As filed with the Securities and Exchange Commission on June 4, 1996
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BYRON PREISS MULTIMEDIA COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 13-3676574
(State or other jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
24 West 25th Street
New York, New York 10010
(Address of Principal Executive Offices and Zip Code)
BYRON PREISS MULTIMEDIA COMPANY, INC.
1993 STOCK OPTION PLAN
(Full Title of Plan)
Byron Preiss
President and Chief Executive Officer
Byron Preiss Multimedia Company, Inc.
24 West 25th Street
New York, New York 10010
(212) 989-6252
(Name, address and telephone number, including area code, of agent for service)
With a copy to:
KANE KESSLER, P.C.
1350 Avenue of the Americas
New York, New York 10019
(212) 541-6222
Attn: Robert L. Lawrence, Esq.
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement becomes
effective.
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=======================================================================================
Proposed
Proposed maximum
maximum aggregate Amount of
Title of Securities Amount to be offering price offering registration
to be registered registered(1) per share(2) price(2) fee
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.001 per share 425,000 shares $5.536 $2,352,986 $811.38
=======================================================================================
</TABLE>
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(1) Byron Preiss Multimedia Company, Inc. 1993 Stock Option Plan (the "Stock
Option Plan") authorizes the issuance of a maximum of 425,000 shares of
Common Stock. To date, there have been no shares issued pursuant to the
Stock Option Plan and approximately 258,140 shares are subject to
outstanding options granted under the Stock Option Plan.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(h), the proposed maximum offering price per share is
based upon (i) the average exercise price relating to approximately 258,140
outstanding options granted under the Stock Option Plan, which is
approximately $4.752 per share and (ii) the average bid and ask prices
reported on the NASDAQ Small Cap Market for the Company's Common Stock on
May 30, 1996, which was $6.75, relating to approximately 166,860 shares
which are issuable under the Stock Option Plan.
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EXPLANATORY NOTE
This Registration Statement has been prepared in accordance with the
requirements of Form S-8 and Form S-3 pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). The Form S-8 portion of this Registration
Statement will be used for offers of shares of Common Stock (the "Common Stock")
of Byron Preiss Multimedia Company, Inc., a New York corporation (the "Company"
or the "Registrant"), pursuant to the Company's 1993 Stock Option Plan (the
"Stock Option Plan"). In accordance with the Note to Part I of Form S-8, the
information specified by Part I for Form S-8 has been omitted from this
Registration Statement. Shares of the Company's Common Stock covered by this
Registration Statement also may be sold pursuant to Rule 144 under the
Securities Act rather than pursuant to this Registration Statement. The
Prospectus filed as a part of this Registration Statement has been prepared in
accordance with the requirements of Part I of Form S-3 and will be used for
reofferings or resales of shares of the Common Stock of the Company which are
deemed to be control securities, which have been acquired or will be acquired by
control persons, pursuant to the Stock Option Plan. A Cross Reference Sheet is
provided for such Prospectus.
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BYRON PREISS MULTIMEDIA COMPANY
Cross Reference Sheet Pursuant to Regulation S-K, Item 501(b)
Form S-3 Item Number and Caption Location in Prospectus
- -------------------------------- ----------------------
1. Forepart of Registration Statement and Outside
Front Cover of Prospectus.................... Outside Front Cover
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside
Prospectus................................... Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.................... Risk Factors
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price *
6. Dilution..................................... *
7. Selling Security Holders..................... Selling Stockholders
Front Cover Page; Plan of
8. Plan of Distribution......................... Distribution
9. Description of Securities to be registered... *
10. Interests of Named Experts and Counsel....... *
11. Material Changes............................. *
12. Incorporation of Certain Information Incorporation of
by Reference................................. Documents by Reference
13. Disclosure of Commission Position of
Indemnification for Securities Act
Liabilities.................................. *
- -----------------
* Not applicable or answer is in the negative.
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PROSPECTUS
BYRON PREISS MULTIMEDIA COMPANY, INC.
425,000 SHARES OF COMMON STOCK
(par value $0.001 per share)
This Prospectus may be used by certain persons (the "Selling
Shareholders") who may be deemed to be affiliates of Byron Preiss Multimedia
Company, Inc., a New York corporation (the "Company"), to sell a maximum of
425,000 shares of the Company's Common Stock, $0.001 par value per share (the
"Shares"), which will be purchased or acquired by the Selling Shareholders
pursuant to the Company's 1993 Stock Option Plan (the "Stock Option Plan").
All or a portion of the Shares offered hereby may be offered for sale,
from time to time, on NASDAQ, or otherwise, at prices and terms then obtainable.
All brokers' commissions or discounts will be paid by the Selling Shareholders.
However, any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), may be sold under Rule 144 rather than pursuant to this
Prospectus. See "Plan of Distribution." The Company will receive none of the
proceeds of this offering, although the Company will receive cash upon the sale
of stock to the Selling Shareholders under the Stock Option Plan. See "Use of
Proceeds." All expenses incurred in connection with the preparation and filing
of this Prospectus and the related Registration Statement are being borne by the
Company.
See "Risk Factors" on page 8 hereof for a discussion of certain factors
that should be carefully considered by prospective purchasers.
The Company's Common Stock is listed on the NASDAQ Small Cap Market. On
May 30, 1996, the closing bid price of the Company's Common Stock on the NASDAQ
Small Cap Market was $6.50 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 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 June 4, 1996
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No person is authorized to give any information or to make any
representation other than as contained in this Prospectus in connection with the
offer made hereby, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company. The delivery
of this Prospectus at any time does not imply that the information herein is
correct as of any time subsequent to its date. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the specific registered securities to which it relates or
an offer or solicitation with respect to those securities in any jurisdiction to
any person to whom is unlawful to make such offer or solicitation in such
jurisdiction.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the public
reference facilities maintained by the Commission's New York regional offices,
located at Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at its principal office at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 at prescribed rates. In addition, similar information can
be inspected at the National Associates of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus omits certain of the information contained in the
Registration Statement of which this Prospectus is a part (the "Registration
Statement"), covering the Common Stock, which pursuant to the Securities Act is
on file with the Commission. For further information with respect to the Company
and the Common Stock, reference is made to the Registration Statement including
the exhibits incorporated therein by reference or filed therewith. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit or incorporated by reference to the Registration Statement.
The Registration Statement and the Exhibits may be inspected without charge at
the offices of the Commission or copies thereof obtained at prescribed rates
from the public reference section of the Commission at the addresses set forth
above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995, as amended;
2. The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996;
3. The Company's Proxy Statement dated April 26, 1996 relating to
the Annual Meeting of Shareholders to be held on June 12, 1996;
4. The Company's Post-Effective Amendment No. 1 to Registration
Statement on Form SB-2, as, filed with the Commission on
May 10, 1996 (Reg. No 33-74990-NY) (the "Registration
Statement");
5. The description of the Company's Common Stock contained in the
Company's Registration Statement; and
6. Description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on or about May 6, 1994 pursuant to Section 12 of the
Exchange Act, including any amendments or reports filed for the
purpose of updating such description.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of Common Stock shall be deemed to
be incorporated in and made a part of this Prospectus by reference from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document that is also incorporated
by reference herein modifies or replaces such statement. Any statements 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,
including any beneficial owner of the Common Stock, to whom this Prospectus is
delivered, on written or oral request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
to such documents). Written or oral requests for such copies should be directed
to Attention: James Dellomo, Secretary, Byron Preiss Multimedia Company, Inc.,
24 West 25th Street, New York, New York 10010, telephone (212) 989-6252.
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THE COMPANY
Byron Preiss Multimedia Company, Inc., a New York corporation (the
"Company"), was incorporated in July 1992, among other things, to develop,
publish and distribute interactive multimedia software on CD-ROM (Compact
Disc-Read Only Memory) and in other multimedia formats for on-line delivery and
in such other non CD-ROM formats as the Company deems commercially viable. The
Company's primary strategy is to endeavor to develop top-quality software and
other content in on-line or broadcast forms, based on licenses of existing or
new media products or talents in specific areas with consumer, educational,
entertainment or professional appeal and recognition. As part of the Company's
primary strategy, the Company aims to develop the appropriate level of market
awareness, appeal and recognition of its multimedia electronic formats by, among
other things, creating content which is primarily intended to be introduced into
electronic format. To facilitate this process, the Company may create such
content through print format. The titles are designed to have long product life
cycles and global market appeal and are aimed to attract consumers, schools,
libraries and small businesses. The Company's products are intended to be
distinctive for their creative editorial content, graphics and audio and video
material in an interactive setting. The Company develops and publishes its
software on CD-ROM for use with personal computers including, Windows compatible
and Apple Macintosh PCs, and will publish in other multimedia formats and for
on-line delivery, as and if these formats gain widespread market acceptance, and
in non-CD-ROM forms, such as audio and books, as the Company deems commercially
viable.
