<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1998
Registration No. 333-64365
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM S-3
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 organization) Identification No.)
1201 Richardson Drive, Suite 277
Richardson, Texas 75080
(972) 498-8100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
RICHARD S. MERRICK
Chief Executive Officer
7th Level, Inc.
1201 Richardson Drive, Suite 277
Richardson, Texas 75080
(972) 498-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
Copies to:
GERALD ADLER, ESQ.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
(212) 758-9500
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<PAGE>
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. The
Selling Stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1998
PROSPECTUS
9,175,000 Shares
7th Level, Inc.
Common Stock
------------------------------------
This Prospectus relates to the offer and sale by the holders thereof (the
"Selling Stockholders") of an aggregate of 9,175,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of 7th Level, Inc. (the "Company")
which are outstanding or which will be issued upon the exercise of certain
outstanding warrants to purchase shares of Common Stock or the conversion of
certain securities convertible into shares of Common Stock. See "Selling
Stockholders" and "Plan of Distribution." The shares of Common Stock offered
hereby are sometimes referred to herein as the "Shares."
------------------------------------
The Common Stock is quoted on the NASDAQ National Market System ("NASDAQ") under
the symbol SEVL. On October 14, 1998, the closing price of the Common Stock
was $2.125 per share.
The Company will not receive any of the proceeds from the sale of the Shares
offered hereby (this "Offering"). Expenses of this Offering, estimated at
$23,245, are payable by the Company. The aggregate proceeds to the Selling
Stockholders from the sale of the Shares will be the purchase price of the
Shares sold, less the aggregate underwriting or brokerage fees, discounts and
commissions and similar selling expenses, if any. See "Plan of Distribution."
The Selling Stockholders and intermediaries through whom the Shares are sold may
be deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Act"), with respect to the Shares, and any profits realized or
commissions received may be deemed underwriting compensation. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Act.
------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October , 1998.
--
------------------------------------
<PAGE>
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 reports, proxy statements, information statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, information statements and other
information concerning the Company may be inspected without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, NW, Room
1024, Washington, D.C. 20549; and at the Commission's regional offices located
at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511, and at Suite 1300, Seven World Trade Center, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, NW, Washington, D.C. 20549 at
prescribed rates. The Commission maintains a web site that contains reports,
proxy statements, information statements and other information regarding issuers
that file electronically with the Commission. The address of such site is
(http://www.sec.gov). The Common Stock is traded on NASDAQ.
The Company has filed with the Commission a registration statement on
Form S-3 (herein together with all amendments thereto, if any, called the
"Registration Statement") under the Act, with respect to the securities offered
by this Prospectus. This Prospectus does not contain all the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits and
schedules thereto which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the offices of the Commission. Statements contained
in this Prospectus or incorporated herein by reference as to the contents of any
contract or other documents referred to are not necessarily complete, and are
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
4. The Company's Current Reports on Form 8-K dated April 23, 1998 and
July 9, 1998.
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5. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission under the
Exchange Act, including any amendment or report filed for the purpose
of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this Offering
shall be deemed to be incorporated by reference in this Prospectus and to be a
part of this Prospectus from the date of filing thereof. Any statement contained
in a document 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 other subsequently filed document which also is
incorporated or 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
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any
and all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference (other than exhibits to the
documents referred to above unless such exhibits are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to: 7th Level, Inc., 1201 Richardson Drive, Suite 277, Richardson, Texas 75080,
Attention: Chief Executive Officer, or by telephone (972) 498-8100.
Cautionary Statement pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Prospectus, including any documents that are incorporated by reference
as set forth in "Incorporation of Certain Documents by Reference," contains
"forward-looking statements" within the meaning of Section 27A of the Act and
Section 21E of the Exchange Act. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate, or imply future
results, performance, or achievements, and may contain the words "believe,"
"anticipate," "expect," "estimate," "project," "will be," "will continue", "will
likely result," or words or phrases of similar meaning. Forward-looking
statements involve risks and uncertainties that may cause actual result to
differ materially from the forward-looking statements. The risks and
uncertainties include, among others, the Company's ability to complete new
products at planned costs and on planned schedules, the Company's ability to
attract and retain strategic partners, the Company's ability to leverage
intangible assets in its technology, the success of the Company's cost reduction
strategy and the Company's ability to maintain a sufficient level of financing
for its new business strategy. Additional factors which are beyond the Company's
control and could influence results include market acceptance of the Company's
products and adoption of the Internet as a medium of commerce and
communications. See the discussion of the Company's business and description of
the various factors that could materially affect the ability of the Company to
achieve the anticipated
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<PAGE>
results which are included in the Company's periodic reports which are
incorporated herein by reference.
