<PAGE>
As filed with the Securities and Exchange Commission on August 16, 1996
Registration No. 333-______________
================================================================================
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
7TH LEVEL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2480669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1110 EAST COLLINS BOULEVARD, SUITE 122
RICHARDSON, TEXAS 75081
(Address, including ZIP code, of registrant's
principal executive offices)
AMENDED AND RESTATED 1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN OF 7TH
LEVEL, INC.
(Full title of the plan)
GEORGE D. GRAYSON
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
7TH LEVEL, INC.
1110 EAST COLLINS BOULEVARD, SUITE 122
RICHARDSON, TEXAS 75081
(Name and address of agent for service)
214-498-8100
(Telephone number, including area code, of agent for service)
Copies to:
DEREK R. MCCLAIN
JAMES A. KRAUSE
VINSON & ELKINS L.L.P.
3700 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of maximum maximum
securities Amount to be offering price aggregate Amount of
to be registered registered per share (1) offering price (1) registration fee
========================================================================================
<S> <C> <C> <C> <C>
Common Stock 75,000 Shares $7-5/8 $571,875 $197.20
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), using the average of the high and low prices
on August 14, 1996, as reported on the Nasdaq National Market.
================================================================================
<PAGE>
The contents of the registration statement on Form S-8, File No. 33-87944,
of 7th Level, Inc., a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission on December 28, 1994, are hereby incorporated
by reference.
ITEM 8. EXHIBITS
5 Opinion of Vinson & Elkins L.L.P.
10.1 Amended and Restated 1994 Non-Employee Directors Stock Option
Plan of 7th Level, Inc.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Vinson & Elkins L.L.P. (included in Exhibit 5).
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Richardson, State of Texas, on August 15, 1996.
7TH LEVEL, INC.
By: /s/ George D. Grayson
---------------------------------------
George D. Grayson
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ George D. Grayson Chief Executive Officer and Chairman of August 15, 1996
- --------------------------------- the Board (Principal Executive Officer)
GEORGE D. GRAYSON
/s/ Robert Alan Ezrin President and Director August 15, 1996
- ---------------------------------
ROBERT ALAN EZRIN
/s/ W. Scott Page Executive Vice President of August 15, 1996
- --------------------------------- Production and Director
W. SCOTT PAGE
/s/ David R. Henkel Chief Operating Officer and Director August 15, 1996
- ---------------------------------
DAVID R. HENKEL
/s/ David W. Craig Chief Financial Officer (Principal August 15, 1996
- --------------------------------- Financial
DAVID W. CRAIG Officer and Principal Accounting Officer)
/s/ Merv Adelson Director August 15, 1996
- ---------------------------------
MERV ADELSON
/s/ Steven Fink Director August 15, 1996
- ---------------------------------
STEVEN FINK
/s/ Lewis C. Solmon Director August 5, 1996
- ---------------------------------
LEWIS C. SOLMON
3
</TABLE>
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ----
5 -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Amended and Restated 1994 Non-Employee Directors
Stock Option Plan of 7th Level, Inc.
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Vinson & Elkins L.L.P.
(included in Exhibit 5)
4
<PAGE>
Exhibit 5
[LETTERHEAD OF VINSON & ELKINS APPEARS HERE]
August 15, 1996
7th Level, Inc.
1110 East Collins Blvd., Suite 122
Richardson, Texas 75081
Dear Sirs:
We have acted as counsel to 7th Level, Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of 1933
(the "Securities Act") of the offer and sale of an aggregate of 75,000 shares
(the "Shares") of common stock ("Common Stock"), par value $.01 per share, of
the Company, as that number may be adjusted from time to time pursuant to the
provisions of the Amended and Restated 1994 Non-Employee Directors' Stock Option
Plan of 7th Level, Inc. (as amended, and including any agreement evidencing an
award thereunder, the "Plan"), that may be issued pursuant to the Plan. Unless
otherwise defined herein, terms having their initial letters capitalized have
the meanings ascribed to them in the Plan.
