<PAGE>
As filed with the Securities and Exchange Commission on October 9, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
7TH LEVEL, INC.
(Exact name of issuer as specified
in its charter)
Delaware 75-2480669
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
organization)
1201 Richardson Drive, Suite 277
Richardson, Texas 75080
(Address of principal executive offices) (Zip Code)
COMMON STOCK ISSUABLE UNDER EMPLOYEE BENEFIT PLANS
(Full titles of the Plans)
Richard S. Merrick Copies to:
Chief Executive Officer Gerald Adler, Esq.
7th Level, Inc. Swidler Berlin Shereff Friedman, LLP
1201 Richardson Drive, Suite 277 919 Third Avenue
Richardson, Texas 75080 New York, New York 10022
(972) 498-8100 (212) 758-9500
(Name, address and telephone number,
including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Price Aggregate Amount of
to be Registered to be Registered/(1)/ Per Share Offering Price Registration Fee/(2)/
<S> <C> <C> <C> <C>
Common Stock, par value 3,728,000 shares $2.359 $8,794,352 $2,594.33
$0.01 per share
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416, this Registration Statement also covers such
additional securities as may become issuable to prevent dilution resulting
from stock splits, stock dividends or similar transactions.
(2) The Registration Fee has been calculated pursuant to Rule 457 as follows:
3,728,000 multiplied by .000295 multiplied by $2.359, the average of the
high and low sales prices of the Registrant's Common Stock as included on
the NASDAQ National Market System on October 7, 1998.
<PAGE>
PROSPECTUS
3,728,000 SHARES
7TH LEVEL, INC.
COMMON STOCK
This Prospectus relates to the offer and sale by certain current and former
officers, directors, employees and consultants (the "Selling Stockholders") of
an aggregate of 3,728,000 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 options to purchase 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 7, 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 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 9, 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-8 (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.
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.
2
<PAGE>
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 results which are included in the Company's periodic
reports which are incorporated herein by reference.
3
<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:
The resale by the respective holders thereof of up to 3,728,000 Shares that
have been, or may be, acquired by certain current and former officers,
directors, employees and consultants of the Company pursuant to certain employee
benefit plans and other employment and consulting arrangements.
The Shares offered hereby are being sold by the Selling Stockholders. The
table below sets forth, as of September 30, 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 tradable.
4
<PAGE>
<TABLE>
<CAPTION>
Stockholders BENEFICIAL BENEFICIAL NUMBER OF SHARES BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP OF TO BE SOLD IN OWNERSHIP OF OWNERSHIP OF
COMMON STOCK COMMON STOCK THE OFFERING COMMON STOCK COMMON STOCK
PRIOR TO OFFERING PRIOR TO OFFERING AFTER OFFERING AFTER OFFERING
(NUMBER) (PERCENT) (NUMBER) (PERCENT)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald Schupak (1) 1,315,092 7.2% 1,255,000 60,092 *
Robert A. Ezrin (2) 1,131,131 6.3% 235,000 896,131 5.0%
James A. Cannavino (3) 215,000 1.2% 215,000 0
Merv Adelson (4) 1,927,426 10.3% 55,000 1,872,426 10.0%
Richard S. Merrick (5) 805,000 4.4% 700,000 105,000 *
Curt W. Marvis (6) 358,500 2.0% 345,000 13,500 *
Timothy Cahill (7) 315,000 1.8% 315,000 0
Jeff Croson (8) 152,500 * 125,000 27,500 *
Wes Bell (9) 115,250 * 76,000 39,250 *
W. Scott Page 445,986 2.5% 20,000 425,986 2.4%
Carolyn Rominger (10) 82,248 * 50,000 32,248 *
Michael E. Thenhaus (11) 66,010 * 45,000 21,010 *
Mark R. Zartler (12) 75,248 * 75,000 248 *
Paul S. Ray (13) 58,371 * 35,000 23,371 *
Paul Schmidman 10,000 * 10,000 0
