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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Fiscal Year Ended December 31, 1995
Commission File #0-15303
UNICO, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 73-1215433
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
8380 Alban Road, Springfield, VA 22150
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(Address of principal executive offices )(Zip Code)
(Registrant's telephone no., including area code) (703) 644-0200
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1101-B Sovereign Row, Oklahoma City, OK 73108
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(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Warrants
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
--
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
Revenues for year ended December 31, 1995. $10,480,507
Aggregate market value of the voting common stock held by non-
affiliates of the registrant as of April 1, 1996, was: $2,207,261
Number of shares of the registrant's common stock outstanding as of
April 1, 1996 was: 7,883,095
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UNICO, Inc.
FORM 10-KSB
PART I
Item 1. Description of Business
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General
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UNICO, Inc., (the Company), was incorporated on April 11, 1984 under the
laws of the State of Delaware. Initial business activities, associated with
the sale and administration of cooperative direct mail advertising franchises,
commenced during May 1984. In September 1986, the Company filed an initial
registration statement with the Securities and Exchange Commission and initiated
a plan to expand Company operations through the acquisition of existing
businesses operating in related fields.
The Company's Business
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Presently, the Company operates as a publicly-owned holding company with
two active wholly-owned subsidiaries, United Coupon Corporation ("United
Coupon") and Cal-Central Marketing Corporation, ("Cal-Central"), involved in
cooperative advertising. United Coupon is involved in cooperative direct mail
advertising through franchising and production. Cal-Central is involved in
cooperative advertising distributed primarily through supermarkets, pharmacies
and restaurants. Management's plans for expansion of the existing cooperative
advertising operations include internal growth through the granting of
additional franchises, opening of additional marketing centers and introducing
new products for use and sale by franchisees. Management has also stated
intentions to expand operations through acquisition of existing businesses
operating in related fields.
The Company's cooperative advertising and production business involves the
design, layout, printing, packaging and distributing of public relations,
marketing materials and promotional coupons for private businesses, usually
involved in retailing goods or providing professional services. Cal-Central's
cooperative advertising process also includes sales of advertising through
independent sales representatives.
Franchising activities related to this business involve the granting and
administering of independent franchise operations to conduct cooperative
direct mail advertising sales. All activities related to franchising are
conducted through the Company's wholly-owned subsidiary, United Coupon, acquired
on July 17, 1987. At year end, December 31, 1995, United Coupon had
approximately 66 active Area franchise operations and one Regional Franchise.
The Company's Markets
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Cooperative Direct Mail Advertising
-----------------------------------
The customer base of most local retailers and professionals comes from
within a three mile radius of their location, therefore it is difficult for them
to advertise effectively and economically. The Company believes that direct
mail is an effective advertising method for the local merchant and professional
since they can target a specific area and have substantial saturation of their
advertising message. Radio and television advertising, in contrast, is costly
to produce and air. The advertiser is paying for broadcasting over a large
metropolitan area, much of which is not part of its customer base. It may not
be efficient or affordable unless the advertiser has multiple locations. Major
city newspapers are also comparatively expensive since they, too, cover an
entire city and not just the specific area relevant to the local retailer and
professional. In addition, newspapers usually contain large amounts of
advertising, which may limit the effectiveness of small ads.
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Individual direct mail programs are also expensive, when the cost of
postage, design, envelopes, printing, and mailing lists are considered.
Cooperative direct mailing of advertisements for several businesses in one
mailing, substantially reduces the advertisers' cost from the price of an
individual direct mail program.
The Company's franchisees sell cooperative direct mail advertising to
retailers and service organizations in a given market area. They assist each
business owner with the design and content of advertisements or coupons. The
Company produces and mails a packet of coupons (usually consisting of fifteen or
more coupons) to thousands of homes in a targeted geographic area. The Company
receives a majority of its revenue by providing, on a wholesale basis to its
distributors, a complete mailing service. Such services include computerized
design, typesetting, paste-up, proofing, printing, inserting, addressing, and
mailing, as well as paper, envelopes, labels and postage.
The market segment targeted by the Company's franchisees includes
local retailers, service businesses and professional organizations. In
addition, specialty mailings are conducted on a regular basis and major consumer
products companies, that market on a national level, are solicited to advertise
in the Company's mailings.
Franchising
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The Company targets the major markets of the United States with a
population of 500,000 or more. Each Area franchise territory can consist of
50,000 to 80,000 mailable homes. Franchise prospects are located through the
use of local and national advertising, franchise shows and seminars, and a
network of franchise sales representatives. Sales tools consist of Company
brochures, a franchise sales booth, and a video presentation.
The Company has also implemented a franchise sales program whereby the
Company assists existing franchisees in selling parts of their respective
territories. Generally, franchise territories which would be involved in this
program, are those which have more than 150,000 mailable homes.
Each franchise consists of an independent operation in an exclusive
territory in which no competition from other Company franchisees is allowed.
The Company provides the franchisee with a thorough, individually-oriented, two-
week training program covering all facets of the business. In addition, the
Company provides the franchisee with operation manuals, sales support materials,
market softeners (direct mailings to potential customers), use of its trademarks
and logos, WATTS telephone and FAX service for transferring layouts, and
continuing management support, including research and development.
Franchise fees are based upon the total number of mailable homes in the
exclusive territory. Area franchise fees are $21,900 for 50,000 mailable-
home territories plus $1,500 for each additional increment of 10,000 mailable-
home territories. Generally, the franchise agreements are for a period of ten
years, and are renewable at the option of the franchisee, if certain conditions
are met. These agreements include a performance clause which is based upon a
minimum distribution standard and frequency of mailings over the term of the
franchise agreements.
Regional franchisees, in addition to operating an Area franchise, are
directly involved in recruiting and training Area franchisees within their
region. United Coupon carefully designed the Regional franchising program to
provide substantial opportunity for the Regional franchisee, while maintaining
appropriate corporate control over the approval of Area franchise grants and
contractual agreements. A Regional Franchisee also has an exclusive territory,
comprised of approximately 1,000,000 mailable homes, and supervises 15-18 Area
Franchisees. The license fee for a Region is $51,000 to $59,000. Regional
Franchisees attend one additional week of training at the corporate
headquarters.
The Company retains the right to terminate a franchise for a variety of
reasons, including insolvency or bankruptcy, failure to operate the business
according to prescribed standards, failure to pay fees, and material
misrepresentation on an application for a franchise.
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Set forth below is the geographical location of the franchises in
operation as of December 31, 1995.
<TABLE>
<CAPTION>
<S> <C><C> <C><C> <C>
Alabama...... 2 Maryland..... 6 North Carolina 3
California... 5 Massachusetts 9 Oklahoma...... 1
Connecticut.. 2 Minnesota.... 2 Pennsylvania.. 6
Delaware..... 1 Nevada....... 1 South Carolina 0
Florida...... 1 New Hampshire 2 Tennessee..... 1
Georgia...... 3 New Jersey... 5 Texas......... 0
Illinois..... 1 New York..... 8 Virginia...... 6
Louisiana.... 1
</TABLE>
Acquisition of Cal-Central Marketing Corporation
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On October 21, 1993, UNICO, Inc. (the "Company") and AEC Acquisitions,
Inc. ("AEC"), a wholly-owned subsidiary of the Company, entered into a
definitive Agreement for the merger of Cal-Central Marketing Corporation, a
Florida Corporation ("Cal-Central/Florida") into AEC. The merger was effected
on October 27, 1993, through the issuance of 1,200,000 shares of restricted
Common Stock of the Company, 600 shares of Redeemable Preferred Stock of the
Company and 1,000 shares of Convertible Preferred Stock of the Company. The
terms of the Redeemable Preferred Stock provided that such shares be redeemed
for $600,000 at the holders' option after certain profit performance tests are
met by Cal-Central. The shares of Convertible Preferred Stock were mandatorily
convertible into Common Stock of the Company after 12 months, and after certain
profit performance tests by Cal-Central for such period. The Convertible
Preferred Stock expired in October 1994, with performance tests not achieved.
In March 1995, 320 shares of the Redeemable Preferred Stock were converted into
355,556 shares of Common Stock of the Company at a conversion price of $.90 per
share, in lieu of cash redemption.
The acquisition was accounted for as a purchase with a price of
approximately $1,400,000. The operating results have been included in the
consolidated financial statements of the Company since October 22, 1993. The
Company acquired assets of $1,887,242 and assumed liabilities of $2,687,824.
The excess purchase price over the fair value of the net assets acquired is
recorded as goodwill in the accompanying balance sheet and is amortized on the
straight line method over forty years.
Cooperative Distribution Point Advertising
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With the acquisition of Cal-Central in October 1993, the Company acquired
several new product lines including TV Sports & Movies Previews, Video Previews,
Family Health & Fitness, bulletin board displays, cash register tape coupons
and take-out menus. The advertising products are distributed primarily
through supermarkets, pharmacies, restaurants and other specialty retailers.
As of December 31, 1995, Cal-Central operated three regional sales offices.
Cal-Central operated a complete art development and printing facility in Fort
Lauderdale, Florida until December 15, 1995. Art and printing are now
performed by third party suppliers and United Coupon. Sufficient printing
capacity exists through these sources to increase business significantly above
current levels.
Marketing is currently done through three regional sales offices. Each
office is staffed with at least one manager who is responsible for recruiting
sales personnel, training a sales staff and directing the overall performance of
the office. Sales personnel are recruited through advertising in local media.
Training sessions are provided prior to sales personnel being authorized to
represent the Company. Turnover of the straight commission sales representatives
is high, due to the independent nature of these sales professionals. Many of
this group represent other organizations and are, therefore, subject to changing
opportunities that may impact their personal incomes. Management estimates that
approximately 2% of inquiries received from independent sales representatives
result in long term relationships for the Company. Successful sales
representatives can earn over $40,000 per year, representing Cal-Central.
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The cost of opening a new sales office is $15,000-$20,000. This covers
the cost of the manager and operating expenses for the two to three month start-
up period prior to break-even. All sales managers receive an override on
contracts generated by their sales representatives. There are no long-term
guarantees or fixed salaries for these individuals. The Company makes small
advances to sales personnel against commissions earned on partially completed
sales contracts, on a selective and limited basis.
Independent Sales Representatives
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The Company utilizes independent sales representatives for a majority of
the advertising sales completed by Cal-Central. Cal-Central has independent
sales agreements with these individuals and is subject to decisions by the
independent sales representatives to devote their efforts to other sales
opportunities which may arise for them with other organizations. Failure to
maintain a ready team of qualified independent sales personnel could result in a
loss of future sales of Cal-Central advertising products or a limitation on the
growth opportunities for this segment of the Company's business.
Trade Names, Service Marks and Logo Types
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The United Coupon Corporation service mark was registered with the United
States Patent Office on Principal Register, register number 1,310,366 on
December 16, 1984. In addition, the service mark was registered in the
Commonwealth of Virginia on April 27, 1984.
Pursuant to its License Agreement, United Coupon Corporation authorizes
franchisees to operate a United Coupon cooperative direct mail,advertising
business under the name United Coupon and in accordance with the United Coupon
System. In connection with the operation of a United Coupon cooperative direct
mail advertising business, franchisees are authorized to use the name and
service mark "UNITED COUPON" as well as other such service marks or commercial
symbols as United Coupon from time to time adopts and makes a part of the United
Coupon System.
Government Regulation
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The Company is subject to regulation under the rules of the Federal Trade
Commission regarding disclosure of certain information for the sale of
franchises as well as state regulatory authorities in certain states where the
Company does business. Statutory provisions in certain states impose certain
substantive requirements on the relationship between the franchiser and the
franchisee. Management believes the Company is in material compliance with such
regulatory requirements.
Competition
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The advertising industry is highly competitive with many firms having
vast resources competing for businesses' advertising dollars. The Company's
business, primarily cooperative advertising delivered through direct mail or
through distributors, is a relatively small, but rapidly growing segment of the
advertising industry. The Company's major competitors in direct mail
cooperative advertising are Val-Pak, Money Mailer, American Advertising
Distributors and Super Coups. Management estimates the Company has about 5% of
that market segment. The Company's major competitor in the distributor-based
cooperative advertising niche, is TV Fanfare. Management estimates the Company
has less than 5% of that market segment. There are a large number of small,
independent businesses operating in each market segment serviced by the Company.
Employees
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The Company had 120 employees as of December 31, 1995. The Company also
relies upon commissioned sales representatives involved in the franchise sales
operations and temporary workers during peak production periods at United
Coupon. At Cal-Central, temporary workers are also used during peak periods and
independent sales representatives are used to sell advertising.
5
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Item 2. Description of Property
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The Company operates its corporate headquarters and its coupon sales and
franchise activities (United Coupon) through an office and production facility
at 8380 Alban Road, Springfield, VA 22150. This space is leased for a monthly
fee of approximately $30,000 covering approximately 63,000 square feet. This
lease expires in April 2005.
Until March 31, 1996, the Company's corporate office was located at 1101
Sovereign Row, Oklahoma City, OK 73108. The Company is leasing this space
with a base monthly fee of $3,045, covering approximately 6,137 square feet.
This lease expires in May 1997. The Company has subleased approximately 3,200
square feet of its total space to two non-affiliated entities for a total
monthly fee of $2,582. The Company has consolidated former operations conducted
from this office with those of United Coupon in Springfield, VA and is seeking
assignment of its position in the master lease.
The Company also formerly operated a general office and production facility
for Cal-Central, at 5420 N.W. 33/rd/ Avenue, Suite 100, Ft. Lauderdale, FL
33309. This facility was closed in December 1995. The Company is required to
make final payments totaling $48,000 during 1996 as a condition for early
termination of this lease.
Item 3. Legal Proceedings
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The Company's subsidiaries, United Coupon Corporation and Cal-Central
Marketing Corporation, are involved in various legal actions associated with the
normal conduct of business operations. No such actions involve known material
gain or loss contingencies not reflected in the consolidated financial
statements of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
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The 1994 Annual Meeting of Stockholders was held on July 21, 1995. The
following directors were nominated and elected at this meeting:
W. Douglas Frans
Gerard R. Bernier
Gerald Bomstad, Jr.
Russell Cleveland
Leon Zajdel
The Stockholders approved the following proposal by a vote of 5,242,985
for; 8,141 against; and 10,467 abstentions:
To ratify Arthur Andersen LLP as independent accountants for the Company.
PART II
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Item 5. Market for Common Equity and Related Stockholder Matters
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On March 29, 1996, there were approximately 526 shareholders of record of
the Company's common stock. Based on information received from brokers and
others in fiduciary capacity, the Company estimates that the total number of
shareholders of the Company's common stock exceeds 526. The Company's common
stock is traded over the counter on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ").
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On October 26, 1993, the Company issued $435,000 of five year subordinated
debentures with interest at 10.5% through October 1996, and 12% from November
1996 through October 1998, together with 230,000 common stock purchase warrants
(referred to herein as the D .S. Warrants). The debentures and D. S. Warrants
were offered in a private placement through Duncan-Smith Co., which received
30,000 warrants with the same terms and conditions noted above. The D. S.
Warrants entitle the holders to purchase one share of common stock per warrant
at prices which range from $.90 in 1994 to $1.40 in 1998. On January 11, 1994,
an additional $25,000 of these debentures, along with 12,500 common stock
purchase warrants, were issued under the same terms. At the time the warrants
were issued, the exercise prices were in excess of the market price of the
Company's common stock. The warrants are presently exercisable and expire in
1998. They contain anti-dilution provisions and registration rights for the
underlying common stock. None of these warrants have been exercised.
On November 22, 1993, an additional $100,000 of these debentures were
issued to pay debt owed by Cal-Central. Terms and conditions were the same as
stated above, including issuance of an additional 50,000 common stock purchase
warrants. These warrants were exercised May 3, 1994 at $.90 per share.
On June 30, 1995, the Company and Cal-Central Marketing Corporation entered
into a $300,000 Subordinated Loan Agreement with six lenders. Interest is due
quarterly at an annual rate of 12%. In conjunction with this financing, the
Company issued 450,000 common stock purchase warrants. The warrants entitle the
holders to purchase one share of common stock per warrant at an exercise price
of $.90 per share. At the time these warrants were issued, the exercise price
was in excess of the market price for the Company's common stock. The warrants
are presently exercisable and expire on December 31, 2000. They contain anti-
dilution provisions and registration rights for the underlying common stock.
None of these warrants have been exercised.
On October 6, 1995, the Company entered into a Convertible Loan Agreement
with Renaissance Capital Group, Inc. and Duncan-Smith Investments Co. The terms
of this agreement allow the periodic borrowing of up to $300,000 by the Company
at an annual interest rate of 10%. No payments of principal or interest are
required before July 1, 1997. The loan matures on October 1, 1997. At December
31, 1995, $273,500 had been advanced and was outstanding. The holders of the
note have the right, at the holders' option, to convert at any time, all or any
increments of $1,000 of the outstanding principal and accrued interest, into
common stock of the Company. Such conversion to be effected at $.25 per share.
The conversion price is subject to anti dilution provisions and registration
rights for the underlying common stock. None of the note or accrued interest
has been converted. United Coupon and Cal-Central are guarantors of this
borrowing.
The following table sets forth, for the periods indicated, the range of
high and low closing bid prices for the Company's common stocks, as reported by
NASDAQ:
<TABLE>
<CAPTION>
Common Stock Bid
1993 High Low
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<S> <C> <C>
First Quarter $ .66 $.47
Second Quarter .81 .38
Third Quarter .78 .56
Fourth Quarter 1.13 .63
1994
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First Quarter $1.19 $.94
Second Quarter 1.00 .78
Third Quarter 1.00 .81
Fourth Quarter .94 .71
1995
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First Quarter $ .87 .65
Second Quarter .87 .50
Third Quarter .75 .50
Fourth Quarter .56 .25
</TABLE>
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Dividends
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The Company has never declared a cash dividend on common stock. The
Company intends to retain future earnings to support the Company's growth. Any
payment of cash dividends in the future will be dependent upon: the amount of
funds legally available therefore; the Company's earnings; financial condition;
capital requirements; and other factors which the Board of Directors deems
relevant.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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General
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The Company commenced operations in May 1984. During 1985, the
Company established its marketing office in Oklahoma City and began a
concentrated effort of developing sales tools, procedures, and training sales
personnel. The first six months of operation in 1986 were devoted to packaging
and preparing a franchise system, developing a sales force and documenting
procedures to provide to franchisees. The actual implementation of the
operations as a franchiser commenced in October 1986.
In July 1987, the Company acquired United Coupon Corporation ("United
Coupon"), a franchiser of cooperative direct mail advertising distributorships.
On October 21, 1993, the Company acquired Cal-Central Marketing Corporation
("Cal-Central"). Management of the Company has stated that future growth of its
cooperative advertising business could be enhanced through the acquisition of
existing operations in similar or related businesses. Cal-Central conducts
cooperative advertising sales that are similar in many respects to those of
United Coupon. The businesses, although similar, are not directly competitive
and do not cause conflict with the franchise operations of United Coupon due to
the fact that Cal-Central's advertising materials are delivered through retail
distribution centers and United Coupon's advertising products are delivered
through the mail. In addition, management believes that synergistic
relationships are possible for the two subsidiaries in areas such as graphic
arts, printing, national account advertising and joint development of company-
owned marketing centers.
Liquidity and Capital Resources
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Management views cash, certificates of deposit, and accounts receivable
as principle measures of liquidity. Management also deems appropriately
collateralized and managed bank lines of credit as proper means for
supplementing liquidity.
In August 1994, the Company renewed a revolving and term credit facility
with a bank which had originally been secured to consolidate existing debt and
to provide supplemental working capital for Company operations. This renewed
credit facility was a revolving note with a borrowing base of $600,000 at
inception and a reducing term note with an initial borrowed amount of $500,000.
The term facility required monthly principal payments of $10,500 and both notes
required monthly interest payments. At December 31, 1995, the Company had
borrowed $934,433, the maximum available on the credit facility. The interest
rate on the term note was 1% over bank prime and on the revolving note was 1.5%
over bank prime, which was 8.5% at December 31, 1995, resulting in interest
rates to the Company of 9.5% and 10% on the respective notes. No principal
payments were required on the revolving note until the funds advanced on the
facility exceeded the available borrowing base. The loan was secured by accounts
and notes receivable, inventory, equipment and other assets of the Company. On
March 4, 1996, the Company entered into an amended and restated credit facility,
which extended the amounts owed the bank through January of 1997. Under the
terms of this amended and restated agreement, the Company is required to make
semi monthly principal payments of $20,000 plus accrued interest on the
outstanding balance owed, beginning March 1, 1996. Additionally, principal
payments will be made on March 1, April 1, May 1, and June 1, 1996, in that
amount which is equal to 50% of certain Cal-Central accounts receivable which
are collected during such periods. For the periods July 1, August 1, September
1, October 1, November 1, and December 1, 1996, such additional principal
payments will be made from 100% of the certain Cal-Central accounts receivable
collected and 25% of collections from certain accounts receivable related to the
Company's divisional operation, d/b/a Alliance Publications. The interest rate
is 1% over bank prime through June 30, 1996. On July 1, 1996, the
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rates increase to 3% over national prime for the remaining term of the
agreement. The Company is required to maintain a collateral base equal to or
greater than the balance outstanding on the original term note. The Company was
in compliance with this collateral requirement at December 31, 1995.
On December 31, 1991, the Company entered into a $1,250,000 Convertible
Debenture financing with Renaissance Capital Partners, Ltd. The debenture is in
the form of a seven-year note with interest only payable quarterly during years
one through three. Beginning in 1995, unless waived, the Company was to begin
quarterly principal payments, plus interest, in an amount sufficient to amortize
50% of the outstanding principal balance over the final four years of the note.
The remaining principal amount is due and payable December 31, 1998. On March 4,
1996, Renaissance executed a subordination agreement which defers all principal
and interest payments regarding this debenture until July 1997 or until such
time as the current amount owed to the bank has been extended under terms which
would allow such payments. Management cannot assure, at this point, that
sufficient cash will be available from operations or from available borrowing
capacity to meet amortization requirements beyond July 1, 1997, if the debenture
is not converted in whole or in part to common stock.
The debenture is currently convertible, at the holder's discretion, into a
maximum of 1,388,888 shares of the Company's common stock. Renaissance has the
right to register the underlying stock at its expense, or to "piggy-back" such
stock with other registrations which might be performed by the Company.
Management believes that it is in the best interests of shareholders, lenders
and the Company, that this debenture be converted to equity in the Company.
Discussions to accomplish such a conversion have been initiated with
Renaissance. A letter of intent to accomplish this conversion, in conjunction
with the restructuring of all long term debt for the Company and, subject to
finalization of specific terms, has been signed by Renaissance and the Company.
Management expects that the terms for conversion will change from those
currently provided by the convertible debenture document. This action, if
completed, will result in the addition of tangible book equity and an equal
reduction of debt for the Company, as well as annual savings of interest expense
and related cash requirements.
On October 21, 1993, the Company and AEC Acquisition, Inc. ("AEC"), a
wholly-owned subsidiary of the Company, entered into a definitive Agreement for
the merger of Cal-Central Marketing Corporation, a Florida Corporation ("Cal-
Central/Florida") into AEC. The merger was effected on October 27, 1993,
through the issuance of 1,200,000 shares of restricted Common Stock of the
Company, 600 shares of Redeemable Preferred Stock of the Company, and 1,000
shares of Series A Convertible Preferred Stock of the Company. The terms of the
Redeemable Preferred Stock provided that such shares be redeemed at any time as
an option of the Company or, at the holders' option after certain profit
performance tests were met by Cal-Central. The shares of Series A Convertible
Preferred Stock of the Company were mandatorily convertible into Common Stock of
the Company after 12 months, and after certain profit performance tests by Cal-
Central for such period. The conversion rights of the Series A Convertible
Preferred Stock expired in October 1994 with performance tests not achieved. In
March 1995, 320 shares of the Redeemable Preferred Stock were converted to
355,556 shares of Common Stock of the Company at a conversion price of $.90 per
share. The terms of the remaining Redeemable Preferred Stock of the Company
provide that the shares are redeemable by the Company at any time or by the
holders after certain profit performance tests are met by Cal-Central. Funds to
be utilized in redeeming the remaining Redeemable Preferred Stock will be
provided through collection of existing notes receivable from stockholders.
As a result of the merger, the name of AEC, the surviving corporation, was
changed to Cal-Central Marketing Corporation ("Cal-Central").
In the fourth quarter of 1993, the Company received $250,000 in proceeds
from the private offering of 400,000 shares of the Common Stock of the Company
and $435,000 from the private sale of five year unsecured subordinated
debentures with interest at 10.5% through October 1996, and 12% from November
1996 through October 1998. These proceeds were utilized to pay Cal-Central
acquisition costs of $52,552 to reduce debt of Cal-Central and to provide
working capital. Management believes it is in the best interest of shareholders,
lenders and the Company that these debentures be converted in whole or in part
to equity in the Company. Discussions to effect such conversion, as a component
of the overall restructuring of all long term debt for the Company, have been
initiated. Also, the holders of these debentures have been required, as a
provision of the amended and restated loan agreement with the bank, to defer all
requirements for receipt of principal and interest until July
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1997. At March 29, 1996, over 70% of these debenture holders had executed such
subordination agreements. Management believes that cash flow from operations and
from available borrowing capacity may not be sufficient to pay the debentures
upon maturity unless a significant portion is converted to equity.
The acquisition of Cal-Central was accounted for as a purchase with a
price of approximately $1,400,000. The operating results have been included in
the consolidated financial statements from October 22, 1993. The Company
acquired assets of $1,887,242 and assumed liabilities of $2,687,824. The excess
purchase price over the fair value of the net assets acquired is recorded as
goodwill in the accompanying balance sheet and is amortized on the straight line
method over forty years.
Several factors were considered in determining the purchase price for
Cal-Central which, in management's opinion, support a purchase price that is
approximately $1,400,000 in excess of the fair value of the Cal-Central assets
acquired. These factors included opportunities to increase profitability by
reducing inordinately high interest rates paid historically by Cal-Central on
borrowed funds, reducing high bank charges paid by Cal-Central due to limited
cash management practices, and reducing costs associated with services performed
by third parties for Cal-Central by bringing these functions into the Company.
Also, the cooperative advertising products and distribution channels of Cal-
Central are logical compliments to those of the Company's subsidiary, United
Coupon. Management also believes future profitability of the Company will be
improved through the consolidation of certain administrative and cash management
functions.
The excess purchase price of $1,400,000 over the fair value of the assets
acquired is equal to the initial negative book equity of Cal-Central of
approximately $800,000 plus the value of the restricted common stock provided of
$600,000. Only the par value of $16 was initially assigned to the Preferred
Stock proceeds provided in the purchase, due to the fact that redemption of the
preferred stock was at the Company's discretion or dependent upon the achieving
of pre-tax operating profits of $500,000 by Cal-Central within a consecutive
twelve month period following the acquisition, in order for the Redeemable
Preferred Stock to be redeemed upon demand from the holders. In February 1995,
The Company converted 355,556 shares of common stock for 320 shares of
redeemable preferred stock, in lieu of future redemption of such stock for
$320,000 in cash. This transaction resulted in the addition of $124,441 of
goodwill as contingent purchase price proceeds related to the acquisition of
Cal-Central. The value of the remaining Redeemable Preferred Stock, 280 shares,
is also considered contingent purchase proceeds and will be reflected at par
value until the stock is redeemed or otherwise retired.
In February 1995, the Company exchanged 221,018 shares of common stock at a
market value of $.90 per share, in full payment of $198,917.22 of amounts owed
by Cal-Central. These shares, along with 355,556 shares issued in exchange for
redeemable preferred stock, were subsequently registered in April 1995 via Form
S-3 Registration Statement.
For the Period Ended December 31, 1995
- --------------------------------------
At December 31, 1995, the Company's working capital position, current
assets minus current liabilities, was a negative $426,518. Working capital was
impacted most heavily by use of $1,095,648 in cash and equivalents during the
year to purchase property and equipment related to the expansion of the United
Coupon art and printing facility, and a decrease of $1,017,942 in accounts
receivable related to down sizing of the Cal-Central business and impairment of
Cal-Central accounts receivable as a result of production delays experienced
during the second half of 1995. These reductions in current assets were
partially offset by a $30,183 increase in raw paper inventory related to
management's efforts to build a safety stock of raw paper inventory to support
expanding printing operations; an increase of $183,225 in notes receivable as a
result of secured credit extended to franchisees; and an increase of $71,708 in
prepaid expenses related to prepaid sales commissions associated with
distributor based advertising sales contracts which had been committed to, but
not yet completed, for purposes of revenue recognition, at year end. Accounts
payable and accrued liabilities increased $65,948 due to lengthened payment
terms negotiated with several United Coupon suppliers. Current portion of long
term debt increased by $335,213 as a result of substantially higher monthly
principal payment requirements for bank debt, as well as borrowings related to
additions to plant and equipment. Deferred revenue was not materially changed
from the prior year.
10
<PAGE>
Total assets for the Company decreased 15% during 1995. This decrease
reflects the changes in current assets noted above, as well as additions to
property and equipment of $1,095,648 at United Coupon, offset by a $325,898
writedown of property and equipment associated with the closing of the art and
printing facility of Cal-Central in Fort Lauderdale, Florida.