4
<PAGE>
THE COMPANY
The Company is a developer of leading-edge Internet software. In April
1998, the Company entered into a comprehensive distribution agreement with
RealNetworks whereby RealNetworks will distribute the Company's Agent 7
technology. Also in April 1998, the Company entered into a strategic
distribution agreement with WaveTop, a division of WavePhore, Inc. Agent 7 is
the first software tool of its kind for preparing and streaming intelligent,
interactive animated characters over the Internet. In addition to Agent 7, the
Company is developing a complete line of software products which provide the end
user with intelligent templates, reusable content libraries and specialized
analysis techniques to greatly reduce the effort and skills required to prepare
rich media for delivery over the Internet. The Company continues to explore
potential strategic alliances or other arrangements to maximize stockholder
value. Additional information on 7th Level is available via the Company web site
at www.7thlevel.com. The Company's principal executive offices are located at
1201 Richardson Drive, Suite 277, Richardson, Texas 75080, telephone (972)
498-8100.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares hereunder. All proceeds will be received by the Selling Stockholders.
DIVIDEND POLICY
No cash dividends have ever been declared by the Company on the Common
Stock. The Company intends to retain earnings to finance the development and
growth of its business. Accordingly, the Company does not anticipate that any
cash dividends will be declared on the Common Stock for the foreseeable future.
Future payment of cash dividends, if any, will depend upon the Company's
financial condition, results of operations, business conditions, capital
requirements, restrictions contained in agreements, future prospects and other
factors deemed relevant by the Company's Board of Directors.
SELLING STOCKHOLDERS
The following securities are covered by this Prospectus:
1. The resale by the respective holders thereof of up to 4,175,000 Shares
that have been acquired upon the exercise of warrants granted by the
Company in connection with certain private placements by the Company
(the "Private Placements").
2. The resale by the respective holders thereof of up to 5,000,000 Shares
that have been, or may be, acquired upon the conversion of the
Company's Series B Convertible Preferred Stock.
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<PAGE>
3. The resale by East-West Capital Associates, Inc. ("Capital") of up to
200,000 Shares that may be acquired upon the exercise of a warrant
granted by the Company in connection with a consulting agreement (the
"Capital Warrant").
4. The resale by Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") of up to 800,000 Shares that may be acquired upon the exercise
of a warrant granted by the Company in connection with an engagement
letter executed in November 1997, with respect to the Company's
private placement of debt or equity securities (the "Engagement
Letter").
The Shares offered hereby are being sold by the Selling Stockholders.
The table below sets forth, as of July 28, 1998 and as adjusted to reflect the
sale of the Shares, certain information regarding the ownership of the Common
Stock by the Selling Stockholders. Except as otherwise indicated, the number of
shares of Common Stock reflected in the table below has been determined in
accordance with Rule 13d-3 promulgated under the Exchange Act. Under such Rule,
each Selling Stockholder is deemed to beneficially own the number of shares of
Common Stock issuable upon, among other things, the exercise of options, if such
options are exercisable within sixty days. Where less than all shares of Common
Stock beneficially owned by a Selling Stockholder are being registered for sale,
the remaining shares of Common Stock, or a portion of them, may already be
registered for sale or otherwise freely tradeable.
