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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1999
REGISTRATION NO. 333-73151
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
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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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)
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THOMAS A. HEYMANN
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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COPY TO:
DAVID P. LEVIN, ESQ.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
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 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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SHARES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
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Common Stock, par value $.01 per
share................................. 2,503,582 $2.563 $6,416,681 $1,784
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(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act, based on the average of
the high and low sales prices for GT common stock as reported on the Nasdaq
National Market on July 29, 1999, which is within five business days prior
to the date of this Amendment to the Registration Statement.
(2) $2,483 was paid on March 1, 1999 in connection with the filing of the
original Registration Statement.
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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 SAID SECTION 8(a), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 2, 1999
PROSPECTUS
2,503,582 SHARES
[GT LOGO]
GT INTERACTIVE SOFTWARE CORP.
COMMON STOCK
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The six stockholders of GT listed on page 12 of this prospectus are
offering and selling a total of 2,503,582 shares of GT common stock under this
prospectus. GT will not receive any of the proceeds from the sale of the shares
sold by these selling stockholders.
GT's common stock is listed on the Nasdaq National Market under the symbol
"GTIS." On July 30, 1999, the closing sales price for GT's common stock, as
reported on the Nasdaq National Market, was $2 11/16 per share.
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INVESTING IN GT'S COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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About GT.................................................... 2
Risk Factors................................................ 4
Forward-Looking Statements.................................. 10
Use of Proceeds............................................. 11
Selling Stockholders........................................ 11
Plan of Distribution........................................ 12
Legal Matters............................................... 13
Experts..................................................... 13
Where You Can Find More Information......................... 13
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS
OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING "RISK
FACTORS" BEGINNING ON PAGE 4. IN ADDITION, YOU SHOULD ALSO READ THE DOCUMENTS WE
HAVE REFERRED YOU TO IN "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 13 FOR
INFORMATION ON OUR COMPANY AND OUR FINANCIAL STATEMENTS.
ABOUT GT
GT Interactive Software Corp., a Delaware corporation, is a leading
worldwide developer, publisher and distributor of interactive entertainment
software for use on various platforms, including PCs, Sony PlayStation and
Nintendo 64. During calendar year 1998, we had the third highest U.S. market
share in number of units sold in the PC software game category. We are also a
leader in certain sub-segments of the entertainment software market, including
the fast growing children's education and leisure entertainment segments.
According to PC Data, in 1998 GT held the number one U.S. market share in the
value-priced/leisure segment, on the basis of both dollar and unit volume. In
addition, during the same period, our Humongous studio held the number three
U.S. market share in the PC education software segment on the basis of units
sold.
GT derives revenue from both publishing and distribution activities. Our
publishing business consists of three divisions: Children's, Leisure and
Frontline. Our Children's Division develops and publishes children's educational
and entertainment software for the personal computer. Our Leisure Division
develops and publishes lower-priced PC entertainment, reference and productivity
titles for mass market consumption. Our Frontline Division develops, internally
and through third party developers, and publishes cutting edge new release
entertainment software for the gaming enthusiast for use on multiple hardware
platforms.
GT distributes both its own and third-party published software through an
established distribution network. We believe that we are one of the few software
publishers that sells its products directly to substantially all of the major
retailers of computer software in the U.S. This division also compiles,
repackages and markets older titles to retailers, extending the economic life of
those products. We believe we are the largest distributor of consumer software
to mass merchants in the United States. We supply consumer software (including
our own and third-party published software) to approximately 2,380 Wal-Mart
stores, approximately 2,165 K-mart stores and approximately 860 Target stores.
We also distribute consumer software to other major retailers including Office
Depot, Best Buy, CompUSA, AAFES, Sam's Club and Babbage's.
Our principal executive offices are located at 417 Fifth Avenue, New York,
New York 10016. Our main telephone number is (212) 726-6500. Our World Wide Web
homepage is located at http://www.gtinteractive.com. Information contained on
our website should not be deemed part of this prospectus.
RECENT DEVELOPMENTS
On June 29, 1999, we announced that we had hired Bear Stearns & Co. to seek
a recapitalization, merger or sale of GT. We also announced that we received
"Commitments" from affiliates of General Atlantic Partners, LLC and certain
members of the Cayre family to provide $30 million of subordinated debt
financing which would be made available to us on or before July 30, 1999.
Certain members of the Cayre family and affiliates of General Atlantic own, in
the aggregate, a significant percentage of GT's common stock. Effective
immediately, but conditioned upon the Commitments, the banks under our $125
million credit facility have agreed to make available to us an additional $20
million under our borrowing base until March 31, 2000. We anticipate that under
the credit facility substantially all of the $125 million credit line should be
available to us through March 31, 2000. We believe that amounts available under
the credit facility and the Commitments will be sufficient to fund our
operational requirements through
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June 30, 2000, when the credit facility becomes due and payable. This financing
will also permit us, with the help of and Bear Stearns, to seek a
recapitalization, merger or sale of GT in an orderly manner and consistent with
the needs of our ongoing business.
