SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / X /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ X / Definitive Proxy Statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11c or Rule 14a-12
UNAPIX ENTERTAINMENT, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and
0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11;
(4) Proposed maximum aggregates value of transaction:
(5) Total Fee paid:
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a) (2) and identify the filing fee for which the
offsetting fee was previously paid. Identify the previous filing by
registration statement number, or the form or schedule and the date of
its filing.
(1) Amount Previously paid:
---------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------
(3) Filing Party:
-------------------------------------------------
(4) Date Filed:
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UNAPIX ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 29, 1999
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of Unapix Entertainment, Inc. (the "Company") to be held on July 29, 1999 at
11:00 a.m. at The Board Room of The American Stock Exchange, Inc., 13th Floor,
86 Trinity Place, New York, New York 10006-1881 for the following purposes:
1. To elect two directors;
2. To approve, adopt and ratify an amendment to the Company's
1993 Stock Option Plan; and
3. To transact such other business as may properly come before
the meeting or any adjournment of the meeting.
Only stockholders of record at the close of business on June 17, 1999
will be entitled to notice of and to vote at the meeting.
Please sign, date and mail the enclosed proxy in the enclosed envelope,
which requires no postage if mailed in the United States, so that your shares
may be represented at the meeting.
By Order of the Board of Directors
Michael R. Epps
Secretary
New York, New York
June 25, 1999
UNAPIX ENTERTAINMENT, INC.
200 MADISON AVENUE
NEW YORK, NY 10016
-----------------
PROXY STATEMENT
----------------
The accompanying proxy is solicited on behalf of the Board of Directors
of the Company for use at the Annual Meeting of Stockholders to be held on July
29, 1999 and at any adjournment of the meeting. The proxy may be revoked at any
time before it is exercised by notice, in writing, to the Secretary of the
Company.
The Board of Directors has fixed the close of business on June 17, 1999
as the record date for the meeting. On that date, the Company had outstanding
7,608,980 shares of common stock, $.01 par value ("Common Stock"), 501,323
shares of Series A 8% Cumulative Convertible Preferred Stock ("Preferred Stock
A"), and 1,175 shares of Series C 8% Convertible Preferred Stock, $.01 par value
per share ("Preferred Stock C"). Only stockholders of record of Common Stock,
Preferred Stock A and Preferred Stock C at the close of business on that date
will be entitled to vote at the meeting or at any adjournment of the meeting.
Each such stockholder will be entitled to one vote for each share of Common
Stock or Preferred Stock A held and 400 votes for each share of Preferred Stock
C held and may vote in person or by proxy authorized in writing. Except as
required by law, Common Stock, Preferred Stock A and Preferred Stock C are
required to vote as a single class on all matters submitted to stockholder vote.
Holders of the Company's Common Stock, Preferred Stock A and Preferred Stock C
have no cumulative voting rights in the election of directors.
The principal executive offices of the Company are located at 200
Madison Avenue, 24th Floor, New York, New York 10016.
This Proxy Statement is being mailed to stockholders of the Company on
or about June 25, 1999.
ELECTION OF DIRECTORS
In 1993, the Company adopted a classified Board of Directors, which
divided the directors into three classes. At each annual meeting, the successors
to the class of directors whose term expires at that meeting are elected to
serve a three-year term and until their successors are elected and qualified.
Accordingly, the directors whose terms expire in 1999 are nominees for
re-election at the 1999 Annual Meeting of Stockholders to serve until the Annual
Meeting of Stockholders in the year 2002, or until their successors are duly
elected. The nominees named by the Board of Directors to serve until the Annual
Meeting of Stockholders in the year 2002 are Messrs. Herbert M. Pearlman and
David S. Lawi, who are currently directors of the Company.
The persons named in the enclosed form of proxy have advised that,
unless contrary instructions are received, they intend to vote for the two
nominees named by the Board of Directors of the Company and listed below. If, by
reason of death or other unexpected occurrence, one or more of these nominees is
not available for election, the persons named in the form of proxy have advised
that they will vote for such substitute nominees as the Board of Directors of
the Company may propose.
