragraph 1, the Corporation adopts a plan for
the liquidation or dissolution of the Corporation.
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Notwithstanding the foregoing, to the extent necessary for
the grant of this option, its exercise or the sale of the Common Stock
acquired hereunder to be exempt from Section 16(b) of the Exchange Act, (i)
except in the case of death or Disability, the Optionee shall not be entitled
to exercise the option granted hereby if granted within six months prior to
the occurrence of a Change in Control until the expiration of the six-month
period following the Date of Grant of this option, or (ii) at least six months
shall elapse from the Date of Grant of this Option to the date of disposition
of the shares of Common Stock acquired upon exercise of this option.
2. The option price shall be payable (a) in cash or by check
acceptable to the Corporation, (b) by transfer to the Corporation of shares of
Common Stock which have been owned by the Optionee for more than six months
prior to the date of exercise and which have a fair market value on the date
of exercise equal to the option price, or (c) by a combination of such methods
of payment. The requirement of payment in cash shall be deemed satisfied if
the Optionee shall have made arrangements satisfactory to the Corporation with
a broker who is a member of the National Association of Securities Dealers,
Inc. to sell on the exercise date a sufficient number of the shares being
purchased so that the net proceeds of the sale transaction will at least equal
the option exercise price and pursuant to which the broker undertakes to
deliver the full option exercise price to the Corporation not later than the
date on which the sale transaction will settle in the ordinary course of
business.
3. This Option shall terminate on the earliest of the following
dates:
(a) Three months following the effective date of the
Optionee's Termination of Service (as defined in Section 5 hereof), if such
Termination of Service results other than from Optionee's death or Disability;
(b) One year following the effective date of the Optionee's
Termination of Service, if such Termination of Service results from Optionee's
death or Disability; and
(c) Ten years from the date of this Agreement.
4. This Agreement shall be subject to all of the terms and conditions
of the Plan, which is incorporated herein by reference.
5. As used in this Agreement:
"Director" means a member of the Board of Directors of the
Corporation who is not an employee of the Corporation. For purposes of this
Agreement, an employee is an individual whose wages are subject to the
withholding of federal income tax under Sections 3401 and 3402 of the Internal
Revenue Code of 1986, as amended from time to time. A Director who becomes an
employee (within the meaning of this Section) shall not forfeit the option
granted by this Agreement solely by reason of assuming employee status.
90
<PAGE>
"Disability" means the inability to engage in any
substantial gainful activity by reason of any -medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12
months. A Director shall not be considered to be subject to a Disability until
he furnishes a certification from a practicing physician in good standing to
the effect that such Director meets the criteria described in this definition.
"Termination of Service" means the time at which the
Optionee ceases to serve as a member of the Board of Directors of the
Corporation for any reason, with or without cause, which includes termination
by resignation, removal, death or retirement.
EXECUTED at ______________, California, as of ___________, 1998.
UNICO, INC.
By:____________________________
Name:__________________________
Title:_________________________
ACCEPTED AND AGREED
By:_______________________
Name:_____________________
Optionee
91
<PAGE>
UNICO, INC.
SCHEDULE 14A
APPENDIX D
FINANCIAL STATEMENTS AND OTHER INFORMATION
INTERMOUNTAIN REFINING CO., INC. (IRC)
92
<PAGE>
INTERMOUNTAIN REFINING CO., INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
PROVIDED IN ACCORDANCE WITH
REGULATION 14(a), ITEM 14(b)(3)(ii)
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
Item
Page
<S> <C>
Financial Statements:
Balance sheets as of November 30, 1998 and February 28, 1998 2
Statements of operations for the three and nine month periods
ended November 30, 1997 and 1998 4
Statements of cash flows for the nine month periods ended
November 30, 1997 and 1998 5
Notes to financial statements 6
Additional Information in accordance with Regulation 14(a), Item 14(b)(3)(ii):
Market for common equity and related stockholder matters 7
Managements discussion and analysis of financial condition
and results of operations 8
Changes in and disagreements with accountants on accounting
and financial disclosure 11
</TABLE>
93
<PAGE>
INTERMOUNTAIN REFINING CO., INC.
