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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7372 13-3689915
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
(212) 726-6500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RONALD CHAIMOWITZ
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
(212) 726-6500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
DAVID P. LEVIN, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING REGISTRATION FEE
PRICE(1)
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Common Stock, par value $.01 per 487,026 $10.9688 $5,342,091 $1,576
share...............................
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act, based on the average of the high and
low sales prices for the Common Stock reported on the Nasdaq National Market
on April 28, 1998.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act, or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to Section 8(a), may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED MAY 1, 1998.
LOGO
487,026 SHARES
COMMON STOCK
The 487,026 shares (the "Shares") of Common Stock offered hereby are being
sold by the holders thereof (the "Selling Stockholders"). GT Interactive
Software Corp. ("GTIS" or the "Company") has agreed to pay the expenses of this
offering but will not receive any of the proceeds from the sale of the Shares
offered hereby. The aggregate proceeds to the Selling Stockholders will be the
purchase price of the Shares sold, less the aggregate brokers' and dealers'
discounts, commissions and concessions, and other expenses of issuance and
distribution not borne by the Company. See "Plan of Distribution" and "Selling
Stockholders." The Common Stock is listed on the Nasdaq National Market under
the symbol "GTIS." On April 30, 1998, the last reported sale price for the
Common Stock, as reported on the Nasdaq National Market, was $10 9/16 per share.
The Shares were originally issued as consideration to the Selling
Stockholders in connection with the acquisition by the Company in October 1997
of SingleTrac Entertainment Technologies, Inc., a Delaware corporation
("SingleTrac"). The Shares may be sold from time to time by the Selling
Stockholders in transactions in the over-the-counter market or otherwise at
prices and on terms then prevailing at the time of sale, at prices related to
the then-current market price or in negotiated transactions. The Selling
Stockholders and any dealers, brokers or agents that participate with the
Selling Stockholders in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Any commissions or discounts received by any such dealers,
brokers or agents may be deemed to be underwriting commissions or discounts
under the Securities Act. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act, or to contribute to payments which the Selling Stockholders
may be required to make in respect thereof. See "Plan of Distribution."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
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The Company was incorporated in Delaware in September 1992 and commenced
operations in February 1993. Unless the context otherwise provides, as used in
this Prospectus "GTIS" or the "Company" refers to GT Interactive Software Corp.
and its subsidiaries. The Company's principal executive offices are located at
417 Fifth Avenue, New York, New York 10016, and its telephone number is (212)
726-6500. The Company's home page can be accessed on the World Wide Web at
http://www.gtinteractive.com. Information contained in the Company's Web site
shall not be deemed to be part of this Prospectus.
The mark "GT" in stylized form is a trademark of the Company. This
Prospectus also includes product names, trademarks and trade names of companies
other than GTIS which are the property of their respective companies. Humongous
Entertainment, Inc. products are not in any manner affiliated with Putt-Putt
Golf Courses of America, Inc.
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). The Common Stock is quoted for trading on the
Nasdaq National Market, and such reports and registration statements filed by
the Company with the Commission and other information concerning the Company may
be inspected at the offices of the Nasdaq Stock Market located at 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed with the Commission, a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain information, exhibits, schedules and undertakings set forth in the
Registration Statement. For further information pertaining to the Company and
the Common Stock, reference is made to such Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete and,
with respect to any contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to such exhibit. Copies of the Registration Statement and exhibits may be
inspected without charge at the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from such office upon payment of fees prescribed by the Commission, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The Registration Statement, including all
exhibits and schedules, and such reports and other information may also be
accessed electronically by means of the Commission's site on the World Wide Web
at http://www.sec.gov. The Company has been an electronic filer since the filing
of its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are by this reference incorporated in
and made a part of this Prospectus: (i) the Company's Annual Report on Form
10-K, as amended, for the fiscal year ended December 31, 1997 (File No.
0-27338);
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(ii) the Company's Current Report on Form 8-K dated February 17, 1998; and (iii)
the description of the Company's capital stock set forth in its Registration
Statement under the Exchange Act on Form 8-A filed with the Commission on
November 30, 1995.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Shares offered
hereby shall be deemed to be incorporated by reference herein and to be part of
this Prospectus from their respective dates of filing. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded to the extent that a statement
contained herein or in any other document subsequently filed which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon a written or oral request, a copy of any
or all of the documents that are incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to GT Interactive
Software Corp., Attention: Investor Relations Manager, 417 Fifth Avenue, New
York, New York 10016. Telephone Number: (212) 726-6500.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," appearing elsewhere in this Prospectus or
incorporated herein by reference and the Consolidated Financial Statements and
notes thereto incorporated herein by reference. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
THE COMPANY
GT Interactive Software Corp., a Delaware corporation (the "Company"),
creates, publishes and merchandises interactive entertainment, edutainment and
value-priced consumer software for a variety of platforms on a worldwide basis.