In reaching the opinion set forth herein, we have reviewed such agreement,
certificates of public officials and officers of the Company, records, documents
and matters of law that we deemed relevant.
Based upon and subject to the foregoing, and subject further to the
assumptions, exceptions, and qualifications hereinafter stated, we express the
opinion that each Share, when issued in accordance with the terms of the Plan,
will be legally issued, fully paid and non-assessable.
The opinion expressed above is subject to the following assumptions,
exceptions and qualifications:
(a) We have assumed that (i) all information contained in all
documents reviewed by us is true and correct, (ii) all signatures on all
documents reviewed by us are genuine, (iii) all documents submitted to us as
originals are true and complete, (iv) all documents submitted to us as copies
are true and complete copies of the originals thereof, and (v) each natural
person signing any document reviewed by us had the legal capacity to do so.
<PAGE>
7th Level, Inc.
August 15, 1996
Page 2
(b) We have also assumed that the Company will receive the full amount
and type of consideration (as specified in the Plan) for each of the Shares upon
issuance, that such consideration will be in cash, personal property, or
services already performed, that such consideration will equal or exceed the par
value per share of Common Stock, that appropriate certificates evidencing the
Shares will be properly executed upon such issuance, and that each grant of an
award pursuant to the Plan will be duly authorized.
The opinion expressed above is limited to the laws of the State of Texas,
the Delaware General Corporation Law, and the federal laws of the United States
of America.
This opinion may be filed as an exhibit to a registration statement filed
under the Securities Act. In giving this consent, we do not thereby admit that
we come into the category of persons whose consent is required under Section 7
of the Securities Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
/s/ VINSON & ELKINS
-----------------------
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN OF
7TH LEVEL, INC.,
A DELAWARE CORPORATION
I. Purpose of Plan
This AMENDED AND RESTATED 1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN of
7TH LEVEL, INC. (the "PLAN") is intended to promote the interests of 7th Level,
Inc., a Delaware corporation (the "COMPANY"), and its stockholders by helping to
award and retain highly-qualified independent directors, and allowing them to
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company. Accordingly, the Company shall grant to
directors of the Company who are not and who never have been employees of the
Company or any of its subsidiaries ("NON-EMPLOYEE DIRECTORS") the option
("OPTION") to purchase shares of the common stock, $.01 par value per share, of
the Company ("COMMON STOCK"), as hereinafter set forth. Options granted under
this Plan shall be options which do not constitute incentive stock options
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "CODE").
II. Grant of Options
Options may be granted only to individuals who are Non-Employee Directors
of the Company.
On the date on which a Non-Employee Director is first elected or appointed
as a member of the Board, he or she (the "OPTIONEE") shall be granted an Option
to purchase 20,000 shares of Common Stock. Upon the close of business on the
date of each annual meeting of stockholders of the Company, commencing with the
1996 annual meeting of stockholders of the Company, each Non-Employee Director
then in office shall be granted an Option to purchase 5,000 shares of Common
Stock. Upon the close of business on the date of the 1996 annual meeting of
stockholders of the Company, each Non-Employee Director in office on April 17,
1996, shall be granted an Option (a "Supplemental Option") to purchase 10,000
shares of Common Stock.
If, as of any date that this Plan is in effect, there are not sufficient
shares of Common Stock available under the Plan to allow for the grant to each
Non-Employee Director of an Option for the number of shares provided herein,
this Plan shall terminate as provided in Article IX hereof. All Options granted
under this Plan shall be at the Option price set forth in Article V hereof and
shall be subject to adjustment as provided in Article VII hereof.
