EXHIBIT 4.1
Page 17
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR UNDER
ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE
HOLDER OF SUCH NOTE, THAT SUCH NOTE AND/OR COMMON STOCK MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
UNAPIX ENTERTAINMENT, INC.
10% Convertible Subordinated Note
Due June 30, 2003
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT
-------------------------------------------------
To obtain information Regarding Original Issue
Discount Contact Steven P. Low, Chief Accounting
Officer of Unapix Entertainment, Inc., Telephone
number: 212-575-7070
$________________ NO. CS-
________________, 1996
Unapix Entertainment, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to ________________, with an address
located at ___________, or his registered assigns (the "Payee" or "Holder"), the
principal amount of ____________________ DOLLARS ($___________) and accrued
interest thereon in accordance with the terms and provisions hereof.
This Note was issued by the Company in a private placement pursuant to a
Private Placement Memorandum, dated April 30 , 1996, and was issued as part of a
Unit or Units, each of which consisted of: (i) a Note in the principal amount of
$250,000; and (ii) Warrants to purchase 25,000 shares of the common stock of the
Company, par value $.01 per share ("Common Stock"), at an exercise price of
$6.00 per share and expiring June 30, 2003. The series of Notes issued in
connection with said private placement are referred to hereafter as the "Notes".
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
-----------------------------------------------------
1.1 METHOD OF PAYMENT. Payment of the principal of and accrued
interest on this Note shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. The Company will pay or cause to be paid
all sums becoming due hereon for principal and interest by check sent to the
Holder's above address or to such other address as Holder may designate for such
purpose from time to time by written notice to the Company, without any
requirement for the presentation of this Note or making any notation thereon
except that the Holder hereof agrees that payment of the final amount due shall
be made only upon surrender of this Note to the Company for cancellation. Prior
to any sale or other disposition of this instrument, the Holder hereof agrees to
endorse hereon the amount of principal paid hereon and the last date to which
interest has been paid hereon and to notify the Company of the name and address
of the transferee.
1.2 PAYMENT OF PRINCIPAL. The entire outstanding principal balance of
this Note shall be due and payable on June 30, 2003 (the "Maturity Date").
1.3 PAYMENT OF INTEREST. Interest (computed on the basis of a 360-day
year of twelve 30-day months) on the unpaid portion of the principal amount from
time to time outstanding hereunder shall be paid by the Company to the Payee at
the rate of ten percent (10%) per annum (the "Stated Interest Rate"). Said
interest to be paid semi-annually on each June 30 and December 31 (commencing
December 31, 1996) and on the Maturity Date.
Page 18
2. SUBORDINATION PROVISIONS.
2.1 PRINCIPAL AND INTEREST. The Company, for itself, its successors
and assigns, covenants and agrees, and the Payee and each successive Holder by
acceptance of this Note, likewise cove-nants and agrees that payment of the
principal of and interest on this Note is subordinated in right of payment to
the payment of all existing and future "Senior Debt" (as hereinafter defined) of
the Company. The term "Senior Debt" shall mean the principal of, premium, if
any, and interest on: (i) all Indebtedness of the Company to any bank or other
financial institution (including, without limitation, to Atlantic Bank of New
York) whether such indebtedness is heretofore or hereafter created, incurred or
entered into (or acquired by assignment) and any deferrals, renewals,
modifications or extensions of any such indebtedness, unless under the express
provisions of the instrument creating or evidencing any such indebtedness, or
pursuant to which the same is outstanding, such indebtedness is not superior in
right of payment to this Note; and (ii) all Indebtedness of the Company owed
with respect to its Variable Rate Senior Subordinated Notes due December 31,
2001. "Indebtedness" for all purposes herein means and includes without
duplication, as of any date as of which the amount thereof is to be determined
(whether or not secured by lien, pledge or deposit), all direct obligations to
repay money borrowed (including without limitation, amounts borrowed under
revolving credit facilities, either now existing or hereafter created (including
any increase in existing facilities), all notes payable and drafts accepted
representing extensions of credit, and all obligations evidenced by bonds,
debentures, notes or other similar instruments) and all interest accrued and
unpaid thereon.