Goodwill increased by $124,441 at December 31, 1995 as compared to December
31, 1994, as a result of the exchange of 355,556 shares of common stock for 320
shares of redeemable preferred stock initially provided as contingent purchase
price proceeds associated with the purchase of Cal-Central. Other assets
decreased $286,231 during this time period due in part to receipt and
installation of a six color printing press at United Coupon. This item was
carried as a deposit of $131,950 at December 31, 1994. The remaining decrease is
related primarily to amortization of funding costs and deposits.
Due to operating losses sustained at Cal-Central, which caused the Company
to recognize a consolidated loss for the year, management has determined that it
is not more likely than not, that the deferred tax asset of $267,000 that was
expected to be utilized during 1995, will be utilized. As a result, a valuation
allowance was provided against this deferred tax asset at December 31, 1995.
The Company continues to have a significant tax loss carryforward that
management expects will provide benefit in future periods. A liability of
$11,319 was recorded at December 31, 1995, to reflect Virginia state income
taxes payable.
Long term liabilities increased by $292,252 during 1995 as a result of
borrowings for production equipment additions at United Coupon and borrowings
associated with supplemental working capital provided to Cal-Central prior to
the closing of the Cal-Central art and printing facility in December 1995.
Management has considered operating losses and acquisitions which have
required substantial utilization of funds, as well as anticipated operating and
debt service requirements for the near term, and believes that sufficient
liquidity may not be available from working capital to support the requirements
of continuing operations for the foreseeable future. As a result, management
has taken steps in four strategic areas to assure continued success:
1. All consolidated operating losses for 1995, other than operating overhead
attributed to the parent company, were generated by UNICO's distributor based
cooperative advertising subsidiary, Cal-Central. This subsidiary was acquired
in October 1993 and has been a significant user of supplemental working capital
provided by UNICO. In August 1995, UNICO management performed an in depth
review of all operating policies and procedures of this operation. As a result,
operating deficiencies were identified that were considered to be the cause of
the continual need for supplemental working capital. Management began
implementation of a restructuring plan for this operation during the third
quarter of 1995. This plan included the closing of the Fort Lauderdale office
and production facility in December 1995, along with the elimination of
approximately 30 full time positions. The plan also included a complete
revamping of sales, billing and collection processes for this business.
Virtually all art development and printing for this segment is now conducted on
a same as arms length basis by United Coupon, utilizing approaches that are
considered by United Coupon management to be superior to and more efficient than
those that were followed in the Fort Lauderdale facility. Revamping the
approach to advertising sales required the rapid scale down of existing
marketing centers to conserve near term working capital and to reduce operating
losses. The distributor based cooperative advertising business is now being
brought forward on a controlled basis through a divisional operation of the
Company. Although it cannot be assured at this point, Company management
believes this emerging segment will be profitable and will produce positive cash
flow within the next twelve months.
2. On March 4, 1996, an amended loan agreement with BancFirst was entered into
by UNICO and subsidiaries. The agreement extended current amounts due to
BancFirst to January 31, 1997. Semi-monthly principal payments of $20,000 plus
accrued interest are required under the terms of the agreement beginning March
1, 1996. Additionally, principal payments will be made on March 1, April 1, May
1, and June 1, 1996, in that amount which is equal to 50% of certain Cal-Central
accounts receivable which are collected during such periods. For the periods
July 1, August 1, September 1, October 1, November 1, and December 1, 1996, such
additional principal payments will be made from 100% of the certain Cal-Central
accounts receivable collected and 25% of collections
11
<PAGE>
from certain accounts receivable related to the Company's divisional operation,
d/b/a Alliance Publications. An additional requirement is the execution, by July
1, 1996, of a revised subordination agreement by at least 80% of the
subordinated lenders of UNICO. This subordination agreement prohibits the
payment of principal or interest on any subordinated debt prior to July 1, 1997
or until such time that other arrangements are completed for the BancFirst debt.
At the date of this report, more than 70% of the subordinated debt lenders have
executed this subordination agreement. The standstill of principal and interest
payments results in reduced cash requirements for such payments of approximately
$600,000 during 1996 and until July 1, 1997, if all subordinated lenders agree
to these terms. Management considers this amended loan agreement to be an
interim step in the restructuring of amounts owed to the bank. Actions are
underway to refinance the amount owed to BancFirst on a longer term basis with
other lender(s). This action, if successful, will further improve the working
capital and liquidity position of the Company.
3. Management has initiated discussions with the subordinated debt lenders for
the near term conversion to equity of a significant portion of subordinated
debt. A letter of intent to accomplish such conversion, subject to finalization
of specific terms, or specific subordination agreements have been signed by
subordinated lenders representing over 76% of the subordinated lender group.
Although not yet assured, management expects this conversion to occur on or
before July 1, 1996. This action, if completed, will result in the addition of
approximately $1,700,000 in equity and an equal reduction of debt, as well as
annual savings of interest expense and related cash requirements of
approximately $200,000.
4. Management has taken steps to consolidate all corporate office functions and
personnel within the headquarters of United Coupon in Springfield, Virginia.
Included in this action is the combining of the offices of Chief Executive
Officer & President and Chief Financial Officer for UNICO and all subsidiaries.
This component of management's plan is made possible by the expansion of the
Company's facility in Springfield, Virginia during 1995 and the addition of key
management positions for the Company. This action, including the closing of the
corporate office for UNICO in Oklahoma City, is expected to be completed on or
about April 15, 1996. This action will result in additional operating cost
savings during the remainder of 1996 and beyond.
Although the ultimate outcome from these strategic actions cannot be
assured, management expects that these efforts will be fruitful and will provide
the basis for future operating success for the Company.
Results of Operations - Year Ended December 31, 1995 Compared to the Year Ended
- -------------------------------------------------------------------------------
December 31, 1994
- -----------------
Total Revenues for the Company decreased by 28% during 1995, including a
decline of 25% in core coupon and cooperative advertising sales. This decline in
core business is attributed to a rapid reduction of cooperative advertising
sales through the Company's subsidiary Cal-Central during the second half of the
year. This decline was caused initially by an unexpected interruption in
distribution of Cal-Central products through three major distributors. In
addition, strong sales during the early summer months created a production
backlog within the art development group of Cal-Central. This backlog, coupled
with the interruption of product distribution, caused a breakdown in customer
service related to the timely delivery of advertising products for customers of
Cal-Central. This delay in delivery impaired the collectibility of accounts
receivable for Cal-Central, precipitating an acute liquidity shortfall for Cal-
Central during the second half of 1995. Company management reacted to this
problem by arranging supplemental working capital through borrowings and by
initiating a program to down size Cal-Central, thereby reducing operating losses
and requirements for supplemental working capital. The number of Cal-Central
marketing centers was reduced from ten to three during this period and the art
and printing facility for Cal-Central, in Fort Lauderdale, Florida, was closed
in December 1995. Sales of distributor based cooperative advertising for Cal-
Central are now being brought forward on a conservative basis under new
management direction. Sales of coupons and services performed for commercial
accounts through the Company's subsidiary United Coupon, increased by
approximately 7% during 1995, reflecting growth in revenues from new and
specialty products and from commercial printing.
Other Income decreased by $568,295 during 1995. During the prior year, the
Company recognized non-recurring other income of approximately $340,000 upon
sale of the Company's investment in TAEC Common stock. The remaining decline
is related to $162,000 recorded in 1994 by Cal-Central for accounts receivable
12
<PAGE>
maintenance fees that were not repeated in 1995, and $145,000 in other income
recorded by Cal-Central in 1994 related to a reduction of the accrued liability
associated with potential sales/use tax tentatively assessed by the state of
Florida.
Franchise Fee Income declined by $43,500 during 1995, reflecting limited
franchise sales efforts conducted during 1995 while physical expansion and
modification of the art and printing facility in Springfield, Virginia was
completed. The number of active United Coupon franchises declined by seven
during 1995. Management expects franchise sales to increase in the near term as
a result of expanded marketing efforts and completion of the expanded art and
printing facility.
Total expenses decreased by approximately 12% during 1995, reflecting the
lower sales achieved by Cal-Central. Included in total expense is $772,443 of
non-recurring restructuring cost related to the reorganizing of the Cal-Central
business, including the closing of the Fort Lauderdale production facility and
seven marketing centers. Had these expenses not been incurred, total expenses
would have declined by approximately 16% for the year. Production Expenses
declined by 18% during 1995, reflecting lower sales levels. These costs, as a
percentage of revenue are higher than expected for future periods due to excess
costs incurred through the Fort Lauderdale facility prior to its closing, as
well as costs related to production employee labor and materials incurred in
completing the expansion and realignment of the Springfield facility. General
and Administrative Expenses declined by 22% during 1995 due to consolidation of
administrative functions throughout the year. This cost is expected to decline
significantly during the coming year, reflecting the consolidation of all
corporate functions in the Springfield location. In addition, interest expense,
as a component of General and Administrative Expense, is expected to decline
during 1996, if management is successful in completing the conversion of
subordinated debt to equity, as disclosed. Franchise Development Expenses
increased $116,742 (42%) during 1995 reflecting the expanded efforts of United
Coupon during the latter portion of the year in launching more aggressive
franchise selling activities.
For fiscal 1995, the Company incurred a consolidated loss of $2,394,516
compared to net income of $626,981 in 1994. This decline was caused by the
following factors: 1). The rapid and unexpected decline of the Cal-Central
cooperative advertising business resulting from an acute liquidity shortfall
caused by an interruption of product distribution and resulting customer support
erosion. The decline in Cal-Central precipitated an operating loss of
approximately $1,028,000 and non-recurring restructuring costs of $772,443; 2).
Additional franchise development expenses incurred by United Coupon, further
negated by a decline in franchise fees of $43,500; 3). Increased cost of raw
paper approximating $400,000 during 1995 at United Coupon, which could not be
passed through to customers until revised wholesale prices were updated in
January 1996; 4). Write-off of the Company's deferred tax asset of $267,000 as
a result of questions over the Company's ability to utilize this asset.
Management has initiated an aggressive plan in four strategic areas to address
these challenges and to assure success for the Company in future periods.
Item 7. Financial Statements
- ----------------------------
The financial statements of the Company, together with the report of
auditors, are included in the report after the signature pages.
Item 8. Changes In and Disagreements With Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
13
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons:
- ---------------------------------------------------------------------
Compliance With Section 16(a) of the Exchange Act
-------------------------------------------------
The directors and officers of the Company and its subsidiaries, as of April
1, 1996, are set forth below. The directors hold office for their respective
term and until their successors are duly elected and qualified. Vacancies in the
existing Board are filled by majority vote of the remaining directors. The
officers serve at the will of the Board of Directors.
<TABLE>
<CAPTION>
With Company
Name Age Since Director/Position
- ---- --- ----- -----------------
<S> <C> <C> <C>
Gerard R. Bernier 46 1987 Vice Chairman of the Board, Chief
Executive Officer & President
Gerald Bomstad, Jr. 68 1993 Director
Russell Cleveland 57 1992 Director
Leon Zajdel 48 1990 Director
Robert Pulliza 57 1990 Corporate Secretary and Treasurer,
Chief Financial Officer
</TABLE>
Business Experience
- -------------------
Gerard R. Bernier was founder and has been a Director of United Coupon
Corporation of Springfield, Virginia, since November 1981, and Chief Executive
Officer since August 1985. Mr. Bernier has held the position of Vice
President and Vice Chairman of the Board of Directors of UNICO, Inc. since
November, 1991. He was elected Chief Executive Officer & President in March
1996. Prior to 1981, Mr. Bernier was an executive with various advertising and
manufacturing companies.
Gerald Bomstad, Jr. has been an investor and a Director of Cal-Central
Marketing Corporation since its inception in 1983. Mr. Bomstad held various
positions with Automation Industries, Inc., from 1951 to 1986. In 1951, he began
his career as a staff accountant. In 1960, he became the General Manager of the
Aerospace Division. In 1962, he was appointed Vice President, Treasurer and
Controller. From 1968 to 1978, he served as Senior Vice President and
Controller. From 1978 to 1986, after Automation Industries became a subsidiary
of Penn Central Corporation, Mr. Bomstad served as President of the Manufactured
Productions Group. In 1986, he led a group of investors and management in a
spin-off of three divisions of Penn Central and was appointed President and
Chief Executive Officer of the new operation. He has been active as a
consultant, investor and director for various enterprises. He became a Director
of the Company on October 26, 1993, when the Company acquired Cal-Central
Marketing Corporation.
Russell Cleveland is the principal founder and the majority shareholder of
Renaissance Capital Group, Inc. (RCG). RCG specializes in providing capital to
growing, emerging, publicly owned companies. Mr. Cleveland is a Chartered
Financial Analyst who has specialized in investing in emerging growth companies
for over 25 years. He has served as President of the Dallas Association of
Investment Analysts and his background includes executive positions with major
southwest regional brokerage firms. For over 10 years he was a contributing
editor of Texas Business Magazine where he analyzed investment trends. Mr.
Cleveland is the co-author of the books, Money Grow in Texas and Being
------------------- -----
Financially Independent, and is presently working on a new book, The Investor's
- ----------------------- --------------
Garden. He has contributed and has been quoted in a number of national
- ------
publications including The Wall Street Journal, Barons, Equity Magazine and
Forbes.
14
<PAGE>
Mr. Cleveland currently serves as the Managing General Partner of
Renaissance VI, Ltd., Renaissance Capital Partners, Ltd. and Renaissance Capital
Partners II, Ltd. Mr. Cleveland also currently serves as director of Greiner
Engineering, Inc., AFN, Inc., Global Environmental, Inc., Maxserve, Inc., CEL
Communications, Inc., Biopharmaceuticals, Inc., International Movie Group, Inc.,
as well as UNICO, Inc. Mr. Cleveland is a graduate of the University of
Pennsylvania, Wharton School of Business.
Leon Zajdel was founder and has served as President of Energy Guard Corp.,
a manufacturer and retailer of replacement windows, located in Beltsville,
Maryland, since 1972. Mr. Zajdel served as a director of United Coupon
Corporation from April, 1985 to November, 1991, and has served as a director of
the Company since July, 1990.
Robert Pulliza, a self employed franchise management consultant since 1994,
was appointed as Chief Financial Officer, Secretary and Treasurer of UNICO, Inc.
and subsidiaries effective April 1, 1996. He previously served as the Executive
Vice President and Chief Operating Officer of United Coupon Corporation from
1990 to 1994. Prior to joining United Coupon, he was affiliated with General
Business Services, Inc. as a franchisee, Regional Director, Director of
Operations and Vice President of Franchise Operations, from 1976 to 1989. From
1956 to 1976, Mr. Pulliza was an Infantry Officer in the United States Army,
completing military service in the grade of Major. He is a graduate of the
University of Nebraska where he earned a Bachelors Degree in Business
Administration. He holds a Masters Degree in Management and Public
Administration from Webster College.
Certain Legal Proceedings
- -------------------------
No director; nominee for director, or executive officer of the Company has
appeared as a party in any legal proceeding material to an evaluation of his
ability or integrity during the past five years.
Item 10. Executive Compensation
- -------------------------------
The following information relates to compensation received by the executive
officers who were serving as of December 31, 1995, whose salary and bonus during
fiscal 1995 exceeded $100,000.
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus(l)
- ----------------------------- ---- -------- ----------
<S> <C> <C> <C>
W. Douglas Frans 1995 $115,890 $ 0
Chief Executive Officer 1994 103,322 0
and President 1993 103,359 0
Gerard R. Bernier 1995 $124,403 $50,347
Chief Executive Officer 1994 106,635 0
and President - United 1993 100,194 0
Coupon Corporation
</TABLE>
(1) Bonus amounts are reflected in the year received by the employee. All
bonus payments relate to services performed, and incentive goals met by the
employee during the prior year. Expenses for such compensation are accrued and
reflected in the operating statements of the year such services are performed.
15
<PAGE>
Aggregated Option Exercises in Fiscal Year Ending December 31. 1995
-------------------------------------------------------------------
and Fiscal Year-End Option Values
---------------------------------
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
12-31-95(1) 12-31-95(2)
Shares Acquired Value Exercisable/ Exercisable/
on Exercise (#) Realized Unexercisable Unexercisable
--------------- -------- -------------- -------------
<S> <C> <C> <C> <C>
W. Douglas Frans - - 185,000 Exer. $0 Exer.(2)
Gerard R. Bernier - - 185,000 Exer. $0 Exer.(2)
- ---------------------------
</TABLE>
(1) There were 50,000 options granted to Officers or Directors, not
including Mr. Frans or Mr. Bernier, during fiscal year 1995.
(2) This amount reflects the difference between the market value of the
Company's Common Stock on December 31, 1995 and the exercise price.
Compensation Pursuant to Plans - Omnibus Equity Compensation Plan. The
-----------------------------------------------------------------
Company has adopted an Omnibus Equity Compensation Plan (the "Plan") under which
1,000,000 shares of Common Stock have been reserved for issuance upon exercise
of options granted pursuant to the Plan. Under the Plan, incentive stock options
may be granted to employees, and non-qualified stock options may be granted to
employees, Directors, Franchisees, and other persons, as the Compensation
Committee determines will assist the Company's business endeavors, at exercise
prices equal to at least 100% of the fair market value of the Common Stock on
the date of grant. In addition to selecting the options, the Compensation
Committee determines the number of shares subject to each option and otherwise
administers the Plan. Options granted under the Plan are not exercisable until
six months after grant and expire a minimum of three years or maximum of five
years after the date of grant, provided employment is continued. As of April 1,
1996, options to purchase 627,042 shares are outstanding under the Plan,
including options for 185,000 shares to officers of the Company. These options
have been granted at exercise prices ranging from $.25 to $1.16. The average
exercise price for all outstanding options is approximately $.45 per share. The
shares underlying the options were registered during 1994.
Employment Agreements. The Company has entered into an Employment Agreement
----------------------
with W. Douglas Frans to serve as the Chief Executive Officer and President of
the Company. The major terms of this Agreement provide for a base salary of
$100,000 plus a monthly automobile allowance and an incentive bonus based upon
the annual consolidated profitability and equity enhancement of the Company. The
Agreement provides for an annual cost of living increase based upon annual
increases in the Consumer Price Index of the general area surrounding the home
office of the Company. Mr. Frans waived such an increase at the end of fiscal
1992. The Agreement was entered into on July 1, 1992 and automatically renewed,
on January 1, 1995 and January 1, 1996. On March 31, 1996, Mr. Frans resigned
as Chairman, Chief Executive Officer & President of UNICO, Inc. Upon
termination of the subject Employment Agreement, Mr. Frans voluntarily waived
payment of approximately $56,000 of unpaid wages and benefits from prior periods
and approximately $50,000 of additional compensation due to him under the
remaining term of the Agreement.
United Coupon Corporation ("United Coupon"), a wholly-owned subsidiary of
the Company, has entered into an Employment Agreement with Gerard R. Bernier to
serve as the Chief Executive Officer and President of United Coupon. The major
terms of this Agreement provide for a base salary of $100,000 plus a company
provided automobile or monthly allowance, and an incentive bonus based upon the
pre-tax profitability of United Coupon. The Agreement provides for an annual
cost of living increase based upon annual increases in the Consumer Price Index
of the general area surrounding the home office of United Coupon. Mr. Bernier
waived such an increase at
16
<PAGE>
the end of fiscal year 1992. The Agreement was entered into on July 1, 1992 and
was renewed through December 31, 1997, at a revised base salary of $125,000, on
January 1, 1995.
Cal-Central Marketing Corporation, a wholly-owned subsidiary of the
Company, had entered into an Employment Agreement with Jack Brown. Under this
Agreement, Mr. Brown served as the President of Cal-Central. This Agreement
included no base salary, but provided that Mr. Brown receive compensation based
upon profitable advertising units sold by Cal-Central. The Agreement was entered
into in October 1993 and terminated by mutual consent in August 1995, upon Mr.
Brown's retirement.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
The following table sets forth as of April 1, 1996, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially 5% or more of such stock,
(ii) each Director of the Company who owns any Common Stock, and (iii) all
Directors and Officers as a group, together with their percentage of beneficial
holdings of the outstanding shares.
<TABLE>
<CAPTION>
Number of Shares of
Name of Beneficial Owner/ Common Stock % of Beneficial
Identity of Group Beneficially Owned Ownership /(1)/
----------------- ------------------ ---------------
<S> <C> <C>
Renaissance Capital Partners, Ltd. 1,988,888 /(2)/ 20.1%
8080 North Central Expressway
Suite 210 LB 59
Dallas, TX 75206-1857
Gerard R. Bernier 612,728 /(3)/ 7.5%
8380 Alban Road
Springfield, VA 22150
Gerald Bomstad, Jr. 823,600 /(4)/ 10.5%
422 Montigue, Suite 6
Greenwood, SC 29649
Duncan Smith Company 655,000 /(6)/ 7.7%
311 Third
San Antonio, TX 78205
Officers and Directors l,461,328 /(3)//(4)//(5)/ 17.9%
As a Group
</TABLE>
_____________________
(1) Percent is rounded to one decimal place.
(2) Includes 1,388,888 shares, the current maximum amount that Renaissance
is entitled to receive upon conversion of the seven year convertible debenture
dated December 31, 1991, and 600,000 shares that may be received upon conversion
of Convertible Subordinated Debenture dated October 1995, if such debentures are
not earlier repaid.
(3) Includes 185,000 shares which may be purchased at $.25 per share
pursuant to the Company's Omnibus Equity Compensation Plan.
17
<PAGE>
(4) Includes 50,000 shares which may be purchased at $.97 per share
pursuant to the Company's Omnibus Equity Compensation Plan and 55,000 shares
which are issued, but restricted from sale until certain profit performance
tests are met by Cal-Central Marketing Corporation.
(5) Includes shares underlying stock options granted to Mr. Bernier and Mr.
Bomstad, as well as, 25,000 shares which may be purchased at $.25 per share by
Leon Zajdel, a Director of the Company, pursuant to the Company's Omnibus Equity
Compensation Plan.
(6) Includes 600,000 shares that may be received upon conversion of
Convertible Subordinated Debenture dated October 1995, if such debenture is not
earlier repaid, plus 55,000 stock purchase warrants which entitle the holder to
purchase common stock at a minimum of $.90 per share.
Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
Transactions with Management and Others
- ---------------------------------------
No business relationship between the Company and any business or
professional entity, for which a director of the Company has served during the
last fiscal year or currently serves as an executive officer of, or has owned a
10% record or beneficial interest in, has existed since the beginning of the
Company's last fiscal year, or currently exists, which represented or will
represent payments for property or services in excess of 5% of the Company's
gross revenues for its last full fiscal year or of the other entity's
consolidated gross revenues for its last full fiscal year.
In addition, except as noted below, the Company did not owe, at the end of
its last fiscal period, to any business or professional entity for which a
director of the Company has served during the last fiscal year or currently
serves as an executive officer, or has owned during the last fiscal year or
currently owns a 10% record or beneficial interest in, an aggregate amount in
excess of 5% of the Company's total assets at the end of its last fiscal period.
No director of the Company has served as a partner or executive officer of any
investment banking firm that performed services for the Company during the last
fiscal year or that the Company proposes to have perform services during the
current year, except as noted below.
At the end of the last fiscal year and at April 1, 1996, the Company has an
outstanding Convertible Debenture in the amount of $1,250,000 issued to
Renaissance Capital Partners, Ltd. Russell Cleveland, who serves as a Director
of the Company, is a major owner and Managing General Partner of Renaissance
Capital Partners, Ltd. Mr. Cleveland did not serve as a Director of the Company
at the time that the debenture was issued. In October 1995, the Company entered
into a Subordinated Convertible Debenture with Renaissance, to provide interim
financing to support the working capital requirements, up to a maximum amount of
$150,000, of the Company's subsidiary, Cal-Central. This debenture is deemed to
be in the best interests of the Company and its shareholders and was entered
into on an arms length basis, at the request of Company management.
The Company has advanced $280,000, in prior periods, to two former officers
of its subsidiary, Cal- Central Marketing Corporation, Jack Brown, formerly
President, and Gerald Bomstad, Jr., formerly Executive Vice President. These
advances are evidenced by notes which are payable on demand by the Company.
These notes originally bore interest at 4%, but subsequent to October 26, 1995,
bear an annual interest rate of 10%. Redeemable preferred stock, with cash
redemption value of an amount equal to the principal value of these advances,
has been pledged as security for the advances.
The Company believes the terms of these transactions are as favorable as it
might have obtained from unaffiliated parties.
18
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The following documents are filed as part of this report:
1. Financial statements; see index to financial statement and schedules
immediately following the signature pages of this report.
2. Financial statement schedules; see index to financial statements and
schedules immediately following the signature pages of this report.
3. Exhibits:
The following exhibits are filed with this Form 10-KSB and are identified
by the numbers indicated; see index to exhibits immediately following
financial statements and schedules of this report.
2 Plan of Reorganization and Agreement of Merger among UNICO, Inc.,
AEC Acquisitions, Inc. and Cal-Central Marketing Corporation/(1)/
3.1 Certificate of Incorporation, as amended/(2)/
3.2 Bylaws, as amended/(2)/
3.3 Amendment to the Certificate of Incorporation to increase the
authorized shares of Common Stock/(3)/
4.1 Form of Common Stock Purchase Warrant, dated September 11, l986/(4)/
4.2 Form of Class B Common Stock Purchase Warrant dated November 1,
1993/(3)/
4.3 Form of Subordinated Debenture dated October 26, 1993, offered
through Duncan Smith Co./(3)/
4.4 Certificate of Designations, Preferences, and Rights of Series A
Convertible Preferred Stock/(3)/
4.5 Certificate of Designations, Preferences, and Rights of Series A
Redeemable Preferred Stock/(3)/
4.6 Certificate of Designations, Preferences, and Rights of Series B
Redeemable Preferred Stock/(3)/
10.1 Employment Agreement between Cal-Central Marketing Corporation and
Jack Brown./(1)/
10.2 Employment Agreement between Cal-Central Marketing Corporation and
Gerald Bomstad, Jr./ (1)/
10.3 Lease of executive offices at 1101-B Sovereign Row, Oklahoma City,
OK 73108./(3)/
10.4 Form of Common Stock Purchase Warrant dated October 26, 1993
offered through Duncan-Smith Co./(3)/
10.3 Second Amendment to Lease Agreement Cal-Central Marketing
Corporation/(3)/
10.6 United Coupon Corporation Franchise Agreement./(2)/
19
<PAGE>
10.7 Employment Agreement between United Coupon Corporation and Gerard
R. Bernier, as amended January 1, 1995. /(5)/
10.8 Employment Agreement between UNICO, Inc. and W. Douglas Frans./(2)/
10.9 Credit Agreement by and Between UNICO, Inc., and its subsidiaries
and BancFirst./(2)/
10.10 Purchase Agreement with Concord Video./(2)/
10.11 Omnibus Equity Compensation Plan./(2)/
10.12 Convertible Debenture Loan Agreement by and between UNICO, Inc. and
its subsidiaries, United Coupon Corporation and AEC Acquisitions,
Inc. and Renaissance Capital Partners, Ltd. Dated
December 31, 1991./(2)/
10.13 Amended and Restated Loan Agreement by and between UNICO, Inc. and
its subsidiaries and BancFirst as amended August 31, 1994./(5)/
10.14 Promissory Note of Jack Brown./(3)/
10.15 Promissory Note of Gerald Bomstad, Jr./(3)/
10.16 Novation/(3)/
10.17 Restructure Agreement Among UNICO, Inc., Cal-Central Marketing
Corporation, and The American Education Corporation, dated as of
December 31, 1993./(3)/
10.18 United Coupon Corporation Lease Agreement. /(5)/
10.19 Master Agreement and Schedules of Indebtedness 1 and 2 between CIT
Group and United Coupon Corporation. /(5)/
10.20 Machinery Contract between MAN Roland, Inc. and Cal-Central
Marketing Corporation. /(5)/
10.21 Exchange Agreement between Gerald Bomstad and the Company dated
February 22, 1995. /(6)/
10.22 Exchange Agreement between Jack Brown and the Company dated February
22, 1995. /(6)/
10.23 Debt Exchange Agreement between Graphic Rolls Unlimited and the
Company dated February 22, 1995. /(6)/
10.24 Debt Exchange Agreement between McCollum & Bunch and the Company
dated February 22, 1995. /(6)/
10.25 Debt Exchange Agreement between Walter Rose and the Company dated
February 22, 1995. /(6)/
10.26 Debt Exchange Agreement between Ronald Martin and the Company dated
February 22, 1995. /(6)/
10.27 Subordinated Loan Agreement dated June 30, 1995, among UNICO, Inc.
and Cal-Central Marketing Corporation and the Harlon Morse Fentress
Trust, Philip M. Stevenson, Jr., RHOJOAMT Partnership, Ltd., CITCAM
Stock Co., Barbara T. Grinnan, and Goose Creek.
10.28 Form of Common Stock Purchase Warrant, dated June 30, 1995.
20
<PAGE>
10.29 Subordinated Convertible Debt Loan Agreement dated October, 1995,
and schedule of advances, among UNICO, Inc., United Coupon
Corporation, and Cal-Central Marketing Corporation and Renaissance
Capital Group, Inc. and Duncan-Smith Company.
10.30 Third Restated Loan Agreement dated March 4, 1996, among UNICO,
Inc., United Coupon Corporation, Cal-Central Marketing Corporation
and BancFirst.