Jason A. Greenwood(14) 29,678 * 20,000 9,678 *
Edwin R. Alcala (15) 20,244 * 5,000 15,244 *
Harry Gold (16) 10,600 * 5,000 5,600 *
Jason Miller (17) 5,000 * 5,000 0
Kenneth T. Roy (18) 14,123 * 5,000 9,123 *
Jay Brent Deshan (19) 11,501 * 5,000 6,501 *
Dane Howard (20) 15,000 * 15,000 0
Steve Holland (21) 5,000 * 5,000 0
Sheri A. Denning (22) 8,125 * 5,000 3,125 *
Mary K. Fischer (23) 10,599 * 7,000 3,599 *
Justin Prough (24) 4,000 * 4,000 0
Paul Tighe (25) 3,623 * 2,500 1,123 *
Angie Spross (26) 1,250 * 1,000 250 *
Jim Shepherd 7,500 * 7,500 0
Storm Thurgeson (27) 10,000 * 10,000 0
Tom Carulli 60,000 * 60,000 0
Rick Segal 10,000 * 10,000 0
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Less than 1%
(1) 570,000 Shares reflected in the number of Shares beneficially owned prior
to the Offering by Donald Schupak will not vest within the next 60 days,
but will vest ratably (1/3 of 570,000) each year until April 20, 2001.
(2) 366,658 Shares reflected in the number of shares beneficially owned by
Robert A. Ezrin are owned by Entec Associates with respect to which Mr.
Ezrin has sole voting power pursuant to a stockholders' voting agreement
and irrevocable proxy. 95,000 Shares reflected in the number of Shares
beneficially owned prior to the Offering by Mr. Ezrin will not vest within
the next 60 days, but will vest ratably (1/3 of 95,000 each year) until
April 20, 2001.
5
<PAGE>
(3) 90,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by James A. Cannavino will not vest within the next 60 days,
but will vest ratably (1/3 of 90,000 each year) until April 20, 2001.
(4) 1,550,000 Shares reflected in the number of Shares beneficially owned by
Merv Adelson are owned by East-West Capital Associates, Inc., all of the
shares of which are owned by The Mervyn Adelson Trust U/T/A dated September
29, 1992, of which Merv Adelson is the trustee. Of such Shares, 166,667
Shares will not vest within the next 60 days, but will vest ratably (1/36
of 200,000 each month) until April 30, 2001.
(5) 600,000 Shares reflected in the number of Shares beneficially owned prior
to the Offering by Richard S. Merrick will not vest within the next 60
days, but will vest ratably (1/3 of 600,000 each year) until April 20,
2001.
(6) 300,000 Shares reflected in the number of Shares beneficially owned prior
to the Offering by Curt W. Marvis will not vest within the next 60 days,
but will vest ratably (1/3 of 300,000 each year) until April 20, 2001.
(7) 285,000 Shares reflected in the number of Shares beneficially owned prior
to the Offering by Timothy Cahill will not vest within the next 60 days,
but will vest ratably (1/3 of 285,000 each year) until April 20, 2001.
(8) 105,000 Shares reflected in the number of Shares beneficially owned prior
to the Offering by Jeff Croson will not vest within the next 60 days, but
will vest ratably (1/3 of 105,000 each year) until April 20, 2001.
(9) 56,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Wes Bell will not vest within the next 60 days, but will
vest ratably (1/3 of 56,000 each year) until April 20, 2001.
(10) 40,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Carolyn Rominger will not vest within the next 60 days, but
will vest ratably (1/3 of 40,000 each year) until April 20, 2001.
(11) 45,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Michael E. Thenhaus will not vest within the next 60 days,
but will vest ratably (1/3 of 45,000 each year) until April 20, 2001.
(12) 55,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Mark R. Zartler will not vest within the next 60 days, but
will vest ratably (1/3 of 55,000 each year) until April 20, 2001.
(13) 30,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Paul S. Ray will not vest within the next 60 days, but will
vest ratably (1/3 of 30,000 each year) until April 20, 2001.
(14) 15,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Jason A. Greenwood will not vest within the next 60 days,
but will vest ratably (1/3 of 15,000 each year) until April 20, 2001.
