<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
/XX/ Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] For fiscal year ended DECEMBER 31, 1998
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
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 were $36,481,000.
The aggregate market value of the common stock held by non-affiliates of the
registrant is approximately $11,859,000 (based upon the closing sales price of
these shares on the American Stock Exchange on March 16, 1999).
On March 16, 1999 there were a total of 7,600,982 shares of the registrant's
common stock outstanding
<PAGE>
Documents Incorporated by Reference:
1. Proxy statement for 1999 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 Annual Report on Form 10-KSB for the year ended
December 31, 1997.
13. Certain exhibits to Current Report on Form 8-K for Event of June 21,
1995.
14. Certain exhibits to Current Report on Form 8-K for Event of July 16,
1998
<PAGE>
EXPLANATORY NOTE
Unapix Entertainment, Inc., a Delaware corporation, hereby amends its
Annual Report on Form 10-KSB for the year ended December 31, 1998 to include the
information required by Items 9, 10, 11 and 12 of Part III.
Page 3 of 28
<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 66 Chairman of the Board of 1990 1999
Directors and Chief
Executive Officer
- ----------------------------------------------------------------------------------------------------------------
David S. Lawi 63 Chairman of Executive 1990 1999
Committee and Director
- ----------------------------------------------------------------------------------------------------------------
Robert Baruc 47 Co-President, President of 1995 2001
A-Pix Entertainment and
Director
- ----------------------------------------------------------------------------------------------------------------
Scott Hanock 40 Co-President, Managing 1990 2001
Director of International
Sales and Marketing and
Director
- ----------------------------------------------------------------------------------------------------------------
David A. Dreilinger 51 Chief Operating Officer -- --
- ----------------------------------------------------------------------------------------------------------------
Cheryl Freeman 40 Chief Financial Officer -- --
- ----------------------------------------------------------------------------------------------------------------
Lawrence Bishop 53 Director 1993 2000
- ----------------------------------------------------------------------------------------------------------------
Walter M. Craig, Jr. 45 Director 1993 2000
- ----------------------------------------------------------------------------------------------------------------
Robert G. Miller 38 Executive Vice President -- --
of Television, President of
the Company's Unapix
Program Enterprises
Division
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 28
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
DIRECTOR TERM AS
OF THE DIRECTOR
COMPANY EXPIRES
NAME AGE POSITION SINCE IN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel T. Murphy 60 Treasurer -- --
- ---------------------------------------------------------------------------------------------------------------
Michael R. Epps 41 General Counsel and -- --
Secretary
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
HERBERT M. PEARLMAN. Mr. Pearlman has been the Company's Chairman of the Board
of Directors since July 1990. Since February 1, 1999 he has also been the
Company's Chief Executive Officer. 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; and Helm Capital Group, Inc.
("Helm"), which finances, initiates, develops, acquires and oversees the
management of various business enterprises.
DAVID S. LAWI. Mr. Lawi has been a Director of the Company since June 1990. He
has been the Chairman of the Company's Executive Committee since December 1993.
From January 1993 until the fourth quarter of 1999 he had been the Company's
Treasurer and Secretary. 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 Chairman of its
Executive Committee.
ROBERT BARUC. Mr. Baruc has been a Director of the Company since November 1995.
He has served in the Office of the President since June 1998, and prior to that
he was an Executive Vice President of the Company, a position he held 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
Page 5 of 28
<PAGE>
video distribution company, from June 1986 to January 1991. Mr. Baruc is
currently a director of General Bearing Corporation.
SCOTT HANOCK. Mr. Hanock has been Managing Director of International Sales and
Marketing of the Company since 1986. He has served in the Office of the
President since June 1998, and prior to that he was Senior Vice President of the
Company. Mr. Hanock has been a Director of the Company since 1990, and 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.