The nominees and directors are presented below by class.
DIRECTOR OF TERM AS
THE COMPANY DIRECTOR
NAME AGE SINCE EXPIRES IN
- ---- --- ----- ----------
NOMINEES FOR DIRECTOR
Herbert M. Pearlman 66 1990 1999
David S. Lawi 63 1990 1999
OTHER DIRECTORS
Lawrence Bishop 53 1993 2000
Walter M. Craig, Jr. 45 1993 2000
Robert Baruc 47 1995 2001
Scott Hanock 41 1990 2001
David A. Dreilinger 51 1999 2001
PRINCIPAL OCCUPATION OVER THE PAST FIVE YEARS AND OTHER DIRECTORSHIPS OF
DIRECTORS
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.
2
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 1998 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.
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 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 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.
3
DAVID A. DREILINGER. Mr. Dreilinger has been a Director of the Company since
June 1999. He 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.
COMMITTEES AND ATTENDANCE
During 1998, the Company's Board of Directors held four full meetings.
Except for Mr. Hanock, each of the Company's incumbent directors attended at
least 75% of the total number of meetings of the Board of Directors and of the
committees on which he served. The Board of Directors has an Executive
Committee, a Compensation Committee, an Audit Committee and a Stock Option
Committee. The Board of Directors does not currently have a Nominating
Committee. The Executive Committee met once during 1998. None of the other
committees met separately from the entire Board during 1998. The purpose of the
Executive Committee is to act on an interim basis for the full Board. The
Executive Committee is comprised of Messrs. Pearlman, Lawi, Baruc and Hanock.
The functions of the Audit Committee are to select the independent accountants
of the Company, to review with them the Company's financial statements, to
review the Company's financial systems and controls and to oversee other matters
relating to the integrity of the Company's finances and financial statements as
the Committee may consider appropriate. The purpose of the Compensation
Committee is to advise management on the compensation of the Company's executive
officers. The function of the Stock Option Committee is to administer the
Company's 1993 Stock Option Plan described below under "Amendment to the
Company's 1993 Stock Option Plan." The Audit, Compensation and Stock Option
Committees are each comprised of Messrs. Bishop and Craig. Mr. Payson had been a
member of each of the Committees of the Company's Board of Directors until
August 24, 1998, which is the date he resigned from the Company's Board.
4
OTHER EXECUTIVE OFFICERS
Other than Messrs. Pearlman, Lawi, Baruc and Hanock, who are also
directors of the Company and for whom biographical information is provided
above, the names of the executive officers of the Company together with certain
biographical information for each of them is set forth below:
NAME AGE POSITION
- ---- --- --------
Cheryl Freeman 41 Chief Financial Officer
Robert G. Miller 38 Executive Vice President of Television,
President of the Company's Unapix
Program Enterprises Division
Daniel T. Murphy 60 Treasurer
Michael R. Epps 41 General Counsel and Secretary
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.
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 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.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of June 1, 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.
TITLE AMOUNT AND NATURE PERCENT
OF NAME AND ADDRESS OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP (1) CLASS
----- ---------------- ------------- -----
Common Stock Herbert M. Pearlman 1,287,477 (2) 15.8%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Legg Mason, Inc. 1,001,005 (3) 11.7%
c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Dolphin Offshore Partners, L.P. 1,195,317 (4) 13.6%
129 East 17th Street
New York, NY 10003
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Forest Investment Management 837,693 (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 529,997 (7) 6.8%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock A* Legg Mason, Inc. 99,996 (8) 20.0%
c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
6
TITLE AMOUNT AND NATURE PERCENT
OF NAME AND ADDRESS OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP (1) CLASS
----- ---------------- ------------- -----
Preferred Stock A* Herbert M. Pearlman 79,999 (9) 14.9%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock A* Tradewind Fund 50,000 10.0%
c/o Harbor Capital Management
2701 Summer Street, Suite 200
Stanford, Connecticut
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock A* Martin & Velia Bramante 38,334 7.6%
45 Peninsula Road
Belvedere, CA 94920
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock A* David S. Lawi 34,166 (10) 6.6%
c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock C Herbert M. Pearlman 200 17.0%
