0000950136-01-501434.txt : 20011009
0000950136-01-501434.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950136-01-501434
CONFORMED SUBMISSION TYPE: S-3
PUBLIC DOCUMENT COUNT: 4
FILED AS OF DATE: 20010926
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ACCLAIM ENTERTAINMENT INC
CENTRAL INDEX KEY: 0000804888
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 382698904
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0831
FILING VALUES:
FORM TYPE: S-3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-70226
FILM NUMBER: 1745397
BUSINESS ADDRESS:
STREET 1: ONE ACCLAIM PLAZA
CITY: GLEN COVE
STATE: NY
ZIP: 11542
BUSINESS PHONE: 5166565000
MAIL ADDRESS:
STREET 1: OEN ACCLAIM PALZA
CITY: GLEN COVEY
STATE: NY
ZIP: 11542
FORMER COMPANY:
FORMER CONFORMED NAME: GAMMA CAPITAL CORP
DATE OF NAME CHANGE: 19880608
S-3
1
file001.txt
REGISTRATION STATEMENT
As filed with the Securities and Exchange Commission on September 26, 2001
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ACCLAIM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-2698904
------------------------------- -----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
-------------------------------------------------------------------------------
(Address and telephone number of registrant's principal executive offices)
Gregory E. Fischbach
Chief Executive Officer
Acclaim Entertainment, Inc.
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
----------------------------------------------------------------
(Name, address and telephone number of agent for service)
Copy to:
Eric M. Lerner, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Telephone: (212) 940-8800
---------------------------------
Approximate date of commencement of proposed sale to the public: From
time to time 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, please 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. |_|
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
Title of each class of Proposed maximum Proposed maximum Amount of
security to be registered Amount to be registered aggregate price per unit aggregate offering price registration fee
---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.02 per share............... 9,898,106(1) $2.36 $23,359,530 $5,840
---------------------------------------------------------------------------------------------------------------------------------
(1) To be offered from time to time by selling stockholders based upon
prevailing market prices.
(2) The proposed maximum aggregate price per unit was estimated pursuant to
Rule 457(c) promulgated under the Securities Act of 1933, solely for the
purpose of determining the registration fee, based on the average of high
and low prices of the registrant's common stock as quoted on The Nasdaq
Small Cap Market System on September 21, 2001.
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED SEPTEMBER 26, 2001
PROSPECTUS
--------------------------------
ACCLAIM ENTERTAINMENT, INC.
9,898,106 SHARES OF COMMON STOCK
This prospectus covers the resale of 9,898,106 shares of Acclaim's common stock
by the selling stockholders named in this prospectus. Acclaim will not receive
any proceeds from the sale of any shares by the selling stockholders. See
"Selling Stockholders" and "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF INVESTMENT RISK
FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK OFFERED
AND SOLD BY THIS PROSPECTUS.
Our common stock is traded on The Nasdaq Small Cap Market System under the
symbol "AKLM." On September 25, 2001, the last reported sale price of the common
stock was $2.75 per share.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________ __, 2001
TABLE OF CONTENTS
Page Number
RISK FACTORS...................................................................3
INFORMATION ABOUT ACCLAIM.....................................................14
RECENT DEVELOPMENTS...........................................................19
USE OF PROCEEDS...............................................................19
SELLING STOCKHOLDERS..........................................................20
PLAN OF DISTRIBUTION..........................................................25
LEGAL PROCEEDINGS.............................................................27
LEGAL MATTERS.................................................................28
EXPERTS.......................................................................28
FORWARD-LOOKING STATEMENTS....................................................28
WHERE YOU CAN FIND MORE INFORMATION...........................................29
INFORMATION NOT REQUIRED IN PROSPECTUS........................................31
i
RISK FACTORS
Our future operating results depend upon many factors and are subject
to various risks and uncertainties. The known material risks and uncertainties
which may cause our operating results to vary from anticipated results or which
may negatively affect our operating results and profitability are as follows:
LIQUIDITY AND MEETING CASH REQUIREMENTS ARE DEPENDENT ON ACHIEVING TIMELY
PRODUCT RELEASES AND SALES OBJECTIVES
If we do not substantially achieve the overall projected revenue levels
for fiscal 2002 as reflected in our business operating plans and do not receive
the ongoing support of our primary lender and our vendors, we will have
insufficient liquidity in fiscal 2002, and we either will require additional
financing to fund operations or we will need to make further significant expense
reductions, including, without limitation, the sale of assets or the
consolidation of operations, staff reductions, and/or the delay, cancellation or
reduction of certain product development and marketing programs. Some of these
measures will require third-party consents or approvals, including that of our
primary lender, and there can be no such assurance that such consents or
approvals can be obtained.
Based on the fiscal third quarter $9.5 million advance from our primary
lender following the March 2001 junior participation, the $10.0 million interim
funding provided by our primary lender, the retirement of $20.5 million of our
10% convertible notes due March 2002, the $33.6 million in gross proceeds from
the sale of common stock in July 2001, proceeds from the exercise of stock
options and the ongoing support of our vendors, together with anticipated
positive cash flow from operations, we expect to meet our currently projected
cash and operating requirements for the next 12 months, including the repayment
of the remaining notes ($29.2 million principal amount, plus interest) at
maturity, assuming we meet our sales forecast by successfully achieving our
planned product release schedule, and continue to realize the savings from
implemented expense reductions. However, if we do not achieve our product
release schedule, sales assumptions, continue to realize the savings from
implemented expense reductions and do not continue to receive the support of our
primary lender and our vendors, there can be no assurance that we will be able
to arrange additional financing on satisfactory terms, if at all. Additionally,
we cannot assure our investors that our future operating cash flows will be
sufficient to meet our operating requirements, our debt service requirements or
to repay our indebtedness at maturity, including, without limitation, repayment
of the 10% convertible notes. If this were to occur, and our primary lender
determined not to provide further interim support and/or to seek available
remedies, our operations and liquidity would be materially adversely affected
and we could be forced to cease operations.
Although the actions we have taken have contributed in returning our
annual operations to profitability we cannot assure our shareholders and
investors that we will achieve profitability or the sales necessary to avoid
further expense reductions in fiscal 2002. See "Industry Trends, Console
Transitions and Technological Change May Adversely Affect Our Revenues and
Profitability" below.
GOING CONCERN CONSIDERATION
At August 31, 2000, our independent auditors' report, as prepared by
KPMG LLP and dated November 29, 2000, which appears in our 2000 Form 10-K,
includes an explanatory paragraph relating to substantial doubt as to our
ability to continue as a going concern due to our significant loss from
operations in fiscal 2000 and our working capital and stockholders'
deficiencies. The unaudited financial statements for the nine months ended June
2, 2001 contained in our Form 10-Q filed with the SEC on July 17, 2001 have been
prepared under the assumption that we will continue as a going concern and
report that we had net earnings for the first nine months of fiscal 2001 of
$18.7 million or $0.32 per diluted share. Although annual operations returned to
profitability in 2001, we cannot assure our stockholders and investors that we
will continue to achieve profitability in fiscal 2002.
