-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qgi6fyQNu0mciN/3zRnOY1+HMxb4NeQlos2TTd02zG92L8B+VomgyO/P6NdQ03sL AIk9BtEuPdwiFeqbnyo3/g== 0000100716-00-000005.txt : 20000516 0000100716-00-000005.hdr.sgml : 20000516 ACCESSION NUMBER: 0000100716-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNICO AMERICAN CORP CENTRAL INDEX KEY: 0000100716 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 952583928 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03978 FILM NUMBER: 632353 BUSINESS ADDRESS: STREET 1: 23251 MULHOLLAND DR CITY: WOODLAND HILLS STATE: CA ZIP: 91364 BUSINESS PHONE: 8185919800 MAIL ADDRESS: STREET 1: 23251 MULHOLLAND DRIVE CITY: WOODLAND HILLS STATE: CA ZIP: 91364 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL COVERAGE CORP DATE OF NAME CHANGE: 19730823 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period from January 1, 2000 to March 31, 2000 Commission File No. 0-3978 UNICO AMERICAN CORPORATION (Exact name of registrant as specified in its charter) Nevada 95-2583928 (State or other jurisdiction of (I.R.S. Employee incorporation or organization) Identification No.) 23251 Mulholland Drive, Woodland Hills, California 91364 (Address of Principal Executive Offices) (Zip Code) (818) 591-9800 Registrant's telephone number Securities registered pursuant to Section 12(b) of the Act: None (Title of each class) Securities registered pursuant to section 12(g) of the Act: Common Stock, No Par Value (Title of Class) No Change (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 6,304,965 Number of shares of common stock outstanding as of May 12, 2000 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS - ----------------------------- UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31 December 31 2000 1999 ---- ---- ASSETS - ------ Investments Available for sale: Fixed maturities, at market value (amortized cost: March 31, 2000 $98,199,836; December 31, 1999 $99,142,275) $96,345,929 $ 97,594,134 Equity securities at market (cost: March 31, 2000 $164,170; December 31, 1999 $164,170) 55,500 66,000 Short-term investments, at cost 5,691,832 5,968,173 ----------- ----------- Total Investments 102,093,261 103,628,307 Cash 232,962 105,439 Accrued investment income 1,633,599 2,060,471 Premiums and notes receivable, net 5,809,661 5,496,890 Reinsurance recoverable: Paid losses and loss adjustment expenses 467,596 19,850 Unpaid losses and loss adjustment expenses 5,613,313 3,964,324 Prepaid reinsurance premiums 29,682 32,438 Deferred policy acquisition costs 4,403,214 4,338,217 Property and equipment (net of accumulated depreciation) 139,557 148,667 Deferred income taxes 1,593,642 1,541,242 Other assets 503,065 642,911 ----------- ----------- Total Assets $122,519,552 $121,978,756 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unpaid losses and loss adjustment expenses $42,180,237 $41,592,489 Unearned premiums 16,737,805 16,583,143 Advance premium and premium deposits 2,563,717 2,571,190 Accrued expenses and other liabilities 5,770,723 6,391,137 Dividends payable 945,745 - ---------- ---------- Total Liabilities $68,198,227 $67,137,959 ---------- ---------- STOCKHOLDERS' EQUITY Common stock, no par - authorized 10,000,000 shares; issued and outstanding shares 6,304,965 at March 31, 2000, and 6,304,953 at December 31, 1999 $3,098,389 $3,098,389 Accumulated other comprehensive loss (1,295,301) (1,086,565) Retained earnings 52,518,237 52,828,973 ---------- ---------- Total Stockholders' Equity $54,321,325 $54,840,797 ---------- ---------- Total Liabilities and Stockholders' Equity $122,519,552 $121,978,756 =========== ===========
See notes to unaudited consolidated financial statements. 2 UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31 --------------------------- 2000 1999 ---- ---- REVENUES - -------- Insurance Company Revenues Premium earned $8,116,552 $8,908,324 Premium ceded 1,339,506 1,416,796 --------- --------- Net premium earned 6,777,046 7,491,528 Net investment income 1,431,490 1,416,410 Net realized investment (losses) - (625) Other income 5,035 - --------- --------- Total Insurance Company Revenues 8,213,571 8,907,313 Other Revenues from Insurance Operations Gross commissions and fees 1,414,352 1,392,421 Investment income 92,667 64,849 Finance charges and late fees earned 207,134 232,890 Other income 1,562 3,124 --------- ---------- Total Revenues 9,929,286 10,600,597 --------- ---------- EXPENSES - -------- Losses and loss adjustment expenses 4,950,539 3,379,802 Policy acquisition costs 2,103,351 2,217,491 Salaries and employee benefits 1,081,561 1,115,822 Commissions to agents/brokers 333,128 318,002 Other operating expenses 632,392 659,852 --------- --------- Total Expenses 9,100,971 7,690,969 --------- --------- Income Before Taxes 828,315 2,909,628 Income Tax Provision 193,306 877,866 ------- --------- Net Income $635,009 $2,031,762 ======= ========= PER SHARE DATA - -------------- Basic Shares Outstanding 6,304,965 6,224,125 Basic Earnings Per Share $0.10 $0.33 Diluted Shares Outstanding 6,348,793 6,353,779 Diluted Earnings Per Share $0.10 $0.32
See notes to unaudited consolidated financial statements 3 UNICO AMERICAN CORPORATION AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31 --------------------------- 2000 1999 ---- ---- Net income $635,009 $2,031,762 Other changes in comprehensive income net of tax: Unrealized (losses) on securities classified as available-for-sale arising during the period (208,736) (991,696) Less: reclassification adjustment for gains included in net income - 86,335 ------- --------- Comprehensive Income $426,273 $1,126,401 ======= =========
See notes to unaudited consolidated financial statements 4 UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31
2000 1999 ---- ---- Cash Flows from Operating Activities Net income $635,009 $2,031,762 Adjustments to reconcile net income to net cash from operations Depreciation and amortization 15,647 18,696 Bond amortization, net 150,779 188,439 Net realized loss on sale of securities - 625 Changes in assets and liabilities Premium, notes and investment income receivable 114,101 (38,983) Reinsurance recoverable (2,096,735) (1,232,353) Prepaid reinsurance premiums 2,756 2,063 Deferred policy acquisitions costs (64,997) 62,110 Other assets 139,846 10,904 Reserve for unpaid losses and loss adjustment expenses 587,748 (58,296) Unearned premium reserve 154,662 (182,429) Advance premium and premium deposits (7,473) 155,104 Accrued expenses and other liabilities (620,414) 741,279 Income taxes current/deferred 55,130 691,980 ------- --------- Net Cash Provided (Used) from Operations (933,941) 2,390,901 ------- --------- Investing Activities Purchase of fixed maturity investments (1,954,140) (4,021,750) Proceeds from maturity of fixed maturity investments 2,735,600 1,510,000 Purchase of equity securities - cost - (3,176,206) Proceeds from sale of equity securities - 2,896,835 Net increase in short-term investments 286,541 471,801 Additions to property and equipment (6,537) (3,139) --------- --------- Net Cash Provided (Used) by Investing Activities 1,061,464 (2,322,459) --------- --------- Financing Activities Proceeds from issuance of common stock - 24 -- Net Cash Provided by Financing Activities - 24 -- Net Increase in Cash 127,523 68,466 Cash at beginning of period 105,439 277,544 ------- ------- Cash at End of Period $232,962 $346,010 ======= ======= Supplemental Cash Flow Information Cash paid during the period for: Interest $ - $1,338 Income taxes $25 $175,000
