<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
/X/ Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] For fiscal year ended December 31, 1997
-----------------
or
/ / Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the transition period
to
------------------------------- -------------------
Commission File No. 1-11976
Unapix Entertainment, Inc.
-------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 95-4404537
-------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
200 Madison Avenue
New York, NY 10016
- ---------------------------------------- -----
(Address of Principal Executive Offices) (zip code)
(212) 252-7600
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- -------------------
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 (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No
--- ---
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. $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 were a total of 6,046,211 shares of the registrant's
common stock outstanding
<PAGE>
Documents Incorporated by Reference:
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.
Page 2 of 30
<PAGE>
EXPLANATORY NOTE
----------------
Unapix Entertainment, Inc., a Delaware corporation, hereby amends its
Annual Report on Form 10-KSB for the year ended December 31, 1997 to include the
information required by Items 9, 10, 11 and 12 of Part III.
Page 3 of 30
<PAGE>
PART III
--------
Item 9. DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The executive officers and directors of the Company are listed in the
table below and brief summaries of their business experience and certain other
information with respect to them are set forth thereafter.
<TABLE>
<CAPTION>
DIRECTOR TERM AS
OF THE DIRECTOR
COMPANY EXPIRES
NAME AGE POSITION SINCE IN
- ---- --- -------- ----- --
<S> <C> <C> <C> <C>
Herbert M. Pearlman 65 Chairman of the Board of 1990 1999
Directors
David M. Fox 49 President, Chief 1992 1998
Executive Officer and
Director
David S. Lawi 62 Chairman of Executive 1990 1999
Committee, Treasurer,
Secretary and Director
Scott Hanock 39 Senior Vice President, 1990 1998
Managing Director of
International Sales and
Marketing and Director
Robert Baruc 46 Executive Vice 1995 1998
President, President of A
Pix Entertainment and
Director
Martin D. Payson 62 Director 1996 1999
Walter M. Craig, Jr. 44 Director 1993 2000
Lawrence Bishop 52 Director 1993 2000
Daniel T. Murphy 59 Vice President and Chief -- -
Financial Officer
</TABLE>
Page 4 of 30
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR TERM AS
OF THE DIRECTOR
COMPANY EXPIRES
NAME AGE POSITION SINCE IN
- ---- --- -------- ----- --
<S> <C> <C> <C> <C>
Michael R. Epps 40 General Counsel -- --
Steven P. Low 37 Chief Accounting Officer -- --
Robert G. Miller 37 Vice President, -- --
Executive Vice President
of the North American
Division
Timothy Smith 45 Vice President, -- --
Executive Vice President
of Production of the
North American Division
</TABLE>
Herbert M. Pearlman. Mr. Pearlman has been the Company's Chairman of the Board
of Directors since July 1990. Mr. Pearlman was a co-founder of Telepictures
Corporation ("Telepictures"), a public company which, during Mr. Pearlman's
tenure, was engaged in marketing and distributing theatrical films and
television programs and which is now part of Time Warner Inc. From 1978 until
February 1986, Mr. Pearlman served in various senior level capacities with
Telepictures including as Chairman of the Board, Chairman of the Executive
Committee and as a Director. He is a co-founder of Seitel, Inc. ("Seitel"), a
New York Stock Exchange listed company engaged in the development and marketing
of a proprietary seismic data library to the oil and gas industry and has been
its Chairman of the Board since 1987. In addition, Mr. Pearlman is an officer
and a director of the following public companies: InterSystems, Inc.
("InterSystems"), an American Stock Exchange listed company, which is engaged in
providing custom compounding services for resin producers and the design,
manufacture, sale and leasing of equipment for sampling, conveying, elevating,
weighing and cleaning a wide variety of products; Helm Capital Group, Inc.
("Helm"), an American Stock Exchange listed company, which finances, initiates,
develops, acquires and oversees the management of various business enterprises;
and Teletrak Advanced Technology Systems, Inc., which is currently inactive
("Teletrak").
David M. Fox. Mr. Fox has been the Company's President, Chief Executive Officer
and a Director since March 1992. From June 1991 until joining the Company, he
was the Chief Executive Officer of David Fox and Associates, a company which he
founded and which provided international programming consulting services and
acted as United States sales agent for producers worldwide. From 1981 until June
1991, Mr. Fox served as Chief Executive Officer and head of Domestic Syndication
and Cable Television for Fox\Lorber Associates, Inc. ("Fox/Lorber"), a
corporation
Page 5 of 30
<PAGE>
which he co-founded and which engaged in the worldwide distribution of feature
films, home video and television programs. From March 1990 to June 1991, Mr. Fox
also served as a director of GAGA Communications, a Japanese company engaged in
home video and theatrical distribution. Prior to founding Fox/Lorber, Mr. Fox
was Eastern and Midwestern Sales Manager for D.L. Taffner Ltd., syndicator of,
among other programs, "Three's Company" and "The Benny Hill Show."
David S. Lawi. Mr. Lawi has been a Director of the Company since June 1990. He
has been the Company's Treasurer and Secretary since January 1993 and Chairman
of the Company's Executive Committee since December 1993. Mr. Lawi was a
Director and Chairman of the Finance Committee of Telepictures from May 1979
until February 1986. He is a director of Seitel and has been the Chairman of its
Executive Committee since March 1987. Mr. Lawi is also a director of
Intersystems and has been Chairman of its Executive Committee since October 1986
and its Secretary since March 1984. In addition, Mr. Lawi is an officer and a
director of Helm and Teletrak.
Scott Hanock. Mr. Hanock has been Managing Director of International Sales and
Marketing of the Company since 1986. He also serves as Senior Vice President of
the Company and has been a Director of the Company since 1990. Mr. Hanock was
one of the original co-founders of the Company. Prior to forming the Company in
1986, from 1983-1986, Mr. Hanock served as Director of Worldwide Sales for Tatum
Communications Inc., a Hollywood based company which specialized in sports
television production and international distribution, most well known for the
North American Pro-Ski tour and various other ESPN and Prime Network series.
Prior to 1983, Mr. Hanock's business activities in the television industry were
diversified in the areas of program consulting and international sales for
several production houses.
Robert Baruc. Mr. Baruc has been a Director of the Company since November 1995.
He has been an Executive Vice President of the Company since April 1994. He has
been President and Chief Executive Officer of A Pix Entertainment since August
1993. From December 1992 to August 1993, Mr. Baruc was President of Triboro
Entertainment Group, a company engaged principally in home video distribution.
From January 1991 to December 1992, Mr. Baruc primarily acted as a film and
marketing consultant. Mr. Baruc was President of Academy Entertainment, a home
video distribution company, from June 1986 to January 1991. Mr. Baruc is
currently a director of General Bearing Corporation.
Martin D. Payson. Martin D. Payson has been a Director of the Company since June
1996. From January 1990, when Time Inc., merged with Warner Communications, Inc.
("Warner"), until December 1992, Mr. Payson was Vice Chairman of the Board of
Time Warner Inc. Prior to 1990 Mr. Payson held the position of office of the
President and General Counsel of Warner. Since departing Time Warner Inc. Mr.
Payson has been engaged in numerous business and investment activities. He is
currently Chairman of Latin Communications Group, Inc., a privately-held Spanish
language media company, a position he has held since July 1997. He is also
currently a director of a number of corporations, including the following which
are publicly held: Delta Financial Corporation (a New York Stock Exchange listed
company); Panavision Inc. (a New York Stock Exchange listed company); and
Meridian Sports Incorporated . In addition, Mr. Payson is actively
Page 6 of 30
<PAGE>
involved in a number of philanthropic organizations including holding the
following positions: Chairman of Maimonides Medical Center; a Trustee of Howard
University; a Director of The Jewish Theological Seminary; a Trustee of New York
University and NYU Law Center Foundation; Vice Chairman Board of Administrators
of Tulane University; Director of the Jewish Museum of New York City; and a
Director of NAACP Legal Defense and Educational Fund.
