SCHEDULE 14A
(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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14A-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNICO INC.
(Name of Registrant as Specified in Its Charter)
_______________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(I) and 0-
11.
1) Title of each class of securities to which transaction applies:
____________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how its determined):
The filing fee is calculated on the sum of the cash to be paid to
Registrant and the liabilities of the Registrant assumed or forgiven totaling,
in the aggregate, approximately $914,615.
4) Proposed maximum aggregate value of transaction:
____________________________________________________
5) Total fee paid:
[X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$182.92
2) Form, Schedule or Registration Statement No.:
Schedule 14A
3) Filing Party:
4) Date Filed:
1/8/99
UNICO INC. LOGO
UNICO INC.
8380 Alban Road
Springfield, VA 22150
(703) 913-0416
January 8, 1999
Dear Stockholder:
Enclosed is a Notice of Special Meeting of the Stockholders of UNICO, Inc.
to be held on the 29th day, January, 1999, at 10:00 a.m. Eastern Standard Time
and a Proxy Statement containing information about the various matters to be
acted upon at the Special Meeting. Also enclosed is a proxy card which we urge
you to complete and promptly return to ensure that your shares are voted
at the Special Meeting.
As described in the accompanying Proxy Statement, you are being asked to
consider, vote upon and approve the sale by UNICO, Inc. (the "Company") of all
of the issued and outstanding stock of the Company's wholly-owned subsidiary,
United Marketing Solutions Inc. ("UMSI"), to Next Generation Media Corp.
("NexGen") pursuant to the terms of an Amended and Restated Stock Purchase
Agreement (the "UMSI Stock Purchase Agreement"). The stock of UMSI
represents substantially all the assets of the Company. You are further being
asked to consider, vote upon and approve an amendment to the Company's Bylaws
to permit actions by stockholders by written consent in lieu of meeting in
accordance with Section 228 of the Delaware General Corporation Law.
In exchange for the UMSI stock, NexGen will (i) pay to the Company
$172,664.50 in cash, (ii) forgive indebtedness owed by the Company to NexGen in
the amount of $175,500.00, (iii) pay to the Company an additional amount of
approximately $164,000 for the payment of certain debts of the Company to
third-party creditors, and (iv) assume debt of approximately $402,000 to the
Company's primary lender.
The sale of the UMSI stock (the "UMSI Stock Sale") represents one
component of a series of interrelated transactions which has resulted in a
transfer of a controlling interest in the Company by certain former members of
the Company's Board of Directors to NexGen which, in turn, has transferred such
interest to T.C. Equities Ltd., a Bahamian company. Approval and adoption of
the UMSI Stock Purchase Agreement requires the affirmative vote of a majority
of the outstanding shares of the Company's common stock. T.C. Equities Ltd.
holds in excess of a majority of such shares and intends to vote for approval
and adoption of the UMSI Stock Purchase Agreement and the UMSI Stock Sale.
Accordingly, approval of the transaction is assured.
Upon consummation of the UMSI Stock Sale, Gerard R. Bernier, the Company's
former President and Chief Executive Officer, and the current President of
UMSI, will become a director, as well as president and chief executive officer,
of NexGen. Mr. Bernier is currently serving as a consultant to NexGen in
connection with implementation of the business plan of which the UMSI Stock
Sale is one part. Further, Mr. Bernier and the other former members of the
Company's Board of Directors are all currently stockholders of NexGen, having
transferred their interests in the Company's common stock to NexGen in exchange
for shares of NexGen common stock.
The Company's Board of Directors, which is now controlled by T.C.
Equities Ltd, is of the view that, notwithstanding the interests of certain of
the Company's former officers and directors in connection with the UMSI
Stock Sale which present such officers and directors with actual or
potential conflicts of interest, the consideration to be received by the
Company in exchange for the UMSI stock, and the terms of the UMSI Stock
Purchase Agreement, are fair both to the Company and to its non-T.C.
Equities Ltd. stockholders.
The Company's Bylaws currently only permit stockholders to take action by
unanimous written consent in lieu of meeting. The proposed amendment would
permit action by written consent to be taken if signed by stockholders holding
the number of shares necessary to approve such action at a special or annual
meeting. As T.C. Equities, Ltd. holds the number of shares necessary to
approve such amendment and intend to vote for its approval, the adoption of the
amendment is assured.
The proposals being submitted for the approval of the Company's
stockholders at the Special Meeting are of great significance to the future
business operations of the Company. Therefore, we ask that you please review
carefully the enclosed Proxy Statement which contains a detailed discussion
concerning the background of the UMSI Stock Sale and the related transactions
entered into by the Company and/or certain of its former officers and
directors, and the factors considered by the Company's board of directors in
approving the UMSI Stock Sale and a discussion of the proposed amendment to the
Company's Bylaws. It is important that your views with respect to such
proposal be represented at the Special Meeting. You are urged to mark, sign
and date the enclosed proxy card, which should be returned promptly in the
enclosed envelope, even if you plan to attend the Special Meeting. Completing
and returning the proxy card will not limit your right to vote in person if you
attend the Special Meeting.
If you have any questions regarding the Special Meeting or the proposals
submitted for stockholder approval, please call Phil Trigg at (703) 913-0416.
On behalf of the Company's Board of Directors, we look forward to seeing
you at the Special Meeting.
Sincerely,
Shane H. Sutton,
President
UNICO INC.
8380 Alban Road
Springfield, VA 22150
(703) 913-0416
__________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1999
__________________________
To the Stockholders:
A Special Meeting (the "Special Meeting") of the stockholders of UNICO,
Inc., a Delaware corporation (the "Company"), will be held on the 29th day,
January, 1999, at 10:00 A.M., Eastern time, at the Company's offices at 8380
Alban Road for the following purposes:
1. To approve the sale by the Company of all of the issued and
outstanding stock of the Company's wholly-owned subsidiary, United Marketing
Solutions Inc. ("UMSI"), to Next Generation Media Corp. ("NexGen") pursuant to
the terms of an Amended and Restated Stock Purchase Agreement (the "UMSI Stock
Purchase Agreement") in exchange for NexGen's (i) payment to the Company of
$172,664.50 in cash, (ii) forgiveness of indebtedness owed by the Company to
NexGen in the amount of $175,500.00, (iii) payment to the Company of an
additional amount of cash of approximately $164,000.00 for the payment of
certain debts of the Company to third-party creditors and (iv) assumption of
the Company's debt to its primary lender of approximately $402,000.00.
2. To amend Section 3.16 of the Company's Bylaws to permit
stockholders to take action by written consent signed by the holders of the
Company's stock having at least the minimum number of votes required to approve
such actions.
3. To transact such other business incidental to the Special Meeting
as may properly come before the Special Meeting or any adjournment or
postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close
of business on December 31, 1998, are entitled to notice of and to vote at the
Special Meeting or any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Special Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Before doing so, the
Company advises all stockholders to carefully read, review and consider the
enclosed material. Any stockholder attending the Special Meeting may vote in
person even if he or she has returned a proxy.
Sincerely,
Phil Trigg
Secretary
Springfield, Virginia
January 8, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. ANY
STOCKHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE SPECIAL
MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A
SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON. AS THESE MATTERS ARE IMPORTANT AND INVOLVE
THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, AND AS
APPROVAL BY THE STOCKHOLDERS OF THESE MATTERS WILL CONFER
SIGNIFICANT DISCRETIONARY AUTHORITY TO THE MANAGEMENT OF THE
COMPANY APPOINTED BY T.C. EQUITIES, WHICH HAS A CONTROLLING
INTEREST IN THE COMPANY, UPON CONSUMMATION OF THE UMSI STOCK
SALE, STOCKHOLDERS ARE ADVISED TO CAREFULLY READ, REVIEW AND
CONSIDER THE ENCLOSED MATERIAL.
THANK YOU FOR ACTING PROMPTLY.
TABLE OF CONTENTS
Summary 10
Introduction 10
The Proposed UMSI Stock Sale 10
The Proposed Bylaw Amendment 11
The Special Meeting 11
Required Vote 12
The Parties To The UMSI Sale 12
Relationships Between UNICO and NexGen; Potential Conflicts of Interest 14
Background of the UMSI Stock Sale 14
Recommendation of the UNICO Board; Reasons for the UMSI Stock Sale 15
Certain Effects of the UMSI Stock Sale 15
Closing Date 15
Conditions to the UMSI Stock Sale 16
Termination of the UMSI Stock Purchase Agreement 16
Absence of Regulatory Filings and Approvals 16
Federal Income Tax Consequences of the UMSI Stock Sale 16
Absence of Appraisal Rights 16
Market Price of UNICO's Common Stock 16
Summary Historical Financial Information 17
Summary Historical Financial Information of UMSI 17
Introduction 19
The Special Meeting 19
Purpose of Meeting 19
Date, Time and Place of Special Meeting; Record Date 19
Required Vote 20
Proposal 1: The UMSI Stock Sale 23
General 23
The UMSI Stock Sale 23
The Related Transactions 23
Background of the UMSI Stock Sale 24
Recommendation of the UNICO Board of Directors; Reasons for the
UMSI Stock Sale 25
Relationships Between UNICO and NexGen; Potential Conflicts of Interest 26
Certain Effects of the UMSI Stock Sale 28
Absence of Regulatory Filings and Approvals 28
Absence of Appraisal Rights 28
Federal Income Tax Consequences 28
The UMSI Stock Purchase Agreement 29
Terms of the UMSI Stock Sale 29
Representations and Warranties 29
Certain Covenants 30
Conditions to Consummation of the UMSI Stock Sale 30
Termination of the UMSI Stock Purchase Agreement 32
Proposal 2: The Bylaw Amendment 32
General 33
Recommendation of the UNICO Board of Directors; Reasons for the
Bylaw Amendment 33
Information Regarding the Company 33
General 34
The Company's Markets 34
Cooperative Direct Mail Advertising 34
Franchising 35
Trade Names, Service Marks and Logo Types 36
Government Regulation 36
Competition 36
Employees 37
Description of Property 37
Legal Proceedings 37
Information Regarding NexGen 37
General 37
Selected Financial Data for UNICO Inc. 39
Management's Discussion and Analysis of Financial Condition and Results of
Operations 41
Overview 41
Results of Operations 41
Nine Months ended September 30, 1998 Compared with Nine Months
ended September 30, 1997 41
Fiscal 1997 Compared to Fiscal 1996 42
Fiscal 1996 Compared to Fiscal 1995 43
Liquidity and Capital Resources 43
Factors which may Affect Future Operating Results 44
For the Period Ended December 31, 1997 44
Market Price And Dividend Information 45
Dividends 46
Securities Ownership of Certain Beneficial Owners And Management 47
Independent Public Accountants 49
Where You Can Find Additional Information 50
Other Business 51
1998 Annual Meeting of Stockholders 52
Index to Consolidated Financial Statements UNICO Inc. 53
UNICO INC. LOGO
UNICO INC.
8380 Alban Road
Springfield, VA 22150
(703) 913-0416
__________________________
PROXY STATEMENT
________________________
SUMMARY
The following summary is qualified in its entirety by and reference is
made to the more detailed information appearing elsewhere in this Proxy
Statement. Capitalized terms used but not defined in this Summary shall have
the meanings ascribed to them elsewhere in this Proxy Statement. Stockholders
are urged to read this Proxy Statement and its appendices in their entirety
before voting.
Introduction
1. THE PROPOSED UMSI STOCK SALE
This Proxy Statement relates, in part, to the solicitation of proxies by
the Board of Directors (the "Board") of UNICO, Inc., a Delaware corporation
("UNICO" or the "Company"), to approve the sale by the Company of all of the
issued and outstanding stock of the Company's wholly-owned subsidiary, United
Marketing Solutions Inc. ("UMSI"), to Next Generation Media Corp. ("NexGen")
pursuant to the terms of an Amended and Restated Stock Purchase Agreement (the
"UMSI Stock Purchase Agreement"). The stock of UMSI represents substantially
all of the assets of the Company.
In exchange for the UMSI stock, NexGen will (i) pay to the Company
$172,664.50 in cash, (ii) forgive indebtedness owed by the Company to NexGen in
the amount of $175,500.00, (iii) pay to the Company an additional amount of
cash of approximately $164,000 for the payment of certain debts of the Company
to third-party creditors, and (iv) assume the Company's debt of approximately
$402,000.00 to its primary lender.
The sale of the UMSI stock (the "UMSI Stock Sale") represents one
component of a series of interrelated transactions which has resulted in a
transfer of a controlling interest in the Company by certain former members of
the Board to NexGen which, in turn, has transferred such interest to T.C.
Equities Ltd. Approval and adoption of the UMSI Stock Purchase Agreement
requires the affirmative vote of a majority of the outstanding shares of the
Company's common stock. T.C. Equities Ltd. holds in excess of a majority of
such shares and intends to vote for approval and adoption of the UMSI Stock
Purchase Agreement and the UMSI Stock Sale. Accordingly, approval of the
transaction is assured.
Upon consummation of the UMSI Stock Sale, Gerard R. Bernier, the Company's
former President and Chief Executive Officer, and the current President of
UMSI, will become a director, as well as president and chief executive officer,
of NexGen. Mr. Bernier is currently serving as a consultant to NexGen in
connection with implementation of the business plan of which the UMSI Stock
Sale is one part. Further, Mr. Bernier and the other former members of the
Board are all currently stockholders of NexGen, having transferred their
interests in the Company's common stock to NexGen in exchange for shares of
NexGen common stock.
The Board, which is now controlled by T.C. Equities, Ltd, is of the
view that, notwithstanding the interests of certain of the Company's
former officers and directors in connection with the UMSI Stock
Sale which present such officers and directors with actual or potential
conflicts of interest, the consideration to be received by the Company in
exchange for the UMSI stock, and the terms of the UMSI Stock Purchase
Agreement, are fair both the Company and to its non-T.C. Equities Ltd.
stockholders.
A copy of the UMSI Stock Purchase Agreement is attached as Appendix A to
this Proxy Statement.
2. THE PROPOSED BYLAW AMENDMENT
This Proxy Statement also relates to a solicitation of proxies by the
Board of Unico to approve an amendment to the Company's Bylaws. The Company's
Bylaws currently only permit stockholders to take action by unanimous written
consent in lieu of voting on the proposed action at a special or annual meeting
of stockholders. The proposed amendment would permit action by written consent
to be taken if signed by Stockholders holding the number of shares necessary to
approve such action at a special or annual meeting. As T.C. Equities, Ltd.
holds the number of shares necessary to approve such amendment and interest to
vote for its approval, the adoption of the amendment is assured. A copy of
Section 3.16 of the Company's Bylaws, as currently in force and as proposed to
be amended is attached as Appendix B to this Proxy Statement.
The Special Meeting
At the Special Meeting of the Company's stockholders (the "Company's
Stockholders") and at any adjournment or postponement thereof (the "Special
Meeting"), the Company Stockholders will be asked to approve the UMSI Stock
Sale pursuant to the UMSI Stock Purchase Agreement and the amendment of the
Company's Bylaws as proposed.
The Special Meeting is scheduled to be held at 10:00 A.M. Eastern time, on
29th day, January, 1999 at the office of the Company, 8380 Alban Road,
Springfield, Virginia. The Board has fixed the close of business on December
31, 1998, as the record date (the "Record Date") for the determination of
holders of the Company's common stock, par value $0.10 per share (the "Common
Stock") entitled to notice of and to vote at the Special Meeting. Each holder
of record of Common Stock at the close of business on the Record Date is
entitled to one vote for each share of Common Stock then held on each matter
submitted to a vote of stockholders. See "The Special Meeting."
The Board unanimously approved the UMSI Stock Sale and recommends that the
Company's Stockholders vote "FOR" the proposal to approve the transaction. See
"The UMSI Stock Sale - Recommendation of the Board; Reasons for the
Transaction."
The Board unanimously approved the Bylaw amendment and recommends that the
Company's Stockholders vote "FOR" the proposal to approve the amendment. See
"The Bylaw Amendment - Recommendation of the Board; Reasons for the Amendment."
Required Vote
Pursuant to Delaware law and the Company's Bylaws, the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Special Meeting is required to adopt the UMSI Stock Sale and the
vote of the holders of at least 66 2/3% of the outstanding shares of Common
Stock is required to amend the Company's Bylaws. Thus, a failure to vote or a
vote to abstain will have the same legal effect as a vote cast against
adoption. In addition, brokers who hold shares of Common Stock as nominees
will not have discretionary authority to vote such shares in the absence of
instructions from the beneficial owners. See "The Special Meeting -- Vote
Required; Quorum."
The holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Special Meeting must be present in person or
represented by proxy to constitute a quorum for the transaction of business.
T.C. Equities Ltd., a Bahamian corporation ("T.C. Equities"), beneficially
owned an aggregate of 3,872,671 shares of Common Stock on the Record Date,
constituting approximately 69% of the outstanding shares of Common Stock
entitled to vote at the Special Meeting. T.C. Equities intends to vote its
shares of Common Stock in favor of the UMSI Stock Sale and the adoption of the
Bylaw amendment. As T.C. Equities has agreed to vote its shares of Common
Stock in favor of the UMSI Stock Sale pursuant to the Amended and Restated
Stock Purchase Agreement between NexGen and T.C. Equities, the presence of a
quorum and the approval of the UMSI Stock Sale and Bylaw amendment is assured.
See "The Special Meeting -- Vote Required; Quorum."
The Parties To The UMSI Sale
UNICO
UNICO Inc., a Delaware corporation ("UNICO" or the "Company"), was
incorporated on April 11, 1984. The Company operates as a publicly-owned
holding company with one active wholly-owned subsidiary, United Marketing
Solutions Inc., which the Company acquired in July 1987. The Company's
executive offices are located at 8380 Alban Road, Springfield, Virginia
22150, and its telephone number is (703) 913-0416.
UMSI
United Marketing Solutions Inc., a Virginia corporation formerly known as
United Coupon Corporation ("UMSI"), engages in the business of cooperative
direct mail advertising through franchising and production. Such business
involves the design, layout, printing and distributing of public relations,
marketing materials and promotional coupons for private businesses, usually
involved in retailing goods or providing professional services. Franchising
activities related to this business involve the granting and administering of
independent franchise operations to conduct cooperative direct mail advertising
sales in a given market area. Franchisees assist business owners (e.g., local
retailers, service businesses and professional organizations) with the design
and content of advertisements or coupons. UMSI's principal executive offices
are located at 8380 Alban Road, Springfield, Virginia 22150 and its telephone
number is (703) 913-0416.
NexGen
Next Generation Media Corp., a Nevada corporation ("NexGen"), was
incorporated on November 21, 1980, under the laws of the State of Nevada under
the name Micro Tech Industries Inc. NexGen's current management believes that
NexGen was a "shell" company (without assets or liabilities) for at least five
years prior to the acquisition by Mr. Joel Sens of a controlling interest in
NexGen in 1997. NexGen is currently a publicly-owned holding company with one
wholly-owned operating subsidiary, Independent News Inc., a Delaware
corporation ("INI").
INI was formed to acquire the assets and liabilities of Pompton Valley
Publishing Company, Inc. in September 1997. INI engages in the business of
publishing and distributing free weekly community newspapers in northern New
Jersey. INI generates all of its revenues from the sale of advertisements
placed by local merchants and others in such newspapers.
Unless the context otherwise requires, "NexGen" refers to NexGen Media
Corp. and INI. NexGen maintains its executive offices and principal
facilities at 900 North Stafford, Suite 2003, Arlington, Virginia 22203. Its
telephone number is (703) 516-9888.
Relationships Between UNICO and NexGen; Potential Conflicts of Interest
In considering the recommendation of the Board with respect to the UMSI
Stock Sale, the Company's Stockholders should be aware that certain former
officers and directors of the Company have interests in connection with the
transaction which may present them with actual or potential conflicts of
interest.