(15) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Edwin R. Alcala will not vest within the next 60 days, but
will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(16) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Harry Gold will not vest within the next 60 days, but will
vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(17) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Jason Miller will not vest within the next 60 days, but
will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(18) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Kenneth T. Roy will not vest within the next 60 days, but
will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(19) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Jay Brent Deshan will not vest within the next 60 days,
but will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(20) 12,500 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Dane Howard will not vest within the next 60 days, but will
vest ratably (1/3 of 12,500 each year) until April 20, 2001.
(21) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Steve Holland will not vest within the next 60 days, but
will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(22) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Sheri Denning will not vest within the next 60 days, but
will vest ratably (1/3 of 5,000 each year) until April 20, 2001.
(23) 7,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Mary K. Fischer will not vest within the next 60 days, but
will vest ratably (1/3 of 7,000 each year) until April 20, 2001.
(24) 4,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Justin Prough will not vest within the next 60 days, but
will vest ratably (1/3 of 4,000 each year) until April 20, 2001.
(25) 2,500 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Paul Tighe will not vest within the next 60 days, but will
vest ratably (1/3 of 2,500 each year) until April 20, 2001.
(26) 1,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Angie Spross will not vest within the next 60 days, but
will vest ratably (1/3 of 1,000 each year) until April 20, 2001.
(27) 5,000 Shares reflected in the number of Shares beneficially owned prior to
the Offering by Storm Thurgeson will not vest within the next 60 days, but
will vest ratably (1/2 of 5,000 each year) until May 20, 2000.
6
<PAGE>
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 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.
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.
7
<PAGE>
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.
8
<PAGE>
UNTIL NOVEMBER 18, 1998, ALL DEALERS 7TH LEVEL, INC.
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 3,728,000 SHARES
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. COMMON STOCK
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 8
Experts 8
PROSPECTUS
OCTOBER 9, 1998
<PAGE>
PART II
INFORMATION REQUIRED IN
THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents, which have been filed by 7th Level, Inc., a
Delaware corporation (the "Registrant"), with the Securities and Exchange
Commission (the "Commission"), are incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the period ended
December 31, 1997.
(b) The Registrant's Quarterly Report on Form 10-Q for the period ended
March 31, 1998.
(c) The Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1998.
(d) The Registrant's Current Reports on Form 8-K dated April 23, 1998 and
July 9, 1998.
(e) The description of the Registrant's Common Stock, par value $0.01 per
share, which is contained in a registration statement filed under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
any amendment or report filed for the purpose of updating such description.
In addition, all documents subsequently filed by the Registrant pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Exchange Act, 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, shall be deemed
to be incorporated by reference in this registration statement and to be a part
hereof from the time of filing of such documents. Any statement contained in
the documents 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 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 registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interest of Named Experts and Counsel.
Not applicable.
Item 6. 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
<PAGE>
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 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.
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
<PAGE>
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 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits
The following exhibits are filed as part of this registration
statement:
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 (included in signature page to this
registration statement).
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.
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 Commission pursuant to Rule
424(b) if, in the aggregate, the change 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 the
effective registration statement;
<PAGE>
(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)(l)(i) and (ii) do not apply if
the registration statement is on Form S-3 or S-8 and the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 the
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 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(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 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 Act and will be governed by the final
adjudication of such issue.
<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-8 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 1st day of
October, 1998.
7TH LEVEL, INC.
By: /s/ Richard S. Merrick
-----------------------------------
Richard S. Merrick
Chief Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Richard S. Merrick and Donald
Schupak, and each of them (with full power of each of them to act alone), his
true and lawful attorneys-in-fact, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any and all capacities to execute and sign any and all amendments or post-
effective amendments to this registration statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or any of them or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof and the Registrant hereby
confers like authority on its behalf.
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.