Walter M. Craig, Jr. Mr. Craig was elected a Director of the Company in April
1993. He has been the President of The Mezzanine Financial Fund, L.P.
("Mezzanine"), an asset-based lender, since January 1991. Mezzanine provides
senior and subordinated debt financing to small and middle market enterprises.
He has been President of Core Capital, Inc., a company that factors accounts
receivable, since February 1993. Since August 1992, Mr. Craig has served as
Executive Vice President and Chief Operating Officer of Helm. Since 1987, he has
been a Director of Seitel. Since 1993 he has been a director of Helm and
InterSystems.
Lawrence Bishop. Mr. Bishop was elected a Director of the Company in November
1993. Mr. Bishop has been an Executive Vice President of Gray, Seifert & Co.,
Inc., an investment banking firm, since 1987, and currently is a Director of
Synergistics, Inc and the Four M. Corporation.
Daniel T. Murphy. Mr. Murphy has been Chief Financial Officer of the Company
since September 1995. He was an Executive Vice President and Chief Financial
Officer of InterSystems from July 1985 to September 1997. He has been a director
of InterSystems since 1986. Since May 1984, he has been a Vice President and the
Chief Financial Officer of Helm. In 1988, he was elected a director of Teletrak.
Michael R. Epps. Mr. Epps has been the General Counsel of the Company since
September 1995. From July 1992 until July 1995, he was General Counsel of Helm.
He was Associate General Counsel of Helm from September 1990 until July 1992.
Prior to joining Helm, Mr. Epps was engaged in the private practice of law.
Steven P. Low. Mr. Low has been the principal accounting officer of the Company
since May 1993. Prior to that time, and since September 1982, he was employed by
the national accounting firm of Ernst & Young, most recently as a senior
manager.
Robert Miller. Mr. Miller has been a Vice President of the Company since
September 1996 and he has been an Executive Vice President of the Company's
North American Division since February 1996. From July 1995 to February 1996,
Mr. Miller was Vice President of International Television Distribution for the
National Football League. He was Vice President of Showtime Program Enterprises,
which is engaged in sales of all original productions of the Showtime Channel,
from February 1993 to July 1995. From October 1991 to February 1993, he was
Director of Event Sales and Management for Golden Gate Productions.
Timothy Smith. Mr. Smith has been a Vice President of the Company since
September 1996 and he has been Executive Vice President of Production of the
Company's North American Division
Page 7 of 30
<PAGE>
since February 1996. From May 1995 to February 1996, he was General Manager of
Programming and head of New Media for IVN Communications, Inc., a company
engaged in producing and distributing tapes and home video and cable television
programming. Mr. Smith was a producer of The MacNeil/Lehrer Newshour from 1983
to 1995.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of Forms 3, 4 and 5, and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) during, and with respect to,
its most recent fiscal year, and written representations furnished to the
Company, it appears that all such reports required to be filed pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended, were filed on a
timely basis, except for the following: Walter M. Craig, Jr., a director of the
Company, failed to timely report the transfer of 7,515 shares of the Company's
common stock effectuated in November 1997; Timothy Smith, an executive officer
of the Company, failed to timely report the disposition of 1,000 shares of the
Company's common stock in April 1997; The High View Fund, L.P., High View
Capital Corporation , High View Asset Management Corporation, The High View Fund
II, L.P., The High View Fund, Ernest P. Werlin and Peter J. Powers, who because
of their relationship to each other could be deemed part of a group owning more
than ten percent of the Company's common stock, failed to timely report the
disposition of an aggregate of 24,000 shares of the Company's common stock
effectuated in December 1997.
Page 8 of 30
<PAGE>
Item 10. EXECUTIVE COMPENSATION
Set forth below is certain information with respect to cash and noncash
compensation awarded, paid or accrued by the Company to its Chief Executive
Officer and its four other most highly paid executive officers, who were
executive officers as of December 31, 1997 (collectively, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Name Compensation All Other
and Principal Compensation
Position Year
Salary Bonus Other Shares of
Annual Common
Compen- Stock
sation Underlying
Options
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Pearlman 1997 $105,750 $126,250 --- 12,000 $50,577 (1)
Chairman of the 1996 25,750 47,600 --- --- 50,577 (1)
Board
1995 25,000 52,615 --- ---
David M. Fox 1997 225,000 $75,000 --- 12,000 ---
President, CEO 1996 200,000 25,000 --- --- ---
1995 173,954 21,697 --- --- ---
Scott Hanock 1997 190,000 71,250 --- 12,000 ---
Managing Director 1996 160,000 12,000 --- --- ---
1995 145,200 30,437 --- --- $10,000 (2)
Robert Baruc 1997 220,000 56,250 --- 12,000 ---
Executive Vice 1996 195,000 7,000 --- --- ---
President
1995 149,040 24,000 --- --- ---
Robert Miller 1997 140,080 27,700 --- 41,002 ---
Vice President
1996 118,000 15,750 --- 95,250 ---
</TABLE>
Page 9 of 30
<PAGE>
(1) Consists of life insurance premiums.
(2) Pursuant to Mr. Hanock's employment agreement the amount set forth was
deposited into a Rabbi Trust account for Mr. Hanock's benefit. The
amount was payable to Mr. Hanock (or his beneficiary) out of such trust
over a five-year period commencing on the earlier of his death or upon
his reaching the age of 65 years. The amounts deposited were calculated
based upon pre-tax profits for 1994 and 1995. During 1996 all amounts
deposited in the Rabbi Trust account were disbursed to Mr. Hanock.
Commencing with such year, the Company is no longer obligated to
deposit any funds into a Rabbi Trust account for Mr. Hanock's benefit.
Stock Options
The following two tables provide information on stock option grants
made to the Named Executive Officers in 1997, options exercised during 1997, and
options outstanding on December 31, 1997.
Stock Options Grants in 1997
<TABLE>
<CAPTION>
Number of Percent of total
securities options granted
underlying options to employees Exercise price
Name granted in 1997 per share Expiration Date
<S> <C> <C> <C> <C>
Herbert M. 12,000 (1) 1.9% $4.50 3/31/2007
Pearlman
David M. Fox 12,000 (1) 1.9% $4.50 3/31/2007
Scott Hanock 12,000 (1) 1.9% $4.50 3/31/2007
Robert Baruc 12,000 (1) 1.9% $4.50 3/31/2007
Robert Miller 12,000 (1) 1.9% $4.50 3/31/2007
Robert Miller 33,500(2)(3) 4.6% $4.44 3/31/2003
</TABLE>
1 These options were not exercisable until October 1, 2006 unless the Company
had pre-tax profits of at least $1,500,000 during 1997. If pre-tax earnings for
1997 equalled or exceeded $3,000,000, then all of the options would have become
exercisable. If the Company's pre-tax earnings for 1997 were between $1,500,000
and $3,000,000, then the options were to become exercisable proportionately,
based upon the extent pre-tax earnings exceeded the $1,500,000 threshold. The
Company's pre-tax profit for 1997 was $2,293,000. Accordingly, 6,344 of the
options are currently exercisable.
Page 10 of 30
<PAGE>
2 These options became exercisable on the date of grant.
3 These options were issued in April 1998 but were earned, pursuant to
Mr. Miller's employment contract, based upon the distribution fees and
commissions of the Company's North American Division accrued for 1997.
.
