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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[XX] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For Fiscal Year Ended December 31, 1997 [Fee Required]
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES ACT OF
1934 [No Fee Required]
For the transition period _______________ to _______________.
Commission File No. 1-11976
UNAPIX ENTERTAINMENT, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-4404537
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
200 Madison Avenue, New York, NY 10016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 252-7600
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock American Stock Exchange
Class B Warrants American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (i) 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 (ii) has been subject to such filing requirements for the past 90
days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB ( ).
Issuer's revenues for its most recent fiscal year were $32,152,000.
The aggregate market value of the common stock held by non-affiliates of the
registrant is approximately $22,091,348 (based upon the closing sales price of
these shares on the American Stock Exchange on March 2, 1998).
On March 2, 1998, there was a total of 6,046,211 shares of the registrant's
common stock outstanding.
Documents Incorporated by Reference:
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1. Proxy statement for 1998 Annual Meeting incorporated in Part III.
2. Certain exhibits to Registration Statement, as amended, File No. 33-61798.
3. Certain exhibits to Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 1993.
4. Certain exhibits to Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 1993.
5. Certain exhibits to Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 1996.
6. Certain exhibits to Quarterly Report on Form 10-QSB for the quarterly
period ended March 31, 1997.
7. Certain exhibits to Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 1997.
8. Certain exhibits to Annual Report on Form 10-KSB for the year ended
December 31, 1993.
9. Certain exhibits to Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10. Certain exhibits to Annual Report on Form 10-KSB for the year ended
December 31, 1995.
11. Certain exhibits to Annual report on Form 10-KSB for the year ended
December 31, 1996.
12. Certain exhibits to Current Report on Form 8-K for Event of June 21, 1995.
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PART I
ITEM 1. BUSINESS
Unapix Entertainment, Inc. (the "Company") is a world-wide licensor,
distributor and producer of programming and feature films, for the television
market, including free and pay television, cable and satellite, and the home
video market, including video cassette, laser discs and digital video disks
("DVD"). The Company's current "library" of films and programs includes feature
films, non-fiction series, children's programming, educational and special
interest programming, musical concerts, comedy shows, adventure series and
classic films and serials (together with music videos and audio recordings,
"Properties").
Prior to 1993 the Company primarily focused on the international
distribution of older Properties. During 1993 the Company expanded its
activities to exploit the increasing worldwide demand for television programming
and home video products resulting from the fractionalization of the television
viewing audience. A shift has occurred from mass audiences dominated by a few,
free broadcast networks to niche audiences served by diverse cable, satellite
and free television services, home videocassette and other products. Since 1993
the Company has primarily focused on the licensing and distribution of newer
Properties that are designed to appeal to a specific segmented audience. In
1997 the Company produced a significant amount of non-fiction television
programs in order to further exploit this dynamic, and it expects this trend to
continue.
In March 1997, the Company completed the acquisition of all of the capital
stock of Miramar Images, Inc. ("Miramar"), which primarily produces and
distributes music videos and audio recordings for the New Adult Contemporary
Market, i.e., products that are designed to appeal to individuals over the age
of 25.
Currently, in addition to Miramar, the Company's operations consist
principally of the following: the distribution of videocassettes to domestic
home video rental stores primarily via sales to wholesalers, which is conducted
by A Pix Entertainment ("A Pix"); the distribution of Properties from the
Company's library to foreign broadcasters and home video publishers, which is
conducted under the name of Unapix International; the licensing of Properties to
the North American television market, which is conducted under the name Unapix
North America; and the marketing of products that are intended to be purchased
by consumers, which is conducted by Unapix/Miramar.
The Company was incorporated in Delaware on January 7, 1993 and is the
successor to Majestic Entertainment, Inc., which was incorporated in California
on January 6, 1986 and which was merged into the Company on March 23, 1993.
ACQUISITION OF FEATURE FILMS AND TELEVISION PROGRAMMING
The Company continuously monitors the industry for available films and
television programming and attempts to acquire rights to such Properties which
it believes are saleable to various markets. Before acquiring the rights to a
specific film or program, the Company analyzes its viability for licensing or
distribution in light of its projected costs and revenues and attempts to target
the Property's audience appeal. The Company includes in its calculation the
degree to which it will be able to exploit the Property through its various
distribution channels, including within the North America home video rental and
television markets, the international video and television markets and the
consumer markets. In determining the desirability of acquiring rights to films
or television programs, the Company examines their content, quality, theme,
participating talent (e.g., actors and directors), plot, format and other
criteria to determine the Properties' suitability for the commercial broadcast,
cable, satellite, pay television, and home video markets. In acquiring finished
films or programming, management typically views a program or film in its
entirety to evaluate its commercial viability.
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In order to obtain licensing or distribution rights with respect to films
or television programs, the Company generally enters into a licensing or
distribution arrangement with the copyright holder or another distributor (who
has a license from the copyright holder). The rights may be limited to specific
media (e.g., broadcast television, cable or home video) or to particular
geographic areas and, in general are exclusive rights to such media and/or
geographic areas. The rights are generally limited to a specified period of
time, ranging in most instances from seven to 21 years. In acquiring rights,
the Company usually pays a non-refundable advance and/or commits to expend a
certain amount of funds on promotion. In most cases, the producer or
distributor licensing the Property to the Company is entitled to receive the
revenues from the Company's distribution activities, after the Company has been
paid a specified distribution fee (which is a percentage of revenues) as well as
recouped its advance and specific recoupable marketing and other distribution
expenses. In acquiring videocassette distribution rights for the "sell-through"
market (and in many cases for the domestic home video rental market)the Company
will agree to pay the licensor a royalty equal to a specific percentage of
revenues; after the Company has recouped its advance, it will then pay the
licensor its royalty and the Company will be entitled to retain all remaining
revenues. The Company usually charges interest on its advances, which, similar
to the principal of the advances, is payable only out of royalties or
participations payable to the licensor.
While the majority of the films and television programs that the Company
acquired for distribution during 1997 were produced by others and had been
completed at the time the Company acquired rights therein, the Company has
increasingly been acquiring distribution rights in films and television programs
by funding all or a portion of their production. In exchange for such funding,
the Company may acquire, in addition to its distribution rights, an ownership
interest in the Property entitling it to a percentage of profits from any
distribution thereof (whether or not effectuated by the Company). Funding
productions often enables the Company to acquire distribution rights of longer
duration than it might otherwise have been able to obtain. In consideration for
its involvement in a production, the Company may also receive a credit as
Executive Producer and an Executive Producer's fee. Because production
arrangements necessarily entail unfinished programs, the Company is not able to
view the program prior to acquiring its rights, and therefore, there is the risk
that the finished product may be different from that which was initially
envisioned.
Production costs include the costs of acquiring or developing a screenplay,
film studio rental, cinematography, post-production and the compensation of
creative and other production personnel. Major studios (such as Universal
Pictures, Warner Brothers, Twentieth Century Fox, Sony Pictures Entertainment,
Paramount Pictures, and The Walt Disney Company) generally fund production costs
from cash flow from their motion picture and related activities or, in some
cases, from unrelated businesses. Independent production companies generally
avoid incurring substantial overhead costs by hiring creative and other
production personnel and retaining the other elements required for
pre-production, principal photography and post-production activities on a
project-by-project basis. Independent production companies often arrange for
financing on a project by project basis.
After acquiring rights in a feature film or television program prior to
production, the Company typically, at a minimum, has approval rights over key
product elements and maintains a production supervisory staff to carefully
monitor production and maintain quality control. However, to date, the Company
has not acted as an independent production Company with respect to feature
films. In connection with acquiring rights in non-fiction television
programming prior to production, the Company has (with increasing frequency)
been acting as an independent production company, retaining the personnel and
other elements required for production, and frequently developing concepts for
programs as well.
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To date, the Company has sought to limit its risk with respect to the
production of both television series and film. In connection with the
production of television series or programs, the Company generally limits its
initial funding to the creation of print materials or the production of a short
demo film. Additional financing of production by the Company is then
conditioned upon attaining a significant level of pre-sales of the series or
program based upon the demo film or print materials. Pre-sales consist of
license fees paid or committed to be paid to the producer by third parties in
return for the right to exhibit the program or to distribute it in home videos,
television, international or ancillary markets. While pre-selling a series
reduces the Company's risk, it does not entirely eliminate the risks to the
Company, which include the following: failure to complete the production and
deliver the programs in which case the Company will either not be entitled to be
paid by the licensee to whom it pre-sold the programs or may have to reimburse
amounts already paid; a delay in completing production as to some or all of the
episodes comprising a series, which would result in the Company's not being paid
according to schedule by the licensee to whom it pre-sold the series and could
result in cancellation of the sale; and actual production costs significantly
exceeding the original production budget, thereby materially increasing the
Company's cash flow requirements and decreasing the ultimate profitability of
the series. When a television program has a well-defined television or home
video audience and entails relatively limited production costs the Company has
funded its entire production without pre-selling the series. During 1997 the
Company completed production of approximately 65 hours of non-fiction television
programming.
In connection with the financing of a feature film, the Company generally
commits to provide an amount of funding that, when added to other financial
commitments the producer already has received, equals the production budget. In
most cases, the Company makes only limited commitments to advance funds prior to
completion of principal photography, when the bulk of production costs has
already been incurred. In addition, in most instances when the Company provides
production financing of a feature film the producer obtains a completion bond
that guarantees delivery of a finished film. In 1997 the Company co-financed
the production of eight films.
There is no assurance that in the future the Company will not change its
conditions for providing production financing for feature films or television
programs.
The Company believes that through production financing it can acquire
distribution rights to higher quality films and programs with better production
values and more recognizable stars, as well as on more favorable terms, than can
be obtained after a Property is completed.
To enhance the Company's position in a dynamic marketplace, given the
financial terms and available rights, the Company seeks to acquire distribution
rights in as many media and territories with respect to films and television
programs as is practicable. This permits a single Property to be marketed by
more than one of the Company's divisions and subsidiaries and has permitted the
Company to exploit new technological developments such as DVD.
VIDEOCASSETTE DISTRIBUTION OF FEATURE FILMS TO NORTH AMERICAN HOME VIDEO RENTAL
STORES
The Company, through A Pix Entertainment("A Pix"), is engaged in the
promotion and distribution of feature films for the home video rental market in
North America, consisting of video rental chains, individual video rental
stores, and supermarkets. Videocassettes distributed by the Company for this
market typically have a suggested retail price of approximately $95, which
generally is too high to result in sales to consumers.
The Company commenced distributing videocassettes to the home video rental
market in 1994, releasing a total of 22 films during that year. During 1995 and
1996 the Company released a total of 23 and 24 films, respectively. The Company
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released 25 films in 1997 and expects to release a similar number in 1998. Most
of the films distributed by the Company in this market to date have been films
that were released directly to the video rental market without any prior
exhibition in theaters or without a premiere on cable or broadcast television.
The market for home videos has become increasingly competitive and video
rental outlets are becoming more selective in their choice of product. In
addition, overall growth in the domestic home video market has slowed as growth
in the number of new outlets and new VCR homes has moderated. The growth in
outlets designed to serve the rental market has remained essentially flat or has
actually declined for the past several years. Furthermore technological
developments could make competing delivery systems economically viable and could
affect the home video marketplace. This has resulted in a significant decrease
in the number of A Pix's competitors.
The Company has been reacting to this evolving market by seeking to acquire
(i) increasingly higher quality films with more recognizable stars and better
production values that generally are targeted to niche audiences and (ii) all
North American distribution rights, which enables the Company's other divisions
to exploit new evolving technologies as well as presently existing distribution
channels such as the following: pay-per-view, which allows cable television and
satellite service subscribers to purchase individual programs; pay television,
which allows cable television subscribers to view premium channels such as
HBO/Cinemax and ShowTime/The Movie Channel; and broadcast and basic cable
television delivery systems, which allow viewers to receive, without charge,
programming broadcast over the air by affiliates of the major networks (ABC,
CBS, NBC and Fox), newly formed networks (UPN and WB Network), independent
television stations and cable and satellite networks and stations.
Approximately 68% of the Company's films distributed to the domestic home video
rental market during 1997 were subsequently licensed for exhibition on
pay-per-view and pay and basic cable television by the Company's North American
division. Almost all feature films released by A Pix are subsequently
distributed to the consumer market by Unapix/Miramar. In addition, certain
films that were previously released by A Pix are now being reformatted on DVD
for new distribution for purchase by consumers.
Notable films that have recently been released by A Pix or are scheduled to
be released by it within the next 12 months include the following: "Diary of a
Serial Killer," starring Gary Busey, Michael Madsen and Arnold Vosloo; "Bram
Stoker's The Mummy" starring Lou Gossett, Jr., which is scheduled to premiere on
HBO in October 1998; and "Little Punks" starring Cathy Moriarty and Randy Quaid.
INTERNATIONAL OPERATIONS
The Company, through its division Unapix International, exploits rights to
Properties in the international marketplace; marketing Properties to
broadcasters and others in more than 100 countries.
The Company's international library contains documentaries and television
series. Its library also contains films in the drama, adventure, comedy,
horror, musical, war and western genres as well as music videos from Miramar.
Many of the Company's recent acquisitions for international distribution consist
of documentaries and light entertainment programs from independent producers; a
number of which have aired on PBS, the Disney, Discovery and A&E Channels as
well as on The Learning Channel. In addition, during 1997 the Company funded
all or a significant portion of the production of approximately 64 hours of
non-fiction television programming that it could exploit in the international
marketplace.
During 1994, the Company formed a unit to concentrate on international
television distribution of educational programming. Currently, the unit has
over 350 hours of telecourse programming in diverse areas, such as science,
humanities, business, sociology, child development and art.
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Notable Properties that the Company commenced distributing in the
international marketplace in 1997 or the first quarter of 1998 include the
following: "Nova's Century of Discovery" (a series consisting of five two-hour
programs that explores 100 years of monumental achievements in a variety of
scientific fields); "Innovation" (a series consisting of three one-hour specials
exploring revolutionary medical technologies); "Banana Zoo" (a series consisting
of 26 half-hour programs that is designed to foster a child's love for nature
and animals); and "Inside the Actors Studio" (a series consisting of 42 one-hour
interviews with actors, directors, composers and playwrights that is exhibited
in the United States on Bravo, The Film and Arts Network and which won the 1997
Ace Award for Best Talk Show).
NORTH AMERICAN TELEVISION LICENSING
The Company, through its division Unapix North America, licenses the
Company's feature films and television programs to domestic and Canadian
television networks, independent television stations, satellite networks and
cable system operators. The Company also acts as a sales agent for other
distributors or producers with respect to the licensing of their programs in
these markets, for which the Company receives a sales commission.
Notable Properties that the Company has licensed in the North American
television market include the following: "Ushuaia: Adventures of Nicolas Hulot"
(a series consisting of 26 one-hour episodes of a television series that had
been broadcast in France for many years. The series began broadcast on CNBC in
January 1998); "Great Minds of Business," "Great Minds of Medicine," and "Great
Minds of Science," (each of which is a series consisting of five half-hour
programs. Each episode focuses on a significant innovator within the particular
subject matter of the series. The series were broadcast on 67% of the PBS
stations nationwide covering 18 of the top 20 domestic markets); and
"Superstructures" (a series consisting of five one-hour programs featuring
episodes on Nuclear Submarines, Tunnels, Skyscrapers, the Panama Canal and an
oil rig off the coast of Nova Scotia. Three episodes aired on The Learning
Channel ("TLC") in November 1997 and the last two episodes are slated to be
exhibited by TLC in June 1998).
CONSUMER PRODUCTS
The Company, through its division Unapix/Miramar, conducts "sell-through"
operations, marketing products that are intended to be purchased by consumers
(such operations were formerly operated through the Company's division known as
Unapix Consumer Products). Products marketed by this division primarily consist
of feature films, television series and special interest programs on
videocassettes. Typical suggested retail prices for videocassettes to be
marketed as sell-through range from $9.95 to $19.95. At such prices it is
believed that the product becomes attractive for consumer purchase.
A portion of the Company's sell-through operations is conducted under the
name "Inner Dimension." Inner Dimension currently distributes home videos and
audio books, which explore the dynamics of the human mind or body or
metaphysics, to retailers, mail-order companies, mass merchants and distributors
primarily in North America. Many of the Properties marketed by Inner Dimension
were the same Properties that the Company marketed prior to 1997 under the name
"Mystic Fire." The Company had operated Mystic Fire's catalogue and wholesale
business under exclusive license from 1995 through the end of 1996. Programs
distributed by Inner Dimension include PBS specials such as the following:
Andrew Weil's "Eight Weeks to Optimum Health" and "Spontaneous Healing;"
Caroline Myss' "Three Levels of Power and How to Use them" and "Why People Don't
Heal and How They Can;" Deepak Chopra's "The Seven Spiritual Laws of Success"
and "The Way of the Wizard;" and Joseph Campbell's "Mythos," hosted by Susan
Sarandon, which explores the world's most enduring archetypes.
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In addition to the Inner Dimension operations, the Company also distributes
for consumer purchase films and programs licensed and distributed by the Company
in other markets as well as Properties acquired by the Company solely for
sell-through distribution. The Company currently markets to consumers
approximately two titles per month that were previously released to the home
video rental market by A Pix; marketing for sell-through typically commences
approximately nine months after the initial rental market release. In addition
to those Properties distributed by Inner Dimension and also marketed by the
Company's other divisions, notable Properties currently being distributed by
Unapix/Miramar include the following: "The U.S. News & World Report" (a
collection of three television series and two television specials consisting of
a total of 34 hours of programming which are marketed by the Company under the
label "U.S. News & World Report Video"), "Tread" and "Retread" (a series of two
90 minute episodes of video road trips that follow the manic exploits of world
champion mountain biking athletes); and "Smithsonian World" (consisting of
thirteen one-hour programs, which explore modern culture).
MARKETING OF FEATURE FILMS AND TELEVISION PROGRAMS
In acquiring the rights to various film and television Properties, the
Company analyzes the viability of the Properties for distribution to the various
marketplaces in an effort to target the Properties' audience appeal. After such
analysis, the Company markets the Properties to the various media in a selective
manner. The Company and its key personnel have established contact with many
broadcasters, cable system operators and home video companies worldwide. The
Company also presents certain of its films and television programs to foreign
and domestic broadcasters, cable system operators and home video companies who
are in attendance at the various international and domestic television
programming conventions such as NATPE, MIP, MIP Asia, MIPCOM, DISCOP East
Europe, the London Screenings, and the Los Angeles Screenings. In addition,
with respect to certain of its non-fiction programming, i.e. to date its "Great
Minds" series, the Company has entered into arrangements with publications to
both promote the series and give the series greater prominence, such as Forbes
for "Great Minds of Business," Health magazine for "Great Minds of Medicine,"
and Discover magazine for "Great Minds of Science."
In connection with its distribution of films and television programming to
the international marketplace and its licensing of such Properties to the North
American television market, the Company licenses Properties for exhibition
primarily via pay, basic cable, pay-per-view and broadcast television, and, in
the case of international distribution, also via home video publishers. The
Company enters into license agreements with ultimate exhibitors, i.e.,
television networks, television stations and cable and satellite systems
operators, as well as sub-distributors. The Company does not, with some minor
exceptions, directly distribute videocassettes internationally, rather, its
licenses videocassette distribution rights to sub-distributors. During 1997 the
Company also licensed 67 feature films and eight television programs or series
(as well as nine music videos) for distribution on DVD.
The Company's license agreement with a customer typically grants the
customer an exclusive license to either exhibit or distribute a specific film or
television program for a specified term, territory and medium, and in the case
of a license to a pay television channel or a broadcast or cable television
operator, the right to exhibit the Property for a specified number of times.
Upon the execution of the license agreement, the Company typically delivers a
copy of the master of the film or television program in a format appropriate to
the customer's needs. In consideration for the granting of the license to a
specific film or television program, the Company receives a licensing fee,
which, in the case of a license granted to a distributor or a pay-per-view
television exhibitor, is a percentage of revenues from the licensee's
distribution or exhibition of the Property and may include an advance of the fee
which is then recoupable from what otherwise would have been payable to the
Company. In the case of a license granted directly by the Company to a
broadcast network or pay or basic cable television operator, the Company usually
receives a set license
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fee that is not dependent upon the amount of revenue achieved by the channel,
network or operator from the exhibition of the licensed Property.
In certain instances the Company has derived revenue streams from the
non-fiction programs that it has developed and produced from other than
licensing the Property for television exhibition or from videocassette, laser
disc or DVD distribution. During 1997 the Company sold a sponsorship of its
"Great Minds of Business" series to Travelers Insurance and a sponsorship of its
"Great Minds of Medicine" to Schering/Plough. The Company also licensed the
book rights to "Great Minds of Business" to John Wiley & Sons Publishing. The
Company will seek sponsors for certain of the future Properties that it develops
as well as seek to exploit certain of these programs in a number of different
distribution platforms as was the case with "Great Minds of Business."
The Company distributes videocassettes of feature films to the domestic
home video rental market primarily by selling them to ten wholesale
distributors, who then sell the videocassettes to rental outlets, such as video
rental chains, individual video rental stores, and supermarkets. The Company
also sells videocassettes directly to Blockbuster Entertainment. During 1997,
an aggregate of approximately 22% of the Company's total revenues on a
consolidated basis arose from sales to two (2) videocassette distributors,
Ingram Entertainment, Inc. and Baker & Taylor, and one rental chain, Blockbuster
Entertainment. The Company distributes videocassettes to the Canadian home
video rental market by sub-licensing the Canadian home video rights to a
Canadian distributor, who then distributes the Properties to Canadian rental
outlets. In addition, the Company sub-licenses laser disc and DVD rights to
other domestic and Canadian distributors, who directly or indirectly, sell the
laser discs and DVDs to retail outlets.
The Company selects an average of approximately two feature films for
release each month to the North American home video rental market.
Approximately sixteen weeks prior to a video's retail release, the Company
embarks on a marketing campaign that includes advertising in distributor mailers
and trade publications and direct mailing of marketing literature and screening
copies of the video. The Company sells video cassettes to the North American
home video rental market primarily on a "pre-order" basis. Distributors who
meet certain sales and performance objectives may earn rebates, return credits
and cooperative advertising allowances.
The Company believes that the packaging and art work for the video boxes,
posters, advertisements and other selling materials relating to the films it
distributes to the North American home video rental market are key factors in
determining the amount of sales. The Company designs the promotional campaign
for each such Property it releases. While some of the art works for packaging,
advertisements, trade show displays and posters are created entirely in-house,
the Company usually commissions outside parties to assist in the art work for
these materials. The Company then arranges for the printing, production and
distribution of all promotional materials.
Most of the feature films the Company distributes to the domestic home
video rental marketplace are released directly to that market. Since 1995 the
Company has not engaged in theatrical distribution, albeit it has distributed
films that were released by others theatrically. Films that are first released
theatrically are generally released to the home video rental market four to six
months after the theatrical release. Films that are first exhibited on cable
television are generally released to the home video rental market two to three
months after the television premiere. It is expected that in the future a
greater percentage of the films the Company releases for the home video rental
market will first be released theatrically or premiere on cable television.
Currently, two of the films that A Pix expects to release to the home video
rental market within the next 12 months, "Bram Stoker's The Mummy" and "Devil
in the Flesh," have been licensed by the Company's North American division to
premiere on HBO during 1998. The Company believes that a theatrical release or
pay cable premiere of a film should complement its home video release by
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generating greater interest and awareness of the film before it is marketed for
home videos.
The Company markets films and television programs that are intended to be
purchased by consumers by the following means: (i) selling to distributors and
"rack-jobbers" who then sell the products to large retail outlets (such as "Best
Buy," "Music Land" and "Tower Records"), convenience stores (such as "Seven
Eleven") or mass merchants (such as "Sears"), or otherwise market the products
via shelf space they occupy at these locations, for resale to the ultimate
consumer, (ii) direct response advertisements appearing on the Company's
videocassettes and at the end of broadcasts of some of the Company's programs,
and (iii) sales to specialty retail outlets (such as governmental agencies, gift
stores, libraries, museums, Radio Shack, The Nature Company, The Sharper Image
and General Nutrition Centers). In addition, the Company markets Properties
directly to consumers through their inclusion in catalogues operated by the
Company and others.
MUSIC VIDEOS AND AUDIO TAPES AND COMPACT DISCS - MIRAMAR IMAGES, INC.
On March 17, 1997 the Company acquired all of the capital stock of
Miramar Images, Inc. ("Miramar") for an aggregate purchase price of
approximately 313,500 shares of the Company's common stock. The Company's
shares had an aggregate fair market value of approximately $1,400,000 as of
the closing date and were issued and delivered to certain creditors and
shareholders of Miramar in exchange for Miramar capital stock and Miramar
debt owed to them. Additionally the Company incurred cash costs of $736,000
and assumed liabilities of $964,000 in connection with the Acquisition.
Miramar primarily produces and distributes music videos and audio
recordings for the New Adult Contemporary market, i.e., products that are
designed to appeal to individuals over the age of 25. Miramar's videos are
primarily long form music videos that match visual images with music rather than
attempting to tell a story. Miramar commenced operations in 1985 and was known
primarily as a "New Age" label. Early Miramar productions included "Natural
States," "Desert Vision," and "Canyon Dreams." During the 1990's Miramar
progressed from merely being a "New Age" label and began producing videos that
utilize a computer animated medium rather than traditional cinematography, such
as "The Mind's Eye," "Beyond the Mind's Eye" and "The Gate to the Mind's Eye."
During 1997 Miramar continued this trend by releasing "TeleVoid," which was
first released on DVD and is now being marketed on videocassette. Miramar
markets the soundtracks to a number of its videos separately as audio products.
In addition, Miramar's record division produces and markets audio albums
independent of videos. Artists who have recorded on the Miramar label include
the following: Tangerine Dream; Pete Bardens; Jan Hammer; Thomas Dolby; and
Abraxas Pool. Audio only albums that have been released by Miramar include:
"Drive"; "220 Volt Live"; and "Tyranny of Beauty." While most of Miramar's
products are marketed to adults, Miramar has a children's line of videos,
examples of which are "Gift of the Whales," "Imaginaria," and "Elroy's Toy."
Currently Miramar has distribution rights with respect to 36 video titles and 93
audio titles.
A significant portion of Miramar's videos are conceived of entirely by
Miramar in-house personnel. After a concept has been agreed upon, Miramar will
license existing film footage from film libraries or retain cinematographers,
usually on a "work for hire" basis, to create the visual images for the video.
Licenses for film footage typically will require a small royalty advance as well
as payment of a small royalty in exchange for the right to use the film footage.
Computer animation and nature/soundscape long-form music videos have been
created in this manner. Miramar also obtains manufacturing and distribution
rights for a significant portion of its videos through licenses from independent
production companies. These licensed productions include children's
educational, children's animation and nature/soundscape titles which, in the
opinion of Miramar's management, have the look and feel of Miramar's own
productions. The remainder of Miramar's videos consist of both videos which are
compilations of existing
10
<PAGE>
Miramar video product and independently produced videos with respect to which
Miramar has purchased all copyrights.
Soundtracks for videos as well as recordings that are released only as
audio compact discs and tapes are primarily obtained from artists and their
agents who approach Miramar seeking a distribution label. In almost all cases,
the music has been recorded on a relatively high quality master when it is
presented to Miramar. Miramar may re-sequence and remix the master, however,
rarely will it arrange for a record to be produced by an artist in a recording
studio.
Most recordings are acquired by Miramar's purchasing the master. Such
master purchase arrangements usually enable Miramar to have distribution rights
in all media and territories in perpetuity to the recordings thereon. The
artist is usually prohibited from rerecording the music on the master for a
period of three to seven years. To a lesser extent, Miramar may acquire
recordings by obtaining the exclusive right to distribute the recordings on
audio tapes and compact discs, and where applicable, use the recordings in
conjunction with videos. The license will usually be limited to a certain time
period and territory. In acquiring distribution rights to recordings under
either master purchase arrangements or license agreements, Miramar usually pays
a small royalty advance as well as royalties based upon net sales. In some
instances Miramar may sign an exclusive recording agreement with a particular
musician or musical group, whereby Miramar agrees to acquire the recording that
has already been presented to Miramar by the musician or musical group and has
the option to acquire the next subsequent recordings at an agreed upon fee
structure.
Miramar distributes its products to both the "traditional retail
marketplace," such as retail record and video stores and chain bookstores, as
well as specialty retail outlets (alternative markets), such as governmental
agencies, gift stores, libraries, museums, Radio Shack and The Sharper Image.
In January, 1998 Miramar entered into a distribution agreement with Distribution
North America ("DNA"), a division of Valley Media, Inc., for distributing its
videocassettes and audio compact discs and tapes in the "traditional retail
marketplace" in United States, which is the principal territory in which
Miramar's products are sold. The distribution agreement with DNA expires in
January 2001. Miramar maintains an in-house sales department that promotes and
markets its products particularly targeting the alternative market; it also
utilizes radio air play, television exposure, retail promotion, and publicity
and advertising to create demand within both the traditional and alternative
markets. Miramar from time to time has licensed its videos for exhibition on
PBS and the Disney Channel. It also markets its products through direct
response television advertisements and direct mail, including through catalogues
operated by the Company and others.
FOREIGN SALES
Revenues derived by the Company from foreign markets were
$6,358,000 and $4,805,000, in the years ended December 31, 1997 and 1996,
respectively. The Company is subject to various risks inherent in foreign trade
which could have a significant impact on the Company's ability to market its
Properties competitively. These risks include economic or political instability
and artificial ceilings placed on the demand for the Company's Properties in
foreign markets by foreign government's implementation of local content and
quota requirements prohibiting or limiting the quantity of foreign-made feature
films and television programs which may be exhibited or broadcast in one or more
foreign countries.
GOVERNMENT AND OTHER REGULATION
United States television stations and networks as well as foreign
governments impose restrictions on the content of motion pictures which may
restrict in whole or in part exhibition on television or in a particular
territory. There can be no assurance, therefore, that current or future
11
<PAGE>
restrictions on the content of the Company's films, may not limit or affect the
Company's ability to exhibit certain of such motion pictures in such media or
markets.
EMPLOYEES
Currently the Company and its subsidiaries, including Miramar, have 80
employees, five of which are part-time.
COMPETITION
Success in the distribution of films, television programming and audio
compact discs and tapes is largely dependent upon a company's ability to acquire
distribution rights to products at attractive prices and upon the subsequent
performance of these products in the marketplace. The Company faces significant
competition both in obtaining distribution rights and in selling products.
Competition for distribution rights to films, television programs and
recordings is based primarily on the amount of royalty advances that companies
are willing to offer to producers and recording artists and the producers' and
artists' perception of the Company's marketing capabilities and its commitment
to marketing the property. The Company's principal competitors for acquisitions
of films and television programs are companies such as New Line Cinema, Live
Entertainment, Trimark Entertainment, Columbia Tristar Home Video, BMG
Entertainment, All American Television and Tapestry International. The
Company's principal competitors for recordings are Windham Hill, Private Music,
and Narada Media; however, to the Company's knowledge, Private Music and Narada
Media do not produce or distribute long form music videos to any significant
extent. Many of the Company's competitors have significantly greater financial
resources and longer operating histories than the Company. In general, the
Company acquires films, television programming, videos and recordings that are
designed to appeal to a specific and limited audience, and which can be promoted
with a limited advertising budget. Many of the films and television programs
the Company acquires may appeal to such a targeted audience that competitors who
are financially stronger than the Company may not actively pursue them, and the
competitors that do seek to acquire distribution rights in them may be
financially weaker than the Company, do not have as good a marketing reputation,
or are unable to exploit the films or programs in as many markets as the Company
(i.e. domestic television, domestic home video rental, consumer or international
markets). Most of the recordings that Miramar seeks to acquire are not pursued
by major record labels because of their limited appeal. The Company believes
that Miramar can compete against other smaller record labels for acquisitions of
recordings because of Miramar's reputation in the industry and the fact that it
produces videos that it believes attract artists to its label as such videos
provide another outlet for their music.
In marketing films, television programs, recordings and music videos, the
Company competes against the same competitors with whom it competes for the
acquisition of such products, as well as major studios and record companies,
such as Time/Warner, The Walt Disney Company, MCA, Paramount, Fox,
Sony/Columbia, and Geffen Records. Since the Company expends significantly less
on product acquisitions than many of these competitors it believes it can
produce profits from even modest sales volumes.
SERVICEMARKS AND TRADEMARKS
The Company has registered the service mark "UNAPIX" and the trademark
"MIRAMAR PRODUCTIONS" with the United States Patent and Trademark Office. The
Company has applied for federal registration of the following trademarks or
service marks: "A-PIX," "INNER DIMENSION," "UNAPIX FILMS," "UNAPIX CONSUMER
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<PAGE>
PRODUCTS," "THE HORROR SHOP," "GREAT MINDS OF ," "Miramar" and
related logo treatments and designs.
FACTORS WHICH MAY AFFECT RESULTS
THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
SUCH STATEMENTS MAY CONSIST OF ANY STATEMENT OTHER THAN A RECITATION OF
HISTORICAL FACT AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "EXPECT," "ESTIMATE," "ANTICIPATE," "MAY," "BELIEVE," OR "CONTINUE" OR
THE NEGATIVE THEREOF AND SIMILAR EXPRESSIONS AND VARIATIONS THEREOF. THE READER
IS CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS ARE NECESSARILY SPECULATIVE AND
THAT THERE ARE CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR
RESULTS TO DIFFER MATERIALLY FROM THOSE REFERRED TO IN SUCH FORWARD-LOOKING
STATEMENTS. CERTAIN OF THOSE RISKS AND UNCERTAINTIES ARE SET FORTH BELOW.
HOWEVER, THE RISKS HIGHLIGHTED BELOW AND ELSEWHERE IN THIS ANNUAL REPORT SHOULD
NOT BE ASSUMED TO BE THE ONLY THINGS THAT COULD AFFECT THE COMPANY'S FUTURE
PERFORMANCE. THE COMPANY DOES NOT HAVE A POLICY OF UPDATING OR REVISING
FORWARD-LOOKING STATEMENTS AND THUS IT SHOULD NOT BE ASSUMED THAT SILENCE BY THE
COMPANY'S MANAGEMENT OVER TIME MEANS THAT ACTUAL EVENTS ARE BEARING OUT AS
ESTIMATED IN SUCH FORWARD-LOOKING STATEMENTS.