DAVID A. DREILINGER. Mr. Dreilinger has been the Company's Chief Operating
Officer since May 1998. From February 1997 until May 1998, he was a consultant
providing business and legal services to international and domestic
broadcasters, producers, authors and executives. He was a member of the Board of
Directors and Senior Vice President of Business and Legal Affairs of BBC
Worldwide Americas, Inc. from January 1995 until February 1997. From August 1985
until December 1994, he was Vice President, Business and Legal Affairs of D.L.
Taffner Ltd. ("Taffner"). Prior to his employment by Taffner, Mr. Dreilinger was
Executive Vice President of Business and Legal Affairs for the Almi Group and
Vice President, General Counsel and Secretary of Viacom International, Inc.
CHERYL FREEMAN. Ms. Freeman has been the Company's Chief Financial Officer since
December 1998. From May 1998 until December 1998 she had been the Company's Vice
President of Finance, Accounting and Operations/West Coast. From July 1993 until
May 1998, she was Chief Financial Officer of Celebrity Home Entertainment, Inc.
and Celebrity Duplicating Services, Inc. Ms. Freeman was Vice President of
Finance of LIVE Entertainment, Inc. from March 1991 to July 1993.
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.
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.
ROBERT MILLER. Mr. Miller has been the Company's Executive Vice President of
Television and President of the Company's Unapix Program Enterprises Division
(formerly known as Unapix
Page 6 of 28
<PAGE>
North America) since June 1998. Prior to that he was Vice President of the
Company (a position he held since September 1996) and an Executive Vice
President of Unapix Program Enterprises (a position he held 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.
DANIEL T. MURPHY. Mr. Murphy has been the Company's Treasurer since December
1998. From September 1995 until December 1998 he had been the Company's Chief
Financial Officer. 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.
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 that Stuart J. Beck, who was a director of the Company,
failed to timely file a Form 3 reflecting his ownership of Company securities
upon his becoming a director.
Page 7 of 28
<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, 1998 (collectively, the "Named Executive
Officers"). *
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- --------------
Name
and Principal
Position Year Salary Bonus Other Shares of All Other
Annual Common Compensation
Compen- Stock
sation Underlying
Options
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
David M. Fox 1998 $250,000 $14,240 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
President, CEO during 1997 $225,000 $75,000 --- 12,000 ---
1996, 1997 and 1998
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $200,000 $25,000 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Baruc 1998 $245,000 $26,602 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Co-President of the 1997 $220,000 $56,250 --- 12,000 ---
Company, President of
A-Pix Entertainment
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $195,000 $ 7,000 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Scott Hanock 1998 $200,000 $20,580 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Co-President of the 1997 $190,000 $71,250 --- 12,000 ---
Company, Managing
Director of
International Sales and
Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $160,000 $12,000 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Miller 1998 $144,000 $56,731 --- 165,750 ---
Executive Vice
President
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $140,080 $27,700 --- 41,002 ---
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $118,000 $15,750 --- 95,250 ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 28
<PAGE>
<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>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Michael R. Epps 1998 $155,750 $25,575 28,000
- ------------------------------------------------------------------------------------------------------------------------------------
General Counsel 1997 $140,750 $14,075 18,000
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $128,750 $12,875 ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The table does not include information regarding compensation paid to Herbert
M. Pearlman, the Company's current Chief Executive Officer, who began holding
such office in 1999, and who was not otherwise within the four most highly
compensated executive officers, in addition to the Chief Executive Officer,
during 1998.
Page 9 of 28
<PAGE>
STOCK OPTIONS
The following two tables provide information on stock option grants
made to the Named Executive Officers in 1998, options exercised during 1998, and
options outstanding on December 31, 1998.