In May 1998, Gerard R. Bernier, the Company's then President and Chief
Executive Officer, as well as a member of the Board, acquired 935,000 shares of
NexGen common stock (representing roughly 30% of the issued and outstanding
shares of such stock) from Joel Sens, NexGen's controlling shareholder. The
purchase price for such stock was $156,145, paid in the form of a non-recourse
secured promissory note (the "Bernier Note"). Mr. Bernier also acquired an
additional 32,934 shares of NexGen common stock, the purchase price paid being
in the form of 169,432 shares of UNICO Common Stock. Mr. Bernier has also
received options to purchase 150,000 shares of NexGen common stock at $0.50 per
share.
Upon the consummation of the UMSI Stock Sale, Mr. Bernier will become the
president and chief executive officer, as well as a member of the Board of
Directors, of NexGen and will receive compensation in the form of options to
purchase initially 250,000 shares and annually 100,000 shares of NexGen common
Stock at $0.02 per share. Mr. Bernier is currently serving as a consultant to
NexGen, primarily to oversee the implementation of the NexGen/UMSI business
plan. Compensation for such services is to take the form of the forgiveness by
NexGen of the Bernier Note, which Mr. Sens transferred to NexGen in partial
satisfaction of an indebtedness of Mr. Sens to NexGen, as well as the payment
of an amount sufficient to cover Mr. Bernier's tax liability stemming from the
forgiveness of the Bernier Note.
Each of Messrs. Gerald Bomstad, Jr. and Leon Zadjel, directors of the
Company, has also acquired shares of NexGen common stock (37,600 and 8,747
shares, respectively) in exchange for (i) in Mr. Bomstad's case, a $12,000
promissory note of the Company and 179,650 shares of Common Stock, and (ii) in
Mr. Zadjel's case, 45,000 shares of Common Stock. Mr. Bomstad has also
acquired an option to purchase an additional 1,781 shares of NexGen common
stock at a purchase price of $0.16 per share. The foregoing transactions have
resulted in Messrs. Bernier, Bomstad and Zajdel exchanging their entire equity
interests in the Company.
In view of the above-summarized relationships among the Company and/or
certain of its former officers and directors with NexGen, the terms of the UMSI
Stock Purchase Agreement (which represents one component of a series of
interrelated transactions more full described elsewhere in the Proxy Statement)
may be viewed as having been negotiated on a non arms'-length basis. See "The
UMSI Stock Sale -- Relationships Between UNICO and NexGen; Potential Conflicts
of Interest," "Principal Stockholders of UNICO" and "Certain Relationships and
Related Transactions."
Background of the UMSI Stock Sale
After several years of unsuccessful efforts to attract additional equity
investment accommodating the rights of the then holders of the Company's
Subordinated Debt and Series C Preferred Stock, the Board determined that a
sale of UMSI as an entity was in the best interest of the Company and its
stockholders. The Board has unanimously approved and recommended to the
stockholders the highest of two offers resulting in a cash distribution to the
stockholders.
For a more complete description, see "The UMSI Stock Sale - Background of
UMSI Stock Sale."
Recommendation of the UNICO Board; Reasons for the UMSI Stock Sale
The Board has determined that the UMSI Stock Purchase Agreement and the
transactions contemplated thereby, including the UMSI Stock Sale, are advisable
and in the best interests of the Company and its stockholders and has
unanimously approved and adopted the UMSI Stock Purchase Agreement and the
transactions contemplated thereby. In reaching its unanimous determination,
the Board considered a number of factors, which taken together support such
determination, including without limitation, the Company's lack of
success in attracting new investments or other financing accommodating the
rights and requests of the Company's then existing Subordinated Debt and
Preferred Stock Holders to address the company's needs for additional
capital to improve it's liquitiy, insure it's continued viability as a
going concern and facilitate the growth of UMSI's business.
For a more complete discussion of the factors considered by the Board, see
"The UMSI Stock Sale -- Recommendation of the Board of Directors."
Certain Effects of the UMSI Stock Sale
The stock of UMSI represents substantially all the assets of the Company.
Accordingly, upon consummation of the UMSI Stock Sale, the Company will become
a "shell" corporation.
Per the UMSI Stock Purchase Agreement, the former members of the Company's
board of directors and its officers who were also stockholders of the Company
tendered their resignations, and were replaced by individuals appointed by T.C.
Equities, the Company's controlling stockholder.
Pursuant to the UMSI Stock Purchase Agreement and the Amended and Restated
Stock Purchase Agreement between NexGen and T.C. Equities, $0.10 per share,
will be distributed to each of the Company's Common Stockholders other than
T.C. Equities. Contemporaneous with the foregoing transaction, the Company
is exploring a potential transaction involving natural resources, however,
additional working capital would likely be required to
consumate such a transaction, the availability of which is uncertain.
Closing Date
The UMSI Stock Sale is expected to be consummated on January 29, 1999,
assuming approval by the Company's Stockholders of the transaction at the
Special Meeting, or on such later date which shall be the first business day
immediately following that day upon which the last of the conditions to closing
of the transaction ("Closing") is satisfied or waived (the "Closing Date").
See "The UMSI Stock Sale - Closing Date," and "The UMSI Stock Purchase
Agreement - Conditions to Consummation of UMSI Stock Sale."
Conditions to the UMSI Stock Sale
The obligations of the Company and NexGen to complete the UMSI Stock Sale
are subject to a number of conditions. If these conditions are not satisfied
or waived, the UMSI Stock Sale will not be completed. These conditions
include, among others, that the UMSI Stock Sale shall have been approved by the
Company's Stockholders. See "The UMSI Stock Sale - The UMSI Stock Purchase
Agreement - Conditions to Consummation of the UMSI Stock Sale."
Termination of the UMSI Stock Purchase Agreement
The UMSI Stock Purchase Agreement may be terminated by either the Company
or NexGen, as applicable, if there has been a material breach by the other
party of such party's representations, warranties, covenants or agreements
which has not been waived in writing. If the UMSI Stock Purchase Agreement is
terminated, it is anticipated that various parties would seek rescission and
restitution with respect to the USMI Stock Purchase Agreement and related
transactions although no express provisions exist providing for such. For a
more complete discussion of these termination provisions, see "The UMSI Stock
Purchase Agreement -- Termination Provisions."
Absence of Regulatory Filings and Approvals
The consummation of the UMSI Stock Sale is not subject to obtaining any
regulatory approvals or complying with any regulatory filing requirements. See
"The UMSI Stock Sale -- Absence of Regulatory Filings and Approvals."
Federal Income Tax Consequences of the UMSI Stock Sale
The receipt of the consideration to be paid by NexGen in exchange for the
UMSI stock pursuant to the UMSI Stock Purchase Agreement and the distribution
of $0.10 per share to each of the Company's common stock holders other than
T.C. Equities will be a taxable transaction for federal income tax purposes.
For a more detailed discussion of the federal income tax consequences of
the UMSI Stock Sale, see "The UMSI Stock Sale -- Federal Income Tax
Consequences." All holders of Common Stock are urged to consult their tax
advisors to determine the effect of the UMSI Stock Sale on such
holders under applicable federal, state, local and foreign tax laws.
Absence of Appraisal Rights
The Company's Stockholders will not be entitled to appraisal rights under
Delaware law in connection with the UMSI Stock Sale. See "The UMSI Stock Sale
- -- Absence of Appraisal Rights."
Market Price of UNICO's Common Stock
On December 18, 1998, (the last trading day prior to the public
announcement of the execution of the UMSI Stock Purchase Agreement), the
closing price of the Common Stock was $0.05 per share. See "Price Ranges of
UNICO Common Stock."
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical financial information pertaining to UMSI
should be read in conjunction with the consolidated financial statements of the
Company which appear elsewhere in this Proxy Statement.
Summary Historical Financial Information of UMSI
The selected financial data set forth below have been derived from the
consolidated financial statements of the Company and the related notes thereto.
The statement of income data for the years ended December 31, 1996 and 1997 and
the balance sheet data as of December 31, 1996 and 1997 are derived from the
consolidated financial statements of the Company, which have been audited by
Aronson, Fetridge & Weigle, independent certified public accountants.
The statement of income data for the years ended 1993, 1994 and 1995 and the
balance sheet data as of December 31, 1993, 1994 and 1995 are derived from the
consolidated financial statements of the Company, which have been audited but
are not contained herein. The following selected financial data should be read
in conjunction with the Company's consolidated financial statements and the
related notes thereto.
Statement of
Income Data:
1993 1994 1995 1996 1997
Net Sales $5,996,879 $6,336,550 $6,766,938 $6,595,526 $5,651,881
Cost of Sales 3,956,925 3,725,670 4,743,943 4,102,525 3,851,427
Gross Profit 2,039,954 2,609,880 2,022,995 2,493,001 1,800,454
General and
administrative
1,563,077 1,783,619 1,650,733 1,980,916 2,177,411
Administrative
charges from
parent 234,547 237,916 38,981
Franchise
development 245,077 280,232 396,974 360,719 356.944
Interest expense 7,867 34,611 45,504 32,002
Legal & settlement 281,464 -- -- -- --
Operating Income -284,211 300,246 -98,304 105,862 -765,903
Interest income -- -- -- 35,677 26,355
Other income 130,659 183,661 279,735 74,954 101,204
Income (loss)
before cumulative
effect of change
in accounting
for income taxes -153,552 -- -- -- --
Deferred income
tax benefit 43,000 -- -- -- --
Cumulative effect
of change in
accounting for
income taxes -286,000 -- -- -- --
Income (loss)
before cumulative
effect of change
in account
principles -- -- -- 216,493 --
Cumulative effect
of change in
accounting
principles -- -- -- 490,022 --
Net income -$396,552 $483,907 $181,431 $706,515 -$638,344
Pro Forma Statement of Income Data:
Income before
income tax -396,552 483,907 181,431 706,515 -638,344
Income tax
provision 0 193,563 75,459 0 0
Net Income -$396,552 $290,344 $105,972 $706,515 -$638,344
Balance Sheet Data:
Working Capital 72,415 609,090 84,496 421,593 114,423
Total Assets 2,628,568 3,488,665 3,858,448 4,185,918 3,917,573
Total Liabilities 1,359,467 1,929,220 2,193,031 1,813,986 2,183,985
Stockholder's
equity 1,269,101 1,559,445 1,665,417 2,371,932 1,733,588
INTRODUCTION
This Proxy Statement is provided to the Company's stockholders in
connection with the Special Meeting. The Special Meeting will be held on the
date, at the time and in the location, and will be held to consider the
matters, set forth under "The Special Meeting." The Board is soliciting
proxies hereby for use at the Special Meeting. Information with respect to the
execution and revocation of proxies is provided under "The Special Meeting --
Voting Rights." This Proxy Statement and the enclosed form of proxy are first
being mailed to the Company's Stockholders on or about January 8, 1999.
The costs of solicitation of the proxies from the Company's Stockholders
will be borne by the Company. The Company will reimburse brokers, fiduciaries,
custodians and other nominees for reasonable out-of-pocket expenses incurred in
sending this Proxy Statement and other proxy materials to, and obtaining
instructions relating to such materials from, the beneficial owners of the
Common Stock. Proxies may be solicited by directors, executive officers or
regular employees of the Company, in person, by letter or by telephone of
telefax.
THE SPECIAL MEETING
Purpose of Meeting
At the Special Meeting, the Company's Stockholders eligible to vote
thereat will be asked to consider and vote upon: (1.) a proposal to approve the
sale by the Company of all of the issued and outstanding stock of the Company's
wholly-owned subsidiary, United Marketing Solutions Inc. ("UMSI"), to Next
Generation Media Corp. ("NexGen") pursuant to the terms of an Amended and
Restated Stock Purchase Agreement (the "UMSI Stock Purchase Agreement") in
exchange for NexGen's (i) payment to the Company of $172,664.50 in cash, (ii)
forgiveness of indebtedness owed by the Company to NexGen in the amount of
$175,500.00, (iii) payment to the Company of an additional amount of cash of
approximately $164,000 for the payment of certain debts of the Company to
third-party creditors, and (iv) assumption of approximately $402,000.00 owed by
the Company to its primary lender, BancFirst; and (2.) a proposal to amend the
Company's Bylaws to permit stockholder activities to be taken by written
consent by the holders of that percentage of the Company's outstanding stock
necessary to approve the transactions.
The Board has unanimously approved the UMSI Stock Sale and the Bylaw
Amendment and recommends that the Company's Stockholders vote "FOR"
such proposals. See "The UMSI Stock Sale - Recommendation of the UNICO
Board; Reasons for the UMSI Stock Sale" and reasons for the Bylaw amendment.
Date, Time and Place of Special Meeting; Record Date
The Special Meeting is scheduled to be held at 10:00 A.M. Eastern Time, on
29th day, January, 1998, at the Company's offices at 8380 Alban Road,
Springfield, Virginia. The Board has fixed the close of business on December
31, 1998, as the record date (the "Record Date") for the determination of
holders of Common Stock entitled to notice of and to vote at the Special
Meeting. On the Record Date, there were 5,631,817 shares of Common Stock
(held by approximately 500 persons of record) outstanding and entitled to
vote.
Each share of Common Stock is entitled to one vote. A majority of the shares
of Common Stock issued and outstanding and entitled to vote must be present at
the Special Meeting in person or by proxy in order to constitute a quorum for
the transaction of business. Because T.C. Equities holds a majority of the
issued and outstanding shares of Common Stock, and T.C. Equities has indicated
that it will be present at the Special Meeting, it is a virtual certainty that
a quorum will be present at the Special Meeting.
Required Vote
The Board is submitting the UMSI Stock Sale and the Bylaw amendment to the
Company's Stockholders for approval in accordance with the requirements of its
organizational documents and applicable securities laws. The effect of such
submission under applicable Delaware law is that any Company Stockholder voting
in favor of the UMSI Stock Sale may be effectively precluded from asserting any
claim against the Board subsequent to the consummation of the transaction which
would allege, among other things, that the Board breached its fiduciary duty to
the Company's Stockholders in approving the UMSI Stock Purchase Agreement and
the transactions contemplated thereby, including the UMSI Stock Sale, and the
Bylaw Amendment.
The affirmative vote of the holders of a majority of all of the
outstanding shares of Common Stock is required to approve the UMSI Stock
Purchase Agreement and the transactions contemplated thereby, including the
UMSI Stock Sale.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Common Stock is required to approve the Bylaw Amendment.
T.C. Equities beneficially owned an aggregate of 3,872,671 shares of
Common Stock on the Record Date, constituting approximately 69% of the
outstanding shares of Common Stock entitled to vote at the Special Meeting.
Pursuant to the Amended and Restated Stock Purchase Agreement between NexGen
and T.C. Equities, Ltd., T.C. Equities has agreed, among other things, to vote
its shares in favor of the UMSI Stock Sale and the adoption of the UMSI Stock
Purchase Agreement. By virtue of its majority ownership of the outstanding
shares of Common Stock, T.C. Equities will have the ability to determine the
outcome of the vote on the proposed UMSI Stock Sale. Consequently, it is a
virtual certainty that such proposal will be approved.
T.C. Equities has proposed the amendment of Section 3.16 of the Company's
By-laws. This amendment will have the effect of reducing the number of
shareholder votes needed to effect a corporate stockholder action through a
written consent in lieu of a meeting of stockholders. The amendment reduces
the requirements for a written consent in lieu of a meeting from unanimous
stockholder consent to a requirement that consents be signed by only so many
stockholders as may be required to approve the proposed action to be taken.
Amendment of the Company's By-laws requires a vote of at least 66 2/3% of the
Company's stockholders. By virtue of its approximate 69% ownership of the
outstanding shares of common stock, T.C. Equities will have the ability to
determine the outcome of the vote on the proposed By-law Amendment.
Consequently, it is a virtual certainty that such proposal will be approved.
The Board is soliciting proxies so that each Company Stockholder on the
Record Date has the opportunity to vote on the proposed UMSI Stock Sale and
Bylaw amendment. When a proxy card is returned properly signed and dated, the
shares represented thereby will be voted in accordance with the instructions on
the proxy card. If a Company Stockholder does not return a signed proxy card,
his or her shares will not be voted (unless such stockholder attends and votes
at the Special Meeting) and thus will have the effect of a vote against the
proposed UMSI Stock Sale and Bylaw amendment.
A broker who holds shares in street name will not be entitled to vote on
the proposed UMSI Stock Sale or Bylaw amendment without instructions from the
beneficial owner of such shares. This inability to vote is referred to as a
broker non-vote. Abstentions and broker non-votes will be counted for purposes
of determining the existence of a quorum at the Special Meeting. If a quorum
has been established for the purpose of conducting the Special Meeting, a
quorum shall be deemed to be present for the purpose of all votes to be
conducted at such meeting.
The Company's Stockholders are urged to mark the box on their proxy card
to indicate how their shares will be voted. If a Company Stockholder (other
than a broker which holds shares in street name for its customers) returns a
signed proxy card, but does not indicate how his or her shares are to be voted,
the shares represented by the proxy card will be voted "FOR" the proposed
UMSI Stock Sale and "FOR" the proposed Bylaw amendment.
The proxy card also confers discretionary authority on the individuals
appointed by the Board and named on the proxy card to vote the shares
represented thereby on any other matter incidental to the Special Meeting that
is properly presented for action at the Special Meeting or any adjournment or
postponement thereof. At this time, the Company knows of no other matters that
may be presented for stockholder action at the Special Meeting. However, if
any matters, other than approval and adoption of the UMSI Stock Purchase
Agreement and the transactions contemplated thereby, including the UMSI Stock
Sale and Bylaw amendment, should properly come before the Special Meeting, it
is the intention of the persons named in the enclosed proxy card
to vote such proxy in accordance with their best judgment. The Board will not
vote proxies solicited by this Proxy Statement in favor of any proposal
presented at the Special Meeting to adjourn or postpone the Special Meeting to
a later date.
All shares represented by properly executed and unrevoked proxies will be
voted at the Special Meeting. Any stockholder may revoke his proxy at any time
before the Special Meeting by written notice to such effect received by the
Company at 8380 Alban Road, Springfield, Virginia 22150, Attention: Corporate
Secretary, by delivery of a subsequently dated proxy, or by attending the
Special Meeting and voting in person.
A list of stockholders entitled to vote at the Special Meeting will be
available for examination by any stockholder at the Company's offices for a
period of 10 days prior to the Special Meeting and at the Special Meeting
itself.
If the enclosed proxy card is duly executed and received in time for the
Special Meeting, and if no contrary instructions are included on the proxy
card, it is the intention of the persons named as proxies to vote the shares of
Common Stock represented thereby in favor of the proposal to approve and adopt
the UMSI Stock Purchase Agreement and the transactions contemplated thereby and
the Bylaw amendment, and, in the discretion of the persons named as proxies, in
connection with any other business that may properly come before the Special
Meeting or any adjournment or postponement thereof.
In the event that there are not sufficient votes to approve and adopt the
UMSI Stock Purchase Agreement and the transactions contemplated thereby and the
Bylaw amendment at the Special Meeting, it is expected that the Special Meeting
will be postponed or adjourned in order to permit further solicitation of
proxies by the Company.
The delivery of this Proxy Statement shall not, under any circumstances,
create any implication that the information contained herein is correct after
the date hereof, January 8, 1999.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE UMSI STOCK PURCHASE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE UMSI STOCK SALE. THE
AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK IS REQUIRED TO APPROVE AND ADOPT THE UMSI STOCK
PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE BYLAW AMENDMENT. THE AFFIRMATIVE VOTE OF HOLDERS
OF AT LEAST 66 2/3% OF THE OUTSTANDING SHARES OF COMMN STOCK IS
REQUIRED TO APPROVE AND ADOPT THE BYLAW AMENDMENT.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY
STATEMENT IN CONNECTION WITH THE COMPANY'S SOLICITATION OF PROXIES
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
OTHER PERSON.