Balance Sheets
<TABLE>
<CAPTION>
November 30, February 28,
1998 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,126,311 $ 1,236,506
Certificate of Deposit 20,000 --
Accounts receivable 68,600 22,059
Accounts and accrued interest receivable
from related parties 28,898 2,390
Inventories -- 20,861
Notes receivable from related parties -- 102,026
Tax refund receivable 22,650 6,567
----------- -----------
TOTAL CURRENT ASSETS 1,266,459 1,390,409
PROPERTY AND EQUIPMENT
Land, buildings and improvements 434,327 434,327
Equipment 164,930 164,930
Refinery equipment 1,183,333 1,183,333
Co-generation equipment 290,298 290,298
Oil and gas properties 894,400 894,400
----------- -----------
Property, plant and equipment (gross) 2,967,288 2,967,288
Accumulated depreciation & depletion (2,062,214) (1,960,679)
----------- -----------
905,074 1,006,609
OTHER ASSETS
Notes receivable -- 8,383
Other assets (net) 167,866 167,866
Investment in Chatfield Dean - Notes B and C 175,250 600,500
----------- -----------
343,116 776,749
$ 2,514,649 $3,173,767
=========== ===========
</TABLE>
94
<PAGE>
Balance Sheets - Continued
<TABLE>
<CAPTION>
November 30, February 28,
1998 1998
---------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 168,581 $ 62,553
Taxes other than income 3,174 9,156
Other accrued expenses -- --
Income taxes payable -- 25,024
---------- ----------
TOTAL CURRENT LIABILITIES 171,755 96,733
DEFERRED TAXES PAYABLE, net of current portion -- 58,250
STOCKHOLDERS' EQUITY
Common stock, no par value,
authorized 100,000 shares,
issued 50,000 shares 446,761 446,761
Retained earnings 1,896,133 2,572,023
---------- ----------
2,342,894 3,018,784
$2,514,649 $3,173,767
========== ==========
</TABLE>
See notes to consolidated financial statements.
95
<PAGE>
INTERMOUNTAIN REFINING CO., INC.
Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months
Ended
Nov 30, Nov 30, Nov 30, Nov 30,
1997 1998 1997 1998
--------- --------- --------- ---------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Natural gas sales $ 65,974 $ 44,438 $ 174,103 $169,554
Electrical capacity and energy -- -- -- --
Processing and terminalling agreements -- -- -- 30,000
Petroleum product sales -- -- -- 584
Rent and other income 6,749 24,715 16,690 34,199
--------- --------- --------- ---------
72,723 69,153 190,793 234,337
--------- --------- --------- ---------
COSTS AND EXPENSES
Cost of sales 27,352 14,328 79,008 87,757
General and administrative - Note B 71,135 440,578 232,174 658,477
Depletion, depreciation & amort. 31,327 33,911 97,970 101,535
Bad debt expense -- 8,024 -- 8,024
Loss on write-down of invest. - Note C -- 175,250 -- 175,250
Interest, net (6,184) (10,182) (17,444) (39,922)
--------- --------- --------- ---------
123,630 661,909 391,708 991,121
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (50,907) (592,756) (200,915) (756,784)
Provision (benefit) for income taxes
Current (14,233) 6 (56,172) (22,644)
Deferred (3,925) (49,715) (11,775) (58,250)
--------- --------- --------- ---------
(18,158) (49,709) (102,896) (80,894)
--------- --------- --------- ---------
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS - Note A (32,749) (543,047) (98,019) (675,890)
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS
NET OF INCOME TAXES - Note A (36,738) -- 196,321 --
--------- --------- --------- ---------
NET INCOME (LOSS) $ (69,487) $(543,047) $ 98,302 $(675,890)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 50,000 50,000 50,000 50,000
BASIC AND FULLY DILUTED
EARNINGS PER SHARE
Continuing operations $ (0.66) $(10.86) $ (1.96) $(13.52)
Discontinued operations (0.73) -- 3.93 --
--------- --------- --------- ---------
$ (1.39) $ (10.86) $ 1.97 $(13.52)
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
96
<PAGE>
INTERMOUNTAIN REFINING CO., INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended
November 30, November 30,
1997 1998
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 98,322 $ (675,890)
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation, depletion and amortization 97,970 101,535
Deferred income taxes (23,600) (58,250)
Partners' share of income (loss) allocations (44,121) --
Loss on write down of Chatfield Dean
investment - Note C -- 175,250
Transfer of investments in satisfaction
of claims - Note B -- 250,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 56,401 (73,049)
Decrease in inventories -- 20,861
Increase (decrease) in accounts payable
and accrued expenses (7,703) 100,046
Bad debt expense -- 8,024
Decrease in refundable deposits 2,541 --
Income tax refunds received 327,767 6,567
Income taxes paid -- (25,030)
Increase (decrease) in income taxes accrued 33,800 (22,644)
---------- -----------
NET CASH FLOW PROVIDED, (USED)
BY OPERATING ACTIVITIES 541,357 (192,580)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in certificates of deposit -- (20,000)
Partnership cash distributions 178,784 --
Investment in Chatfield Dean (500) --
Increase in notes receivable (525,334) (55,000)
Collections on notes receivable 432,687 157,385
----------- -----------
NET CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES 85,637 82,385
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (18,619) --
----------- -----------
NET CASH FLOW USED BY FINANCING ACTIVITIES (18,619) --
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALEN $ 608,375 $ (110,195)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 349,055 1,236,506
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 957,430 $ 1,126,311
=========== ===========
</TABLE>
See notes to consolidated financial statements.