STOCK OPTIONS GRANTS IN 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Number of Percent of total Exercise
securities underlying options granted to price per
options granted employees share (2) Expiration Date
Name in 1998 (1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Miller 78,750 5.7% $2.86 (3) June 30, 2001
- ------------------------------------------------------------------------------------------------------------------------------
Robert Miller 16,500 1.2% $2.86 (3) March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------
Robert Miller 12,000 (4) .9% $2.86 (3) March 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------
Robert Miller 33,500 2.4% $2.86 (3) March 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
Robert Miller 25,000 (5) 1.8% $1.88 March 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------
Michael R. Epps 10,000 .7% $2.86 (3) February 13, 2007
- ------------------------------------------------------------------------------------------------------------------------------
Michael R. Epps 10,000 (6) .7% $2.86 January 8, 2008
- ------------------------------------------------------------------------------------------------------------------------------
Michael R. Epps 8,000 (7) .6% $2.86 (3) March 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 All figures represent the percentage of options granted to all employees
during 1998. A total of 1,119,950 options held by the Company's employees that
were repriced by the Company during 1998 are included as new grants during 1998.
No options held by directors of the Company were repriced.
2 Unless otherwise indicated, all options are immediately exercisable.
3 All options indicated were originally granted during previous years but were
repriced during 1998 to lower the exercise price to $2.86 per share, which was
higher than the market price of the Company's common stock on the date of reset.
4 6,344 of such options are currently exercisable. The remaining 5,656 options
will not be exercisable until October 1, 2006.
5 These options were issued in March 1999 but were earned, pursuant to Mr.
Miller's employment contract, based upon the distribution fees and commissions
accrued for 1998 by Unapix Program Enterprises.
Page 10 of 28
<PAGE>
6 6,667 of such options are currently exercisable. The remaining 3,333 of such
options will become exercisable in January 2000.
7 4,229 of such options are currently exercisable. The remaining 3,771 of such
options will not be exercisable until October 1, 2006.
Page 11 of 28
<PAGE>
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
Cised Options At In-the Money Options At
Fiscal Year-end Fiscal Year-end (1)
Number of
Shares
Acquired On Value Unexer- Unexer-
Name Exercise Realized Exercisable Cisable Exercisable Cisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David M. Fox --- --- 253,474 90,312 $103,896(2) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Scott Hanock --- --- 73,719 43,282 --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Baruc --- --- 58,844 5,656 --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Miller --- --- 135,094 (3) 5,656 --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Michael Epps --- --- 37,738 16,512 --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as otherwise noted, all options were out-of-the-money as of the
end of 1998.
(2) Represents the difference between (i) $2.1875, the closing sales price
of the Company's Common Stock on December 31, 1998, as reported by the
American Stock Exchange and the exercise price of the option,
multiplied by the number of options held which are exercisable and
in-the-money as of such date.
(3) Does not include 25,000 options that were issued to Mr. Miller in 1999
based upon the distribution fees and commissions of Unapix Program
Enterprises that were accrued for 1998.
COMPENSATION OF DIRECTORS
The Company reimburses travel and other expenses incurred by its
directors in connection with attending Board of Director's meetings. Stuart
Beck, who became a director of the Company during the fourth quarter of 1998 and
resigned in March 1999, Lawrence Bishop, who has been a director of the Company
since 1993, and Walter M. Craig, Jr., who has been a director of the Company
since 1993, were each granted, during the fourth quarter of 1998, options to
purchase 25,000 shares of common stock at an exercise price of $2.86 per share
(which price was above the market value of the Company's Common Stock on the
date the
Page 12 of 28
<PAGE>
Board authorized the grant). All of Messrs. Bishop's and Craig's options were
exercisable on the date of grant. 6,250 of the options granted to Mr. Beck were
exercisable as of the date of grant. Mr. Beck's options will expire in June
1999.
EMPLOYMENT AGREEMENTS
EMPLOYMENT CONTRACTS WITH NAMED EXECUTIVE OFFICERS
Pursuant to an agreement effective January 31, 1999, Mr. Fox, who until
such date was serving as the Company's Chief Executive Officer, and the Company
mutually agreed to sever his employment relationship. Mr. Fox agreed to provide
consulting services to the Company for a one year period after such date for a
total of approximately $146,000 of consulting fees. Pursuant to his separation
arrangement, Mr. Fox will have a six month option to surrender 68,673 shares of
capital stock to the Company to be applied against $356,318 of indebtedness owed
by him to the Company (most of which was incurred in connection with his
purchase of such shares). To the extent the market value of the capital stock on
the date of surrender is less than the outstanding amount of indebtedness, the
excess amount of indebtedness will be refinanced as a non-recourse loan secured
solely by the proceeds from 151,593 common stock purchase options held by Mr.