Aggregated Option Exercises In Last Fiscal
Year And Fiscal Year-End Option Values
The following table sets forth aggregated option exercises in the last
year, the number of unexercised options and fiscal year-end values of
in-the-money options for the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Unexer- Value of Unexercised
Number of cised Options at In-the Money Options at
Shares Fiscal Year-End Fiscal Year-End (1)
Acquired --------------- -------------------
on Value Unexer- Unexer-
Name Exercise Realized Exercisable cisable Exercisable cisable
- ---- -------- -------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Herbert M. -- --- 245,203 118,548 $272,299 $128,697
Pearlman
David M. Fox --- --- 253,474 90,312 449,873 96,509
Scott Hanock 29,539 $91,971 73,719 43,282 76,808 42,894
(2)
Robert Baruc --- --- 58,844 5,656 59,850 ---
Robert Miller --- --- 101,594 (3) 5,656 --- ---
</TABLE>
(1) Represents the difference between $4.00, the closing sales price of the
Company's Common Stock on December 31, 1997, as reported by the
American Stock Exchange, and the exercise price of the option,
multiplied by the number of options for each respective person named.
(2) Represents the difference between (i) $4.4375, the closing sales price
of the Company's Common Stock on May 29, 1997, the date Mr. Hanock
exercised his options, multiplied by the number of shares acquired upon
exercise and (ii) the aggregate price paid for the shares upon exercise
of the options.
Page 11 of 30
<PAGE>
(3) Does not include 33,500 options that were issued to Mr. Miller in 1998
based upon the distribution fees and commissions of the Company's North
American Division that were accrued for 1997.
Compensation of Directors
- -------------------------
The Company reimburses travel and other expenses incurred by its
directors in connection with attending Board of Director's meetings. Mr. Payson,
who became a director of the Company in 1996, was granted options to purchase
50,000 shares of Common Stock in connection with his serving as a director. The
options, which were granted in June 1996, expire on June 5, 2006 and have an
exercise price of $4.00 per share, which was the market value of the Company's
Common Stock on the date the Board authorized the grant. Options to purchase
33,333 shares are currently exercisable. Options to purchase 16,667 shares will
become exercisable on June 6, 1998, subject to Mr. Payson's continuing to serve
as a director. Other than Mr. Payson, directors have not been compensated for
services they render in their capacity as directors.
Employment Agreements
Employment Contracts with Named Executive Officers
- --------------------------------------------------
Herbert M. Pearlman is employed under an agreement expiring June 23,
1998. Pursuant to his agreement, Mr. Pearlman is required to devote such amount
of time as he, in his discretion, deems necessary for performance of his duties.
Mr. Pearlman's employment agreement provides for an annual bonus equal to five
percent of the Company's annual pre-tax profits and a salary equal to $26,000,
$53,000, $79,312 and $105,750 if the Company's pre-tax profits exceed $650,000,
$1,350,000, $1,750,000 and $2,000,000, respectively.
David Fox is employed under an agreement expiring December 31, 2000,
pursuant to which he has been and shall be paid an annual salary of $200,000,
$225,000 and $250,000 for 1996, 1997 and 1998, respectively, with a further
increase in 1999 and 2000 based on the consumer price index. Mr. Fox was also
entitled to receive an annual bonus equal to three percent of the Company's
pre-tax profits in excess of $650,000 for 1996 and a bonus equal to four percent
of pre-tax profits in excess of $650,000 for 1997. He is entitled to receive a
bonus equal to four percent of the Company's pre-tax profits for each subsequent
year of the agreement. However, after pre-tax profits have exceeded $7,500,000
with respect to any particular year, Mr. Fox has agreed that the remaining
amount of his bonus, if any, for that year will be calculated based upon two
percent of the Company's remaining pre-tax profits. For 1996 and 1997, Mr. Fox
was entitled to be paid a minimum annual bonus of $25,000.
Scott Hanock is employed under a contract expiring December 31, 2000,
under which Mr. Hanock has been and shall be paid an annual salary of $160,000,
$190,000, $200,000 and $220,000 for 1996, 1997, 1998 and 1999 respectively, with
a further increase in 2000 based on the consumer
Page 12 of 30
<PAGE>
price index. Mr. Hanock was entitled to receive an annual bonus equal to 2% of
the Company's annual pre-tax profits in excess of $650,000 for 1996. For 1997,
Mr. Hanock was entitled to receive an annual bonus equal to the greater of (i)
3% of the Company's pre-tax profits in excess of $650,000 for such year or (ii)
4% of the pre-tax profits of the Unapix International Division ("UID") for such
year. For 1998 and each subsequent year, the Company will pay Mr. Hanock an
annual bonus equal to the greater of (i) 3% of the Company's pre-tax profits or
(ii) 4% of UID's pre-tax profits. However, after pre-tax profits have exceeded
$7,500,000 with respect to any particular year, Mr. Hanock has agreed that the
remaining amount of his bonus, if any, for that year will be based upon the
greater of (i) 1.5% of the Company's remaining pre-tax profits or (ii) 2% of
UID's remaining pre-tax profits. The Company also has agreed to pay Mr. Hanock
an additional bonus, for each year of his employment period, equal to 1% of the
amount by which sales of UID for each such year exceeded its sales for the prior
year. Additionally, he is entitled to receive a bonus equal to one-half percent
of all Company sales in the United States of products sold or acquired as a
result of the efforts of a UID employee. In no event will the amount of Mr.
Hanock's bonus with respect to any particular year be less than 75% of Mr. Fox's
bonus for that year.
Robert Baruc, an Executive Vice President of the Company and the
President and Chief Executive Officer of A Pix, is currently employed under an
agreement having a term expiring on December 31, 2000, which is automatically
renewed for successive four-year periods unless the Company or Mr. Baruc elects
to terminate. Under his Agreement, Mr. Baruc has been and is entitled to be paid
an annual salary of $195,000, $220,000 and $245,000 for 1996, 1997 and 1998,
respectively, with a further increase in 1999 and 2000 based upon the consumer
price index. Mr. Baruc was also entitled to receive an annual bonus equal to
2.25% of the Company's pre-tax profits in excess of $650,000 for 1996 and a
bonus equal to 3% of pre-tax profits in excess of $650,000 for 1997. He is
entitled to receive a bonus equal to 3% of the Company's pre-tax profits for
each subsequent year of the agreement. Similar to Messrs. Fox and Hanock, Mr.
Baruc has agreed that after pre-tax profits have exceeded $7,500,000 with
respect to any particular year, the remaining amount of his bonus, if any, for
that year will be based upon 1.5% of the Company's remaining pre-tax profits.
For each fiscal year during his employment term that A Pix's sales for such year
have increased by more than 25% of its sales for the immediately preceding year,
Mr. Baruc is entitled to receive an additional bonus equal to 1% of such excess,
so long as the Company's pre-tax profits are at least 5% of its sales. If the
Company's pre-tax profit is less than 5% of its sales for the year, then Mr.
Baruc shall be entitled to a bonus that is proportionately reduced to the extent
pre-tax profit is under the 5% threshold but still exceeds 2.5% of the Company's
sales. Mr. Baruc will not receive any such bonus if the Company's pre-tax profit
is not at least 2.5% of its sales for the year. In no event will such sales
bonus exceed $100,000 with respect to any particular year . Pursuant to his
employment agreement, Mr. Baruc received 52,500 employee common stock purchase
options, exercisable at $2.86 per share, all of which have vested. If any
options to purchase shares of the Company's common stock are granted to Mr. Fox
after January 1, 1996, Mr. Baruc is entitled to receive a grant of options equal
to 75% of the amount granted to Mr. Fox and having substantially identical
terms.
Page 13 of 30
<PAGE>
Robert Miller is employed under an agreement having a term expiring in
February 1999. Under the terms of the Agreement Mr. Miller was paid a salary at
an annual rate of $136,000 for 1996. Commencing January 1, 1997 and for each
year that he is employed, Mr. Miller's salary is to be increased based upon the
consumer price index (resulting in a salary of $140,080 for 1997 and a salary of
$144,000 for 1998). Under his agreement Mr. Miller is entitled to receive a
bonus equal to 2.5% of all sales commissions or distribution fees received by
the Company's North American Division ("NAD Fees") plus 2.5% of all NAD Fees
generated from sales with respect to which he was the principal salesperson. Mr.