IF CASH FLOWS FROM OPERATIONS ARE NOT SUFFICIENT TO MEET OUR NEEDS, WE MAY BE
FORCED TO SELL ASSETS, REFINANCE DEBT, OR FURTHER DOWNSIZE OR CEASE OPERATIONS
If we do not substantially achieve the overall projected revenue levels
for fiscal 2002 as reflected in our business operating plans and do not receive
the ongoing support of our primary lender and our vendors, we will have
insufficient liquidity in fiscal 2002, and we either will require additional
financing to fund operations or we will need to make further significant expense
reductions, including, without limitation, the sale of assets or the
consolidation of operations, staff reductions, and/or the delay, cancellation or
reduction of certain product development and marketing programs.
We believe the expense reductions initiated by us in the fourth quarter
of fiscal 2000 which continued throughout fiscal 2001 have contributed in
returning our annual operations to profitability. However, we cannot assure our
shareholders and investors that we will achieve profitability or the sales
necessary to avoid further reductions in fiscal 2002. See "Industry Trends,
Platform Transitions and Technological Change May Adversely Affect Our Revenues
and Profitability" below.
ABILITY TO SERVICE DEBT AND PRIOR RIGHTS OF CREDITORS MAY ADVERSELY AFFECT
HOLDERS OF COMMON STOCK
If our cash and projected cash flow from operations in fiscal 2002 is
insufficient to make interest and principal payments when due, we may have to
restructure our indebtedness. We cannot guarantee that we will be able to
restructure or refinance our debt on satisfactory terms, or obtain permission to
do so under the terms of our existing indebtedness. We cannot assure investors
that our future operating cash flows will be sufficient to meet our debt service
requirements or to repay our indebtedness at maturity. Our failure to meet these
obligations could result in defaults being declared by our primary lender, and
the lender seeking its remedies, including immediate repayment of the debt
and/or foreclosure on collateral, which could cause us to become insolvent or
cease operations.
In order to meet our debt service obligations, from time to time we
also depend on dividends, advances and transfers of funds from our subsidiaries.
State and foreign law regulate the payment of dividends by these subsidiaries,
which is also subject to the terms of the credit agreement with our primary
lender and the indenture governing the notes. A significant portion of our
assets, operations, trade payables and indebtedness is located among these
foreign
4
subsidiaries. The creditors of the subsidiaries would generally recover
from these assets on the obligations owed to them by the subsidiaries before any
recovery by our creditors and before any assets are distributed to stockholders.
A VIOLATION OF OUR FINANCING ARRANGEMENTS COULD RESULT IN THE LENDER DECLARING
DEFAULT AND SEEKING REMEDIES
If we violate the financial or other covenants contained in the credit
agreement with our primary lender or in the indenture governing the 10%
convertible notes, we will be in default under the credit agreement and/or the
indenture. If a default occurs and is not timely cured or waived by our primary
lender, the lender could seek remedies against us, including: (1) penalty rates
of interest; (2) immediate repayment of the debt; and/or (3) the foreclosure on
any assets securing the debt. Pursuant to the terms of the agreement with our
primary lender, we are required to maintain specified levels of working capital
and tangible net worth, among other covenants. While we were not in compliance
with some of the financial covenants contained in the credit agreement as of
June 2, 2001, we received waivers regarding this non-compliance from our primary
lender.
While we anticipate that we will not be in compliance with all of the
financial covenants in the credit agreement in the near term, and anticipate
being able to obtain necessary waivers as we have in the past, we cannot make
any assurances that we will be able to obtain waivers of any future covenant
violations. If we become insolvent, are liquidated or reorganized, after payment
to the creditors, there are likely to be insufficient assets remaining for any
distribution to our stockholders.
REVENUES AND LIQUIDITY ARE DEPENDENT ON TIMELY INTRODUCTION OF NEW TITLES
The timely shipment of a new title depends on various factors,
including the development process, debugging, approval by hardware licensors,
and approval by third- party licensors. It is likely that some of our titles
will not be released in accordance with our operating plans. A significant delay
in the introduction of one or more new titles could negatively affect sales and
have a negative impact on our financial condition, liquidity and results of
operations, as was the case in fiscal 2000 and 2001, including the third
quarter of fiscal 2001. We cannot assure stockholders that our new titles will
be released in a timely fashion.
The life cycle of a new title generally ranges from less than three
months to upwards of 12 months, with the majority of sales occurring in the
first 30 to 120 days after release. Factors such as competition for access to
retail shelf space, consumer preferences and seasonality could result in the
shortening of the life cycle for older titles and increase the importance of our
ability to release new titles on a timely basis. Therefore, we are constantly
required to introduce new titles in order to generate revenues and/or to replace
declining revenues from older titles. In the past, we experienced delays in the
introduction of new titles, which have had a negative impact on our results of
operations. The complexity of next-generation systems has resulted in higher
development expenses, longer development cycles, and the need to carefully
monitor and plan the product development process. If we do not introduce titles
in accordance with our operating plans for a period, our results of operations,
liquidity and profitability in that period could be negatively affected.
5
INDUSTRY TRENDS, CONSOLE TRANSITIONS AND TECHNOLOGICAL CHANGE MAY ADVERSELY
AFFECT OUR REVENUES AND PROFITABILITY
The life cycle of existing game consoles and the market acceptance and
popularity of new game consoles significantly affects the success of our
products. We cannot guarantee that we will be able to predict accurately the
life cycle or popularity of each game console. If we (1) do not develop software
for games consoles that achieve significant market acceptance; (2) discontinue
development of software for a game console that has a longer-than-expected life
cycle; (3) develop software for a game console that does not achieve a
significant installed base; or (4) continue development of software for a game
console that has a shorter-than-expected life cycle, we will experience losses
from operations.
In addition, the cyclical nature of the video and computer games
industry requires us to continually adapt software development efforts to
emerging hardware systems. The industry is currently in the midst of a hardware
transition from 32-bit and 64-bit to 128-bit game consoles such as Sony's
PlayStation 2, Nintendo's GameCube and Microsoft's Xbox. In early 2001, Sega
announced its plans to exit the hardware business, cease distribution and sales
of its Dreamcast console and re-deploy its resources to develop software for
multiple consoles. No assurance can be given that these new game consoles will
achieve commercial success similar to and/or installed bases comparable to that
of the 32-bit PlayStation or 64-bit N64, nor can any assurances be made as to
the timing of their success. In addition, we cannot guarantee that we will be
successful in developing and publishing software for these new game consoles nor
can we guarantee that Microsoft or Nintendo will release their new platforms in
accordance with their announced November 2001 release dates.
OUR FUTURE SUCCESS IS DEPENDENT ON OUR ABILITY TO RELEASE "HIT" TITLES
The market for software is "hits" driven. Therefore, our future success
depends on developing, publishing and distributing "hit" titles for game
consoles with significant installed bases. If we do not publish "hit" titles in
the future, our financial condition, results of operations and profitability
could be negatively affected, as has occurred in the past. It is difficult to
predict consumer preferences for titles, and few titles achieve sustained market
acceptance. We cannot assure stockholders that we will be able to publish "hit"
titles in the future.
