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 (Amendment No. )
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 AMERICAN CORPORATION
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(Name of Registrant as Specified in Its Charter)
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Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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UNICO AMERICAN CORPORATION
23251 Mulholland Drive
Woodland Hills, California 91364-2732
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Friday, June 1, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of shareholders of Unico
American Corporation (the "Company") to be held at the Woodland Hills Hilton and
Towers at Warner Center, 6360 Canoga Avenue, Woodland Hills, California 91367,
at 2:00 p.m. local time, to consider and act upon the following matters:
1. The election of seven (7) directors to hold office until the next annual
meeting of shareholders and thereafter until their successors are
elected and qualified; and
2. The transaction of such other business as may properly be brought before
the meeting.
The Board of Directors has fixed the close of business on April 13, 2001, as the
record date for the determination of shareholders who will be entitled to notice
of and to vote at the meeting. The voting rights of the shareholders are
described in the Proxy Statement.
IT IS IMPORTANT THAT ALL SHAREHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
SHAREHOLDERS WHO DO NOT PLAN TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
VOTE, DATE, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID AND
ADDRESSED RETURN ENVELOPE. PROXIES ARE REVOCABLE AT ANY TIME, AND SHAREHOLDERS
WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON IF
THEY SO DESIRE.
By Order of the Board of Directors,
/s/ Erwin Cheldin
-----------------
Erwin Cheldin
Chairman of the Board, President, and
Chief Executive Officer
Woodland Hills, California
April 17, 2001
10
UNICO AMERICAN CORPORATION
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
June 1, 2001
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Unico American Corporation, a Nevada corporation
(the "Company"), for use at the Annual Meeting of Shareholders of the Company to
be held at the Woodland Hills Hilton and Towers at Warner Center, 6360 Canoga
Avenue, Woodland Hills, California 91367 on June 1, 2001, 2:00 p.m. local time.
Accompanying this Proxy Statement is a proxy card, which you may use to indicate
your vote as to each of the proposals described in this Proxy Statement.
All proxies which are properly completed, signed, and returned to the Company
prior to the Annual Meeting, and which have not been revoked, will be voted. A
shareholder may revoke his or her proxy at any time before it is voted either by
filing with the Secretary of the Company at its principal executive offices a
written notice of revocation or a duly executed proxy bearing a later date, or
by appearing in person at the Annual Meeting and expressing a desire to vote his
or her shares in person.
The close of business on April 13, 2001, has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof. As of the record date, the Company
had outstanding 5,453,219 shares of common stock, the only outstanding voting
securities of the Company. For each share held on the record date, a shareholder
is entitled to one vote on all matters to be considered at the Annual Meeting.
The Company's Articles of Incorporation do not provide for cumulative voting.
Directors are elected by a plurality of the votes cast and abstentions and
broker non-votes are counted for the purposes of determining the existence of a
quorum at the meeting, but not for purposes of determining the results of the
vote.
The Company will bear the cost of the Annual Meeting and the cost of soliciting
proxies, including the cost of preparing, assembling and mailing the proxy
material. In addition to solicitation by mail, officers and other employees of
the Company may solicit proxies by telephone, facsimile, or personal contact
without additional compensation.
The Company's principal executive offices are located at 23251 Mulholland Drive,
Woodland Hills, California 91364-2732. The approximate mailing date of this
Proxy Statement and the Company's proxy card is April 20, 2001.
ELECTION OF DIRECTORS
The Company's By-Laws provide for a range of three to eleven directors and allow
the Board of Directors to set the exact number of authorized directors within
that range. The current number of authorized directors established by the Board
of Directors is eight (8). There is a vacancy on the Board of Directors and the
Board has determined not to nominate any person to fill such vacancy at this
time. Directors are elected at each Annual Meeting of Shareholders to serve
thereafter until their successors have been duly elected and qualified. Except
for Messieurs Orloff and Urfrig, each nominee is currently a director, having
served in that capacity since the date indicated in the following table. All
nominees have advised the Company that they are able and willing to serve as
directors. If any nominee refuses or is unable to serve (an event which is not
anticipated), the persons named in the accompanying proxy card will vote for
another person nominated by the Board of Directors, provided, however, that the
proxies cannot be voted for a greater number of persons than 7. Unless otherwise
directed in the accompanying proxy card, the persons named therein will vote FOR
the election of the seven nominees listed in the following table.