On July 29, 1999, affiliates of General Atlantic and certain members of the
Cayre family funded the $30 million of subordinated debt financing. Concurrently
with the funding of the subordinated debt, GT issued to the affiliates of
General Atlantic warrants to purchase, at an exercise price of $0.01 per share,
an aggregate of 1,500,000 shares of GT common stock.
GT is seeking a recapitalization, merger or sale because management
believes that in a consolidating industry, our existing capital resources are
not adequate to carry out management's long-term strategic objectives. We would
consider a recapitalization if it involved a refinancing or replacement of our
debt and provided additional permanent capital sufficient to carry out a
long-term strategic business plan designed to permit GT to remain competitive in
its industry. We cannot assure you that any such transaction will be completed.
If such a transaction is not the subject of a binding agreement before December
31, 1999, or a transaction is not completed which results in repayment of our
credit facility and certain other loans to GT, or the credit facility and loans
are not extended or refinanced prior to June 30, 2000, our operations and
financial condition could be materially and adversely affected. We cannot assure
you that a refinancing, if required, can be completed on favorable terms, or at
all.
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RISK FACTORS
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO COMPLETE A RECAPITALIZATION,
MERGER OR SALE OF GT. In addition, the process of seeking a recapitalization,
merger or sale of GT may disrupt our ongoing business and distract our
management and workforce from the day-to-day operations of GT. If we fail to
sign a binding agreement for a recapitalization, merger or sale of GT by
December 31, 1999, then the amounts outstanding under our credit facility may be
accelerated.
AS A RESULT OF THE CREDIT FACILITY AND THE COMMITMENTS, WE WILL HAVE
SUBSTANTIAL INDEBTEDNESS. After giving effect to the credit facility and the
Commitments, our total indebtedness could be as high as $155 million. The level
of our indebtedness could have negative consequences to us including the
following:
- our ability to obtain additional financing in the future for working
capital, capital expenditures, debt service requirements or other
purposes may be limited;
- a substantial portion of our cash flow from operations must be dedicated
to the payment of interest on our indebtedness and other obligations and
will not be available for use in our business; and
- our substantial indebtedness may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive pressures.
IF REQUIRED, ADDITIONAL FINANCING MAY NOT BE AVAILABLE. Although we
believe that financing from the credit facility and the Commitments will provide
sufficient amounts to fund our anticipated operations through June 30, 2000 and
to seek a recapitalization, merger or sale of GT in an orderly manner, we may
require additional financing before that time. If we do need additional
financing, or we must refinance the credit facility and the Commitments on or
before June 30, 2000, we cannot assure you that a financing will be available on
favorable terms, or at all.
THE CREDIT FACILITY WILL RESULT IN THE DILUTION OF OUR COMMON STOCK. We
are required to issue warrants to purchase a total of 2,275,000 shares of our
common stock, at an exercise price equal to par value, before July 30, 1999, in
connection with the funding of the credit facility and the Commitments. In
addition, the terms of the credit facility and the Commitments provide for the
issuance of significant additional warrants to our debtholders if we do not sign
an agreement for a recapitalization, merger or sale of GT which provides for the
repayment of these debt facilities by October 31, 1999 and complete the
transaction by February 28, 2000. If we do not sign an agreement for a
recapitalization, merger or sale of GT by October 31, 1999, we will be required
to issue warrants, at an exercise price equal to par value, to purchase a total
of an additional 2,750,000 shares of our common stock. If we do not complete a
recapitalization, merger or sale of GT by February 28, 2000, we will be required
to issue an additional 3,225,000 warrants, and if we do not repay the
Commitments by June 30, 2000, we will be required to issue 3,000,000 additional
warrants each fiscal quarter until we make repayment.
THE LOSS OF WAL-MART AS A KEY CUSTOMER COULD NEGATIVELY AFFECT OUR
BUSINESS. Our sales to Wal-Mart accounted for approximately 29% of net revenues
for the fiscal year ended March 31, 1999 and our accounts receivable from
Wal-Mart were approximately $49.1 million at March 31, 1999. Our business,
operating results and financial condition would be adversely affected if:
- we lost Wal-Mart as a customer,
- we began shipping fewer products to Wal-Mart,
- we were unable to collect receivables from Wal-Mart, or
- we experienced any other adverse change in our relationship with
Wal-Mart.
We do not have any written agreements or understandings with Wal-Mart.
Consequently, our relationship with Wal-Mart could end at any time. We cannot
assure you that Wal-Mart will continue to use us as a major supplier of consumer
software, or at all. During the second half of 1997, Wal-Mart began purchasing
software directly from five publishers whose software was previously sold to
Wal-Mart through GT. During 1998 and 1999, Wal-Mart has continued, and can be
expected to continue, to buy
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software directly from other publishers, rather than purchasing software through
GT. These direct purchases could significantly reduce our sales to Wal-Mart. For
example, Wal-Mart has recently announced that it expects to begin purchasing
products directly from Microsoft and Activision in fiscal year 2000. Our
combined net revenues from sales of those products to Wal-Mart totaled
approximately $47.3 million in the fiscal year ended March 31, 1999.