PROPOSAL 1: THE UMSI STOCK SALE
General
The following information, insofar as it relates to matters contained in
the UMSI Stock Purchase Agreement, is qualified in its entirety by reference to
the UMSI Stock Purchase Agreement, which is incorporated herein by reference
and attached hereto as Appendix A. Stockholders are urged to read the UMSI
Stock Purchase Agreement in its entirety.
All information contained in this Proxy Statement with respect to NexGen
has been supplied by NexGen for inclusion herein and has not been independently
verified by the Company.
The UMSI Stock Sale
Subject to the approval the Company's stockholders, the Company will sell
all of the issued and outstanding stock of the Company's wholly owned and sole
active subsidiary, United Marketing Solutions, Inc., formerly United Coupon
Corporation, to Next Generation Media Corporation ("NexGen") pursuant to the
terms of an Amended and Restated Stock Purchase Agreement (the "UMSI Stock
Purchase Agreement") in exchange for NexGen's (i) payment to the Company of
$172,664.50 in cash, (ii) forgiveness of indebtedness owed by the Company to
NexGen in the amount of $175,000.00, (iii) payment to the Company of an
additional amount of cash of approximately $164,000 for the payment of certain
debts of the Company to third-party creditors, and (iv) assumption of
approximately $402,000.00 owed by the Company to its primary lender, BancFirst.
The stock of UMSI represents substantially all of the assets of the
Company. The consummation of the UMSI Stock Sale and the performance of the
UMSI Stock Purchase Agreement, including the distribution of $0.10 per share to
each holder of the Company's common stock other than T.C. Equities, will
essentially render the Company a "shell corporation."
The Related Transactions
In May 1998, Gerard R. Bernier, the Company's then President and Chief
Executive Officer, as well as a member of the Board, acquired 935,000 shares of
NexGen common stock (representing roughly 30% of the issued and outstanding
shares of such stock) from Joel Sens, NexGen's controlling shareholder. The
purchase price for such stock was $156,145, paid in the form of a non-recourse
secured promissory note (the "Bernier Note"). Mr. Bernier also acquired an
additional 32,934 shares of NexGen common stock, the purchase price paid being
in the form of 169,432 shares of UNICO Common Stock. Mr. Bernier has also
received options to purchase 150,000 shares of NexGen common stock at $0.50 per
share.
Upon the consummation of the UMSI Stock Sale, Mr. Bernier will become the
president and chief executive officer, as well as a member of the Board of
Directors, of NexGen and will receive compensation in the form of options to
purchase initially 250,000 shares and annually 100,000 shares of NexGen common
Stock at $0.02 per share. Mr. Bernier is currently serving as a consultant to
NexGen, primarily to oversee the implementation of the NexGen/UMSI business
plan. Compensation for such services is to take the form of the forgiveness by
NexGen of the Bernier Note, which Mr. Sens transferred to NexGen in partial
satisfaction of an indebtedness of Mr. Sens to NexGen, as well as the payment
of an amount sufficient to cover Mr. Bernier's tax liability stemming from the
forgiveness of the Bernier Note.
Each of Messrs. Gerald Bomstad, Jr. and Leon Zadjel, directors of the
Company, has also acquired shares of NexGen common stock (37,600 and 8,747
shares, respectively) in exchange for (i) in Mr. Bomstad's case, a $12,000
promissory note of the Company and 179,650 shares of Common Stock, and (ii) in
Mr. Zadjel's case, 45,000 shares of Common Stock. Mr. Bomstad has also
acquired an option to purchase an additional 1,781 shares of NexGen common
stock at a purchase price of $0.16 per share. The foregoing transactions have
resulted in Messrs. Bernier, Bomstad and Zajdel exchanging their entire equity
interests in the Company.
The foregoing transactions in which the former directors agreed to accept
NexGen stock in exchange for shares of UNICO stock owned by them and, in
certain instances, options to acquire additional UNICO shares and debt owed to
a director by UNICO, arose to accommodate certain financing arrangements made
by NexGen. In order to secure financing for the initial funds required upon
execution of the original Stock Purchase Agreement dated May 8, 1998 between
the Company and NexGen, NexGen agreed to convey a controlling interest in the
Company to T.C. Equities. Pursuant to its March 18, 1998 agreement, as
amended, with the holders of the Company's Series C Preferred Stock and certain
Subordinated Indebtednesses of the Company, ("the Renaissance/Duncan Smith
Agreement") NexGen acquired all of the Company's outstanding shares of Series
C Preferred Stock having the voting power of approximately 45% of the entire
voting power of the Company's stock, upon the execution of a definitive
purchase agreement between NexGen and the Company for the sale of UMSI. To
achieve the ability to convey a controlling interest in the Company to T.C.
Equities, NexGen acquired the stock of the former directors representing
approximately 9% of the entire voting power of the Company's stock. In
individual agreements with NexGen, the former Directors agreed to convey all of
their equity interests in the Company to NexGen in exchange for NexGen common
stock. The former directors consented to the exchanges upon the agreement of
NexGen, contained in the UMSI Stock Purchase Agreement, to cancel all of the
Subordinated Debt and waive all preferential rights of the Series C Preferred
Stock NexGen was purchasing pursuant to the Renaissance/Duncan Smith Agreement
upon execution of the original UMSI Stock Purchase Agreement of May 8, 1998.
As a consequence of such action, Unico was released from approximately
$1,314,248 of subordinated debt and liquidation preferences of approximately
$1,712,740 were waived.
Background of the UMSI Stock Sale
Beginning in 1995, as a consequence of the poor financial performance, and
ultimate liquidation of its other operating subsidiary, Cal-Central Marketing
Corp. ("Cal-Central"), the Company's management and Board of Directors sought
additional equity investments in the Company to service and retire existing
debt and to provide an adequate capital foundation for further growth of the
Company's UMSI subsidiary. Simultaneously, efforts were made to convert
existing debt to equity. The Company was partially successful in that on June
30, 1996, it converted approximately $1,712,740 of subordinated debt into
convertible preferred stock, the Series C Preferred Stock, having a liquidation
preference equal to the amount converted.
The Company was also successful in obtaining several proposals for
substantial additional equity investment. However, in each instance the
proposals were conditioned upon further agreements with, and in one instance
additional investments from, the then holders of the Company's Subordinated
Debt and Series C Preferred Stock. The Company was never able to obtain these
further agreements.
As a consequence, the debt the Company had incurred in connection with the
acquisition and poor financial performance of Cal-Central imperilled the
continuing operations of the Company. Unable to reach agreements with the
former holders of the Company's subordinated debt and Series C Preferred Stock
to facilitate new equity investments in the Company, management and the Board
sought suitors acceptable to the former holders of the Company's Subordinated
debt and Series C Preferred Stock to buy UMSI. After many inconclusive
discussions, two suitors acceptable to the former holders of the Company's
Subordinated Debt and Series C Preferred Stock emerged with competing offers of
cash and assumption of debt and the Board of Directors selected the offer
resulting in the highest cash distribution to the Company's stockholders.
Recommendation of the UNICO Board of Directors; Reasons for the UMSI Stock Sale
In reaching its unanimous determination that the UMSI Stock Purchase
Agreement and the transactions contemplated thereby, including the UMSI Stock
Sale, are advisable and in the best interests of the Company and its
stockholders, the Company's board of directors considered a number of factors,
which factors, taken together, support such determination, including without
limitation, the following:
(1) The existing assets, financial condition and operations of the
Company, including, without limitation, concerns over the Company's liquidity
and capital resources, the inability of the Company to obtain new financing,
the Company's relatively small size and market capitalization, and the
assessment of management that the Company could not long sustain its continuing
operating losses;
(2) The current and prospective environment in which the Company
operates, including national and local economic conditions;
(3) The conclusion of the Board that NexGen's proposal was the most
favorable proposal received, in terms of the value to be realized by
stockholders of the Company and the likelihood of consummation, based on the
advice of the Company's management, as well as the board's judgment, after
review with the Company's management and its outside legal advisors of
alternatives to the UMSI Stock Sale, that the stockholders of the Company would
realize greater value from the transaction with NexGen than from the other
alternatives available to the Company (see "-- Background of the UMSI Stock
Sale");
(4) The extensive solicitation process conducted by the Company in
seeking an acquiror for UMSI (see "-- Background of the UMSI Stock Sale"),
particularly the fact that, based upon the discussions described therein, none
of such alternatives, even if successfully carried to completion,
would have resulted in per-share consideration to the holders of Common Stock
as high as the cash consideration component of the purchase price for the UMSI
stock;
(5) The terms and conditions of the UMSI Stock Purchase Agreement, as
reviewed by the board with its legal advisors, including the provisions
relating to the cancellation of the Company's subordinated debt and liquidation
preferences and the receipt of cash upon execution of the UMSI Stock Purchase
Agreement;
(6) The fact that the consideration to be paid by NexGen consists of
cash and that the UMSI Stock Sale is not subject to financing contingencies
(see "-- The UMSI Stock Purchase Agreement"); and
(7) The fact that the Company was not in compliance under its credit
facility with its primary lender BancFirst.
The foregoing discussion of the information and factors considered by
the Company's Board is not meant to be exhaustive but is believed to include
the material factors considered by the Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the UMSI Stock Purchase Agreement and the
transactions contemplated thereby, including the UMSI Stock Sale, are advisable
and in the best interests of the Company's Stockholders. In reaching its
determination, the Board took the various factors into account collectively and
the board did not perform a factor-by-factor analysis, nor did the Board
consider whether any individual factor was, on balance, positive or negative.
Relationships Between UNICO and NexGen; Potential Conflicts of Interest
In considering the recommendation of the Board with respect to the UMSI
Stock Sale, the Company's Stockholders should be aware that certain former
officers and directors of the Company have interests in connection with the
transaction which may present them with actual or potential conflicts of
interest.
In May 1998, Gerard R. Bernier, the Company's then President and Chief
Executive Officer, as well as a member of the Board, acquired 935,000 shares of
NexGen common stock (representing roughly 30% of the issued and outstanding
shares of such stock) from Joel Sens, NexGen's controlling shareholder. The
purchase price for such stock was $156,145, paid in the form of a non-recourse
secured promissory note (the "Bernier Note"). Mr. Bernier also acquired an
additional 32,934 shares of NexGen common stock, the purchase price paid being
in the form of 169,432 shares of Common Stock of the Company. Mr. Bernier has
also received options to purchase 150,000 shares of NexGen common stock at
$0.50 per share.
Upon the consummation of the UMSI Stock Sale, Mr. Bernier will become the
president and chief executive officer, as well as a member of the board of
directors, of NexGen and will receive compensation in the form of options to
purchase initially 250,000 shares and annually 100,000 shares of NexGen Common
Stock at $0.02 per share. Mr. Bernier is currently serving as a consultant to
NexGen, primarily to oversee the implementation of the NexGen/UMSI business
plan. Compensation for such services is to take the form of the forgiveness by
NexGen of the Bernier Note, which Mr. Sens transferred to NexGen in partial
satisfaction of an indebtedness of Mr. Sens to NexGen, as well as the payment
of an amount sufficient to cover Mr. Bernier's tax liability stemming from the
forgiveness of the Bernier Note.
Each of Messrs. Gerald Bomstad, Jr. and Leon Zadjel, directors of the
Company, has also acquired shares of NexGen common stock (37,600 and 8,747
shares, respectively) in exchange for (i) in Mr. Bomstad's case, a $12,000
promissory note of the Company and 179,650 shares of Common Stock, and (ii) in
Mr. Zadjel's case, 45,000 shares of Common Stock. Mr. Bomstad has also
acquired an option to purchase an additional 1,781 shares of NexGen common
stock at a purchase price of $0.16 per share. The foregoing transactions have
resulted in Messrs. Bernier, Bomstad and Zajdel transferring their entire
equity interests in the Company.
In view of the relationships among the Company and/or certain of its
former officers and directors with NexGen, the terms of the UMSI Stock Sale
(such transaction representing one component of a series of interrelated
transactions more full described elsewhere in the Proxy Statement) may be
viewed as having been negotiated on a non arms'-length basis. See "The UMSI
Stock Sale -- Relationships Between UNICO and NexGen; Potential Conflicts of
Interest," "Principal Stockholders of UNICO" and "Certain Relationships and
Related Transactions."
Certain Effects of the UMSI Stock Sale
The stock of UMSI represents substantially all the assets of the Company.
Accordingly, upon consummation of the UMSI Stock Sale, the Company will become
a "shell" corporation.
Pursuant to the UMSI Stock Purchase Agreement and the Amended and Restated
Stock Purchase Agreement between NexGen and T.C. Equities, $0.10 per share,
will be distributed to each of the Company's Commo Stockholders other
than T.C. Equities.
Contemporaneous with the foregoing transaction, the Company is exploring a
potential transaction involving natural resources, however, additional working
capital would likely be required to consumate such a transaction, the
availability of which is uncertain.
Absence of Regulatory Filings and Approvals
The UMSI Stock Sale is not subject to obtaining any regulatory approvals
or complying with any regulatory filing requirements.
Absence of Appraisal Rights
Holders of UNICO Common Stock will not be entitled to appraisal rights
under applicable Delaware law in connection with the UMSI Stock Sale.
Federal Income Tax Consequences
The receipt of the consideration to be paid by NexGen in exchange for the
UMSI stock pursuant to the UMSI Stock Purchase Agreement and the distribution
of $0.10 per share to each of the Company's common stock holders other than
T.C. Equities will be a taxable transaction for federal income tax purposes.
Each holder of Common Stock is urged to consult their tax advisors
to determine the effect of the UMSI Stock Sale on such holder under applicable
federal, state, local and foreign tax laws.
THE UMSI STOCK PURCHASE AGREEMENT
The following is a summary of all material terms of the UMSI Stock
Purchase Agreement. This Summary is qualified in its entirety by reference to
the UMSI Stock Purchase Agreement, which is attached to this Proxy Statement as
Appendix A and is incorporated herein by reference.
Terms of the UMSI Stock Sale
Subject to the approval the Company's stockholders, the Company will sell
all of the issued and outstanding stock of the Company's wholly owned and sole
active subsidiary, United Marketing Solutions, Inc., formerly United Coupon
Corporation, to Next Generation Media Corporation ("NexGen") pursuant to the
terms of an Amended and Restated Stock Purchase Agreement (the "UMSI Stock
Purchase Agreement") in exchange for NexGen's (i) payment to the Company of
$172,664.50 in cash, (ii) forgiveness of indebtedness owed by the Company to
NexGen in the amount of $175,000.00, (iii) payment to the Company of an
additional amount of cash of approximately $164,000 for the payment of certain
debts of the Company to third-party creditors, and (iv) assumption of
approximately $402,000.00 owed by the Company to its primary lender, BancFirst.
The stock of UMSI represents substantially all of the assets of the
Company. The consummation of the UMSI Stock Sale and the performance of the
UMSI Stock Purchase Agreement, including the distribution of $0.10 per share to
each holder of the Company's common stock other than T.C. Equities, will
essentially render the Company a "shell
corporation."
Representations and Warranties
Each of the Company and UMSI has made various representations and
warranties to NexGen in the UMSI Stock Purchase Agreement relating to the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions): (i) corporate organization and qualification;
(ii) capitalization; (iii) authority; (iv) consents, approvals and
absence of violations; (v) the absence of litigation; (vi) related party
transactions; (vii) the timeliness, accuracy and completeness of its filings
and reports with the Securities and Exchange Commission; (viii) the absence of
certain adverse changes or events; (ix) certain indebtedness; (x) the timely
filing of all tax returns and the payment of taxes; (xi) compliance with
applicable laws; (xii) brokers and finders; (xiii) the compliance of the Proxy
Statement with applicable securities laws; (xiv) insurance policies; (xv) labor
agreements and actions; (xvi) employee benefit plans; (xvii) agreements and
contracts; and (xviii) compliance with environmental laws. In general, the
representations and warranties of each of the Company and UMSI shall survive
the Closing for a period of three years. Certain of such representations and
warranties survive the Closing indefinitely.
NexGen has made various representations and warranties to the Company in
the UMSI Stock Purchase Agreement relating to the following matters: (i)
corporate organization; (ii) authority; (iii) consents, approvals and absence
of violations; (iv) brokers and finders; and (v) the accuracy of all
information supplied by NexGen for inclusion in the Proxy Statement. In
general, the representations and warranties of NexGen shall survive the Closing
for a period of three years. Certain of such representations and warranties
survive the Closing indefinitely.
Certain Covenants
Pursuant to the UMSI Stock Purchase Agreement, the Company has made
various covenants to NexGen, including that: (a) from and after the Closing the
Company will not have any interest in any intellectual property rights owned or
held by UMSI, and the Company will hold in confidence all knowledge or
information of a confidential nature acquired at or before the Closing
Date with respect to UMSI and its business, and (b) from the date of the UMSI
Stock Purchase Agreement through the Closing, the Company will use its best
efforts to keep UMSI intact and will conduct UMSI's operations only in the
ordinary course of business as presently conducted. Without limiting the
generality of clause (b) of the preceding sentence, the UMSI Stock Purchase
Agreement provides that, from the date of the UMSI Stock Purchase Agreement
until the Closing, neither the Company nor UMSI will: (i) engage in any new
activity; (ii) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock; (iii) issue any shares of its
capital stock, (iv) issue, grant or authorize any rights or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization; (v) amend its certificate or articles of incorporation or
bylaws; (vi) impose or permit imposition of any lien, charge or encumbrance on
any share of stock held by it in any subsidiary; (vii) waive or release any
material right or cancel or compromise any debt or claim, other than in the
ordinary course of business; (viii) merge into or consolidate with any other
entity, or liquidate, sell or otherwise dispose of any assets or acquire any
assets, other than in the ordinary course of business consistent with past
practices; (ix) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus to, or provide any
other employee benefit or incentive to, any of its directors, officers or
employees; (xi) enter into any material agreement, arrangement or commitment
not made in the ordinary course of business; or (xii) agree to do any of the
foregoing.
Each of the Company and NexGen have covenanted to the other party that it
will: (i) provide prompt notice to the other party of the occurrence, or
failure to occur, of any event that could cause any representation or warranty
of such party contained in the UMSI Stock Purchase Agreement to be untrue or
inaccurate at any time from the date of the UMSI Stock Purchase Agreement
through the Closing Date; (ii) cooperate and use its best efforts to obtain any
licenses or permits, and to make any registration or filing required to be made
to consummate the transactions contemplated by the UMSI Stock Purchase
Agreement; (iii) use its best efforts to respond to any inquiries concerning
the Proxy Statement from the Securities and Exchange Commission; (iv)
permit each party to have access to the other party's assets, books and records
as deemed necessary or appropriate for making a due diligence investigation of
the other parties to the UMSI Stock Purchase Agreement; (v) take all actions
and to do all things necessary in order to consummate and make effective the
transactions contemplated by the UMSI Stock Purchase Agreement; and (vi)
consult with one another before issuing any press release or otherwise making
any public announcement concerning the transactions provided for in the UMSI
Stock Purchase Agreement.