21 List of Subsidiaries/(3)/
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
--------------------
last quarter of the Registrant's fiscal year ending
December 31, 1995.
_____________________
(1) Incorporated by reference to the Registrant's Form 8-K, October 27,
1993 (SEC File No. (0-15303).
(2) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ending December 31, 1992 (SEC File No. 0-15303).
(3) Incorporated by reference to the Registrant's Form 1O-KSB for the
fiscal year ending December 31, 1993 (SEC File No. 0-15303).
(4) Incorporated by reference to the Registrant's Form S-18 registration
statement (SEC File No. 33-73 10-FW).
(5) Incorporated by reference to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994, (SEC File No. 0-15303).
(6) Incorporated by reference to the Registrant's Form S-3 dated
April 28, 1995 (SEC File No. 33-91270).
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNICO, Inc.
/s/ Gerard R. Bernier
April 9, 1996 By:_______________________
Gerard R. Bernier
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/ Gerard R. Bernier
________________________ Chief Executive officer April 9, 1996
Gerard R. Bernier Chairman of the Board
/s/ Robert Pulliza
________________________ Chief Financial officer April 9, 1996
Robert Pulliza
/s/ Gerald Bomstad, Jr.
________________________ Director April 9, 1996
Gerald Bomstad, Jr.
/s/ Russell Cleveland
________________________ Director April 9, 1996
Russell Cleveland
/s/ Leon Zajdel
________________________ Director April 9, 1996
Leon Zajdel
22
<PAGE>
UNICO, Inc.
-----------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants 24
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1995 25
Consolidated Statements of Operations for the 27
years ended December 31, 1995 and 1994
Consolidated Statements of Stockholders' Equity for 28
the years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the 29
years ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements 30
</TABLE>
All other schedules are omitted because of the absence of the condition
under which they are required or because the information is included in the
financial statements or notes thereto.
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of UNICO, Inc.:
We have audited the accompanying consolidated balance sheet of UNICO, Inc. and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UNICO, Inc. and subsidiaries
as of December 31, 1995, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As described in Note 1, the
Company suffered a loss from operations in 1995, and its consolidated current
liabilities exceeded its consolidated current assets at December 31, 1995.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. Management's plan in addressing these matters
is set forth in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
March 26, 1996
Oklahoma City, Oklahoma
24
<PAGE>
UNICO, Inc.
- -----------
CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1995 1 of 2
- --------------------------------------------- -------
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
CURRENT:
Cash and cash equivalents $ 300,821
Accounts receivable - trade
(net of allowance for uncollectible
accounts of $377,793) 771,495
Inventory 254,505
Notes receivable 189,707
Notes receivable - Stockholders 280,000
Prepaid expenses 171,203
---------
Total current assets 1,967,731
PROPERTY:
Furniture, fixtures, & equipment 4,285,322
Leasehold improvements 152,470
Less accumulated depreciation (1,552,175)
---------
Property, net 2,885,617
GOODWILL (net of amortization of
$317,309) 1,707,713
DEPOSITS AND OTHER 200,619
---------
TOTAL $6,761,680
=========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
UNICO, Inc.
- -----------
CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1995 2 of 2
- ---------------------------------------------- ------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,258,768
Accrued liabilities 242,844
Notes payable, current portion 781,715
Deferred revenue 110,921
-----------
Total current liabilities 2,394,248
LONG-TERM LIABILITIES:
Notes payable 805,021
Convertible debenture - Affiliate 1,386,750
Subordinated debenture 996,750
Other 91,933
-----------
Total long-term liabilities 3,280,454
-----------
Total liabilities 5,674,702
REDEEMABLE PREFERRED STOCK:
Preferred stock - $.0l par value:
5,000,000 shares authorized;
Series A and B Redeemable Preferred stock -
280 shares issued and outstanding 3
(Redemption value of $280,000)
COMMITMENTS & CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY:
Preferred stock - $.0l Par value:
5,000,000 shares authorized;
Series A Convertible Preferred stock -
0 shares issued and outstanding -
Common stock - $.0l par value:
20,000,000 shares authorized;
7,883,095 shares outstanding 78,830
Additional paid-in capital 4,974,034
Accumulated deficit (3,965,889)
-----------
Total stockholders' equity 1,086,975
-----------
TOTAL $ 6,761,680
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
UNICO, Inc.
- -----------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------
<TABLE>
<CAPTION>
REVENUES: 1995 1994
---- ----
<S> <C> <C>
Coupon and advertising sales,
net of discounts and allowances $ 10,058,864 $13,545,725
Franchise fees 105,054 148,554
Other 316,589 884,884
------------ -----------
TOTAL REVENUES 10,480,507 14,579,163
------------ -----------
EXPENSES:
Production 7,596,629 9,215,427
General and administrative 3,442,690 4,398,636
Franchise development 396,974 280,232
Interest expense - Affiliate 158,022 156,678
Interest expense - Other 207,946 168,209
Restructuring expense 772,443 -
------------ -----------
TOTAL EXPENSES 12,574,704 14,219,182
------------ -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES ( 2,094,197) 359,981
INCOME TAX BENEFIT (PROVISION) (300,319) 267,000
------------ -----------
NET INCOME (LOSS) $ (2,394,516) $ 626,981
============ ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,710,913 6,964,549
============ ===========
NET INCOME (LOSS) PER COMMON SHARE $(.311) $.090
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE>
UNICO, Inc.
- -----------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PREFERRED PAID-IN TREASURY ACCUMULATED
SHARES STOCK STOCK CAPITAL STOCK DEFICIT
------ ----- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, 1993 6,851,544 $70,223 $ 16 $4,858,663 $(292,077) $(2,198,354)
Exercise of options 4,577 46 3,949
Exercise of warrants 450,400 4,504 207,412
Net income 626,981
--------- -------- ------- --------- --------- -----------
BALANCE, 1994 7,306,521 74,773 16 5,070,024 (292,077) (1,571,373)
Exchange of Preferred
for Common 355,556 3,556 (3) 119,865
Exchange of stock in
lieu of payables 221,018 2,211 74,512
Cancel Series A
Convertible Preferred (10)
Cancel Treasury stock (1,710) (290,367) 292,077
Net loss (2,394,516)
--------- -------- ------- ---------- --------- -----------
BALANCE, 1995 7,883,095 $78,830 $ 3 $4,974,034 $ 0 $(3,965,889)
========= ======= ======= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
28
<PAGE>
UNICO, Inc.
- -----------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
------------ ------------
<S> <C> <C>
Net income (loss) $(2,394,516) $ 626,981
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 472,112 494,979
Provision for bad debts 323,532 15,564
Deferred income tax provision (benefit) 267,000 (267,000)
Gain on sale of TAEC stock - (342,528)
Gain on sale of equipment (31,500) -
Gain on exchange of common stock (121,561) -
Write down of fixed assets due to restructuring 325,898 -
Impairment of accounts receivable 330,000 -
Changes in operating assets and liabilities, net
of effects from purchase and sale of subsidiaries:
Accounts and notes receivable 181,185 (202,757)
Prepaid expenses and inventory (101,891) (116,436)
Deposits and other assets 256,301 (132,700)
Accounts payable and accrued liabilities 233,282 (245,052)
Deferred revenue 3,041 (115,931)
----------- -----------
Net Cash Provided by (Used in) Operating Activities (257,117) (284,880)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property (1,099,968) (345,425)
Proceeds from sale of equipment 31,500 -
Advances to stockholders - (112,000)
Proceeds from sale of TAEC stock - 501,520
----------- -----------
Net Cash Provided by (Used in) Investing Activities (1,068,468) 44,095
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debentures 573,500 25,000
Proceeds from notes payable 861,435 1,674,373
Payment of notes payable (517,271) (1,259,172)
Proceeds from issuance of common stock - 215,911
Payment of funding costs - (48,000)
----------- -----------
Net Cash Provided by Financing Activities 917,664 608,112
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: (407,921) 367,327
CASH AND CASH EQUIVALENTS,
Beginning of Year 708,742 341,415
----------- -----------
CASH AND CASH EQUIVALENTS,
End of Year $ 300,821 $ 708,742
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ 22,000 -
Cash paid for interest $ 289,661 $ 312,132
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
29
<PAGE>
UNICO. Inc.
- -----------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 and 1994
- ----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
--------------------------------------------------------
Organization and Operations - UNICO, Inc. (the "Company") was incorporated
---------------------------
on April 11, 1984 in the State of Delaware. The Company's primary business,
cooperative advertising, involves the designing, printing, packaging, and
distributing of public relations and marketing materials and coupons for
retailers who provide goods and services. Sales are conducted through
franchise operations and through independent sales representatives. The
Company's customers are primarily located in the eastern, southeastern,
midwestern and western United States.
During 1995, the Company suffered a loss from operations of $2,394,516 and
has negative working capital of $426,518 as of December 31, 1995. These
factors raise substantial doubt about the Company's ability to continue
operating in the normal course of business. Although there can be no
assurance, management believes the Company will continue as a going
concern. The financial statements do not include any adjustments relating
to the recoverability or classification of asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management has considered operating losses and acquisitions which have
required substantial utilization of funds, as well as anticipated operating
and debt service requirements for the near term, and believes that
sufficient liquidity may not be available from working capital to support
the requirements of continuing operations for the foreseeable future. As a
result, management has taken steps in four strategic areas to assure
continued success:
A. All consolidated operating losses for 1995, other than operating
overhead attributed to UNICO, Inc., the Parent Company, were generated by
the Company's distributor-based cooperative advertising subsidiary, Cal-
Central Marketing Corporation ("Cal-Central"). This subsidiary was
acquired in late 1993 and has been a heavy user of supplemental working
capital provided by the Company since its acquisition. In August of 1995,
Company management performed an in-depth review of all operating policies
and procedures of this operation. As a result, operating deficiencies were
identified that were considered to be the cause of the continual need for
supplemental working capital infusion. Management began implementation of
a restructuring plan for this operation during the third quarter of 1995.
This plan included the closing of the Fort Lauderdale office and production
facility in December 1995, along with the elimination of approximately 30
full-time positions. The plan also included a complete revamping of sales,
billing and collection processes for this business segment. All art
development and printing for Cal-Central is now conducted by the Company's
other subsidiary, United Coupon Corporation ("United Coupon") in
Springfield, Virginia, on a same as arms length basis, utilizing approaches
that are considered by Company management to be superior to and more
efficient than those that were followed in the Fort Lauderdale facility.
Revamping the approach to advertising sales required the rapid scale-down
of existing marketing centers to conserve near term working capital and to
reduce operating losses. The distributor-based cooperative advertising
business is now being brought forward on a controlled basis through a
divisional operation of United Coupon. Although there can be no assurance,
Company management believes this emerging segment will be profitable and
will produce positive cash flow within the next 12 months.
B. On March 4, 1996, an amended loan agreement with BancFirst was
entered into by the Company whereby the current amounts due BancFirst were
extended to January 31, 1997. Semi-monthly principal payments of $20,000
plus accrued interest are required under the terms of the amended
agreement. An
30
<PAGE>
additional requirement is the execution of a revised subordination
agreement by at least 80% of the subordinated debenture lenders of the
Company. This subordination agreement prohibits the payment of principal or
interest on any subordinated debt prior to July 1, 1997, or until such time
that other arrangements are completed for the BancFirst debt. As of March
26, 1996, approximately 76% of the subordinated lenders have executed this
subordination agreement. The standstill of principal and interest payments
results in reduced cash requirements for such payments of approximately
$600,000 during 1996 and until July 1, 1997, if all subordinated lenders
agree to these terms. Management considers this amended loan agreement to
be an interim step in the restructuring of amounts owed to the bank.
Actions are underway to refinance the amount owed to BancFirst on a longer
term basis with other lender(s). This action, if successful, will further
improve the working capital and liquidity position of the Company.
C. Company management has initiated discussions with the subordinated
debt lenders regarding the conversion to equity of a significant portion of
subordinated debt. A Letter of Intent to accomplish such conversion,
subject to finalization of specific terms, or specific subordination
agreements have been signed by subordinated lenders representing
approximately 76% of the subordinated lender group. Although not yet
assured, management expects this conversion to occur on or before July 1,
1996. This action, if completed, will result in the addition of
approximately $1,700,000 in equity and an equal reduction of debt for the
Company, resulting in annual savings of interest expense and related cash
requirements of approximately $200,000. Management cannot assure, at this
point, that sufficient cash will be available from operations to meet
amortization requirements beyond July 1, 1997, if the debentures are not
converted in whole or in part to Common stock.
D. Company management has taken steps to consolidate all corporate
office functions and personnel within the headquarters of United Coupon in
Springfield, Virginia. Included in this action is the combining of the
offices of Chief Executive Officer & President and Chief Financial Officer
for both the Company and United Coupon. This component of management's
plan is made possible by the expansion of United Coupon's facility during
1995, and the addition of key management positions for United Coupon. This
action, including closing the former corporate office of the Company in
Oklahoma City, is expected to be completed on or about April 15, 1996,
resulting in additional operating cost savings for 1996 and beyond.
Although the ultimate outcome from these strategic actions cannot be
assured, management expects that these efforts will be fruitful and will
provide the basis for future operating success for the Company.
Principles of Consolidation - The consolidated financial statements include
---------------------------
the accounts of the Company and its wholly-owned subsidiaries, United
Coupon Corporation, Cal-Central Marketing Corporation, and Greenleaf
Catalogue, Inc. (a dormant corporation). All material intercompany
accounts and transactions between the Company and its subsidiaries have
been eliminated.
Revenue Recognition - The Company recognizes coupon sales revenue on a
-------------------
percentage of completion basis as stages of the production process are
completed, and defers franchise fee revenue until substantially all
services relating to the sale of a franchise have been performed. Costs
related to franchise sales are recognized in the periods in which such
costs are incurred. Revenue derived from sales of advertisements in
publications and on cash register tapes is also recognized on a percentage
of completion basis as stages of the production process are completed. A
current liability is established for cash received and amounts billed in
excess of revenue recognized.
Inventory - Inventory consists primarily of paper, envelopes and printing
---------
materials and is stated at the lower of cost or market.
Property - Property is recorded at cost and adjusted for depreciation.
--------
Depreciation is provided over the assets' estimated useful lives of ten to
fourteen years using the straight-line method of depreciation. Leasehold
improvements are amortized over their estimated useful life or the term of
the lease, whichever is shorter.
31
<PAGE>
Net Income (Loss) Per Share - Net income (loss) per common share is
---------------------------
computed by dividing net income (loss) by the weighted average number of
shares outstanding. Stock warrants and certain options have not been
considered as their effect would be anti-dilutive.
Goodwill - Goodwill represents the excess of purchase price over the fair
--------
value of net assets acquired and is being amortized over lives of eight to
forty years. The Company evaluates goodwill using a permanent impairment
approach. The assessment of permanent impairment of goodwill is premised
on future operating earnings and cash flows on a non-discounted basis which
is reviewed at each balance sheet date. Future operating earnings and cash
flows are estimated based upon a number of factors, including operating
results, business plans, budgets and economic projections. In addition,
the evaluation considers non-financial data such as continuity of
personnel, changes in the operating environment, name recognition,
competitive developments, market trends and client and business
relationships. Finally, the evaluation considers changes in management's
strategic direction and market emphasis, which may require impairment of
the value of goodwill. Measurement of the amount of impairment, if any, is
based upon the difference between the carrying value of goodwill and the
expected net realizable value over the remaining life of the subject
business enterprise.
Cash Flows - For purposes of reporting cash flows, cash and cash
----------
equivalents include cash on deposit with depository institutions and
certificates of deposit with original maturities of three months or less.
Income Taxes - The Company files a consolidated federal income tax return.
------------
Deferred income taxes are provided for temporary differences between the
financial reporting and tax bases of the Company's assets and liabilities.
Fair Value of Financial Instruments - The carrying value of the financial
-----------------------------------
instruments on the balance sheet, not otherwise discussed in these notes,
approximates fair market value.
Accounting Pronouncements - In March 1995, the Financial Accounting
-------------------------
Standards Board issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Adoption
of SFAS No. 121 is required for fiscal years beginning after December 15,
1995. The Company will adopt this new standard effective January 1, 1996,
and believes it will not have a material impact on the Company's financial
position or the results from operations.
Use of Estimates - The preparation of financial statements in conformity
----------------
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications - Certain items in the 1994 financial statements have
-----------------
been reclassified to conform to the 1995 presentation.
2. ACQUISITION
-----------
On October 21, 1993, the Company and a wholly-owned subsidiary of the
Company entered into a definitive agreement for the merger of Cal-Central
Marketing Corporation ("Cal-Central/Florida"), a Florida Corporation, into
the subsidiary. The merger was effected on October 27, 1993, through the
issuance of 1,200,000 shares of restricted Common Stock of the Company, 600
shares of Redeemable Preferred Stock of the Company with a redemption value
of $600,000, and 1,000 shares of Convertible Preferred Stock of the
Company.
32
<PAGE>
The consideration paid for the acquisition of Cal-Central/Florida was
negotiated between the Company and the shareholders of Cal-Central/Florida.
As a result of the merger, the name of the surviving corporation was
changed to Cal-Central Marketing Corporation ("Cal-Central").
The terms of the Redeemable Preferred Stock of the Company issued in the
acquisition provided that such shares were redeemable at the holders'
option after attainment of certain profit performance tests by Cal-Central.
The shares of Convertible Preferred Stock were mandatorily convertible into
Common Stock of the Company after 12 months, assuming certain profit
performance tests by Cal-Central for such period were achieved. Redemption
of the Redeemable Preferred Stock and conversion of the Convertible
Preferred Stock subsequent to the acquisition would have resulted in the
payment of up to an additional $600,000 for the redemption of preferred
stock and additional market valuation for the issuance of common shares.
These amounts would be recorded as additional cost of the acquisition and
would increase the recorded amount of goodwill. Conversion rights of the
Convertible Preferred Stock expired on October 26, 1994, with the
performance tests not achieved. This stock was retired in 1995. On April
20, 1995, 320 shares of the Redeemable Preferred Stock were exchanged, in
lieu of redemption for cash, to 355,556 shares of Common Stock of the
Company at an exchange price of $.90 per share. This exchange of Common
Stock for Redeemable Preferred reduced the Company's future cash redemption
requirements by $320,000. As of December 31, 1995, 280 shares of
Redeemable Preferred Stock, with a redemption value of $280,000, remained
outstanding.
3. NOTES PAYABLE -
---------------
<TABLE>
<CAPTION>
Notes payable consist of the following: December 31, 1995
-----------------
<S> <C>
Convertible Debenture - Affiliate $1,250,000
Convertible Debenture - Affiliate 136,750
Subordinated Debenture - Duncan Smith 560,000
Subordinated Debenture - Duncan Smith 136,750
Subordinated Debenture Agreement with six lenders 300,000
Revolving line of credit bearing interest at 1.5%
over Bank prime through June 30, 1996 and 3% over
bank prime thereafter, (8.5% Bank prime rate at
December 31, 1995), collateralized by equipment,
accounts receivable, inventory, and certain other
assets, due January 31, 1997. Accrued interest plus
principal payments in an amount to cause the
outstanding balance owed to be equal to or less than
the required collateral base are due monthly. 600,000
Term loan bearing interest at 1% over Bank prime
through June 30, 1996 and 3% over bank prime
thereafter, (8.5% Bank prime rate at December 31,
1995), collateralized by equipment, accounts
receivable, inventory, and certain other assets.
Principal payments of $20,000 plus interest are
payable semi-monthly until January 31, 1997, when
the remaining balance is due. 334,433
Revolving line of credit bearing interest at 1.5% over
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
Bank prime, (8.5% Bank prime rate at December 31,
1995) collateralized by equipment, accounts
receivable, inventory, and certain other assets, due
January 10, 1996. 60,000
Installment loan secured by certain equipment bearing
interest at 9.75%. Principal and interest payments are
due monthly until maturity on July 14, 2000. 241,600
Installment loan secured by certain equipment bearing
interest at 12.0%. Principal and interest payments
are due monthly until maturity on March 1, 1997. 104,550
Installment loan secured by certain equipment bearing
interest at 9.5%. Principal and interest payments are
due monthly until maturity on August 18, 1997. 72,254
Installment loan secured by certain equipment bearing
interest at 9.95%. Principal and interest payments are
due monthly until maturity on October 7, 1999. 132,701
Unsecured note to an individual bearing interest at
15%. Interest payments are due quarterly until
maturity on July 7, 1996. 30,000
Equipment lease classified as an installment loan
secured by certain equipment. Principal and interest
payments are due monthly until maturity on June 1,
1997. Lease was repaid before maturity in February
1996. 11,198
----------
Total Notes Payable 3,970,236
Less Current Portion 781,715
----------
Long-Term Portion of Notes Payable $3,188,521
==========
</TABLE>
The Company completed a convertible debenture financing with Renaissance
Capital Partners, Ltd. ("Renaissance") effective December 31, 1991, wherein
the Company received $1,250,000 in cash proceeds. The debenture is a
seven-year note bearing interest at 12 1/2% per annum, due in quarterly
installments beginning April 1, 1992. Renaissance may, at any time,
convert all or part of the debenture into shares of the common stock of the
Company. The debenture is currently convertible into a maximum of
1,388,000 shares, although management believes a lower conversion price per
share, which will yield a larger number of shares, may be necessary to
complete a conversion in the near term. The Company may call the debenture
at any time after three years from the effective date. The Company was to
pay quarterly principal installments of thirty dollars per thousand of
debenture amount outstanding at January 1, 1995. These principal payments
were to begin January 1, 1995, and continue on the first day of each
quarter thereafter until maturity, January 1, 1999, at which time all
unpaid principal and accrued interest was to be due and payable in full.
Renaissance has signed a revised subordination and standstill agreement
34
<PAGE>
whereby all payments of principal and interest are deferred until July 1,
1997. The Company is required to meet certain minimum financial Covenants.
These affirmative covenants were amended August 29, 1994, and require that
the Company maintain a minimum net working capital of $800,000, minimum
current ratio of one and one quarter to one (1.25:1) and minimum
shareholder equity of $2,400,000. Although the Company was not in
compliance with these covenants as of December 31, 1995, Renaissance'
execution of the revised subordination agreement suspends financial
covenant requirements. Renaissance is considered an affiliate as Russell
Cleveland, who is a Director of the Company, is the Managing General
Partner of Renaissance Capital Corporation, Inc. Cleveland did not serve
as a Director at the time the debenture was issued.
In October 1993, the Company issued $435,000 of five year subordinated
debentures with interest at 10.5% through October 1996, and 12% from
November 1996 through October 1998, together with 217,500 common stock
purchase warrants (referred to herein as the D. S. Warrants). The
debentures and D. S. Warrants were offered in a private placement through
Duncan-Smith Co., which received 30,000 warrants with the same terms as the
D. S. Warrants. The D. S. Warrants entitle the holders to purchase one
share of Common Stock per Warrant at prices which range from $ .90 in 1994
to $1.40 in 1998. At the time the warrants were issued, the exercise
prices were in excess of the market price of the Company's common stock.
The warrants are presently exercisable and expire in 1998. They contain
anti-dilution provisions and registration rights for the underlying Common
Stock. None of these warrants have been exercised.
In November 1993, the Company issued an additional $100,000 of the
subordinated debenture and 50,000 common stock purchase warrants, with the
same terms noted above, to a creditor of Cal-Central in exchange for
$100,000 in short term notes payable. These warrants were exercised on May
3, 1994.
In January 1994, an additional $25,000 of subordinated debentures and
12,500 common stock purchase warrants with the same terms as noted above,
were issued in connection with the private placement noted above. None of
these warrants have been exercised.
In February 1994, the Company procured a loan with Duncan-Smith Company in
the amount of $400,000 secured by accounts receivable of Cal-Central. The
note bears interest at 7% with interest payable quarterly and matures
February 14, 1995. Twenty-five thousand common stock purchase warrants
were granted to the owners of Duncan-Smith Company in association with this
transaction. These warrants are exercisable for 25,000 shares of common
stock for a period of five years at $1.25 per share. This note was repaid
during the period from September 13, 1994 to December 30, 1994. None of
these warrants have been exercised.
In June 1995, the Company and Cal-Central entered into a $300,000
subordinated Loan Agreement with six lenders. Interest is due quarterly at
an annual rate of 12%. The note matures on October 1, 1997. In
conjunction with this financing, the Company issued 450,000 common stock
purchase warrants. The warrants entitle the holders to purchase one share
of common stock per warrant at an exercise price of $ .90 per share. At
the time these warrants were issued, the exercise price exceeded the market
price for the Company's common stock. The warrants are presently
exercisable and expire on December 31, 2000. They contain anti-dilution
provisions and registration rights for the underlying stock. None of these
warrants have been exercised.
On October 6, 1995, the Company entered into a Convertible Loan Agreement
with Renaissance Capital Group, Inc. and Duncan-Smith Investments Company.
The terms of this agreement allow the periodic borrowing of up to $300,000
by the Company at an annual interest rate of 10%. No payments of principal
or interest are required prior to July 1, 1997, as a component of the
subordination and standstill agreement executed by Renaissance Capital
Group, Inc., Duncan-Smith Investments Company, BancFirst and the Company.
The loan matures on October 1, 1997. At December 31, 1995, $273,500 had
been advanced and was outstanding. The holders of the note have the right,
at the holders' option, to convert at any time, all or any $1,000
increments of the outstanding principal and accrued interest, into common
stock of the
35
<PAGE>
Company. Such conversion is to be effected at $.25 per share. The
conversion price is subject to anti-dilution provisions and registration
rights for the underlying common stock. None of the note principal or
accrued interest has been converted. Both United Coupon and Cal-Central are
guarantors of this borrowing.
In August 1994, the Company renewed a revolving line of credit with a local
bank and established a term facility. The line was renewed under the same
terms and conditions for a period of sixteen months, expiring in January
1996. The term note required monthly principal payment of $10,500 plus
interest until the note matured in January, 1996. Subsequent to year end,
the Company entered into an amended renewal of these loan agreements
whereby the maturity dates of the notes were extended to January 31, 1997.
The amended agreement calls for semi-monthly principal payments on the term
note of $20,000, plus accrued interest beginning on March 1, 1996.
Additionally, principal payments will be made on March 1, April 1, May 1,
and June 1, 1996, in that amount which is equal to 50% of certain Cal-
Central accounts receivable which are collected during such periods. For
the periods July 1, August 1, September 1, October 1, November 1, and
December 1, 1996, such additional principal payments will be made from 100%
of the certain Cal-Central accounts receivable collected and 25% of
collections from certain accounts receivable related to the Company's
divisional operation, d/b/a Alliance Publications. The interest rate for
the term and revolving notes is 1% over bank prime through June 30, 1996.
On July 1, 1996, the rate increases to 3% over the national prime rate for
the remaining term of the agreement. The revolving instrument is not to
exceed a borrowing base determined by including certain percentages of
accounts receivable and inventory of the Company's subsidiaries. This
revised agreement also provides for the standstill of all principal and
interest payments to any subordinated debt lenders until July 1, 1997.
Additionally, under the terms of the amendment, the minimum financial
covenants previously required on these notes were eliminated.
Notes payable maturities are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 --------------------------- $ 781,715
1997 --------------------------- 1,220,268
1998 --------------------------- 770,258
1999 --------------------------- 1,162,552
2000 --------------------------- 35,443
----------
Total Maturities ---------------- $3,970,236
==========
</TABLE>
4. STOCKHOLDERS' EQUITY
--------------------
In connection with the acquisition of Cal-Central in October 1993, the
Company issued 800,000 warrants allowing the holders to acquire 800,000
shares of common stock at $.625 per share ("Combined Warrants"). Warrants
to acquire 400,000 shares were exercised immediately in 1993. The
remaining 400,000 Combined Warrants were exercisable commencing on the date
the common stock underlying the warrants was registered, until six months
after the effective date of the registration statement. The Company filed a
registration statement in 1994. These Warrants were exercised periodically
from August 1, 1994, to November 23, 1994.
On February 22, 1995, the Company entered into an agreement with the
holders of the Company's Redeemable Preferred stock to exchange 320 shares
of such stock for 355,556 shares of Common stock. This transaction was
completed with the issuance of these restricted shares on April 20, 1995.
This exchange reduced the future cash redemption required under the
Redeemable Preferred stock by $320,000.
In conjunction with the consolidation of certain administrative functions
and planned reduction of debt at Cal-Central, the Company entered into
agreements during February 1995, with two venders of the Company to
exchange 92,963 shares of Common stock for $83,667 of accounts payable, in
lieu of cash payment. Additional agreements were reached on the same date
with two note holders of Cal-Central, whereby 128,055 shares of Common
stock were exchanged in cancellation of $115,250 of debt. These
36
<PAGE>
transactions were completed with the issuance of restricted shares on April
20, 1995. Due to a prevailing market price which was lower than the agreed
upon exchange price of the Common stock, the Company recognized gross
benefit of approximately $121,500, which is included in other revenue. The
effects of these transactions have not been reflected in the accompanying
consolidated statements of cash flows as they represent non-cash
transactions.
Effective March 26, 1996, the Company elected to retire all remaining
Treasury Stock held by the Company.