The Company, through its wholly-owned subsidiary Byron Preiss Multimedia
On-Line Services, Inc., a Delaware corporation, has launched an on-line service,
Virtual Comics, primarily on the World Wide Web and also under an independent
content provider agreement with the Microsoft Network. The Company is in the
process of developing an election campaign simulation game for use on Decision
'96 a new interactive on-line service. Decision '96, which is being produced by
NBC News and Microsoft Corporation, is expected to deliver updated news and
information surrounding the candidates, issues and political elections of 1996.
In addition, the Company also independently provides a World Wide Web based
on-line service, The Virtual Toy Shoppe(Trademark), which allows users to browse
a multimedia toy shop, select three-dimensional toys, and download the toys for
play.
The Company's first product, Isaac Asimov's The Ultimate Robot(Registered)
was released by the Company in November 1993 and received a prestigious Invision
Award. The Company's next CD-ROM products, which were released during 1994,
were: the Seinfeld Screensaver & Planner; the R. Crumb Screensaver and
Companion; The Multimedia Cartoon Studio; The Essential Frankenstein: The
Multimedia Experience; Trouble Is My Business: The Raymond Chandler Library; The
World of Totty Pig; Gahan Wilson's The Ultimate Haunted House; The Ultimate
Frank Lloyd Wright: America's Architect; and Kurt Vonneguts's - Slaughterhouse
Five. During 1995, the Company released approximately fifteen (15) titles,
including but not limited to, The Melrose Place Companion; Beverly Hills 90210;
The Frasier Companion; The Baywatch Companion; Hard Hat; Ray Bradbury's The
Martian Chronicles; American Heritage History of the Civil War; Exploring the
Planets; Robot City; "Not Now!" Said the Cow; Baby Rom; The Ultimate Einstein;
Will Eisner's The Spirit; Seinfeld 95 and John Steinbeck - Of Mice and Men.
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The Company is developing approximately sixteen (16) titles, which it currently
anticipates releasing during 1996, including, Scientific American Library Quarks
to the Cosmos; Timetables of Technology; Scientific American Library's The Doors
of the Mind; The Way Baseball Works; Total Television; His Name Was Lincoln;
American Heritage History of the United States for Young People; The Twelve
Circus Rings; My Cool Diner; Inside/Outside World Tour Game; Spider-Man; Private
Eye Game; Westworld 2000; Forbes business simulation game; The Pearl and The Red
Pony and The Grapes of Wrath. All of the foregoing 1996 titles are in various
stages of development, with the majority of which being anticipated for release
during the fourth quarter of 1996. Pursuant to certain agreements the Company
has entered into with Marvel Entertainment Group, Inc., the Company has
co-published books including Spider-Man; The Venom Factor; The Ultimate
Spider-Man; Iron Man: The Armor Trap; Spider-Man Carnage In New York; The
Incredible Hulk: What Savage Beast; and Fantastic Four: To Free Atlantis. In
1996, the Company anticipates releasing the following books pursuant to
agreements with Marvel: Stan Lee's Riftworld: Odyssey; Daredevil: Predator's
Smile; X-Men: Mutant Empire Book 1 Siege; Spider-Man & The Incredible Hulk:
Rampage; Spider-Man: Goblin's Revenge; Spider-Man: The Octopus Agenda; The
Ultimate Super-Villains; The Ultimate X-Men; X-Men: Mutant Empire Book 2:
Sanctuary; and Iron Man: Operation A.I.M.
Byron Preiss, the founder, Chief Executive Officer, President and a
principal shareholder of the Company, is also president, chief executive officer
and principal shareholder of Byron Preiss Visual Publications, Inc. ("BPVP") and
certain other publishing entities. BPVP, over its 19-year existence, has
produced numerous books for major publishers, including Bantam Doubleday, Dell,
Simon & Schuster and Random House. Mr. Preiss' experience as a book publisher
includes bringing writers, artists and scientific experts together to produce
such books as The Universe (Bantam) and The Secret World of Pandas (Abrams), and
in preparing illustrated publications such as Paul Simon's At the Zoo and Isaac
Asimov's Robot Dreams (Berkeley). Mr. Preiss has also developed various audio,
video and software products for companies such as Spinnaker Software and Best
Film and Video. Pursuant to Mr. Preiss' Employment Agreement with the Company,
Mr. Preiss will devote, on average, approximately seventy (70%) percent of his
working time to the Company.
The Company's principal executive offices are located at 24 West 25th
Street, New York, New York, 10010. Its telephone number is (212) 989-6252.
RISK FACTORS
The shares of Common Stock being offered hereby involve a high degree of risk
and Prospective purchasers of Common Stock offered hereby should carefully
consider the following specific factors as well as other information contained
in this Prospectus prior to making an investment decision.
Recent Losses. The Company has experienced losses since its inception in July
1992; and the Company's operations to date have been funded primarily by the
proceeds of its initial public offering in 1994 (the "IPO"), loans from
shareholders, which have been repaid, advance royalties and development fees
from a co-publisher, funds received as a result of the stock purchase in March
1995 by Viacom International Inc. of a 20% interest in the Company and to a
lesser degree from the sale of the Company's products. The Company's operating
loss for the year ended December 31, 1995 was $1,541,884. The Company
anticipates incurring additional losses unless and until such time as the
Company can successfully and profitably develop, produce and distribute a broad
line of
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product services. At December 31, 1995, the Company had a retained deficit of
$2,729,238. The Company remains in its early stages and is subject to the risks
inherent in such a business enterprise. To date, the Company's activities have
consisted of development of business plans, negotiations for acquisitions of
rights to properties, development of software on CD-ROMs and other multimedia
formats, development of content in on-line or broadcast forms, based on licenses
of existing or new media products and development of distribution methods for
the Company's products. The Company's future success will depend upon increased
revenue from the development and marketing of its current and future products.
The development of multimedia products is difficult, expensive and time
consuming, requiring the coordinated participation of various technical and
marketing personnel and independent third party suppliers and the ability to
develop an attractive error-free product. In addition, costs as a percentage of
revenues, increased during 1995 fiscal year to 70% up from 60% for the 1994
fiscal year, as a result of higher development costs for certain CD-ROM titles
as well as a greater number of CD-ROM titles being shipped. Furthermore, there
has been a general decline in both wholesale and retail selling prices of CD-ROM
titles without a corresponding reduction in costs of development of CD-ROM
titles. The Company believes that cost of revenues as a percentage of revenues
should improve as the Company continues to sell its backlist of titles in future
years at a time when all development costs relating to said titles have already
been included in cost of revenues. However, there is no assurance that costs
will decrease or even remain the same as a percentage of revenues. Furthermore,
the development process often encounters unanticipated delays and expenses,
extending projected time schedules and increasing estimated expenses. The
likelihood of the success of the Company's business must be considered in light
of the problems, expenses, difficulties, complications and unforeseen delays
frequently encountered in connection with operation of a business and
development of new technologies. Other factors affecting the Company's future
success include, but are not limited to, intense competition, the need to
develop customer support capabilities, dependence on distribution of its
products by third parties, the ability of the Company to overcome problems and
delays in product development, market acceptance, sales and marketing and
potential returns of a material amount of the Company's products.
New Products; Rapid Technological Change; Short Product Life Cycles and
Market Acceptance. The market for educational and entertainment software
products is subject to frequent and rapid changes in technology and consumer
preferences. As a result, the Company's development, growth and future financial
performance will depend upon its ability to develop and introduce new products
and enhance existing products in order to accommodate the latest technological
advances and consumer requirements. There can be no assurance that the Company
will be able to develop successful products or achieve market acceptance, that,
if accepted, such acceptance will be sustained for a period long enough to
recoup costs or realize profits or that other software or hardware vendors will
not develop and market products which render obsolete or less competitive the
Company's products under development. The Company will be required to devote
substantial efforts and financial resources to enhance its existing products and
to develop new products and will be required to engage in the constant
development and market introduction of new software products and improvements to
existing products. Moreover, legal and other costs incurred in connection with
content license acquisitions and the amount of time such acquisitions consume
may adversely affect the profitability of a title. In addition, the Company
develops and publishes its software on CD- ROM for use with personal computers
including, Windows compatible and Apple Macintosh PCs, and will publish in other
multimedia formats and for on-line delivery, as and if these formats gain
widespread market acceptance, and in non-CD-ROM forms, such as audio CDs and
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books, as the Company deems commercially viable. There can be no assurance that
the Company will be able to successfully translate software from one format to
another in a commercially practical manner.
The Company, through its wholly-owned subsidiary Byron Preiss Multimedia
On-Line Services, Inc., a Delaware corporation, has launched an on-line service,
Virtual Comics, primarily on the World Wide Web and also under an independent
content provider agreement with the Microsoft Network. The Company is in the
process of developing an election campaign simulation game for use on Decision
'96 a new interactive on-line service. Decision '96, which is being produced by
NBC News and Microsoft Corporation, is expected to deliver updated news and
information surrounding the candidates, issues and political elections of 1996.