1
The following table provides certain information as of April 13, 2001, for each
person named for election as a director, which includes all executive officers
of the Company:
First
Present Position with Company or Elected
Name Age Principal Occupation and Prior History Director
- ----- --- -------------------------------------- --------
Erwin Cheldin 69 President, Chief Executive Officer and
Director since 1969. Chairman of the
Board since 1987. 1969
Cary L. Cheldin 44 Executive Vice President since 1991.
Vice President 1986 to 1991 and
Secretary 1987 to 1991. 1983
Lester A. Aaron, CPA 55 Treasurer and Chief Financial Officer
since 1985. Secretary 1991 to 1992. 1985
George C. Gilpatrick 56 Vice President, Management Information
Systems, since 1981. Secretary since 1992. 1985
David A. Lewis, CPCU 79 Director. Retired insurance executive with
over 40 years insurance experience. The
last 27 years were with the Transamerica
group of insurance companies. 1989
Warren D. Orloff 66 Retired actuary with over 40 years
experience specializing in retirement
plans. From 1990 until retiring in
1997, he was an independent actuarial
consultant for pension administration
firms. He is a Fellow of Society of
Actuaries, Fellow of Conference of
Consulting Actuaries, and member of
Academy of Actuaries
Donald B. Urfrig 59 Consulting engineer in the areas of
project management and integrated
product development since 1996. In
addition, he is also a private
investor and owner of commercial and
agricultural businesses for past 30
years. From 1963 to 1996 worked in
the aerospace industry in both
technical and management positions.
Except for Cary Cheldin, who is the son of Erwin Cheldin, none of the executive
officers or directors of the Company are related to any other officer or
director of the Company. The executive officers of the Company are elected by
the Board of Directors and except for Cary Cheldin, all serve at the pleasure of
the Board. Cary Cheldin serves pursuant to an employment agreement with the
Company having a term expiring December 1, 2001. Cary Cheldin's employment
agreement, as amended, provides for a base salary of $330,000 per year with no
required cost of living adjustments and a mandatory bonus if the Company's net
income before taxes for any calendar year is equal to or greater than
$4,000,000. However, the Board of Directors may in its discretion decrease the
amount of his mandatory bonus.
During the year ended December 31, 2000, the Company's Board of Directors held
two meetings at which all directors were present. Non-management directors
receive $1,000 for each board meeting they attend. All incumbent directors
attended 75% or more of the combined total meetings of the Board of Directors
and the committees on which they served.
The Board of Directors has established an Audit Committee presently consisting
of David A. Lewis, David E. Driscoll and Lester A. Aaron. The Audit Committee of
the Board of Directors is responsible for coordinating matters with the outside
independent auditors and reviewing internal and external accounting controls.
The Audit Committee held two meeting subsequent to the year ended December 31,
2000, to discuss accounting and financial statement matters related to the year
ended December 31, 2000. Mr. Lewis is independent as defined in the rules of
National Association of Securities Dealers ("NASD") listing standards. Messrs.
Driscoll and Aaron are not independent as defined in such rules. Mr. Driscoll is
not standing for re-election as a Director at the Annual Meeting of Shareholders
and, following the meeting, he will no longer be a member of the Audit
Committee. It is presently contemplated that following the Annual Meeting of
Shareholders and the election of Messrs. Orloff and Urfrig as Directors, both of
whom are independent as defined in the rules of the NASD listing standards, that
the Audit Committee will be reconstituted so that it consists of Messrs. Orloff,
Urfrig and Lewis, all of whom are independent as defined in the rules of the
NASD listing standards.
2
The Board of Directors has also established a Compensation Committee presently
consisting of Messieurs Cary Cheldin, Aaron and Driscoll. This Committee
considers and recommends to the Board of Directors compensation for executive
officers. The Compensation Committee held one meeting during the year ended
December 31, 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 13, 2001, the names and holdings of
all persons who are known by the Company to own beneficially more than 5% of its
outstanding common stock, its only class of outstanding voting securities, and
the beneficial ownership of such securities held by each Director, nominee for
Director, and all Executive Officers and Directors as a group. Unless otherwise
indicated, the Company believes that each of the persons and entities set forth
below has the sole power to vote and dispose of the shares listed opposite his
or its name.