2.2 DEFAULT. No payment or prepayment, directly or indirectly, on
account of the principal of or interest on this Note shall be made, and no
holder of this Note shall be entitled to demand or receive any such payment or
prepayment if, at the time of such payment or prepayment or immediately after
giving effect thereto, there shall have occurred any event or default under such
Senior Debt or under any agreement pursuant to which any such Senior Debt has
been or will be issued which default has not been waived or cured as of the date
on which such payment or prepayment is due.
2.3 LIQUIDATION, DISSOLUTION, ETC. In the event of any insolvency or
bankruptcy proceeding, and any receivership, total liquidation, reorganization
or other similar proceedings in connection therewith, relative to the Company,
or to its property, or in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company, whether or not
involving insolvency or bankruptcy, then the holders of Senior Debt shall be
entitled to receive payment in full of all principal (and premium, if any) and
interest on all such Senior Debt before the holders of this Note shall be
entitled to receive any payment on account of principal or interest of this
Note, and to that end (but subject to the power of a court of competent
jurisdiction to make other equitable provisions reflecting the rights conferred
by these provisions upon such Senior Debt and the holders thereof with respect
to this Note and the Holder hereof by a lawful plan or reorganization under
applicable bankruptcy law) the holders of Senior Debt (until payment in full of
all principal, premium (if any) and interest on all such Senior Debt, including
interest thereon accruing before or in respect of periods subsequent to the
commencement of any such proceedings) shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property, or by set-off or otherwise, which may be
payable or deliverable in any such proceedings in respect of this Note
(including any such payment or distribution which may be payable or deliverable
by reason of the provisions of any indebtedness of the Company which is
subordinate and junior in right to this Note), except securities issued in such
proceedings which are the subordinate and junior in right of payment to the
payment of Senior Debt.
2.4 SUBROGATION. Subject to the payment in full of Senior Debt, the
holders of this Note shall be subrogated to the rights of the holders of such
Senior Debt to receive payment or distributions of assets of the Company
applicable to such Senior Debt until this Note shall be paid in full, and no
payment or distributions to the holders of such Senior Debt by or on behalf of
the Company from the proceeds that would otherwise be payable to the holder of
this Note shall, as between the Company and the holder of this Note, be deemed
to be a payment by the Company to or on account of this Note.
2.5 AMENDMENT. These provisions with respect to subordination cannot
be amended, modified or waived without the prior written consent of the holder
or holders of all Senior Debt at the time outstanding; and the subordination
effected hereby shall not be affected by any amendment or modification of, or
addition or supplement to, any such Senior Debt or any instrument or agreement
relating thereto, without the prior written consent of the holder or holders of
all such Senior Debt at the time outstanding. No present or future holder of
Senior Debt shall be prejudiced in his right to enforce subordination of this
Note by any act or failure to act on the part of the Company.
2.6 BENEFIT OF SENIOR DEBT. The foregoing subordination provisions
shall be for the benefit of the holders of Senior Debt and may be enforced
directly by such holders against the holder of this Note. Upon any payment or
distribution of assets of the Company referred to above, the holder of this Note
shall be entitled to rely upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the holder of this Note, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of Senior Debt and other
Page 19
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertaining thereto or
hereto.
2.7 OBLIGATION TO PAY PRINCIPAL AND INTEREST ABSOLUTE. The foregoing
provisions as to subordination are solely for the purpose of defining the
relative rights of the holders of such Senior Debt, on the one hand, and the
holder of this Note on the other hand. Nothing contained herein is intended to
or shall impair as between the Company, its creditors, other than the holders of
Senior Debt, and the holder of this Note, the obligation of the Company, which
shall be absolute and unconditional, to pay the holder of this Note the
principal and interest on this Note as and when the same shall become due and
payable in accordance with the terms hereof or affect the relative rights of the
holder of this Note and the creditors of the Company other than holders of
Senior Debt, nor shall anything herein prevent the Holder hereof from exercising
all remedies otherwise permitted by applicable law upon default hereunder
subject to the rights of holders of Senior Debt, if any, in respect of cash,
properties or securities of the Company received upon the exercise of any such
remedy. The Holder of this Note by acceptance hereof acknowledges and agrees
that the subordination provisions of this Section 2 are, and/or are intended to
be, an inducement and a consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of this
Note, to acquire and continue to hold, or to continue to hold, such Senior Debt
and each holder of Senior Debt shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt. Nothing contained herein or elsewhere in
this Note shall prevent the Company from making payment of the principal of or
interest on this Note at any time except under the conditions described above.