In addition, the Company also independently provides a World Wide Web based
on-line service, The Virtual Toy Shoppe(Trademark), which allows users to browse
a multimedia toy shop, select three-dimensional toys, and download the toys for
play. There is no assurance that the Company will be able to develop successful
on-line services or if successful, realize profits from its efforts.
Future Capital Needs. At this time, the Company believes its existing
cash, cash equivalents and marketable securities and anticipated cash flow from
operations will be adequate to meet the Company's cash requirements for fiscal
1996. The Company's future capital requirements will depend on many factors,
including cash flow from operations, continued progress in its research and
development programs, the adverse impact of competing technological and market
developments and the Company's ability to market its products successfully. To
the extent that the funds generated by the Company are insufficient to fund the
Company's activities, it may be necessary to raise additional funds through
equity or debt financing. There can be no assurance that such financing will be
available or available on terms acceptable to the Company, and any future equity
financings could result in dilution to the Company's then existing shareholders.
If adequate funds are not available, the Company may be required to
significantly curtail its activities.
Dependence Upon Key Personnel; Small Workforce. The Company's success
depends, to a significant extent, upon a number of key employees. The loss of
services of one or more of these employees, especially Mr. Byron Preiss, the
Company's President and Chief Executive Officer, could have a material adverse
effect on the business of the Company. Mr. Preiss, having other business
interests, has agreed in his Employment Agreement with the Company, that he will
devote, on average approximately seventy percent of his working time to the
Company. The Company has obtained two key-man life insurance policies
aggregating approximately $2,950,000 to insure the life of Mr. Preiss, of which
the Company is the beneficiary. The Company's development, growth and
profitability will be dependent upon the services of Mr. Preiss as well as the
Company's ability to attract and retain other skilled technical, managerial and
marketing personnel. The multimedia industry is characterized by a high level of
employee mobility and aggressive recruiting of skilled personnel. An inability
to attract, retain and motivate personnel required for the development,
maintenance and expansion of the Company would have an adverse effect on its
business. There can be no assurance that the Company will be successful in
attracting and retaining such personnel.
The Company, which currently has approximately 57 full-time and 2
part-time employees, is dependent upon the continuing services of freelance
software developers, consultants, programmers and product designers who comprise
the teams which develop products under Company supervision. A portion of the
proceeds from the exercise of Warrants may be
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applied to maintain and increase the number of salaried employees and to retain
freelance software developers.
Control By Certain Shareholders. Mr. Byron Preiss, who owns approximately
24% of the outstanding Common Stock, Viacom International Inc., which owns
approximately 20% of the outstanding Common Stock, and certain former partners
of the Berman CD-ROM Partnership, L.P., who own in the aggregate approximately
19% of the outstanding Common Stock, own in the aggregate approximately 63% of
the outstanding Common Stock, without taking into effect any options or warrants
to purchase shares of Common Stock. Therefore, the foregoing shareholders are
able to control the election of all of the members of the Company's board of
directors and otherwise exercise control over the business, policies and affairs
of the Company. The Company's Restated Certificate of Incorporation, as amended,
does not provide for cumulative voting rights with respect to the election of
directors.
Software Technology; Lack of Patent Protection and Clearance of Rights;
Trademarks. The Company's future success will be heavily dependent upon its
software technology; and the Company will rely on a combination of contractual
rights, trademarks, trade secrets and copyright laws to establish or protect its
technology in the countries where it will conduct business. The Company will not
possess any patent or other registered intellectual property rights with respect
to its software technology, other than copyrights with respect to the overall
content of its completed titles. There can be no assurance that the steps taken
by the Company to protect its rights will be adequate to deter misappropriation.
Furthermore, there can be no assurance that claims relating to the Company's
alleged infringement on the intellectual property of others will not be asserted
against the Company. Copyright and other proprietary rights to the use of CD-ROM
material and material licensed for use on CD-ROM is a relatively new area and
there is the possibility of legal challenges in respect of all such rights.
Moreover, as is the case in the music recording industry, CD-ROM software is
capable of being reproduced by unauthorized persons. Any such unauthorized
reproduction might be difficult to police and could detrimentally affect the
Company. Further, there can be no assurance that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to the Company's. As the number of interactive software products in the
market increases and the functionality of these products further overlaps, the
Company believes that interactive software may increasingly become the subject
of claims that such software infringes the copyrights or patents of others. Any
such claims, with or without merit, can be time consuming and difficult and
expensive to defend. In addition, the laws of some foreign countries do not
protect proprietary rights in products and technology to the same extent as do
the laws of the United States.
In addition, practically all of the content (text, excerpts, artwork,
film, photographs, plot, concepts, music, talent, programming and software) of
the Company's products will be used by the Company pursuant to rights obtained
in licensing agreements from others or under contracts with creative talent
including programmers, some of whom will be employees of the Company and others
who will be third party suppliers. The Company will, therefore, necessarily be
dependent upon the validity of its licensors' rights and the agreement and
financial capability of each licensor to indemnify the Company against any
claims, litigation and eventual damages from any such claims. This exposure is
increased by reason of the fact that each of the Company's products is expected
to include materials based upon rights obtained from a variety of different
licensors.
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The Company currently owns federal trademarks which are ARTS AND
COMMERCE(Registered), CRAYON MULTIMEDIA(Registered), THE ULTIMATE
ROBOT(Registered), and DIGITAL BAUHAUS(Registered). In addition, the Company has
approximately thirteen (13) active trademark applications pending, including
BABY ROM(Trademark), HARD HAT(Trademark), 21ST CENTURY CLASSICS(Trademark) and
BROOKLYN MULTIMEDIA(Trademark). There can be no assurance that the Company will
be granted registrations on any or all of such trademarks. The failure to obtain
a trademark registration may require the Company to select an alternative
trademark for that product or imprint, as the case may be.
Although the Company implements protective measures, by primarily filing
copyright and trademark applications when deemed appropriate, in order to defend
its material proprietary rights, there can be no assurance that such efforts
will be successful. The failure and ability of the Company to effectively
protect its proprietary information could have an adverse effect on the
Company's business.
Lack of Independent Distribution Capability and Other Distribution Risks.
The Company has limited experience in the distribution of CD-ROM products, and
is currently relying on a title by title basis on the distribution capabilities
of third parties, including WEA Visual Entertainment, Simon and Schuster
Interactive and the use of other third party distributors. There can be no
assurance that the Company will be successful in any of its future distribution
activities. See "BUSINESS -- Marketing and Distribution."
Commencing in May, 1995, although the Company's contractual relationship
remained with Time Warner Interactive Group ("TWIG"), TWIG delegated the
distribution that TWIG was required to perform responsibilities under the Time
Warner Agreement to Warner Electra Atlantic computer software sales force, which
is WEA Visual Entertainment ("WEA"). Thereafter, TWIG merged with and into
Inscape On-line Multimedia, an affiliate of Time Warner, apparently reduced its
marketing department and subsequently notified the Company that it intends to
terminate the Time Warner Agreement on June 17, 1996 in accordance with the
terms of the Time Warner Agreement. However, the Company has been verbally
presented with the opportunity to continue a distribution relationship directly
with WEA, upon terms which have, to date, yet to be negotiated. At this time, it
is unlikely that the Company will continue a distribution relationship with WEA.
During 1995, Simon & Schuster Interactive Distribution Services ("S&S"
Distribution"), a division of Simon & Schuster, Inc., distributed three (3) of
the Company's titles without a formal agreement. With a view towards enhancing
the distribution activities of the Company by, among other things, expanding the
Company's market penetration, the Company entered into a Distribution Services
Agreement (the "S&S Distribution Agreement"), dated as of January 1, 1996 with
S&S Distribution pursuant to which the Company granted to S&S Distribution
certain rights to market and distribute titles, and to provide inventory,
warehousing and fulfillment services for the titles. The S&S Distribution
Agreement initially identified six (6) titles which shall be distributed by S&S
Distribution, including The Frasier Companion; The Baywatch Companion with
Screensaver; The Ultimate Einstein; The Sci-Fi Channel Trivia Game; My Cool
Diner; and Westworld. In addition, the Company agreed to grant S&S Distribution
the right to distribute any and all titles that the Company develops, publishes
or for which the Company gains distribution rights throughout the term of the
S&S Distribution Agreement, with permitted exceptions. There can be no assurance
that S&S Distribution will be successful in promoting and selling the Company's
titles.
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<PAGE>
In June 1995, the Microsoft Agreement (as hereinafter defined) was further
amended whereby the Company regained the rights to publish and distribute three
titles, Ray Bradbury's The Martian Chronicles, Exploring the Planets and Raymond
Chandler's Philip Marlowe: The Little Sister. Microsoft continues to distribute
and support three titles of the Company, which are Isaac Asimov's The Ultimate
Robot; Gahan Wilson's The Ultimate Haunted House and The Ultimate Frank Lloyd
Wright: America's Architect. The three titles that the Company regained the
rights to publish and distribute, which are Ray Bradbury's The Martian
Chronicles, Exploring the Planets and Raymond Chandler's Philip Marlowe: The
Little Sister, are now distributed or, in the case of The Little Sister, will be
distributed by S&S Distribution pursuant to the S&S Distribution Agreement.