97
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The balance sheet as of November 30, 1998, the statements of
operations for the three and nine month periods ended November 30, 1998 and
1997, and the statement of cash flows for the nine month periods ended
November 30, 1998 and 1997, have been prepared by IRC, without audit. In the
opinion of management, all adjustments, (which include only normal recurring
adjustments), necessary to present fairly the financial position, results of
operations and changes in cash at November 30, 1998, and for all periods
presented have been made.
IRC's financial statements for the period November 30, 1998 have been
prepared on a going concern basis which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. Several of IRC's revenue sources have substantially declined over
the past year. Management recognizes that IRC must generate additional
resources to replace its existing depleting revenue base. IRC has positive
working capital and positive stockholders' equity at November 30, 1998. IRC
also has no debt service requirements at November 30, 1998. IRC's current
declining revenue stream would allow IRC to sustain operations on an ongoing
basis for at least the next fiscal year. Management's plans to enhance its
revenue base including consideration of the sale of its refinery in Fredonia,
Arizona, with a possible continued equity participation, acquisition of
additional refinery equipment in other locations, or other business
transactions which would generate sufficient resources to assure continuation
of IRC's operations.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with IRC's Annual
Report to Shareholders filed for Unico, Inc. for the year ended February 28,
1998, filed with the Securities and Exchange Commission. The results of
operations for the period ended November 30, 1998, are not necessarily
indicative of operating results for the full year.
NOTE A - BASIS OF PRESENTATION
In anticipation of consummation of the acquisition of Starlicon
International Corporation by Unico, Inc., the parent company of IRC, Unico
transferred all of it's assets, net of related liabilities, to IRC effective
as of March 1, 1998. Prior to consummation of the acquisition of Starlicon on
June 30, 1998, the consolidated financial statements of Unico, Inc. contained
all of the assets and business activities of both Unico and IRC presented on a
consolidated basis along with historical results of operations of certain
discontinued operations associated with Unico's investments in Intermountain
Chemical, Inc. and Gas Technologies, Inc. The financial statements presented
herein include the ongoing operations of IRC associated with business
activities presently carried out by IRC along with those business activities
formerly carried out by Unico, Inc. prior to the transfer of such assets and
business activities to IRC. Results of operations pertaining to discontinued
operations previously reported in the consolidated financial statements of
Unico have been included in the statements of operations and statements of
cash flows presented for all prior year periods presented in order to maintain
consistency with financial statements previously filed.
Amounts related to discontinued operations of Unico, Inc. for the nine months
ended November 30, 1997 that have been included in these financial statements
are as follows:
<TABLE>
<S> <C>
Results of Operations:
Overhead and management fee income 237,564
Partner share of partnership income allocations 44,121
-------
281,685
Provision for Income Taxes
Current 97,189
Deferred (11,825)
-------
</TABLE>
98
<PAGE>
<TABLE>
<S> <C>
85,364
---------
Income from discontinued operations $ 196,321
=========
Cash Flows:
Income from discontinued operations $ 196,321
Partner share of partnership income allocations (44,121)
Deferred taxes (11,825)
Taxes accrued 89,972
Tax refunds received 257,767
Partnership distributions received 178,784
---------
Increase in cash from discontinued operations $ 666,898
=========
</TABLE>
NOTE B - SETTLEMENT OF CLAIM
During the quarter ended November 30, 1998, IRC was contacted by a law firm
concerning a $427,000 outstanding account associated with services performed
in conjunction with the failed merger between Unico, Inc. and Chatfield Dean
and Co.,("Chatfield") during 1996 and 1997. It was originally understood that
IRC had retained the law firm and had made an initial payment of $20,000 for
the services to be rendered and Chatfield Dean was to be responsible for the
payment of the remainder of the account. The law firm however has been unable
to collect the account from Chatfield and had threatened legal action against
Unico to collect the amount. Upon review of the matter by management, it was
concluded that it was in the best interest of IRC to seek a settlement of the
matter. Accordingly,IRC is negotiating a settlement whereby IRC is to pay
$150,000 in cash, and transfer ownership of $250,000 face value Chatfield Dean
Series B Preferred stock to the law firm in exchange for a full release of all
claims. IRC is presently exploring the potential for making claim against
Chatfield to recover all or a portion of the settlement costs.