Similar to major film studios and record companies, the Company employs a
portfolio approach to achieve a broad base of products across most major
consumer software categories. The Company obtains new software content by
blending its internal software development capabilities with the publishing
relationships it has established with a variety of independent software design
groups and content providers. Recognizing that software distribution
capabilities attract publishing content, the Company has used its strong
distribution foundation to build its current position as a leader in the
consumer software publishing business. According to PC Data, the Company
achieved the industry's second highest market share for 1997 in number of units
sold in the PC software game category and, for the second consecutive year, the
industry's highest market share for 1997 in dollars and number of units sold in
the PC software budget/value-priced category. In addition, the Company achieved
the industry's fourth highest market share for 1997 in number of units sold in
the PC edutainment software industry.
The Company believes that it is also the largest distributor of consumer
software to mass merchants in the United States. The Company believes that it is
the largest supplier of consumer software (including its own and third-party
published software) to approximately 2,325 Wal-Mart Stores, Inc. and
approximately 790 Target stores and supplies value-priced software under
specially designed programs to approximately 2,115 Kmart stores. In addition,
the Company has established direct selling relationships for its own published
software with a variety of major retailers, including Sam's Club, Price-Costco,
CompUSA, Best Buy and Computer City, among others. During 1997, the Company also
launched an affiliate label program. Under this program, the Company intends to
sell and distribute interactive software for, and provide marketing consulting
services to, a variety of publishers on a global basis.
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RISK FACTORS
CUSTOMER CONCENTRATION AND CREDIT RISK
The Company believes it is the largest supplier of consumer software to
Wal-Mart Stores, Inc. ("Wal-Mart"), including titles published by the Company
and products from other publishers. On a pro forma basis, giving effect to the
acquisition of Slash Corporation ("Slash") in 1995, sales to Wal-Mart accounted
for approximately 48%, 45% and 36% of the Company's net sales for 1995, 1996 and
1997, respectively. The Company's status as Wal-Mart's largest supplier is not
based upon any written agreement or understanding. Accordingly, such status
could be terminated at any time by Wal-Mart. In addition, Wal-Mart has dedicated
the software department in a limited number of stores to other software
publishers on a test basis. There can be no assurance that Wal-Mart will
continue to use the Company as its largest supplier of consumer software, or at
all. The loss of Wal-Mart as a customer, a significant decrease in product
shipments to or an inability to collect receivables from Wal-Mart or any other
adverse change in the Company's relationship with Wal-Mart would have a material
adverse effect on the Company's business, operating results and financial
condition. During the second half of 1997, Wal-Mart began purchasing software
directly from five publishers (gross sales of whose products to Wal-Mart
aggregated approximately $37 million and $29 million for the year ended December
31, 1996 and the six months ended June 30, 1997, respectively) and may begin
purchasing products directly from other publishers. Such direct purchases could
significantly reduce the Company's sales to Wal-Mart.
RISKS ASSOCIATED WITH ACQUISITIONS
In June 1995 the Company acquired Slash, in June 1996 the Company acquired
WizardWorks Group, Inc. and Candel Inc., in July 1996 the Company acquired
Humongous Entertainment, Inc., in November 1996 the Company acquired the
business of Warner Interactive Europe, in January 1997 the Company acquired
Premier European Promotion Ltd. and in October 1997, the Company acquired
SingleTrac. The Company undertook these acquisitions to expand its publishing
and distribution capabilities with the assumption that the combined entity would
be better able to take advantage of market opportunities than if each of the
companies were operated individually. Realization of these benefits will depend
in part on the ability of the Company to retain in-house publishing staffs and
third-party relationships and to utilize distribution, sales and marketing
capabilities. The Company has partially integrated the acquired companies by
consolidating certain operations, offices and facilities, and combining
administrative, accounting, sales and marketing and distribution functions. The
integration of these acquired companies involves, among other things, the
opening of new facilities or the expansion of existing facilities, the expansion
of accounting systems, controls and procedures, the increase in warehouse and
distribution capabilities, the closing of redundant facilities and the
elimination of duplicate personnel. The Company is in the early stages of
integrating certain of the more recently acquired companies and there can be no
assurance that the integration will be completed without disrupting the
Company's business. Should the Company not be able to achieve such integration
in a timely manner or in a coordinated fashion, it could materially and
adversely affect the Company's business, operating results or financial
condition.
The Company believes that its future growth will depend, in part, on its
ability to continue to identify, acquire and integrate companies which have
software development and publishing capabilities. While the Company reviews
acquisition opportunities in the ordinary course of its business, some of which
may be material and some of which are currently under investigation or
discussion, the Company presently has no commitments or undertakings with
respect to any material acquisitions and there can be no assurance that the
Company will be successful in identifying and acquiring suitable acquisition
candidates or integrating the acquired businesses into the Company's operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced and may continue to experience significant
quarterly fluctuations in net sales and operating results due to a variety of
factors, including fluctuations in the mix of products with varying profit
margins sold by the Company, the size and timing of acquisitions, the size and
growth rate of the
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consumer software market, market acceptance of the Company's products (including
the Company's published and third-party distributed titles) and those of its
competitors, development and promotional expenses relating to the introduction
of new products or enhancements of existing products, projected and actual
changes in product platforms, the timing and success of product introductions by
the Company and its competitors, product returns, changes in pricing policies by
the Company and its competitors, the accuracy of retailers' forecasts of
consumer demand, the timing of orders from major customers, order cancellations
and delays in shipment. In addition, delays in the introduction of the Company's
front-line titles could result in material fluctuations of the Company's
operating results. The Company has experienced, and expects to experience in the
future, significant fluctuations in its quarterly net sales and operating
results as a result of such factors. In response to competitive pressures, the
Company may take certain pricing or marketing actions that could materially and
adversely affect the Company's business, operating results and financial
condition. Products are generally shipped as orders are received and,
accordingly, the Company operates with little backlog. The Company's expense
levels are based, in part, on its expectations regarding future sales and, as a
result, operating results would be disproportionately adversely affected by a
decrease in sales or a failure to meet the Company's sales expectations.