III. Shares Subject to Plan
The aggregate number of shares of Common Stock that may be issued pursuant
to Options granted under this Plan shall not exceed 125,000 shares of Common
Stock (subject to adjustment as provided in Article VII). Such shares may
consist of authorized but unissued shares of Common Stock or previously issued
shares of Common Stock reacquired by the Company. Any of such shares which
remain unissued and which are not subject to outstanding Options at the
termination of this Plan shall cease to be subject to this Plan, but, until
termination of this Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of this Plan. Should any
Option hereunder expire or terminate prior to its exercise in full, the shares
of Common Stock theretofore subject to such Option may again be subject to an
Option granted under this Plan to the extent permitted under Rule 16b-3. The
aggregate number of shares which may be issued under this Plan shall be subject
to adjustment as provided in Article VII hereof. Exercise of an Option in any
manner shall result in a decrease in the number of shares of Common Stock which
may thereafter be available, both for purposes of the Plan and for sale to any
one individual, by the number of shares as to which the Option is exercised.
1
<PAGE>
IV. Option Agreements
Each Option shall be evidenced by a written agreement substantially in
the form attached hereto as Exhibit A; provided that each Supplemental Option
shall be evidenced by a written agreement substantially in the form attached
hereto as Exhibit B.
V. Option Price
The purchase price for a share of Common Stock issued under each
Option granted pursuant to this Plan shall be the fair market value for the
Common Stock at the time the Option is granted; provided, however, that the
purchase price for each share of Common Stock issued pursuant to each
Supplemental Option shall be $16.75 per share. The fair market value of a share
of Common Stock on a particular date shall be equal to the mean of the high and
low sales prices of the Common Stock (i) reported by the Nasdaq National Market
System on that date or (ii) if the Common Stock is listed on a national stock
exchange, reported on the stock exchange composite tape on that date; or, in
either case, if no prices are reported on that date, on the last preceding date
on which such prices of the Common Stock are so reported. If the Common Stock
is traded over the counter at the time a determination of its fair market value
is required to be made hereunder, its fair market value shall be deemed to be
equal to the average between the reported high and low or closing bid and ask
prices of the Common Stock on the most recent date on which the Common Stock was
publicly traded. In the event the Common Stock is not publicly traded at the
time a determination of its value is required to be made hereunder, the
determination of its fair market value shall be made by the Board of Directors
in such manner as it deems appropriate.
VI. Options Nontransferable
Each Option and all rights granted thereunder shall not be
transferable other than by will or the laws of descent and distribution, and
shall be exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative; provided, however, that on and
after the date the Company elects to have this Plan governed under the
amendments to Rule 16b-3 effective on or after May 1, 1991, this Plan shall be
deemed to be amended to limit the transferability of Options, including any
exceptions thereto, to the same extent provided by Rule 16b-3 as so amended.
VII. Recapitalization or Reorganization
In the event of a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, an appropriate and
proportionate adjustment shall be made in the number of shares of Common Stock
for which Options may be granted pursuant to Article III hereof. A
corresponding change shall be made to the number and kind of shares, and the
exercise price per share, of unexercised Options.
VIII. Merger, Consolidation or Dissolution of Company
Following the merger of one or more corporations into the Company, or
any consolidation of the Company and one or more corporations in which the
Company is the surviving corporation, the exercise of Options under this Plan
shall apply to the shares of the surviving corporation.
Notwithstanding any other provision of this Plan, all Options under
this Plan shall terminate on the dissolution or liquidation of the Company, or
on any merger or consolidation in which the Company is not the surviving
corporation.
2
<PAGE>
IX. Term of Plan
This Plan shall be effective on approval by the outstanding shares or
unanimous written consent of the stockholders of the Company in the manner
required by Rule 16b-3. Except with respect to Options then outstanding, if not
sooner terminated under the provisions of Article VIII or Article X, the Plan
shall terminate upon and no further Options shall be granted as of the date that
the remaining number of shares of Common Stock which may be issued under the
Plan pursuant to Article III is not sufficient to cover the Options required to
be granted under Article II.
X. Amendment and Termination of Plan
The Board in its discretion may terminate this Plan at any time with
respect to any shares of Common Stock for which Options have not theretofore
been granted. The Board shall have the right to alter or amend this Plan or any
part hereof from time to time; provided, that this Plan shall not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder; and provided, further, that no change in any Option heretofore
granted may be made which would impair the rights of an Optionee without the
consent of such Optionee; and provided, further, that Board may not make any
alteration or amendment which would materially increase the benefits accruing to
participants under this Plan, increase the aggregate number of shares which may
be issued pursuant to the provisions of this Plan, change the class of
individuals eligible to receive Options under this Plan or extend the term of
this Plan, without the approval of the stockholders of the Company.