Fox; each such option has an exercise price of $2.86 per share and expires on
December 23, 2003. In addition, the Company may be a participant in certain
Internet ventures that Mr. Fox may pursue.
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 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 of his agreement, Mr. Hanock is entitled to 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.
Robert Baruc, Co-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, $245,000 and $257,000 for 1996,
Page 13 of 28
<PAGE>
1997, 1998 and 1999, respectively, with a further increase in 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. For
1998 and each subsequent year of his agreement, he is entitled to receive a
bonus equal to 3% of the Company's pre-tax profits. In addition, Mr. Baruc is
entitled to be paid up to $50,000 of the executive producer fees earned by A-Pix
in each year, which amount is advanced to Mr. Baruc each year in equal monthly
installments and is recouped by the Company as the fees are earned. Similar to
Mr. 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.
EMPLOYMENT CONTRACT WITH CURRENT CHIEF EXECUTIVE OFFICER.
Herbert M. Pearlman, the Company's current Chief Executive Officer, is
currently employed under an agreement that commenced on June 23, 1998 and
expires on December 31, 2000, pursuant to which he is and will be paid a salary
from the commencement date of such contract through the remainder of 1998 at an
annual rate of $200,000. For each of 1999 and the year 2000, Mr. Pearlman's
salary will increase by the same percentage that the Company's pre-tax profits
for the immediately preceding year increased over the pre-tax profits for the
year before that (the "Prior Year"), but in no event will Mr. Pearlman's salary
ever exceed Mr. Baruc's salary. For purposes of calculating such increase, the
Prior Year shall be deemed to have had pre-tax profits of no less than
$2,293,000 (the Company's pre-tax profits for 1997). Mr. Pearlman is also
entitled to receive an annual bonus equal to 5% of the Company's first
$7,500,000 pre-tax profits for each year of his contract (including with respect
to the entire 1998 calendar year), and 2.5% of all pre-tax profits for each such
year in excess of $7,500,000.
Page 14 of 28
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of April 15, 1999, 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 1,285,642 (2) 15.8%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Legg Mason, Inc. 993,632 (3) 11.6%
c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Dolphin Offshore Partners, L.P. 986,079 (4) 11.5%
129 East 17th Street
New York, NY 10003
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Forest Investment Management 841,699 (5) 9.9%
53 Forest Avenue
Old Greenwich, Connecticut 06870
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Strategic Growth International, Inc. 570,000 (6) 7.0%
111 Great Neck Road
Suite 606
Great Neck, New York 11021-5402
- ---------------------------------------------------------------------------------------------------------------------
Common Stock David S. Lawi 529,585 (7) 6.8%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock Legg Mason, Inc. 99,996 (8) 20.0%
A* c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock Herbert M. Pearlman 79,999 (9) 14.9%
A* c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 15 of 28
<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>
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock Tradewind Fund 50,000 10.0%
A* c/o Harbor Capital Management
2701 Summer Street, Suite 200
Stanford, Connecticut
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock Martin & Velia Bramante 38,334 7.6%
A* 45 Peninsula Road
Belvedere, CA 94920
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock David S. Lawi 34,166 (10) 6.6%
A* c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock C Herbert M. Pearlman 200 30.0%
** c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock C Legg Mason, Inc. 175 25.9%
** c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock C George Back 100 14.8%
** c/o Unapix Entertainment, Inc.
200 Madison Avenue, 24th Floor
New York, New York 10016
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock C David S. Lawi 100 14.8%
** c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock C Paul Levy 100 14.8%
** 4 Ironwood Lane
Rye, New York 10580
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
* Shares set forth are shares of the Company's Series A 8% Cumulative
Convertible Preferred Stock, $.01 par value per share ("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.