IF PRODUCT RETURNS, PRICE PROTECTION AND ADJUSTMENTS EXCEED ALLOWANCES, WE MAY
INCUR LOSSES
In the past, during platform transitions, we have had to provide
greater price protection and adjustments. Coupled with more competitive pricing,
if our allowances for returns, exchanges and price adjustments are exceeded, our
financial condition and results of operations will be negatively impacted, as
has occurred in the past. We are not contractually obligated to accept returns
except for defective product. We may permit customers to return or exchange
products and may provide price protection or concessions on products unsold by
the customer. We believe that at June 2, 2001, our allowances for future
returns, exchanges and price protection and adjustments are adequate, but we
cannot guarantee the adequacy of our current or future allowances.
6
Management makes significant estimates and assumptions regarding
allowances for estimated product returns, price protection and adjustments in
preparing our financial statements. We established allowances at the time of
product shipment, taking into account the potential for product returns, price
protection and adjustments based primarily on: (1) market acceptance of products
in retail and distributor inventories; (2) level of retail inventories; (3)
seasonality; and (4) historical return and price adjustment rates.
IF WE ARE UNABLE TO OBTAIN OR RENEW LICENSES FROM HARDWARE DEVELOPERS, WE WILL
NOT BE ABLE TO RELEASE SOFTWARE FOR GAME CONSOLES
We are substantially dependent on each hardware developer (1) as the
sole licensor of the specifications needed to develop software for its game
consoles; (2) as the sole manufacturer (Nintendo and Sony software) of the
software developed by us for its game consoles; (3) to protect the intellectual
property rights to their game consoles and technology and (4) to discourage
unauthorized persons from producing software for its game consoles.
Substantially all of our revenues have historically been derived from
sales of software for game consoles. For the nine months ended June 2, 2001 and
May 31, 2000, we derived:
o 15% and 40%, respectively, of gross revenues from the sale of
Nintendo-compatible software;
o 49% and 33%, respectively, of gross revenues from the sale of
Sony PlayStation software;
o 20% and 0%, respectively, of gross revenues from the sale of
Sony PlayStation 2 software;
o 11% and 20%, respectively, of gross revenues from the sale of
Sega-compatible software; and
o 5% and 7%, respectively, of gross revenue from the sale of PC
and other software.
If we cannot obtain licenses to develop software from developers of new
game consoles or if any of our existing license agreements are terminated, we
will not be able to release software for those game consoles, which would have a
negative impact on our results of operations and profitability. Although we
cannot assure our stockholders that, at the end of their current terms, we will
be able to obtain extensions or that we will be successful in negotiating
definitive license agreements with developers of new game consoles, to date we
have always obtained extensions or new agreements with the hardware companies.
Our revenue growth may also be dependent on the hardware companies. If
new license agreements contain product quantity limitations, our revenue and
profitability may be negatively impacted.
7
PROFITABILITY IS AFFECTED BY RESEARCH AND DEVELOPMENT EXPENSE FLUCTUATIONS DUE
TO CONSOLE TRANSITIONS AND DEVELOPMENT FOR MULTIPLE CONSOLES
Our research and development expenses decreased ($10.0) million to $6.5
million, or (61%), for the quarter ended June 2, 2001 from $16.5 million for the
quarter ended May 31, 2000 and decreased ($16.2) million to $29.5 million, or
(36%), for the nine months ended June 2, 2001 from $45.7 million for the same
period one year ago. Although fiscal 2001 product development expenses were
lower than in fiscal 2000 due to our focus on fewer, better games our product
development expenses may increase thereafter as a result of releasing more games
across multiple platforms and the complexity of developing games for the new
128-bit game consoles. We anticipate that our profitability will continue to be
impacted by the levels of research and development expenses relative to
revenues, and by fluctuations relating to the timing of development in
anticipation of the next-generation platforms.
During fiscal 2000, we focused our development efforts and costs on
N64, PlayStation 1, PlayStation 2, Xbox and Dreamcast, while incurring
incremental costs in the development of tools and engines necessary for the new
platforms. Our current release schedule commencing in the second quarter of
fiscal 2001 is developed around PlayStation 2, Xbox, Game Boy Advance and Game
Cube. In addition, we will continue to support PlayStation 1 and Game Boy Color
on a limited basis through a select group of independent software developers,
thus permitting us to reduce in part our internal development costs.
INABILITY TO PROCURE COMMERCIALLY VALUABLE INTELLECTUAL PROPERTY LICENSES MAY
PREVENT PRODUCT RELEASES OR RESULT IN REDUCED PRODUCT SALES
Our titles often embody trademarks, trade names, logos, or copyrights
licensed by third parties, such as the NBA, the NFL and MLB or their respective
players' associations. We may not be successful in acquiring or renewing
licenses to property rights with significant commercial value. The loss of one
or more of these licenses could prevent our release of a title or limit its
economic success. Based on our product release strategy, financial resources and
the economic viability of such products, licenses relating to WWF, South Park
and ECW software were not renewed or were terminated. For example, our license
for the WWF properties expired in November 1999 and was not renewed. Sales of
titles using WWF properties aggregated 0% of gross revenues for the nine months
ended June 2, 2001 as compared to 14% for the nine months ended May 31, 2000.
Our license for the South Park properties was terminated in September 2000. See
"Legal Proceedings." Sales of titles using South Park properties aggregated 0.5%
and 9% of gross revenues in the first nine months of fiscal 2001 and 2000,
respectively. Accordingly, we cannot assure stockholders that our licenses will
be extended on reasonable terms or at all.
License agreements relating to these rights generally extend for a term
of two to three years. The agreements are terminable upon the occurrence of a
number of factors, including our (1) material breach of the agreement; (2)
failure to pay amounts due to the licensor in a timely manner; or (3) bankruptcy
or insolvency.
8
COMPETITION FOR MARKET ACCEPTANCE AND RETAIL SHELF SPACE, PRICING COMPETITION,
AND COMPETITION WITH THE HARDWARE MANUFACTURERS, AFFECTS OUR REVENUE AND
PROFITABILITY
The video and computer games market is highly competitive. Only a small
percentage of titles introduced in the market achieve any degree of sustained
market acceptance. If our titles are not successful, our operations and
profitability will be negatively impacted. We cannot guarantee that our titles
will compete successfully.
Competition in the video and computer games industry is based primarily
upon:
o the quality of titles;
o reviews received for a title from independent reviewers who
publish reviews in magazines, websites, newspapers and other
industry publications;
o publisher's access to retail shelf space;
o the success of the game console for which the title is
written;
o the price of each title;
o the number of titles then available for the system for which
each title is published; and
o the marketing campaign supporting a title at launch and
through its life.
Our chief competitors are the developers of games consoles, to whom we
pay royalties and/or manufacturing charges, as well as a number of independent
software publishers licensed by the hardware developers.
The hardware developers have a price, marketing and distribution
advantage with respect to software marketed by them. Our competitors vary in
size from very small companies with limited resources to very large corporations
with greater financial, marketing and product development resources than us,
such as Nintendo, Sega, Microsoft, and Sony.
As each hardware cycle matures, significant price competition and
reduced profit margins result as we experienced in fiscal 2000. In addition,
competition from new technologies may reduce demand in markets in which we have
traditionally competed. As a result of prolonged price competition and reduced
demand as a result of competing technologies, our operations and liquidity have
been, and in the future could continue to be, negatively impacted.