If the Company were to lose all or a significant portion of the revenue
attributable to its principal distributors, or if its principal distributors
were to lose sales of the Company's products to their principal accounts, the
loss could have a material adverse effect on the Company's operating results.
The distribution channels through which consumer software products are sold have
been characterized by rapid change, including consolidations and financial
difficulties of certain distributors and the emergence of new channels for
distribution of consumer products such as mass merchandisers. In addition, there
is an increasing number of companies competing for access to those channels.
Intense competition exists for recognition from large volume wholesalers and for
retail shelf space in the consumer software industry. A number of factors,
including discounts to wholesalers, customer service, marketing and promotional
efforts and purchase of shelf space, affect access to wholesalers and retailers.
The Company believes that its success will also be dependent on penetrating
distribution channels, including schools, libraries, bookstores and mass
merchants. There can be no assurance that the Company will be able to distribute
its titles successfully or compete for such limited shelf space with other
companies, many of whom are better financed and have superior marketing power
than that of the Company.
Seasonality and Product Development Schedule. The entertainment software
industry is highly seasonal. Product demand typically peaks during the holiday
season. The Company believes that poor sales performance by retailers during a
holiday season may negatively impact on the sales of the Company's titles.
Timely releases to meet demand are crucial to success, and delays will result in
lost sales during peak times. Other factors that may lead to quarterly
fluctuations include delays in market acceptance of new products, timing of
orders by distributors and dealers, and direct-mail and other marketing
expenditures. Delays are prevalent in the business of software production.
Schedule overruns have short and long term effects. In the short term they drive
development costs up; in the long run they delay product shipment, could impair
the Company's credibility in the market place materially adversely effecting the
ability of the Company to obtain shelf space among key retailers and
distributors and possibly result in lower sales and margins. Similarly, cost
overruns can slow down the release of a product, inflate its sales price and
diminish its commercial appeal and profitability. The release dates for certain
of the Company's products are also dependent upon the timely completion of the
development work contracted to third parties over which the Company has only
limited control and the completion of acceptance procedures set forth in certain
of the Company's content license and joint venture agreements. Any delays in
planned delivery or release dates will correspondingly delay the Company's
receipt and recognition of revenues. In addition, the failure by the Company to
release certain licensed titles by contractually stipulated dates could result
in the termination of many of the content licenses granted to the Company as
well as certain joint venture agreements.
13
<PAGE>
There can be no assurance that the Company will be successful in meeting such
contractually stipulated dates or obtaining a waiver therefrom.
Conflicts of Interest. The business of the Company has been and will in
the near term continue to be subject to certain potential conflicts of interest
with respect to the licensing of rights from Byron Preiss Visual Publications,
Inc. ("BPVP") and its affiliates, the payment of continuing fees and royalties
to BPVP, the acquisition of properties and allocation of executive time. In
addition, the Company has entered into certain agreements with Simon & Schuster
Interactive ("S&S"), a division of Simon & Schuster, Inc., which is an affiliate
of Viacom International Inc. who owns approximately 20% of the outstanding
Common Stock of the Company. Furthermore, the Board of Directors of the Company
includes one director nominated by Viacom International Inc.
Competition. The market for entertainment, educational and desktop
publishing software products is extremely competitive and the Company expects
competition to increase. The Company faces competition principally in the areas
of financial resources, technical know-how, access to rights of popular authors
and organizations, attractiveness and efficacy of products, marketing and
distribution. It can be expected that there will be thousands of products on the
market during the next several years. Many of the Company's current and
prospective competitors have significantly greater market recognition and
greater financial, technical, marketing and human resources than the Company.
There can be no assurance that the Company will be able to compete successfully
against existing companies or new entrants to the marketplace. Furthermore, the
development by competitors of new or improved products or technologies, such as
"on-line" services may render the Company's titles or proposed titles obsolete
or less competitive.
Possible Delisting of Securities on the NASDAQ System and the Boston Stock
Exchange; Penny Stock Registration. The Company's Common Stock and Warrants are
also listed on the Boston Stock Exchange ("BSE") and on the NASDAQ Small Cap
Market. Under the applicable rules for continual listings on the NASDAQ Small
Cap Market, a company must maintain at least $2,000,000 in total assets, at
least $1,000,000 in stockholders' equity and a minimum bid price of $1.00 per
share. If the Company experiences losses it may be unable to maintain the
standards for continued listing and the listed securities could be subject to
delisting from the NASDAQ Small Cap Market and the BSE. Trading, if any, in the
listed securities would thereafter be conducted in the over-the-counter market
on an electronic bulletin board or in what is commonly referred to as the "pink
sheets." As a result, an investor may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of, the Company's securities. In
addition, if the Company's securities were delisted, they would be subject to a
rule that imposes additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors (generally defined as an investor with a net worth in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with a
spouse). For transactions covered by this rule, the broker-dealer must make a
special suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale. Consequently,
delisting, if it
14
<PAGE>
occurred, may affect the ability of broker-dealers to sell the Company's
securities and the ability of investors to sell their securities in the
secondary market.
The Securities and Exchange Commission (the "Commission") has adopted
regulations that define a "penny stock" to be any equity security that has a
market price of less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission relating to the
penny stock market. A broker-dealer must also disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. While many NASDAQ-listed securities are covered
by the definition of penny stock, transactions in a NASDAQ-listed security are
exempt from all but the sole market-maker provision for (i) issuers who have
$2,000,0000 in tangible assets ($5,000,000 if the issuer has not been in
continuous operation for three years), (ii) transactions in which the customer
is an institutional accredited investor, and (iii) transactions that are not
recommended by the broker-dealer. In addition, transactions in a NASDAQ security
directly with a NASDAQ market-maker for such securities are subject only to the
sole market-maker disclosure, and the disclosure with respect to commissions to
be paid to the broker-dealer and the registered representative. These disclosure
requirements may have the effect of reducing the level of trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
The Company's securities are not presently subject to penny stock rules. If the
Company's securities become subject to the penny stock rules, investors may find
it more difficult to sell their securities.
Volatility of Market Price for Common Stock and Warrants. While the
Company's Common Stock and Warrants have been listed on the NASDAQ Small Cap
Market since May of 1994, trading in the Company's Common Stock and Warrants
have been characterized by a high degree of volatility. The market price of the
Common Stock and Warrants are subject to significant fluctuations in response to
variations in quarterly operating results and other factors. In addition, the
securities markets have experienced significant price and volume fluctuations
from time to time in recent years, particularly with respect to companies in the
technology and computer related industries, that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Common Stock and
Warrants. In addition, trading in the Company's Common Stock and Warrants, to
date, have been dominated by a related small number of firms which make a market
in such securities. To the extent that the market continues to be dominated by
such market makers, the market in the Company's Common Stock and Warrants may
continue to experience a high degree of volatility. Such degree of volatility
and market dominance may adversely affect the price and liquidity of the
Company's securities in the future.
Substantial Options and Warrants Reserved; Underwriter's Warrant. Under
the 1993 Plan, as amended, the Company may issue options to purchase up to
425,000 shares of Common Stock to employees, officers, directors, and
consultants, of which options to purchase 258,140 shares of Common Stock
are outstanding and are exercisable at prices between $2.18 and $7.50 as of May
3, 1996. It is anticipated that at the Company's 1996 Annual Meeting of
Shareholders, the Shareholders will be asked to consider and act upon a proposal
to
15
<PAGE>
amend the 1993 Plan to increase by 100,000 shares the total number of shares of
the Company's Common Stock that may be awarded under the 1993 Plan. The Company
has also granted options to purchase 22,000 shares of Common Stock outside of
the 1993 Plan. The Company has sold to the Underwriters in connection with the
IPO, the Underwriter's Warrant to purchase up to 52,500 Units consisting of (i)
105,000 shares of Common Stock issuable upon exercise of such Units, (ii)
105,000 redeemable common stock purchase warrants issuable upon exercise of such
Units and (ii) 105,000 shares of Common Stock underlying the redeemable common
stock purchase warrants included in the Units. The securities underlying the
Underwriter's Warrant are being included for resale by the Selling
Securityholders under this prospectus. In connection with the Viacom Purchase
Agreement (hereinafter defined) the Company issued to Viacom International Inc.