See notes to unaudited consolidated financial statements 5 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- Nature of Business - ------------------ Unico American Corporation ("Unico") is an insurance holding company. Unico and its subsidiaries (the "Company"), all of which are wholly owned, provides primarily in California, property, casualty, health and life insurance, and related premium financing. Principles of Consolidation - --------------------------- The accompanying unaudited consolidated financial statements include the accounts of Unico American Corporation and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. Basis of Presentation - --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. Quarterly financial statements should be read in conjunction with the financial statements and related notes in the Company's 1999 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. NOTE 2 - INCENTIVE STOCK PLANS - ------------------------------ The Company's 1985 stock option plan provided for the grant of incentive stock options to officers and key employees. The plan covers an aggregate of 1,500,000 shares of the Company's common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.). As of March 31, 2000, there were 101,415 options outstanding and all are currently exercisable. There are no additional options available for future grant under the 1985 plan. The Company's 1999 Omnibus Stock Plan also provides, among other things, for the grant of incentive options to officers and key employees. The plan covers an aggregate of 500,000 shares of the Company's common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.). As of March 31, 2000, there were 135,000 options outstanding under this plan. None of the 135,000 options outstanding under the 1999 stock option plan are currently exercisable. NOTE 3 - EARNINGS PER SHARE - --------------------------- The following table represents the reconciliation of the numerators and denominators of the Company's basic earnings per share and diluted earnings per share computations reported on the Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999: 6 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 Three Months Ended March 31 --------------------------- 2000 1999 ---- ---- Basic Earnings Per Share - ------------------------ Net income numerator $635,009 $2,031,762 Weighted average shares outstanding denominator 6,304,965 6,224,125 Per share amount $0.10 $0.33 Diluted Earnings Per Share - -------------------------- Net income numerator $635,009 $2,031,762 Weighted average shares outstanding 6,304,965 6,224,125 Effect of diluted securities 43,828 129,654 --------- --------- Diluted shares outstanding denominator 6,348,793 6,353,779 --------- --------- Per share amount $0.10 $0.32 NOTE 4 - SEGMENT REPORTING - -------------------------- Statement of Financial Accounting Standards No. 131 (SFAS No. 131), Disclosures about Segments of an Enterprise and Related Information, became effective for fiscal years beginning after December 15, 1997. SFAS No. 131 establishes standards for the way information about operating segments is reported in financial statements. The Company has adopted SFAS No. 131 and has identified its insurance company operation, Crusader Insurance Company ("Crusader"), as its primary reporting segment. Revenues from this segment comprise 83% of consolidated revenues. The Company's remaining operations constitute a variety of specialty insurance services, each with unique characteristics and individually insignificant to consolidated revenues. Three Months Ended March 31 --------------------------- 2000 1999 ---- ---- Revenues - -------- Insurance company operation $8,213,571 $8,907,313 Other insurance operations 4,183,349 4,301,613 Intersegment elimination (1) (2,467,634) (2,608,329) --------- --------- Total other insurance operations 1,715,715 1,693,284 --------- --------- Total Revenues $9,929,286 $10,600,597 ========= ========== Income (Loss) Before Income Taxes - --------------------------------- Insurance company operation $750,517 $2,952,107 Other insurance operations 77,798 (42,479) ------- --------- Total Income Before Income Taxes $828,315 $2,909,628 ======= ========= Assets - ------ Insurance company operation $101,776,571 $105,239,708 Intersegment eliminations (2) (162,406) (210,274) ----------- ----------- Total insurance company operation 101,614,165 105,029,434 Other insurance operations 20,905,387 18,739,840 ----------- ----------- Total Assets $122,519,552 $123,769,274 =========== =========== (1) Intersegment revenue eliminations reflect commission paid by Crusader to Unifax Insurance Systems, Inc., ("Unifax") a wholly owned subsidiary of the Company. (2) Intersegment asset eliminations reflect the elimination of Crusader receivables and Unifax payables. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS - -------------- (a) Liquidity and Capital Resources: - ------------------------------------ Due to the nature of the Company's business (insurance and insurance services) and whereas Company growth does not normally require material reinvestments of profits into property or equipment, the cash flow generated from operations usually results in improved liquidity for the Company. Crusader generates a significant amount of cash as a result of its holdings of unearned premium reserves, reserves for loss payments, and its capital and surplus. Crusader's loss and loss adjustment expense payments are the most significant cash flow requirement of the Company. These payments are continually monitored and projected to ensure that the Company has the liquidity to cover these payments without the need to liquidate its investments. As of March 31, 2000, the Company had cash and cash investments of $104,288,800 (at amortized cost) of which $95,385,768 (91%) were investments of Crusader. As of the quarter ended March 31, 2000, the Company had invested $98,199,836 (at amortized cost) or 94% of its invested assets in fixed maturity obligations. In accordance with Statement of Financial Accounting Standard No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company is required to classify its investments in debt and equity securities into one of three categories: held-to-maturity, available-for-sale or trading securities. Although all of the Company's investments are classified as available-for-sale, the Company's investment guidelines place primary emphasis on buying and holding high-quality investments. The Company's investments in fixed maturity