<TABLE>
<CAPTION>
Number of
Beneficial Ownership Shares to Beneficial Ownership
of Common Stock be Sold in of Common Stock
Prior to Offering Offering After Offering
----------------- -------- --------------
Stockholders Number Percent Number Percent
- ------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Hare & Co. 1,875,000 9.64% 1,875,000 0 *
Stanley I. Aber 30,000 * 30,000 0 *
Nevada Anderson, Inc. 120,000 * 120,000 0 *
Daniel Silna 138,750 * 138,750 0 *
Ozzie Silna 221,250 1.24% 221,250 0 *
Entec Associates(1) 989,158 5.43% 622,500 366,658 2.09%
Mayfirst Associates Ltd. 150,000 * 150,000 0 *
DNK Investments LLP 112,500 * 112,500 0 *
Andrew Schupak(2) 37,500 * 37,500 0 *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of
Beneficial Ownership Shares to Beneficial Ownership
of Common Stock be Sold in of Common Stock
Prior to Offering Offering After Offering
----------------- -------- --------------
Stockholders Number Percent Number Percent
- ------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Stephen Leroy Kling &
Rosalyn H. Kling, Trustees
of the S. Lee Kling
Revocable Trust U/T/A
1/20/82 120,000 * 120,000 0 *
David Chu 135,000 * 135,000 0 *
Lance and Ericka Maiss 18,750 * 18,750 0 *
Eric J. Maiss 18,750 * 18,750 0 *
CastleRock Partners 150,000 * 150,000 0 *
Anthony DeLuise** 52,500 * 52,500 0 *
Marc Cummins** 52,500 * 52,500 0 *
Safra Catz** 15,000 * 15,000 0 *
Jack Maier** 18,750 * 18,750 0 *
David Hurwitz** 15,000 * 15,000 0 *
Pat McCloskey** 7,500 * 7,500 0 *
IRA F/B/O Robert E.
Diemar, Jr. DLJSC as
Custodian** 7,500 * 7,500 0 *
Joe Reece** 15,000 * 15,000 0 *
Louis Klevan** 11,250 * 11,250 0 *
Tom Sullivan** 3,750 * 3,750 0 *
Mark Manson** 18,750 * 18,750 0 *
Michael McManus** 5,250 * 5,250 0 *
Sean Feeley** 2,250 * 2,250 0 *
Saber Development
Corporation 15,000 * 15,000 0 *
Talisman Capital, Inc. 30,000 * 30,000 0 *
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Number of
Beneficial Ownership Shares to Beneficial Ownership
of Common Stock be Sold in of Common Stock
Prior to Offering Offering After Offering
----------------- -------- --------------
Stockholders Number Percent Number Percent
- ------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Mystic Investment Limited 30,000 * 30,000 0 *
Donaldson, Lufkin &
Jenrette Securities
Corporation/(3)//(4)/ 875,000 4.75% 875,000 0 *
Alpine Associates, A New
Jersey Limited Partnership 2,700,000 13.31% 2,700,000 0 *
East-West Capital
Associates, Inc./(5)//(6)/ 1,550,000 8.10% 1,550,000 0 *
</TABLE>
- -------------------------------
* Less than 1%
** Employed by DLJ
(1) Entec Associates - Certain Shares beneficially owned by Entec Associates
are subject to a stockholders' voting agreement and irrevocable proxy
pursuant to which Robert Alan Ezrin, the Company's Vice Chairman of the
Board of Directors, has sole voting power with respect to such Shares.
(2) Andrew Schupak is the son of Donald Schupak, the Company's Chairman of the
Board of Directors.
(3) Certain Shares attributed to DLJ are registered in the name of DLJ's
affiliates including DLJ Capital Corp. and DLJ Fund Investment Partners II,
LP.
(4) DLJ currently acts as the Company's financial advisor and was retained by
the Company to act as its placement agent pursuant to the Engagement
Letter.
(5) 166,667 Shares reflected in the number of Shares beneficially owned by
Capital will not vest within the next 60 days, but will vest ratably (1/36
of 200,000 each month) until April 30, 2001.
(6) Capital - All of the shares of Capital are owned by The Mervyn Adelson
Trust U/T/A dated September 29, 1992, of which Merv Adelson, a director of
the Company, is the trustee.
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. The Selling Stockholders who hold their Shares may sell their
Shares from time to time.
As used herein, "Selling Stockholders" includes donees and pledgees
selling Shares received from a named Selling Stockholder after the date of this
Prospectus. All costs, expenses and fees in connection with the registration of
the Shares offered hereby will be borne by the Company.