XI. Compliance with Section 16
It is intended that this Plan and any grant of an Option made to a
person subject to Section 16 of the Securities Exchange Ace of 1934, as amended
(the "1934 ACT") meet all of the requirements of Rule 16b-3, as currently in
effect or as hereinafter modified or amended ("RULE 16B-3"), promulgated under
the 1934 Act. If any provision of this Plan or any such Option would disqualify
this Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to Rule
16b-3.
7TH LEVEL, INC.
By:
-----------------------------
David R. Henkel
Chief Operating Officer
3
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT (the "Agreement") is made effective as of
______________________, by and between 7th Level, Inc., a Delaware corporation
(the "Company"), and ___________________ ("Director").
To carry out the purposes of the AMENDED AND RESTATED 7TH LEVEL, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN (the "Plan") by affording
Director the opportunity to purchase shares of common stock, par value $.01 per
share, of the Company ("Common Stock"), and in consideration of the mutual
agreements and other matters set forth herein and in the Plan, the Company and
Director hereby agree as follows:
1. Grant of Option. The Company hereby grants Director the right,
---------------
privilege, and option (the "Option") to purchase ___________ shares of Common
Stock (the "Option Shares") at the purchase price of $_____ per share (the
"Option Price"), in the manner and subject to the conditions hereinafter
provided. This Option shall not be treated as an incentive stock option within
the meaning of section 422(b) of the Internal Revenue Code of 1986, as amended.
2. Time and Exercise of Option. Subject to the limitations contained
---------------------------
herein, the aforesaid Option may be exercised at any time, and from time to
time, in whole or in part, until the termination thereof as provided in Section
4 below.
3. Method of Exercise. The Option shall be exercised by written
------------------
notice directed to the Company, at the Company's principal place of business,
addressed to the attention of its President, specifying the number of shares of
Common Stock purchased and accompanied by payment of the Option Price therefor.
(a) The Option Shares shall be divided into four (4) equal
installments. The first such installment shall accrue, and the Option
shall be exercisable with respect to the Option Shares included
therein, on the date one year after the grant of the Option, and each
succeeding installment shall accrue, and the Option shall be
exercisable with respect to the Option Shares included therein,
annually thereafter on the anniversary of the grant of the Option.
(b) The Company shall make immediate delivery of such shares,
provided that if any law or regulation requires the Company to take
any action with respect to the shares specified in such notice before
the issuance thereof, then the date of delivery of such shares shall
be extended for the period necessary to take such action.
(c) The Option may be exercised within the above limitations and
subject to the limitations contained within this section, as to any
part or all of the shares covered thereby; provided, however, that the
Option may not be exercised as to less than 1,000 shares at any one
time (or the remaining shares then purchasable under the Option, if
less than 1,000 shares).
4. Termination of Option. Except as herein otherwise stated, the
---------------------
Option to the extent not heretofore exercised shall terminate upon the first to
occur of the following dates:
(a) If Director's membership on the Board of Directors of the Company
(the "Board") terminates for cause or voluntarily by Director (other
than by reason of mandatory retirement pursuant to the policy of the
Board) not at the request of the Board, this Option may be exercised
by Director at any time during the period of three months following
such termination, or by Director's estate (or the person who acquires
this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Director) during a period of one
year following Director's death if Director dies during such three-
month period, but in each case only as to the number of shares
Director was entitled to purchase hereunder upon exercise of this
Option as of the date Director's membership on the Board so
terminates. For purposes of this Agreement, "cause"
A-1
<PAGE>
shall mean Director's gross negligence or willful misconduct in
performance of his duties as a director, or Director's final
conviction of a felony or of a misdemeanor involving moral turpitude.