Miller is paid an advance of such bonus of $1,500 per month. In connection with
his employment agreement, Mr. Miller was granted 78,750 common stock purchase
options having an exercise price of $4.29 per share, all of which are currently
exercisable. In addition, the Company has committed to issue an additional
aggregate amount of 75,000 common stock purchase options to Mr. Miller subject
to the North American Division's attaining certain levels of NAD Fees for the
years 1996, 1997 and 1998. The exercise price of each such additional option
will be equal to the then current market price of the Company's common stock on
the date of such option's issuance and will have a term of five years. Mr.
Miller was issued 16,500 and 33,500 such options in March 1997 and 1998 based
upon the NAD Fees for 1996 and 1997, respectively.
Page 14 of 30
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of April 7, 1998, information regarding the
stock holdings of each person known to the Company to own beneficially more than
5% of any class of outstanding voting securities of the Company.
<TABLE>
<CAPTION>
Title Amount and Nature Percent
of Name and Address of of Beneficial of
Class Beneficial Owner Ownership (1) Class
----- ---------------- ------------- -----
<S> <C> <C> <C>
Common Stock Herbert M. Pearlman 1,324,880 (2) 19.7%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
Common Stock The High View Fund, L.P. 767,534(3)(4) 11.3%
805 Third Avenue
New York, NY 10022.
Common Stock The High View Fund 322,223(4)(5) 5.0%
c/o Mees Pierson Fund Services
(Bahamas) Limited
Windermere House
404 East Bay Street
P.O. Box SS 6238
Nassau, The Bahamas
Common Stock Legg Mason, Inc. 891,979 (6) 12.9%
c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
Common Stock Strategic Growth International, 570,000 (7) 8.6%
Inc.
111 Great Neck Road
Suite 606
Great Neck, New York 11021-
5402
Common Stock David S. Lawi 465,831 (8) 7.4%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
</TABLE>
Page 15 of 30
<PAGE>
<TABLE>
<CAPTION>
Title Amount and Nature Percent
of Name and Address of of Beneficial of
Class Beneficial Owner Ownership (1) Class
----- ---------------- ------------- -----
<S> <C> <C> <C>
Common Stock AIM Overseas N.V. 315,000 5.2%
Luxembourg Information
Systems
31, BD Prince Felix
L-1513 Luxembourg
Common Stock David M. Fox 449,304 (9) 7.0%
c/o Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Common Stock Robert Baruc 346,343 (10) 5.6%
c/o Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Preferred Stock* Legg Mason, Inc. 99,996 (11) 19.8%
c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
Preferred Stock* Herbert M. Pearlman 79,999 (12) 14.8%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
Preferred Stock* Tradewind Fund 50,000 9.8%
c/o Harbor Capital Management
2701 Summer Street
Suite 200
Stanford, Connecticut
Preferred Stock* Martin & Velia Bramante 38,334 7.6%
45 Peninsula Road
Belvedere, CA 94920
Preferred Stock* David S. Lawi 34,166 (13) 6.5%
c/o Unapix Entertainment, Inc.
93 Mason Street
Greenwich, Connecticut 06830
</TABLE>
Page 16 of 30
<PAGE>
* Shares set forth are shares of the Company's Series A 8% Cumulative
Convertible Preferred Stock ("Preferred Stock A"). Each share is
convertible into 1.05 shares of Common Stock. Holders of Preferred
Stock A, voting together with holders of Common Stock and not as a
separate class, are entitled to one vote with respect to each share of
Preferred Stock A. Each share of Preferred Stock A has a liquidation
preference of $3.00 plus accumulated and unpaid dividends and is
entitled to semi-annual dividends of $.12.
(1) Except as otherwise indicated, each named holder has, to the
best of the Company's knowledge, sole voting and investment
power with respect to the shares indicated.
(2) Includes the following shares of Common Stock: 47,248 shares
that are issuable upon conversion of Preferred Stock A; 97,999
shares that are issuable upon exercise of Class B redeemable
common stock purchase warrants ("Class B Warrants"), each
having an exercise price of $4.28 per share and expiring on
June 22, 1998; 202,109 shares that are issuable upon exercise
of options having an exercise price of $2.86 per share and
that expire in December 2003 ("Earnings Options"); 76,999
shares issuable upon exercise of warrants having an exercise
price of $19.05 per share and that expire in December 2000
("$19.05 Warrants"); 76,999 shares issuable upon exercise of
warrants having an exercise price of $28.57 per share and that
also expire in December 2000 ("$28.57 Warrants"); 36,750
shares which are issuable upon exercise of options to purchase
Preferred Stock A ("Preferred Stock Options") and the
subsequent conversion of such shares of Preferred Stock A
(These options have an exercise price of $3.00 per share of
Preferred Stock A and expire in January 1999); 6,344 shares
that are issuable upon exercise of options having an exercise
price of $4.50 per share and expiring March 2007 ("March 2007
Options"); 84,211 shares issuable upon conversion of $400,000
principal amount of notes due in June 2003 (the "June 2003
Notes"); and 50,000 shares issuable upon exercise of common
stock purchase warrants that are issuable upon conversion of
the June 2003 Notes (the "June 2003 Warrants'), each such
warrant having an exercise price of $6.00 per share and
expiring June 2003. Also includes 1,000 shares owned by Mr.
Pearlman's wife as to which Mr. Pearlman disclaims beneficial
ownership.
(3) Consists of the following: 529,334 shares of Common Stock
issuable upon conversion of $2,382,000 principal amount of
notes due in June 2003; and 238,200 shares issuable upon
exercise of warrants, having an exercise price of $6.00 per
share, and expiring in June 2003 ("$6.00 Warrants").
(4) The sole general partner of The High View Fund, L.P. (the
"Partnership") is High View Capital Corporation ("HVCC"). The
investment manager of The High View Fund (the"Fund") is High
View Asset Management Corporation ("HVAM"). The sole holder of
voting stock of both HVCC and HVAM is Ernest P. Werlin. Mr.
Werlin is a director of HVCC and the sole director of HVAM.
Mr. Werlin is also an executive officer of each of HVCC and
HVAM. Peter J. Powers is a director and an executive officer
of HVCC and is an executive officer of HVAM. Ernest P. Werlin
individually beneficially owns a total of 75,556 shares of the
Company's
Page 17 of 30
<PAGE>
Common Stock (which figure consists of 55,556 shares of Common
Stock issuable upon conversion of a $250,000 note due in 2003
and 25,000 shares issuable upon exercise of $6.00 Warrants).
Peter Powers individually owns a total of 10,000 shares of
Common Stock. In addition, HVCC is (i) the general partner of
The High View Fund II, L.P. ("Partnership II"), the beneficial
owner of 118,578 shares of the Company's Common Stock
(consisting of 81,778 shares issuable upon conversion of
$368,000 principal amount of notes due in June 2003, and
36,800 shares issuable upon exercise of $6.00 Warrants) and
(ii) the investment manager of The High View SSFI Fund, LDC.
(the "SSFI Fund"), the beneficial owner of 83,882 shares of
Common Stock (consisting of 52,632 shares issuable upon
conversion of $250,000 principal amount of notes due in June
2003, and 31,250 shares issuable upon exercise of $6.00
Warrants). Because of their relationship to the Partnership
and the Fund, HVCC, HVAM, Partnership II, the SSFI Fund and
Messrs. Werlin and Powers could be deemed to have beneficial
ownership of the shares owned by such entities, or could be
deemed to constitute a group together with such entities. If
Messrs. Werlin and Powers, HVCC, HVAM, the Partnership,
Partnership II, SSFI Fund and the Fund were deemed to
constitute a group, such a group would beneficially own an
aggregate of 1,377,773 shares of Common Stock constituting
beneficial ownership of 25.4% of the Company's Common Stock.