NATURE OF THE ENTERTAINMENT INDUSTRY - The film, television programming and
audio compact disc and tape distribution business involves a substantial degree
of risk. The success of a product depends upon unpredictable and changing
factors such as competition and audience acceptance, which may bear little or no
correlation to the Company's production and other costs. Audience acceptance of
the Company's products represents a response not only to the artistic components
of the products, but also to the level of advertising and promotion by the
distributor and availability of alternative forms of entertainment and leisure
time activities, general economic conditions and public taste, and other
intangible factors, all of which change rapidly and cannot be predicted with
certainty. In addition, as a result of the Company increasing its resources to
film and television product earlier in its production and acquisition stages,
the possibility always exists that the finished product may be different from
that which was initially envisioned. Therefore, there is a substantial risk
that some or all of the Company's products may not be commercially successful,
resulting in costs not being recouped or anticipated profits not being realized.
CAPITAL INTENSIVE INDUSTRY; ADDITIONAL FINANCING REQUIREMENTS - The film,
television programming and audio compact disc and tape distribution and
licensing industry is capital intensive and requires significant expenditures of
funds to establish a library of Properties from which revenues may be
generated. The Company could be dependent upon future financing in order to
compete more effectively in the marketplace. The Company's cash requirements
have been and will continue to be significant. If additional funding is
unavailable to the Company when needed, the Company could be required to curtail
significantly one or more aspects of its operations and the Company's business
and financial condition could be materially adversely affected.
DEPENDENCE UPON KEY PERSONNEL - The Company is highly dependent on the services
of Herbert M. Pearlman, its Chairman of the Board, David M. Fox, its President,
David S. Lawi, its Treasurer and Chairman of the Executive Committee, Scott
Hanock, its Senior Vice President and Managing Director of International Sales
and Marketing, and Robert Baruc, its Executive Vice President (and President of
A Pix Entertainment). The loss of the services of one or more of Messrs.
Pearlman, Fox, Lawi, Hanock, or Baruc would have a material adverse effect upon
the Company's business. Presently, the Company has key man life insurance only
on the lives of Messrs. Fox and Baruc, in the amounts of $1,000,000 and
$750,000, respectively.
COMPETITION - The Company currently competes with other home video and
television licensing and distribution companies as well as other recording
companies, including many of which have longer-standing relationships in the
industry, significantly greater financial resources and more extensive libraries
13
<PAGE>
than the Company. There can be no assurance that the Company will be able to
compete successfully against these other companies.
SHIFT IN STRATEGY - Although members of management of the Company have prior
experience in film and television program productions, the Company itself has a
limited track record in such activities. This shift in strategy toward an
increased emphasis on motion picture production may increase the rewards
available to the Company, but may increase the risks as well.
ITEM 2. PROPERTIES
The Company's principal executive offices, consisting of approximately
11,254 square feet, are located at 200 Madison Avenue, 24th Floor, New York, New
York 10016. The Company occupies these offices pursuant to an eleven-year lease
that commenced in May 1996 and provides for annual rent of $281,350 during the
first three years, annual rent of $298,231 during the next three and one-half
years, and annual rent of $320,739 during the remainder of the lease term.
The Company also leases approximately 3,400 square feet of office space
located at 4515 Van Nuys Boulevard, Sherman Oaks, California 91403. The current
lease is for a term of three years, commencing April 1996, at a base annual rent
of $44,400 for the first year, $45,600 for the second year and $46,200 for the
third year. This space is used for the offices of Unapix International.
The Company also shares occupancy, with three other affiliated
corporations, of 4,500 square feet of office space located at 537 Steamboat
Road, Greenwich, CT. All four corporations are tenants under a lease which is
for a term of three years commencing May 1995 with an annual base rent of
$99,000 for the first year, $103,500 for the second year and $108,000 for the
third year. The Company currently pays approximately 25% of the rent.
Miramar's offices, consisting of approximately 7,000 square feet of office
space, are located at 200 Second Avenue West, Seattle, Washington 98119.
Miramar occupies these offices pursuant to a lease expiring in January 1999,
which provides for a current base annual rent of $99,000.
The Company believes that its office space is adequate for its current
needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings which have arisen in the
normal course of business. The Company believes that any liability which may
arise as a result of any such proceeding will not have a material adverse effect
on its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 6, 1997, the Company held its 1997 Annual Meeting of
Stockholders at which stockholders elected Lawrence Bishop and Walter M. Craig,
Jr. as directors of the Company to serve until the Company's Annual Meeting of
Stockholders in the year 2000, or until their successors are duly elected.
4,455,120 shares were voted in favor of the election of such individuals and
votes were withheld with respect to 110,910 shares. In addition to the
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<PAGE>
individuals elected as directors at the 1997 Annual Meeting, Messrs. Herbert M.
Pearlman, David M. Fox, David S. Lawi, Robert Baruc, Scott Hanock and Martin D.
Payson continue to serve as directors of the Company.
The stockholders also approved an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock from
20,000,000 shares to 40,000,000 shares. The holders of record of 4,373,078
shares voted in favor of the amendment, including 3,985,752 shares of Common
Stock, 151,665 shares (including 43,331 shares of Common Stock) voted against
the amendment and 41,287 shares elected to abstain.
In addition, the stockholders also approved an amendment to the Company's
1993 Stock Option Plan (the "Plan") at the Annual Meeting. The amendment
increases the number of shares authorized for issuance under the Plan from
600,000 shares to 875,000 shares. Holders of 4,299,730 shares voted in favor of
the amendment, holders of 223,655 shares voted against the amendment and holders
of 42,645 shares voted to abstain with respect to the resolution.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) MARKET INFORMATION
The Company's Common Stock and Class B Warrants are primarily traded on the
American Stock Exchange (the "AMEX") under the symbols UPX and UPX.WS.B,
respectively.
The following table sets forth the range of high and low sales prices of
the Company's securities as reported by the AMEX.
<TABLE>
<CAPTION>
American
Stock Exchange
--------------
Low High
--- ----
<S> <C> <C>
1996
- ----
First Quarter Common Stock 4 3/8 5 1/2
Class B Warrants 7/8 1 3/8
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
Second Quarter Common Stock 3 5/8 4 11/16
Class B Warrants 1/2 1 3/16
Third Quarter Common Stock 3 1/2 4 7/8
Class B Warrants 9/16 7/8
Fourth Quarter Common Stock 3 1/4 4 7/16
Class B Warrants 7/16 3/4
1997
- ----
First Quarter Common Stock 3 13/16 4 3/4
Class B Warrants 9/16 7/8
Second Quarter Common Stock 3 9/16 4 11/16
Class B Warrants 9/16 1
Third Quarter Common Stock 4 1/8 4 15/16
Class B Warrants 5/8 1
Fourth Quarter Common Stock 3 13/16 5 3/8
Class B Warrants 9/16 1 5/16
</TABLE>
___________________________
(b) HOLDERS
As of March 3, 1998, there were, to the best of the Company's knowledge,
approximately 201 and 29 holders of record (not beneficial holders) of the
Company's Common Stock and Class B Warrants, respectively.
(c) DIVIDENDS
The Company has not paid any cash dividends. The Company does not
anticipate paying any cash dividends in the foreseeable future, and is
prohibited from paying any cash dividends on its common stock under its working
capital credit facility. In April 1996 the Company declared a 5% stock dividend
on its outstanding shares of Common Stock. The record date for the dividend was
Monday, April 22, 1996, and the payment date was Monday, May 6, 1996.
(d) RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is a description of all sales of unregistered securities
during the fourth quarter of 1997 (sales of unregistered securities during the
first three quarters of 1997 were previously reported on the Company's Quarterly
Reports on Form 10-QSB).
In October through December of 1997 the Company sold a total of 5.2 Units
of its securities. Each Unit was priced at $250,000 and consisted of (i) a
$250,000 principal amount 10% Convertible Subordinated Note due June 30, 2004,
convertible into the Company's common stock, $.01 par value per share ("Common
Stock"), at an conversion price of $5.00 per share; and (ii) 25,000 common stock
purchase warrants, each entitling the holder to purchase one share of common
stock at price of $6.00 per share and expiring June 30, 2004. The offering was
made pursuant to the exemption contained in Section 4(2) of the Securities Act
of 1933, as amended (the "Act"). All of the investors were "accredited" (as
such
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<PAGE>
term is defined in Rule 501 of Regulation D promulgated under the Act). In
connection with the sale of the Units, the Company incurred a placement agent
fee of: $65,000 in cash; and 26,000 common stock purchase warrants, each
entitling the holder to purchase one share of Common Stock at a price of $5.00
per share and expiring December 31, 2002 (the "Placement Fee Warrants"). The
Placement Fee Warrants were issued pursuant to the exemption contained in
Section 4(2) of the Act.
A total of 1,125 shares of Common Stock are issuable to a public relations
firm as partial consideration for services rendered during the fourth quarter of
1997. The shares were issued pursuant to the exemption contained in Section
4(2) of the Act.
Also see "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources" for a description of a private placement of
$5,250,000 of convertible notes that closed in February 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Revenues for the year ended December 31, 1997 increased by 43%, to
$32,152,000 from $22,413,000 in 1996. This increase in revenues is primarily a
result of the increase in licensing and distribution revenues by 90%, to
$12,671,000 as compared to $6,673,000 in 1996 due to the release of productions
to the markets, the continued growth of the library through acquisitions and
aggressive marketing in the domestic and foreign marketplaces. It is expected
that improvement in licensing revenues will be realized in 1998. In addition,
home video revenues increased by 24%, to $19,481,000 from $15,740,320 in 1996.
This increase was largely due to a significant increase in sales volume by the
video sell-through operations which began in 1996, and to a lesser extent to the
distribution of higher quality films to the rental marketplace. Sell-through
revenues are expected to increase significantly in the second half of 1998, due
to the continued growth in the Company's library of programming. The Company
released 25 films to the rental marketplace in 1997. It is expected that the
Company will release a similar number of films in 1998, however, these releases
will be of higher quality films which should increase revenue.
Licensing and distribution costs for the year ended December 31, 1997
increased by 90%, to $8,947,000 as compared to $4,704,000 in 1996. This increase
reflects increased royalty and amortization expense associated with the higher
levels of revenues described above. The increase in home video operating costs
of 21% to $12,574,000 from $10,373,000, represents the amortization of film
costs and royalty expense related to the increase in home video revenues,
described above.
General and administrative costs increased by 18%, to $7,364,000 for the
year ended December 31, 1997, as compared to $6,224,000 in the same period in
1996. This increase is chiefly attributable to costs related to the
infrastructure required to support the Company's expansion and diversification.
These costs mainly consisted of increased staffing and office costs to support
the increased sales activity described above.
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<PAGE>
Interest and debt expense increased to $1,433,000 in 1997 from $541,000 in
1996. The increase reflects the interest and related expenses on the increase
in the 10% Convertible Notes issued in 1997 and the second half of 1996, as well
as increased borrowings under the bank line of credit.
The Company had income before taxes of $2,293,000 for the year ended
December 31, 1997 compared to $989,000 for the year ended 1996. The
increase is due to the increase in sales volume described above, partially
offset by increases in general and administrative expenses and interest
costs. Management anticipates that as the number of higher quality and
higher margin releases to the video and the licensing and distribution
markets increase in 1998, the impact on operating results should continue to
be favorable.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1997, the Company had operating cash
inflows of $10,791,000, as compared to $10,395,000 for the prior year.
Investing activity cash requirements of $20,570,000 in 1997, largely
consisting of film cost expenditures and expenditures relating to the
acquisition of Miramar Images, were primarily met by cash inflows from
operations, the proceeds of the private offerings of 10% convertible
subordinated notes, described below, increased utilization of the Company's
credit facility, and cash on hand.
In the normal course of business the Company makes certain guarantees to
producers and other third parties as to the minimum amount such parties will
receive from the Company's distribution of their products. The Company has
committed to pay film acquisition advances and guarantees of approximately
$3,000,000 as of December 31, 1997, which amounts are payable upon delivery
of the films. The Company also expects to incur significant additional costs
relating to its continued expansion. The Company has met its funding needs
through utilizing cash on-hand, operating cash flows, its line of credit and
other financings, including the financings described below.
In the first half of 1997, the Company completed $1,250,000 of private
offerings of units, each consisting of: a $250,000 principal amount 10%
convertible subordinated note due June 30, 2003 convertible into the
Company's common stock at a price of $4.50 per share and warrants to purchase
25,000 shares of the common stock, at an exercise price of $6.00 per share
expiring June 30, 2003. (for further details concerning these private
placement see footnote 4).
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On May 2, 1997, the Company entered into a credit facility (the
"Facility") with Imperial Bank (the "Bank") providing for borrowings of up to
$7,000,000. The Facility was amended on March 25, 1998 to provide for
borrowings of up to $10,000,000. Loans are extended and required to be
repaid based upon the Company's outstanding accounts receivable and other
contractual rights to payment. Interest on the outstanding loan balance
accrues at a rate of 1.25% per annum in excess of the Bank's publicly
announced benchmark rate (9.75% at December 31, 1997). The Company paid
facility fees of $112,500 and is also required to pay an unused credit line
fee at a rate equal to .5% per annum of the amount by which the collateral
base exceeds the average daily loan balance during any calendar quarter. The
term of the facility expires on September 30, 1998. The Company expects to
renew or replace the facility prior to its scheduled maturity. Oustanding
amounts under the facility are secured by a security interest in
substantially all of the Company's assets. The facility contains restrictive
covenants, including a prohibition on the payment of cash dividends on the
Company's Common Stock and replaces the Company's previous credit facility of
$2,500,000 with Atlantic Bank of New York (see footnote 4).
In the first quarter of 1998, the Company completed a private placement of
$1,300,000 principal amount of 10% convertible notes due June 30, 2004
($1,275,000 was received in 1997 and $25,000 was received in 1998). The
notes are convertible into common stock at $5.00 per share. For every $1,000
principal amount of notes purchased, the holders also received warrants to
purchase 100 shares of common stock at $6.00 per share expiring June 30,
2004.
In February 1998, the Company issued, in a private placement, $5,250,000
principal amount of 10% convertible subordinated debentures due June 30, 2003
convertible initially into common stock at $4.75 per share. The conversion
price is subject to adjustment in certain circumstances, including resets at
September 1, 1998 and March 1, 1999 to 110% of the then current market price
of the common stock but not less than $4.00 and $3.50, respectively. For
every $1,000 principal amount converted, the holder will recieve warrants to
purchase 125 shares of common stock (an aggregate of 656,250) at $6.00 per
share expiring June 30, 2003. If a holder converts the note prior to
September 1, 1999, (the first date that the notes can be redeemed at the
Company's option), the holder will receive an amount equal to 75% of the
interest which would have accrued from date of conversion through September
1, 1999. The Company also issued warrants expiring June 30, 2003 to purchase
42,500 shares of common stock at $6.00 per share as a placement fee. Notes
in the principal amount of $900,000 were issued to certain investors in the
film acquisition fund in exchange for their interests therein (Note 4).
Short term loans aggregating $1,000,000 were obtained in December 1997
and in 1998 from Mezzanine Financial Corp., the Chairman ($150,000) and the
Secretary ($100,000) in order to enable the Company to fund program
acquisitions in accordance with its expansion plans pending the completion of
the private offering of 10% convertible notes. The Chairman and Secretary
are also officers and directors of Mezzanine Financial Corp. Upon completion
of the offering, proceeds of $250,000 were used to repay the loans from the
Chairman and the Secretary, and proceeds of $650,000 were used to repay
Mezzanine Financial Corp. The remaining $100,000 of the Mezzanine loan was
exchanged for an equivalent amount of 10% convertible subordinated notes.
(See footnote 13)
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company will need additional funding sources to meet its cash
requirements for the upcoming year as well as for future acquisitions. The
feature film, television and audio compact disc and tape licensing and
distribution industries require significant expenditures of funds to
establish and expand a library of films, programs and audio products from
which revenues may be generated. The Company could be dependent upon future
financing to continue its long term plans of expansion and growth. The
Company anticipates that as its asset base grows it will secure increasing
working capital lines of credit as well as explore other film acquisition
financing arrangements. It is also possible that the Company may have
additional debt or equity financings.
ITEM 7. FINANCIAL STATEMENTS.
See financial statements set forth in Item 13 of this annual report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by Item 9 is incorporated herein by reference to
the information set forth under the sections entitled "ELECTION OF DIRECTORS and
"EXECUTIVE OFFICERS" in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders for 1998 to be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1997 (the "Proxy
Statement").
ITEM 10. EXECUTIVE COMPENSATION.
The information required by Item 10 is incorporated herein by reference to
the material under this heading in the Proxy Statement.
20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 11 is incorporated herein by reference to
the information under this heading in the Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 12 is incorporated herein by reference to
the information under this heading in the Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report............... F-1
Consolidated Balance Sheet as of
December 31, 1997....................... F-2
Consolidated Statements of Operations
for the years ended December 31, 1997
and 1996................................ F-3
Consolidated Statements of Changes in
Stockholders' Equity for the years
ended December 31, 1997 and 1996........ F-4
Consolidated Statements of Cash Flows
for the years ended December 31, 1997
and 1996................................ F-5
Notes to Consolidated Financial Statements. F-7
</TABLE>
21
<PAGE>
[LETTERHEAD OF RICHARD A. EISNER & COMPANY]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Unapix Entertainment, Inc.
We have audited the accompanying consolidated balance sheet of Unapix
Entertainment, Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the years in the two-year period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the consolidated financial position of Unapix
Entertainment, Inc. and subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their consolidated cash flows
for each of the years in the two-year period then ended in conformity with
generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
March 27, 1998
F-1
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
ASSETS (Note 4)
Cash and cash equivalents $ 425
Accounts receivable- trade, net of allowances of $1,610 14,355
Film costs, released films, net of amortization
of $41,630 17,535
Film costs, unreleased films and films in process 6,277
Product inventory 1,653
Property and equipment, net 685
Other assets 3,139
Excess of cost over fair value of net assets acquired 3,002
----------
Total Assets $ 47,071
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities :
Accounts payable and accrued expenses $ 7,306
Deferred income taxes 997
Royalty payable 3,745
Bank line of credit 6,793
Advances from affiliates 300
Acquisition fund payable 1,035
Variable rate senior subordinated notes 2,864
10% convertible subordinated notes 8,001
--------
Total Liabilities $ 31,041
----------
Stockholders' Equity :
Common stock $.01 par value per share; 40,000,000
shares authorized; 6,002,000 shares issued and
outstanding 60
Cumulative convertible series A 8% preferred stock,
$.01 par value per share; 3,000,000 shares
authorized; 505,000 shares issued and outstanding
(aggregate liquidation preference of $1,515) 5
Additional paid-in capital 17,179
Notes receivable from equity sales (2,017)
Retained earnings 803
----------
Total Stockholders' Equity $ 16,030
----------
Total Liabilities and Stockholders' Equity $ 47,071
----------
----------
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996
---- ----
<S> <C> <C>
Revenues:
Licensing and distribution $ 12,671 $ 6,673
Home video 19,481 15,740
------------ ------------
32,152 22,413
------------ ------------
Operating costs:
Licensing and distribution 8,947 4,704
Home video 12,571 10,373
General and administrative expenses 7,364 6,224
------------ ------------
28,882 21,301
------------ ------------
Income from operations before other income (expenses) 3,270 1,112
------------ ------------
Other income (expenses):
Interest and debt expense (1,433) (541)
Interest income 456 418
------------ ------------
(977) (123)
------------ ------------
Income before provision for income taxes $ 2,293 $ 989
Provision for income taxes 946 400
------------ ------------
Net income $ 1,347 $ 589
------------ ------------
------------ ------------
Net income per basic common share $ .21 $ .09
------------ ------------
------------ ------------
Net income per diluted common share $ .19 $ .08
------------ ------------
------------ ------------
Weighted average number of basic common shares
outstanding 5,796 5,268
------------ ------------
------------ ------------
Weighted average number of diluted common shares
outstanding 6,465 5,838
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Convertible Preferred
Common Stock Stock
------------ ---------------------
Notes Retained
Par Par Additional Receivable Earnings
Value Value Paid-in on Stock (Accumulated)
Shares ($.01) Shares ($.01) Capital Sales (Deficit) Total
------ ------ ------ ------ ------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1996 4,931 $49 654 $ 7 $14,723 ($2,091) ($1,073) $ 11,615
5% stock dividend 249 3 (3) - -
Notes receivable on common
stock sales and
exercise of warrants 58 - 58
Warrant, option and
private placement
expenditures (86) - (86)
Issuance of common stock 3 - 12 - 12
Preferred stock dividend 23 - (138) (138)
Common stock issued in
lieu of cash dividend 86 86
Issuance of warrants 679 - 679
Preferred stock conversion 119 1 (116) (2) - - (1)
Net income for the year
ended December 31, 1996 589 589
------- ------- -------- -------- ---------- ---------- --------- -----------
Balance at
December 31, 1996 5,325 53 538 5 15,273 (2,033) (484) 12,814
Notes receivable on common
stock sales and
exercise of warrants 16 16
Acquisition of subsidiary 314 3 1,397 1,400
Exercise of options and
warrants 109 2 271 273
Warrant, option and
private placement
expenditures (14) (14)
Issuance of common stock 202 2 7 9
Preferred stock dividend 19 (61) (60) (121)
Common stock issued in
lieu of cash dividend 82 82
Issuance of warrants 224 224
Preferred stock conversion 33 (33)
Net income for the year
ended December 31, 1,347 1,347
1997 ------- ------- -------- -------- ---------- ---------- --------- -----------
Balance at
December 31, 1997 6,002 $60 505 $5 $17,179 ($2,017) $803 $16,030
------- ------- -------- -------- ---------- ---------- --------- ----------
- ----------- ------- ------- -------- -------- ---------- ---------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,347 $ 589
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization and depreciation 15,200 10,033
Deferred income taxes 867 360
Accretion of debentures discount 90 49
Film rights received (900)
Loss on disposal of assets - 2
Increase in accounts receivable, net (3,802) (1,765)
Increase in product inventory (605) (341)
Increase in other assets (800) (1,326)
Increase (decrease) in accounts payable and
accrued expenses (1,582) 1,300
Increase in royalties payable 976 1,494
--------- ---------
Total cash flows provided by operating activities 10,791 10,395
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Film cost expenditures (19,600) (17,635)
Acquisition of subsidiary (736) -
Purchase of property and equipment (234) (304)
--------- ---------
Total cash flows used by investing activities (20,570) (17,939)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from 10% convertible notes private placement 2,525 5,948
Net borrowings under bank line of credit 6,484 309
Proceeds from employee notes receivable 55 56
Proceeds from warrant and option exercises 234 -
Private placement expenditures (14) (86)
Proceeds from advances from affiliates 300 -
Preferred stock dividend (39) (52)
--------- ---------
Total cash flows from financing activities $ 9,545 $ 6,175
--------- ---------
</TABLE>
F-5
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31
1997 1996
---- ----
<S> <C> <C>
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (234) $ (1,369)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 659 2,028
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 425 $ 659
--------- ---------
--------- ---------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Film cost additions 1,812 1,106
Acquisition of subsidiary 2,365 -
Warrants issued 224 292
Conversion of accrued liability to acquisition fund payable 71 79
Preferred stock dividend paid in common stock 82 86
Notes received for employee common stock purchase 39 -
Conversion of debt to equity - 12
Other 8 -
--------- ---------
$4,601 $1,575
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,390 $ 632
--------- ---------
--------- ---------
Cash paid for taxes $ 65 $ 44
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Business Organization and Summary of Significant Accounting Policies:
Business organization and presentation:
Unapix Entertainment. Inc. and its subsidiaries (the "Company"), is a
world-wide licensor, distributor and producer of programming and feature
films for the television market, including free and pay television, cable and
satellite, and the home video market, including video cassette, laser disc
and digital video disks.
Significant Accounting Policies:
The following is a summary of significant accounting policies consistently
followed by the Company in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that effect the amounts
reported in the financial statements and related notes. Actual amounts could
differ from those estimates.
Principles of consolidation:
The consolidated financial statements include the accounts of Unapix
Entertainment, Inc. and its wholly - owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Revenue and cost recognition:
Revenues earned under non-cancelable film and television programming licenses
are recognized when the films or programming are made available to the licensee
and all other conditions of the sale are met. Home video and direct marketing
revenues are recorded upon shipment. The Company provides for estimated future
returns and allowances at the time the units are sold. Revenues relative to
other services are recognized when such services are performed.
Film costs include the direct costs of acquiring and producing films and
television programming, as well as exploitation costs which benefit future
periods. The Company amortizes film costs using the
individual-film-forecast-computation method. This method amortizes costs in the
same ratio that current gross revenues bear to anticipated total gross revenues
for each particular film. The anticipated total gross revenues are reviewed
quarterly by management, which may result in revised amortization rates and,
when applicable, write downs to net realizable value. Direct costs, such as
duplication and shipping, are expensed as the related product is shipped.
Film costs are stated at the lower of unamortized historical cost or estimated
net realizable value. Participation, royalty, and commission expense, to the
extent that such amounts can be reasonably estimated, are accrued when revenue
is recognized on the related license agreement.
F-7
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
1. Business Organization and Summary of Significant Accounting
Policies: (continued)
Property and equipment:
Property and equipment, which are stated at cost, are depreciated using the
straight-line method over estimated useful lives of 3 to 10 years.
Earnings Per Common Share
Effective for the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". In
accordance with SFAS 128, the Company provides earnings per basic and diluted
share.
The net income per basic common share is computed by dividing the net income
available to common shareholders by the weighted average number of common shares
outstanding.
Net income per diluted share is computed by dividing the net income available
to common shareholders, adjusted on an as if converted basis, by the weighted
average number of common shares outstanding plus potential dilutive securities.
<TABLE>
<CAPTION>
Shares (in thousands)
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Weighted average basic shares outstanding 5,796 5,268
Effect of dilutive securities:
Options 550 506
Warrants 119 64
-------- --------
Weighted average dilutive shares outstanding 6,465 5,838
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
Dollars (in thousands)
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Net income $1,347 $589
Less preferred stock dividends 121 138
-------- --------
Net income available to common shareholders
per basic and dilutive share $1,226 $451
-------- --------
-------- --------
</TABLE>
F-8
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
1. Business Organization and Summary of Significant Accounting
Policies: (continued)
Earnings Per Common Share (continued)
Securities not included in the calculation of diluted earnings per share for the
years ended December 31, because of their anti-dilutive effects are as follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Options 340 102
Warrants 2,047 3,097
Shares issuable on conversion of preferred stock 505 538
Shares issuable on conversion of debentures 1,860 1,327
----- -----
4,752 5,064
----- -----
----- -----
</TABLE>
In February 1998 the Company issued $5,250,000 principal amount of 10%
convertible subordinated debentures due June 30, 2003 convertible, initially,
into common stock at $4.75 per share. For every $1,000 principal amount
converted, the holder will receive warrants to purchase 125 shares of common
stock at $6.00 per share expiring June 30, 2003. The Company also issued
warrants expiring June 30, 2003 to purchase 42,500 shares of common stock at
$6.00 per share as a placement fee.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Stock Options and Warrants:
The Company accounts for stock options and warrants issued to employees in
accordance with Accounting Principles Board Opinion 25 "Accounting for Stock
Issued to Employees." For financial statement disclosure purposes and issuance
of options and warrants to non-employees for service rendered, the Company
follows SFAS 123, "Accounting for Stock-Based Compensation."
Recent Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and
No. 131, "Disclosure About Segments of an Enterprise and Related
Information", effective for fiscal years beginning after December 15, 1997.
The Company believes their adoption will not have a significant effect on its
disclosures regarding financial position or results of operations.
EXCESS OF COST OVER FAIR VALUES OF NET ASSETS ACQUIRED
Excess of cost over the Fair Value of net assets acquired is being amortized
on a straight line basis over 20 years and is evaluated periodically, and
adjusted if necessary, if events and circumstances indicate that the carrying
amount is impaired.
F-9
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2. Film Costs
The Company's film costs include, in thousands:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Films released $ 59,165
Accumulated amortization (41,630)
------------
17,535
Films completed - not released 2,409
Films in process 3,868
------------
$ 23,812
------------
------------
</TABLE>
The company expects that it will amortize approximately 80% of its remaining
film costs during the three-year period ending December 31, 2000.
3. Property and Equipment, Net
Property and equipment, net, consists of the following, in thousands:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Furniture and equipment $ 830
Leasehold improvements 198
------------
1,028
Less accumulated depreciation (343)
------------
$ 685
------------
------------
</TABLE>
F-10
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
4. Financing
In 1996 and through the first half of 1997, the Company completed a
$7,222,500 private offering of units (proceeds of
$5,947,500 in 1996 and $1,275,000 in 1997), each consisting of a $250,000
principal amount of convertible subordinated notes due June 30, 2003
convertible into common stock at $4.50 per share and warrants to purchase
25,000 shares of common stock, at an exercise price of $6.00 per share
expiring June 30, 2003. Such warrants (722,500) were valued at $471,000
(unamortized balance of $410,000 at December 31, 1997) and recorded as debt
discount. The warrants and notes are redeemable by the Company under certain
circumstances. The Company incurred placement and finders' fees of $394,000
and granted warrants to purchase 295,000 shares of common stock at $4.50
expiring in five years. Such warrants were valued at $167,000 and recorded as
deferred financing costs which are being amortized over the term of the notes.
On May 2, 1997, the Company entered into a revolving credit facility (the
"Facility") with Imperial Bank (the "Bank") providing for borrowings of up to
$7,000,000. The Facility was amended on March 25, 1998 to provide for
borrowings of up to $10,000,000. Loans are extended and required to be repaid
based upon the Company's outstanding accounts receivable and other
contractual rights to payment. Interest on the outstanding loan balance
accrues at a rate of 1.25% per annum in excess of the Bank's publicly
announced benchmark rate (9.75% at December 31, 1997). The Company paid
facility fees of $112,500 and is also required to pay an unused credit line
fee at a rate equal to .5% per annum of the amount by which the collateral
base exceeds the average daily loan balance during any calendar quarter. The
term of the facility expires on September 30, 1998. Outstanding amounts under
the facility are secured by a security interest in substantially all of the
Company's assets.
The facility contains restrictive covenants that require minimum tangible net
worth. The covenants also, among other things, prohibit the payment of cash
dividends on the Company's common stock, require minimum amounts of tangible
net worth and limit (a) the Company's ratio of debt to net worth on a
consolidated basis, (b) the amount of cost that the Company can incur in
producing, financing or acquiring entertainment properties, (c) the amount of
cost and expenses that the Company may incur with respect to theatrical
releases of films, and (d) the Company incurring losses for two consecutive
quarters.
The Facility replaces the Company's previous credit facility with Atlantic Bank
of New York that permitted borrowings of up to $2,500,000 (the "Atlantic
Facility"). Proceeds from the Facility were utilized to repay the Atlantic
Facility in full.
The variable rate senior subordinated notes ("variable rate notes") of
$2,864,000, net of unamortized discount of $161,000 at December 31, 1997 were
issued with common stock purchase warrants in a private placement. The units
were sold only to accredited investors by officers of the Company (without
remuneration). Certain customers of an investment advisory firm, of which a
director of the Company is an Executive Vice President, acquired the units in
the placement. The variable rate notes bear interest at a rate of 10% per
annum through 1998 and at 3% over the prime rate for the remaining four
years, provided however, that the rate does not fall below 8% or exceed 12%
per annum. Mandatory repayment of 10% of the original principal amount will
commence in 1999, followed by 15% of the original principal amount in 2000
and 2001 with the balance due in 2002.
F-11
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
4. Financing (continued)
The variable rate notes are subordinated to indebtedness of the Company to a
bank or other financial institution. The Company may redeem all or a portion
of the Variable Rate Notes at any time after December 31, 1997 at a premium
over the principal amount of the notes of 6%, which declines annually at the
rate of 2% until January 1, 2001, after which the redemption price will be
the principal amount of the notes. A total of 410,000 warrants were issued in
this offering, each such warrant entitles the holder to purchase one share of
common stock at an exercise price of $3.70 per share and expires on December
31, 2001. The holders of the warrants are entitled to certain registration
rights with respect to the shares issuable upon exercise thereof.
In December 1993, the Company developed an acquisition fund for the purpose of
funding the acquisition of the distribution rights to independently produced
films. The initial investors were the Chairman, Secretary and an investor who is
a customer of an investment advisory firm, of which a director of the Company is
an Executive Vice President, and a partnership of which the same Director is a
general partner. The acquisition fund provided $150,000 in 1993, $200,000 in
1994, $79,000 in 1996 and $71,000 in 1997. The oral agreement provided for: (i)
a term to be determined (ii) the acquisition fund to recoup 110% of its
investment in any one film from the first dollars of gross receipts; (iii) the
fund to receive up to 20% of the net profits of each film in which it invests;
(iv) roll-over of the fund's receipts into other films; and (v) shortfall of
investment in any film to be recovered in shares of common stock of the Company
issued at market, or if market is less than $2.86 a share, at the lower of $2.86
or 125% of market. The initial funding of the fund was fully utilized to acquire
film distribution rights. The investors also received 36,750 Class B warrants
for providing such funding, which were valued at $12,000 and were charged to
expense. In February 1998, the fund was terminated and the investors exchanged
their interests in the acquisition fund for $900,000 principal amount of 10%
convertible subordinated debentures due June 30, 2003 and one investor's
interest was exchanged for a $200,000 promissory demand note with interest at
10%.
In the fourth quarter of 1997, the Company sold in a private placement
$1,275,000 principal amount of 10% convertible notes due June 30, 2004. The
notes are convertible into common stock at $5.00 per share. For every $1,000
principal amount of notes purchased, the holders also received warrants to
purchase 100 shares of common stock at $6.00 per share expiring June 30,
2004. Such warrants (127,500) were valued at $86,000 and recorded as debt
discount. The notes are redeemable by the Company beginning July 1, 1999 at a
premium. The warrants are redeemable on or after July 1, 2000. The Company
also issued warrants expiring December 31, 2002 to purchase 26,000 shares of
common stock at $5.00 per share as a placement fee. Such warrants were valued
at $21,000 and recorded as deferred financing costs which are being amortized
over the term of the notes.
F-12
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
4. Financing (continued)
Maturities of debt subsequent to December 31, 1997, in thousands, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 7,293
1999 302
2000 454
2001 454
2002 1,815
Thereafter 9,333
-------
19,651
Less debt discount (658)
-------
$18,993
-------
-------
</TABLE>
The 1998 maturities includes $6,793,000 outstanding under the bank line
of credit which the Company expects to renew or replace prior to its scheduled
maturity in September 1998.