NOTE C - INVESTMENT IN CHATFIELD DEAN
During December 1998, IRC received information which indicated that the
financial position of Chatfield had become impaired. This has lead management
to reassess the valuation of its investment in Chatfield. The original
investment in Chatfield consisted of $100,000 face value Series A Preferred
Stock, $500,000 face value of Series B Preferred Stock, and 50,000 shares of
common stock recorded at a cost of $500. $250,000 face value of the Series B
preferred stock has been disposed of in conjunction with the settlement of a
prior claim, (see Note C), leaving a total investment in Chatfield of
$350,500. Based on information available to IRC, it is anticipated that, if
certain future events occur, the holders of preferred stock in Chatfield could
recover full value of the stock. However, as there is no assurance at this
time that such events are highly probable, IRC has provided a reserve in the
amount of $175,250 representing 50% of the current book value of this
investment.
ADDITIONAL INFORMATION RELATIVE TO IRC
PROVIDED IN ACCORDANCE WITH REGULATION 14(A), ITEM 14(B)(3)(II)
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At present, there is no public market established for IRC's common
stock. However, in conjunction with the spin off of IRC's common stock to the
shareholders of Unico, IRC intends to file a registration statement with the
Securities Exchange Commission and seek a listing on the OTC Bulletin Board.
There are presently no plans for IRC to make any public offering of additional
shares in the near future. Upon implementation of the proposed spin off, IRC
will have approximately 1,125,609 shares of its common stock outstanding with
approximately 500 shareholders.
99
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
BUSINESS
IRC was incorporated under the laws of the State of New Mexico in
1985. Company resources are segmented into three categories of business;
petroleum product refining and processing, electrical energy production, and
natural gas production.
REFINING
IRC in the past refined low-cost, heavy crude oil and other low
gravity refined products into diesel fuel, fuel oils, and asphalt which were
generally marketed on a wholesale basis in the Intermountain region. IRC
experienced a sharp reduction in the availability of crude oil from it's
traditional sources and has operated its refinery only on a limited basis
during the past four years. IRC is hopeful that a long term solution to the
supply shortage can be resolved but thus far has been unsuccessful in locating
raw materials that would allow the economic operation of the facility. IRC
periodically provides certain asphalt terminalling services wherein IRC
receives a fixed monthly fee and reimbursement of certain operating expenses
directly related to the service provided.
CO-GENERATION
The co-generation plant is capable of producing up to 3,000 kilowatts
of electrical energy which, in the past, has been sold to an electric company
in the local area. Additionally, when the refinery is operating the plant
produces all electricity and a portion of the steam used in the refining
process thereby contributing some savings in refinery operating costs. In 1997
IRC's electric customer terminated its electric purchase agreement with IRC
and the co-generation plant has been idled pending identification of
alternative uses for this resource.
NATURAL GAS PRODUCTION
IRC has an interest in and operates 19 natural gas wells located in
the Hugoton basin in Southwestern Kansas. Natural gas and helium produced is
sold, under exclusive contract, to K.N. Energy, of Lakewood, Colorado. The
ownership the natural gas reserves associated with this activity were
transferred from Unico, Inc. to IRC effective as of March 1, 1998.
OTHER BUSINESS ACTIVITIES
IRC, on occasion, provides certain management consulting and
administrative services to others on a fee basis. In addition, IRC owns a
7,000 square foot office building in Farmington, New Mexico and leases unused
office space to others.
PROPERTIES
All properties used by IRC in the conduct of its business are owned
in fee. IRC's refinery is located on approximately 21 acres of fee-owned land
in Fredonia, Arizona. Facilities include: a 4,000 barrel per day crude and
vacuum distillation unit, a 3,000 kilowatt co-generation plant, boilers,
cooling towers, offices, shops, control and electrical buildings, loading
racks, storage tanks and associated ancillary facilities. In addition, the
plant contains a reforming unit which is not currently employed in the
refining operation. The co-generation plant was previously held under a long
term lease which expired in 1996 at which time, was acquired by IRC for
approximately $27,000.
100
<PAGE>
IRC owns an interest in and operates 19 producing natural gas wells
located in Southwestern Kansas. Developed proven reserves are estimated at
2,743 MMCF gross and 2,049 MMCF net to IRC's interest as of November 30, 1998.
No reserve estimates have been filed with any Federal authorities or agencies.
