SCHEDULE 14A
(Rule 14a-101)(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filedregistrant [X] Files by a party other than Registrantthe registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statementproxy statement. [ ] Confidential, for Useuse of the
Commission Only(asonly (as permitted
by Rule 14a-6(e)(2))
[ X ].
[X] Definitive Proxy Statementproxy statement.
[ ] Definitive Additional Materialsadditional materials.
[ ] Soliciting Material Pursuantmaterial pursuant to Rule 14a-11 (c)14a-11(c) or Rule 14a-12
_______________________________________________________________________14a-12.
UNICO AMERICAN CORPORATION
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(Name of Registrant as Specified in itsIts Charter)
_______________________________________________________________________
(Name------------------------------------------------------------
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set(set forth the amount on which the filing fee is
calculated and state how it was determined:
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previously. Identify the previous filing by registration statement number, or
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UNICO AMERICAN CORPORATION
23251 Mulholland Drive
Woodland Hills, California 91364-2732
_____________________---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Friday, June 6, 19974, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of shareholders of Unico
American Corporation (the "Company") to be held at the Warner Center Marriott,
21850 Oxnard Street, Woodland Hills, California 91367, at 2:00 p.m. local time,
to consider and act upon the following matters:
1. The election of seven (7) directors to hold office until the next
annual meeting of shareholders and thereafter until their successors
are elected and qualified; and
2. To approve the adoption of the 1999 Omnibus Stock Plan, including the
reservation of 500,000 shares of common stock covered by such Plan;
and
3. The transaction of such other business as may properly be brought
before the meeting.
The Board of Directors has fixed the close of business on April 18, 1997,16, 1999, as the
record date for the determination of shareholders who will be entitled to notice
of and to vote at the meeting. The voting rights of the shareholders are
described in the Proxy Statement.
IT IS IMPORTANT THAT ALL SHAREHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
SHAREHOLDERS WHO DO NOT PLAN TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
VOTE, DATE, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID AND
ADDRESSED RETURN ENVELOPE. PROXIES ARE REVOCABLE AT ANY TIME, AND SHAREHOLDERS
WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON IF
THEY SO DESIRE.
By Order of the Board of Directors,
\s\ Erwin Cheldin
------------------
Erwin Cheldin
Chairman of the Board, President, and
Chief Executive Officer
Woodland Hills, California
April 21, 199719, 1999
UNICO AMERICAN CORPORATION
---------------------
PROXY STATEMENT
----------------------
ANNUAL MEETING OF SHAREHOLDERS
June 6, 19974, 1999
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Unico American Corporation, a Nevada Corporationcorporation
(the "Company"), for use at the Annual Meeting of Shareholders of the Company to
be held at the Warner Center Marriott, 21850 Oxnard Street, Woodland Hills,
California 91367 on June 6, 1997,4, 1999, at 2:00 p.m. local time. Accompanying this
Proxy Statement is a proxy card, which you may use to indicate your vote as to
each of the proposals described in this Proxy Statement.
All proxies which are properly completed, signed, and returned to the Company
prior to the Annual Meeting, and which have not been revoked, will be voted. A
shareholder may revoke his or her proxy at any time before it is voted either by
filing with the Secretary of the Company at its principal executive offices a
written notice of revocation or a duly executed proxy bearing a later date, or
by appearing in person at the Annual Meeting and expressing a desire to vote his
or her shares in person.
The close of business on April 18, 1997,16, 1999, has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof. As of the record date, the Company
had outstanding 6,120,0816,224,369 shares of common stock, the only outstanding voting
securities of the Company. For each share held on the record date, a shareholder
is entitled to one vote on all matters to be considered at the Annual Meeting.
The Company's Articles of Incorporation do not provide for cumulative voting.
Directors are elected by a plurality of the votes cast and abstentions and
broker non-votes are counted for the purposes of determining the existence of a
quorum at the meeting, but not for purposes of determining the results of the
vote.
Approval of the proposal adopting the 1999 Omnibus Stock Plan requires that the
number of votes cast in favor of the proposal exceed the number of votes cast
against the proposal. Abstentions and broker non-votes will not be voted for or
against the proposal and thus will have no effect on the outcome of the approval
of the proposal.
The Company will bear the cost of the Annual Meeting and the cost of soliciting
proxies, including the cost of preparing, assembling and mailing the proxy
material. In addition to solicitation by mail, officers and other employees of
the Company may solicit proxies by telephone, facsimile, or personal contact
without additional compensation.
In December 1996, the Company changed its fiscal year from a year ending March
31 to a year ending December 31, effective December 31, 1996. As a result of
this change, the Company's fiscal year ended December 31, 1996, consists of nine
months and all references herein to the fiscal year ended December 31, 1996, are
references to such nine-month period. The fiscal years ended December 31, 1998,
and December 31, 1997, consist of twelve months.
The Company's principal executive offices are located at 23251 Mulholland Drive,
Woodland Hills, California 91364-2732. The approximate mailing date of this
Proxy Statement and the Company's proxy card is April 21, 1997.19, 1999.
ELECTION OF DIRECTORS
The Company's By-Laws provide for a range of three to eleven directors and allow
the Board of Directors to set the exact number of authorized directors within
that range. The current number of authorized directors established by the Board
of Directors is eight (8). There is a vacancy on the Board of Directors and the
Board has determined not to nominate any person to fill such vacancy at this
time. Directors are elected at each Annual Meeting of Shareholders to serve
thereafter until their successors have been duly elected and qualified. Each
nominee is currently a director, having served in that capacity since the date
indicated in the following table. All nominees
1
have advised the Company that they are able and willing to serve as directors.
If any nominee refuses or is unable to serve (an event which is not anticipated), the persons named in the accompanying proxy card will vote for another person
nominated by the Board of Directors, provided, however, that the proxies cannot
be voted for a greater number of persons than 7. Unless otherwise directed in
the accompanying proxy card, the persons named therein will vote FOR the
election of the seven nominees listed in the following table.
1
The following table provides certain information as of April 18, 1997,16, 1999, for each
person named for election as a director, which includes all executive officers
of the CompanyCompany:
Present Position
with Company or First
Present Position with Company or Elected
Name Age Principal Occupation Elected
Age and Prior History Director
- ---- --- -------------------------------------- --------
Erwin Cheldin 6567 President, Chief Executive 1969
Officer and 1969
Director since 1969. Chairman of the Board
since 1987.
Cary L. Cheldin 4042 Executive Vice President since 1991. Vice 1983
Vice
President 1986 to 1991 and Secretary 19911987
to 1992.1991.
Lester A. Aaron, CPA 5153 Treasurer and Chief Financial 1985
Officer since 1985
1985. Secretary 1991 to 1992.
George C. Gilpatrick 5254 Vice President, Management Information 1985
Information
Systems, since 1981. Secretary since 1992.
Roger H. Platten 4749 Vice President since 1988 and General 1987
General
Counsel since 1985.
David A. Lewis, CPCU 7577 Director. 1989
Retired insurance executive with over 40
yearsyears' insurance experience. The last 27
years were with the Transamerica group of
insurance companies.
Bernard R. Gans 48David E. Driscoll 44 Director. 19891998
Attorney specializing in intellectual property since
1973.and
casualty insurance defense.
Except for Cary Cheldin, who is the son of Erwin Cheldin, none of the executive
officers or directors of the Company is related to any other officer or director
of the Company. The executive officers of the Company are elected by the Board
of Directors and serve at the pleasure of the Board.
During the nine month fiscal year ended December 31, 1996,1998, the Company's Board of Directors
held one meeting at which all directors were present. Non-management directors
receive $1,000 for each board meeting they attend. The Board of Directors has
established an Audit Committee presently consisting of Messieurs Lewis, GansDriscoll
and Aaron. The Audit Committee of the Board of Directors is responsible for
coordinating matters with the outside independent auditors and reviewing
internal and external accounting controls. The Audit Committee held one meeting
subsequent to the end of the fiscal year ended December 31, 1996,1998, to discuss
accounting and financial statement matters related to the fiscal year ended
December 31, 1996.1998. The Board of Directors has also established a Compensation
Committee presently consisting of Messieurs Cary Cheldin, Aaron and Gans.Driscoll.
This Committee considers and recommends to the Board of Directors compensation
for executive officers. The Compensation Committee held one meeting during the
nine month fiscal year ended December 31, 1996.1998.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 18, 1997,16, 1999, the names and holdings of
all persons who are known by the Company to own beneficially more than 5% of its
outstanding common stock, its only class of outstanding voting securities, and
the beneficial ownership of such securities held by each Director and all
Executive Officers and Directors as a group. Unless otherwise indicated, the
Company believes that each of the persons set forth below has the sole power to
vote and dispose of the shares listed opposite his name.
Amount Beneficially Owned
-------------------------
(1) (1)
Options Percent
Without Currently Of
Name of Beneficial Owner Options Exercisable Total Class
- ------------------------ ------- ----------- ----- -----
Certain Beneficial Owners
- -------------------------
Erwin Cheldin 2,266,969 0 2,259,969 36.4%
23251 Mulholland Drive
Woodland Hills, CA 91364
General Re Corporation 432,092 (2) 0 432,092 6.9%
695 East Main Street
Stamford, CT 06904
Dimensional Fund Advisors Inc. 391,000 (3) 0 391,000 6.3%
1299 Ocean Avenue
Santa Monica, CA 90401
FRM Corp. 386,500 (4) 0 386,500 6.2%
82 Devonshire Street
Boston, MA 02109
Executive Officers and Directors
- --------------------------------
Erwin Cheldin 2,266,969 0 2,266,969 36.4%
Cary L. Cheldin 177,596 25,164 202,760 3.2%
Lester A. Aaron 106,417 78,334 184,751 2.9%
George C. Gilpatrick 107,017 78,333 185,350 2.9%
Roger H. Platten 99,039 0 99,039 1.6%
David A. Lewis 0 0 0 0.0%
David E. Driscoll 0 0 0 0.0%
All executive officers &
directors as a group
(7 persons) 2,757,038 181,831 2,938,869 45.9%
(1) Includes for each person or group, shares issuable upon exercise of
presently exercisable options or options exercisable within 60 days, held
by such person or group.