Amount Beneficially Owned
-------------------------
(1) (1)
Options Percent
Without Currently Of
Name of Beneficial Owner Options Exercisable Total Class
- ------------------------ ------- ----------- ----- -----
Certain Beneficial Owners
- -------------------------
Erwin Cheldin 2,293,969 0 2,293,969 42.1%
23251 Mulholland Drive
Woodland Hills, CA 91364
Dimensional Fund Advisors, Inc. 482,800 (2) 0 482,800 8.9%
1299 Ocean Avenue
Santa Monica, CA 90401
General Re Corporation 432,092 (3) 0 432,092 7.9%
695 East Main Street
Stamford, CT 06904
Wellington Management Co., LLP 425,000 (4) 0 425,000 7.8%
75 State Street
Boston, MA 02109
FMR Corp 309,000 (5) 0 309,000 5.7%
82 Devonshire Street
Boston, MA 02109
Executive Officers, Directors, and Nominees for Director
- --------------------------------------------------------
Erwin Cheldin 2,293,969 0 2,293,969 42.1%
Cary L. Cheldin 202,760 0 202,760 3.7%
Lester A. Aaron 128,504 45,000 173,504 3.2%
George C. Gilpatrick 124,057 14,860 138,917 2.5%
David A. Lewis 3,000 0 3,000 0.1%
David E. Driscoll (6) 0 0 0 0.0%
Warren D. Orloff (7) 0 0 0 0.0%
Donald B. Urfrig (7) 20,000 0 20,000 0.4%
All executive officers &
directors as a group (6 persons) 2,752,290 59,860 2,812,150 51.0%
1. Includes for each person or group, shares issuable upon exercise of
presently exercisable options or options exercisable within 60 days,
held by such person or group.
2. Per Schedule 13G dated February 2, 2001.
3. Per Schedule 13G dated April 25, 1997.
4. Per Schedule 13G dated February 14, 2001. Of the 425,000 shares
beneficially owned, Wellington Management Company, LLP has no sole
voting power over the shares, shared voting power over 425,000 shares,
and shared power to dispose or to direct the disposition of 425,000
shares.
5. Per Schedule 13G dated February 14, 2000. Of the 309,000 shares
beneficially owned, FRM Corp. has no sole voting power over the
shares, no shared voting power over the shares, and sole power to
dispose or to direct the disposition of 309,000 shares.
6. Mr. Driscoll is not standing for reelection.
7. Nominee for Director.
3
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Executive Compensation
- ---------------------------------
The following table sets forth information for year ended December 31, 2000,
1999, and 1998 as to executive compensation paid to the chief executive officer
and the other four most highly-compensated executive officers of the Company for
the year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------- All Other
Salary Bonus Compensation (1)
Name and Principal Position Year ($) ($) ($)
- --------------------------- ---- --- --- ---
Erwin Cheldin 2000 431,375 - 30,000
President, Chief Executive 1999 431,375 50,000 30,000
Officer and Chairman of the 1998 431,375 50,000 24,000
Board
Cary L. Cheldin 2000 330,000 32,500 30,000
Executive Vice President 1999 330,000 65,000 30,000
1998 330,000 65,000 24,000
Lester A. Aaron 2000 170,000 40,000 30,000
Treasurer and Chief 1999 160,000 45,000 30,000
Financial Officer 1998 160,000 33,000 24,000
George C. Gilpatrick 2000 165,000 40,000 30,000
Vice President and 1999 159,355 45,000 30,000
Secretary 1998 159,355 45,000 24,000
Roger H. Platten (2) 2000 186,489 30,000 30,000
Vice President 1999 191,633 60,000 30,000
(through 12-21-00) 1998 175,000 60,000 24,000
(1) Represents amounts contributed or accrued to the person's account under the
Company's Profit Sharing Plan, and for 1999 and 2000, the Company's Money
Purchase Plan, all of which is vested. During 1999 and 2000, the amount
contributed to each executive officer's account under the Profit Sharing
Plan and Money Purchase Plan was $24,000 and $6,000, respectively. The
Company's Profit Sharing Plan and Money Purchase Plan have a March 31
fiscal year end. See "Retirement Plans."