OUR REVENUES WILL DECLINE AND OUR COMPETITIVE POSITION WILL BE ADVERSELY
AFFECTED IF WE ARE UNABLE TO INTRODUCE NEW PRODUCTS ON A TIMELY BASIS. Our
continued success in the publishing business depends on the timely introduction
of successful new products, sequels or enhancements of existing products to
replace declining revenues from older products. A significant delay in
introducing new products, sequels or enhancements could materially and adversely
affect the ultimate success of our products and, in turn, our business,
operating results and financial condition, particularly in view of the
seasonality of our business. For example, we recently announced that the
introduction of five major titles was delayed from the fourth quarter of fiscal
year 1999 to the first half of fiscal year 2000, significantly contributing to
operating losses during the fourth quarter of fiscal year 1999. The process of
introducing new products, sequels or product enhancements is extremely difficult
and will only become more difficult as new platforms and technologies emerge.
Competitive factors in our industry demand that we create increasingly
sophisticated products, which in turn makes it difficult to produce and release
these products on a predictable schedule.
WE MAY BE UNABLE TO DEVELOP, MARKET AND PUBLISH NEW PRODUCTS IF WE ARE
UNABLE TO SECURE OR MAINTAIN RELATIONSHIPS WITH INDEPENDENT SOFTWARE
DEVELOPERS. Although we substantially increased our internal software
capabilities in 1996, 1997 and 1998, we are still dependent, to a meaningful
degree, upon independent software developers. For the fiscal year ended March
31, 1999, approximately 68% of our Frontline publishing revenues were derived
from products developed by independent developers. Consequently, our success
depends in part on our continued ability to obtain and/or renew product
development agreements with independent developers. However, we cannot assure
you that we will be able to obtain or renew these product development agreements
on favorable terms, or at all; nor can we assure you that we will be able to
obtain the rights to sequels of successful products which were originally
developed by independent developers for GT. In addition, many of our competitors
have greater access to capital than we do, which puts us at a competitive
disadvantage when bidding to attract independent developers to enter into
publishing agreements with us.
Our agreements with independent software developers are easily terminable,
often without notice, if either party declares bankruptcy, becomes insolvent,
ceases operations or materially breaches its agreement and fails to cure that
breach within a designated time frame. In addition, many independent software
developers have limited financial resources. Many are small companies with a few
key individuals without whom a project may be difficult or impossible to
complete. Consequently, we are exposed to the risk that these developers will go
out of business before completing a project, or simply cease work on a project,
for which we have hired them.
COMPETITION FOR INDEPENDENT SOFTWARE DEVELOPERS IS INTENSE AND MAY PREVENT
US FROM SECURING OR MAINTAINING RELATIONSHIPS WITH INDEPENDENT SOFTWARE
DEVELOPERS. We may be unable to secure or maintain relationships with
independent developers if our competitors can offer them better shelf access,
better marketing support, more development funding, higher royalty rates, or
other selling advantages. Even if these independent developers have developed
products for us in the past, we cannot assure you that they will continue to
develop products for us in the future. In fact, we have in the past worked with
independent developers who later entered into agreements with our competitors
because of our competitor's ability or willingness to pay higher royalty rates
and/or advances.
INDEPENDENT DEVELOPERS MAY PUBLISH THEIR OWN PRODUCTS INSTEAD OF USING GT
TO PUBLISH AND DISTRIBUTE THEIR PRODUCTS, OR MAY SIGN PUBLICATION AGREEMENTS
WITH OUR COMPETITORS, EITHER OF WHICH MAY ADVERSELY AFFECT OUR ABILITY TO
DEVELOP, MARKET AND PUBLISH NEW PRODUCTS. For example, in January 1998, a
consortium, in which certain independent developers purport to have ownership
interests, announced that it secured publishing rights with respect to software
titles to be produced by these developers. These developers include Apogee
Software (3D Realms), developer of Duke Nukem and Prey, and Epic Games,
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developer of Unreal. Although the consortium also announced that these
developers will honor their existing obligations to other software publishers,
we do not know if the competitive pressures exerted by the consortium will
inhibit us from establishing and maintaining relationships with independent
software developers in the future. For example, it was recently announced that
Apogee Software (3D Realms) has agreed to publish one of the future sequel Duke
Nukem titles through one of our competitors.
AS OUR PAYMENT OF ADVANCES AND GUARANTEED ROYALTIES TO INDEPENDENT
DEVELOPERS INCREASES, WE FACE THE RISK THAT OUR OPERATING RESULTS MAY SUFFER IF
WE ARE UNABLE TO RECOVER THESE PREPAID ROYALTIES. In connection with our
licensing agreements with independent developers and licensors, we had
approximately $9.2 million of royalty advances, associated with multi-year
output contracts, on our balance sheet as of March 31, 1999. We cannot assure
you that current or future royalty advances will be recouped. Our ability to
receive revenue and recoup these advances may be prevented or delayed if:
- we fail to release the products associated with royalty advances,
- we experience a delay in the release of these products, or
- sales of these products do not cover the advances made.
FLUCTUATIONS IN OUR QUARTERLY NET REVENUES AND OPERATING RESULTS MAY RESULT
IN REDUCED PROFITABILITY AND LEAD TO REDUCED PRICES FOR OUR STOCK. Our
quarterly net revenues and operating results have varied in the past and can be
expected to vary in the future. As a result, we cannot assure you that we will
be consistently profitable on a quarterly or annual basis. If our operating
results in any future quarter fall below the expectations of market analysts or
investors, the price of our common stock will likely decrease.