The Company has reserved 1,000,000 shares of the Company's common stock for
issuance to directors, key employees, franchisees, and others contractually
related to the Company, pursuant to an Omnibus Equity Compensation Plan
adopted by the Company in 1989. The Plan provides for the granting of both
incentive and non-qualified stock options. The exercise price of the
options is not less than the market value of the stock on the date of
grant. Options granted become exercisable upon date of grant or such other
time as the compensation committee may determine, and expire in a maximum
of five years. The following table reflects a summary of stock option
activity:
<TABLE>
<CAPTION>
1995
-------------
<S> <C>
Shares available for grant
at beginning of period 213,544
Options granted (88,610)
Options forfeited or canceled 206,737
------------
Shares available for grant
at end of period 331,671
------------
Shares under option
at end of period 627,042
Option price per share $.25 - $1.16
Shares exercisable
at end of period 627,042
============
</TABLE>
During 1995, no options were exercised. As of December 31, 1995, 41,287
options had been exercised since inception of the Plan.
The Company's Common Stock entitles the holder to one vote per share,
dividends when, as, and if declared by the Board of Directors; and a pro
rata share of net assets distributable to equity holders on liquidation,
subject to any prior rights of preferred stockholders. There are no
preemptive rights. The outstanding preferred stock at December 31, 1995,
consists of two classes: Series A and Series B Redeemable Preferred Stock.
The holders of Series A and Series B Redeemable Preferred Stock are
entitled to dividends when, as, and if declared by the Board of Directors,
and are entitled to one vote per share, voting with the holders of Common
Stock as one class, except that any amendment to the Certificate of
Incorporation that would materially alter the relative rights and
preferences of the Series A or Series B Redeemable Preferred Stock requires
the consent of a majority of the shares of Series A or Series B,
respectively. Upon liquidation, the holders of Series A and Series B
Redeemable Preferred Stock are entitled to a liquidation preference of
$1,000 per share. The shares are redeemable at the option of the holders
at $1,000 per share, plus any unpaid dividends, at anytime after the pretax
net income of Cal-Central exceeds $500,000 for any consecutive 12 month
period. The number of shares of Series A and Series B Redeemable Preferred
Stock outstanding is subject to adjustment in the event of any stock split,
stock dividend or similar action.
37
<PAGE>
5. COMMITMENTS & CONTINGENCIES
---------------------------
Rental commitments under non-cancelable operating leases for buildings are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1996........ $ 330,493
1997........ 355,208
1998........ 375,977
1999........ 407,265
2000........ 437,250
Thereafter.. 2,392,228
</TABLE>
Rental expense under these leases was $451,821 and $622,872 in 1995 and
1994 respectively.
The Company has an employment agreement with an officer which provides for
approximately $125,000 in base compensation, plus incentive compensation
based upon the earnings of one of its subsidiaries through December, 1997.
Prior to 1995, the Florida Department of Revenue issued a Notice of Intent
to levy additional sales taxes with penalty and interest charges totaling
approximately $480,000 against the Company's subsidiary, Cal-Central. A
liability for a portion of this matter was recorded by Cal-Central and was
included in other long-term liabilities in the financial statements at
December 31, 1994. Subsequent to December 31, 1995, oral settlement was
reached with Florida authorities whereby Cal-Central agreed to a payout of
$35,000, payable at $5,000 per quarter, over seven quarters beginning in
June, 1996. A formal agreement has not yet been finalized, but is expected
to be completed in the near term. The agreed to amount is recorded as a
liability at December 31, 1995.
The Company is exposed to various other legal matters encountered in the
normal course of business. In the opinion of management, the resolution of
these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
6. INCOME TAXES
------------
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires an asset and liability approach to
accounting for income taxes. Under SFAS 109, deferred tax assets or
liabilities are computed on the difference between the financial statement
and income tax bases of assets and liabilities ("temporary differences")
using the enacted marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the deferred tax asset or liability
from period to period.
The tax effects of temporary differences which give rise to deferred tax
assets and liabilities as of December 31, 1995, are as follows:
<TABLE>
<S> <C>
Current deferred tax asset:
Accounts receivable $ 64,510
Inventory 2,095
Prepaid expenses (9,569)
Accrued liabilities 21,900
Valuation allowance (78,936)
-----------
Net current deferred tax asset 0
-----------
Non-current deferred tax asset:
Property (539,494)
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
Other assets (50,243)
Operating loss carryforwards 2,217,284
Valuation allowance (1,627,547)
-----------
Net non-current deferred tax asset 0
-----------
Net deferred tax asset $ 0
===========
</TABLE>
Management has determined that it is not more likely than not that the
Company will be able to realize all the tax benefits from the net operating
loss carryforwards and has, therefore, provided a valuation allowance of
$1,706,483. Given the level of net loss before taxes in 1995, and the
uncertainty that exists regarding the ability of the company to continue as
a going concern, the Company has provided an additional valuation allowance
of $267,000 related to the deferred tax asset reflected as of December 31,
1994.
The following table details the difference between the federal statutory
rate and the effective tax rate for the years ended December 31, 1995 and
1994 (amounts expressed as percentages):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Statutory rate (34.0) 34.0
Change in valuation allowance due to
current year income (loss) 34.0 (34.0)
Increase (decrease) in valuation
allowance to recognize deferred tax
asset 14.3 (74.2)
----- -----
Effective rate 14.3 (74.2)
===== =====
</TABLE>
7. PENSION PLAN
------------
The Company has a defined contribution pension plan which covers
substantially all of the employees of the Company's subsidiary, United
Coupon Corporation. Under the Plan, the Company's contributions equal 50%
of the participants' contributions, up to 2% of their respective gross
wages. Contributions to the Plan by the Company were $33,619 in 1995, and
$21,464 in 1994.
8. RELATED PARTY TRANSACTIONS
--------------------------
The Company has advanced $280,000 to two former officers of its subsidiary,
Cal-Central Marketing Corporation, who are also stockholders of the
Company. These advances are evidenced by notes which originally matured on
October 26, 1995, and are currently being extended on a month-to-month
basis. These notes originally bore interest at 4%, but subsequent to
October 26, 1995, bear an annual interest rate of 10%. Redeemable Preferred
Stock (280 shares) are pledged as collateral for the advances.
9. OTHER INCOME
------------
In February 1994, the Company restructured a $130,000 note receivable and
approximately $120,000 in accounts receivable from The American Education
Corporation ("TAEC"), in connection with the recapitalization of TAEC. The
terms of the restructuring provided for a cash payment of $75,000, a one
year note for $50,000 with 7% annual interest, and 260,602 shares of TAEC
Common Stock. The new note was paid in March 1994. In addition, the
Company converted its TAEC Convertible Preferred Stock into 1,371,420
shares of TAEC Common Stock.
39
<PAGE>
On June 9, 1994, the Company sold its investment in TAEC Common Stock for
cash. Total proceeds of the sale were $501,520 and resulted in other
income of approximately $340,000 for the period ended December 31, 1994.
10. SUBSIDIARY RESTRUCTURING
-------------------------
The Company acquired Cal-Central Marketing Corporation as a wholly owned
subsidiary on October 27, 1993. Operating profitability and cash flow for
the subsidiary have been below management's expectations and anticipated
potential since the acquisition. During the third quarter of 1995,
management determined that it was in the best interest of shareholders and
the Company to close the Fort Lauderdale, Florida, production facility and
consolidate all art and printing functions for Cal-Central into the
Company's newly expanded facility in Springfield, Virginia. This
transition was accomplished during December 1995, and a restructuring
charge comprised of the following items was recorded during 1995 to reflect
the costs associated with the restructuring:
<TABLE>
<CAPTION>
<S> <C>
Leasehold Improvement Forfeiture $ 59,426
Write Down of Plant & Equipment 266,472
Deposits Forfeiture 34,110
Employee Severance 20,000
Distributor Cancellations 30,000
Legal, Accounting, and Moving Costs 32,435
Accounts Receivable Impairment 330,000
--------
Total Restructuring Expense $772,443
========
</TABLE>
Additionally, Cal-Central entered into a settlement agreement with the
owner of the Fort Lauderdale facility whereby the Company is required to
make final payments totaling $48,000 during 1996 as a condition for early
termination of this lease. This amount has been recorded as a period
expense and is included in accrued liabilities at December 31, 1995.
11. SUBSEQUENT EVENTS
-----------------
On March 4, 1996, the Company entered into a Third Restated and Amended
Loan Agreement with BancFirst which provided for the renewal of the
Company's existing term and revolving credit facilities until January 31,
1997. This amended agreement is discussed more fully in Note 3.
In consideration of the plan to consolidate the corporate office functions
from Oklahoma City to the expanded offices of the Company in Springfield,
Virginia, the Company's Chairman, Chief Executive Officer and President, W.
Douglas Frans, and its Chief Financial Officer, Ted W. Strickland, proposed
to resign their positions following completion of specific key objectives
encompassing the bank restructuring and annual audit. The Board of
Directors approved this plan on March 22, 1996, and appointed Gerard R.
Bernier, current Chief Executive Officer and President of United Coupon,
and Robert F. Pulliza, Chief Financial Officer of United Coupon, as their
respective successors. This transition of corporate authority will become
effective March 31, 1996.
40
<PAGE>
Exhibit 10.27
Subordinated Loan Agreement dated June 30, 1995, among UNICO, Inc. and Cal-
Central Marketing Corporation and the Harlon Morse Fentress Trust, Philip M.
Stevenson, Jr., RHOJOAMT Partnership, Ltd., CITCAM Stock Co., Barbara T.
Grinnan, and Goose Creek.
<PAGE>
LOAN AGREEMENT
--------------
THIS AGREEMENT is made and entered into this 30th day of June, 1995, by and
----
among UNICO, INC., a Delaware corporation ("Unico"), CAL-CENTRAL MARKETING
CORPORATION, an Oklahoma corporation ("Cal-Central") (Unico and Cal-Central are
sometimes hereinafter referred to collectively as the "Borrowers") and Sara
Humphreys Warren, Margaret H. Cummings, and Laurie F. Humphreys, Trustees of the
HARLON MORSE FENTRESS "TRUST and PHILIP M. STEVENSON, JR., RHOJCOAMT
PARTNERSHIP, LID., a Texas limited partnership, CITCAM STOCK CO., a Texas
general partnership, BARBARA T. GRINNAN, and GOOSE CREEK, a Texas general
partnership (the "Lenders").
W I T N E S S E T H:
-------------------
WHEREAS, the Borrowers have requested the Lenders to extend credit to them
in the form of a term loan in the principal amount of Three Hundred Thousand and
No/100 Dollars ($300,000.00), as evidenced by promissory notes described herein;
WHEREAS, to induce the Lenders to extend such credit, Cal-Central desires
to secure the Borrowers' joint and several obligations under this Agreement and
such promissory notes with certain property pursuant to the terms and conditions
of this Agreement and other loan and security documents as described herein; and
WHEREAS, as further inducement to the Lenders to extend such credit Unico
desires to deliver to the Lenders a warrant to purchase a specified number of
the shares of common stock of Unico,
NOW, THEREFORE, in consideration of the foregoing and of mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
-----------
the following meanings:
1.1. Accounts. The term "Accounts" shall mean all accounts, accounts
--------
receivable, notes, drafts, acceptances, chattel paper and all other forms
of obligations and receivables owing to Cal-Central.
1.2. Agreement. The term "Agreement" shall mean this Loan Agreement,
---------
as the same may from time to time be amended, supplemented or modified.
1.3. Collateral. The term "Collateral" shall have the meaning set
----------
forth in Paragraph 5 hereof and the Security Agreement.
<PAGE>
1.4. Events of Default. The term "Events of Default" shall have the
-----------------
meaning set forth in Paragraph 8 hereof and the Notes and Security
Agreement.
1.5. Inventory. The term "Inventory" shall mean all inventory, raw
---------
materials, finished goods, work-in-process and all other personal property
of whatever nature now or hereafter owned by Cal-Central which are held for
sale or lease or are furnished or to be furnished under contracts of
service.
1.6. Lien. The term "Lien" shall mean, with respect to any asset of
----
Cal-Central, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
1.7. Loan. The term "Loan" shall mean the loan contemplated by this
----
Agreement and evidenced by the Notes, and as evidenced and secured by the
Loan Documents.
1.8. Loan Documents. The term "Loan Documents" shall collectively
--------------
mean the Notes and all security agreements, financing statements and all
other security documents and instruments executed and delivered in
connection with the Loan described herein which secure the obligations of
the Borrowers to the Lenders and any renewals, amendments, supplements or
modifications thereof or thereto.
1.9. Notes. The term "Notes" shall mean those certain Promissory
-----
Notes in the form attached hereto as Exhibit "A" co-made by the Borrowers
and payable to the order of each Lender dated of even date herewith each in
the aggregate principal amount of $300,000, and all renewals, extensions
and modifications thereof.
1.10. Security Agreement. The term "Security Agreement" shall mean
------------------
that certain Security Agreement of even date herewith executed by the
Borrowers in favor of the Lenders.
1.11. Warrants. The term "Warrants" shall mean those certain Warrants
--------
in the form attached hereto as Exhibit "B" executed by Unico and entitling
the Lenders to purchase an aggregate of 450,000 shares of the common stock
of Unico upon the terms stated therein.
2. LOAN TERMS. Subject to the terms and conditions hereof, and the terms
----------
and conditions of the Loan Documents, the Lenders agree to extend credit to the
Borrowers and the Borrowers agree to such extensions of credit from the Lenders
on the following conditions:
2.1. Loan. The Lenders agree to extend credit to the Borrowers, and
----
the Borrowers agree to be jointly and severally obligated for such credit,
as evidenced by the Notes in the aggregate principal amount of $300,000.
The credit will be in the form of a term debt which the Borrowers shall
amortize as hereinafter described pursuant to the
2
<PAGE>
terms and conditions of this Agreement. The aggregate principal amount of
the Notes shall be $300,000. The Notes shall be payable in their pro-rata
shares of installments of $25,000 on March 31, 1997, June 30, 1997, and
September 30, 1997, and $225,000 on December 31, 1997. The outstanding
principal of the Notes shall bear interest at the rate of 12% per annum.
Interest on the outstanding principal amount of the Note at the rate
described above shall be due and payable on a quarterly basis commencing
September 30, 1995. All outstanding and unpaid principal and all accrued
and unpaid interest on the Notes shall be due and payable December 31,
1997.
2.2. Payments. The principal of and interest on the Notes shall be
--------
payable in lawful money of the United States of America, in immediately
available funds, at the respective offices of the Lenders in Waco, Cameron
and San Antonio, Texas. All such payments shall be made not later than
2:00 p.m., Waco time on the date due, and funds received for payments on
the Notes after such hour on any day shall be treated for all purposes of
this Agreement as having been received on the next succeeding business day
in Waco. If any payment made by the Borrowers under this Agreement or the
Notes is to be made on a Saturday, Sunday or legal holiday in Waco, Cameron
or San Antonio, such payment shall be made on the next succeeding business
day and such extension of time will in such case be included in computing
interest, if any, in connection with such payment.
2.3. Prepayment. The Borrowers may prepay the Notes either in whole
----------
or in part on any date, without premium or penalty, provided that any
prepayment shall be applied in equal shares to the Notes, and if either
Lender shall receive a payment or prepayment disproportionate to the
payment made to the other Lender, it shall hold the excess amount in trust
for payment to the other Lender.
2.4. Default Interest. While any default exists hereunder or under
----------------
the Notes or any of the Loan Documents, in lieu of the interest rate
provided in the Notes, all sums owing by Borrowers to Lenders in connection
with the Loans shall bear interest at the rate equal to the lesser of the
maximum legal rate or 3% per annum in excess of the rate set forth in the
Notes, accrued from the date of default but after any applicable grace
period to cure certain events of default as is provided herein, to the date
on which such default is cured to the reasonable satisfaction of the
Lenders.
3. ISSUANCE OF WARRANTS. Contemporaneously with its execution hereof,
--------------------
Unico shall execute and deliver the Warrants to the Lenders.
4. BORROWERS' REPRESENTATIONS AND WARRANTIES. The Borrowers represent and
-----------------------------------------
warrant to the Lenders jointly and severally, as follows:
4.1. Corporate Existence. Unico is a corporation duly organized and
-------------------
existing under the laws of the State of Delaware. Cal-Central is a
corporation duly organized and existing under the laws of the State of
Oklahoma. Unico is duly qualified and in good
3
<PAGE>
standing in Oklahoma and each other state in which the nature of its business
requires it to be qualified. Cal-Central is duly qualified and in good standing
in the State of Florida and each other state in which the nature of its business
requires it to be qualified.
4.2. Corporate Authority. The execution, delivery and performance of this
-------------------
Agreement and the Loan Documents by the Borrowers are within their respective
corporate powers, have been duly authorized, are not in contravention of law or
the terms of their charters, bylaws or other incorporation papers, or of any
indenture, agreement or undertaking to which they are a party or by which they
are bound.
4.3. Survival of Representations. All of the representations and
---------------------------
warranties made by the Borrowers herein will survive the delivery of the Loan
Documents and the extension of the Loans hereunder.
4.4. Compliance with Laws. The Borrowers are in material compliance with
--------------------
all laws, orders, and regulations affecting their business, including without
limitation all environmental laws and ERISA.
4.5. Financial Statements. The financial statements of Unico set forth in
--------------------
filings with the Securities and Exchange Commission are correct and complete and
fairly reflect the financial condition and results of operations of Unico for
the periods reflected therein. There has been no material adverse change in the
financial condition of Unico since March 31, 1995.
4.6. Litigation. Except as disclosed in Schedule "4.6" attached hereto,
----------
there is no action, suit, proceeding or investigation pending, or threatened
against the Borrowers which, if adversely determined, would materially adversely
affect the Borrowers or any of the Collateral or impair the ability of the
Borrowers to carry on their businesses substantially as now conducted or result
in any substantial liability to the Borrowers not adequately covered by
insurance.
4.7. Ownership. The Borrowers have good and indefeasible tide to the
---------
Collateral free and clear of all liens, claims or encumbrances except those in
favor of the Lenders and BancFirst.
4.8. Taxes. To the best of the Borrowers' knowledge after due inquiry,
-----
Borrowers have filed all foreign, federal, state and local tax returns which are
required to be filed and have paid or made provisions for payment of all taxes
which have or may become due pursuant to said returns or pursuant to any
assessment, except such taxes as are being contested in good faith and as to
which adequate reserves have been provided. The Borrowers know of no basis for
the assessment of any deficiency taxes.
4.9. Solvency. Neither of the Borrowers is insolvent and, after giving
--------
effect to the transactions contemplated hereby, the Notes and the other Loan
Documents,
4
<PAGE>
neither of the Borrowers will become insolvent as a result thereof. Each of
the Borrowers: (a) is and will be able to pay their respective debts as
they become due; (b) has and will have capital sufficient to carry on their
respective businesses; (c) owns and will own property having a value, both
at fair valuation and at present fair salable value, greater than the
amount required to pay their respective debts and obligations; and,
(d) after giving effect to the transactions contemplated by the Loan
Documents, neither of the Borrowers will have incurred, intended to incur,
or believes that it has incurred, debts beyond their respective ability to
pay as such debts become due. Each of the Borrowers has received at least a
reasonably equivalent value in exchange for incurring the Obligations.
5. COLLATERAL. The Loan shall be secured by the following Collateral:
----------
5.1. Collateral. The Lenders shall have a second and junior Lien in
----------
and to all of Cal-Central's Accounts and Inventory, whether now owned or
hereafter acquired, and certain of its equity, together with all proceeds
thereof and insurance policies relating thereto and any additions,
accessions or substitutions thereto or therefor. Said Lien shall be
evidenced by a properly executed and delivered Security Agreement in the
form attached hereto as Exhibit "C," financing statements in the form
attached hereto as Exhibit "D" and other security documents the Lenders may
reasonably require.
5.2. Subordination to BancFirst. The Lien upon the Collateral
--------------------------
granted to the Lenders shall be and remain junior, subordinate, and
inferior in all respects to those of BancFirst, an Oklahoma banking
corporation, and any successor to or replacement of BancFirst as senior
lender, (BancFirst and any such successor or replacement are hereinafter
collectively referred to as "BancFirst") in such Collateral, so long as the
principal amount of the indebtedness to BancFirst secured by the Collateral
is not more than $1,750,000.
6. CONDITIONS OF LENDING. The obligation of the Lenders to perform this
---------------------
Agreement and to make the advances under the Notes is subject to the continued
performance by the Borrowers of the following conditions precedent:
6.1. Loan Documents: Collateral. The Loan Documents and all other
--------------------------
instruments and documents incidental to the transactions contemplated
hereby shall have been duly executed, acknowledged (where appropriate) and
delivered to the Lenders by the Borrowers, all in form and substance
satisfactory to the Lenders.
6.2. Authority. The Lenders shall have received Certificates of
---------
Incorporation and Certificates of Good Standing from the respective states
of the Borrowers' incorporation and certified copies of corporate
resolutions and other documents reasonably required to authorize the
execution, delivery and performance of the Loan Documents by the
Borrowers, together with a certificate of the President of the Borrowers as
to such matters in a form satisfactory to the Lenders.
5
<PAGE>
7. AFFIRMATIVE COVENANTS. Until payment in full of the Notes, and any
---------------------
renewals and extensions thereof, the Borrowers agree, unless the Lenders shall
otherwise consent in writing, to perform or cause to be performed the following
agreements:
7.1. Books and Records: Inspections. Accurate books and records shall
------------------------------
be kept by the Borrowers, and the Lenders will have the right to inspect
any assets, books and records of the Borrowers at reasonable times upon
Lender's reasonable request.
7.2. Taxes. An taxes imposed on the Borrowers and their assets,
-----
income and profits will be paid prior to the date on which penalties attach
thereto, except such taxes being contested in good faith by proper
proceedings.
7.3. Notify Account Debtors. Upon the request of any Lender after an
----------------------
Event of Default, and after the expiration of any applicable period of
notice and opportunity to cure, including but not limited to that of
BancFirst, Cal-Central will promptly notify its Account debtors of the
Lenders' security interests in the Accounts, and will affirmatively
instruct all of said Account debtors to make all payments thereafter
directly to the Lenders. Cal-Central shall deliver to the Lenders a
schedule of all such Account debtors and their respective addresses upon
the request of any Lender. If after an Event of Default Cal-Central fails,
or refuses to make such notification, the Lenders shall have the right to
notify the Account debtors as provided herein.
7.4. Other Information. The Borrowers will furnish to the Lenders
-----------------
quarterly and annual financial statements as filed with the SEC and such
other information concerning the financial status of the Borrowers as the
Lenders may reasonably request.
7.5. Existence. The Borrowers shall take all necessary actions to
---------
preserve their respective charters and corporate existences and their
rights to conduct business in the applicable jurisdictions; to obtain and
retain all necessary governmental authorities approvals, consents, permits,
licenses and certificates; to comply with all valid and applicable
statutes, rules and regulations; and to continue to conduct their
businesses in substantially the same manner as such businesses are now
conducted.
8. NEGATIVE COVENANTS. Prior to the payment in full of the Note and any
------------------
renewals and extensions thereof, the Borrowers agree that, unless the Lenders
otherwise consent in writing, the Borrowers will not perform or permit to be
performed any of the following acts:
8.1. Sale of Collateral. The Borrowers will not sell, lease,
------------------
exchange or transfer title to any or all of the Collateral or other
property described herein which secures the Note, except in the ordinary or
normal course of business operations.
8.2. Encumbrances. The Borrowers will not create or suffer to exist
------------
any security interest, security agreement, pledge, lien, charge,
encumbrance, assignment or transfer upon the Collateral, except for those
in favor of the Lenders and BancFirst. The
6
<PAGE>
Borrowers shall not increase the principal amount of the indebtedness to
BancFirst referred to in Section 5.2 above without the Lender's express
written consent.
8.3. Liquidation: Merger: Consolidation: Change of Name. The
--------------------------------------------------
Borrowers will not liquidate or discontinue their normal operations with an
intention to liquidate and will not merge or consolidate with any
corporation, firm or partnership, or change their corporate names.
9. EVENTS OF DEFAULT. The following shall constitute Events of Default
-----------------
hereunder and under each of the Loan Documents:
9.1. Nonpayment. Default in payment when due of any principal or
----------
interest due and owing on the Notes or under the terms of this Agreement or
the Loan Documents.
9.2. Breach of Covenants. Default by the Borrowers in the
-------------------
performance or observance of any covenant or agreement contained in this
Agreement, the Notes or the Loan Documents.
9.3. Representations and Warranties. Any representation or warranty
------------------------------
herein, or in any statement, certificate, schedule or report made or
furnished to the Lenders proves to be false or erroneous in any material
respect or any warranty ceases to be complied with in any material respect.
9.4. Insolvency. Either of the Borrowers shall: (i) apply for or
----------
consent to the appointment of a receiver, trustee or liquidator of the
properties of any of the Borrowers; (ii) admit in writing the inability to
pay debts as they mature; (iii) make a general assignment for the benefit
of creditors; or (iv) any part of the assets or property of any of the
Borrowers shall be placed in the hands of a receiver, trustee or other
officers or representatives of a court or of creditors.
9.5. Voluntary Bankruptcy. Either of the Borrowers shall be
--------------------
adjudged bankrupt or any voluntary preceding shall be instituted by either
of the Borrowers in insolvency or bankruptcy or for readjustment, extension
or composition of debts or for any other relief of debtors.
9.6. Involuntary Bankruptcy. Any involuntary proceeding shall be
---------------------
instituted against either of the Borrowers in insolvency or for
readjustment, extension, or composition of debts which proceeding is not
dismissed within sixty (60) days from the filing or the commencement of the
same.
9.7. Creditor's Proceedings. Entry by any court of a final judgment
----------------------
against either of the Borrowers in an amount exceeding $150,000 or the
institution of any levy, attachment, garnishment or charging order against
any of the Borrowers.
7
<PAGE>
9.8. Other Default. Either Borrower shall be in default under the
-------------
terms of any other indebtedness owed by it, including, without limitation,
indebtedness to Duncan-Smith Co., BancFirst and Renaissance Capital
Partners, Inc.
10. OPPORTUNITY TO CURE. The Lenders shall mail notice of an Event of
-------------------
Default to the Borrowers and BancFirst. In the event the Borrowers or BancFirst
(a) shall cure or cause to be cured the foregoing Events of Default to the
reasonable satisfaction of the Lenders, or (b) the Borrowers have obtained a
written waiver thereof from the Lenders as provided herein, within thirty (30)
days (except for failure to pay principal or interest on the Notes in which
case the time to cure shall be ten (10) days with respect to the Borrowers and
twenty (20) days with respect to BancFirst) after mailing notice to the
Borrowers, the parties shall be restored to their respective rights and
obligations under this Agreement as if no such Event or Events of Default had
occurred. No failure or delay by Lenders to require performance with this
Agreement or to exercise any right or remedy shall constitute a waiver of any
such right or remedy.
11. REMEDIES. Upon the occurrence of any Event of Default, which has not
--------
been timely cured pursuant to Paragraph 10 hereof, the Lenders may, at their
option:
11.1. Acceleration of Notes. Declare the Notes and all sums
---------------------
outstanding pursuant to this Agreement or the Loan Documents to be
immediately due and payable, and the Lenders will be entitled to proceed to
selectively and successively enforce its rights under this Agreement, the
Loan Documents, or any applicable law.
11.2. Waiver of Default. By an instrument in writing, the Lenders may
-----------------
waive any Event of Default which shall have occurred and any of the
consequences of such Event of Default. Any Event of Default so waived will
be deemed to have been cured and not to be continuing, but no such waiver
will extend to any subsequent or other Event of Default.
12. GENERAL CONDITIONS. The following conditions shall be applicable
------------------
throughout the term of this Agreement;
12.1. Notices. All notices hereunder shall be in writing and shall
-------
be deemed to have been sufficiently given or served for all purposes when
presented personally or sent by certified or registered mail to any party
hereto at the following address:
To Borrowers: UNICO, INC.
1101-B Sovereign Row
Oklahoma City, Oklahoma 73108
Attn: W. Douglas Frans
8
<PAGE>
CAL-CENTRAL, MARKETING CORPORATION
1101-B Sovereign Row
Oklahoma City, Oklahoma 73108
Attn: W. Douglas Frans
To Lenders: HARLON MORSE FENTRESS TRUST
c/o Humphreys Management Company
P.O. Box 8359
Waco, Texas 76714
Attn: Sara Humphreys Warren, J. C. Snead, or
Sandy Tompkins
PHILLIP M. STEVENSON, Jr.
3497 River Way
San Antonio, Texas 78230
RHOJCOAMT PARTNERSHIP, LTD.
1100 N.E. Loop 410, Suite 548
San Antonio, Texas 78209
CITCAM STOCK CO.
c/o Citizens National Bank of Milam County
P.O. Drawer 111
Cameron, Texas 76520
BARBARA T. GRINNAN
10106 Jandre Place
San Antonio, Texas 72813
GOOSE CREEK
P.O. Box 2520
Waco, Texas 76702
To BancFirst: BANCFIRST
101 North Broadway
Oklahoma City, Oklahoma 73102
Attn: E.G. Alexander, Senior Vice President
or at such other address of which it shall have notified the party giving such
notice in writing.
12.2. Amendment: Waiver. This Agreement may not be amended, modified,
-----------------
waived, discharged or terminated in any way, except by an instrument in writing
executed by all parties hereto.