(2) Mr. Platten resigned as an officer and director of the Company effective
December 21, 2000. In connection with his resignation, he entered into a
new employment agreement with the Company pursuant to which he is to render
services through December 31, 2001, for an annual base salary of $200,000
plus a guaranteed bonus of $30,000. In addition, in January 2001, the
Company purchased from Mr. Platten 65,000 shares of common stock of the
Company owned by him for an aggregate purchase price of $422,500.
Option / SAR Grants in Last Fiscal Year
- ---------------------------------------
No stock options or stock appreciation rights were granted to any executive
officer during the year ended December 31, 2000.
Stock Plans
- -----------
Incentive Stock Option Plan
---------------------------
On March 29, 1985, the Board of Directors unanimously adopted the Unico American
Employee Incentive Stock Option Plan (the "1985 Plan"), which was approved by
the shareholders of the Company in January 1986. The 1985 Plan provides for the
grant of "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986 to key employees of the Company (including officers,
whether or not they are directors of the Company) and its subsidiaries.
Directors who are not also employees of the Company are not eligible to
participate in the 1985 Plan. The 1985 Plan includes an aggregate of 1,500,000
of the Company's Common Stock. The 1985 Plan expired in March 1995, and as of
December 31, 1997, there were no options available for
4
future grant. Under the terms of the Plan, options were required to be granted
at exercise prices of not less than 100% of the fair market value of the Common
Stock on the date the option was granted. In the case of grants of options to
employees owning over 10% of the voting stock of the Company, the exercise price
was required to be not less than 110% of the fair market value of the Common
Stock on the date of grant. The 1985 Plan is administered by the Board of
Directors or a committee thereof, which had the authority to determine the
optionees, the number of shares to be covered by each option, the time during
which each option is exercisable and certain other terms of the options. An
option may not be exercised later than 10 years from the date of grant and may
sooner expire upon, among other things, the death, disability or other
termination of the employment of the optionee by the Company. Options granted to
employees owning over 10% of the voting stock of the Company could not be
exercised later than five years from the date of grant.
1999 Omnibus Stock Plan
-----------------------
The Company's 1999 Omnibus Stock Plan (the "1999 Plan") that covers 500,000
shares of the Company's common stock (subject to adjustment in the case of stock
splits, reverse stock splits, stock dividends, etc.) was adopted by the Board of
Directors in March 1999 and approved by shareholders on June 4, 1999. The 1999
Plan is divided into a Stock Option Program under which eligible persons may be
granted options to purchase shares of common stock, a Stock Appreciation Program
under which eligible persons may be granted the right to receive a payment in
the form of cash, stock or a combination of the foregoing and a Restricted Stock
Program under which eligible persons may be issued shares of common stock
directly either through an immediate purchase or as a bonus. The 1999 Plan and
each Program is administered by the Board of Directors or a committee authorized
by the Board and consisting of at least two directors each of whom is not an
officer or employee of the Company and meets the qualifications set forth in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
Presently, the 1999 Plan is being administered by the Board of Directors.
Employees, consultants, advisors and directors of the Company are eligible to
participate in the 1999 Plan. However, only employees are entitled to receive
"incentive stock options" (as provided in Section 422 of the Internal Revenue
Code of 1986, as amended) under the Stock Option Program. Under the Stock Option
Program, both incentive stock options and options which do not qualify as
incentive stock options may be granted. The term of an option may not exceed ten
years (or five years in the case of the grant of an incentive stock option to a
holder of more than ten percent (10%) of the outstanding common stock). The
exercise price per share of common stock under an option may not be less than
the fair market value of the common stock on the date of the option grant. In
the case of the grant of an incentive stock option to a holder of more than 10%
of the outstanding common stock, the exercise price may not be less than 110% of
the fair market value of the common stock on the date of the option grant. Under
the Stock Appreciation Program, stock appreciation rights may be granted
separately or in tandem with a stock option. Stock appreciation rights entitle
the holder thereof to receive upon exercise of such right without payment to the
Company an amount which is not greater than the fair market value of a share of
common stock on the date of exercise of the stock appreciation right over the
fair market value of a share of common stock on the date of grant of the stock
appreciation right. Under the Restricted Stock Program, the Company may issue
shares of its common stock directly to eligible persons for consideration
consisting of cash, notes or past services rendered by the recipient. The
purchase price of the shares may not be less than the fair market value of the
Company's common stock on the date of issue. If a recipient terminates his or
her employment or other arrangements with the Company before the shares are
fully vested, then the recipient is required to surrender to the Company for
cancellation all unvested shares and the Company must repay the recipient cash
or cash equivalent consideration paid by him or her for those unvested shares
and cancel the unpaid principal balance, if any, on any promissory notes
attributable to surrender the shares.