Our business has experienced, and is expected to continue to experience,
significant seasonality. Typically, our net sales are significantly higher
during the fourth calendar quarter because of increased consumer demand during
the year-end holiday season. In other calendar quarters, our net revenues may be
lower and vary significantly.
OUR REVENUE GROWTH AND COMPETITIVE POSITION MAY BE ADVERSELY AFFECTED IF WE
ARE UNABLE TO ANTICIPATE AND ADAPT TO RAPIDLY CHANGING TECHNOLOGY. The consumer
software industry is characterized by rapidly changing technology. The
introduction of new technologies, including new technologies that support multi-
player games and new media formats such as on-line delivery and digital video
disks (DVDs), could render our previously released products obsolete or
unmarketable. We must continually anticipate the emergence of, and adapt our
products to, new technologies and systems. In addition, the development cycle
for products designed to operate on new systems can be significantly longer than
our current development cycles. When we choose to publish or develop a product
for a new system, we may need to make a substantial development investment one
or two years in advance of when we actually ship products for that system. If we
develop products for a new system that is ultimately unpopular, our expected
revenues from that product will suffer and we may not be able to recoup our
investment. Conversely, if we choose not to publish products for a new system
that is ultimately popular, our revenue growth and competitive position may be
adversely affected. While 32 and 64 bit game systems, such as Sony PlayStation
and Nintendo 64, continue to be popular and their installed base has reached
significant levels in the US and worldwide, new systems are being developed. For
example, Sony recently announced the development of its next-generation
PlayStation, a 128 bit system which, among other things, will incorporate DVD
technology. Sony plans to introduce its next generation PlayStation in Japan by
March 2000 and in its overseas markets by fall 2000. If successfully developed,
these new systems would require us to reassess our commitment to 32 and 64 bit
game systems and/or any new systems which are introduced.
BECAUSE SOME LICENSORS HAVE SIGNIFICANT CONTROL OVER OUR PRODUCTS, THE
COSTS OF DEVELOPING AND MANUFACTURING THOSE PRODUCTS MAY INCREASE. We are
required to obtain a license to develop and distribute software for each of the
video game systems for which we develop products. We currently have licenses
from Sony, to develop products for the Sony PlayStation, and Nintendo, to
develop products for Nintendo 64. Our contracts with Sony and Nintendo often
grant them significant control over the manufacturing of GT products. For
example, we are obligated to submit new games to Sony or Nintendo
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for approval prior to development and/or manufacture. In some circumstances,
this could adversely affect GT by:
- leaving GT unable to have its products manufactured and shipped to
customers,
- increasing manufacturing lead times and expense to us over the lead times
and costs we could achieve independently,
- delaying the manufacture and, in turn, the shipment of products, and
- requiring GT to take significant risks in prepaying for and holding its
inventory of products.
These factors could materially and adversely affect our business, operating
results and financial condition.
THE LOSS OF OUR SENIOR MANAGEMENT AND SKILLED PERSONNEL COULD NEGATIVELY
AFFECT OUR BUSINESS. In early 1999, we replaced our three most senior executive
officers. Our success will depend to a significant degree upon the performance
and contribution of our senior management team and upon our ability to attract,
motivate and retain highly qualified employees with technical, management,
marketing, sales, product development and other creative skills. In the computer
software industry, competition for highly skilled and creative employees is
intense and costly. We expect this competition to continue for the foreseeable
future, and we may experience increased costs in order to attract and retain
skilled employees.
We cannot assure you that we will be successful in attracting and retaining
skilled personnel. Although we have entered into employment agreements with
Thomas Heymann, as Chairman of the Board of Directors and Chief Executive
Officer of the Company, and John Baker, as President and Chief Operating Officer
of the Company, these individuals or other senior management could leave or
attempt to compete against us. Our business, operating results and financial
condition could be materially and adversely affected if we lost the services of
these or other senior employees or if we fail to replace other employees who
leave or to attract additional qualified employees. Our recent announcement that
we will be seeking a recapitalization, merger or sale of GT may make it more
difficult to retain or attract qualified employees.
THE GENERAL ECONOMIC AND POLITICAL RISKS OF DOING BUSINESS ABROAD COULD
NEGATIVELY AFFECT OUR BUSINESS IN INTERNATIONAL MARKETS. In the past three
years, we have materially increased our international revenues. International
publishing revenues accounted for approximately 31%, 48%, 48% and 44%, of
publishing revenues for the years ended December 31, 1996 and 1997, the three
months ended March 31, 1998 and the twelve months ended March 31, 1999,
respectively. We expect that international revenues will account for a
significant portion of our net revenues in the future. However, in addition to
the possibility that our international business will not continue to grow at the
same rate as in the past, our international revenues are subject to the general
risks of doing business abroad, including:
- unexpected changes in regulatory requirements, tariffs and other
barriers,
- fluctuating exchange rates,
- potential political instability,
- difficulties installing and managing foreign operations,
- difficulties collecting accounts receivable,
- costs and difficulties of localizing products for use in foreign markets
and
- inability of foreign laws to protect our proprietary rights to the same
extent as U.S. law, particularly in some international markets such as
South America, the Middle East, the Pacific Rim and the Far East where
software piracy presents a particularly acute problem.