2.8 FURTHER INSTRUMENTS. The Holder of this Note covenants and agrees
to execute such further instruments and waivers as may be necessary in the
opinion of a lender or creditor, or reasonably requested by the Company, to
facilitate the issuance or the continued holding of Senior Debt.
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
3.1 THIS NOTE.
(a) a default in the payment of any principal payment on this Note,
when and as the same shall become due and payable, and such default shall
continue uncured for thirty (30) days after the day fixed for the making of such
principal payment; or
(b) a default in the payment of any interest payments on this Note,
and such default shall continue uncured for thirty (30) days after the date
fixed for the making of such interest payment; or
(c) a material default in the performance, or material breach, of any
covenant of the Company in this Note (other than a covenant or a default which
is elsewhere herein specifically dealt with as an Event or Default), and
continuance of such default or breach uncured for a period of ninety (90) days
after notice has been given to the Company of such default.
3.2 BANKRUPTCY. The entry of a decree or order by a court having
jurisdiction adjudging the Company as bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company, under Federal bankruptcy law, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial part
of its assets, and the continuance of any such decree or order unstayed and in
effect for a period of ninety (90) days; or the commencement by the Company of a
voluntary case under Federal bankruptcy law, as now or hereafter constituted, or
any other applicable Federal or state bankruptcy, insolvency, or other similar
law, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under Federal bankruptcy law or any other
applicable Federal or state bankruptcy, insolvency, or other similar law, or the
consent by it to the filing of such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or similar official of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due.
3.3 LIMITATIONS ON CLAIMS IN BANKRUPTCY OR ON ACCELERATION UPON AN
EVENT OF DEFAULT. Should an acceleration of the maturity of this Note be
declared as a result of the occurrence and continuation of an Event of Default,
absent bankruptcy, the claim of the Holder would be for the unpaid principal
amount and accrued interest of the Note. The amount that
Page 20
the Holder would be able to recover from the Company under a bankruptcy or an
Event of Default, may, however, be limited by applicable law to the issued price
of this Note plus that portion of any original issue discount which has been
amortized.
4. REMEDIES UPON DEFAULT.
4.1 ACCELERATION. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of this Note
shall already have become due and payable), the Holder, by notice in writing
given to the Company, may declare the principal of and accrued interest on this
Note then outstanding to be due and payable immediately, and upon any such
declaration the same shall become and be due and payable immediately, anything
herein to the contrary notwithstanding.
4.2 PROCEEDINGS AND ACTIONS. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights, and
may prosecute and enforce its claims, against all assets of the Company and
shall be entitled to receive therefrom payment on such claims up to an amount
not exceeding the principal amount of this Note then outstanding plus accrued
interest to the date of payment plus reasonable expenses of collection,
including, without limitation, attorney's fees and expenses.
Page 21
5. REDEMPTION
The Notes may be redeemed at the option of the Company, in whole or in
part, from time to time at any time after July 1, 1998, on not less than 30 nor
more than 60 days written notice. Any such redemptions shall be made at the
following prices, expressed as percentages of the principal amount being
redeemed, during the respective periods set forth below, plus accrued and unpaid
interest thereon to the redemption date. If redeemed during the 12-month period
beginning July 1:
Year Percentage
---- ----------
1998 106.0%
1999 104.5%
2000 103.0%
2001 101.5%
2002 100.0%
If less than the entire principal amount of the Series of Notes is to
be redeemed at one time, the Notes may be redeemed on a pro rata basis or the
Notes to be redeemed may be selected by lot, such manner to be determined by the
Board of Directors of the Company in its sole discretion.