In the event of a Change of Control Event as defined in the 1999 Plan, all
unvested options, stock appreciation rights and restricted stock issuances will
immediately become exercisable or vest, as the case may be. The 1999 Plan
administrator may override the acceleration of these rights either in the
agreement setting forth those rights or prior to the Change of Control Event. A
Change of Control Event occurs if (1) more than twenty percent (20%) of the
Company's common stock or combined voting power is acquired by a person or
entity other than Mr. Erwin Cheldin, the Company or an Employee Benefit Plan of
the Company, but not including any acquisition directly from the Company; (b) a
majority of the Company's Board of Directors ceases to consist of the present
directors or persons whose election or nomination was approved by a majority of
the then incumbent Board of Directors (excluding any director who assumes his or
her position as a result of an actual or threatened proxy contest); (c) the
Company is reorganized, merged or consolidated into another entity; or (d) the
shareholders approve the liquidation or dissolution of the Company or the sale
of all or substantially all of its assets; unless with respect to (c) or (d),
after the event more than eighty percent (80%) of the common stock or the
outstanding voting securities
5
of the Company, the surviving company or the company that purchases the
Company's assets is still held by persons who were formerly the shareholders of
the Company, and no person or entity other than Mr. Erwin Cheldin, the Company,
any employee benefit plan of the Company or the resulting company or a twenty
percent (20%) shareholder prior to the transaction holds more then twenty
percent (20%) of such company's common stock or combined voting power.
All outstanding options, stock appreciation rights and/or unvested stock
issuances under the 1999 Plan will terminate upon consummation of (a) a
dissolution of the Company, or (b) in case no provision has been made for the
survival, substitution, exchange or other settlement of any outstanding option,
stock appreciation rights and/or unvested stock issuances, a merger or
consolidation of the Company with another corporation in which the shareholders
of the Company immediately prior to the merger will own less than a majority of
the outstanding voting securities of the surviving corporation after the merger,
or a sale of all or substantially all of the assets and business of the Company
to another corporation.
AGGREGATED OPTION / SAR EXERCISED IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Shares Options/SARs Options/SARs
Acquired At Fiscal Year End (#) At Fiscal Year End ($) (1)
on Value ---------------------- --------------------------
Exercise Realized Exercisable/ Exerciable/
Name (#) ($) Unexercisable Unexercisable
- ---- --- --- ------------- -------------
Erwin Cheldin 0 0 0 0 0 0
Cary L. Cheldin 0 0 0 0 0 0
Lester A. Aaron 0 0 45,000 0 106,875 0
George C. Gilpatrick 30,140 124,328 14,860 0 35,293 0
(1) Difference between fair market value of $5.875 per share, the closing price
of the Company's common stock on the National Market System of the NASDAQ
Stock Market on December 31, 2000, and the exercise price of the options.
The exercise price of all outstanding options is equal to the fair market
value of the common stock as of the date of grant of each option.
Retirement Plans
- ----------------
Profit Sharing Plan
-------------------
During the fiscal year ended March 31, 1986, the Company adopted the Unico
American Corporation Profit Sharing Plan. Company employees who are at least 21
years of age and have been employed by the Company for at least two years are
participants in such Plan. Pursuant to the terms of such Plan, the Company
annually contributes for the account of each participant an amount equal to a
percentage of the participant's eligible compensation as determined by the Board
of Directors. Participants must be employed by the Company on the last day of
the plan year to be eligible for contribution. Participants are entitled to
receive distribution of benefits under the Plan upon retirement, termination of
employment, death or disability.
Money Purchase Plan
-------------------
During the year ended December 31, 1999, the Company adopted the Unico American
Corporation Money Purchase Plan. This plan covers the present executive officers
of the Company; namely Lester A. Aaron, Cary L. Cheldin, Erwin Cheldin, and
George C. Gilpatrick. The plan also covers Roger H. Platten, a current employee
and former executive officer of the Company, for the plan year ending March 31,
2001. Pursuant to the terms of such Plan, the Company annually contributes for
the account of each participant an amount equal to a percentage of the
participant's eligible compensation as determined by the Board of Directors.