Page 16 of 28
<PAGE>
** Shares set forth are shares of the Company's Series C 8% Cumulative
Convertible Preferred Stock, $.01 par value per share ("Preferred Stock
C"). Each share is convertible into 400 shares of the Company's Common
Stock. Holders of Preferred Stock C, voting together with holders of
Common Stock and not as a separate class, are entitled to 400 votes
with respect to each share of Preferred Stock C. Each share of
Preferred Stock C has a liquidation preference of $1,000 plus
accumulated and unpaid dividends and is entitled to semi-annual
dividends of $40 per share.
(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;
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 ("December 2003 Options"); 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 $2.86 per share of Preferred Stock A
and expire in June 2004); 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"); 85,653
shares issuable upon conversion of $400,000 principal amount
of notes due in June 2003; 65,360 shares issuable upon
exercise of common stock purchase warrants that are issuable
upon conversion of the June 2003 Notes (the "$4.59 Warrants"),
each such warrant having an exercise price of $4.59 per share
and expiring June 2003; and 80,000 shares issuable upon
conversion of 200 shares of Preferred Stock C. Also includes
1,000 shares owned by Mr. Pearlman's wife as to which Mr.
Pearlman disclaims beneficial ownership.
(3) 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: 104,995 shares of Common
Stock issuable upon conversion of Preferred Stock A; 416,814
shares of Common Stock issuable upon exercise of warrants,
each of which is exercisable into a share of Common Stock at a
price of $3.64 per share and expires on December 31, 2001;
232,019 shares of Common Stock issuable upon conversion of an
aggregate principal amount of $1,000,000 of notes due in 2003;
109,890 shares of Common Stock issuable upon exercise of
warrants, having an exercise price of $5.46 per share and
expiring in June 2003 ("$5.46 Warrants"); 26,767 shares of
Common Stock issuable upon conversion of $125,000 principal
amount of Notes due in June 2003 and 20,425 shares issuable
upon exercise of $4.59 Warrants; and 70,000 shares issuable
upon conversion of 175 shares of Preferred Stock C.
Page 17 of 28
<PAGE>
(4) Consists of 986,079 shares issuable upon conversion of
$4,250,000 of notes due in 2003.
(5) Consists of 571,429 shares issuable upon conversion of
$2,000,000 principal amount of Notes due in June 2003 owned by
various funds managed by Forest Investment Management and
270,270 shares issuable upon exercise of warrants having an
exercise price of $5.55 per share and expiring in June 2003
that are issuable upon exercise of such Notes ("$5.55
Warrants").
(6) 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 (ii) 270,000 shares that are issuable
upon exercise of warrants having an exercise 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 7.1% of the Company's Common Stock.
(7) Includes the following shares of Common Stock: 17,500 shares
that are issuable upon conversion of Preferred Stock A;
101,056 shares that are issuable upon exercise of December
2003 Options; 18,375 shares that are issuable upon exercise of
Preferred Stock Options and the subsequent conversion of
shares underlying such options; 6,344 shares that are issuable
upon exercise of March 2007 Options; 21,413 shares issuable
upon conversion of $100,000 principal amount of notes due in
June 2003; 16,340 shares issuable upon exercise of $4.59
Warrants; and 40,000 shares issuable upon conversion of 100
shares of Preferred Stock C.
(8) 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 power to vote
and dispose of all such shares. Legg Mason, Inc. is a parent
holding company of Gray, Seifert & Co. Inc.
