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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, 1996
Commission File #0-15303
UNICO, Inc.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 73-1215433
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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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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(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, 1996. $6,825,875
Aggregate market value of the voting common stock held by non-affiliates
of the registrant as of April 1, 1997, was: $1,589,308
Number of shares of the registrant's common stock outstanding as of
April 1, 1997 was: 8,476,309
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UNICO, Inc.
FORM 10-KSB
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
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
Presently, the Company operates as a publicly-owned holding company with
two 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 currently
inactive and was involved in cooperative advertising distributed primarily
through supermarkets, pharmacies and restaurants. Management's plans for
expansion of the existing cooperative direct mail advertising operations
include internal growth through the granting of additional franchises, 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 direct mail 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.
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, 1996, United Coupon had
approximately 66 active Area franchise operations.
THE COMPANY'S MARKETS
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 twenty
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 franchisees, a complete mailing service. Such services include
computerized design, typesetting, 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
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,
three-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, 1996.
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Alabama 2 Maryland 6 North Carolina 2
California 5 Massachusetts 8 Connecticut 2
Minnesota 2 Pennsylvania 6 Delaware 1
Florida 2 Illinois 1 New Hampshire 1
Tennessee 1 New York 10 Georgia 3
Virginia 6 Louisiana 1 New Jersey 7
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ACQUISITION OF CAL-CENTRAL MARKETING CORPORATION
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 was
recorded as goodwill in the Company's balance sheet and was amortized on the
straight line method over forty years. During 1995, the Company was forced to
close the majority of the Cal-Central business segment due to lingering
operating losses and a shortage of working capital as a part of its overall
restructuring plan. In furtherance of this plan, management determined that it
was in the best interests of the shareholders and the Company to discontinue
the minimal remaining operations of Cal-Central in 1996 and abandon the
restructuring plan for this business segment. Accordingly, remaining goodwill
of $1,468,453 was written off in 1996.
COOPERATIVE DISTRIBUTION POINT ADVERTISING
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 were distributed
primarily through supermarkets, pharmacies, restaurants and other specialty
retailers.
In December 1995, the Company closed Cal-Central's art development and
printing facility in Fort Lauderdale, Florida and seven of its ten regional
sales offices. The remaining offices were closed in 1996.
TRADE NAMES, SERVICE MARKS AND LOGO TYPES
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.
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GOVERNMENT REGULATION
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
The advertising industry is highly competitive with many firms having
vast resources competing for businesses' advertising dollars. The Company's
business, primarily cooperative direct mail advertising, is a rapidly growing
segment of the advertising industry. The Company's major competitors in
direct mail cooperative advertising are Val-Pak and Money Mailer. Management
estimates the Company has about 5% of that market segment. There are a number
of small, independent businesses operating in each market segment serviced by
the Company.
EMPLOYEES
The Company had approximately 100 employees as of December 31, 1996. The
Company also relies upon commissioned sales representatives involved in the
franchise sales operations and temporary workers during peak production
periods at United Coupon.
ITEM 2. DESCRIPTION OF PROPERTY
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. The annual rental
payment in 1996 for this space covering approximately 63,000 square feet was
approximately $290,000, with scheduled escalations in future years. 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 has consolidated former
operations conducted from this office with those of United Coupon in
Springfield, VA.
The Company also formerly operated a general office and production
facility for Cal-Central, at 5420 N.W. 33rd Avenue, Suite 100, Ft.
Lauderdale, FL 33309. This facility was closed in December 1995. The Company
was required to make final payments totaling $48,000 during 1996 as a
condition for early termination of this lease.
ITEM 3. LEGAL PROCEEDINGS
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
The Company's Annual Meeting of Stockholders was held on December 2,
1996. The following directors were nominated and elected at this meeting:
Gerard R. Bernier
Gerald Bomstad, Jr.
Leon Zajdel
The Stockholders also adopted amendments to the Company's Bylaws at the
Annual Meeting. 5,323,409 shares voted for the amendments while 2,655,148
shares abstained from voting on the amendments.
5
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On April 1, 1997, there were approximately 520 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 520. The Company's Common
Stock is traded over the counter on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ").
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. The Company is currently
discussing possible conversion of these debentures to common or preferred
stock of the Company.
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 (the
"Humphrey Group"). 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. The Company is also discussing possible conversion of
these loans to common or preferred stock of the Company.
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 allowed the periodic borrowing of up to $300,000 by
the Company at an annual interest rate of 10%. No payments of principal or
interest were required before July 1, 1997. The loan matures on October 1,
1997. At January 31, 1996, $298,500 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 was subject to anti dilution
provisions and registration rights for the underlying Common Stock. As
discussed below, the note and accrued interest was converted to Series C
Preferred Stock in July 1996.
On March 22, 1996, the Board of Directors voted to issue its former Chief
Financial Officer 20,000 shares of the Company's Common Stock as severance in
lieu of cash. The estimated value of the stock at the date of issue was $2188.
This transaction was exempt from registration pursuant to Rule 4(2) of the
Securities Act of 1933.
Effective April 1, 1996, the Company's Board of Directors voted to issue
its new President and Chief Executive Officer 250,000 shares of the Company's
Common Stock as compensation for his services during the initial two years of
his appointment. The estimated value of the stock at the date of issue was
$27,344. In the event the President and Chief Executive Officer does not
serve the full two years of the initial term, a ratable portion of the shares
are subject to forfeiture. This transaction was exempt from registration
pursuant to Rule 4(2) of the Securities Act of 1933.
On July 30, 1996, the Company entered into a Loan Conversion Agreement
and Addendum to Loan Conversion Agreement, by and among Unico, Inc.,
Renaissance Capital Partners, Ltd., and Duncan Smith Investments Co. Pursuant
to these Agreements, the holders of the Company's Convertible Notes and
Convertible Debentures converted their $1,712,739 of convertible debentures
and subordinated notes and accrued interest into shares of the Company's
Series C Convertible Preferred Stock. These securities were exempt from
registration pursuant to Rule 3(a)(9) of the Securities Act of 1933.
The holders of the Company's Series C Convertible Preferred Stock are
entitled to convert all or any increments of 250 shares of that stock into
shares of Unico's Common Stock at a ratio of four shares of Common Stock for
each share of Preferred Stock converted, the intention being that the
conversion ratio yield one share of Common Stock per $.25 of indebtedness
under the converted debentures and notes. The Conversion Ratio is Subject to
anti dilution provisions for the underlying Common Stock. Further, in the
event of a capital reorganization or reclassification of Common Stock (other
than a change in par value or from par value to no par value due to a
subdivision or combination), a consolidation or merger of the Company with or
into another corporation (unless the Company is the continuing corporation
and no changes to the Common Stock occur), or a sale of all or substantially
all of the Company's properties and assets, the holders of the Series C
Preferred Stock are entitled to obtain common stock of the surviving entity
as if the holder had held the Company's Common Stock immediately prior to the
event. On August 1, 1998 or, if earlier, the date upon which a registration
statement with respect to an offering of Unico's securities is declared
effective, the Series C Preferred Stock will automatically be converted into
the Company's Common Stock according to the conversion ratio described above.
In 1996, the Company offered the holders of its five year subordinated
debentures the opportunity to exchange their securities for Unico Common
Stock. In response, $100,000 in principal debentures, together with accrued
and unpaid interest of $13,125, was exchanged for 323,214 shares of Unico's
Common Stock, effective September 30, 1996. These securities were exempt from
registration pursuant to Rule 3(a)(9) of the Securities Act of 1933.
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The following table sets forth, for the periods indicated, the range of
high and low closing bid prices for the Company's Common Stock, as reported
by NASDAQ:
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COMMON STOCK BID
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HIGH LOW
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1994
First Quarter......................... $ 1.19 $ .94
Second Quarter........................ 1.00 .78
Third Quarter......................... 1.00 .81
Fourth Quarter........................ .94 .71
1995
First Quarter......................... $ .87 .65
Second Quarter........................ .87 .50
Third Quarter......................... .75 .50
Fourth Quarter........................ .56 .25
1996
First Quarter......................... $ .22 $ .22
Second Quarter........................ .34 .31
Third Quarter......................... .38 .34
Fourth Quarter........................ .25 .25
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DIVIDENDS
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 OF OPERATIONS
Certain matters discussed herein (including the documents incorporated
herein by reference) are forward-looking statements intended to qualify for
the safe harbors from liabilities established by the Private Litigation
Reform Act of 1995. These forward-looking statements can generally be
identified as such because the context of the statement will include words
such as the Company "believes," "plans," "intends," "anticipates," "expects,"
or words of similar import. Similarly, statements that describe the Company's
future plans, objectives, estimates, or goals are also forward-looking
statements. Such statements address future events and conditions concerning
capital expenditures, earnings, litigation, liquidity and capital resources
and accounting matters. Actual results in each case could differ materially
from those currently anticipated in such statements by reason of factors such
as future economic conditions, including changes in customer demands; future
legislative, regulatory and competitive developments in markets in which the
Company operates; and other circumstances affecting anticipated revenues and
costs.
GENERAL
The Company commenced operations in May 1984. During 1985, the Company
established its marketing office 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
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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.
LIQUIDITY AND CAPITAL RESOURCES
Management views cash, certificates of deposit, and accounts receivable
as principal 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. 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 was
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 were required to 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 were 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 would be made from 100%
of the certain Cal-Central accounts receivable collected. The interest rate
was 1% over bank prime through June 30, 1996. On July 1, 1996, the rates
increased to 3% over national prime for the remaining term of the agreement.
The Company was 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 August
15, 1996, the Company entered into a consolidated renewal promissory note
with BancFirst in the face amount of $721,425, with interest at the prime
rate plus 1%. The note is payable in monthly installments, including
interest, of $22,500 through January 15, 1997 and $27,500 through December
15, 1998. The note matures December 31, 1998. The note is collateralized by
substantially all assets of the Company. The balance outstanding at December
31, 1996 was $643,022.
On December 31, 1991, the Company entered into a $1,250,000 Convertible
Debenture financing with Renaissance Capital Partners, Ltd. The debenture was
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 was due and payable December 31,
1998. On March 4, 1996, Renaissance executed a subordination agreement which
deferred all principal and interest payments regarding this debenture until
July 1997 or until such time as the current amount owed to the bank was
extended under terms which would allow such payments. During 1995,
Renaissance and Duncan-Smith Investment Co. loaned the Company an additional
$298,500 under several notes that were convertible into Common Stock of the
Company at $.25 per share. On July 12, 1996, the Company, Renaissance and
Duncan-Smith entered into a loan conversion agreement whereby the debenture,
notes and accrued interest related thereto were exchanged for 1,712,739
shares of Series C Preferred Stock of the Company. Each share of Series C
Preferred Stock is convertible into four shares of the Company's Common Stock
at any time, at the option of the Holder.
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
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Company, and 1,000 shares of Series A Convertible Preferred Stock of the
Company. As a result of the merger, the name of AEC, the surviving
corporation, was changed to Cal-Central Marketing Corporation ("Cal-Central").
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. During 1996, the
collectibility of these loans became doubtful and an allowance for the full
amount of the loans was recorded.
In the fourth quarter of 1993, the Company received $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,
together with 230,000 common stock purchase warrants (referred 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. The proceeds received from the issuance of these debentures
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. 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. In
1996, the Company offered the holders of its five year subordinated
debentures the opportunity to exchange their securities for Unico Common
Stock. Effective September 30, 1996, $100,000 of these debentures, together
with $13,125 in accrued and unpaid interest, were exchanged for 323,214 shares
of the Company's Common Stock. Discussions are ongoing to effect the
converstion of the remaining subordinated debentures as a component of the
overall restructuring of the Company's long term debt.
On June 30, 1995, the Company and Cal-Central Marketing Corporation
entered into a $300,000 Subordinated Loan Agreement with six lenders (the
"Humphrey Group"). 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. The Company is also discussing possible conversion of
these loans to common or preferred stock of the Company. 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.
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 1997. At
December 31, 1996, over 90% of these debenture holders had executed such
subordination agreements.
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.
9
<PAGE>
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. During 1995 and 1996, Cal-Central's
operations were closed and the remaining unamortized goodwill was written off
in 1996.
FOR THE PERIOD ENDED DECEMBER 31, 1996
At December 31, 1996, the Company's working capital position, current
assets minus current liabilities, was a negative $1,826,349. Working capital
was impacted by use of $232,795 in cash and equivalents during the year to
purchase property and equipment related to the United Coupon art and printing
facility, and $462,200 for net payment of notes payable. In addition, short
term notes and accounts receivable decreased by $901,034, as a result of
discontinuation of the Cal-Central business and impairment of notes
receivable; inventories decreased by $114,490 due to utilization of stocks
built in prior periods; and prepaid expenses decreased by $148,567 due to
utilization of accrued expenses related to the reorganization attempt for
Cal-Central. Also, accrued liabilities increased by $280,831 and deferred
rent increased by $229,280 as a result of accelerated recognition of deferred
rent payments as current period expenses.
Total assets for the Company decreased 49% during 1996. This decrease
reflects the changes in current assets and property noted above, as well as a
writedown of $1,468,453 of goodwill related to closure of the Cal-Central
business.
Long term liabilities decreased by $1,940,899 during 1996 as a result of
required principal payments made and conversion of convertible debentures and
notes to the Company's Series C Preferred Stock. The Company is currently
discussing the possible conversion of additional long term debt to equity.
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 to assure continued operation. These actions
include closure of the Cal-Central business to stem operating losses and
restructuring of bank and debenture debt. This restructuring includes
conversion of appropriate debt to equity. In addition, to reduce operating
costs and solidify administrative control with a minimal staff, all Company
operations are now conducted from a central headquarters in Springfield,
Virginia.
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, 1996 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1995
Total Revenues for the Company decreased by 35% during 1996 due
primarily to the elimination of cooperative advertising sales and services
of the Company's subsidiary Cal-Central. Cal-Central's
decline was caused initially by an unexpected interruption in distribution of
its products through three major distributors. In addition, strong
sales during the summer months of 1995 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,
10
<PAGE>
Florida, was closed in December 1995. Sales of distributor based cooperative
advertising for Cal-Central were completely discontinued in 1996. Sales of
coupons through the Company's subsidiary United Coupon, increased marginally
during 1996, reflecting restrained operations as a result of working capital
limitations.
Other Income decreased by $103,939 during 1996. The decline is related to
elimination of accounts receivable maintenance fees by Cal-Central in 1996.
Franchise Fee Income increased by $80,654 during 1996, reflecting
positive results from expanded franchise sales efforts conducted during 1996
by both Company staff and independent franchise sales representatives. The
number of active United Coupon franchises remained constant, at 66, during
1996.
Total expenses decreased by approximately 19% during 1996, reflecting the
lower sales results and restructuring actions. Included in total expense in
1995 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. Included in 1996
costs is $956,913 of one-time charges related to closing Company locations
and other one-time charges, as well as 1,692,710 in one-time costs associated
with abandonment and re-evaluation of assets and other one-time costs
totaling approximately $916,000. Had all non-recurring expenses not been
incurred, total expenses would have declined by approximately 36% for the
year. Production Expenses declined by 45% during 1996, reflecting lower sales
levels and discontinuation of unprofitable operations. General and
Administrative Expenses declined by 24% during 1996 due to consolidation of
administrative functions throughout the year. In addition, interest expense
declined during 1996 by 8% due to the conversion of subordinated debt to
equity, as disclosed. Franchise Development Expenses decreased $36,255 (9%)
during 1996 reflecting more efficient sales efforts and utilization of
outside sales services.
For fiscal 1996, the Company incurred a consolidated loss of $3,343,449
compared to a net loss of $2,394,516 in 1995. This decline was caused by
substantial non-recurring charges primarily incurred in connection with the
restructuring plan begun in 1995 designed to spawn long term profitability and
growth. Management believes these non-recurring charges relate to: 1) the
Company's determination that previously capitalized and unamortized goodwill
in the amount of $1,468,453 associated with the Cal-Central marketing
subsidiary should be written off concurrent with the elimination of that
business segment; 2) $956,913 associated with closed locations and other one
time charges; 3) approximately $400,000 in one-time costs associated with the
fulfillment of Cal-Central customer orders; 4) a $280,000 one-time loss on
uncollectible loans to former Cal-Central officers; 5) approximately $224,257
in one-time costs associated with the closing of the Oklahoma City
headquarters office and transfer of those activities to the Springfield,
Virginia facility; 6) approximately $200,000 in one-time charges relating
to the write-off of bad debt; and 7) approximately $36,000 relating to the
one-time incurrence of a state sales tax. Management believes that, in the
absence of these one-time charges, the Company would have recognized a profit
of more than $200,000. Management believes that the completion of the
Company's restructuring plan, the consolidation of all the Company's functions
to its expanded and modernized facility and the elimination of resource
draining segments will unleash the Company's true profit potential.
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
During the fourth quarter of 1996, the Company elected to dismiss Arthur
Andersen, L.L.P. as its independent accountants and auditors and to retain
the services of Aronson, Fetridge & Weigle. The change was initiated to
reduce professional fees and out of pocket expenses through use of a firm
located geographically in the area of the Company headquarters in
Springfield, Virginia. Prior auditing services had been conducted through the
Oklahoma City office of Arthur Andersen, L.L.P. There were no disagreements
on accounting matters at the time of the change in independent accountants.
11
<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, 1997, 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.
WITH COMPANY
------------
NAME AGE SINCE DIRECTOR/POSITION
- --------------------- --- ----- --------------------------------------
Gerard R. Bernier 47 1987 Chairman of the Board, Chief Executive
Officer & President
Gerald Bomstad, Jr. 69 1993 Director
Leon Zajdel 49 1990 Director
Subhash Ghei 53 1994 Corporate Secretary and Treasurer,
Chief Financial Officer
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
effective April 1, 1996. Prior to 1981, Mr. Bernier was an executive with
various advertising and manufacturing companies.
Gerald Bomstad, Jr. has been an investor 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.
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.
Subhash Ghei, Controller, Secretary and Treasurer of United Coupon
Corporation since 1994, was appointed Chief Financial Officer, Secretary and
Treasurer of UNICO, Inc. and subsidiaries effective August 8, 1996. Prior to
joining the Company he was employed with several organizations in management,
accounting and administrative positions. He earned his Bachelors Degree with
emphasis in accounting and economics from the University of Delhi in 1972 and
another Bachelors Degree in Business Administration from the University of
Phoenix in 1987. He also holds a Masters Degree in Business Administration
from Averett College.