6. CONVERSION
6.1 CONVERSION PRIVILEGE. At any time and from time to time commencing
with the date hereof until the earlier of (i) the Maturity Date or (ii) the date
set for redemption in accordance with the provisions of Section 5 hereof, the
outstanding amount of debt of this Note is convertible at the Holder's option
into the Company's shares of common stock, $.01 par value per share (the "Common
Stock"), upon surrender of this Note, at the Office of the Company, accompanied
by a written notice of conversion in form annexed hereto duly executed by the
registered holder or its duly authorized attorney. The outstanding indebtedness
of this Note is convertible at the option of the Holder from time to time at any
time on or after the date hereof into shares of Common Stock at a price of $4.50
per share of Common Stock (the "Conversion Price"). No fractional shares or
scrip representing fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, in respect of any fraction of a share which
would otherwise be issuable upon the surrender of this Note for conversion. The
Conversion Price is subject to adjustment as provided in Section 6.3 hereof.
6.2 REGISTRATION OF TRANSFER. Subject to the terms of this Note, at
any time after the date hereof, upon surrender of this Note for conversion, the
Company shall issue and deliver with all reasonable dispatch to or upon the
written order of the Holder of this Note and in such name or names as such
Holder may designate, a certificate or certificates for the number of full
shares of Common Stock due to such Holder upon the conversion of this Note (the
"Shares"). Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
the Holder of record of such Shares as of the date of the surrender of this
Note; provided, however, that if, at the date of surrender the transfer books of
the Common Stock shall be closed, the certificates for the Shares shall be
issuable as of the date on which such books shall be opened and until such date
the Company shall be under no duty to deliver any certificate for such Shares;
provided, further, however, that such transfer books, unless otherwise required
by law or by applicable rule of any national securities exchange, shall not be
closed at any one time for a period longer than 20 days.
6.3 ADJUSTMENTS FOR DIVIDENDS, RECLASSIFICATIONS, STOCK ISSUANCES,
ETC. Subject to the provisions of this Section 6.3, the Conversion Price in
effect, and accordingly, the number of shares of Common stock into which this
Note may be converted, shall be subject to adjustment from time to time as
follows:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then the
Conversion Price shall be proportionately decreased as of the close of business
on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Conversion
Price immediately prior to such subdivision shall be proportionately decreased,
and if the Company shall at any time combine the outstanding Common Stock by
recapitalization, reclassification or combination thereof, the Conversion Price
immediately prior to such combination shall be proportionately increased. Any
such
Page 22
adjustment to the Conversion Price shall become effective at the close of
business on the record date for such subdivision or combination.
(c) In case the Company after the date hereof shall distribute to all
of the holders of outstanding shares of Common Stock any securities or other
assets (other than a cash distribu- tion made as a dividend payable out of
earnings), the Board of Directors shall be required to make such equitable
adjustment in the Conversion Price, as in effect immediately prior to the record
date for such distribution, as may be necessary to preserve for the Holder
rights substantially proportionate to those enjoyed here- under by the Holder
immediately prior to the happening of such distribution. Any such adjustment to
the Conversion Price shall become effective at the close of business on the
record date for such distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash, or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall make such appropriate
provision so that the Holder shall have the right thereafter and until the
Maturity Date to convert this Note for the kind and amount of stock, securities,
cash or assets receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares of Common
Stock into which this Note might have been converted immediately prior to such
reorganization, reclassification, consolidation, merger or sale, subject to
further adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 6.3.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein collectively
referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subparagraph (f) of
this Section 6.3; or
(ii) shares issued, subdivided or combined in transactions described
in subparagraphs (a),(b),(c), or (d) of this Section 6.3;
for a consideration per share which is less than the Conversion Price, then the
Conversion Price in effect immediately prior to such issuance or sale (the
"Applicable Conversion Price") shall, and thereafter upon each issuance or sale,
the Applicable Conversion Price shall, simultaneously with such issuance or
sale, be adjusted, so that such Applicable Conversion Price shall equal a price
determined by multiplying the Applicable Conversion Price by a fraction, the
numerator of which shall be:
(A) the sum of (x) the total number of shares of Common Stock
outstanding immediately prior to such issuance plus (y) the number of
shares of Common Stock which the aggregate consideration received, as
determined in accordance with subparagraph (g) below for the issuance
or sale of such additional Common Stock or Convertible Securities
deemed to be an issuance of Common Stock as provided in subparagraph
(h) below, would purchase (including any consideration received by the
Company upon the issuance of any shares of Common Stock or Convertible
Securities since the date the Applicable Conversion Price became
effective not previously included in any computation resulting in an
adjustment pursuant to this subparagraph (e)) at the Applicable
Conversion Price; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subparagraph (g)) immediately
after the issuance or sale of such additional shares.