(9) Includes 35,000 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(10) Includes 17,500 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
Page 18 of 28
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 15, 1999, 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 AND PREFERRED STOCK C - OWNED BENEFICIALLY AS
OF APRIL 15, 1999 (1)
---------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON PERCENT PREFERRED PERCENT PREFERRED PERCENT
NAME STOCK OF CLASS STOCK A (2) OF CLASS STOCK C OF CLASS
(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Herbert M. 1,285,642(4) 15.8% 79,999 (5) 14.9% 200 30.0%
Pearlman
- ----------------------------------------------------------------------------------------------------------------------------------
David S. Lawi 529,585 (6) 6.8% 34,166 (7) 6.6% 100 14.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Scott Hanock 195,842 (8) 2.5% 8,333 1.7% --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Baruc 293,843 (9) 3.8% 8,333 1.7% --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Lawrence Bishop 240,075 (10) 3.1% --- --- --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Walter M. Craig, 61,766 (11) * --- --- --- ---
Jr.
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Miller 160,094 (12) 1.7% --- --- --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Michael R. Epps 49,165 (13) * 1,749 * --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
David M. Fox 339,836 (14) 4.3% 12,498 2.5% --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
All directors and 2,913,296 32.3% 153,953 (16) 27.8% 300 44.4%
executive officers as (15)
a group (11
persons)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* Less than 1%
(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, $.01 par value per
share ("Preferred Stock A").
Page 19 of 28
<PAGE>
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) Shares set forth are shares of the Company's Series C 8%
Cumulative Convertible Preferred Stock, $.01 par value per
share ("Preferred Stock C") . Each shares is convertible into
400 shares of Common Stock. Holders of Preferred Stock C,
voting together with holders of Common Stock and not as a
separate class, are entitled to 400 votes with respect to each
share of Preferred Stock C. Each share of Preferred Stock C
has a liquidation preference of $1,000 plus accumulated and
unpaid dividends and is entitled to semi-annual dividends of
$40 per share.
(4) Includes the following shares of Common Stock: 47,248 shares
that are issuable upon conversion of Preferred Stock A;
202,109 shares that are issuable upon exercise of December
2003 Options; 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; 85,653
shares issuable upon conversion of $400,000 principal amount
of Notes due in June 2003; 65,360 shares issuable upon
exercise of $4.59 Warrants; and 80,000 shares issuable upon
conversion of 200 shares of Preferred Stock C. Also includes
1,000 shares owned by Mr. Pearlman's wife as to which Mr.
Pearlman disclaims beneficial ownership.
(5) Includes 35,000 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(6) Includes the following shares of Common Stock: 17,500 shares
that are issuable upon conversion of Preferred Stock A;
101,056 shares that are issuable upon exercise of December
2003 Options; 18,375 shares that are issuable upon exercise of
Preferred Stock Options and the subsequent conversion of
shares underlying such options; 6,344 shares that are issuable
upon exercise of March 2007 Options; 21,413 shares issuable
upon conversion of $100,000 principal amount of notes due in
June 2003; 16,340 shares issuable upon exercise of $4.59
Warrants; and 40,000 shares issuable upon conversion of 100
shares of Preferred Stock C.
(7) Includes 17,500 shares of Preferred Stock A which are issuable
upon exercise of Preferred Stock Options.
(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 December 2003 Options; and 6,344
shares that are issuable upon exercise of March 2007 Options.
Page 20 of 28
<PAGE>
(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; and 6,344 shares
that are issuable upon exercise of March 2007 Options.
(10) Includes 47,250 shares of Common Stock owned by a partnership
of which Mr. Bishop is a general partner (the "Partnership");
80,300 shares of Common Stock issuable upon conversion of
$375,000 principal amount of Notes due June 2003 owned by the
Partnership; 25,000 shares of Common Stock issuable upon
exercise of options having an exercise price of $2.86 per
share and expiring June 30, 2008; and 61,275 shares issuable
upon exercise of $4.59 Warrants owned by the Partnership.
(11) Includes 26,950 shares of Common Stock issuable upon exercise
of December 2003 Options; and 25,000 shares having an exercise
price of $2.86 and expiring June 2008.