5. Stockholders' Equity
In April 1996, the Company declared a special 5 percent stock dividend, payable
on May 6, 1996 to stockholders of record of its common stock on April 22, 1996.
The company issued 249,000 shares of common stock pursuant to the declared stock
dividend.
In June 1996, the Company entered into an agreement with an investor relations
firm, pursuant to which the Company issued 300,000 common stock purchase
options. Each option entitles the holder to purchase one share of Common Stock
at a price of $3.875, which was the market price as of the date of the
Agreement. The options have a term of five years and were valued at
approximately $160,000. The Company is also obligated to issue an additional
100,000 options if all of the Company's Class B Warrants have been exercised
prior to June 3, 1998. If all the Class B Warrants are exercised during the one
year period, the additional options will also have a term of five years.
In September 1995, the Company completed the placement of 420,000 shares of
common stock under a stock purchase plan ("the Plan") which permitted certain of
the Company's employees, directors and consultants to purchase units ("Units"),
each of which consists of one share of common stock, one common stock purchase
warrant with an exercise price of $19.05 per share and one common stock purchase
warrant with an exercise price $28.57 per share. The warrants expire on December
31, 2000. They are redeemable by the Company (at a price of $0.025 per warrant)
at any time after the closing sales price of the common stock has been at least
125% of the then effective exercise price of the warrants for a period of 20
consecutive business days after the underlying shares of common stock have been
registered under the Securities Act of 1933. The purchase price of each unit was
$4 (which was the closing market price of the common stock on effective date of
the Plan). The Company ascribed a diminimus value to the common stock purchase
warrants.
F-13
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
The Plan permitted participants to acquire Units by paying 5% of the total price
upon purchase and delivering a promissory note for the remaining 95% of the
price. Each note provides for the annual payment of 5% of the original principal
amount thereof, commencing in 1996, with a balloon payment of the remaining
unpaid principal amount of the Note payable on a specified date in 2005 (the
"Maturity Date"). Interest accrues on each Note at a rate of 6% per annum,
payable on the last day of each year throughout the term of the Note, with all
remaining accrued and unpaid interest due on the Maturity Date.
Each participant pledged 95% of the Units that they acquired under the plan to
the Company as security for such participant's Note. Such Units may be released
to the participant as the Note is paid under certain circumstances. Participants
are permitted to make payments under their Notes by delivering shares of common
stock that they own, including pledged shares, which are credited against
amounts owed under their Notes at fair market value thereof. Purchasers of Units
are entitled to certain registration rights with respect to the securities
comprising the Units.
As of December 31, 1997 there are 505,000 shares of Cumulative Convertible
Series A 8% Preferred Stock outstanding. Each share has a liquidation preference
of $3.00 plus accumulated and unpaid dividends; is convertible into 1.05 shares
of common stock at any time prior to redemption; and is entitled to one vote.
Semi-annual dividends of $0.12 per share are payable on June 30 and December 31.
The Company may redeem the shares if the market price of the common stock has
exceeded twice the then applicable conversion price at a time when the
underlying shares of common stock are registered under the Securities Act of
1933. The Company may redeem the shares at a premium of 4% declining annually at
the rate of 1% until January 1, 2002, after which the redemption price will be
$3.00. The Company accepted 9% promissory notes aggregating $95,000, of which
$10,250 was paid as of December 31, 1997, from three officers in connection with
their participation in the preferred stock offering. The corresponding shares
are held by the Company as collateral for the notes. The Company declared
preferred stock dividends of $121,000 and $138,000 for the years ended December
31, 1997 and 1996, respectively. Shareholders were given the option of receiving
shares of common stock (at a price equal to 90% of the average closing sales
price of the common stock over the last 10 trading days preceding the dividend
payment date) in lieu of the cash dividend declared, which resulted in $82,000
and $86,000 of the dividends being paid in shares of common stock for the years
ended December 31, 1997 and 1996, respectively, and the remainder in cash.
As of December 31, 1997, there were 1,393,000 B warrants outstanding and
2,554,000 other warrants. The Class B warrants are exercisable at $4.29, and are
redeemable by the Company at $0.10 per warrant provided the common stock has a
high bid closing price of at least $5.71 for the prior 20 consecutive trading
days and 30 days prior notice is given to the warrant holders. In addition,
there were 2,330,000 options and 55,000 preferred stock options outstanding as
of December 31, 1997.
F-14
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
Warrants:
A summary of the status of the Company's warrants as of December 31, 1997 and
1996, and changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996
-------------------------------- --------------------------------
Weighted Weighted
Shares Average Shares Average
(000) Exercise Price (000) Exercise Price
---------- ------------------ ---------- ------------------
<S> <C> <C> <C> <C>
Outstanding at beginning 3,593 $ 9.07 2,762 $10.12
Granted 354 $ 5.61 831 $ 5.58
Exercised - $ - - $ -
Forfeited - $ - - $ -
---------- ------------------ ---------- ------------------
Outstanding at end
of year 3,947 $ 8.76 3,593 $ 9.07
---------- ------------------ ---------- ------------------
---------- ------------------ ---------- ------------------
Warrants exercisable at
year-end 3,947 $ 8.76 3,593 $ 9.07
---------- ------------------ ---------- ------------------
---------- ------------------ ---------- ------------------
Weighted-average fair
value of warrants
granted during the
year $ .65 $ .63
------- -------
------- -------
</TABLE>
The following table summarizes information relating to warrants outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
---------------------------------------------------------------- -----------------------------------
Number Weighted-Average Number
Range Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price
------------------ ------------- ------------------ ------------------ ------------- ------------------
<S> <C> <C> <C> <C> <C>
$3.14 - $4.50 2,210 2 $ 4.18 2,210 $ 4.18
$4.91 - $6.00 897 6 $ 5.95 897 $ 5.95
$19.05 - $28.57 840 3 $23.81 840 $23.81
------------- ------------------ ------------------ ------------- ------------------
$3.14 - $28.57 3,947 3 $ 8.76 3,947 $ 8.76
------------- ------------------ ------------------ ------------- ------------------
------------- ------------------ ------------------ ------------- ------------------
</TABLE>
F-15
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
Employee Stock Option Plan:
The 1993 Option Plan (the "Plan") authorizes the grant of options to purchase up
to an aggregate of 875,000 shares. Both non-qualified options and options
intended to qualify as "Incentive" stock options under Section 422 of the
Internal Revenue Code of 1986, as amended, may be granted under the Plan. A
Stock Option Committee of the Board of Directors administers the Plan. As of
December 31, 1997, the exercise price of any option granted under the Plan shall
not be less than the fair market value of the common stock on the date of the
grant.
A summary of the status of the Company's employee stock options as of December
31, 1997 and 1996, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996
---- ----
Weighted Weighted
Shares Average Shares Average
(000) Exercise Price (000) Exercise Price
----- -------------- ----- --------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 419 $ 3.52 265 $ 3.16
Granted 71 $ 4.59 154 $ 4.15
Exercised (68) $ (2.86) -- $ --
Forfeited (24) $ (4.40) -- $ --
--- -------- --- --------
Outstanding at end
of year 398 $ 3.77 419 $ 3.52
--- -------- --- --------
--- -------- --- --------
Options exercisable at
year-end 381 $ 3.76 385 $ 3.48
--- -------- --- --------
--- -------- --- --------
Weighted-average fair
value of options
granted during the
year $ 1.91 $ .55
-------- --------
-------- --------
</TABLE>
F-16
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
Other Options:
In April 1993, the Company granted options ("Earning Performance Options") to
purchase an aggregate of 945,000 shares of Common Stock at an exercise price of
$2.86 per share to employees and other persons considered to be instrumental to
the progress of the Company. The Earnings Performance Options are exercisable at
various times through June 2003.
A summary of the status of the Company's other stock options as of December 31,
1997 and 1996, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1997 1996
---- ----
Weighted Weighted
Shares Average Shares Average
(000) Exercise Price (000) Exercise Price
----- -------------- ----- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 1,536 $ 2.98 1,173 $ 2.79
Granted 491 $ 4.45 400 $ 3.88
Exercised (40) $ (1.79) -- $ --
Forfeited -- $ -- (37) $ (6.39)
Outstanding at end
of year 1,987 $ 3.37 1,536 $ 2.98
----- --------- ----- --------
----- --------- ----- --------
Options exercisable at
year-end 1,412 $ 3.341 1,097 $ 2.94
----- --------- ----- --------
----- --------- ----- --------
Weighted-average fair
value of options
granted during the
year $ 1.85 $ .49
---------- --------
---------- --------
</TABLE>
F-17
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
The following table summarizes information related to options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------ --------------------------------
Number Weighted-Average Weighted- Number Weighted-
Range Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price
--------------- ----------- ---------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
$1.10 - $3.12 1,243 5 $ 2.72 904 $ 2.67
$3.81 - $5.00 1,142 6 $ 4.21 889 $ 4.19
----- --- ------ ------ ------
$1.10 - $5.00 2,385 5 $ 3.43 1,793 $ 3.41
----- --- ------ ------ ------
----- --- ------ ------ ------
</TABLE>
The fair value of each warrant and option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997 and 1996: expected
volatility of thirty-seven (37%) percent, risk-free interest rates ranging from
4.95% to 6.49%, and expected life ranging from 3 to 10 years.
The Company applies APB Opinion 25 and related Interpretations in accounting
for its options. Accordingly, no compensation cost has been recognized for
its stock option grants. The effect of applying SFAS No. 123 on 1997 and 1996
pro forma net income is not necessarily representative of the effects on
reported net income for future years due to, among other things, (1) the
vesting period of stock options and (2) the fair value of additional stock
options in future years. Had compensation costs for the Company's stock
option grants been determined based on the fair value at the grant dates for
awards consistent with the method of SFAS 123, the Company's net income and
earnings per share would have reduced to the pro forma amounts indicated
below (in thousands) except per share data.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Net Income As reported $ 1,347 $ 589
Pro forma $ 718 $ 538
Net Income Per Basic As reported $ .21 $ .09
Common Share
Pro forma $ .10 $ .09
Net Income Per Diluted As reported $ .19 $ .08
Common Share
Pro forma $ .10 $ .08
</TABLE>
F-18
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Stockholders' Equity (continued)
On October 6, 1997, the stockholders approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
common stock from 20,000,000 to 40,000,000 shares.
6. Financial Instruments
Other than cash and cash equivalents the Company's financial instruments consist
of the credit facility, Acquisition Fund payable, 10% Convertible Subordinated
Notes and Variable Rate Senior Subordinated Notes described in Note 4 and notes
receivable from common stock and convertible preferred stock sales described in
Note 5. Management believes that based on the current interest rate, and
provision for future adjustment of such rate, the fair value of the credit
facility, acquisition fund payable, the variable rate notes and 10% convertible
subordinated notes approximates their face value. The fair value of the notes
receivable from common stock and convertible preferred stock sales is not
readily determinable.
7. Income Taxes
The provision for income taxes for 1997 consists of current Federal and State
income taxes of $22,000 and $57,000, respectively, and deferred taxes of
$867,000. The provision for income taxes for 1996 consists of current state
taxes of $40,000 and deferred taxes of $360,000. Deferred income taxes reflect
the impact of temporary differences between the amounts of assets and
liabilities for financial reporting purposes and the tax law treatments of such
amounts. The principal items comprising deferred taxes are differences in
accounts receivable valuation reserves, film inventory amortization and net
operating losses.
The deferred tax assets (liabilities) as of December 31, 1997, in thousands, are
as follows:
<TABLE>
<S> <C>
Accounts receivable and general reserves $ 262
Film inventory amortization (2,038)
Net operating loss carryforwards 572
Other items 207
---
Net $ (997)
-----
-----
</TABLE>
F-19
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
7. Income Taxes (continued)
A reconciliation between the actual income tax expense and income taxes computed
by applying the Federal income tax rate to income before taxes, in thousands, is
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Computed at federal statutory rate
of 34% $ 780 $ 335
Permanent differences 65 28
State taxes, net of federal benefit 94 26
Other 7 11
--------- --------
$ 946 $ 400
--------- --------
--------- --------
</TABLE>
At December 31, 1997, net operating loss carryforwards available to reduce
future taxable income amounted to approximately $1,430,000, expiring at various
dates through 2010.
8. Operating Leases
The Company leases office facilities and certain equipment under non-cancelable
lease agreements expiring through January 2007. Total lease expense for the
years ended December 31, 1997 and 1996 were $506,000 and $317,000, respectively.
Minimum future payments, in thousands, as of December 31, 1997 are:
<TABLE>
<S> <C>
1998.............................................. $528
1999.............................................. 512
2000.............................................. 502
2001.............................................. 483
2002 ............................................. 487
2003 and later............................... 1,494
-----
Total lease payments..................... $ 4,006
--------
--------
</TABLE>
Included in the above minimum future payments, is the cost of certain executive
offices, occupied pursuant to an office sharing arrangement with an affiliate at
the monthly base rate of $2,700.
F-20
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
9. Commitments and Other Matters
Credit risk exists with respect to accounts receivable which are primarily due
from video distributors, television stations, pay cable channels and video
distributors. One customer in 1997 accounted for 12% of revenues and two
customers in 1996 accounted for 16% and 9% respectively.
As of December 31, 1997, commitments for advances and guaranteed royalties
amounted to $3,000,000.
10. Related Party Transactions
General and administrative costs include $132,000 and $182,000 for services
rendered by an affiliate for the years ended December 31, 1997 and December 31,
1996, respectively.
11. Export Sales
<TABLE>
<CAPTION>
December 31
-----------
(in thousands)
1997 1996
---- ----
<S> <C> <C>
Europe $3,260 $1,972
Asia 1,070 987
Latin America 968 900
Africa 356 580
Middle East 329 216
Other 375 150
------ ------
$6,358 $4,805
------ ------
------ ------
</TABLE>
Export sale contracts are generally denominated in US dollars. For the years
ended December 31, 1997 and 1996, there were no significant foreign exchange
gains or losses.
F-21
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
12. Acquisition of Subsidiary
In March 1997 the Company acquired all of the capital stock of Miramar
Images, Inc. ("Miramar"), a producer and distributor of music videos and
audio recordings primarily for the New Adult Contemporary market, for 313,500
shares of the Company's common stock valued at $1,400,000 and by assuming
certain obligations of $964,000 and $736,000 of other costs. The acquisition
of Miramar is being accounted for as a purchase and the Company recorded
$3,100,000 of excess of cost over fair value of net assets in connection with
the acquisition which is being amortized over 20 years. The operating results
of Miramar have been included in the consolidated statement of operations
from the date of aquisition.
In connection with the acquisition, the Company entered into a four-year
employment agreement with the current president of Miramar providing for, among
other things, an annual salary of $125,000 per year, a performance bonus equal
to 5% of Miramar's pre-tax profit (as defined), and one-half of one percent of
the increase of the gross revenues of Miramar over its revenues for the
immediately preceding year. In addition, for each fiscal year commencing on or
after January 1, 1998, if such increase in revenues is equal to or greater than
20% of such preceding year's gross revenues, then the president also will
receive one-half of one percent of the excess of such previous year's gross
revenues over the gross revenues realized by Miramar during the second
immediately preceding fiscal year. The Company also issued an aggregate of
210,000 stock options to Miramar employees and consultants (including the
current president). Each option entitles the holder to purchase one share of the
Company's Common Stock at a purchase price of $4.375 (i.e. $.125 above the
market price of the Company's Common Stock on the closing date of the
acquisition), subject to the holder's continuing to be employed by the Company.
The options have a term of ten years, but subject to certain exceptions, will
not be exercisable for a period of 9.5 years unless Miramar's operations attain
certain earnings thresholds.
Assuming the acquisition of Miramar had taken place on January 1, 1996, the
proforma revenue and net income for the Company would have been as follows:
<TABLE>
<CAPTION>
Proforma
in thousands except per share
-----------------------------
1997 1996
<S> <C> <C>
Revenues $ 32,561 $ 24,577
Net income $ 1,159 $ 47
-------- -------
-------- -------
Net income (loss) per common
share:
Basic $ .18 $ (.02)
-------- -------
-------- -------
Diluted $ .16 $ (.02)
-------- -------
-------- -------
</TABLE>
F-22
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
13. Subsequent Events
In February 1998, the Company issued, in a private placement, $5,250,000
principal amount of 10% convertible subordinated debentures due June 30, 2003
convertible initially into common stock at $4.75 per share. The conversion price
is subject to adjustment in certain circumstances, including resets at September
1, 1998 and March 1, 1999 to 110% of the then current market price of the common
stock but not less than $4.00 and $3.50 respectively.
For every $1,000 principal amount converted, the holder will receive warrants to
purchase 125 shares of common stock (an aggregate of 656,250) at $6.00 per share
expiring June 30, 2003. If a holder converts the note prior to September 1,
1999, the holder will receive an amount equal to 75% of the interest which would
have accrued from date of conversion through September 1, 1999. The Company also
issued warrants expiring June 30, 2003 to purchase 42,500 shares of common stock
at $6.00 per share as a placement fee. Notes in the principal amount of $900,000
were issued to certain investors in the film acquisition fund in exchange for
their interests therein (Note 4).
Short term loans of $1,000,000 were obtained in December 1997 ($300,000) and
January 1998 ($700,000) from Mezzanine Financial Corp. ($750,000), the Chairman
($150,000) and the Secretary ($100,000) in order to enable the Company to fund
program acquisitions in accordance with its expansion plans pending the
completion of the private offering of 10% convertible notes. The Chairman and
Secretary are also officers and directors of Mezzanine Financial Corp. Upon
completion of the offering, proceeds of $250,000 were used to repay the loans
from the Chairman and the Secretary, and proceeds of $650,000 were used to repay
Mezzanine Financial Corp.. The remaining $100,000 of the Mezzanine loan was
exchanged for an equivalent amount of 10% convertible subordinated notes.
F-23
<PAGE>
(b) Reports on Form 8-K
The Company did not file any current Reports on Form 8-K during the fourth
quarter of 1997.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Company's Certificate of Incorporation, dated January 7, 1993
[incorporated herein by reference to Exhibit 3.1 to the Company's Form
SB-2 Registration Statement, File No. 33-61798 (the "Registration
Statement")]
3.1.1 Amendment No. 1 to Company's Certificate of Incorporation, dated March
15, 1993 [incorporated herein by reference to Exhibit 3.1.1 to the
Registration Statement]
3.1.2 Certificate of Ownership and Merger, dated March 23, 1993
[incorporated herein by reference to Exhibit 3.1.2 to the Registration
Statement]
3.1.3 Amendment No. 2 to Company's Certificate of Incorporation, dated April
21, 1993 [incorporated herein by reference to Exhibit 3.1.3 to the
Registration Statement]
3.1.4 Amendment No. 3 to Company's Certificate of Incorporation, dated June
10, 1993 [incorporated herein by reference to Exhibit 3.1.4 to the
Registration Statement]
3.1.5 Certificate of Designations, Preferences and Rights of Series A 8%
Cumulative Convertible Preferred Stock [incorporated herein by
reference to Exhibit 3.1.5 to the Company's Annual Report on Form
10-KSB for 1993 (the "1993 Form 10-KSB")]
3.1.6 Certificate of Increase to the Certificate of Designations,
Preferences and Rights of Series A 8% Cumulative Convertible Preferred
Stock [incorporated herein by reference to Exhibit 3.1.6 to the
Company's Annual Report on Form 10-KSB for 1994 (the "1994 Form
10-KSB")]
3.1.7 Certificate of Ownership and Merger, dated August 8, 1996, merging A
Pix Entertainment, Inc. into the Company [incorporated herein by
reference to Exhibit 3.1.7 to the Company's Annual Report on Form
10-KSB for 1996 (the "1996 Form 10-KSB")]
3.1.8 Certificate of Amendment of the Company's Certificate of
Incorporation, dated October 7, 1997, increasing the number of
authorized shares of common stock [incorporated herein by reference to
Exhibit 3 to the Company's Quarterly Report on Form 10-QSB for the
Quarterly Period ended September 30, 1997]
3.2 By-Laws of the Company [incorporated herein by reference to
Exhibit 3.2 to the Registration Statement]
4.1 Form of Common Stock Certificate [incorporated herein by reference to
Exhibit 4.1 to the Registration Statement]
4.2 Form of Class B Warrant Certificate [incorporated herein by reference
to Exhibit 4.3 to the Registration Statement]
4.3 Form of Class B Warrant Agreement between AST and the Company
[incorporated herein by reference to Exhibit 4.5 to the Registration
Statement]
22
<PAGE>
Exhibit
Number Description
- ------ -----------
4.4 Form of Underwriter's Unit Purchase Option [incorporated herein by
reference to Exhibit 4.6 to the Registration Statement]
4.5 Form of Variable Rate Senior Subordinated Note due December 31, 2001
[incorporated herein by reference to Exhibit 4.8 of the 1994 Form
10-KSB]
4.6 Form of Common Stock Purchase Warrant Certificate for Warrants issued
together with Variable Rate Senior Subordinated Notes due December 31,
2001 [incorporated herein by reference to Exhibit 4.9 of the 1994 Form
10-KSB]
4.7 Common Stock Purchase Warrant Certificate issued to Atlantic Bank of
New York entitling it to purchase 20,000 shares of Common Stock
[incorporated herein by reference to Exhibit 10.3 of the Company's
Current Report on Form 8-K for event of June 21, 1995]
4.8 Common Stock Purchase Warrant Certificate entitling the holder to
purchase 15,000 shares of common stock at an exercise price of $4.25
per share and expiring on June 30, 2000 [incorporated herein by
reference to Exhibit 4.11 of the Company's Annual Report on Form
10-KSB for 1995 (the "1995 Form 10-KSB")]
4.9 Common Stock Purchase Warrant Certificate entitling the holder to
purchase 10,000 shares of common stock at an exercise price of $4.50
per share and expiring on December 31, 2000 [incorporated herein by
reference to Exhibit 4.12 of the 1995 Form 10-KSB]
4.10 Form of 10% Convertible Subordinated Note due June 30, 2003 having a
conversion price of $4.50 per share [incorporated herein by reference
to Exhibit 4.1 to the Company's Quarterly Report on Form 10-QSB for
the Quarterly Period ended June 30, 1996 (the "June 1996 Form
10-QSB")]
4.11 Form of Common Stock Purchase Warrant Certificate, entitling the
holder to purchase shares of Common Stock at $6.00 per share and
expiring on June 30, 2003 [incorporated herein by reference to Exhibit
4.2 to the June 1996 Form 10-QSB]
4.12 Form of Common Stock Purchase Warrant Certificate, entitling the
holder to purchase shares of Common Stock at $4.50 per share and
expiring on December 31, 2001 [incorporated herein by reference to
Exhibit 4.15 of the 1996 Form 10-KSB]
4.13 Form of 10% Convertible Subordinated Note due June 30, 2003 having a
conversion price of $4.75 per share(1)
4.14 Form of 10% Convertible Subordinated Note due June 30, 2004 having a
conversion price of $5.00 per share (1)
4.15 Form of Common Stock Purchase Warrant Certificate, entitling the
holder to purchase shares of Common Stock at $6.00 per share and
expiring on June 30, 2004 (1)
4.16 Form of Common Stock Purchase Warrant Certificate, entitling the
holder to purchase shares of Common Stock at $5.00 per share and
expiring December 31, 2002 (1).
23
<PAGE>
Exhibit
Number Description
- ------ -----------
*10.1 Employment Agreement between the Company and David Fox [incorporated
herein by reference to Exhibit 10.1 to the Registration Statement]
*10.1.1 Form of Amendment No. 1 to Employment Agreement between the Company
and David Fox [incorporated herein by reference to Exhibit 10.1.1 to
the Registration Statement]
*10.2 Employment Agreement between the Company and Scott Hanock
[incorporated herein by reference to Exhibit 10.2 to the Registration
Statement]
*10.2.1 Form of Amendment No. 1 to Employment Agreement between the Company
and Scott Hanock [incorporated herein by reference to Exhibit 10.2.1
to the Registration Statement]
*10.2.2 Form of Amendment No. 2 to Employment Agreement between the Company
and Scott Hanock [incorporated herein by reference to Exhibit 10.2.2
to the Registration Statement]
*10.3 Form of Employment Agreement between the Company and Herbert M.
Pearlman [incorporated herein by reference to Exhibit 10.4 to the
Registration Statement]
*10.4 Form of Employment Agreement between the Company and David S. Lawi
[incorporated herein by reference to Exhibit 10.5 to the Registration
Statement]
*10.5 1993 Stock Option Plan, as amended (1)
10.6 Lease Agreement for Sherman Oaks, California offices [incorporated
herein by reference to Exhibit 10.8 to the Registration Statement]
10.7 Lease Extension Agreement, dated April 22, 1996, relating to Sherman
Oaks, California offices [incorporated herein by reference to Exhibit
10.7 to the Company's 1996 Form 10-KSB]
10.8 Lease Extension Agreement, dated March 12, 1997, relating to Sherman
Oaks, California offices [incorporated herein by reference to Exhibit
10.8 to the Company's 1996 Form 10-KSB]
10.9 Form of Lease Agreement for 537 Steamboat Road, Greenwich, CT offices
[incorporated herein by reference to Exhibit 10.9 to the 1994 Form
10-KSB]
10.10 Lease Agreement for 200 Madison Avenue Location [incorporated herein
by reference to Exhibit 10.9 to the 1995 Form 10-KSB]
*10.11 Stock Option Agreement between the Company and David Fox (embodied in
Exhibit 10.1) [incorporated herein by reference to Exhibit 10.1 to the
Registration Statement]
*10.12 Form of Earnings Performance Stock Option Agreement between the
Company and Herbert M. Pearlman, dated April 23, 1993 [incorporated
herein by reference to Exhibit 10.18 to the Registration Statement]
24
<PAGE>
Exhibit
Number Description
- ------ -----------
10.12.1 Schedule of omitted documents in the form of Exhibit 10.12, including
material detail in which such documents differ from Exhibit 10.12
[incorporated herein by reference to Exhibit 10.18.1 to the
Registration Statement]
*10.13 Employment Agreement between the Company and Robert Baruc
[incorporated herein by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-QSB for the Quarterly Period ended June
30, 1993]
*10.14 Amendment No. 1 to Employment Agreement of Robert Baruc [incorporated
herein by reference to Exhibit 10.16 to the Company's 1996 Form
10-KSB]
*10.15 Employment Agreement between the Company and Robert Miller
[incorporated herein by reference to Exhibit 10.17 to the Company's
1996 Form 10-KSB]
*10.16 Employment Agreement between the Company and Timothy Smith
[incorporated herein by reference to Exhibit 10.18 to the Company's
1996 Form 10-KSB]
10.17 Agreement under which Strategic Growth International serves as
Investor Relations Consultant to the Company [incorporated herein by
reference to Exhibit 10.1 to the June 1996 Form 10-QSB]
10.18 Stock Purchase Agreement, dated March 17, 1997, relating to the
Company's purchase of all of the capital stock of Miramar Images, Inc.
("Miramar") [incorporated herein by reference to Exhibit 10.24 to the
1996 Form 10-KSB]
10.19 Pooled Consideration Agreement, dated March 17, 1997, entered into in
connection with the Company's purchase of Miramar [incorporated herein
by reference to Exhibit 10.25 to the 1996 Form 10-KSB]
10.20 Settlement Agreement, dated March 17, 1997, among the Company, Miramar
and Steven Churchill, entered into in connection with the Company's
purchase of Miramar [incorporated herein by reference to Exhibit 10.26
to the 1996 Form 10-KSB]
10.21 Assignment Agreement, dated March 17, 1997, among the Company, Miramar
and Charles Walsh, entered into in connection with the Company's
purchase of Miramar [incorporated herein by reference to Exhibit 10.27
to the 1996 Form 10-KSB]
10.22 Agreement, dated October 16, 1996, between the Company and Strategic
Growth International relating to payment of Finder's Fee with respect
to private placement [incorporated herein by reference to Exhibit
10.28 to the 1996 Form 10-KSB]
10.23 Lease Agreement, as amended to date, for Miramar's offices at 200
Second Avenue West, Seattle, Washington [incorporated herein by
reference to Exhibit 10.29 to the 1996 Form 10-KSB]
10.24 Revolving Credit Loan and Security Agreement, dated April 16, 1997,
among Imperial Bank, Unapix Entertainment, Inc., A Pix Entertainment,
25
<PAGE>
Exhibit
Number Description
- ------ -----------
Inc. and Miramar Images, Inc. [incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-QSB for the
Quarterly Period ended March 31, 1997]
10.25 Amendment No. 1 to Revolving Credit Loan and Security Agreement,
entered into March 25, 1998, by and between (i) Unapix
Entertainment, Inc. and Miramar Images, Inc. and (ii) Imperial Bank.
21.1 Subsidiaries [incorporated herein by reference to Exhibit 21.1 to the
1996 Form 10-KSB]
23.1 Consent of Richard A. Eisner & Company, LLP. (1)
27.1 Financial Data Schedules (1)
</TABLE>
___________________________________
(1) Filed herewith.
* Management contract or compensatory plan or arrangement.
26
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on the 14th day of April, 1998.
UNAPIX ENTERTAINMENT, INC.
By: /s/ David M. Fox
-------------------------------------
David M. Fox
President, Chief Executive Officer
(principal executive officer)
By: /s/ Daniel T. Murphy
-------------------------------------
Daniel T. Murphy
Chief Financial Officer
(principal financial officer)
By: /s/ Steven P. Low
-------------------------------------
Steven P. Low
Chief Accounting Officer
(principal accounting officer
27
<PAGE>
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ Herbert M. Pearlman
- ------------------------- Chairman of the
Herbert M. Pearlman Board of Directors April 14, 1998
/s/ David M. Fox
- ------------------------- President, Chief Executive
David M. Fox Officer and Director April 14, 1998
/s/ David S. Lawi
- ------------------------- Chairman of the Executive
David S. Lawi Committee, Treasurer,
Secretary, and Director April 14, 1998
/s/ Robert Baruc
- ------------------------- Executive Vice President
Robert Baruc and Director April 14, 1998
/s/ Scott Hanock
- ------------------------- Sr. Vice President of Inter-
Scott Hanock national Sales and Marketing
and Director April 14, 1998
/s/ Martin D. Payson
- ------------------------- Director April 14, 1998
Martin D. Payson
/s/ Walter M. Craig, Jr.
- ------------------------- Director April 14, 1998
Walter M. Craig, Jr.
/s/ Lawrence Bishop
- ------------------------- Director April 14, 1998
Lawrence Bishop
28
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE LOCATION
- --------- --------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
3.1 Company's Certificate of Incorporation, dated January 7, 1993 [incorporated herein by
reference to Exhibit 3.1 to the Company's Form SB-2 Registration Statement, File No.
33-61798 (the "Registration Statement")]
3.1.1 Amendment No. 1 to Company's Certificate of Incorporation, dated March 15, 1993
[incorporated herein by reference to Exhibit 3.1.1 to the Registration Statement]
3.1.2 Certificate of Ownership and Merger, dated March 23, 1993 [incorporated herein by
reference to Exhibit 3.1.2 to the Registration Statement]
3.1.3 Amendment No. 2 to Company's Certificate of Incorporation, dated April 21, 1993
[incorporated herein by reference to Exhibit 3.1.3 to the Registration Statement]
3.1.4 Amendment No. 3 to Company's Certificate of Incorporation, dated June 10, 1993
[incorporated herein by reference to Exhibit 3.1.4 to the Registration Statement]
3.1.5 Certificate of Designations, Preferences and Rights of Series A 8% Cumulative
Convertible Preferred Stock [incorporated herein by reference to Exhibit 3.1.5 to the
Company's Annual Report on Form 10-KSB for 1993 (the "1993 Form 10-KSB")]
3.1.6 Certificate of Increase to the Certificate of Designations, Preferences and Rights of
Series A 8% Cumulative Convertible Preferred Stock [incorporated herein by reference to
Exhibit 3.1.6 to the Company's Annual Report on Form 10-KSB for 1994 (the "1994 Form
10-KSB")]
3.1.7 Certificate of Ownership and Merger, dated August 8, 1996, merging A Pix Entertainment,
Inc. into the Company [incorporated herein by reference to Exhibit 3.1.7 to the
Company's Annual Report on Form 10-KSB for 1996 (the "1996 Form 10-KSB")]
3.1.8 Certificate of Amendment of the Company's Certificate of Incorporation, dated October
7, 1997, increasing the number of authorized shares of common stock [incorporated
herein by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-QSB for
the Quarterly Period ended September 30, 1997]
3.2 By-Laws of the Company [incorporated herein by reference to 3.2 to the Registration
Statement]
4.1 Form of Common Stock Certificate [incorporated herein by reference to Exhibit 4.1 to
the Registration Statement]
4.2 Form of Class B Warrant Certificate [incorporated herein by reference to Exhibit 4.3 to
the Registration Statement]
4.3 Form of Class B Warrant Agreement between AST and the Company [incorporated herein by
reference to Exhibit 4.5 to the Registration Statement]
4.4 Form of Underwriter's Unit Purchase Option [incorporated herein by reference to Exhibit
4.6 to the Registration Statement]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE LOCATION
- --------- --------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
4.5 Form of Variable Rate Senior Subordinated Note due December 31, 2001 [incorporated
herein by reference to Exhibit 4.8 of the 1994 Form 10-KSB]
4.6 Form of Common Stock Purchase Warrant Certificate for Warrants issued together with
Variable Rate Senior Subordinated Notes due December 31, 2001 [incorporated herein by
reference to Exhibit 4.9 of the 1994 Form 10-KSB]
4.7 Common Stock Purchase Warrant Certificate issued to Atlantic Bank of New York entitling
it to purchase 20,000 shares of Common Stock [incorporated herein by reference to
Exhibit 10.3 of the Company's Current Report on Form 8-K for event of June 21, 1995]
4.8 Common Stock Purchase Warrant Certificate entitling the holder to purchase 15,000
shares of common stock at an exercise price of $4.25 per share and expiring on June 30,
2000 [incorporated herein by reference to Exhibit 4.11 of the Company's Annual Report
on Form 10-KSB for 1995 (the "1995 Form 10-KSB")]
4.9 Common Stock Purchase Warrant Certificate entitling the holder to purchase 10,000
shares of common stock at an exercise price of $4.50 per share and expiring on December
31, 2000 [incorporated herein by reference to Exhibit 4.12 of the 1995 Form 10-KSB]
4.10 Form of 10% Convertible Subordinated Note due June 30, 2003 having a conversion price
of $4.50 per share [incorporated herein by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-QSB for the Quarterly Period ended June 30, 1996 (the "June
1996 Form 10-QSB")]
4.11 Form of Common Stock Purchase Warrant Certificate, entitling the holder to purchase
shares of Common Stock at $6.00 per share and expiring on June 30, 2003 [incorporated
herein by reference to Exhibit 4.2 to the June 1996 Form 10-QSB]
4.12 Form of Common Stock Purchase Warrant Certificate, entitling the holder to purchase
shares of Common Stock at $4.50 per share and expiring on December 31, 2001
[incorporated herein by reference to Exhibit 4.15 of the 1996 Form 10-KSB]
4.13 Form of 10% Convertible Subordinated Note due June 30, 2003 having a conversion price
of $4.75 per share(1)
4.14 Form of 10% Convertible Subordinated Note due June 30, 2004 having a conversion price
of $5.00 per share (1)
4.15 Form of Common Stock Purchase Warrant Certificate, entitling the holder to purchase
shares of Common Stock at $6.00 per share and expiring on June 30, 2004 (1)
4.16 Form of Common Stock Purchase Warrant Certificate, entitling the holder to purchase
shares of Common Stock at $5.00 per share and expiring December 31, 2002 (1)
*10.1 Employment Agreement between the Company and David Fox [incorporated herein by
reference to Exhibit 10.1 to the Registration Statement]
*10.1.1 Form of Amendment No. 1 to Employment Agreement between the Company and David Fox
[incorporated herein by reference to Exhibit 10.1.1 to the Registration Statement]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE LOCATION
- --------- --------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
*10.2 Employment Agreement between the Company and Scott Hanock [incorporated herein by
reference to Exhibit 10.2 to the Registration Statement]
*10.2.1 Form of Amendment No. 1 to Employment Agreement between the Company and Scott Hanock
[incorporated herein by reference to Exhibit 10.2.1 to the Registration Statement]
*10.2.2 Form of Amendment No. 2 to Employment Agreement between the Company and Scott Hanock
[incorporated herein by reference to Exhibit 10.2.2 to the Registration Statement]
*10.3 Form of Employment Agreement between the Company and Herbert M. Pearlman [incorporated
herein by reference to Exhibit 10.4 to the Registration Statement]
*10.4 Form of Employment Agreement between the Company and David S. Lawi [incorporated herein
by reference to Exhibit 10.5 to the Registration Statement]
*10.5 1993 Stock Option Plan, as amended (1)
10.6 Lease Agreement for Sherman Oaks, California offices [incorporated herein by reference
to Exhibit 10.8 to the Registration Statement]
10.7 Lease Extension Agreement, dated April 22, 1996, relating to Sherman Oaks, California
offices [incorporated herein by reference to Exhibit 10.7 to the Company's 1996 Form
10-KSB]
10.8 Lease Extension Agreement, dated March 12, 1997, relating to Sherman Oaks, California
offices [incorporated herein by reference to Exhibit 10.8 to the Company's 1996 Form
10-KSB]
10.9 Form of Lease Agreement for 537 Steamboat Road, Greenwich, CT offices [incorporated
herein by reference to Exhibit 10.9 to the 1994 Form 10-KSB]
10.10 Lease Agreement for 200 Madison Avenue Location [incorporated herein by reference to
Exhibit 10.9 to the 1995 Form 10-KSB]
*10.11 Stock Option Agreement between the Company and David Fox (embodied in Exhibit 10.1)
[incorporated herein by reference to Exhibit 10.1 to the Registration Statement]
*10.12 Form of Earnings Performance Stock Option Agreement between the Company and Herbert M.