Each of the Partnership, the Fund, Partnership II, the SSFI
Fund, HVCC, HVAM and Messrs. Werlin and Powers disclaim
beneficial ownership of the shares owned by any other person
or entity and disclaims membership in a group.
(5) Consists of the following: 222,223 shares of Common Stock
issuable upon conversion of $1,000,000 of notes due in 2003;
and 100,000 shares issuable upon exercise of $6.00 Warrants.
(6) Legg Mason, Inc. is a parent holding company of Gray, Seifert
& Co., Inc. ("Gray Seifert"). All such shares are owned by
customers of Gray Seifert, however, through agreements with
such customers, Gray Seifert has discretionary power to vote
and dispose of all such shares. The figure includes the
following shares of Common Stock: 5,250 shares of Common Stock
issuable upon exercise of Class B Warrants; 104,995 shares of
Common Stock issuable upon conversion of Preferred Stock A;
410,054 shares of Common Stock issuable upon exercise of
warrants, each of which is exercisable into a share of Common
Stock at a price of $3.70 per share and expires on December
31, 2001; 222,222 shares of Common Stock issuable upon
conversion of an aggregate principal amount of $1, 000, 000 of
notes due in 2003; 100,000 shares of Common Stock issuable
upon exercise of $6.00 Warrants; 26,316 shares of Common Stock
issuable upon conversion of $125,000 principal amount of June
2003 Notes; and 15,625 shares issuable upon exercise of June
2003 Warrants that are issuable upon conversion of such June
2003 Notes.
(7) Consists of the following: (i) 300,000 shares that are
issuable upon exercise of options having an exercise price of
$3.875 per share and expiring in June 2001; and (ii) 270,000
shares that are issuable upon exercise of warrants having an
exercise
Page 18 of 30
<PAGE>
price of $4.50 per share and expiring in December 2001.
Richard Cooper is the Chairman of Strategic Growth
International, Inc. ("Strategic Growth") and owns 50% of its
common stock. Mr. Cooper individually owns 11,000 shares of
the Company's Common Stock. Because of his relationship to
Strategic Growth he may be deemed to own, in addition to such
11,000 shares, the shares beneficially owned by Strategic
Growth. Accordingly, he may be deemed to own 581,000 shares of
Common Stock constituting beneficial ownership of 8.8% of the
Company's Common Stock. Stanley Altschuler is the President of
Strategic Growth and owns 50% of its common stock. Mr.
Altschuler individually owns 39,500 Class B Warrants. Because
of Mr. Altschuler's relationship to Strategic Growth he may be
deemed to own, in addition to such 39,500 warrants, the shares
beneficially owned by Strategic Growth. Accordingly, he may be
deemed to own 609,500 shares of Common Stock constituting
beneficial ownership of 9.2% of the Company's Common Stock.
(8) Includes the following shares of Common Stock: 17,500 shares
that are issuable upon conversion of Preferred Stock A; 41,126
shares that are issuable upon exercise of Class B Warrants;
101,056 shares that are issuable upon exercise of Earnings
Options; 12,251 shares that are issuable upon exercise of
$19.05 Warrants; 12,251 shares that are issuable upon exercise
of $28.57 Warrants; 18,375 shares that are issuable upon
exercise of Preferred Stock Options and the subsequent
conversion of shares underlying such options; and 6,344 shares
that are issuable upon exercise of March 2007 Options.
(9) Includes the following shares of Common Stock: 95,537 shares
issuable upon exercise of options having an exercise price of
$1.10 per share and expiring six months after the end of Mr.
Fox's employment term; 26,250 shares that are issuable upon
exercise of Class B Warrants; 151,593 shares issuable upon
exercise of Earnings Options; 24,937 shares that are issuable
upon exercise of $19.05 Warrants; 24,937 shares that are
issuable upon exercise of $28.57 Warrants; 17,499 shares
issuable upon conversion of Preferred Stock A and 6,344 shares
that are issuable upon exercise of March 2007 Options. Also
includes the following as to which Mr. Fox disclaims
beneficial ownership: 10,237 shares owned by Mr. Fox's wife;
1,312 shares that are issuable upon exercise of $19.05
Warrants and 1,312 shares that are issuable upon exercise of
$28.57 Warrants that are also owned by Mr. Fox's wife.
(10) Includes the following shares of Common Stock: 8,749 shares
issuable upon conversion of Preferred Stock A; 52,500 shares
issuable upon exercise of options having an exercise price of
$2.86 per share and expiring August 2003; 26,250 shares that
are issuable upon exercise of $19.05 Warrants; 26,250 shares
that are issuable upon exercise of $28.57 Warrants; and 6,344
shares that are issuable upon exercise of March 2007 Options.
(11) Consists of shares of Preferred Stock A that are owned by
customers of Gray Seifert; however, through agreements with
such customers, Gray Seifert has discretionary
Page 19 of 30
<PAGE>
power to vote and dispose of all such shares. Legg Mason,
Inc. is a parent holding company of Gray, Seifert & Co. Inc.
(12) Includes 35,000 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(13) Includes 17,500 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 7, 1998, information
concerning the beneficial ownership of each class of equity securities by each
director, nominee, Named Executive Officer (as defined in "Executive
Compensation"), and by all executive officers and directors as a group.
Shares and Percent of Common Stock or
Preferred Stock A - Owned Beneficially as
of April 7, 1998 (1)
-----------------------------------------
<TABLE>
<CAPTION>
Common Percent Preferred Percent
Name Stock of Class Stock (2) of Class
<S> <C> <C> <C> <C>
Herbert M. Pearlman 1,324,880 (3) 19.7 % 79,999 (4) 14.8%
David S. Lawi 465,831 (5) 7.4 % 34,166 (6) 6.5%
David M. Fox 449,304 (7) 7.0 % 16,666 3.3%
Scott Hanock 248,342 (8) 4.0 % 8,333 1.6%
Robert Baruc 346,343 (9) 5.6 % 8,333 1.6%
Martin D. Payson 130,555 (10) 2.1% --- ---
Lawrence Bishop 251,823 (11) 4.0% --- ---
Walter M. Craig, Jr. 58,152 (12) 1.0% --- ---
Robert Miller 137,094 (13) 2.2% --- ---
Timothy Smith 75,678 (14) 1.2% --- ---
All directors and executive officers 3,716,587 (15) 44.7% 159,496 (16) 28.6%
as a group (13 persons)
</TABLE>
* Less than 1%
Page 20 of 30
<PAGE>
(1) Except as otherwise indicated, each named holder has, to the
best of the Company's knowledge, sole voting and investment
power with respect to the shares indicated.
(2) Shares set forth are shares of the Company's Series A 8%
Cumulative Convertible Preferred Stock ("Preferred Stock A").
Each share is convertible into 1.05 shares of Common Stock.
Holders of Preferred Stock A, voting together with holders of
Common Stock and not as a separate class, are entitled to one
vote with respect to each share of Preferred Stock A. Each
share of Preferred Stock A has a liquidation preference of
$3.00 plus accumulated and unpaid dividends and is entitled to
semi-annual dividends of $.12.
(3) Includes the following shares of Common Stock: 47,248 shares
that are issuable upon conversion of Preferred Stock A; 97,999
shares that are issuable upon exercise of Class B Warrants;
202,109 shares that are issuable upon exercise of Earnings
Options; 76,999 shares issuable upon exercise of $19.05
Warrants; 76,999 shares issuable upon exercise of $28.57
Warrants; 36,750 shares which are issuable upon exercise of
Preferred Stock Options and the subsequent conversion of the
underlying shares of Preferred Stock A; 6,344 shares that are
issuable upon exercise of March 2007 Options; 84,211 shares
issuable upon conversion of $400,000 principal amount of June
2003 Notes; and 50,000 shares issuable upon exercise of June
2003 Warrants. Also includes 1,000 shares owned by Mr.
Pearlman's wife as to which Mr. Pearlman disclaims beneficial
ownership.