(2) Per Schedule 13G dated April 25, 1997.
(3) Per Schedule 13G dated February 12, 1999.
(4) Per Schedule 13G dated February 1, 1999. Beneficial ownership consists of
sole power to dispose of
Name of Beneficial Owner Options Exercisable Total Class
Certain Beneficial Owners
Erwin Cheldin
23251 Mulholland Drive 2,255,969 0 2,255,969 36.9%
Woodland Hills, CA 91364
National Reinsurance Corp.
777 Long Ridge Road 432,092 (2) 0 432,092 7.1%
Stamford, CT 06904
Dimensional Fund
Advisors Inc. 378,100 (3) 0 378,100 6.2%
1299 Ocean Avenue
Santa Monica, CA 90401
Executive Officers and Directors
Erwin Cheldin 2,255,969 0 2,255,969 36.9%
Cary L. Cheldin 225,252 21,926 247,178 4.0%
Lester A. Aaron 106,417 78,334 184,751 3.0%
George C. Gilpatrick 107,017 78,333 185,350 3.0%
Roger H. Platten 18,894 117,204 136,098 2.2%
David Lewis 3,000 0 3,000 0.0%
Bernard R. Gans 0 0 0 0.0%
All executive officers & directors
as a group (7 Persons) 2,716,549 295,797 3,012,346 47.0%
(1) Includes for each person or group, shares issuable upon exercise of
presently exercisable options or options exercisable within 60 days, held
by such person or group.
(2) Per Schedule 13D dated January 15, 1993.
(3) Per Schedule 13G dated February 7, 1996. Of the 378,100 shares beneficially
owned, Dimensional Fund Advisors Inc. has sole voting power over 227,400
shares and shared voting power over 150,700 shares.
3
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Executive Compensation
- ---------------------------------
The following table sets forth information as to executive compensation paid to
the chief executive officer and the other four most highly compensated executive
officers of the Company for the fiscal year ended December 31, 1998, the fiscal
year ended December 31, 1997, the nine month period ended December 31, 1996.
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------- All Other
Name and Principal Position Year Salary Bonus Compensation (1)
- --------------------------- ---- ($) ($) ($)
--- --- ---
Erwin Cheldin 1998 (2) 431,375 50,000 24,000
President, Chief Executive 1997 (3) 431,375 50,000 23,625
Officer and Chairman of the 1996 (4) 323,531 50,000 16,875
Board
Cary L. Cheldin 1998 (2) 330,000 65,000 24,000
Executive Vice President 1997 (3) 205,000 65,000 23,625
1996 (4) 153,750 65,000 16,875
Lester A. Aaron 1998 (2) 160,000 33,000 24,000
Treasurer and the fiscal years ended March 31,Chief 1997 (3) 160,313 30,000 23,625
Financial Officer 1996 (4) 128,712 30,000 16,875
George C. Gilpatrick 1998 (2) 159,355 45,000 24,000
Vice President and March 31, 1995.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities
Annual Restricted Underlying All other
Compen- Stock Options/ LTIP Compen-
Name and Position Salary Bonus sation Awards SARs Payouts sation (1)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ---- --- --- --- --- --- --- ---
Erwin Cheldin 1996 (2) 323,531 50,000 - - - -Secretary 1997 (3) 159,355 45,000 23,625
1996 (4) 119,516 45,000 16,875
Roger H. Platten 1998 (2) 175,000 60,000 24,000
Vice President 1997 (3) 175,000 60,000 23,625
1996 (4) 131,250 60,000 16,875
President, Chief 1996 (3) 426,594 48,000 - - - - 22,500
Executive Officer 1995 (4) 423,264 48,000 - - - - 22,500
and Chairman of
the Board.
Cary L. Cheldin 1996 (2) 153,750 65,000 - - - - 16,875
Executive Vice 1996 (3) 197,500 48,000 - - - - 22,500
President 1995 (4) 175,560 48,000 - - 25,164 - 22,500
Lester A. Aaron 1996 (2) 128,712 30,000 - - - - 16,875
Treasurer and 1996 (3) 169,714 45,000 - - - - 22,500
Chief Financial 1995 (4) 169,080 45,000 - - - - 22,500
Officer
George C. Gilpatrick 1996 (2) 119,516 45,000 - - - - 16,875
Vice President 1996 (3) 157,589 45,000 - - - - 22,500
and Secretary 1995 (4) 154,968 45,000 - - - - 22,500
Roger H. Platten 1996 (2) 131,250 60,000 - - - - 16,875
Vice President 1996 (3) 170,560 48,000 - - - - 22,500
1995 (4) 152,520 46,000 - - 65,000 - 22,500
(1) Represents amounts contributed or accrued to the person's account under the
Company's profit sharing plan, all of which is fully vested. The Company's
profit sharing plan has a March 31 fiscal year end. See "Profit Sharing
Plan."
(2) Covers the twelve month fiscal year ended December 31, 1998.
(3) Covers the twelve month fiscal year ended December 31, 1997.
(4) Covers the nine month fiscal year ended December 31, 1996.
(3) Covers the twelve month fiscal year ended March 31, 1996.
(4) Covers the twelve month fiscal year ended March 31, 1995.
4
Option / SAR Grants in Last Fiscal Year
- ---------------------------------------
No stock options were granted to any executive officer during the nine month
fiscal year
ended December 31, 1996.
The Company has no stock appreciation rights.1998.
Incentive Stock Option Plan
- ---------------------------
On March 29, 1985, the Board of Directors unanimously adopted the Unico American
Employee Incentive Stock Option Plan (the "1985 Plan"), which was approved by
the shareholders of the Company in January 1986. The 1985 Plan provides for the
grant of "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986 to key employees of the Company (including officers,
whether or not they are directors of the Company) and its subsidiaries.
Directors who are not also employees of the Company are not eligible to
participate in the 1985 Plan. The 1985 Plan includes an aggregate of 1,500,000
of the Company's Common Stock. The 1985 Plan expired in March 1995, and as of
December 31, 1996,1997, there were no options available for future grant. Under the
terms of the Plan, options were required to be granted at exercise prices of not
less than 100% of the fair market value of the Common Stock on the date the
option was granted. In the case of grants of options to employees owning over
10% of the voting stock of the Company, the exercise price was required to be
not less than 110% of the fair market value of the Common Stock on the date of
grant. The 1985 Plan is
4
administered by the Board of Directors or a committee thereof, which had the
authority to determine the optionees, the number of shares to be covered by each
option, the time during which each option is exercisable and certain other terms
of the options. An option may not be exercised later than 10 years from the date
of grant and may sooner expire upon, among other things, the death, disability
or other termination of the employment of the optionee by the Company. Options
granted to employees owning over 10% of the voting stock of the Company could
not be exercised later than 5 years from the date of grant.
The exercise price of all outstanding options is equal to the fair market value
of the common stock as of the date of grant of each option.
AGGREGATED OPTION / SAR EXERCISED IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
Value of Unexercised
Number of Securities Value of Unexercisedin-the Money
Shares Underlying Unexercised in-the-MoneyOptions/SARs
Acquired Options/SARs Options/SARs
on Value At Fiscal Year End (#) At Fiscal Year End ($) Excercise(1)
on Value ----------------------- --------------------------
Exercise Realized Exercisable/ Exercisable/
(#)Name # ($) Unexercisable Unexercisable
- ---- --- --- ------------- -------------
Name
- -----
Erwin Cheldin 81,943 585,8920 0 0 0 0 0
Cary L.Cheldin 13,500 43,875 129,355 127,473 953,993 918,095L. Cheldin 0 0 25,164 0 201,312 0
Lester A.AaronA. Aaron 0 0 78,334 0 579,797628,755 0
George A.GilpatrickC. Gilpatrick 0 0 78,333 0 579,789628,747 0
Roger H. Platten 18,858 88,535 117,20473,262 803,954 0 808,409 0 0 0
(1) Difference between fair market value of $11.50 per share, the closing price
of the Company's common stock on the National Market System of the NASDAQ
Stock Market on December 31, 1998, and the exercise price of the options.
5
Profit Sharing Plan
- -------------------
During the fiscal year ended March 31, 1986, the Company adopted the Unico
American Corporation Profit Sharing Plan. Company employees who are at least 21
years of age and have been employed by the Company for at least two years are
participants in such Plan. Pursuant to the terms of such Plan, the Company
annually contributes for the account of each participant an amount equal to a
percentage of the participant's eligible compensation as determined by the Board
of Directors. Participants are entitled to receive benefits under the Plan upon
the later of the following: the date 60 days after the end of the Plan year in
which the participant's retirement occurs or one year and 60 days after the end
of the Plan year following the participant's termination with the Company.
However, the participant's interest must be distributed in its entirety no later
than April 1 of the calendar year following the calendar year in which the
participant attains age 70 1/2 or otherwise in accordance with the Treasury
Regulations promulgated under the Internal Revenue Code of 1986, as amended.
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions
- ---------------------------------------------
The Compensation Committee consists of the following Company directors: Cary L.
Cheldin, Lester A. Aaron and Bernard R. Gans.David E. Driscoll. Cary Cheldin is the son of Erwin
Cheldin, the President, Chief Executive Officer and Chairman of the Board.
During the nine month periodfiscal year ended December 31, 1996,1998, Cary Cheldin was the Executive
Vice President of the Company and Mr. Aaron was Treasurer and Chief Financial
Officer of the Company. Mr. GansDriscoll is a partner in the law firm of Oppenheimer Poms SmithFoster,
Driscoll & Reynolds, which has rendered legal services to the Company during the
nine month fiscal year ended December 31, 1996, 1998,and has been retained to render legal
services in the current fiscal year.