REVENUES VARY DUE TO THE SEASONAL NATURE OF VIDEO AND COMPUTER GAMES SOFTWARE
PURCHASES
The video and computer games industry is highly seasonal. Typically,
net revenues are highest in the last calendar quarter, decline in the first
calendar quarter, are lower in the second calendar quarter and increase in the
third calendar quarter. The seasonal pattern is due primarily to the increased
demand for software during the year-end holiday selling season and the reduced
demand for software during the summer months. Our earnings vary significantly
and are materially affected by releases of "hit" titles and, accordingly, may
not necessarily reflect the seasonal patterns of the industry as a whole. We
expect that operating results will continue to fluctuate significantly in the
future. See "Fluctuations in Quarterly Operating Results Lead to
Unpredictability of Revenues and Income" below.
9
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS LEAD TO UNPREDICTABILITY OF REVENUES
AND INCOME
The timing of release of new titles can cause material quarterly
revenues and earning fluctuations. A significant portion of revenues in any
quarter is often derived from sales of new titles introduced in that quarter or
in the immediately preceding quarter. If we are unable to begin volume shipments
of a significant new title during the scheduled quarter, as has been the case in
the past (including the third quarter of fiscal 2001), our revenues and earnings
will be negatively affected in that period. In addition, because a majority of
the unit sales for a title typically occur in the first 30 to 120 days following
its introduction, revenues and earnings may increase significantly in a period
in which a major title is introduced and may decline in the following period or
in which there are no major title introductions.
Quarterly operating results also may be materially impacted by factors
including (1) the level of market acceptance or demand for titles and (2) the
level of development and/or promotion expenses for a title. Consequently, if net
revenues in a period are below expectations, our operating results and financial
position in that period are likely to be negatively affected, as has occurred in
the past.
STOCK PRICE IS VOLATILE AND STOCKHOLDERS MAY NOT BE ABLE TO RECOUP THEIR
INVESTMENT
There is a history of significant volatility in the market prices of
companies engaged in the software industry, including Acclaim. Movements in the
market price of our common stock from time to time have negatively affected
stockholders' ability to recoup their investment in the stock. The price of our
common stock is likely to continue to be highly volatile, and stockholders may
not be able to recoup their investment. If our future revenues, profitability or
product releases do not meet expectations, the price of our common stock may be
negatively affected.
IF OUR SECURITIES WERE DELISTED FROM THE NASDAQ SMALL CAP MARKET, IT MAY
NEGATIVELY IMPACT THE LIQUIDITY OF OUR COMMON STOCK
In the fourth quarter of fiscal 2000, our securities were delisted from
quotation on The Nasdaq National Market. Our common stock is currently trading
on The Nasdaq Small Cap Market. Although we meet the current listing criteria
for The Nasdaq Small Cap Market, no assurance can be given as to our ongoing
ability to meet The Nasdaq Small Cap Market maintenance requirements. In order
to obtain relisting of our common stock on The Nasdaq National Market, we must
satisfy certain quantitative designation criteria. No assurance can be given
that we will be able to meet such relisting criteria for The Nasdaq National
Market in the near future.
If our common stock was to be delisted from trading on The Nasdaq Small
Cap Market, trading, if any in the common stock may continue to be conducted on
the OTC Bulletin Board or in the non-Nasdaq over-the-counter market. Delisting
of the common stock would result in limited release of the market price of the
common stock and limited news coverage of us and could restrict investors'
interest in the common stock as well as materially adversely affect the trading
market and prices for the common stock and our ability to issue additional
securities or to secure additional financing.
10
"Penny stocks" generally are equity securities with a price of less
than $5.00 per share, which are not registered on certain national securities
exchanges or quoted on the Nasdaq system. If our common stock was delisted from
The Nasdaq Small Cap Market, it could become subject to the SEC's penny stock
rules. These rules, among other things, require broker-dealers to satisfy
special sales practice requirements, including making individualized written
suitability determinations and receiving a purchaser's written consent prior to
any transaction. In addition, under the penny stock rules, additional disclosure
in connection with trades in the common stock would be required, including the
delivery of a disclosure schedule explaining the nature and risks of the penny
stock market. Such requirements could severely limit the liquidity of the common
stock.
PREVALENCE OF ILLEGAL COPYING OF SOFTWARE COULD ADVERSELY AFFECT SALES
In order to protect our software and proprietary rights, we rely mainly
on a combination of copyrights, trade secret laws, patent and trademark laws,
and nondisclosure agreements.
Existing U.S. and international laws afford only limited protection. An
unauthorized person may be able to copy our software or otherwise obtain and use
our proprietary information. If a significant amount of illegal copying of
software published or distributed by us occurs, our product sales could be
adversely impacted. Policing illegal use of software is extremely difficult and
software piracy is expected to persist. In addition, the laws of some foreign
countries in which our software is distributed do not protect us and our
intellectual property rights to the same extent as the laws of the U.S. We
cannot guarantee that our attempts to protect our proprietary rights will be
adequate.
INFRINGEMENT COULD LEAD TO COSTLY LITIGATION AND/OR THE NEED TO ENTER INTO
LICENSE AGREEMENTS, WHICH MAY RESULT IN INCREASED OPERATING EXPENSES
Existing or future infringement claims by or against us may result in
costly litigation or require us to license the proprietary rights of third
parties, which could have a negative impact on the our results of operations,
liquidity and profitability.
We believe that our proprietary rights do not infringe on the
proprietary rights of others. As the number of titles in the industry increases,
we believe that claims and lawsuits with respect to software infringement will
also increase. From time to time, third parties have asserted that some of our
titles infringed their proprietary rights. We have also asserted that third
parties have likewise infringed our proprietary rights. These infringement
claims have sometimes resulted in litigation by and against us. To date, none of
these claims has negatively impacted our ability to develop, publish or
distribute our software. We cannot guarantee that future infringement claims
will not occur or that they will not negatively impact our ability to develop,
publish or distribute our software.
11
FACTORS SPECIFIC TO INTERNATIONAL SALES MAY RESULT IN REDUCED REVENUES AND/OR
INCREASED COSTS
International sales have historically represented material portions of
our revenues and we expect that international sales will continue to account for
a significant portion of our revenues in future periods. Sales in foreign
countries may involve expenses incurred to customize titles to comply with local
laws. In addition, titles that are successful in the domestic market may not be
successful in foreign markets due to different consumer preferences.
International sales are also subject to fluctuating exchange rates and may be
affected by the recent adoption of a single currency in much of Europe. These
and other factors specific to international sales may result in reduced revenues
and/or increased costs.
CHARTER AND ANTI-TAKEOVER PROVISIONS COULD NEGATIVELY AFFECT RIGHTS OF HOLDERS
OF COMMON STOCK
Our Board of Directors has the authority to issue shares of preferred
stock and to determine their characteristics without stockholder approval. In
this regard, in June 2000, the board of directors approved a stockholder rights
plan. If the Series B junior participating preferred stock is issued it would be
more difficult for a third party to acquire a majority of our voting stock.
In addition to the Series B preferred stock, the board of directors may
issue additional preferred stock and, if this is done, the rights of common
stockholders may be additionally negatively affected by the rights of those
preferred stockholders.