(4) Includes 35,000 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(5) Includes the following shares of Common Stock: 17,500 shares
that are issuable upon conversion of Preferred Stock A; 41,126
shares that are issuable upon exercise of Class B Warrants;
101,056 shares that are issuable upon exercise of Earnings
Options; 12,251 shares that are issuable upon exercise of
$19.05 Warrants; 12,251 shares that are issuable upon exercise
of $28.57 Warrants; 18,375 shares that are issuable upon
exercise of Preferred Stock Options and the subsequent
conversion of shares underlying such options; and 6,344 shares
that are issuable upon exercise of March 2007 Options.
(6) Includes 17,500 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(7) Includes the following shares of Common Stock: 95,537 shares
issuable upon exercise of options having an exercise price of
$1.10 per share and expiring six months after the end of Mr.
Fox's employment term; 26,250 shares that are issuable upon
exercise of Class B Warrants; 151,593 shares issuable upon
exercise of Earnings Options; 24,937 shares that are issuable
upon exercise of $19.05 Warrants; 24,937 shares that are
issuable upon exercise of $28.57 Warrants; 17,499 shares
issuable upon conversion of Preferred Stock A and 6,344 shares
that are issuable
Page 21 of 30
<PAGE>
upon exercise of March 2007 Options. Also includes the
following as to which Mr. Fox disclaims beneficial ownership:
10,237 shares owned by Mr. Fox's wife ; 1,312 shares that are
issuable upon exercise of $19.05 Warrants and 1,312 shares
that are issuable upon exercise of $28.57 Warrants that are
also owned by Mr. Fox's wife.
(8) Includes the following shares of Common Stock: 8,749 shares
issuable upon conversion of Preferred Stock A; 67,375 shares
issuable upon exercise of Earnings Options; 26,250 shares that
are issuable upon exercise of $19.05 Warrants; 26,250 shares
that are issuable upon exercise of $28.57 Warrants; and 6,344
shares that are issuable upon exercise of March 2007 Options.
(9) Includes the following shares of Common Stock: 8,749 shares
issuable upon conversion of Preferred Stock A; 52,500 shares
issuable upon exercise of options having an exercise price of
$2.86 per share and expiring August 2003; 26,250 shares that
are issuable upon exercise of $19.05 Warrants; 26,250 shares
that are issuable upon exercise of $28.57 Warrants; and 6,344
shares that are issuable upon exercise of March 2007 Options.
(10) Consists of: 55,555 shares issuable upon conversion of a
$250,000 note due on June 30, 2003; 25,000 shares issuable
upon exercise of $6.00 Warrants; and 50,000 shares issuable
upon exercise of options, having an exercise price of $4.00
per share, and expiring on June 5, 2006.
(11) Includes 31,500 shares of Common Stock owned by a partnership
of which Mr. Bishop is a general partner (the "Partnership");
26,250 shares that are issuable upon exercise of $19.05
Warrants; 26,250 shares that are issuable upon exercise of
$28.57 Warrants; 15,750 shares of Common Stock issuable upon
exercise of Class B Warrants owned by the Partnership; 78,948
shares of Common Stock issuable upon conversion of $375,000
principal amount of June 2003 Notes owned by the Partnership;
and 46,875 shares issuable upon exercise of June 2003 Warrants
that are issuable upon conversion of the June 2003 Notes owned
by the Partnership.
(12) Includes 26,950 shares of Common Stock issuable upon exercise
of Earnings Options; 10,500 shares that are issuable upon
exercise of $19.05 Warrants; and 10,500 shares that are
issuable upon exercise of $28.57 Warrants.
(13) Includes 78,750 shares issuable upon exercise of options
having an exercise price of $4.29 per share and expiring in
June 2001; 16,500 shares issuable upon exercise of options
having an exercise price of $4.44 per share and expiring in
March 2002; 6,344 shares that are issuable upon exercise of
March 2007 Options; and 33,500 shares issuable upon exercise
of options having an exercise price of $4.44 per share and
expiring in March 2003.
(14) Includes 16,667 shares issuable upon exercise of options
having an exercise price of $4.00 per share and expiring in
June 2001; 10,000 shares that are issuable upon
Page 22 of 30
<PAGE>
exercise of options, having an exercise price of $4.50 per
share and expiring June 2002, 6,344 shares that are issuable
upon exercise of March 2007 Options; 25,000 shares that are
issuable upon exercise of options having an exercise price of
$4.81 per share and expiring in November 2002; and 16,667
shares issuable upon exercise of options having an exercise
price of $4.56 per share and expiring in January 2008.
(15) Includes all shares described in footnotes (3), (5), (7), (8),
(9), (10), (11), (12), (13) and (14) above as well as the
following shares of Common Stock: 12,598 shares issuable upon
conversion of shares of Preferred Stock A; 72,346 shares
issuable upon exercise of options having an exercise price of
$2.86 per share; 1,050 shares that are issuable upon exercise
of options having an exercise price of $5.00 per share; 1,575
shares that are issuable upon exercise of Class B Warrants;
36,750 shares that are issuable upon exercise of $19.05
Warrants; 36,750 shares that are issuable upon exercise of
$28.57 Warrants; 12,690 shares that are issuable upon exercise
of March 2007 Options; 10,000 options having an exercise price
of $4.56 per share expiring February 2007; and 3,333 shares
issuable upon exercise of options having an exercise price of
$4.56 per share and expiring January 2008.
(16) Includes all shares described in footnotes (4) and (6) above.
Page 23 of 30
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1993 the Company agreed to develop a joint venture for the
purpose of funding the acquisition by A Pix Entertainment of the distribution
rights to independently produced films. The initial investors were: Messrs.
Pearlman and Lawi, who are executive officers and directors of the Company; a
partnership of which Mr. Bishop, a director of the Company, is the general
partner (the "Bishop Partnership"); and an investor who is a customer of Gray,
Seifert & Co., Inc. ("Gray Seifert"), an investment advisory firm of which Mr.
Bishop is an Executive Vice President. In December 1993 and the first and second
quarters of 1994 Messrs. Pearlman and Lawi, the Bishop Partnership and the
customer of Gray Seifert invested $100,000, $50,000, $150,000 and $50,000,
respectively. In January 1996 and 1997, Mr. Pearlman invested approximately
another $53,000 and $47,600, respectively, and Mr. Lawi invested approximately
another $26,000 and $23,800, respectively. Such investments are sometimes
hereinafter referred to as "Film Acquisition Investments". Pending the execution
of formal agreements, the $500,400 was treated as demand loans. The oral
agreement with respect to the joint venture provided for the following: (i) a
term to be determined; (ii) the venture's recoupment of 110% of its investment
in any one film from the first dollars of gross receipts; (iii) the venture's
receipt of up to 20% of the net profits of each film in which it invests; (iv)
roll-over of the venture's receipts into other films; and (v) any shortfall of
investment in a film to be paid in shares of Common Stock of the Company issued
at market or, if market is less than $2.85 a share, at the lower of $2.85 or
125% of market. The initial investments were fully utilized to acquire film
distribution rights. Messrs. Pearlman and Lawi, the Bishop Partnership and the
Gray Seifert customer received 10,500, 5,250, 15,570 and 5,250 Class B Warrants,
respectively, in connection with their investments.