12
<PAGE>
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 employees
who served as Chief Executive Officer of the Company in 1996 and, to the
executive officers who were serving as of December 31, 1996 whose salary and
bonus during fiscal 1996 exceeded $100,000.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
RESTRICTED
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) STOCK AWARD
- ---------------------------------- ------ -------- ---------- -----------
<S> <C> <C> <C> <C>
Gerard R. Bernier 1996 $0 $0 $250,000(2)
Chief Executive Officer
and President, Unico, Inc.
Gerard R. Bernier 1996 $125,000 $0 0
Chief Executive Officer 1995 $124,403 $50,347 0
and President 1994 $106,635 $0 0
W. Douglas Frans 1996 $ 46,000(3) $0 0
Chief Executive Officer 1995 $115,890 $0 0
and President, Unico, Inc. 1994 $103,322 $0 0
</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.
(2) Stock issued as compensation for services during initial two year
term of appointment as President and Chief Executive Officer of Unico. Shares
subject to forfeiture of a ratable amount of such shares if officer does not
serve full two years of initial term.
(3) This compensation was for Mr. Frans' services as the Company's CEO
from January 1, 1996 through March 31, 1996.
13
<PAGE>
Aggregated Option Exercises in Fiscal Year Ending December 31.1996
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12-31-96(1) 12-31-96(2)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
------------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Gerard R. Bernier -- -- 185,000 Exer. $ 0 Exer.(2)
</TABLE>
- ------------------------
(1) There were no options granted to Officers or Directors during fiscal year
1996.
(2) This amount reflects the difference between the market value of the
Company's Common Stock on December 31, 1996 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, 1997, options to purchase 535,970
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's subsidiary, United Coupon
Corporation has entered into an Employment Agreement with Gerard R. Bernier
to serve as the Chief Executive Officer and President of that company. The
major terms of this Agreement provide for a base salary of $125,000 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. The Agreement was entered into on April 1, 1996 and extends
through March 31, 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 1, 1997, 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
14
<PAGE>
IDENTITY OF GROUP BENEFICIALLY OWNED OWNERSHIP (1)
- ------------------------------- ------------------ -------------
<S> <C> <C>
Renaissance Capital Partners, Ltd. $6,267,220 (2) 42.5%
8080 North Central Expressway
Suite 210 LB 59
Dallas, TX 75206-1857
Gerard R. Bernier 862,728 (3) 9.2%
8380 Alban Road
Springfield, VA 22150
Gerald Bomstad, Jr. 823,600 (4) 8.7%
422 Montigue, Suite 6
Greenwood, SC 29649
Duncan Smith Company 638,736 (6) 7.0%
311 Third
San Antonio, TX 78205
Officers and Directors 1,711,328 (3)(4)(5) 16.8%
As a Group
</TABLE>
- ------------------------
(1) Percent is rounded to one decimal place.
(2) Includes 6,267,220 shares, the current maximum amount that
Renaissance is entitled to receive upon conversion of the Series C Preferred
Stock issued in July 1996. Such preferred shares are convertible at the
option of the Holder at any time.
(3) Includes 185,000 shares which may be purchased at $.25 per share
pursuant to the Company's Omnibus Equity Compensation Plan and 250,000 shares
which have been granted to Mr. Bernier subject to continued employment for a
specified period.
(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 583,736 shares, the current maximum amount that Duncan-Smith
is entitled to receive upon conversion of the Series C Preferred Stock issued
in July 1996, 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
15
<PAGE>
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, 1997, the Company has
1,566,805 shares of Series C Preferred Stock issued to Renaissance Capital
Partners, Ltd. Russell Cleveland, who served as a Director of the Company
until the Annual Meeting of Shareholders on December 2, 1996, is a major
owner and Managing General Partner of Renaissance Capital Partners, Ltd. The
Series C Preferred Stock was issued to Renaissance upon conversion of a
$1,250,000 Convertible Debenture entered into with Renaissance in 1991 and a
Subordinated Convertible Note in the amount of $149,250 entered into with
Renaissance during 1995. Mr. Cleveland did not serve as a Director of the
Company at the time that the Convertible Debenture was issued. Mr. Cleveland
was a director in 1995, when the Company entered into the Subordinated
Convertible Note with Renaissance to provide interim financing to support the
working capital requirements. This note was 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. These notes
were deemed uncollectible and were fully reserved during 1996.
The Company believes the terms of these transactions are as favorable as
it might have obtained from unaffiliated parties.
16
<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. (7)
2. Financial statement schedules; see index to financial statements and
schedules immediately following the signature pages of this report. (7)
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)
3.4 Bylaws, as amended.
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)
4.7 Certificate of Designations, Preferences, and Rights of Series C
Preferred Stock.
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)
17
<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. (7)
10.28 Form of Common Stock Purchase Warrant, dated June 30, 1995. (7)
18
<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. (7)
10.30 Third Restated Loan Agreement dated March 4, 1996, among UNICO,
Inc., United Coupon Corporation, Cal-Central Marketing Corporation and
BancFirst (7)
10.31 Debt Exchange Agreement among UNICO, Inc., Renaissance Capital
Partners, Ltd. and Duncan-Smith Investment Co. dated July 1996. (8)
10.32 Employment Agreement Between United Coupon Corporation and Gerard
R. Bernier dated April 1, 1996.
10.33 Modification and Extension to the Third Restated Loan Agreement
between Unico, Inc., United Coupon Corporation, Cal-Central Marketing
Corporation, and BancFirst dated August 15, 1996.
10.34 Consolidated Renewal Promissory Note between UNICO, Inc., United
Coupon Corporation and Cal-Central Marketing Corporation and BancFirst
dated August 15, 1996.
10.35 Loan Conversion Agreement between Unico, Inc. and Kurt H.C.
Bottcher dated September 30, 1996.
16 LETTER From Arthur Andersen, LLP to Securities & Exchange
Commission, DATED DECEMBER 3, 1996 (9)
21 List of Subsidiaries(3)
27 Financial Data Schedule--Pursuant to EDGAR filing requirements for
the period ended December 31, 1995, filed herewith this Form 10-KSBA
dated May 30, 1996.
(b) Reports on Form 8-K.--Form 8-K was filed during the last quarter of
the Registrant's fiscal year ending December 31, 1996 describing
the change in independent accountants and auditors and Chief
Financial Officer.
- ------------------------
(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).
(7) Incorporated by reference to the Registrant's Form 10-KSB dated April 15,
1996 (SEC File No. 0-15303).
(8) Incorporated by reference to the Registrant's Form 8-K dated July 30,
1996 (SEC File No. 000-15303).
(9) Incorporated by reference to the Registrant's Form 8-K/A DATED DECEMBER
12, 1996 (SEC FILE No. 000-15303).
19
<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.
April 15, 1997 By: /s/ Gerard R. Bernier
-----------------------------------------
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ ----------------------- ---------
<S> <C> <C>
/s/ Gerard R. Bernier
- ------------------------------ Chief Executive officer April 15, 1997
Gerard R. Bernier Chairman of the Board
/s/ Subhash Ghei
- ------------------------------ Chief Financial officer April 15, 1997
Subhash Ghei
/s/ Gerald Bomstad, Jr.
- ------------------------------ Director April 15, 1997
Gerald Bomstad, Jr.
/s/ Leon Zajdel
- ------------------------------ Director April 15, 1997
Leon Zajdel
</TABLE>
20
<PAGE>
UNICO, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Page
------
Independent Auditor's Report--1996 22
Report of Independent Public Accountants--1995 23
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1996 24
Consolidated Statements of Operations for the Years Ended
December 31, 1996 and 1995 26
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996 and 1995 27
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996 and 1995 28
Notes to Consolidated Financial Statements 30
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.
21
<PAGE>
Independent Auditor's Report
Board of Directors
UNICO, INC. AND SUBSIDIARIES
Springfield, Virginia
We have audited the accompanying Consolidated Statement of Financial
Condition of UNICO, INC. AND SUBSIDIARIES as of December 31, 1996, and the
related Consolidated Statements of Operations, Stockholders' Equity
(Deficiency) and Cash Flows for the year then ended. 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 audit.
We conducted our audit 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 principals used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of UNICO, INC. AND SUBSIDIARIES as of December 31, 1996, and the consolidated
results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company suffered losses from operations in 1996 and
1995, and its consolidated current liabilities exceeded its consolidated
current assets at December 31, 1996. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans regarding these matters are also described in Note 16. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Aronson, Fetridge & Weigle
(A Professional Corporation)
Rockville, Maryland
March 14, 1997
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of UNICO, Inc.:
We have audited the consolidated statements of operations, stockholders'
equity and cash flows of UNICO, Inc. and subsidiaries for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of UNICO,
Inc. and subsidiaries for the year 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. The Company
suffered a loss from operations in 1995 and its consolidated current
liabilities exceeded 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 16. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
March 24, 1996
23
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1).............................................. $ 233,971
Accounts and notes receivable--trade (net of allowance for uncollectible
accounts of $355,000)......................................................... 357,774
Inventory (Note 1).............................................................. 140,015
Prepaid expenses................................................................ 22,636
-----------
Total current assets.......................................................... 754,396
-----------
PROPERTY AND EQUIPMENT, AT COST (NOTE 1)
Furniture, fixtures and equipment............................................... 4,006,961
Leasehold improvements.......................................................... 109,045
Less:Accumulated depreciation................................................... (1,759,425)
-----------
Net property and equipment.................................................... 2,356,581
-----------
GOODWILL (NOTE 1)................................................................ 232,407
-----------
DEPOSITS AND OTHER ASSETS........................................................ 75,830
-----------
TOTAL ASSETS..................................................................... $ 3,419,214
-----------
-----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
these financial statements.
24
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable............................................................... $ 1,278,604
Accrued liabilities............................................................ 428,092
Current portion of long-term liabilities (Note 2).............................. 749,261
Deferred revenue (Note 1)...................................................... 124,788
------------
Total current liabilities.................................................... 2,580,745
------------
LONG-TERM LIABILITIES
Notes payable (Note 2)......................................................... 1,110,275
Deferred rent (Note 3)......................................................... 229,280
------------
Total long-term liabilities.................................................. 1,339,555
------------
Total liabilities............................................................ 3,920,300
------------
</TABLE>
COMMITMENTS AND CONTINGENCIES (NOTES 3, 4, 8, 15 AND 16)
<TABLE>
<S> <C>
DEFICIENCY IN STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized, designated as:
Redeemable preferred; 280 shares issued and outstanding (Note 5) 3
Series A Convertible Preferred --
Series B Preferred --
Series C Preferred stock--$.01 par value; voting on the basis of 4 votes to 1 vote for the common
stock, preferred in liquidation at $1 per share over common stockholders, convertible into common
stock on the basis of 4 common shares for each preferred share with automatic conversion on August
1, 1998; authorized, 2,000,000 shares, issued and outstanding, 1,712,739 shares (Note 6) 17,127
Common stock--$.01 par value; 20,000,000 shares authorized, 8,476,309 shares issued and outstanding
(Notes 8, 9 and 10) 84,763
Additional paid-in capital 6,724,589
Deferred compensation (Note 8) (18,230)
Accumulated deficit (7,309,338)
-------------
Total deficiency in stockholders' equity (501,086)
-------------
TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY $ 3,419,214
-------------
-------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
these financial statements.
25
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
REVENUE
Printing, design and advertising sales, net of discounts and
allowances.................................................. $ 6,410,818 $ 10,058,864
Franchise fees................................................ 185,708 105,054
Interest income............................................... 35,677 --
Other......................................................... 91,150 195,089
Extinguishment of current debt obligations.................... 102,522 121,500
------------ -------------
Total revenue.............................................. 6,825,875 10,480,507
------------ -------------
EXPENSES
Cost of sales................................................. 4,205,160 7,596,629
General and administrative.................................... 2,616,612 3,442,690
General and administrative associated with closed locations and
other one time charges 956,913 --
Franchise development......................................... 360,719 396,974
Interest expense--affiliate................................... 87,514 158,022
Interest expense--other....................................... 249,696 207,946
Loss on abandonment and revaluation of assets................. 1,692,710 --
Restructuring expense......................................... -- 772,443
------------ -------------
Total expenses............................................. 10,169,324 12,574,704
------------ -------------
NET LOSS BEFORE INCOME TAXES.................................... (3,343,449) (2,094,197)
INCOME TAX PROVISION............................................ -- 300,319
------------ -------------
NET LOSS (SEE DISCUSSION AT NOTE 16) $(3,343,449) $(2,394,516)
------------ -------------
------------ -------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...................... $ 8,190,470 $ 7,710,913
------------ -------------
------------ -------------
NET LOSS PER COMMON SHARE $ (.41) $ (.31)
------------ -------------
------------ -------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
these financial statements.
26
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------------------------
REDEEMABLE SERIES A SERIES C COMMON STOCK
-------------- -------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ----------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1,
1995...... 600 $ 6 1,000 $ 10 -- $ -- 7,306,521 $ 74,773
EXCHANGE OF
PREFERRED
FOR COMMON
STOCK
(NOTE 5).. (320) (3) -- -- -- -- 355,556 3,556
ISSUE OF
STOCK FOR
PAYABLES
(NOTE 7).. -- -- -- -- -- -- 221,018 2,211
CANCEL
SERIES A
PREFERRED.. -- -- (1,000) (10) -- -- -- --
CANCEL
TREASURY
STOCK..... -- -- -- -- -- -- -- (1,710)
NET LOSS FOR
1995...... -- -- -- -- -- -- -- --
------ ------ ------ ------ ----------- ------- --------- ---------
BALANCE,
DECEMBER
31, 1995.. 280 3 -- -- -- -- 7,883,095 78,830
ISSUE OF
COMMON
STOCK AS
COMPENSATION
(NOTE 8).. -- -- -- -- -- -- 270,000 2,700
CONVERSION
OF DEBT TO
PREFERRED
STOCK
(NOTE 6).. -- -- -- -- 1,712,739 17,127 -- --
CONVERSION
OF DEBT TO
COMMON
STOCK
(NOTE 7).. -- -- -- -- -- -- 323,214 3,233
NET LOSS FOR
1996...... -- -- -- -- -- -- -- --
------ ------ ------ ------ ----------- ------- --------- ---------
BALANCE,
DECEMBER
31, 1996.. 280 $ 3 -- $ -- 1,712,739 $17,127 8,476,309 $ 84,763
------ ------ ------ ------ ----------- ------- --------- ---------
------ ------ ------ ------ ----------- ------- --------- ---------
<CAPTION>
PAID-IN DEFERRED TREASURY ACCUMULATED
CAPITAL COMPENSATION STOCK DEFICIT TOTAL
---------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1,
1995...... $5,070,024 $ -- $(292,077) $(1,571,373) $ 3,281,36
EXCHANGE OF
PREFERRED
FOR COMMON
STOCK
(NOTE 5).. 119,865 -- -- -- 123,418
ISSUE OF
STOCK FOR
PAYABLES
(NOTE 7).. 74,512 -- -- -- 76,723
CANCEL
SERIES A
PREFERRED.. -- -- -- -- (10)
CANCEL
TREASURY
STOCK..... (290,367) -- 292,077 -- --
NET LOSS FOR
1995...... -- -- -- (2,394,516) (2,394,516)
---------- ------------- ---------- ------------ ----------
BALANCE,
DECEMBER
31, 1995.. 4,974,034 -- -- (3,965,889) 1,086,978
ISSUE OF
COMMON
STOCK AS
COMPENSATION
(NOTE 8).. 26,832 (18,230) -- -- 11,302
CONVERSION
OF DEBT
TO
PREFERRED
STOCK
(NOTE 6).. 1,695,612 -- -- -- 1,712,739
CONVERSION
OF DEBT TO
COMMON
STOCK
(NOTE 7).. 28,111 -- -- -- 31,344
NET LOSS FOR
1996...... -- -- -- (3,343,449) (3,343,449)
---------- ------------- ---------- ------------ ----------
BALANCE,
DECEMBER
31, 1996.. $6,724,589 $(18,230) $ -- $(7,309,338) $ (501,086)
---------- ------------- ---------- ------------ ----------
---------- ------------- ---------- ------------ ----------
</TABLE>
- ------------------------
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
27
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,343,449) $(2,394,516)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities
Depreciation and amortization.................................... 414,454 472,112
Provision for bad debts.......................................... (17,606) 323,532
Deferred income tax provision.................................... -- 267,000
Write-off of assets from closure of offices...................... 1,944,310 --
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
Common stock issued for compensation............................. 11,302 --
Changes in assets and liabilities
Inventory...................................................... 114,490 (40,103)
Accounts and notes receivable.................................. 901,034 181,185
Prepaid expenses............................................... 148,567 (61,788)
Deposits and other assets...................................... 3,162 256,301
Accounts payable............................................... 19,836 183,791
Accrued liabilities............................................ 280,831 49,491
Deferred rent.................................................. 229,280 --
Deferred revenue............................................... 13,867 3,041
Other.......................................................... (91,933) --
---------- ----------
Net cash provided (used) by operating activities............ 628,145 (257,117)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property............................................... (232,795) (1,099,968)
Proceeds from sale of equipment.................................... -- 31,500
---------- ----------
Net cash used by investing activities....................... (232,795) (1,068,468)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debentures........................................... -- 573,500
Proceeds from notes payable........................................ 93,599 861,435
Payment of notes payable........................................... (555,799) (517,271)
---------- ----------
Net cash (used) provided by financing activities............ (462,200) 917,664
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS................................ (66,850) (407,921)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR......................... 300,821 708,742
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR............................... $ 233,971 $ 300,821
---------- ----------
---------- ----------
</TABLE>
- ------------------------
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
28
<PAGE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for income taxes.......................................... $ -- $ 22,000
------------ ----------
------------ ----------
Cash paid for interest.............................................. $ 338,357 $ 289,661
------------ ----------
------------ ----------
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Exchange of common and preferred stock for debt and other
liabilities at fair value on date of exchange................... $ 1,744,083 $ 76,723
------------ ----------
------------ ----------
Common stock issued (270,000 shares) for compensation at an
estimated fair value at the date of issue of.................... $ 29,532 $ --
------------ ----------
------------ ----------
</TABLE>
- ------------------------
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
29
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF OPERATIONS
UNICO, Inc. (the "Company") was incorporated on April 11, 1984 in the State
of Delaware. The Company's primary business, cooperative direct mail
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. The
Company's customers are primarily located in the eastern, southeastern,
midwestern and western United States.