These or other factors could have a material adverse effect on our future
international revenues and, consequently, on our business, operating results and
financial condition.
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OUR INTERNATIONAL BUSINESS MAY BE ADVERSELY AFFECTED IF WE LOSE RIGHTS TO
DISTRIBUTE GAMES DEVELOPED BY MIDWAY GAMES. In June 1999, Midway Games, Inc.
notified us that it was terminating our agreements to distribute games developed
by Midway, and we are in litigation over that issue. Games from Midway have been
a material part of our international sales for the last several years. On July
2, 1999, we learned that Midway plans to distribute through a competitor of ours
eleven games which we had accepted for distribution, even if our agreements with
Midway are terminated. We have sued to prevent distribution of these games by
Midway through any third party. If these games are not available to us, it could
hurt our relationships with subdistributors and retailers and is likely to
materially adversely affect our international business.
SIGNIFICANT COMPETITION IN OUR INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS. The market for our products is highly competitive and relatively few
products achieve significant market acceptance. Currently, we compete primarily
with other publishers of interactive entertainment software for both personal
computers and video game consoles. Our competitors include Electronic Arts Inc.,
Mattel Inc., Hasbro Corporation, Havas SA, a French company, and Activision. In
addition, some large software companies, media companies and film studios, such
as Walt Disney Company, who are increasing their focus on the interactive
entertainment and edutainment software market, may become significant
competitors of GT. As compared to GT, many of our current and future competitors
may have significantly greater financial, technical and marketing resources than
we do. As a result, these current and future competitors may be able to:
- respond more quickly to new or emerging technologies or changes in
customer preferences,
- 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 GT.
We may not have the resources required for us to respond effectively to
market or technological changes or to compete successfully with current and
future competitors. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on our business, operating results or financial
condition. We cannot assure you that we will be able to successfully compete
against our current or future competitors. Competitive pressures could have a
material adverse effect on our business, operating results and financial
condition.
REVENUES FROM OUR DISTRIBUTION BUSINESS MAY DECLINE AS COMPETITION
INCREASES AND INTERNET TECHNOLOGY IMPROVES. During the fiscal year ended March
31, 1999, revenues from our distribution business were approximately 48% of net
revenues. Recently, several of our competitors have sought to expand their
distribution capabilities and Wal-Mart has announced plans to purchase products
directly from Microsoft and Activision. New video game systems 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. In addition, revenues from our distribution
business may be adversely affected as Internet technology is improved to enable
consumers to purchase and download full-version software products or order
products directly from publishers or from unauthorized or illegal pirate sources
over the Internet.
REVENUES FROM OUR DISTRIBUTION BUSINESS MAY DECLINE IF THE THIRD-PARTY
PRODUCTS WHICH WE DISTRIBUTE FOR OTHER COMPANIES BECOME UNAVAILABLE TO US. As
part of our distribution program, we provide our mass merchant customers with a
wide variety of titles. To achieve this product mix, we must supplement the
distribution of our published products with third-party software products,
including products published by our competitors. We cannot assure you that these
competitors will continue to provide us with their products for distribution to
our mass merchant customers. Our inability to obtain software titles developed
or published by our competitors, coupled with our inability to obtain these
titles from other distributors, could have a material adverse effect on our
relationships with our mass merchant customers and our ability
8
<PAGE> 11
to obtain shelf space for our own products. This, in turn, could have a material
adverse effect on our business, operating results and financial condition.
WE MAY FACE INCREASED COMPETITION AND DOWNWARD PRICE PRESSURE IF WE ARE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS. Our success is heavily
dependent upon our confidential and proprietary intellectual property. We sell a
significant portion of our published software under licenses from independent
developers and, in these cases, we do not acquire the copyrights for the
underlying work. We rely primarily on a combination of confidentiality and
non-disclosure agreements, patent, copyright, trademark and trade secret laws,
as well as other proprietary rights laws and legal methods, to protect our
proprietary rights and the rights of our developers. However, current U.S. and
international laws afford us only limited protection. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy our
products or obtain and use information that we regard as proprietary. Software
piracy is a persistent problem in the computer software industry. Policing
unauthorized use of our products is extremely difficult because consumer
software can be easily duplicated and disseminated. Furthermore, the laws of
some foreign countries may not protect our proprietary rights to as great an
extent as U.S. law. Software piracy is a particularly acute problem in some
international markets such as South America, the Middle East, the Pacific Rim
and the Far East. Our business, operating results and financial condition could
be materially and adversely affected if a significant amount of unauthorized
copying of our products were to occur. We cannot assure you that our attempts to
protect our proprietary rights will be adequate. In addition, our competitors
could independently develop similar or competitive products.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS WHICH WOULD BE COSTLY
TO RESOLVE. As the number of available software products increase, and their
functionality overlaps, software developers and publishers may increasingly
become subject to infringement claims. We are not aware that any of our products
infringe on the proprietary rights of third parties; however, third parties
could attempt to assert infringement claims against GT 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. We have also initiated litigation to assert our intellectual property
rights. Whether brought by or against GT, these claims can be time-consuming,
result in costly litigation and divert management's attention from the
day-to-day operations of GT, which can have a material adverse effect on our
business, operating results and financial condition.