We are also subject to anti-takeover provisions of Delaware corporate
law, which may impede a tender offer, change in control or takeover attempt that
is opposed by the Board. In addition, employment arrangements with some members
of management provide for severance payments upon termination of their
employment if there is a change in control.
SHARES ELIGIBLE FOR FUTURE SALE
As of September 21, 2001 we had 76,727,569 shares of common stock
issued and outstanding, of which 28,262,042 are "restricted" securities within
the meaning of Rule 144 under the Securities Act. Generally, under Rule 144, a
person who has held restricted shares for one year may sell such shares, subject
to certain volume limitations and other restrictions, without registration under
the Securities Act.
As of the date of this prospectus, 4,493,938 shares of common stock are
covered by effective registration statements under the Securities Act for resale
on a delayed or continuous basis by certain of our security holders, of which
843,637 shares of common stock are issuable upon the exercise of warrants issued
in settlement of litigation.
In connection with the April 2001 retirement of $7.2 million in
principal amount of notes, we are required to issue to a certain investor up to
an additional 1,328,000 shares of common stock if the average closing price of
our common stock is less than $0.90 per share for a 20-day period prior to the
effective date of the registration statement in which the investor is included
as
12
a selling stockholder. As of September 25, 2001, the 20-day average closing
price of our common stock was $3.79.
As of September 21, 2001, the outstanding principal amount of our notes
was $29.2 million, which are convertible into approximately 5,641,892 shares of
common stock. Such shares, if issued pursuant to the terms of the indenture and
the notes, would be generally eligible for resale pursuant to Rule 144.
In addition to the warrants described above, a total of 3,783,383
shares of common stock are issuable upon the exercise of warrants, the resale of
3,550,000 of which is covered by a separate pending registration statement
currently on file with the Securities and Exchange Commission.
We have also registered on Form S-8 a total of 14,236,000 shares of
common stock (issuable upon the exercise of options) under our 1988 Stock Option
Plan and our 1998 Stock Incentive Plan, and a total of 2,448,425 shares of
common stock under our 1995 Restricted Stock Plan. As of August 31, 2001,
options to purchase a total of 10,200,922 shares of common stock were
outstanding under the 1988 Stock Option Plan and our 1998 Stock Incentive Plan,
of which 7,024,115 were exercisable.
In addition, we have agreed to issue to the Company's lender a
five-year warrant to purchase 100,000 shares of common stock at an initial
exercise price equal to the market price per share on the date of issuance. In
connection with such issuance, we have agreed to register the underlying shares.
In connection with licensing and distribution arrangements,
acquisitions of other companies, the repurchase of notes and financing
arrangements, we have issued and may continue to issue common stock or
securities convertible into common stock. Any such issuance or future issuance
of substantial amounts of common stock or convertible securities could adversely
affect prevailing market prices for the common stock and could adversely affect
our ability to raise capital.
13
INFORMATION ABOUT ACCLAIM
A Delaware corporation, Acclaim was founded in 1987. Our principal
executive offices are located at One Acclaim Plaza, Glen Cove, New York 11542,
and our main telephone number is (516) 656-5000. Our Internet website is:
http://www.acclaim.com. Information contained on our website should not be
deemed part of this prospectus.
We develop, publish, market and distribute video and computer games for
use with game consoles, both dedicated and portable, and PCs on a worldwide
basis. We own and operate four software development studios located in the U.S.
and U.K. where we develop our own software, and also a motion capture studio and
a recording studio in the U.S. We also contract with independent software
developers to create software for us. We publish, or release to the public under
our brand names, software developed by us as well as by third-party developers.
We distribute our software directly to retailers in North America, U.K.,
Germany, France, Spain and Australia. We also distribute software developed and
published by third parties, develop and publish strategy guides in support of
our software and issue "special edition" comic book magazines from time to time
to support our time-valued brands, Turok and Shadowman.
The video and computer games industry is characterized by rapid
technological changes, which have resulted in successive introductions of
increasingly advanced game consoles and PCs. As a result of the rapid
technological shifts, no single game console or PC system has achieved long-term
dominance in the video and computer games market. Therefore, we must continually
anticipate game console cycles and our research and development group must
develop programming tools and engines necessary for the development of software
for emerging hardware systems.
Our revenues have traditionally been derived from sales of software for
the then-popular game consoles. Accordingly, our performance has been, and is
expected in the future to be, materially adversely affected by platform
transitions. As a result of the industry transition to 32-bit and 64-bit game
consoles, which commenced in 1995, our software sales during fiscal 1996, 1997
and 1998 were significantly lower than in fiscal 1994 and 1995. Our inability to
predict accurately the timing of such transition resulted in material losses in
fiscal 1996 and 1997. In fiscal 2000, the video and computer games industry
began experiencing another platform transition from 32-bit and 64-bit to 128-bit
game consoles and related software. We believe that sales of 32-bit and 64-bit
game consoles peaked in 2000 and will continue to decrease substantially in
future periods. This transition during fiscal 2000 resulted in increased
competition, fewer hit titles capable of achieving significant sales levels and
increased price weakness for non-hit titles. The software transition has also
resulted in industry-wide software pricing weakness which impacted our operating
results during fiscal 2000 and 2001, as the market shifts to the next-generation
systems that were launched by Sony in fiscal 2001, and which are anticipated to
be launched in North America by Nintendo and Microsoft in the Fall of 2001.
We will continue to support PlayStation and Game Boy Color on a
limited basis; we currently publish PlayStation 2 titles and will begin to
publish titles for Game Boy Advance, which was launched in June 2001. We did not
release any new N64 titles in fiscal 2001. We expect our portfolio of titles
for fiscal 2002 to be dominated by PlayStation 2, Game Cube, Xbox and Game Boy
Advance. In early 2001, Sega announced its
14
plan to exit the hardware business, cease distribution and sales of its
Dreamcast console and re-deploy its resources to develop software for multiple
platforms and accordingly we have not released any additional titles for
the Dreamcast console after the second quarter of fiscal 2001.
Although we do not believe that the installed base of next-generation
platforms in 2001 will support software sales at the levels achieved in fiscal
1999 (before the current platform transition), when the transition is complete
we anticipate that the eventual installed base of 128-bit systems will provide a
larger market for our software, with improved gross margins (based on the
predominance of CD-based product rather than cartridge-based product) as
compared to fiscal 1999. There can be no assurance that the newly announced
next-generation game consoles (e.g., Nintendo's Game Cube and Microsoft's Xbox)
will achieve commercial success similar to that of the 32-bit PlayStation or
64-bit N64, nor can there be any assurances made as to the timing of such
success. See "Risk Factors: Industry Trends, Console Transitions and
Technological Change May Adversely Affect our Revenues and Profitability."
The rapid technological advances in game consoles have significantly
changed the look and feel of software as well as the software development
process. Currently, the process of developing software is extremely complex and
we expect it to become more complex and expensive in the future with the advent
of the more powerful next-generation game consoles. According to our estimates,
the average development time for a title for dedicated game consoles is between
12 and 36 months and the average development cost for a title is between $1
million and $6 million. The average development time for our software for
portable systems is currently between six and nine months and the average
development cost for a title is between $100,000 and $300,000.