(b) If Director's membership on the Board terminates by reason of
disability, this Option may be exercised in full by Director (or
Director's guardian or legal representative or Director's estate or
the person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of Director) at any
time during the period of one year following such termination.
(c) If Director dies while a member of the Board, Director's estate,
or the person who acquires this Option by will or the laws of descent
and distribution or otherwise by reason of the death of Director, may
exercise this Option in full at any time during the period of one year
following the date of Director's death.
(d) If Director's membership on the Board terminates for any reason
other than as described in (a), (b) or (c) above, this Option may be
exercised in full by Director at any time during the period of three
months following such termination, or by Director's estate (or the
person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of Director) during a
period of one year following Director's death if Director dies during
such three-month period.
This Option shall not be exercisable in any event after the expiration of ten
years from the date of grant hereof. The purchase price of shares as to which
this Option is exercised shall be paid in full at the time of exercise (A) in
cash (including check, bank draft or money order payable to the order of the
Company), (B) by delivering to the Company shares of Common Stock having a fair
market value equal to the purchase price, or (C) any combination of cash or
Common Stock. No fraction of a share of Common Stock shall be issued by the
Company upon exercise of an Option or accepted by the Company in payment of the
purchase price thereof; rather, Director shall provide a cash payment for such
amount as is necessary to effect the issuance and acceptance of only whole
shares of Common Stock. Unless and until a certificate or certificates
representing such shares shall have been issued by the Company to Director,
Director (or the person permitted to exercise this Option in the event of
Director's death) shall not be or have any of the rights or privileges of a
shareholder of the Company with respect to shares acquirable upon an exercise of
this Option.
5. Withholding of Tax. To the extent that the exercise of this
------------------
Option or the disposition of shares of Common Stock acquired by exercise of this
Option results in compensation income to Director for federal or state income
tax purposes, Director shall deliver to the Company at the time of such exercise
or disposition such amount of money or shares of Common Stock as the Company may
require to meet its obligation under applicable tax laws or regulations, and, if
Director fails to do so, the Company is authorized to withhold from any cash or
Common Stock remuneration then or thereafter payable to Director any tax
required to be withheld by reason of such resulting compensation income. Upon
an exercise of this Option, the Company is further authorized in its discretion
to satisfy any such withholding requirement out of any cash or shares of Common
Stock distributable to Director upon such exercise.
6. Reclassification, Consolidation or Merger. If all or any portion
-----------------------------------------
of the Option shall be exercised subsequent to any share dividend, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
separation, reorganization or liquidation occurring after the date hereof, as a
result of which shares of any class of the capital stock of the Company shall be
issued in respect of the then issued and outstanding Common Stock, or Common
Stock shall be changed into the same or a different number of shares of the same
or another class or classes of the capital stock of the Company, the person or
persons so exercising the Option shall receive, for the aggregate price paid
upon such exercise, the aggregate number and class of shares of the capital
stock of the Company which, if Common Stock (as authorized at the date hereof)
had been purchased immediately prior to such event at the price per share set
forth in Section 1 hereof, such person or persons would be holding at the time
of such exercise; provided; however, that no fractional share shall be issued
upon any such exercise, and the aggregate price paid shall be appropriately
reduced on account of any fractional shares not issued. No adjustment shall be
made in the minimum number of shares which may be purchased at any one time, as
fixed by subsection 3(c) hereof.
A-2
<PAGE>
7. Rights Prior to Exercise of Option. This Option is not
----------------------------------
transferable by Director, except in the event of his/her death as provided in
Subsection 4(c) above, and during his/her lifetime is exercisable only by
him/her. Director shall have no rights as a shareholder with respect to the
Option Shares until payment of the Option Price and delivery to him/her of such
shares as herein provided.