9
<PAGE>
12.3. Prohibition Against Assignment. Borrowers shall not assign nor
------------------------------
transfer, voluntarily or by operation of law, this Agreement or any rights
hereunder.
12.4. Entire Agreement. This Agreement, the Notes and the Loan Documents
----------------
constitute the entire agreement between the parties, and any and all prior
agreements and understandings with respect to the Loan are cancelled and merged
herein.
12.5. Severability. If any provisions contained in this Agreement, the
------------
Notes or the Loan Documents should be deemed invalid, illegal or unenforceable,
such provision or provisions will not in any way affect or impair the validity,
legality and enforceability of the remaining provisions contained herein.
12.6. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto and their respective successors and
assigns.
12.7. Contrary Provisions. The terms and conditions of this Agreement
-------------------
shall govern and control any and all contrary provisions of the Loan Documents.
12.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
UNDER THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED
STATES OF AMERICA. THE COUNTY OF DALLAS, TEXAS, SHALL BE THE PROPER PLACE OF
VENUE TO ENFORCE OR CONSTRUE THIS AGREEMENT. THE PARTIES IRREVOCABLY AGREE THAT
THE STATE DISTRICT COURTS OR UNITED STATES DISTRICT COURT IN DALLAS COUNTY,
TEXAS, SHALL BE THE EXCLUSIVE COURTS FOR ANY LEGAL PROCEEDINGS ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT.
12.9. Loan Proceeds. Borrowers agree that the proceeds of the Loans shall
-------------
be applied toward a reduction of accounts payable in the amount of approximately
$200,000, a reduction of indebtedness in the approximate amount of $65,000, and
the balance to Cal-Central's working capital.
12.10. Expenses. Within ten days of receipt of invoices therefor, the
--------
Borrowers will pay all reasonable expenses and costs incurred by the Lenders in
connection with the transactions and Loans described herein, including without
limitation all filing fees, recording costs and reasonable fees and expenses of
Lenders' legal counsel. In addition, Borrowers will pay all reasonable costs and
expenses incurred by the Lenders in connection with the modification or
enforcement of the Loan Documents.
12.11. Counterparts. The Loan Documents may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument. Delivery of executed counterparts
of the Loan Documents by facsimile transmission shall be as effective as
delivery of a manually executed
10
<PAGE>
counterpart thereof for purposes of closing the transaction and funding
the Loan contemplated in the Loan Documents.
13. LENDERS' REPRESENTATIONS AND WARRANTIES. The Lenders, jointly and
---------------------------------------
severally, except as indicated otherwise, represent and warrant to the
Borrowers:
13.1. Harlon Morse Fentress Trust Matters. The Harlon Morse Fentress
-----------------------------------
Trust represents and warrants that Sara Humphreys Warren, formerly Sara F.
Humphreys, Margaret H. Cummings, and Laurie F. Humphreys are all of the
trustees of such trust and that Sara Humphreys Warren is duly authorized to
execute this and all other Loan Documents.
13.2. Warrants. Each Lender, as to itself only, represents and
--------
warrants that:
13.2.1. They are sole purchasers of the Warrants.
13.2.2. They are Accredited Investors as that term is defined
in Rule 501(a)(1) under the Securities Act of 1933 (the "Act").
13.2.3. They are acquiring the Warrants for their own
accounts, for investment and not with a view toward resale,
fractionalization, division or distribution. They do not at present
have any reason to anticipate any change in their circumstances,
financial or otherwise, or any particular occasion or event which
would necessitate or require a further sale or distribution of the
Warrants or of the common stock of Unico which may be purchased
pursuant to the Warrants ("Underlying Common Stock").
13.2.4. They recognize that neither the Warrants nor the
Underlying Common Stock has been registered under the Act or under
the securities laws of any state and, therefore, in connection with
any resale of the Warrants or the Underlying Common Stock the Lenders
shall cause the Warrants or the Underlying Common Stock to be so
registered or, in the alternative, shall deliver to Unico an opinion
of counsel (such opinion and counsel to be reasonably acceptable to
Unico) that registration under the Act and applicable state
securities laws is not required in connection with such resale.
13.2.5. They have independently investigated the investment in
the Warrants, have examined all records and data relative to the
Warrants which they deem necessary to evaluate fully and prudently
the merits and risks of the investment including, without limitation,
the Forms 10-K for the 1993 and 1994 fiscal years, the Form 10-Q for
the first quarter of 1995 and other published reports including proxy
statements and annual reports of Unico, have been advised by
competent counsel experienced in such matters, have actively
negotiated the terms of the transaction contemplated in this Loan
Agreement, have
11
<PAGE>
been furnished all information requested by them, have been given
access to all information material to the investment and have had the
opportunity to ask questions of and receive answers from Unico.
13.2.6. They have knowledge and experience in financial and
business matters and are capable of evaluating the relative merits
and risks of the investment in the Warrants.
13.2.7. They recognize the speculative nature and risks of
loss associated with the Warrants and have determined that the
Warrants constitute an investment which is suitable and consistent
with their investment programs and their financial condition enables
them to bear the risks of the investment.
13.3. No Commissions. No person is entitled to any commission or
--------------
finder's fee in connection with the transactions contemplated in this
Agreement or the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date and year first above written.
"BORROWERS" UNICO, INC., a
Delaware corporation
By: /s/ W. Douglas Frans,
--------------------------------------
W. Douglas Frans, President
CAL-CENTRAL MARKETING CORPORATION,
an Oklahoma corporation
By: /s/ W. Douglas Frans,
--------------------------------------
W. Douglas Frans, Chief Executive
Officer
12
<PAGE>
"LENDERS" HARLON MORSE FENTRESS TRUST
By: /s/ Sara Humphreys Warren
---------------------------------------
Sara Humphreys Warren, Trustee
(formerly Sara F. Humphreys)
/s/ Phillip M. Stevenson, Jr. /s/ Barbara T. Grinnan
- --------------------------------- ------------------------------------------
PHILLIP M. STEVENSON, Jr. BARBARA T. GRINNAN
RHOJCOAMT PARTNERSHIP, LTD. CITCAM STOCK CO,
a Texas limited partnership a Texas general partnership
By: ^SIGNATURE APPEARS HERE^ By: ^SIGNATURE APPEARS HERE^
------------------------------ ---------------------------------------
General Partner General Partner
GOOSE CREEK,
a Texas general partnership
By: ^SIGNATURE APPEARS HERE^
------------------------------
General Partner
13
<PAGE>
Exhibit 10.28
Form of Common Stock Purchase Warrant, dated June 30, 1995.
<PAGE>
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE
"STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR
OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
UPON THE ISSUANCE TO THE CORPORATION OF A FAVORABLE OPINION OF ITS COUNSEL
AND/OR SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY IN COUNSEL FOR THE CORPORATION, TO THE EFFECT THAT ANY SUCH
TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT CERTIFICATE
WARRANT TO PURCHASE COMMON STOCK
OF
UNICO, INC.
Date: June ___, 1995
This is to certify that, for value received, CITCAM STOCK CO. ("Holder"),
is entitled to purchase, subject to the provisions of this Warrant, from UNICO,
INC., a Delaware corporation (the "Corporation"), Seventy-Five Thousand (75,000)
shares of the Corporation's common stock, $.01 par value (such class of stock
being referred to herein as the "Stock"), at Ninety Cents ($.90) per share (the
"Exercise Price"). The number of shares of Stock to be received upon the
exercise of this Warrant and the Exercise Price shall be adjusted from time to
time as hereinafter set forth. The shares of Stock or other securities or
property deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares." Unless the context
otherwise requires, the term "Warrant" or "Warrants" as used herein includes
this Warrant and any other Warrant or Warrants which may be issued pursuant to
the provisions of this Warrant, whether upon transfer, assignment, partial
exercise, divisions, combinations, exchange or otherwise, and the term "Holder"
includes any registered transferee or transferees or registered assignee or
assignees of Holder, who in such case shall be subject to the provisions of this
Warrant, and when used with reference to Warrant Shares, means the holder or
holders of such Warrant Shares.
SECTION 1. Exercise of Warrant. Subject to the provisions of Section 9
-------------------
hereof, this Warrant may be exercised in whole or in part at any time or from
time to time during the period commencing on June __, 1995 (the "Commencement
Date") and ending 5:00 P.M., Central
<PAGE>
Standard Time, on December 31, 2000 (the "Expiration Date"), by presentation and
surrender to the Corporation at its principal office of this Warrant and the
Purchase Form annexed hereto duly executed and accompanied by payment, in cash,
certified or official bank check payable to the order of the Corporation in the
amount of the Exercise Price for the number of Warrant Shares specified in such
form. If this Warrant is exercised in part only, the Corporation shall, promptly
after presentation of this Warrant upon such exercise, execute and deliver a new
Warrant evidencing the rights of Holder thereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon and as of receipt by the Corporation at its office, in
proper form for exercise and accompanied by payment as herein provided, Holder
shall be deemed to be the holder of record of the shares of Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Corporation
shall then be closed or that certificates representing such shares of Stock
shall not then be actually delivered to Holder.
SECTION 2. Reservation of Shares. The Corporation shall at all times after
---------------------
the Commencement Date and until expiration of this Warrant reserve for issuance
and delivery upon exercise of this Warrant the number of Warrant Shares as shall
be required for issuance and delivery upon exercise of this Warrant.
SECTION 3. Fractional Shares. No fractional shares or scrip representing
-----------------
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, the
Corporation shall pay to Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(a) if the Stock is listed on a national securities exchange or
admitted to unlisted trading privileges thereon, the current value shall be
the last reported sale price of the Stock on such exchange on the last
business day prior to the date of exercise of this Warrant, or if no such
sale is made on such day, such price of the Stock for such immediately
preceding day as such a sale occurred on such exchange; or
(b) if the Stock is not so listed or admitted to unlisted trading
privileges, the current value shall be the mean of the last reported high
and low prices of the Stock reported by a comparable exchange system
selected by the Board of Directors of the Corporation, on the last business
day prior to the date of the exercise of this Warrant; or
(a) if the Stock is not so listed or admitted to unlisted trading
privileges, and bid and asked prices are not so reported, the current value
shall be an amount, not less than book value per share of Stock, determined
in such reasonable manner as may be agreed to by the Board of Directors of
the Corporation and the Holder.
2
<PAGE>
SECTION 4. Transfer, Exchange, Assignment or Loss of Warrant.
-------------------------------------------------
4.1 This Warrant may be assigned or transferred as provided herein so long
as such assignment or transfer is in accordance with and subject to the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (said Act and such rules and Regulations
being hereinafter collectively referred to as the "Securities Act"). Any
purported transfer or assignment made other than in accordance with this
Section 4 shall be null and void and of no force and effect.
4.2 My assignment permitted hereunder shall be made by surrender of this
Warrant to the Corporation at its principal office with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. In
such event the Corporation shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
designate the assignee as the registered holder on the Corporation's records and
this Warrant shall promptly be canceled. This Warrant may be divided or combined
with other Warrants which carry the same rights upon presentation thereof at the
principal office of the Corporation together with a written notice signed by
Holder thereof, specifying the names and denominations in which new Warrants are
to be issued.
4.3 Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification to the
Corporation or (in the case of mutilation) presentation of this Warrant for
surrender and cancellation, the corporation will execute and deliver a new
Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated
Warrant shall thereupon become void. Any Warrant Certificate or Certificates may
be exchanged at the option of the holder thereof for another Warrant Certificate
or Certificates of different denominations, of like tenor and representing in
the aggregate the same number of Warrants, upon surrender of such Warrant
Certificate or Certificates, with the Form of Assignment duly filled in and
executed, to the Corporation at in principal office, at any time or from time to
time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Corporation shall promptly cancel the
surrendered Warrant Certificate and deliver the new Warrant Certificate pursuant
to the provisions of this Section.
SECTION 5. Adjustment in the Number of Warrant Shares Purchasable and
----------------------------------------------------------
Exercise Price.
- --------------
5.1 The number of shares of Stock for which this Warrant may be exercised
shall be subject to adjustment as follows:
(a) in the event there is a subdivision or combination of the
outstanding shares of Stock into a larger or smaller number of shares, the
number of shares of Stock for which this Warrant may be exercised and the
Exercise Price shall be
3
<PAGE>
increased or reduced in the same proportion as the increase or decrease in
the outstanding shares of Stock;
(b) if the Corporation declares a dividend on Stock payable in Stock
or securities convertible into Stock, the number of shares of Stock for
which this Warrant may be exercised shall be increased, as of the record
date for determining which holders of Stock shall be entitled to receive
such dividend, in proportion to the increase in the number of outstanding
shares of Stock as a result of such dividend; and
(c) if the Corporation declares a dividend to its shareholders of
securities of any subsidiary of the Corporation, Holder, upon exercise
thereof, shall be entitled to receive the shares of such securities that
Holder would have been entitled to receive at the same aggregate Exercise
Price if Holder's Warrants had been exercised immediately prior to such
dividend.
5.2 In the event at any time prior to the expiration of this Warrant of
any reorganization or reclassification of the outstanding shares of Stock (other
than a change in par value, or from no par value to par value, or from par value
to no par value, or as a result of a subdivision or combination), Holder shall
have the right to receive the same kind and number of shares of stock and other
securities, cash or other property as would have been distributed to Holder upon
such reorganization or reclassification had Holder exercised this Warrant
immediately prior to such reorganization or reclassification. Holder shall pay
upon any subsequent exercise the Exercise Price that otherwise would have been
payable pursuant to the terms of this Warrant. If any such reorganization or
reclassification results in a cash distribution in excess of the Exercise Price
provided by this Warrant, Holder may, at Holder's option, exercise this Warrant
without making payment of the Exercise Price, and in such case the Corporation
shall, upon distribution to Holder, consider the Exercise Price to have been
paid in full, and in making settlement to Holder, shall deduct an amount equal
to the Exercise Price from the amount payable to Holder.
5.3 If the Corporation shall, at any time prior to the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, Holder shall have the
right, but not the obligation, to exercise this Warrant. Upon such exercise
Holder shall have the right to receive, in lieu of the shares of Stock that
Holder otherwise would have been entitled to receive, the same kind and amount
of assets as would have been issued, distributed or paid to Holder upon any such
dissolution, liquidation or winding up with respect to such shares of Stock had
Holder been the holder of record of such shares of stock receivable upon
exercise of this Warrant on the date for determining those entitled to receive
any each distribution. If any such dissolution, liquidation or winding up
results in any cash distribution in excess of the Exercise Price provided for by
this Warrant, Holder may, at Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Corporation shall,
upon distribution to Holder, consider the Exercise Price to have been paid in
full, and in making settlement to Holder shall deduct an amount equal to the
Exercise Price from the amount payable to Holder.
4
<PAGE>
5.4 In the event at any time prior to the expiration of this Warrant that
the Corporation is merged into or consolidated with another corporation under
circumstances where the Corporation is not the surviving corporation, or more
than 50 percent (50%) of the outstanding voting securities of the Corporation
are owned by another corporation as a result of such merger or consolidation,
then at the election of the Board of Directors of the Corporation (i) the
successor entity shall assume the Corporation's obligations hereunder and Holder
shall be entitled, upon exercise of this Warrant, to receive in lieu of shares
of Stock shares of such stock or other securities as the holder of shares of
Stock received pursuant to the terms of the merger or consolidation or (ii) this
Warrant may be canceled by the Board of Directors of the Corporation as of the
effective date of any such merger or consolidation, provided that thirty days
prior written notice of such cancellation shall be given to Holder.
5.5 In the event at any time prior to the expiration of this Warrant that
the Corporation shall offer shares of its common stock for sale (i) in a public
offering pursuant to a registration statement filed under the Securities Act of
1933, (ii) in a private placement, (iii) upon the exercise of other warrants,
options or convertible securities (except for stock options issued or hereafter
issued pursuant to the Omnibus Equity Stock Option Plan currently in effect, or
(iv) pursuant to the exercise of rights issued to all shareholders of the
Corporation, then the Exercise Price shall be adjusted by a fraction determined
by the following formula: (a + b) divided by (c + d), where (a) equals the
product of the number of shares outstanding immediately preceding the issuance
as reported on the Cover Page of the Corporation's most recent Form 10-Q or 10-
K, times .90, (b) equals the net proceeds in the issuance, (c) equals the number
of shares outstanding before the issuance, and (d) equals the numbers of shares
issued. The fraction so determined shall be multiplied by the warrant exercise
price to determine the new exercise price, and the number of shares issuable
upon exercise of the warrants shall be increased in proportion to the change in
exercise price.
5.6 The Corporation may retain a firm of independent public accountants of
recognized standing (who may be any such firm regularly employed by the
Corporation) to make any computation required under this Section 5, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section.
5.7 Whenever the number of shares of Stock purchasable upon the exercise
of this Warrant is adjusted as herein provided, the Exercise Price shall be
adjusted by multiplying the applicable Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Stock purchasable upon exercise of this Warrant immediately prior to such
adjustment and the denominator of which shall be the number of shares of Stock
purchasable immediately after such adjustment
SECTION 6. Officer's Certificate. Whenever the number of Warrant Shares or
---------------------
the Exercise Price shall be adjusted as required by the provisions of Section 5
hereof, the Corporation forthwith shall file in the custody of its secretary or
an assistant secretary, at its principal office, a certificate of the chief
executive officer of the Corporation setting forth the number and kind of shares
purchasable, as so adjusted, stating that such adjustments in the
5
<PAGE>
number or kind of shares or other securities conform to the requirements of
Section 5 of this Warrant, and setting forth a brief statement of the facts
accounting for such adjustments. Promptly after receipt of such certificate, the
Corporation will deliver, by first-class, postage pre-paid mail, a brief summary
thereof (to be supplied by the Corporation) to the Holder; provided, however,
-------- -------
that failure to file or to give any notice required under this Subsection, or
any defect therein, shall not affect the legality or validity of any such
adjustments under Section 5. Each such officer's certificate be made available
at all reasonable times during reasonable hours for inspection by Holder.
SECTION 7. Notice to Holder. So long as this Warrant shall be outstanding,
----------------
(i) if the Corporation shall pay any dividend or make any distribution upon the
Stock otherwise than in cash or (ii) if the Corporation shall offer to the
holders of Stock for subscription or purchase by them any shares of any class of
stock of the Corporation or any other rights or (iii) if there shall be any
capital reorganization of the Corporation, reclassification of the capital stock
of the Corporation, consolidation or merger of the Corporation with or into
another corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then in any such event, the
Corporation shall cause to be mailed by certified mail to Holder, at least
20 days prior to the relevant date described below, a notice containing a brief
description of the proposed action and stating the date or expected date on
which a record is to be taken for the purpose of such dividend, distribution or
rights, or such reclassification, organization, consolidation, merger,
conveyance, lease or transfer, dissolution, liquidation or winding up and the
date or expected date as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such event.
SECTION 8. Warrant Certificate Holder Not Deemed a Stockholder. Holder
---------------------------------------------------
shall not, solely because of holding the Warrant, be entitled to vote, receive
dividends or be deemed the holder of Common Stock or any other securities of the
Corporation which at any time may be issuable on the exercise of the Warrants
for any purpose whatsoever, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Corporation for any right to vote for the election of directors or upon any
matter submitted to stockholders at any time thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance or otherwise), or to receive notice
of meetings or other actions affecting stockholders (except as provided in
Section 7 hereof), or to receive dividend or subscription rights, or otherwise,
until such Warrant Certificate shall have been exercised in accordance with the
provisions hereof and the receipt of the Exercise Price and any other amounts
payable upon such exercise by the Corporation.
6
<PAGE>
SECTION 9. Registration Rights.
-------------------
9.1 In the event that the Corporation proposes, at any time during the
period commencing on the date hereof and ending January 31, 2001, to file a
registration statement on a general form of registration under the Securities
Act of 1933, as amended, and relating to securities issued or to be issued by
it, then it shall give written notice of such proposal to the Holder. If, within
30 days after the giving of such notice, the Holder shall request in writing
that all or any of the shares of Common Stock issued or issuable upon exercise
of the Warrants be included in such proposed registration, the Corporation will,
at its own expense, register such securities as shall have been so requested in
writing; provided, however that
(i) Holder shall have exercised or shall have agreed to exercise, on
or before the effective date of the registration statement, the Warrants
covering the shares Holder proposes to have included in the registration
statement;
(ii) the Corporation shall not be required to include any of such
shares if, by reason of such inclusion, the Corporation shall be required to
prepare and file a registration statement on a form promulgated by the
Securities and Exchange Commission substantially different from that which the
Corporation would otherwise use;
(iii) the Holder shall cooperate with the Corporation in the
preparation of such registration statement to the extent required to furnish
information concerning the Holder;
(iv) if any underwriter or managing agent is purchasing or arranging
for the sale of the securities then being offered by the Corporation under such
registration statement, then the Holder (a) shall agree to have the shares being
so registered sold to or by such underwriter or managing agent on terms
substantially equivalent to the terms upon which the Corporation is selling the
securities so registered, or (b) shall delay the sale of such shares for the
90 day period commencing the effective date of the registration statement;
(v) the participation of the Holder in an underwritten registration
shall be conditional on the inclusion of the Holder's shares in such an
underwriting as provided herein. If the underwriter determines that marketing or
other factors require limitation of the number of shares to be underwritten, the
underwriter may so limit the number of the Holder's shares to be included in the
underwriting on a pro rata basis with all other shares subject to Warrants
issued at the same time and on the same terms as this Warrant; and
(vi) if the Holder elects to withdraw a request made pursuant to this
Section 9.1, it may do so provided such request for withdrawal is made in
writing and delivered to the Corporation and the underwriter, if any, prior to
the effective date of the registration statement relating thereto.
All expenses incident to the Corporation's performance of its obligations
under this Section 9.1, including without limitation, all registration and
filing fees, fees and expenses of
7
<PAGE>
compliance with securities and Blue Sky laws, printing expenses, fees and
disbursements of the Corporation's counsel, independent certified public
accountants, and other persons retained by the Corporation (all such expenses
being therein called "Registration Expenses") will be borne by the Corporation.
The Holder shall be responsible for all selling fees, expenses, discounts and
commissions relating to the Warrant Shares and for the fees and expenses of
counsel and other persons engaged by the Holder.
9.2 Obligations of Holder.
---------------------
(a) Holder agrees that it will offer and sell the Warrant Shares in
compliance with all applicable state and federal securities laws.
(b) Holder agrees to promptly notify the Corporation after any
Warrant Shares are sold and when Holder elects to terminate all further
offers and sales of the Warrant Shares pursuant to the Registration
Statement.
9.3 Indemnification
---------------
(a) Indemnification by Holder. To the extent permitted by law, Holder
-------------------------
will, and hereby does, indemnify and hold harmless each underwriter, each
Person who controls such underwriter within the meaning of the Securities
Act, the Corporation, each director of the Corporation, each officer of the
Corporation and each other Persons, if any, who controls the Corporation
within the meaning of the Securities Act, with respect to any untrue
statement of any material fact in such Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was
made in reliance upon information furnished to the Corporation in writing
by Holder for inclusion therein and with respect to any violation by Holder
of the Securities Act or the Exchange Act.
(b) Indemnification by the Corporation. To the extent permitted by
----------------------------------
law, the Corporation will, and hereby does, indemnify and hold harmless
each underwriter, each Person who controls such underwriter within the
meaning of the Securities Act, the Holder, each director of the Holder,
each officer of the Holder and each other Person, if any, who controls the
Holder within the meaning of the Securities Act, with respect to any untrue
statement of any material fact in such Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading but only
8
<PAGE>
to the extent that such statement or omission was not made in reliance upon
written information furnished to the Corporation by Holder for inclusion
therein.
(c) Notices of Claim, etc. Promptly after receipt by an indemnified
---------------------
party of notice of the commencement of any action or proceding involving a claim
referred to in the preceding subsections of this Section 9.3, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subsections of this Section 9.3, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties actually exists in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so as to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
---------------------
preceding subsections of this Section 9.3 (with appropriate modifications) shall
be given by the Corporation and Holder with respect to any required registration
or other qualification of securities under any Federal or state law or
regulation of any governmental authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
Section 9.3 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 9.3
------------
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of
9
<PAGE>
such loss, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damage, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among
other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in Section
9.3(c), any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 9.3(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Securities Act shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. If indemnification is
available under this Section 9.3, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in Section 9.3(a) through Section
9.3(e) without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided for in this
Section 9.3(f).
9.4 Remedies. The Corporation stipulates that the remedies at law of the
--------
Holder in the event of any default or threatened default by the Corporation in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against the violation of any of the terms hereof or otherwise, in
addition to any other remedies which may be available at law or in equity.
SECTION 10. Agreement of Holder. The Holder, by accepting this Warrant
-------------------
consents and agrees with the Corporation that:
(a) The Warrants are transferable on the registry books of the
Corporation only upon the terms and conditions set forth in this Warrant;
and
(b) The Corporation may deem and treat the person in whose name the
Warrant is registered as the absolute owner of the Warrant (notwithstanding
any notation of ownership or other writing thereon made by anyone other
than the Corporation or the Warrant Agent) for all purposes whatever and
the Corporation
10
<PAGE>
shall not be affected by any notice to the contrary, except as set forth in
Section 4 of this Warrant.
SECTION 11. Governing Law. This Warrant shall be governed by and construed
-------------
under the applicable laws of the State of Texas and the laws of the United
States of America. The County of Dallas, Texas, shall be the proper place of
venue to enforce this Warrant. Maker irrevocably agrees that the State District
Courts or United States District Court in Dallas County, Texas, shall be the
exclusive courts for any legal proceedings arising out of or in connection with
this Warrant.
SECTION 12. Notice. Notices and other communications to be given to Holder
------
of the Warrants evidenced hereby shall be delivered by hand or by first-class
mail, postage prepaid, to the Holder at the address designated for such holder
on the books of the Corporation (until another address is filed in writing by
the Holder with the Corporation). Notices or other communications to the
Corporation shall be deemed to have been sufficiently given if delivered by hand
or by first-class mail, postage prepaid to the Corporation at 1101-B Sovereign
Row, Oklahoma City, Oklahoma 73108, or such other address as the Corporation
shall have designated by written notice to such registered owner as herein
provided. Notice by mail shall be deemed given when deposited in the United
States mail, postage prepaid, as herein provided.
SECTION 13. Successors. All the covenants and provisions of this Warrant by
----------
or for the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder, and all covenants and provisions of this
Warrant by or for the benefit of the Holder of this Warrant shall bind and inure
to the benefit of the registered holder(s) of the Warrants.
SECTION 14. Termination. This Agreement shall terminate as of the close of
-----------
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed. However, with respect to obligations
contained herein regarding the registration of the Warrant Shares, such
obligations shall continue on and after the Expiration Date if the Warrant is
fully or partially exercised on or before the Expiration Date.
SECTION 15. Benefits of This Agreement. Nothing in this Agreement or in the
--------------------------
Warrant Certificates shall be construed to give to any person or corporation
other than the Corporation, and its respective successors and assigns hereunder
and the registered holders of the Warrants any legal or equitable right, remedy
or claim under this warrant, but this Agreement shall be for the sole and
exclusive benefit of the Corporation and its respective successors and assigns
hereunder and the registered holders or the Warrants.
SECTION 16. Transfer Books. The Corporation will at no time close its
--------------
transfer books against the transfer of this Warrant in any manner which
interferes with the timely exercise of this Warrant.
11
<PAGE>
SECTION 17. Amendment. This Warrant Certificate may be modified or amended
---------
and any provision hereof may be waived only by a writing executed by the
Corporation and the Holder.
IN WITNESS WHEREOF, the Corporation has executed this Warrant as of the
date set forth above.
UNICO, INC.
By
------------------------------
W. Douglas Frans, President
12
<PAGE>
Exhibit 10.29
Form of Subordinated Convertible Debt Agreement dated October 1995, and schedule
of advances, among UNICO, Inc., United Coupon Corporation, Cal-Central Marketing
Corporation, Renaissance Capital Group, Inc. and Duncan Smith Company.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR APPLICABLE STATE SECURITIES LAWS
("STATE ACTS") AND SHALL NOT BE SOLD, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED UNLESS THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF LEGAL
COUNSEL FOR THE COMPANY, OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO LEGAL
COUNSEL FOR THE COMPANY, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT REQUIRE
REGISTRATION UNDER THE ACT AND THE STATE ACTS.
================================================================================
UNICO, INC.
(A Delaware corporation)
10% CONVERTIBLE NOTE
--------------------
$12,500 No.DS7
------- ------
Date of Issue: December 22, 1995
--------------------------------
FOR VALUE RECEIVED, the undersigned maker, UNICO, INC., (a Delaware
--------
corporation, herein sometimes called "UNICO" OR "BORROWER") is indebted and, for
value received, herewith unconditionally promises to pay to:
DUNCAN SMITH INVESTMENTS COMPANY
--------------------------------
or to its order, (together with any assignee or successor in interest,
jointly or severally, the "Holder" or "Lender") on or before October 1, 1997,
---------------
(the "Due Date"), (unless this Note shall have been sooner called for redemption
or presented for conversion as herein provided), the sum of Twelve Thousand Five
--------------------
Hundred Dollars ($12,500)(the "Principal Amount") and to pay interest on the
- ---------------
Principal Amount at the rate of Ten percent (10%) per annum as provided herein.