** c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock C Legg Mason, Inc. 175 14.9%
** c/o Gray, Seifert & Co., Inc.
380 Madison Avenue
New York, NY 10017
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock C George Back 100 8.5%
** c/o Unapix Entertainment, Inc.
200 Madison Avenue, 24th Floor
New York, New York 10016
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock C David S. Lawi 100 8.5%
** c/o Unapix Entertainment, Inc.
537 Steamboat Road
Greenwich, Connecticut 06830
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock C Paul Levy 100 8.5%
** 4 Ironwood Lane
Rye, New York 10580
- ---------------------------------------------------------------------------------------------------------------------
7
TITLE AMOUNT AND NATURE PERCENT
OF NAME AND ADDRESS OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP (1) CLASS
----- ---------------- ------------- -----
-------------------------------------------------------------------------------------------------------------------
Preferred Stock C Dolphin Offshore Partners, L.P. 500 42.6%
** 129 East 17th Street
New York, New York 10003
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------
* 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.
** 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"); 86,768
shares issuable upon conversion of $400,000 principal amount
of notes due in June 2003; 66,080 shares issuable upon
exercise of common stock purchase warrants that are issuable
upon conversion of such notes (the "$4.54 Warrants"), each
such warrant having an exercise price of $4.54 per share and
expiring June 2003; and 80,000 shares issuable upon conversion
of 200 shares of Preferred Stock C. Also includes
8
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; 420,278
shares of Common Stock issuable upon exercise of warrants,
each of which is exercisable into a share of Common Stock at a
price of $3.61 per share and expires on December 31, 2001;
234,193 shares of Common Stock issuable upon conversion of an
aggregate principal amount of $1,000,000 of notes due in 2003;
111,111 shares of Common Stock issuable upon exercise of
warrants, having an exercise price of $5.40 per share and
expiring in June 2003 ("$5.40 Warrants"); 27,056 shares of
Common Stock issuable upon conversion of $125,000 principal
amount of Notes due in June 2003 and 20,650 shares issuable
upon exercise of $4.54 Warrants; and 70,000 shares issuable
upon conversion of 175 shares of Preferred Stock C.
(4) Consists of 995,317 shares issuable upon conversion of
$4,250,000 of notes due in 2003, and 200,000 shares issuable
upon conversion of 500 shares of Preferred Stock C.
(5) Consists of 576,369 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
261,324 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 ("$5.74
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
9
Preferred Stock Options and the subsequent conversion of
shares underlying such options; 6,344 shares that are issuable
upon exercise of March 2007 Options; 21,645 shares issuable
upon conversion of $100,000 principal amount of notes due in
June 2003; 16,520 shares issuable upon exercise of $4.54
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.
10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of June 1, 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 JUNE 1, 1999 (1)
COMMON PERCENT PREFERRED PERCENT PREFERRED PERCENT
NAME STOCK OF CLASS STOCK A (2) OF CLASS STOCK C OF CLASS
(3)
- -----------------------------------------------------------------------------------------------------------------------------
Herbert M. 1,287,477 (4) 15.8% 79,999 (5) 14.9% 200 17.0%
Pearlman
David S. Lawi 529,997 (6) 6.8% 34,166 (7) 6.6% 100 8.5%
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 2,915,543 (15) 32.3% 153,953 (16) 27.8% 300 25.5%
executive officers
as a group (11
persons)
- -------------------------- ------------------- ------------- ------------------- ------------- --------------- -------------
- ------------------------
* 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"). Each share is
11
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 share 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; 86,768
shares issuable upon conversion of $400,000 principal amount
of Notes due in June 2003; 66,080 shares issuable upon
exercise of $4.54 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; 21,645 shares issuable
upon conversion of $100,000 principal amount of notes due in
June 2003; 16,520 shares issuable upon exercise of $4.54
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
12
2003 Options; and 6,344 shares that are issuable upon exercise
of March 2007 Options.