However, amounts contributed to the Unico American Corporation Profit Sharing
Plan will be considered first in determining the actual amount available under
the Internal Revenue Service maximum contribution limits. Participants must be
employed by the Company on the last day of the plan year to be eligible for
contribution. Participants are entitled to receive distribution of benefits
under the Plan upon retirement, termination of employment, death or disability.
6
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
- -----------------------------------------------
The Compensation Committee consists of the following Company directors: Cary L.
Cheldin, Lester A. Aaron and David E. Driscoll. Cary Cheldin is the son of Erwin
Cheldin, the President, Chief Executive Officer and Chairman of the Board.
During the year ended December 31, 2000, Cary Cheldin was the Executive Vice
President of the Company and Mr. Aaron was Treasurer and Chief Financial Officer
of the Company. Mr. Driscoll is a partner in the law firm of Driscoll &
Reynolds, which has rendered legal services to the Company during the year ended
December 31, 2000, and has been retained to render legal services in the current
year.
Executive Compensation Committee Report
- ---------------------------------------
The Company's compensation package for executive officers primarily consists of
a base salary, an annual incentive bonus, long-term incentive or non-cash awards
in the form of stock options, and contributions under the Profit Sharing and
Money Purchase Plans. The executive compensation program is designed to retain
and reward individuals who are capable of leading the Company in achieving its
business objectives. The Compensation Committee submits its recommendation to
the entire Board of Directors. The philosophy of the Compensation Committee is
to maintain a competitive base salary for executive officers and to provide an
incentive program that rewards executive officers for achieving certain
financial results. Base compensation is determined on a calendar year basis and
other incentives are determined when deemed appropriate.
When determining base compensation for the executive officers, the Committee
takes into account competitive pay levels in the industry with its emphasis on
the median of the survey data. The Committee recommends adjustments to base
compensation when it determines that an executive officer's base compensation is
not competitive.
When determining bonuses for the executive officers, the Committee first
evaluates, and gives primary weight to, the operational and financial
performance of the executive management team, including the chief executive
officer, as a group. After the team results are determined, individual
effectiveness in contributing to the achievement of those results is considered.
The financial results, which are reviewed by the Committee, include the
Company's net income, revenues and expenses.
The Committee's base compensation review determined that the base salary for the
chief executive officer was competitive with that of others in the industry. The
Committee recommended that the chief executive officer receive no change in base
compensation for the calendar years 2000 and 1999.
The Committee's bonus review considered and evaluated the decrease in earnings
and revenues since December 31, 1999, and determined that although the chief
executive officer contributed to maintaining profitable business for the Company
in an intensely competitive marketplace, no bonus should be paid to him for the
year ended December 31, 2000. The committee also recommended that the aggregate
bonuses paid to all other executive officers (excluding Roger Platten who
resigned as an officer and director effective December 21, 2000) for the year
ended December 31, 2000, be decreased 25% to 30%.
Section 162(m) of the Internal Revenue Code, enacted as part of the Omnibus
Budget Reconciliation Act of 1993 ("OBRA"), limits to $1,000,000 the
deductibility for any year beginning after December 31, 1993, of compensation
paid by a public corporation to the chief executive officer and the next four
most highly compensated executive officers unless such compensation is
performance-based within the meaning of Section 162(m) and the regulations
thereunder. For the year ended December 31, 2000, the Company does not
contemplate that there will be nondeductible compensation for the five Company
positions in question.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Cary L. Cheldin
Lester A. Aaron
David E. Driscoll
7
Report of the Audit Committee
- -----------------------------
Neither the following report of the Audit Committee nor any other information
included in this proxy statement pursuant to item 7(d)(3) of Schedule 14A
promulgated under the Securities Exchange Act of 1934 or pursuant to Rule 306 of
Regulation S-K constitutes "soliciting material" and none of such information
should be deemed to be "filed" with the Securities and Exchange Commission or
incorporated by reference into any other filing of the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates such information by reference
in any of those filings.
The Audit Committee has a written charter, a copy of which is reproduced as
Appendix A to this proxy statement.
The Audit Committee has reviewed and discussed the audited financial statements
of the Company for the fiscal year ended December 31, 2000 with the Company's
management.
The Audit Committee has discussed with KPMG LLP the matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Codification of
Statements on Auditing Standards, AU ss.380). Additionally, the Audit Committee
has received from KPMG LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees). The Audit
Committee also has discussed with KPMG LLP matters relating to their
independence.