(B) Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, United Coupon Corporation, Cal-Central
Marketing Corporation ( a dormant corporation) and Greenleaf Catalogue, Inc. (a
dormant corporation). All material intercompany accounts and transactions have
been eliminated in consolidation.
(C) Use of accounting 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
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.
(D) Property and equipment
Property is recorded at cost and is depreciated over the estimated useful
lives of the individual assets, which are ten to fourteen years using the
straight-line method. Leasehold improvements are amortized over their estimated
useful life or the term of the lease, whichever is shorter.
(E) Revenue recognition
The Company recognizes revenue from the design, production and printing of
coupons on a percentage of completion basis as stages of the production process
are completed. Revenue from initial franchise fees are recognized when
substantially all services or conditions relating to the sale have been
substantially performed. Franchise support and other fees are recognized when
billed to the franchisee. Franchise fees recognized as revenue in 1996 includes
$174,000 of initial franchise fees. Amounts billed or collected in advance of
final delivery or shipment are reported as deferred revenue.
30
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(F) Inventory
Inventory consists primarily of paper, envelopes and printing materials and
is stated at the lower of cost or market, with cost determined on the first-in,
first-out method.
(G) Goodwill
Goodwill represents the excess of the cost of businesses acquired over the
fair value of the net assets acquired and is amortized over the estimated
economic life of the intangible assets, but not longer than 40 years. It is
management's policy to re-evaluate the estimated economic life of all
intangible assets on an annual basis and adjust the carrying amount of such
assets when circumstances so dictate. During 1996, the Company wrote-off
goodwill that had a book value at the beginning of the year of $1,468,453 as a
result of its re-evaluation. During 1996, the Company recorded amortization of
goodwill of $6,853 and had accumulated amortization at December 31, 1996 of
$66,604.
(H) Net loss per share
Net loss per common share is computed by dividing the net loss by the
weighted average number of shares outstanding during the period. Stock options
and convertible securities have not been considered as common stock equivalents
since their effect would be anti-dilutive.
(I) Cash and cash equivalents
The statements of cash flows are prepared on the basis of cash on hand and
in banks which are subject to withdrawal on demand. The Company considers all
investments that have an original maturity of three months or less to be cash
equivalents.
The Company maintains cash balances which may exceed Federally insured
limits. The Company does not believe that this results in any significant credit
risk.
(J) 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 and for all loss and tax
credit carryforwards, less valuation allowances as applicable.
31
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
(K) Fair value of financial instruments
The fair value of the financial instruments included in the consolidated
financial statements, except as otherwise discussed in the notes to financial
statements, approximates their carrying value.
(L) Impairment of long-lived assets
It is the Company's policy to periodically evaluate the economic
recoverability of all of its long-lived assets. In accordance with that policy,
when the Company determines that an asset has been impaired, it recognizes the
loss on the basis of the discounted future cash flows expected from the asset.
(M) Accounting pronouncements
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting No. 123, Accounting for Stock Based
--------------------------
Compensation (SFAS No. 123). That Standard recommends the use of a fair market
- ------------
valuation method for recognizing compensation from stock options and similar
equity instruments. However, SFAS No. 123 permits the continued measurement of
compensation using the intrinsic value based method as prescribed by Accounting
Principle Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
----------------------------------------
No. 25), provided that financial statements disclose the effect of applying SFAS
No. 123 had it been adopted. This pronouncement was effective for transactions
entered into in fiscal years that began after December 15, 1995. In that regard,
the Company has elected to continue to measure stock based compensation on the
basis of APB No. 25.
In February 1997, the FASB issued SFAS No. 128, Earning per Share to
-----------------
supersede all prior standards issued concerning earnings per share calculations
and disclosures. The new Standard is effective for financial statements of
interim and annual periods ending after December 15, 1997, with earlier
application not permitted. The Company is currently evaluating the effect of
this pronouncement on its calculations of loss per share for 1996 and 1995 and
believes that had it been applied to those periods, that the effect on the loss
per share as herein reported would not have been significant.
(N) Reclassifications
Certain amounts in the 1995 financial statements as reported herein have
been reclassified to conform with the 1996 presentation. This reclassification
had no effect on the net loss, total current assets or total current liabilities
as previously reported.
32
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2--NOTES PAYABLE
Notes payable at December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
BancFirst--consolidated renewal promissory note dated August 15, 1996 in
the face amount of $721,425 with interest at the prime rate, as defined,
plus 1%. The note is payable in monthly installments of $22,500 through
January 15, 1997, and $27,500 through December 15, 1998, including
interest, with the entire unpaid balance due on December 31, 1998. The
note is collateralized by substantially all assets of the Company. $ 643,022
Duncan-Smith Company--eighteen notes due in October 1998 bearing interest
at 12%. This note has been subordinated as to payment to the BancFirst
note. 460,000
Humphrey Group--four notes for $25,000, one note for $50,000 and one note
for $150,000 that bear interest at 12%, and due in quarterly installments
of principal commencing March 31, 1997 of $25,000, with a final payment
of $225,000 on December 31, 1997. This note has been subordinated as to
payment to the BancFirst note. 300,000
CIT Group--three installment notes bearing interest at rates ranging from
8.3% to 10.3% and requiring monthly payments, in aggregate, of $12,867
including interest. One note with a balance at December 31, 1996 of
approximately $30,000 is scheduled to be paid 1997 with the two remaining
notes scheduled for final payment in 1999 and 2000. The proceeds of these
loans were used to purchase specific equipment and are collateralized by
the equipment. 332,397
Renaissance Capital Partners, Ltd. -note dated August 13, 1996 requiring
interest at 9.35% payable monthly, with principal due December 31, 1998.
This note is subordinate in payment to the BancFirst note described
above. Renaissance Capital Partners, Inc. are the holders of all of the
Company's Series C Preferred Stock, and a principal of Renaissance is
also a common stockholder and was a member of the Board of Directors of
the Company for a portion of 1996. 50,000
</TABLE>
33
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2--NOTES PAYABLE (CONTINUED)
<TABLE>
<S> <C>
Unsecured note to an individual bearing interest at 15% and due
July 7, 1996. $ 30,000
Other--two installment agreements for the purchase or lease of
specific equipment payable in monthly installments of $7,376,
including interest.One agreement with a balance at December
31, 1996 of $25,518 requires final payment in 1997, with the
remaining loan's final payment due in 1999. 44,117
-----------
Total notes payable 1,859,536
Less:Current portion 749,261
-----------
Long-term portion $1,111,275
-----------
-----------
</TABLE>
Scheduled future maturities of notes payable at December 31, 1996, are as
follows:
YEAR ENDING
DECEMBER 31 AMOUNT
- ----------- ------------
1997 $ 749,261
1998 973,556
1999 99,290
2000 37,429
------------
Total $ 1,859,536
------------
------------
Subsequent to December 31, 1996, Renaissance Capital Partners, Ltd. loaned
the Company an additional $200,000 under terms similar to those described above.
NOTE 3--LEASES
The Company leases its main office and printing facility under an agreement
last amended by restatement in September 1994. The lease has a term of 10 years
and requires payment of base rent which includes scheduled rent increases plus
increases in the annual operating costs and real estate taxes applicable to the
property. The lease provides for an eighteen month abatement of rent during the
initial period for a portion of the space leased. The Company has an option to
renew the lease for a five year period at the end of the base term at the then
current fair rental value of the property. The minimum payments required under
the lease, which takes into account the rent abatement and scheduled increases
in base rent, are recognized as expense on a straight-line basis over the life
of the lease, with a liability recognized in the balance sheet to the extent
that expense to date exceeds the minimum lease payments to date.
34
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3--LEASES (CONTINUED)
SCHEDULED FUTURE MINIMUM PAYMENTS REQUIRED UNDER THE LEASE ARE AS FOLLOWS:
YEAR ENDING
DECEMBER 31 AMOUNT
- ------------ ------
1997 $ 351,469
1998 383,799
1999 415,088
2000 444,290
2001 474,534
Thereafter 1,804,275
------------
Total $ 3,873,455
------------
------------
Rent expense for the years ended December 31, 1996 and 1995 was $652,659 and
$451,821, respectively.
NOTE 4--PROFIT SHARING PLAN
The Company has a defined contribution plan that is qualified under 401(k)
of the Internal Revenue Code. Employees may elect to contribute up to 15% of
their salary before income taxes subject to an annual limit provided for in the
Code, which was $9,500 for 1996. The Company matches employee contributions up
to 3% of gross wages. All employees who are at least 18 years of age are
eligible to participate in the plan. Contributions to the plan by the Company
were $27,578 and $33,619 in 1996 and 1995, respectively.
NOTE 5--REDEEMABLE PREFERRED STOCK
In the Company's 1993 acquisition of Cal-Central Marketing Corporation
(CCMC), 600 shares of redeemable preferred stock were issued. These shares are
redeemable at $1,000 per share at the option of the holder after the attainment
of certain profit performance tests by CCMC. On April 20, 1995, holders
exchanged 320 of these shares for 355,556 shares of common stock at an exchange
rate of $.90 per common share. The profit performance tests of CCMC were never
achieved, and in 1995 CCMC's operations were discontinued except for fulfillment
of work in process. This stock was pledged as collateral for loans totaling
$280,000 by two former officers of CCMC (Note 12).
35
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6--SERIES C PREFERRED STOCK
Prior to 1996, the Company had issued a 12.5% Convertible Debenture to
Renaissance Capital Partners, Ltd. in the face amount of $1,250,000. During
1995, Renaissance and Duncan-Smith Investment Co. loaned the Company $298,500
under several notes that were to be convertible into common stock of the
Company. On July 12, 1996, the Company, Renaissance and Duncan Smith entered
into a loan conversion agreement whereby the debenture and notes plus accrued
interest were exchanged for 1,712,739 shares of the Company's newly authorized
Series C Preferred Stock. Each share of the Series C Preferred Stock is
convertible into four shares of the Company's common stock at any time at the
option of the holders. The agreement further provides that if and whenever any
additional shares of common stock are issued by the Company for a net
consideration of less than $.25 per share then in each such case the
conversion price shall be reduced to the net consideration received per share
and the number of shares issuable to the holders of the Series C Preferred
Stock shall be proportionality increased. In addition, the agreement provides
for adjustment of the conversion ratio in the event the number of shares of
common stock outstanding is changed as the result of a subdivision or
combination in manner of the common stock or the making of a stock dividend.
NOTE 7--CONVERSION OF DEBT TO COMMON STOCK
Effective September 30, 1996, the holder of a debenture issued by the
Company prior to 1996 agreed to exchange the debenture and all accrued interest
for 323,214 shares of the Company's common stock. The Company recognized a gain
on the conversion of $45,250 representing the differences in the fair value of
the stock at the date of the exchange and the amount of the debt. The gain is
included in income in the Statement of Operations as part of the revenue from
extinguishment of current obligations.
During 1995, the Company entered into agreements with two vendors of the
Company and two note holders whereby the Company issued 221,018 shares of its
common stock in exchange for these debts which totaled $198,917. These exchanges
were recorded at the estimated fair value of the stock at the date of the
exchanges and resulted in a gain to the Company of $121,500, which is included
in revenue from extinguishment of current obligations in the Statement of
Operations.
NOTE 8--COMMON STOCK ISSUED FOR COMPENSATION
Pursuant to an action by the Board of Directors, the Company issued 20,000
shares of its common stock to its former Chief Financial Officer as
compensation. The estimated value of the stock at the date of issue was
$2,188, which is recognized as a general and administrative expense in the
Statement of Operations.
36
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 8--COMMON STOCK ISSUED FOR COMPENSATION (CONTINUED)
Effective April 1, 1996, the Board of Directors adopted a resolution to
issue 250,000 shares of the Company's common stock to the newly appointed
President and Chief Executive Officer of the Company as compensation for his
services during the initial two year term of his appointment. Under the
resolution, the shares shall be subject to forfeiture of a ratable amount of
such shares in the event the officer does not serve the full two years of the
initial term. The Board further resolved to issue 100,000 shares of the
Company's common stock for each successive one year term which the officer is so
appointed by the Board. The 250,000 shares issued were estimated to have a fair
value of $27,344 at the date of the award and are being recognized over the two
year period. As a result, $9,114 has been recognized as an expense in 1996, and
$18,230 is reported as deferred compensation in the Statement of Stockholders'
Equity (Deficiency).
NOTE 9--STOCK PURCHASE WARRANTS
In connection with a financing arrangement entered into in October 1993 and
January 1994, the Company issued 230,000 common stock purchase warrants to the
lenders, known as the D.S. Warrants, and 30,000 warrants to Duncan-Smith Co.,
the investment banker that arranged the private placement. The warrants entitle
the holder to purchase one share of common stock per warrant at prices which
range from $.90 to $1.40. The warrants expire in 1998.
In February 1994, the Company issued warrants to the owner of Duncan-Smith
Co. to purchase 25,000 shares of common stock at a price of $1.25 per share.
These warrants are exercisable over a five year period from the date granted.
These warrants were issued in connection with a financing arrangement.
In June 1995, in connection with a lending arrangement, the Company issued
warrants to purchase 450,000 shares of common stock at $.90 per share. These
warrants expire if not exercised on December 31, 2000.
Certain of the above mentioned warrants contain anti-dilution provisions and
require the Company to register the warrants under certain conditions. The
Company has reserved 730,000 shares of its unissued common stock for exercise of
these warrants.
37
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10--STOCK OPTION PLAN
The Company has reserved 1,000,000 shares of its 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 at the date of grant or at 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 for 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Shares available for grant at beginning of year......................... 331,671 213,544
Options granted during the year......................................... -- (88,610)
Options forfeited or cancelled.......................................... 91,092 206,737
--------- ---------
Shares available forgrant at the end of the year........................ 422,743 331,671
--------- ---------
--------- ---------
Shares under option at the end of the year at option prices of $.25 to
$1.16................................................................. 535,970 627,042
--------- ---------
--------- ---------
Options exercised since inception of the plan........................... 41,287 41,287
--------- ---------
--------- ---------
</TABLE>
NOTE 11--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
basis 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 Company has a deferred tax asset at December 31, 1996 of approximately
$2,100,000 that is principally the result of income tax net operating loss
carryforwards of approximately $5,200,000. Because of the uncertainty that the
Company will be able to utilize these losses, which expire in years 2010 and
2011, a valuation allowance for the full amount of the deferred tax asset has
been provided at December 31, 1996. Accordingly, there is no income tax
provision or benefit for 1996.
38
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 11--INCOME TAXES (CONTINUED)
A reconciliation of the 1995 provision for income taxes to the statutory
rates is as follows:
<TABLE>
<S> <C>
Statutory rate....................................................... (34.0)
Current year loss 34.0
Change in valuation allowance on deferred tax asset 14.3
---------
Effective rate....................................................... 14.3
---------
---------
</TABLE>
NOTE 12--LOANS TO OFFICERS
At the time the Company acquired its Cal-Central Marketing Corporation
subsidiary in October 1993, the Company loaned two of the officers of CCMC
$280,000 on notes that matured in October 1995. The Company's 280 shares of
Redeemable Preferred Stock were pledged as collateral for these loans. During
1996, the Company determined that collectibility of these loans was doubtful
and provided an allowance for the full amount of the loans. This loss has been
charged to general and administrative expense in the Statement of Operations.
NOTE 13--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 were 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 expended facility in
Springfield, Virginia. This transaction 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>
<S> <C>
Leasehold improvement forfeiture.................................. $ 59,426
Write down of plant and 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>
39
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 13--SUBSIDIARY RESTRUCTURING (CONTINUED)
Additionally, as a result of the restructuring plan that began in 1995
whereby the Company closed Cal-Central's Fort Lauderdale, Florida production
facility, Cal-Central entered into a settlement agreement with its former
landlord to extinguish its long term lease agreement in exchange for a $48,000
early termination fee. This amount was recorded as an expense in 1995.
NOTE 14--FOURTH QUARTER ADJUSTMENTS
During the first and second quarters of 1996, the Company continued the
corporate restructuring plan it initiated in 1995 by closing its headquarters
office in Oklahoma City, Oklahoma, and transferring these activities to its
expanded and modernized Springfield, Virginia facility. These actions,
designed to realize long-term benefits for the Company, resulted in a one-time
charge of $224,257 in costs in 1996, or $.03 per share. In furtherance of the
restructuring plan, management determined that it was in the best interests of
the shareholders and the Company to discontinue the minimal remaining
operations of its Cal-Central subsidiary. As a result, the Company determined
that previously capitalized and unamortized goodwill associated with the
acquisition of Cal-Central should be written-off concurrent with the
elimination of that business segment. That adjustment, in the amount of
$1,468,453 or $.18 per share, was also recorded in the fourth quarter of 1996.
NOTE 15--CLOSURE OF CAL-CENTRAL MARKETING CORPORATION
As discussed in Notes 13 and 14, the Company has closed its Cal-Central
operations in Florida and that subsidiary has ceased all activities. In that
regard, Cal-Central has recorded liabilities of approximately $400,000, not
otherwise guaranteed or co-obligated by the Company. The Company is evaluating
when it can recognize the cancellation of these debts as income.
40
<PAGE>
UNICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 16--FINANCIAL CONDITION
The Company has a deficiency in stockholder's equity at December 31, 1996
of approximately $500,000 and a deficit in working capital of approximately
$1,800,000. These conditions primarily resulted from nonrecurring expenses
relating to the write-off of $1,468,453 of goodwill associated with the
Cal-Central marketing subsidiary; and general and administrative expenses of
$956,913 associated with closed locations and other one time charges; a
$280,000 loss on uncollectible loans to former Cal-Central officers; one-time
costs associated with the fulfillment of Cal-Central customer orders of
approximately $400,000; one-time costs associated with the closing of the
Oklahoma City headquarters office and transfer of those activities to the
Springfield, Virginia facility of $224,257; and certain other one-time costs
of approximately $236,000. It is management's belief that, absent these
burdens, the Company is now in a position to operate profitably and generate
funds through operations that will enable it to meet its obligations as they
come due. The ability to meet its obligations was further enhanced by the
conversion of approximately $1,700,000 of debt into equity during 1996.
However, the ability to continue operating during 1997 is dependent upon the
forbearance of certain creditors of the Company and the availability of
short-term credit on an as-needed basis. While management believes it can
work through these issues, there can be no assurance it will be successful,
in which event, the Company may not be able to continue as a going concern.
41
<PAGE>
EXHIBIT 3.4
UNICO, INC.
(a Delaware corporation)
AMENDED AND RESTATED
BY-LAWS
As adopted by the Stockholders on December 2, 1996.