(9) Includes the following shares of Common Stock: 8,749 shares
issuable upon conversion of Preferred Stock A; 52,500 shares
issuable upon exercise of options having an exercise price of
$2.86 per share and expiring August 2003; 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
13
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 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.
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.
14
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
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
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 1996 $195,000 $ 7,000 --- --- ---
of A-Pix
Entertainment
Scott Hanock 1998 $200,000 $20,580 --- --- ---
Co-President of the 1997 $190,000 $71,250 --- 12,000 ---
Company, Managing 1996 $160,000 $12,000 --- --- ---
Director of
International Sales and
Marketing
Robert Miller 1998 $144,000 $56,731 --- 165,750 ---
Executive Vice 1997 $140,080 $27,700 --- 41,002 ---
President 1996 $118,000 $15,750 --- 95,250 ---
15
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
- ---------------------------- --------- ---------------- -------------- ------------- ------------------- -------------------
Michael R. Epps 1998 $155,750 $25,575 --- 28,000 ---
General Counsel 1997 $140,750 $14,075 --- 18,000 ---
1996 $128,750 $12,875 --- --- ---
* 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.
16
STOCK OPTIONS
The following two tables provide information on stock option grants made
to the Named Executive Officers in 1998, options exercised during 1998 (of which
there were none), and options outstanding on December 31, 1998.
STOCK OPTIONS GRANTS IN 1998
NUMBER OF Percent of total Exercise
SECURITIES options granted to price per
UNDERLYING OPTIONS employees share (2) Expiration Date
Name GRANTED in 1998 (1)
- ----------------------------------------------------------------------------------------------------------------
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
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
17
employment contract, based upon the distribution fees and commissions accrued
for 1998 by Unapix Program Enterprises.
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.
18
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.
Number of Unexer- Value of Unexercised
Number of cised Options at In-the Money Options at
Shares FISCAL YEAR-END FISCAL YEAR-END (1)
Acquired
on Value Unexer- Unexer-
Name Exercise Realized Exercisable Cisable Exercisable Cisable
- -----------------------------------------------------------------------------------------------------------------------------
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 --- ---
- --------------------- ---------------- -------------- ------------------ -------------- -------------------- --------------
(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 (ii) 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.
REPORT ON REPRICING OF OPTIONS
On December 9, 1998, the Board of Directors unanimously resolved to adjust the
exercise price of stock options previously granted to employees, including
executive officers (but excluding any executive officers who were also directors
of the Company at the time of such repricing) to $2.86 per share. Before the
adjustment, the exercise prices of the stock options ranged from $3.93 go $6.375
per share. On December 9, 1998 the closing price of the Company's common stock,
as reported by the American Stock Exchange, was $2.1875. The purpose of the
19
adjustment was to incentivize employees and strengthen employee morale by
bringing the exercise price of the options within range of the current trading
price of the stock.
The options that were repriced include 559,750 incentive stock options
granted under the Company's 1993 Stock Option Plan, as amended to date, having
exercise prices prior to the repricing ranging from $3.93 per share to $6.375
per share and 560,200 non-plan options having exercise prices prior to the
repricing ranging from $4.00 per share to $4.81 per share. The repriced options
held by Mr. Miller were as follows: 78,750 options had a preadjusted exercise
price of $4.29 per share; 50,000 options had a preadjusted exercise price of
$4.44 per share; and 12,000 options had a preadjusted exercise price of $4.50
per share. The repriced options held by Mr. Epps were as follows: 20,000 options
had a preadjusted exercise price of $4.56 per share; and 8,000 options had a
preadjusted exercise price of $4.50 per share. No other options held by Named
Executive Officers were repriced. Other than the adjustment to the exercise
price (and the extension of the term of a total of 13,125 options that were
otherwise scheduled to expire in 1999 held by an employee who is not a Named
Executive Officer), the terms and conditions of the repriced options were not
modified.