Based on the review and discussions described above, the Audit Committee
recommended to the Board of Directors of the Company that the audited financial
statements of the Company be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
Members of the Audit Committee:
Lester A. Aaron
David L. Lewis
David E. Driscoll
Performance Graph
- -----------------
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of equity securities
traded on the National Association of Securities Dealers Automated Quotation
System (NASDAQ) and a peer group consisting of all NASDAQ property and casualty
companies. The comparison assumes $100.00 was invested on March 31, 1996, in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends. It should be noted that this graph represents
historical stock price performance and is not necessarily indicative of any
future stock price performance.
8
3/31/96 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
------- -------- -------- -------- -------- --------
Unico American Corp. $100.0 159.7 185.6 170.7 106.5 91.7
NASDAQ Market Index $100.0 117.5 143.9 203.0 377.2 226.8
Peer Group Index $100.0 110.9 168.5 143.7 108.1 140.4
CERTAIN TRANSACTIONS
--------------------
The Company presently occupies a 46,000 square foot building located at 23251
Mulholland Drive, Woodland Hills, California, under a master lease expiring
March 31, 2007. The lease provides for an annual gross rental of $1,025,952.
Erwin Cheldin, the Company's president, chairman and principal shareholder, is
the owner of the building. On February 22, 1995, the Company signed an extension
to the lease with no increase in rent to March 31, 2007. The Company believes
that the terms of the lease at inception and at the time the lease extension was
signed were at least as favorable to the Company as could have been obtained
from unaffiliated third parties.
David E. Driscoll, a director of the Company, is an attorney with the law firm
of Driscoll & Reynolds which has provided and continues to provide certain legal
services to the Company. During the year ended December 31, 2000, the total
amount of fees paid to such law firm was $759,048.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (SEC) initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Executive officers, directors and greater than 10% shareholders are required by
regulation of the SEC to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review of copies of
such reports furnished to the Company and written representations that no other
reports were required during the year ended December 31, 2000, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were complied with.
APPOINTMENT OF AUDITORS
-----------------------
The Company has selected KPMG LLP, independent accountants, to continue as the
Company's auditors and to audit the books and other records of the Company for
the year ending December 31, 2001. A representative of KPMG LLP, is expected to
attend the Annual Meeting of Shareholders. Such representative will have the
opportunity to make a statement and will be available to respond to appropriate
questions.
AUDIT FEES
----------
Audit Fees
- ----------
The aggregate fees billed by KPMG LLP for professional services rendered for the
audit of the Company's financial statements for the fiscal year ended December
31, 2000 and for the reviews of the financial statements included in the
Company's Form 10-Qs for that fiscal year were $103,000.
Financial Information Systems Design and Implementation Fees
- ------------------------------------------------------------
The Company was not billed any fees for professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by KPMG LLP for the
fiscal year ended December 31, 2000.
All Other Fees
- --------------
The aggregate fees billed for services rendered by KPMG LLP (other than for the
services described above under the headings "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" above) for the fiscal year
ended December 31, 2000 were $35,000. These fees consisted of $20,000 for
professional services with respect to the Company's income tax returns for the
year ended December 31, 2000, $5000 for professional services for auditing the
company's Pension Plan, and $10,000 for actuarial services rendered with respect
to Crusader's loss reserves.
The Audit Committee has considered whether the provision of services other than
those described above under the heading "Audit Fees" are compatible with
maintaining the independence of KPMG LLP.
9
OTHER MATTERS
-------------
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except for the matters set forth in the Notice of Annual Meeting
and described in this Proxy Statement. Unless otherwise directed, all shares
represented by proxy holders will be voted in favor of the proposals described
in this Proxy Statement. If any other matters come before the Annual Meeting,
the proxy holders will vote on those matters using their best judgment.
SHAREHOLDERS' PROPOSALS
-----------------------
Shareholders desiring to exercise their right under the proxy rules of the
Securities and Exchange Commission to submit proposals for consideration by the
shareholders at the Year 2002 Annual Meeting are advised that their proposals
must be received by the Company no later than December 21, 2001, for inclusion
in the Company's Proxy Statement and form of proxy relating to that meeting. If
a shareholder intends to present a proposal at the year 2002 Annual Meeting but
does not seek inclusion of that proposal in the Proxy Statement for that
meeting, the holders of proxies for that meeting will be entitled to exercise
their discretionary authority on that proposal if the Company does not have
notice of the proposal by March 6, 2002.