(collectively, the "Viacom Warrants") (i) warrants to purchase 315,000 shares of
the Company's Common Stock at an exercise price of $7.00 per share and (ii) an
additional warrant (the "Additional Warrant") to purchase up to an aggregate of
a number of shares of Common Stock (the "Additional Warrant Shares") equal to,
at any time, 20% of the shares of Common Stock issuable upon the exercise of
stock options (x) granted pursuant to the 1993 Plan, as such plan may be amended
from time to time and (y) granted to employees not pursuant to any stock option
plan, at an exercise price of $7.00 per share of Common Stock. The existence of
the Warrants, the Underwriter's Warrant, the Viacom Warrants and the options
that have been or may be issued under the 1993 Plan or otherwise may prove to be
a hindrance to future financing efforts by the Company. Further, the holders of
such options and warrants may be able to exercise them at a time when the
Company would otherwise be able to obtain additional equity capital on terms
more favorable to the Company. Furthermore, sales of substantial amounts of
shares underlying the aforesaid warrants and options could adversely affect
prevailing market prices for the Common Stock and the exercise of any such
options or warrants may dilute the net tangible book value of the Common Stock.
Possible Issuance of Preferred Stock; Anti-Takeover Provisions. The
Company is authorized to issue up to 5,000,000 shares of Preferred Stock, $.001
par value ("Preferred Stock"). Preferred Stock may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
board of directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. No Preferred Stock is currently outstanding, and
the Company has no present plans for the issuance thereof. The issuance of any
Preferred Stock could affect the rights of the holders of Common Stock and
therefore reduce the value of the Common Stock and make it less likely that
holders of Common Stock would receive a premium upon a sale of their shares of
Common Stock. In particular, specific rights granted to future holders of
Preferred Stock could be issued to restrict the Company's ability to merge with
or sell its assets to a third party, which could have the effect of delaying or
preventing a change of control of the Company and may adversely affect the
rights of holders of Common Stock and Warrants.
Immediate Substantial Dilution and Disproportionate Risk of Loss. Dilution
to public investors may result to the extent that the Warrants, the
Underwriter's Warrant, the Viacom Warrants and/or outstanding stock options are
exercised at a time when the net tangible book value per share of Common Stock
exceeds the exercise price of the Underwriter's Warrant, the Viacom Warrants and
the outstanding options, as the case may be.
Potential Sales Pursuant to Rule 144. As of the date hereof, there were
approximately 3 million shares (the "Restricted Shares") of Common Stock issued
and outstanding, which are
16
<PAGE>
"restricted securities" within the meaning of Rule 144 under the Securities Act
of 1933, as amended (the "Securities Act"). Such shares are eligible for sale,
subject to the volume limitations and other conditions imposed by Rule 144 but
without the requirement of any further holding period. Ordinarily, under Rule
144, a person having held restricted securities for a period of two years may,
every three months, sell in ordinary brokerage transactions or in transactions
directly with a market maker an amount equal to the greater of one percent of
the Company's then outstanding Common Stock or the average weekly trading volume
during the four calendar weeks prior to such sale. Approximately 2 million of
the Restricted Shares are eligible for resale under Rule 144 and approximately 1
million shares of the Restricted Shares will be eligible for resale under Rule
144 in March 1997. Future sales of such shares and sales of shares purchased by
holders of options or warrants could have an adverse effect on the market price
of the Common Stock and Warrants.
No Anticipated Dividends. The Company has not previously paid any
dividends on its Common Stock and for the foreseeable future intends to retain
any earnings to finance the development and expansion of its business. The
declaration of dividends in the future will be at the election of the Board of
Directors, and will depend upon the earnings, capital requirements and financial
position of the Company, plans for expansion, general economic conditions and
other pertinent factors. In addition, under the terms of the Viacom Purchase
Agreement, the Company may not pay any cash dividends to its shareholders
without Viacom's prior written consent.
FOR ALL OF THE FOREGOING REASONS AND OTHERS SET FORTH IN THIS PROSPECTUS, THE
SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF THESE AND
OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THE SECURITIES SHOULD BE PURCHASED
ONLY BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY.
17
<PAGE>
SELLING STOCKHOLDERS
The Shares of Common Stock covered by this Prospectus will be offered by
an undetermined number of officers and directors of the Company who are deemed
affiliates of the Company and who have or may acquire Shares under the Company's
Stock Option Plan. The names of the Selling Shareholders currently known and the
amount of Shares that they will offer for sale, are set forth below. The names
of additional selling shareholders and the amount of Shares to be offered by
sale by such additional Selling Shareholders, will be added by a Post-Effective
Amendment to this Prospectus. There is no assurance that any of such Selling
Shareholders will offer for sale or sell any or all of the Company's Common
Stock offered by them pursuant to this Prospectus.
<TABLE>
<CAPTION>
Percentage
of
Number of Number of Common
Shares Shares to Stock to be
Owned Prior Number of be Owned Owned
Name of Seller to the Shares to be After the After the
Offering Offered Offering(1) Offering(1)
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
James Dellomo 45,000(2) 45,000(2) -0- *
(Chief Financial Officer and
Director)
Matthew Shapiro 10,000(3) 10,000(3) -0- *
(Director)
Marvin Sharfstein 10,000(4) 10,000(4) -0- *
(Director)
</TABLE>
- --------------
(1) Assuming that all of the Shares offered or to be offered hereunder are
sold.
(2) Includes (i) options to purchase 25,000 Shares granted to Mr. Dellomo
pursuant to the Stock Option Plan, of which one-third of such options are
immediately exercisable, one-third are exercisable on July 16, 1996 and
one-third are exercisable on July 16, 1997 at an exercise price of $5.50
per share, (ii) options to purchase 10,000 Shares granted to Mr. Dellomo
pursuant to the Stock Option Plan, of which one-third of such options are
immediately exercisable, one-third are exercisable on December 6, 1996 and
one-third are exercisable on December 6, 1997 at an exercise price of
$5.125 per share and (iii) options to purchase 10,000 Shares granted to
Mr. Dellomo pursuant to the Stock Option Plan, of which one-third of such
options are exercisable on August 16, 1996, one-third are exercisable on
August 16, 1997 and one-third are exercisable on August 16, 1998 at an
exercise price of $6.00 per share.
(3) Includes (i) options to purchase 5,000 Shares granted to Mr. Shapiro
pursuant to the Stock Option Plan, of which one-third of such options are
immediately exercisable, one-third are exercisable on July 20, 1996 and
one-third are exercisable on July 20, 1997 at an exercise price of $5.00
per share and (ii) options to purchase 5,000 Shares granted to Mr. Shapiro
pursuant to the Stock Option Plan, of which one-third of such options are
immediately exercisable, one-third are exercisable on December 6, 1996 and
one-third are exercisable on December 6, 1997 at an exercise price of
$5.125 per share.
(4) Includes options to purchase 10,000 Shares granted to Mr. Sharfstein
pursuant to the Company's Stock Option Plan, of which one-third of such
options are immediately exercisable, one-third are exercisable on December
6, 1996 and one-third are exercisable on December 6, 1997 at an exercise
price of $5.125 per share.
* Less than 1%
18
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders (or their pledgees, donees, transferees, or other
successors in interest) from time to time may sell all or a portion of the
Shares "at the market" to or through a marketmaker or into an existing trading
market, in private sales, including direct sales to purchasers, or otherwise at
prevailing market prices or at negotiated or fixed prices. By way of example,
and not by way of limitation, the Shares may be sold by one or more of the
following methods: (a) a block trade in which the broker or dealer so engaged
will attempt to sell the Shares as agent but may purchase and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the seller may arrange for other brokers or
dealers to participate. Brokers or dealers will receive commissions or discounts
from the seller in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. In addition, any securities covered by this Prospectus which qualify
for sale pursuant to Rule 144 under the Securities Act may be sold under Rule
144 rather than pursuant to this Prospectus.
The Selling Shareholders 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. Any commissions paid or any discounts or concessions allowed to any such
broker-dealer which purchases Shares as principal or any profits received on the
resale of such Shares may be deemed to be underwriting discounts and commissions
under the Securities Act.
In order to comply with certain state securities law, if applicable, the
Common Stock will not be sold in a particular state unless the Common Stock has
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
EXPENSES
All expenses of this Offering, including the expenses of the registration
of the Shares of Common Stock offered hereby, will be borne by the Company. It
is estimated that the total amount of such expenses will not exceed $15,000.
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<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the Shares of Common
Stock by the Selling Shareholders, but will receive funds from the sale of stock
to the Selling Shareholders, which funds will be used by the Company for working
capital.
LEGALITY
Certain legal matters in connection with the securities offered hereunder
will be passed upon for the Company by Kane Kessler, P.C., 1350 Avenue of the
Americas, New York, New York 10019.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus 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
accounting and auditing in giving said reports.
20
<PAGE>
This Prospectus contains information concerning the Company, but does not
contain all of the information set forth in the Registration Statement and the
Exhibits relating thereto, which the Company has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933, as
amended, and to which reference is hereby made.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...................................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 6
THE COMPANY................................................................ 7
RISK FACTORS............................................................... 8
SELLING STOCKHOLDERS....................................................... 18
PLAN OF DISTRIBUTION....................................................... 19
EXPENSES................................................................... 19
USE OF PROCEEDS............................................................ 20
LEGALITY................................................................... 20
EXPERTS.................................................................... 20
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale
made hereunder shall under any circumstances create any implication that there
have been no changes in the affairs of the Company since the date hereof.