BOARD OF DIRECTORS
COMPENSATION OF DIRECTORS
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 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
20
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.
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, 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.
Scott Hanock is currently 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
21
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.
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.
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1998, Herbert M. Pearlman, the Company's Chairman of the
Board, 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, rolled-over certain of their prior
investments in the Company (hereinafter referred to as "Film Acquisition
Investments) into investments in 10% Convertible Subordinated Notes due June 30,
2003 ("June 2003 Notes"). 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 $4.62 per share. In addition,
for every $1,000 principal amount of such Notes that is converted, the holders
will receive warrants to purchase 165 shares of Common Stock at an exercise
price of $4.54 per share, expiring June 30, 2003 (the "$4.54 Warrants") (the
conversion price of the Notes as well as such figures regarding the warrants
have 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. The Film Acquisition Investments
had been utilized for the purpose of funding the acquisition by A-Pix
Entertainment of the distribution rights to independently produced films. Each
Film Acquisition Investment provided for: (i) an indeterminate term; (ii) the
recoupment of 110% of the amount thereof invested in any one film from the first
dollars of gross receipts; (iii) aggregate payments to all holders of Film
Acquisition Investments of up to 20% of the net profits of each film in which
such funds were invested; (iv) roll-over of the receipts from each investment in
a film 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.
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.
23
During 1997 and 1998 the Company paid Strategic Growth, the
beneficial owner of over 5% of the Company's common stock, approximately
$248,000 and $161,000 (including reimbursement for out-of-pocket expenses),
respectively, for providing investor relations services. The Company terminated
Strategic Growth as its investor relations consultant in January 1999.
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 Treasurer, 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
24
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 and Lawi exercised 80,834, and 39,116 Class B Warrants, respectively,
pursuant to the Company's offer.
In December 1998, the Company 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. The Variable
Rate Notes are held by customers of Gray Seifert. The Variable Rate Notes are
due on December 31, 2001 and currently bear interest at 3% over the prime rate,
provided, however, that the rate cannot 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. Customers of
Gray Seifert currently own $2,722,500 principal amount of Variable Rate Notes.
As of December 1998, Messrs. Pearlman and Lawi purchased 200 and 100
shares of Preferred Stock C for $200,000 and $100,000, respectively.
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. $150,000 principal 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 $350,000 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.
In May 1999, Dolphin Offshore Partners, L.P., the beneficial owner of
over 5% of the Company's common stock, purchased 500 shares of the Company's
Preferred Stock C for an aggregate purchase price of $500,000.
25
In addition to the indebtedness incurred by Messrs. Pearlman and Lawi
with respect to their exercise of Class B Warrants during 1998 described above,
Messrs. Pearlman, Lawi, Hanock, Baruc, Murphy, Bishop and Epps, all of whom are
presently officers or directors of the Company, currently are indebted to the
Company in the principal amount of $650,974 ($322,729 of which is non-recourse
indebtedness), $208,318 ($77,404 of which is non-recourse indebtedness),
$98,750, $103,750, $40,000, $80,000, and $32,000, respectively, which
indebtedness was incurred in connection with purchases by such individuals of
capital stock that they made at various times from the Company, or from certain
other employees (in exchange for the assumption of debt owed to the Company),
during 1994 through 1997.
AMENDMENT TO THE COMPANY'S 1993 STOCK OPTION PLAN
In 1993, the Company adopted the 1993 Stock Option Plan (the "Plan").
The purpose of the Plan is to promote the interests of the Company and its
stockholders by helping the Company and its subsidiaries attract, retain,
motivate, and reward key employees and consultants, including officers and
directors of the Company.
Under the Plan, the Company may grant to eligible individuals stock
options to purchase the Company's Common Stock. Both non-qualified options
("Non-Qualified Options") and options intended to qualify as "Incentive" stock
options ("Qualified Options") under Section 422 of the Internal Revenue Code
(the "Code") may be granted under the Plan (collectively, Non-Qualified and
Qualified Options are referred to as "Options"). Officers, directors, and
employees of, and consultants to, the Company (or a subsidiary thereof, within
the meaning of Section 424 (f) of the Code), are eligible to receive Options
under the Plan. The Company has approximately 105 employees, as well as two
non-employee directors.