Executive Compensation Committee Report
- ---------------------------------------
The Company's compensation package for executive officers primarily consists of
a base salary, an annual incentive bonus, and long-term incentive or non-cash
awards in the form of stock options. The executive compensation program is
designed to retain and reward individuals who are capable of leading the Company
in achieving its business objectives. The Compensation Committee submits its
recommendation to the entire Board of Directors. The philosophy of the
Compensation Committee is to maintain a competitive base salary for executive
officers and to provide an incentive program that rewards executive officers for
achieving certain
5
financial results. Base compensation is determined on a calendar year basis and
other incentives are determined when deemed appropriate. Bonuses for the fiscal
year ended December 31, 1998, the fiscal year ended December 31, 1997, and the
nine month fiscal year ended December 31, 1996, were determined as of the
calendar year end. Bonuses for the fiscal years ended March 31, 1996,
and March 31, 1995, were determined on the fiscal year periods ended March 31.
When determining base compensation for the executive officers, the Committee
takes into account competitive pay levels in the industry with its emphasis on
the median of the survey data. The Committee recommends adjustments to base
compensation when it determines that an executive officer's base compensation is
not competitive.
When determining bonuses for the executive officers, the Committee first
evaluates, and gives primary weight to, the operational and financial
performance of the executive management team, including the chief executive
officer, as a group. After the team results are determined, individual
effectiveness in contributing to the achievement of those results is considered.
The financial results, which are reviewed by the Committee, include the
Company's net income, revenues and expenses.
The Committee's base compensation review determined that the base salary for the
chief executive officer was competitive with that of others in the industry. As
a result, theThe
Committee recommended that the chief executive officer receive only cost of living increasesno change in base
compensation for the calendar years 19951997 and 1996.
6
1998.
The Committee's bonus review considered and evaluated the growth in earnings and
the growth in revenues since MarchDecember 31, 1996,1997, and determined that the chief
executive officer contributed to this growth and performed well. Although the
Company's net earnings increased 21.1%13.8% during the nine monthsfiscal year ended December 31,
1996,1998, when compared to the same periodfiscal year ended December 31, 1997, revenues
reflected a decrease of the prior year, revenues only
reflected an increase of 10.8%1.5%. Primarily due to this modest growthdecrease in revenues,
the Committee recommended that the chief executive officer's bonus for the
nine
month fiscal year ended December 31, 1996,1998, should be increased by $2,000 overequal to the amount that was paid
to him for the fiscal year ended MarchDecember 31, 1996.1997. The committee also
recommended that the aggregate bonuses paid for the nine month
fiscal year ended December
31, 1996,1998, to all other executive officers as a group, remain approximately the same as the
prior fiscal year.years'.
Section 162(m) of the Internal Revenue Code, enacted as part of the Omnibus
Budget Reconciliation Act of 1993 ("OBRA"), limits to $1,000,000 the
deductibility for any year beginning after December 31, 1993, of compensation
paid by a public corporation to the chief executive officer and the next four
most highly compensated executive officers unless such compensation is
performance-based within the meaning of the Section 162(m) and the regulations
thereunder. For the nine month fiscal year ended December 31, 1996,1998, the Company does not
contemplate that there will be nondeductible compensation for the five Company
positions in question.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Cary L. Cheldin
Lester A. Aaron
Bernard R. Gans
7David E. Driscoll
6
Performance Graph
- -----------------
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of equity securities
traded on the National Association of Securities Dealers Automated Quotation
System (NASDAQ) and a peer group consisting of all NASDAQ Property & Casualty
Companies.property and casualty
companies. The comparison assumes $100.00 was invested on March 31, 19921994, in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends. It should be noted that this graph represents
historical stock price performance and is not necessarily indicative of any
future stock price performance.
3/31/94 3/31/95 3/31/96 12/31/96 12/31/97 12/31/98
------- ------- ------- -------- -------- --------
Unico American Corporation
12-96 Proxy Graph
3/31/92 3/31/93 3/31/94 3/31/95 3/29/96 12/31/96
Unico American Corp $100.00 $73.172 $94.687 $85.534 $116.228 $185.626
NASDAQ Market Index $100.00 $114.955 $124.083 $138.031 $187.423 $220.234
Peer Group Index $100.00 $143.908 $126.737 $138.472 $177.621 $197.017
Corp. $100.0 $ 88.2 $122.7 $196.0 $227.8 $209.5
NASDAQ Market Index $100.0 $111.3 $151.1 $177.5 $217.7 $306.7
Peer Group Index $100.0 $109.3 $140.1 $155.4 $236.0 $201.4
CERTAIN TRANSACTIONS
The Company presently occupies a 46,000 square foot building located at 23251
Mulholland Drive, Woodland Hills, California, under a master lease expiring
March 31, 2007. The lease provides for an annual gross rental of $1,025,952.
Erwin Cheldin, the Company's president, chairman and principal stockholder,shareholder, is
the owner of the building. On February 22, 1995, the Company signed an extension
to the lease with no increase in rent to March 31, 2007. The Company believes
that the terms of the lease at inception and at the time the lease extension was
signed were at least as favorable to the Company as could have been obtained
from unaffiliated third parties.
The Company utilizes for its own operations 100% of the space it leases.
Bernard R. Gans,David E. Driscoll, a director of the Company, is an attorney with the law firm
of Oppenheimer Poms SmithFoster, Driscoll & Reynolds which has provided and continues to provide
certain legal services to the Company.
8Bernard R. Gans, a director of the Company until June 17, 1998, is an attorney
with the law firm of Jeffer, Mangels, Butler & Marmaro LLP which has provided
and continues to provide certain legal services to the Company.
7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (SEC) initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Executive officers, directors and greater than 10% shareholders are required by
regulation of the SEC to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review of copies of
such reports furnished to the Company and written representations that no other
reports were required during the nine month fiscal year ended December 31, 1996,1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were complied with.
PROPOSAL FOR APPROVAL OF THE 1999 OMNIBUS STOCK PLAN
The Board of Directors adopted the 1999 Omnibus Stock Plan on March 15, 1999,
for the purpose of attracting and retaining desirable employees, consultants,
advisers and directors through the opportunity to acquire stock of the Company
and other incentives. At the Annual Meeting, the shareholders will be requested
to vote on a proposal approving the 1999 Omnibus Stock Plan. Under Nevada law,
the shareholders will be deemed to have approved the Plan if the number of votes
cast in favor of the proposal exceeds the number of votes cast against the
proposal.
Description of the Plan
- -----------------------
The material features of the Plan are described below. However, this summary is
subject to, and qualified in its entirety by, the full text of the Plan, a copy
of which is attached hereto as Exhibit A.
The Plan covers an aggregate of 500,000 shares of the common stock of the
Company. The number of shares covered by the Plan is subject to adjustment in
the case of stock dividends, stock splits, reverse stock splits, mergers,
recapitalizations and other similar changes in the capitalization of the
Company.
The Plan is divided into the following three separate programs, each of which is
described in more detail below:
o the Stock Option Program under which eligible persons may be
granted options to purchase shares of common stock;
o the Stock Appreciation Program under which eligible persons may be
granted the right to receive a payment in the form of cash, stock or
a combination of the foregoing; and
o the Restricted Stock Program under which eligible persons may be
issued shares of common stock directly either through an immediate
purchase or as a bonus.
The Plan and each of the programs may be administered by the Board of Directors
or any committee authorized by the Board and consisting of at least two
directors each of whom is not an officer or employee of the Company and meets
certain other qualifications set forth in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Board of Directors anticipates
that it will administer the Plan and all of the programs initially.
Employees, consultants, advisers and directors of the Company are eligible to
participate in the Plan. However, only employees are entitled to receive
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended) under the Stock Option Program. It is presently
intended that participation by employees in the Plan will be limited to
employees holding the title of manager and above. As of April 16, 1999 there
were approximately 20 persons holding those titles and two non-employee
directors who are eligible to participate in the Plan. Grants of stock options,
stock appreciation rights and restricted stock under the Plan may be made
selectively (and may be made on a non-uniform basis) among the various programs
and among the persons eligible to participate in the Plan.
Because the persons to receive grants under the Plan (and the amount and nature
thereof) will be determined by the applicable administrator, in its sole
discretion, it is not possible to state the names or positions of, or to set
forth the grants that may be made to, any of the Company's officers, directors
or employees.
8
Nothing in the Plan or in any agreements which will be issued
under the Plan will obligate the Company or its subsidiary corporations to
continue to employ or engage any employee, consultant, adviser or director nor
limit the Company's right to amend, modify or terminate such person's employment
or other arrangement with the Company.
Unless the administrator otherwise determines, in the event of a Change of
Control Event, all unvested options, stock appreciation rights and restricted
stock issuances under the Plan will immediately become exercisable or vest, as
the case may be. The administrator of the applicable program may override the
acceleration of those rights either in the agreement setting forth those rights
or in connection with, but prior to, the Change of Control Event. In the latter
case, if the Change of Control Event is a reorganization, merger or
consolidation, the administrator is required to make provision in connection
with such transaction for continuance of the Plan and the assumption of, or
substitution of new grants for, outstanding options, stock appreciation rights
or restricted stock issuances. A "Change of Control Event" occurs if (a) more
than twenty percent (20%) of the Company's common stock or combined voting power
is acquired by a person or entity other than Mr. Erwin Cheldin, the Company or
an Employee Benefit Plan of the Company, but not including any acquisition
directly from the Company; (b) a majority of the Company's Board of Directors
ceases to consist of the present directors or persons whose election or
nomination was approved by a majority of the then incumbent Board of Directors
(excluding any directors who assumes his or her position as a result of an
actual or threatened proxy contest); (c) the Company is reorganized, merged or
consolidated into another entity; or (d) the shareholders approve the
liquidation or dissolution of the Company or the sale of all or substantially
all of its assets; unless with respect to (c) or (d), after the event more than
eighty percent (80%) of the common stock of the combined voting power of the
Company, the surviving company or the company that purchases the Company's
assets is still held by persons who were formerly the shareholders of the
Company, and no person or entity other than Mr. Erwin Cheldin, the Company, any
employee benefit plan of the Company or the resulting company or a twenty
percent (20%) shareholder prior to the transaction holds more than twenty
percent (20%) of such company's common stock or combined voting power.