Defective front-line published products may result in higher customer support
costs and product returns. Further, the consumer software business is seasonal.
Net sales are typically significantly higher during the fourth calendar quarter,
due primarily to the increased demand for consumer software during the year-end
holiday buying season. Net sales in other quarters are generally lower and vary
significantly. Accordingly, the Company believes that period to period
comparisons of operating results are not necessarily meaningful, unless such
comparisons are made between the comparable periods in different years, and
should not be relied upon as an indication of future performance. There can be
no assurance that the Company will achieve consistent profitability on a
quarterly or annual basis. Due to all of the foregoing factors, the Company's
operating results in any quarter may be below the expectations of public market
analysts and investors. In such event, the market price of the Company's Common
Stock would likely be materially and adversely affected. See "-- Possible
Volatility of Stock Price."
DEPENDENCE ON NEW PRODUCT AND PRODUCT ENHANCEMENT INTRODUCTIONS; PRODUCT DELAYS
The Company's continued success in the publishing business depends on the
timely introduction of successful new products or enhancements of existing
products to replace declining revenues from older products. Consumer preferences
for software products are difficult to predict, and few consumer software
products achieve sustained market acceptance. If revenues from new products or
enhancements were to fail to replace declining revenues from existing products,
the Company's business, operating results and financial condition could be
adversely affected. The process of developing software products such as those
offered by the Company is extremely complex and is expected to become more
complex and expensive in the future as new platforms and technologies are
addressed. A significant delay in the introduction of one or more new products
or enhancements could have a material adverse effect on the ultimate success of
such products and on the Company's business, operating results and financial
condition, particularly in view of the seasonality of the Company's business.
See "-- Reliance on Third-Party Software Developers -- Reliance on Other
Publishers" and "-- Fluctuations in Quarterly Operating Results; Seasonality."
CONTROL OVER, AND EXPENSE OF, GAME CONSOLE PRODUCTS
The Company's contracts with hardware licensors such as Sony and Nintendo,
which are also some of the Company's chief competitors, often grant significant
control to the licensor over the manufacturing of the Company's products. This
fact could, in certain circumstances, leave the Company unable to have its
products manufactured and shipped to customers. In most events, control of the
manufacturing process by hardware companies increases both the manufacturing
lead times and the expense to the Company over the lead times and costs that the
Company can achieve independently. The Company could experience delays in the
manufacturing of products which would cause delays in shipping those products.
The results of future periods could be affected by such delays. Finally, the
Company's contracts with its hardware licensors often require the Company to
take significant risks in prepaying for and holding its inventory of products.
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RELIANCE ON THIRD-PARTY SOFTWARE DEVELOPERS -- RELIANCE ON OTHER PUBLISHERS
Although the Company substantially increased, primarily through
acquisitions, its internal software development capabilities in 1996 and 1997, a
significant portion of the Company's published products have been licensed from,
or developed by, independent software developers. Due primarily to the increased
demand for consumer software programs, the payment of advances and guaranteed
royalties to independent developers has increased and may continue to increase.
The Company's success depends in part on its continued ability to obtain and
renew product development agreements with independent developers. As independent
developers are in high demand, there can be no assurance that independent
developers, including those which have developed products for the Company in the
past, will be available to develop products for the Company in the future. For
example, in January 1998, a newly formed consortium, in which a number of
independent software developers (including Apogee Software, Ltd. (3D Realms),
developer of Duke Nukem and Prey, and Epic Megagames, Inc., developer of Unreal)
purport to have ownership interests, announced that it has secured publishing
rights with respect to software titles to be produced by such developers. The
consortium also announced, however, that such developers intend to fulfill their
existing commitments to other software publishers, including the Company.
Although the Company believes that at the present time it is premature to assess
the competitive impact of the consortium, there can be no assurance that the
competitive pressures exerted by the consortium will not have an adverse effect
on the Company's ability to secure future publishing commitments from such
developers or any other software developers and, consequently, on the Company's
business, operating results and financial condition.
Many independent developers have limited financial resources, which could
expose the Company to the risk that such developers may go out of business prior
to completing a project. In addition, the Company cannot always control the
timing of the introduction of its products which are developed by or in
conjunction with independent developers. While the Company maintains production
liaisons with these developers, there can be no assurance that new products
developed by them and published by the Company will be introduced on schedule or
at all or within acceptable quality guidelines or that they will achieve market
acceptance. The Company's success is also dependent in part on its ability to
obtain content for its products from external sources. There can be no assurance
that the Company will be able to obtain or renew product development agreements,
or to obtain such content, on favorable terms, or at all. Such agreements are
terminable, in some cases without notice, upon the occurrence of one or more of
the following events: those involving the bankruptcy or insolvency of either
party to such agreements, the cessation of operations by either of such parties
or the material breach of specified provisions of such agreements which breach
is not cured within a designated time frame.