Pearlman, dated April 23, 1993 [incorporated herein by reference to Exhibit 10.18 to
the Registration Statement]
10.12.1 Schedule of omitted documents in the form of Exhibit 10.12, including material detail
in which such documents differ from Exhibit 10.12 [incorporated herein by reference to
Exhibit 10.18.1 to the Registration Statement]
*10.13 Employment Agreement between the Company and Robert Baruc [incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-QSB for the
Quarterly Period ended June 30, 1993]
*10.14 Amendment No. 1 to Employment Agreement of Robert Baruc [incorporated herein by
reference to Exhibit 10.16 to the Company's 1996 Form 10-KSB]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE LOCATION
- --------- --------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
*10.15 Employment Agreement between the Company and Robert Miller [incorporated herein by
reference to Exhibit 10.17 to the Company's 1996 Form 10-KSB]
*10.16 Employment Agreement between the Company and Timothy Smith [incorporated herein by
reference to Exhibit 10.18 to the Company's 1996 Form 10-KSB]
10.17 Agreement under which Strategic Growth International serves as Investor Relations
Consultant to the Company [incorporated herein by reference to Exhibit 10.1 to the June
1996 Form 10-QSB]
10.18 Stock Purchase Agreement, dated March 17, 1997, relating to the Company's purchase of
all of the capital stock of Miramar Images, Inc. ("Miramar") [incorporated herein by
reference to Exhibit 10.24 to the 1996 Form 10-KSB]
10.19 Pooled Consideration Agreement, dated March 17, 1997, entered into in connection with
the Company's purchase of Miramar [incorporated herein by reference to Exhibit 10.25 to
the 1996 Form 10-KSB]
10.20 Settlement Agreement, dated March 17, 1997, among the Company, Miramar and Steven
Churchill, entered into in connection with the Company's purchase of Miramar
[incorporated herein by reference to Exhibit 10.26 to the 1996 Form 10-KSB]
10.21 Assignment Agreement, dated March 17, 1997, among the Company, Miramar and Charles
Walsh, entered into in connection with the Company's purchase of Miramar [incorporated
herein by reference to Exhibit 10.27 to the 1996 Form 10-KSB]
10.22 Agreement, dated October 16, 1996, between the Company and Strategic Growth
International relating to payment of Finder's Fee with respect to private placement
[incorporated herein by reference to Exhibit 10.28 to the 1996 Form 10-KSB]
10.23 Lease Agreement, as amended to date, for Miramar's offices at 200 Second Avenue West,
Seattle, Washington [incorporated herein by reference to Exhibit 10.29 to the 1996 Form
10-KSB]
10.24 Revolving Credit Loan and Security Agreement, dated April 16, 1997, among Imperial
Bank, Unapix Entertainment, Inc., A Pix Entertainment, Inc. and Miramar Images, Inc.
[incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-QSB for the Quarterly Period ended March 31, 1997]
10.25 Amendment No. 1 to Revolving Credit Loan and Security Agreement entered into March 25,
1998, by and between (i) Unapix Entertainment, Inc., and Miramar Images, Inc. and (ii)
Imperial Bank. (1)
21.1 Subsidiaries [incorporated herein by reference to Exhibit 21.1 to the 1996 Form 10-KSB]
23.1 Consent of Richard A. Eisner & Company, LLP. (1)
27.1 Financial Data Schedules (1)
</TABLE>
- ------------------------
(1) Filed herewith
* Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 4.13
THIS NOTE AND THE COMMON STOCK AND WARRANTS ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, THAT SUCH NOTE, WARRANTS AND/OR COMMON STOCK
MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
UNAPIX ENTERTAINMENT, INC.
10% Convertible Subordinated Note
Due June 30, 2003
CUSIP 904270 AA 3
NO. CS-__
$________
February 19, 1998
Unapix Entertainment, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to _________________________, or its
registered assigns (the "Payee" or "Holder"), the principal amount of
__________________________ ($_________) and accrued interest thereon in
accordance with the terms and provisions hereof.
This Note was issued by the Company in a private placement pursuant to
an Offering Memorandum, dated February 12, 1998 (together with the exhibits
attached thereto, the "Private Placement Memorandum"). The series of Notes
defined as the "Notes" in the Private Placement Memorandum are referred to
hereafter as the "Notes".
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
1.1 Method of Payment. Payment of the principal of and accrued
interest on this Note shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. The Company will pay or cause to be
paid all sums becoming due hereon for principal, interest, redemptions and
Change of Control events by check sent to the Holder's address as it appears
in the Company's records at the close of business on the related Record Date
(as defined below), without any requirement for the presentation of this Note
or making any notation thereon except that the Holder hereof agrees that
payment of the final amount due shall be made only upon surrender of this
Note to the Company for cancellation at the Company's offices (or an agency
maintained by the Company for such purposes)
<PAGE>
in New York, New York (the "Office of the Company"). For purposes of this
Note, the term "Record Date" shall mean, with respect to regularly scheduled
payments of interest the June 15 and December 15, respectively, immediately
preceding the next interest payment date, and with respect to all other
payments, the record date set by the Company at least five business days
prior to the proposed payment date and of which the Company shall give the
Holder notice at least 15 days' prior to such Record Date. Prior to any sale
or other disposition of this instrument, the Holder hereof agrees to endorse
hereon the amount of principal paid hereon and the last date to which
interest has been paid hereon and to notify the Company of the name and
address of the transferee.
1.2 Payment of Principal. The entire outstanding principal
balance of this Note shall be due and payable on June 30, 2003 (the "Maturity
Date").
1.3 Payment of Interest. Interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid portion of the principal
amount from time to time outstanding hereunder shall be paid by the Company
to the Payee at the rate of ten percent (10%) per annum (the "Stated Interest
Rate"). Said interest to be paid (i) semi-annually on each June 30 and
December 31 of each year, commencing June 30, 1998, (ii) within 30 days of
the date of conversion, through the conversion date, with respect to the
portion of the Note converted, in connection with any redemption on the
redemption date with respect to that portion of the Note being redeemed,
(iii) in connection with any Change of Control Payment (as hereinafter
defined) on the date of such payment and (iv) on the Maturity Date, or, if
any such day is not a business day, on the next succeeding business day.
2. SUBORDINATION PROVISIONS.
2.1 Principal and Interest. The Company, for itself, its
successors and assigns, covenants and agrees, and the Payee and each
successive Holder by acceptance of this Note, likewise covenants and agrees
that payment of the principal of and interest on this Note is subordinated in
right of payment to the payment of all existing and future "Senior Debt".
The term "Senior Debt" shall mean the principal of and premium, if any, and
accrued interest on (a) existing indebtedness of the Company (including
indebtedness of the Company to Imperial Bank pursuant to one or more credit
facilities extended by Imperial Bank (collectively, the "Imperial Bank
Facility"), and indebtedness of others guaranteed by the Company) other than
the Notes, which is (i) for money borrowed, other than the Company's 10%
Convertible Subordinated Notes due June 30, 2003 and the Company's 10%
Convertible Subordinated Notes due June 30, 2004 which will rank pari passu
with the Notes, or (ii) evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of
any kind; (b) obligations of the Company as lessee under leases required to
be capitalized on the balance sheet of the lessee under generally accepted
accounting principles and leases of property or assets made as part of any
sale and leaseback transaction to which the Company is a party; (c)
amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation constituting Senior Debt pursuant to the foregoing
provisions; and (d) all future indebtedness of the Company of a similar
nature described in (a) above, and all amendments, renewals, extensions,
modifications and refundings thereof, if the instrument creating or
evidencing such future indebtedness provides by its
2
<PAGE>
terms that such indebtedness is senior in right of payment to the Notes;
provided, however, that all future indebtedness for money borrowed or
evidenced by a note or similar instrument which by its terms is convertible
or exchangeable into shares of Common Stock or other equity securities of the
Company, and amendments, renewals, extensions, modifications and refundings
thereof, will rank pari passu with the Notes, unless the instruments creating
such future indebtedness provide by their terms that such indebtedness is
junior in right of payment to the Notes. Senior Debt does not include
indebtedness or amounts owed (except to banks and other financial
institutions) for compensation to employees, for goods or materials purchased
or for services utilized, in the ordinary course of business of the Company,
or of any other person from whom such indebtedness or amount was assumed.
2.2 Default. No payments on account of principal of and premium,
if any, and interest on this Note or any other amount payable by the Company
to the Holder on or with respect to this Note (collectively, the "Note
Payments") shall be made if at the time thereof: (i) there is a default in
the payment of all or any portion of the obligations under any Senior Debt or
(ii) there exists a default in any covenant with respect to the Senior Debt
(other than as specified in clause (i) of this sentence) that permits the
maturity of such Senior Debt to be accelerated, and, in such event, such
default shall not have been cured or waived or shall not have ceased to
exist; provided that, no such default will prevent any payment on, or in
respect of the Notes for more than 120 days unless (A) the maturity of such
Senior Debt has been accelerated, or (B) during such 120-day period, the
holder of such Senior Debt shall have been stayed by applicable law from
accelerating such Senior Debt, in which case, such 120-day period shall be
tolled during the period of such stay.
2.3 Liquidation, Dissolution, etc. In the event of any insolvency
or bankruptcy proceeding, and any receivership, total liquidation,
reorganization or other similar proceedings in connection therewith, relative
to the Company, or to its property, or in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, then the holders of Senior
Debt shall be entitled to receive payment in full of all principal and
premium, if any, and interest on all such Senior Debt before the Holder shall
be entitled to receive any Note Payment and before the Company may acquire
this Note for any cash, property, assets or securities, and to that end (but
subject to the power of a court of competent jurisdiction to make other
equitable provisions reflecting the rights conferred by these provisions upon
such Senior Debt and the holders thereof with respect to this Note and the
Holder hereof by a lawful plan or reorganization under applicable bankruptcy
law) the holders of Senior Debt (until payment in full of all principal, and
premium, if any, and interest on all such Senior Debt, including interest
thereon accruing before or in respect of periods subsequent to the
commencement of any such proceedings) shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property, or by set-off or otherwise, which may
be payable or deliverable in any such proceedings in respect of this Note
(including any such payment or distribution which may be payable or
deliverable by reason of the provisions of any indebtedness of the Company
which is subordinate and junior in right to this Note), except securities
issued in such proceedings which are subordinate and junior in right of
payment to the payment of Senior Debt.
3
<PAGE>
2.4 Subrogation. Subject to the payment in full of Senior Debt,
to the extent of payments made on or with respect to Senior Debt from any
assets out of the distributive share of the Notes, the Holder shall be
subrogated to the rights of the holders of such Senior Debt to receive
payment or distributions of assets of the Company applicable to such Senior
Debt until this Note shall be paid in full, and no payment or distributions
to the holders of such Senior Debt by or on behalf of the Company from the
proceeds that would otherwise be payable to the Holder shall, as between the
Company and the Holder, be deemed to be a payment by the Company to or on
account of this Note.
2.5 Amendment. These provisions with respect to subordination
cannot be amended, modified or waived without the prior written consent of
the holder or holders of all Senior Debt at the time outstanding; and the
subordination effected hereby shall not be affected by any amendment or
modification of, or addition or supplement to, any such Senior Debt or any
instrument or agreement relating thereto, without the prior written consent
of the holder or holders of all such Senior Debt at the time outstanding. No
present or future holder of Senior Debt shall be prejudiced in his right to
enforce subordination of this Note by any act or failure to act on the part
of the Company.
2.6 Benefit of Senior Debt. The foregoing subordination
provisions shall be for the benefit of the holders of Senior Debt and may be
enforced directly by such holders against the Holder. Upon any payment or
distribution of assets of the Company referred to above, the Holder shall be
entitled to rely upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, delivered to the Holder for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of Senior
Debt and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other
facts pertaining thereto or hereto.
2.7 Obligation to Pay Principal and Interest Absolute. The
foregoing provisions as to subordination are solely for the purpose of
defining the relative rights of the holders of such Senior Debt, on the one
hand, and the holder of this Note on the other hand. Nothing contained
herein is intended to or shall impair as between the Company, its creditors,
other than the holders of Senior Debt, and the Holder, the obligation of the
Company, which shall be absolute and unconditional, to pay the Holder the
Note Payments or affect the relative rights of the Holder and the creditors
of the Company other than holders of Senior Debt, nor, except as expressly
provided otherwise in Section 2.9, shall anything herein prevent the Holder
hereof from exercising all remedies otherwise permitted by applicable law
upon default hereunder subject to the rights of holders of Senior Debt, if
any, in respect of cash, properties or securities of the Company received
upon the exercise of any such remedy. The Holder, by acceptance hereof,
acknowledges and agrees that the subordination provisions of this Section 2
are, and/or are intended to be, an inducement and a consideration to each
holder of any Senior Debt, whether such Senior Debt was created or acquired
before or after the issuance of this Note, to acquire and continue to hold,
or to continue to hold, such Senior Debt and each holder of Senior Debt shall
be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Debt.
4
<PAGE>
2.8 Further Instruments. The Holder covenants and agrees to
execute such further instruments and waivers as may be necessary in the
opinion of a lender or creditor, or reasonably requested by the Company, to
facilitate the issuance or the continued holding of Senior Debt.
2.9 Subordination Provisions for the Benefit of Imperial Bank.
In addition to the foregoing provisions, the Payee, and each successive
Holder, by acceptance of this Note hereby agree to the following:
(a) Notwithstanding anything to the contrary contained in any
agreement or otherwise, the Holder acknowledges and consents to the Company's
and its subsidiaries' grant of the security interest in the "Collateral" to
Imperial Bank (including its successors and assigns, the "Bank"), as such
term is defined in that certain Revolving Credit Loan and Security Agreement,
dated as of April 16, 1997 (as amended from time to time, the "Loan
Agreement"), by and between the Company, A Pix Entertainment, Inc., Miramar
Images, Inc. and the Bank;
(b) To provide to the Bank a courtesy copy (at 9777 Wilshire
Boulevard, Beverly Hills, California 92012, Attn: Patrick Lee, Entertainment
Industries Group) of any notice which such Holder gives to the Company of the
existence of any breach by the Company of, or event of default under, this
Note or other agreements with the Company or any of its subsidiaries;
(c) Notwithstanding anything to the contrary contained in any
other agreement or document, and notwithstanding whether or not or the order
in which the respective security interests, if any, of the Bank and the
Holder are perfected, filed or recorded, the Holder's security interest, if
any, in collateral for this Note is and shall remain subject, junior and
subordinate to the Bank's security interest in the Collateral;
(d) Not to make any legal, equitable or other challenge to the
Bank's security interest in the Collateral and not to institute or support
any legal action against the Bank by any entity (including, without
limitation, any creditors body, creditors committee or the Company);
(e) Not to foreclosure on or otherwise seize or dispose of any
collateral given with respect to this Note, if any, or commence any action or
proceeding to foreclosure on, seize or otherwise dispose of any of such
collateral unless and until all the obligations of the Company (or any other
borrower) under the "Loan Documents" (as defined in the Loan Agreement) are
fully and indefeasibly repaid. Notwithstanding the above sentence, the
Holder may defend its security interests, if any, against attack by third
parties or by the Company or any of its subsidiaries but may not take any
action or bring any claim (whether by counterclaim or otherwise) which would
affect the interests of the Bank;
(f) Not to take any action as a secured creditor, including, but
not limited to, instituting any legal action against the Company, including,
without limitation, any action to appoint a receiver or to enjoin the Company
(or any other borrower under the Loan Agreement) until all the
5
<PAGE>
obligations of the Company (or any other borrowers under the Loan Documents)
to the Bank have been fully and indefeasibly repaid;
(g) Except as provided otherwise in Section 2.2, upon the
occurrence and continuance of an "Event of Default" (as defined in the Loan
Agreement), the Company shall not make any Note Payments and any such
payments made to the Holder notwithstanding the foregoing, shall be deemed
held in trust by such Holder for the benefit of the Bank. The Holder agrees
not to amend, modify or rescind any of the subordination provisions in favor
of the Bank set forth in this Note or in any other agreement or document
executed by such Holder or to change any terms of payment or add any
collateral for its security;
(h) Notwithstanding anything to the contrary in this Note or in
any other agreement or document executed by the Holder of this Note, (A) the
Company shall not pay any of the principal of this Note (other than payments
for fractional shares upon conversion of this Note into shares of Common
Stock of the Company) prior to October 1, 1998 whether by reason of
acceleration, redemption, repurchase or otherwise and (B) the Holder may
convert this Note at any time into shares of Common Stock of the Company; and
(i) The Holder will duly execute and deliver such further
agreements, documents and instruments and do such further acts as may be
necessary or proper to carry out more effectively the provisions and purposes
contained herein as the Bank from time to time may reasonably request.
3. EVENTS OF DEFAULT.
It shall be an "Event of Default" with respect to this Note upon
the occurrence and continuation uncured of any of the following events:
3.1 This Note.
(a) failure to pay principal of or premium, if any, on this Note
when due and payable, whether at maturity, upon redemption, upon a Change of
Control Offer (as hereinafter defined) or otherwise, whether or not such
payment is prohibited by the subordination provisions of this Note; or
(b) failure to pay any interest on this Note when due, which
failure continues for 15 days, whether or not such payment is prohibited by
the subordination provisions of this Note; or
(c) failure to perform the other covenants of the Company in this
Note, which failure continues for 60 days after written notice has been given
to the Company of such failure; or
(d) failure to pay when due principal of and/or acceleration of
any indebtedness for money borrowed by the Company or any of its Subsidiaries
(as hereinafter defined) in excess of $2,000,000, individually or in the
aggregate, if such indebtedness is not discharged, or such acceleration is
not annulled, within 30 days after written notice thereof; or
6
<PAGE>
(e) the entry of a decree or order by a court having jurisdiction
adjudging the Company or any Significant Subsidiary as bankrupt or insolvent,
or approving a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary,
under federal bankruptcy law, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of the Company or such Subsidiary's assets, and the
continuance of any such decree or order unstayed and in effect for a period
of 90 days; or the commencement by the Company or any Significant Subsidiary
of a voluntary case under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency
or other similar law, or the consent by the Company or such Subsidiary to the
institution of bankruptcy or insolvency proceedings against it, or the filing
by the Company or such Subsidiary of a petition or answer or consent seeking
reorganization or relief under federal bankruptcy law or any other applicable
federal or state bankruptcy, insolvency, or other similar law, or the consent
by the Company or such Subsidiary to the filing of such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of the Company's
or such Subsidiary's property, or the making by the Company or such
Subsidiary of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due.
For purposes of this Note, the term "Significant Subsidiary" shall mean each
Subsidiary which, as of the then most recent December 31, accounted for more
than 10% of the Company's consolidated assets, or more than 10% of the
Company's consolidated revenue during the 12 months then ended; and the term
"Subsidiary" shall mean Unapix Films, Inc., Miramar Images, Inc., Green Leaf
Advertising Company, Inc., Abacus Films Ltd. and any future direct or
indirect subsidiaries of the Company.
3.2 Notice. If an Event of Default occurs and is continuing, the
Holder by notice to the Company may declare the unpaid principal of and
premium if any, and interest hereunder to be due and payable; provided,
however, that if an Event of Default under clause (e) above shall occur, all
unpaid principal of and premium, if any, and interest on the Notes will
automatically become due and payable without any declaration or other act on
the part of the Holder.
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. If an Event of Default occurs and is continuing
under this Note, the Holder by written notice to the Company may declare the
unpaid principal of and premium, if any, and interest thereunder to be due
and payable; provided, however, that if an Event of Default under clause (e)
above shall occur, all unpaid principal of and premium, if any, and interest
on this Note will automatically become due and payable without any
declaration or other act on the part of the Holder.
4.2 Proceedings and Actions. Except as otherwise provided in
Section 2.9(e) and/or (g), during the continuation of any one or more Events
of Default, the Holder may institute such actions or proceedings in law or
equity as it shall deem expedient for the protection of its rights, and may
prosecute and enforce its claims, against all assets of the Company and shall
be entitled to
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receive therefrom payment on such claims up to an amount not exceeding the
principal amount of this Note then outstanding plus accrued and unpaid
interest to the date of payment plus reasonable expenses of collection,
including, without limitation, attorney's fees and expenses.
5. REDEMPTION.
5.1 Redemption. Except as otherwise provided in Section 2.9(g),
Notes may be redeemed at the option of the Company, in whole or in part, from
time to time at any time on or after September 1, 1999, on not less than 30
days' nor more than 60 days' prior written notice of such redemption to the
Holder at such Holder's last address as it appears in the Company's books, on
the record date established for such redemption. Any such redemptions shall
be made at the following prices (the "Redemption Price"), expressed as
percentages of the principal amount being redeemed, during the respective
periods set forth below, plus accrued and unpaid interest thereon to the
redemption date:
For the 12 Months
Commencing September 1, Percentage
----------------------- ----------
1999 103%
2000 102%
2001 101%
2002 100.0%
If less than all the Notes are to be redeemed, the Notes may be redeemed
on a pro rata basis or the Notes to be redeemed may be selected by lot, in
such manner as determined by the Board of Directors in its sole discretion.
The Company may select for redemption portions of the Notes in amounts of
$1,000 or multiples thereof. The Company will make the selection from Notes
outstanding and not previously called for redemption. On and after the
redemption date, interest shall cease to accrue hereon (or such portions
hereof called for redemption), and this Note (or such portions thereof called
for redemption) shall cease to be convertible, unless and for so long as the
Company defaults in its obligation to pay the Redemption Price.
5.2 Notice of Redemption. The Company's notice of redemption to
the Holder shall identify the Note to be redeemed and shall state:
(a) the redemption date;
(b) the Redemption Price;
(c) the conversion price;
(d) the name and address of the paying agent;
(e) that the Note called for redemption must be surrendered to the
paying agent to collect the Redemption Price;
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(f) if less than all of the outstanding amount of the Note is to
be redeemed, the certificate number and the amount of the Note to be redeemed;
(g) if the Note is being redeemed in part, that, after the
redemption date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued; and
(h) that unless the Company defaults in making such redemption
payment or the paying agent is prohibited from making such redemption
payment, interest on the Note called for redemption ceases to accrue on and
after the redemption date.
6. CONVERSION.
6.1 Conversion Right. At any time and from time to time
commencing with the date hereof until the earlier of (i) the Maturity Date or
(ii) the date set for redemption in accordance with the provisions of Section
5 hereof, the outstanding principal amount of debt of this Note is
convertible at the Holder's option into the Company's shares of common stock,
$.01 par value per share (the "Common Stock"), upon surrender of this Note,
at the Office of the Company, accompanied by a written notice of conversion
in the form annexed hereto duly executed by the registered holder or its duly
authorized attorney. The outstanding principal amount of indebtedness of
this Note is convertible at the option of the Holder from time to time at any
time on or after the date hereof into shares of Common Stock at a price of
$4.75 per share of Common Stock (as adjusted pursuant to the express
provisions hereof, the "Conversion Price"). No fractional shares or scrip
representing fractional shares will be issued upon any conversion, but the
Holder will receive an amount of cash equal to the equivalent fraction of the
current market price of the share of Common Stock on the business day prior
to the conversion, in respect of any fraction of a share which would
otherwise be issuable upon the surrender of this Note for conversion. Upon
conversion of this Note, the Holder shall also be entitled to receive 125
"$6.00 Warrants" (as hereinafter defined) for each $1,000 of principal of
this Note converted (as adjusted pursuant to the express provisions hereof).
The term "$6.00 Warrants" shall mean common stock purchase warrants, each of
which entitles the holder to purchase one share of Common Stock for an
initial exercise price of $6.00 (as adjusted pursuant to the express
provisions of such $6.00 Warrants) and expires on June 30, 2003, in the form
attached hereto as Exhibit A. Accrued and unpaid interest on this Note (or a
portion thereof) so converted through the date of conversion will be paid to
the Holder in cash. If the Holder converts this Note prior to September 1,
1999, the Holder will also receive an amount of cash equal to 75% of the
interest which would have accrued with respect to the portion of this Note so
converted had it not been converted, from the date of conversion through
September 1, 1999. All such shares of Common Stock, $6.00 Warrants and cash
(including accrued interest) shall be delivered or paid within 30 days of the
date of conversion.
6.2 Registration of Transfer. Subject to the terms of this Note,
at any time after the date hereof, upon surrender of this Note for
conversion, the Company shall issue and deliver with all reasonable dispatch
to or upon the written order of the Holder and in such name or names as such
Holder may designate, a certificate or certificates for the number of full
shares of Common Stock
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due to such Holder upon the conversion of this Note (the "Shares") as well as
a certificate for the $6.00 Warrants due to such Holder upon conversion of
this Note. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become the Holder of record of such Shares and $6.00 Warrants as of the
date of the surrender of this Note; provided, however, that if, at the date
of surrender the transfer books of the Common Stock shall be closed, the
certificates for the Shares shall be issuable as of the date on which such
books shall be opened and until such date the Company shall be under no duty
to deliver any certificate for such Shares; provided, further, however, that
such transfer books, unless otherwise required by law or by applicable rule
of any national securities exchange, shall not be closed at any one time for
a period longer than 20 days.
6.3 Scheduled Adjustments and Adjustments for Dividends,
Reclassifications, Stock Issuances, etc. Subject to the provisions of this
Section 6.3, the Conversion Price in effect, and accordingly, the number of
shares of Common Stock into which this Note may be converted, shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then the
Conversion Price shall be proportionately decreased as of the close of
business on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding
Common Stock by recapitalization, reclassification or split-up thereof, the
Conversion Price immediately prior to such subdivision shall be
proportionately decreased; and if the Company shall at any time combine the
outstanding Common Stock by recapitalization, reclassification or combination
thereof, the Conversion Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Conversion Price shall
become effective at the close of business on the record date for such
subdivision or combination.
(c) In case the Company after the date hereof shall make any of
the following-described issuances, distributions or dividends generally to
the holders of outstanding shares of Common Stock or generally to holders of
a class or series of capital stock convertible into or exchangeable or
exercisable for Common Stock, the Board of Directors shall immediately make
such equitable adjustment in the Conversion Price, as in effect immediately
prior to the record date for such distribution, as may be necessary to
preserve for the Holder rights substantially proportionate to those enjoyed
hereunder by the Holder immediately prior to the happening of such
distribution: (i) capital stock of the Company or options, rights, warrants
or convertible or exchangeable securities entitling the holder thereof to
subscribe for, purchase, convert into or exchange for capital stock of the
Company ("Convertible Securities") at less than the current market price of
such capital stock on the date of issuance or distribution; and (ii)
indebtedness of the Company or other assets of the Company (including
securities, but excluding any issuance, dividend or distribution defined in
item (i) above, and distributions in connection with the liquidation,
dissolution or winding-up of the Company). Any such adjustment to the
Conversion Price shall become effective at the close of business on the
record date for such distribution.
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(d) In case the Company after the date hereof shall distribute
cash to the holders of outstanding shares of Common Stock or the holders of
Convertible Securities (exclusive of distributions of cash as payments of
interest on or principal with respect to indebtedness of the Company),
subject to the provisions of subsection 6.3(m) the Board of Directors shall
immediately make such equitable adjustment in the Conversion Price as in
effect immediately prior to the record date for such distribution as may be
necessary to preserve for the Holder rights substantially proportionate to
those enjoyed hereunder by the Holder immediately prior to the making of such
distribution. Any such adjustment to the Conversion Price shall become
effective at the close of business on the record date for such distribution.
(e) If any capital reorganization or reclassification or change of
the capital stock of the Company, or consolidation, merger or combination of
the Company with another entity, or the sale of all or substantially all of
its assets to another entity, shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities, cash, property
or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger,
combination or sale, the Company or such successor or purchasing entity, as
the case may be, shall make such appropriate provision so that the Holder
shall have the right thereafter and until the Maturity Date to convert the
outstanding principal amount of this Note for the kind and amount of stock,
securities, cash, property or assets receivable upon such reorganization,
reclassification, consolidation, merger, combination or sale by a holder of
the number of shares of Common Stock into which this Note might have been
converted immediately prior to such reorganization, reclassification,
consolidation, merger, combination or sale, subject to further adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 6.3.
(f) In case the Company after the date hereof shall issue or sell
shares of Common Stock or Convertible Securities excluding shares or
Convertible Securities issued in any of the transactions described in
subsections 6.2(a)-(e) above; for a consideration per share less than the
current Conversion Price, the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares and
the number of shares of Common Stock which the aggregate consideration
received (determined as provided in subsection 6.2(h) below) for the issuance
of such additional shares or Convertible Securities would purchase at such
Conversion Price, and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an issuance
is made.
(g) For purposes of the adjustments provided for in subsections
6.2(c) and (f) above if at any time, (i) the Company shall issue or
distribute any Convertible Securities, the Company shall be deemed to have
issued or distributed at the same time as the issuance of such Convertible
Securities the maximum number of shares of Common Stock issuable upon
conversion or exercise of the total amount of Convertible Securities; or (ii)
the conversion or exercise price of any Convertible Security is adjusted as a
result of the future market value of the Common Stock (which adjustments are
other than as a result of anti-dilution adjustments resulting from the
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<PAGE>
issuance or distribution of securities or other assets) then the Company
shall be deemed to have issued at the same time as such adjustment new
Convertible Securities having such adjusted conversion or exercise price and
the Convertible Securities subject to such adjustment shall be deemed expired.
(h) For purposes of any computation respecting consideration
received pursuant to subsections 6.2 (f), the following shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of Directors
of the Company (irrespective of the accounting treatment thereof),
whose determination shall be conclusive;
(C) in the case of the issuance of Convertible Securities,
the aggregate consideration received therefor (before deduction of
any expenses, commissions or other compensation incurred or paid in
connection therewith) shall be deemed to be the consideration
received by the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be received by the
Company upon the conversion or exchange thereof (the consideration
in each case to be determined in the same manner as provided in
clauses (A) and (B) of this subsection 6.2(h)); and
(D) if such consideration consists of the cancellation of
debt issued by the Company, the consideration shall be deemed to be
the amount of the outstanding principal amount of such debt as of
the date of cancellation plus accrued but unpaid interest, through
the date of cancellation.
(i) On the expiration, cancellation or redemption of any
Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be readjusted to such Conversion Price as would have been obtained
(i) had the adjustments made upon the issuance or sale of such expired,
canceled or redeemed Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock theretofore actually
delivered upon the exercise or conversion of such Convertible Securities (and
the total consideration received therefor) and (ii) had all subsequent
adjustments been made only on the basis of the Conversion Price as readjusted
under this subsection (h) for all transactions (which would have affected
such adjusted Conversion Price) made after the issuance or sale of such
Convertible Securities.
(j) Anything in this Section 6.3 to the contrary notwithstanding,
no adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
Conversion Price, as last adjusted; provided, however, that any
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<PAGE>
adjustments which by reason of this subsection (j) are not required to be
made shall be carried forward and taken into account in making subsequent
adjustments. All calculations under this Section shall be made to the
nearest cent or to the nearest tenth of a share, as the case may be.