Conditions to Consummation of the UMSI Stock Sale
Pursuant to the UMSI Stock Purchase Agreement, the obligations of each of
the parties to the UMSI Stock Purchase Agreement to complete the transactions
contemplated thereunder, including the UMSI Stock Sale, are subject to the
fulfillment of the following conditions: (i)obtaining any and all
authorizations and approvals from third parties and governmental authorities
required to consummate the transactions contemplated by the UMSI Stock Purchase
Agreement; (ii) the absence of any actual or threatened suit, action,
investigation, inquiry or other proceeding by any governmental authority or any
other person questioning the validity or legality of the transactions
contemplated by the UMSI Stock Purchase Agreement or which could reasonably be
expected to adversely affect NexGen's ability to consummate such transactions;
(iii) the absence of any injunction, writ, preliminary restraining order or any
other order of a court of competent jurisdiction directing that the
transactions contemplated by the UMSI Stock Purchase Agreement
not be consummated in accordance with its terms, or imposing any material
conditions on the consummation of such transactions; (iv) written evidence of
NexGen's acquisition of 100% of the subordinated debt and the Series C
Preferred Stock of the Company, and simultaneous cancellation
of such subordinated debt and waiver of all rights of such Series C Preferred
Stock (other than voting and conversion rights); (v) written evidence of the
consent of BancFirst to the transactions contemplated by the UMSI Stock
Purchase Agreement, its release of the Company from its obligations in regard
to the Company's debt to BancFirst and its agreement to the assumption of
such debt by NexGen; (vi) the entering into of a stock purchase and shareholder
agreement between Messrs. Joel Sens and Gerard R. Bernier providing for, among
other things, the structure of NexGen's board of directors upon consummation of
the transactions contemplated by the UMSI Stock Purchase Agreement; (vii) the
entering into of an employment agreement between Gerard R. Bernier and NexGen
providing for the appointment of Mr. Bernier as the chief executive officer of
NexGen; (viii) the entering into an of a consulting agreement between Mr. Joel
Sens and NexGen; (ix) the entering into of stock option agreement between
NexGen and each of Messrs. Joel Sens and Kenneth Brochin providing for the
grant of stock options, exercisable at $0.50 per share, for 150,000 shares of
NexGen common stock; (x) the entering into of stock purchase agreements
between NexGen and each of Messrs. Bernier, Bomstad and Zadjel providing for
the sale of Common Stock held by each of them to NexGen in exchange for shares
of NexGen common stock; (xi) the cancellation of certain indebtedness of NexGen
to certain stockholders of NexGen, and the cancellation of certain indebtedness
of certain NexGen stockholders to NexGen; (xii) evidence of he reservation of
150,000 shares of NexGen common stock by NexGen's board of directors for
awards to key employees of UMSI; (xiii) evidence of the restructuring of
NexGen's loan from KeyBank National Association to extend repayment of such
loan past January 1, 2000; and (xiv) the approval of the UMSI Stock Purchase
Agreement and the transactions contemplated thereby by the Company's
Stockholders.
Pursuant to the UMSI Stock Purchase Agreement, the obligations of NexGen
to complete the UMSI Stock Sale are further subject to the fulfillment of the
following conditions, any one or more of which may be waived: (i) the
representations and warranties of the Company set forth in the UMSI Stock
Purchase Agreement shall be true and correct at and as of the Closing Date;
(ii) the Company shall have performed and complied with all obligations and
covenants required to be performed or complied with by it prior to the Closing
Date under the UMSI Stock Purchase Agreement; (iii) the Company and UMSI shall
each have delivered to NexGen secretarial certificates certifying the Company's
board resolutions authorizing execution and delivery of the UMSI Stock Purchase
Agreement and performance of the transactions contemplated thereby, and
the incumbency of the officers executing the UMSI Stock Purchase Agreement on
the Company's behalf; (iv) the Company shall have delivered to NexGen
certificates of the Secretary of State of the State of Delaware and the
Virginia Corporation Commission certifying that each of the Company
and UMSI, respectively, has, as of the Closing Date, filed all required
reports, paid all required fees and taxes, and is in good standing and
authorized to transact business as a domestic corporation; (v)the Company shall
have delivered the written resignations, effective on the Closing Date, of all
members of UMSI's board of directors and officers, and shall have caused all
persons who have been designated by NexGen to be duly elected as directors and
officers of UMSI; (vi) the Company shall have delivered to NexGen all
certificates and other instruments representing the shares of UMSI stock, duly
endorsed for transfer or accompanied by appropriate stock powers, together with
all other documents necessary or appropriate to validly transfer such stock to
NexGen, free and clear of all liens; and (vii) there shall not have occurred
any material adverse change in the business, client relations, operations,
properties, assets or condition of UMSI.
Under the UMSI Stock Purchase Agreement, the obligations of the Company to
complete the UMSI Stock Sale are further subject to the fulfillment of the
following conditions, any one or more of which may be waived by the Company:
(i) the representations and warranties of NexGen set forth in the UMSI Stock
Purchase Agreement shall be true and correct at and as of the Closing
Date; (ii) NexGen shall have performed and complied with all obligations and
covenants required to be performed or complied with by it under the UMSI Stock
Purchase Agreement; (iii) NexGen shall have delivered to the Company a
secretarial certificate certifying NexGen's board resolutions authorizing
execution and delivery of the UMSI Stock Purchase Agreement and performance of
the transactions contemplated thereby, and the incumbency of the officers
executing the UMSI Stock Purchase Agreement on NexGen's behalf; (iv) NexGen
shall have delivered the consideration for the UMSI stock; (v) NexGen shall
have adopted by-laws in the form appended to the UMSI Stock Purchase Agreement;
(vi) Buyer shall have agreed to exchange Seller's obligation to repay an
additional $180,000 advanced to Seller for the issuance of an additional
1,800,000 shares of the Company's Common Stock to T.C. Equities, Ltd.; and
(vii) NexGen and certain of its affiliates shall have duly performed their
obligations set forth in an Amended and Restated Stock Purchase and Shareholder
Agreement of even date with the UMSI Stock Purchase Agreement.
Termination of the UMSI Stock Purchase Agreement
The UMSI Stock Purchase Agreement may be terminated and the UMSI Stock
Sale may be abandoned at any time prior to the Closing Date in the event of any
of the following: (i) by mutual written consent of the Company and NexGen; (ii)
by the Company or NexGen if the Closing has not occurred prior to January 31,
1999; (iii) by NexGen, if the Company has breached, in any material respect,
the representations, warranties or covenants made by the Company in the UMSI
Stock Purchase Agreement; (iv) by the Company, if NexGen has breached in any
material respect its representations, warranties or covenants made by NexGen in
the UMSI Stock Purchase Agreement. Termination of the UMSI Stock Purchase
Agreement pursuant to either clause (iii) or (iv) shall not in any way
terminate, limit or restrict the rights and remedies of any party to the UMSI
Stock Purchase Agreement against any other party which has breached or failed
to perform any of the representations, warranties, covenants or agreements
contained in the UMSI Stock Purchase Agreement prior to the termination
thereof.
PROPOSAL 2: THE BYLAW AMENDMENT
General
The following information, insofar as it relates to matters contained in
the Company's Bylaws, is qualified in its entirety by reference to the Bylaws.
Section 3.16 of the Company's Bylaws in its present and its proposed amended
and restated form are incorporated herein by reference and attached hereto as
Appendix B. Stockholders are urged to read the proposed amendment.
The Company's Bylaws currently only permit stockholders to take action by
unanimous written consent in lieu of voting at an annual meeting called to
consider such action. The proposed amendment would permit action by written
consent to be taken if signed by stockholders holding the number of shares
necessary to approve such action at a special or annual meeting. As T.C.
Equities, Ltd. holds the number of shares necessary to approve such amendment
and intends to vote for its approval, the adoption of the amendment is
assured. Adoption of the proposed amendment would enable T.C. Equities to
approve any matter required to be approved by the Company's stockholders by
executing and delivering a written consent to the Company.
Recommendation of the UNICO Board of Directors; Reasons for the Bylaw Amendment
In reaching it's unanimous determination that the Bylaw amendment is
advisable and in the best interests of the Company and its stockholders, the
Company's board of directors considered a number of factors, which factors,
taken together, support such determination, including without limitation, the
following:
(1) the relative ownership interests of the Company's Shareholders including
T.C. Equities approximate 69% ownership interest;
(2) the cost normally incurred in holding meetings of the Company's
stockholders; and
(3) the desirability of more expeditious corporate action in attracting and
exploring new business opportunities for the Company.
The foregoing discussion of the information and factors considered by the
Company's board is not meant to be exhaustive but is believed to include the
material factors considered by the board. The board did not quantify or attach
any particular weight to the various factors that it considered in reaching its
determination that the Bylaw amendment advisable and in the best interests of
the Company's Stockholders. In reaching its determination, the board took the
various factors into account collectively and the board did not perform a
factor-by-factor analysis, nor did the board consider whether any individual
factor was, on balance, positive or negative.
INFORMATION REGARDING THE COMPANY
Some statements contained in this Proxy Statement regarding future
financial performance and results and other statements that are not historical
facts are forward-looking statements. The words "expect," "project,"
"estimate," "predict," "anticipate," "believes" and similar expressions are
also intended to identify forward-looking statements. Such statements and the
Company's results are subject to numerous risks, uncertainties and assumptions,
including, but not limited to: possible deficiencies in future liquidity
levels, possible declines in market growth rates, possible failure of
product development activities, price pressures and other competitive factors,
volatility in the market for UMSI's products, and legal proceedings. These
risk factors are more fully described in "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated in this
Proxy Statement.
General
The Company was incorporated on April 11, 1984, under the laws of the
State of Delaware. Initial business activities, associated with the sale and
administration of cooperative direct mail advertising franchises, commenced
during May 1984. In September 1986 the Company filed an initial registration
statement with the Securities and Exchange Commission and initiated a plan to
expand Company operations through the acquisition of existing businesses
operating in related fields. Presently, the Company operates as a publicly-
owned holding company with one active wholly-owned subsidiary, UMSI. UMSI is
involved in cooperative direct mail advertising through franchising and
production.
The Company's cooperative advertising and production business involves the
design, layout, printing, packaging and distributing of public relations,
marketing materials and promotional coupons for private businesses, usually
involved in retailing goods or providing professional services. Franchising
activities related to this business involve the granting and administering of
independent franchise operations to conduct cooperative direct mail advertising
sales. All activities related to franchising are conducted through UMSI, which
was acquired on July 17, 1987. As of September 30, 1998, UMSI had
approximately 56 active franchise operations.
The Company's Markets
Cooperative Direct Mail Advertising
The customer base of most local retailers and professionals comes from
within a three-mile radius of its location, therefore, it is difficult for them
to advertise effectively and economically. The Company believes that direct
mail is an effective advertising method for the local merchant and professional
since they can target a specific area and have substantial saturation of their
advertising message. Radio and television advertising, in contrast, is costly
to produce and air. The advertiser is paying for broadcasting over a large
metropolitan area, much of which is not part of its customer base. It may not
be efficient or affordable unless the advertiser has multiple locations.
Major city newspapers are also comparatively expensive since they, too, cover
an entire city and not just the specific area relevant to the local retailer or
professional. In addition, newspapers usually contain large amounts of
advertising, which may limit the effectiveness of small ads.
Individual direct mail programs are also expensive, when the cost of
postage, design, envelopes, printing, and mailing lists are considered.
Cooperative direct mailing of advertisements for several businesses in one
mailing substantially reduces the advertisers' cost from the price of an
individual direct mail program.
The Company's franchisees sell cooperative direct mail advertising to
retailers and service organizations in a given market area. They assist each
business owner with the design and content of advertisements or coupons. The
Company produces and mails a packet of coupons (usually consisting of fifteen
or more coupons) to thousands of homes in a targeted geographic area. The
Company receives a majority of its revenue by providing, on a wholesale basis
to its distributors, a complete mailing service. Such services include
computerized design, typesetting, paste-up, proofing, printing, inserting,
addressing, and mailing, as well as paper, envelopes, labels and postage.
The market segment targeted by the Company's franchisees includes local
retailers, service businesses and professional organizations. In addition,
specialty mailings are conducted on a regular basis and major consumer products
companies that market on a national level are solicited to advertise in the
Company's mailings.
Franchising
The Company targets the major markets of the United States with a
population of 500,000 or more. Each area franchise territory can consist of
50,000 to 80,000 mailable homes. Franchise prospects are located through the
use of local and national advertising, franchise shows and seminars, and a
network of franchise sales representatives. Sales tools consist of Company
brochures, a franchise sales booth and a video presentation.
The Company has also implemented a franchise sales program whereby the
Company assists existing franchisees in selling parts of their respective
territories. Generally, franchise territories which would be involved in this
program are those which have more than 150,000 mailable homes.
Each franchise consists of an independent operation in an exclusive
territory in which no competition from other Company franchisees is allowed.
The Company provides the franchisee with a thorough, individually-oriented,
two-week training program covering all facets of the business. In addition,
the Company provides the franchisee with operation manuals, sales support
materials, market softeners (direct mailings to potential customers), use of
its trademarks and logos, WATTS telephone and FAX service for transferring
layouts, and continuing management support.
Franchise fees are based upon the total number of mailable homes in the
exclusive territory. Area franchise fees are $21,900 for 50,000 mailable-home
territories plus $2,000 for each additional increment of 10,000 mailable-home
territories. Generally, the franchise agreements are for a period of ten
years, and are renewable at the option of the franchisee, if certain conditions
are met. These agreements include a performance clause, which is based upon a
minimum distribution standard and frequency of mailings over the term of the
franchise agreements.
Regional franchisees, in addition to operating an area franchise, are
directly involved in recruiting and training area franchisees within their
region. UMSI carefully designs the regional franchising program to provide
substantial opportunity for the regional franchisee, while maintaining
appropriate corporate control over the approval of area franchise grants and
contractual agreements. A regional franchisee also has an exclusive territory,
comprised of approximately 1,000,000 mailable homes, and supervises 15-18 area
franchisees. The license fee for a region is $51,000 to $59,000. Regional
franchisees attend one additional week of training at UMSI's corporate
headquarters.
The Company retains the right to terminate a franchise for a variety of
reasons, including insolvency or bankruptcy, failure to operate the business
according to prescribed standards, failure to pay fees, and material
misrepresentations on an application for a franchise.
Set forth below is the geographical location of the franchises in
operation as of September 30, 1998.
Alabama 2 Massachusetts 11 Pennsylvania 4
California 3 Minnesota 1 Texas 2
Connecticut 2 New Hampshire 1 Utah 2
Florida 2 New Jersey 6 Virginia 5
Georgia 2 New York 7 Washington 2
Maryland 1 North Carolina 2 West Virginia 1
Trade Names, Service Marks and Logo Types
The United Coupon Corporation service mark was registered with the United
States Patent Office on Principal Register, register number 1,310,366 on
December 16, 1984. In addition, the service mark was registered in the
Commonwealth of Virginia on April 27, 1984. UMSI franchisees are allowed to
operate under the trade names of United Marketing Solutions or United
Coupon.
Pursuant to its License Agreement, UMSI authorizes franchisees to operate
a cooperative direct mail advertising business under the name United Coupon or
United Marketing Solutions in accordance with the UMSI system. In connection
with the operation of a UMSI cooperative direct mail advertising business,
franchisees are authorized to use the name and service mark "UNITED
COUPON" as well as other such service marks or commercial symbols as UMSI from
time to time adopts and makes a part of the UMSI system.
Government Regulation
The Company is subject to regulation under the rules of the Federal Trade
Commission regarding disclosure of certain information in connection with the
sale of franchises as well as state regulatory authorities in certain states
where the Company does business. Statutory provisions in certain states impose
certain substantive requirements on the relationship between the franchisor
and the franchisee. Management believes the Company is in material compliance
with such regulatory requirements.
Competition
The advertising industry is highly competitive with many firms having vast
resources competing for businesses' advertising dollars. The Company's
business, primarily cooperative advertising delivered through direct mail or
through distributors, is a relatively small, but rapidly growing segment of the
advertising industry. The Company's major competitors in direct mail
cooperative advertising are Val-Pak, Money Mailer, and Super Coups. Management
estimates the Company has about 5% of that market segment. There are a large
number of small, independent businesses operating in each market segment
serviced by the Company.
Employees
The Company had approximately 82 employees as of September 30, 1998. The
Company also relies upon commissioned sales representatives involved in
franchise sales operations and temporary workers during peak production periods
at UMSI.
Description of Property
The Company operates its corporate headquarters and its coupon sales and
franchise activities through an office and production facility at 8380 Alban
Road, Springfield, VA 22150. This space is leased for a monthly fee of
approximately $33,000 covering approximately 64,000 square feet. This lease
expires in April 2005.
Legal Proceedings
The Company and UMSI are involved in various legal actions associated with
the normal conduct of business operations. No such actions involve known
material gain or loss contingencies not reflected in the Company's consolidated
financial statements.
INFORMATION REGARDING NEXGEN
General
NexGen was incorporated on November 21, 1980, under the laws of the State
of Nevada under the name of Micro Tech Industries, Inc. Pursuant to a Stock
Purchase Agreement, dated as of February 6, 1997, by and between Pocotopaug
Investment, Inc. and Joel P. Sens, Mr. Sens acquired control of 6,686,551 of
the 8,008,890 outstanding shares of common stock (equivalent to 668,655
shares after the March 19, 1997, reverse stock split), representing an 85.72%
interest, for $50,000. In connection with this transaction, John S. McAvoy,
the then sole director of NexGen resigned effective as of the date of such
transaction, and new members of the board of directors were elected
and new management appointed. Current management believes that NexGen was a
"shell" company for at least five years prior to February 6, 1997, without
assets or liabilities. Current management is unaware of any operating history
of NexGen prior to February 6, 1997.
Currently, NexGen operates as a publicly-owned holding company with a
single wholly-owned operating subsidiary, Independent News, Inc. ("INI").
NexGen had no revenues from operations prior to its acquisition of certain
assets and liabilities of Pompton Valley Publishing Company, Inc. ("Pompton
Valley") as of September 29, 1997. These assets and liabilities were
acquired through INI, which was formed to operate the acquired business. The
acquisition was funded with cash and NexGen common stock, and by means of INI's
assumption of certain of Pompton Valley's liabilities. The cash portion of the
purchase price was funded by means of a loan from Mr. Sens.
INI engages in the community newspaper publishing business. It produces
and issues weekly free newspapers distributed via the mail to approximately
67,761 homes in northern New Jersey. INI generates all of its revenues from
the sale of advertisements which generally are placed by local merchants in the
communities which the newspapers serve. The newspapers generally are
identical in editorial content but are varied according to advertising content.
Therefore, a local merchant or other advertiser may target the audience for its
advertisements in a relatively close geographic vicinity by placing
advertisements in the version of the INI community newspaper serving its local
community. The New Jersey townships that INI's community newspapers serve
include Wayne, Fairfield, Lincoln Park, Pequannock, Pompton Plains, Montville,
Towaco, Bloomingdale, Riverdale, Butler, Kinnelon, Smoke Rise, Pompton Lakes,
Little Falls, Totowa and West Patterson.
INI's working capital is provided primarily from operations. INI sales
are made by its sales representatives on credit with payment terms due in 30
days. No single customer of INI represents 10% or more of its revenues.
The advertising business, including the community newspaper business, is
highly competitive with many firms competing in various forms of media and
possessing substantial resources. NexGen's community newspaper business has
several direct competitors servings its local markets, although management
believes that INI has no direct competitor offering a 100% mailed (as opposed
to delivery) weekly newspaper. The circulation of other newspapers in the
local markets in which INI operates includes: The New Jersey Star Ledger,
circulation 11,889; The Herald & News, circulation 8,983; The Record,
circulation 8,131; and The Suburban Trends, circulation 7,401.
INI had approximately 12 employees as of September 30,1998.
SELECTED FINANCIAL DATA FOR UNICO INC.
The following table presents certain summary selected consolidated
financial data of the Company as of and for each of the five years in the
period ended December 31, 1997. This financial data was derived from the
audited historical consolidated financial statements for the years ended
December 31, 1993, 1994, 1995, 1996, and 1997 of the Company and should be read
in conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Proxy
Statement and the consolidated financial statements and notes thereto included
herein.