ANNUAL REPORT TO SHAREHOLDERS
-----------------------------
The Company's 2000 Annual Report on Form 10-K includes financial statements for
the year ended December 31, 2000, the year ended December 31, 1999, and the year
ended December 31, 1998, and is being mailed to the shareholders along with this
Proxy Statement. The Form 10-K is not to be considered a part of the soliciting
material.
By Order of the Board of Directors,
/s/ Erwin Cheldin
-----------------
Erwin Cheldin
Chairman of the Board, President
and Chief Executive Officer
Woodland Hills, California
April 17, 2001
10
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF UNICO AMERICAN CORPORATION
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors of Unico American
corporation (the "Company") to assist the Board in fulfilling its oversight
responsibilities. The Audit Committee's primary duties and responsibilities are
to:
o Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance and accounting.
o Monitor the independence and performance of the Company's independent
auditors.
o Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the NASDAQ Stock Market
for National Market Securities issuers applicable to the Company.
Audit Committee members shall be appointed by the Board.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
1) Review and reassess the adequacy of this Charter at least annually and
recommend any proposed changes.
2) Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices and judgments.
3) In consultation with the management and the independent auditors, consider
the integrity of the Company's financial reporting processes and controls.
Discuss significant financial risk exposures and the steps management has
taken to monitor, control and report such exposures. Review significant
findings prepared by the independent auditors together with management's
responses.
4) Discuss any significant changes to the Company's accounting principles and
any items required to be communicated by the independent auditors in
accordance with SAS 61.
A-1
Independent Auditors
5) The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the
independence, and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve
any discharge of auditors when circumstances warrant.
6) Review the fees and other significant compensation to be paid to the
independent auditors and make recommendations to the Board with respect
thereto.
7) Receive and review periodic written reports from the independent auditors
delineating all relationships between the independent auditors and the
Company. On an annual basis, review and discuss with the independent
auditors all significant relationships they have with the Company that
could impair the auditors' independence.
8) Prior to the audit, review the independent auditors audit plan.
9) Following the audit, discuss the results of the audit with the independent
auditors. Discuss certain matters required to be communicated to audit
committees in accordance with AICPA SAS 61.
10) Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Other Audit Committee Responsibilities
- --------------------------------------
11) Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. The report should be included in the Company's annual
proxy statement.
12) Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
13) Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
A-2
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF UNICO AMERICAN CORPORATION
The undersigned hereby constitutes and appoints LESTER A. AARON and CARY L.
CHELDIN, and each of them, with full power of substitution, the proxies of the
undersigned to represent the undersigned and vote all shares of common stock of
UNICO AMERICAN CORPORATION (the "Company"), which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders to
be held at the Woodland Hills Hilton and Towers at Warner Center, 6360 Canoga
Avenue, Woodland Hills, California 91367, on June 1, 2001, at 2:00 p.m. local
time and at any adjournments thereof, with respect to the matters described in
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement,
receipt of which is hereby acknowledged, in the following manner.
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the to vote all nominees
contrary below) listed Below
ERWIN CHELDIN, CARY L. CHELDIN, LESTER A. AARON, GEORGE C. GILPATRICK
DAVID A. LEWIS, WARREN D. ORLOFF, DONALD B. URFRIG
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ON THE LIST ABOVE.
2. IN ACCORDANCE WITH THEIR BEST JUDGMENT, with respect to any other matters
which may properly come before the meeting and any adjournment or
adjournments thereof.
Please sign and date on reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS
DIRECTED HEREIN. When this proxy is properly executed and returned, the shares
it represents will be voted at the Annual Meeting in accordance with the choices
specified herein. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
DATED:_____________________________________________, 2001
---------------------------------------------------------
(Signature)
---------------------------------------------------------
(Signature if jointly held)
Please date and sign exactly as your name or names
appear herein. If more than one owner, all should
sign. When signing as attorney, executor, administrator,
trustee or guardian, give your full title as such. If the
signatory is a corporation or partnership, sign the full
corporate or partnership name by its duly authorized
officer or partner.
PLEASE COMPLETE, SIGN, AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.