obligations of $98,199,836 (at amortized cost) include $26,229,224 (27%) of pre-refunded state and municipal tax-exempt bonds, $10,041,191 (10%) of U.S. treasury securities, $61,729,421 (63%) of high-quality industrial and miscellaneous bonds, and $200,000 of certificates of deposit. The tax-exempt interest income earned for the three months ended March 31, 2000 and 1999 was $332,395 and $407,965, respectively. The balance of the Company's investments are in equity securities and high-quality, short-term investments that include a U.S. treasury bill, bank money market accounts, certificates of deposit, commercial paper and a short-term treasury money market fund. The Company's investment policy limits investments in any one company to $2,000,000. This limitation excludes bond premiums paid in excess of par value and U.S. government or U.S. government guaranteed issues. The Company's investment guidelines on equity securities limit investments in equity securities to an aggregate maximum of $2,000,000. All of the Company's investments are high-grade investment quality, all state and municipal tax-exempt fixed maturity investments are pre-refunded issues, and all certificates of deposits are FDIC insured. On March 1, 2000, the Board of Directors declared a fifteen-cent ($0.15) per share cash dividend payable on May 19, 2000, to shareholders of record at the close of business on April 28, 2000. In April 2000, the Company announced that its Board of Directors had authorized the repurchase in the open market from time to time of up to an aggregate of 315,000 shares of the common stock of the Company. It is expected that any purchases will be funded from cash-on-hand and short-term investments. Although material capital expenditures may also be funded through borrowings, the Company believes that its cash and short-term investments at year end, net of trust restriction of $2,982,256, statutory deposits of $2,725,000, and the dividend restriction between Crusader and Unico plus the cash to be generated from operations, should be sufficient to meet its operating requirements during the next twelve months without the necessity of borrowing funds. State of Washington Regulatory Proceeding - ----------------------------------------- In August 1999 the Insurance Commissioner of the State of Washington announced that she would seek to impose a $307,000 fine, seek repayment of policy service fees to Washington policyholders including interest at the rate of 12% per annum (estimated to be approximately $780,000 plus interest to November 5, 2000, of $360,000), seek payment of all back premium taxes owed on the subject service fees including appropriate penalties required for delinquent taxes (estimated to be approximately $16,000 plus penalties), and seek to suspend Crusader's Certificate of Authority to do business in the state of Washington for a period of 120 days. The Insurance Commissioner alleges that a service fee of $250 per policy, which was charged by a Washington agent after the Company became admitted in the state of Washington, is premium and subject to rate filing requirements and premium taxes. This service fee was first charged by the Washington agent under his broker's license in 1992, when the Company began its operation 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ---------------------------------------------------------------------- OF OPERATIONS (continued) - ------------------------ in Washington as a non-admitted insurer. The Company believes that the nature of the service fee did not change in 1995 when the Company became admitted in Washington, and believes that the service fee continued to be a broker fee and is not subject to rate filing requirements or premium taxes. Crusader commenced pursuit of its legal remedies, starting with a demand for an administrative hearing. That administrative hearing ended on February 7, 2000. On May 5, 2000, the administrative hearing officer, an employee of the Washington Commissioner's Office, rendered her decision against the Company and ordered that all of the sanctions previously stated be imposed. The order states that the $307,000 fine be paid on or before August 5, 2000; that refunds to policyholders be completed by November 5, 2000; that all back premium taxes on the subject service fees be paid on or before May 5, 2001; and that Crusader's Certificate of Authority to do business in the state of Washington be suspended from May 20, 2000, through September 17, 2000. Premium written in the state of Washington in the quarter ended March 31, 2000, was $216,419. The Company continues to pursue its legal avenues of recourse, the next steps being to seek a stay of the enforcement of the administrative hearing officer's decision and to seek an appeal in the superior court for the state of Washington. The Company does not believe it has done anything improper and does not believe that the outcome of this matter will have a materially adverse effect on its financial statements. No accruals have been made in the March 31, 2000, financial statements for the sanctions described above. YEAR 2000 - --------- Subsequent to December 31, 1999, the Company has not experienced adverse effects as a result of Year 2000 issues from either internal or external sources. However, due to the unusual nature of the problem and lack of historical experience with Year 2000 issues, it is difficult to predict with certainty if there may be other computer or infrastructure problems which may occur and affect the Company and its customers or suppliers. Due to the fact that the Company has not experienced any adverse effects of Year 2000 issues through the date of this report, the Company does not anticipate it will be adversely materially affected by any future Year 2000 events from its internal operations or from others with whom the Company directly or indirectly does business. There are no material commitments for capital expenditures as of the date of this report. (b) Results of Operations: - -------------------------- All comparisons made in this discussion are comparing the quarter ended March 31, 2000, to the quarter ended March 31, 1999, unless otherwise indicated. The Company's net income for the quarter ended March 31, 2000, decreased $1,396,753 (69%) to $635,009 compared to $2,031,762 for the quarter ended March 31, 1999. Revenues for the quarter ended March 31, 2000, decreased $671,311 (6%) to $9,929,286, compared to $10,600,597 for the quarter ended March 31, 1999. Premium earned before reinsurance decreased $791,772 (9%) to $8,116,552 for the quarter ended March 31, 2000, compared to $8,908,324 for the quarter ended March 31, 1999. Intense price competition continues to adversely affect the premium written and earned in nearly all states that the Company does business. Although the Company attempts to be competitive on price, it believes that maintaining adequate rates and a favorable loss ratio is a better business strategy than increasing premium writings at inadequate