21
<PAGE>
PART II
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the Company are incorporated as of their
respective dates in this Registration Statement by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995, as amended;
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996;
3. The Company's Proxy Statement dated April 26, 1996 relating to the
Annual Meeting of Shareholders to be held on June 12, 1996;
4. The Company's Post-Effective Amendment No. 1 to Registration
Statement on Form SB-2, as, filed with the Commission on May 10,
1996 (Reg. No 33-74990-NY) (the "Registration Statement");
5. The description of the Company's Common Stock contained in the
Company's Registration Statement; and
6. Description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on or
about May 6, 1994 pursuant to Section 12 of the Exchange Act,
including any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, subsequent to the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, are incorporated by reference
in this registration statement and are a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities.
Not applicable.
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<PAGE>
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Company's Restated Certificate of Incorporation, as amended,
provides that the Company's directors have the authority to provide in the
Company's By-laws for the indemnification of directors and officers to the
fullest extent permitted by law, including without limitation to a greater
extent than provided in Sections 721 through 726 of the New York Business
Corporation Law (the "BCL"), as the same may be amended and supplemented, or any
successor provisions thereto.
The Company's Amended and Restated By-laws generally provide that: The
Company shall indemnify any present or former officer or director of the Company
or the personal representatives thereof, made or threatened to be made a party
in any civil or criminal action or proceeding by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or served
any other corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise in any capacity at the request of the Company, against
judgments, fines (including excise tax assessed on such a person in connection
with service to an employee benefit plan), amounts paid in settlement and
reasonable expenses, including without limitation, court costs, attorneys' fees
and disbursements and those of accountants and other experts and consultants
incurred as a result of such action or proceeding or any appeal therein, all of
which expenses as incurred shall be advanced by the Company pending the final
disposition of such action or proceeding. Such required indemnification shall be
subject only to the exception that no indemnification may be made to or on
behalf of any director or officer in the event and to the extent that a judgment
or other final adjudication adverse to the director or officer establishes that
his acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled (provided, that indemnification shall be made upon any
successful appeal of any such adverse judgment or final adjudication). For
purposes of indemnification, the Company shall be deemed to have requested such
present or former officer or director to serve an employee benefit plan where
the performance by such person of his duties to the Company also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan. The foregoing right of indemnification shall not
be deemed exclusive of any other rights to which any such person, his testator
or intestate, may be entitled apart from this provision.
In addition, the Company and certain other persons may be entitled
pursuant to the Underwriting Agreement to indemnification by the Underwriter
against certain liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments which the Company or such persons may
be required to make in respect thereof.
23
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provision, or otherwise, the Company has been
advised that in the opinion of 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 Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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 Company 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 Company's Restated Certificate of Incorporation, as amended,
provides that the personal liability of the directors of the Company shall be
eliminated to the fullest extent permitted by the provisions of paragraph (b) of
Section 402 of the BCL as the same may be amended and supplemented, or any
successor provision thereto. Section 402(b) of the BCL enables a corporation in
its Certificate of Incorporation to set forth a provision eliminating or
limiting the personal liability of Directors to the Corporation or its
Shareholders for damages for any breach of duty in such capacity, provided that
no such provision shall eliminate or limit: (i) the liability of a director if a
judgment or other final adjudication adverse to him establishes that his acts or
omissions were in bad faith or involve intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled or that his acts of
violated Section 719, or (ii) liability of any director for any act or admission
prior to the adoption of a provision authorized by said paragraph.
Item 7. Exemption from Registration Claimed.
Not applicable.
24
<PAGE>
Item 8. Exhibits.
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation and Amendment thereto*
3.2 Amended and Restated By-Laws*
4.1 Specimen Common Stock Certificate*
4.2 The 1993 Stock Option Plan, as amended.**
5.1 Opinion of Kane Kessler, P.C.**
24.1 Consent of Kane Kessler, P.C. (included in Exhibit 5.1)**
24.2 Consent of Arthur Andersen LLP**
25.1 Power of Attorney (included in the signature page hereto)
- ----------
* Incorporated by reference to the Registration Statement on Form SB-2
filed with the Securities and Exchange Commission on May 11, 1994
(No. 33-74990-NY).
** Filed herewith.
25
<PAGE>
Item 9. Undertakings.
A. 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 of 1933;
(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 paragraphs A(1)(i) and A(1)(ii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Exchange Act 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.
(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.
(B) 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 Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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.
26
<PAGE>
(C) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(D) 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 express 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.
27
<PAGE>
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-8 and has duly caused this 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 the 3rd day of June,
1996.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: /s/ Byron Preiss
---------------------------------------------
Name: Byron Preiss,
Title: President and Chief Executive Officer
We, the undersigned officers and directors of Byron Preiss Multimedia
Company, Inc., and each of us, do hereby constitute and appoint Byron Preiss and
James Dellomo, or any of them, our true and lawful attorneys and agents, each
with full power of substitution, to do any and all acts and things in our name
and behalf in our capacities as directors or officers and to execute any and all
instruments for us and in our names in the capacities listed below, which
attorneys and agents, or any of them, may deem necessary or advisable to enable
said corporation to comply with the Securities Act, as amended, and any rules,
regulations, and requirements of the Securities and Exchange Commission, in
connection with the Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorneys
and agents, or their substitute or substitutes, or any of them, shall do or
cause to be done by virtue thereof.
28
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/Byron Preiss Chief Executive Officer June 3, 1996
- ------------------------ and President
Byron Preiss (Principal Executive Officer)
/s/James Dellomo Chief Financial Officer June 3, 1996
- ------------------------ (Principal Financial and
James Dellomo Accounting Officer),
Secretary and Director
/s/Marvin Scharfstein Director June 3, 1996
- ------------------------
Marvin Scharfstein
/s/Jack Romanos Director June 3, 1996
- ------------------------
Jack Romanos
/s/Matthew Shapiro Director June 3, 1996
- ------------------------
Matthew Shapiro
/s/Roger Cooper Director June 3, 1996
- ------------------------
Roger Cooper
29
<PAGE>
EXHIBIT INDEX
The following documents heretofore filed by the Company with the Commission are
hereby incorporated by reference:
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation and Amendment thereto*
3.2 Amended and Restated By-Laws *
4.1 Specimen Common Stock Certificate*
The following documents are filed herewith: Page
No.
---
4.2 The 1993 Stock Option Plan, as amended.**
5.1 Opinion of Kane Kessler, P.C.**
24.1 Consent of Kane Kessler, P.C. (included in Exhibit 5.1)**
24.2 Consent of Arthur Andersen LLP**
25.1 Power of Attorney (included in the signature page hereto)
- ----------
* Incorporated by reference to the Registration Statement on Form SB-2
filed with the Securities and Exchange Commission on May 11, 1994
(No. 33-74990-NY).
** Filed herewith.
EXHIBIT 4.2
BYRON PREISS MULTIMEDIA COMPANY, INC.
1993 STOCK OPTION PLAN
1. Purpose. The purpose of this 1993 Stock Option Plan ("Plan") of Byron
Preiss Multimedia Company, Inc., a New York corporation, is to encourage certain
officers, employees, directors and consultants of the Company (as hereinafter
defined) to acquire and hold stock in the Company as an added incentive to
remain with the Company and to increase their efforts in promoting the interests
of the Company and to enable the Company to attract and retain persons of
competence.
The term "subsidiary," as used herein, shall mean any corporation
(other than Byron Preiss Multimedia Company, Inc.) in an unbroken chain of
corporations beginning with and including Byron Preiss Multimedia Company, Inc.,
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
The term "Company," as used herein shall include Byron Preiss Multimedia
Company, Inc. and any present or future subsidiary thereof.
2. Stock Options. Awards under the Plan shall be granted in the form of
stock options ("Option" or "Options"), which may either qualify for treatment as
Incentive Stock Options ("ISOs") within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended, (the "IRC") or not so qualify
("Non-Qualifying Stock Options" or "NQSOS").
The term "Shares," as used herein, shall mean shares of the common
stock, $.001 par value, of the Company.
The aggregate number of Shares which may be issued and sold under
the Plan shall not, except as such number may be adjusted pursuant to section 8
hereof, exceed 425,000 Shares, which may be either authorized and unissued
Shares or issued Shares reacquired by the Company. The total number of Shares
subject to Options authorized under the Plan shall be subject to increase or
decrease in order to give effect to the adjustment provisions of Section 8
hereof and to give effect to any amendment adopted as provided in Section 12
hereof. Notwithstanding the above limitation, any Shares subject to an Option
under the Plan which terminates, is cancelled or expires for any reason without
being either exercised in full or surrendered in full, may again be subjected to
an Option under the Plan, unless the Plan shall have been terminated. Existing
Options may be cancelled and new options granted at a lower price in the event
of decline in the market value of the Shares.