IRC owns a 7,000 square foot office building in Farmington, New
Mexico. Approximately 48 percent of the office building is being fully
utilized by IRC for its corporate office, tenants are leasing another 52
percent. There are no outstanding mortgages on any of the properties owned by
IRC.
RESULTS OF OPERATIONS
QUARTER ENDED NOVEMBER 30, 1998 COMPARED TO QUARTER ENDED NOVEMBER 30, 1997
Total revenues for the current year quarter decreased to $69,000,
down 5% from $73,000 during the same period last year. Earnings from
continuing operations declined to a loss of $593,000, down 1,064% from a loss
of $51,000 experienced during the third quarter last year.
The decline in revenues is attributed to a 33% reduction in revenues
from natural gas production coupled with a 266% increase in office space
rental and other income. The decrease in natural gas revenues is attributed to
a 27% increase in production over the same period last year offset by a 46%
decrease in gas prices realized.
Operating income (loss) from continuing operations by industry
segment, before allocation of general corporate overhead for the third quarter
of 1999 compared to the same period during 1998 is as follows:
<TABLE>
<CAPTION>
Increase
Segment 1999 1998 (Decrease)
- ------- --------- --------- ---------
<S> <C> <C> <C>
Refining $ (43,300) $ (21,000) $ (22,300)
Electrical generation 36,600 (2,000) 38,600
Gas production 2,300 31,200 (28,900)
Corporate overhead
and other (588,400) (59,200) (529,200)
--------- --------- ----------
$(592,800) $ (51,000) $(541,800)
========= ========= ==========
</TABLE>
The increase in refining losses is attributed to the write off of
$21,000 for refined product inventory which was determined to have little or
no recoverable value. The remaining loss shown for the current year quarter
includes $16,000 in depreciation and $6,000 in annual property taxes. The
increase in electrical generation income is attributed to the write off of
$39,000 in previously accrued generator repairs which were never performed.
The decline in gas production earnings is attributed to a $21,000 decline in
natural gas revenues coupled with a $4,000 increase in production costs.
Natural gas prices declined drastically during the third quarter compared to
higher than average prices experienced during the same period last year. The
substantial increase in corporate overhead and other costs is the result of
the $400,000 one-time charge taken for the settlement of a claim made for
legal services performed in conjunction with the failed Chatfield Dean merger
and a $175,000 charge made for the write down in the value of the investment
in Chatfield Dean preferred stock offset by realization of an increase of
approximately $18,000 in consulting fees and rental income.
NINE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED
NOVEMBER 30, 1997:
101
<PAGE>
Revenues increased to $234,000, up 23% from $174,000 realized during
the first nine months last year. Results of continuing operations declined to
a loss of $757,000, down 2,767% from a loss of $201,000 during the same period
last year.
The increase in revenues consists of $30,000 received for
terminalling services provided during the summer of 1998 and an increase of
$18,000 received from consulting fees and rental income, offset by a $5,000
decline in natural gas revenues. The decline in natural gas revenue consists
of 12% increase in production offset by a 14% decrease in sales prices.
Operating income (loss) from continuing operations by industry
segment, before allocation of general corporate overhead for the first nine
months of 1999 compared to the same period during 1998 is as follows:
<TABLE>
<CAPTION>
Increase
Segment 1999 1998 (Decrease)
- ------- --------- --------- ---------
<S> <C> <C> <C>
Refining $ (46,100) $ (56,000) $ 9,900
Electrical generation 31,200 (8,200) 39,400
Gas production 36,300 71,200 (34,900)
Corporate overhead
and other (778,200) (208,000) (570,200)
--------- --------- ---------
$(756,800) $(201,000) $(555,800)
========= ========= =========
</TABLE>
The reduction in refining operation loss is attributed to the realization of
$30,000 in terminalling fee income during the summer of 1998 offset by the
write-off of $20,000 of refined product inventory which was deemed to have
little or no realizable value. The current year loss in refining operations
includes $47,000 provision for depreciation and $6,000 in annual property
taxes. It is anticipated that the refinery facility can be maintained at
relatively low cost in the future. The improvement in co-generation earnings
was the result of the write-off of $39,000 in previously accrued generator
repair obligations for which the repairs were never performed. As with the
refinery, it is anticipated that the generation facility can be maintained in
an idled mode at very small cost. The decline in natural gas earnings is the
result of the decline in natural gas revenues previously discussed coupled
with a $27,000 increase in well operating costs attributed to significant
repair costs experienced earlier in the year. Gas prices showed a marked
improvement during the early part of the year, but, due to the warmer than
normal fall, have fallen significantly during the past several months. With
the significant repairs performed earlier in the year, production has
demonstrated some increases which should result in improved operations in
future months, especially if gas prices move higher during the now colder
winter months. The increase in general and administrative costs is almost
entirely attributed to the $400,000 charge taken for the settlement of a claim
for prior legal services performed in conjunction with the failed Chatfield
Dean Merger and the $175,000 reserve established for the perceived impairment
of the investment in Chatfield Dean. Additionally, the increase in consulting
fees and rental income have been partially offset by increased professional
services costs related to the Starlicon acquisition and renovations performed
on IRC's Farmington New Mexico office building to provide for additional
rental income.