If, however, the Applicable Conversion Price thus obtained would result in the
issuance of a lesser number of shares upon exercise than would be issued at the
initial Conversion Price specified in the first paragraph hereof, the Applicable
Price shall be such initial Conversion Price.
(f) Anything in this Paragraph 6.3 to contrary notwithstanding, no
adjustment in the Conversion Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible Securities
pursuant to the Company's qualified or non-qualified Employee Stock
Option Plans or any other bona fide employee benefit plan or incentive
arrangement (including, without limitation, pursuant to individual
employment agreements), previously adopted, authorized or entered into
or as may hereafter be adopted, authorized or entered into by the
Page 23
Company's Board of Directors or its officers, for the benefit of the
Company's employees, consultants or directors, as any such plans,
agreements or arrangements may hereafter be amended from time to time;
and
(ii) the issuance of any shares of Common Stock pursuant to the grant
or exercise of Convertible Securities outstanding as of the date
hereof.
(g) For the purpose of subparagraph (e) above, the following
provisions shall also be applied:
(i) In case of the issuance or sale of additional shares of Common
Stock for cash, the consideration received by the Company therefor
shall be deemed to be the amount of cash received by the Company for
such shares, before deducting therefrom any commissions, compensation
or other expenses paid or incurred by the Company for any underwriting
of, or otherwise in connection with, the issuance or sale of such
shares.
(ii) In case of the issuance of Convertible Securities, the
consideration received by the Company therefor shall be deemed to be
the amount of cash, if any, received by the Company for the issuance
of such rights or Convertible Securities, plus the minimum amounts of
cash and fair value of other consideration, if any, payable to the
Company upon the exercise of such rights or options or payable to the
Company on conversion of such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part, other
than cash, the consideration other than cash shall be deemed to be the
fair market value thereof as reasonably determined in good faith by
the Board of Directors of the Company (irrespective of accounting
treatment thereof); provided, however, that if such consideration
consists of the cancellation of debt issued by the Company, the
consideration shall be deemed to be the amount the Company received
upon issuance of such debt (gross proceeds) plus accrued interest and,
in the case of original issue discount or zero coupon indebtedness,
accreted value to the date of such cancellation, but not including any
premium or discount at which the debt may then be trading or which
might otherwise be appropriate for such class of debt.
(iv) In case of the issuance of additional shares of Common Stock upon
the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Company
for such Common Stock shall be deemed to be the consideration received
by the Company for such obligation or shares so converted or
exchanged, before deducting from such consideration so received by the
Company any expenses or commissions or compensations incurred or paid
by the Company for any underwriting of, or otherwise in connection
with, the issuance or sale of such obligations or shares, plus any
consideration received by the Company in adjustment of interest and
dividends. If obligations or shares of the same class or series of a
class as the obligations or shares so converted or exchanged have been
originally issued for different amounts of consideration, then the
amount of consideration received by the Company upon the original
issuance of each of the obligations or shares so converted or
exchanged shall be deemed to be the average amount of the
consideration received by the Company upon the original issuance of
all such obligations or shares. The amount of consideration received
by the Company upon the original issuance of the obligations or shares
so converted or exchanged and the amount of the consideration, if any,
other than such obligations or shares received by the Company upon
such conversion or exchange shall be determined in the same manner as
provided in Paragraphs (i) through (iii) above with respect to the
consideration received by the Company in case of the issuance of
additional shares of Common Stock or Convertible Securities.