8. Status of Stock. The Company intends to register for issuance
---------------
under the Securities Act of 1933, as amended (the "Act"), the shares of Common
Stock acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption from registration under
the Act, issuance of shares of Common Stock acquirable upon exercise of this
Option will be delayed until registration of such shares is effective or an
exemption from registration under the Act is available. The Company intends to
use all reasonable efforts to ensure that no such delay will occur. In the event
exemption from registration under the Act is available upon an exercise of this
Option, Director (or the person permitted to exercise this Option in the event
of Director's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Director agrees that the shares of Common Stock which Director may
acquire by exercising this Option will not be sold or otherwise disposed of in
any manner which would constitute a violation of any applicable federal or state
securities laws. Director also agrees (i) that the certificates representing
the shares of Common Stock purchased under this Option may bear such legend or
legends as the Company deems appropriate in order to assure compliance with
applicable securities laws, (ii) that the Company may refuse to register the
transfer of the shares of Common Stock purchased under this Option on the stock
transfer records of the Company if such proposed transfer would in the opinion
of counsel satisfactory to the Company constitute a violation of any applicable
securities law and (iii) that the Company may give related instructions to its
transfer agent if any, to stop registration of the transfer of the shares of
Common Stock purchased under this Option.
9. Modification and Waiver. Except for the Plan, this Agreement
-----------------------
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
the party to be charged therewith. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
10. Applicable Law and Venue. This Agreement has been executed by
------------------------
the Company at, and shall be deemed to be performable in, Dallas County, Texas.
For these and other reasons, the parties agree that this Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
11. Jurisdiction. The parties agree that the courts of the State of
------------
Texas, and any courts whose jurisdiction is derivative on the jurisdiction of
the courts of the State of Texas, shall have exclusive personal jurisdiction
over all parties to this Agreement.
12. Headings. The subject headings of the sections of this Agreement
--------
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
13. Counterparts. This Agreement may be executed simultaneously in
------------
one or more identical counterparts, each of which for all purposes shall be
deemed an original, and all of which shall constitute, collectively, one
instrument; but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one executed counterpart.
A-3
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it on the dates indicated below, to be effective, however, as of the date first
hereinabove written.
7TH LEVEL, INC.
Date:__________________________ By:___________________________________
Name
Title
DIRECTOR
Date:__________________________ By:___________________________________
Printed Name
Address
Social Security Number
A-4
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT (the "Agreement") is made effective as of
______________________, by and between 7th Level, Inc., a Delaware corporation
(the "Company"), and ___________________ ("Director").
To carry out the purposes of the AMENDED AND RESTATED 7TH LEVEL, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN (the "Plan") by affording
Director the opportunity to purchase shares of common stock, par value $.01 per
share, of the Company ("Common Stock"), and in consideration of the mutual
agreements and other matters set forth herein and in the Plan, the Company and
Director hereby agree as follows:
1. Grant of Option. The Company hereby grants Director the right,
---------------
privilege, and option (the "Option") to purchase 10,000 shares of Common Stock
(the "Option Shares") at the purchase price of $_____ per share (the "Option
Price"), in the manner and subject to the conditions hereinafter provided. This
Option shall not be treated as an incentive stock option within the meaning of
section 422(b) of the Internal Revenue Code of 1986, as amended.
2. Time and Exercise of Option. Subject to the limitations contained
---------------------------
herein, the aforesaid Option may be exercised at any time, and from time to
time, in whole or in part, until the termination thereof as provided in Section
4 below.
3. Method of Exercise. The Option shall be exercised by written
------------------
notice directed to the Company, at the Company's principal place of business,
addressed to the attention of its President, specifying the number of shares of
Common Stock purchased and accompanied by payment of the Option Price therefor.
(a) The Option Shares shall be divided into four (4) equal
installments. The Option shall be exercisable with respect to the
Option Shares included in the first such installment on the date of
grant, and each succeeding installment shall accrue, and the Option
shall be exercisable with respect to the Option Shares included
therein, annually thereafter on the anniversary of the date on which
the Director was initially granted options under the Plan.
(b) The Company shall make immediate delivery of such shares,
provided that if any law or regulation requires the Company to take
any action with respect to the shares specified in such notice before
the issuance thereof, then the date of delivery of such shares shall
be extended for the period necessary to take such action.