All outstanding options, stock appreciation rights and/or unvested stock
issuances will terminate upon consummation of (a) a dissolution of the Company,
or (b) in case no provision has been made for the survival, substitution,
exchange or other settlement of any outstanding options, stock appreciation
rights and/or unvested stock issuances, a merger or consolidation of the Company
with another corporation in which the shareholders of the Company immediately
prior to the merger will own less than a majority of the outstanding voting
securities of the surviving corporation after the merger, or a sale of all or
substantially all of the assets and business of the Company to another
corporation.
The Plan will terminate by its terms ten (10) years from the date of approval of
the Plan by the Board of Directors and any then outstanding options, stock
appreciation rights or unvested stock issuances will continue in full force in
accordance with the agreements under which those rights were issued. Although
the Board of Directors may, at any time, terminate, suspend or modify the Plan,
the Board of Directors cannot increase the number of shares covered by the Plan
without shareholder approval. No such amendment, suspension or termination may
adversely affect any right or obligation under any then outstanding option,
stock appreciation right or unvested stock issuance without the consent of the
holder thereof.
The Board of Directors may also postpone the exercise or vesting of any option,
stock appreciation right or restricted stock issuance for such period of time as
may be necessary in order to comply with federal and/or applicable state
securities law requirements.
The implementation of the Plan and the programs thereunder are subject to the
Company's procurement of all approvals and permits required by regulatory
agencies having authority with respect to the Plan and approval of the Plan by
the Company's shareholders.
The closing price of the Company's common stock as reported on the NASDAQ Stock
Market on April 16, 1999, was $9 9/16.
STOCK OPTION PROGRAM. Under the Stock Option Program, both incentive stock
options (that is, options meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")) and
options which do not qualify as incentive stock options may be granted. The term
of an option may not exceed ten (10) years (or five (5) years in the case of the
grant of an incentive stock option to a holder of more than 10% of the
outstanding common stock of the Company).
9
The exercise price per share of common stock under an option may not be less
than the fair market value of the common stock on the date of the option grant.
Payment of the purchase price must be made concurrently with the exercise of the
option and may be paid, in the discretion of the administrator, in cash, by
check or by delivery of a promissory note or previously acquired shares of
common stock. In the case of the grant of an incentive option to a holder of
more than 10% of the outstanding common stock, the exercise price may not be
less than 110% of the fair market value of the common stock on the date of the
option grant. The Plan sets forth the method for determining fair market value.
Options may be subject to vesting as determined by the administrator. Options
may not be transferred other than by will or the laws of descent and
distribution and may be exercised during the grantee's lifetime only by the
grantee, unless the administrator otherwise permits.
If a grantee's employment (or if a consultant, adviser or director, his or her
arrangement with the Company) terminates by reason of death or disability, the
grantee or his or her successor may exercise his or her options to the extent
that the options were exercisable at his or her death and within the period set
forth in his or her option agreement but not in excess of one year after such
termination (unless the option term expires prior to the end of such period). If
the grantee's employment terminates for breach of his or her employment
agreement or for cause (as determined by the administrator), the grantee's
options will terminate immediately upon his or her termination. If the grantee's
employment (or arrangement with the Company, as the case may be) is terminated
for any other reason, the grantee may exercise his or her options to the extent
that they were exercisable upon the date of such termination and within the
period specified in the applicable option agreement but not in excess of thirty
(30) days (unless the option term expires prior to the end of that thirty-day
period).
Upon exercise of an option which is not an incentive stock option, the grantee
will be required to remit when due an amount sufficient to satisfy all
applicable withholding taxes. If the administrator permits, the grantee may
satisfy the withholding requirements (in whole or in part) with previously
acquired shares of common stock or by instructing the Company to withhold a
number of shares of common stock to which the grantee otherwise would be
entitled upon exercise of the option.
STOCK APPRECIATION PROGRAM. Stock appreciation rights entitle the holder thereof
to receive upon exercise of such right, and without payment to the Company
(except for applicable withholding taxes), an amount which is not greater than
(a) the fair market value of a share of common stock on the date of exercise of
the stock appreciation right over (b) the fair market value of a share of common
stock on the date of grant of the stock appreciation right. Fair market value
will be determined in the manner set forth in the Plan. The payment may be made
in cash or shares of the common stock of the Company (or a combination of cash
and stock) as determined by the administrator of the program.
Stock appreciation rights may be granted separately or in tandem with stock
options. If a stock appreciation right is granted in tandem with a stock option,
the Plan provides that the exercise of the option will cause a proportional
reduction in the related stock appreciation right. Conversely, the payment of a
stock appreciation right will cause a proportional reduction in the number of
shares issuable upon exercise of the related option.
The Company has the right to deduct from any amount payable upon exercise of a
stock appreciation right all amounts necessary to satisfy the applicable
withholding taxes. Unless the administrator otherwise permits, stock
appreciation rights are not transferable other than by will or the laws of
descent and distribution and may be exercised during the grantee's lifetime only
by the grantee.
RESTRICTED STOCK PROGRAM. Under this program, the Company may issue shares of
its common stock directly to eligible persons without any intervening option
grants and for consideration consisting of cash, an interest-bearing promissory
note or past services rendered by the recipient to the Company or its
subsidiaries, as the administrator may determine. The per share purchase price
for those shares will be determined by the administrator but may not be less
than the fair market value per share of the Company's common stock on the date
of issue. The program administrator may also impose vesting requirements on such
shares.
A recipient of shares under this program will have all the rights of a
shareholder upon the issuance of such shares except that the recipient may not
dispose of any unvested shares. If the recipient terminates his or her
employment or other arrangement with the Company for any reason before his or
her shares are fully vested, or if any performance objectives upon which the
vesting of the shares are based are not met, then the recipient will be required
to surrender to the Company for cancellation all unvested shares. The Company
will repay the recipient
10
the cash or cash equivalent consideration paid by the recipient for those
unvested shares and will cancel the unpaid principal balance, if any, on any
promissory note attributable to the surrendered shares. The administrator has
the right, in its sole discretion, to waive the surrender and cancellation of
the unvested shares and the waiver may be selective and non-uniform among
participants in this program.
The Company may require that, as a condition to the issuance of any shares under
this program, the participant remit when due an amount sufficient to satisfy all
withholding tax requirements.
Federal Income Tax Consequences
- -------------------------------
The following summary description of the federal income tax consequences of the
grant and exercise of options, stock appreciation rights and restricted stock
issuances made under the Plan is based upon federal tax laws and regulations
currently in effect and does not discuss or address any state, local or other
tax laws. The federal income tax consequences of an eligible person's
participation in any program under the Plan are complex and are subject to
change and differ from person to person. Each person should consult with his or
her own tax adviser as to his or her own particular situation.
INCENTIVE STOCK OPTIONS. Upon the grant or exercise of an incentive stock
option, the grantee thereof will not recognize any income for federal income tax
purposes. If a grantee exercises an incentive stock option and retains the
shares received for at least two years after the date of grant of such option
and at least one year from the date of the option exercise, any gain realized
upon the subsequent sale of the shares will be characterized as long-term
capital gain and, in such case, the Company will not be entitled to a federal
tax deduction. If a grantee disposes of shares acquired upon exercise of an
incentive stock option within two years after the date of grant of such option
or within one year after the date of exercise of such option, the disposition
will be treated as a disqualifying disposition and an amount equal to the lesser
of (1) the fair market value of the shares on the date of exercise minus the
purchase price, or (2) the amount realized on the disposition minus the purchase
price, will be taxed as ordinary income to the grantee in the taxable year in
which the disposition occurs. The excess, if any, of the amount realized upon
disposition over the fair market value at the time of the exercise of the option
will be treated as long-term capital gain if the shares have been held for more
than 12 months following the exercise of the option.
The exercise of an incentive stock option may subject a grantee to alternative
minimum tax liability because the excess of the fair market value of the shares
at the time an incentive stock option is exercised over the purchase price of
the shares is included in income for purposes of the alternative minimum tax
even though it is not included in taxable income for purposes of determining the
regular tax liability of an employee. Consequently, a grantee may be obligated
to pay alternative minimum tax in the year he or she exercises an incentive
stock option.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of an incentive stock option.
However, in the event of a disqualifying disposition, the Company will be
entitled to a deduction for federal income tax purposes in an amount equal to
the ordinary income, if any, recognized by a grantee upon disposition of the
shares, provided that the deduction is not otherwise disallowed under the
Internal Revenue Code.
OPTIONS OTHER THAN INCENTIVE STOCK OPTIONS. Stock options granted under the
stock option program that do not meet the requirements of incentive stock
options or expressly state that they are not intended to be treated as incentive
stock options will not qualify for any special tax benefits to the grantee
thereof. A grantee generally will not recognize any taxable income at the time
he is granted a non-incentive option. However, upon exercise of an option, the
grantee will recognize ordinary income for federal tax purposes measured by the
excess of the then fair market value of the shares over the exercise price. The
income realized by the grantee will be subject to income and other employee
withholding taxes.
The grantee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of a non-incentive option will
be the amount paid for such shares plus any ordinary income recognized as a
result of the exercise of such option. Upon disposition of any shares acquired
pursuant to the exercise of a non-incentive option, the difference between the
sale price and the grantee's basis in the shares will be treated as a capital
gain or loss and generally will be characterized as long-term capital gain or
loss if the shares have been held for more than 12 months at their disposition.
11
In general, there will be no federal income tax deduction allowed to the Company
upon the grant or termination of a non-incentive option or a sale or disposition
of the shares acquired upon the exercise of a non-incentive option. However,
upon the exercise of a non-incentive option, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
that a grantee is required to recognize as a result of the exercise, provided
that the deduction is not otherwise disallowed under the Internal Revenue Code.
STOCK APPRECIATION RIGHTS. The grantee of a stock appreciation right will not be
taxed upon the grant of such right, but will realize ordinary income at the time
the right is exercised equal to the amount of cash and/or the fair market value
of the stock received. The Company will be entitled to a deduction at the time
of exercise equal to the income realized by the grantee.