LIQUIDITY AND CAPITAL RESOURCES
IRC had cash and cash equivalents of $1,126,000 as of November 30,
1998 compared with $1,237,000 at the beginning of the current year
representing a $111,000 decrease during the current year. The decrease
consists of $192,000 use from operations and the posting of a well plugging
bond in the form of a $20,000 certificate of deposit, offset by $102,000 net
collection of the note receivable from Red Hills Manufacturing, Inc.
Presently, capital requirements are viewed to be minimal as IRC has
relatively no debt and management believes that cash flow from ongoing
operations will be adequate to meet cash demands in the near future. Longer
term however, it is recognized that the Registrant will need to utilize its
resources and develop additional sources of cash flow to avoid depletion of
current working capital.
102
<PAGE>
IRC continues to explore opportunities to more fully utilize its
refining resources. The availability of suitable crude oil continues to be a
major obstacle to restarting the facility. IRC has however been active in
discussions with others regarding the feasibility of making certain
modifications and improvements to the process equipment to allow processing of
a different grade of crude oil which may be available in the area. The
discussions to date however have not resulted in a definitive plan.
Sources of cash flow in the coming months are estimated to consist of
approximately $10,000 per month from natural gas production, rental income of
$1,500 per month and $5,000 from interest income. Monthly cash outflows for
ongoing overhead are presently estimated to be approximately $22,000 per
month. In accordance with the settlement of the legal service claim, IRC
intends to pay the $150,000 cash portion of the settlement in January or
February of 1999. It is further anticipated that IRC will collect
approximately $30,000 in outside consulting fees during the next few months.
REGULATIONS AND TAXES
All operations of IRC are regulated by the United States
Environmental Protection Agency and various state environmental and health
departments. IRC is responsible for the payment of applicable Federal and
State excise taxes on the sale of refined products. Severance taxes on natural
gas production in Kansas are collected and paid by K.N. Energy, the purchaser
of the gas.
INFLATION, DEFLATION AND CHANGING PRICES
The results of operations and capital expenditures will continue to
be affected by inflation, deflation and changing prices. Prices of natural gas
could have a materially adverse effect on IRC's operations. Management is
unable to predict the full impact of these factors on the results of
operations or working capital.
IMPACT OF YEAR 2000
IRC has reviewed the potential impact of Year 2000 issues and has
already addressed the majority of issues necessary to avoid potential problems
associated with the Year 2000 problem. The cost of addressing Year 2000 issues
thus far has not been material and management believes that IRC's ability to
operate into the next century is secure.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Prior to the acquisition of Starlicon by Unico in June 1998, IRC's
financial statements had been audited by Atkinson and Company, in conjunction
with their audit of the consolidated financial statements of Unico. IRC has
engaged Atkinson and Company to continue to audit the financial statements of
IRC for the current fiscal year ending February 28, 1999. There has not been
any disagreement between IRC and its Accountants of a nature which would
require disclosure in compliance with Item 304 of Regulation SB.
103
<PAGE>
UNICO, INC.
SCHEDULE 14A
APPENDIX E
RESTATED ARTICLES OF INCORPORATION
104
<PAGE>
RESTATED
ARTICLES OF INCORPORATION
Unico, Inc. adopts the following Restated Articles of Incorporation
under the New Mexico Business Corporation Act:
ARTICLE I.
Its corporate name will be Paradise Innovations Technology
Corporation.
ARTICLE II.
It is organized to engage in the business of design and marketing of
computer and internet products, and for every other purpose permitted by the
Business Corporation Act.
ARTICLE III.
A. Authorized Shares. The aggregate number of shares which the
Corporation will have the authority to issue is 58,000,000 shares. Of such
shares, 50,000,000 shares will be designated as Common Stock and will have a
par value of $.20 per share, and 8,000,000 shares will be designated as
Preferred Stock and will have a par value of $.01 per share. Subject to the
provisions of this Article, authority is vested in the Board of Directors of
the Corporation to establish by resolution the preferences, limitations and
rights of the Preferred Stock. Any unissued shares of this Corporation may be
used, allotted and sold from time to time in such amounts and for such
consideration as may be lawfully determined by the Board of Directors.