(k) Upon any adjustment of any Conversion Price or the exercise
price of the $6.00 Warrants, then and in each such case the Company shall
promptly deliver a notice to the Holder, which notice shall state the
Conversion Price or such exercise price, as the case may be, resulting from
such an adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the conversion hereof or exercise
thereof, as the case may be, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(l) In addition to the adjustments provided for elsewhere in this
Section 6.3, on September 1, 1998, the Conversion Price shall be adjusted to
equal the lower of (a) the then existing Conversion Price, or (b) 110% of the
then current market price, but not less than $4.00; and on March 1, 1999, the
Conversion Price shall be again adjusted to equal the lower of (a) the then
current Conversion Price, or (b) 110% of the then current market price, but
in no event lower than $3.50. For purposes of this Note, the term "then
current market price" shall mean as of the date of measurement, the average
of the daily per share closing prices of the Common Stock for the 20
consecutive trading days immediately preceding such date. The closing price
for each day shall be the last price regular way or, in case no such reported
sale takes place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if
not listed or admitted to trading on such an exchange, the average of the
closing bid and asked prices as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors.
The minimum Conversion Prices of $4.00 and $3.50 mentioned in this subsection
6.3(l) are subject to adjustment to the same extent and under the same
circumstances as the Conversion Price shall be adjusted pursuant to
subsections 6.3(a) (b) and (e).
(m) Notwithstanding anything herein to the contrary, no adjustment
shall be made pursuant to this Section 6.3 for any of the following: (i)
distributions of cash to the extent such distribution is made in connection
with the liquidation, dissolution or winding-up of the Company, or to the
extent the amount of such cash combined with all such cash distributions
(exclusive of distribution of cash as payments of interest on or principal
with respect to indebtedness of the Company and cash dividends on convertible
preferred stocks referred to in subsection 6.3(m)(ii)(cc)) made during the
then preceding 12 months with respect to which no adjustment has been made,
does not exceed 10% of the Company's market capitalization (being the product
of the then current market price of the Common Stock multiplied by the number
of shares of Common Stock then outstanding on the record date for such
distribution); (ii) the issuance or sale by the Company of shares of Common
Stock or Convertible Securities (A) pursuant to any compensation or incentive
plan (including, without limitation, individual employment agreements) now or
hereafter adopted or entered into for officers, Directors, employees or
consultants of the Company, which plan has been approved by the Compensation
Committee or Stock Option Committee of the Board of Directors (or by a
majority vote of the
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independent directors) and, if required by law, the requisite vote of the
stockholders of the Company (unless the exercise or conversion price of the
instrument issued pursuant to such plan is subsequently changed other than
solely by the operation of the anti-dilution provisions thereof, or by the
Compensation Committee, the Stock Option Committee, or the independent
directors and, if required by law, the stockholders of the Company as
provided by this clause (A)); (B) upon the conversion or exercise of
Convertible Securities outstanding, granted or subscribed for, on or prior to
the date hereof, unless the conversion or exercise price thereof is changed
after the date of issuance of the Notes (other than solely by operation of
the anti-dilution provisions thereof); and (C) the declaration, setting aside
or payment of regularly scheduled dividends on any outstanding convertible
preferred stock or any other convertible preferred stock hereafter issued by
the Company (including the payment of such dividends by the issuance of
shares of Common Stock in accordance with the terms of such convertible
preferred stock, or in the case of the Preferred Stock A, in accordance with
past practice)
(m) Upon any adjustment of the Conversion Price pursuant to any
provisions contained in this Section 6.3, the number of Shares issuable upon
conversion of this Note shall be changed accordingly.
6.4 Notice of Certain Events. In case at any time:
(a) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends) to
the holders of the Common Stock;
(b) The Company shall offer for subscription pro-rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(c) There shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation; or
(d) There shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the Holder of the date on which (i) the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights; or (ii) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. Such notice shall be given at least ten days
prior to the record date or the date on which the Company's transfer books
are closed in respect thereof. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any of the matters set
forth in this paragraph.
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7. REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL.
Subject to Section 2.9(h), if a Change of Control occurs, the
Company shall offer to repurchase this Note pursuant to an offer (the "Change
of Control Offer") at a purchase price equal to 100% of the principal amount
of this Note, plus accrued but unpaid interest, if any, to the date of
repurchase.
A "Change of Control" means the occurrence of any of the following
events after the date of the issuance of this Note: (i) any person or group
(within the meaning of Section 13(d) or Section 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") becomes the direct or
indirect beneficial owner of shares of capital stock of the Company
representing greater than 50% of the combined voting power of all outstanding
shares of capital stock of the Company entitled to vote in the election of
directors under ordinary circumstances; (ii) subject to the exception listed
below, the Company consolidates with or merges into any other entity and the
outstanding Common Stock is changed or exchanged as a result; (iii) sale,
transfer, lease or other disposition of all or substantially all of the
assets of the Company individually, or of the collective assets of the
Company and its subsidiaries, to any other entity, in a single or series of
related transactions; (iv) at any time Continuing Directors (as defined
hereinafter) cease to constitute a majority of the Board of Directors of the
Company then in office; or (v) on any day (a "Calculation Day"), the Company
makes any distribution of cash, property or securities (other than regular
quarterly dividends, Common Stock, preferred stock which is substantially
equivalent to Common Stock or rights to acquire Common Stock or preferred
stock which is substantially equivalent to Common Stock) to holders of Common
Stock, or the Company or any of its Subsidiaries purchases or otherwise
acquires Common Stock, and the sum of the fair market value of such
distributions or purchases on the Calculation Date, plus the fair market
value, when made, of all other distributions and purchases which have
occurred during the 12-month period ending on the Calculation Date, in each
case expressed as a percentage of the aggregate market price of all of the
shares of Common Stock outstanding at the close of business on the last day
prior to the date of such distribution or purchase, exceeds 50%. "Continuing
Director" means, at any date, a member of the Company's Board of Directors
(i) who was a member of such Board on the date of the issuance of the Note or
(ii) who was nominated or elected by at least two-thirds of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by
at least two-thirds of the directors who were Continuing Directors at the
time of such election. (Under this definition, if the present Board of
Directors of the Company were to approve a new director or directors and then
resign, no Change of Control would occur even though the present Board of
Directors would thereafter cease to be in office). Notwithstanding the
foregoing, a Change of Control under clause (ii) above will not include any
transaction or series of related transactions in which 85% or more of the
consideration received by the holders of the Notes (assuming conversion of
the Notes immediately after such transaction) consists of common stock that
is listed on a national securities exchange or approved for quotation on the
NASDAQ National Market.
Within 30 days after any Change of Control, unless the Company has
previously given a notice of optional redemption by the Company of all of the
Notes, the Company shall give
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a notice of the Change of Control Offer to the Holder at such Holder's last
address as it appears in the Company's books stating: (i) that a Change of
Control has occurred and that the Company is offering to repurchase this
Note; (ii) a brief description of such Change of Control; (iii) the
repurchase price (the "Change of Control Payment"); (iv) the expiration date
of the Change of Control Offer, which shall be no earlier than 30 days nor
later than 60 days from the date such notice is given; (v) the date such
purchase shall be effected (the "Change of Control Payment Date"), which
shall be no later than 30 days after the expiration date of the Change of
Control Offer; (vi) that if this Note is not accepted for payment pursuant to
the Change of Control Offer, this Note shall continue to accrue interest;
(vii) that unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (viii) the Conversion Price; (ix) the name and address of the
paying agent and conversion agent; (x) that this Note must be surrendered to
the paying agent to collect the Change of Control Payment; and (xi) any other
information required by applicable law and any other procedures that the
Holder must follow in order to have this Note repurchased.
In the event the Company is required to make a Change of Control
Offer, the Company will comply with any applicable securities laws and
regulations, including, to the extent applicable, Section 14(e) of, and Rule
14e-1 and any other tender offer rules under, the Exchange Act, which may
then be applicable to a Change of Control Offer.
8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
The Holder is entitled to the registration rights set forth in the
Subscription Agreement executed and delivered by the Holder or its
predecessor-in-interest in this Note in connection with the offering made by
and through the Private Placement Memorandum. The Holder, each transferee
hereof and any Holder and transferee of any shares of Common Stock or $6.00
Warrants into which this Note or $6.00 Warrants are convertible or
exercisable (the "Underlying Securities"), by its acceptance thereof, agrees
that (i) no public distribution of this Note or Underlying Securities will be
made in violation of the Act, and (ii) during such period as the delivery of
a prospectus with respect to the Note or Underlying Securities may be
required by the Act, no public distribution of the Note or Underlying
Securities will be made in a manner or on terms different from those set
forth in, or without delivery of, a prospectus then meeting the requirements
of Section 10 of the Act and in compliance with applicable state securities
laws. The Holder of this Note and each transferee hereof further agrees that
if any distribution of the Note or any Underlying Securities is proposed to
be made by them otherwise than by delivery of a prospectus meeting the
requirements of Section 10 of the Act, such action shall be taken only after
submission to the Company of an opinion of counsel, reasonably satisfactory
in form and substance to the Company's counsel, to the effect that the
proposed distribution will not be in violation of the Act or of applicable
state law. Furthermore, it shall be a condition to the transfer of this Note
that any transferee hereof deliver to the Company its written agreement to
accept and be bound by all of the terms and conditions contained in this Note.
This Note, the Underlying Securities or any other security issued
or issuable upon conversion of this Note may not be sold or otherwise
disposed of except as follows:
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(a) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Note or
Underlying Securities may legally be transferred without registration and
without the delivery of a current prospectus under the Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section with respect to any resale or
other disposition of such securities which agreement shall be satisfactory in
form and substance to the Company and its counsel; provided that the
foregoing shall not apply to any such Note, shares or other security as to
which such Holder shall have received an opinion letter from counsel
acceptable to the Company as to the exemption thereof from registration under
the Act pursuant to Rule 144(k) under the Act; or
(b) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
Unless the Company directs its transfer agent otherwise, each
certificate for Underlying Securities issued upon conversion of this Note
shall bear a legend relating to the non-registered status of such Underlying
Securities under the Act.
9. SPECIAL NEGATIVE COVENANTS. Without the consent of the Holders of
a majority in aggregate principal amount of the Notes then outstanding, the
Company shall not, and shall not permit any of its Subsidiaries to:
(a) create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Subsidiary to (i) pay to the Company dividends or make to the Company any
other distribution on its capital stock, (ii) pay any debt owed to the
Company or any other Subsidiary, (iii) make loans or advances to the Company
or any other Subsidiary or (iv) transfer any of its property or assets to the
Company or any other Subsidiary, other than such encumbrances or restrictions
existing or created under or by reason of (A) applicable laws, (B) the Notes,
(C) encumbrances, covenants or restrictions contained in any instrument or
agreement governing debt of the Company or any of the Subsidiaries existing
on the date of the issuance of the Notes, or encumbrances, covenants or
restrictions in any loan documents relating to Senior Debt or indebtedness of
its Subsidiaries incurred after the date hereof, provided that, in the
absence of a default under any such loan documents, no such restriction shall
prevent a Subsidiary from paying dividends or otherwise distributing funds to
the Company in amounts sufficient to enable the Company to make interest and
principal payments on the Notes as and when due (including pursuant to any
Change of Control Offer), (D) customary provisions restricting subletting,
assignment and transfer of any lease governing a leasehold interest of the
Company or any of its Subsidiaries or in any license or other agreement
entered into in the ordinary course of business, (E) any agreement governing
debt of a person acquired by the Company or any of its Subsidiaries in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrances or restrictions are not applicable to any
person, or the property or assets of any person, other than the person, or
the property or assets of the person, so acquired or (F) any restriction with
respect to a Subsidiary imposed pursuant to an agreement entered into in
accordance with the terms of the Notes for the sale or disposition of capital
stock or property or assets of such Subsidiary, pending the closing of such
sale or disposition; or
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<PAGE>
(b) consolidate with or merge into any other entity or convey,
transfer, sell or lease its assets substantially as an entirety to any
entity, unless: (i) either (A) the Company is the continuing corporation or
(B) the entity formed by such consolidation or into which the Company is
merged or the entity to which such assets are sold, leased, transferred,
conveyed or disposed is organized under the laws of the United States of
America or any state thereof or the District of Columbia and expressly
assumes all obligations of the Company under the Notes; (ii) immediately
before and immediately after giving effect to such merger, consolidation,
conveyance, transfer, sale, lease or disposition no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default has occurred and is continuing; and (iii) immediately after giving
effect to such merger, consolidation, conveyance, transfer, sale, lease or
disposition, the Notes will be a valid and enforceable obligation of the
Company or such successor.
10. MISCELLANEOUS.
10.1 Notices. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or
certified mail addressed to Unapix Entertainment, Inc., 200 Madison Avenue,
New York, New York 10016, Attention: President, or, if to the Holder, at the
address shown for the Holder in the registration books maintained by the
Company.
10.2 Lost, Stolen or Mutilated Notes. In case this Note shall be
mutilated, lost, stolen or destroyed, the Company may, in its discretion,
issue and deliver in exchange and substitution for and upon cancellation of
the mutilated Note, or in lieu of and in substitution for the Note, lost,
stolen or destroyed, a new Note of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction and an indemnity, if requested,
also satisfactory to it.
10.3 Stamp Tax The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Common Stock and $6.00 Warrants
issuable upon conversion of this Note; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
the Common Stock or $6.00 Warrants in a name other than that of the Holder in
respect of which this Note is issued, and in such case the Company shall not
be required to issue or deliver any certificate for the Common Stock or $6.00
Warrants until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that no such tax is required to be paid.
10.4 Shares Validly Issued. The Company agrees that all shares of
Common Stock issuable upon conversion of this Note and exercise of the $6.00
Warrants shall be, at the time of delivery of certificates for such shares,
validly issued and outstanding, fully paid and non-assessable and that the
issuance of such shares will not give rise to preemptive rights in favor of
existing stockholders.
10.5 Governing Law. This Note shall be construed in accordance
with and governed by the laws of the State of New York, without giving effect
to such state's conflict of laws principles.
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10.6 No Recourse. No recourse whatsoever, either directly or
through the Company or any trustee, receiver or assignee, shall be had in any
event or in any manner against any past, present or future stockholder,
director or officer of the Company for the payment of the redemption price,
principal of or interest on this Note or for any claim based thereon or
otherwise in respect this Note; this Note being a corporate obligation only.
10.7 Registration of Transfer. The Company shall maintain books
for the transfer and registration of Notes. The Company may treat the person
in whose name this Note is registered as the owner and Holder of the Note for
the purpose of receiving principal of and premium, if any, and interest on
this Note and for all other purposes whatsoever, and the Company shall not be
affected by any notice to the contrary. Upon the transfer of any Note in
accordance with the provisions of Section 8 hereof, the Company shall issue
and register the Note in the names of the new holders. The Notes shall be
signed manually by the Chairman, Chief Executive Officer, President or any
Vice President and the Secretary or Assistant Secretary of the Company.
Subject to the terms of Sections 6 and 8 and Section 10.3, upon surrender of
this Note, the Company shall issue and deliver with all reasonable dispatch
to or upon the written order of the Holder, and in such name or names as such
Holder may designate, a certificate or certificates for the number of Shares
and $6.00 Warrants due to such Holder upon the conversion of this Note. Such
certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become the
Holder of record of such Shares and $6.00 Warrants as of the date of the
surrender of this Note pursuant to said sections; provided, however, that if,
at the date of surrender the transfer books of the Common Stock shall be
closed, the certificates for the Shares shall be issuable as of the date on
which such books shall be opened and until such date the Company shall be
under no duty to deliver any certificate for such Shares; provided, further,
however, that such transfer books, unless otherwise required by law or by
applicable rule of any national securities exchange, shall not be closed at
any one time for a period longer than 20 days.
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<PAGE>
IN WITNESS WHEREOF, Unapix Entertainment, Inc. has caused this Note to
be signed in its corporate name by a duly authorized officer in accordance
herewith and to be dated the day and year first above written.
UNAPIX ENTERTAINMENT, INC.
By:______________________________
David M. Fox, President
Attest:
____________________________
Michael R. Epps
Assistant Secretary
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ASSIGNMENT
For value received I hereby assign
to __________________________________________ $ _____________
principal amount of the 10% Convertible Subordinated Note due June 30, 2003
evidenced hereby and hereby irrevocably appoint
attorney to transfer the Note on the books of the within named
corporation with full power of substitution in the premises.
Dated:
In the presence of:
________________________________
________________________________
21
<PAGE>
CONVERSION NOTICE
TO: UNAPIX ENTERTAINMENT, INC.
The undersigned holder of this Note hereby irrevocably exercises the option
to convert $_________ principal amount of such Note (which may be less than
the stated principal amount thereof) into shares of common stock of Unapix
Entertainment, Inc. ("Common Stock") and "$6.00 Warrants" (as such term is
defined in such Note) in accordance with the terms of such Note, and directs
that the shares of Common Stock and $6.00 Warrants issuable and deliverable
upon such conversion, together with a check (if applicable) in payment for
any fractional shares as provided in such Note, be issued and delivered to
the undersigned unless a different name has been indicated below. If shares
of Common Stock and $6.00 Warrants are to be issued in the name of a person
other than the undersigned holder of such Note, the undersigned will pay all
transfer taxes payable with respect thereto.
- ---------------------------------
Name and Address of Holder
- ---------------------------------
Signature of Holder
Principal amount converted $
-------------------------
If shares are to be issued otherwise than to the Holder:
- ---------------------------------
Name of Transferee
- ---------------------------------
Name and SS# of Transferee
22
<PAGE>
EXHIBIT A
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN WHOLE OR IN PART IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED SALE,
TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION.
UNAPIX ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
_________ SHARES OF COMMON STOCK
VOID AFTER 5:00 PM NEW YORK, NEW YORK LOCAL TIME ON JUNE 30, 2003
CUSIP 804270 13 8
Cert. No. W-6-
This Warrant Certificate certifies that ________________, or registered
assigns, is the registered holder ("Holder") of _______ Common Stock Purchase
Warrants ("Warrants") to purchase shares of common stock, $.01 par value per
share ("Common Stock"), of UNAPIX ENTERTAINMENT, INC., a Delaware corporation
(the "Company"). Each Warrant enables the Holder to purchase from the
Company at any time until 5:00 p.m. New York, New York local time on June 30,
2003 one fully paid and nonassessable share of Common Stock (individually, a
"Share" and collectively the "Shares") upon presentation and surrender of
this Warrant Certificate and upon payment of the "Exercise Price". The
"Exercise Price" shall initially be $6.00 per share, and shall be subject to
adjustment from time to time in accordance with the provisions of Section 8.
Payment shall be made in lawful money of the United States of America by
certified check payable to the Company. Such payment shall be made at the
principal office of the Company at 200 Madison Avenue, New York, NY 10016.
As hereinafter provided, the Exercise Price and number of Shares purchasable
upon the exercise of the Warrants are subject to modification or adjustment
upon the happening of certain events.
The Warrants represented by this Warrant Certificate were issued upon
conversion of a 10% Convertible Subordinated Note of the Company due June 30,
2003 (a "Note"), which Note was issued by
<PAGE>
the Company in a private placement pursuant to a Private Placement Memorandum
dated February 12, 1998 (the "Private Placement Memorandum Date").
1. Upon surrender to the Company, this Warrant Certificate may be exchanged
for another Warrant Certificate or Warrant Certificates evidencing a like
aggregate number of Warrants. If this Warrant Certificate shall be exercised
in part, the Holder shall be entitled to receive upon surrender hereof
another Warrant Certificate or Warrant Certificates evidencing the number of
Warrants not exercised.
2. No Holder shall be deemed to be the holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings or to
receive dividends or subscription rights or otherwise until a Warrant shall
have been exercised and the Common Stock purchasable upon the exercise
thereof shall have become issuable.
3. Each Holder consents and agrees with the Company and any other Holder
that:
(a) this Warrant Certificate is exercisable by the Holder in person or
by attorney duly authorized in writing at the principal office of the Company
in whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall
the Company be obligated to issue Warrant Certificates evidencing other than
a whole number of Warrants or issue certificates evidencing other than a
whole number of Shares upon the exercise of this Warrant Certificate;
provided, however, that the Company shall pay with respect to any such
fraction of a share an amount of cash based upon the current market value (or
book value, if there shall be no public market value for shares purchasable
upon exercise hereof); and
(c) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner
hereof for all purposes whatsoever.
4. The Company shall maintain books for the transfer and registration of
Warrants. Upon the transfer of any Warrants, the
2
<PAGE>
Company shall issue and register the Warrants in the names of the new
Holders. The Warrants shall be signed manually by the Chairman, Chief
Executive Officer, President or any Vice President and the Secretary (or
Assistant Secretary) of the Company. Subject to Paragraph 10, the Company
shall transfer, from time to time, any outstanding Warrants upon the books to
be maintained by the Company for such purpose upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instruction for
transfer. Upon any transfer, a new Warrant Certificate shall be issued to
the transferee and the surrendered Warrants shall be cancelled by the
Company. Warrants may be exchanged at the option of the Holder, when
surrendered at the office of the Company, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Shares. Subject to the
terms of this Warrant Certificate, upon such surrender and payment of the
purchase price, the Company shall issue and deliver with all reasonable
dispatch to or upon the written order of the Holder of such Warrants and in
such name or names as such Holder may designate, a certificate or
certificates for the number of full Shares so purchased upon the exercise of
such Warrants. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become the holder of record of such Shares as of the date of the
surrender of such Warrants and payment of the Exercise Price; provided,
however, that if, at the date of surrender and payment, the transfer books of
the Shares shall be closed, the certificates for the Shares shall be issuable
as of the date on which such books shall be opened and until such date the
Company shall be under no duty to deliver any certificate for such Shares;
provided, further, however, that such transfer books, unless otherwise
required by law or by applicable rule of any national securities exchange,
shall not be closed at any one time for a period longer than 20 days. The
rights of purchase represented by the Warrants shall be exercisable, at the
election of the Holders, either in whole or from time to time in part (but in
no event with respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Shares issuable upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Shares in a name other than that
of the Holder in respect of which such Shares are issued, and in such case
the Company shall not be required to issue or deliver any certificate for
Shares or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or that no such tax is required to
be paid.
3
<PAGE>
6. In case the Warrant Certificate shall be mutilated, lost stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange
and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate,
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction and
an indemnity, if requested, also satisfactory to it.
7. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented
by this Warrant Certificate. The Company agrees that all Shares issuable
upon exercise of the Warrants shall be, at the time of delivery of the
certificates for such Shares, validly issued and outstanding, fully paid and
nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the Exercise
Price and number of Shares subject to this Warrant Certificate shall be
adjusted from time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then the
Exercise Price as in effect immediately prior to such dividend or
distribution shall be proportionately decreased as of the close of business
on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Exercise
Price as in effect immediately prior to such subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding Common Stock by recapitalization, reclassification or combination
thereof, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased. Any such adjustment to the Exercise
Price shall become effective at the close of business on the record date for
such subdivision or combination.
(c) In case the Company shall distribute to all of the holders of
outstanding shares of Common Stock any securities or other assets (other than
a cash distribution made as a dividend payable out of earnings or out of any
earned surplus legally available for dividends under the laws of the State of
Delaware), the Board of Directors shall be required to make such equitable
adjustment in the Exercise Price, as in effect immediately prior to the
record date for such distribution, as may be necessary to preserve for the
Holder rights substantially proportionate to those
4
<PAGE>
enjoyed hereunder by the Holder immediately prior to the happening of such
distribution. Any such adjustment to the Exercise Price shall become
effective at the close of business on the record date for such distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash, or assets with respect
to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Company
or such successor or purchasing corporation, as the case may be, shall
execute a supplemental Warrant Certificate providing that each Holder shall
have the right thereafter and until the expiration date to exercise a Warrant
for the kind and amount of stock, securities, cash or assets receivable upon
such reorganization, reclassification, consolidation, merger or sale by a
holder of the number of shares of Common Stock for the purchase of which such
Warrant might have been exercised immediately prior to such reorganization,
reclassification, consolidation, merger or sale, subject to further
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8.
(e) If at any time the Company shall grant or issue any shares of
Common Stock, or grant or issue any rights or options for the purchase of, or
stock or other securities convertible into, Common Stock (such Common Stock,
rights or options, convertible stock or securities being herein collectively
referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subparagraph (f)
of this Paragraph 8; or
(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a),(b),(c), or (d) of this Paragraph 8;
for a consideration per share which is less than the Exercise Price, then the
Exercise Price as in effect immediately prior to such issuance or sale (the
"Applicable Exercise Price") shall, and thereafter upon each issuance or
sale, the Applicable Exercise Price shall, simultaneously with such issuance
or sale, be adjusted, so that such Applicable Exercise Price shall equal a
price determined by multiplying the Applicable Exercise Price by a fraction,
the numerator of which shall be:
5
<PAGE>
(A) the sum of (x) the total number of shares of Common Stock
outstanding immediately prior to such issuance plus (y) the number
of shares of Common Stock which the aggregate consideration
received, as determined in accordance with subparagraph (g) below
for the issuance or sale of such additional Common Stock or
Convertible Securities, would purchase at the Applicable Exercise
Price; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding
(or deemed to be outstanding as provided in subparagraph (g))
immediately after the issuance or sale of such additional shares.
If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon exercise than would be issued at
the Applicable Exercise Price in effect immediately prior to the calculation
provided for in this Section 8(e), the Applicable Exercise Price shall be
such exercise price immediately prior to said calculation.
(f) Anything in this Paragraph 8 to contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or non-qualified
Employee Stock Option Plans or any other bona fide employee benefit
plan or incentive arrangement, (including, without limitation, any
issuances pursuant to individual employment agreements) previously
adopted or entered into, or as may hereafter be adopted or entered
into, by the Company's Board of Directors or its officers, for the
benefit of the Company's employees, consultants or directors, as
any such plans, agreements or arrangements may hereafter be
amended from time to time; and
(ii) the issuance of any shares of Common Stock pursuant to
the grant or exercise of Convertible Securities outstanding as of
the Private Placement Memorandum Date (or with respect to which the
Company has accepted subscription agreements as of such date) or
the issuance, conversion or exercise of any Notes or Warrants at
any time.
(g) For the purpose of subparagraph (e) above, the following provisions
shall also be applied:
6
<PAGE>
(i) In the case of the issuance or sale of additional shares
of the Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be the amount of cash received
by the Company for such shares, before deducting therefrom any
commissions, compensation or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with,
the issuance or sale of such shares.
(ii) In the case of the issuance of Convertible Securities,
the consideration received by the Company therefor shall be deemed
to be the amount of cash, if any, received by the Company for the
issuance of such rights or Convertible Securities, plus the minimum
amounts of cash and fair value of other consideration, if any,
payable to the Company upon the exercise of such rights or options
or payable to the Company on conversion of such Convertible
Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part,
other than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as reasonably determined in
good faith by the Board of Directors of the Company (irrespective
of accounting treatment thereof); provided, however, that if such
consideration consists of the cancellation of debt issued by the
Company, the consideration shall be deemed to be the amount of the
outstanding principal amount of such debt as of the date of
cancellation plus accrued but unpaid interest, through the date of
cancellation.
(iv) In the case of the issuance of additional shares of
Common Stock upon the conversion or exchange of any obligations
(other than Convertible Securities), the amount of the
consideration received by the Company for such Common Stock shall
be deemed to be the consideration received by the Company for such
obligation or shares so converted or exchanged, before deducting
from such consideration so received by the Company any expenses or
commissions or compensations incurred or paid by the Company for
any underwriting of, or otherwise in connection with, the issuance
or sale of such obligations or shares, plus any consideration
received by the Company in adjustment of interest and dividends.
If obligations or shares of the same class or series of a class as
the obligations or shares so converted or exchanged have been
originally issued for different amounts of consideration, then the
amount of consideration received by the Company
7
<PAGE>
upon the original issuance of each of the obligations or shares so
converted or exchanged shall be deemed to be the average amount of
the consideration received by the Company upon the original
issuance of all such obligations or shares. The amount of
consideration received by the Company upon the original issuance of
the obligations or shares so converted or exchanged and the amount
of the consideration, if any, other than such obligations or shares
received by the Company upon such conversion or exchange shall be
determined in the same manner as provided in Paragraphs (i) through
(iii) above with respect to the consideration received by the
Company in case of the issuance of additional shares of Common
Stock or Convertible Securities.
(h) For purposes of the adjustments provided for in subparagraph (e)
above, (i) if at any time, the Company shall issue any Convertible
Securities, the Company shall be deemed to have issued at the same time as
the issuance of such Convertible Securities the maximum number of shares of
Common Stock issuable upon conversion of the total amount of Convertible
Securities, and (ii) if at any time the conversion or exercise price of any
Convertible Securities is adjusted as a result of the future market value of
the Common Stock (which adjustments are other than as a result of
anti-dilution adjustments resulting from the issuance or distribution of
securities of other assets by the Company), then the Company shall be deemed
to have issued at the same time as such adjustment new Convertible Securities
having such adjusted conversion or exercise price, and the Convertible
Securities subject to such adjustment shall be deemed expired.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise Price as in effect immediately prior to such
expiration, cancellation or redemption shall forthwith be readjusted to such
Exercise Price as would have been obtained (A) had the adjustments made upon
the issuance or sale of such expired, cancelled or redeemed Convertible
Securities been made upon the basis of the issuance of only the number of
shares of Common Stock theretofore actually delivered upon the exercise or
conversion of such Convertible Securities (and the total consideration
received therefor) and (B) had all subsequent adjustments been made only on
the basis of the Exercise Price as readjusted under this subparagraph (i) for
all transactions (which would have affected such adjusted Exercise Price)
made after the issuance or sale of such Convertible Securities.
(j) Anything in this Paragraph 8 to the contrary notwith-standing, no
adjustment in the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Exercise Price;
provided, however, that any
8
<PAGE>
adjustments which by reason of this subparagraph (j) are not required to be
made shall be carried forward and taken into account in making subsequent
adjustments. All calculations under this Paragraph shall be made to the
nearest cent or to the nearest tenth of a share, as the case may be.
(k) Notwithstanding anything to the contrary contained herein, the
adjustments to the Exercise Price and number of Shares subject to this
Warrant Certificate provided for in this Section 8 shall be made with respect
to transactions occurring after the Private Placement Memorandum Date. Any
adjustments or Company obligations arising with respect to transactions
described above, which take place prior to the issuance of the Warrants,
shall be effective simultaneous with the issuance of this Warrant Certificate
upon conversion of a Note and shall be calculated as if the Warrants
represented hereby had been issued on the Private Placement Memorandum Date.
(l) Upon any adjustment of the Exercise Price, then and in each such
case the Company shall promptly deliver a notice to the registered Holder of
this Warrant, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise hereof, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(m) Upon any adjustment of the Exercise Price pursuant to any
provisions contained in this Paragraph 8, the number of Shares issuable upon
exercise of this Warrant shall be changed to the number of shares determined
by dividing (i) the aggregate Exercise Price payable for the purchase of all
Shares issuable upon exercise of the Warrant immediately prior to such
adjustment by (ii) the Exercise Price per Share in effect immediately after
such adjustment.
9. In case at any time after the issuance hereof:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash
dividends) to the holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the
holders of the Common Stock any additional shares of stock of any class
or other rights;
(iii) There shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to,
another corporation; or
9
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(iv) There shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the Holder of the date on which (X) the books of the Company shall close
or a record shall be taken for such dividend, distribution, or subscription
rights, or (Y) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution, or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such notice shall be given at least 20 days
prior to the record date or the date on which the Company's transfer books
are closed in respect thereof. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any of the matters set
forth in this paragraph.
10. (a) The Holder of this Warrant Certificate, each transferee hereof and
any holder and transferee of any Shares, by his or its acceptance thereof,
agrees that (i) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933, as amended (the "Act"), and (ii)
during such period as the delivery of a prospectus with respect to Warrants
or Shares may be required by the Act, no public distribution of Warrants or
Shares will be made in a manner or on terms different from those set forth
in, or without delivery of, a prospectus then meeting the requirements of
Section 10 of the Act and in compliance with all applicable state securities
laws. The Holder of this Warrant Certificate and each transferee hereof
further agrees that if any distribution of any of the Warrants or Shares is
proposed to be made by them otherwise than by delivery of a prospectus
meeting the requirements of Section 10 of the Act, such action shall be taken
only after submission to the Company of an opinion of counsel, reasonably
satisfactory in form and substance to the Company's counsel, to the effect
that the proposed distribution will not be in violation of the Act or of
applicable state law. Furthermore, it shall be a condition to the transfer
of the Warrants that any transferee thereof deliver to the Company his or its
written agreement to accept and be bound by all of the terms and conditions
contained in this Warrant Certificate.
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except
as follows:
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<PAGE>
(i) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Warrant
or Shares may legally be transferred without registration and without
the delivery of a current prospectus under the Act with respect thereto
and then only against receipt of an agreement of such person to comply
with the provisions of this Section 10(b)(i) with respect to any resale
or other disposition of such securities which agreement shall be
satisfactory in form and substance to the Company and its counsel;
provided that, the foregoing shall not apply to any such Warrant, Shares
or other security as to which such Holder shall have received an opinion
letter from counsel acceptable to the Company as to the exemption
thereof from the registration under the Act pursuant to Rule 144(k)
under the Act; or
(ii) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant
shall bear a legend relating to the non-registered status of such Shares
under the Act, unless at the time of exercise of this Warrant such Shares are
subject to a currently effective registration statement under the Act.
11. (a) The Warrants represented by this Certificate may be redeemed (as a
whole at any time or in part from time to time) on not less than 30 days'
notice, at any time on or after the later of (i) September 1, 2000 or (ii)
the redemption date that has been set for the redemption of the remaining
outstanding principal amount of Notes (or, if earlier, the date that all such
Notes have been converted), at a redemption price of $.025 per Warrant,
provided that the average "Market Price" (as hereinafter defined) of the
Common Stock, receivable upon exercise of such Warrants, over a period of any
20 trading days during any 30 consecutive trading-day period has been at
least 150% of the then effective Exercise Price (the 30 consecutive
trading-day period referred to as the "Measurement Period"). Notwithstanding
the foregoing, the Company shall not be entitled to redeem any of the
Warrants represented by this Certificate, unless the Shares into which the
Warrants are exercisable have been registered under the Act, at all times
during the applicable Measurement Period and shall continue to be so
registered at all times between the date on which the notice of redemption is
given and the "Redemption Date" (as hereinafter defined). For purposes
hereof, "Market Price" shall mean with respect to each trading day the
greater of (i) the closing sales price of the Common Stock reported on the
American Stock Exchange, or if different, the primary securities exchange on
which the
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<PAGE>
Common Stock is traded, or for any day on which there is no closing sales
price so reported, then the closing bid price for such day; and (ii) the
closing sales price of the Common Stock as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, if any,
or for any day on which there is no closing sales price so reported, then the
closing bid price for such day, if any.