<PAGE>
TABLE OF CONTENTS
ARTICLE/SECTION Page
I. DEFINITIONS 1
1.01 Definitions 1
1.02 Offices 1
II. OFFICE 1
2.01 Principal Office 1
2.02 Registered Office 1
2.03 Other Offices 2
III. MEETINGS OF STOCKHOLDERS 2
3.01 Annual Meetings 2
3.02 Special Meetings 2
3.03 Place of Meetings 2
3.04 Notice of Meetings 2
3.05 Waiver of Notice 2
3.06 Adjournment of Meeting 3
3.07 Quorum 3
3.08 Stockholder Proposals 3
3.09 Organization 4
3.10 Conduct of Business 4
3.11 List of Stockholders 4
3.12 Closing of Transfer Books or Fixing of Record Date 5
3.13 Voting of Shares 5
3.14 Inspectors 6
3.15 Proxies 6
3.16 Consent of Stockholders in Lieu of Meeting 6
IV. DIRECTORS 6
4.01 General Powers 6
4.02 Number 6
4.03 Nomination of Directors 7
4.04 Election of Directors and Term of Office 8
4.05 Resignations 8
4.06 Removal 8
4.07 Vacancies 8
4.08 Chairman of the Board 8
4.09 Compensation 8
4.10 Corporate Opportunities 8
- i -
<PAGE>
V. MEETINGS OF DIRECTORS 9
5.01 Regular Meetings 9
5.02 Place of Meetings 9
5.03 Meetings by Telecommunications 9
5.04 Special Meetings 9
5.05 Notice of Special Meetings 9
5.06 Waiver by Presence 9
5.07 Quorum 10
5.08 Conduct of Business 10
5.09 Action by Consent 10
5.10 Presumption of Assent 10
VI. COMMITTEES 10
6.01 Committees of the Board 10
6.02 Selection of Committee Members 10
6.03 Conduct of Business 10
6.04 Authority 11
6.05 Minutes 11
VII. OFFICERS 11
7.01 Officers of the Corporation 11
7.02 Election and Term 11
7.03 Compensation of Officers 11
7.04 Removal of Officers and Agents 11
7.05 Resignation of Officers and Agents 12
7.06 Bond 12
7.07 President 12
7.08 Vice-Presidents 12
7.09 Secretary 12
7.10 Assistant Secretaries 13
7.11 Treasurer 13
7.12 Assistant Treasurers 13
7.13 Delegation of Authority 13
7.14 Actions with Respect to Securities of Other Corporations 13
7.15 Vacancies 13
VIII. CONTRACTS, LOANS, DRAFTS, DEPOSITS AND ACCOUNTS 14
8.01 Contracts 14
8.02 Loans 14
8.03 Drafts 14
8.04 Deposits 14
8.05 General and Special Bank Accounts 14
- ii -
<PAGE>
IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER 14
9.01 Certificates for Shares 14
9.02 Transfer of Shares 15
9.03 Lost, Stolen, Destroyed and Mutilated Certificates 15
9.04 Regulations 15
9.05 Holder of Record 15
9.06 Treasury Shares 16
X. INDEMNIFICATION 16
10.01 Action Other Than By or In the Right of the Corporation 16
10.02 Actions By or In the Right of the Corporation 16
10.03 Determination of Right of Indemnification 17
10.04 Indemnification Against Expenses of Successful Party 17
10.05 Advance of Expenses 17
10.06 Other Rights and Remedies 17
10.07 Insurance 17
10.08 Constituent Corporations 18
10.09 Other Insurance 18
10.10 Public Policy 18
XI. NOTICES 18
11.01 General 18
11.02 Waiver of Notice 18
XII. MISCELLANEOUS 19
12.01 Facsimile Signatures 19
12.02 Corporate Seal 19
12.03 Fiscal Year 19
XIII. AMENDMENTS 19
- iii -
<PAGE>
BY-LAWS
OF
UNICO,INC.
(A Delaware Corporation)
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless the context clearly requires
otherwise, in these Bylaws:
(a) "Articles of Incorporation" means the Certificates of
Incorporation of UNICO, INC., formerly CMS Advertising, Inc., as filed with
the Secretary of State of the State of Delaware and includes all amendments
thereto subsequently filed.
(b) "Board" means the board of directors of the Corporation.
(c) "Bylaws" means these bylaws as amended and restated by the
Stockholders on December 2, 1996, and includes amendments subsequently
adopted by the Board or by the Stockholders.
(d) "Corporation" means UNICO, Inc.
(e) "Section" refers to sections of these Bylaws.
(f) "Stockholder" means stockholders of record of the Corporation.
Section 1.02. Offices. The title of an office refers to the person or
persons who at any given time perform the duties of that particular office
for the Corporation.
ARTICLE II
OFFICES
Section 2.01. Principal Office. The Corporation may locate its principal
office within or without the state of incorporation as the Board may
determine.
Section 2.02. Registered Office. The registered office of the
Corporation required by law to be maintained in the state of incorporation
may be, but need not be, identical with the principal office of the
Corporation. The Board may change the address of the registered office from
time to time.
- 1 -
<PAGE>
Section 2.03. Other Offices. The Corporation may have offices at such
other places, either within or without the state of incorporation, as the
Board may designate or as the business of the Corporation may require from
time to time.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 3.01. Annual Meetings. The Stockholders of the Corporation shall
hold their annual meetings for the purpose of electing directors and for the
transaction of such other proper business as may come before such meetings at
such time, date and place as the Board shall determine by resolution. Board
of Directors,
Section 3.02. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called only by the Board or a committee of the
Board duly designated and whose powers and authority include the power to
call such meetings, pursuant to a resolution adopted by a majority of the
members of the Board or Committee then in office.
Section 3.03. Place of Meetings. The Stockholders shall hold all
meetings at such places, within or without the State of Virginia, as the
Board or a committee of the Board shall specify in the notice or waiver of
notice for such meetings.
Section 3.04. Notice of Meetings. Except as otherwise required by law,
the Board or a committee of the Board shall give notice of each meeting of
Stockholders, whether annual or special, not less than 10 nor more than 60
days before the date of the meeting. The Board or a committee of the Board
shall deliver a notice to each Stockholder entitled to vote at such meeting
by delivering a typewritten or printed notice thereof to him personally, or
by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his address as it appears on the records of the
Corporation, or by transmitting a notice thereof to him at such address by
telegraph, telecopy, cable or wireless. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
Stockholder at his address as it appears on the records of the Corporation.
An affidavit of the Secretary or an Assistant Secretary or of the Transfer
Agent of the Corporation that he has given notice shall constitute, in the
absence of fraud, prima facie evidence of the facts stated therein.
Every notice of a meeting of the Stockholders shall state the place,
date and hour of the meeting and, in the case of a special meeting, also
shall state the purpose or purposes of the meeting. Furthermore, if the
Corporation will maintain the list at a place other than where the meeting
will take place, every notice of a meeting of the Stockholders shall specify
where the Corporation will maintain the list of Stockholders entitled to vote
at the meeting.
Section 3.05. Waiver of Notice. Whenever these Bylaws require written
notice, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated
- 2 -
<PAGE>
therein, shall constitute the equivalent of notice. Attendance of a person at
any meeting shall constitute a wavier of notice of such meeting, except
when the person attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. No written wavier of notice need
specify either the business to be transacted at, or the purpose or purposes
of any regular or special meeting of the Stockholders, directors or members of
a committee of the Board.
Section 3.06. Adjournment of Meeting. When the Stockholders adjourn a
meeting to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting, the Stockholders may
transact any business which they may have transacted at the original meeting.
If the adjournment is for more than 30 days or, if after the adjournment, the
Board or a committee of the Board fixes a new record date for the adjourned
meeting, the Board or the committee of the Board shall give notice of the
adjourned meeting to each Stockholder of record entitled to vote at the
meeting.
Section 3.07. Quorum. Except as otherwise required by law, the holders
of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes at any meeting of the Stockholders. In the absence of a quorum at any
meeting or any adjournment thereof, the holders of a majority of the shares of
stock entitled to vote who are present, in person or by proxy, or, in the
absence therefrom of all the Stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting to
another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Stockholders to all Stockholders entitled to vote thereat, stating
that those present shall constitute a quorum, then, except as otherwise
required by law, those present at such adjourned meeting shall constitute a
quorum and a majority of the votes cast at such meeting shall determine all
matters.
Section 3.08. Stockholder Proposals.
a. Condition of Submission to Stockholders. No proposal for a
stockholder vote shall be submitted by a stockholder (a "Stockholder
Proposal") to the Corporation's stockholders unless the stockholder
submitting such proposal (the "Proponent") shall have filed a written notice
(a "Proposal Notice") setting forth with particularity (1) the names and
business addresses of the Proponent and all persons or entities (the
"Persons") acting in concert with the Proponent; (2) the name and address of
the Proponent and the Persons identified in clause (1), as they appear on the
Corporation's books (if they so appear); (3) the class and number of shares
of the Corporation beneficially owned by the Proponent and the Persons
identified in clause (1); (4) a description of the Stockholder Proposal
containing all material information relating thereto; and (5) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and stockholders of the
Corporation to consider the
- 3 -
<PAGE>
Stockholder Proposal. The presiding officer at any stockholders' meeting may
determine that any Stockholder Proposal was not made in accordance with the
procedures prescribed in these Amended and Restated Bylaws (the "Bylaws") or
is otherwise not in accordance with law, and if it is so determined, such
officer shall so declare at the meeting and the Stockholder Proposal shall be
disregarded.
b. Stockholder Proposal Notice. Proposal Notices shall be delivered
to the Secretary at the principal executive office of the Corporation not
later than 120 days in advance of the anniversary date of the Corporation's
proxy statement for the previous year's annual meeting or, in the case of
special meetings or the Corporation's 1994 annual meeting, at the close of
business on the seventh day following the date on which notice of such
meeting is first given to stockholders.
Section 3.09. Organization. Such person as the Board may have
designated or, in the absence of such a person, the highest ranking officer
of the Corporation who is present shall call to order any meeting of the
Stockholders, determine the presence of a quorum and act as chairman of the
meeting. In the absence of the Secretary or an Assistant Secretary of the
Corporation, the chairman shall appoint the secretary of the meeting.
Section 3.10. Conduct of Business. The chairman of any meeting of
Stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as he deems in order. Unless otherwise determined by the
Chairman, at each meeting of stockholders, the chairman of the meeting shall
fix and announce the date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at the meeting
and shall determine the order of business and all other matters of
procedure. Except to the extent inconsistent with any such rules and
regulations as adopted by the Board of Directors, the chairman of the meeting
may establish rules, which need not be in writing, to maintain order for the
conduct of the meeting, including, without limitation, restricting
attendance to bona fide stockholders of record and their proxies and other
persons in attendance at the invitation of the chairman and making rules
governing speeches and debates. The chairman of the meeting acts in his or
her absolute discretion and his or her rulings are not subject to appeal.
Section 3.11. List of Stockholders. At least 10 days before every
meeting of Stockholders, the Secretary shall prepare a list of the
Stockholders entitled to vote at the meeting or any adjournment thereof,
arranged in alphabetical order, showing the address of each Stockholder and
the number of shares registered in the name of each Stockholder. The
Corporation shall make the list available for examination by any Stockholder,
for any purpose germane to the meeting, either at a place within the city
where the meeting will take place or at the place designated in the notice of
the meeting.
The Secretary shall produce and keep the list at the meeting during the
entire duration of the meeting, and any Stockholder who is present may
inspect the list at the meeting. The list shall
- 4 -
<PAGE>
constitute presumptive proof of the identity of the Stockholders entitled to
vote at the meeting and the number of shares each Stockholder holds.
A determination of Stockholders entitled to vote at any meeting of
Stockholders pursuant to this Section shall apply to any adjournment thereof.
Section 3.12. Closing of Transfer Books or Fixing of Record Date. In
order that the Corporation may determine the stockholders entitled (i) to
notice of or to vote at any meeting of stockholders or any adjournments
thereof, (ii) to receive payment of any dividend or other distribution, or
allotment of any rights, or (iii) to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors, in advance, may fix a date as the
record date for any such determination, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty (60)
days nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to the date of any other action. A determination
of the stockholders of record entitled to notice of or to vote at a meeting
of the stockholders shall apply to any adjournment of the meeting taken
pursuant to Section 2.06 hereof; provided, however, that the Board of
Directors, in its discretion, may fix a new record date for an adjourned
meeting. Only stockholders determined to be stockholders of record on the
record date so fixed shall be entitled to notice of, or to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend
or other distribution, or allotment of rights, or to exercise such rights in
respect of such change, conversion or exchange of stock, or to participate in
any such other lawful action, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 3.13. Voting of Shares. Unless otherwise provided in a
resolution or resolutions providing for any class or series of Preferred
Stock pursuant to the Amended and Restated Certificate of Incorporation or by
the Delaware General Corporation Law, each Stockholder shall have one vote
for every share of voting stock registered in his name on the record date for
the meeting. The Corporation shall not have the right to vote treasury stock
of the Corporation, nor shall another corporation have the right to vote its
stock of the Corporation if the Corporation holds, directly or indirectly, a
majority of the shares entitled to vote in the election of directors of such
other corporation. Persons holding stock of the Corporation in a fiduciary
capacity shall have the right to vote such stock. Persons who have pledged
their stock of the Corporation shall have the right to vote such stock unless
in the transfer on the books of the Corporation the pledger expressly
empowered the pledgee to vote such stock. In that event, only the pledges, or
his proxy, may represent such stock and vote thereon.
A plurality of the votes cast shall determine all elections and, except
when the law requires otherwise, a majority of the votes cast shall determine
all other matters.
The Stockholders may vote by voice vote on all matters. However, upon
demand by a
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Stockholder entitled to vote, or his proxy, the Stockholders shall vote by
ballot. In that event, each ballot shall state the name of the Stockholder or
proxy voting, the number of shares voted and such other information as the
Corporation may require under the procedure established for the meeting.
Section 3.14. Inspectors. At any meeting in which the Stockholders vote
by ballot, the chairman may appoint a Inspector or Inspectors. Each Inspector
shall subscribe an oath to execute the duties of a Inspector at such meeting
faithfully, with strict impartiality and according to the best of his
ability. The Inspector or Inspectors shall decide the qualification of the
voters and shall report the number of shares represented at the meeting and
entitled to vote on any question, shall conduct and accept the votes, and,
when the Stockholders have completed voting, ascertain and report the number
of shares voted respectively for and against the question. The Inspector
shall prepare a subscribed, written report and shall deliver the report to
the Secretary of the Corporation. A Inspector need not be a Stockholder of
the Corporation, and any officer of the Corporation may be a Inspector on any
question other than a vote for or against a proposal in which he has a
material interest.
Section 3.15. Proxies. A Stockholder may exercise any voting rights in
person or by his proxy appointed by an instrument in writing, which he or his
authorized attorney-in-fact has subscribed and which the proxy has delivered
to the secretary of the meeting.
A proxy is not valid after the expiration of 11 months from the date of
its execution, unless the person executing it specifies thereon the length of
time for which it is to continue in force, or limits its use to a particular
meeting. No proxy shall be valid after 10 years from the date of its
execution.
The attendance at any meeting of a Stockholder who previously has given
a proxy shall not have the effect of revoking the same unless he notifies the
Secretary in writing prior to the voting of the proxy.
Section 3.16. Consent of Stockholders in Lieu of Meeting. The
Stockholders may take any action which they could take at any annual or
special meeting without a meeting, prior notice and a vote only if all the
holders of outstanding stock sign a unanimous consent in writing, setting
forth the action taken.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.01. General Powers. The Board shall manage the property,
business and affairs of the Corporation.
Section 4.02. Number. The number of directors who shall constitute the
Board shall equal not less than three nor more than 15, as the Board may
determine by resolution from time to time.
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Section 4.03. Nomination of Directors.
a. Eligibility. Only persons who are selected and recommended by
the Board of Directors or the committee of the Board of Directors designated
to make nominations, or who are nominated by stockholders in accordance with
the procedures set forth in this Section 4.03, shall be eligible for
election, or qualified to serve, as directors. Nominations of individuals for
election to the Board of Directors of the Corporation at any annual meeting
or any special meeting of stockholders at which directors are to be elected
may be made by any stockholder of the Corporation entitled to vote for the
election of directors at that meeting by compliance with the procedures set
forth in this Section 4.03. Nominations by stockholders shall be made by
written notice (a "Nomination Notice"), which shall set forth the following
information: (1) as to each individual nominated, (i) the name, date of
birth, business address and residence address of such individual, (ii) the
business experience during the past five years of such nominee, including his
or her principal occupations and employment during such period, the name and
principal business of any corporation or other organization in which such
occupations and employment were carried on, and such other information as to
the nature of his or her responsibilities and level of professional
competence as may be sufficient to permit assessment of his or her prior
business experience, (iii) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital
stock, partnership interests or other equity interest of any corporation,
partnership or other entity, (iv) any directorships held by such nominee in
any company with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
subject to the requirements of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company Act
of 1940, as amended; and (v) whether, in the last five years, such nominee
has been convicted in a criminal proceeding or has been subject to a
judgment, order, finding or decree of any federal, state or other
governmental entity, concerning any violation of federal, state or other law,
or any proceeding in bankruptcy, which conviction, order, finding, decree or
proceeding may be material to an evaluation of the ability or integrity of
the nominee; and (2) as to the Person submitting the Nomination Notice and
any Person acting in concert with such Person, (i) the name and business
address of such Person, (ii) the name and address of such Person as they
appear on the Corporation's books (if they so appear) and (iii) the class and
number of shares of the Corporation that are beneficially owned by such
Person. A written consent to being named in a proxy statement as a nominee,
and to serve as a director if elected, signed by the nominee, shall be filed
with any Nomination Notice. If the presiding officer at any stockholders'
meeting determines that a nomination was not made in accordance with the
procedures prescribed by these Bylaws, he shall so declare to the meeting and
the defective nomination shall be disregarded.
b. Stockholder Nomination Notice. Nomination Notices shall be
delivered to the Secretary at the principal executive office of the
Corporation not later than 120 days in advance of the anniversary date of the
Corporation's proxy statement for the previous year's annual meeting or, in
the case of special meetings, at the close of business on the seventh day
following the date on which notice of such meeting is first given to
stockholders.
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Section 4.04. Election of Directors and Term of Office. The Stockholders
of the Corporation shall elect the directors at the annual or adjourned
annual meeting (except as otherwise provided herein for the filling of
vacancies). Each director shall be elected for a full term of office
expiring at the first, second or third succeeding annual meeting after their
election and will serve until successors are duly elected and qualified. The
Nominating Committee will be empowered to define appropriate terms of office
for each nominee.