(c) The Option may be exercised within the above limitations and
subject to the limitations contained within this section, as to any
part or all of the shares covered thereby; provided, however, that the
Option may not be exercised as to less than 1,000 shares at any one
time (or the remaining shares then purchasable under the Option, if
less than 1,000 shares).
4. Termination of Option. Except as herein otherwise stated, the
---------------------
Option to the extent not heretofore exercised shall terminate upon the first to
occur of the following dates:
(a) If Director's membership on the Board terminates for cause or
voluntarily by Director (other than by reason of mandatory retirement
pursuant to the policy of the Board) not at the request of the Board,
this Option may be exercised by Director at any time during the period
of three months following such termination, or by Director's estate
(or the person who acquires this Option by will or the laws of descent
and distribution or otherwise by reason of the death of Director)
during a period of one year following Director's death if Director
dies during such three-month period, but in each case only as to the
number of shares Director was entitled to purchase hereunder upon
exercise of this Option as of the date Director's membership on the
Board so terminates. For purposes of this Agreement, "cause" shall
mean Director's
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gross negligence or willful misconduct in performance of his duties as
a director, or Director's final conviction of a felony or of a
misdemeanor involving moral turpitude.
(b) If Director's membership on the Board terminates by reason of
disability, this Option may be exercised in full by Director (or
Director's guardian or legal representative or Director's estate or
the person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of Director) at any
time during the period of one year following such termination.
(c) If Director dies while a member of the Board, Director's estate,
or the person who acquires this Option by will or the laws of descent
and distribution or otherwise by reason of the death of Director, may
exercise this Option in full at any time during the period of one year
following the date of Director's death.
(d) If Director's membership on the Board terminates for any reason
other than as described in (a), (b) or (c) above, this Option may be
exercised in full by Director at any time during the period of three
months following such termination, or by Director's estate (or the
person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of Director) during a
period of one year following Director's death if Director dies during
such three-month period.
This Option shall not be exercisable in any event after the expiration of ten
years from the date of grant hereof. The purchase price of shares as to which
this Option is exercised shall be paid in full at the time of exercise (A) in
cash (including check, bank draft or money order payable to the order of the
Company), (B) by delivering to the Company shares of Common Stock having a fair
market value equal to the purchase price, or (C) any combination of cash or
Common Stock. No fraction of a share of Common Stock shall be issued by the
Company upon exercise of an Option or accepted by the Company in payment of the
purchase price thereof; rather, Director shall provide a cash payment for such
amount as is necessary to effect the issuance and acceptance of only whole
shares of Common Stock. Unless and until a certificate or certificates
representing such shares shall have been issued by the Company to Director,
Director (or the person permitted to exercise this Option in the event of
Director's death) shall not be or have any of the rights or privileges of a
shareholder of the Company with respect to shares acquirable upon an exercise of
this Option.
5. Withholding of Tax. To the extent that the exercise of this
------------------
Option or the disposition of shares of Common Stock acquired by exercise of this
Option results in compensation income to Director for federal or state income
tax purposes, Director shall deliver to the Company at the time of such exercise
or disposition such amount of money or shares of Common Stock as the Company may
require to meet its obligation under applicable tax laws or regulations, and, if
Director fails to do so, the Company is authorized to withhold from any cash or
Common Stock remuneration then or thereafter payable to Director any tax
required to be withheld by reason of such resulting compensation income. Upon
an exercise of this Option, the Company is further authorized in its discretion
to satisfy any such withholding requirement out of any cash or shares of Common
Stock distributable to Director upon such exercise.