The Company also distributes products on behalf of other publishers. There
can be no assurance that the Company will obtain or renew any rights to
distribute such products. Failure to retain or obtain such rights could have a
material adverse effect on the Company's business, operating results and
financial condition.
RECOVERY OF PREPAID ROYALTIES AND GUARANTEES; CHANGE IN ACCOUNTING ESTIMATE
In connection with its licensing arrangements with independent software
developers, the Company had recorded $87.5 million of royalty advances on its
consolidated balance sheet as of September 30, 1997. As a result of changes in
marketplace forces discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 (which is incorporated herein by
reference), the Company made a change in estimate with respect to royalty
advances and expensed $73.8 million, and changed its accounting policies
effective January 1, 1998, as discussed below. At December 31, 1997, there
remained $15.9 million of royalty advances, associated with multi-year output
contracts, on the Company's consolidated balance sheet after this change in
estimate. There can be no assurance that the Company's release of products
associated with such remaining royalty advances will not be delayed, which would
delay the Company's ability to receive revenue to recoup such advances. Further,
the sales volumes of products subject to such arrangement may not be sufficient
to recover such advances and guarantees.
Beginning January 1, 1998, royalty advances to independent developers are
expensed as incurred, rather than capitalized and recorded as an asset on the
Company's consolidated balance sheet. Although the
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Company has determined to increase its expenditures on internal product
development, it expects to continue to enter into licensing arrangements with
independent developers, which will likely require significant additional royalty
advances. All such internal development costs and third party royalty advances
will be charged as an expense as incurred, which could, under certain
circumstances, result in lower reported earnings during the year in which such
expenses are incurred than if such third party royalty advances were capitalized
and expensed as sales of product occur.
CHANGING PRODUCT PLATFORMS
The consumer software market is characterized by rapidly changing
technology, particularly with respect to product platforms. The Company must
continually anticipate the emergence of, and adapt its products to, popular
platforms for consumer software. When the Company chooses to publish or develop
a product for a new platform, it may be required to make a substantial
development investment one to two years in advance of shipments of products for
that platform. If the Company invests in the development of a product for a
platform that does not achieve significant market penetration, the Company's
planned revenues from that product will be adversely affected and it may not
recover its development investment. In addition, if the Company does not choose
to publish or co-develop for a platform that achieves significant market
success, the Company's revenue growth and competitive position may also be
adversely affected.
INTERNET STRATEGIES
The Company believes that the proliferation of the Internet and on-line
networks has created new opportunities for the consumer software industry,
including opportunities for the Company to strengthen customer relationships,
direct marketing, promotion and distribution, broaden its reach to new
customers, add value to existing products and to develop new products and
markets. The Company has initiated steps to take advantage of these
opportunities, including the expansion of its site on the World Wide Web and the
development of its Internet infrastructure and capabilities, including
electronic distribution capabilities, incorporation of on-line functionality
into existing products, and continued development of, and investment in, new
Internet-based businesses and products, including multi-user entertainment
products. The Company has incurred, and expects to incur, significant additional
costs in connection with its Internet infrastructure, including costs associated
with the acquisition and maintenance of hardware and software necessary to allow
for on-line commerce and multi-user games, as well as the maintenance of its web
site and personnel who dedicate significant amount of time thereto. Although the
Company believes that these platforms and technologies are an integral part of
its overall business, there can be no assurance that the Company's Internet
strategies will be successful, or that the costs and investments will provide
adequate returns, or any at all.
INTERNATIONAL SALES
The Company has increased international sales materially over the past
three years, and expects that international sales will account for a significant
portion of its net sales in the future. International sales are subject to
inherent risks, including unexpected changes in regulatory requirements, tariffs
and other barriers, fluctuating exchange rates, potential political instability,
difficulties installing and managing foreign operations and difficulty in
collection of accounts receivable. In addition, acceptance of the Company's
products in certain markets has required, and may in the future require,
extensive, time-consuming and costly modifications to localize the products for
use in particular markets. Software piracy presents a particularly acute problem
in certain international markets such as South America, the Middle East, the
Pacific Rim and the Far East, and the laws of foreign junctions may not protect
the Company's proprietary rights to the same extent as the laws of the United
States. There can be no assurance that these or other factors will not have a
material adverse effect on the Company's future international sales and,
consequently, on the Company's business, operating results and financial
condition.