<PAGE>
3. Eligibility. ISO awards shall be granted only to officers (including
those who are also directors) and other employees who, at the time of the grant
of the award (a) are employees of the Company and (b) shall be selected by the
Committee (as hereinafter defined). NQSO awards shall be granted only to
officers, employees, directors and consultants of the Company who, at the time
of grant of the awards (a) serve in one or more of such capacities with the
Company and (b) shall be selected by the Committee. A person to whom an award is
granted hereunder is hereafter sometimes referred to as an "Optionee."
Optionees are eligible to receive more than one Option grant during
the life of the Plan and such Option may be in addition to or in the
substitution for, an Option or Options previously granted under the Plan, under
another stock option plan of the Company or under a plan of another corporation
assumed by the Company. No Options shall be granted under the Plan after the
tenth anniversary date of the adoption of the Plan by the Company's Board of
Directors.
Each Option granted pursuant to the Plan shall be evidenced by a
written Option Agreement between the Company and the Optionee which shall
contain such provisions, terms and conditions including the period of their
exercise, whether in installments or otherwise, which need not be the same for
all Options, as the Committee shall determine to be appropriate and within the
contemplation of the Plan.
As used in the Plan, the term "employment" shall mean employment by
the Company, and the term "employee" shall be deemed to include any salaried
officer and any salaried person who is also a director; provided, that a
director who is not a salaried employee shall not be entitled to receive or hold
an ISO under the Plan. Whether military, government or public service shall
constitute termination of employment for purposes of this Plan or any Option
granted thereunder shall be determined in each case by the Committee.
4. Administration of the Plan. The Board of Directors of the Company
("Board") shall appoint a committee ("Committee") to administer the Plan. The
Committee shall consist of not less than two members of the Board who shall not
have received grants or awards of equity securities under a plan of the Company
during the year prior to serving as an administrator on the Committee and shall
not be eligible to participate in the 1993 Plan or any other plan of the Company
while serving on the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, exercisable in its discretion, to administer the Plan and to
exercise all the powers and authorities either specifically granted to it under
the Plan or necessary or advisable in the administration of the Plan including,
without limiting the generality of the foregoing, to grant Options, to determine
the purchase price of the Shares covered by each Option, the persons to whom,
and the time or times at which, Options
2
<PAGE>
shall be granted and the number of Shares to be covered by each Option; to
determine which Options shall be accompanied by Rights; to interpret the Plan;
to determine, in the case of the employees, whether Options shall be ISO or
NQSOs; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the Option Agreements (which need
not be identical) entered into in connection with awards under the Plan; and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
Vacancies in the Committee shall be filled by the Board. The
Committee may act by a majority of its members either at a meeting, by written
consent, or conference telephone meeting. No member of the Board or of the
Committee shall be liable for any action taken or determination made in good
faith with respect to the Plan or any Option. The Board may at any time remove
one or more members of the Committee and substitute others, and a majority of
disinterested members of the Board shall at all times have the right to exercise
any and all rights and powers of the Committee.
5. Option Price. The purchase price of the shares covered by each Option
shall be established by the Committee, but in no event shall be less than 50% of
the Fair Market Value of the Shares on the date the Option is granted. The term
"Fair Market Value" shall mean (i) if the Shares are listed on a national
securities exchange or the NASDAQ system, the mean between the highest and
lowest sales prices for the Shares on such date, or, if no such prices are
reported for such day, then on the next preceding day on which there were
reported prices or (ii) if the Shares are not listed on a national securities
exchange or the NASDAQ system, the mean between the bid and asked prices for the
shares on such date, or if no such prices are reported for such day, then on the
next preceding day on which there were reported prices. If the Shares are not
traded and there are, therefore, no reported prices, the Committee shall
determine the Fair Market value. In the case of an ISO, in no event shall the
purchase price of the Shares covered by the ISO be less than 100% of the Fair
Market Value of the Shares on the date the ISO is granted. In the case of an ISO
granted to an employee who owns, directly or through attribution, more than 10
percent of the total voting power of all classes of stock of the Company (an
"Insider ISO"), the purchase price of the Shares shall in no event be less than
110% of the Fair Market Value of the Shares on the date the ISO is granted. The
Option price may be subject to adjustment in accordance with the provisions of
Section 8 hereof. The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the date on which such Option is granted.
The price so determined shall also be applicable in connection with the exercise
of any related Right.
6. Period of Option and Certain Limitations on Right to
Exercise.
(a) Options shall be exercisable over the Option period
as, and at the times the Committee determines. The Option period
shall be determined by the Committee,, but shall not exceed ten
3
<PAGE>
years from the date of the grant of such option (except as provided in (e)
below). In the case of an Insider ISO, the Option period shall not exceed five
years from the date of the grant of such Option.
(b) Except as provided in (d) and (e) below, however, an ISO may not
be exercised unless the Optionee is then in the employ of the Company and shall
have been continuously so employed since the date of the grant of the Option.
Absence on leave approved by the Committee shall not be considered a termination
of employment for any purpose of the Plan. The Committee may, if it or counsel
for the Company shall deem it necessary or desirable for any reason, require as
a condition of exercise, that the Optionee (or the purchaser acting under (c) or
(e) below) represent in writing to the Company at the time of the exercise of
such Option that it is the Optionee's then intention to acquire the Shares as to
which the Option is then being exercised for investment and not with a view to
the distribution thereof.
(c) Options granted under the Plan to an Optionee shall not be
transferable otherwise than by will or by the laws of descent and distribution,
and such Option shall be exercisable, during the Optionee's lifetime, only by
him or his legal guardian or legal representative. A transfer of an Option by
will or by the laws of descent and distribution shall not be effective unless
the Committee shall have been furnished with such evidence as it may deem
necessary to establish the validity of the transfer.
(d) Unless earlier terminated in accordance with their terms, all
Options of any Optionee shall terminate ninety days after any of the following:
(i) voluntary termination of employment by the
Optionee, with or without Company consent, or
(ii) termination of the Optionee's employment by the
Company other than for cause, or
(iii) termination of the Optionee's employment because of
disability, retirement, or because the employing subsidiary has
ceased to be a subsidiary of the Company and the Optionee did not,
prior thereto or contemporaneously therewith, become an employee of
the Company or of another subsidiary, or
(iv) termination of the Optionee's service as a Director or
consultant of the Company (other than for cause), unless the
Optionee remains thereafter an employee of the Company;
provided, that if the employment of an Optionee (or service as a Director or
consultant) shall be terminated for cause (which shall be determined by the
Committee), all of such Optionee's Options shall terminate as of the date of
such termination for cause.
4
<PAGE>
(e) If an Optionee dies while in the employ of the Company or in the
service of the Company as a Director or consultant, or within ninety days after
the date on which the Optineee ceased to be an employee, Director or consultant
of the Company (other than by reason of termination for cause), the Option
theretofore granted to the Optionee shall be exercisable by the Optionee's
estate, or by a person who acquired the right to exercise such option by bequest
or inheritance or by reason of the death of the Optionee, but only within a
period of twelve calendar months next succeeding such death and then only if and
to the extent that the Optionee was entitled to exercise such Option at the date
of death, except that the number of shares may be adjusted in accordance with
the provisions of Section 8 hereof.
(f) An ISO, granted under the Plan, in order to remain qualified as
such, shall be subject to all other limitations on exercise imposed by the IRC
to qualify for treatment as an ISO.
7. Payment of Option Price and Cancellation of Options. An Option granted
under the Plan shall be exercised by giving written notice of such exercise to
the Secretary of the Company. The Option price for the Shares with respect to
which any Option is exercised shall be paid in full at the time of exercise.
The Option price shall be paid in cash or, with the approval of the
Committee (which may be withheld in its sole discretion), Shares having a fair
market value, as determined by the Committee, at least equal to the option price
or a combination of cash and Shares, and, with the approval of the Committee
(which may be withheld in its sole discretion) may be effected wholly or in part
by monies borrowed from the Company pursuant to repayment terms and conditions
as shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of Options and each Optionee; provided,
that each such method and time for payment and each such borrowing and terms and
conditions of repayment shall then be permitted by and be in compliance with
applicable law. An Option may not be exercised for a fraction of a Share. No
holder of any Option or legal representative, legatee or distributee of such
holder, as the case may be, will be, or will be deemed to be, a holder of any
Shares covered by an Option unless and until certificates for the Shares are
issued to the Optionee or representative, legatee or distributee under the Plan.
8. Effect of Change in Shares. If there is any change in the Shares of the
Company through the declaration of stock dividends, or through recapitalization
resulting in stock splits, or combinations or exchanges of Shares, or otherwise,
the number of Shares available for Options and the number of Shares thereof
covered by outstanding Options, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares by the Board; provided, that
any fractional Shares resulting from such adjustment shall be eliminated, by
rounding to the nearest whole number.