(12) Includes 78,750 shares issuable upon exercise of options
having an exercise price of $2.86 per share and expiring in
June 2001; 16,500 shares issuable upon exercise of options
having an exercise price of $2.86 per share and expiring in
March 2002; 6,344 shares that are issuable upon exercise of
March 2007 Options; 33,500 shares issuable upon exercise of
options having an exercise price of $2.86 per share and
expiring March 2003; and 25,000 shares issuable upon exercise
of options having an exercise price of $1.88 per share and
expiring in March 2004.
(13) Includes 16,842 shares that are issuable upon exercise of
December 2003 Options; 1,749 shares that are issuable upon
conversion of Preferred Stock A; 10,000 shares issuable upon
exercise of options having an exercise price of $2.86 per
share and expiring in February 2007; 4,229 shares issuable
upon exercise of options having an exercise price of $2.86 per
share and expiring March 2007; and 6,667 shares issuable upon
exercise of options having an exercise price of $2.86 per
share and expiring in January 2008.
(14) Includes the following shares of Common Stock: 70,537 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; 151,593 shares issuable upon exercise
of December 2003 Options; and 13,123 shares issuable upon
conversion of Preferred Stock A. Also includes the following
as to which Mr. Fox disclaims beneficial ownership: 10,237
shares owned by Mr. Fox's wife; 15,750 shares owned in Trust
for his children of which his wife is trustee; and an
aggregate of 2,624 warrants owned by Mr. Fox's wife, half of
which have an exercise price of $19.05 per share and half of
which have an exercise price of $28.57 per share.
(15) Includes all shares described in footnotes (4), (6), (8), (9),
(10), (11), (12) and (13) above as well as the following
shares of Common Stock: 8,749 shares
Page 21 of 28
<PAGE>
issuable upon conversion of shares of Preferred Stock A;
13,474 shares issuable upon exercise of December 2003 Options;
4,229 shares that are issuable upon exercise of March 2007
Options; 6,667 shares that are issuable upon exercise of
options having an exercise price of $2.86 per share and
expiring in June 2008; 16,667 shares issuable upon exercise of
options having an exercise price of $2.86 per share and
expiring in May 2008; and 33,334 shares issuable upon exercise
of options having an exercise price of $2.86 per share and
expiring May 2003. The amount set forth does not include any
shares held by David M. Fox who, as of April 15, 1999, was
neither an officer or director of the Company.
(16) Includes all shares described in footnotes (5) and (7) above.
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. Such Notes
are currently 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 $4.67 per share. In addition, for every $1,000 principal
amount of such Notes that is converted, the holders will receive warrants to
purchase 163 shares of Common Stock at an exercise price of $4.59 per share,
expiring June 30, 2003 (the "$4.59 Warrants") (the conversion price of the Notes
as well as such figures regarding the warrants have
Page 22 of 28
<PAGE>
been adjusted to reflect anti-dilution adjustments for events occurring
subsequent to the issuance of the Notes). If a holder of such 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 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 principal amount promissory note, bearing interest at a rate of 10%
per annum and payable on demand. Such note, together with all accrued and unpaid
interest thereon, was paid in full during 1998.
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 were at
the time 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 commenced at the end of 1998; 15% of the original
amount is required to be paid at the end of 1999 and at the end of 2000. 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 1,377 Private Placement Warrants (which figure reflects certain
anti-dilution adjustments for events occurring subsequent to the issuance of
such warrants). Each such warrant entitles the holder thereof to purchase one
share of Common Stock at a current exercise price of $3.64 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. In December 1998, the Company
Page 23 of 28
<PAGE>
exchanged 175 shares of its Series C 8% Cumulative Convertible Preferred
Stock, $.01 per value per share ("Preferred Stock C") for $175,000 principal
amount of Variable Rate Notes that was required to be paid at such time. Each
share of Preferred Stock C has a stated valued of $1,000 per share, is
convertible into shares of Common Stock at a conversion price of $2.50 per
share (i.e. each share of Preferred Stock C is currently convertible into 400
shares of the Company's Common Stock), pays a semi-annual dividend of $40 per
share and is entitled to 400 votes per share.