Signature Title Date
--------- ----- ----
/s/ Richard S. Merrick Chief Executive Officer and Director October 1, 1998
- ------------------------ (Principal Executive Officer)
Richard S. Merrick
/s/ Donald Schupak Chairman of the Board of Directors October 1, 1998
- ------------------------ and Director (Principal Financial
Donald Schupak Officer and Principal Accounting
Officer)
/s/ Robert Alan Ezrin Vice Chairman of the Board of October 1, 1998
- ------------------------ Directors and Director
Robert Alan Ezrin
/s/ Merv Adelson Director October 5, 1998
- ------------------------
Merv Adelson
/s/ James A. Cannavino Director October 7, 1998
- ------------------------
James A. Cannavino
<PAGE>
7TH LEVEL, INC.
FORM S-8
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 (included in signature page to this registration
statement).
<PAGE>
EXHIBIT 5.1
October 9, 1998
7th Level, Inc.
1201 Richardson Drive, Suite 277
Richardson, Texas 75080
Ladies and Gentlemen:
On the date hereof, 7th Level, Inc., a Delaware corporation (the
"Company"), intends to transmit for filing with the Securities and Exchange
Commission a Registration Statement on Form S-8 (the "Registration Statement")
relating to 3,728,000 shares (the "Shares") of common stock, par value $.01 per
share, of the Company which have been issued or are issuable pursuant to the
terms of certain stock options ("Stock Options") and other employment and
consulting arrangements relating thereto (the "Plans"). This opinion is an
exhibit to the Registration Statement.
We have at times acted as counsel to the Company with respect to
certain corporate and securities matters, and in such capacity we are familiar
with the various corporate and other proceedings taken by or on behalf of the
Company in connection with the proposed offer and sale of the Shares as
contemplated by the Registration Statement. We have examined copies (in each
case signed, certified or otherwise proven to our satisfaction to be genuine) of
the Company's Restated Certificate of Incorporation as presently in effect, its
By-Laws as presently in effect, minutes and other instruments evidencing actions
taken by its directors and stockholders, the Plans and such other documents and
instruments relating to the Company and the proposed offering as we have deemed
necessary under the circumstances. Insofar as this opinion relates to
securities to be issued in the future, we have assumed that all applicable laws,
rules and regulations in effect at the time of such issuance are the same as
such laws, rules and regulations in effect as of the date hereof.
We note that we are members of the Bar of the State of New York and
that we are not admitted to the Bar in the State of Delaware. To the extent
that the opinions expressed herein involve the law of the State of Delaware,
such opinions are based solely upon our reading of the Delaware General
Corporation Law as reported by Prentice-Hall Legal and Financial Services,
without any investigation of the legal decisions or other statutory provisions
in effect in such state that may relate to the opinions expressed herein.
Based on the foregoing, and subject to and in reliance on the accuracy
and completeness of the information relevant thereto provided to us, it is our
opinion that the
<PAGE>
7th Level, Inc.
October 9, 1998
Page 2
Shares which have been or will be issued pursuant to the Plans have been duly
authorized and, subject to the effectiveness of the Registration Statement and
compliance with applicable state securities laws, are, or when issued in
accordance with the terms set forth in the Stock Options, will be legally and
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to any filing made by the Company under
the securities or "Blue Sky" laws of any state.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose, except as expressly provided in the preceding
paragraph, without our express written consent, and no party other than you is
entitled to rely on it. This opinion is rendered to you as of the date hereof
and we undertake no obligation to advise you of any change, whether legal or
factual, after the date hereof.
Very truly yours,
/S/ SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
----------------------------------------
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
SBSF,LLP:GA:JSH:RAG:DIG
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
7th Level, Inc.:
We consent to the incorporation by reference herein of our report related to the
consolidated balance sheets of 7th Level, Inc. and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows and the financial statement schedule for
each of the years in the three-year period ended December 31, 1997, which report
appears in the December 31, 1997 Annual Report on Form 10-K of 7th Level, Inc.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
Our report 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
that uncertainty.
/S/ KPMG PEAT MARWICK LLP
--------------------------
KPMG PEAT MARWICK LLP
Dallas, Texas
October 9, 1998