The Plan is administered by either the Company's Board of Directors
or the Stock Option Committee of the Board of Directors (the "Committee").
Subject to the provisions of the Plan, the Board or the Committee has the
authority to determine the individuals to whom Options are to be granted, the
time or times Options are to be granted, the number of shares to be covered by
each Option and the terms and provisions of each Option, including the vesting
thereof. An aggregate of 1,225,000 shares of Common Stock is currently reserved
for issuance under the Plan.
Under the Plan, the exercise price of Options shall be no less than
the fair market value of the Common Stock on the date of grant. However, at no
time may the exercise price of a Qualified Option granted to an individual (a
"Principal Stockholder") owning more than 10% of the total combined voting power
of all classes of stock of the Company, or any of its subsidiaries or of a
parent, be less than 110% of the fair market value of the shares of Common Stock
on the date of grant. Options may be granted for terms not exceeding ten years
from the date of grant, except for Qualified Options which are granted to
Principal Stockholders which may be granted for terms not exceeding five years
from the date of grant. No Qualified Options may be granted after April 23,
2003.
26
In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a cash dividend), stock split, reverse
stock split, or other change in corporate structure affecting the Common Stock,
such substitution or adjustment will be made in the aggregate number of shares
reserved for issuance under the Plan and in the number and exercise price of
Shares subject to outstanding Options granted under the Plan as may be
determined to be appropriate in order to prevent dilution or enlargement of
rights.
The grant of an option, whether it is a Qualified Option or a
Non-Qualified Option, has no tax effect on the Company or on the Optionee.
An Optionee will not realize taxable compensation income as a result
of the exercise of a Qualified Option if the Optionee holds the shares acquired
until at least one year after exercise or, if later, until two years after the
date of grant of the option. The amount by which the fair market value of the
shares exceeds the option price at the time of exercise generally is treated as
an adjustment to income for purposes of the alternative minimum tax. If an
Optionee acquires stock through the exercise of a Qualified Option under the
Plan and subsequently sells the stock after holding the stock for the period
described above, the excess of the sale price of the stock over the option
exercise price will be taxed as capital gain. The gain will not be treated as
compensation income except when the holding period requirements discussed above
are not satisfied. A Qualified Option does not entitle the Company to an income
tax deduction except to the extent that an Optionee realizes compensation
income.
When an Optionee exercises a Non-Qualified Option, the Optionee will
realize taxable compensation income at that time equal to the excess of the fair
market value of the stock on the date of exercise over the option price. An
Optionee will generally have a basis in stock acquired through the exercise of a
Non-Qualified Option under the Plan equal to the fair market value of the stock
on the date of exercise. If the Optionee subsequently sells the stock, the gain
which is the difference between the sale price and the basis will be taxed as
long-term or short-term capital gain, depending on the holding period of the
stock. Any compensation income realized by an Optionee upon exercise of a
Non-Qualified Option will be allowable to the Company as a deduction at the time
it is realized by the Optionee.
The Company has granted options to purchase a total of 1,413,000
shares of Common Stock under the Plan. Of such options, 68,250 have been
exercised to date and 1,344,750 are currently outstanding. The exercise prices
of the outstanding options range from $1.875 per share to $2.86 per share. Of
such options: Options to purchase 402,500 shares were granted to Robert Baruc, a
Director and Co-President of the Company, 52,500 of which have an exercise price
of $2.86 per share and expire in August 2003 (the "August 2003 Options") and
350,000 of which have an exercise price of $1.875 per share and expire in March
2009 (the "March 2009 Options"); Options to purchase 175,000 shares at an
exercise price of $1.875 per share and expiring in March 2009 were granted to
Scott Hanock, Co-President and Director of the Company; Options to purchase
153,750 shares of Common Stock were granted to Robert Miller, Executive Vice
President of Television of the Company and President of the Company's Unapix
27
Program Enterprises' division, 78,750 of which have an exercise price of $2.86
per share and expire in June 2001, 16,500 of which have an exercise price of
$2.86 per share and expire in March 2002, 33,500 of which have an exercise price
of $2.86 per share and expire in March 2003 and 25,000 of which have an exercise
price of $1.88 per share and expire in March 2004; Options to purchase 20,000
shares were granted to Daniel Murphy, the Company's Treasurer, all of which
options have an exercise price of $2.86 per share and expire in June 2008;
Options to purchase 20,000 shares of common stock were granted to Michael R.