rates. The Company cannot determine how long this "soft market" condition will continue. Premium ceded decreased $77,290 (5%) to $1,339,506 for the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. Although earned premium ceded decreased, the ratio of earned premium ceded to earned premium remained approximately 16%. Earned premium ceded consists of both premium ceded under the Company's current reinsurance contracts and premium ceded to the Company's provisionally rated reinsurance contract. Premium ceded under the provisionally rated contract, which was canceled on a runoff basis effective December 31, 1997, is subject to adjustment based on the amount of losses ceded, limited by a maximum percentage that can be charged by the reinsurer. The change in premium ceded between the quarters is as follows: Decrease in ceded premium ceded under current reinsurance contracts $152,704 Increase in provisionally rated premium ceded 75,414 ------ Net decrease in premium ceded $77,290 ====== 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS (continued) - ------------------------- Premium written before reinsurance decreased $454,684 (5%) to $8,271,213 for the quarter ended March 31, 2000, compared to the three months ended March 31, 1999. The decrease in written premium in California accounted for $355,243 (78%) of this decrease. Crusader's written premium by state is as follows: Three Months Ended March 31 --------------------------- Increase State 2000 1999 (Decrease) ----- ---- ---- ---------- California $7,051,421 $7,406,664 $(355,243) Arizona 360,498 270,517 89,981 Pennsylvania 217,153 282,302 (65,149) Washington 216,419 263,878 (47,459) Oregon 149,629 220,824 (71,195) Ohio 116,146 120,570 (4,424) Montana 81,222 87,032 (5,810) Texas 49,065 58,846 (9,781) Nevada 22,573 1,141 21,432 Kentucky 7,087 14,123 (7,036) --------- ---------- -------- Total $8,271,213 $8,725,897 $(454,684) ========= ========= ======== Investment income, excluding realized investment losses, increased $42,898 (3%) to $1,524,157 for the quarter ended March 31, 2000, compared to $1,481,259 for the quarter ended March 31, 1999. Although average fixed maturity (at amortized value) and short-term investments increased less than one percent, the mix of the taxable and tax-exempt fixed maturity investments changed. Tax exempt securities, which generally carry a lower yield than taxable securities, decreased to $26,229,224 (27% of fixed maturities) at March 31, 2000, compared to $33,486,161 (34% of fixed maturities) as of March 31,1999. Commission and fee income increased $21,931 (2%) to $1,414,352 for the three months ended March 31, 2000, compared to the three months ended March 31, 1999. This increase consisted of the following: Health and life insurance program $45,564 Other commission and fee income 7,046 Service fee income 4,379 Daily automobile rental insurance progr (4,575) Workers' compensation program (30,483) ------- Net increase in commission and fee income $21,931 ====== Losses and loss adjustment expenses were $4,950,539 or 73% of net premium earned for the quarter ended March 31, 2000, compared to $3,379,802 or 45% of net premium earned for the quarter ended March 31, 1999. This increase was primarily due to an increase in reserves for losses of prior years of approximately $503,000 (adverse development) in the quarter ended March 31, 2000, compared to a reduction of approximately $1,482,000 in reserves for losses of prior years (favorable development) in the quarter ended March 31, 1999 - a total change of $1,985,000. Although the methodology used by the Company in determining case and IBNR reserves during the quarter ended March 31, 2000, is consistent with prior years, the Company is not reflecting favorable development as it did in previous years due to uncertainty resulting from various settlements and/or verdicts in excess of reserves which occurred during 1999 and the quarter ended March 31, 2000. Policy acquisition costs consist of commissions, premium taxes, inspection fees, and certain other underwriting costs, which are directly related to the production of Crusader insurance policies. These costs include both Crusader expenses and allocated expenses of other Unico subsidiaries. Crusader's reinsurers pay Crusader a ceding commission, which is primarily a reimbursement of the acquisition cost related to the ceded premium. Policy acquisition costs, net of ceding commission, are deferred and amortized as the related premiums are earned. These costs were 31% of net premium earned for the quarter ended March 31, 2000, compared to 30% for the quarter ended March 31, 1999. 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS (continued) - ------------------------- Salaries and employee benefits decreased $34,261 (3%) to $1,081,561 for the quarter ended March 31, 2000, compared to $1,115,822 for the quarter ended March 31, 1999. Commissions to agents/brokers increased $15,126 (5%) to $333,128 in the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. Other operating expenses decreased $27,460 (4%) during the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. Income tax provision decreased to 23% of income before taxes in the quarter ended March 31, 2000, compared to 30% in the quarter ended March 31, 1999. This change was primarily due to tax-exempt interest income which comprised 40% of income before taxes in the quarter ended March 31, 2000, compared to 14% in the quarter ended March 31, 1999. The effect of inflation on net income of the Company during the three months ended March 31, 2000, and 1999 was not significant. Forward looking statements - -------------------------- Certain statements contained herein, including the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," that are not historical facts are forward looking. These statements, which may be identified by forward-looking words or phrases such as "anticipate," "believe," "expect," "intend," "may," "should," and "would," involve risks and uncertainties, many of which are beyond the control of the Company. Such risks and uncertainties could cause actual results to differ materially from these forward-looking statements. Factors which could cause actual results to differ materially include premium rate adequacy relating to competition or regulation, actual versus estimated claim experience, regulatory changes or developments, unforeseen calamities, general market conditions, the Company's ability to introduce new profitable products, and the Company's ability to expand geographically. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------- The Company's consolidated balance sheet includes a substantial amount of invested assets whose fair values are subject to various market risk exposures including interest rate risk and equity price risk. The Company's invested assets consist of the following: March 31 December 31 2000 1999 ---------- ----------- Fixed maturity bonds (at amortized value) $97,999,836 $98,942,275 Short-term cash investments (at cost) 5,691,832 5,968,173 Equity securities (at cost) 164,170 164,170 Certificates of deposit (over 1 year, at cost) 200,000 200,000 ----------- ----------- Total invested assets $104,055,838 $105,274,618 =========== =========== There have been no material changes in the composition of the Company's invested assets or market risk exposures since the end of the preceding fiscal year end. 11 PART II - OTHER INFORMATION ITEM 2 - CHANGES IN SECURITIES - ------------------------------ (c) None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits: Exhibit 10.1 - Employment Agreement between the Company and Roger Platten dated November 27, 1996. Exhibit 10.2 - Employment Agreement between the Company and Cary Cheldin dated November 27, 1996 Exhibit 10.3 - Amendment to Employment Agreement between the Compamy and Cary Cheldin dated January 10, 2000. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto authorized. UNICO AMERICAN CORPORATION Date: May 12, 2000 By: /s/ ERWIN CHELDIN ------------------ Erwin Cheldin Chairman of the Board, President and Chief Executive Officer, (Principal Executive Officer) Date: May 12, 2000 By: /s/ LESTER A. AARON -------------------- Lester A. Aaron Treasurer, Chief Financial Officer, (Principal Accounting and Principal Financial Officer) 12 EX-10.1 2 EMPLOYMENT AGREEMENT - ROGER PLATTEN EMPLOYMENT AGREEMENT -------------------- This Employment Agreement is entered into as of the 27th day of November 1996 by and between UNICO AMERICAN CORPORATION, a Nevada corporation (the "Company"), and Roger Platten (the "Executive"). WHEREAS, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and conditions of this Agreement. Accordingly, the parties hereto agree as follows: 1. Employment of Executive. ----------------------- Effective 12-1-1996, the Company shall employ the Executive for the Term (as hereinafter defined) to render the services and to perform the duties with respect to the business of the Company as hereinafter provided. The duties of the Executive shall be the duties of vice president. 1.1 Acceptance of Employment by the Executive. ----------------------------------------- The Executive hereby accepts the employment and agrees to fulfill the duties described above. Under no circumstances shall the Executive be obligated without his consent to relocate his residence in order to render the services or to perform his duties outside of the Los Angeles metropolitan area. 1.2 Termination of Existing Contracts. --------------------------------- The Executive hereby agrees that all agreements and contracts, whether written or oral, relating to the current employment of the Executive will be terminated as of the commencement of the Tern. 2. Term of Employment. ------------------ The term of Executive's employment under this Agreement (the "Term") shall commence on December 1, 1996, and continue until December 1, 2001. 3. Compensation and Other Benefits. -------------------------------- 3.1 Salary. ------ As compensation for services to be rendered pursuant to this Agreement, the Company shall pay the Executive, during the Term, a salary at an annual rate of $175,000 (the "Annual Salary") to be paid in equal installments no less frequently than two (2) times per month in accordance with the Company's normal payroll practices. The Annual Salary shall be subject to increase from time to time at the discretion of the Board of Directors of the Company, provided, however, that the Annual Salary shall be increased, effective January 1 of each year during the Term, by an amount not less than the difference, if any, between 1 (i) the rate of Annual Salary in effect on the immediately preceding January 1 multiplied by the aggregate percentage increase, if any, in The United States Department of Labor, Bureau of Labor Statistics Consumer Price Index of Urban Wage Earners and Clerical Workers, Los Angeles - Long Beach - Anaheim Average (the "Consumer Price Index"), during the preceding twelve (12) calendar months, and (ii) the aggregate amount of any discretionary increases in the Annual Salary granted by the Board of Directors (excluding any payments of a Mandatory Bonus, as defined below, or other discretionary bonus) during the immediately preceding calendar year. 3.2 Annual Bonus. ------------ The Company shall pay to the Executive a bonus (the "Mandatory Bonus") on or before December 31 of each year, provided that the net income of the Company for the most recent four (4) quarters (prior to deductions for income taxes and current Mandatory Bonuses but including discretionary bonuses paid to all employees) is equal to or greater than $4,000,000 (the "Net Income Goal"). The amount of said Mandatory Bonus shall be in an amount determined by the Board of Directors, in its discretion, but shall not be less than an amount equal to one hundred percent (100%) of the aggregate bonus paid to the Executive during such immediately preceding calendar year, less any amounts paid to the Executive as a discretionary bonus paid since the immediately preceding January 1; provided however, that in no event shall the Mandatory Bonus be reduced to less than zero (0). Nothing herein shall prevent the Board of Directors from electing, in its discretion, to grant a bonus to the Executive, in such amount as may be determined by the Board of Directors in the event the Net Income Goal is not met. Notwithstanding the foregoing, if the Executive is terminated other than for Cause, the Executive will be entitled to the minimum Mandatory Bonus amount calculated in accordance with the foregoing, regardless of whether the Net Income Goal is attained. 3.3 Participation in Employee Benefit Plans. --------------------------------------- The Executive shall be permitted during the Term, if and to the extent eligible, to participate in any group life, hospitalization or disability insurance plan, health program, pension plan, similar benefit plan, vacation benefits, or other so-called "fringe benefits" of the Company, which may be available to other comparable or lower ranking executives of the Company generally on the same terms as such other executives. 3.4 General Business Expenses. ------------------------- The Company shall pay or reimburse the Executive for all reasonable expenses incurred by the Executive during the Term in the performance of the Executive's services under this Agreement. Such payment shall be upon presentation of itemized expense statements or vouchers or such other supporting information as the Company may require, including, whenever possible, actual bills, receipts, or other evidence of expenditures. 2 4. Non-competition. --------------- The Executive agrees that be shall not compete against the Company. 