Section 4.05. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any resignation shall take effect upon receipt or at the time
specified in the notice. Unless the notice specifies otherwise, the
effectiveness of the resignation shall not depend upon its acceptance.
Section 4.06. Removal. Except as may be provided in a resolution or
resolutions providing for any class or series of Preferred Stock with respect
to any directors elected by the holders of such class or series, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of
at least 66-2/3% of the voting power of all of the shares of capital stock of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class.
Section 4.07. Vacancies. Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any
increase in the number of directors may be filled only by the Board of
Directors, acting by a majority of the remaining directors then in office,
although less than a quorum, or by a sole remaining director, and any
directors so appointed shall hold office until the next election of the class
for which such directors have been chosen and until their successors are
elected and qualified.
Section 4.08. Chairman of the Board. At the annual meeting of the Board,
the directors may elect from their number a Chairman of the Board of
Directors. The Chairman shall preside at all meetings of the Board and shall
perform such other duties as the Board may direct. The Board also may elect a
Vice Chairman and other officers of the Board, with such powers and duties as
the Board may designate from time to time.
Section 4.09. Compensation. The Board may compensate directors for their
services and may provide for the payment of all expenses the directors incur
by attending meetings of the Board.
Section 4.10. Corporate Opportunities. The officers and directors of the
Corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined by the Board of Directors as evidenced by
resolutions appearing in the Corporation's minutes. When such areas of
interest are delineated, all such business opportunities within such areas of
interest which come to the attention of an officer or director of the
Corporation shall be promptly disclosed to the Corporation and made available
to it. The Board of Directors may reject any opportunity presented to it and
thereafter any officer or director may avail himself or herself of such
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opportunity. Until such time as the Corporation, through its Board of
Directors, has designated as area of interest, the officers and directors of
the Corporation shall be free to engage in such area of interest on their own
and the doctrine of corporate opportunities shall not limit the rights of any
officer or director of this Corporation to continue a business existing prior
to the time that such area of interest is designated by the Corporation. This
provision shall not be construed to release any employee of the Corporation
(other than an officer or director) from the duties which he may have to the
Corporation.
ARTICLE V
MEETINGS OF DIRECTORS
Section 5.01. Regular Meetings. The Board may hold regular meetings at
such places, dates and times as the Board shall establish by resolution. If
any day fixed for a meeting falls on a legal holiday, the Board shall hold
the meeting at the same place and time on the next succeeding business day.
The Board need not give notice of regular meetings.
Section 5.02. Place of Meetings. The Board may hold any of its meetings
in or out of the state of Virginia, at such places as the Board may
designate, at such places as the notice or waiver of notice of any such
meeting may designate, or at such places as the persons calling the meeting
may designate.
Section 5.03. Meetings by Telecommunications. The Board or any committee
of the Board may hold meetings by means of conference telephone or similar
telecommunications equipment that enable all persons participating in the
meeting to hear each other. Such participation shall constitute presence in
person at such meeting.
Section 5.04. Special Meetings. The Chairman of the Board, the President
or one-third of the directors then in office may call a special meeting of
the Board. The person or persons authorized to call special meetings of the
Board may fix any place, either in or out of the State of Virginia as the
place for the meeting.
Section 5.05. Notice of Special Meetings. The person or persons calling
a special meeting of the Board shall give written notice to each director of
the time, place and date of the meeting of not less than three days if by
mail and not less than 24 hours if by telegraph or in person. A director may
waive notice of any special meeting, and any meeting shall constitute a legal
meeting without notice if all the directors are present or if those not
present sign either before or after the meeting a written waiver of notice, a
consent to such meeting or an approval of the minutes of the meeting. A
notice or waiver of notice need not specify the purposes of the meeting or
the business which the Board will transact at the meeting.
Section 5.06. Waiver by Presence. Except when expressly for the purpose
of objecting to the legality of a meeting, a director's presence at a meeting
shall constitute a waiver of notice of such meeting.
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Section 5.07. Quorum. One-third of the directors then in office shall
constitute a quorum for all purposes at any meeting of the Board. In the
absence of a quorum, a majority of directors present at any meeting may
adjourn the meeting to another place, date, or time, without further notice.
Section 5.08. Conduct of Business. The Board shall transact business in
such order and manner as the Board may determine. Except as the law requires
otherwise, the Board shall determine all matters by the vote of a majority of
the directors present. The directors shall act as a Board, and the individual
directors shall have no power as such.
Section 5.09. Action by Consent. The Board or a committee of the Board
may take any required or permitted action without a meeting if all members of
the Board or committee sign a written consent and file the consent with the
minutes of the proceedings of the Board.
Section 5.10. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors when a vote on any matter
is taken is deemed to have assented to the action taken unless he or she
votes against or abstains from the action taken or unless, at the beginning
of the meeting or promptly upon arrival, the director objects to the holding
of the meeting or transacting specified business at the meeting. Any such
dissenting votes, abstentions or objections shall be entered in the minutes
of the meeting.
ARTICLE VI
COMMITTEES
Section 6.01. Committees of the Board. The Board may designate by a vote
of a majority of the directors then in office committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
Section 6.02. Selection of Committee Members. The Board shall elect by a
vote of a majority of the directors then in office a director or directors to
serve as the member or members of a committee. By the same vote, the Board
may designate other directors as alternative members who may replace any
absent or disqualified member at any meeting of a committee. In the absence
or disqualification of any member of any committee and any alternate member
in his place, the member or members of the committee present at the meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may appoint by unanimous vote another member of the Board to act at
the meeting in the place of the absent or disqualified member.
Section 6.03. Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as the law
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or these Bylaws require otherwise. Each committee shall make adequate
provision for notice of all meetings to members. One-third of the members
shall constitute a quorum, unless the committee consists of one or two
members. In that event, one member shall constitute a quorum. A majority vote
of the members present shall determine all matters. A committee may take
action without a meeting if all the members of the committee consent in
writing and file the consent or consents with the minutes of the proceedings
of the committee.
Section 6.04. Authority. Any committee, to the extent the Board
provides, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and
may authorize the affixation of the Corporation's seal to all instruments
which may require or permit it. However, no committee shall have any power or
authority in regard to amending the Articles of Incorporation, adopting an
agreement of merger or consolidation, recommending to the Stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property, recommending to the Stockholders a dissolution of the Corporation
or a revocation of a dissolution, or amending these Bylaws of the
Corporation. Unless a resolution of the Board expressly provides, no
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 6.05. Minutes. Each committee shall keep regular minutes of its
proceedings and report the same to the Board when required.
ARTICLE VII
OFFICERS
Section 7.01. Officers of the Corporation. The officers of the
Corporation shall consist of a President, a Secretary, a Treasurer and such
Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and other
officers as the Board may elect from time to time. The same person may hold
at the same time any two offices, except the offices of President and
Secretary, President and Assistant Secretary, Vice President and Secretary,
or Vice President and Assistant Secretary.
Section 7.02. Election and Term. The Board shall elect the officers of
the Corporation. Each officer shall hold office until his death, resignation,
retirement, removal or disqualification, or until his successor shall have
been elected and qualified.
Section 7.03. Compensation of Officers. The Board shall fix the
compensation of all officers of the Corporation. No officer shall serve the
Corporation in any other capacity and receive compensation therefor, unless
the Board authorizes such additional compensation.
Section 7.04. Removal of Officers and Agents. The Board may remove any
officer or agent it has elected or appointed whenever the Board judges that
such removal will serve the best interest of the Corporation. However, such
removal shall not prejudice the contractual rights of the person removed, if
any.
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Section 7.05. Registration of Officers and Agents. Any officer or agent
the Board has elected or appointed may resign at any time by giving written
notice to the Board, the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified. Unless
otherwise specified in the notice, the Board need not accept the resignation
to make it effective.
Section 7.06. Bond. The Board may require by resolution any officer,
agent, or employee of the Corporation to give bond to the Corporation, with
sufficient sureties conditioned on the faithful performance of the duties of
his respective office or agency. The Board also may require by resolution any
officer, agent or employee to comply with such other conditions as the Board
may require from time to time.
Section 7.07. President. The President shall be the principal executive
officer of the Corporation and, subject to the Board's control, shall
supervise and control all of the business and affairs of the Corporation.
When present, he shall sign, with the Secretary, an Assistant Secretary, or
any other officer or agent of the Corporation which the Board has authorized,
deeds, mortgages, bonds, contracts or other instruments which the Board has
authorized an officer or agent of the Corporation to execute. However, the
President shall not sign any instrument which the law, these Bylaws or the
Board expressly require some other officer or agent of the Corporation to
sign and execute. In general, the President shall perform all duties incident
to the office of President and such other duties as the Board may prescribe
from time to time.
Section 7.08. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice Presidents in the
order of their length of service as Vice Presidents, unless the Board
determines otherwise, shall perform the duties of the President. When acting
as the President, a Vice President shall have all the powers and restrictions
of the Presidency. Any Vice President may sign, with the Secretary, an
Assistant Secretary, or any other officer or agent of the Corporation which
the Board has authorized, certificates for shares of the Corporation. A Vice
President shall perform such other duties as the President or the Board may
assign to him from time to time.
Section 7.09. Secretary. The Secretary shall: (a) keep the minutes of
the meetings of the Stockholders and of the Board in one or more books
for-that purpose; (b) give all notices which these Bylaws or the law
requires; (c) serve as custodian of the records and seal of the Corporation;
(d) affix the seal of the Corporation to all documents which the Board has
authorized execution on behalf of the Corporation under seal; (e) maintain a
register of the address of each Stockholder of the Corporation; (f) sign,
with the President, a Vice President, or any other officer or agent of the
Corporation which the Board has authorized, certificates for shares of the
Corporation; (g) have charge of the stock transfer books of the Corporation;
and (h) perform all duties which the President or the Board may assign to him
from time to time.
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Section 7.10. Assistant Secretaries. In the absence of the Secretary or
in the event of his death, inability or refusal to act, the Assistant
Secretaries in the order of their length of service as Assistant Secretary,
unless the Board determines otherwise, shall perform the duties of the
Secretary. When acting as the Secretary, an Assistant Secretary shall have
the powers and restrictions of the Secretary. Any Assistant Secretary may
sign, with the President, a Vice President, or any other officer or agent of
the Corporation which the Board has authorized, certificates for shares of
the Corporation. An Assistant Secretary shall perform such other duties as
the President, Secretary or Board may assign from time to time.
Section 7.11. Treasurer. The Treasurer shall: (a) have responsibility
for all funds and securities of the Corporation; (b) receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever; (c) deposit all moneys in the name of the Corporation in
depositories which the Board selects; and (d) perform all of the duties which
the President or the Board may assign to him from time to time.
The Treasurer shall prepare, or have prepared, a true statement of the
Corporation's financial condition as of the close of each fiscal year. The
Treasurer shall file the statement at the Corporation's principal place of
business within four months after the end of the fiscal year. The Treasurer
shall keep the statement available for inspection at that place for a period
of at least ten years. The statement shall contain, when applicable, a
statement of the then current conversion rate of any outstanding securities.
The statement also shall include, when applicable, a statement of the number
of shares subject to options and the exercise price of the options.
Section 7.12. Assistant Treasurers. In the absence of the Treasurer or
in the event of his death, inability or refusal to act, the Assistant
Treasurers in the order of their length of service as Assistant Treasurer,
unless the Board determines otherwise, shall perform the duties of the
Treasurer. When acting as the Treasurer, an Assistant Treasurer shall have
the powers and restrictions of the Treasurer. An Assistant Treasurer shall
perform such other duties as the Treasurer, the President or the Board may
assign to him from time to time.
Section 7.13. Delegation of Authority. Notwithstanding any provision of
these Bylaws to the contrary, the Board may delegate the powers or duties of
any officer to any other officer or agent.
Section 7.14. Action with Respect to Securities of Other Corporations.
Unless the Board directs otherwise, the President shall have the power to
vote and otherwise act on behalf of the Corporation, in person or by proxy,
at any meeting of Stockholders of or with respect to any action of
Stockholders of any other corporation in which the Corporation holds
securities. Furthermore, unless the Board directs otherwise, the President
shall exercise any and all rights and powers which the Corporation possesses
by reason of its ownership of securities in another corporation.
Section 7.15. Vacancies. The Board may fill any vacancy in any office
because of death, resignation, removal, disqualification or any other cause
in the manner which these Bylaws prescribe for the regular appointment to
such office.
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ARTICLE VIII
CONTRACTS, LOANS, DRAFTS
DEPOSITS AND ACCOUNTS
Section 8.01. Contracts. The Board may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation. The Board may
make such authorization general or special.
Section 8.02. Loans. Unless the Board has authorized such action, no
officer or agent of the Corporation shall contract for a a loan on behalf of
the Corporation or issue any evidence of indebtedness in the Corporation's
name.
Section 8.03. Drafts. such persons as the Board shall determine shall
issue all checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of or payable by the
Corporation.
Section 8.04. Deposits. The Treasurer shall deposit all funds of the
Corporation not otherwise employed in such banks, trust companies or other
depositories as the Board may select or as any officer, assistant, agent or
attorney of the Corporation to whom the Board has delegated such power may
select. For the purpose of deposit and collection for the account of the
Corporation, the President or the Treasurer (or any other officer, assistant,
agent or attorney of the Corporation whom the Board has authorized) may
endorse, assign and deliver checks, drafts and other orders for the payment
of money payable to the order of the Corporation.
Section 8.05. General and Special Bank Accounts. The Board may authorize
the opening and keeping of general and special bank accounts with such banks,
trust companies or other depositories as the Board may select or as any
officer, assistant, agent or attorney of the Corporation to whom the Board
has delegated such power may select. The Board may make such special rules
and regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE IX
CERTIFICATES FOR SHARES AND THEIR
TRANSFER
Section 9.01. Certificates for Shares. Every owner of stock of the
Corporation shall have the right to receive a certificate or certificates,
certifying to the number and class of shares of the stock of the Corporation
which he owns. The Board shall determine the form of the certificates for the
shares of stock of the Corporation. The secretary, transfer agent, or
registrar of the Corporation shall number the certificates representing
shares of the stock of the Corporation in the order in which the Corporation
uses them. The President or any Vice
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President and the Secretary or any Assistant Secretary shall sign the
certificates in the name of the Corporation. Any or all certificates may
contain facsimile signatures. In case any officer, transfer agent or
registrar who has signed a certificate, or whose facsimile signature appears
on a certificate, ceases to serve as such officer, transfer agent or
registrar before the Corporation issues the Certificate, the Corporation may
issue the certificate with the same effect as though the person who signed
such certificate, or whose facsimile signature appears on the certificate,
was such officer, transfer agent or registrar at the date of issue. The
Secretary, transfer agent, or registrar of the Corporation shall keep a
record in the stock transfer books of the Corporation of the names of the
persons, firms or corporations owning the stock represented by the
certificates, the number and class of shares represented by the certificates
and the dates thereof and, in the case of cancellation, the dates of
cancellation. The Secretary, transfer agent, or registrar of the Corporation
shall cancel every certificate surrendered to the Corporation for exchange or
transfer. Except in the case of a lost, destroyed or mutilated certificate,
the Secretary, transfer agent, or registrar of the Corporation shall not
issue a new certificate in exchange for an existing certificate until he has
canceled the existing certificate.
Section 9.02. Transfer of Shares. The holder of record of shares of the
Corporation's stock, or his attorney-in-fact authorized by power of attorney
duly executed and filed with the Secretary, transfer agent or registrar of
the Corporation, may transfer his shares only on the stock transfer books of
the Corporation. Such person shall furnish to the Secretary, transfer agent,
or registrar of the Corporation proper evidence of his authority to make the
transfer and shall properly endorse and surrender for cancellation his
existing certificate or certificates for such shares. Whenever the holder of
record of shares of the Corporation's stock makes a transfer of shares for
collateral security, the Secretary, transfer agent, or registrar of the
Corporation shall state such fact in the entry of transfer if the transferor
and the transferee request.
Section 9.03. Lost, Stolen, Destroyed and Mutilated Certificates. The
Board may direct the Secretary, transfer agent, or registrar of the
Corporation to issue a new certificate to any holder of record of shares for
the Corporation's stock claiming that he has lost such certificate, or that
someone has stolen, destroyed or mutilated such certificate, upon the receipt
of an affidavit from such holder to such fact. When authorizing the issue of
a new certificate, the Board, in its discretion, may require as a condition
precedent to the issuance that the owner of such certificate give the
Corporation a bond of indemnity in such form and amount as the Board may
direct.
Section 9.04. Regulations. The Board may make such rules and
regulations, not inconsistent with these Bylaws, as it deems expedient
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. The Board may appoint, or authorize any officer
or officers to appoint one or more transfer agents, or one or more registrars,
and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 9.05. Holder of Record. The Corporation may treat as absolute
owners of shares the person in whose name the shares stand of record as if
that person had full competency,
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capacity and authority to exercise all rights of ownership, despite any
knowledge or notice to the contrary or any description indicating a
representative, pledge or other fiduciary relation, or any reference to any
other instrument or to the rights of any other person appearing upon its
record or upon the share certificate. However, the Corporation shall treat
any person furnishing proof of his appointment as a fiduciary as if he were
the holder of record of the shares.
Section 9.06. Treasury Shares. Treasury shares of the Corporation shall
consist of shares which the Corporation has issued and thereafter acquired
but not canceled. Treasury shares shall not carry voting or dividend rights.
ARTICLE X
INDEMNIFICATION
Section 10.01. Action Other Than By or In the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust of other enterprise or as a member of any committee or
similar body, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not
create, of itself, a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Section 10.02. Actions By or In the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or as a member of any committee or
similar body, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Corporation,
except that the Corporation shall make no indemnification in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for
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negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 10.03. Determination of Right of Indemnification. The
Corporation shall not indemnify any person under Section 10.01 or Section
10.02, in the absence of a court order, unless authorized in the specific
case upon a determination that the director, officer, employee or agent has
met the applicable standard of conduct set forth in Section 10.01 or Section
10.02. One of the following shall make the determination: (a)the Board, by a
majority vote of a quorum of directors not a party to the action, suit or
proceeding; (b)absent a quorum or at the direction of a quorum of
disinterested directors, independent legal counsel, by a written opinion; or
(c)the Stockholders.