-----------------
In furtherance thereof, and in consideration of the premises, the Borrower
covenant, promise and agree as follows:
1. Interest: Interest on the Principal Amount outstanding from time to time
--------
shall accrue at the rate of 10% per annum and be payable yearly commencing
October 1, 1996 and subsequent payments made on the first day of each calendar
- ---------------
year thereafter until the Principal Amount and all accrued and unpaid interest
shall have been paid in full. Overdue principal and interest on the Notes shall,
to the extent permitted by applicable law, bear interest at the rate of 15% per
annum. All payments of both principal and interest, shall be made at the address
of the Holder hereof as it appears in the books and records of the Borrower, or
at such other place as may be designated by the Holder hereof.
2. Maturity: If not sooner redeemed or converted, this Note shall mature on
--------
October 1, 1997 at which time all then remaining unpaid principal, interest and
- ---------------
any other charges then due under the Loan Agreement shall be due and payable in
full.
3. Redemption: Commencing on January 1, 1996, and after 90 days prior notice
---------- ---------------
as provided herein, the then remaining outstanding principal amount of the Note
may, at the option of the Borrower and subject to the written notice
requirements to the holder as provided herein, be redeemed, in whole but not in
part; at par; plus, in each case, accrued interest to date of redemption. The
Borrower may exercise this right to redeem prior to maturity by giving notice
(the "Redemption Notice") thereof to the holder of this Note as such name
appears on the books of the Borrower, which notice shall specify the terms of
redemption (including the place at which the holder may obtain payment), the
total principal amount to be redeemed (such principal amount plus interest
herein called the "Redemption Amount") and the date for redemption (the
"Redemption Date"), which date shall not be less than 90 days nor more than
120 days after the date of the notice. On the Redemption Date, the Borrower
shall pay all accrued unpaid interest on the Note up to and including the
Redemption Date, and shall pay to the holder a dollar amount equal to the
Redemption Amount.
5. Conversion Right: The holder of this Note shall have the right, at
----------------
holder's option, at any time, to convert all, or, in multiples of $1,000, any
part of this Note principal and accrued and unpaid interest into such number of
fully paid and nonassessable shares of Common Stock, one cent (1(C)) par value,
---------------
of Borrower (the "Common Stock") as shall be provided herein. The holder of this
Note may exercise the conversion right by giving written notice (the "Conversion
Notice") to Borrower of the exercise of such right and stating the name or names
in which the stock certificate or stock certificates for the shares of Common
Stock are to be issued and the address to which such certificates shall be
delivered. The Conversion Notice shall be accompanied by the Note. The number of
shares of Common Stock that shall be issuable upon conversion of the Note shall
equal the face amount of the Note divided by the Conversion Price as defined
below and in effect on the date the Conversion Notice is given; provided,
however, that in the event that this Note shall have been partially redeemed,
shares of Common Stock shall be issued pro rata, rounded to the nearest whole
share. Conversion shall be deemed to have been effected on the date the
Conversion Notice is given (the "Conversion Date"). Within 10 business days
after receipt of the Conversion Notice, Borrower shall issue and deliver by hand
against a signed receipt therefor or by United States registered mail, return
receipt requested, to the address designated in the Conversion Notice, a stock
certificate or stock certificates of Borrower representing the number of shares
of Common Stock to which Holder is entitled and a check or cash in payment of
all interest accrued and unpaid on the Note up to and including the Conversion
Date. The conversion rights will be governed by the following provisions:
- --------------------------------------------------------------------------------
Page 1
Issuers Initial _______
<PAGE>
UNICO-Convertible Note (continued)
- --------------------------------------------------------------------------------
(a) Redemption: In the case of Notes called for redemption, the conversion
rights will expire at the close of business on the redemption date.
(b) Conversion Price:
(i) Conversion Price: The Conversion Price per share initially be
Twenty Five Cents per share (initially $0.25 per share); provided, however, that
-------------------------
the Conversion Price shall he subject to adjustment at the times and in
accordance with the provisions hereunder.
(ii) Adjustment for Issuance of Shares at less than the Conversion Price: If
and whenever any additional shares of Common Stock shall be issued by Borrower
(the "Stock Issue Date") for a consideration per share less than the Conversion
Price, then in each such case the initial Conversion Price shall be reduced to a
new Conversion Price in amount equal to the consideration per share received by
the Borrower for the additional shares of Common Stock then issued and the
number of shares issuable to Holder upon conversion shall be proportionately
increased; and, in the case of shares issued without consideration, the initial
Conversion Price shall be reduced in amount and the number of shares issued upon
conversion shall be increased in an amount so as to maintain for the Holder the
right to convert the Note into shares equal in amount to the same percentage
interest in the Common Stock of the Borrower as existed for the Holder
immediately preceding the Stock Issue Date.
(iii) Sale of Shares: In case of the issuance of shares of Additional Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of the cash
received by Borrower for such shares, after any compensation or discount in the
sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any shares of Additional Common Stock for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor, other than cash, shall be deemed to be the then fair
market value of the property received.
(iv) Reclassification of Shares: In case of the reclassification of
securities into shares of Common Stock, the shares of Common Stock issued in
such reclassification shall be deemed to have been issued for a consideration
other than cash. Shares of Additional Common Stock issued by way of dividend or
other distribution on any class of stock of Borrower shall be deemed to have
been issued without consideration.
(v) Split up or Combination of Shares: In case issued and outstanding shares
of Common Stock shall be subdivided or split up into a greater number of shares
of the Common Stock, the Conversion Price shall be proportionately decreased,
and in case issued and outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the Conversion Price shall be
proportionately increased, such increase or decrease, as the case may be,
becoming effective at the time of record of the split-up or combination, as the
case may be.
(vi) Exceptions: The term "Additional Common Stock" herein shall mean all
shares of Common Stock hereafter issued by Borrower (including Common Stock held
in the treasury of Borrower), except (1) Common Stock issued upon the conversion
of any of the Notes; (2) Common Stock issued upon exercise of any warrants or
stock purchase options issued and outstanding as of the date of this Note; (3)
Common Stock issued pursuant to exercise of any incentive stock option plan
(including non-qualifying stock options) for the officers, directors, and
certain other key personnel as defined in said stock option plan of Borrower
currently established or as may be established in the future:
(c) Adjustment for Mergers, Consolidations, Etc.: In the event of:
(i) distribution to all Common Stock holders of any stock, indebtedness of
Borrower or assets (excluding cash dividends or distributions from retained
earnings) or other rights to purchase securities or assets, then, after such
event, the Notes will be convertible into the kind and amount of securities,
cash and other property which the holder of the Notes would have been entitled
to receive if the holder owned the Common Stock issuable upon conversion of the
Notes immediately prior to the occurrence of such event.
(ii) In case of any capital reorganization, reclassification of the stock of
Borrower (other than a change in par value or as a result of a stock dividend,
subdivision, split up or combination of shares), or consolidation or merger of
Borrower with or into another person or entity (other than a consolidation or
merger in which Borrower is the continuing corporation and which does not result
in any change in the Common Stock) or of the sale, exchange, lease, transfer or
other disposition of all or substantially all of the properties and assets of
Borrower as an entirety or the participation by Borrower in share exchange as
the corporation the stock of which is to be acquired, this Note shall be
convertible into the kind and number of shares of stock or other securities or
property of Borrower (or of the corporation resulting from such consolidation or
surviving such merger or to which such properties and assets shall have been
sold, exchanged leased, transferred or otherwise disposed, or which was the
corporation whose securities were exchanged for those of Borrower), to which the
holder of the Note would have been entitled to receive if the holder owned the
Common Stock issuable upon conversion of the Note immediately prior to the
occurrence of such event. The provisions of these foregoing sentence shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, exchanges, leases, transfers or other
dispositions or other share exchanges.
(iii) The term "Fair Market Value", as used herein, is the value ascribed to
consideration other than cash as determined by the Board of Directors of
Borrower in good faith, which determination shall be final, conclusive and
binding. If the Board of Directors shall be unable to agree as to such fair
market value, then the issue of fair market value shall be submitted to
arbitration under and pursuant to the rules and regulations of the American
Arbitration Association, and the decision of the arbitrators shall be final,
conclusive and binding, and a final judgment may be entered thereon, provided
however that such arbitration shall be limited to determination of the fair
market value of assets tendered in consideration for the issue of Common Stock.
(iv) Notice of Adjustment. (A) In the event Borrower shall propose to take
any action which shall result in an adjustment in the Conversion Price, Borrower
shall give notice to the holder of this Note, which notice shall specify the
record date, if any, with respect to such action and the date on which such
action is to take place. Such notice shall be
- --------------------------------------------------------------------------------
Page 2
Issuers Initial ______
<PAGE>
UNICO-Convertible Note (continued)
- --------------------------------------------------------------------------------
given on or before the earlier of 30 days before the record date or the date
which such action shall be taken. Such notice shall also set forth all facts (to
the extent known) material to the effect of such action on the Conversion Price
and the number, kind or class of shares or other securities or property which
shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of this Note. (B) Following completion of an event
wherein the Conversion Price shall be adjusted, Borrower shall furnish to the
holder of this Note a statement, signed by the Chief Executive Officer of
Borrower, of the facts creating such adjustment and specifying the resultant
adjusted Conversion Price then in effect.
7. Reservation of Shares: Borrower warrants and agrees that it shall at all
----------------------
times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued, or of treasury, shares of Common Stock to effect
conversion of this Note.
8. Registration Rights: Shares issued upon conversion of this Note shall be
--------------------
restricted from transfer by the holder except if, and unless, the shares are
duly registered for sale pursuant to the Securities Act of 1933, as amended, or
the transfer is duly exempt from registration.
If the Holder exercises the rights to convert the note, or any part thereof,
into shares of Common Stock of the Borrower, the Borrowers shall during the a
three year period following such conversion, upon the written request of the
Holder, take action to promptly file a registration statement under the
Securities Act of 1933 with respect to the sale of such Common Stock. In the
event that such request is given at a time that, in the reasonable judgment of
the Directors of the Borrower, would cause an undue burden on the Borrower or
would cause a material action or material disclosure so as to interfere with a
material pending business transactions, such filing may be delayed for up to 90
days upon notification to Holder specifying the cause and circumstances
involved.
Holder shall cooperate with Borrower in providing information necessary for
such filing. In the event that Holder proposes to distribute such securities
through an underwriter, all costs and expenses of the underwriter, including any
selling commissions, shall be paid by the Holder. The Borrower shall pay all
filing fees and the fees and costs of legal counsel, accountants, and other
persons employed by Borrower in completion of such filing and any distribution
of the Common Stock, including printing expenses and qualification of such
Common Stock for sale in a reasonable number of states. The Holder shall pay all
costs of legal counsel, accountants and other persons employed by the Holder in
completion of such filing and the distribution of the Common Stock.
In the event that Borrower shall file a registration statement pursuant to
request of a Holder, such patties shall cross-indemnify each other against any
losses, claims, or damages based on any untrue statement or omission to state a
material fact and in support thereof each party shall enter into an appropriate
indemnification agreement in form and substance reasonably satisfactory to legal
counsel for the Borrower.
9. Taxes: The Borrower shall pay any documentary or other transactional taxes
------
attributable to the issuance or delivery of this Note or the shares of Common
Stock issued upon conversion by the Holder (excluding any federal, state or
local income taxes and any franchise taxes or taxes imposed upon the Holder by
the jurisdiction, or any political subdivision thereof of, under which such
Holder is organized or is qualified to do business.)
10. Default:
-------
(a) Event of Default: An "Event of Default" shall exist if any one or more of
the following events (herein collectively called "Events of Default") shall
occur and be continuing:
(i) Borrower shall fail to pay (or shall state in writing an intention not to
pay or its inability to pay), when due or not later than 30 days thereof, any
installment of interest on or principal of, any Note or any fee, expense or
other payment required hereunder:
(ii) Any representation or warranty made under this Loan Agreement, or any of
the other Loan Documents, or in any certificate or statement furnished or made
to Lender pursuant hereto or in connection herewith or with the Loans hereunder,
shall prove to be untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made;
(iii) Default shall occur in the performance of any of the covenants or
agreements of Borrower or of its subsidiaries, if any, contained herein, or in
any of the other Loan Documents, which is not remedied within thirty (30) days
after written notice thereof to Borrower from Lender;
(iv) Default shall occur in the payment of any material Indebtedness of the
Borrower or its subsidiaries, if any, (other than the Obligation) or default
shall occur in respect of any note, loan agreement or credit agreement relating
to any such Indebtedness and such default shall continue for more than the
period of grace, if any, specified therein and any such Indebtedness shall
become due before its stated maturity by acceleration of the maturity thereof or
shall become due by its terms and shall not be promptly paid or extended.
Default in the performance of any of the covenants or agreements of Borrower or
its subsidiaries, if any, contained under the Loan Agreement, or in any of the
other Loan Documents, which default is not remedied within thirty (30) days
after written notice thereof to Borrower from Lender, provided that such 30 day
grace period shall not apply to default of any payment requirement or notice
covenant made by Borrower;
(v) Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the Borrower in accordance with the respective
terms thereof or shall in any way be terminated or become or be declared
ineffective or inoperative or shall in any way whatsoever cease to give or
provide the respective rights, titles, interests, remedies, powers or privileges
intended to be created thereby;
(vi) Borrower or its subsidiaries, if any, shall (A) apply for or consent to
the appointment of a receiver, trustee, custodian, intervenor or liquidator of
itself, or of all or substantially all, of such Person's assets, (B) file a
voluntary petition in bankruptcy, admit in writing that such Person is unable to
pay such Person's debts as they become due or generally not pay such Person's
debts as they become due, (C) make a general assignment for the benefit of
creditors, (D) file a petition or answer seeking reorganization of an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (E) file an answer admitting the material allegations of, or consent to,
or default in answering, a
- --------------------------------------------------------------------------------
Page 3
Issuers Initial ____
<PAGE>
UNICO-Convertible Note (continued)
- --------------------------------------------------------------------------------
petition filed against such Person in any bankruptcy, reorganization or
insolvency proceeding, or (F) take corporate action for the purpose of effecting
any of the foregoing;
(vii) An involuntary petition or complaint shall be filed against Borrower or
any of its subsidiaries, if any, seeking bankruptcy or reorganization of such
Person or the appointment of a receiver, custodian, trustee, intervenor or
liquidator of such Person, or all or substantially all of such Person's assets,
and such petition or complaint shall not have been dismissed within sixty (60)
days of the filing thereof or an order, order for relief, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition or complaint seeking reorganization of Borrower
or its subsidiary, if any, or appointing a receiver, custodian, trustee,
intervenor or liquidator of such Person, or of all or substantially all of such
Person's assets; or
(viii) Any final judgment(s) for the payment of money in excess of the sum of
$250,000 in the aggregate shall be rendered against Borrower or any subsidiary
and such judgment or judgments shall not be satisfied or discharged at least ten
(10) days prior to the date on which any of its assets could be lawfully sold to
satisfy such judgment.
(ix) The failure of Borrower to issue and deliver shares of Common Stock as
provided herein upon conversion of the Note.
(x) The failure to submit Lender's nominee, if any, for election to the Board
of Directors of the Borrower or the removal of Lender's nominee from the Board
of Directors of Borrower.
(xi) The Common Stock of Borrower is suspended from trading on any exchange or
on NASDAQ in excess of ten (10) trading days.
(b) Remedies Upon Event of Default: If an Event of Default shall have occurred
and be continuing, then Lender may exercise any one or more of the following
rights and remedies, and any other remedies provided in any of the Loan
Documents, as Lender in its sole discretion, may deem necessary or appropriate:
(i) declare the unpaid Principal Amount (after application of any payments or
installments received by Lender) of, and all interest then accrued but unpaid
on, the Notes and any other liabilities hereunder to be forthwith due and
payable, whereupon the same shall forthwith become due and payable without
presentment, demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind, all of which Borrower
hereby expressly waives, anything contained herein or in the Notes to the
contrary notwithstanding.
(ii) reduce any claim to judgment, and/or
(iii) without notice of default or demand, pursue and enforce any of Lender's
rights and remedies under the Loan Documents, or otherwise provided under or
pursuant to any applicable law or agreement, all of which rights may be
specifically enforced
(c) Remedies Non-exclusive: Each right, power or remedy of the holder hereof
upon the occurrence of any Event of Default as provided for in this Note or now
or hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Note or now or hereafter existing at law or in equity or by
statute, and the exercise or beginning of the exercise by the holder or
transferee hereof of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise by the holder of any or all such
other rights, powers or remedies.
(d) Expenses: Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any provided therefore,
Borrower agrees to pay and shall pay all costs and expenses (including Lenders
attorney's fees and expenses) reasonably incurred by Lender in connection with
the preservation and enforcement of Lender's rights under the Loan Agreement,
the Notes, or any Loan Document.
11. Failure to Act and Waiver: No failure or delay by the holder hereof to
--------------------------
require the performance of any term or terms of this Note nor to exercise any
right, or any remedy shall constitute a waiver of any such term or of any right
or of any default, nor shall such delay or failure preclude the holder hereof
from exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Note, the
holder hereof shall not be deemed to waive the right either to require payment
when due of all other amounts payable, or to later declare a default for failure
to effect such payment of any such other amount. The failure of the holder of
this Note to give notice of any failure or breach of the Borrower under this
Note shall not constitute a waiver of any right or remedy in respect of such
continuing failure or breach or any subsequent failure or breach.
12. Consent to Jurisdiction: The Borrower hereby agrees and consents that any
------------------------
action, suit or proceeding arising out of this Note may be brought in any
appropriate court in the State of Texas including the United States District
Court for the Northern District of Texas, or in any other court having
jurisdiction over the subject matter, all at the sole election of the holder
hereof, and by the issuance and execution of this Note the Borrower irrevocably
consents to the jurisdiction of each such court. The Borrower hereby irrevocably
appoints CT Corporation, Dallas, Texas as agent for the Borrower to accept
service of process for and on behalf of the Borrower in any action, suit or
proceeding arising out of this Note.
13. Holders Right to Request Multiple Notes: The Holder shall, upon written
----------------------------------------
request and presentation of the Note, have the right, at any interest payment
date, to request division of this Note into two or more units, each of such to
be in such amounts as shall be requested; provided however that no Notes shall
be issued in denominations of face amount less than $1,000.00.
14. Transfer: This Note may be transferred on the books of the Borrower by the
--------
registered Holder hereof, or by Holder's attorney duly authorized in writing,
only upon (i) delivery to the Borrower of a duly executed Assignment,
substantially in the form attached hereto as Exhibit A, of the Note, or part
thereof, to the proposed new Holder, along with a current notation of the amount
of installments received and net Principal Amount yet unpaid, and presentment of
such Note to the Borrower for issue of a replacement Note, or Notes, in the name
of the new Holder and (ii) the designation by the new Holder of the Lender's
Agent for Notice, such agent to be the sole party to whom Borrower shall be
required to provide notice when notice to Lender is required hereunder and who
shall be the sole party authorized to represent Lender in regard to modification
or waivers under the Note, the Loan Agreement, or other Loan Documents; and any
action,
- --------------------------------------------------------------------------------
Page 4
Issuers Initial_________
<PAGE>
UNICO-Convertible Note (continued)
- --------------------------------------------------------------------------------
consent or waiver, (other than a compromise of principal and interest), when
given or taken by Lender's Agent for Notice, shall be deemed to be the action of
the holders of a majority in amount of the Principal Amount of the Notes, as
such holders are recorded on the books of the Borrower.
The Borrower shall be entitled to treat any holder of record of the Note as
the Holder in fact thereof and shall not be bound to recognize any equitable or
other claim to or interest in this Note in the name of any other person, whether
or not it shall have express or other notice thereof, save as expressly
provided by the laws of Texas.
15. Notices: All notices and communications under this Note shall be in
--------
writing and shall be either delivered in person and accompanied by a signed
receipt therefor, or mailed first-class United States certified mail, return
receipt requested, postage prepaid, and addressed as follows: (i) if to the
Borrower at its address for notice as stated in the Loan Agreement or
alternatively, at the option of the holder, at Borrower's registered address in
the State of Texas; and, (ii) if to the holder of this Note, to the address (a)
of such holder as it appears on the books of the Borrower if, or (b) in the case
of a partial assignment to one or more holders, to the Lender's Agent for
Notice, as the case may be. Any notice of communication shall be deemed given
and received as of the date of such delivery if delivered; or if mailed, then
three days after the date of mailing.
16. Rights under Loan Agreement: This Note is issued pursuant to that certain
----------------------------
Convertible Note Loan Agreement and those certain Collateral Securities
Agreements dated as of October 20, 1995 by and between UNICO, Inc. as Borrower,
---------------- -----------
and its wholly owned subsidiaries, United Coupon Corporation and Cal-Central
Marketing Corporation as Guarantors, and RENAISSANCE CAPITAL PARTNERS, LTD. AND
--------------------------------------
DUNCAN SMITH COMPANY as Lenders (the "Loan Agreement") and the holder hereof is
- --------------------
entitled to all the rights and benefits, and subject to all the obligations of
Lender under said agreement, including the maximum interest rates limitations as
specified in Section 11.07 thereof. Both Borrower, Guarantor and Lenders have
participated in the negotiation and preparation of the Loan Agreement and of
this Note. Borrower agrees that a copy of the Loan Agreement with all
amendments, additions and substitutions therefor shall be available to the
Holder at the offices of Borrower. The terms and provisions of the agreements
referred to above are for the benefit of the parties thereto and their
successors and assigns and shall not benefit any person not a party to such
agreements.
17. Collateral Security Agreement and Sharing Agreement between Lendors.
--------------------------------------------------------------------
Notwithstanding that each Holder is extending separate loans to Borrower, each
such loan is extended in reliance upon the Holder obtaining a security interest
in the same respective collateral as specified in the Collateral Security
Agreement. It is the agreement and understanding of the Borrower and each Holder
that the relative rights of each Holder of a Convertible Note issued pursuant to
the Convertible Note Loan Agreement of October 20, 1995 is that all such Holders
shall have an equal priority status in the Collateral with any rights to
Collateral or the proceeds thereof to be allocated pro-rata to the Holders based
on then outstanding unpaid principal and interest under the Notes. In the event
of a default under the Convertible Note Loan Agreement or any other agreement
with Holders, either Holder may upon notice to the Borrower and the other
Holders, declare its Note due and pursue its remedies under the Loan Agreement,
the Notes or the Collateral Security Agreement and commencement of action by one
party shall be deemed a commencement of action by all parities unless
specifically waived by any party. A waiver or extension by one Holder shall not
be binding on the other Holders without their consent and except for notice
requirements in the event of action on default, one Holder shall not be
obligated to the other in respect to their rights or dealings with the Borrower
or any Guarantors.
17. GOVERNING LAW: THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
--------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, OR, WHERE APPLICABLE, THE
LAWS OF THE UNITED STATES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be duly
executed under its corporate seal on the Date of Issue above stated.
Attest BORROWER
--------
UNICO Inc.
by: /s/ (SIGNATURE APPEARS HERE)
----------------------------
Title: Secretary by: /s/ Doug Frans
----------------------------
Title: President
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT FOR BORROWER
---------------------------
State of Texas )
County of Dallas )
On the 22nd day of Dec., 1995, before me personally appeared Douglas Frans,
known to me, who by me being duly sworn deposed and said: that he is the
President of UNICO, Inc. a Delaware corporation, and the corporation described
in and which executed the foregoing instrument; that the foregoing instrument
has been duly authorized by the Board of Directors of the corporation; that he
has been duly ordered and has the power to execute such instrument as the
binding obligation of the corporation and has signed his name thereto by such
order; and that the seal affixed to the instrument is the seal of such
corporation and it was affixed to this instrument by such order, or, if no seal
is affixed then, no seal is required to authenticate the instrument as the
binding act and agreement of such corporation.
My Commission Expires /s/ Cynthia S. Nelson
---------------------------
[NOTARY SEAL APPEARS HERE] Notary Public
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 5
Issuers Initial _______
<PAGE>
UNICO-Convertible Note (continued)
- --------------------------------------------------------------------------------
GUARANTY
--------
For value received, the undersigned, United Coupon Corporation and Cal-
Central Marketing Corporation, (jointly and severally "Guarantor" or
"Guarantors") do jointly and severally guaranty to the Holders and to each of
them and their assigns and successors in interest the due and faithful payment
in full of the principal and interest due under this Convertible Note. This
Guaranty is secured by the grant to the Holder of a security interest in certain
Collateral owned by the undersigned Guarantors as provided in the Collateral
Security Agreement of October 20, 1995.
Dated as of December 7, 1995 GUARANTOR
---------
Attest United Coupon Corporation
by:/s/ (SIGNATURE APPEARS HERE)
---------------------------- by: /s/ Doug Frans
Title: Secretary ---------------------------------
Title: Chairman
Dated as of December 7, 1995 GUARANTOR
---------
Attest Cal-Central Marketing Corporation
by:/s/ (SIGNATURE APPEARS HERE)
---------------------------- by: /s/ Doug Frans
Title: Secretary ---------------------------------
Title: Chief Executive Officer
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT FOR GUARANTOR
----------------------------
State of Texas )
County of Dallas )
On the 22nd day of Dec., 1995, before me personally appeared Doug Frans, known
to me, who by me being duly sworn deposed and said: that he is the Chairman of
United Coupon Corporation a corporation, and the corporation described in and
which executed the foregoing instrument; that the foregoing instrument has been
duly authorized by the Board of Directors of the corporation; that he has been
duly ordered and has the power to execute such instrument as the binding
obligation of the corporation and has signed his name thereto by such order; and
that the seal affixed to the instrument is the seal of such corporation and it
was affixed to this instrument by such order, or, if no seal is affixed then, no
seal is required to authenticate the instrument as the binding act and agreement
of such corporation.
My Commission Expires /s/ Cynthia S. Nelson
---------------------------
[NOTARY SEAL APPEARS HERE] Notary Public
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT FOR GUARANTOR
----------------------------
State of Texas )
County of Dallas )
On the 22nd day of Dec., 1995, before me personally appeared Doug Frans, known
to me, who by me being duly sworn deposed and said: that he is the CEO of Cal-
Central Marketing Corporation, a Florida corporation, and the corporation
described in and which executed the foregoing instrument; that the foregoing
instrument has been duly authorized by the Board of Directors of the
corporation; that he has been duly ordered and has the power to execute such
instrument as the binding obligation of the corporation and has signed his name
thereto by such order; and that the seal affixed to the instrument is the seal
of such corporation and it was affixed to this instrument by such order, or, if
no seal is affixed then, no seal is required to authenticate the instrument as
the binding act and agreement of such corporation.
My Commission Expires /s/ Cynthia S. Nelson
---------------------------
[NOTARY SEAL APPEARS HERE] Notary Public
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 6
Issuers Initial ____
<PAGE>
UNICO, Inc.
10% Convertible Note
Schedule of Advances
As of December 3l, 1995
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
10-20-95 $ 37,500
10-23-95 37,500
11-02-95 47,500
11-03-95 18,000
11-13-95 8,000
11-22-95 50,000
12-07-95 50,000
12-22-95 25,000
-------
Total Advanced $273,500
=======
</TABLE>
<PAGE>
Exhibit 10.30
Third Restated Loan Agreement dated March 4, 1996, among UNICO, Inc., United
Coupon Corporation, Cal-Central Marketing Corporation and BancFirst.
<PAGE>
THIRD RESTATED LOAN AGREEMENT
-----------------------------
THIS AGREEMENT is made effective January 10, 1996, between UNICO,
INC., a Delaware corporation, UNITED COUPON CORPORATION, a Virginia corporation,
CAL-CENTRAL MARKETING CORPORATION, an Oklahoma corporation, and BANCFIRST, an
Oklahoma banking corporation, with reference to the following facts.
R E C I T A L S :
A. The Borrowers are jointly and severally indebted to the Lender pursuant
to the terms of the Prior Loan Documents; and
B. The Borrowers and the Lender desire to amend the terms of the Prior
Loan Documents as provided by this Agreement.
A G R E E M E N T S :
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Borrowers, it is agreed as follows:
1. Defined Terms. As used in this Agreement, the following terms when bearing
-------------
initial capital letters will have the meanings hereafter indicated:
1.1 Account(s). All accounts, accounts receivable, contract rights,
----------
notes, drafts, acceptances, instruments, general intangibles,
chattel paper and other forms of obligations and receivables owing
by any person to any one or more of the Borrowers, now owned or
hereafter acquired, including, without implied limitation, deposits
and other sums due from the Lender to any one or more of the
Borrowers. The term "Account(s)" will have the meaning defined in
the UCC to the extent not inconsistent with the foregoing
definition.
1.2 Affiliate. Any person who is an officer or director of any of the
---------
Borrowers and any person or entity which, directly or indirectly, is
in control of, is controlled by or is under common control with any
of the Borrowers.
1.3 Agreement. This Third Restated Loan Agreement, including Schedules
---------
"A" through "G" inclusive which are
<PAGE>
attached as a part hereof and all extensions, renewals and
modifications hereof.