Underwriting or brokerage commissions and similar selling expenses, if any,
attributable to the sale of Shares will be borne by the Selling Stockholders.
Sales of Shares may be effected by Selling Stockholders from time to time in one
or more types of transactions (which may include block transactions) on NASDAQ,
in the over-the-counter market, in negotiated transactions, through put or call
options transactions relating to the Shares, through short sales of Shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Usual and customary or specifically negotiated
underwriting or brokerage fees, discounts and commissions
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may be paid by the Selling Stockholders in connection with such sales of Shares.
Such transactions may or may not involve brokers or dealers. The Company is not
aware of any Selling Stockholders which have entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their Shares, nor is the Company aware of any underwriter or
coordinating broker acting in connection with the proposed sale of Shares by the
Selling Stockholders.
The Selling Stockholders may effect such transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholders and/or the
purchasers of Shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection
with the sale of Shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Act, and any commissions received by such broker-dealers
and any profit on the resale of the Shares sold by them while acting as
principals might be deemed to be underwriting discounts or commissions under the
Act. The Company has agreed to indemnify each Selling Stockholder against
certain liabilities, including liabilities arising under the Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Shares against certain
liabilities, including liabilities arising under the Act.
Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act, the Selling Stockholders will be
subject to the prospectus delivery requirements of the Act. The
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to the sale of Shares by the Selling Stockholders in the market.
At the time a particular offer of the Shares offered hereby is made, to
the extent required, a supplement to this Prospectus will be distributed (or, if
required, a post-effective amendment to the Registration Statement of which this
Prospectus is a part will be filed) which will identify the specific Shares
being offered and set forth the aggregate amount of Shares being offered, the
purchase price and the terms of the offering, including the name or names of the
Selling Stockholders and of any underwriters, dealers or agents, the purchase
price paid by any underwriter for Shares purchased from the Selling
Stockholders, any discounts, commissions and other items constituting
compensation from the Selling Stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public.
Pursuant to that certain Registration Rights Agreement granting
registration rights to certain Selling Stockholders, which was executed in
connection with the Private Placements, the Company will use its best efforts to
keep the Registration Statement, of which this Prospectus forms a part,
continuously effective under the Act.
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The certificates representing the Shares offered hereby contain legends
as to their restricted transferability. Upon the effectiveness of the
Registration Statement, of which this Prospectus forms a part, and the transfer
of the Shares pursuant thereto, such legends will no longer be necessary, and
accordingly, new certificates representing such Shares will be issued to the
transferee without any such legends unless otherwise required by law.
Selling Stockholders also may resell all or a portion of the Shares in
open market transactions in reliance upon Rule 144 under the Act, provided they
meet the criteria and conform to the requirements of such Rule.
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LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Swidler Berlin Shereff Friedman, LLP, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule
of the Company, as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 1997, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The report of KPMG Peat Marwick LLP contains an explanatory paragraph
that states that the Company has suffered recurring losses since inception and
does not currently have sufficient resources to meet its anticipated operating
requirements during 1998, which conditions raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements and financial statement schedule do not include any adjustments that
might result from the outcome of this uncertainty.
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Until [ ], 1998, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
Page
----
Available Information.........................................................2
Incorporation of Certain Documents
by Reference.........................................................2
The Company...................................................................4
Use of Proceeds ..............................................................4
Dividend Policy ..............................................................4
Selling Stockholders .........................................................4
Plan of Distribution .........................................................7
Legal Matters ...............................................................10
Experts .....................................................................10
7th Level, Inc.