Section 10.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 10.01 or Section 10.02 of these Bylaws, or in defense
of any claim, issue or matter therein, the Corporation shall indemnify him
against expenses (including attorneys' fees) which he actually and reasonably
has incurred in connection therewith.
Section 10.05. Advance of Expenses. The Corporation may pay expenses
incurred in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon
specific authorization by the Board and upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount if
the Corporation ultimately determines that the Corporation should not
indemnify him pursuant to the provisions of this Article.
Section 10.06. Other Rights and Remedies. The indemnification provided
by this Article shall not be deemed exclusive and is declared expressly to be
nonexclusive of any other rights to which those seeking indemnification may
be entitled under any Bylaws, agreement, note of Stockholders or
disinterested directors or otherwise, both as to actions in his official
capacity and as to actions in another capacity while holding such office, and
shall continue as to any person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 10.07. Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise or as a member of any committee or similar body, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such,
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whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 10.08. Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body, shall stand in the same position under the provisions of the Article
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its existence had continued.
Section 10.09 Other Insurance. The Corporation shall reduce the amount
of the indemnification of any person pursuant to the provisions of this
Article by the amount which such person collects as indemnification (a)under
any policy of insurance which the Corporation purchased and maintained on his
behalf or (b)from another corporation, partnership, joint venture, trust or
other enterprise.
Section 10.10. Public Policy. Nothing contained in this Article, or
elsewhere in these Bylaws, shall operate to indemnify any director or officer
if such indemnification is contrary to law, either as a matter of public
policy, or under the provisions of the Federal Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, or any other
applicable state or Federal law.
ARTICLE XI
NOTICES
Section 11.01. General. Whenever these Bylaws require notice to any
Stockholder, director, officer or agent, such notice does not mean personal
notice. A person may give effective notice under these Bylaws in every case
by depositing a writing in post office or letter box in a postpaid, sealed
wrapper, or by dispatching a prepaid telegram addressed to such Stockholder,
director, officer or agent at his address on the books of the Corporation.
Unless these Bylaws expressly provide to the contrary, the time when the
person sends notice shall constitute the time of the giving of notice.
Section 11.02. Waiver of Notice. Whenever the law or these Bylaws
require notice, the person entitled to said notice may waive such notice in
writing, either before or after the time stated therein.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. Facsimile Signatures. In addition to the use of facsimile
signatures which these Bylaws specifically authorize, the Corporation may use
such facsimile signatures of any officer or officers, agents or agent, of the
Corporation as the Board or a committee of the Board may authorize.
Section 12.02. Corporate Seal. The Board may provide for a suitable seal
containing the name of the Corporation, of which the Secretary shall be in
charge. The Treasurer, any Assistant Secretary, or any Assistant Treasurer
may keep and use the seal or duplicates of the seal if and when the Board or
a committee of the Board so directs.
Section 12.03. Fiscal Year. The Board shall have the authority to fix
and change the fiscal year of the Corporation.
ARTICLE XIII
AMENDMENTS
The Board of Directors shall have the power by the affirmative vote of
the majority of the members of the Board of Directors then in office to
adopt, amend, alter, change and repeal any bylaws of the Corporation;
provided, however, the Board may not adopt or alter any provision of these
Bylaws fixing the number, qualifications, classifications or term of office
of the directors adopted by the stockholders. In addition to any requirements
of the Delaware General Corporation law (and notwithstanding the fact that a
lesser percentage may be specified by the Delaware General Corporation Law),
the affirmative vote of the holders of at least 66-2/3% of the voting power
of all of the shares of capital stock of the Corporation then entitled to
vote generally in the election of directors, voting together as single class,
shall be required for the stockholders of the Corporation to adopt, amend,
alter, change or repeal any bylaws of the Corporation. No bylaws hereafter
adopted shall invalidate any prior act of the directors that would have been
valid if such new bylaws had not been adopted.
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EXHIBIT 4.7
CERTIFICATE OF DESIGNATIONS
PREFERENCES, AND RIGHTS OF SERIES C VOTING CONVERTIBLE
PREFERRED STOCK
OF
UNICO, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
UNICO, Inc., a Delaware corporation (the "Corporation"), certifies that
pursuant to the authority contained in Article 4 of its Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors has
adopted the following resolution creating a series of its Preferred Stock
designated as Series C Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restriction thereof are as follows:
Series C Preferred Stock. UNICO has created and reserved 2,000,000
shares of Series C Preferred Stock designating therefor rights and privileges to
the Holder thereof
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identical in each and every respect to the rights and privileges of Holders
of shares of Common Stock except in the following respects:
a. Dividends. Holders of Series C Preferred Stock and the holders of
Common Stock shall be entitled to receive, when and as declared by the Board
of Directors, dividends (payable in cash, stock or otherwise) out of any
funds legally available therefore, provided that neither the Series C
Preferred Stock nor the Common Stock shall be preferred over the other as to
any dividend or distribution except as provided in Subsection c hereof.
Neither the holders of the Series C Preferred Stock nor the holders of the
Common Stock shall be entitled to receive any dividend or distribution which
is not identical in kind, record and payment date per share for each class
except as provided in subsection c. The amount of any dividend or
distribution to the holders of Series C Preferred Stock shall be four times
that of the dividend or distribution to any holder of Common Stock.
b. Voting Rights. The holders of Series C Preferred Stock shall have the
following voting rights:
(A) Each shares of Series C Preferred Stock shall entitle the
holder thereof to four votes on all matters submitted to a vote of the
Corporation's stockholders;
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(B) Except as otherwise provided herein or by law, the holders of
Series C Preferred Stock and the holders of Common Stock shall vote together
as one class on all matters submitted to a vote of the Corporation's
stockholders.
c. Liquidating Preference.
In the event of a voluntary or involuntary liquidation, dissolution
or winding up of UNICO, the holders of Series C Preferred Stock shall be
entitled to be paid the sum of $1.00 per share before any distribution or
payment shall be made to the holder of any Common Stock
d. Call, Redemption or Conversion.
Neither the Series C Preferred Stock nor the Common Stock into which
it may be converted shall be subject to or enjoy any call or redemption or
conversion rights by UNICO or the holders thereof except as follows:
The holders' of Series C Preferred Stock shall have the right, at the
holders option, at any time, to convert all or in multiples of 250 shares any
part of their holdings of Series C Preferred Stock into such number of fully
paid and nonassessable shares of Common Stock $.01 par value of UNICO as
shall be provided for herein.
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i. Conversion Ratio
Each share of Series C Preferred Stock shall be
convertible into four shares of UNICO's Common Stock, subject to adjustment
at the time of conversion in accordance with the provisions hereof.
ii. Adjustment to Conversion Ratio
The parties acknowledge their intent to establish a
preferred stock conversion ratio which yields one share of UNICO Common Stock
for every $.25 of indebtedness under the Debenture and Convertible Notes
converted, redeemed and exchanged hereunder. If and whenever any additional
shares of Common Stock are issued by UNICO for a net consideration per share
less than $.25 per share then in each such case the conversion price shall be
reduced to the net consideration received per share and the number of shares
issuable to the holder of Series C Preferred Stock shall be proportionately
increased. Further, in the event that UNICO shall at any time change as a
whole by subdivision or combination in any manner or by the making of a stock
dividend the number of shares of Common Stock then outstanding into a
different number of shares, with or without par value, then thereafter the
number of shares of Common Stock issuable upon the conversion of Series C
Preferred Stock shall be increased or decreased as the case may be in direct
proportion to the increase or decrease in the number of shares of Common
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Stock by reason of such change; provided however that no adjustment in the
conversion ratio shall be made hereunder in either of the following cases:
1. A stock dividend on the Common Stock where the
identical stock dividend in Common Stock was paid in the Series C Preferred
Stock; and
2. A subdivision or combination of the Common Stock where
the identical subdivision or combination was made on the Series C Preferred
Stock.
Further, in the event of any capital reorganization or reclassification
of Common Stock of the corporation (other than a change in par value or from
par value to no par value or from no par value to par value as a result of a
subdivision or combination), or in case of the consolidation or merger of the
corporation with or into any other corporation (other than a consolidation or
merger in which the corporation is the continuing corporation and which does
not result in any change in the Common Stock), or of the sale of the
properties and assets of the corporation as, or substantially as, an entity
to any other corporation, each share of Series C Preferred Stock shall after
such capital reorganization, reclassification of capital stock,
consolidation, merger or sale entitle the holder to obtain the kind and
number of shares of Common Stock or other securities or property of the
corporation or of the corporation resulting from such consolidation or
surviving such merger or to which such sale shall be made, as the case may
be, to which such holder would have been entitled if he had held the Common
Stock issuable upon conversion of such shares of Series C Preferred Stock
immediately prior to such capital reorganization, reclassification
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of capital stock, consolidation, merger or sale. All calculations under this
subsection shall be made to the nearest share or dollar as the case may be.
iii. Automatic Conversion
On August 1, 1998 or, if earlier, the date upon which a
registration statement with respect to an offering of UNICO's securities is
declared effective, ( the "Automatic Conversion Date"), the Series C
Preferred Stock shall thereupon be automatically converted into Common Stock
in accordance with the conversion ratio above specified. From and after the
Automatic Conversion Date, each outstanding certificate which prior to the
Automatic Conversion Date represented Series C Preferred Stock shall be
deemed for all corporate purposes to evidence the ownership of the whole
number of duly issued and outstanding shares of Common Stock into which the
shares of Series C Preferred Stock have been so converted and upon surrender
of such certificate the holder shall be entitled to receive in exchange
therefore a certificate or certificates representing the whole number of
shares of Common Stock into which the shares of Series C Preferred Stock
theretofore represented by such certificate have been converted as aforesaid.
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iv. Certificates Upon Conversion
As promptly as practicable after surrender for conversion
of a certificate representing shares of Series C Preferred Stock, UNICO shall
deliver to or upon written order of the holder of the share of Series C
Preferred Stock so surrendered a certificate representing the number of fully
paid and nonassessable shares of Common Stock into which such Series C
Preferred Stock may be converted in accordance with the provisions hereof.
With respect to conversions prior to the Automatic Conversion Date such
conversion shall be deemed to be made at the close of business on the date
that such Series C Preferred Stock shall have been surrendered for conversion
so that the rights of the holder of such Series C Preferred Stock as a holder
of Series C Preferred Stock shall cease at such time and the person or
persons entitled to receive the shares of Common Stock upon conversion of
such Series C Preferred Stock shall be treated for all purposes as having
become the record holder or holders of such shares of Common Stock at such
time.
v. Registration Rights
Upon conversion of the Series C Preferred Stock into
Common Stock, Renaissance shall have with respect to such Common Stock as is
issued in exchange for UNICO's indebtedness under the Loan Agreement and
Debenture, the demand and piggyback registration rights provided for in the
Registration Rights Agreement. Duncan Smith and Renaissance shall have with
respect to such Common Stock as is issued in
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exchange for UNICO's indebtedness under the Convertible Notes, the demand
registration rights provided for in the Convertible Notes.
IN WITNESS WHEREOF, UNICO, INC. has caused this Certificate of
Designations, Preferences and Rights of Series C Voting Convertible Preferred
Stock to be duly executed by its President and attested to by its Secretary
and has caused its corporation seal to be affixed hereto, this 30th day of
July, 1996.
UNICO, INC.,
A Delaware corporation
By:/s/Gerard Bernier, President
---------------------------------
Gerard Bernier, President
ATTEST:
- ---------------------
Secretary
(SEAL)
I:\DATA\USERS\PAMOU\UNICO\SERIESC.CRT
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EXHIBIT 10.32
EMPLOYMENT AGREEMENT
AGREEMENT is made this 1st day of April 1996, by and between United
Coupon Corporation, a Virginia corporation ("Employer") and Gerard R. Bernier
("Employee").
WITNESSETH:
WHEREAS, the Employee has agreed to be employed by the Employer as its
Chief Executive Officer and President;
WHEREAS, it is in the Employer's best interest to obtain the services of
the Employee;
WHEREAS, the Employer and the Employee have previously engaged in
negotiations regarding the terms and conditions of their future employment
relationship;
WHEREAS, the Employer and the Employee are desirous of now committing to
writing the agreed upon terms and conditions of their future employment
relationship by way of this Agreement.
NOW, THEREFORE, for and in consideration of the sum of Ten dollars
($10.00), in hand paid for by the Employer to the Employee and other valuable
consideration, receipt of which is hereby acknowledged, and the covenants,
conditions and promises herein contained, it is hereby agreed as follows:
1. Employment. The Employer, by authorization of the Compensation
Committee of the Board of Directors for the sole shareholder of Employer, and
by resolution duly adopted by Employer's Board of Directors ("the Board"), a
copy of the Compensation Committee's authorization and the Board's resolution
to be attached hereto as Exhibit A and a certified copy delivered to the
Employee, hereby authorizes and agrees to employ the Employee and confirms
said authority by the Chairman of the Board executing this Agreement on
behalf of the Employer, and the Employee hereby accepts said employment upon
the terms and conditions hereinafter set forth.
2. Positions and Titles. The Employee shall have the title of chief
Executive Officer and President of United Coupon Corporation, and shall be
appointed to such standing committees of the Employer that are or may be
formed during the period of this Agreement. The Employee shall perform such
duties as are normally associated with the position of Chief Executive
Officer and President of the Employer and such additional duties as may, from
<PAGE>
time to time, be assigned by the Employer's Board of Directors, and shall
further have the usual authority associated with said position and office as
more fully described in the By-Laws of the Employer in effect during the term
of this Agreement.
3. Term. The term or period of this Agreement shall be for the
period beginning on the date of execution hereof and ending on March 31,
1999, provided, however, that the term of this Agreement shall be
automatically extended under the same terms and conditions for additional
terms of two years each unless at least ninety (90) days prior to expiration
of the initial term or any subsequent terms, either party shall deliver to
the other written notice of their intent to terminate said employment or to
negotiate other terms and conditions thereof. In the event this Agreement is
not renewed or extended, Employee shall be paid compensation which would have
been paid under this Agreement for twelve (12) months after expiration of the
initial term or any subsequent terms. The Employee agrees to remain in the
employ of the Employer during the period this Agreement is in effect unless
terminated pursuant to either paragraph 7, 8 or 12 herein.
4. Performance of Duties. During the period of the Employee's
employment, he shall perform faithfully the duties required of him and agrees
to devote his entire time, attention, skill and ability to the performance of
such duties. The foregoing, however, shall not be construed as preventing
the Employee from investing his assets in such manner as will not require any
services on the part of the Employee in the operation or the affairs of the
entities in which such investments are made nor will the foregoing prevent
the Employee from serving on the Boards of Directors of other corporations as
may be approved by the Board of Directors of the sole shareholder of
Employer, providing such does not: interfere with the performance of his
duties for the Employer; or create any actual or potential conflict of
interest with respect to the Employee's loyalties, obligations or duties to
the Employer.
5. Compensation. The employer shall pay to the Employee as
compensation for his services hereunder, the amounts set forth, subject to
the further provisions of this paragraph:
(A) Salary. The employee shall be paid an annual salary of not
less than One Hundred Twenty Five Thousand ($125,000.00), payable pursuant to
the Employer's salary payment practices, to be reviewed by the Compensation
Committee one (1) month prior to the end of each fiscal year and adjusted
upward as the parties may mutually agree. In the event that the "Consumer
Price Index, Washington, D.C. Area, all items", published by the Bureau of
Labor Statistics of the United States Department of Labor shall indicate as
of December 31 of any year commencing with 1995 that the average cost of
living during the year then ended and any succeeding year during the period
of the Employee's employment hereunder shall have
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increased over the average cost of living during the year ending December 31,
1994 (determined on a cumulative basis), then the salary referred to in the
preceding sentence shall be increased prospectively, effective on the 1st day
of January thereafter to reflect a percentage increase equal to the increase
in the Consumer Price Index.
(B) Percentage Compensation. The Employee shall be paid
annually, in addition to salary, a percentage compensation bonus equal to
five percent (5.0%) of the Pre-Tax Profits of the Employer's Business (as such
term is hereinafter defined) for the fiscal years ending December 31, during
the term of this agreement.
Pre-Tax Profits shall mean the profits of the Employer's Business as
determined in accordance with generally accepted accounting principles
consistently applied before deduction for any federal, state or local income
taxes and without considering charges or credits of an extraordinary or
non-operating nature, unless agreed to in entirety by the parties.
As an example, Pre-Tax Profits will not include gains associated with sale of
equipment or facilities utilized in the operation of the Employer's Business,
or non-cash gains from settlement of legal or operational matters. Bonuses
paid to other employees, not including percentage compensation paid hereunder
to Employee, are expenses to be included in computing Pre-Tax Profits.
Pre-Tax Profits of the Employer's Business shall not reflect charges, for the
portions of salaries of the management of UNICO, Inc. and/or its subsidiaries
(other than the Employer of its subsidiaries) or any items of general
corporate overhead of UNICO, Inc., and/or its subsidiaries (other than the
Employer and its subsidiaries) or management fees paid or payable to UNICO,
Inc. except for charges directly related to the operations or compliance
requirements of Employer. Any interest component included in the management
fee billed to Employer by UNICO, Inc. will be deducted in determining Pre-Tax
Profit.
Employee shall be entitled to receive the percentage compensation payable
hereunder provided Pre-Tax Profits, as computed hereunder, equal or exceed
$350,000 (not including any reduction by virtue of Percentage Compensation
payable to Employee.) For example, if the Pre-Tax Profit computed hereunder,
equals $300,000, Employee shall not be entitled to receive Percentage
Compensation. Alternatively, if the Pre-Tax Profits computed hereunder,
equal $400,000, Employee shall be entitled to receive $20,000. The
percentage compensation payable hereunder shall be payable promptly after
determination thereof by Employer, following completion of the annual
independent audit.
(C) Definition of Employer's Business. For purposes of
subsection (B) hereof, the term "Employer's Business" shall mean
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<PAGE>
the present line of business of the Employer and future extensions and
expansions thereof. The employee understands that the Employer may be merged
into another subsidiary of UNICO, Inc. or operated as a direct or indirect
subsidiary of UNICO, Inc. other than in its present corporate form, whether
by merger, consolidation and/or transfer of the Employer's assets to UNICO,
Inc. or another subsidiary of UNICO, Inc. and the Employer's Business may be
operated other than in its present corporate form or as a division of such
other subsidiary. In such case, the Employer's Business shall be kept as a
separate and discrete entity with its own books and records for the purpose
of determining Employee's compensation.