YEAR 2000 ISSUES
The Company has reviewed its critical information systems for Year 2000
compliance and is in the process of developing a plan to remedy any deficiencies
in a timely manner. The Company expects to resolve
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Year 2000 compliance issues primarily through normal upgrades of its software
or, when necessary, through replacement of existing software with Year 2000
compliant applications. The cost of these upgrades or replacements, some of
which have been budgeted for the year ending March 31, 1999 (the Company has
changed its fiscal year end to March 31), is not expected to be material to the
Company's financial position or results of operations. However, there can be no
assurance that such upgrades and replacements can be completed on schedule or
within estimated costs or can successfully address the Year 2000 compliance
issues. In addition, the Company is in the process of asking vendors to certify
that they are Year 2000 compliant or, if they are not yet so compliant, to
provide a description of their plans to become so. If the Company's present
efforts to address the Year 2000 compliance issues are not successful, or if
vendors and other third parties with which the Company conducts business do not
successfully address such issues, the Company's business, operating results and
financial position could be materially and adversely affected.
COMPETITION
The market for consumer software products is highly competitive. Only a
small percentage of products introduced in the consumer software market achieve
any degree of sustained market acceptance. Competition is based primarily upon
game appeal, price, access to retail shelf space, product enhancements, ability
to operate on popular platforms, availability of titles, new product
introductions, marketing support and distribution systems. Many of the companies
with which the Company currently competes or may compete in the future have
comparable or greater financial, technical, marketing, sales and customer
support resources, larger and more seasoned internal development teams, greater
name recognition and a larger customer base than the Company. In addition, the
Company believes that large software companies, media companies and film studios
are increasing their focus on the interactive entertainment and edutainment
software markets and, as a result of their financial and other resources, name
recognition and customer base, may become significant competitors of the
Company. Moreover, in a number of geographic markets, certain of the titles
offered by the Company, including various hit titles, are offered on a limited
number of platforms and compete with the same titles offered by the Company's
competitors on other platforms. Current and future competitors with greater
financial resources than the Company may be able to carry larger inventories,
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make higher offers or guarantees to software developers and
licensors than the Company. The market is also extremely competitive with
respect to access to third-party developers and content providers. This
competition is based primarily on breadth of distribution, development funding,
reputation and royalty rates. To the extent that competitors maintain or achieve
greater title portfolio breadth, title rights for popular platforms, or access
to third-party developers and content providers, or price, shelf access,
marketing support, distribution or other selling advantages, the Company could
be materially and adversely affected. In addition, several competitors of the
Company have recently sought to expand their distribution capabilities. New
hardware platforms and electronic delivery systems may be introduced into the
software market and potential new competitors may enter the software development
and distribution market, resulting in greater competition for the Company. There
can be no assurance that the Company will have the resources required to respond
effectively to market or technological changes or to compete successfully with
current or future competitors or that competitive pressures faced by the Company
will not materially and adversely affect its business, operating results and
financial condition. In addition, as part of its value added distribution
program, the Company seeks to provide its mass merchant customers with a wide
variety of popular titles. Achieving such a product mix requires the Company to
supplement the distribution of its published products with certain third-party
software products, including products published by the Company's competitors.
There can be no assurance that such competitors will continue to provide such
products to the Company for distribution to the Company's mass merchant
customers and, in fact, during 1997 five competitors began selling their
products direct to Wal-Mart, rather than through the Company. See "-- Customer
Concentration and Credit Risk." The failure to obtain software titles developed
or published by one or more of the Company's competitors, and not being able to
obtain these products from other distributors, could have a material adverse
effect on the Company's relationships with such mass merchant customers, which
in turn would have a material adverse effect on the Company's business,
operating results and financial condition.
9
<PAGE> 11
DEPENDENCE ON KEY PERSONNEL
The continued success of the Company depends to a significant extent upon
the continued performance and contribution of its senior management and on its
ability to continue to attract, motivate and retain highly qualified employees.
The loss of the services of any of the Company's senior management could have a
material adverse effect on the Company's business, operating results and
financial condition. Competition for highly skilled employees with technical,
management, marketing, sales, product development and other specialized training
is intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. Specifically, the Company may
experience increased costs in order to attract and retain skilled employees. In
addition, while the Company has entered into employment agreements with certain
members of its senior management, there can be no assurance that such employees
will not leave or compete with the Company. The Company's failure to attract
additional qualified employees or to retain the services of key personnel could
materially and adversely affect the Company's business, operating results and
financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been, and may in the
future be, volatile. The market price of the Company's Common Stock will be
influenced by a number of factors, including quarterly variations in the
financial results of the Company and its competitors, acquisitions, changes in
earnings estimates by analysts and conditions in the computer software industry,
the overall economy and the financial markets. These and other factors may
adversely affect the market price of the Company's Common Stock.
PRODUCT RETURNS
The Company accepts product returns or provides markdowns or other credits
on varying terms in the event that the customer holds excess inventory of the
Company's products. Software products as complex as those published by the
Company may contain undetected errors when first introduced or when new versions
are released. It is the Company's practice to accept returns of defective or
damaged products at any time. At the time of product shipment, the Company
establishes a return reserve which covers expected future returns and, if
necessary, price protection, the Company's policies for stock balancing and
returns of defective or damaged products. This estimate of the potential for
future returns of products is based on historical return rates, seasonality of
sales, retailer inventories of the Company's products and other factors. The
Company has historically experienced product returns at a rate of approximately
30% of gross sales. Product returns that exceed the Company's reserves, or the
loss of or a delay in market acceptance of a new product as a result of software
failures or otherwise, could materially and adversely affect the Company's
business, operating results and financial condition. Although the Company
maintains reserves which it believes to be adequate with respect to product
returns and price reductions, there can be no assurance that actual returns to
the Company will not exceed the reserves established.