5. Termination. ------------ 5.1 Termination Upon Death. ---------------------- If the Executive dies during the Term, this Employment Agreement shall terminate, except that the Executive's legal representatives shall be entitled to receive (i) unpaid Annual Salary accrued up to the date of the Executive's death, and (ii) a pro rata portion of the Mandatory Bonus payable in the calendar year following the year during which such death occurred equal to the product of (a) the amount which, but for the Executive's death, would have been paid to the Executive as such Mandatory Bonus multiplied by (b) a fraction, the denominator of which is 365 and the numerator of which is the number of days elapsed from the last previous January 1 to the date of the Executive's death. 5.2 Termination for Cause. --------------------- Subject to all of the provisions hereof, the Company has the right, at any time during the Term, exercisable by serving written notice, effective in accordance with its terms, to terminate the Executive's employment under this Agreement and discharge the Executive for "Cause" (as hereinafter defined). If such right is exercised, the Company's obligation to the Executive shall be limited to the payment of unpaid Annual Salary accrued up to the effective date specified in the Company's notice of termination. As used in this Section 5.2, the term "Cause" shall mean (i) chronic alcoholism or drug addiction, (ii) fraud, (iii) unlawful appropriation of any money or other assets or properties of the Company or any affiliate of the Company, (iv) a material breach by the Executive of the terms of this Agreement, (v) the conviction of the Executive of any felony involving moral turpitude or other serious crime involving moral turpitude, (vi) the Executive's gross moral turpitude relevant to his office or employment with the Company or any affiliate of the Company, and (vii) the Executives willful engagement in misconduct which is demonstrably and materially injurious to the Company and its subsidiaries taken as a whole. (No act, or failure to act, on the part of the Executive shall be considered "willful" unless done, or omitted to be done, by the Executive not in good faith and without a reasonable belief that the action or omission was in the best interests of the Company and its subsidiaries.) 5.3 Termination Upon Disability. --------------------------- If during the Term the Executive becomes physically or mentally disabled, whether totally or partially; so that the Executive is unable substantially to perform his services hereunder for (i) a period of four (4) consecutive months or (ii) short periods aggregating six (6) months during any twelve (12) month period, the Company may at any time, while the disability is continuing, after the last day of the fourth consecutive month of disability or the last day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to the Executive, terminate the Executive's employment hereunder. If 3 such right to terminate is exercised, the Company's obligation to the Executive shall be limited to the payment of (i) unpaid Annual Salary accrued up to the effective date specified in the Company's notice of termination (which shall be the last day of the calendar month in which such notice is given) and (ii) a pro rata portion of the Mandatory Bonus payable in the calendar year following the year during which such disability occurred equal to the product of (a) the amount which, but for such suspension, would have been paid to the Executive as such Mandatory Bonus, multiplied by (b) a fraction, the denominator of which is 365 and the numerator of which is the number of days elapsed from the last previous January 1 to the effective date specified in the Company's notice of termination. 6. Insurance. --------- The Company may from time to time apply for and take out in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability, or other insurance upon the Executive in any amount or amounts that it may deem necessary or appropriate to protect its interest. The Executive agrees to aid the Company in procuring such insurance by submitting to medical examinations and by filling out, executing, and delivering such applications and other instruments in writing as may reasonably be required by an insurance company or companies to which any application or applications for insurance may be made by or for the Company. 7. Indemnification. --------------- To the fullest extent permitted under the laws of the state of the Company's incorporation at the time of any action, the Company shall indemnify the Executive, if the Executive is made a party, or threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was an officer or director of the Company or any affiliate of the Company, in which capacity the Executive is or was serving the Company, against any and all liabilities, costs, expenses (including reasonable attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding. This Section 7 shall not limit in any way the Executive's rights under any agreement relating specifically to indemnification. 8. Other Provisions. ----------------- 8.1 Notices. ------- Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission, by courier, or sent by certified, registered, or overnight courier postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed, by courier, or sent by facsimile transmission, or, if mailed, five (5) days after the date of deposit in the United States mail, as follows: 4 (i) If to the Company, to: Unico American Corporation 23251 Mulholland Drive Woodland Hills, California 91364 Attention: President (ii) If to the Executive, to: Roger Platten 23251 Mulholland Drive Woodland Hills, CA 91364 Any party may change its address for notice hereunder by notice to the other parties hereto. 8.2 Entire Agreement. ---------------- This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. 8.3 Waivers and Amendments. ---------------------- This Employment Agreement may be amended, modified, superseded, cancelled, renewed, or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power, or privilege hereunder, nor any single or partial exercise of any right, power, or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder. 8.4 Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such State. 