(D) Director's and Committee Attendance Fees. The Employee
shall be entitled to receive fees for attendance at all meetings of the Board
and standing committees to which he has been appointed, payable at such times
as shall be in accordance with the Employer's practices and at the rates
determined by the Board and the Compensation Committee of UNICO, Inc.
6. Additional Benefits. In addition to the salary specified in
paragraph 5(A) and Percentage Compensation specified in Paragraph 5(B) above,
Employer shall provide Employee comparable additional benefits as are
provided to officers of other subsidiaries of the employer's parent
corporation, UNICO, Inc., holding the title or position of Chief Executive
Officer of said subsidiaries; provided, however, the said additional benefits
shall not be less favorable to Employee than as more particularly described
in subparagraphs (A) through (F) of this paragraph 6. The term "comparable"
as used in this paragraph 6 shall mean: by using the same factors, formulae
and considerations, and especially the contribution to the profits of UNICO,
Inc., as may be utilized in determining the benefits granted to the aforesaid
officers of other UNICO, Inc. subsidiaries.
(A) Vacations and Sick Leave. The Employee shall be entitled to
reasonable vacations and sick leave, in line with prevailing policies in
effect for Employer.
(B) Business Expenses. The Employer will reimburse the Employee
in full for all reasonable (as determined by Employer's Board of Directors)
expenses incurred by the Employee in pursuit of the Employer's business
during the period of this Agreement. The Employee shall be required to
submit the appropriate expense reports and vouchers in support of the
expenses incurred on behalf of the Employer as required by the general
practices and procedures of the Employer and in compliance with all
reasonable business expense requirements of the Internal Revenue Service.
(C) Hospital, Medical and Dental Reimbursement Plan. The
Employer shall provide, at its cost, the Employee Health, Major Medical and
Dental benefits for the Employee and his immediate family no less favorable
than Employee had enjoyed during his
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employment by United Coupon Corporation prior to the date of execution hereof.
(D) Life Insurance.
(1) During the term of this Agreement, the Employer shall
obtain and pay the premium, up to a limit of $5,000 annually, on a whole life
insurance policy currently in existence on the Employee in the face amount of
One Hundred Fifty Thousand Dollars ($150,000.00). The Employee shall be
entitled to designate the beneficiary under such policy of insurance. The
Employer agrees that it shall:
(a) Pay the premium on such policy and otherwise
maintain it in full force and effect.
(b) Not borrow on the policy or otherwise encumber it.
(c) Regularly exhibit to the Employee, if requested,
receipts for premium payments.
(d) Reimburse Employee for all Federal, State and
other taxes paid by Employee as a result of any Life
Insurance premium payments being reported as income by
such Employee.
(2) The Employee shall also have the right to elect to
purchase by payroll deduction, additional whole life insurance in Ten
Thousand Dollar ($10,000.00) increments up to One Hundred Thousand Dollars
($100,000.00) at a rate then in effect at the time of purchase. The Employee
may be required to provide evidence of insurability, if requested by the
appropriate insurance carrier, as a condition to purchasing any increment.
(3) Employee agrees that the Employer and/or UNICO, Inc.,
in the discretion of either party, may apply for and procure, in its own name
and for its own benefit, life insurance in an amount or amounts considered
advisable and that he shall have no right, title, or interest therein and
further, agrees to submit to any medical or other examination and to execute
and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
(E) Automobile. During the term hereof, the Employer shall
provide the Employee with an automobile or monthly car allowance comparable in
purchase price or amount to that presently provided to officers of Employer,
including, in lieu of a monthly allowance, the payment of all costs and
expenses incidental to the operation, maintenance and repair of said
automobile.
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(F) Disability. If the Employee becomes unable to perform the
services expected hereunder by reason of illness or incapacity, his full
compensation, including Percentage Compensation and all benefits shall be
continued for a period of 180 days from the last day of the month that the
Corporation determines that the Employee is first disabled. At the end of
such 180 days, his compensation by the Employer shall cease; but said
Employee shall be entitled to a leave of absence for the balance of the term
of the Agreement, during any continuance of such inability to perform. The
Employer, at its expense, will acquire disability insurance on the Employee
in an amount equal to sixty-percent (60%) of the Employee's base salary
(exclusive of additional Percentage Compensation) which will become effective
after a 180-day waiting period. Proceeds from such disability insurance will
be paid directly to Employee by the insurance carrier, as provided by the
insurance policy.
7. Termination. This Agreement may be terminated pursuant to the
following:
(A) Voluntary Termination. The Employer and Employee may
voluntarily terminate this Agreement by mutual written consent.
(B) Involuntary Termination. This Agreement may be terminated
by the Employer for "Just Cause", or as provided for in paragraph 12. For
purposes of this Agreement, "Just Cause" shall mean: Unappealable conviction
by a trial court of a felony or crime involving moral turpitude; declaration
of unsound mind by court order; or the failure to diligently apply himself to
the duties required by Employer. In the event the Employee is judged by
Employer as failing to diligently apply himself to the duties hereunder,
Employer will provide written notice to Employee specifying with
particularity the conduct constituting such failure and such steps as are
necessary to warrant the deficiency of performance. Employee will be allowed
ninety (90) days from the date of such notice to attempt to correct the
deficiencies. Upon the expiration of this cure period, Employer will provide
written notice to Employee of the adequacy or failure of efforts made by
Employee to correct the deficiencies. The Employer agrees to provide the
Employee at least sixty (60) days written notice of termination pursuant to
this subparagraph. In the event of a termination, Employee shall be paid the
same compensation which would be paid under this Agreement through the end of
the term of this Agreement including all benefits. In the event of a
termination pursuant to this subparagraph, the percentage compensation
payable to Employee pursuant to paragraph 5(B) hereof, for the fiscal year
within which said termination occurs, shall be pro-rated and paid to Employee
through the date of termination of Employee's daily managerial
responsibilities. Such percentage compensation will be paid within ninety
(90) days following the end of the fiscal year.
6
<PAGE>
(C) Severance Pay. Upon termination or non-renewal of this
agreement, Employee will be paid the sum of $5,000 for each year of
employment with the company in addition to any other compensation that may be
due employee.
8. Change of Ownership. This Agreement shall terminate in the event
that the Corporation's assets, and/or goodwill, or its stock are purchased in
conjunction with a corporate (stock or assets) sale, merger, Employee shall
be entitled to his annual salary and percentage compensation from the
effective date of such transaction, through the end of the term of this
Agreement or for a period of one (1) year, whichever such period is longer,
provided Employee is not offered a comparable position with the acquiring
company or operation. All such compensation and severance pay will be paid
within ninety (90) days of the effective date of the dissolution. In the
event of such payment, Employer and Employee shall have no further
obligations under this Agreement except that Employer will pay all premiums
for health insurance policies then in effect for Employee, through the end
of such compensation period.
9. Covenants Against Competition. The Employee agrees that he will
not, unless acting with the written consent of the Employer, at any time
during the term of his employment, directly or indirectly, be employed by,
consult with, own (as a stockholder or otherwise in a proprietary capacity),
manage, operate or control any firm or company engaged in, or in manner
carry on or engage in, a business competitive with the Employer's business
now or hereinafter carried on by the Employer in the Continental United States
and all territorial possessions. The foregoing shall not preclude the
Employee from making investments in any public corporation in the management
of which the Employee shall not be involved. The Employee further agrees:
(A) That he shall not, during the term of his employment and for a
period of one (1) year after the term of his employment, unless acting with
the prior written consent of the Employer and UNICO, Inc., disclose to any
person, firm, corporation or other entity, except as required by
law, any then confidential information, know-how trade secrets or other
proprietary information of the Employer or any of its
affiliates acquired by Employee during the term of this Agreement or any such
prior agreements.
(B) That upon the completion of the term of his employment or upon
the termination of the Agreement by Employee or Employer, and for a period of
one (1) year thereafter:
(i) Employee will not start any company or continue any
company in competition with the Employer;
7
<PAGE>
(ii) Employee will not solicit or hire or employ, directly or
through any entity of which Employee is a beneficial owner, any
Employee or Franchisee of the Employer; and
(iii) Employee will not solicit, directly or through any
entity of which Employee is a beneficial owner, any current,
marketed or targeted customers of Employer.
10. Obligations on Termination. In addition to the obligations on the
Employee set forth in paragraph 9 herein, upon termination of employment for
any reason, the Employee shall deliver to the Employer all correspondence,
letters, records, computer programs, data bases and any and all other
material pertaining to or containing information relative to the business of
the Employer or its affiliates which the Employee has acquired during his
association with the Employer.
11. Indemnification. The Employer agrees to indemnify and defend
Employee (and his heirs, executor, and administrators) from all claims,
liabilities, judgements, settlements, costs and expenses, including all
attorneys' fees, imposed upon or reasonably incurred by him in connection
with or resulting from any action, suit, proceeding, or claim to which he is
or may be made a party by reason of his being or having been an employee of
the Employer (whether or not an employee at the time such costs or expenses
are incurred by or imposed upon him) to the full extent provided for in the
Employer's Articles of Incorporation or the Statutes of the Commonwealth of
Virginia, whichever is broader, as in effect on the date of execution hereof.
Such right of indemnification shall not be deemed exclusive of any rights to
which he many be entitled otherwise.
12. Death of Employee. In the event of the Employee's death during the
term of this Agreement, the Agreement shall stand terminated and all payments
hereunder shall ceases as of the date of death, except as to the following:
(A) The base salary being paid to the Employee by the Employer as
of the date of death shall continue to be paid to Employee's estate for a
period of one hundred eighty (180) days after the date of death.
(B) The percentage compensation payable to the Employee by the
Employer for the fiscal year within which the date of death occurs shall be
prorated through the date of death and paid to Employee's estate within
ninety (90) days following the end of the fiscal year.
8
<PAGE>
(C) The Employer shall cooperate and take all necessary steps to
effectuate the payment of the life insurance proceeds established in
paragraph 6(D) of this Agreement.
(D) All accrued and unpaid benefits under this Agreement,
whatsoever in nature, shall be payable to the Employee's estate.
13. Assignment of Agreement. The obligations of the Employer under
this Agreement shall be binding upon the successors and assigns of the
Employer. In the event this contract is assigned, Employee shall be entitled
to enforce the provisions of this Agreement or, in his sole discretion,
terminate this Agreement upon the terms provided in paragraph 8 hereof. For
purposes of this Agreement, the term "successors" and "assigns" shall include
any person, firm, corporation, or other entity which at the time, whether by
merger, reorganization, purchase, or otherwise, shall acquire all or
substantially all the assets, stock, or business of the Company.
14. Amendments. This Agreement cannot be changed or terminated orally
and no waiver of compliance with any provision or condition hereof shall be
effective unless evidenced by an instrument in writing duly executed by the
parties hereto and sought to be changes by such waiver.
15. Writing. This Agreement sets forth the entire understanding of the
parties with respect to the employment of the Employee by the Employer and
supersedes any and all prior agreements, arrangements and understanding
relating to the subject matter hereof. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns.
16. Waiver. The waiver by the Employer or the Employee of any breach
of any provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent breach of this Agreement.
17. General Provisions.
(A) Should any controversy or claim arise out of or relate to
the Agreement, or a breach thereof, the parties shall attempt to negotiate a
settlement of their differences. If, however, the negotiations are
unsuccessful, either party may seek the aid of a court of competent
jurisdiction in Virginia. In that event, the court shall deny attorneys'
fees and costs to the party not prevailing and award the same to the party
who prevails. Notwithstanding the foregoing, any controversy or claims
arising out of, or relating to this Agreement or the breach thereof, shall at
the option of either party, be settled by arbitration in the Washington, D.C.
area in accordance with the rules of commercial
9
<PAGE>
arbitration then obtaining of the American Arbitration Association, and
judgement upon the award rendered may be entered in any court having
jurisdiction thereof. Cost of such arbitration will be borne by Employer.
(B) In the event that any term, provisions, or paragraph of this
Agreement is declared illegal, void or unenforceable, the same shall not
effect or impair the other terms, provisions or paragraphs of this Agreement.
Covenants contained in this Agreement shall be independent. The doctrine of
severability shall be applied. The parties do not intend by this statement
to imply the illegality, voidness or unenforceability of any of the terms,
provisions or paragraphs of this Agreement.
18. Captions. The captions for each paragraph are not part of this
Agreement, but are for identification purposes.
19. Governing Law. This Agreement is made under and shall be construed
pursuant to the other laws of Virginia.
20. Notices. Any notice, writing, report or other document required or
permitted hereunder shall be in writing and shall be given by prepaid
registered or certified mail, with return receipt requested, addressed as
follows:
IF TO THE EMPLOYER:
United Coupon Corporation
c/o UNICO, Inc.
8380 Alban Road
Springfield VA 22153
Attention: Chairman of the Compensation Committee
IF TO THE EMPLOYEE:
Gerard R. Bernier
HC 73 Box 831 B-LOW
Locust Grove VA 22508
The date of any such notice and of service thereof shall be seemed to be the
date of dispatch. Either party may change its address for purposes of notice
by giving notice in accordance with the provisions of this paragraph.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the date and year first above written.
FOR THE EMPLOYER:
Attest: UNITED COUPON CORPORATION
(can't read) 4/24/96 /s/ Leon Zajdel 4/24/96
- -------------------------------------- By: -----------------------------
Assistant Secretary Leon Zajdel
Chairman of the
Compensation Committee
On behalf of UNICO, Inc.
By Its Board of Directors
(Sole Shareholder of Employer)
(CORPORATE SEAL)
THE EMPLOYEE:
Witness: GERARD R. BERNIER
Cathryn E. Campbell /s/ Gerard R. Bernier
- -------------------------------------- ---------------------------------
Gerard R. Bernier
Executed Copies Provided to the Following UNICO Directors:
Leon Zajdel
Russell Cleveland
Gerald Bomstad Jr
11
<PAGE>
EXHIBIT 10.33
MODIFICATION AND EXTENSION TO
THE THIRD RESTATED LOAN AGREEMENT
THIS MODIFICATION AND EXTENSION TO THE THIRD RESTATED LOAN
AGREEMENT (the "Amendment") is made effective August 15, 1996, by UNICO,
INC., a Delaware corporation, UNITED COUPON CORPORATION, a Virginia
corporation and CAL-CENTRAL MARKETING CORPORATION, formerly AEC Acquisitions,
Inc., an Oklahoma corporation (the "Borrowers"), and BANCFIRST, an Oklahoma
banking corporation (the "Lender"). All capitalized terms used in this
Amendment, unless otherwise defined herein, will have the meanings defined in
the Third Restated Loan Agreement (the "Loan Agreement") dated effective
January 10, 1996 between the Borrowers and the Lender providing for an
extension of credit by the Lender to the Borrowers of an amount not to exceed
Nine Hundred Thirty-Four Thousand Four Hundred Thirty-Two and 73/100 Dollars
($934,432.73).
RECITALS:
A. The Borrowers and the Lender have heretofore executed the Loan
Agreement.
B. The Borrowers and the Lender desire to modify the Loan Agreement
by means of this Amendment.
AGREEMENTS:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Lender and the Borrowers agree as
follows:
1. Loan Amount. After the date of this Amendment, the maximum principle
amount of the Loans will not exceed Seven Hundred Twenty-One Thousand Four
Hundred Twenty-Four and 85/100 Dollars ($721,424.85) and all references to
the principal amount of the Loans contained in the Loan Documents are hereby
so amended.
2. Representations; Warranties. The Borrowers represent and warrant to the
Lender that each of the representations and warranties set forth at
paragraphs 3.1 through 3.18, both inclusive, of the Loan Agreement are true
and correct on the date of this Amendment except as follows:
2.1 Financial Statements. Paragraph 3.2 of the Loan Agreement is
deleted in its entirety and the following is substituted
therefore:
<PAGE>
"3.2 Financial Statements. The financial statements of the
Borrowers 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."
2.2 Litigation. Paragraph 3.6 of the Loan Agreement is deleted in
its entirety and the following is substituted therefor:
"3.6 Litigation. Except as disclosed in writing to the Lender,
there is no action, suit, proceeding or investigation pending or
threatened against any of the Borrowers which has an amount in
excess of Ten Thousand Dollars ($10,000.00) at issue or which, if
adversely determined, would materially adversely affect any of the
Borrowers, any of the Collateral or impair the ability of UNICO
or UC to carry on their respective businesses substantially as
now conducted or result in any substantial liability to UNICO or
UC not adequately covered by insurance."
2.3 Location of Collateral. Paragraph 3.14 of the Loan Agreement is
deleted in its entirety and the following is substituted
therefor:
"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 shall be kept at the Borrowers' principal
places of business which are: UNICO--8380 Alban Road,
Suite 100, Springfield, Virginia 22150; UC--8380 Alban
Road, Suite 100, Springfield, Virginia 22150; and
Cal-Central--8380 Alban Road, Suite 100, Springfield,
Virginia 22150.
2.4 Solvency. Paragraph 3.17 of the Loan Agreement is deleted in its
entirety and the following is substituted therefor:
- 2 -
<PAGE>
"3.17 Solvency. After eliminating intercompany
transactions, neither UNICO nor UC is insolvent.
UNICO and UC: (a) are 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; and (c) own 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."
3. Terms of Payment. Paragraph 4 of the Loan Agreement is deleted in
its entirety and the following provisions are substituted therefor:
"4. Note. The Loans will be evidenced by a Consolidated Renewal
Promissory Note (the "Renewal Note") in the principal amount
of Seven Hundred Twenty-One Thousand Four Hundred Twenty-Four
and 85/100 Dollars ($721,424.85) payable on the following
terms:
4.1 Interest. Absent Default, the Renewal Note will bear
interest on the unpaid principal balance at an annual rate
equal to the Prime Rate plus one percent (1%).
4.2 Payments. Absent Default, the unpaid balance of the Renewal
Note will be paid as follows: (a) on September 15, 1996 and
on the fifteenth (15th) day of each month thereafter through
January 15, 1997 an installment of Twenty-Two Thousand Five
Hundred Dollars ($22,500.00); (b) on February 15, 1997 and
on the fifteenth (15th) day of each month thereafter through
December 15, 1998 an installment of Twenty-Seven Thousand
Five Hundred Dollars ($27,500.00); and (c) the entire unpaid
principal balance of the Renewal Note plus all accrued
interest thereon will be due and payable on December 31,
1998. All payments will be first applied to the payment of
accrued interest and the balance, if any, in reduction of
the principal sum.