RAPID EXPANSION
The Company has experienced significant and rapid sales growth since it
commenced operations. There can be no assurance that the Company will be able to
maintain its present level of sales or continue to experience sales growth.
There can be no assurance that, if the Company continues to experience sales
growth, it can do so without adversely affecting its profitability. The
Company's ability to manage its growth effectively will require it to continue
to attract, train, motivate, manage and retain key employees and to improve its
operational, financial and management information systems. If the Company's
management becomes unable to manage growth effectively, the Company's business,
operating results and financial condition could be adversely affected. See
"-- Risks Associated with Acquisitions."
RISK OF CUSTOMER BUSINESS FAILURE
The Company's sales are typically made on credit, with terms that vary
depending upon the customer and the nature of the product. The Company does not
hold collateral to secure payment. Retailers and distributors
10
<PAGE> 12
compete in a volatile industry and are subject to the risk of business failure.
The Company believes its existing reserves are adequate to cover its exposure
with respect to such receivables. Although the Company maintains a reserve for
uncollectible receivables that it believes to be adequate, there can be no
assurance that such reserve is adequate or that additional payment defaults on
significant sales would not materially and adversely affect its business,
operating results and financial condition.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company sells a significant portion of published software under
licenses from independent developers and, in such cases, does not acquire the
copyrights for the underlying work. The Company relies primarily on a
combination of patent, trademark, copyright, trade secret and other proprietary
rights laws, license agreements, employee and third-party nondisclosure
agreements and other methods to protect its proprietary rights and the rights of
its co-developers. Unauthorized copying occurs within the software industry, and
if there is a significant increase in the amount of unauthorized copying of the
Company's published products or products distributed by it, the Company's
business, operating results and financial condition could be materially and
adversely affected. Also, as the number of software products in the industry
increases and the functionality of these products further overlaps, software
developers and publishers may increasingly become subject to infringement
claims. There can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to current or
future products. There has been substantial litigation in the industry regarding
copyright, trademark and other intellectual property rights. The Company has
also initiated litigation to assert its intellectual property rights. Any such
claims or litigation, whether against the Company, with or without merit, or
brought by the Company, could be costly and cause a diversion of management's
attention, which could have a material adverse effect on the Company's business,
operating results and financial condition.
CONCENTRATION OF SHARE OWNERSHIP
The Common Stock entitles its holders to one vote per share on all matters
submitted to a vote of the holders of the Company's Common Stock. As of March
31, 1998, Joseph J. Cayre, Kenneth Cayre, Stanley Cayre, the various trusts for
the benefit of their respective children, and Jack J. Cayre, as well as various
charities for which they serve as trustee (together, the "Cayre Family
Stockholders"), collectively held approximately 51.7% of the combined voting
power of the outstanding shares of Common Stock. Accordingly, the Cayre Family
Stockholders have the voting power required to elect all directors and to
approve other matters required to be voted upon by the stockholders of the
Company.
ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue shares of
preferred stock and to determine the designations, preferences and rights and
the qualifications or restrictions of those shares without any further vote or
action by the stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate actions, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL").
In general, this statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. Furthermore, certain other provisions of the Company's
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, such as the provision for a staggered Board of Directors, may have the
effect of discouraging, delaying or preventing a merger, tender offer or proxy
contest, which could adversely affect the market price of the Company's Common
Stock.
11
<PAGE> 13
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 1998, the Company had a total of 67,990,879 shares of
Common Stock outstanding. Upon the effectiveness of the registration of the
Shares, approximately 51,900,000 shares of Common Stock will be "restricted"
securities within the meaning of Rule 144 under the Securities Act. Generally,
under Rule 144, a person who has held restricted shares for one year may sell
such shares, subject to certain volume limitations and other restrictions,
without registering them under the Securities Act. In addition and subject to
certain limitations, holders of approximately 47,700,000 shares of the Company's
Common Stock (including Common Stock issuable upon the exercise of warrants)
have contractual rights to require the Company to register such shares for
future sale and holders of approximately 5,300,000 additional shares of Common
Stock (including Common Stock issuable upon the exercise of warrants) have
contractual rights to include such shares in future registration statements
filed by the Company under the Securities Act. Further, the Company has
registered on registration statements on Form S-8, the shares of Common Stock
subject to outstanding options or reserved for issuance under the Company's
stock incentive or bonus plans. As of March 31, 1998, options to purchase
approximately 9,980,000 shares of Common Stock were outstanding, of which
approximately 3,460,000 option shares were exercisable as of such date. In
connection with licensing and distribution arrangements and acquisitions of
other companies, the Company has issued and may continue to issue Common Stock
or securities convertible into Common Stock. Any such sales, or future sales of
substantial amounts of Common Stock, could adversely affect prevailing market
prices for the Common Stock and could adversely affect the Company's ability to
raise needed capital.
12
<PAGE> 14
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares.