8.5 Counterparts. ------------ This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.6 Headings. -------- The headings in the Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 5 8.7 Binding Effect. -------------- All of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, whether or not there shall have been a formal assignment hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: UNICO AMERICAN CORPORATION A Nevada Corporation BY: /s/ Erwin Cheldin ----------------- NAME: Erwin Cheldin ITS: President BY: /s/ Cary Cheldin ---------------- NAME: Cary Cheldin ITS: Vice President EXECUTIVE: /s/ Roger Platten ----------------- Roger Platten 6 EX-10.2 3 EMPLOYMENT AGREEMENT - CARY CHELDIN EMPLOYMENT AGREEMENT -------------------- This Employment Agreement is entered into as of the 27th day of November 1996 by and between UNICO AMERICAN CORPORATION, a Nevada corporation (the "Company"), and Cary Cheldin (the "Executive"). WHEREAS, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and conditions of this Agreement. Accordingly, the parties hereto agree as follows: 1. Employment of Executive. ----------------------- Effective 12-1-1996, the Company shall employ the Executive for the Term (as hereinafter defined) to render the services and to perform the duties with respect to the business of the Company as hereinafter provided. The duties of the Executive shall be the duties of executive vice president 1.1 Acceptance of Employment by the Executive. ----------------------------------------- The Executive hereby accepts the employment and agrees to fulfill the duties described above. Under no circumstances shall the Executive be obligated without his consent to relocate his residence in order to render the services or to perform his duties outside of the Los Angeles metropolitan area. 1.2 Termination of Existing Contracts. --------------------------------- The Executive hereby agrees that all agreements and contracts, whether written or oral, relating to the current employment of the Executive will be terminated as of the commencement of the Tern. 2. Term of Employment. ------------------ The term of Executive's employment under this Agreement (the "Term") shall commence on December 1, 1996, and continue until December 1, 2001. 3. Compensation and Other Benefits. -------------------------------- 3.1 Salary. ------ As compensation for services to be rendered pursuant to this Agreement, the Company shall pay the Executive, during the Term, a salary at an annual rate of $205,000 (the "Annual Salary") to be paid in equal installments no less frequently than two (2) times per month in accordance with the Company's normal payroll practices. The Annual Salary shall be subject to increase from time to time at the discretion of the Board of Directors of the Company, provided, however, that the Annual Salary shall be increased, effective January 1 of each year during the Term, by an amount not less than the difference, if any, between 1 (i) the rate of Annual Salary in effect on the immediately preceding January 1 multiplied by the aggregate percentage increase, if any, in The United States Department of Labor, Bureau of Labor Statistics Consumer Price Index of Urban Wage Earners and Clerical Workers, Los Angeles - Long Beach - Anaheim Average (the "Consumer Price Index"), during the preceding twelve (12) calendar months, and (ii) the aggregate amount of any discretionary increases in the Annual Salary granted by the Board of Directors (excluding any payments of a Mandatory Bonus, as defined below, or other discretionary bonus) during the immediately preceding calendar year. 3.2 Annual Bonus. ------------ The Company shall pay to the Executive a bonus (the "Mandatory Bonus") on or before December 31 of each year, provided that the net income of the Company for the most recent four (4) quarters (prior to deductions for income taxes and current Mandatory Bonuses but including discretionary bonuses paid to all employees) is equal to or greater than $4,000,000 (the "Net Income Goal"). The amount of said Mandatory Bonus shall be in an amount determined by the Board of Directors, in its discretion, but shall not be less than an amount equal to one hundred percent (100%) of the aggregate bonus paid to the Executive during such immediately preceding calendar year, less any amounts paid to the Executive as a discretionary bonus paid since the immediately preceding January 1; provided however, that in no event shall the Mandatory Bonus be reduced to less than zero (0). Nothing herein shall prevent the Board of Directors from electing, in its discretion, to grant a bonus to the Executive, in such amount as may be determined by the Board of Directors in the event the Net Income Goal is not met. Notwithstanding the foregoing, if the Executive is terminated other than for Cause, the Executive will be entitled to the minimum Mandatory Bonus amount calculated in accordance with the foregoing, regardless of whether the Net Income Goal is attained. 3.3 Participation in Employee Benefit Plans. --------------------------------------- The Executive shall be permitted during the Term, if and to the extent eligible, to participate in any group life, hospitalization or disability insurance plan, health program, pension plan, similar benefit plan, vacation benefits, or other so-called "fringe benefits" of the Company, which may be available to other comparable or lower ranking executives of the Company generally on the same terms as such other executives. 3.4 General Business Expenses. ------------------------- The Company shall pay or reimburse the Executive for all reasonable expenses incurred by the Executive during the Term in the performance of the Executive's services under this Agreement. Such payment shall be upon presentation of itemized expense statements or vouchers or such other supporting information as the Company may require, including, whenever possible, actual bills, receipts, or other evidence of expenditures. 2 4. Non-competition. --------------- The Executive agrees that be shall not compete against the Company. 5. Termination. ------------ 5.1 Termination Upon Death. ---------------------- If the Executive dies during the Term, this Employment Agreement shall terminate, except that the Executive's legal representatives shall be entitled to receive (i) unpaid Annual Salary accrued up to the date of the Executive's death, and (ii) a pro rata portion of the Mandatory Bonus payable in the calendar year following the year during which such death occurred equal to the product of (a) the amount which, but for the Executive's death, would have been paid to the Executive as such Mandatory Bonus multiplied by (b) a fraction, the denominator of which is 365 and the numerator of which is the number of days elapsed from the last previous January 1 to the date of the Executive's death. 5.2 Termination for Cause. --------------------- Subject to all of the provisions hereof, the Company has the right, at any time during the Term, exercisable by serving written notice, effective in accordance with its terms, to terminate the Executive's employment under this Agreement and discharge the Executive for "Cause" (as hereinafter defined). If such right is exercised, the Company's obligation to the Executive shall be limited to the payment of unpaid Annual Salary accrued up to the effective date specified in the Company's notice of termination. As used in this Section 5.2, the term "Cause" shall mean (i) chronic alcoholism or drug addiction, (ii) fraud, (iii) unlawful appropriation of any money or other assets or properties of the Company or any affiliate of the Company, (iv) a material breach by the Executive of the terms of this Agreement, (v) the conviction of the Executive of any felony involving moral turpitude or other serious crime involving moral turpitude, (vi) the Executive's gross moral turpitude relevant to his office or employment with the Company or any affiliate of the Company, and (vii) the Executives willful engagement in misconduct which is demonstrably and materially injurious to the Company and its subsidiaries taken as a whole. (No act, or failure to act, on the part of the Executive shall be considered "willful" unless done, or omitted to be done, by the Executive not in good faith and without a reasonable belief that the action or omission was in the best interests of the Company and its subsidiaries.) 