(b) In the event the Company shall elect to redeem all or any part of
the Warrants, the Company shall fix a date for redemption (the "Redemption
Date"). Notice of redemption shall be mailed by first-class mail, postage
prepaid, by the Company not less than 30 days from the date fixed for
redemption to the registered Holder of this Warrant Certificate at its last
address as it shall appear on the Company's Warrant registry books. Any
notice mailed in the manner herein shall be conclusively presumed to have
been duly given whether or not the Holder receives such notice. Any right to
exercise a Warrant being redeemed shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon presentation
and surrender of this certificate to the Company by or on behalf of the
Holder thereof, deliver or cause to be delivered to or upon the written order
of the Holder a sum in cash equal to the redemption price of each Warrant
being redeemed. From and after the date fixed for redemption, such Warrants
shall expire and become void and all rights hereunder with respect thereto,
except the right to receive payment of the redemption price, shall cease.
(d) If less than all of the Warrants are called for redemption by the
Company, the particular Common Stock purchase warrants to be redeemed shall
be selected at random by the Company in such manner as the Company in its
discretion may deem fair and appropriate. If there shall be drawn for
redemption less than all of the Warrants represented by this Warrant
Certificate, the Company shall execute and deliver, upon surrender of this
Warrant Certificate, without charge to the Holder, a new Warrant Certificate
representing the number of Warrants not being redeemed.
12. (a) This Warrant shall be governed by and construed in accordance with
the substantive laws of the State of New York, without giving effect to such
State's conflict of laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions whether
12
<PAGE>
express or implied, oral or written. Neither this Warrant Certificate nor
any portion or provision hereof may be changed, waived or amended orally or
in any manner other than by an agreement in writing signed by the Holder and
the Company.
(c) Except as otherwise provided in this Warrant Certificate, all
notices, requests, demands and other communications required or permitted
under this Warrant Certificate or by law shall be in writing and shall be
deemed to have been duly given, made and received only when delivered against
receipt or when deposited in the United States mails, certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Company: Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Holder: At the address shown for the
Holder in the registration
books maintained by the
Company.
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction, such
provision shall, as to such jurisdiction, be in effect to the extent of such
prohibition without invalidating the remaining provisions hereof; provided,
however, that any such prohibition in any jurisdiction shall not invalidate
such provision in any other jurisdiction; and provided, further that where
the provisions of any such applicable law may be waived, that they hereby are
waived by the Company and the Holder to the full extent permitted by law and
to the end that this Warrant instrument shall be deemed to be a valid and
binding agreement in accordance with its terms.
IN WITNESS WHEREOF, Unapix Entertainment, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officers as of the ____ day
of __________.
UNAPIX ENTERTAINMENT, INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
Attest:
__________________________________
Name:
Title:
[SEAL]
13
<PAGE>
PURCHASE FORM
To: Unapix Entertainment, Inc.
The undersigned hereby irrevocably elects to exercise the attached
Warrant Certificate, No.W-__-_______, to the extent of _________ shares
of Common Stock, $.01 par value per share, of UNAPIX ENTERTAINMENT,
INC., and hereby makes payment of $_________ in payment of the aggregate
exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: ____________________________________________
(Please typewrite or print in block letters)
Address: ______________________________________________________________________
By: ________________________________
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<PAGE>
Exhibit 4.14
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE, THAT SUCH NOTE AND/OR
COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAWS.
UNAPIX ENTERTAINMENT, INC.
10% Convertible Subordinated Note
Due June 30, 2004
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT
-------------------------------------------------
To obtain information Regarding Original Issue
Discount Contact Steven P. Low, Chief Accounting
Officer of Unapix Entertainment, Inc., Telephone
number: 212-252-7600
$________________ NO. CS-
________________, 1997
Unapix Entertainment, Inc., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to ________________, with an
address located at ___________, or his registered assigns (the "Payee" or
"Holder"), the principal amount of ____________________ DOLLARS
($___________) and accrued interest thereon in accordance with the terms
and provisions hereof.
This Note was issued by the Company in a private placement pursuant to
a Private Placement Memorandum, dated July 15, 1997, and was issued as part
of a Unit or Units ("Units"), each of which consisted of: (i) a Note in
the principal amount of $250,000; and (ii) Warrants to purchase 25,000
shares of the common stock of the Company, par value $.01 per share
("Common Stock"), at an exercise price of $6.00 per share and expiring June
30, 2004 ("Warrants"). The series of Notes issued in connection with said
private placement are referred to hereafter as the "Notes".
<PAGE>
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
1.1 Method of Payment. Payment of the principal of and accrued
interest on this Note shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. The Company will pay or cause to be
paid all sums becoming due hereon for principal and interest by check sent
to the Holder's above address or to such other address as Holder may
designate for such purpose from time to time by written notice to the
Company, without any requirement for the presentation of this Note or
making any notation thereon except that the Holder hereof agrees that
payment of the final amount due shall be made only upon surrender of this
Note to the Company for cancellation. Prior to any sale or other
disposition of this instrument, the Holder hereof agrees to endorse hereon
the amount of principal paid hereon and the last date to which interest has
been paid hereon and to notify the Company of the name and address of the
transferee.
1.2 Payment of Principal. The entire outstanding principal
balance of this Note shall be due and payable on June 30, 2004 (the
"Maturity Date").
1.3 Payment of Interest. Interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid portion of the
principal amount from time to time outstanding hereunder shall be paid by
the Company to the Payee at the rate of ten percent (10%) per annum (the
"Stated Interest Rate"). Said interest to be paid semi-annually on each
June 30 and December 31 (commencing December 31, 1997) and on the Maturity
Date.
2. SUBORDINATION PROVISIONS.
2.1 Principal and Interest. The Company, for itself, its
successors and assigns, covenants and agrees, and the Payee and each
successive Holder by acceptance of this Note, likewise cove-nants and
agrees that payment of the principal of and interest on this Note is
subordinated in right of payment to the payment of all existing and future
"Senior Debt" (as hereinafter defined) of the Company. The term "Senior
Debt" shall mean the principal of, pre- mium, if any, and interest on: (i)
all Indebtedness of the Company to any bank or other financial institution
(including, without limitation, to Imperial Bank) whether such indebtedness
is heretofore or hereafter created, incurred or entered into (or acquired
by assignment) and any deferrals, renewals, modifications or extensions of
any such indebtedness, unless under the express provisions of the
instrument creating or evidencing any such indebtedness, or pursuant to
which the same is outstanding, such
2
<PAGE>
indebtedness is not superior in right of payment to this Note; and (ii) all
Indebtedness of the Company owed with respect to its Variable Rate Senior
Subordinated Notes due December 31, 2001. "Indebtedness" for all purposes
herein means and includes without duplication, as of any date as of which
the amount thereof is to be determined (whether or not secured by lien,
pledge or deposit), all direct obligations to repay money borrowed
(including without limitation, amounts borrowed under revolving credit
facilities, either now existing or hereafter created (including any
increase in existing facilities), all notes payable and drafts accepted
representing extensions of credit, and all obligations evidenced by bonds,
debentures, notes or other similar instruments) and all interest accrued
and unpaid thereon.
2.2 Default. No payment or prepayment, directly or indirectly,
on account of the principal of or interest on this Note shall be made, and
no holder of this Note shall be entitled to demand or receive any such
payment or prepayment if, at the time of such payment or prepayment or
immediately after giving effect thereto, there shall have occurred any
event or default under such Senior Debt or under any agreement pursuant to
which any such Senior Debt has been or will be issued which default has not
been waived or cured as of the date on which such payment or prepayment is
due.
2.3 Liquidation, Dissolution, etc. In the event of any
insolvency or bankruptcy proceeding, and any receivership, total
liquidation, reorganization or other similar proceedings in connection
therewith, relative to the Company, or to its property, or in the event of
any proceedings for voluntary liquidation, dissolution or other winding up
of the Company, whether or not involving insolvency or bankruptcy, then the
holders of Senior Debt shall be entitled to receive payment in full of all
principal (and premium, if any) and interest on all such Senior Debt before
the holders of this Note shall be entitled to receive any payment on
account of principal or interest of this Note, and to that end (but subject
to the power of a court of competent jurisdiction to make other equitable
provisions reflecting the rights conferred by these provisions upon such
Senior Debt and the holders thereof with respect to this Note and the
Holder hereof by a lawful plan or reorganization under applicable
bankruptcy law) the holders of Senior Debt (until payment in full of all
principal, premium (if any) and interest on all such Senior Debt, including
interest thereon accruing before or in respect of periods subsequent to the
commencement of any such proceedings) shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property, or by set-off or otherwise, which
may be payable or deliverable in any such
3
<PAGE>
proceedings in respect of this Note (including any such payment or
distribution which may be payable or deliverable by reason of the
provisions of any indebtedness of the Company which is subordinate and
junior in right to this Note), except securities issued in such proceedings
which are the subordinate and junior in right of payment to the payment of
Senior Debt.
2.4 Subrogation. Subject to the payment in full of Senior Debt,
the holders of this Note shall be subrogated to the rights of the holders
of such Senior Debt to receive payment or distributions of assets of the
Company applicable to such Senior Debt until this Note shall be paid in
full, and no payment or distributions to the holders of such Senior Debt by
or on behalf of the Company from the proceeds that would otherwise be
payable to the holder of this Note shall, as between the Company and the
holder of this Note, be deemed to be a payment by the Company to or on
account of this Note.
2.5 Amendment. These provisions with respect to subordination
cannot be amended, modified or waived without the prior written consent of
the holder or holders of all Senior Debt at the time outstanding; and the
subordination effected hereby shall not be affected by any amendment or
modification of, or addition or supplement to, any such Senior Debt or any
instrument or agreement relating thereto, without the prior written consent
of the holder or holders of all such Senior Debt at the time outstanding.
No present or future holder of Senior Debt shall be prejudiced in his right
to enforce subordination of this Note by any act or failure to act on the
part of the Company.
2.6 Benefit of Senior Debt. The foregoing subordination
provisions shall be for the benefit of the holders of Senior Debt and may
be enforced directly by such holders against the holder of this Note. Upon
any payment or distribution of assets of the Company referred to above, the
holder of this Note shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the holder of this Note,
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertaining thereto or hereto.
2.7 Obligation to Pay Principal and Interest Absolute. The
foregoing provisions as to subordination are solely for the purpose of
defining the relative rights of the holders of such Senior Debt, on the one
hand, and the holder of this Note on the
4
<PAGE>
other hand. Nothing contained herein is intended to or shall impair as
between the Company, its creditors, other than the holders of Senior Debt,
and the holder of this Note, the obligation of the Company, which shall be
absolute and unconditional, to pay the holder of this Note the principal
and interest on this Note as and when the same shall become due and payable
in accordance with the terms hereof or affect the relative rights of the
holder of this Note and the creditors of the Company other than holders of
Senior Debt, nor shall anything herein prevent the Holder hereof from
exercising all remedies otherwise permitted by applicable law upon default
hereunder subject to the rights of holders of Senior Debt, if any, in
respect of cash, properties or securities of the Company received upon the
exercise of any such remedy. The Holder of this Note by acceptance hereof
acknowledges and agrees that the subordination provisions of this Section 2
are, and/or are intended to be, an inducement and a consideration to each
holder of any Senior Debt, whether such Senior Debt was created or acquired
before or after the issuance of this Note, to acquire and continue to hold,
or to continue to hold, such Senior Debt and each holder of Senior Debt
shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold,
such Senior Debt. Nothing contained herein or elsewhere in this Note shall
prevent the Company from making payment of the principal of or interest on
this Note at any time except under the conditions described above.
2.8 Further Instruments. The Holder of this Note covenants and
agrees to execute such further instruments and waivers as may be necessary
in the opinion of a lender or creditor, or reasonably requested by the
Company, to facilitate the issuance or the continued holding of Senior
Debt.
2.9 Subordination Provisions for the Benefit of Imperial Bank.
Notwithstanding anything to the contrary contained in this Note or
otherwise, in addition to the foregoing provisions, the Payee and each
successive Holder by acceptance of this Note hereby agree to the following:
(a) The Holder of this Note acknowledges and consents to the
Company's and its subsidiaries' grant of the "Bank Security Interest" in
the "Bank Collateral" to Imperial Bank (the "Bank"), as such terms are
defined in that certain Revolving Credit Loan and Security Agreement, dated
as of April 16, 1997 (the "Loan Agreement"), by and between the Company, A
Pix Entertainment, Inc., Miramar Images, Inc., and the Bank (as such
agreement may hereafter be amended);
5
<PAGE>
(b) To provide to the Bank a courtesy copy of any notice which
such Holder gives to the Company of the existence of any breach by the
Company of, or event of default under, this Note or other agreements with
the Company or any of its subsidiaries;
(c) Notwithstanding anything to the contrary contained in any
other agreement or document, and notwithstanding whether or not or the
order in which the respective security interests, if any, of the Bank and
the Holder of this Note are perfected, filed or recorded, the Holder's
security interest in collateral for this Note is and shall remain subject,
junior and subordinate to the Bank Security Interest in the Bank
Collateral;
(d) Not to make any legal, equitable or other challenge to the
Bank Security Interest in the Bank Collateral and not to institute or
support any legal action against the Bank by any entity (including without
limitation any creditors body, creditors committee, or the Company or any
of its subsidiaries). The Holder of this Note further agrees not to vote
on any plan of reorganization ("Plan") or serve (or cast a vote) as a
member of any official or unofficial creditors committee or subcommittee,
except with the written consent of the Bank. Upon three (3) days notice to
the Holder of this Note, the Bank may cast a vote for or against any Plan
proposed in any bankruptcy of the Debtor, or any of its affiliates or
related companies;
(e) Not to foreclosure on or otherwise seize or dispose of any
collateral given with respect to this Note, if any, or commence any action
or proceeding to foreclosure on, seize or otherwise dispose of any of such
collateral unless and until all the obligations of the Company (or any
other borrower) under the "Loan Documents" (as such term is defined in the
Loan Agreement) are fully and indefeasibly repaid. Notwithstanding the
above sentence, the Holder of this Note may defend its security interests,
if any, against attack by third parties or by the Company or any of its
subsidiaries but may not take any action or bring any claim (whether by
counterclaim or otherwise) which would affect the interest of the Bank;
(f) Not to take any action as a secured creditor, including but
not limited to, instituting any legal action against the Company or any of
its subsidiaries, including without limitation, any action to appoint a
receiver or to enjoin the Company or any of its subsidiaries (or any other
borrower under the Loan Agreement) until all the obligations of such
borrowers to the Bank have been fully and indefeasibly repaid;
6
<PAGE>
(g) Upon the occurrence and continuance of "an Event of Default"
(as defined in the Loan Agreement), the Company shall not make any interest
or principal payments with respect to this Note and any such payments made
to the Holder of this Note notwithstanding the foregoing, shall be deemed
held in trust by such Holder for the benefit of the Bank. The Holder of
this Note agrees not to amend, modify or rescind any of the subordination
provisions in favor of the Bank set forth in this Note or in any other
agreement or document executed by such Holder or to change any terms of
payment or add any collateral for its security;
(h) Notwithstanding anything to the contrary in this Note or in
any other agreement or document executed by the Holder of this Note, the
Company shall not pay any of the principal of this Note prior to October 1,
1998 whether by reason of acceleration or otherwise; and
(i) At its sole cost and expense, it will duly execute and
deliver such further agreements, documents and instruments and do such
further acts as may be necessary or proper to carry out more effectively
the provisions and purposes contained herein as the Bank from time to time
may reasonably request.
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon
the occurrence and continuation uncured of any of the following events:
3.1 This Note.
(a) a default in the payment of any principal payment on this
Note, when and as the same shall become due and payable, and such default
shall continue uncured for thirty (30) days after the day fixed for the
making of such principal payment; or
(b) a default in the payment of any interest payments on this
Note, and such default shall continue uncured for thirty (30) days after
the date fixed for the making of such interest payment; or
(c) a material default in the performance, or material breach,
of any covenant of the Company in this Note (other than a covenant or a
default which is elsewhere herein specifically dealt with as an Event or
Default), and continuance of such default or breach uncured for a period of
ninety (90) days after notice has been given to the Company of such
default.
7
<PAGE>
3.2 Bankruptcy. The entry of a decree or order by a court
having jurisdiction adjudging the Company as bankrupt or insolvent, or
approving a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, under Federal bankruptcy law,
as now or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or of any substantial part of its assets, and the continuance
of any such decree or order unstayed and in effect for a period of ninety
(90) days; or the commencement by the Company of a voluntary case under
Federal bankruptcy law, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency, or other similar law,
or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under Federal bankruptcy law or
any other applicable Federal or state bankruptcy, insolvency, or other
similar law, or the consent by it to the filing of such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due.
3.3 Limitations on Claims in Bankruptcy or on Acceleration Upon
an Event of default. Should an acceleration of the maturity of this Note
be declared as a result of the occurrence and continuation of an Event of
Default, absent bankruptcy, the claim of the Holder would be for the unpaid
principal amount and accrued interest of the Note. The amount that the
Holder would be able to recover from the Company under a bankruptcy or an
Event of Default, may, however, be limited by applicable law to the issued
price of this Note plus that portion of any original issue discount which
has been amortized.
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default
and at any time during the continuation thereof (unless the principal of
this Note shall already have become due and payable), the Holder, by notice
in writing given to the Company, may declare the principal of and accrued
interest on this Note then outstanding to be due and payable immediately,
and upon any such declaration the same shall become and be due and payable
immediately, anything herein to the contrary notwithstanding.
8
<PAGE>
4.2 Proceedings and Actions. During the continuation of any one
or more Events of Default, the Holder may institute such actions or
proceedings in law or equity as it shall deem expedient for the protection
of its rights, and may prosecute and enforce its claims, against all assets
of the Company and shall be entitled to receive therefrom payment on such
claims up to an amount not exceeding the principal amount of this Note then
outstanding plus accrued interest to the date of payment plus reasonable
expenses of collection, including, without limitation, attorney's fees and
expenses.
5. REDEMPTION
The Notes may be redeemed at the option of the Company, in whole
or in part, from time to time at any time after July 1, 1999, on not less
than 30 nor more than 60 days written notice. Any such redemptions shall
be made at the following prices, expressed as percentages of the principal
amount being redeemed, during the respective periods set forth below, plus
accrued and unpaid interest thereon to the redemption date. If redeemed
during the 12-month period beginning July 1:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 106.0%
2000 104.5%
2001 103.0%
2002 101.5%
2003 100.0%
</TABLE>
If less than the entire principal amount of the Series of Notes
is to be redeemed at one time, the Notes may be redeemed on a pro rata
basis or the Notes to be redeemed may be selected by lot, such manner to be
determined by the Board of Directors of the Company in its sole discretion.
6. CONVERSION
6.1 Conversion Privilege. At any time and from time to time
commencing with the date hereof until the earlier of (i) the Maturity Date
or (ii) the date set for redemption in accordance with the provisions of
Section 5 hereof, the outstanding amount of debt of this Note is
convertible at the Holder's option into the Company's shares of common
stock, $.01 par value per share (the "Common Stock"), upon surrender of
this Note, at the Office of the Company, accompanied by a written notice of
conversion in form annexed hereto duly executed by the registered holder or
its duly authorized attorney. The outstanding indebtedness of this Note is
convertible at the option of the Holder from time to time at any
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<PAGE>
time on or after the date hereof into shares of Common Stock at a price of
$5.00 per share of Common Stock (the "Conversion Price"). No fractional
shares or scrip representing fractional shares will be issued upon any
conversion, but an adjustment in cash will be made, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of
this Note for conversion. The Conversion Price is subject to adjustment as
provided in Section 6.3 hereof.
6.2 Registration of Transfer. Subject to the terms of this
Note, at any time after the date hereof, upon surrender of this Note for
conversion, the Company shall issue and deliver with all reasonable
dispatch to or upon the written order of the Holder of this Note and in
such name or names as such Holder may designate, a certificate or
certificates for the number of full shares of Common Stock due to such
Holder upon the conversion of this Note (the "Shares"). Such certificate
or certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become the Holder of
record of such Shares as of the date of the surrender of this Note;
provided, however, that if, at the date of surrender the transfer books of
the Common Stock shall be closed, the certificates for the Shares shall be
issuable as of the date on which such books shall be opened and until such
date the Company shall be under no duty to deliver any certificate for such
Shares; provided, further, however, that such transfer books, unless
otherwise required by law or by applicable rule of any national securities
exchange, shall not be closed at any one time for a period longer than 20
days.
6.3 Adjustments for Dividends, Reclassifications, Stock
Issuances, etc. Subject to the provisions of this Section 6.3, the
Conversion Price in effect, and accordingly, the number of shares of Common
stock into which this Note may be converted, shall be subject to adjustment
from time to time as follows:
(a) In case the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common Stock,
then the Conversion Price shall be proportionately decreased as of the
close of business on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding
Common Stock by recapitalization, reclassification or split-up thereof, the
Conversion Price immediately prior to such subdivision shall be
proportionately decreased, and if the Company shall at any time combine the
outstanding Common Stock by recapitalization, reclassification or
combination thereof, the Conversion Price immediately prior to such
combination shall be
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proportionately increased. Any such adjustment to the Conversion Price shall
become effective at the close of business on the record date for such
subdivision or combination.
(c) In case the Company after the date hereof shall distribute
to all of the holders of outstanding shares of Common Stock any securities
or other assets (other than a cash distribu- tion made as a dividend
payable out of earnings), the Board of Directors shall be required to make
such equitable adjustment in the Conversion Price, as in effect immediately
prior to the record date for such distribution, as may be necessary to
preserve for the Holder rights substantially proportionate to those enjoyed
here- under by the Holder immediately prior to the happening of such
distribution. Any such adjustment to the Conversion Price shall become
effective at the close of business on the record date for such
distribution.
(d) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its
assets to another corporation, shall be effected in such a way that holders
of Common Stock shall be entitled to receive stock, securities, cash, or
assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger
or sale, the Company or such successor or purchasing corporation, as the
case may be, shall make such appropriate provision so that the Holder shall
have the right thereafter and until the Maturity Date to convert this Note
for the kind and amount of stock, securities, cash or assets receivable
upon such reorganization, reclassification, consolidation, merger or sale
by a holder of the number of shares of Common Stock into which this Note
might have been converted immediately prior to such reorganization,
reclassification, consolidation, merger or sale, subject to further
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 6.3.
(e) If at any time after the date of issuance hereof the Company
shall grant or issue any shares of Common Stock, or grant or issue any
rights or options for the purchase of, or stock or other securities
convertible into, Common Stock (such convertible stock or securities being
herein collectively referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subparagraph (f)
of this Section 6.3; or
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(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a),(b),(c), or (d) of this Section 6.3;
for a consideration per share which is less than the Conversion Price, then
the Conversion Price in effect immediately prior to such issuance or sale
(the "Applicable Conversion Price") shall, and thereafter upon each
issuance or sale, the Applicable Conversion Price shall, simultaneously
with such issuance or sale, be adjusted, so that such Applicable Conversion
Price shall equal a price determined by multiplying the Applicable
Conversion Price by a fraction, the numerator of which shall be:
(A) the sum of (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance plus (y) the
number of shares of Common Stock which the aggregate
consideration received, as determined in accordance with
subparagraph (g) below for the issuance or sale of such
additional Common Stock or Convertible Securities deemed to be an
issuance of Common Stock as provided in subparagraph (h) below,
would purchase (including any consideration received by the
Company upon the issuance of any shares of Common Stock or
Convertible Securities since the date the Applicable Conversion
Price became effective not previously included in any computation
resulting in an adjustment pursuant to this subparagraph (e)) at
the Applicable Conversion Price; and the denominator of which
shall be
(B) the total number of shares of Common Stock outstanding
(or deemed to be outstanding as provided in subparagraph (g))
immediately after the issuance or sale of such additional shares.
If, however, the Applicable Conversion Price thus obtained would result in
the issuance of a lesser number of shares upon exercise than would be
issued at the initial Conversion Price specified in the first paragraph
hereof, the Applicable Price shall be such initial Conversion Price.
(f) Anything in this Paragraph 6.3 to contrary notwithstanding, no
adjustment in the Conversion Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or non-qualified Employee
Stock Option Plans or any other bona fide employee benefit plan or
incentive arrangement (including, without limitation, pursuant to
individual employment agreements), previously adopted,
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authorized or entered into or as may hereafter be adopted, authorized or
entered into by the Company's Board of Directors or its officers, for the
benefit of the Company's employees, consultants or directors, as any such
plans, agreements or arrangements may hereafter be amended from time to
time; and
(ii) the issuance of any shares of Common Stock pursuant to the
grant or exercise of Convertible Securities outstanding as of the date
hereof or the issuance, conversion or exercise of any Notes or Warrants
which were included in the Units (regardless of whether such Notes and
Warrants were outstanding prior to the date hereof or issued thereafter).
(g) For the purpose of subparagraph (e) above, the following
provisions shall also be applied:
(i) In case of the issuance or sale of additional shares of
Common Stock for cash, the consideration received by the Company therefor
shall be deemed to be the amount of cash received by the Company for such
shares, before deducting therefrom any commissions, compensation or other
expenses paid or incurred by the Company for any underwriting of, or
otherwise in connection with, the issuance or sale of such shares.
(ii) In case of the issuance of Convertible Securities, the
consideration received by the Company therefor shall be deemed to be the
amount of cash, if any, received by the Company for the issuance of such
rights or Convertible Securities, plus the minimum amounts of cash and fair
value of other consideration, if any, payable to the Company upon the
exercise of such rights or options or payable to the Company on conversion
of such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part, other than
cash, the consideration other than cash shall be deemed to be the fair
market value thereof as reasonably determined in good faith by the Board of
Directors of the Company (irrespective of accounting treatment thereof);
provided, however, that if such consideration consists of the cancellation
of debt issued by the Company, the consideration shall be deemed to be the
amount the Company received upon issuance of such debt (gross proceeds)
plus accrued interest and, in the case of original issue discount or zero
coupon indebtedness, accreted value to the date of such cancellation, but
not including any premium or discount at which the debt may then be trading
or which might otherwise be appropriate for such class of debt.
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<PAGE>
(iv) In case of the issuance of additional shares of Common Stock
upon the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Company for
such Common Stock shall be deemed to be the consideration received by the
Company for such obligation or shares so converted or exchanged, before
deducting from such consideration so received by the Company any expenses
or commissions or compensations incurred or paid by the Company for any
underwriting of, or otherwise in connection with, the issuance or sale of
such obligations or shares, plus any consideration received by the Company
in adjustment of interest and dividends. If obligations or shares of the
same class or series of a class as the obligations or shares so converted
or exchanged have been originally issued for different amounts of
consideration, then the amount of consideration received by the Company
upon the original issuance of each of the obligations or shares so
converted or exchanged shall be deemed to be the average amount of the
consideration received by the Company upon the original issuance of all
such obligations or shares. The amount of consideration received by the
Company upon the original issuance of the obligations or shares so
converted or exchanged and the amount of the consideration, if any, other
than such obligations or shares received by the Company upon such
conversion or exchange shall be determined in the same manner as provided
in Paragraphs (i) through (iii) above with respect to the consideration
received by the Company in case of the issuance of additional shares of
Common Stock or Convertible Securities.
(h) For purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities,
the Company shall be deemed to have issued at the same time as the issuance
of such Convertible Securities the maximum number of shares of Common Stock
issuable upon conversion of the total amount of Convertible Securities.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith
be readjusted to such Conversion Price as would have been obtained (a) had
the adjustments made upon the issuance or sale of such expired, cancelled
or redeemed Convertible Securities been made upon the basis of the issuance
of only the number of shares of Common Stock theretofore actually delivered
upon the exercise or conversion of such Convertible Securities (and the
total consideration received therefor) and (b) had all subsequent
adjustments been made only on the basis of the Conversion Price as
readjusted under this subparagraph (i) for all transactions (which would
have affected such adjusted Conversion
14
<PAGE>
Price) made after the issuance or sale of such Convertible Securities.
(j) Anything in this Section 6.3 to the contrary notwith- standing,
no adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
Conversion Price; provided, however, that any adjustments which by reason
of this subparagraph (j) are not required to be made shall be carried
forward and taken into account in making subsequent adjustments. All
calculations under this Section shall be made to the nearest cent or to the
nearest tenth of a share, as the case may be.
(k) Upon any adjustment of any Conversion Price, then and in each
such case the Company shall promptly deliver a notice to the registered
Holder of this Note, which notice shall state the Conversion Price
resulting from such an adjustment and the increase or decrease, if any, in
the number of shares purchasable at such price upon the conversion hereof,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
(l) Upon any adjustment of the Conversion Price pursuant to any
provisions contained in this Paragraph 6.3, the number of Shares issuable
upon conversion of this Note shall be changed accordingly.
6.4 In case at any time:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends)
to the holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation; or
(iv) There shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written
notice to the Holder of the date on which (X) the books of the Company
shall close or a record shall be taken for such
15
<PAGE>
dividend, distribution, or subscription rights, or (Y) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution, or subscription rights or shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolida- tion,
merger, sale, dissolution, liquidation, or winding-up, as the case may be.
Such notice shall be given at least ten (10) days prior to the record date
or the date on which the Company's transfer books are closed in respect
thereof. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any of the matters set forth in this
paragraph.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
The Holder of this Note, each transferee hereof and any Holder
and transferee of any shares of Common Stock into which this Note is
convertible (the "Shares"), by his acceptance thereof, agrees that (i) no
public distribution of Note or Shares will be made in violation of the
Securities Act of 1933, as amend (the "Act"), and (ii) during such period
as the delivery of a prospectus with respect to the Shares may be required
by the Act, no public distribution of the Shares will be made in a manner
or on terms different from those set forth in, or without delivery of, a
prospectus then meeting the requirements of Section 10 of the Act and in
compliance with applicable state securities laws. The Holder of this Note
and each transferee hereof further agrees that if any distribution of any
Shares is proposed to be made by them otherwise than by delivery of a
prospectus meeting the requirements of Section 10 of the Act, such action
shall be taken only after submission to the Company of an opinion of
counsel, reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be
a condition to the transfer of this Note that any transferee thereof
deliver to the Company his written agreement to accept and be bound by all
of the terms and conditions contained in this Note.
This Note or the Shares or any other security issued or issuable upon
conversion of this Note may not be sold or otherwise disposed of except as
follows:
(1) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Note or
Shares may legally be transferred without registration and without the
delivery of a current prospectus under the Act with
16
<PAGE>
respect thereto and then only against receipt of an agreement of such
person to comply with the provisions of this Section with respect to any
resale or other disposition of such securities which agreement shall be
satisfactory in form and substance to the Company and its counsel; provided
that the foregoing shall not apply to any such Note, shares or other
security as to which such Holder shall have received an opinion letter from
counsel to the Company as to the exemption thereof from the registration
under the Act pursuant to Rule 144(k) under the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
Each certificate for Shares issued upon conversion of this Note
shall bear a legend relating to the non-registered status of such Shares
under the Act, unless at the time of conversion of this Note such Shares
are subject to a currently effective registration statement under the Act
and the Holder is not otherwise an "affiliate," or could potentially be
deemed an "affiliate," of the Company as such term is defined in the Act.
8. MISCELLANEOUS
8.1 Notices. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or
certified mail addressed to Unapix Entertainment, Inc., 200 Madison Avenue,
New York, New York 10016, Attention: President, or, if to the Holder at the
address shown for the Holder in the registration books, maintained by the
Company.
8.2 Lost, Stolen, or Mutilated Notes. In case this Note shall
be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Note, or in lieu of and substitution for the
Note, lost, stolen, or destroyed, a new Note of like tenor and representing
an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction and an
indemnity, if requested, also satisfactory to it.
8.3 Stamp Tax The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Common Stock issuable upon
conversion of this Note; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificates for the
Common Stock in a name other than that of the Holder in respect of which
this Note is
17
<PAGE>
issued, and in such case the Company shall not be required to issue or
deliver any certificate for the Common Stock until the person requesting
the same has paid to the Company the amount of such tax or has established
to the Company's satisfaction that such tax has been paid.
8.4 Shares Validly Issued. The Company agrees that all shares
issuable upon conversion of this Note shall be, at the time of delivery of
certificates for such shares, validly issued and outstanding, fully paid
and non-assessable and that the issuance of such shares will not give rise
to preemptive rights in favor of existing stockholders.
8.6 Governing Law. This Note shall be construed in accordance
with and governed by the laws of the State of New York, without giving
effect to conflict of laws principles.
8.7 No Recourse. No recourse whatsoever, either directly or
through the Company or any trustee, receiver or assignee, shall be had in
any event or in any manner against any past, present or future stockholder,
director or officer of the Company for the payment of the redemption price,
principal of or interest on this Note or for any claim based thereon or
otherwise in respect this Note; this Note being a corporate obligation
only.
8.8 Registration of Transfer. The Company shall maintain books
for the transfer and registration of Notes. The Company may treat the
person in whose name this Note is registered as the owner and Holder of the
Note for the purpose of receiving principal of or interest on this Note and
for all other purposes whatsoever and the Company shall not be affected by
any notice to the contrary. Upon the transfer of any Note in accordance
with the provisions of Section 7 hereof, the Company shall issue and
register the Note in the names of the new holders. The Notes shall be
signed manually by the Chairman, Chief Executive Officer, President or any
Vice President and the Secretary or Assistant Secretary of the Company.
Subject to the terms of Sections 6 and 7 and Section 8.3, upon surrender of
this Note, the Company shall issue and deliver with all reasonable dispatch
to or upon the written order of the Holder of such Note, and in such name
or names as such Holder may designate, a certificate or
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<PAGE>
certificates for the number of full shares due to such Holder upon the
conversion of this Note. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall
be deemed to have become the Holder of record of such Shares as of the date
of the surrender of this Note pursuant to said sections; provided, however,
that if, at the date of surrender the transfer books of the Common stock
shall be closed, the certificates for the Shares shall be issuable as of
the date on which such books shall be opened and until such date the
Company shall be under no duty to deliver any certificate for such Shares;
provided, further, however, that such transfer books, unless otherwise
required by law or by applicable rule of any national securities exchange,
shall not be closed at any one time for a period longer than 20 days.