B. Common Stock.
1. Voting Power. Each share of Common Stock will have one
vote, and except as may be provided herein and by the laws of the State of New
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Mexico, the exclusive voting power for all purposes will be vested in the
holders of the Common Stock.
2. Dividends. Subject to the provisions of law and the
preferences of the Preferred Stock, dividends may be paid on the Common Stock
of the Corporation at such times and in such amounts as the Board of Directors
may deem advisable.
3. Liquidation. In the event of any liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary, the
holders of the Common Stock will be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation and the amount
to which the holders of the Preferred Stock will be entitled, to share ratably
in the remaining net assets of the Corporation.
4. Transfer Restrictions. The Corporation will have the
right by appropriate action to impose restrictions upon the transfer of any
shares of its Common Stock or any interest therein, from time to time issued,
provided that such restrictions as may from time to time be so imposed or
notice of the substance thereof will be set forth upon the face or back of the
certificates representing such shares of Common Stock.
C. Preferred Stock.
1. Authority of Directors to Issued Preferred Stock in
Series. The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series, each of which will be so designated as to
distinguish the shares thereof from the shares of all other series and
classes. The Board of Directors may provide for variations between different
series of Preferred Stock in any and all of the following:
(a) The rate of dividend;
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(b) Whether shares may be redeemed, and, if so, the
redemption price and term and conditions of
redemption;
(c) The amounts payable upon shares in the event of
voluntary or involuntary liquidation;
(d) Sinking fund provisions, if any, for the
redemption or purchase of shares;
(e) The terms and conditions, if any, on which
shares may be converted into any other class;
(f) Voting rights, if any; and
(g) Such other preferences, privileges,
restrictions and qualifications as the Board of
Directors may determine.
2. Procedure to Establish a Series. In order for the Board
of Directors to establish a series of Preferred Stock, the Board of Directors
will adopt a resolution setting forth the designation of the series and fixing
and determining the number of shares in the series and the relative rights and
preferences thereof pursuant to Paragraph 1 of this Section C; and upon the
filing of the statement required by the laws of the State of New Mexico with
the Corporation Commission thereof, the resolution establishing and
designating the series and determining the number of shares in the series and
the relative rights and preferences thereof will become effective and will
constitute an amendment to the Article of Incorporation.
D. General.
1. Corporation's Purchase of Stock of the Corporation. The
Corporation, from time to time, may purchase any of its stock outstanding (so
far as
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may be permitted by law or by any provision of the Articles of Incorporation
or any resolution of the Board of Directors pursuant to the authority vested
in it by provisions of the Certificate of Incorporation) at such price as may
be fixed by the Board of Directors and accepted by the holders of the stock
purchased and may resell any stock so purchased at such price as may be fixed
by the Board of Directors but in case the stock purchased is subject to
redemption at the time of purchase the price paid therefor will not exceed the
price at which such stock is redeemable. Specific authority is hereby
conferred to make such purchases of any class of its stock to the extent such
authority is in conformity with Section 53-11-44 N.M.S.A. (1978).
2. Abrogation of Pre-emptive Rights. No holder of any class
of shares of the Corporation will be entitled of the right to purchase or
subscribe for any unissued or treasury shares of any class or any additional
shares of any class to be issued by reason of any increase of the authorized
shares of the Corporation of any class or any bonds, certificate of
indebtedness, debenture or other securities, rights, warrants or options
convertible into shares of the Corporation or carrying any right to purchase
shares of any class, but any unissued or treasury shares of class, or any such
additional authorized issue of new stock or of securities convertible into
stock, may be issued and disposed of by the Board of Directors to such
persons, firms, corporations or associations for such consideration and upon
such terms and in such a manner as the Board of Directors may in their
discretion determine, consistent with the provisions of Section C hereof and
the New Mexico Business Corporation Act, without offering any thereof on the
same terms or on any terms to the holders of any class of stock of the
Corporation then of record.
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3. Stock Book. The Corporation will be entitled to treat the
person in whose name any share, right or option is registered as the owner
thereof, for any purposes, and will not be bound to recognize any equitable or
other claim to, or interest in such share, right or option on the part of any
other persons, whether or not the Corporation will have notice except as may
be expressly provided by the laws of the State of New Mexico.
4. Cumulative Voting. The cumulative system of voting for
Directors or for any other purpose will not be allowed.
ARTICLE IV.