RESTRICTED STOCK ISSUANCES. As long as restricted stock remains both
nontransferable and subject to a substantial risk of forfeiture, there are
generally no tax consequences resulting from the issuance of such restricted
stock for either the participant or the Company. At such time as the restricted
stock either becomes transferable or is no longer subject to a substantial risk
of forfeiture, the participant will recognize ordinary income in an amount equal
to the excess of the fair market value of the stock over the amount the
recipient paid for it, if any. However, the participant may elect, within 30
days after receipt of the stock issuance grant, to report the excess, if any, of
the fair market value of the restricted stock subject to the grant (valued at
the date of grant as if it were unrestricted) over the amount paid for it as
ordinary income at the time of receipt. The Company will receive a compensation
deduction equal to the ordinary income recognized by the participant when so
recognized. If such an election is made and the restrictions on the stock fail
to lapse for any reason, the participant will not be entitled to a deduction.
When stock that was formerly restricted stock is sold or otherwise disposed of,
the tax treatment will depend on whether the participant made the election
described in the previous paragraph. If the participant did not make the
election, disposition of the stock will result in a long- or short-term capital
gain or loss, depending on the length of time from the date the restrictions
lapsed to the date of sale or other disposition, in an amount equal to the
difference between the amount received on disposition and the greater of the
amount the participant paid for the stock or the fair market value of the stock
on the date the restrictions lapsed. If the participant made the election,
disposition of the stock will result in a long- or short-term capital gain or
loss, depending on the length of time from the date of grant of the restricted
stock issuance to the date of disposition, in an amount equal to the difference
between the amount received on disposition and the sum of any amount paid by the
participant for the restricted stock and the amount recognized by the recipient
as ordinary income at the time of the grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PLAN.
12
APPOINTMENT OF AUDITORS
The Company has selected Getz, Krycler & Jakubovits,KPMG LLP, independent accountants, to continue as the
Company's auditors and to audit the books and other records of the Company for
the fiscal year ending December 31, 1997.
Getz, Krycler & Jakubovits has audited the Company's financial statements since
1988. The Company does not anticipate that a1999. A representative of Getz, Krycler &
JakubovitsKPMG LLP, is
expected to attend the Annual Meeting of Shareholders. Such representative will
have the opportunity to make a statement and will be present at the Annual Meeting.available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except for the matters set forth in the Notice of Annual Meeting
and described in this Proxy Statement. Unless otherwise directed, all shares
represented by proxy holders will be voted in favor of the proposals described
in this Proxy Statement. If any other matters come before the Annual Meeting,
the proxy holders will vote on those matters using their best judgment.
SHAREHOLDERSSHAREHOLDERS' PROPOSALS
Shareholders desiring to exercise their right under the proxy rules of the
Securities and Exchange Commission to submit proposals for consideration by the
shareholders at the 1998Year 2000 Annual Meeting are advised that their proposals
must be received by the Company no later than December 22, 1997.20, 1999, for inclusion
in the Company's Proxy Statement and form of proxy relating to that meeting. If
a shareholder intends to present a proposal at the year 2000 Annual Meeting but
does not seek inclusion of that proposal in the Proxy Statement for that
meeting, the holders of proxies for that meeting will be entitled to exercise
their discretionary authority on that proposal if the Company does not have
notice of the proposal by March 5, 2000.
ANNUAL REPORT TO SHAREHOLDERS
The Company's 19961998 Annual Report on Form 10-K includes financial statements for
the fiscal year ended December 31, 1998, the fiscal year ended December 31,
1997, the twelve month period ended December 31, 1996 (unaudited), the nine
month fiscal year ended December 31, 1996, and the fiscal years ended
March 31, 1995, and 1996, and is being mailed to the
shareholders along with this Proxy Statement. The Form 10-K is not to be
considered a part of the soliciting material.
By Order of the Board of Directors,
\s\ Erwin Cheldin
-----------------
Erwin Cheldin
Chairman of the Board, President
and Chief Executive Officer
Woodland Hills, California
April 21, 199719, 1999
13
EXHIBIT "A"
1999 OMNIBUS STOCK PLAN
-----------------------
OF
--
UNICO AMERICAN CORPORATION
--------------------------
1. Purpose
-------
The purpose of this 1999 Omnibus Stock Plan is to secure for Unico American
Corporation (the "Company") the benefits arising from stock ownership by and the
grant of incentives to selected employees, consultants, advisers and directors
of the Company and its subsidiary corporations who are important to the success
and the growth of the business of the Company, and to help the Company and its
subsidiary corporations secure and retain the services of such persons.
2. Definitions
-----------
"Act" means the Securities Act of 1933, as amended.
"Board" means the Board of Directors of the Company.
"Change of Control Event" means:
(i) The acquisition by any individual (other than Erwin Cheldin), entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act)(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the then
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control Event: (1) any acquisition directly from the
Company (except that an acquisition by virtue of the exercise of a conversion
privilege shall not be considered within this clause (1) unless the converted
security was itself acquired directly from the Company), (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (4) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation (a "Transaction"), if, following such Transaction, the
conditions described in clauses (A) and (B) of subparagraph (iii) below are
satisfied;
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual who becomes a director subsequent
to the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; provided, however, that any transaction which
does not constitute a Change in Control Event by reason of an exception
contained in subparagraph (i) above or subparagraphs (iii) or (iv) below, shall
not constitute a Change in Control Event by reason of this subparagraph (ii); or
(iii) Approval by the shareholders of the Company of a Transaction, unless,
following such Transaction in each case, (A) more than 80% of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Transaction and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such Transaction and (B) no Person (excluding
the Company, Erwin Cheldin, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Transaction and any Person
beneficially owning, immediately prior to such Transaction, directly or
indirectly, 20% or more of the Outstanding Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then
A-1
outstanding shares of common stock of the corporation resulting from such
Transaction or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors; or
(iv) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other disposition
of all or substantially all of the assets of the Company, unless such assets are
sold to a corporation and following such sale or other disposition, the
conditions described in clauses (A) and (B) of subparagraph (iii) above are
satisfied with respect to the acquiring corporation.
"Company" shall have the meaning set forth in Section 1 hereof.
"Common Stock" means shares of the Company's Common Stock, no par value.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means (i) if the Common Stock is then listed on a
national securities exchange, the closing sales price of the Common Stock on the
day such value is determined on the principal securities exchange on which such
stock is then listed, or if there is no reported sale on that day, the average
of the bid and asked quotations on such exchange on that day, or (ii) if the
Common Stock is then publicly traded in the National Market System of the NASDAQ
Stock Market, the closing sales price of the Common Stock as reported in the
National Market System of the NASDAQ Stock Market on the day such value is
determined, or if there is no reported sale on that day, the average of the bid
and asked quotations on that day, or (iii) if the Common Stock is then publicly
traded in the over-the-counter market (other than in the National Market System
of the NASDAQ Stock Market), the mean between the closing bid and asked prices
of the Common Stock in the over-the-counter market on the day such value is
determined or, if no shares were traded that day, on the next preceding day on
which there was such a trade, or (iv) if the Common Stock is not then separately
quoted or publicly traded, the fair market value on the date such value is to be
determined, as determined in good faith by the Plan Administrator.
"Grantee" means an employee, consultant, adviser or director of the Company
or its subsidiary corporations to whom an Option and/or a Stock Appreciation
Right is granted.
"Incentive Stock Option" means an option which is designated as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code and satisfies the requirements of that Section.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended.
"Option" means any right to purchase, at a price and for the Term fixed by
the Plan Administrator in accordance with the Plan and subject to such other
limitations and restrictions as the Plan Administrator may impose, the number of
shares of Common Stock specified by the Plan Administrator.
"Option Agreement" means a written agreement in a form approved by the Plan
Administrator to be entered into by the Company and the Grantee with respect to
the grant of an Option under the Stock Option Program.
"Subsidiary" shall have the definition of a subsidiary corporation
contained in Section 424 of the Internal Revenue Code.
"Participant" means an employee, consultant, adviser or director of the
Company or its subsidiary corporations who is issued shares of Common Stock
under the Restricted Stock Program.
"Plan" means the 1999 Omnibus Stock Plan of the Company, as set forth in
this document, and includes without limitation each of the Stock Option Program,
the Stock Appreciation Program and the Restricted Stock Program.
"Plan Administrator" means the Board or any committee of the Board which is
authorized to administer the Stock Option Program, the Stock Appreciation
Program and/or the Restricted Stock Program, as applicable, to the extent that
such entity is carrying out its administrative functions under those programs.
The persons constituting the Plan Administrator for any program may be the same
as or different from those persons administering any other program under the
Plan.
A-2
"Restricted Stock Agreement" means a written agreement in a form approved
by the Plan Administrator to be entered into by the Company and the Participant
with respect to the issuance of restricted stock under the Restricted Stock
Program.
"Restricted Stock Program" means the restricted stock issuance program in
effect under Section 10 hereof.
"Spread" means the excess of (a) the Fair Market Value of a share of Common
Stock on the date of exercise of a Stock Appreciation Right over (b) the Fair
Market Value of a share of Common Stock on the date of grant of such Stock
Appreciation Right.
"Stock Appreciation Agreement" means a written agreement in a form approved
by the Plan Administrator to be entered into between the Company and a Grantee
with respect to the grant of Stock Appreciation Rights under the Stock
Appreciation Program, which agreement may (but is not required to be) included
in an Option Agreement.
"Stock Appreciation Program" means the stock appreciation rights program in
effect under Section 9 hereof.
"Stock Appreciation Right" means the right to receive an amount of cash or
shares of Common Stock, or a combination of cash and shares of Common Stock,
equal to no greater than the Spread.
"Stock Option Program" means the stock option program in effect under
Section 8 hereof.
"Successor" means the legal representative of the estate of a deceased
Grantee or Participant or the person or persons who shall acquire the right to
exercise an Option or Stock Appreciation Right or to acquire shares, as the case
may be, by bequest or inheritance or by reason of the death of the Grantee or
the Participant, as the case may be.