1.4 Borrowers. UNICO, UC and Cal-Central, jointly and severally.
---------
1.5 Borrowing Base. As of each date of determination, the lesser of:
--------------
(a) the maximum principal amount of Note A determined in accordance
with paragraph 4.1 of this Agreement; or (b) the total of:
(i) thirty-five percent (35%) of Old Cal-Central Accounts and
after June 30, 1996, no Old Cal-Central Accounts; (ii) seventy
percent (70%) of Eligible Accounts owing to UNICO d/b/a Alliance
Publications; (iii) seventy percent (70%) of Eligible Accounts
owing to UC; and (iv) fifty percent (50%) of the stock paper
inventory held by UC, but not more than One Hundred Fifty Thousand
Dollars ($150,000.00).
1.6 Borrowing Base Certificate. The document(s) to be provided by the
--------------------------
Borrowers to the Lender in form acceptable to the Lender certifying
that: (a) no Event of Default has occurred and that all requirements
of the Loan Documents have been fully performed, or if any of the
terms of any of the Loan Documents have not been fully performed,
such certificate will specify the Event of Default and the steps
taken by the Borrowers to correct such Event of Default; and (b) the
amount of the Borrowing Base as of the last day of the preceding
month.
1.7 Business Day. A day on which the Lender is open for business at its
------------
office at 101 North Broadway, Oklahoma City, Oklahoma 73102.
1.8 Cal-Central. Cal-Central Marketing Corporation (formerly AEC
-----------
Acquisitions, Inc.), an Oklahoma corporation, its successors and
permitted assigns.
1.9 Closing Date. The date on which the Loan Documents are accepted by
------------
the Lender at the Lender's office at 101 North Broadway, Oklahoma
City, Oklahoma 73102.
1.10 Code. The Internal Revenue Code of 1986, as amended to the date of
----
determination, together with all regulations issued pursuant
thereto.
1.11 Collateral. All property, real, personal or mixed now owned or
----------
hereafter acquired by the Borrowers including, without implied
limitation, the Stock, the Accounts,
- 2 -
<PAGE>
the Equipment, the Inventory, contract rights, documents of title,
chattel paper, general intangibles, insurance policies and proceeds
and business records, together with all increases, replacements and
substitutions therefor, additions and accessions thereto and
proceeds and products therefrom.
1.12 Conversion Agreement. An agreement between UNICO and the
--------------------
Subordinated Creditors made pursuant to the letter of intent dated
February 2, 1996 by Renaissance, the Duncan-Smith Group and the
Humphreys Group which provides inter alia that: (a) the subordinated
----- ----
Creditors will convert no less than One Million Five Hundred
Thousand Dollars ($1,500,000.00) of existing subordinated debt to
preferred or common stock of UNICO on terms satisfactory to the
Lender; and (b) no payment of principal or interest will be required
by the Subordinated Creditors prior to July 1, 1997.
1.13 Default. The occurrence of any one or more of the Events of Default
-------
and the determination by the Lender that the Lender will exercise
the remedies available to the Lender by reason thereof.
1.14 Duncan-Smith Group. Comer M. Alden, Beverly Arnold, Dan E. Butt, M.
------------------
A. Mizdor, A. Baker Duncan, Sally W. Duncan, Luella Hardie, Jane
Jacobs, Johnnie Jean Lovett, Thomas Lovett, Mary Malone, Eleanor
Morrison, Richard Oldfather, Deborah Quebe, Jordon Reese, III, Eddie
W. Spalten, Kurt H. C. Bottcher and Fred Grinstead, all individuals,
Tres Hombres, a partnership, or their agent, Duncan-Smith Company,
a Texas corporation, their respective heirs, representatives,
successors and assigns.
1.15 Eligible Account(s). Each Account in which the Lender has a first
-------------------
perfected security interest and which: (a) arises from providing
services or the sale or lease of Inventory or other goods and such
Inventory or other goods has been shipped or delivered to the
Account debtor; (b) is a valid, legally enforceable obligation of
the Account debtor thereunder and is not subject to any dispute,
recoupment, claim, offset, counterclaim, adjustment, allowance or
other defense on the part of the Account debtor or to any claim on
the part of the Account debtor denying liability thereunder in whole
or in part; (c) is not subject to any lien or security interest in
favor of a person other than the Lender; (d) is evidenced by an
invoice having payment terms acceptable to the Lender rendered to
the Account debtor
- 3 -
<PAGE>
and is not evidenced by any instrument or chattel paper; (e) is not
owing by an Account debtor the collection of whose Accounts either
the Borrowers or the Lender have determined to be doubtful; (f) is
not owing by any Account debtor who has any Account more than sixty
(60) days past the invoice due date; (g) is not more than sixty
(60) days past the invoice due date; and (h) is lawfully owned by
one of the Borrowers with good right to subject the same to a first
security interest in favor of the Lender. An Account which initially
constitutes an Eligible Account, but which subsequently fails to
meet any of the foregoing requirements, will thereafter cease to be
an Eligible Account.
1.16 Equipment. All equipment, furniture, fixtures, machinery, apparatus
---------
and other personal property now owned or hereafter acquired by one
of the Borrowers, including, without implied limitation, all
printing equipment, computer systems, programs, hardware, software
and computer graphics equipment. The term "Equipment" will have the
meaning defined in the UCC to the extent not inconsistent with the
foregoing definition.
1.17 ERISA. The Employee Retirement Income Security Act of 1974, as
-----
amended on the date of determination, together with all regulations
issued pursuant thereto.
1.18 Events of Default. The occurrences specified in paragraph 9 of this
-----------------
Agreement.
1.19 GAAP. The generally accepted accounting principles adopted from
----
time to time by the Financial Accounting Standards Board of the
Association of Independent Certified Public Accountants. All
accounting terms used in this Agreement will, unless otherwise
specifically provided herein, have the meanings customarily given
such terms in accordance with GAAP and, unless otherwise
specifically provided herein, all financial computations required by
this Agreement will be computed in accordance with GAAP consistently
applied.
1.20 Humphreys Group. Sara Humphreys Warren, Margaret H. Cummings and
---------------
Laurie F. Humphreys, Trustees of the Harlon Morse Fentriss Trust,
Phil M. Stevenson, Jr., an individual, Rhojcoamt Partnership, Ltd.,
a Texas limited partnership, Citcam Stock Co., a Texas general
partnership, Barbara T. Grinnan, an individual, and Goose Creek, a
Texas general partnership or Duncan-
- 4 -
<PAGE>
Smith Company as their agent, and their respective heirs,
representatives, successors and assigns.
1.21 Inventory. All goods, merchandise and other personal property now
---------
owned or hereafter acquired by one of the Borrowers which are held
for sale or lease or are to be furnished under contracts of service,
or which are raw materials, work in process or materials used or
consumed in the Borrowers' businesses. The term "Inventory" will
have the meaning defined in the UCC to the extent not inconsistent
with the foregoing definition.
1.22 Lender. BancFirst, an Oklahoma banking corporation, its successors
------
and assigns.
1.23 Loans. The extensions of credit having an outstanding principal
-----
amount not to exceed NINE HUNDRED THIRTY-FOUR THOUSAND FOUR HUNDRED
THIRTY-TWO AND 73/100 DOLLARS ($934,432.73) made by the Lender to
the Borrowers pursuant to the terms of this Agreement and all
extensions, renewals, increases, consolidations and modifications
hereof.
1.24 Loan Documents. This Agreement, the Notes, the Stock Pledge
--------------
Agreement, the Security Agreement, the Subordination Agreements,
financing statements, the Lockbox Agreements and all other documents
executed by the Borrowers or any other person on behalf of the
Borrowers and delivered to the Lender in connection with or related
to the Loans and all amendments, extensions, renewals, increases and
modifications of any of the foregoing.
1.25 Lockbox Agreements. The documents to be executed by the Borrowers
------------------
and delivered to the Lender to facilitate the collection of Accounts
in substantially the form and containing the terms which appear as
Schedule "G" and all extensions, renewals and modifications thereof.
1.26 Note A. The document to be executed by the Borrowers and delivered
------
to the Lender to evidence a portion of the Loans payable on the
terms set forth at paragraph 4.1 of this Agreement in substantially
the form and containing the terms set forth at Schedule "A" and all
extensions, renewals, modifications and increases thereof.
1.27 Note B. The document to be executed by the Borrowers and delivered
------
to the Lender to evidence a portion of
- 5 -
<PAGE>
the Loans payable on the terms set forth at paragraph 4.2 of this
Agreement in substantially the form and containing the terms set
forth at schedule "B" and all extensions, renewals, modifications
and increases thereof.
1.28 Notes. Note A and Note B.
-----
1.29 Obligations. The joint and several obligations of the Borrowers to:
-----------
(a) pay the principal and interest on the Notes in accordance with
the terms thereof and to satisfy all other liabilities of the
Borrowers to the Lender under the Loan Documents, whether now
existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions,
modifications, increases or renewals thereof and substitutions
therefor; (b) repay to the Lender all amounts advanced by the Lender
under the Loan Documents on behalf of the Borrowers, including,
without implied limitation, all advances for principal or interest
payments to prior secured parties, lessors, mortgagees or lienors,
or for taxes, levies, rent, repairs to or maintenance or storage of
any of the Collateral; and (c) reimburse the Lender, on demand, for
all of the Lender's expenses and costs, including the reasonable
fees and expenses of the Lender's counsel, in connection with the
preparation, administration, negotiation, amendment, modification or
enforcement of the Loan Documents.
1.30 Old Cal-Central Accounts. Accounts owing to Cal-Central having an
------------------------
invoice date prior to November 1, 1995.
1.31 PBGC. The Pension Benefit Guaranty Corporation as established
----
pursuant to Section 4002 of ERISA or any successor thereto.
1.32 Permitted Encumbrances. Encumbrances which constitute: (a) liens for
----------------------
taxes, assessments or other governmental charges or levies not yet
due or which are being contested in good faith by appropriate action
and for which reserves have been established in accordance with
GAAP; (b) liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or
public liability obligations; (c) mechanics', materialmen's,
laborers' or other like liens arising by operation of law in the
ordinary course of business in respect of liabilities which are
- 6 -
<PAGE>
not yet due or which are being contested in good faith by
appropriate proceedings by or on behalf of the Borrowers and for
which reserves have been established in accordance with GAAP; and
(d) the secured liens described in Schedule "C."
1.33 Prime Rate. The base interest rate per annum on corporate loans
----------
posted by at least seventy-five percent (75%) of the United States'
thirty (30) largest banks as published from time to time in the
"Money Rates" column of The Wall Street Journal or, if such
-----------------------
publication ceases, an alternative similar index designated by the
Lender.
1.34 Prior Loan Documents. The loan documents governing, evidencing and
--------------------
securing payment of the extensions of credit made by the Lender to
the Borrowers prior to the effective date of this Agreement
including, without implied limitation, the following: (a) the Second
Amended and Restated Loan Agreement dated effective August 31, 1994,
as amended by: (i) the First Amendment to Second Amended and
Restated Loan Agreement dated effective December 29, 1994, and (ii)
the Second Amendment to Second Amended and Restated Loan Agreement
dated effective August 11, 1995; (b) the Revolving Note dated August
31, 1994 in the face amount of Six Hundred Thousand Dollars
($600,000.00) executed by the Borrowers and delivered to then
Lender; (c) the Renewal Term Note dated August 31, 1994 in the face
amount of Five Hundred Thousand Dollars ($500,000.00) executed by
the Borrowers and delivered to the Lender; (d) the Amended and
Restated Security Agreement dated effective August 31, 1994, as
amended by the First Amendment to Amended and Restated Security
Agreement dated August 11, 1995; (e) the Amended and Restated Stock
Pledge Agreement dated effective August 31, 1994, as amended by: (i)
the First Amendment to Amended and Restated Stock Pledge Agreement
dated effective September 1994, and (ii) the Second Amendment to
Amended and Restated Stock Pledge Agreement dated effective August
11, 1995; and (f) the Amended and Restated Collateral Subordination
Agreement dated effective August 31, 1994.
1.35 Renaissance. Renaissance Capital Partners, Ltd., a Texas limited
-----------
partnership, its successors and assigns.
1.36 Security Agreement. The Third Restated Security Agreement to be
------------------
executed by the Borrowers and delivered to the Lender to secure
payment of the Obligations by
- 7 -
<PAGE>
granting to the Lender a first perfected security interest covering
that portion of the Collateral described therein in substantially
the form and containing the terms set forth at Schedule "D" and all
extensions, renewals and modifications thereof.
1.37 Stock. All of the capital stock of UC and Cal-Central now or
-----
hereafter issued and outstanding.
1.38 Stock Pledge Agreement. The Third Restated Stock Pledge Agreement to
----------------------
be executed by UNICO and delivered to the Lender to secure payment
of the Obligations by granting to the Lender a first perfected
security interest covering the Stock in substantially the form and
containing the terms set forth at Schedule "E" and all extensions,
renewals and modifications thereof.
1.39 Subordinated Creditors. Renaissance, the Duncan-Smith Group and the
----------------------
Humphreys Group.
1.40 Subordination Agreements. The Third Restated Subordination
------------------------
Agreements to be executed and delivered among the Subordinated
Creditors, the Borrowers and the Lender evidencing the subordination
of the priority of security interests held by Subordinated Creditors
to the security interests held by the Lender in substantially the
form and containing the terms set forth at Schedule "F" and all
extensions, renewals and modifications thereof.
1.41 Subsidiaries. Any corporation of which more than ten percent (10%)
------------
of the issued and outstanding securities having voting rights is
owned or controlled, directly or indirectly, by any one or more of
the Borrowers and/or any one or more of the Borrowers' Subsidiaries.
1.42 UNICO UNICO, Inc., a Delaware corporation, its successors and
-----
permitted assigns.
1.43 UC. United Coupon Corporation, a Virginia corporation, its
--
successors and permitted assigns.
1.44 UCC. The uniform Commercial Code as adopted in the State of
---
Oklahoma.
2. Lending Agreement. Based on the foregoing representations and warranties
-----------------
and subject to the terms and conditions of this Agreement, provided that no
Event of Default has occurred and is continuing, the Lender agrees to lend to
the Borrowers and the
- 8 -
<PAGE>
Borrowers agree to borrow from the Lender the aggregate sum of NINE HUNDRED
THIRTY-FOUR THOUSAND FOUR HUNDRED THIRTY-TWO AND 73/100 DOLLARS ($934,432.73).
Advances will be made under the Notes solely to renew the unpaid principal
balance of the extensions of credit made by the Lender pursuant to the Prior
Loan Documents.
3. Representations and Warranties. To induce the Lender to enter into this
------------------------------
Agreement, the Borrowers jointly and severally represent and warrant to the
Lender that:
3.1 Existence; Power. Each of the Borrowers is and will continue to be a
----------------
corporation duly formed and validly existing in good standing under
the laws of the respective states of their incorporation; the
Borrowers are each authorized and qualified to do business in each
state where the nature of their activities or assets requires such
qualification, except those states where failure to so qualify will
not have a material adverse effect on the Borrowers; the Borrowers
have adequate power, authority and legal right to own, operate and
hold the Collateral; the Borrowers are duly authorized, qualified
and licensed under all applicable laws, regulations, ordinances or
orders of public authorities to carry on the Borrowers' respective
businesses in the operation and ownership of the Collateral; the
Borrowers have adequate authority, power and legal right to enter
into, execute, deliver and perform the terms of the Loan Documents,
to borrow money and give security for borrowing as contemplated by
the Loan Documents and to consummate the transactions contemplated
thereby, and in doing so, the Borrowers will not violate any law or
the provisions of any articles, charter, bylaws or any other
agreement or instrument binding on the Borrowers or the Collateral.
The Loan Documents will constitute valid, legal and binding
obligations of the Borrowers, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditor's rights
generally. UNICO owns one hundred percent (100%) of the issued and
outstanding stock of UC and Cal-Central free and clear of all liens,
claims and encumbrances except those in favor of the Lender.
3.2 Financial Condition. The Borrowers' current consolidated financial
-------------------
statements, dated October 31, 1995, copies of which have been
furnished to the Lender, are correct, complete and fairly reflect
the financial condition of the Borrowers as of the date thereof and
have been prepared in conformity with GAAP. There has
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<PAGE>
occurred no material adverse change in the financial condition of
the Borrowers from the date of such financial statements to the
Closing Date.
3.3 Compliance with ERISA. To the best of the Borrowers' knowledge after
---------------------
due inquiry: (a) each employee benefit plan maintained by the
Borrowers is in substantial compliance with ERISA; (b) no such plan
is insolvent, in reorganization or has an unfunded current
liability, and no plan has an accumulated or waived funding
deficiency or permitted decreases in its funding standard account
within the meaning of Section 412 of the Code; (c) neither the
Borrowers nor any Subsidiary has incurred any material liability to
or on material account of a plan pursuant to Sections 515, 4062,
4063, 4064, 4201 or 4204 of ERISA or expects to incur any liability
under any of the foregoing sections on account of the termination of
participation in or contributions to any such plan; (d) the
Borrowers are not aware of any condition that exists which presents
a material risk to the Borrowers of incurring a liability to or on
account of a plan pursuant to the foregoing provisions of ERISA or
the Code; (e) the Borrowers are not aware of any lien imposed under
the Code or ERISA on the assets of the Borrowers or any Subsidiary
that exists or is likely to arise on account of any plan; and (f) no
underfunding of a multiemployer plan exists which, on severance of
participation in such multi-employer plan, would result in a
withdrawal liability of the Borrowers or any Subsidiary.
3.4 Liabilities. None of the Borrowers has any material liabilities,
-----------
direct or contingent, except those disclosed in the financial
statements described in paragraph 3.2 of this Agreement.
3.5 Disclosure. No representation or warranty made by the Borrowers in
----------
the Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make the statements
therein not misleading. There is no fact known to the Borrowers
which has or might reasonably be anticipated to have a material
adverse effect on the business, assets, financial condition or
operations of the Borrowers or the value of the Collateral which has
not been disclosed to the Lender in writing.
3.6 Litigation. Except as listed on Schedule 3.6 or as otherwise
----------
disclosed, there is no action, suit,
- 10 -
<PAGE>
proceeding or investigation pending or threatened against any of the
Borrowers which, if adversely determined, would materially adversely
affect any of the Borrowers, any of the Collateral or impair the
ability of any of the Borrowers to carry on their respective
businesses substantially as now conducted or result in any
substantial liability to any of the Borrowers not adequately covered
by insurance.
3.7 No Default. The making and performance by the Borrowers of this
----------
Agreement will not violate any provision or constitute a default
under any indenture, agreement or instrument to which the Borrowers
are a party or by which any one or more of the Borrowers or any of
the Collateral is bound or affected.
3.8 Ownership. The Borrowers have good and marketable title to the
---------
Collateral free and clear of all liens, claims or encumbrances
except encumbrances held by the Lender and the Permitted
Encumbrances.
3.9 Permits. To the best of the Borrowers' knowledge after due inquiry,
-------
the Borrowers have all governmental and private permits,
certificates, consents and franchises which are material to the
business, property, assets, operations or condition, financial or
otherwise, of the Borrowers or are necessary to carry on their
respective businesses as now being conducted and to own or lease and
operate their respective properties as now owned or leased. All such
governmental and private permits, certificates, consents and
franchises are valid and subsisting and there is no existing
violation thereof.
3.10 Taxes. To the best of the Borrowers' knowledge after due inquiry,
-----
the Borrowers have filed all foreign, federal, state and local tax
returns which are required to be filed and have paid or made
provisions for payment of all taxes which have or may become due
pursuant to said returns or pursuant to any assessment, except such
taxes as are being contested in good faith and as to which adequate
reserves have been provided. The Borrowers know of no basis for the
assessment of any tax deficiency.
3.11 Compliance. To the best of the Borrowers' knowledge after due
----------
inquiry, none of the Borrowers is in default in the performance,
observance or fulfillment of any of the obligations, covenants or
Conditions contained in any agreement pursuant to which any
indebtedness has
- 11 -
<PAGE>
been issued or any other material agreement to which any of the
Borrowers is a party, except those which are being contested in good
faith and which have been disclosed to the Lender in writing. The
execution and delivery of the Loan Documents, the consummation of
the transactions contemplated thereby or compliance with the terms,
conditions and provisions thereof by the Borrowers will not: (a)
conflict with or result in a breach of or constitute a default under
any of the terms, conditions or provisions of any law, regulation,
order, writ, injunction or decree of any court or governmental
instrumentality, domestic or foreign, or the certificate of
incorporation or bylaws of the Borrowers or any of the contractual
obligations of any of the Borrowers; or (b) result in the creation
or imposition of any lien, charge or encumbrance of any nature
whatsoever on the Collateral other than the liens created by the
Loan Documents and the Permitted Encumbrances. None of the Borrowers
is a party to any contractual obligation or subject to any
requirements of law which will materially and adversely affect the
business, operations, properties, assets, prospects or condition,
financial or otherwise, of any of the Borrowers.
3.12 Investment Company Act. None of the Borrowers is an "investment
----------------------
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.13 Regulations. None of the Borrowers is engaged in the business of
-----------
extending credit for the purpose of purchasing or carrying margin
stock within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System, and the making of the Loans and the
use of the proceeds by the Borrowers will not violate Regulations C,
T, U or X of the Board of Governors of the Federal Reserve System.
3.14 Location of Collateral. The Borrowers will give the Lender written
----------------------
notice of each location at which Inventory and records of the
Borrowers pertaining to the Collateral are kept. Except as such
notice is given, all Inventory and records of the Borrowers
pertaining to the Collateral are and will continue to be kept at the
Borrowers' respective addresses set forth in this Agreement. UNICO's
principal and only place of business is in the State of Oklahoma;
UC's principal and only place of business is in the State of
Virginia;
- 12 -
<PAGE>
and Cal-Central's principal and only place of business is in the
State of Oklahoma.
3.15 Governmental Approvals. To the best of the Borrowers' knowledge
----------------------
after due inquiry, no authorizations, approvals or consents on the
part of any public body or authority, federal, state or local are
required to be obtained by the Borrowers in connection with the
execution, delivery or performance of this Agreement or the Loan
Documents.
3.16 Insurance. The Borrowers will continuously maintain with financially
---------
sound and reputable insurers, liability and casualty insurance
against such hazards and in such amounts as is commonly maintained
by entities similarly situated with respect to comparable assets and
businesses.
3.17 Solvency. After eliminating intercompany transactions, none of the
--------
Borrowers is insolvent and, after giving effect to the transactions
contemplated by the Loan Documents, none of the Borrowers will
become insolvent as a result thereof. Each of the Borrowers: (a) is
and will be able to pay their respective debts as they become due;
(b) has and will have capital sufficient to carry on their
respective businesses; (c) owns and will own property having a
value, both at fair valuation and at present fair salable value,
greater than the amount required to pay their respective debts and
obligations; and (d) after giving effect to the transactions
contemplated by the Loan Documents, none of the Borrowers will have
incurred, intended to incur or believes that it has incurred, debts
beyond their respective ability to pay such debts as they become
due. Each of the Borrowers has received at least a reasonably
equivalent value in exchange for incurring the Obligations.
3.18 Survival of Representations. All representations and warranties made
---------------------------
by the Borrowers will survive the delivery of the Loan Documents and
the making of the Loans, and any investigation at any time made by
or on behalf of the Lender will not diminish the Lender's right to
rely thereon. All statements contained in any certificate or other
instrument delivered by or on behalf of the Borrowers in connection
with the Loans will constitute representations and warranties made
by the Borrowers hereunder.
- 13 -
<PAGE>
4. Notes. The Loans will be evidenced by the Notes which will be payable as
-----
follows:
4.1 Note A. Note A will be in the principal amount of SIX HUNDRED
------
THOUSAND DOLLARS ($600,000.00) and will be payable on the following
terms:
4.1.1 Interest. Absent Default, Note A will bear interest on the
--------
unpaid principal balance at an annual rate equal to the
Prime Rate plus one percent (1%) until July 1, 1996; on and
after July 1, 1996, Note A will bear interest on the unpaid
principal balance at an annual rate equal to the Prime Rate
plus three percent (3%). Interest will be payable monthly
throughout the term of Note A on the first (1st) day of
each month until Note A is paid in full.
4.1.2 Amortization. Absent Default, the unpaid principal balance
------------
of Note A will be paid as follows: (a) on March 1, April 1,
May 1, June 1 and July 1, 1996, the principal balance of
Note A will be reduced by that amount which is equal to
fifty percent (50%) of the Cal-central Accounts collected
during the preceding month; provided the cumulative
principal reduction of Note A will be no less than the
following amounts: (i) Twenty Thousand Dollars ($20,000.00)
on April 1, 1996; (ii) Sixty Thousand Dollars ($60,000.00)
on May 1, 1996; (iii) One Hundred Thousand Dollars
($100,000.00) on June 1, 1996; and (iv) One Hundred Fifty
Thousand Dollars ($150,000.00) on July 1, 1995; (b) on
August 1, September 1, October 1, November 1 and December
1, 1996, the principal balance of Note A will be reduced by
that amount which is equal to one hundred percent (100%) of
the Cal-Central Accounts and twenty-five percent (25%) of
the UNICO d/b/a Alliance Publications Accounts collected
during the preceding month; and (c) the entire unpaid
principal balance of Note A plus all accrued interest
thereon will be due and payable on January 31, 1997.
4.1.3 Prepayments. The Borrowers will have the right to prepay
-----------
the unpaid principal balance of Note A in whole or in part
at any time and
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<PAGE>
from time to time without penalty. The Borrowers will apply
as a mandatory principal prepayments of Note A: (a) that
amount by which the unpaid principal balance of Note A
exceeds the Borrowing Base; (b) that amount, if any, which
is equal to the proceeds received by the Borrowers from the
sale of Equipment; and (c) after payment of Note B in full,
the amount of Twenty Thousand Dollars ($20,000.00) on the
first (1st) and fifteenth (15th) days of each month. Each
prepayment will be applied by the Lender to the payment of
the principal installments of Note A in the inverse order
of their maturity.
4.2 Note B. Note B will be in the principal amount of THREE HUNDRED
------
THIRTY-FOUR THOUSAND FOUR HUNDRED THIRTY-TWO AND 73/100 DOLLARS
($334,432.73) and will be payable on the following terms:
4.2.1 Interest. Absent Default, Note B will bear interest on the
--------
unpaid principal balance at an annual rate equal to the
Prime Rate plus one percent (1%) until July 1, 1996; on and
after July 1, 1996, Note B will bear interest on the
unpaid principal balance at an annual rate equal to the
Prime Rate plus three percent (3%). Interest will be
payable semi-monthly throughout the term of Note B on the
first (1st) and fifteenth (15th) days of each month until
Note B is paid in full.
4.2.2 Amortization. Absent Default, the unpaid principal balance
------------
of Note B will be paid as follows: (a) on the first (1st)
and fifteenth (15th) days of each month, semi-monthly
principal installments in the amount of Twenty Thousand
Dollars ($20,000.00) will be payable, and (b) unless sooner
paid, the entire unpaid principal balance of Note B plus
all accrued interest thereon will be due and payable on
January 31, 1997.
4.2.3 Prepayment. The Borrowers will have the right to prepay the
----------
unpaid principal balance of Note B in whole or in part at
any time and from time to time without penalty. Each
prepayment will be applied by the Lender to the payment
- 15 -
<PAGE>
of principal installments in the inverse order of their
maturity.
4.3 Place of Payment. All payments and prepayments of principal or
----------------
interest on the Notes will be made to the Lender in collected funds
on or before 11:00 a.m. Oklahoma City time on the due date at the
Lender's offices at 101 North Broadway, Oklahoma City, Oklahoma
73102. All payments will be made without setoff or counterclaim and
without reduction for, and free from, any and all taxes, levies,
imposts, duties, fees, charges, deductions, withholdings,
restrictions or conditions of any nature imposed by any government
or any political subdivision or taxing authority thereof. If any
payment under the Notes or this Agreement becomes due and payable on
a day other than a Business Day, the maturity thereof will be
extended to the next succeeding Business Day and such extension of
time will in each case be included in the computation of payments of
interest.
5. Collateral. Payment of the Obligations and all other indebtedness of the
----------
Borrowers from time to time owing to the Lender will be secured by the
Collateral.
6. Conditions of Lending. The obligation of the Lender to perform this
---------------------
Agreement is subject to the continued performance by the Borrowers of the
following conditions:
6.1 Loan Documents; Collateral. The Loan Documents and all other
--------------------------
documents incidental to the transactions contemplated hereby shall
have been duly executed, acknowledged (where appropriate) and
delivered to the Lender by the Borrowers, all in form and substance
satisfactory to the Lender. The Lender shall have received
possession of the Stock and any other Collateral, possession of
which is necessary to perfect the Lender's security interest
therein.
6.2 Prohibited Orders. No order, writ or injunction of any court or
-----------------
administrative agency shall be in effect or sought prohibiting the
transactions contemplated by the Loan Documents.
6.3 Authority. The Lender shall have received certificates of
---------
incorporation, certificates of good standing for the Borrowers and
each Subsidiary from the respective states of incorporation and
certified copies of corporate resolutions and other documents
reasonably
- 16 -
<PAGE>
required to authorize the execution, delivery and performance of the
Loan Documents by the Borrowers, all in form and substance
satisfactory to the Lender.
6.4 No Default. The representations and warranties set forth in
----------
paragraph 3 of this Agreement shall be true and correct and there
shall have occurred and be continuing no Event of Default.