IN WITNESS WHEREOF, Unapix Entertainment, Inc. has caused this Note to
be signed in its corporate name by a duly authorized officer in accordance
herewith and to be dated the day and year first above written.
UNAPIX ENTERTAINMENT, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Attest:
_____________________
Name:
Title:
19
<PAGE>
Assignment
For value received I hereby assign
to $
principal amount of the 10% Convertible Subordinated Note due June 30, 2004
evidenced hereby and hereby irrevocably appoint
attorney to transfer the Note on the books of the within named corporation
with full power of substitution in the premises.
Dated:
In the presence of:
- -------------------------------
--------------------------------------
20
<PAGE>
CONVERSION NOTICE
TO: UNAPIX ENTERTAINMENT, INC.
The undersigned holder of this Note hereby irrevocably exercises the option
to convert $_____________ principal amount of such Note (which may be less
than the stated principal amount thereof) into shares of common stock of
Unapix Entertainment, Inc. ("Common Stock"), in accordance with the terms
of such Note, and directs that the shares of Common Stock issuable and
deliverable upon such conversion, together with a check (if applicable) in
payment for any fractional shares as provided in such Note, be issued and
delivered to the undersigned unless a different name has been indicated
below. If shares of Common Stock are to be issued in the name of a person
other than the undersigned holder of such Note, the undersigned will pay
all transfer taxes payable with respect thereto.
- ----------------------------------------
Name and Address of Holder
- ----------------------------------------
Signature of Holder
Principal amount converted $____________
If shares are to be issued otherwise than to the holder:
- ----------------------------------------
Name of Transferee
- ----------------------------
Name and SS# of Transferee
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<PAGE>
Exhibit 4.15
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN WHOLE OR IN PART IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IN FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED SALE, TRANSFER,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION.
UNAPIX ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
_________ SHARES OF COMMON STOCK
VOID AFTER 5:00 PM NEW YORK, NEW YORK LOCAL TIME ON JUNE 30, 2004
Cert. No. W-6-
This Warrant Certificate certifies that __________________, or registered
assigns, is the registered holder ("Holder") of _______ Common Stock Purchase
Warrants ("Warrants") to purchase shares of common stock, $.01 par value per
share ("Common Stock"), of UNAPIX ENTERTAINMENT, INC., a Delaware corporation
(the "Company"). Each Warrant enables the Holder to purchase from the
Company at any time until 5:00 p.m. New York, New York local time on June 30,
2004 one fully paid and non-assessable share of Common Stock (individually, a
"Share" and collectively the "Shares") upon presentation and surrender of
this Warrant Certificate and upon payment of the purchase price of $6.00 per
Share (the "Exercise Price"). Payment shall be made in lawful money of the
United States of America by certified check payable to the Company. Such
payment shall be made at the principal office of the Company at 200 Madison
Avenue, New York, NY 10016. As hereinafter provided, the Exercise Price and
number of Shares purchasable upon the exercise of the Warrants are subject to
modification or adjustment upon the happening of certain events.
The Warrants represented by this Warrant Certificate were issued as part
of a Unit pursuant to a Private Placement Memorandum, dated July 15, 1997
(the "Memorandum"), each of which consisted of: (i) a $250,000 principal
amount 10% Convertible
<PAGE>
Subordinated Note of the Company due June 30, 2004 (the "Note"); and 25,000
Warrants.
1. Upon surrender to the Company, this Warrant Certificate may be exchanged for
another Warrant Certificate or Warrant Certificates evidencing a like aggregate
number of Warrants. If this Warrant Certificate shall be exercised in part, the
Holder shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates evidencing the number of Warrants not
exercised.
2. No Holder shall be deemed to be the holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings or to
receive dividends or subscription rights or otherwise until a Warrant shall
have been exercised and the Common Stock purchasable upon the exercise
thereof shall have become issuable.
3. Each Holder consents and agrees with the Company and any other Holder
that:
(a) this Warrant Certificate is exercisable by the Holder in person or
by attorney duly authorized in writing at the principal office of the Company
in whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall
the Company be obligated to issue Warrant Certificates evidencing other than
a whole number of Warrants or issue certificates evidencing other than a
whole number of Shares upon the exercise of this Warrant Certificate;
provided, however, that the Company shall pay with respect to any such
fraction of a share an amount of cash based upon the current market value (or
book value, if there shall be no public market value for shares purchasable
upon exercise hereof); and
(c) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner
hereof for all purposes whatsoever.
2
<PAGE>
4. The Company shall maintain books for the transfer and registration of
Warrants. Upon the transfer of any Warrants, the Company shall issue and
register the Warrants in the names of the new Holders. The Warrants shall be
signed manually by the Chairman, Chief Executive Officer, President or any
Vice President and the Secretary (or Assistant Secretary) of the Company.
Subject to Paragraph 10, the Company shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Company for such
purpose upon surrender thereof for transfer properly endorsed or accompanied
by appropriate instruction for transfer. Upon any transfer, a new Warrant
Certificate shall be issued to the transferee and the surrendered Warrants
shall be cancelled by the Company. Warrants may be exchanged at the option
of the Holder, when surrendered at the office of the Company, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Shares.
Subject to the terms of this Warrant Certificate, upon such surrender and
payment of the purchase price, the Company shall issue and deliver with all
reasonable dispatch to or upon the written order of the Holder of such
Warrants and in such name or names as such Holder may designate, a
certificate or certificates for the number of full Shares so purchased upon
the exercise of such Warrants. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become the holder of record of such Shares as of the
date of the surrender of such Warrants and payment of the Exercise Price;
provided, however, that if, at the date of surrender and payment, the
transfer books of the Shares shall be closed, the certificates for the Shares
shall be issuable as of the date on which such books shall be opened and
until such date the Company shall be under no duty to deliver any certificate
for such Shares; provided, further, however, that such transfer books, unless
otherwise required by law or by applicable rule of any national securities
exchange, shall not be closed at any one time for a period longer than 20
days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders, either in whole or from time to
time in part (but in no event with respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Shares issuable upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Shares in a name other than that
of the Holder in respect of which such Shares are issued, and in such case
the Company shall not be required to issue or deliver any certificate for
Shares or any Warrant until the person requesting the same has
3
<PAGE>
paid to the Company the amount of such tax or has established to the
Company's satisfaction that such tax has been paid.
6. In case the Warrant Certificate shall be mutilated, lost stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange
and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate,
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction and
an indemnity, if requested, also satisfactory to it.
7. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented
by this Warrant Certificate. The Company agrees that all Shares issuable
upon exercise of the Warrants shall be, at the time of delivery of the
certificates for such Shares, validly issued and outstanding, fully paid and
nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the purchase
price and number of Shares subject to this Warrant Certificate shall be
adjusted from time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then the
Exercise Price shall be proportionately decreased as of the close of business
on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Exercise
Price immediately prior to such subdivision shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding
Common Stock by recapitalization, reclassification or combination thereof,
the Exercise Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Exercise Price shall
become effective at the close of business on the record date for such
subdivision or combination.
(c) In case the Company after the date hereof shall distribute to all
of the holders of outstanding shares of Common Stock any securities or other
assets (other than a cash distribution made as a dividend payable out of
earnings or out of
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<PAGE>
any earned surplus legally available for dividends under the laws of the
State of Delaware), the Board of Directors shall be required to make such
equitable adjustment in the Exercise Price, as in effect immediately prior to
the record date for such distribution, as may be necessary to preserve for
the Holder rights substantially proportionate to those enjoyed hereunder by
the Holder immediately prior to the happening of such distribution. Any such
adjustment to the Exercise Price shall become effective at the close of
business on the record date for such distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash, or assets with respect
to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Company
or such successor or purchasing corporation, as the case may be, shall
execute a supplemental Warrant Certificate providing that each Holder shall
have the right thereafter and until the expiration date to exercise a Warrant
for the kind and amount of stock, securities, cash or assets receivable upon
such reorganization, reclassification, consolidation, merger or sale by a
holder of the number of shares of Common Stock for the purchase of which such
Warrant might have been exercised immediately prior to such reorganization,
reclassification, consolidation, merger or sale, subject to further
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein collectively
referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subparagraph (f)
of this Paragraph 8; or
(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a),(b),(c), or (d) of this Paragraph 8;
for a consideration per share which is less than the Exercise Price, then the
Exercise Price in effect immediately prior to such issuance or sale (the
"Applicable Exercise Price") shall, and
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<PAGE>
thereafter upon each issuance or sale, the Applicable Exercise Price shall,
simultaneously with such issuance or sale, be adjusted, so that such
Applicable Exercise Price shall equal a price determined by multiplying the
Applicable Exercise Price by a fraction, the numerator of which shall be:
(A) the sum of (x) the total number of shares of Common Stock
outstanding immediately prior to such issuance plus (y) the number of
shares of Common Stock which the aggregate consideration received, as
determined in accordance with subparagraph (g) below for the issuance
or sale of such additional Common Stock or Convertible Securities
deemed to be an issuance of Common Stock as provided in subparagraph
(h) below, would purchase (including any consideration received by the
Company upon the issuance of any shares of Common Stock or Convertible
Securities since the date the Applicable Exercise Price became
effective not previously included in any computation resulting in an
adjustment pursuant to this subparagraph (e)) at the Applicable
Exercise Price; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subparagraph (g)) immediately
after the issuance or sale of such additional shares.
If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon exercise than would be issued at
the initial Exercise Price specified in the first paragraph hereof, the
Applicable Price shall be such initial Exercise Price.
(f) Anything in this Paragraph 8 to contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or non-qualified
Employee Stock Option Plans or any other bona fide employee benefit
plan or incentive arrangement, (including, without limitation, any
issuances pursuant to individual employment agreements) previously
adopted or entered into, or as may hereafter be adopted or entered
into, by the Company's Board of Directors or its officers, for the
benefit of the Company's employees, consultants or
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<PAGE>
directors, as any such plans, agreements or arrangements may
hereafter be amended from time to time; and
(ii) the issuance of any shares of Common Stock pursuant to the
grant or exercise of Convertible Securities outstanding as of date
hereof or the issuance, conversion or exercise of any Notes or
Warrants on or after the date hereof (regardless of whether such Notes
and Warrants were outstanding prior to the date hereof or issued
thereafter).
(g) For the purpose of subparagraph (e) above, the following provisions
shall also be applied:
(i) In case of the issuance or sale of additional shares of
Common Stock for cash, the consideration received by the Company
therefor shall be deemed to be the amount of cash received by the
Company for such shares, before deducting therefrom any commissions,
compensation or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with, the issuance or sale
of such shares.
(ii) In case of the issuance of Convertible Securities, the
consideration received by the Company therefor shall be deemed to be
the amount of cash, if any, received by the Company for the issuance
of such rights or Convertible Securities, plus the minimum amounts of
cash and fair value of other consideration, if any, payable to the
Company upon the exercise of such rights or options or payable to the
Company on conversion of such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part, other
than cash, the consideration other than cash shall be deemed to be the
fair market value thereof as reasonably determined in good faith by
the Board of Directors of the Company (irrespective of accounting
treatment thereof); provided, however, that if such consideration
consists of the cancellation of debt issued by the Company, the
consideration shall be deemed to be the amount the Company received
upon issuance of such debt (gross proceeds) plus accrued interest and,
in the case of original issue discount
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<PAGE>
or zero coupon indebtedness, accreted value to the date of such
cancellation, but not including any premium or discount at which the
debt may then be trading or which might otherwise be appropriate for
such class of debt.
(iv) In case of the issuance of additional shares of Common Stock
upon the conversion or exchange of any obligations (other than
Convertible Securities), the amount of the consideration received by
the Company for such Common Stock shall be deemed to be the
consideration received by the Company for such obligation or shares so
converted or exchanged, before deducting from such consideration so
received by the Company any expenses or commissions or compensations
incurred or paid by the Company for any underwriting of, or otherwise
in connection with, the issuance or sale of such obligations or
shares, plus any consideration received by the Company in adjustment
of interest and dividends. If obligations or shares of the same class
or series of a class as the obligations or shares so converted or
exchanged have been originally issued for different amounts of
consideration, then the amount of consideration received by the
Company upon the original issuance of each of the obligations or
shares so converted or exchanged shall be deemed to be the average
amount of the consideration received by the Company upon the original
issuance of all such obligations or shares. The amount of
consideration received by the Company upon the original issuance of
the obligations or shares so converted or exchanged and the amount of
the consideration, if any, other than such obligations or shares
received by the Company upon such conversion or exchange shall be
determined in the same manner as provided in Paragraphs (i) through
(iii) above with respect to the consideration received by the Company
in case of the issuance of additional shares of Common Stock or
Convertible Securities.
(h) For purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities,
the Company shall be deemed to have issued at the same time as the issuance
of such Convertible Securities the maximum number of shares of Common Stock
issuable upon conversion of the total amount of Convertible Securities.
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<PAGE>
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise Price then in effect hereunder shall forthwith be
readjusted to such Exercise Price as would have been obtained (a) had the
adjustments made upon the issuance or sale of such expired, cancelled or
redeemed Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually delivered upon
the exercise or conversion of such Convertible Securities (and the total
consideration received therefor) and (b) had all subsequent adjustments been
made only on the basis of the Exercise Price as readjusted under this
subparagraph (i) for all transactions (which would have affected such
adjusted Exercise Price) made after the issuance or sale of such Convertible
Securities.
(j) Anything in this Paragraph 8 to the contrary notwith- standing, no
adjustment in the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Exercise Price;
provided, however, that any adjustments which by reason of this subparagraph
(j) are not required to be made shall be carried forward and taken into
account in making subsequent adjustments. All calculations under this
Paragraph shall be made to the nearest cent or to the nearest tenth of a
share, as the case may be.
(k) Upon any adjustment of any Exercise Price, then and in each such
case the Company shall promptly deliver a notice to the registered Holder of
this Warrant, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise hereof, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(l) Upon any adjustment of the Exercise Price pursuant to any
provisions contained in this Paragraph 8, the number of Shares issuable upon
exercise of this Warrant shall be changed to the number of shares determined
by dividing (i) the aggregate Exercise Price payable for the purchase of all
Shares issuable upon exercise of the Warrant immediately prior to such
adjustment by (ii) the Exercise Price per Share in effect immediately after
such adjustment.
9. In case at any time:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends)
to the holders of the Common Stock;
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<PAGE>
(ii) The Company shall offer for subscription pro-rata to the holders
of the Common Stock any additional shares of stock of any class or other
rights;
(iii) There shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation; or
(iv) There shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the Holder of the date on which (X) the books of the Company shall close
or a record shall be taken for such dividend, distribution, or subscription
rights, or (Y) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution, or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up, as the case may be. Such notice shall be given at least 20 days
prior to the record date or the date on which the Company's transfer books
are closed in respect thereof. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any of the matters set
forth in this paragraph.
10. (a) The Holder of this Warrant Certificate, each transferee hereof and
any holder and transferee of any Shares, by his or its acceptance thereof,
agrees that (i) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933 (the "Act"), and (ii) during such
period as the delivery of a prospectus with respect to Warrants or Shares may
be required by the Act, no public distribution of Warrants or Shares will be
made in a manner or on terms different from those set forth in, or without
delivery of, a prospectus then meeting the requirements of Section 10 of the
Act and in compliance with all applicable state securities laws. The Holder
of this Warrant Certificate and each transferee hereof further agrees that if
any distribution of any of the Warrants or Shares is proposed to be made by
them otherwise than by delivery of a prospectus meeting the requirements of
Section 10 of the Act, such action shall be taken only after submission to
the Company of an opinion of counsel, reasonably satisfactory in form and
substance to the Company's
10
<PAGE>
counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver
to the Company his or its written agreement to accept and be bound by all of
the terms and conditions contained in this Warrant Certificate.
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except
as follows:
(1) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Warrant or
Shares may legally be transferred without registration and without the
delivery of a current prospectus under the Act with respect thereto and
then only against receipt of an agreement of such person to comply with the
provisions of this Section (1) with respect to any resale or other
disposition of such securities which agreement shall be satisfactory in
form and substance to the Company and its counsel; provided that the
foregoing shall not apply to any such Warrant, Shares or other security as
to which such Holder shall have received an opinion letter from counsel to
the Company as to the exemption thereof from the registration under the Act
pursuant to Rule 144(k) under the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant
shall bear a legend relating to the non-registered status of such Shares
under the Act, unless at the time of exercise of this Warrant such Shares are
subject to a currently effective registration statement under the Act.
11. (a) The Warrants represented by this Certificate may be redeemed (as a
whole at any time or in part from time to time) on not less than thirty (30)
days' notice, at any time after June 30, [1999], at a redemption price of
$.025 per Warrant, provided the average "Market Price" (as hereinafter
defined) of the Common Stock, receivable upon exercise of such Warrants, over
20 consecutive trading days has been at least 150% of the then effective
Exercise Price (the 20 consecutive trading day period referred to as the
"Measurement Period"). Notwithstanding the foregoing, the Company shall not
be entitled to redeem any of the
11
<PAGE>
Warrants represented by this Certificate, unless the Shares into which the
Warrants are exercisable have been registered under the Act, at all times
during the applicable Measurement Period and shall continue to be so
registered at all times between the date on which the notice of redemption is
given and the "Redemption Date" (as hereinafter defined). For purposes
hereof, "Market Price" shall mean with respect to each trading day the
greater of (i) the closing sales price of the Common Stock reported on the
American Stock Exchange, or if different, the primary securities exchange on
which the Common Stock is traded, or for any day on which there is no closing
sales price so reported, then the closing bid price for such day; and (ii)
the closing sales price of the Common Stock as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, if any,
or for any day on which there is no closing sales price so reported, then the
closing bid price for such day, if any.
(b) In the event the Company shall elect to redeem all or any part of
the Warrants, the Company shall fix a date for redemption (the "Redemption
Date"). Notice of redemption shall be mailed by first class mail, postage
prepaid, by the Company not less than 30 days from the date fixed for
redemption to the registered holder of this Warrant Certificate at its last
address as it shall appear on the Company's Warrant registry books. Any
notice mailed in the manner herein shall be conclusively presumed to have
been duly given whether or not the Holder receives such notice. Any right to
exercise a Warrant being redeemed shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon presentation
and surrender of this certificate to the Company by or on behalf of the
Holder thereof, deliver or cause to be delivered to or upon the written order
of the Holder a sum in cash equal to the redemption price of each Warrant
being redeemed. From and after the date fixed for redemption, such Warrants
shall expire and become void and all rights hereunder with respect thereto,
except the right to receive payment of the redemption price, shall cease.
(d) If less than all of the Commom Stock purchase warrants sold in the
private placement pursuant to the Memorandum are called for redemption by the
Company, the particular Common Stock purchase warrants to be redeemed shall
be selected at random by the Company in such manner as the Company in its
discretion may deem fair and appropriate. If there shall be drawn for
redemption less than all of the Warrants represented by this Warrant
Certificate, the
12
<PAGE>
Company shall execute and deliver, upon surrender of this Warrant
Certificate, without charge to the Holder, a new Warrant Certificate
representing the number of Warrants not being redeemed.
12. (a) This Warrant shall be governed by and construed in accordance with
the substantive laws of the State of New York, without giving effect to
conflict of laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions whether express or implied, oral or
written. Neither this Warrant Certificate nor any portion or provision
hereof may be changed, waived or amended orally or any manner other than by
an agreement in writing signed by the Holder and the Company.
(c) Except as otherwise provided in this Warrant Certificate, all
notices, requests, demands and other communications required or permitted
under this Warrant Certificate or by law shall be in writing and shall be
deemed to have been duly given, made and received only when delivered against
receipt or when deposited in the United States mails, certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Company: Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Holder: At the address shown for the
Holder in the registration
books maintained by the
Company.
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction, such
provision shall, as to such jurisdiction, be in effect to the extent of such
prohibition without invalidating the remaining provisions hereof; provided,
however, that any such prohibition in any jurisdiction shall not invalidate
such provision in any other jurisdiction; and provided, further that where
the provisions of any such applicable law may be waived, that they hereby are
waived by the Company and the Holder to the full extent permitted by law and
to the end that this
13
<PAGE>
Warrant instrument shall be deemed to be a valid and binding agreement in
accordance with its terms.
IN WITNESS WHEREOF, Unapix Entertainment, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officers as of the ____ day
of _________, 1997.
UNAPIX ENTERTAINMENT, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Attest:
_______________________________
Name:
Title:
[SEAL]
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<PAGE>
PURCHASE FORM
To: Unapix Entertainment, Inc.
The undersigned hereby irrevocably elects to exercise the attached Warrant
Certificate, No.W-__-_______, to the extent of ________ shares of Common
Stock, $.01 par value per share, of UNAPIX ENTERTAINMENT, INC., and hereby
makes payment of $_______ in payment of the aggregate exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name:_____________________________________________
(Please typewrite or print in block letters)
Address:________________________________________________________________
By:__________________________________
15
<PAGE>
Exhibit 4.16
VOID AFTER 5:00 P.M., NEW YORK, NEW YORK LOCAL TIME ON DECEMBER 31, 2002.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF
(COLLECTIVELY THE "SECURITIES") HAVE EVEN ACQUIRED FOR INVESTMENT ONLY AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UNAPIX
ENTERTAINMENT, INC. THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
UNAPIX ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
TO PURCHASE ______
SHARES OF COMMON STOCK
Certificate No. PW- _____
This Warrant Certificate certifies that First Montauk Securities, Corp.
having an office at 328 Newman Springs Road, Red Bank, NJ 07701, or registered
assigns, is the registered Holder (the "Holder") of __________ Common Stock
Purchase Warrants (the "Warrants") to purchase shares of the common stock, $.01
par value (the "Common Stock"), of Unapix Entertainment, Inc., a Delaware
corporation (the "Company").
The Warrants represented by this Warrant Certificate were issued as partial
compensation to the Holder for acting as a non-exclusive Placement Agent in
connection with a private placement pursuant to a Sales Agency Agreement, dated
as of November , 1997.
1. EXERCISE OF WARRANT.
(A) Each Warrant enables the Holder, subject to the provisions of
this Warrant Certificate and to the listing of the shares issuable upon exercise
hereof on the American Stock Exchange (the "AMEX"), to purchase from the Company
at any time and from time to time commencing on the date of issuance (the
"Initial Exercise Date") through and including 5:00 p.m., New York, New York
local time on December 31, 2002 (the "Expiration Date") one (1) fully paid and
non-assessable share of Common Stock ("Shares") upon due presentation and
surrender of this Warrant Certificate accompanied by payment of the purchase
price of $5.00 per Share (the "Exercise Price"). Payment shall be made in
lawful money of the United States of America by
<PAGE>
certified check payable to the Company at its principal office at 200 Madison
Avenue, New York, New York 10016, or upon surrender of this Warrant as
hereinafter described. As hereinafter provided, the Exercise Price and number
of Shares purchasable upon the exercise of the Warrants are subject to
modification or adjustment upon the happening of certain events.
(B) Subject to the shares issuable upon exercise of the Warrant being
listed on the AMEX, this Warrant Certificate is exercisable at any time on or
after the Initial Exercise Date in whole or in part by the Holder in person or
by attorney duly authorized in writing at the principal office of the Company.
2. EXCHANGE, FRACTIONAL SHARES, TRANSFER.
(A) Upon surrender to the Company, this Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates evidencing a
like aggregate number of Warrants. If this Warrant Certificate shall be
exercised in part, the Holder shall be entitled to receive upon surrender hereof
another Warrant Certificate or Warrant Certificates evidencing the number of
Warrants not exercised;
(B) Anything herein to the contrary notwithstanding, in no event
shall the Company be obligated to issue Warrant Certificates evidencing other
than a whole number of Warrants or issue certificates evidencing other than a
whole number of Shares upon the exercise of this Warrant Certificate; provided,
however, that the Company shall pay with respect to any such fraction of a Share
an amount of cash based upon the current public market value (or book value, if
there shall be no public market value) for Shares purchasable upon exercise
hereof;
(C) The Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner hereof
for all purposes whatsoever; and
(D) This Warrant Certificate may not be transferred except in
compliance with the provisions of the Act and applicable state securities laws
and in accordance with the provisions of Section 11 hereof.
3. RIGHTS OF A HOLDER. No Holder shall be deemed to be the Holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose nor shall anything contained
herein be construed to confer upon the Holder any of the rights of a shareholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof or to give or withhold
consent to any corporate action (whether upon any reorganization, issuance of
stock, reclassification or conversion of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings or to receive dividends or subscription rights or otherwise until a
Warrant shall have been exercised and the Common Stock purchasable upon the
exercise thereof shall have become issuable.
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<PAGE>
4. REGISTRATION OF TRANSFER. The Company shall maintain books for the
transfer and registration of Warrants. Upon the transfer of any Warrants in
accordance with the provisions of Section 2(D) hereof (a "Permitted Transfer"),
the Company shall issue and register the Warrants in the names of the new
Holder. The Warrants shall be signed manually by the Chairman, Chief Executive
Officer, President or any Vice President and the Secretary or Assistant
Secretary of the Company. The Company shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Company for such
purpose upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer. Upon any Permitted Transfer, a new
Warrant Certificate shall be issued to the transferee and the surrendered
Warrants shall be cancelled by the Company. Warrants may be exchanged at the
option of the Holder, when surrendered at the office of the Company, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Shares.
Subject to the terms of this Warrant Certificate, upon such surrender and
payment of the purchase price at any time after the Initial Exercise Date, the
Company shall issue and deliver with all reasonable dispatch to or upon the
written order of the Holder of such Warrants and in such name or names as such
Holder may designate, a certificate or certificates for the number of full
Shares so purchased upon the exercise of such Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become the Holder of record of such
Shares as of the date of the surrender of such Warrants and payment of the
purchase price; provided, however, that if, at the date of surrender and
payment, the transfer books of the Company shall be closed, the certificates for
the Shares shall be issuable as of the date on which such books shall be opened
and until such date the Company shall be under no duty to deliver any
certificate for such Shares; provided, further, however, that such transfer
books, unless otherwise required by law or by applicable rule of any national
securities exchange or interdealer quotation system, shall not be closed at any
one time for a period longer than 20 days. The rights of purchase represented
by the Warrants shall be exercisable, at the election of the Holders, either as
an entirely or from time to time for only part of the Shares at any time on or
after the Initial Exercise Date.
5. STAMP TAX. The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Shares issuable upon the exercise of
the Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Shares in a name other than that of
the Holder in respect of which such Shares are issued, and in such case the
Company shall not be required to issue or deliver any certificate for Shares or
any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid.
6. LOST, STOLEN OR MUTILATED CERTIFICATES. In case this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company may, in
its discretion, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate of like tenor representing an equivalent right or interest,
but only upon receipt of evidence
3
<PAGE>
satisfactory to the Company of such loss, theft or destruction and an indemnity,
if requested, also satisfactory to it.
7. RESERVED SHARES. The Company warrants that there have been reserved,
and covenants that at all times in the future it shall keep reserved, out of the
authorized and unissued Common Stock, a number of Shares sufficient to provide
for the exercise of the rights of purchase represented by this Warrant
Certificate. The Company agrees that all Shares issuable upon exercise of the
Warrants shall be, at the time of delivery of the certificates for such Shares,
validly issued and outstanding, fully paid and non-assessable and that the
issuance of such Shares will not give rise to preemptive rights in favor of
existing stockholders.
8. ANTI-DILUTION PROVISIONS.
(A) Stock Dividend - Split-Ups. If after the date hereof, the number
of outstanding shares of Common Stock is increased by a stock dividend payable
in shares of Common Stock or by a split-up of shares of Common Stock or other
similar event, then, on the day following the date fixed for the determination
of holders of Common Stock entitled to receive such stock dividend or split-up,
the number of shares issuable on exercise of each Warrant shall be increased in
proportion to such increase in outstanding shares and the then applicable
Exercise Price shall be correspondingly decreased.
(B) Aggregation of Shares. If after the date hereof, the number of
outstanding shares of Common Stock is decreased by a consolidation, combination
or reclassification of shares of Common Stock or other similar event, then,
after the effective date of such consolidation, combination or reclassification,
the number of shares issuable on exercise of each Warrant shall be decreased in
proportion to such decrease in outstanding shares and the then applicable
Exercise Price shall be correspondingly increased.
(C) Reorganization, etc. If after the date hereof any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Warrant holders shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in the Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such shares of stock, securities, or assets as may
be issued or payable with the respect to or in exchange for the number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests, of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares purchasable
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upon the exercise of the Warrants) shall thereafter be applicable, as nearly as
may be in relation to any share of stock, securities, or assets thereafter
deliverable upon the exercise hereof.
(D) Notice of Certain Transactions. If, at any time while this
Warrant is outstanding, the Company shall pay any dividend payable in cash or in
Common Stock, shall offer to the holders of its Common Stock for subscription or
purchase by them any shares of stock of any class or any other rights, or shall
enter into an agreement to merge or consolidate with another corporation, the
Company shall cause notice thereof to be mailed to the registered holder of this
Warrant at its address appearing on the registration books of the Company, at
least 30 days prior to the record date as of which holders of Common Stock shall
participate in such dividend, distribution or subscription or other rights or at
least 30 days prior to the effective date of the merger or consolidation.
Failure to give notice as required by this Section, or any defect therein, shall
not affect the legality or validity of any dividend, distribution or
subscription or other right.
9. CONSOLIDATION OR MERGER. The Company covenants and agrees that
it will not merge or consolidate with or into or sell or otherwise transfer all
or substantially all of its assets to any other corporation or entity unless at
the time of or prior to such transaction the successor corporation (if other
than the Company) resulting from such consolidation or merger, or the
corporation purchasing such assets, shall expressly assume all of the
liabilities and obligations of the Company under this Warrant and (without
limiting the generality of the foregoing) shall expressly agree that the Holder
of this Warrant shall thereafter have the right to receive upon the exercise of
this Warrant the number and kind of shares of stock and other securities and
property receivable upon such transaction by a Holder of the number and kind of
shares which would have been receivable upon the exercise of this Warrant
immediately prior to such transaction.
10. REGISTRATION RIGHTS UNDER THE SECURITIES ACT OF 1933.
(A) The Company shall advise the Holder of this Warrant or of
the Warrant Shares or any then Holder of warrants of Warrant Shares (such
persons being collectively referred to herein as "Holders") by written notice at
least three weeks prior to the anticipated filing of any registration statement
under the Act (other than a registration statement on Forms S-4 or Form S-8
promulgated under the Act or any successor or similar form) filed by the Company
covering the public offering of securities of the Company for its own account
(the "Registration Statement"), or subject to the Company's not being prohibited
from doing so pursuant to an agreement with another party, for the account of
another party, and will for a period of two (2) years commencing the date
hereof, upon the request of any such Holder given not later than 10 days after
receipt of such notice from the Company (which notice from the Company will
offer such Holder the option to include Shares in such Registration Statement),
include in any such Registration Statement such information as may be required
to permit a public offering of the Shares. Such inclusion shall be on the same
terms and conditions as any similar securities of the Company so included,
including, without limitation, the same registration form. Notwithstanding the
foregoing, if the Managing Underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the shares represented to be included in the registration concurrently with the
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securities being registered by the Company would materially adversely affect the
distribution of such securities then the Holders who shall have requested
registration of Warrant Shares shall withdraw the offer and sale of such Warrant
Shares (or the portions thereof so designated by such Managing Underwriter) for
such period as the Managing Underwriter shall in its sole discretion determine.
The Company shall supply prospectuses and other documents as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Shares, use its best efforts to qualify the Shares for sale in such
states as any such Holder reasonably designates and do any and all acts and
things which may be necessary or desirable to enable such Holders to consummate
the public sale or other disposition of the Shares, and furnish indemnification
in the manner set forth in Subsection (B)(2)(a) and (b) of this Section 10.
Such Holders shall furnish information as set forth in Subsection (B)(2)(c) of
this Section 10. Notwithstanding anything to the contrary contained herein,
each holder of Warrants or Warrant Shares shall be entitled to exercise his or
its rights pursuant to the terms of this Section 10(A) with respect to not more
than one registration which becomes effective under the Act.
(B) The following provisions of this Section 10 shall also be
applicable:
(1) The Company shall bear the entire cost and expense
of any registration of securities under Subsection (A) of this
Section 10 notwithstanding that Shares subject to this Warrant may
be included in any such registration, except that the Holders shall
bear the fees of their own counsel and any underwriting discounts
or commissions applicable to any of the securities sold by them.
(2) (a) The Company shall indemnify and hold harmless
each such Holder whose Shares are included in any such registration
statement, the directors and officers of any such Holder, and each
person that controls such Holder (within the meaning of Section 15
under the Act), and each underwriter, within the meaning of the
Act, who may purchase from or sell for any such Holder any Shares,
from and against any and all losses, claims, damages and
liabilities caused by and untrue statement or alleged untrue
statement of a material fact contained in such registration
statement or any post-effective amendment thereto under the Act or
any prospectus included therein or filed or furnished in connection
therewith, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be
furnished in writing to the Company by such Holder or underwriter
expressly for use therein, which indemnification shall include each
person, if any, who controls any such underwriter within the
meaning of such Act; provided, however, that the Company shall not
be obliged to indemnify any such underwriter or controlling person
unless such underwriter shall at the same time indemnify the
Company, its directors, each officer signing the related
registration statement and each person, if any, who controls the
Company within the meaning of
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such Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any such registration
statement or any prospectus included therein or filed or furnished
in connection therewith or caused by any omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omission based upon information
furnished in writing to the Company by any such underwriter
expressly for use therein.
(b) If any action or proceeding (including any
governmental investigation) shall be brought, threatened or asserted
against any indemnified person in respect of which indemnity may be
sought from the Company, such indemnified person shall promptly notify
the Company in writing, and the Company shall assume the defense
thereof, including the retention of counsel and the payment of all
related expenses. Any such indemnified person shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such indemnified person unless: (i) the Company has
agreed to pay such fees and expenses; or (ii) the Company shall have
failed to assume the defense of such action or proceeding. The
Company shall not be liable for any settlement of any action or
proceeding or confession of judgement effected by the indemnified
person without the Company's consent.