5
<PAGE>
In the event of the proposed dissolution or liquidation of the
Company, or in the event of an Offer as defined in Section 10, or a proposed
sale of substantially all of the assets of the Company, or in the event of any
merger or consolidation of the Company with or into another corporation, or in
the event of any corporate separation or division, including, but not limited
to, split-up, split-off or spin-off, the Committee may provide that the holder
of each Option then exercisable shall have the right to exercise such Option, at
its then aggregate exercise price, solely for the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such dissolution, liquidation, sale, consolidation or merger, or similar
corporate event, by a holder of the number of Shares for which such Option might
have been exercised immediately prior to such dissolution, liquidation, sale,
consolidation or merger; or the Committee may provide, in the alternative, that
each Option granted under the Plan shall terminate as of a date to be fixed by
the Board; provided, that no less than thirty days written notice of the date so
fixed shall be given to each holder of Options, and each holder of Options shall
have the right, during the period of thirty days preceding such termination, to
exercise the Options as to all or any part of the Shares covered thereby,
including Shares as to which such Options would not otherwise be exercisable.
The preceding paragraph shall not apply to a merger or consolidation
in which the Company is the surviving corporation and Shares are not converted
into or exchanged for stock, securities of any other corporation, cash or any
other thing of value. Notwithstanding the preceding sentence, in case of any
consolidation or merger of any corporation into the Company in which the Company
is the continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares (other than a change in par value, or from par value to no value, or as a
result of a subdivision or combination, but including any change in the Shares
into two or more classes or series of shares), the Committee may provide that
the holder of each Option then exercisable shall have the right to exercise such
Option solely for the kind and amount of shares of stock and other securities
(including those of any new direct or indirect parent of the Corporation),
property, cash or any combination thereof receivable upon such reclassification,
change, consolidation or merger by a holder of the number of shares for which
such Option might have been exercised.
9. Substitute Awards. If an employee of a corporation, other than the
Company, holds a stock option granted by such employee's employer-corporation
(meaning thereby the corporation which actually employs the employee and any
corporation which directly or indirectly controls the employee's actual
employer), and the employee becomes an eligible employee of the Company by
reason of a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company and the employee's
employer-corporation ("Reorganization"), then the Committee may select such
employee as an Optionee and direct the granting to the employee of an award of
Options in substitution for
6
<PAGE>
the stock options held by the employee. The Committee shall determine the terms
and conditions of the substitute awards which may vary from the terms and
conditions required by the Plan. At the time of any substitute award, the
Committee shall determine the number of Shares to be taken into account and the
exercise price per Share consistent with the provisions of the Plan.
10. Amendment and Discontinuance of the Plan. The Board may at any time
amend, modify, suspend or terminate the Plan, but except in accordance with the
provisions of Section 8 hereof, no change shall be made which will have a
material adverse effect upon any Option previously granted unless the consent of
the Optionee is obtained; provided, that, except in the case of adjustments made
pursuant to Section 8 hereof, the Board may not, without further approval of the
shareholders, (a) increase the maximum number of Shares for which Options may be
granted under the Plan, or (b) change the class of persons eligible to receive
Options.
11. Approval by Shareholders. The Plan shall become
effective upon approval by the shareholders of Byron Preiss
Multimedia Company, Inc., a New York Corporation.
12. Use of Proceeds. The proceeds from the sale of Shares
pursuant to Options granted under the Plan shall constitute general
funds of the Company and may be used for its corporate purposes as
the Board may determine.
13. Agreement by Optionee Regarding Withholding Taxes. If the
Committee shall so require, as a condition of exercise, each
Optionee shall agree that:
(i) no later than the date of exercise of any Option granted
hereunder, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of, any federal,
state or local taxes of any kind required by law to be withheld with
respect to the Shares subject to Options; and
(ii) the Company shall, to the extent permitted or required by
law, have the right to deduct from any payment of any kind otherwise
due to the Optionee federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares subject to
Options.
14. Restricted Shares. In its discretion the Committee may issue Shares
subject to certain restriction upon exercise of Option pursuant to Section 7 of
the Plan. The term "Restricted Shares" shall mean the shares that are made
subject to restrictions on the transferability thereof until the recipient has
remained in the employ of the Company or a Subsidiary for a specified period of
time.
(a) All Restricted Shares shall be subject to (i) such
restrictions on the transferability and encumbrance thereof until
7
<PAGE>
the recipient has remained in the employ of the Company for the period of time
specified by the Committee with respect thereto; (ii) such provisions relating
to the forfeiture of and right of the Company to reacquire the Shares if the
recipient's employment terminates within such period of time, (iii) such
provisions relating to the lapse of such restrictions, and (iv) such other terms
and conditions, as may be determined by the Committee and are set forth in the
Option Agreement. All stock certificates for such Shares shall bear a legend
that the Shares represented thereby are subject to such restrictions,
provisions, terms and conditions. If the Committee so determines, the stock
certificates representing Restricted Shares shall be deposited by the recipient
with a third party designated by the Committee until the restrictions thereon
have lapsed.
(b) The existence of restrictions on Restricted Shares shall not
affect the rights of the recipient as a stockholder of the Company including the
right to receive dividends on and to vote such Restricted Shares except that any
Shares issued as a stock dividend on or in a stock split-up of the Restricted
Shares or any other securities issued in exchange for the Restricted Shares
shall be subject to the same restrictions, provisions, terms and condition that
are applicable to the Restricted Shares.
8
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF KANE KESSLER, P.C.]
June 3, 1996
Byron Preiss Multimedia Company, Inc.
24 West 25th Street
New York, New York 10010
Gentlemen:
We have acted as special counsel to Byron Preiss Multimedia Company,
Inc., a New York corporation (the "Company"), in connection with the preparation
of a Registration Statement on Form S-8 (the "Registration Statement")
pertaining to the registration by the Company under the Securities Act of 1933,
as amended, of an offering of up to 425,000 shares of the Company's Common
Stock, $.001 par value per share (the "Shares"), pursuant to the Company's 1993
Stock Option Plan, as amended (the "Plan").
We have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We have relied, without independent investigation, upon a
certificate from the Company's Chief Financial Officer that the number of shares
which the Company is authorized to issue in its Certificate of Incorporation, as
amended, exceeds the sum of (i) the number of shares of the Company's Common
Stock outstanding, (ii) the number of shares of the Company's Common Stock held
as
<PAGE>
Byron Preiss Multimedia Company, Inc.
June __, 1996
Page 2
treasury shares, and (iii) the number of shares of the Company's Common Stock
which the Company is obligated to issue (or has otherwise reserved for issuance
for any purposes, including, but not limited to, the Company's Warrants, other
than issuance in connection with options granted under the Plan), by at least
the number of shares which may be issued in connection with the Plan, and we
have assumed for purposes of our opinion herein that such condition will remain
true at all future times relevant to this opinion. We have also assumed that the
Company will cause certificates representing Shares issued in the future to be
properly executed and delivered and will take all other actions appropriate for
the due and proper issuance of such Shares. We have assumed for purposes of this
opinion that options issued under the Plan and the Shares issuable upon exercise
of such options have been duly authorized by all necessary corporate action on
the part of the Company and such options have been duly authorized and granted
under the Plan. We express no opinion regarding any shares reacquired by the
Company after initial issuance.
We are members of the Bar of the State of New York and are not
admitted to practice law in any other jurisdiction. We do not hold ourselves out
as being conversant with, and express no opinion as to, the laws of any other
jurisdiction.
Subject to the limitations stated in this letter, and subject
further to the following limitations, it is our opinion that the Shares issued
by the Company upon exercise of any option under the Plan, will, upon delivery
thereof and receipt by the Company of all consideration owed to the Company
under the terms of such option and the Plan, be validly issued, fully paid and
nonassessable except as provided in Section 630 of the Business Corporation Law
of the State of New York.
The foregoing assumes that the aforesaid Registration Statement will
become and remain effective under the Securities Act of 1933, as amended, prior
to any offering of the Shares pursuant to the terms thereof and will be amended,
as appropriate, and that there will be compliance with all applicable state
securities laws in connection with the offering of such securities, as well as
compliance with the terms of the offering set forth in the Registration
Statement.
This opinion is rendered solely for your benefit and may
not be relied upon by any other person or entity. This opinion is
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Byron Preiss Multimedia Company, Inc.
June __, 1996
Page 3
provided to you as of the date hereof. We undertake no, and hereby disclaim any
obligation to advise you of any change in any matter set forth herein. Without
our prior written consent, this opinion may not be quoted in whole or in part or
otherwise referred to in any report or document furnished to any person or
entity.
We consent to the filing of this letter as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
Kane Kessler, P.C.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 15, 1996
included in Byron Preiss Multimedia Company Inc.'s Form 10-KSB for the year
ended December 31, 1995 and to all references to our firm included in this
Form S-8 registering 425,000 shares of common stock.
Arthur Andersen LLP
New York, New York
June 3, 1996