6. Reclassification, Consolidation or Merger. If all or any portion
-----------------------------------------
of the Option shall be exercised subsequent to any share dividend, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
separation, reorganization or liquidation occurring after the date hereof, as a
result of which shares of any class of the capital stock of the Company shall be
issued in respect of the then issued and outstanding Common Stock, or Common
Stock shall be changed into the same or a different number of shares of the same
or another class or classes of the capital stock of the Company, the person or
persons so exercising the Option shall receive, for the aggregate price paid
upon such exercise, the aggregate number and class of shares of the capital
stock of the Company which, if Common Stock (as authorized at the date hereof)
had been purchased immediately prior to such event at the price per share set
forth in Section 1 hereof, such person or persons would be holding at the time
of such exercise; provided; however, that no fractional share shall be issued
upon any such exercise, and the aggregate price paid shall be appropriately
reduced on account of any fractional shares not issued. No adjustment shall be
made in the minimum number of shares which may be purchased at any one time, as
fixed by subsection 3(c) hereof.
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<PAGE>
7. Rights Prior to Exercise of Option. This Option is not
----------------------------------
transferable by Director, except in the event of his/her death as provided in
Subsection 4(c) above, and during his/her lifetime is exercisable only by
him/her. Director shall have no rights as a shareholder with respect to the
Option Shares until payment of the Option Price and delivery to him/her of such
shares as herein provided.
8. Status of Stock. The Company intends to register for issuance
---------------
under the Securities Act of 1933, as amended (the "Act"), the shares of Common
Stock acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption from registration under
the Act, issuance of shares of Common Stock acquirable upon exercise of this
Option will be delayed until registration of such shares is effective or an
exemption from registration under the Act is available. The Company intends to
use all reasonable efforts to ensure that no such delay will occur. In the event
exemption from registration under the Act is available upon an exercise of this
Option, Director (or the person permitted to exercise this Option in the event
of Director's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Director agrees that the shares of Common Stock which Director may
acquire by exercising this Option will not be sold or otherwise disposed of in
any manner which would constitute a violation of any applicable federal or state
securities laws. Director also agrees (i) that the certificates representing
the shares of Common Stock purchased under this Option may bear such legend or
legends as the Company deems appropriate in order to assure compliance with
applicable securities laws, (ii) that the Company may refuse to register the
transfer of the shares of Common Stock purchased under this Option on the stock
transfer records of the Company if such proposed transfer would in the opinion
of counsel satisfactory to the Company constitute a violation of any applicable
securities law and (iii) that the Company may give related instructions to its
transfer agent if any, to stop registration of the transfer of the shares of
Common Stock purchased under this Option.
9. Modification and Waiver. Except for the Plan, this Agreement
-----------------------
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
the party to be charged therewith. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
10. Applicable Law and Venue. This Agreement has been executed by
------------------------
the Company at, and shall be deemed to be performable in, Dallas County, Texas.
For these and other reasons, the parties agree that this Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
11. Jurisdiction. The parties agree that the courts of the State of
------------
Texas, and any courts whose jurisdiction is derivative on the jurisdiction of
the courts of the State of Texas, shall have exclusive personal jurisdiction
over all parties to this Agreement.
12. Headings. The subject headings of the sections of this Agreement
--------
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
13. Counterparts. This Agreement may be executed simultaneously in
------------
one or more identical counterparts, each of which for all purposes shall be
deemed an original, and all of which shall constitute, collectively, one
instrument; but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one executed counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it on the dates indicated below, to be effective, however, as of the date first
hereinabove written.
7TH LEVEL, INC.
Date:__________________________ By:___________________________________
Name
Title
DIRECTOR
Date:__________________________ By:___________________________________
Printed Name
Address
Social Security Number
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
7th Level, Inc.:
We consent to incorporation by reference herein of our reports relating to
the financial statements of (a) 7th Level, Inc. as of December 31, 1995 and 1994
and for each of the years in the two-year period ended December 31, 1995 and the
period from April 28, 1993 (inception) through December 31, 1993 and (b) 7th
Level Sole Proprietorship (a development stage enterprise) as of December 31,
1993 and for the period from January 1, 1993 (inception) through December 31,
1993, which reports appear in the December 31, 1995 annual report on Form 10-K
of 7th Level, Inc.
KPMG Peat Marwick LLP
Dallas, Texas
August 15, 1996