"Term" means the period during which a particular Option may be exercised.
3. Structure of the Plan
---------------------
The Plan shall be divided into three separate programs:
(a) the Stock Option Program under which eligible persons may, at the discretion
of the Plan Administrator, be granted Options to purchase shares of Common
Stock, which may include Incentive Stock Options;
(b) the Stock Appreciation Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted the right to receive a payment
(in cash, stock or a combination of the foregoing) on the terms set forth in
Section 9 hereof, which right may (but is not required to be) granted in tandem
with an Option; and
(c) the Restricted Stock Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of the Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered to the Company (or its subsidiary corporations).
4. Effective Date of Plan
----------------------
The Plan shall become effective on the date it is adopted by the Board, subject,
however, to its approval by the shareholders of the Company within twelve months
of such effective date. If such shareholder approval is not obtained within
twelve months of the effective date, then any unexercised Options and Stock
Appreciation Rights granted prior to the expiration of such twelve-month period
shall terminate and cease to be outstanding and the Company will promptly refund
to the Grantees and the Participants the exercise or purchase price paid for any
shares acquired under the Plan during such twelve-month period, together with
interest at the applicable short-term federal rate, from the date the exercise
price or purchase price for such shares was paid, and such shares (and all
outstanding rights to acquire any additional shares under the Plan) shall
thereupon, without further action, automatically be cancelled and cease to be
outstanding.
5. Administration of the Plan
--------------------------
(a) The Plan and/or the programs thereunder may be administered by the Board or
by a committee of the Board. Any committee of the Board shall consist of not
less than two (2) directors, each of whom shall be a "Non-Employee Director"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. Any
committee shall serve at the pleasure of the Board. If no committee is
constituted, the Plan and/or the programs thereunder shall be administered by
the Board.
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(b) Any committee, if one be designated or constituted, shall adopt
such rules of procedure as it may deem proper; provided, however, that it may
only take action upon the agreement of a majority of the whole committee. Any
action which the Board or any committee shall take through a written instrument
signed by a majority of its members shall be as effective as though taken at a
meeting duly called and held.
(c) The Board shall have the ultimate power and authority to interpret the Plan.
To the extent the Board delegates to a committee of the Board authority to
administer the Stock Option Program, the Stock Appreciation Program and/or the
Restricted Stock Program, the Plan Administrator for such program shall have the
authority to interpret the Stock Option Program, the Stock Appreciation Program
and/or the Restricted Stock Program, as applicable. Subject to the provisions of
the Plan, the Plan Administrator of each program shall have plenary authority
with respect to that program, including without limitation the authority to
determine when and to whom Options, rights or stock issuances shall be granted,
the number of shares subject to each Option, right or stock issuance, the method
and medium of payment, the vesting schedule and terms and conditions of each
Option, right or stock issuance.
(d) Determinations under the Plan need not be uniform and may be made
selectively among persons who receive, or are eligible to receive, grants of
Options, Stock Appreciation Rights or stock issuances under the Plan (whether or
not such persons are similarly situated). Without limiting the generality of the
foregoing, as to any program under the Plan, the Plan Administrator shall be
entitled, among other things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Option Agreements, Stock
Appreciation Agreements or Restricted Stock Agreements, as the case may be, as
to the persons to receive Options, Stock Appreciation Rights or stock issuances
under the Plan.
6. Number and Source of Shares Subject to the Plan
-----------------------------------------------
(a) The stock issuable under the Plan shall be shares of authorized and unissued
Common Stock which are not reserved for some other purpose. The maximum number
of shares of Common Stock which may be issued under the Plan and/or upon which
Stock Appreciation Rights may be based shall not exceed 500,000 shares (subject
to adjustment as provided in Section 12 hereof).
(b) Shares of Common Stock as to which Options previously granted shall for any
reason lapse or upon which Stock Appreciation Rights have been granted but which
have terminated unexercised shall be restored to the total number of shares
available under the Plan. Unvested shares issued under the Restricted Stock
Program which are surrendered to the Company for cancellation pursuant to the
Company's rights under the Plan, shall also be restored to the total number
available under the Plan. If the exercise price under an outstanding Option is
paid, in whole or in part, with shares of Common Stock, then the number of
shares available for issuance under the Plan shall be reduced by the gross
number of shares for which the Option is exercised and not by the net number of
shares of Common Stock actually issued to the Grantee.
7. Eligibility Under the Plan
--------------------------
(a) The persons eligible to participate in the Plan are employees, consultants,
advisers and directors (whether or not employees) of the Company or one or more
of its subsidiary corporations. Eligibility shall be determined by the Plan
Administrator (subject to Section 7(b) below), and such determination shall be
final and conclusive upon all persons.
(b) As to the Stock Option Program, employees are eligible to receive either or
both Incentive Stock Options and Options other than Incentive Stock Options.
Directors, consultants and/or advisers who are not also employees or officers of
the Company or one or more of its subsidiary corporations shall not be eligible
to receive Incentive Stock Options under the Stock Option Program. A Grantee who
owns (as determined in accordance with Section 422(b)(6) of the Internal Revenue
Code) shares possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or one or more of its subsidiary
corporations may only be granted an Incentive Stock Option under the Stock
Option Program if at the time such Incentive Stock Option is granted the
Incentive Stock Option price is at least one hundred ten percent (110%) of the
Fair Market Value of the shares subject to the Incentive Stock Option, and such
Incentive Stock Option by its terms is not exercisable after the expiration of
five (5) years from the date such Incentive Stock Option is granted. To the
extent that the aggregate Fair Market Value (determined as of the time the
Option is granted) of the shares with respect to which Incentive Stock Options
are exercisable for the first time by a Grantee during any calendar year (under
all plans of the Company and its subsidiary corporations, if any) exceeds such
amount as the Internal Revenue Code shall then specify, if any, such Options
shall be treated as Options which are not Incentive Stock Options.
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8. Stock Option Program
---------------------
(a) GENERAL. Each Option shall be evidenced by an Option
Agreement in a form approved by the Plan Administrator; provided, however, that
each Option Agreement shall comply with the terms specified below and shall
indicate therein whether the Option evidenced thereby is intended to be an
Incentive Stock Option or an Option not intended to by an Incentive Stock
Option. The Option Agreement may (but is not required to) include therein Stock
Appreciation Rights. Each Option Agreement evidencing an Incentive Stock Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.
(b) DATE OF GRANT. The date of grant of an Option shall be the date specified by
the Plan Administrator which date shall not be earlier than the date the Plan
Administrator's action is final.
(c) EXERCISE OF OPTIONS.
(i) The exercise price per share to be paid by the Grantee to the Company
upon exercise of an Option shall not be less than 100% of the Fair Market Value
of the shares of Common Stock subject to the Option on the date the Option is
granted. The aggregate Option price shall be paid at the time of the exercise of
the Option in full in cash, electronic funds transfer or by check made payable
to the Company or, if permissible under applicable state law and in the
discretion of the Plan Administrator, in installments or in part by a promissory
note or notes of the Grantee bearing interest at such rate or rates as may be
determined by the Plan Administrator. In the sole discretion of the Plan
Administrator, payment of the aggregate Option price also may be made in whole
or in part by delivery of shares of previously acquired Common Stock held for
the requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and having a Fair Market Value (determined as of
the date such Option was exercised) equal to all or part of the aggregate Option
price and, if and to the extent permissible and applicable, cash, electronic
funds transfer or a check or note payable to the Company for any remaining
portion of the aggregate Option price.
(ii) In connection with the exercise of an Option, the Company shall be
entitled to require as a condition of delivery of the shares issuable upon
exercise thereof that the Grantee remit or, in appropriate cases agree to remit
when due, an amount sufficient to satisfy all current or estimated future
federal, state and local withholding tax requirements and any federal social
security or other federal or state employment tax or other tax requirements
relating thereto. If permitted by the Plan Administrator in its sole discretion,
the Grantee may satisfy, in whole or in part, the foregoing withholding
requirement by (A) delivery of shares of previously acquired Common Stock,
and/or (B) instructing the Company to reduce the number of shares of Common
Stock to be delivered upon exercise of the Option by a number of shares, having,
in either case, a Fair Market Value (determined as of the date such Option was
exercised) equal to all or part of the aggregate withholding taxes and, if
permissible and applicable, cash or a check payable to the Company for any
remaining portion of the aggregate withholding taxes.
(iii) If requested by the Plan Administrator, prior to the acceptance of
shares of Common Stock from the Grantee as provided in subparagraph (i) or (ii)
of this Section 8(c), the Grantee shall supply the Plan Administrator with
written representations and warranties as to title thereto, including without
limitation, a representation and warranty that the Grantee has good and
marketable title to such shares free and clear of liens, encumbrances and any
other third-party or community property interests (or a spousal consent to the
use of such shares in the manner described in said subparagraphs (i) or (ii)).
(iv) The Plan Administrator, in its sole discretion, may permit a Grantee
to elect to pay the Option price upon exercise of an Option by authorizing a
third party to sell shares of Common Stock (or a sufficient portion of the
shares) acquired upon exercise of such Option and to remit to the Company a
sufficient portion of the sale proceeds to pay the entire Option price and any
tax withholding resulting from such exercise.
(v) Each Option granted under the Stock Option Program shall be exercisable
at such time or times, or upon the occurrence of such event or events, and in
such amounts, as the Plan Administrator shall specify in the Option Agreement
except that no Option granted hereunder shall be for a Term exceeding ten (10)
years (or five (5) years as provided in Section 7(b) hereof). Options shall be
exercised by delivering or mailing to the Company, Attention: Corporate
Secretary:
(A) a notice, in the form prescribed by the Plan Administrator,
specifying the number of shares to be purchased;
(B) the total consideration therefor, as specified in the Option
Agreement relating thereto; and
(C) if required, the representation and agreement referred to in clause
(iii)(A) of the first sentence of Section 15(b) hereof.
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(vi) Upon receipt of such notice and payment, the Company shall promptly
deliver to the Grantee a certificate or certificates for the shares purchased,
without charge to the Grantee for any issue or transfer tax.