4.3 Prepayments. The Borrowers will have the right to prepay the
unpaid principal balance of the Renewal Note in whole or in
part at any time and from time to time without penalty. The
Borrowers will apply as mandatory principal prepayments of
the Renewal Note that amount which is equal to all Accounts
of Cal-Central and UNICO d/b/a Alliance Publications
collected by the Borrowers. Each prepayment will be applied
to payment of the principal installments of the Renewal Note
in the inverse order of their maturity.
4.4 Place of Payment. All payments and prepayments of principal
or interest on the Renewal Note will be made 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 Renewal Note or this Agreement is 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."
4. Renewal Note. Simultaneously with the execution of this Amendment, the
Borrowers agree to execute and deliver the form of Renewal Note appearing at
Schedule "A" to the Amendment. Effective on August 15, 1996, the Renewal Note
is substituted for the Notes appearing as Schedules "A" and "B" to the Loan
Agreement.
5. Conversion Agreements. Simultaneously with the execution of this Amendment,
the Borrowers agree to provide to the Lender: An executed counterpart of the
Loan Conversion Agreement dated July 12, 1996 as modified by the Addendum to
Loan Conversion Agreement dated effective July 30, 1996 (the "Conversion
Agreement") between UNICO as debtor and Renaissance and the Duncan-Smith
Group as creditors, together with evidence satisfactory to the Lender that:
(a) Renaissance has completed the conversion of One Million Five Hundred
Eighty-Nine Thousand Two Hundred Twenty Dollars ($1,589,220.00) in
subordinated debt to Series C Preferred Stock issued by UNICO on the terms
set forth in the Conversion Agreement; and (b) the Duncan-Smith Group has
completed the conversion of One Hundred Sixty-Eight Thousand Three Hundred
Forty-Nine Dollars ($168,349.00) in subordinated debt to Series C Preferred
stock issued by UNICO on the terms set forth in the Conversion Agreement.
- 4 -
<PAGE>
6. Subordinated Creditor Obligations. If any Borrower pays any indebtedness
owing to any one or more of the Subordinated Creditors prior to the payment
in full of the Obligations (other than payment of accrued interest at the
rate of nine and one-quarter percent [9 1/4%] per annum on a loan in the
principal amount of Fifty Thousand [$50,000.00] owing by UNICO to
Renaissance) or if any one or more of the Subordinated Creditors commences
any legal action against any Borrower to collect any indebtedness or to
enforce any other obligation owing by any one or more of the Borrowers to
such Subordinated Creditor, each such action will constitute an Event of
Default entitling the Lender to exercise the remedies available to the Lender
under the Loan Documents.
7. Effect of Modification. Except as modified by this Amendment, the Loan
Agreement and the Loan Documents remain in full force and effect and the
mortgage liens, security interests and other encumbrances thereby created are
intended to secure payment of the indebtedness evidenced by the Renewal Note
after the date of this Amendment with the priority and enforceability thereof
to continue in effect, uninterrupted and unabated.
IN WITNESS WHEREOF, this Amendment is executed and delivered by the
parties effective on the date set forth above.
UNICO, INC., a Delaware corporation
By
---------------------------------
Gerard R. Bernier, President
UNITED COUPON CORPORATION, a
Virginia corporation
By
---------------------------------
Gerard R. Bernier, President
CAL-CENTRAL MARKETING CORPORATION,
formerly AEC Acquisitions, Inc., an
Oklahoma corporation
By
---------------------------------
Authorized Agent
(the "Borrowers")
- 5 -
<PAGE>
BANCFIRST, an Oklahoma banking
corporation
By
---------------------------------
E. G. Alexander,
Senior Vice President
(the "Lender")
- 6 -
<PAGE>
EXHIBIT 10.34
CONSOLIDATED RENEWAL PROMISSORY NOTE
------------------------------------
$721,424.85 Oklahoma City, Oklahoma
August 15, 1996
FOR VALUE RECEIVED, UNICO, INC., a Delaware corporation, UNITED COUPON
CORPORATION, a Virginia corporation, AND CAL-CENTRAL MARKETING CORPORATION,
formerly AEC ACQUISITIONS, INC., an Oklahoma corporation (the "Borrowers"),
jointly and severally promise to pay to the order of BANCFIRST, an Oklahoma
banking corporation, its successors and assigns (the "Lender"), at 101 North
Broadway, Oklahoma City, Oklahoma 73102, or at such other place as might be
designated in writing by the Lender, the principal sum of SEVEN HUNDRED
TWENTY-ONE THOUSAND FOUR HUNDRED TWENTY-FOUR AND 85/100 DOLLARS
($721,424.85), together with interest thereon at a variable rate equal to
one percent (1%) per annum in excess of the Prime Rate (as hereafter defined)
then in effect. Interest will be calculated on the basis of the actual days
elapsed based on a per diem charge computed over a year composed of three
hundred sixty (360) days. The rate of interest charged hereunder will change
effective on the date of each change in the Prime Rate without notice to the
Borrowers. As used in this Note, the term "Prime Rate" means 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. The Prime Rate is currently eight and one-quarter percent (8.25%) per
annum and the Borrowers acknowledge that this Note will initially bear
interest at the rate of nine and one-quarter percent (9.25%).
Principal and interest will be paid in monthly installments in the
amount of Twenty-Two Thousand Five Hundred Dollars ($22,500.00) each
commencing on September 15, 1996 and continuing on the fifteenth (15th) day
of each month thereafter to and including January 15, 1997; thereafter
payments of principal and interest will be paid in monthly installments in
the amount of Twenty-Seven Thousand Five Hundred Dollars ($27,500.00) each
commencing on February 15, 1997 and continuing on the fifteenth (15th) day of
each month thereafter until December 15, 1998. On December 31, 1998, the
entire unpaid principal balance and all accrued but unpaid interest thereon
will be due and payable.
The Borrowers will have the right at any time and from time to time to
prepay the unpaid principal balance of this Note in whole or in part without
penalty, but with interest accrued to the date of prepayment on the entire
unpaid principal balance of this Note. The Borrowers will apply as mandatory
principal prepayments that amount which is equal to all Accounts of
Cal-Central and UNICO
<PAGE>
d/b/a Reliance Publications collected by the Borrowers. Each pre-payment will
be applied to the payment of principal installments in the inverse order of
their maturity.
This Note is issued by the Borrowers and accepted by the Lender pursuant
to the Modification and Extension to the Third Restated Loan Agreement (the
"Loan Agreement Amendment") and evidences the Loans made to the Borrowers
pursuant to the Loan Agreement Amendment. Unless otherwise defined in this
Note, terms bearing initial capital letters are intended to have the meanings
defined in the Loan Agreement Amendment.
The Borrowers jointly and severally agree that if, and as often as, this
Note is placed in the hands of an attorney for collection or to defend or
enforce any of the Lender's rights under this Note, the Loan Documents or
otherwise relating to the indebtedness hereby evidenced, the Borrowers will
pay the Lender's reasonable attorneys' fees, all court costs and all other
expenses incurred by the Lender in connection therewith.
The Lender may collect a late charge equal to five percent (5%) of each
monthly payment which is not received by the Lender within ten (10) business
days after the maturity date of each installment. Such late charge represents
the estimate of reasonable compensation for the loss which will be sustained
by the Lender arising from the Borrowers' failure to make timely payments and
may be collected without prejudice to the rights of the Lender to collect any
other amounts arising from the Borrowers' default in payment or to accelerate
the maturity of the indebtedness hereby evidenced. To the extent the Lender
does not elect to collect the foregoing late charge, at the option of the
Lender, after the occurrence of any Event of Default, the unpaid balance of
this Note will bear interest at that rate which is equal to the greater of
fifteen percent (15%) per annum or five percent (5%) per annum in excess of
the Prime Rate and such interest which has accrued will be paid at the time
of and as a condition precedent to curing any Event of Default. During the
existence of any Default, the Lender may apply payments received on any
amount due hereunder or under any other Loan Document as the Lender
determines from time to time.
This Note is issued by the Borrowers and accepted by the Lender pursuant
to a lending transaction negotiated, consummated and to be performed in
Oklahoma City, Oklahoma County, Oklahoma. This Note is 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
this Note, the Loan Documents or any other instrument securing payment of
this Note will be instituted in a state or federal court sitting in the
judicial district in which Oklahoma City, Oklahoma is
- 2 -
<PAGE>
situate, as the Lender might elect from time to time. By the execution of
this Note, the Borrowers irrevocably and unconditionally submit to the
jurisdiction (both subject matter and personal) of each such court and
irrevocably and unconditionally waive: (a) any objection the Borrowers might
now or hereafter have to the venue in any such court; and (b) any claim that
any action or proceeding brought in any such court has been brought in an
inconvenient forum.
Payment of the indebtedness hereby evidenced is secured by certain
security interests described in the Loan Documents. On the breach by the
Borrowers (or any of them) of any provision of this Note, any one or more of
the Loan Documents or any other instrument now or hereafter evidencing or
securing payment of the indebtedness hereby evidenced, at the option of the
Lender, the entire indebtedness evidenced by this Note will become
immediately due, payable and collectible then or thereafter as the Lender
might elect, regardless of the date of maturity of this Note. Failure by the
Lender to exercise such option will not constitute a waiver of the right to
exercise the same on the occurrence of any subsequent Event of Default.
The makers, endorsers, sureties, guarantors and all other persons who
might become liable for all or any part of this obligation severally waive
presentment for payment, protest and notice of nonpayment. Such parties
consent to any extension of time (whether one or more) of payment hereof,
release of all or any part of the collateral securing payment hereof or
release of any party liable for the payment of this obligation. Any such
extension or release may be made without notice to any such party and without
discharging such party's liability hereunder.
This Note is executed, delivered and accepted for the purpose of
consolidating, renewing and amending the terms of payment of the indebtedness
evidenced by: (a) that certain Third Renewal Promissory Note dated January
10, 1996 in the face amount of Six Hundred Thousand Dollars ($600,000.00)
executed by the Borrowers in favor of the Lender described as Note A in the
Loan Agreement Amendment; and (b) that certain Third Renewal Promissory Note
dated effective January 10, 1996 in the face amount of Three Hundred
Thirty-Four Thousand Four Hundred Thirty-Two and 73/100 Dollars ($334,432.73)
executed by the Borrowers in favor of the Lender described as Note B in the
Loan Agreement Amendment. The acceptance of this Note by the Lender is not
intended to constitute payment, accord, satisfaction or a novation of the
indebtedness heretofore evidenced by Note A or Note B. To the extent that the
terms of this Note differ from the terms of Note A or Note B, the terms of
this Note will control.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the Borrowers have executed this
instrument effective the date first above written.
UNICO, INC., a Delaware corporation
By___________________________________
Gerard R. Bernier, President
UNITED COUPON CORPORATION, a
Virginia corporation
By__________________________________
Gerard R. Bernier, President
CAL-CENTRAL MARKETING CORPORATION,
formerly AEC Acquisitions, Inc., an
Oklahoma corporation
By__________________________________
Authorized Agent
- 4 -
<PAGE>
EXHIBIT 10.35
LOAN CONVERSION AGREEMENT
(Duncan-Smith Group)
THIS LOAN CONVERSION AGREEMENT is made effective September 30, 1996,
by and between UNICO, Inc., a Delaware corporation ("UNICO"), and Kurt H.C.
Bottcher, an individual, (hereafter called the "the Subordinated Debenture
Holder") with reference to the following facts.
R E C I T A L S:
A. On or about October 26, 1993, November 22, 1993 or January 2, 1994,
UNICO issued and delivered a certain Five Year Subordinated Debenture
payable to the order of the Subordinated Debenture Holder in the face amount
of One Hundred Thousand Dollars ($100,000) (hereafter called the
"Subordinated Debentures") together with Warrants to purchase, in the
aggregate, 50,000 shares of UNICO Common Stock, of which none remain
unexercised (hereafter called the "Warrants").
B. The Subordinated Debenture Holder is the current owner and holder,
of Subordinated Debenture having a current principal balance of $100,000.00
and unpaid interest has accrued under the Subordinated Debentures, as of and
through the date hereof, in the amount of $13,125 yielding a total
indebtedness due of $113,125.
C. The Subordinated Debenture is unsecured and is expressly
subordinated by its terms, inter alia, to the prior payment in full of the
principal of and interest on all indebtedness owing by UNICO to its primary
commercial lender, BancFirst, an Oklahoma banking corporation, (the "Bank")
and any and all extensions and renewals thereof. The Bank holds security
interests in all assets now owned or hereafter acquired by UNICO or any of
its subsidiaries.
D. By their letter agreement of February 2, 1996, the Subordinated
Debenture Holders agreed to convert and exchange the entirety of the
principal and accrued interest owing on the Subordinated Debenture into and
for: (i) 1/3 into Common Stock of UNICO at an exchange ratio of one share for
each $0.25 of debenture indebtedness; (ii) 1/3 into Preferred Stock
convertible into Common stock at a ratio of one share for each $0.35 of
debenture indebtedness; and (iii) 1/3 into a restated convertible debenture
indebtedness convertible into Common Stock at a ratio of one share for each
$0.40 of restated debenture indebtedness. Said agreement was contingent upon
the refinancing of UNICO's debt to the Bank, due December 1995, to a term
of three (3) or more years.
E. Subsequently, the Bank has agreed to extend the term of UNICO's
indebtedness by three (3) years to December 1998.
1
<PAGE>
F. UNICO and Subordinated Debenture Holder, in fulfillment of their
prior agreement and in modification thereof to address the Warrants and to
provide an arrangement more favorable to the Subordinated Debenture Holder do
hereby amend and restate their agreement as set forth in this Loan Conversion
Agreement.
A G R E E M E N T S:
In consideration of the mutual benefits and agreements herein contained
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. CONVERSION REDEMPTION AND EXCHANGE
Contemporaneous with the execution hereof the Subordinate Debenture
Holders and UNICO agree to convert, redeem and exchange 323,214 shares of
UNICO's Common Stock for all indebtedness created pursuant to and evidenced
by the Subordinated Debentures and UNICO, as borrower, and its subsidiaries,
as guarantors, are released of any further liability thereunder.
2. NECESSARY DOCUMENTS
The parties agree to execute such documents and certificates as may
be reasonable and necessary to effectuate the purposes of this agreement.
3. MISCELLANEOUS
a. This Conversion Agreement contains the entire agreement between
the parties and supersedes all prior agreements and understandings of any
relating to the subject matter hereof and thereof.
b. Section headings are for the convenience of reference only and
except as a means of identification of reference, shall in no way effect the
interpretation of this Conversion Agreement.
4. MULTIPLE COUNTERPARTS
This Conversion Agreement may be executed in any number of counterparts
all of which taken together shall constitute one and the same signing any
such counterpart.
5. Miscellaneous. The parties further agree as follows:
a. Binding Effect. This Conversion Agreement will be binding on
the parties and will enure to the benefit of and bind their respective heirs,
personal representatives, successors and permitted assigns.
2
<PAGE>
b. Third Party Beneficiaries. This Conversion Agreement is
intended to create rights between UNICO and the Subordinated Debenture Holder
and is not intended to confer rights on any other person or to constitute
such person a third party beneficiary of this Conversion Agreement.
c. Notices. Any notice, demand or communication required or
permitted to be given by any provision of this Conversion Agreement will be
in writing and will be deemed to have been given when delivered personally or
by telefacsimile (with a hard copy sent within one [1] business day by any
other means described in this paragraph) to the party designated to received
such notice, or on the date following the day sent by a national recognized
overnight courier, or on the third (3rd) business day after the same is sent
by certified mail, return receipt requested, postage and charges prepaid,
directed to the following addresses or to such other or additional addresses
as any party might designate by written notice to the other party:
<TABLE>
<CAPTION>
<S> <C>
To the Subordinated Debenture Holder: Kurt H.C. Bottcher
Fasanenweg
64380 Rossdorf
Germany
Telefacsimile:
To : UNICO, INC.
8380 Alban Road, Suite 100
Springfield, Virginia 22150
Attn: Mr. Gerard R. Bernier, President
Telefacsimile: (703) 913-0425
With Copy To: Clary & Moore, P.C.
10306 Eaton Place, Suite 240
Fairfax, Virginia 22030
Attn: Matthew A. Clary, III, Esquire
Telefacsimile: (703) 359-9499
</TABLE>
d. Governing Law. This Conversion Agreement is to be construed
according to the internal laws of the Commonwealth of Virginia. All actions
with respect to this Conversion Agreement may be instituted in the courts of
the Commonwealth of Virginia sitting in Fairfax County, Virginia or the
United States District Court for the Eastern District of Virginia, Alexandria
Division, as UNICO might elect, and by the execution and delivery of this
Conversion Agreement, the Subordinated Debenture Holder irrevocably and
unconditionally submits to the jurisdiction (both subject mater and personal)
of each such court and irrevocable and unconditionally waive: (a) any
objection they might now or hereafter have to the venue in any such court;
and (b) any claim that any action or proceeding brought in any such court has
been brought in an inconvenient forum.
3
<PAGE>
e. Severability. If any provision of this Conversion
Agreement is determined by a court having jurisdiction to be illegal, invalid
or unenforceable under any present or future law, the remainder of this
Conversion Agreement will not be affected thereby. It is the intention of
the parties that if any provision is so 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 that is legal, valid and enforceable.
f. Entire Agreement. This document constitutes the entire
agreement between the parties relating to the subject matter of this
Conversion Agreement and there are no agreements, understands, warranties or
representations between the parties except as set forth herein.
IN WITNESS WHEREOF, the undersigned have fully executed this
Conversion Agreement to be effective the date first above written.
UNICO, INC., a Delaware corporation
By /s/Gerard R. Bernier
----------------------------------
Gerard R. Bernier, President
/s/Kurt C. Bottcher
--------------------------------
Kurt C. Bottcher, an individual
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schudule contains summary financial information extracted from From 10-KSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 233,971
<SECURITIES> 0
<RECEIVABLES> 712,774
<ALLOWANCES> (355,000)
<INVENTORY> 140,015
<CURRENT-ASSETS> 754,396
<PP&E> 4,116,006
<DEPRECIATION> (1,759,425)
<TOTAL-ASSETS> 3,419,214
<CURRENT-LIABILITIES> 2,580,745
<BONDS> 0
0
17,130
<COMMON> 84,763
<OTHER-SE> 6,724,589
<TOTAL-LIABILITY-AND-EQUITY> 3,419,214
<SALES> 6,825,875
<TOTAL-REVENUES> 6,825,875
<CGS> 4,205,160
<TOTAL-COSTS> 10,169,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 337,210
<INCOME-PRETAX> (3,343,449)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,343,449)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,343,449)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