(h) For purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities, the
Company shall be deemed to have issued at the same time as the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of Convertible Securities.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith be
readjusted to such Conversion Price as would have been obtained (a) had the
adjustments made upon the issuance or sale of such expired, cancelled or
redeemed Convertible Securities been made upon the basis of the issuance of only
the number of shares of Common Stock theretofore actually delivered upon the
exercise or conversion of such Convertible Securities (and the total
consideration received therefor) and (b) had all subsequent adjustments been
made only on the basis of the Conversion Price as readjusted under this
subparagraph (i) for all transactions (which would have affected such adjusted
Conversion Price) made after the issuance or sale of such Convertible
Securities.
Page 24
(j) Anything in this Section 6.3 to the contrary notwith- standing, no
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Conversion Price;
provided, however, that any adjustments which by reason of this subparagraph (j)
are not required to be made shall be carried forward and taken into account in
making subsequent adjustments. All calculations under this Section shall be made
to the nearest cent or to the nearest tenth of a share, as the case may be.
(k) Upon any adjustment of any Conversion Price, then and in each such
case the Company shall promptly deliver a notice to the registered Holder of
this Note, which notice shall state the Conversion Price resulting from such an
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the conversion hereof, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(l) Upon any adjustment of the Conversion Price pursuant to any
provisions contained in this Paragraph 6.3, the number of Shares issuable upon
conversion of this Note shall be changed accordingly.
6.4 IN CASE AT ANY TIME:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends) to the
holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the holders
of the Common Stock any additional shares of stock of any class or other rights;
(iii) There shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
or
(iv) There shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder of the date on which (X) the books of the Company shall close or a
record shall be taken for such dividend, distribution, or subscription rights,
or (Y) such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution, or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolida- tion, merger, sale, dissolution, liquidation, or winding-up, as the
case may be. Such notice shall be given at least ten (10) days prior to the
record date or the date on which the Company's transfer books are closed in
respect thereof. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any of the matters set forth in this
paragraph.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
The Holder of this Note, each transferee hereof and any Holder and
transferee of any shares of Common Stock into which this Note is convertible
(the "Shares"), by his acceptance thereof, agrees that (i) no public
distribution of Note or Shares will be made in violation of the Securities Act
of 1933, as amend (the "Act"), and (ii) during such period as the delivery of a
prospectus with respect to the Shares may be required by the Act, no public
distribution of the Shares will be made in a manner or on terms different from
those set forth in, or without delivery of, a prospectus then meeting the
requirements of Section 10 of the Act and in compliance with applicable state
securities laws. The Holder of this Note and each transferee hereof further
agrees that if any distribution of any Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements of Section
10 of the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of this Note that any transferee thereof deliver to
the Company his written agreement to accept and be bound by all of the terms and
conditions contained in this Note.
This Note or the Shares or any other security issued or issuable upon
conversion of this Note may not be sold or otherwise disposed of except as
follows:
(1) To a person who, in the opinion of counsel for the Holder reasonably
acceptable to the Company, is a person to whom this Note or Shares may legally
be transferred without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provisions of
Page 25
this Section with respect to any resale or other disposition of such securities
which agreement shall be satisfactory in form and substance to the Company and
its counsel; provided that the foregoing shall not apply to any such Note,
shares or other security as to which such Holder shall have received an opinion
letter from counsel to the Company as to the exemption thereof from the
registration under the Act pursuant to Rule 144(k) under the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.
Each certificate for Shares issued upon conversion of this Note shall
bear a legend relating to the non-registered status of such Shares under the
Act, unless at the time of conversion of this Note such Shares are subject to a
currently effective registration statement under the Act and the Holder is not
otherwise an "affiliate," or could potentially be deemed an "affiliate," of the
Company as such term is defined in the Act.
8. MISCELLANEOUS
8.1 Notices. All communications provided hereunder shall be in writing
and, if to the Company, delivered or mailed by registered or certified mail
addressed to Unapix Entertainment, Inc., ______________________________________,
Attention: President, or, if to the Holder at the address shown for the Holder
in the registration books, maintained by the Company.