Our revenues in any period are generally driven by the titles released
by us in that period. We have experienced delays in the introduction of new
titles, which has had a negative impact on our results of operations. It is
likely that some of our future titles will not be released in accordance with
our operating plans, in which event our results of operations and profitability
in that period would be negatively affected. See "Risk Factors: Revenues and
Liquidity Are Dependent on Timely Introduction of New Titles."
Revenues from our 32-bit and 64-bit software in fiscal 2000 were
significantly below our expectations, even as we moved to implement our strategy
to transition our operating model to focus on CD-based product. Although we
anticipated the softening of the market for these two maturing gaming consoles
we were not able to precisely gauge the depth of the impact on our sales. We
attributed the significant revenue decrease to three primary factors: (1) lower
than expected retail sell-through on certain titles, which accounted for
approximately 335,000 less units being sold; (2) delays in the introduction of
new titles, which delays impacted fiscal 2000 revenue by approximately $131
million; and (3) the decline of the N64 market and our prior emphasis on the N64
gaming console. With respect to (3), during fiscal 1999, the N64 gaming console
accounted for approximately 59% of our total revenue. For fiscal 2000, we
anticipated the impending decline and planned a decrease of 13% from the prior
year. In fact, our fiscal 2000 N64 business decreased 55% from fiscal 1999 and
only accounted for 31% of total revenue in fiscal 2000. We also assessed the
impact of these factors on shipments of new 32-bit and 64-bit product during the
last half of fiscal 2000 by providing higher sales allowances as a percentage of
gross revenues at the time these products were shipped.
15
Revenues from the our 64-bit software and certain 128-bit software in
fiscal 2001 were affected by (1) the decline of the market for N64 software and
our prior emphasis on the N64 platform, (2) the decline of the market for
Dreamcast software and Sega's exit from the hardware market, (3) the declining
rate of growth of the installed base of 64-bit game consoles, and (4) the
limited distribution of PlayStation 2 consoles. During fiscal 2000 we
substantially increased our sales allowances to address the effects on us of
increased competition and industry-wide weakness in cartridge-based software
sales and slower-than-expected sales of certain products. The decline in fiscal
2000 sales was partially offset by revenues from software for Sega's Dreamcast
128-bit CD game console, but sales for this console were lower in the first nine
months of fiscal 2001 than the comparable period of the prior year based
predominantly on Sega's announced hardware product discontinuation. The decline
in sales for the first nine months of fiscal 2001 was partially offset by an
increase in Sony PlayStation and Nintendo Game Boy revenue.
We recorded net earnings of $7.4 million, or $0.12 per fully diluted
share, for the three months ended June 2, 2001 compared to a net loss of $(49.7)
million, or $(0.88) per fully diluted share, for the three months ended May 31,
2000. For the nine months ended June 2, 2001, we reported net earnings of $18.7
million, or $0.32 per fully diluted share, compared to a net loss of $(68.2)
million, or $(1.21) per fully diluted share, for the nine months ended May 31,
2000. During the quarter ended June 2, 2001, our early retirement of certain of
the notes resulted in an extraordinary gain of $7.1 million, or approximately
$0.12 per fully diluted share. Because we were required to issue additional
shares of common stock to certain investors due to delayed effectiveness of a
registration statement filed by Acclaim on their behalf, the issuance of the
additional shares of common stock in the fourth quarter of fiscal 2001 reduced
the reported third quarter extraordinary gain of $7.1 million by approximately
$4.0 million. In addition, in June 2001, we retired $6.6 million in principal
amount of notes in exchange for 2,021,882 shares of our common stock which
resulted in a non-cash loss on early extinguishment of debt of approximately
$0.4 million in the fourth quarter of fiscal 2001.
In addition, earnings from operations increased due to a significant
reduction in operating expenses of $15.9 million or (39%) in the third quarter
of fiscal 2001 when compared to the same period in fiscal 2000. In the second
half of fiscal 2000 and continuing into the first nine months of fiscal 2001, we
implemented expense reduction initiatives, which have reduced operating expenses
commencing with the fourth quarter of fiscal 2000 and continuing into fiscal
2001. The plan reduced fixed and variable expenses company-wide, eliminated
certain marginal titles under development, reduced staff and lowered marketing
expenses, and featured the following efforts:
o Reduction of Marketing and Selling Expenses - we successfully
implemented our plan to substantially reduce selling and
marketing expenses. For the first nine months of fiscal 2001
our selling and marketing expenses of $24.8 million were
$32.3 million or 57% below the same period of the prior year,
primarily the result of a reduction in TV and print media
advertising as compared to the prior year.
o Reduction of Overhead and Other Operating Expenses - Through
a series of targeted headcount and other operating expense
reductions, we successfully executed our cost reduction plan,
which for the first nine months of fiscal 2001 reduced
overhead and other operating expenses by $29.5 million, or
33%, to $59.4 million from $88.9 million for the same period
of the prior year.
16
For the third quarter of fiscal 2001 and 2000, approximately 65% and
17%, respectively, and for the first nine months of fiscal 2001 and fiscal 2000,
approximately 21% and 60%, respectively, of our gross revenue was derived from
software developed by our studios. Third quarter revenue for fiscal 2001 was
primarily driven by All-Star Baseball 2002 and Crazy Taxi, which accounted for
an aggregate of approximately 62% of total revenues and were developed by our
internal studios.
We have implemented our two-tier strategy to rationalize our product
development efforts by first ensuring that the development of software for the
next-generation game consoles was performed by our own studios (i.e. All Star
Baseball, Crazy Taxi, Quarterback Club). Internal development will permit us to
better control variable expenses and help ensure the timely release and quality
of our titles scheduled for release in fiscal 2002. At the same time, our
product development efforts for the first half of fiscal 2001 emphasized the
licensing of software development to third parties predominantly for
already-released platforms. Research and development expenses declined $16.2
million or 36% because we reduced the overall number of titles being developed,
reduced the development of software for the older consoles and concentrated our
software development expenditures predominantly on next-generation platforms.
Because of the focus on fewer and better games for the next-generation consoles,
and the fact that a significant amount of the research and development work for
developing the next-generation game engines is completed, we believe that we are
well positioned to compete in the future. However, we generally expect research
and development expenses to increase in the future as we develop titles and
sequels across all platforms. See "Risk Factors: Profitability is Affected By
Research and Development Expense Fluctuations due to Console Transitions and
Development for Multiple Consoles."
Significant operating expense reductions in the first nine months of
fiscal 2001 of $61.8 million, or 42%, were realized as compared to the same
period in fiscal 2000. We believe the expense reductions initiated by us in the
fourth quarter of fiscal 2000 which continued throughout fiscal 2001 have
contributed in returning our annual operations to profitability. However, we
cannot assure our shareholders and investors that we will achieve profitability
or the sales necessary to avoid further reductions in fiscal 2002. See "Risk
Factors: Industry Trends, Platform Transitions and Technological Change May
Adversely Affect Our Revenues and Profitability".
Gross profit is primarily impacted by the percentage of sales of
CD-based software as compared to the percentage of sales of cartridge-based
software. Gross profit may also be significantly impacted from time to time by
the level of returns and price protection and concessions to retailers and
distributors to which we provide discounts and allowances. The percentage of
foreign sales and the percentage of foreign sales to third party distributors
may impact gross margins as well. Our margins on foreign software sales to third
party distributors are approximately one-third lower than those on sales that we
make directly to foreign retailers.