In February 1998, Mr. Pearlman, the Bishop Partnership and the
customer of Gray Seifert rolled-over their Film Acquisition Investments into an
investment in 10% Convertible Subordinated Notes due June 30, 2003 (the "June
2003 Notes"). The June 2003 Notes are convertible at any time prior to maturity,
unless previously redeemed or repurchased, into shares of the Company's Common
Stock at a conversion price of $4.75 per share. In addition, for every $1,000
principal amount of the June 2003 Notes that is converted, the holders will
receive warrants to purchase 125 shares of Common Stock at an exercise price of
$6.00 per share, expiring June 30, 2003 (the "June 2003 Warrants"). If a holder
of the June 2003 Notes converts prior to September 1, 1999 (the first date that
at the Company's option it could redeem the notes), the holder will also receive
an amount equal to 75% of the interest that would have accrued on the notes, had
they not been converted, from the date of conversion through September 1, 1999.
The exercise price of the June 2003 Warrants may be reset on each of September
1, 1998 and March 1, 1999 if the "market price" (as defined) of the Company's
Common Stock is less than $4.75 on either such date, but not less than $5.25
with respect to the September 1, 1998 reset and not less than $4.75 with respect
to the March 1, 1999 reset. The value of Mr. Pearlman's Film Acquisition
Investment was approximately $400,000 on the date he exchanged it for an
equivalent principal amount of Notes. The Bishop Partnership's and the Gray
Seifert customer's Film Acquisition Investments had an aggregate value of
approximately $500,000 on the date they exchanged them for an equivalent
principal amount of Notes. At the same time that Mr. Pearlman, the Bishop
Partnership and the Gray Seifert customer rolled-over their Film Acquisition
Investments, the Company redeemed Mr. Lawi's Film Acquisition Investment, which
had a value of approximately $200,000 on the date of redemption, in exchange for
a $200,000
Page 24 of 30
<PAGE>
principal amount promissory note, bearing interest at a rate of 10% per annum
and payable on demand.
From January through May 1994, the Company privately placed 735,820
shares of Preferred Stock A for approximately $2,207,000, at a price of $3.00
per share. Messrs. Pearlman, Lawi, Fox, Hanock and Baruc (all of whom are
executive officers or directors of the Company), purchased 44,999, 16,666,
16,666, 8,333 and 8,333 shares of Preferred Stock A, respectively, in the
private placement. Messrs. Fox, Hanock and Baruc acquired their shares by
delivering promissory notes providing for annual payments of principal, maturing
in five years and bearing interest at 9% per annum. The notes are secured by a
pledge of the purchased shares. In addition, investors who are customers of Gray
Seifert purchased an aggregate of approximately 100,000 shares of Preferred
Stock A in such private placement.
From December 1994 through the second quarter of 1995 the Company
received total proceeds of $3,025,000 from customers of Gray Seifert in a
private placement of units of Variable Rate Senior Subordinated Notes ("Variable
Rate Notes") and Common Stock purchase warrants ("Private Placement Warrants") .
The purchase price of a unit was equal to the principal amount of the note
included therein. The Variable Rate Notes are due on December 31, 2001 and bear
interest at a rate of 10% per annum for the first three years 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 at the end of the 4th year, followed by
15% of the original amount at the end of years 5 and 6. The Variable Rate Notes
are subordinated to indebtedness of the Company incurred 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. For each 10,000 of Variable Notes acquired, each purchaser
received 1,355 Private Placement Warrants. Each such warrant entitles the holder
thereof 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 Private Placement
Warrants are entitled to certain registration rights with respect to the shares
issuable upon exercise thereof.
During 1996, 1997 and to date in 1998, management of Helm has
provided various administrative, managerial, financial, legal and accounting
services to the Company. The Company paid Helm $182,000 and $132,000 for such
services rendered in 1996 and 1997, respectively.
In April 1995, the Company's Board of Directors authorized a stock
purchase plan, which permitted certain of the Company's employees, officers,
directors and consultants (and to a limited extent members of their immediate
family) to purchase units ("Units") in a private placement. Each Unit consisted
of the following: (i) 1.05 shares of the Company's common stock, $.01 par value
per share ("Common Stock"), (ii) 1.05 Common Stock purchase warrants, each
entitling the holder, at any time on or after August 1, 1996 (the "Initial
Exercise Date"), to purchase one share of Common Stock at a price of $19.05 per
share and expiring on December 31, 2000 (a "$19.05 Warrant"), and (iii) 1.05
Common Stock purchase warrants, each entitling the holder, at any time on or
after the Initial Exercise Date, to purchase one share of Common Stock at a
price of $28.57 per share and also
Page 25 of 30
<PAGE>
expiring on December 31, 2000 (a "$28.57 Warrant") (collectively, the $19.05
Warrants and the $28.57 Warrants are referred to as the "Warrants"). The
Warrants are redeemable by the Company (at a price of $.024 per Warrant) at any
time after the closing sales price of the Common Stock (as reported by the
principal securities exchange on which the Common Stock is traded) has been at
least 125% of the then effective exercise price of the Warrants (currently
$23.81 for the $19.05 Warrants and $35.71 for the $28.57 Warrants) for a period
of 20 consecutive business days during a period that the shares issuable upon
exercise of the Warrants have been registered for sale under the Securities Act
of 1933. The purchase price of each Unit was $4.00. Purchasers of Units are
entitled to certain registration rights with respect to the securities
comprising the Units.
Pursuant to the plan, participants were permitted to acquire Units by
paying 5% of the total price upon purchase, and delivering a promissory note (a
"Note") for the remaining 95% of the price. Each Note provides for the annual
payment of 5% of the total purchase price, commencing in 1996, with a balloon
payment of the remaining unpaid principal amount of the Note (i.e. 50% of the
total purchase price) payable on a specified date in 2005 (the "Maturity Date").
Interest accrues on each Note at a rate of 6% per annum, which is 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. 95% of the Units that each
participant acquired under the plan were pledged 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 the fair market value thereof.
Messrs. Pearlman, Fox, Lawi, Craig, Bishop, Baruc, Murphy, Low and
Epps purchased 73,333, 25,000, 11,667, 10,000, 25,000, 25,000, 12,500, 12,500
and 10,000 Units pursuant to such plan, respectively. Mr. Lawi's son and
daughter each purchased 12,500 Units.
In June 1995 the Company and A Pix Entertainment entered into a
credit facility (the "Atlantic Facility") with Atlantic Bank of New York (the
"Bank") providing for revolving loans totaling up to $2,500,000. Mr. Pearlman
and The Mezzanine Financial Fund, L.P. ("Mezzanine") were contingently liable to
pay outstanding amounts under the Atlantic Facility up to $300,000 in the
aggregate. Messrs. Pearlman and Lawi are officers, directors and principal
stockholders of the general partner of Mezzanine. In addition, Messrs. Pearlman
and Lawi are executive officers, directors and principal stockholders of Helm
Resources, Inc. ("Helm"), which owns approximately [9%] of the limited
partnership interests of Mezzanine. Mr. Craig is an officer and director of
Helm. In consideration of its financial accommodation, Mezzanine was entitled to
receive 7,875 Class B Warrants for every year that its accommodation was in
effect and $500 per month during the term of the accommodation and during which
amounts were outstanding under the Atlantic Facility. The Company and A Pix
Entertainment were obligated to repay any sums that Mezzanine was required to
pay to the Bank, and in order to secure this obligation, the Company and A Pix
Entertainment granted Mezzanine a security interest in substantially all of
their assets, which was subordinated to the Bank's security interest. In May
1997 the Company replaced the Atlantic Facility with a new credit facility with
Imperial Bank (the "Imperial Facility"). Proceeds from the Imperial Facility
were used to repay the Atlantic Facility in full.