(c) The Holders registering Shares shall agree to
indemnify and hold harmless the Company, its directors and officers,
and each person, if any, who controls the Company within the meaning
of Section 15 of the Act, to the same extent as the indemnity from the
Company to each such person provided in Subsection (B)(2)(a) of this
Section 10 but only with respect to information relating to such
indemnified person furnished in writing by such indemnified person to
the Company expressly for use in the registration statement or related
prospectus (preliminary or final), or any amendment or supplement
thereto. In case any action or proceeding shall be brought against
the Company or its directors or officers or any such controlling
person, in respect to which indemnity may be sought against a Holder
under the preceding sentence, each such Holder shall have the rights
and duties given the Company under Section (B)(2)(b) of this Section
10.
(C) Notwithstanding anything to the contrary contained in this
Section 10, the Holder shall not be entitled to registration rights or to
receive notice, in each case pursuant to Section 10 if the Holder receives an
opinion in form and substance reasonably satisfactory to him from counsel to the
Company reasonably acceptable to him that the proposed offer and sale of the
Shares by him is exempt from the registration requirements of the Act, by reason
of the availability of the exemption provided by Rule 144.
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(D) The Holders requesting registration shall furnish to the
Company in writing such information and documents as, in the opinion of counsel
to the Company, may be reasonably required properly to prepare and file such
registration statement in accordance with the applicable provision of the Act.
11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
(A) The Holder of this Warrant Certificate, each transferee
hereof and any Holder and transferee of any Shares, by his acceptance thereof,
agrees that (a) no public distribution of Warrants or Shares will be made in
violation of the Act, and (b) during such period as the delivery of a prospectus
with respect to Warrants or Shares may be required by the Act, no public
distribution of Warrants or Shares will be made in a manner or on terms
different from those set forth in, or without delivery of, a prospectus then
meeting the requirements of Section 10 of the Act and in compliance with
applicable state securities laws. The Holder of this Warrant Certificate and
each transferee hereof further agrees that if any distribution of any of the
Warrants or Shares is proposed to be made by them otherwise than by delivery of
a prospectus meeting the requirements of Section 10 of the Act, such action
shall be taken only after submission to the Company of an opinion of counsel,
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed distribution will not be in violation of the Act or of
applicable state law. Furthermore, it shall be a condition to the transfer of
the Warrants that any transferee thereof deliver to the Company his written
agreement to accept and be bound by all of the terms and conditions contained in
this Warrant Certificate.
(B) This Warrant or the Shares or any other security issued or
issuable upon exercise of this Warrant may not be sold or otherwise disposed of
except as follows:
(1) To a person who, in the opinion of counsel for the
Holder reasonably acceptable to the Company, is a person to whom this Warrant or
Shares may legally be transferred without registration and without the delivery
of a current prospectus under the Act with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions of this
subsection (B)(1) with respect to any resale or other disposition of such
securities which agreement shall be satisfactory in form and substance to the
Company and its counsel; provided that the foregoing shall not apply to any such
Warrant, Shares or other security as to which Holder shall have received an
opinion letter from counsel to the Company as to the exemption thereof from the
registration under the Act pursuant to Rule 144 under the Act; or
(2) To any person upon delivery of a prospectus then
meeting the requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
(C) Each certificate for Shares issued upon exercise of this
Warrant shall bear a legend relating to the non-registered status of such Shares
under the Act, unless at the time
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of exercise of this Warrant such Shares are subject to a currently effective
registration statement under the Act.
12. MISCELLANEOUS.
(A) LAW TO GOVERN. This Warrant shall be governed by and
construed in accordance with the substantive laws of the State of New York,
without giving effect to conflict of laws principles.
(B) ENTIRE AGREEMENT. This Warrant Certificate constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions whether express or
implied, oral or written. Neither this Warrant Certificate nor any portion or
provision hereof may be changed, waived or amended orally or in any manner other
than by an agreement in writing signed by the Holder and the Company.
(C) NOTICES. Except as otherwise provided in this Warrant
Certificate, all notices, requests, demands and other communications required or
permitted under this Warrant Certificate or by law shall be in writing and shall
be deemed to have been duly given, made and received only when delivered against
receipt or when deposited in the United States mails, certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Company: Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Attn: President
Holder: At the address shown for the
Holder in the registration
book maintained by the
Company.
Copy to: Michael R. Epps, Esq.
c/o Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
(D) SEVERABILITY. If any provision of this Warrant Certificate
is prohibited by or is unlawful or unenforceable under any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction be in effect to the
extent of such prohibition without invalidating the remaining provisions hereof;
provided, however, that any such prohibition in any jurisdiction shall not
invalidate such provision in any other jurisdiction; and provided, further that
where the provisions of any such applicable law may be waived, that they hereby
are waived by the
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Company and the Holder to the full extent permitted by law and to the end that
this Warrant instrument shall be deemed to be a valid and binding agreement in
accordance with its terms.
IN WITNESS WHEREOF, Unapix Entertainment, Inc., has caused this Warrant
Certificate to be signed by its duly authorized officers as of the ______ day
of ____________________________________.
UNAPIX ENTERTAINMENT, INC.
By:__________________________
Herbert M. Pearlman, Chairman
Attest:
_________________________________
David S. Lawi, Secretary
[CORPORATE SEAL]
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Exhibit 10.5
UNAPIX ENTERTAINMENT, INC.
1993 Stock Option Plan
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of the Unapix Entertainment, Inc. (the
"Company") 1993 Stock Option Plan (the "Plan") is to enable the Company to
offer its key employees, officers, directors and consultants whose past,
present and/or potential contributions to the Company have been, are or will
be important to the success of the Company, an opportunity to acquire a
proprietary interest in the Company.
1.2 Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Agreement" means the agreement between the Company and
the Holder setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto and the regulations
promulgated thereunder.
(d) "Committee" means the Stock Option Committee of the Board
or any other committee of the Board which the Board may designate to
administer the Plan or any portion thereof. If no Committee is so
designated, then all references in this Plan to "Committee'' shall mean the
Board.
(e) "Common Stock" means the Common Stock of the Company, par
value $.01 per share.
(f) "Company" means Unapix Entertainment, Inc. , a
corporation organized under the laws of the State of Delaware.
(g) "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan
(h) "Effective Date" means the date set forth in Section 7.
(i) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, means,
as of any given date: (i) if the Common Stock is listed on a national
securities exchange, quoted on the NASDAQ National Market System or quoted on
the NASDAQ Small Cap Market, the last sale price of the Common Stock on the
last preceding day on which the Common Stock was traded, as reported by the
<PAGE>
exchange or NASDAQ, as the case may be; (ii) if the Common Stock is not
listed an a national securities exchange or quoted on the NASDAQ National
Market System or NASDAQ Small Cap Market, but is traded in the
over-the-counter market, the average of the high bid and low asked prices for
the Common Stock on the last preceding day for which such quotations are
reported by a service providing such quotations (e.g. , National Quotation
Bureau, Inc. ) ; and (iii) if the fair market value of the Common Stock
cannot be determined ,pursuant to clause (i) or (ii) above, such price as the
Committee shall determine, in good faith.
(j) "Family Group Member" shall mean the spouse, sibling or
lineal descendant of the Holder or a trust established for any such person.
(k) "Holder" means a person who has received an award under
the Plan.
(1) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(m) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after age 65.
(o) "Parent" means any present or future parent corporation
of the Company, as such term is defined in Section 424 (e) of the Code.
(p) "Plan" means the Unapix Entertainment, Inc. 1993 Stock
Option Plan, as hereinafter amended from time to time.
(q) "Stock,' means the Common Stock of the Company, par value
$.01 per share.
(r) "Stock Option" of "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(s) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such term as the
Board may in each case determine, and shall be subject to removal at any time
by the Board. It is the intent of the Board that the Plan qualify under Rule
16b-3 promulgated under the Securities Exchange Act of 1934.
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To that end, unless otherwise determined by the Board, each committee member
shall be a disinterested person (i.e., a director who is not, during the one
year prior to service as an administrator of the plan, or during such
service, granted or awarded equity securities of the Company pursuant to the
Plan or any other plan of the Company or its affiliates as provided by Rule
16b-3) .
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4.1 hereof, to grant Stock Options pursuant to the terms
of the Plan. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express provisions of this
Plan).
(a) to select the officers, key employees, directors and
consultants of the Company or any Subsidiary to whom Stock Options may from
time to time be granted hereunder;
(b) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Stock Option granted hereunder (including,
but not limited to, number of shares, share price, any restrictions or
limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the
Committee shall determine);
(c) to determine any specified performance goals or such
other factors or criteria which need to be attained for the vesting of an
award granted hereunder;
(d) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish,
including the crediting of interest on deferred amounts denominated in cash
and of dividend equivalents on deferred amounts denominated in Stock;
(e) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall be
deferred which may be either automatic or at the election of the Holder; and
(f) to substitute (i) new Stock Options for previously
granted Stock Options, which previously granted Stock Options have higher
option exercise prices and/or contain other less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 6 hereof, the
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and to determine
the form and
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substance of all Agreements relating thereto) , and to otherwise supervise
the administration of the Plan. Subject to Section 10 hereof, all decisions
made by the Committee pursuant to the provisions of the Plan shall be made in
the Committee's sole discretion and shall be final and binding upon all
persons, including the Company, its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options or any Agreement providing for Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422 of the Code, or, without the consent of the Holder(s)
affected, to disqualify any Incentive Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 875,000
shares. Shares of Stock under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. If any shares of Stock
that have been optioned cease to be subject to a Stock Option granted
hereunder are forfeited or any such award otherwise terminates without a
payment being made to the Holder in the form of Stock, such shares shall
again be available for distribution in connection with future grants and
awards under the Plan. Only net shares issued upon a stock-for-stock
exercise (including stock used for withholding taxes) shall be counted
against the number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event
of any merger, reorganization, consolidation, recapitalization, dividend
(other than a cash dividend), stock split, reverse stock split, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for
issuance under the Plan and in the number and exercise price of shares
subject to outstanding Options granted under the Plan as may be determined to
be appropriate by the Committee in order to prevent dilution or enlargement
of rights, provided that the number of shares subject to any award shall
always be a whole number.
Section 4. Eligibility.
4.1 General. Awards may be made or granted to key employees,
officers, directors and consultants who are deemed to have rendered or to be
able to render significant services to the Company or its Subsidiaries and
who are deemed to have contributed or to have the potential to contribute to
the success of the Company. No Incentive Stock Option shall be granted to
any person who is not an employee of the Company or a Subsidiary at the time
of grant.
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4.2 Grant of Options to Officers and Directors. The granting of
options to officers and directors of the Company shall be determined by a
committee of two or more directors, of which all members shall be
disinterested persons, as described in Section 2.1 hereof.
Section 5. Stock Options.
5.1. Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i ) Incentive Stock Options and (ii) Non-Qualified Stock
Options. Any Stock Option granted under the Plan shall contain such terms,
not inconsistent with this Plan, or with respect to Incentive Stock Options,
the Code, as the Committee may from time to time approve. The Committee
shall have the authority to grant Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options and may be granted alone or in
addition to other awards granted under the Plan. To the extent that any
Stock Option intended to qualify as an Incentive Stock Option does not so
qualify, it shall constitute a separate Non-Qualified Stock option. An
Incentive Stock Option may only be granted within the ten year period
commencing From the Effective Date and may only be exercised within ten years
of the date of grant (or five years in the case of an Incentive Stock Option
granted to an optionee ("10% Stockholder") who, at the time of grant, owns
Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a Parent or Subsidiary.
5.2. Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and may be less than 100% of the Fair Market Value of the Stock
at the time of grant; provided, however, that the exercise price of an
Incentive Stock Option shall not be less than 100% of the Fair Market Value
of the Stock at the time of grant (110%, in the case of 10% Holder) .
(b) Option Term. Subject to the limitations contained in
Section 5.1, the term of each Stock option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides, in its discretion,
that any Stock Option is exercisable only in installments, i.e., that it
vests over time, the Committee may waive such installment exercise provisions
at any time at or after the time of grant in whole or in part, based upon
such factors as the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the
term of the Option, by giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchased. Such notice shall
be accompanied by payment in full of the purchase price, which shall be in
cash or, unless otherwise
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provided in the Agreement, in shares of Stock or, partly in cash and partly
in such Stock, or such other means which the Committee determines are
consistent with the Plan's purpose and applicable law. Cash payments shall
be made by wire transfer, certified or bank check or personal check, in each
case payable to the order of the Company; provided, however, that the Company
shall not be required to deliver certificates for shares of Stock with
respect to which an Option is exercised until the Company has confirmed the
receipt of good and available funds in payment of the purchase price thereof.
Payments in the f form of Stock shall be valued at the Fair Market Value of
a share of Stock on the date prior to the date of exercise. Such payments
shall be made by delivery of stock certificates in negotiable form which are
effective to transfer good and valid title thereto to the Company, free of
any liens or encumbrances. A Holder shall have none of the rights of a
stockholder with respect to the shares subject to the Option until such
shares shall be transferred to the Holder upon the exercise of the Option.
(e) Transferability. No Stock Option shall be transferable by
the Holder, otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the Holder's
lifetime, only by the Holder; provided however that, notwithstanding anything
to the contrary contained herein, the Committee may in its sole discretion
allow a Non-Incentive Stock Option to be transferred to a Family Group Member.
(f) Termination by Reason of Death. If a Holder's employment
by the Company or a Subsidiary terminates by reason of death, any Stock
Option held by such Holder, unless otherwise determined by the Committee at
the time of grant and set forth in the Agreement, shall be fully vested and
may thereafter be exercised by the legal representative of the estate or by
the legatee of the Holder under the will of the Holder, for a period of one
year (or such other greater or lesser period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such Holder, unless otherwise determined
by the Committee at the time of grant and set forth in the Agreement, shall
be fully vested and may thereafter be exercised by the Holder for a period of
one year (or such other lesser period as the Committee may specify at the
time of grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(h) Other Termination. Subject to the provisions of Section
8 below and unless otherwise determined by the Committee at the time of grant
and set forth in the Agreement, if a Holder is an employee of the Company or
a Subsidiary at the time of grant and if such are Holder's employment by the
Company or any Subsidiary terminates for any reason other than death or
Disability, the Stock Option shall thereupon automatically terminate, except
that if the Holder's employment is terminated by the Company or a Subsidiary
without cause or due to Normal Retirement, then the portion of such Stock
Option which has vested on the date of the termination of employment may be
exercised for the lesser of three months after termination of
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employment or the balance of such Stock Option's term.
(i) Additional Incentive Stock Option Limitation. In the
case of an Incentive Stock Option, the amount of aggregate Fair Market Value
of Stock (determined at the time of grant of the Option) with respect to
which Incentive Stock Options are exercisable for the first time by a Holder
during any calendar year (under all such plans of the Company and its Parent
and Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at
any time offer to buy out a Stock Option previously granted, based upon such
terms and conditions as the Committee shall establish and communicate to the
Holder at the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by, and shall be subject to the terms of, the Agreement
executed by the Company and the Holder.
(l) Holding Period. All shares of Stock received by a Holder
upon exercise of an Option granted hereunder shall be non-transferable by the
Holder until at least six months has elapsed from the date of the granting of
such Option.
Section 6. Amendments and Termination.
The Board (but not the Committee) may at any time amend, alter, suspend
or discontinue the Plan, but no amendment, alteration, suspension or
discontinuance shall be made which would impair the rights of a Holder under
any Agreement theretofore entered into hereunder, without his consent.
Section 7. Term of Plan.
7.1 Effective Date. The Plan shall be effective as of April 23,
1993 ("Effective Date") , subject to the approval of the Plan by the
stockholders of the Company within one year after the Effective Date. Any
awards granted under the Plan prior to such approval shall be effective when
made (unless otherwise specified by the Committee at the time of grant) , but
shall be conditioned upon, and subject to, such approval of the Plan by the
Company's stockholders. If the Plan shall not be so approved, all awards
granted thereunder shall be of no effect and any Stock received by a Holder
upon the exercise of an award shall be deemed forfeited and the Holder shall
return the Stock to the Company.
7.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may be
granted and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only be
made during the ten year, period following the Effective Date.
7
<PAGE>
Section 8. General Provisions.
8.1 Written Agreements. Each award granted under the Plan shall
be confirmed by, and shall be subject to the terms of the Agreement executed
by the Company and the Holder. The committee may terminate any award made
under the Plan if the Agreement relating thereto is not executed and returned
to the Company within 60 days after the Agreement has been delivered to the
Holder for his or her execution.
8.2 Unfunded Status of Plan. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Holder by the Company, nothing contained
herein shall (give any such Holder any rights that are greater than those of
a general creditor of the Company.
8.3 Employees.
(a) Engaging in Competition With the Company. In the event
an employee Holder terminates his employment with the company or a Subsidiary
for any reason whatsoever, and within eighteen (18) months after the date
thereof accepts employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any award
which was realized or obtained (measured at the date of exercise) by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with the
Company.
(b) Termination for Cause. The Committee may, in the event
an employee is terminated for cause, annul any award granted under this Plan
to such employee and in such event the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any award
which was realized or obtained (measured at the date of exercise) by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with the
Company.
(c) No Right of Employment. Nothing contained in the Plan or
in any award hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary any right to continued employment with the Company
or any Subsidiary, nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of any of its employees
at any time.
8.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award
under the Plan to represent to and agree with the Company in writing that the
Holder is acquiring the shares for investment without a view to distribution
thereof.
8.5 Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem
8
<PAGE>
desirable, including, but not limited to, the granting of stock options and
the awarding of stock and cash otherwise than under the Plan; and such
arrangements may be either generally applicable or applicable only in
specific cases.
8.6 Withholding Taxes. Not later than the date as of which an
amount first becomes includible in the gross income of the Holder for Federal
income tax purposes with respect to any option or other award under the Plan,
the Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such amount. If
Permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award
that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional upon such payment or arrangements
and the Company or the Holder's employer (if not the Company) shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Holder from the Company or any
Subsidiary.
8.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of
the State of Delaware (without regard to choice of law provisions)
8.8 Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such other plan to
awards under this Plan).
8.9 Non-Transferability. Except as otherwise expressly provided
in the Plan, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
8.10 Applicable Laws. The obligations of the Company with
respect to all Stock Options and awards under the Plan shall be subject to
(i) all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933,
as amended, and (ii) the rules and regulations of any securities exchange an
which the Stock may be listed.
8. 11 Conflicts. If any of the terms or provisions of the Plan
conflict with the requirements of with respect to Incentive Stock Options,
Section 422A of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of said
Section 422A of the Code. Additionally, if this Plan does not contain any
provision required to be included herein under Section 422A of the Code, such
provision shall be
9
<PAGE>
deemed to be incorporated herein with the same force and effect as if such
provision had been set out at length herein.
8.12 Non-Registered Stock. The shares of Stock being distributed
under this Plan have not been registered under the Securities Act of 1933, as
amended (the "1933 Act") , or any applicable state or foreign securities laws
and the Company has no obligation to any Holder to register the Stock or to
assist the Holder in obtaining an exemption from the various registration
requirements, or to list the Stock on a national securities exchange.
10
<PAGE>
Exhibit 10.25
AMENDMENT NO. 1 TO REVOLVING
CREDIT LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of March 25, 1998, by and
between (i) UNAPIX ENTERTAINMENT, INC., a Delaware corporation ("Unapix"),
and MIRAMAR IMAGES, INC., a Washington corporation ("Miramar"; and together
with Unapix, collectively the "Borrowers"), and (ii) IMPERIAL BANK, a
California chartered bank (the "Bank"), with respect to the following facts:
A. Pursuant to the terms of that certain Revolving Credit Loan and
Security Agreement dated as of April 16, 1997 (the "Loan Agreement"), by and
among the Borrowers, A Pix Entertainment, Inc., a New York corporation ("A
Pix"), and the Bank, the Bank has heretofore made available to the Borrowers
and A Pix a revolving credit facility in an aggregate amount not to exceed
$7,000,000. Capitalized terms not expressly defined herein shall have the
respective meanings ascribed thereto in the Loan Agreement.
B. A Pix has heretofore merged with and into Unapix; and as a result
thereof Unapix has (1) succeeded to all assets and properties of A Pix
subject to the security interests of the Bank therein pursuant to the Loan
Documents, and (ii) assumed all liabilities and obligations of A Pix
(including, without limitation, all Obligations of A Pix to the Bank pursuant
to and/or in connection with the Loan Documents).
C. The Borrowers have requested the Bank to (i) increase the amount of
the Commitment from $7,000,000 to $10,000,000, (ii) change the Tier 1
Borrowing Base Component and Tier 4 Borrowing Base Component percentages, and
(iii) formally consent to the issuance by Unapix (a) during the fourth
calendar quarter of 1997, of $1,300,000 of certain convertible notes, and (b)
on February 19, 1998, of $5,250,000 of certain convertible subordinated notes.
D. The Bank is willing to agree to the foregoing subject to the terms
and conditions contained herein.
NOW, THEREFORE, in consideration of the above facts and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. AMENDMENTS
1.1. Definitions. Section 1 of the Loan Agreement is hereby
amended by adding thereto the following definition:
1
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"`1998 Convertible Notes' shall mean the 10% Convertible
Subordinated Notes in an aggregate principal amount not
to exceed $5,250,000, due June 30, 2003, issued by
Unapix, the terms of which have been reviewed and
approved in writing by the Bank."
1.2 Increase In Committment. Section 2.1.1 of the Loan
Agreement is hereby amended and restated to read in its entirety as
follows:
"2.1.1 Commitment. To the Borrower, in the form of
Advances and Letters of Credit by way of a revolving credit
facility (the "Facility) in the aggregate sum owing hereunder
of up to Ten Million Dollars ($10,000,000) (the "Commitment")
from time to time during the period (the "Availability
Period") commencing on the execution date hereof and expiring
on September 30, 1998; provided, however, that subject to
Section 2.1.2 hereof, at no time shall the sum of all
Advances and all undrawn amounts under all Letters of Credit
at any time outstanding under the Facility exceed the lesser
of (i) the Commitment, or (ii) the then current amount of the
Borrowing Base; provided, further, however, that the
aggregate sum of all undrawn amounts under Standby Letters of
Credit shall not at any time exceed the Standby Letters of
Credit Sublimit. Subject to the terms and conditions of this
Agreement, the Borrowers may borrow, repay and reborrow
amounts constituting the Commitment. Notwithstanding
anything herein to the contrary, no Letter of Credit shall
remain outstanding after the Final Repayment Date."
1.3 Promissory Note.
1.3.1 The first sentence of Section 2.6 of the Loan
Agreement is hereby amended and restated to read in its
entirety as follows:
"The Principal (and Interest thereon) owing to the Bank
under the Facility shall be evidenced by an Amended and
Restated Promissory Note (hereinafter the 'Note')
executed by the Borrowers and payable to the Bank in the
face amount of the Commitment."
1.3.2 As soon as practicable following the Borrowers'
compliance with each of the conditions precedent set forth in
Section 3 hereof, the Bank shall return to the Borrowers the
existing $7,000,000 Promissory Note dated April
2
<PAGE>
16, 1997, previously executed by the Borrowers in favor of the
Bank.
1.4 Tier 1 Borrowing Base Component. Section 3.1.1 of the Loan
Agreement is hereby amended by changing the Tier 1 Borrowing Base Component
percentage from "55%" to "65%."
1.5 Tier 4 Borrowing Base Component. Section 3.1.4 of the Loan
Agreement is hereby amended by (i) changing the Tier 4 Borrowing Base
Component percentage from "50%" to "75%", and (ii) adding the following
proviso at the end of said Section: "provided, however, that in no event
shall the aggregate amount of the Tier 4 Borrowing Base Component exceed
$3,000,000;".
1.6 Commitment Fees. Section 4.3 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"4.3 Commitment Fees. The Borrowers shall pay to the
Bank a non-refundable commitment fee (the "Commitment
Fee") equal to one-half percent (1/2%) per annum on the
greater of (i) the average unused portion of the first
$7,000,000 of the Commitment, and (ii) the average
unused portion of the Borrowing Base (i.e. that portion
of the Borrowing Base which is not used to borrow
Advances or issue Letters of Credit). The Commitment
Fee shall be calculated and payable quarterly in
arrears on the first Business Day of each calendar
quarter and on the Final Repayment Date. For purposes
of calculation of the Commitment Fee, the aggregate
undrawn amount of all outstanding Letters of Credit
shall be considered part of the used portions of the
Commitment."
1.7 Permitted Indebtedness.
1.7.1 Section 10.3.8 of the Loan Agreement is hereby
amended by changing the dollar amount "$1,000,000" to
"$2,300,000".
3
<PAGE>
1.7.2 Section 10.3 of the Loan Agreement is hereby
amended by adding thereto a new Subsection 10.3.17 which shall
read in its entirety as follows:
"10.3.17 the Indebtedness evidenced by the 1998
Convertible Notes."
1.8 Modification Covenant. Section 10.9 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:
"10.9 Prohibition of Modifications. Modify or
permit or suffer to occur any Modification (i) to any
License Agreement underlying any receivable included in the
Borrowing Base, (ii) to the Variable Rate Notes, the 1996
Convertible Notes, the 1997 Convertible Notes, or the 1998
Convertible Notes, or (iii) to any other agreement to which
any Borrower is a party or which requires the consent or
approval of any Borrower to Modify that would materially and
adversely (a) affect the condition (financial or otherwise)
of any Borrower, (b) lessen the ability of any Borrower to
perform its obligations under any Loan Document, (c) lessen
any of the rights granted to the Bank under any Loan
Document, (d) affect the Collateral, and/or (e) affect the
Bank's interest in any of the Collateral."
1.9 Restricted Payments Covenant. Section 10.17 of the Loan
agreement is hereby amended as follows:
1.9.1 Sections 10.17.2 and 10.17.3 of the Loan Agreement
are hereby amended by adding the phrase "and 1998 Convertible
Notes" immediately following the phrase" and 1997 Convertible
Notes" appearing in each of said Sections; and
1.9.2 The last paragraph of Section 10.17 of the Loan
Agreement is hereby amended by adding the phrase "and 1998
Convertible Notes" immediately following each phrase "and 1997
Convertible Notes" appearing in said paragraph.
1.10. Events of Default. Section 11.4 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:
"11.4 A default or breach (without
regard to any notice or period of cure) with respect
to the
4
<PAGE>
payment of any indebtedness for borrowed money of any
Borrower to any third party (including, the Variable Rate
Notes, the 1996 Convertible Notes, the 1997 Convertible
Notes, and the 1998 Convertible Notes) when due or in the
performance of any other obligation incurred in connection
with any such indebtedness for borrowed money by any
Borrower which accelerates (or permits the acceleration of)
any such indebtedness in an amount not less than $250,000 or
would have a material adverse effect upon the Collateral or
any Borrower's ability to fully and timely perform all of
its obligations under the Loan Documents."
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties. For the purpose of inducing
the Bank to enter into this Amendment, the Borrowers hereby jointly and
severally represent and warrant to the Bank that as of the date hereof and
as of each Drawdown Date including, without limitation, as of the date of
each Advance under the increased Commitment (except to the extent that any
such representation or warranty expressly relates to an earlier date):
2.1.1 Each of the representations and warranties of the
Borrowers contained in the Loan Agreement and in any and all other
Loan Documents is or was (as the case may be) true and correct on and
as of the date given with the effect as though such representations
and warranties had been made on and as of such date;
2.1.2 No Event of Default or Potential Event of Default
has occurred and is continuing;
2.1.3 Each of the Borrowers is duly authorized to enter
into this Amendment, the Note (i.e. the Amended and Restated
Promissory Note to be executed by the Borrowers pursuant to Section
3.1.1 hereof) and consummate the transactions herein contemplated and
has the requisite power, authority and legal right to execute, deliver
and perform this Amendment, such Note and the other documents and
transactions contemplated herein, and has taken all necessary action
to authorize it's execution, delivery and performance of this
Amendment, such Note and such other documents and transactions as
contemplated herein; and
5
<PAGE>
2.1.4 The consummation of the transactions herein
contemplated and the fulfillment of the terms hereof and the
compliance by the Borrowers with all of the terms and conditions of
this Amendment and the other documents herein provided will not result
in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or violate, any indenture, bank loan,
credit agreement or other agreement or instrument, or existing law or
judgment, to which either or both of the Borrowers is a party or by
which they or any of their assets is bound, nor will it result it in
the creation of any Encumbrance upon any of their properties or assets
pursuant to the provisions of any such indenture, bank loan, credit
agreement or other agreement or instrument, nor are any of the
Borrowers prohibited by their articles of incorporation, by-laws or
any indenture or other agreement, nor does it require any approval or
consent of any Person that has not otherwise been obtained as of the
date hereof; and that this Amendment, the Note and each additional
instrument and document required hereunder when executed and delivered
by the Borrowers will constitute the legal, valid and binding
obligation of the Borrowers enforceable against them in accordance
with its terms.
2.2 Survival of Representations and Warranties.
All warranties and representations herein shall survive the
execution of this Amendment and the consummation of the transactions
contemplated herein.
3. CONDITIONS PRECEDENT.
3.1 The provisions of Section 1 hereof shall not become
effective, and the Bank shall not be under any obligation to make any
Advances under the contemplated increase in the Commitment until the
Borrowers shall have complied with each of the following conditions
precedent to the satisfaction of the Bank in its sole and absolute
discretion, unless otherwise waived by the Bank in writing in its sole and
absolute discretion:
3.1.1 Amended and Restated Note.
Delivery to the Bank of the Note duly executed by each
Borrower in the form of Exhibit 1 attached hereto;
3.1.2 Supporting Documents of Borrowers.
6
<PAGE>
Delivery to the Bank of a certificate of a senior executive
officer of each Borrower acceptable to the Bank in substance and form
satisfactory to the Bank (including, without limitation, certification
by such officer of each Borrower that attached thereto is a true and
correct complete copy of resolutions of the Board of Directors or the
Executive Committee thereof (and if applicable, the shareholders) of
such Borrower approving and authorizing the execution, delivery and
performance of this Amendment and the other documents and transactions
contemplated herein, including, but not limited to, the Amended and
Restated Note);
3.1.3 Good Standing Certificates.
Delivery to the Bank of a good standing certificate, dated
as of a recent date, issued by the Office of the Secretary of State of
(i) the jurisdiction of incorporation of each Borrower, and (ii) each
additional State where any Borrower is qualified to transact business
as a foreign corporation (or the failure to so qualify could have a
material adverse effect on any Borrower or any of the Collateral);
3.1.4 Payment of Loan Fee.
The Borrowers shall pay to the Bank in consideration of the
increase in the Commitment provided for herein, a non-refundable
loan fee of $25,000;
3.1.5 Closing Costs.
The Borrowers shall have paid to the Bank all Costs incurred
by the Bank in connection with the negotiation, review and preparation
of this Amendment, the Amended and Restated Note, any other Loan
Documents and the various transactions contemplated herein and
therein; and
3.1.6 Compliance.
The Borrowers shall have complied and then be in compliance
with all terms, covenants and conditions of the Loan Agreement.
4. ACKNOWLEDGEMENTS.
Each Borrower hereby acknowledges that (a) it has been advised by
counsel in the negotiation, execution and delivery of this Amendment and the
transactions contemplated hereby; (b) it has made an independent decision to
7
<PAGE>
enter into this Amendment without reliance on any representation, warranty or
covenant or undertaking by the Bank other than as expressly set forth in this
Amendment; and (c) should any shortfall occur between such Borrower's financing
needs and the Commitment, as amended by this Amendment, such shortfall shall be
the sole responsibility of such Borrower and such Borrower shall not make any
claim against the Bank based on any facts, events or circumstances now or
hereafter existing.
5. MISCELLANEOUS.
5.1 All references in the Loan Agreement and in any other
Loan Document to the "Loan Agreement," "this Agreement", the "Note"
and/or "Loan Documents" (or words of similar import) shall be deemed a
reference to the Loan Agreement as amended by this Amendment and/or
shall include the Note to be executed by the Borrowers pursuant to
Section 3.1.1 hereof, as the case may be.
5.2 Except as expressly modified, amended or restated by this
Amendment and the Amended and Restated Note, all of the terms and
conditions of the Loan Agreement, as so modified or amended and the
additional Loan Documents shall remain in full force and effect.
5.3 This Amendment shall be subject to, construed in
accordance with and governed by the laws of the State of
California without giving effect to such state's conflicts of law
provisions.
5.4 This Amendment may be executed in one or more
counterparts, each of which shall constitute an original
Amendment, but all of which together shall constitute one and the
same instrument.
5.5 Section headings are included for the sake of convenience
only and shall not affect the interpretation of any provision of
this Amendment.
5.6 This Amendment and the other documents referred to herein
are intended by the Borrowers and the Bank to be the final,
complete and exclusive expression of the agreement between them.
This Amendment supersedes any and all prior oral or written
agreements relating to the subject matter hereof.
5.7 Whether or not the transactions contemplated herein shall
be consummated, the Borrowers jointly and severally agree to pay
all costs incurred by or on behalf of the Bank in connection with
the transactions hereby contemplated (including, without
limitation,
8
<PAGE>
the performance of any due diligence by the Bank) and the preparation,
negotiation, execution, delivery, waiver, Modification and/or
administration of this Amendment, the Note and any other documentation
contemplated hereby or thereby, the making of additional Advances
and/or the enforcement or protection of the rights of the Bank in
connection therewith, including, without limitation, any internally
allocated audit costs and the fees and disbursements of Mitchell,
Silberberg & Knupp LLP, counsel to the Bank.
9
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Amendment as
of the date first above written.
IMPERIAL BANK,
a California chartered bank
By:________________________________
Its:_______________________________
UNAPIX ENTERTAINMENT, INC.,
a Delaware corporation
By:________________________________
Its:_______________________________
MIRAMAR IMAGES, INC.,
a Washington corporation
By:________________________________
Its:_______________________________
S-1
<PAGE>
S-2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in (i) the Post-Effective
Amendment No. 2 on Form S-3 to the Registration Statement on Form SB-2, File No.
33-61798, (ii) the Registration Statement on Form S-3, File No. 33-83186, (iii)
the Registration Statement on Form S-8, File No. 33-86080, (iv) the Registration
Statement on Form S-3, File No. 33-80019, and (v) the Registration Statement on
Form S-3, File No. 333-29635 of our report dated March 27, 1998 on the
consolidated financial statements of Unapix Entertainment, Inc. and subsidiaries
included in its Annual Report on Form 10-KSB for the year ended December 31,
1997, and to the use of our name, and the statements with respect to us, under
the heading "Experts" in the related Prospectuses.
/s/ Richard A. Eisner & Company, LLP
New York, New York
April 14, 1998
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<RECEIVABLES> 15965
<ALLOWANCES> 1610
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<TOTAL-LIABILITY-AND-EQUITY> 47071
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<TOTAL-REVENUES> 32152
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