WE MAY BE AT A COMPETITIVE DISADVANTAGE IF WE ARE UNABLE TO SUCCESSFULLY
IMPLEMENT OUR INTERNET STRATEGY. To take advantage of Internet opportunities,
we have, and will continue to:
- expand our World Wide Web sites and the development of our Internet
infrastructure and capabilities;
- expand our electronic distribution capabilities;
- incorporate on-line functionality into existing products; and
- develop and invest in new Internet-based businesses and products,
including multi-player entertainment products.
Implementing our Internet strategy has been costly. We have incurred, and
expect to incur, significant additional costs in connection with these efforts.
These costs include those associated with the acquisition and maintenance of
hardware and software necessary to permit on-line commerce and multi-player
games, as well as the related maintenance of our website and personnel. Although
we believe these platforms and technologies are an integral part of our
business, we cannot assure you that our Internet strategy will be successful or
that we will be able to recoup the cost of our investment.
WE ARE CURRENTLY IN LITIGATION WHICH COULD BE COSTLY IF WE LOSE. As
described in our Annual Report on Form 10-K for the fiscal year ended March 31,
1999 incorporated by reference into this prospectus, GT is currently a
defendant, or subject to counterclaims, in a number of lawsuits. In all of these
lawsuits, we believe that the plaintiffs' complaints are without merit. Although
we intend to defend ourselves vigorously against these actions, doing so is
costly and time-consuming and may divert management's attention from
9
<PAGE> 12
our day-to-day operations. In addition, we cannot assure you that these actions
will be ultimately resolved in our favor. An adverse outcome could have a
material adverse effect on our business, operating results and financial
condition.
IF ACTUAL RETURNS EXCEED OUR RETURN RESERVE, OUR BUSINESS MAY BE NEGATIVELY
AFFECTED. To cover returns, we establish a return reserve at the time we ship
our products. We estimate the potential for future returns based on historical
return rates, seasonality of sales, retailer inventories of GT products, and
other factors. Historically, we have experienced product returns at a rate of
approximately 30% of gross revenues. While we are able to recover the majority
of our costs when third-party products are returned, we bear the full financial
risk when our own products are returned. In addition, the license fees we pay
Sony and Nintendo are non-refundable and we cannot recover these fees when our
console products are returned. Although we believe we maintain adequate reserves
with respect to product returns, if actual returns exceed reserves, it could
adversely affect our business, operating results and financial condition.
OUR PRODUCTS, SYSTEMS AND SALES MAY BE SUBJECT TO YEAR 2000 PROBLEMS. We
have reviewed our critical information systems and other technology for Year
2000 compliance and we are correcting any deficiencies through normal upgrades
of our software or, when necessary, through replacement of existing software or
affected systems with Year 2000 compliant applications or systems. However, if
our present efforts to address Year 2000 compliance issues are not successful,
our business, operating results and financial position could be materially and
adversely affected. For example, failure to achieve Year 2000 compliance for our
internal critical information systems could delay our ability to manufacture and
ship products, disrupt customer service and technical support facilities, or
interrupt customer access to online products and services. In addition, because
of the number of products sold by GT currently and in the past, we could face
litigation relating to Year 2000 compliance of products that we no longer sell
and/or support, although we believe that any such exposure should not be
material.
Furthermore, our business is heavily dependent upon third parties such as
vendors, suppliers, service providers and a large retail distribution channel.
We have asked vendors and other third parties with whom we have relevant
relationships to certify that they are Year 2000 compliant or, if they are not,
to provide us with a description of their plans to become so. However, if these
vendors or other third parties experience Year 2000 failures or malfunctions,
our ability to conduct ongoing operations could be materially and adversely
affected. For example, our ability to manufacture and ship products (including
our own and third-party published software) into the retail channel, to receive
retail sales information necessary to maintain proper inventory levels or to
complete online transactions dependent upon third party service providers could
be affected. In addition, should third-party published products distributed by
GT fail to be Year 2000 compliant, especially any utility software which, if not
Year 2000 compliant could corrupt a user's hardware system, our retail customers
might return these products or seek redress from us, which in turn would require
us to seek redress from the publisher of the product.
THE START-UP OF OUR OUTSOURCING CONTRACT FOR WAREHOUSE OPERATIONS COULD
CREATE OPERATING DIFFICULTIES. We recently entered into an agreement with an
outside vendor to have all of our physical inventory (including returns) handled
and shipped by that vendor from its plant in Pennsylvania. While we believe that
this outsourcing of our warehouse operations will result in more efficient and
cost effective operations for GT, the process of the changeover to the vendor's
facility (scheduled for August 1999) could create unforeseen operating
difficulties or adversely affect our warehouse operations and our relationships
with our retail customers.
FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words "intends," "expects," "plans,"
"estimates," "projects," "believes," "anticipates," and similar expressions are
intended to identify forward-looking statements. Except for historical
information contained herein, the matters discussed and the statements made
herein concerning GT's future prospects are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although we believe
10
<PAGE> 13
that our plans, intentions and expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such plans, intentions
or expectations will be achieved. There can be no assurance that future results
will be achieved, and actual results could differ materially from the forecast
and estimates. Important factors that could cause actual results to differ
materially include, but are not limited to, worldwide business and industry
conditions (including consumer buying and retailer ordering patterns), adoption
of new hardware systems, product delays, changes in research and development
spending, software development requirements and their impact on product
launches, GT customer relations (in particular, levels of sales to Wal-Mart and
other mass merchants), retail acceptance of GT's published and third-party
titles, competitive conditions and other risks and factors, including, but not
limited to, those discussed in "Risk Factors" above beginning on page 4.
USE OF PROCEEDS
All net proceeds from the sale of the GT common stock offered hereby will
go to the selling stockholders.
SELLING STOCKHOLDERS
The selling stockholders are offering and selling a total of 2,503,582
shares of GT common stock under this prospectus. The following table sets forth:
- the number of shares of GT common stock owned by each selling stockholder
as of the date of this prospectus;
- the number of shares being offered by each selling stockholder under this
prospectus; and
- the number of shares of GT common stock which will be owned by each
selling stockholder after the completion of the offering.
All information with respect to share ownership has been provided by the
selling stockholders. The shares offered under this prospectus may be offered
from time to time, in whole or in part, by the selling stockholders or their
transferees. Except as indicated in the footnotes to the following table, none
of the selling stockholders has been an officer, director or employee of GT for
the past three years.
Of the shares being offered under this prospectus, an aggregate of
2,292,314 shares were originally issued to the selling stockholders other than
id Software, Inc. as consideration in connection with GT's acquisition of One
Zero Media, Inc., a Massachusetts corporation, on November 4, 1998. In
connection with the acquisition, we agreed to register these shares under the
Securities Act of 1933.
On July 28, 1999, GT sold One Zero Media to some of the original
stockholders of One Zero Media and certain other investors.
The remaining 211,268 shares being offered under this prospectus are
issuable upon the exercise of a common stock purchase warrant held by id
Software. The warrant is exercisable at a price of $9.47 per share.
11
<PAGE> 14
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING
-----------------------
NUMBER OF PERCENT OF SHARES TO BE SOLD
SELLING STOCKHOLDER SHARES CLASS(1) IN OFFERING(2)
- ------------------- --------- ---------- -----------------
<S> <C> <C> <C>
Alan B. Chebot(3)...................................... 1,062,619 1.5% 1,062,619
Steve Garson(3)........................................ 99,226 * 99,226
id Software, Inc....................................... 211,268(4) * 211,268(5)
Jardine Family Limited Partnership..................... 422,057 * 422,057
Mathew Lindley(3)...................................... 354,206 * 354,206
Kevin Wells(3)......................................... 354,206 * 354,206
</TABLE>
- ---------------
* Less than 1%.
(1) Based on 72,900,776 shares of GT common stock outstanding as of June 18,
1999.
(2) Assumes that all of the shares beneficially owned by the selling
stockholders and being offered under this prospectus are sold and that the
selling stockholders acquire no additional shares of common stock prior to
the completion of this offering. If so, after the offering, each selling
stockholder will not beneficially own any share of GT common stock.
(3) The selling stockholder was an employee of GT from November 4, 1998 to July
28, 1999.
(4) Assumes exercise of the common stock purchase warrant.
PLAN OF DISTRIBUTION
We are registering the shares of GT common stock offered hereby on behalf
of the selling stockholders. As used herein, "selling stockholders" includes
donees and pledgees selling shares received from the selling stockholders after
the date of this prospectus. We will pay all expenses of registration of the
shares offered hereby, other than commissions, discounts and concessions of
underwriters, dealers or agents. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of the shares will be borne by the
selling stockholders. We will not receive any of the proceeds from the sale of
the shares by the selling stockholders.
The shares may be sold from time to time by the selling stockholders, or by
their pledgees, donees, distributees, transferees or other successors in
interest. Sales of the shares may be made in one or more types of transactions
(which may include block transactions) on one or more exchanges, in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of the shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. These transactions may or may not involve brokers
or dealers.
The selling stockholders may effect these transactions by selling their
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling stockholders and/or
the purchasers of shares for whom these broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection with
the sale of the shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933. Consequently, any commissions
received by these broker-dealers and any profit on the resale of the shares sold
by them while acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act of 1933. We have agreed to indemnify the
selling stockholders against certain liabilities, including liabilities arising
under the Securities Act of 1933, or to contribute to payments which the selling
stockholders may be required to make in respect hereof. The selling stockholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act of 1933.
Because the selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, the selling
stockholders will be subject to the prospectus
12
<PAGE> 15
delivery requirements of the Securities Act of 1933, which may include delivery
through the facilities of the Nasdaq National Market pursuant to Rule 153 under
the Securities Act of 1933. We have informed the selling stockholders that the
anti-manipulative provisions of Regulation M under the Securities Exchange Act
of 1934 may apply to their sales in the market.
The selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that Rule.