(d) TRANSFERABILITY. Unless the Plan Administrator, in its sole discretion,
permits otherwise, all Options granted under the Plan shall be nontransferable
other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Grantee only by the Grantee. Upon the
exercise of an Option by the Grantee, the share certificate or certificates may,
at the request of the Grantee, be issued in the Grantee's name and the name of
another person as joint tenants with right of survivorship.
(e) ADDITIONAL PROVISIONS. An Option may contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the Plan
Administrator and any Option intended to be an Incentive Stock Option shall
include such provisions and conditions as may be necessary to qualify the Option
as an Incentive Stock Option.
(f) EFFECT OF TERMINATION OF EMPLOYMENT. The unexercised portion of any Option
granted under the Stock Option Program shall automatically and without notice
terminate and become null and void at the time of the earliest to occur of the
following:
(i) The expiration of not more than ten years from the date on which such
Option was granted;
(ii) The expiration of thirty days (or such shorter period as may be
determined by the Plan Administrator upon the granting of an Option) from the
date of termination (other than a termination described in Section 8(f)(iv)
below or on account of death) of the Grantee's employment with the Company or
its subsidiary corporations (or, in the case of a director, consultant or
adviser who is not an employee, from the date of termination of the Grantee's
directorship or consulting or advising arrangement, as the case may be),
provided that if the Grantee shall die during such thirty day (or shorter)
period, the provisions of Section 8(f)(iii) below shall apply;
(iii) The expiration of one year (or such shorter period as may be
determined by the Plan Administrator upon the granting of an Option) following
the date of the Grantee's death, if such death occurs during his or her
employment with the Company or its subsidiary corporations (or, in the case of a
director, consultant or adviser who is not an employee, during the term of his
or her directorship or consulting or advising arrangement, as the case may be);
(iv) The expiration of one year (or such shorter period as may be
determined by the Plan Administrator upon the granting of an Option) from the
date of termination of the Grantee's employment with the Company or its
subsidiary corporations (or, in the case of a director, consultant or adviser
who is not an employee, from the date of termination of the Grantee's
directorship or consulting or advising arrangement, as the case may be), if such
termination is attributable to a disability of the Grantee within the meaning of
Section 22(e)(3) of the Internal Revenue Code. The Plan Administrator shall have
the right to determine whether the Grantee's termination is attributable to a
disability of the Grantee within the meaning of Section 22(e)(3) of the Internal
Revenue Code, such determination of the Plan Administrator to be final and
conclusive.
(v) Unless otherwise determined by the Plan Administrator upon the granting
thereof, the date of termination of the Grantee's employment with the Company or
its subsidiary corporations, if such termination constitutes or is attributable
to a breach by the Grantee of an employment agreement with the Company or its
subsidiary corporations or if the Grantee is discharged for cause (the Plan
Administrator shall have the right to determine whether the Grantee has been
discharged for cause and the date of such discharge, such determination of the
Plan Administrator to be final and conclusive); and
(vi) The expiration of such period of time or the occurrence of such event
as the Plan Administrator in its sole discretion may provide upon the granting
thereof.
(g) SHAREHOLDER RIGHTS. No person shall have any rights of a shareholder by
virtue of a grant of an Option except with respect to shares actually issued to
that person upon the exercise thereof.
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9. Stock Appreciation Program
--------------------------
(a) GENERAL. The Plan Administrator may grant Stock Appreciation Rights to
eligible persons, which may or may not be granted in tandem with Options that
have been or are granted under the Plan as the Plan Administrator so directs. A
Stock Appreciation Right shall be evidenced by a Stock Appreciation Agreement in
a form approved by the Plan Administrator (which may but is not required to be
included in an Option Agreement) provided, however, that each Stock Appreciation
Agreement shall comply with the terms below.
(b) GRANT OF STOCK APPRECIATION RIGHTS. The date of grant of a Stock
Appreciation Right shall be the date specified by the Plan Administrator, which
date shall be not earlier than the date the Plan Administrator's action is
final. Except as permitted under Section 9(c) below, the Plan Administrator
shall, at the time of granting a Stock Appreciation Right, specify such
conditions and limitations to the Stock Appreciation Right as it shall deem
advisable, including, but not limited to (i) the number of Stock Appreciation
Rights so granted, (ii) the time within which and the extent to which such Stock
Appreciation Right shall be exercisable, (iii) the event or events upon which
such Stock Appreciation Rights shall terminate and (iv) the maximum amount of
appreciation to be recognized with regard to such Stock Appreciation Right (but
in no event shall such appreciation exceed the Spread).
(c) TANDEM STOCK APPRECIATION RIGHTS. A Stock Appreciation Right associated with
an Option may be granted either at the time the Option is granted or by amending
the Option Agreement at any time thereafter prior to the end of the Term of the
associated Option. If Stock Appreciation Rights are granted in tandem with an
Option, the exercise of the Option shall cause a proportional reduction in the
Stock Appreciation Rights standing to a Grantee's credit which were granted in
tandem with the Option; and the payment of Stock Appreciation Rights shall cause
a proportional reduction in the number of shares issuable upon exercise of such
Option. If Stock Appreciation Rights are granted in tandem with an Incentive
Stock Option, such Stock Appreciation Rights shall have such terms and
conditions as shall be required for the Incentive Stock Option to qualify under
the Internal Revenue Code as an Incentive Stock Option.
(d) EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be
exercised by delivering or mailing to the Company, Attention: Corporate
Secretary, a written notice in the form prescribed by the Plan Administrator
specifying the number of Stock Appreciation Rights being exercised. The date of
exercise shall be the date upon which such notice is received in the office of
the Corporate Secretary. Upon the exercise of a Stock Appreciation Right, the
payment to be made to the Grantee may be in cash, or in shares of Common Stock
valued at their Fair Market Value on the date of exercise, or partly in cash and
partly in shares of Common Stock, as determined by the Plan Administrator. Such
payment shall be made to the Grantee within thirty days of the exercise of such
Stock Appreciation Right. The Company shall have the right to deduct from all
amounts payable upon exercise of a Stock Appreciation Right any federal, state
and local taxes required by law to be withheld with respect to such payment.
(e) TRANSFERABILITY. Unless the Plan Administrator, in its sole discretion,
permits otherwise, all Stock Appreciation Rights granted under the Plan shall be
nontransferable other than by will or by the laws of descent and distribution
and may be exercised during the lifetime of the Grantee only by the Grantee.
10. Restricted Stock Program
------------------------
(a) GENERAL. Shares of Common Stock may be issued under the Restricted Stock
Program through direct and immediate issuances by the Plan Administrator without
any intervening option grants. Each such stock issuance shall be evidenced by a
Restricted Stock Agreement which complies with the terms specified below.
(b) PURCHASE PRICE. The purchase price per share for any shares issued under the
Restricted Stock Program shall be fixed by the Plan Administrator but shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the issue date and the aggregate purchase price shall be paid in
full upon issuance of the applicable shares. Shares of Common Stock may be
issued under the Restricted Stock Program for any of the following items of
consideration which the Plan Administrator in its sole discretion may deem
appropriate in each individual instance:
(i) cash, electronic funds transfer or check made payable to the Company;
(ii) if permissible under applicable state law, a promissory note or notes
of the Participant bearing interest at such rate or rates as may be determined
by the Plan Administrator; or
A-7
(iii) past services rendered to the Company (or its subsidiary
corporations).
(c) VESTING. Shares of Common Stock issued under the Restricted Stock Program
may, in the sole discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over such period of
time or upon the attainment of specified performance objectives.
(d) SHAREHOLDER RIGHTS; TRANSFERABILITY. The Participant shall have full
shareholder rights with respect to any shares of Common Stock issued to the
Participant under the Restricted Stock Program, whether or not the Participant's
interest in those shares is vested, including without limitation the right to
vote such shares and to receive any and all dividends paid on such shares;
provided, however, that the Participant shall not have the right to sell,
transfer, assign, give, pledge, hypothecate or otherwise dispose of any shares
issued under the Restricted Stock Program in which the Participant's interest is
not then vested.
(e) EFFECT OF TERMINATION OF EMPLOYMENT OR FAILURE TO OBTAIN OBJECTIVES.
(i) Upon the termination of the Participant's employment with the Company
or its subsidiary corporations (or in the case of a director, consultant or
adviser, who is not an employee, upon termination of the Participant's
directorship, consulting or advising arrangement, as the case may be), for any
reason or if specified performance objectives upon which the stock issuance is
conditioned are not met, then any and all unvested shares of Common Stock issued
under the Restricted Stock Program (and any and all shares or other securities
attributable thereto issued to the Participant with respect to such unvested
shares, including without limitation shares or other securities issued as
dividends, in exchange for any of such unvested shares or upon any split of the
capital stock of the Company) shall be immediately surrendered to the Company
for cancellation, and the Participant shall have no further shareholder rights
with respect to those shares or securities. Upon such surrender, the Company
shall repay to the Participant the cash or cash equivalent consideration paid by
such Participant for the surrendered shares or securities and the Company shall
cancel the unpaid principal balance of any outstanding promissory note of the
Participant attributable to such surrendered shares.
(ii) The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock (and/or such other
shares or securities as may be attributable thereto) which would otherwise occur
upon the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock (and/or such other shares or securities as may be
attributable thereto) as to which the waiver applies. Such waiver may be
selective and non-uniform among Participants and may be effected at any time,
whether before or after the termination of a Participant's employment,
directorship or consulting or advising arrangement, as the case may be, or the
attainment or non-attainment of the applicable performance objectives.
(f) ESCROW LEGENDS. Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Company until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
(g) WITHHOLDING. The Company shall be entitled to require as a condition to the
issuance of any shares under the Restricted Stock Program that the Participant
remit, or in appropriate cases agree to remit when due, an amount sufficient to
satisfy all current or estimated federal, state and local withholding tax
requirements and any federal social security or other federal or state
employment tax or other tax requirements relating thereto.