Epps, the Company's General Counsel and Secretary, all of which have an exercise
price of $2.86 per share and 10,000 of which expire in February 2007 and 10,000
of which expire in January 2008. Options to purchase 110,000 shares of common
stock were granted to James Coane, the President of Unapix Productions West, all
of which have an exercise price of $2.86 per share and expire in June 2008;
Options to purchase 200,000 shares of common stock were granted to George Back,
President of the Company' majority owned subsidiary Unapix Syndication, Inc.
("Unapix Syndication"), all of which have an exercise price of $2.38 per share
and expire in October 2008; Options to purchase 110,000 shares of common stock
were granted to Timothy Smith, formerly the Executive Vice President of
Production of the Company, all of which have an exercise price of $2.86 per
share and are expected to expire in 2000; Options to purchase a total of 153,500
shares of Common Stock were granted to other employees of the Company, all of
which options have an exercise price of $2.86 per share, and 65,625 of which
expire in June 2004, 7,875 of which expire in December 2000, 55,000 of which
expire in January 2008, 15,000 of which expire in June 2008, and 10,000 of which
expire in March 2007.
Currently, all 52,500 of Mr. Baruc's August 2003 Options, all of Mr.
Miller's options, 16,667 of Mr. Epps' options, 6,667 of Mr. Murphy's options,
18,333 of Mr. Coane's options, 50,000 of Mr. Back's options, 93,334 of Mr.
Smith's options and 125,168 options held by other employees are currently
exercisable. None of Mr. Hanock's options are currently exercisable. 100,000 of
Mr. Baruc's March 2009 Options will become exercisable upon his entering into a
new employment agreement with the Company, having a term expiring in December
2003 and containing mutually acceptable terms. Subject to the completion of such
an employment agreement, another 100,000 of such options will become exercisable
in January 2000 and 50,000 of such options will become exercisable in each of
January 2001, January 2002 and January 2003. 50,000 of Mr. Hanock's options will
become exercisable upon his entering into a new employment agreement with the
Company having a term expiring in December 2003 and containing mutually
acceptable terms. Subject to the completion of such an employment agreement,
another 45,000 of such options will be exercisable in January 2000 and 40,000 of
such options will become exercisable in each of January 2001 and January 2002.
3,333 of Mr. Epps' options will become exercisable in January 2000. 6,667 of the
options granted to Mr. Murphy will become exercisable in December of each of the
years 1999 and 2000. 18,334 of Mr. Coane's options will become exercisable in
each of May 2000 and May 2001, and 55,000 of Mr. Coane's options will not become
exercisable until December 2007, subject to earlier exercisability if Unapix
Productions West achieves certain earnings goals. The remaining 150,000 of Mr.
Back's options that are not currently exercisable will not be exercisable until
April 2008, subject to earlier exercisability upon Unapix Syndications'
attainment of certain
28
earnings goals. Of the 28,332 options held by other employees that are not
currently exercisable, all such options will be exercisable on or before June
2001.
The grant of 125,334 and 62,666 of Mr. Baruc's and Mr. Hanock's
Options, respectively, are subject to the approval of the amendment to the Plan
proposed hereby.
The closing sales price of the Company's Common Stock, as reported by
the American Stock Exchange, on June 22, 1999, was $3.00.
The Board of Directors has adopted an amendment to the Plan, subject
to stockholder approval at the meeting, increasing the number of shares
authorized to be issued upon exercise of Options granted under the Plan from
1,225,000 to 1,600,000 shares.