Upon being notified by any selling stockholder that he has entered into any
material arrangement with a broker-dealer for the sale of the shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, we will file a supplement to this
Prospectus, if required, pursuant to Rule 424(b) under the Securities Act of
1933, disclosing:
- the name of the selling stockholder and the participating broker-dealers;
- the number of shares involved;
- the price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to these
broker-dealers, where applicable;
- that the broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and
- other facts material to the transaction.
We have agreed with the selling stockholders to keep the registration
statement, of which this prospectus is a part, effective for a period ending on
the earlier of (i) one year after the effectiveness of the registration
statement, (ii) the date on which the shares offered hereby can be sold without
registration under the Securities Act of 1933 or any applicable state securities
laws, or (iii) the date on which all shares offered hereby have been sold and
the distribution contemplated hereby has been contemplated, subject to certain
exceptions and limitations.
LEGAL MATTERS
Certain legal matters in connection with the shares of GT common stock
offered hereby have been passed upon for GT by Kramer Levin Naftalis & Frankel
LLP, New York, New York. Certain members of, and persons associated with, such
firm own an aggregate of 23,642 shares of GT common stock.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our filings with the
Securities and Exchange Commission are available to the public over the Internet
at the SEC's web site at http://www.sec.gov. You may also read and copy any
document we file at the Securities and Exchange Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those
13
<PAGE> 16
documents. The information incorporated by reference is an important part of
this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until the selling stockholders sell
all the shares:
The following documents are incorporated by reference into this prospectus:
- Annual Report on Form 10-K, as amended, for the fiscal year ended March
31, 1999 (File No. 0-27338);
- Current Report on Form 8-K, filed April 9, 1999; and
- The description of GT's capital stock set forth in its Registration
Statement under the Exchange Act of 1934 on Form 8-A filed with the
Securities and Exchange Commission on November 30, 1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Director
GT Interactive Software Corp.
417 Fifth Avenue
New York, New York 10016
Telephone number: (212) 726-6500
You should rely on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. The selling stockholders will not
make an offer of these shares in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of those documents.
14
<PAGE> 17
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS 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 GT OR THE SELLING STOCKHOLDERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
2,503,582 SHARES
[GT LOGO]
GT INTERACTIVE SOFTWARE CORP.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1999
<PAGE> 18
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)............................... $ 2,483
Accounting fees and expenses................................ $ 10,000
Legal fees and expenses..................................... $ 15,000
Printing and engraving expenses............................. $ 15,000
Miscellaneous expenses...................................... $ 5,000
--------
Total............................................. $ 47,483
========
</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, as
amended, 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
attorney's 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, as
amended, provides indemnification of directors and officers of the Registrant to
the fullest extent permitted by the DGCL. Pursuant to the respective
registration rights agreements 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.
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.
II-1
<PAGE> 19
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.1 Specimen form of stock certificate for Common Stock
(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))
5.1* Opinion of Kramer Levin Naftalis & Frankel LLP
23.1* Consent of Arthur Andersen LLP
23.3* Consent of Kramer Levin Naftalis & Frankel LLP (contained in
the opinion filed as Exhibit 5.1 hereto)
24.1* Power of Attorney
</TABLE>
- ---------------
* Previously filed.
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 the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange 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 securities being
registered, 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 the 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
Registration Statement is on Form S-3, Form S-8 or Form F-3, and 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 that are incorporated by reference
in the Registration Statement;
(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;
II-2
<PAGE> 20
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
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 the 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> 21
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 Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on August
2, 1999.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ THOMAS A. HEYMANN
--------------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board of
Directors and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman Emeritus of the Board August 2, 1999
- --------------------------------------------------- of Directors
Joseph J. Cayre
/s/ WALTER PARKS Senior Vice President, Finance August 2, 1999
- --------------------------------------------------- and Administration, and Chief
Walter Parks Financial Officer (Principal
Financial and Accounting
Officer)
/s/ THOMAS A. HEYMANN Chairman of the Board of August 2, 1999
- --------------------------------------------------- Directors and Chief Executive
Thomas A. Heymann Officer
* Executive Vice President, August 2, 1999
- --------------------------------------------------- Director
Jack J. Cayre
* Director August 2, 1999
- ---------------------------------------------------
Stanley Cayre
* Director August 2, 1999
- ---------------------------------------------------
Steven A. Denning
* Director August 2, 1999
- ---------------------------------------------------
William E. Ford
Director August 2, 1999
- ---------------------------------------------------
Jordan A. Levy
</TABLE>
II-4
<PAGE> 22
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director August 2, 1999
- ---------------------------------------------------
Phillip J. Riese
* Director August 2, 1999
- ---------------------------------------------------
Alvin N. Teller
</TABLE>
*By: /s/ THOMAS A. HEYMANN
------------------------------
Thomas A. Heymann
Attorney-in-Fact
II-5
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.1 Specimen form of stock certificate for Common Stock
(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))
5.1* Opinion of Kramer Levin Naftalis & Frankel LLP
23.1* Consent of Arthur Andersen LLP
23.3* Consent of Kramer Levin Naftalis & Frankel LLP (contained in
the opinion filed as Exhibit 5.1 hereto)
24.1* Power of Attorney
</TABLE>
- ---------------
* Previously filed.
II-6