During 1997 and 1998 management of Helm has provided various
administrative, managerial, financial, legal and accounting services to the
Company. The Company paid Helm $132,000 and $133,000 for such services rendered
in 1997 and 1998, 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 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 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. Holders of $19.05 Warrants and $28.57
Warrants were given the opportunity to surrender such warrants to the Company in
exchange for a credit against the December 1998 interest payment and May 1999
principal on their Notes. Each $19.05 Warrant was valued at $.025 and each
$28.57 Warrant was valued at $.015 for such purpose.
Messrs. Pearlman, Fox, Lawi, Craig, Bishop, Baruc, Murphy and Epps and
Steven P. Low (the former Chief Accounting Officer of the Company) purchased
73,333, 25,000, 11,667,
Page 24 of 28
<PAGE>
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 September 1995 the Company extended an offer to its then 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 July 1996, the Company sold a total of four Units of its
securities to customers of Gray Seifert in a private placement for an aggregate
purchase price of $1,000,000. Each unit consisted of the following: a $250,000
principal amount 10% Convertible Subordinated Note of the Company due 2003,
which is currently convertible into shares of Common Stock at a price of $4.31
per share (a "1996 Private Placement Note"); and 27,473 warrants having a
current exercise price of $5.46 per share and expiring in June 2003 ("1996
Private Placement Warrants").
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 was subsequently
extended during 1997. The Company's agreement with Strategic Growth was
terminated effective as of January 31, 1999. In consideration of Strategic
Growth's services, the Company paid 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.
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 1996 Private Placement Note; and (ii) 27,473
1996 Private Placement Warrants.
Page 25 of 28
<PAGE>
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.
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 13,636 common stock purchase warrants ("Mezzanine Warrants") (which
figure gives effect to anti-dilution adjustments for events occurring subsequent
to the issuance of such warrants). Each Mezzanine Warrant has a term expiring on
June 30, 2003 and entitles the holder to purchase one share of Common Stock at a
current exercise price of $5.50 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.
In June 1998, the Company extended an offer to its officers and
directors pursuant to which they could exercise any of the Company's Class B
Warrants then owned by them by borrowing 90% of the exercise price thereof. Each
Class B Warrant entitled the holder to purchase 1.05 shares of Common Stock for
$4.50. Outstanding amounts of principal of such loans bear interest at 4.5% per
annum (which is payable annually). Principal is to be repaid in five consecutive
annual installments, the first four of which will each be in an amount equal to
10% of the aggregate exercise price of the Class B Warrants with respect to
which the loan was extended and the last of which will be in an amount equal to
the remaining outstanding balance. Messrs. Pearlman, Fox, Lawi and Low exercised
80,834, 25,000, 39,166, and 1,500 Class B Warrants, respectively, pursuant to
the Company's offer.
As of December 1998, Messrs. Pearlman and Lawi purchased 200 and 100
shares of Preferred Stock C for $200,000 and $100,000, respectively.
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In January 1999 Mr. Pearlman loaned the Company $250,000. The
outstanding balance of the loan bears interest at a rate of 10% per annum and is
payable on demand. The full amount of the loan is still outstanding.
In the first quarter of 1999, Messrs. Pearlman and Lawi extended
bridge loans to the Company in the amounts of $250,000 and $175,000, (the
"Pearlman and Lawi Loans"), respectively, in order to fund productions and
acquisitions of entertainment programming by the Company, pending the
anticipated increase in the Company's credit facility with Imperial Bank
("Imperial"). Funds for the Pearlman and Lawi Loans were obtained by Messrs.
Pearlman and Lawi from a loan to them from Imperial. The Pearlman and Lawi Loans
are payable on demand and bear interest at the same rate Imperial is charging
Messrs. Pearlman and Lawi for its loan to them.
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<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/ Herbert M. Pearlman
-------------------------------
Name: Herbert M. Pearlman
Title: Chief Executive Officer
Date: April 29, 1999
Page 28 of 28