As we continue to manage through the current game console transition
and prepare to compete in the software market for next-generation game consoles,
it is necessary that we meet our product release schedule, sales projections,
manage our operational expenditures at the planned levels and continue to
receive the support of our primary lender and our vendors in order to generate
sufficient liquidity to fund our operations and repay the remaining note holders
at maturity.
17
Our results of operations in the future will be dependent in large part
on (1) the timing and rate of growth of the software market for 128-bit and
other emerging game consoles and (2) our ability to identify, develop and timely
publish, in accordance with our product release schedule software that performs
well in the marketplace.
---------------------
You should not use historical trends or factors affecting our operating
results and financial condition to anticipate results or trends in future
periods. See "Risk Factors" above. Also, you should not consider historic
financial performance as a reliable indicator of future performance.
---------------------
18
RECENT DEVELOPMENTS
July Private Placement
In July 2001, we issued a total of 9,335,334 shares of our common stock
to certain qualified institutional buyers and accredited investors at a price of
$3.60 per share, for an aggregate gross purchase price of $33,607,201. This
prospectus covers the offer and sale by the selling stockholders named in this
prospectus of the 9,335,334 shares issued in the July private placement. The per
share price represented an approximate 10% discount to the then-public trading
price of the common stock. The proceeds of the private placement are intended to
be used for ongoing product development for the next generation video game
platforms, strategic acquisitions of additional properties, holiday season
marketing and advertising campaigns, and the reduction of outstanding
liabilities.
The private placement was effected under the exemption from
registration provided under section 4(2) of the Securities Act of 1933. We
agreed to use our best efforts to register with the SEC all the common stock
sold in the offering within 60 days following the closing. If the registration
statement (of which this prospectus forms a part) is not effective on or before
September 28, 2001, we must pay a penalty to each investor equal to 1% of the
purchase price paid for the stock purchased by that investor. Thereafter, for
every 30 days that pass without the registration statement being declared
effective, we will be required to pay to each investor an additional amount
equal to 1% of the purchase price paid for the stock purchased by that investor.
Reduction in Extraordinary Gain
Because we were required to issue additional shares of common stock to
certain investors due to delayed effectiveness of a registration statement, the
issuance of the additional shares of common stock in the fourth quarter of
fiscal 2001 reduced the related reported third quarter extraordinary gain of
$7.1 million by approximately $4.0 million. In addition, in June 2001, we
retired $6.6 million in principal amount of notes in exchange for 2,021,882
shares of our common stock which resulted in a non-cash loss on early
extinguishment of debt of approximately $0.4 million in the fourth quarter of
fiscal 2001.
USE OF PROCEEDS
Acclaim will not receive any proceeds from the sale of any of the
shares of its common stock by the selling stockholders.
19
SELLING STOCKHOLDERS
Beneficial Ownership and Other Information
The following table sets forth information with respect to the shares
of common stock beneficially held by the selling stockholders:
Shares Percent Percent
Beneficial Beneficially Owned Owned
Ownership Prior Shares Being Owned After the Before After
Name to an Offering** Offered Offering(1)** Offering Offering
---- ---------------- ------- ------------- -------- --------
Alexandra Global Investment
Fund I, Ltd.(2) 5,181,882(2) 1,000,000 4,181,882 6.75% 5.45%
Cumber Int'l S.A.(3) 72,000 72,000 0 * 0%
Cumberland Benchmarked
Partners, L.P.(3) 166,000 166,000 0 * 0%
Cumberland Partners(3) 622,000 622,000 0 * 0%
LongView Partners(3) 140,000 140,000 0 * 0%
Hartford MF Small Company
Fund(4) 1,142,200 710,000 432,200 1.49% *
Hartford VA Small Company
Fund(4) 3,163,000 1,962,000 1,201,000 4.12% 1.57%
John D. and Catherine T.
MacArthur Foundation(4) 152,800 95,000 57,800 * *
Quissett Partners, L.P.(4) 581,500 570,000 11,500 * *
Quissett Investors (Bermuda)
L.P.(4) 525,100 515,500 9,600 * *
Raytheon Master Pension
Trust(4) 1,163,522 1,136,722 26,800 1.52% *
WTC-CIF Emerging Growth
Portfolio(4) 16,778 10,778 6,000 * *
20
Shares Percent Percent
Beneficial Beneficially Owned Owned
Ownership Prior Shares Being Owned After the Before After
Name to an Offering** Offered Offering(1)** Offering Offering
---- ---------------- ------- ------------- -------- --------
n-Space, Inc.(5) 120,608 120,608 0 * 0%
Pequot Scout Fund, L.P.(6) 1,326,400 695,000 631,400 1.73% *
Pequot Navigator Offshore
Fund, Inc.(6) 586,100 305,000 281,100 * *
Potomac Capital Partners
L.P.(7) 380,000 350,000 30,000 * *
RLR Partners, L.P.(8) 592,000 417,000 175,000 * *
TGT Capital Partners LP(9) 268,334 268,334 0 * 0%
UBS Warburg LLC(10) 236,896 233,383 3,513 * *
Z-Axis, Ltd.(11) 208,781 208,781 0 * 0%
Zeke L.P.(12) 1,441,930 300,000 1,141,930 1.86% 1.47%
------------------
* Less than one percent.
** Beneficial ownership calculated as of September 21, 2001 in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 and
is based on 76,727,569 shares of common stock outstanding.
(1) Assumes that all of the shares covered by this prospectus are sold by the
selling stockholders pursuant to this prospectus. The selling
stockholders may choose to dispose of none or only a portion of the
shares held by them pursuant to this prospectus.
(2) We have been advised that Mikhail Filimonov and Dimitri Sogoloff are
the principals of Alexandra Investment Management, LLC, the investment
adviser of Alexandra Global Investment Fund I, Ltd. Alexandra Global
beneficially holds a total of 5,181,882 shares of Acclaim's common
stock, 4,181,882 of which is covered by a separate pending registration
statement filed with the SEC.
(3) We have been advised that Dipak M. Patel has voting and dispositive
control over the following entities: Cumberland Associates, LLC, the
investment adviser to Cumber Int'l S.A.; Cumberland GP LLC, the general
partner of Cumberland Benchmarked Partners, L.P; LongView GP LLC, the
21
general partner of LongView Partners; and Cumberland GP LLC, the general
partner of Cumberland Partners.
(4) We have been advised that Wellington Management Company, LLP, serves as
investment manager, investment adviser or investment sub-adviser to:
Hartford MF Small Company Fund, Hartford VA Small Company Fund, Quissett
Partners, L.P., Quissett Investors (Bermuda) L.P., Raytheon Master
Pension Trust and WTC-CIF Emerging Growth Portfolio. Wellington
Management Company is an investment adviser registered under the
Investment Advisers Act of 1940. We have been advised that Wellington
Management Company has shared voting and shared dispositive control over
the securities in the accounts managed by it for these selling
stockholders. Wellington Management Company, in its capacity as
investment manager, investment adviser and investment sub-adviser, may be
deemed to have shared beneficial ownership of a total of 8,392,910 shares
of Acclaim's common stock, which shares are owned by numerous clients of
Wellington Management.