Statement of
Income Data: 1993 1994 1995 1996 1997
Net Sales $7,577,546 $13,694,279 $10,163,918 $19,049
Cost of Sales 5,034,191 9,215,427 7,596,629 187,661
Gross Profit 2,543,355 4,478,852 2,567,289 -168,612
General and
administrative 2,692,861 4,398,636 3,442,690 1,556,942 401,959
Franchise
development 245,077 280,232 396,974
Interest expense 324,887 365,968 291,706 173,964
Legal&settlement 281,464 -- -- -- --
Restructuring
expense 772,443
Loss on abandonment
And revaluation -- -- 1,692,710 --
Operating Income -676,047 -524,903 -2,410,786 -3,709,970 -575,923
Other income 213,159 884,884 316,589 102,668 29,147
Income (loss)
before income
taxes discontinued
operations and
extraordinary gain -- -- -- 3,607,302 -546,776
Gain or loss
on operations to be
Discontinued -- -- -- 163,653 546,676
Loss before
extraordinary gain -- -- -- -3,443,649 -1,093,452
Extraordinary gain
from termination
Of obligations,
net of income taxes -- -- -- -- 305,886
Net income -$462,888 $359,981 -$2,094,197 -$3,443,649 -$787,566
Pro Forma Statement of Income Data:
Income before
income tax -462,888 359,981 -2,094,197 -3,443,649 -787,566
Income tax provision - 267,000 -300,319 -100,200 29,100
Net Income -$462,888 $626,981 -$2,394,516 -$3,343,449 -$916,666
Net income
per share -0.084 0.090 -0.311 -1.63 -0.043
Weighted average common
shares o
utstanding 5,537,571 6,964.549 7,710,913 2,047,618 2,119,077
Balance Sheet Data:
Working Capital 683,873 536,130 -426,518 -1,826,349 -2,809,441
Total Assets 7,337,586 8,259,614 6,761,680 3,419,214 2,639,941
Total Liabilities 4,889,115 4,978,252 5,674,705 3,920,300 4,044,020
Stockholder's
equity 2,438,471 3,281,362 1,086,975 -501,086 1,404,079
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company commenced operations in May 1984. During 1985, the Company
established its marketing office and began a concentrated effort of developing
sales tools and procedures, and training sales personnel. The first six months
of operation in 1986 were devoted to packaging and preparing a franchise
system, developing a sales force and documenting procedures to provide to
franchisees. The actual implementation of the operations as a franchiser
commenced in October 1986.
In July 1987, the Company acquired United Coupon Corporation, now United
Marketing Solutions, Inc., ("United Coupon"), a franchiser of cooperative
direct mail advertising distributorships. On October 21, 1993, the Company
acquired Cal-Central Marketing Corporation ("Cal-Central").
During 1996, the Company was forced to close the Cal-Central business due
to lingering operating losses and a shortage of working capital.
The debt the Company has incurred in connection with the acquisition and
poor financial performance of Cal-Central has imperilled the continuing
operations of the Company. Unable to reach agreements with the former holders
of the Company's subordinated debt and Series C Preferred Stock to facilitate
new equity investments in the Company, management and the Board sought suitors
to buy UMSI. After many inconclusive discussions, two suitors acceptable to
the former holders of the Company's Subordinated debt and Series C Preferred
Stock emerged with competing cash offers and the Board of Directors selected
the offer resulting in the highest cash distribution to the Company's
stockholders.
Results of Operations
Nine Months ended September 30, 1998 Compared with Nine Months ended
September 30, 1997.
Total revenues for the Company decreased by 9% during the nine month
period ended September 30, 1998, compared to the same period in 1997, after
restatement of both periods to reflect the plan to discontinue, through
potential sale, the operations of the Company?s remaining operating subsidiary,
United Marketing. This decline reflects a reduction of $932,424 in printing,
advertising and design sales to third parties and a $115,020 increase in
franchise fees. These changes were impacted by a $251,982 increase in other
revenue during the 1998 period. Overall, the decline in total revenue reflects
the dilution of management's efforts related to negotiations to sell United
Marketing and to restructure UNICO.
Production Expenses, which include art development, printing, bindery,
delivery, product development, distributor support and selling expenses,
decreased by $1,104,006, during the 1998 period in contrast to the same period
in 1997. This decrease is directly related to the decline in printing
advertising and design sales, as well as elimination of marginally profitable
business addressed during the 1997 period.
General and Administrative Expense decreased by $234,948 over the same
period last year primarily as a result of lower overall level of business and
required administrative functions.
Franchise Development Cost, which includes the cost of developing,
advertising, selling, training and supporting United Marketing franchises, was
$35,543 lower than the prior year, reflecting attention directed to
restructuring activities, as opposed to new franchise sales during the
early portion of 1998. Such activities have increased during the third quarter
of 1998.
Interest Expense decreased $130,550 from the same period last year as a
result of conversion of convertible debenture debt to equity during the past
year.
An extraordinary gain of $1,314,248 was recorded during May 1998, as a
result of forgiveness of an equal amount of subordinated note debt by the
holders. No income tax provision was deemed necessary for this gain due to
available net operating loss carryforward amounts.
Extraordinary gain related to Business Dissolution was $563,827 for the
current period compared to $493,386 for the same period in 1997. The 1997
period was aided by approximately $403,000 of non-recurring income related to
the write-off of Cal-Central obligations that were deemed extinguished during
the period. The gain during 1998 is related to the operations of United
Marketing Solutions which was designated to be sold during the fourth quarter
of 1997.
Consolidated Net Income for the current nine-month period was $1,706,690
compared to a net loss of $26,797 for the prior year.
Fiscal 1997 Compared to Fiscal 1996
Total revenues for the Company decreased by 76% during the fiscal year-
ended December 31, 1997 when compared with fiscal 1996, after restatement of
both periods to reflect the plan to discontinue the operations of the Company's
remaining operating subsidiary, UMSI. This decline reflects a decline of
$19,049 in printing, advertising and design sales to third parties and a
$73,521 decline in other revenue associated with reimbursement of expenses and
non-recurring miscellaneous revenues.
Total expenses decreased by approximately 85% during fiscal 1997 when
compared with fiscal 1996, after restatement of both periods to reflect the
plan to discontinue UMSI. Included in total expense in fiscal 1996 is $187,661
of non-recurring cost of sales related to cooperative advertising activities
conducted by the Company during the initial months of 1996, while
restructuring efforts were attempted for the Company's discontinued operating
subsidiary, Cal-Central. Included in fiscal 1996 costs is $956,913 of one-time
charges related to closing Company locations and other one-time charges, as
well as evaluation of assets. General and administrative expenses declined by
33% during fiscal 1997 when compared with fiscal 1996 due to consolidation
of administrative functions throughout the year. In addition, interest expense
declined during fiscal 1997 by 40% vs. fiscal 1996 due to conversion of
subordinated debt to equity.
Loss from operations of subsidiary to be sold, UMSI, was $407,244 net of a
$231,000 tax benefit related thereto, for fiscal 1997, compared to income of
$163,653, net of an income provision of $100,200, for fiscal 1996. Operating
results of UMSI for fiscal 1997 included $5,779,440 of total revenue compared
to $6,704,158 in fiscal 1996. Total operating expenses for fiscal 1997 were
$6,417,784 compared to $6,440,305 for fiscal 1996. The decline in total
revenue is related to a 13% decline in the subsidiary's commercial printing,
design and advertising sales, as well as a 40% decline in franchise fee
revenue. The decline in total operating expenses in fiscal 1997 is related to
a 4% decline in cost of sales, partially offset by an 8% increase in general
and administrative expense.
For fiscal 1997, the Company incurred a consolidated loss of $916,666
compared to a net loss of $3,343,449 in fiscal 1996. This reduced loss
reflects the net impact of operating losses and additional losses incurred
during fiscal 1996 related to the abandonment and closure of Cal-Central
compared to the loss from operation incurred during fiscal 1997 related to the
discontinued business segment, UMSI.
Fiscal 1996 Compared to Fiscal 1995
Total revenues for the Company decreased by 35% during 1996 primarily to
the elimination of cooperative advertising sales and services of the Company's
subsidiary Cal-Central. Cal- Central's decline was caused initially by an
unexpected interruption of its products through three major distributors. In
addition, strong sales during the summer months of 1995 created a
production backlog within the art development group of Cal-Central. This
backlog, coupled with the interruption of product distribution, caused a
breakdown in customer service related to the timely delivery of advertising
products for customers of Cal-Central. This delay in delivery impaired the
collectability of accounts receivable for Cal-Central, precipitating an acute
liquidity shortfall for Cal-Central during the second-half of 1995. Company
management reacted to this problem by arranging supplemental working capital
through borrowings and by initiating a program to down size Cal-Central,
thereby reducing operating losses and requirements for supplemental working
capital. The number of Cal-Central marketing centers was reduced from ten
to three during this period and the art and printing facility for Cal-Central,
in Fort Lauderdale, Florida, was closed in December 1995. Sales of distributor
based cooperative advertising for Cal-Central were complete discontinued in
1996. Sales of coupons through the Company's subsidiary United Coupon,
increased marginally during 1996, reflecting restrained operations as a result
of working capital limitations.
Other income deceased by $103,939 during 1996. The decline is related to
elimination of accounts receivable maintenance fees by Cal-Central in 1996.
Franchise Fee Income increased by $80,654 during 1996, reflecting positive
results from expanded franchise sales efforts conducted during 1996 by both
Company staff and independent franchise sales representatives. The number of
active United Coupon franchises remained constant, at 66, during 1996.
Total expenses decreased by approximately 19% during 1996, reflecting the
lower sales results and restructuring actions. Included in total expense in
1995 is $772,443 of non-recurring restructuring costs related to the organizing
of the Cal-Central business, including the closing of the Fort Lauderdale
production facility and seven marketing centers. Included in 1996 costs
$956,913 of one-time charges related to closing Company locations and other
one-time charges, as well as, $1,692,710 in one-time charges associated with
abandonment and re-evaluation of assets and other one-time costs totaling
approximately $916,000. Had all non-recurring expenses not been incured,
total expenses would have declined by approximately 36% for the year.
Production Expenses declined by 45% during 1996, reflecting lower sales levels
and discontinuation of unprofitable operations. General and Administrative
Expenses decline by 24% during 1996 due to consolidation of administrative
functions throughout the year. In addition, interest expense declined during
1996 by 8% due to the conversion of subordinated debt to equity, as disclosed.
Franchise Development Expenses decreased $36,255 (9%) during 1996 reflecting
more efficient sales efforts and utilization of outside sales services.
For fiscal 1996, the Company incurred a consolidated loss of $3,343,449
compared to a net loss of $2,394,516 in 1995. This decline was caused by
substantial non-recurring charges primarily incurred in connection with the
reconstructing plan begun in 1995 designed to spawn long term profitability and
growth.
Liquidity and Capital Resources
The Company's principal measures of liquidity are cash, certificates of
deposit, accounts receivable and salable inventory. Also, management deems
appropriately managed and collateralized bank lines of credit as a proper
supplement to its liquidity.
The Company's working capital was a deficit $488,299 at September 30,
1998, an 82% improvement from December 31, 1997. This change reflects: an
increase in Cash and Equivalents of $98,271 resulting primarily from operating
profits and supplemental borrowings for the period; a net increase of $78,171
in Trade and Other Accounts Receivable; an increase of $10,634 in paper and
work in process Inventory at United Marketing Solutions, Inc. ("United
Marketing"); a decrease of $9,140 in Prepaid Expenses related to utilization of
annual insurance renewals and similar contracts; These changes were impacted
by a decrease of $694,469 in Accounts Payable and a $247,160 decrease in
Accrued Liabilities related to utilization of seasonally accrued operating
costs at United Marketing. Working capital was also aided by a $1,092,358
reduction in the current portion of Notes Payable related to principal payments
made on bank debt and write-off of $1,314,248 of debenture debt that was
forgiven during the period. These amounts were partially offset by $175,000 of
additional borrowings during the period. Deferred Revenue also decreased by
$109,219 during the period.
Long term liabilities increased by $325,946 during the period.
Management adopted a restructuring plan for its subsidiary Cal-Central
Marketing Corporation during 1995. Management abandoned its restructuring plan
for Cal-Central during the fourth quarter of 1996 and wrote off remaining
accounts receivable and goodwill associated with this operation.
Factors which may Affect Future Operating Results
The following issues and uncertainties, among others, should be considered
in evaluating the Company's outlook.
Although the Company's sole operating subsidiary, UMSI, has been able to
reduce the Company's long term debt, its continuing ability to do so in the
event the proposed UMSI Stock Sales is not consummated is uncertain. The
dedication of substantial portions of UMSI's revenue for these purposes has
deprived UMSI of capital needed for its growth. Additionally, the Company
has been required to seek and obtain modifications to its obligations to
repay its primary lender BancFirst. The ability of the Company to obtain
such modifications in the event the UMSI sale is not consummated is
uncertain.
FOR THE PERIOD ENDED DECEMBER 31, 1997
At December 31, 1997, the Company's working capital position, current
assets minus current liabilities, was a negative $2,089,441. Working capital
was impacted by the $916,666 loss from operations as well as use of $164,597 in
cash and equivalents during the year to purchase property and equipment related
to the United Marketing art and printing facility, and $49,530 for
net payment of notes payable. In addition: short term notes and accounts
receivable declined by $360,771, as a result of lower levels of business
activity; inventories declined by $20,812 due to utilization of stocks built in
prior periods; and prepaid expenses and other assets declined by
$71,024 due to utilization of accrued expenses and amortization of prepaid
items. Also, accrued liabilities and accounts payable increased by $85,935 and
deferred rent increased by $91,594 as a result of accelerated recognition of
deferred rental payments as current period expenses.
Total assets for the Company declined 23% during 1997. This change
reflects the changes in current assets and property noted above, as well as
write-off of $224,932 of goodwill related to the election to discontinue
UNICO's ownership of United Marketing Solutions, Inc.
Long-term liabilities decreased by $658,059 during 1997 as a result of
required net principal payments made of $49,530 and reclassification of items
previously classified as long term to short term.
Management has considered operating losses and acquisitions which have
required substantial utilization of funds, as well as anticipated operating and
debt service requirements for the near term, and believes that sufficient
liquidity may not be available from working capital to support the requirements
of continuing operations for the foreseeable future. As a result, management
has taken steps to assure continued operation. These actions include the
election to seek a buyer for United Marketing Solutions, Inc. Because of this
election, the accompanying financial statements reflect the operations of
United Marketing Solutions, Inc. as a discontinued operation. The ultimate
outcome from this strategic action cannot be assured at this time.
MARKET PRICE AND DIVIDEND INFORMATION
On September 30, 1998, there were approximately 523 shareholders of
record of the Common Stock. Based on information received from brokers and
others in fiduciary capacity, the Company estimates that the total number of
shareholders of the Common Stock exceeds 500. The Common Stock was formerly
traded on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"). During 1997, the Company no longer qualified for
this listing and is now available through electronic trading services via
NASD's Electronic Bulletin Board.
All outstanding shares of Common Stock and related options and warrants
were reverse split on the basis of four (4) shares for one (1) share effective
December 30, 1997.
The following table sets forth, for the periods indicated, the range of
high and low closing bid prices for the Common Stock, as reported by NASDAQ
through March 1997 and as available through electronic trading services
subsequent to such date. The values have not been restated for
the one for four reverse split that was effective December 30, 1997:
Common Stock Bid
High Low
1995
First Quarter $.87 $.65
Second Quarter .87 .50
Third Quarter .75 .50
Fourth Quarter .56 .25
1996
First Quarter $.22 $.22
Second Quarter .34 .31
Third Quarter .38 .34
Fourth Quarter .25 .25
1997
First Quarter $.31 $.19
Second Quarter .19 .13
Third Quarter .07 .05
Fourth Quarter .05 .02
1998
First Quarter $.13 $.03
Second Quarter .25 .13
Third Quarter .22 .06
Fouth Quarter* .10 .03
*through 12/29/98
Dividends
The Company has never declared a cash dividend on the Common Stock. The
Company intends to retain future earnings to support the Company's growth. Any
payment of cash dividends in the future will be dependent upon: the amount of
funds legally available therefore; the Company's earnings; financial condition;
capital requirements; and other factors which the Board of Directors deems
relevant.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of May 1, 1998: (i) the name of each
person who, to the knowledge of the Company, owned beneficially more than 5% of
the Common Stock outstanding at such date; (ii) the name of each director;
(iii) the name of each of the executive officers; and (iv) the number of shares
of Common Stock owned by each of such persons and all officers, directors
and nominees as a group and the percentage of the outstanding shares
represented thereby.
Name of Beneficial Owner/ # of Shares of Common % of Beneficial
Identity of Group Stock Beneficially Ownership (1)
T.C. Equities, LTD 3,872,671 68.76%
Charoltte House
Nassau Bahamas
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Aronson, Fetridge & Weigle, P.C., the Company's former
independent public accountants, are not expected to be present at the Special
Meeting having previously declined to renew their engagement.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by law, the Company files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information contain additional information about the Company. You can inspect
and copy these materials at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
7 World Trade Center, Suite 1300, New York, New York 10048. For further
information concerning the Commission's public reference rooms, you may call
the Commission at 1-800-SEC-0330. Some of this information may also be
accessed on the World Wide Web through the Commission's Internet address at
"http://www.sec.gov."
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. THE COMPANY HAS NOT AUTHORIZED ANYONE TO GIVE ANY
INFORMATION DIFFERENT FROM THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. THIS PROXY STATEMENT IS DATED JANUARY 8, 1999. YOU SHOULD
NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
IS ACCURATE AS OF ANY LATER DATE, AND THE MAILING OF THIS PROXY
STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
OTHER BUSINESS
The Company knows of no other matter to be presented at the Special
Meeting. However, if other matters should properly come before the Special
Meeting, it is the intention of the persons named in the enclosed proxy to vote
the proxy with respect to such matters in accordance with their best judgment.
1998 ANNUAL MEETING OF STOCKHOLDERS
The Company does not plan to hold an annual meeting of stockholders for
1998 unless the Merger is not consummated. If the Merger is not consummated,
stockholder proposals must have been received by the Secretary of the Company
no later than July 28, 1999 in order to be considered for inclusion in the
proxy materials for the Company's next annual meeting of stockholders.
By Order of the Board of Directors,
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED FORM OF PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE
APPENDIX A
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT AND
PLAN OF MERGER
UNICO INC.,
UNITED MARKETING SOLUTIONS INC.,
NEXT GENERATION MEDIA CORP. and
UNITED MARKETING MERGER CORP.
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated the 30th day of December, 1998, among UNICO, Inc., a
Delaware corporation ("Seller"), United Marketing Solutions Inc., a Virginia
corporation formerly known as United Coupon Corporation ("UMSI"), Next
Generation Media Corp., a Nevada corporation ("Buyer"), and United Marketing
Merger Corp., a Virginia corporation ("Newco").
Recitals
A. Seller owns 100% of the issued and outstanding shares of the capital
stock of UMSI.
B. Seller desires to sell, and Buyer desires to purchase, all of Seller's
shares of capital stock of UMSI, for the consideration and upon the terms and
subject to the conditions hereinafter set forth.
C. The parties desire that Newco shall be merged with and into UMSI (said
transaction being hereinafter referred to as the "Merger") pursuant to a plan
of merger substantially in the form set forth in Annex A hereto (the "Plan of
Merger").
D. The parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated
hereby.
E. The parties executed a Stock Purchase Agreement dated as of May 8, 1998 (the
"Prior Agreement") and, since the date of the execution of the Prior Agreement,
certain events have occurred that have rendered the Prior Agreement no longer
reflective of the parties' desired method of consummating the Merger.