SELLING STOCKHOLDERS
The following table provides certain information with respect to the Shares
held by each Selling Stockholder, which information has been furnished to the
Company by the Selling Stockholders and other sources and which information the
Company has not verified. Each Selling Stockholder is hereby offering two-
thirds of the total number of the shares of Common Stock issued as consideration
to such Selling Stockholder in the October 1997 acquisition (the "Acquisition")
by the Company of SingleTrac, now a wholly owned subsidiary of the Company.
Fifteen percent of the shares issued to each Selling Stockholder in the
Acquisition is held in escrow, and may not be sold, transferred, pledged or
assigned by such Selling Stockholder until June 30, 1999. In connection with the
Acquisition, the Company agreed to register the Shares under the Securities Act.
The Shares offered by this Prospectus may be offered from time to time in whole
or in part by the persons named below or by their transferees. See "Plan of
Distribution."
Messrs. Michael A. Ryder, Todd J. Kelly and Michael J. Bartholomew serve as
Senior Vice President, Product Development, Vice President, Mergers and
Acquisitions, and Chief Technology Officer, respectively, of the Company. Prior
to the Acquisition, Messrs. Ryder, Kelly and Bartholomew served as President and
Chief Executive Officer, Chief Financial Officer and Treasurer, and Chief
Technical Officer and Secretary, respectively, of SingleTrac. Prior to the
Acquisition, each of Messrs. Ryder, Kelly and Bartholomew also served as a
member of, and Microsoft Corporation appointed a member to, the Board of
Directors of SingleTrac.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES THAT SHARES THAT MAY BE
OWNED PRIOR TO MAY BE BENEFICIALLY OWNED
NAME(1) THE OFFERING OFFERED AFTER THE OFFERING
------- ------------------- ----------- ------------------
<S> <C> <C> <C>
Michael A. Ryder(2)........................... 143,598 95,732 47,866
Todd J. Kelly(3).............................. 143,598 95,732 47,866
Michael J. Bartholomew(4)..................... 143,598 95,732 47,866
Jenilee Temple Leininger(5)................... 12,793 1,122 11,671
Sony Computer Entertainment America Inc. ..... 155,178 103,452 51,726
Microsoft Corporation......................... 139,517 93,011 46,506
Evans & Sutherland Computer Corp. ............ 3,367 2,245 1,122
</TABLE>
- ---------------
(1) None of the Selling Stockholders beneficially owns prior to the Offering,
nor shall beneficially own following the Offering, 1% or more of the
outstanding Company's Common Stock.
(2) Represents 143,598 shares beneficially owned by a revocable grantor trust,
of which Mr. Ryder is the beneficiary and for which he serves as trustee.
(3) Represents 143,598 shares beneficially owned by a revocable grantor trust,
of which Mr. Kelly is the beneficiary and for which he serves as trustee.
(4) Represents 143,598 shares beneficially owned by a revocable grantor trust,
of which Mr. Bartholomew is the beneficiary and for which he serves as
trustee.
(5) Includes 1,683 shares beneficially owned by a revocable grantor trust, of
which Ms. Leininger is the beneficiary and for which she serves as trustee.
Also includes 841 shares subject to options exercisable within 60 days.
13
<PAGE> 15
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby. The Shares may be sold from time to time by or for the
account of any of the Selling Stockholders or by their pledgees, donees,
distributees or transferees or other successors in interest to the Selling
Stockholders. Such persons may choose to sell all or any of the Shares in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices related to the then-current market price or in
negotiated transactions. Brokers or dealers involved in the sale may receive
commissions or discounts in connection with such sale in amounts to be
negotiated (and, if such broker-dealer acts as agent for the purchaser of such
Shares, from such purchaser).
The Company has agreed with the Selling Stockholders to keep the
Registration Statement, of which this Prospectus constitutes a part, effective
for a period ending on the earlier of one hundred eighty (180) days from the
date of this Prospectus or the date on which all of the Shares offered hereby
have been sold and the distribution contemplated hereby has been completed,
subject to certain exceptions.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kramer, Levin, Naftalis & Frankel, New York, New York.
Certain members of, and persons associated with, such firm own an aggregate of
24,662 shares of Common Stock.
EXPERTS
The consolidated financial statements and schedule of the Company
incorporated by reference in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
14
<PAGE> 16
LOGO
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this Registration Statement will be as
follows:
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
SEC registration fee (actual)............................... $ 1,576
Accounting fees and expenses................................ $10,000
Legal fees and expenses..................................... $15,000
Printing and engraving expenses............................. $15,000
Miscellaneous expenses...................................... $ 5,000
-------
Total..................................................... $46,576
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's fiduciary duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant's Amended and Restated Certificate of Incorporation
contains provisions permitted by Section 102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such director, officer, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal actions or
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify directors and/or officers in an action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the director
or officer is adjudged to be liable to the corporation. Where a director or
officer is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such director or officer actually and reasonably incurred.
The Registrant's Amended and Restated Certificate of Incorporation provides
indemnification of directors and officers of the Registrant to the fullest
extent permitted by the DGCL. Pursuant to the registration rights agreement
entered into with the Registrant, the Selling Stockholders have agreed to
indemnify directors and officers of the Registrant against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
II-1
<PAGE> 18
The Registrant maintains liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.