The approval of the proposal to amend the Plan requires the
affirmative vote of the holders of a majority of the voting power of the shares
of Common Stock, Preferred Stock A and Preferred Stock C, voting together as a
single class, present in person or represented by proxy and entitled to vote at
the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS ADOPTION, APPROVAL
AND RATIFICATION OF THE AMENDMENT BY THE STOCKHOLDERS AT THE
MEETING.
VOTING ON THE PROPOSALS
With regard to the election of directors, votes may be cast in favor
or withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. With respect to the proposal to amend the Plan, abstentions
may be specified and will be counted as present for purposes of the item on
which the abstention is noted. Accordingly, since the amendment to the Plan
requires the approval of a majority of the voting power, present in person or
represented by proxy at the Meeting and entitled to vote, abstentions will have
the effect of a negative vote. Broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but they are not counted for purposes of determining whether the proposal has
been approved.
PROPOSALS BY STOCKHOLDERS
Proposals that stockholders wish to include in the Company's proxy
statement and form of proxy for presentation at the next Annual Meeting of
Shareholders must be received by the Company at 200 Madison Avenue, New York,
New York 10016, Attention Michael R. Epps, prior to February 26, 2000. The
Company will be allowed to have discretionary voting authority on any proposal
that is to be presented at next year's annual meeting, unless it receives notice
of such proposal by no later than May 12, 2000.
29
INDEPENDENT AUDITORS
The Board of Directors has selected Richard A. Eisner & Company, LLP
("Richard Eisner & Co.") as independent auditors for the Company for the year
ending December 31, 1999. Richard Eisner & Co. have served as independent
auditors for the Company since 1994. The Company has been advised that
representatives of Richard Eisner & Co. will attend the Annual Meeting of
Stockholders, will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
MISCELLANEOUS
The Board of Directors knows of no other matters that are to be
brought before the meeting. However, if any other matters do come before the
meeting, the persons named on the enclosed form of proxy or their substitutes
will vote in accordance with their judgement on those matters.
The cost of solicitation of proxies, including expenses in connection
with preparing, assembling and mailing this proxy statement, will be borne by
the Company. The solicitation will be made by mail and may also be made by
officers or regular employees of the Company personally or by telephone or
telegram, or by professional proxy solicitors acting on behalf of the Company.
The Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy materials to beneficial owners.
New York, New York
June 25, 1999
30
UNAPIX ENTERTAINMENT, INC.
FORM OF PROXY
The undersigned hereby appoints HERBERT M. PEARLMAN, DAVID S. LAWI and
DAVID A. DREILINGER, and each of them with full power of substitution, proxies
to vote all shares of common stock or preferred stock of Unapix Entertainment,
Inc. (the "Company") owned by the undersigned at the Annual Meeting of
Stockholders on July 29, 1999 and at any adjournment thereof on the items of
business set forth on the reverse and on such other business as may properly
come before the meeting.
/x/ PLEASE MARK YOUR NOMINEES:
VOTES AS IN THIS Herbert M. Pearlman
EXAMPLE. David S. Lawi
FOR WITHHOLD AUTHORITY
1. Election of / / / /
all nominees
as directors
until their
successors shall be
duly elected
TO WITHHOLD AUTHORITY TO VOTE FOR ANY SPECIFIC NOMINEE(S), PRINT
NAMES BELOW
- --------------------------------------------------------------------------------
2. Proposal to approve, adopt, and ratify an amendment to the Company's
1993 Stock Option Plan
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF THE UNDERSIGNED
FAILS TO SPECIFY HOW THE PROXY IS TO BE VOTED, IT WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES AND FOR THE PROPOSALS.
(L.S.) (L.S.) DATE 1999
- --------------------------- ---------------------- -------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
NOTE: (Please sign your name exactly as it appears on the proxy. When signing
as attorney, agent, executor, administrator, trustee, guardian or
corporate officer, please give full title as such. Each joint owner
should sign the proxy).