F. In light of the changes in circumstances and the desire among the parties to
amend the Prior Agreement, the parties have executed this Agreement to provide
for a more rapid conclusion of the transactions contemplated in the Prior
Agreement and in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree as follows:
1. Purchase and Sale of Stock and Merger.
1.1. Agreement to Purchase and Sell. Upon the terms and subject to
the conditions set forth in this Agreement, on the Closing Date (as defined
below), Seller shall sell to Buyer, and Buyer shall purchase from Seller, 1
share of common stock (the "UMSI Shares"), par value $20.00, of UMSI ("UMSI
Common") representing 100% of the issued and outstanding capital stock of UMSI.
1.2. Purchase Price. In exchange for the UMSI Shares, Buyer agrees to
pay the Seller the purchase price in the form of (a) $172,664.50 in cash (the
"Merger Consideration") which is equal to $0.10 multiplied by the number of
shares of Unico Common Stock, par value $0.01 per share ("Unico Common") held
by the holders of Unico Common ("Unico Common Holders") other than either T.C.
Equities Ltd. or Next Generation Media Corp., (b) forgiveness of indebtedness
in the amount of $175,500.00 owed by Seller to Buyer pursuant to Section 6.15.1
hereof (the "Debt Forgiveness"), and (c) $164,000.00 cash (the "Debt Pay-Off
Consideration," and, together with the Merger Consideration and the Debt
Forgiveness, the "Purchase Price") for the payment of debts of Seller to the
extent that creditors of Seller (other than BancFirst, an Oklahoma banking
corporation ("BancFirst")) do not consent to the assignment of such debt by
Seller, the assumption of such debt by Buyer and the release of Seller
in respect of such debt by such creditor.
1.3. Payment of Purchase Price. The Purchase Price shall be payable
as follows:
1.3.1. Buyer shall pay to the Seller the Merger Consideration upon the Closing
(as defined herein).
1.3.2. Buyer shall pay Seller the Debt Pay-Off Consideration at
Closing.
1.4. Closing. The closing of the purchase and sale of the UMSI Shares
(the "Closing") shall take place at the offices of Williams & Connolly,
Washington, D.C., as soon after the vote of the shareholders of Seller as is
practicable (such date, the "Closing Date").
1.5. Merger. UMSI and Newco are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the Virginia Stock
Corporation Act, as amended (the "VSCA"). At the Effective Time (as defined
herein):
1.5.1. Newco shall be merged with and into UMSI in accordance
with the applicable provisions of the VSCA, with UMSI being the surviving
corporate entity (the "Surviving Corporation").
1.5.2. The separate existence of Newco shall cease, and the
Merger shall in all respects have the effect provided for in subsection 1.8.
1.5.3. The Articles of Incorporation of UMSI at the Effective
Time shall become the Articles of Incorporation of the Surviving Corporation.
1.5.4. The bylaws of UMSI at the Effective Time shall become the
bylaws of the Surviving Corporation.
1.6. Filing; Plan of Merger. The Merger shall not become effective
unless this Agreement and the Plan of Merger are duly adopted by the respective
boards of directors of the Constituent Corporations and approved by
shareholders holding the requisite number of shares of Seller and each of the
Constituent Corporations. Upon fulfillment or waiver of the conditions in
Section 5 and provided that this Agreement has not been terminated pursuant to
Section 6.2, the Constituent Corporations will cause the Plan of Merger to be
certified, executed, acknowledged and filed with the Virginia Corporation
Commission as provided in the VSCA. The Plan of Merger is incorporated herein
by reference, and adoption of this Agreement by the Boards of Directors of the
Constituent Corporations and approval by the shareholders of the Constituent
Corporations and of Seller shall constitute adoption and approval of the Plan
of Merger.
1.7. Effective Time. The Merger shall be effective at the day and
hour specified in the Articles of Merger (including the Plan of Merger) filed
with the Virginia Corporation Commission (the "Effective Time").
1.8. Effect of Merger. From and after the Effective Time, the Merger
shall have the effect described in the VSCA. At the Effective Time, by virtue
of the Merger and without any action on the part of Constituent Corporations,
each share of the common stock of Newco issued and outstanding immediately
prior to the Effective Time shall no longer be issued and outstanding, and each
share of the UMSI Common issued and outstanding immediately prior to the
Effective Time shall continue to be issued and outstanding. The Surviving
Corporation shall become, by virtue of the Merger and without any action on the
part of the Constituent Corporations, a wholly-owned subsidiary of Buyer.
2. Representations and Warranties of Seller and UMSI. Seller and UMSI each
represents and warrants to Buyer as follows:
2.1. Capital Structure, Organization, Standing and Authority. The
authorized capital stock of Seller consists of 20,000,000 shares of Unico
Common, par value $0.01 per share, and 5,000,000 shares of Preferred Stock, par
value $0.01 per share ("Unico Preferred") of which Seller has one designated
series (the "Unico Series C Preferred"). No other classes of capital
stock of Seller are authorized. As of the date hereof, 5,631,817 shares of
Unico Common and no other shares of capital stock of Seller are issued and
outstanding. (The 428,185 shares of Unico Series C Preferred stock converted
at a ratio of 1:4 to common stock as of August 1, 1998.) All outstanding
shares of Unico Common have been duly authorized and are validly issued, fully
paid and nonassessable. Except as set forth on Schedule 2.1 of the Prior
Agreement, Seller has no warrants, options, rights, convertible securities and
other arrangements or commitments that obligate it to issue or dispose of any
of its capital stock or other ownership interests, and stock
appreciation rights, performance units and similar stock-based rights whether
or not they obligate the issuer thereof to issue stock, or other securities or
to pay cash (collectively, "Rights") authorized, issued or outstanding with
respect to the capital stock of Seller. Holders of Unico Common do not have
preemptive rights. Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware with full
corporate power and authority to carry on its business in any other state of
the United States or foreign jurisdiction where such failure would have a
material adverse effect on the financial condition, results of
operations, business or business prospects of Seller.
2.2. Authorization; Validity and Effect of Transaction Documents. The
execution and delivery of this Agreement and all other Transaction Documents
(as defined herein) by Seller, and the consummation by it of the transactions
contemplated hereby and thereby (the "Transactions"), have been duly authorized
by all requisite corporate action (subject to receipt of approval of the Unico
Common Holders of this Agreement and the Plan of Merger). This Agreement
constitutes, and all other agreements and documents contemplated hereby (the
"Transaction Documents"), which are to be executed and delivered by Seller,
when executed and delivered pursuant hereto, will constitute the valid and
legally binding obligations of Seller, enforceable in accordance with their
respective terms (subject to receipt of approval of the Seller's shareholders
of this Agreement and the Plan of Merger). The execution and delivery of
this Agreement and any other Transaction Document does not, and the
consummation of the Transactions will not: (i) require the consent of any
third party (other than the approval of the Seller's shareholders of this
Agreement and the Plan of Merger and the consent of BancFirst), (ii) violate
any statute or law or any rule, regulation, order, writ, injunction,
arbitration award, or decree of any court, administrative or governmental
agency, instrumentality, commission, authority, board or other body (a
"Governmental Authority") or require any authorization, consent, approval,
exemption or other action by or notice to any Governmental Authority; (iii)
result in the breach of any term or provision of, or constitute a default
under, or result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest, encumbrance, assessment or adverse claim (a "Lien")
upon any part of the property of Seller pursuant to any provision of, any
material contract, indenture, mortgage, lease, license, Lien, or other
agreement or instrument to which Seller is a party or by which it is
bound, or (iv) violate or conflict with any provision of the bylaws or articles
of incorporation of the Seller as amended to the date of this Agreement.
2.3. Ownership of Subsidiary. Seller's sole operating subsidiary is UMSI, a
Delaware corporation. The authorized capital stock of UMSI consists of 100
shares of UMSI Common, par value $20.00 per share. No other classes of capital
stock of UMSI are authorized. As of the date hereof, one share of UMSI Common
is issued and outstanding, and no other shares of capital stock of UMSI are
issued and outstanding. All outstanding shares of UMSI Common have been duly
authorized and are validly issued, fully paid and nonassessable. No shares of
capital stock have been reserved for any purpose. UMSI has no Rights
authorized, issued or outstanding with respect to the capital stock of UMSI.
Seller is the sole holder of 100% of the issued and outstanding capital stock
of UMSI, free and clear of all Liens, encumbrances, charges, defaults, pledges
or equitable interests other than the Lien of BancFirst. UMSI is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia with full corporate power and authority to carry on
its business as it is currently being conducted in any other state of the
United States or foreign jurisdiction where such failure would have a material
adverse effect on the financial condition, results of operations, business or
business prospects of
UMSI.
2.4. Authorization; Validity and Effect of Transaction Documents -
UMSI. The execution and delivery of this Agreement and all other Transaction
Documents by UMSI, and the consummation by it of the Transactions have been
duly authorized by all requisite corporate action. This Agreement and the
Transaction Documents which are to be executed and delivered by UMSI, when
executed and delivered pursuant hereto, will constitute the valid and legally
binding obligations of UMSI, enforceable in accordance with their respective
terms (subject to receipt of approval of the Unico Common Holders of this
Agreement and the Plan of Merger). The execution and delivery of this
Agreement and any other Transaction Document does not, and the consummation of
the Transactions will not: (i) require the consent of any third party (other
than the approval of Seller's shareholders of this Agreement and the Plan of
Merger and the consent of BancFirst), (ii) violate any statute or law or any
rule, regulation, order, writ, injunction, arbitration award, or decree of any
Governmental Authority or require any authorization, consent, approval,
exemption or other action by or notice to any Governmental Authority; (iii)
result in the breach of any term or provision of, or constitute a default
under, or result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of any Lien
upon any part of the property of UMSI pursuant to any provision of, any
material contract, indenture, mortgage, lease, license, Lien, or other
agreement or instrument to which UMSI is a party or by which it is bound, or
(iv) violate or conflict with any provision of the bylaws or articles of
incorporation of UMSI as amended to the date of this Agreement.
2.5. Assets and Contract Rights. Seller has no significant assets
other than the UMSI Shares and its contract rights pursuant to this Agreement
and the other Transaction Documents.
2.6. Litigation. Other than as provided in Schedule 2.6 of the Prior
Agreement as updated herewith, there are no actions, suits, investigations,
inquiries or other proceedings with respect to Seller or UMSI involving claims
by or against Seller or UMSI which are pending or threatened against any such
entity, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality regarding Seller's ownership of the UMSI Shares, Seller's
business or UMSI's business.
2.7. Interested Party Transactions. No current or former officer,
director, or shareholder of Seller, or any family member of any such natural
person: (a) is owed or will be owed any debt by UMSI, either directly or
indirectly; (b) is indebted or will be indebted to UMSI; or (c) is, directly or
indirectly, interested in any contract of UMSI or any other entity now owning
or which has owned in the past calendar year any assets of UMSI, other than Mr.
Gerard Bernier, in respect of whom UMSI has executed an employment agreement
and an in connection with a line of credit established for the benefit of UMSI.
2.8. Securities Filings; Statements True.
2.8.1. Seller has timely filed all reports, proxy statements, registration
statements and all similar documents (the "Securities Documents") filed, or
required to be filed, pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended, the
Investment Company Act of 1940, as amended, the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "SEC") promulgated thereunder (collectively,
the "Securities Laws") since January 1, 1995, with the exception of
Seller's annual report on Form 10-K for fiscal year 1997 that was filed
with the SEC on April 16, 1998. Seller has provided to Buyer a true and
complete copy of each Securities Document filed by Seller with the SEC
that Seller was required to file during such period. As of their respective
dates of filing, such Securities Documents complied with the Securities
Laws as then in effect, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.8.2. The consolidated balance sheets of Seller as of December
31, 1997, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) for each of the three years ended December 31, 1997, 1996 and 1995, as
filed by Seller in Securities Documents and the consolidated balance
sheets of Seller (including related notes and schedules, if any) and the
related consolidated statements of income, changes in shareholders' equity and
cash flows (including related notes
and schedules, if any) including in Securities Documents filed by Seller with
respect to periods ended subsequent to December 31, 1997 (collectively, the
"Financial Statements") fairly present or will fairly present, as the case may
be, the consolidated financial position of Seller and UMSI as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity and statements of cash flows for the periods then ended (subject, in the
case of unaudited interim statements, to the absence of notes and to normal
year-end audit adjustments that are not material in amount or effect) in
conformity with U.S. generally accepted accounted principles on a consistent
basis.
2.8.3. No statement, certificate, instrument or other writing
furnished or to be furnished hereunder by Seller or UMSI contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.9 Adverse Change. Since December 31, 1997, Seller and UMSI have not
incurred any liability except as disclosed in the most recent Seller Financial
Statements, or entered into any transactions with affiliates, in each case
other than in the ordinary course of business consistent with past practices,
nor has there been any adverse change or any event involving a prospective
adverse change in the business, financial condition or results of operations of
Seller or of UMSI. All liabilities (including contingent liabilities) of
Seller and UMSI are disclosed in the most recent Financial Statements of Seller
or were incurred in the ordinary course of business since the date of Seller's
most recent Financial Statements.
2.10. Loans. All of the loans on the books of Seller and UMSI are
valid and properly documented, and were made in the ordinary course of
business. Neither the terms of such loans, nor any of the loan documentation,
nor the manner in which such loans have been administered and serviced,
violates any federal, state or local law, rule, regulation or ordinance
applicable thereto. Attached at Schedule 2.10 of the Prior Agreement is (a) a
summary of all outstanding material debt obligations of Seller including the
name and address of each creditor, the outstanding principal and interest owed
as of the date hereof and the material terms of such debt obligation, and (b) a
copy of written evidence from BancFirst that BancFirst will not object to the
Transactions, consents to the acquisition of UMSI by Buyer, releases Seller
from its obligations in regard to its debt to BancFirst and agrees to the
assumption by Buyer of such obligations in regard to the debt of Seller to
BancFirst.
2.11. Taxes. Other than as described on Schedule 2.11 of the Prior
Agreement, Seller and UMSI have timely filed (or requests for extensions have
been timely filed and any such extensions have been granted and have not
expired) all federal, state and local (and, if applicable, foreign) tax returns
required by applicable law to be filed by them and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all taxes required to be paid in respect of the
period covered by such returns and will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all taxes for any subsequent periods ending on or prior to
the Closing Date. Neither Seller nor UMSI will have any liability for any such
taxes in excess of the amounts so paid or reserves or accruals so established.
All federal, state and local (and, if applicable, foreign) tax returns filed by
Seller and UMSI are complete and accurate. Neither Seller nor UMSI is
delinquent in the payment of any tax, assessment or governmental charge.
2.12. Compliance with Laws. Each of Seller and UMSI is in compliance
with all statutes and regulations, and has obtained and maintained all permits,
licenses and registrations applicable to the conduct of its business, and
neither Seller nor UMSI has received notification (a) asserting a violation or
possible violation of any such statute or regulation, (b) threatening to
revoke any permit, license, registration or other government authorization, or
(c) restricting or in any way limiting its operations.
2.13. No Brokers. Neither Seller nor UMSI has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Buyer, Seller or UMSI to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement and the other Transaction Documents
or the consummation of the Transactions, and Seller is not aware of any claim
or basis for any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement and the other Transaction Documents or the consummation of
the Transactions.
2.14. Certain Information. When the proxy statement is mailed, and at
the time of the meeting of Seller's shareholders to vote upon this Agreement
and the Plan of Merger, the proxy statement and all amendments and supplements
thereto, with respect to all information set forth therein provided by Seller,
(a) shall comply with the applicable provisions of the Securities Laws
and (b) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
2.15. Insurance. Set forth in Schedule 2.15 of the Prior Agreement is
a complete list of insurance policies that Seller maintains with respect to
itself and/or UMSI, together with a copy of the declarations page of each such
policy setting forth, with respect to each policy, the amount and type of
coverage, limits and deductibles, inception and expiration dates and insurance
carrier. Such policies are in full force and effect.
2.16 Employees. Set forth in Schedule 2.16 of the Prior Agreement is
an accurate and complete list of the names of all persons employed by UMSI
("Employees") as of its date, together with the following information with
respect to each Employee: base compensation and department. Except as set
forth in Schedule 2.16, neither Seller nor UMSI has promised or agreed to give
any Employee a pay raise or any additional compensation other than with respect
to a review in the ordinary course of business consistent with past practice.
Schedule 2.16 also sets forth the names of all Employees with whom Seller or
UMSI has entered into an employment agreement and/or a non-compete agreement,
as well as the material terms of any such agreement.
2.17 Employee Benefit Plans; ERISA Compliance. With respect to each
employee benefit plan, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and every other fringe
benefit, stock option, bonus, incentive compensation, deferred compensation,
excess, supplemental executive compensation, employee stock purchase, vacation,
sickness or disability, severance or separation, restricted stock or other
employee benefit plan, policy or arrangement, whether written or oral,
maintained or contributed to within the last five years by UMSI or by a Common
Control Entity (as defined below) for the benefit of Employees or former
employees or under which UMSI has or may have any liability or obligation (the
"Benefit Plans") maintained by UMSI or any corporation or other trade or
business under common control with UMSI (as determined under Section 414(b) or
(c) of the Code, a "Common Control Entity"): (i) there is no actual or
contingent liability under Title IV of ERISA or the Code to any person or
entity, including the Pension Benefit Guaranty Corporation, the IRS, any such
plan or the participants (or their beneficiaries) in any such plan; (ii) the
assets of UMSI have not been subject to a lien under ERISA or the Code; and
(iii) there is no basis for such liability or the assertion of any such lien
with respect to the assets of UMSI as the result of or after the consummation
of the transactions contemplated by this Agreement. UMSI and each
Common Control Entity has at all times complied with the continuation of
coverage requirements of Section 601 through 609 of ERISA and Section 4980B of
the Code ("COBRA"). No Benefit Plan provides health, dental, life insurance or
other welfare benefits (whether on an insured or self-insured basis) to
Employees or former employees after their retirement or other ermination of
employment from UMSI (other than continuation coverage required under
COBRA which may be purchased at the sole expense of the employee or former
employee).
2.18. Employee Relations. For the past three years, neither Seller
nor UMSI has engaged in any unfair labor practice with respect to any Employees
or former employees; no unfair labor practice complaint has been brought or is
pending before the National Labor Relations Board with respect to any Employees
or former employees; there has been no labor strike, dispute, slowdown or
stoppage involving any Employees or former employees, nor is there any now
pending or threatened; no representation question has been raised or now exists
respecting Employees or former employees; neither Seller nor UMSI has been
notified of any material grievance, and no arbitration proceeding arising out
of or under any collective bargaining agreement has been brought or is pending
with respect to any Employees or former employees; and neither Seller nor UMSI
has been or is a party to any collective bargaining agreement.
2.19. Suppliers. Except as set forth in Schedule 2.19, no supplier of
the Seller or UMSI has, in the six months prior to the date hereof, given
written notice to Seller or UMSI to cancel or otherwise terminate or reduce, or
given such notice orally or threatened to cancel, terminate or reduce, its
relationship with Seller or UMSI other than in the ordinary course of business
consistent with past experience.
2.20 Environmental Laws. Neither Seller nor USMI has received any
notification that: Hazardous Materials (as defined below) have been generated,
used, treated or stored at, or transported to or from, any real property used
in UMSI's business; Hazardous Materials have been released or disposed of on
any such property; or Seller or UMSI is not in compliance with applicable
Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to any such property, nor have any of the
foregoing events occurred. There are no pending or threatened claims, suits,
demands, investigations, proceedings or other actions relating to any
Environmental Law with respect to any such property. For purposes of this
Agreement, "Environmental Laws" shall mean any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, permit, policy or order now in
effect and in each case as amended to date and any judicial or administrative
interpretation thereof relating to Hazardous Materials, environmental matters,
the protection of public health and safety from environmental or health
concerns or otherwise relating to environmental conditions; and "Hazardous
Materials" shall mean all hazardous substances, wastes, materials or
constituents, solid wastes, special wastes, toxic substances, pollutants,
contaminants, petroleum or petroleum derived substances or wastes, radioactive
materials, urea formaldehyde, polychlorinated biphenyls, radon gas and related
materials, including, without limitation, any such materials defined, listed,
identified under or described in any Environmental Laws.