11. Right to Terminate Employment
-----------------------------
Nothing contained in the Plan or in any Option or Stock Appreciation Right
granted pursuant to the Plan or in any Restricted Stock Agreement shall obligate
the Company or its subsidiary corporations to continue to employ or engage any
employee, consultant, adviser or director in such or in any other capacity with
the Company, nor confer upon any employee, consultant, adviser or director any
right to continue in the employ or as a consultant, adviser or director of or in
any other capacity with the Company or its subsidiary corporations nor limit in
any way the right of the Company or its subsidiary corporations to amend, modify
or terminate any person's compensation, employment, directorship or consulting
or advising agreement at any time.
12. Adjustments
-----------
In the event that the shares of Common Stock subject to the Plan shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether by reason of
a Transaction, recapitalization, reclassification, split-up, combination of
shares, or otherwise) or if the number of such shares of stock shall be
increased solely through the payment of a stock dividend, then
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appropriate and proportionate adjustments to reflect the foregoing events shall
be made to the maximum number and/or kind of securities issuable under the Plan
and to the number and/or kind of securities and exercise price per share in
effect under the outstanding Options and/or Stock Appreciation Rights. In the
event there shall be any other change in the number or kind of the outstanding
shares of stock of the Company subject to the Plan, or of any stock or other
securities into which such stock shall have been changed, or for which it shall
have been exchanged, then if the Board, in its sole discretion, determines that
such change equitably requires an adjustment in any Option and/or Stock
Appreciation Right theretofore granted or which may be granted under the Plan or
the terms, such adjustments shall be made in accordance with such determination.
Fractional shares resulting from any adjustment in Options pursuant to this
Section 12 shall be eliminated. Notice of any adjustment shall be given by the
Company to each holder of an Option and/or Stock Appreciation Right which shall
have been so adjusted and such adjustment (whether or not such notice is given)
shall be final and conclusive for all purposes of the Plan.
13. Acceleration of Awards Upon Change in Control
---------------------------------------------
(a) As to any or all Grantees and Participants, upon the occurrence of a Change
in Control Event (i) each Option and Stock Appreciation Right shall become
immediately exercisable and (ii) all unvested shares issued under the Restricted
Stock Program shall immediately vest free of restrictions; provided, however,
that in no event shall any Option, Stock Appreciation Right or unvested shares
issued under the Restricted Stock Program be accelerated as to any person
subject to Section 16(a) of the Exchange Act to a date less than six months
after the grant or issuance thereof unless the grant or issuance thereof was
exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3(d)(1) or
(2) promulgated thereunder. Notwithstanding the foregoing, prior to a Change of
Control Event, the applicable Plan Administrator may determine that, upon its
occurrence, there shall be no acceleration of benefits under any one or more of
the foregoing, and/or determine that only certain or limited benefits under any
one or more of the foregoing shall be accelerated and the extent to which they
shall be accelerated, and/or establish a different time in respect of such
transaction for such acceleration. In that event, the Plan Administrator will
make provision in connection with such transaction for continuance of the Plan
and the assumption of Options, Stock Appreciation Rights and/or Restricted Stock
Agreements (and/or unvested shares) theretofore granted, delivered or issued, or
the substitution for such with new Options, Stock Appreciation Rights and/or
Restricted Stock Agreements (and/or unvested shares) covering the stock of a
successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices. In
addition, the Plan Administrator may override the limitations on acceleration in
this Section 13 by express provision in a Stock Option Agreement, Stock
Appreciation Agreement or Restricted Stock Agreement and may accord any Grantee
or Participant a right to refuse any acceleration, whether pursuant to such
agreement or otherwise, in such circumstances as the Plan Administrator may
approve. Any acceleration of the foregoing shall comply with applicable
regulatory requirements including without limitation Section 422 of the Internal
Revenue Code.
(b) If any Option, Stock Appreciation Right or right to acquire shares of Common
Stock under this Plan has not been exercised or has not vested prior to (i) a
dissolution of the Company, (ii) a merger or consolidation of the Company with
another corporation in which the shareholders of the Company immediately prior
thereto own less than a majority of the outstanding voting securities of the
surviving corporation immediately thereafter or (iii) consummation of a sale of
all or substantially all of the assets and business of the Company to another
corporation and in the case of clauses (ii) or (iii) no provision has been made
for the survival, substitution, exchange or other settlement of such Option,
Stock Appreciation Right and/or right, such Option, Stock Appreciation Right
and/or right shall thereupon terminate.
14. Proceeds from Sale of Shares
----------------------------
Any cash proceeds received by the Company from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.
15. Termination, Suspension or Modification of Plan
-----------------------------------------------
(a) The Plan shall terminate ten (10) years from the date on which it is adopted
by the Board. All Options, Stock Appreciation Rights and unvested stock
issuances outstanding at that time under the Plan shall continue to have full
force and effect in accordance with the provisions of the documents evidencing
such options, rights or stock issuances.
(b) The Board may postpone any exercise of an Option, a Stock Appreciation Right
or the vesting of any stock issuance for such time as the Board in its
discretion may deem necessary or condition the exercise thereof in such
A-9
manner as the Board may determine in order to permit the Company with reasonable
diligence (i) to effect or maintain the listing of such shares on any securities
exchanges, or (ii) to effect or maintain registration or qualification under the
Act, or any applicable state statute, of the Plan or the shares issuable
hereunder, or (iii) to determine in its sole discretion that the Plan and
issuance of such shares are exempt from registration or qualification and in
connection therewith to require (A) as a condition of the issuance of shares
hereunder that the Grantee or the Participant, as applicable, represent and
agree in a form prescribed by the Company that such person is acquiring shares
of Common Stock for investment and without a view to the distribution or resale
thereof in violation of the Act and any applicable state securities law and (B)
that the certificates evidencing such shares bear a legend setting forth such
representation. The Company shall not be obligated by virtue of any Option
Agreement, Stock Appreciation Agreement, Restricted Stock Agreement or any
provision of the Plan to recognize the exercise of an Option or a Stock
Appreciation Right or to sell or issue shares in violation of the Act or of the
law of any state having jurisdiction thereof. Any such postponement shall not
extend the Term of an Option or Stock Appreciation Right; and neither the
Company nor its directors or officers shall have any obligation or liability to
the Grantee of an Option or Stock Appreciation Right, or to the Grantee's
Successor, with respect to any shares as to which the Option shall lapse because
of such postponement.
(c) The Board may at any time terminate, suspend, or modify the Plan, except
that the Board shall not, without the authorization of the holders of a majority
of the shares entitled to vote with respect thereto, increase the aggregate
number of shares covered by the Plan (other than through adjustment for changes
in capitalization as hereinabove provided). No termination, suspension, or
modification of the Plan shall adversely affect any right or obligation with
respect to Options, Stock Appreciation Rights or unvested stock issuances at the
time outstanding under the Plan unless the Grantee or the Participant (or his or
her Successor) consents to such amendment or modification; but it shall be
conclusively presumed that any adjustment for changes in capitalization as
provided in Section 12 shall not adversely affect any such right. In addition,
certain amendments may require shareholder approval pursuant to applicable laws
and regulations. Subject to the foregoing provisions of this Section 15, the
Board expressly reserves the right, in its sole determination, to amend or
modify the terms and provisions of the Plan and of any outstanding Options
thereunder to the extent necessary to qualify any or all Options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded employee stock options under the Internal Revenue
Code or any amendment thereto or other statutes or regulations which become
effective after the effective date of the Plan.
16. Regulatory Approvals
--------------------
The implementation of the Plan, the granting of any Options under the Stock
Option Program, the granting of any Stock Appreciation Right under the Stock
Appreciation Program and the issuance of any shares of Common Stock (i) upon the
exercise of any Option or Stock Appreciation Right or (ii) under the Restricted
Stock Program shall be subject to the Company's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the Options and/or Stock Appreciation Rights granted under it and the shares of
Common Stock issued pursuant to the foregoing and/or the Restricted Stock
Program.
A-10
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF UNICO AMERICAN CORPORATION
The undersigned hereby constitutes and appoints LESTER A. AARON and ROGER H.
PLATTEN, and each of them, with full power of substitution, the proxies of the
undersigned to represent the undersigned and vote all shares of common stock of
UNICO AMERICAN CORPORATION (the "Company"), which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders to
be held at the Warner Center Marriott, 21850 Oxnard Street, Woodland Hills,
California 91367, on June 6, 1997,4, 1999, at 2:00 p.m. local time and at any
adjournments thereof, with respect to the matters described in the accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement, receipt of which
is hereby acknowledged, in the following manner.
1.1 ELECTION OF DIRECTORS [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the to vote all nominees
contrary below) listed below
ERWIN CHELDIN, CARY L. CHELDIN, LESTER A. AARON, GEORGE C. GILPATRICK
ROGER H. PLATTEN, DAVID E. DRISCOLL, DAVID A. LEWIS
BERNARD R. GANS
INSTRUCTIONSINSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE:NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ON THE LIST ABOVE.
2. [ ] FOR [ ] AGAINST [ ] ABSTAIN ADOPTION OF 1999 OMNIBUS STOCK PLAN.
3. IN ACCORDANCE WITH THEIR BEST JUDGMENT, with respect to any other matters
which may properly come before the meeting and any adjournment or
adjournments thereof.
Please sign and date on reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS
DIRECTED HEREIN. When this proxy is properly executed and returned, the shares
it represents will be voted at the Annual Meeting in accordance with the choices
specified herein. IF NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR
ALL
NOMINEES.PROPOSALS 1 AND 2.
DATED:________________________________________________, 1997.
_________________________________________________________________________________________, 1999.
-------------------------------------------------------
(Signature)
________________________________________________-------------------------------------------------------
(Signature if jointly held)
Please date and sign exactly as your name or names
appear herein. If more than one owner, all should sign.
When signing as attorney,executor, administatoradministrator,
trustee or guardian, give your full title as such. If
the signatory is a corporation or partnership, sign the
full corporate or partnership name by its duly
authorized officer or partner.
PLEASE COMPLETE, SIGN, AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.