9,175,000 Shares
Common Stock
PROSPECTUS
October __, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission Registration Fee................... $5,245
NASD Fee.............................................................. N/A
Printing and Engraving................................................ 4,000
Legal Fees and Expenses (other than Blue Sky)......................... 10,000
Blue Sky Fees and Expenses............................................ N/A
Accounting Fees and Expenses.......................................... 3,000
Transfer Agent Fees................................................... N/A
Miscellaneous......................................................... 1,000
Total ....................................................... 23,245
All of the above items, except the registration fee, are estimated. All
expenses incurred in connection with this offering will be borne by the Company,
including without limitation, the reasonable fees and disbursements of counsel
retained by the Selling Stockholders, but excluding underwriting discounts and
commissions, if any.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the Registrant is governed
by Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") and the Restated Certificate of Incorporation and By-Laws of the
Registrant. Subsection (a) of DGCL Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the
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<PAGE>
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
DGCL Section 145 further provides that to the extent that a present or
former director or officer is successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. In all cases in
which indemnification is permitted under subsections (a) and (b) of Section 145
(unless ordered by a court), it shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the applicable standard of conduct has been met by the
party to be indemnified. Such determination must be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
The statute authorizes the corporation to pay expenses incurred by an officer or
director in advance of the final disposition of a proceeding upon receipt of an
undertaking by or on behalf of the person to whom the advance will be made, to
repay the advances if it shall ultimately be determined that he was not entitled
to indemnification. DGCL Section 145 also provides that indemnification and
advancement of expenses permitted thereunder are not to be exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors, or otherwise. DGCL Section 145 also authorizes the
corporation to purchase and maintain liability insurance on behalf of its
directors, officers, employees and agents regardless of whether the corporation
would have the statutory power to indemnify such persons against the liabilities
insured.
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<PAGE>
Article Eighth of the Restated Certificate of Incorporation of the
Registrant, as amended (the "Certificate"), provides that no director of the
Registrant shall be personally liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (involving certain unlawful dividends or stock purchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit.
Article Tenth of the Registrant's Certificate entitles directors and
officers of the Registrant to indemnification to the fullest extent permitted by
Section 145 of the DGCL, as the same may be supplemented from time to time. The
Certificate further provides that the Registrant may, to the fullest extent
authorized by the Board of Directors, indemnify any employee or agent of the
Registrant.
Pursuant to Section 145(g) of the DGCL, the Registrant's By-Laws, as
amended, authorize the Registrant to obtain insurance to protect officers and
directors from certain liabilities, including liabilities against which the
Registration cannot indemnify its officers and directors. The Registrant
maintains a primary directors and officers liability and company reimbursement
policy which, among other things, provides for payment up to $3 million on
behalf of any of the Registrant's past, present or future directors or officers
against Loss (as defined in such policy). The Registrant also maintains a
supplemental insurance and company reimbursement policy providing for, among
other things, payment up to $2 million on behalf of any of the Registrant past,
present or future directors or officers against Loss (as defined in such
policy).
ITEM 16. Exhibits
The following exhibits are filed as part of this Amendment No. 1 to the
Registration Statement.
Exhibit Number Description
5.1* Opinion of Swidler Berlin Shereff Friedman, LLP.
23.1* Consent of KPMG Peat Marwick LLP.
23.2* Consent of Swidler Berlin Shereff Friedman, LLP
(included in Exhibit 5.1).
24.1* Power of Attorney (appears on signature page).
*Previously filed.
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
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<PAGE>
(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 this Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission
pursuant to Rule 424(b) promulgated under the Securities
Act of 1933 if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in this
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (ii) shall not apply if
-------- -------
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, 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 of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
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<PAGE>
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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 of 1933 and will be governed by the final adjudication of such
issue.
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<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 the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Richardson, State of Texas, on this 15th day of
October, 1998.
7TH LEVEL, INC.
By: /s/ Richard S. Merrick
--------------------------------------
Richard S. Merrick
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard S. Merrick Chief Executive Officer and Director October 15, 1998
- ------------------------- (Principal Executive Officer)
Richard S. Merrick
/s/ Donald Schupak Chairman of the Board of Directors and October 15,1998
- ------------------------- Director (Principal Financial and
Donald Schupak Accounting Officer)
* Vice Chairman of the Board of Directors October 15, 1998
- ------------------------- and Director
Robert Alan Ezrin
* Director October 15, 1998
- -------------------------
Merv Adelson
* Director October 15, 1998
- -------------------------
James A. Cannavino
*By: /s/ Richard S. Merrick
------------------------
Richard S. Merrick
Attorney-in-Fact
</TABLE>
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<PAGE>
7TH LEVEL, INC.
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
EXHIBIT INDEX
Exhibit
5.1* Opinion of Swidler Berlin Shereff Friedman, LLP
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1)
24.1* Power of Attorney (appears on signature page)
*Previously filed.