2.21. No Misrepresentation or Omission. No representation or warranty
by Seller or UMSI in this Section 2 or in any other section of this Agreement,
or in any certificate or other document furnished or to be furnished by Seller
or UMSI pursuant hereto, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which
they were made, not misleading.
2.22. Merger Consideration. Seller represents and warrants that it
shall use the Merger Consideration, after payment of any indebtedness not
assigned to and assumed by Buyer for which the creditor shall also release
Seller from such obligation, to pay a special dividend to the holders of its
common stock, provided, however, that Seller shall not pay any portion of such
Merger Consideration to T.C. Equities, Ltd. with respect to common stock of
Seller held by T.C. Equities, Ltd.
The representations and warranties of Seller and UMSI set forth above (other
than in Sections 2.1., 2.2., 2.3., 2.4. and 2.8.) shall survive the Closing for
a period of three years. The representations and warranties of Seller and UMSI
set forth in Sections 2.1., 2.2., 2.3., 2.4. and 2.8.), and the covenants of
Seller and UMSI set forth herein shall survive the Closing
indefinitely.
3. Representations and Warranties of Buyer. Buyer and Newco each represents
and warrants to Seller as follows:
3.1. Capital Structure, Organization, Standing and Authority. The
authorized capital stock of Buyer consists of 50,000,000 shares of NexGen
Common, par value $0.01 per share, and 1,000,000 shares of preferred stock, par
value $0.001 per share ("NexGen Preferred") of which Buyer has designated two
series, the "Series A Preferred Stock" and the "Series B Preferred Stock." No
other classes of capital stock of Seller are authorized. As of the date
hereof, 3,397,071 shares of NexGen Common, 250,000 shares of Series A Preferred
Stock and 70,000 shares of Series B Preferred Stock are issued and outstanding,
and no other shares of capital stock of Buyer are issued and outstanding. All
outstanding shares of NexGen Common and NexGen Preferred have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth on Schedule 3.1 of the Prior Agreement, Buyer has no Rights authorized,
issued or outstanding with respect to the capital stock of Buyer other than
certain rights with regard to certain financing transactions relating to this
Agreement attached hereto as Schedule 3.1(A). Holders of NexGen Common do not
have preemptive rights. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada. Newco is
a corporation duly incorporated, validly existing and in good standing
under the laws of the Commonwealth of Virginia. Buyer owns all of the issued
and outstanding shares of capital stock of Newco.
3.2. Authorization; Validity and Effect of Transaction Documents. The
execution and delivery of this Agreement and all other Transaction Documents by
each of Buyer and Newco, and the consummation by it of the Transactions, have
been duly authorized by all requisite corporate action. This Agreement
constitutes, and all other Transaction Documents to be executed and delivered
by Buyer, when executed and delivered pursuant hereto, will constitute,
the valid and legally binding obligations of Buyer, enforceable in accordance
with their respective terms. The execution and delivery of this Agreement and
the other Transaction Documents does not, and the consummation of the
Transactions will not, (i) require the consent of any third party, (ii) violate
any statute or law or any rule, regulation, order, writ, injunction,
arbitration award or decree of any Governmental Authority or require any
authorization, consent, approval, exemption or other action by or notice to any
Governmental Authority, (iii) result in the breach of any term or provision of,
or constitute a default under, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or the lapse of time or
both) any obligation under, or result in the creation or imposition of any Lien
upon any part of the property of Buyer pursuant to any provision of, any
material contract, indenture, mortgage, lease, license, Lien, or other
agreement or instrument to which Buyer is a party or by which it is bound, or
(iv) violate or conflict with any provision of the bylaws or articles of
incorporation of Buyer, as amended to the date of this Agreement.
3.3 Investment Intent. Buyer is acquiring the UMSI Shares for Buyer's
own account for investment with no present intention of distributing or
reselling any such Shares with a view to any distribution within the meaning of
the Securities Act, and Buyer will not, directly or indirectly, voluntarily
offer, sell, pledge or otherwise dispose of (or solicit any offers to purchase
or otherwise acquire or take a pledge of) any UMSI Shares, except as
ontemplated by the Pledge Agreement, unless (i) registered pursuant to the
provisions of the Securities Act or (ii) an exemption from registration is
available under the Securities Act.
3.4. Litigation. There are no actions, suits, investigations,
inquiries or other proceedings with respect to Buyer or Newco involving claims
by or against Buyer or Newco which are pending or threatened against any such
entity, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality regarding Buyer's or Newco's business. 3.5 Securities Filings;
Statements True.
3.5.1. Buyer has filed all Securities Documents filed, or required to be
filed, pursuant to the Securities Laws since February 6, 1997 with the
exception of a quarterly report to be filed for the second quarter of 1998
which shall be filed together with its quarterly report for the third quarter
of 1998 with the SEC prior to the Closing. Buyer has provided or will provide
prior to the Closing to Seller a true and complete copy of each Securities
Document filed by Buyer with the SEC that Buyer was required to file during
such period. As of their respective dates of filing, such Securities Documents
complied with the Securities Laws as then in effect, and did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.5.2. The consolidated balance sheet of Buyer as of December 31, 1997, and
the related consolidated statements of income, shareholders' equity and cash
flows (including related notes and schedules, if any) for the year ended
December 31, 1997, as filed by Buyer in Securities Documents and the
consolidated balance sheets of Buyer (including related notes and
schedules, if any) and the related consolidated statements of income, changes
in shareholders' equity and cash flows (including related notes and schedules,
if any) including in Securities Documents filed by Buyer with respect to
periods ended subsequent to December 31, 1997 (collectively, the "Financial
Statements") fairly present or will fairly present, as the case may be,
the consolidated financial position of Buyer as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity and
statements of cash flows for the periods then ended (subject, in the case of
unaudited interim statements, to the absence of notes and to normal
year-end audit adjustments that are not material in amount or effect) in
conformity with U.S. generally accepted accounted principles on a consistent
basis.
3.5.3. No statement, certificate, instrument or other writing furnished or
to be furnished hereunder by Buyer contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.6 Adverse Change. Since December 31, 1997, Buyer has not incurred
any liability except as disclosed in the most recent Buyer Financial
Statements, or entered into any transactions with affiliates, in each case
other than in the ordinary course of business consistent with past practices,
nor has there been any adverse change or any event involving a prospective
adverse change in the business, financial condition or results of operations of
Buyer. All liabilities (including contingent liabilities) of Buyer are
disclosed in the most recent Financial Statements of Buyer or were incurred in
the ordinary course of business since the date of Buyer's most recent Financial
Statements.
3.7. Taxes. Buyer's sole operating subsidiary, Independent News Inc.
("INI"), has timely filed (or requests for extensions have been timely filed
and any such extensions have been granted and have not expired) all federal,
state and local (and, if applicable, foreign) tax returns required by
applicable law to be filed by it and has paid, or where payment is not required
to have been made, has set up an adequate reserve or accrual for the payment
of, all taxes required to be paid in respect of the period covered by such
returns and will have paid, or where payment is not required to have been made,
will have set up an adequate reserve or accrual for the payment of, all taxes
for any subsequent periods ending on or prior to the Closing Date. Buyer
will not have any liability for any such taxes or in excess of the amounts so
paid or reserves or accruals so established. All federal, state and local
(and, if applicable, foreign) tax returns filed by Buyer are complete and
accurate. INI and, to the best of Buyer's knowledge, Buyer are not
delinquent in the payment of any tax, assessment or governmental charge.
3.8. Compliance with Laws. Buyer is in compliance with all statutes
and regulations, and has obtained and maintained all permits, licenses and
registrations applicable to the conduct of its business, and Buyer has not
received notification (a) asserting a violation or possible violation of any
such statute or regulation, (b) threatening to revoke any permit, license,
registration or other government authorization, or (c) restricting or in any
way limiting its operations.
3.9. No Brokers. Buyer has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
Buyer, Seller or UMSI to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement and the other Transaction Documents or the consummation of
the Transactions, and Buyer is not aware of any claim or basis for any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement and the other Transaction Documents or the consummation of the
Transactions.
3.10. Certain Information. When the proxy statement is mailed to
Seller's shareholders, and at the time of the meeting of Seller's shareholders
to vote upon this Agreement and the Plan of Merger, the proxy statement and all
amendments and supplements thereto, with respect to all information set forth
therein provided by Buyer (a) shall comply with the applicable provisions
of the Securities Laws and (b) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
3.11 Material Contracts. Set forth in Schedule 3.11 of the Prior
Agreement is a list of all material contracts entered into by Buyer since
February 6, 1997 other than those agreements and contracts listed on Schedule
3.1(A) hereto. Buyer has furnished to Seller copies of all material contract
listed on Schedule 3.11 of the Prior Agreement prior to the execution of this
Agreement.
a. INI Acquisition. All obligations of Buyer in connection with
its acquisition of the business of its subsidiary INI shall have been fully
performed and no conditions to such acquisition, either precedent or
subsequent, shall remain unsatisfied.
3.12. Employee Relations. Buyer has not engaged in any unfair labor
practice with respect to any Employees or former employees; no unfair labor
practice complaint has been brought or is pending before the National Labor
Relations Board with respect to any Employees or former employees; there has
been no labor strike, dispute, slowdown or stoppage involving
any Employees or former employees, nor is there any now pending or threatened;
no representation question has been raised or now exists respecting Employees
or former employees; Buyer has not been notified of any material grievance, and
no arbitration proceeding arising out of or under any collective bargaining
agreement has been brought or is pending with respect to any Employees or
former employees; and Buyer has not been or is not a party to any
3.14. Suppliers. No supplier of the Buyer has, in the six months
prior to the date hereof, given written notice to Buyer to cancel or otherwise
terminate or reduce, or given such notice orally or threatened to cancel,
terminate or reduce, its relationship with Buyer other than in the ordinary
course of business consistent with past experience.
3.15 Environmental Laws. Buyer has not received any notification
that: Hazardous Materials have been generated, used, treated or stored at, or
transported to or from, any real property used in Buyer's business; Hazardous
Materials have been released or disposed of on any such property; or Buyer is
not in compliance with applicable Environmental Laws and the requirements of
any permits issued under such Environmental Laws with respect to any such
property, nor have any of the foregoing events occurred. There are no pending
or threatened claims, suits, demands, investigations, proceedings or other
actions relating to any Environmental Law with respect to any such property.
3.16. No Misrepresentation or Omission. No representation or warranty
by Buyer in this Section 3 or in any other Section of this Agreement, or in any
certificate or other document furnished or to be furnished by Buyer pursuant
hereto, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading.
The representations and warranties of Buyer and Newco set forth above (other
than in Sections 3.1., 3.2. and 3.5.) shall survive the Closing for a period of
three years. The representations and warranties of Buyer and Newco set forth
in Sections 3.1., 3.2., and 3.5.), and the covenants of Buyer and Newco set
forth herein shall survive the Closing indefinitely.
4. Other Covenants and Agreements.
4.1. Reserved.
4.2. Reserved.
4.3. Reserved.
4.4. Taxes and Expenses.
4.4.1. Seller covenants and agrees to pay any and all taxes on the
transfer to Buyer of the UMSI Shares. Except as otherwise specifically
provided for in this Agreement, Seller will assume and pay all costs,
liabilities and other obligations incurred by Seller in connection with the
performance of and compliance with all Transactions and other agreements
and conditions contained in this Agreement and the other Transaction Documents
to be performed or complied with by Seller, including legal and accounting
fees. To the extent that such costs, together with other cost, liabilities and
other obligations of Seller are not paid by Seller in the ordinary course and
exceed the Debt Pay-Off Consideration, such excess costs shall become an
obligation of the Buyer.
4.4.2. Except as otherwise specifically provided for in this
Agreement, Buyer will assume and pay all costs, liabilities and other
obligations incurred by Buyer in connection with the performance of and
compliance with all Transactions and other agreements and conditions contained
in this Agreement and the other Transaction Documents to be performed or
complied with by Buyer, including legal and accounting fees.
4.5. Proprietary Information.
4.5.1. Seller covenants and represents that from and after the
Closing, Seller and its affiliates will not have any interest in, or claim to,
any patents, trademarks, trade names, service marks, copyrights or applications
therefor, or licenses to use any of the foregoing, or designs, methods,
inventories or know-how related thereto (collectively "Business Property
Rights") owned or held by UMSI, and all such Business Property Rights which are
necessary to, or used in the conduct of UMSI's business, and all knowledge or
information of a confidential nature acquired at or before the Closing Date
with respect to the UMSI and its business will be held in confidence by Seller
and will not be disclosed or made public, except for the benefit of Buyer or
UMSI, or made use of by or through Seller, directly or indirectly.
4.5.2. Seller, on its own behalf and on behalf of its affiliates,
acknowledges that a breach of subsection 4.5.1. hereof would cause irreparable
damage to Buyer, and in the event of Seller's actual or threatened breach of
the provisions of subsection 4.5.1. hereof, Buyer shall be entitled to a
temporary restraining order and an injunction restraining such Seller from
breaching such covenants without the necessity of posting bond or proving
irreparable harm, such being conclusively admitted by Seller. Nothing shall be
construed as prohibiting Buyer from pursuing any other available remedies for
such breach or threatened breach, including the recovery of damages.
4.6. Operation of the Business. Except as contemplated herein or as
otherwise consented to by Buyer in writing, prior to the Closing Seller will,
and will cause UMSI to:
4.6.1. Use its best efforts to keep UMSI intact and not take or permit
to be taken or do or suffer to be done anything other than in the ordinary
course of the business of UMSI as with the business;
4.6.2. Not take any action that could result in the breach of any of
the representations, warranties or covenants of Seller or UMSI pursuant to this
Agreement, or that could cause any of the representations, warranties or
covenants of Seller or UMSI not to be true and correct in all material respects
immediately after such action or on the Closing Date; and
4.6.3. Recommend to the Unico Common Holders to vote in favor of the
Merger which will result in the sale of the UMSI Shares, Seller's sole
significant asset.
4.7. Access for Due Diligence Investigation. To the extent within
Seller's and Buyer's ability and control, each of the parties hereto have
afforded, and until the Closing, shall continue to afford, to the other parties
hereto and their respective representatives (including, without limitation,
directors, officers, employees, investment bankers, accountants, counsel, and
other advisors) full access during normal business hours to all of the assets,
books, and records of such party and such other information with regard to such
party as any other party hereto may from time to time request, and to make
copies of such books, records and other documents and to discuss the business
of such party with such persons (including, without limitation, directors,
officers, employees, accountants, counsel, suppliers, customers and creditors)
as each of the other parties hereto deems necessary or appropriate for making a
due diligence investigation of the other parties hereto. Buyer and Seller
shall coordinate contact with third parties concerning their due diligence
investigations.
4.8. Notification of Certain Events.
4.8.1. Each party shall give prompt notice to the other parties
hereto of (i) the occurrence, or failure to occur, of any event that could
cause any representation or warranty of such party contained in this Agreement
to be untrue or inaccurate at any time from the date hereof to the Closing Date
or which if known as of the date hereof would have been required to be
disclosed to the other parties hereto, and (ii) any failure of such party to
comply with any covenant, condition, or agreement to be complied with or
satisfied by it under this Agreement.
4.8.2. Each party shall give prompt notice to the other parties
hereto of any determination by it that an event described in clause 4.8.1.(i)
or (ii) could reasonably be expected to interfere with the Closing on the
scheduled Closing Date.
4.9. Permits and Consents. Seller and Buyer agree to cooperate and use
their best efforts to obtain any license, permit, authorization or approval (a
"Permit"), and to make any registration, declaration, or filing, required to be
obtained or made with any Governmental Authority or any other person or entity,
to consummate the Transactions. This covenant shall survive the Closing.
4.10. UCC and Lien Searches. Buyer shall, at its sole cost and expense,
obtain copies of written reports of UCC and judgment lien searches in each
jurisdiction in which Seller or UMSI is organized or in which assets thereof
are located, such reports to be dated within ten days of the
Closing Date. Seller and UMSI represent and warrant that all of the assets of
Seller and UMSI are located in Fairfax County, Virginia.
4.11. Seller Shareholder Meeting; Proxy Statement. As promptly as
practicable after the date hereof, Seller shall prepare and file a proxy
statement with the SEC. Buyer will furnish to Seller upon request the
information required to be included in the proxy statement with respect
to the business and affairs of Buyer before it is filed with the SEC. Seller
and Buyer shall use their best efforts in responding to any inquiries
concerning the proxy statement from the SEC prior to mailing such proxy
statement to the Seller's shareholders. Seller shall cause the proxy
statement to be mailed to and call for a vote of its shareholders of record in
accordance with all applicable notice requirements under the Securities Laws
and the Delaware General Corporation Law.
5. Conditions of Closing.
5.1 Buyer's and Seller's Conditions of Closing. The obligation of
Buyer to purchase and pay for the UMSI Shares, and the obligation of Seller to
sell the UMSI Shares shall be subject to and conditioned upon the satisfaction
at the Closing of each of the following conditions:
5.1.1. Any and all Permits from third parties and Governmental
Authorities
required to consummate the Transactions shall have been obtained.
5.1.2. No suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other person shall
have been instituted or threatened which questions the validity or legality of
the Transactions or which could reasonably be expected to adversely affect the
ability of Buyer to consummate such Transactions.
5.1.3. As of the Closing, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the Transactions or
any of them not be consummated as so provided, or imposing any material
conditions on the consummation of such Transactions by Seller or Buyer.
5.1.4. The parties hereto shall have executed and delivered to
the other parties hereto all other Transaction Documents and shall have
received and delivered to the other parties the following documents:
a. Written evidence by Buyer of the consummation of its
acquisition of 100% of the subordinated debt of Seller and the Unico Series C
Preferred, and contemporaneous cancellation of the subordinated debt of Seller
to Buyer and waiver of all rights of the Unico Series C Preferred other than
voting and conversion rights;
b. Written evidence from BancFirst that BancFirst will not
object to the Transactions, consents to the acquisition of UMSI by Buyer,
releases Seller from its obligations in regard to its debt to BancFirst and
agrees to the assumption by Buyer of such obligations in regard to the debt of
Seller to BancFirst;
c. A stock purchase and shareholder agreement between
Messrs. Joel Sens ("Sens") and Gerard Bernier ("Bernier") providing for, among
other things, an agreement between Sens and Bernier concerning the structure of
Buyer's board of directors upon consummation of the Transactions;
d. Employment agreements between Bernier and each of Buyer
and the Surviving Corporation for the appointment of Bernier as CEO of each
such corporation;
e. A consulting agreement between Buyer and Sens providing
for the engagement of Sens as a consultant to Buyer;
f. Stock option agreements between Buyer and each of Sens
and Kenneth Brochin ("Brochin") providing for 150,000 stock options,
exercisable at $0.50 per share for a term of ten years from the date of their
issuance to acquire one share per option of NexGen Common, for each of Sens and
Brochin;
g. A stock purchase agreement among Buyer, Bernier, Gerald
Bomstad ("Bomstad") and Leon Zajdel ("Zajdel") providing for the exchange of
Unico Common of each of Bernier, Bomstad and Zajdel for shares of NexGen
Common;
h. The cancellation of certain indebtedness of the Buyer to
certain shareholders of Buyer, and the cancellation of
certain indebtedness of certain shareholders of Buyer to
Buyer;
i. Evidence of the reservation of 150,000 shares of NexGen
Common by Buyer's board of directors for awards to key employees of Buyer
and/or UMSI by Buyer's board of directors; and
j. Evidence of a restructuring of Buyer's loan from KeyBank
National Association to extend repayment past January 1, 2000, and Buyer shall
undertake its best efforts to reduce substantially the debt prior to maturity.