ITEM 16. EXHIBITS.
Exhibit 4.1 below is incorporated herein by reference to the exhibit with
the corresponding number filed as part of the Registrant's Registration
Statement on Form S-1 filed on October 20, 1995, and all amendments thereto
(Registration No. 33-98448).
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.1 Specimen form of stock certificate for Common Stock.
5.1* Opinion of Kramer, Levin, Naftalis & Frankel.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of Kramer, Levin, Naftalis & Frankel (contained in
the opinion filed as Exhibit 5.1 hereto).
24.1* Power of Attorney (contained on the signature page of this
Registration Statement).
</TABLE>
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in Item 15 above, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Common Stock covered hereby, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement, provided, however, that
clauses (i) and (ii) do not apply if the information required to be
included in a post-effective amendment by such clauses is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE> 19
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on May 1, 1998.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ RONALD W. CHAIMOWITZ
--------------------------------------
Name: Ronald W. Chaimowitz
Title: Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph J. Cayre, Ronald W. Chaimowitz and
Jack J. Cayre his true and lawful attorney-in-fact and agent, each acting alone,
with full powers of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this registration statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement or amendment has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ JOSEPH J. CAYRE Chairman Emeritus of the Board May 1, 1998
- ---------------------------------------------
Joseph J. Cayre
/s/ ANDREW GREGOR Senior Vice President, Finance and May 1, 1998
- --------------------------------------------- Administration, and Chief Financial
Andrew Gregor Officer (Principal Financial and
Accounting Officer)
/s/ RONALD W. CHAIMOWITZ Chairman of the Board, Chief Executive May 1, 1998
- --------------------------------------------- Officer and Director
Ronald W. Chaimowitz
/s/ JACK J. CAYRE Executive Vice President, Director May 1, 1998
- ---------------------------------------------
Jack J. Cayre
/s/ KENNETH CAYRE Director May 1, 1998
- ---------------------------------------------
Kenneth Cayre
/s/ STANLEY CAYRE Director May 1, 1998
- ---------------------------------------------
Stanley Cayre
/s/ STEVEN A. DENNING Director May 1, 1998
- ---------------------------------------------
Steven A. Denning
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ WILLIAM E. FORD Director May 1, 1998
- ---------------------------------------------
William E. Ford
/s/ JORDAN A. LEVY Director May 1, 1998
- ---------------------------------------------
Jordan A. Levy
/s/ PHILLIP J. RIESE Director May 1, 1998
- ---------------------------------------------
Phillip J. Riese
/s/ ALVIN N. TELLER Director May 1, 1998
- ---------------------------------------------
Alvin N. Teller
</TABLE>
<PAGE> 22
EXHIBIT INDEX
Exhibit 4.1 below is incorporated herein by reference to the exhibit with
the corresponding number filed as part of the Registrant's Registration
Statement on Form S-1 filed on October 20, 1995, and all amendments thereto
(Registration No. 33-98448).
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
<C> <S> <C>
4.1 Specimen form of stock certificate for Common Stock.
5.1* Opinion of Kramer, Levin, Naftalis & Frankel.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of Kramer, Levin, Naftalis & Frankel (contained in
the opinion filed as Exhibit 5.1 hereto).
24.1* Power of Attorney (contained on the signature page of this
Registration Statement).
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
May 1, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: GT Interactive Software Corp.
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to GT Interactive Software Corp., a Delaware
corporation (the "Company"), in connection with the preparation and filing of
the above-captioned Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
covering 487,026 shares of common stock, par value $.01 per share, of the
Company to be sold by the selling stockholders named in the Registration
Statement (the "Shares").
As such counsel, we have examined such corporate records, certificates and
other documents and such questions of law as we have considered necessary or
appropriate for the purposes of this opinion. In rendering this opinion, we have
(a) assumed (i) the genuineness of all signatures on all documents examined by
us, (ii) the authenticity of all documents submitted to us as originals, and
(iii) the conformity to original documents of all documents submitted to us as
photostatic or conformed copies and the authenticity of the originals of such
copies; and (b) relied on (i) certificates of public officials and (ii) as to
matters of fact, statements and certificates of officers of the Company.
Based upon the foregoing, we are of the opinion that the Shares have been
validly authorized and issued, and are fully-paid and non-assessable shares of
common stock of the Company.
We are attorneys admitted to the Bar of the State of New York, and we
express no opinion as to the laws of any other jurisdiction other than the laws
of the United States of America and the General Corporation Law of the State of
Delaware.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Matters" in the
prospectus forming a part of the Registration Statement. In giving such consent
we do not thereby concede that we are within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations promulgated thereunder.
Very truly yours,
Kramer, Levin, Naftalis & Frankel
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
New York, New York
April 30, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated May 10,
1996, with respect to the financial statements of WizardWorks Group, Inc.,
included in GT Interactive Software Corp.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, in this Registration Statement on Form S-3
(No. 333- ) of GT Interactive Software Corp. for the registration of
487,026 shares of its common stock.
ERNST & YOUNG LLP
Minneapolis, Minnesota
April 30, 1998