5.3 Termination Upon Disability. --------------------------- If during the Term the Executive becomes physically or mentally disabled, whether totally or partially; so that the Executive is unable substantially to perform his services hereunder for (i) a period of four (4) consecutive months or (ii) short periods aggregating six (6) months during any twelve (12) month period, the Company may at any time, while the disability is continuing, after the last day of the fourth consecutive month of disability or the last day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to the Executive, terminate the Executive's employment hereunder. If 3 such right to terminate is exercised, the Company's obligation to the Executive shall be limited to the payment of (i) unpaid Annual Salary accrued up to the effective date specified in the Company's notice of termination (which shall be the last day of the calendar month in which such notice is given) and (ii) a pro rata portion of the Mandatory Bonus payable in the calendar year following the year during which such disability occurred equal to the product of (a) the amount which, but for such suspension, would have been paid to the Executive as such Mandatory Bonus, multiplied by (b) a fraction, the denominator of which is 365 and the numerator of which is the number of days elapsed from the last previous January 1 to the effective date specified in the Company's notice of termination. 6. Insurance. --------- The Company may from time to time apply for and take out in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability, or other insurance upon the Executive in any amount or amounts that it may deem necessary or appropriate to protect its interest. The Executive agrees to aid the Company in procuring such insurance by submitting to medical examinations and by filling out, executing, and delivering such applications and other instruments in writing as may reasonably be required by an insurance company or companies to which any application or applications for insurance may be made by or for the Company. 7. Indemnification. --------------- To the fullest extent permitted under the laws of the state of the Company's incorporation at the time of any action, the Company shall indemnify the Executive, if the Executive is made a party, or threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was an officer or director of the Company or any affiliate of the Company, in which capacity the Executive is or was serving the Company, against any and all liabilities, costs, expenses (including reasonable attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding. This Section 7 shall not limit in any way the Executive's rights under any agreement relating specifically to indemnification. 8. Other Provisions. ----------------- 8.1 Notices. ------- Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission, by courier, or sent by certified, registered, or overnight courier postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed, by courier, or sent by facsimile transmission, or, if mailed, five (5) days after the date of deposit in the United States mail, as follows: 4 (i) If to the Company, to: Unico American Corporation 23251 Mulholland Drive Woodland Hills, California 91364 Attention: President (ii) If to the Executive, to: Cary Cheldin 23251 Mulholland Drive Woodland Hills, CA 91364 Any party may change its address for notice hereunder by notice to the other parties hereto. 8.2 Entire Agreement. ---------------- This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. 8.3 Waivers and Amendments. ---------------------- This Employment Agreement may be amended, modified, superseded, cancelled, renewed, or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power, or privilege hereunder, nor any single or partial exercise of any right, power, or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder. 8.4 Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such State. 8.5 Counterparts. ------------ This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.6 Headings. -------- The headings in the Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 5 8.7 Binding Effect. -------------- All of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, whether or not there shall have been a formal assignment hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: UNICO AMERICAN CORPORATION A Nevada Corporation BY: /s/ Erwin Cheldin ----------------- NAME: Erwin Cheldin ITS: President BY: /s/ Roger Platten ----------------- NAME Roger Platten ITS: Vice President EXECUTIVE: /s/ Cary Cheldin ---------------- Cary Cheldin 6 EX-10.3 4 AMENDMENT TO EMPLOYMENT AGREEMENT - CARY CHELDIN To: Unico American Corporation January 10, 2000 23251 Mulholland Drive Woodland Hills, CA 91364 Attention: Erwin Cheldin, President From: Cary Cheldin 23251 Mulholland Drive Woodland Hills, CA 91364 Re: Amendment to Employment Agreement Pursuant to Sections 8.1 and 8.3 of the "Employment Agreement" entered into on the 27th day of November, 1996, between myself and Unico American Corporation, I, Cary Cheldin, hereby agree to waive certain rights as described below. These waivers are retroactive to December 1, 1996, and shall remain effective from December 1, 1996, until the expiration of the Employment Agreement on December 1, 2001. Nothing contained in the following waivers shall be construed to require me to reimburse the company for any compensation, however defined, which has already been paid to me. Waivers: 1. I, Cary Cheldin, hereby waive my right to the minimum annual salary increase provided under Section 3.1 of the Employment Agreement, provided however, that the annual salary in effect on December 31, 1999, is not decreased during the remaining term of the agreement. 2. I, Cary Cheldin, hereby waive my right to protection against the company's decision, if any, to decrease my annual bonus, as provided under Section 3.2 of the Employment Agreement. By Executive: /s/ Cary Cheldin ---------------- Cary Cheldin Date: 1-11-00 By Unico American Corporation: /s/ Erwin Cheldin ----------------- Erwin Cheldin Date: 1-11-00 By Unico American Corporation: /s/ Roger Platten ----------------- Roger Platten Date: 1-11-00 EX-27 5 FDS --
7 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 102,037,761 0 0 55,500 0 0 102,093,261 232,962 6,080,909 4,403,214 122,519,552 42,180,237 16,737,805 2,563,717 0 0 0 0 3,098,389 51,222,936 122,519,552 6,777,046 1,524,157 0 1,628,083 4,950,539 2,103,351 2,047,081 828,315 193,306 635,009 0 0 0 635,009 0.10 0.10 0 0 0 0 0 0 0
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