Page 26 of 30
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In September 1995 the Company extended an offer to its officers,
directors and certain consultants pursuant to which they could exercise any of
the Company's Class A Warrants then owned by them by borrowing the exercise
price of $3.14 per share from the Company . Outstanding amounts of principal of
such loans bear interest at 6.2% per annum. Payment of principal and interest is
due on December 31, 2000, or if earlier, on the date the shares purchased upon
exercise (the "Underlying Shares") are sold. The loans are secured by a security
interest in the Underlying Shares. In the event of non-payment, the Company's
recourse is limited to exercising its rights with respect to such security
interest. Messrs. Pearlman, Fox and Lawi exercised, 102,780, 23,979 and 24,651
Class A Warrants, respectively, pursuant to the Company's offer. In April 1998,
Mr. Fox obtained the release of the Company's security interest in his 23,979
Underlying Shares by replacing the non-recourse loan with a full recourse loan
bearing interest at 6.2% per annum and secured by a pledge of 9,381 shares of
Common Stock.
In May 1996, the Company sold a Unit of the Company's securities to
an IRA of Martin D. Payson, a director of the Company, in a private placement.
The Unit consisted of the following: a $250,000 principal amount 10% Convertible
Subordinated Note of the Company due 2003, which is convertible into shares of
Common Stock at a price of $4.50 per share; and twenty five thousand $6.00
Warrants. Mr. Payson's IRA paid $237,500 for the Unit. Mr. Payson became a
director of the Company on June 25, 1996. In July 1996, the Company sold a total
of four Units to customers of Gray Seifert in the same private placement for an
aggregate purchase price of $1,000,000.
In August 1996 the Company effectuated the merger of A Pix
Entertainment with and into the Company under Delaware Law. Robert Baruc, the
President of A Pix Entertainment and an Executive Vice President and Director of
the Company, was the owner of 9.5% of the capital stock of A Pix Entertainment,
and received 200,000 shares of the Company's Common Stock with respect to the
merger. The valuation was based upon the recent growth and profitability of A
Pix Entertainment. The Company owned 90.5% of the capital stock of A Pix
Entertainment prior to the merger.
Also in June 1996, the Company entered into an agreement with
Strategic Growth, Inc. ("Strategic Growth"), an investor relations firm,
pursuant to which the Company retained Strategic Growth to provide investor
relations services to the Company. Strategic Growth is currently the beneficial
owner of over 5% of the Company's common stock, but did not own such percentage
of shares at the time the agreement was entered into. The term of the Agreement
was originally one year, commencing on June 4, 1996, which has subsequently been
extended for an additional two year period. In consideration of Strategic
Growth's services, the Company pays Strategic Growth a monthly retainer of
$8,000 . In addition, the Company granted Strategic Growth 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. The Company is also
obligated to issue an additional 100,000 options to Strategic Growth 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 prior to such date, the 100,000 options will
have the same term as the other 300,000 options. The shares issuable upon
exercise of the options granted to Strategic Growth will have certain
registration rights.
Page 27 of 30
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The Class B Warrants currently have an exercise price of $4.28 per
share. In order for the Company to redeem the Class B Warrants, the closing high
bid price of the Common Stock on each of 20 consecutive trading days (or such
lesser number of days with the consent of the underwriter from the Company's
initial public offering, but not less than 10 consecutive trading days) ending
on the third business day prior to the date on which notice of redemption is
given must have been at least $5.71 per share.
During the fourth quarter of 1996 and the first and second quarters
of 1997, the Company paid a total of $337,500 and issued an aggregate of 270,000
common stock purchase warrants, each having an exercise price of $4.50 per share
and expiring in December 2001, to Strategic Growth as a finder's fee in
connection with private placements of the Company's securities. Securities that
were sold consisted of units ("Units"), each priced at $250,000 and comprised of
: (i) a $250,000 principal amount 10% Convertible Subordinated Note due in 2003
convertible into the Company's common stock at a price of $4.50 per share; and
(ii) twenty-five thousand $6.00 Warrants.
During the fourth quarter of 1996, The High View Fund, L.P. (the
"Partnership") purchased a total of eight Units and The High View Fund (the
"Fund") purchased a total of four Units , for an aggregate purchase price of
$3,000,000. As a result of such purchases, the Partnership and the Fund became
beneficial owners of over 5% of the Company's common stock. During the second
quarter of 1997, the Partnership purchased another 1.5 Units and the Fund
purchased another 1.5 Units for an aggregate purchase price of $750,000. The
sole general partner of the Partnership is High View Capital Corporation
("HVCC"). The investment manager of the Fund is High View Asset Management
Corporation ("HVAM"). The sole holder of voting stock of both HVCC and HVAM is
Ernest P. Werlin. Mr. Werlin is a director of HVCC and the sole director of
HVAM; he is also the President and Treasurer of both HVCC and HVAM. Mr. Werlin
purchased one Unit in January 1997 for a purchase price of $250,000. In February
1998 the Highview SSFI Fund LDC ("Highview SSFI") purchased $250,000 principal
amount of notes due June 30, 2003. The notes were identical to the June 2003
Notes, except that the conversion price of $4.75 per share is subject to reset
on 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, and the
exercise price ($6.00 per share) of the warrants issuable upon conversion of
such notes is not subject to reset as is the case with the June 2003 Warrants.
The investment manager of Highview SSFI is HVCC. See "Security Ownership of
Certain Beneficial Owners and Management."
In December 1997 and January 1998, the Company obtained short term
loans from Mezzanine Financial Corp. ("Mezzanine"; such loan being referred
to as the "Mezzanine Loan") and also from Messrs. Pearlman and Lawi (the
"Pearlman and Lawi Loans"). Collectively, the Mezzanine Loan and the Pearlman
and Lawi Loans are referred to as the "Short Term Loans". Mezzanine is a
wholly-owned subsidiary of Helm Capital Group, Inc. ("Helm") Messrs. Pearlman
and Lawi are officers, directors and stockholders of the Company and Helm. In
addition, Walter M. Craig, Jr., a director of the Company, is also an
officer, director and stockholder of Helm and Daniel T. Murphy, the Company's
Chief Financial Officer, is a stockholder of Helm and its Chief Financial
Officer. The loans were extended in order to enable the Company to fund
program acquisitions in accordance with its current expansion plans pending
the completion of a private placement of convertible notes due June 30, 2003.
The Company usually charges interest of between 1.25% and 1.5% per month on
the advances it extends to producers in connection with program acquisitions.
Page 28 of 30
<PAGE>
The Mezzanine Loan was in the amount of $750,000 with a maturity date
of December 31, 1998. Interest accrued at an annual rate of 15%. Mezzanine also
received 12,500 common stock purchase warrants ("Mezzanine Warrants"). Each
Mezzanine Warrant has a term expiring on June 30, 2003 and entitles the holder
to purchase one share of Common Stock at an exercise price of $6.00 per share.
Mezzanine was granted a security interest in substantially all of the Company's
assets to secure the facility.
The Pearlman and Lawi Loans were demand loans in the aggregate amount
of $250,000; $150,000 of which was extended by Mr. Pearlman and $100,000 of
which was extended by Mr. Lawi. Outstanding amounts under the Pearlman and Lawi
Loans accrued interest at the rate of 1% per month.
The Company repaid, without premium or penalty, the Short Term Loans
in full in February 1998; $900,000 principal amount of Short Term Loans was
repaid in cash from the proceeds of the private placement of notes completed
during that month, and $100,000 principal amount of the Mezzanine Loan was
retired by the Company's exchanging $100,000 principal amount of June 2003 Notes
for such amount.
Page 29 of 30
<PAGE>
SIGNATURE
In accordance with Rule 12b-15 under the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNAPIX ENTERTAINMENT, INC.
By: /s/ David M. Fox
---------------------------------
Name: David M. Fox
Title: Chief Executive Officer
Date: April 30, 1998
Page 30 of 30