8.2 LOST, STOLEN, OR MUTILATED NOTES. In case this Note shall be
mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue
and deliver in exchange and substitution for and upon cancellation of the
mutilated Note, or in lieu of and substitution for the Note, lost, stolen, or
destroyed, a new Note of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction and an indemnity, if requested, also satisfactory to
it.
8.3 STAMP TAX. The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Common Stock issuable upon
conversion of this Note; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for the Common Stock in
a name other than that of the Holder in respect of which this Note is issued,
and in such case the Company shall not be required to issue or deliver any
certificate for the Common Stock until the person requesting the same has paid
to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
8.4 SHARES VALIDLY ISSUED. The Company agrees that all shares issuable
upon conversion of this Note shall be, at the time of delivery of certificates
for such shares, validly issued and outstanding, fully paid and non-assessable
and that the issuance of such shares will not give rise to preemptive rights in
favor of existing stockholders.
8.6 GOVERNING LAW. This Note shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to conflict
of laws principles.
8.7 NO RECOURSE. No recourse whatsoever, either directly or through
the Company or any trustee, receiver or assignee, shall be had in any event or
in any manner against any past, present or future stockholder, director or
officer of the Company for the payment of the redemption price, principal of or
interest on this Note or for any claim based thereon or otherwise in respect
this Note; this Note being a corporate obligation only.
8.8 REGISTRATION OF TRANSFER. The Company shall maintain books for the
transfer and registration of Notes. The Company may treat the person in whose
name this Note is registered as the owner and Holder of the Note for the purpose
of receiving principal of or interest on this Note and for all other purposes
whatsoever and the Company shall not be affected by any notice to the contrary.
Upon the transfer of any Note in accordance with the provisions of Section 7
hereof, the Company shall issue and register the Note in the names of the new
holders. The Notes shall be signed manually by the Chairman, Chief Executive
Officer, President or any Vice President and the Secretary or Assistant
Secretary of the Company. Subject to the terms of Sections 6 and 7 and Section
8.3, upon surrender of this Note, the Company shall issue and deliver with all
reasonable dispatch to or upon the written order of the Holder of such Note, and
in such name or names as such Holder may designate, a certificate or
certificates for the number of full shares due to such Holder upon the
conversion of this Note. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become the Holder of record of such Shares as of the date of the
surrender of this Note pursuant to said sections; provided, however, that if, at
the date of surrender the transfer books of the Common stock shall be closed,
the certificates for the Shares shall be issuable as of the date on which such
books shall be opened and until such date the Company shall be under no
Page 26
duty to deliver any certificate for such Shares; provided, further, however,
that such transfer books, unless otherwise required by law or by applicable rule
of any national securities exchange, shall not be closed at any one time for a
period longer than 20 days.
IN WITNESS WHEREOF, Unapix Entertainment,Inc. has caused this Note to be
signed in its corporate name by its President and to be dated the day and year
first above written.
UNAPIX ENTERTAINMENT, INC.
By:
Name:
Title:
Attest:
- ---------------------
Name:
Title:
Page 27
Assignment
For value received I hereby assign
to $
principal amount of the 10% Convertible Subordinated Note due June 30, 2003
evidenced hereby and hereby irrevocably appoint attorney
to transfer the Note on the books of the within named corporation with full
power of substitution in the premises.
Dated:
In the presence of:
- ----------------------------
----------------------------------
Page 28
CONVERSION NOTICE
TO: UNAPIX ENTERTAINMENT, INC.
The undersigned holder of this Note hereby irrevocably exercises the option to
convert $_________ principal amount of such Note (which may be less than the
stated principal amount thereof) into shares of common stock of Unapix
Entertainment, Inc. ("Common Stock"), in accordance with the terms of such Note,
and directs that the shares of Common Stock issuable and deliverable upon such
conversion, together with a check (if applicable) in payment for any fractional
shares as provided in such Note, be issued and delivered to the undersigned
unless a different name has been indicated below. If shares of Common Stock are
to be issued in the name of a person other than the undersigned holder of such
Note, the undersigned will pay all transfer taxes payable with respect thereto.
Name and Address of Holder
Signature of Holder
Principal amount converted $
If shares are to be issued otherwise than to the holder:
Name of Transferee
Name and SS# of Transferee
Page 29