In addition to any other powers provided by law or by these Articles
of Incorporation,
A. The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other that an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expense (including
attorneys' fees), judgment, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The
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termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendre or its equivalent, will not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification will be made in respect of any claim, issue or matter as to
which such person will have been adjudged to be liable for negligence or
misconduct in the performance of his duties to the Corporation unless and only
to the extent that the court in which such action or suit was brought will
determine upon application that, despite and adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court will deem proper.
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C. To the extent that a director, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subparagraph (a) or (b), or in defense of any
claim, issue or matter therein, he may be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
D. Any indemnification under subparagraphs (a) or (b) (unless order
by a court) may be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subparagraphs (a) or (b). Such
determination will be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by the shareholders.
E. Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided in subparagraph (d) upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it will ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this subparagraph.
F. The indemnification provided by this subparagraph will not be
deemed exclusive of any other rights to which those indemnified may be
entitled under
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any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and will continue as to a person
who has ceased to be a director, officer, employee or agent and will inure to
the benefit of the heirs, executors and administrators of such a person.
G. The Corporation will have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
ARTICLE V
The corporation may enter into contracts or transact business with
any one or more of its directors, officers, or stockholders, or with any
corporation, association, trust company, organization or other concern in
which any one or more of its directors, officers, or stockholders are
directors, officers, or stockholders are directors, officers, trustees,
beneficiaries, or stockholders, or otherwise interested in other contracts or
transactions in which any one or more of its directors, officers, or
stockholders is in any way interested; and, in the absence of fraud, no such
contract or transaction will be invalidated or in any wise affected by the
fact that such directors, officers or stockholders of the corporation have, or
may have, interests which are, or might be
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adverse to, the interests of the corporation, even though the vote or action
of directors, officers, or stockholders having such adverse interests may have
been necessary to obligate the corporation upon such contract or transaction.
At any meeting of the board of directors of the corporation (or any duly
authorized committee thereof) which will authorize or ratify any such contract
or transaction, any such director or directors may vote or act thereat with
like force and effect as if he had not such interests, provided in such case
the nature of such interests (though not necessarily the extent or details
thereof) will be disclosed or will have been known to the directors or a
majority thereof. A general notice that a director or officer is interested in
any corporation or other concern of any kind above referred to will be
sufficient disclosure as to such director or officer with respect to all
contracts and transactions with such corporation or other concern. No director
will be disqualified from holding office as a director or officer of the
corporation by reason of any such adverse interests. In the absence of fraud,
no director, officer, or stockholder having such adverse interest will be
liable to the corporation or to any stockholder or creditor thereof, or to any
other person for any loss incurred by it under or by reason of such contract
or transaction, nor will any such director, officer or stockholder be
accountable for any gains or profits realized thereon. Notwithstanding
anything contained herein to the contrary, any contract or transaction
referred to above will be fair and reasonable to the Corporation.
ARTICLE VI
The officers, directors and other members of management of this
corporation will be subject to the doctrine of corporate opportunities only
insofar as it applies to
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business opportunities in which this corporation has expressed an interest as
determined from time to time by the corporation's Board of Directors as
evidenced by resolutions appearing in the corporation's minutes.
Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors and other members of management of this Company will be
disclosed promptly to this corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and, thereafter,
any officer, director or other member of management may avail himself of such
opportunity. Until such time as this corporation, through its Board of
Directors, has designated an area of interest, the officers, directors and
other members of management of this corporation will be free to engage in such
areas of interest on their own and this doctrine will not limit the rights of
any officer, director, or other member of management of this corporation to
continue a business existing prior to the time that such area of interest is
designated by the corporation. This provision will not be construed to release
any employee of the corporation (other than an officer, director or member of
management) from any duties which he may have to the corporation.
ARTICLE VII
The provisions of the 1983 Amendments to the New Mexico Business
Corporation Act (Sections 53-11-1 to 53-18-2 N.M.S.A. (1978)) lowering voting
requirements from a two-thirds majority to a simple majority will apply to
this Corporation, effective April 3, 1985.
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DATED:____________________________.
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ACCEPTANCE OF APPOINTMENT
AS REGISTERED AGENT
The undersigned, being duly sworn, accepts appointment as Registered
Agent pursuant to the Business Corporation Act for Paradise Innovations
Technology Corporation, a New Mexico corporation.
JAY D. ROSENBLUM
STATE OF NEW MEXICO
COUNTY OF BERNALILLO
Signed and sworn to before me on _____________________,
1999,
by Jay D. Rosenblum.
_____________________________________
Notary Public
My commission expires:
_______________________
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