5.1.5. The shareholders of Seller shall have approved the
Transactions through a shareholder vote.
5.2. Buyer's Conditions of Closing. The obligation of Buyer to purchase
and pay for the UMSI Shares shall be subject to and conditioned upon
the satisfaction at the Closing of each of the following conditions:
5.2.1. All representations and warranties of Seller and UMSI
contained in this Agreement and the other Transaction Documents shall be
true and correct at and as of the Closing Date, Seller shall have
performed all agreements and covenants and satisfied all conditions on its
part required to be performed or satisfied by the Closing Date pursuant to
the terms of this Agreement, and Buyer shall have received a certificate
of the Seller dated the Closing Date to such effect.
5.2.2. Seller shall have delivered to Buyer certificates of each
of Seller's and UMSI's corporate Secretary certifying:
(i) Resolutions of its Board of Directors authorizing execution
and delivery of this Agreement and the other Transaction Documents and the
performance of all Transactions; and
(ii) The incumbency of its officers executing this Agreement
and all other Transaction Documents executed on Seller's behalf.
5.2.3. Seller shall have delivered to Buyer certificates of the
Secretary of State of Delaware and the Virginia Corporation Commission
certifying as of a date reasonably close to the Closing Date that each of
Seller and UMSI, respectively, has filed all required reports, paid all
required fees and taxes, and is, as of such date, in good standing and
authorized to transact business as a domestic corporation.
5.2.4. Seller shall have delivered the stock and minute book of
UMSI and the written resignations, effective on the Closing Date, of all
members of the Board of Directors and duly elected as directors and officers of
UMSI.
5.2.5. Seller shall have delivered to Buyer certificates and
other instruments representing all the UMSI Shares issued and outstanding, duly
endorsed for transfer or accompanied by appropriate stock powers (in either
case executed in blank or in favor of Buyer), together with all other documents
necessary or appropriate to validly transfer the UMSI Shares to Buyer free and
clear of all Liens.
5.2.6. There shall not have occurred any material adverse change in
the business, client relations, operations, properties, prospects, assets or
condition of UMSI, and no event shall have occurred or circumstance shall exist
that has specific application to UMSI (other than general economic or industry
conditions) that could reasonably be expected to result in such a material
adverse change.
5.3. Seller's Conditions of Closing. The obligation of Seller to sell
the UMSI Shares shall be subject to and conditioned upon the satisfaction at
the Closing of each of the following conditions:
5.3.1. All representations and warranties of Buyer contained in
this Agreement and the other Transaction Documents shall be true and correct at
and as of the Closing Date, Buyer shall have performed all agreements and
covenants and satisfied all conditions on its part required to be performed or
satisfied by the Closing Date pursuant to the terms of this Agreement, and
Seller shall have received a certificate of Buyer dated the Closing Date to
such effect.
5.3.2. Buyer shall have delivered to Seller a certificate of its
corporate Secretary certifying:
(i) Resolutions of its Board of Directors authorizing execution
of this Agreement and the execution, performance and delivery of all
agreements, documents and transactions contemplated hereby; and
(ii) The incumbency of its officers executing this Agreement
and all agreements and documents contemplated hereby.
5.3.3. Buyer shall have delivered the Merger Consideration and
the Debt Pay-Off Consideration as provided for in Section 1.2 herein on the
Closing Date, together with satisfactory evidence of the Debt Forgiveness as
provided for in Section 1.2 herein, collectively constituting the Purchase
Price.
5.3.4. Buyer shall have adopted bylaws in the form attached
hereto as Exhibit 5.3.4.
5.3.5. Buyer shall, as soon as practical after the date hereof
but no later than December 31, 1998, enter into a stock purchase agreement, in
satisfaction of Seller's indebtedness to Buyer, and Seller shall issue
1,800,000 shares of UNICO Common to T.C. Equities, Ltd. in satisfaction
thereof.
5.3.6. Seller, Seller's associates and NexGen, as those parties
are defined in that certain Amended and Restated Stock Purchase and Shareholder
Agreement of even date herewith, shall have fully performed each and all of
their obligations set forth in such agreement including, but not limited to,
performance of those specific items set forth in Exhibit C thereto.
6. Miscellaneous.
6.1. Notice. Any notice or other communication required or permitted
hereunder shall be in writing and personally delivered, mailed by registered or
certified mail (return receipt requested and postage prepaid), sent by telegram
(with messenger service specified), sent by telecopier (with a confirming copy
sent by regular mail), or sent by prepaid overnight courier service, and
addressed to the relevant party at its address set forth below, or at such
other address as such party may, by written notice, designate as its address
for purposes of notice hereunder.
(a) If to Buyer, at:
Next Generation Media Corp.
900 North Stafford, Suite 2003
Arlington, VA 22203
Telecopy: (703) 516-9888
With a copy (which shall not constitute
notice) to:
Jonathan P. Graham, Esq.
Williams & Connolly
725 12th Street, N.W.
Washington, D.C. 20005
Telecopy: (202) 434-5029
(b) If to Seller, at:
UNICO, Inc.
8380 Alban Road
Springfield, VA 22150
Telecopy: (703) 913-0425
With a copy (which shall not constitute
notice) to:
Matthew A. Clary III, Esq.
Holland & Knight LLP
3110 Fairfax Park Drive, Suite 900
Falls Church, VA 22042
Telecopy: (703) 645-8610
Notice shall be effective immediately upon personal delivery or telecopy, seven
(7) business days after deposit in the mail, or one (1) business day after
deposit with a telegraph company or overnight courier service.
6.2. Termination.
6.2.1. Right of Termination Without Breach. This Agreement may
be terminated without further liability of any party at any time prior to the
Closing by mutual written agreement of the parties. Without the mutual written
agreement of the parties hereto, this Agreement will terminate on January 31,
1999.
6.2.2. Termination for Breach.
(i) Termination By Buyer. If there has been a material
breach by Seller or UMSI of any of Seller's or UMSI's agreements,
representations or warranties contained in this Agreement which has not been
waived in writing by Buyer, then Buyer may, by written notice to Seller at any
time prior to the Closing that such breach is continuing, terminate this
Agreement with the effect set forth in Section 6.2.2. (iii) hereof.
(ii) Termination By Seller. If there has been a material
breach by Buyer of any of Buyer's agreements, representations or warranties
contained in this Agreement which has not been waived in writing by Seller,
then Seller may, by written notice to Buyer at any time prior to the Closing
that such breach is continuing, terminate this Agreement with the effect set
forth in Section 6.2.2. (iii).
(iii) Effect of Termination. Termination of this Agreement
pursuant to this Section 6.2.2. shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other party
which has breached or failed to perform any of the representations, warranties,
covenants, or agreements of this Agreement prior to termination hereof.
6.3 Disclosures and Announcements. Both the timing and the content of
all disclosures to third parties (other than disclosures to agents acting on
behalf of Buyer or Seller for purposes of conducting their respective due
diligence investigation) and public announcements concerning the transactions
provided for in this Agreement by either Seller or Buyer shall be subject to
the approval of the other in all essential respects until the Closing following
which the specific terms of the Transaction Documents shall remain confidential
between the parties, except to the extent that disclosure of such terms is
required under applicable laws or regulations.
6.4. Further Assurances. Each party will do such acts, and execute and
deliver to any other party such additional documents or instruments as may be
reasonably requested in order to effect the purpose of this Agreement and the
other Transaction Documents and to better assure and confirm unto the
requesting party its rights, powers and remedies hereunder and thereunder.
6.5. Binding Effect; No Assignment. This Agreement and the other
Transaction Documents shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
the foregoing, no party shall assign any of its rights or delegate any of its
obligations under any Transaction Document without the prior written consent of
the other parties thereto, which may be withheld at their respective
discretion.
6.6. Entire Agreement. This Agreement and the other Transaction
Documents constitute the full and entire understanding and agreement among the
parties with regard to their respective subject matters and supersede any and
all prior written or oral agreements, understandings, representations and
warranties made with respect thereto. No amendment, supplement or
modification of this Agreement or any other Transaction Document nor any waiver
of any provision hereof or thereof shall be made except in writing executed by
all parties hereto or thereto.
6.7. Governing Law. THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF VIRGINIA, WITHOUT REGARD
TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
Each of the parties hereto (a) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement will be instituted exclusively in
the state courts of Virginia or in the United States District Court for the
Eastern District of Virginia, (b) waives any objection which such party may
have now or hereafter to the venue of any such suit, action or proceeding, and
(c) irrevocably consents to the jurisdiction of the state courts of Virginia
and the United States District Court for the Eastern District of Virginia in
any such suit, action or proceeding. Each party further agrees to accept and
acknowledge service of any and all process which may be served in any such
suit, action or proceeding in such courts and agrees that service of process
upon such party mailed by certified mail to the party's address specified
pursuant to Section 6.1 will be deemed in every respect effective service of
process upon such party in any such suit, action or proceeding.
6.8. Survival. All representations, warranties, covenants and agreements
made by the parties to this Agreement and the other Transaction Documents shall
survive the execution of this Agreement and the Closing. Notwithstanding any
investigation conducted before the date of this Agreement or the Closing, or
the decision of any party to execute this Agreement or proceed to Closing, each
party shall be entitled to rely on the representations and warranties of the
other party set forth herein or in any other Transaction Document.
6.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
6.10. Interpretation. No provision of this Agreement or any other
Transaction Document shall be interpreted or construed against any party
because that party or its legal representative drafted such provision. The
titles of the paragraphs of this Agreement and other Transaction Documents are
for convenience of reference only and are not to be considered in construing
this Agreement or the relevant Transaction Document. For all purposes of this
Agreement and the other Transaction Documents, unless the context otherwise
requires or as otherwise expressly provided, (a) all defined terms shall
include both the singular and the plural forms thereof; (b)
reference to any gender shall include all other genders; (c) all references to
words such as "herein", "hereof", and the like shall refer to this Agreement as
a whole and not to any particular Article or Section within this Agreement; (d)
the term "include" means "include without limitation"; and (e) the term "or" is
intended to include the term "and/or".
6.11. No Waiver; Remedies Cumulative. No waiver by any party hereto of
any one or more defaults by any other party or parties in the performance of
any of the provisions of this Agreement shall operate or be construed as a
waiver of any future default or defaults, whether of a like or different
nature. No failure or delay on the part of any party in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to any party hereto at law, in equity
or otherwise.
6.12. Incorporation of Exhibits. All exhibits and schedules attached
hereto are by this reference incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
6.13. Severability. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
6.14. Stand Still. Except with the written consent of both Buyer and
Seller, each of the parties hereto, covenants that between the date hereof and
the Effective Time, other than as provided for in the Transaction Documents,
neither it nor any of its subsidiaries shall:
a. carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, or
establish or acquire any new subsidiary or engage in any new activity;
b. declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
c. issue any shares of its capital stock;
d. issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization;
e. amend its articles of incorporation or bylaws; impose or
permit imposition of any lien, charge or encumbrance on any share of stock held
by it in any subsidiary, or permit such lien, charge or encumbrance to exist;
or waive or release any material right or cancel or compromise any debt or
claim, in each case other than in the ordinary course of business;
f. merge with any other entity or permit any other entity to
merge into it, or consolidate with any other entity; acquire control over any
other entity; or liquidate, sell or otherwise dispose of any assets or acquire
any assets, other than in the ordinary course of its business consistent with
past practices;
g. fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business;
h. increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus to, or provide any
other employee benefit or incentive to, any of its directors, officers or
employees;
i. enter into any material agreement, arrangement or commitment
not made in the ordinary course of business;
j. dispose of any material assets other than in the ordinary
course of business; or
k. agree to do any of the foregoing.
6.15 Execution Date.
6.15.1 Seller acknowledges that, pursuant to the Prior Agreement, Buyer has
made advances to Seller in the amount of $175,500 for working capital,
payment of creditors and other purposes. Seller and Buyer agree that on
the Closing Date, Buyer shall forgive this indebtedness to Seller and such
forgiveness of indebtedness shall be included in the Purchase Price.
6.15.2 Seller acknowledges that, in addition to the advances made pursuant to
Section 6.15.1 hereof, Buyer has made advances to Seller in the amount of
$170,000 for working capital, payment of creditors and other purposes
since the execution of the Prior Agreement. Seller shall enter into a stock
purchase agreement as soon as practical after the date hereof and on or
before December 31, 1998, whereby, in satisfaction of this obligation to
Buyer and in consideration of Buyer's obligation to make certain other
advances to Seller on or before December 31, 1998, Seller shall sell
1,800,000 shares of Unico Common to T.C. Equities, Ltd.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first set forth above.
NEXT GENERATION MEDIA
CORP. (BUYER)
By:___________________________
Lawrence Grimes
President
UNITED MARKETING MERGER
CORP. (NEWCO)
By:___________________________
Lawrence Grimes
President
UNICO, INC. (SELLER)
By:___________________________
Shane H. Sutton
President
UNITED MARKETING SOLUTIONS INC.
(UMSI)
By:___________________________
Gerard Bernier
President
ANNEX A
PLAN OF MERGER
OF
UNITED MERGER INC.
WITH AND INTO
UNITED MARKETING SOLUTIONS INC.
Section 1. Corporations Proposing to Merger and Surviving Corporation.
United Marketing Merger Corp., a Virginia corporation ("Newco") shall be merged
(the "Merger") with and into United Marketing Solutions Inc., a Virginia
corporation ("UMSI"), pursuant to the terms and conditions of this Plan of
Merger and of the Amended and Restated Stock Purchase Agreement dated as of
December __, 1998 (the "Agreement"), by and among Next Generation Media Corp.,
a Nevada Corporation and parent corporation of Newco ("Buyer"), Unico Inc., a
Delaware corporation and parent corporation of UMSI ("Seller"), UMSI and Newco.
The effective time for the Merger (the "Effective Time") shall be set forth in
the Articles of Merger to be filed with the Clerk of the State Corporation
Commission of the Commonwealth of Virginia. UMSI shall continue as the
surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of Newco shall cease.
Section 2. Effects of the Merger. The Merger shall have the effect
set forth in section 13.1-721 of the Virginia Stock Corporation Act (the
"VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of UMSI as in effect immediately prior to the
Effective Time shall remain in effect as the Articles of Incorporation and
Bylaws of the Surviving Corporation following the Effective Time until changed
in accordance with their terms and the VSCA.
Section 4. Conversion of Shares. At the Effective Time, each share of
the common stock of UMSI issued and outstanding immediately prior to the
Effective Time shall continue to be issued and outstanding, and each share of
the common stock of Newco issued and outstanding immediately prior to the
Effective Time shall cease to continue to be issued and outstanding.
Section 5. Merger Consideration. The merger consideration shall be
paid in the form of (a) $172,664.50 in cash (the "Merger Consideration") which
is equal to $0.10 multiplied by the number of shares of Unico Common Stock, par
value $0.01 per share ("Unico Common") held by the holders of Unico Common
("Unico Common Holders") other than either T.C. Equities Ltd. or Next
Generation Media Corp., (b) forgiveness of indebtedness in the amount of
$175,500.00 owed by Seller to Buyer pursuant to Section 6.15.1 hereof (the
"Debt Forgiveness"), and (c) $164,000.00 cash (the "Debt Pay-Off
Consideration") for the payment of debts of Seller to the extent that creditors
of Seller (other than BancFirst, an Oklahoma banking corporation) do not
consent to the assignment of such debt by Seller, the assumption of such debt
by Buyer and the release of Seller in respect of such debt by such creditor.
The Debt Pay-Off Consideration shall be paid to extinguish any unassigned debt
obligations of Unico to permit a special dividend of the Merger Consideration
to the Unico Common Stock Holders other than either T.C. Equities Ltd. or Next
Generation Media Corp.
Section 6. Amendment. At any time before the Effective Time, this
Plan of Merger may be amended, provided that: (i) any such amendment is
approved by the Board of Directors of UMSI and Newco; and (ii) no such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of UMSI and the shareholders of Seller shall have any of the
effects specified in section 13.1-718.1 of the VSCA without the approval of the
shareholders affected thereby.
[SIGNATURES APPEAR ON NEXT PAGE]
The undersigned, Presidents of each of UMSI and Newco, declare that the
facts herein stated are true as of _________________, 1998.
UNITED MARKETING SOLUTIONS INC.
By:___________________________________
Name: Gerard Bernier
Title: President
UNITED MARKETING MERGER CORP.
By:___________________________________
Name: Lawrence Grimes
Title: President
APPENDIX B
Existing Bylaw Provision
Section 3.16. Consent of Stockholders in Lieu of Meeting. The Stockholders
may take any action which they could take at any annual or special meeting
without a meeting, prior notice and a vote only if all of the holders of
outstanding stock sign a unanimous consent in writing, setting forth the
action taken.
Proposed Bylaw Provision
Section 3.16. Consent of Stockholders in Lieu of Meeting. The Stockholders
may tan any action which they could take at any annual or special meeting
without a meeting, prior notice and a vote, if the holders of outstanding stock
having not less than the minimum votes necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, sign a consent in writing, setting forth the action.
WAS1-392126
UNICO, INC.
8380 ALBAN ROAD
SPRINGFIELD, VIRGINIA 22150
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Phil Trigg proxy of the undersigned, with full
power of substitution, to represent and to vote, as designed hereby, all shares
of shares of UNICO, Inc. held of record by the undersigned on December 31,
1998 at the adjouned Annual Meeting of Stockholders to be held on January 29,
1999.
Name of Stockholder Date:_________________________
TOTAL SHARES SIGNATURE:____________________
SIGNATURE IF JOINTLY HELD:____________________
Please sign exactly as name or names appear to the left. When
signing as Trustee, Executor, Administrator, Officer of a Corporation
or Partner of a Partnership, give title as such.
PLEASE VOTE. YOU MUST SIGN, DATE AND RETURN YOUR PROXY FOR IT TO BE VOTED.
__________________________________________________________________________
THIS PROXY WHEN PROPERLY EXECTED WILL BE VOTED AS SPECIFIED BELOW. IF
EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
FOLLOWING PROPOSALS.
The Board of Directors recommends a vote for the following proposals:
1. To vote for the UMSI Stock Sale
FOR_____ AGAINST_____ ABSTAIN_____
2. To vote for the amendment to the Company's Bylaws
FOR_____ AGAINST_____ ABSTAIN______
Please mark, sign and date (on the other side), and return this Proxy
card promplty, using the enclosed envelope.
UNICO, INC.
8389 ALBAN ROAD
SPRINGFIELD, VIRGINIA 22150
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Phil Trigg proxy of the
undersigned, with full power of substitution, to represent and to
vote, as designed hereby, all shares of UNICO, Inc. held of
record by the undersigned on December 31, 1998 at the adjourned
Annual Meeting of Stockholders to be held on January 29, 1999.
Name of Stockholder Date:_____________________
TOTAL SHARES Signature:_____________________
Signature if jointly held:_____________________
Please sign exactly as name or names appear to the left. When
signing as Trustee, Executor, Administrator, Officer of a
Corporation or Partner of a Partnership, give title as such.
PLEASE VOTE. YOU MUST SIGN, DATE AND RETURN YOUR PROXY FOR IT TO
BE VOTED.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED
BELOW. IF EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE FOLLOWING PROPOSALS.
The Board of Directors recommends a vote for the following
proposals:
1. To vote for UMSI Stock Sale
FOR_____________ AGAINST______________ ABSTAIN__________
2. To vote for the amendment to the Company's Bylaws
FOR_____________ AGAINST______________ ABSTAIN__________
Please mark, sign and date (on the other side), and return this
Proxy card promptly, using the enclosed envelope.