6.5 Opinion of Counsel. The Lender shall have received an opinion of
------------------
counsel for the Borrowers stating that:
6.5.1 Status. Each of the Borrowers is a corporation duly formed
------
and validly existing under the laws of the respective states
of their incorporation and failure to qualify as a
domesticated corporation in any state in which any of the
Borrowers conducts business will not impair the businesses of
the Borrowers;
6.5.2 Authority. The Borrowers have the power and have been duly
---------
authorized to execute, deliver and perform the Loan
Documents;
6.5.3 Enforceability. The Loan Documents, when executed and
--------------
delivered, will be valid and legally binding obligations of
the Borrowers enforceable in accordance with their respective
terms;
6.5.4 No Violation. Compliance by the Borrowers with the Loan
------------
Documents will not violate any law, including, without
implied limitation, applicable securities laws, orders of
public authorities, the certificates of incorporation and
bylaws of the Borrowers or any other agreements binding on
the Borrowers, including, without implied limitation, the
Borrowers' agreements with the Subordinated Creditors or any
lender secured by Permitted Encumbrances; and
6.5.5 Collateral. The Loan Documents are entitled to the benefit of
----------
the Collateral therein described and are enforceable in
accordance with their respective terms against the Collateral
to which they relate, except as limited by applicable
bankruptcy, insolvency and debtor relief laws.
- 17 -
<PAGE>
6.6 Information; Consents. The Borrowers shall have furnished to the
---------------------
Lender such financial statements, information and consents of third
parties to the transactions contemplated by this Agreement as have
been requested by the Lender.
6.7 Insurance. The Lender shall have received copies of certificates,
---------
policies or other evidence of casualty and liability insurance
covering the Collateral and naming the Lender as an additional
insured or as loss payee issued by insurers, in amounts and
containing terms satisfactory to the Lender.
6.8 Additional Documents. The Borrowers shall have furnished to the
--------------------
Lender such additional agreements, contracts, indentures and
documents in connection with the Loans as the Lender requests, in
the Lender's sole discretion:
6.9 Collateral Reports. The Borrowers shall have furnished to the
------------------
Lender: (a) a Borrowing Base Certificate; (b) the Borrowers' most
recent aging report of Accounts and accounts payable; and (c) the
Borrowers' most recent inventory of Equipment.
6.10 Conversion Agreement. No later than Monday, July 1, 1996, the
--------------------
Subordinated Creditors and UNICO shall have entered into the
Conversion Agreement for the benefit of the Lender.
6.11 Appraisal. Not later than March 11, 1996, the Borrowers shall have
---------
provided to the Lender an appraisal report prepared by an appraiser
selected by the Borrowers and approved by the Lender which will
contain a detailed estimate of the fair market value and forced sale
value of the Equipment and such additional information as the Lender
might reasonably request.
6.12 Payments at Closing. On the Closing Date, the "Borrowers will pay to
-------------------
the Lender: (a) the amount required to pay interest accrued on the
Notes to February 15, 1996; and (b) the sum of Twenty Thousand
Dollars ($20,000.00) to be applied to: (i) the payment of the
balance of a promissory note owing by Cal-Central to the Lender;
(ii) the payment of attorneys' fees owing to Self, Giddens & Lees,
Inc. and Hastie, McCutcheon and Maye; and (iii) the balance, if any,
as a principal prepayment of Note B.
- 18 -
<PAGE>
6.13 Subordination Agreements. On the Closing Date, the Borrowers will
------------------------
deliver to the Lender a Subordination Agreement duly executed by the
Humphreys Group (or such of them as the Lender might request), a
Subordination Agreement duly executed by the Duncan-Smith Group (or
such of them as the Lender might request) and a Subordination
Agreement duly executed by Renaissance. To the extent the Lender
waives the execution of a Subordination Agreement by any
Subordinated Creditor on the Closing Date, the Borrowers will
thereafter exercise all reasonable efforts to expeditiously obtain
execution of the Subordination Agreements by all of the Subordinated
Creditors and will provide executed counterparts thereof to the
Lender no later than Monday, July 1, 1996.
7. Affirmative Covenants. Until payment in full of the Obligations, the
---------------------
Borrowers jointly and severally agree that, unless the Lender otherwise consents
in writing, the Borrowers will perform or cause to be performed the following
agreements:
7.1 Records. Accurate books and records will be kept by the Borrowers in
-------
accordance with GAAP. The Lender will have the right to examine and
copy such books and records and the federal and state income tax
returns of the Borrowers, to discuss the affairs, finances and
accounts of the Borrowers and to be informed as to the same at such
times and intervals as the Lender might reasonably request. The
Borrowers will furnish or cause to be furnished to the Lender at the
times hereafter specified the following reports:
7.1.1 Financial Statements. The Borrowers will furnish to the
--------------------
Lender within thirty (30) days after the close of each
month a copy of the Borrowers' monthly management summary.
In addition, within forty-five (45) days after the close of
each fiscal quarter, the Borrowers will furnish to the
Lender quarterly and year-to-date unaudited consolidated
financial statements of the Borrowers in form satisfactory
to the Lender certified to be accurate by an authorized
officer of the Borrowers. In addition, within ninety (90)
days after the close of each fiscal year of the Borrowers,
the Borrowers will furnish to the Lender annual
consolidated audited financial statements audited by
certified public accountants satisfactory to the Lender,
prepared in
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<PAGE>
accordance with GAAP and in form and substance satisfactory
to the Lender.
7.1.2 Borrowing Base Certificate. On or before the fifteenth
--------------------------
(15th) day of each month, the Borrowers will deliver to the
Lender a Borrowing Base Certificate.
7.1.3 Aging Reports. The Borrowers will furnish to the Lender
-------------
within fifteen (15) days after the last day of each fiscal
quarter of the Borrowers, an aging report setting forth the
aging of the Accounts and accounts payable of the Borrowers
as of the last day of the preceding fiscal quarter in form
and substance satisfactory to the Lender.
7.1.4 SEC Filings. Simultaneously with the filing thereof, the
-----------
Borrowers will deliver to the Lender copies of all
information, documents and forms filed or submitted by the
Borrowers to the United States securities and Exchange
Commission, any state securities authority and any other
similar governmental authority.
7.1.5 Other Information. At the Lender's request from time to
-----------------
time, the Borrowers will provide the Lender with such other
information as the Lender might request regarding the
business affairs and financial condition of the Borrowers
and the Borrowers will provide access to the Lender at all
reasonable times to all agreements, leases, assignments,
purchase and sale contracts, operating agreements and all
other documents and information relating to the Borrowers
and the Collateral.
7.2 Taxes. All taxes, assessments, governmental charges and levies
-----
imposed on the Borrowers and their respective assets, income and
profits will be paid prior to the date on which penalties attach
thereto; provided that the Borrowers will not be required to pay any
such charge which is being contested in good faith by proper
proceedings as to which adequate reserves have been established in
accordance with GAAP.
7.3 Access. Any representative of the Lender will have reasonable access
------
to the Collateral and any other property owned by the Borrowers.
- 20 -
<PAGE>
7.4 Insurance. The Borrowers will continuously maintain with financially
---------
sound and reputable insurers policies of liability and casualty
insurance against such risks and in such amounts as are commonly
maintained by entities similarly situated with respect to comparable
assets and businesses. Such insurance policies will name the Lender
as loss payee or as an additional insured in compliance with the
applicable insurance provisions. The Lender will be furnished copies
of all insurance policies in effect and evidence of premium payment
thereon.
7.5 Collateral. The Borrowers agree to maintain the Collateral in a
----------
prudent and efficient manner consistent with normal industry
practice, to grant the Lender first perfected security interests
covering all additions to the Collateral and to promptly deliver to
the Lender such documents as might be requested by the Lender to
subject the same to security interests in favor of the Lender. The
Borrowers will maintain and defend title to the Collateral against
all claims, liens and encumbrances except those in favor of the
Lender and the Permitted Encumbrances.
7.6 Qualification; Licenses. The Borrowers will take such actions or
-----------------------
cause such actions to be taken as might be required to maintain the
Borrowers' corporate existence and all governmental and private
permits, licenses and authorities necessary or desirable to the
continuation of the respective businesses of the Borrowers and will
comply with all statutes and governmental regulations.
7.7 Notices. The Borrowers will promptly give written notice to the
-------
Lender of: (a) any litigation in excess of Fifty Thousand Dollars
($50,000.00) commenced against or affecting any one or more of the
Borrowers or the Collateral; (b) any dispute which exists between
the Borrowers and any governmental authority relating to any federal
or state law that could reasonably be expected to have a material
adverse effect on: (i) the financial condition or results of
operations of the Borrowers or (ii) the ability of the Borrowers,
taken as a whole, to perform their obligations under the Loan
Documents; (c) any labor controversy resulting in or threatening to
result in a strike against the Borrowers; (d) any proposal by any
public authority to acquire the assets or businesses of the
Borrowers; (e) the occurrence of any Event of Default; and (f) any
other matter which has resulted or could be expected to
- 21 -
<PAGE>
result in a material adverse change in: (i) the financial condition
or results of operations of the Borrowers or (ii) the ability of any
one or more of the Borrowers, taken as a whole, to perform their
obligations under the Loan Documents.
7.8 ERISA. As soon as possible and, in any event, within ten (10) days
-----
after the Borrowers know any of the following, the Borrowers will
deliver to the Lender a certificate of the Borrowers setting forth
details as to any of the following occurrences stating the action,
if any, which the Borrowers are required or propose to take,
together with any notices required or proposed to be given to or
filed with or by the Borrowers, the PBGC, a plan participant or the
plan administrator with respect thereto that: (a) a reportable event
has occurred; (b) an accumulated funding deficiency has been
incurred or an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding
standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code
with respect to a maintained plan; (c) a maintained plan has been or
may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA; (d) a maintained plan has an unfunded
current liability giving rise to a lien under ERISA; (e) proceedings
may be or have been instituted to terminate a maintained plan; (f) a
proceeding has been instituted pursuant to Section 515 of ERISA to
collect from the Borrowers a delinquent contribution to a plan; or
(g) the Borrowers or any Affiliate will or may incur any liability
(including any contingent or secondary liability) to or on account
of the termination of or withdrawal from a plan under Sections 4062,
4063, 4064, 4201 or 4204 of ERISA or that a trustee of a
multiemployer plan has notified the Borrowers of any potential
withdrawal liability with respect to a multiemployer plan. The
Borrowers will deliver to the Lender on request a complete copy of
the annual report (Form 5500) of each maintained plan required to be
filed with the Internal Revenue Service and will deliver to the
Lender a complete copy of the annual report of each multiemployer
plan delivered to the Borrowers by a trustee of such plan. In
addition to any certificates or notices delivered to the Lender
pursuant to the first sentence hereof, copies of annual reports and
any other notices received by the Borrower required to be delivered
to the Lender hereunder will be delivered to the Lender no
- 22 -
<PAGE>
later than ten (10) days after the later of the date such report or
notice has been filed with the Internal Revenue Service or the PBGC,
given to plan participants or received by the Borrowers.
7.9 Additional Documents. From time to time, on the written request of
--------------------
the Lender, the Borrowers agree to execute additional documents
consistent with the provisions of the Loan Documents which are
reasonably requested by the Lender.
7.10 Bank Accounts. UNICO and Cal-Central will continuously maintain the
-------------
Borrowers' primary bank accounts on deposit with the Lender and will
comply with the terms of all agreements relating to such accounts.
7.11 Prior Encumbrances. Within thirty (30) days after the Closing Date,
------------------
the Borrowers will furnish to the Lender in form and substance
satisfactory to the Lender such releases, termination statements,
assignments or other documents as might be required by the Lender to
effect a total release or assignment to the Lender of any other
liens and/or security interests covering any of the Collateral,
except for the Permitted Encumbrances.
7.12 Compliance. The Borrowers will continuously comply with all
----------
applicable regulations, rules, ordinances and orders of any federal,
state or local taxing authority which might materially and adversely
affect the business, operations or financial condition of any one or
more of the Borrowers.
7.13 Lockbox Collections. Prior to Default and until July 1, 1996, the
-------------------
Borrowers will cause fifty percent (50%) of the proceeds of the Cal-
Central Accounts to be applied as principal reductions of Note A and
the remaining proceeds of Cal-Central Accounts will be deposited to
the Cal-Central operating account. On Default or after July 1, 1996,
the Borrowers will cause all of the proceeds of the Cal-Central
Accounts to be applied as principal reductions of Note A. Prior to
Default and until July 1, 1996, provided that the Lender has
approved a weekly budget for the use of collections of such Accounts
proposed by UNICO, all of the proceeds of the UNICO d/b/a Alliance
Publications Accounts will be deposited to the UNICO operating
account. Prior to Default and on and after July 1, 1996, provided
the Lender has approved a weekly budget for the use of collections
of such Accounts proposed by UNICO, twenty-five percent (25%) of the
proceeds of the
- 23 -
<PAGE>
UNICO d/b/a Alliance Publications Accounts will be applied as
principal reductions of Note A and the remaining proceeds of such
Accounts will be deposited to the UNICO operating account. After
Default, all proceeds of the Accounts will be applied to payment of
the Obligations in such order as the Lender might determine from
time to time.
7.14 Lockbox Agreements. On or before the Closing Date, UNICO and Cal-
------------------
Central will execute and deliver the Lockbox Agreements and
implement the procedures described in the Lockbox Agreements. UC
will execute and deliver the Lockbox Agreement on the Closing Date,
but UC will not be required to implement the procedures described in
the Lockbox Agreement until such time as the Lender requests that UC
do so. The Lender will have the absolute right to require UC to
initiate the procedures described in the Lockbox Agreement at any
time the Lender determines in good faith, but in the absolute
judgment of the Lender that the prospects for payment of the Loans
have deteriorated or the Lender otherwise deems itself to be
insecure.
8. Negative Covenants. Until payment in full of the Obligations, the Borrowers
------------------
jointly and severally agree that unless the Lender otherwise consents in
writing, the Borrowers will not perform or permit to be performed any of the
following acts:
8.1 Creation of Liens. The Borrowers will not create, assume or suffer
-----------------
to exist any mortgage, pledge, lien, charge or encumbrance on any of
the Collateral, excluding only encumbrances to the Lender and the
Permitted Encumbrances.
8.2 Creation of Debt. The Borrowers will not create, assume or suffer to
----------------
exist any indebtedness for borrowed money or issue or sell any
obligation of the Borrowers (whether absolute, contingent or
otherwise) excluding only: (a) the Loans; (b) debts and liabilities
in existence on the date hereof and reflected in the consolidated
financial statements of the Borrowers delivered to the Lender
pursuant to paragraph 3.2 of this Agreement; (c) accounts payable
and accrued liabilities arising in the ordinary course of business;
and (d) the indebtedness owing as of the Closing Date by the
Borrowers to the subordinated Creditors and the holders of the
Permitted Encumbrances.
- 24 -
<PAGE>
8.3 Loans. The Borrowers will not make any loans, advances or extensions
-----
of credit to any person, firm or corporation, except in the ordinary
course of business.
8.4 Disposition. The Borrowers will not sell, lease, convey, assign,
-----------
transfer or otherwise dispose of any of the collateral, except in
the ordinary course of business. UNICO will not sell, convey,
assign, transfer or otherwise dispose of the Stock or any interest
therein.
8.5 Senior Debt. The Borrowers will not take or permit to be taken any
-----------
action which would or might impair the senior position of the Lender
under the Loan Documents.
8.6 Contingent Liabilities. The Borrowers will not assume, guarantee,
----------------------
endorse or otherwise become contingently liable for the obligations
of any other person, firm or corporation, except by the endorsement
of negotiable instruments for deposit or collection or other similar
transactions in the ordinary course of business.
8.7 Liquidation; Merger. The Borrowers will not liquidate, dissolve or
-------------------
enter into any consolidation, merger, joint venture, syndicate,
pool, management agreement or other combination.
8.8 Dividends. Excluding salaries, expense reimbursements and other
---------
compensation paid to employees in the ordinary course of business,
the Borrowers will not: (a) declare or pay any dividends, stock
bonuses or any other form of compensation or distribution to any
Affiliate, any stockholder of UNICO or any other person; or (b)
authorize or make any other distribution to any stockholder,
Subsidiary, Affiliate or person of any of the assets or businesses
of the Borrowers.
8.9 Margin Stock. The Borrowers will not use any of the proceeds of the
------------
Loans for the purpose of purchasing or carrying margin stock within
the meaning of Regulation U of the Board of Governors of the Federal
Reserve System.
8.10 Stock Issuance; Redemption. The Borrowers will not purchase,
--------------------------
acquire, redeem, retire or call or make any commitment to purchase,
acquire, redeem, retire or call any of the stock of any of the
Borrowers and none of the Borrowers will issue any additional stock
or securities convertible into stock, except as disclosed in and
contemplated by the designations for the UNICO Redeemable Preferred
Stock, the UNICO Convertible
- 25 -
<PAGE>
Preferred Stock, existing stock purchase warrants and stock options
issued pursuant to the UNICO Omnibus Equity Compensation Plan.
8.11 Other Agreements. The Borrowers will not enter into any agreement
----------------
that limits or restricts the ability of the Borrowers to comply with
the terms of the Loan Documents.
9. Events of Default. The Lender may terminate all obligations of the Lender
-----------------
under the Loan Documents and may exercise the remedies held by the Lender under
the Loan Documents, at law or in equity, if any of the following events occur
and are not remedied by the Borrowers or waived in writing by the Lender.
9.1 Nonpayment. The nonpayment when due of any installment of interest
----------
or principal owing under either of the Notes or the nonpayment when
due of any other Obligation; or
9.2 Breach of Agreement. The failure by the Borrowers to perform any
-------------------
agreement contained in any of the Loan Documents; or
9.3 Lien Filings. The existence for a period of ten (10) days of any
------------
lien other than the liens created by the Loan Documents and the
Permitted Encumbrances covering all or any portion of the
Collateral; or
9.4 Casualty Loss. Substantial damage or destruction of a substantial
-------------
portion of the Collateral; or
9.5 Representations; Warranties. Any representation, statement,
---------------------------
certificate, schedule or report made or furnished to the Lender by
or on behalf of the Borrowers proves to be false or erroneous in any
material respect at the time of the making thereof or any
representation or warranty contained in the Loan Documents ceases to
be complied with in any material respect; or
9.6 Insolvency; Bankruptcy. The insolvency (meaning an inability to pay
----------------------
debts as the same become due or the existence of liabilities in
excess of assets after the elimination of intercompany transactions)
of any one or more of the Borrowers or the institution of a
bankruptcy, reorganization, liquidation, receivership or
conservatorship proceeding by or against any one or more of the
Borrowers or a material portion of the Collateral; or
- 26 -
<PAGE>
9.7 Adverse Change. The discontinuance of business or a material adverse
--------------
change in the nature of the respective businesses of any one or more
of the Borrowers or in the financial condition of any one or more of
the Borrowers; or
9.8 Judgment. Entry by any court of a final judgment against any of the
--------
Borrowers in excess of One Hundred Thousand Dollars ($100,000.00) or
an attachment of any material portion of the Collateral either of
which is not discharged to the satisfaction of the Lender within
thirty (30) days or contested in good faith by appeal, provided that
a sufficient supersedeas bond is posted in compliance with the law
of the jurisdiction where the judgment was rendered; or
9.9 Other Debt. The nonpayment when due or acceleration of the maturity
----------
of any other indebtedness of any of the Borrowers including, without
implied limitation, the obligations to the subordinated Creditors or
the holders of permitted Encumbrances; or
9.10 Corporate Existence. The cessation by any of the Borrowers to be
-------------------
validly existing corporations under the laws of the respective
states of their incorporation; or
9.11 Failure of Liens. Failure of the Lender's security interests
----------------
covering the Collateral to constitute a first priority perfected
lien on any of the Collateral.
10. Remedies. On the occurrence of an Event of Default, in addition to any
--------
other rights and remedies which the Lender might hold under the terms of any one
or more of the Loan Documents, the Lender will have the following remedies:
10.1 Acceleration. The Lender may declare the Notes and all other
------------
Obligations to be immediately due and payable, demand performance of
all other obligations of the Borrowers under the Loan Documents and
proceed to selectively and successively enforce the Lender's rights
under any one or more of the Loan Documents, at law or in equity.
10.2 Selective Enforcement. If the Lender elects to selectively and
---------------------
successively enforce the Lender's rights under any one or more of
the Loan Documents, such action will not be deemed a waiver or
discharge of any other right, lien or encumbrance securing payment
of
- 27 -
<PAGE>
the Obligations until such time as the Lender has been paid in full
all sums owing to the Lender.
10.3 Performance by Lender. If the Borrowers fail to cure or cause to be
---------------------
cured any Event of Default, the Lender will have the right, but not
the obligation, to cause the Event of Default to be cured on the
Borrowers' behalf and to pay any secured or unsecured claim (whether
senior or subordinate to the claims of the Lender) affecting the
Collateral in such manner and at such times as the Lender determines
to be appropriate under the circumstances. The Borrowers hereby
authorize the Lender to increase the amount of the Obligation by the
cost of curing any Event of Default or satisfying any claim against
the Borrowers or the Collateral and agree that the Loan Documents
will evidence and secure payment of such costs whether or not the
total funds advanced by the Lender exceed the face amount of the
Loan Documents.
10.4 Waiver of Default. The Lender may, by an instrument in writing
-----------------
signed by the Lender, waive any Event of Default which has occurred
and any of the consequences of such Event of Default and, in such
event, the Lender and the Borrowers will be restored to their
respective former positions, rights and obligations under the Loan
Documents. Any Event of Default so waived will, for the purposes of
the Loan Documents, be deemed to have been cured and not to be
continuing, but no such waiver will extend to any subsequent or
other Event of Default or impair any consequences of such subsequent
or other Event of Default. No waiver of any Event of Default by the
Lender will be implied from the failure or delay by the Lender to
take any action in respect of the Event of Default. No express
waiver of any condition precedent or Event of Default will affect
any other Event of Default or extend any period of time for
performance other than as specified in such express waiver. One or
more waivers of any Event of Default will not be deemed a waiver of
any subsequent failure by the Borrowers to perform the same
provision or any other provision. The consent to or approval of any
act or request by the Lender will not be deemed to waive or render
unnecessary the consent to or approval of any subsequent similar act
or request. The partial exercise of any right or remedy under the
Loan Documents will not preclude any other or further exercise
thereof or the exercise of any other right or remedy. No advance of
the proceeds of either of the Loans will constitute a waiver of any
of the representations, warranties,
- 28 -
<PAGE>
conditions or agreements contained in the Loan Documents. If the
Lender elects to advance proceeds of either of the Loans to the
Borrowers notwithstanding the Borrowers' failure to satisfy any
condition precedent to such advance, the advancement of funds will
not preclude the Lender from thereafter declaring the Borrowers'
failure to satisfy such condition precedent to be an Event of
Default. No course of dealing between the Borrowers and the Lender
will be deemed to amend the terms of the Loan Documents or to
preclude the Lender from exercising the rights and remedies therein
contained notwithstanding such course of dealing.
10.5 Cumulative Remedies. The rights and remedies of the Lender provided
-------------------
by the Loan Documents are Cumulative and no right or remedy will be
exclusive of any other or of any other right or remedy which the
Lender might otherwise have by virtue of the occurrence of an Event
of Default and the exercise of any right or remedy by the Lender
will not impair the Lender's standing to exercise any other right or
remedy.
10.6 Deposits; Setoff. Regardless of the adequacy of any other Collateral
----------------
held by the Lender, any deposits or other sums credited by or due
from the Lender to any of the Borrowers will at all times constitute
security for all of the obligations of the Borrowers and may be set-
off against any and all liabilities, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
of any one or more of the Borrowers to the Lender. The rights
granted by this paragraph will be in addition to the rights of the
Lender under any statutory banker's lien.
11. Miscellaneous. It is further agreed as follows:
-------------
11.1 Time. Time is the essence of each provision of this Agreement.
----
11.2 Indemnity. The Borrowers agree to indemnify and hold the Lender
---------
harmless from all liability, loss, damage or expense, including
reasonable attorney's fees, whether incurred under retainer, salary
or otherwise, which the Lender incurs in good faith in the
enforcement of the terms of the Loan Documents.
11.3 Expenses. Within ten (10) days after receipt of an invoice therefor,
--------
the Borrowers will pay all out-of-pocket expenses incurred by the
Lender in connection
- 29 -
<PAGE>
To the Lender: BANCFIRST
Post Office Box 26788
101 North Broadway
Oklahoma City, Oklahoma 73126
Attention: Mr. E. G. Alexander,
Senior Vice President
Telefacsimile: (405) 270-1090
With Copy To: HASTIE, McCUTCHEON AND MAYE
300 MidFirst Plaza
501 Northwest Expressway
Oklahoma City, Oklahoma 73118
Attention: John D. Hastie, Esquire
Telefacsimile: (405) 842-5666
11.5 Governing Law. The Loan Documents are executed and delivered
-------------
pursuant to a lending transaction negotiated and to be performed in
Oklahoma City, Oklahoma County, Oklahoma, and are to be construed
according to the laws of the State of Oklahoma applicable to
contracts to be performed entirely within the State of Oklahoma. All
actions with respect to the Loan Documents may be instituted in a
state or federal court sitting in the judicial district in which
Oklahoma City, Oklahoma is situate, as the Lender might elect from
time to time, and by the execution and delivery of this Agreement,
the Borrowers irrevocably and unconditionally submit to the
jurisdiction (both subject matter and personal) of such court and
irrevocably and unconditionally waive: (a) any objection the
Borrowers might now or hereafter have to the venue in such court;
and (b) any claim that any action or proceeding brought in such
court has been brought in an inconvenient forum.
11.6 Construction. Nothing in the Loan Documents is intended to
------------
constitute the Lender as a joint venturer with the Borrowers or to
create a partnership. Except for the terms defined in paragraph 1 of
this Agreement, the descriptive headings contained in this Agreement
are for convenience in reference and are not intended to be used in
the construction of the content of this Agreement. This Agreement
may be executed in multiple counterparts, each of which will be an
original instrument, but all of which will constitute one agreement.
11.7 Severability. If any provision contained in any of the Loan
------------
Documents is determined to be invalid, illegal or unenforceable in
any respect in any jurisdiction, the validity, legality and
enforceability of such provision will not in any way be affected or
impaired thereby in
- 30 -
<PAGE>
any other jurisdiction nor will the validity, legality and
enforceability of the remaining provisions of the Loan Documents in
any way be affected or impaired thereby. It is the intention of the
parties that if any such provision is held to be illegal, invalid or
unenforceable, there will be added in lieu thereof a provision as
similar in terms to such provision as is possible and be legal,
valid and enforceable.
11.8 Amendment. This Agreement may not be amended, altered, modified or
---------
changed verbally, but only by an agreement in writing signed by the
party against whom enforcement of any amendment, waiver, change,
modification or discharge is sought.
11.9 Extension of Term. It is understood that the Lender is under no
-----------------
obligation to extend the term of this Agreement beyond the maturity
of the Notes and that any such extension will be made in the
Lender's sole discretion and on such terms as the Lender might
determine.
11.10 Exclusive Benefit. All provisions of the Loan Documents are for the
-----------------
sole and exclusive benefit of the Lender and the Borrowers and no
other person will have standing to require satisfaction of the
provisions thereof.
11.11 Binding Effect. This Agreement will be binding on the Borrowers and
--------------
their respective successors and permitted assigns and will inure to
the benefit of the Lender and the Lender's successors and assigns.
11.12 Participating Lenders. The Borrowers agree that although the Loan
---------------------
Documents name the Lender as the holder thereof, the Lender is
authorized to sell participation interests in the Loans to any other
financial institution. The Borrowers agree that: (a) each holder of
a participation interest will be entitled to rely on the terms of
the Loan Documents as if such holder had been named as an original
party to the Loan Documents; and (b) the Lender is authorized to
provide all information furnished to the Lender by the Borrowers to
each holder of a participation interest.
11.13 Supersession. The Loan Documents supersede and replace the Prior
------------
Loan Documents and all prior agreements between some or all of the
Borrowers and the Lender relating to the Loans. Effective on the
execution of the Loan Documents by all required parties, all
Obligations will be governed by the terms of this Agreement
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<PAGE>
and not by the Prior Loan Documents, provided that the acceptance of
the Loan Documents by the Lender will not discharge, interrupt,
impair or otherwise modify the priority or validity of any lien or
security interest securing payment of the Obligations created by the
Prior Loan Documents.
IN WITNESS WHEREOF, the Borrowers and the Lender have duly executed
this Agreement effective the date first above written.
UNICO, INC., a Delaware corporation
By /s/ W. Douglas Frans
----------------------------------------
W. Douglas Frans, President
UNITED COUPON CORPORATION, a
Virginia corporation
By /s/ Gerard R. Bernier
----------------------------------------
Gerard R. Bernier, President
CAL-CENTRAL MARKETING CORPORATION,
formerly AEC Acquisitions, Inc., an Oklahoma
corporation
By /s/ W. Douglas Frans
----------------------------------------
W. Douglas Frans
Chief Executive Officer
(the "Borrowers")
BANCFIRST, an Oklahoma banking
corporation
By /s/ E. G. Alexander
----------------------------------------
E. G. Alexander,
Senior Vice President
(the "Lender")
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