(5) We have been advised that Eric Dyke, Sean Purcell and Dan O'Leary are the
shareholders of n-Space, Inc.
(6) We have been advised that Pequot Capital is the Investment Manager to
Pequot Navigator Offshore Fund, Inc. and Pequot Scout Fund, L.P. The
executive officers of Pequot Capital are Messrs. Arthur J. Samberg,
Daniel C. Benton and Kevin E. O'Brien, the directors of Pequot Capital
are Messrs. Samberg, Benton and O'Brien, and the controlling shareholders
are Messrs. Samberg and Benton.
22
(7) We have been advised that Paul J. Solit, Managing Member of Potomac
Capital Management LLC (which is the management company for the selling
stockholder) is the natural person who has voting or dispositive control
over Potomac Capital Partners, L.P.
(8) We have been advised that Ronald Rotter is the General Partner of RLR
Partners, L.P.
(9) We have been advised that Todd Turchetta has voting and dispositive
control over TGT Capital Partners, L.P.
(10) We have been advised that UBS Warburg LLC is owned by UBS AG, a company
listed on the New York Stock Exchange.
(11) We have been advised that David Luntz is the controlling stockholder of
Z-Axis Ltd.
(12) We have been advised that Ed Antoian is the General Partner of Zeke L.P.
Zeke L.P. holds a total of 1,441,930 shares of Acclaim's common stock,
500,000 of which shares beneficially owned by Zeke L.P. are issuable
upon the exercise of warrants received in connection with a junior
participation transaction and which are covered by a separate pending
registration statement filed with the SEC.
July Private Placement
In July 2001, we issued a total of 9,335,334 shares of our common stock
to certain of the selling stockholders at a price of $3.60 per share, for an
aggregate gross purchase price of $33,607,201. This prospectus covers the offer
and sale by the selling stockholders named herein of the 9,335,334 shares issued
in the July private placement. The per share price represented an approximate
10% discount to the then-public trading price of the common stock. The
proceeds of the private placement are intended to be used for ongoing product
development for the next generation video game platforms, strategic acquisitions
of additional properties, holiday season marketing and advertising campaigns,
and the reduction of outstanding liabilities.
The private placement was effected under the exemption from
registration provided under section 4(2) of the Securities Act of 1933. If the
registration statement (of which this prospectus forms a part) is not effective
on or before September 28, 2001, we must pay a penalty to each investor equal to
1% of the purchase price paid for the stock purchased by that investor.
Thereafter, for every 30 days that pass without the registration statement being
declared effective, we will be required to pay to each investor an additional
amount equal to 1% of the purchase price paid for the stock purchased by that
investor.
This prospectus also covers the offer and sale by UBS Warburg LLC of
the 233,388 shares issuable to UBS upon exercise of a warrant issued to UBS on
July 30, 2001, in connection with a portion of its placement agent fee with
respect to the July private placement. The shares are issuable at any time from
time to time upon the exercise of the warrant by UBS at an exercise price of
$3.60 per share and, if not exercised in full prior to July 30, 2004, expire on
that date. This warrant (and the underlying shares issuable upon exercise) was
originally issued in July 2001 by Acclaim to UBS pursuant to the exemption from
registration provided under section 4(2) of the Securities Act of 1933.
23
Consultants
Of the shares covered by this prospectus, 329,389 were issued to
software developers. Acclaim entered into separate agreements with n-Space and
Z-Axis under which each of n-Space and Z-Axis develops software for Acclaim. In
June 2001, in consideration for development services rendered under these
agreements, Acclaim issued 208,781 shares of common stock to n-Space and 120,608
shares of common stock to Z-Axis, both in separately privately-negotiated
transactions pursuant to the exemption from registration provided under Section
4(2) of the Securities Act.
The shares issued to each of the selling stockholders are restricted
securities within the meaning of the Securities Act and cannot be offered for
sale without an effective registration statement covering such offer and sale or
pursuant to an applicable exemption from the registration requirements of the
Securities Act. Pursuant to the terms of the various agreements, Acclaim filed
the registration statement (of which this prospectus is a part) and will use its
best efforts to keep the registration statement effective until all of the
shares issued to the selling stockholders are disposed of by them.
Except for the placement agent services provided by UBS to Acclaim and
the software development services provided by n-Space and Z-Axis to Acclaim,
neither Acclaim nor any of its affiliates has had any material relationship with
any of the selling stockholders within the past three years.
24
PLAN OF DISTRIBUTION
The selling stockholders have not employed an underwriter for the sale
of shares by the selling stockholders. The selling stockholders may offer shares
directly or through pledgees, donees, transferees or other successors in
interest at various times:
o on The Nasdaq Small Cap Market or in any other securities market
on which Acclaim's common stock is then listed or traded,
o in negotiated transactions,
o in a combination of any of the above transactions, or
o through any other available market transaction.
The selling stockholders may offer shares at (1) fixed prices which may
be changed, (2) prices prevailing at the time of sale, (3) prices related to
such prevailing market prices, or (4) at negotiated prices. Sales on or through
The Nasdaq Small Cap Market will be effected at such prices as may be obtainable
and as may be satisfactory to the selling stockholders. No sales or
distributions other than as disclosed in this prospectus will be effected until
after this prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms of the sale or distribution. The shares held by
the selling stockholders may be sold directly or through brokers or dealers, or
in a distribution by one or more underwriters on a firm commitment or best
efforts basis. The method by which the selling stockholders' shares may be sold
include:
o a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resale by that
broker or dealer for its account under this prospectus;
o exchange distributions and/or secondary distributions in
accordance with the rules of The Nasdaq Small Cap Market;
o ordinary brokerage transactions in which the broker solicits
purchasers; and
o privately negotiated transactions.
In addition, any shares of common stock that qualify for sale under Rule 144 or
Rule 144A under the Securities Act may be sold under any such rules rather than
under this prospectus.
Brokers or dealers may receive commission or discounts from the selling
stockholders in amounts to be negotiated immediately prior to the sale.
Commission expenses and brokerage fees will be paid by the selling stockholders.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of its shares of Acclaim's common stock may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profit on the resale of those shares by them or any
25
discounts, commissions or adjustments received by any such underwriters, dealers
or agents may be deemed to be underwriting discounts and commissions under the
Securities Act.
Acclaim has agreed to indemnify the selling stockholders, their
officers, directors, shareholders, employees, agents, counsel, and each person
who controls each selling stockholder, as determined under applicable securities
laws, against certain kinds of liability relating to this offering. Types of
liability include liability arising from any untrue statement or alleged untrue
statement in this prospectus or the registration statement of which it is a
part, any omission or alleged omission to state a material fact within this
prospectus or the registration statement of which it is a part, and any
violation under the Securities Act or any federal or state securities law or
regulation. The selling stockholders have also agreed to indemnify Acclaim and
its officers, directors, shareholders, partners, employees, agents, counsel, and
each person who controls Acclaim, as determined under applicable securities
laws, against certain kinds of liability relating to this offering. Types of
liability include liability arising from any untrue statement or alleged untrue
statement in this prospectus or the registration statement of which it is a
part, any omission or alleged omission to state a material fact within this
prospectus or the registration statement of which it is a part, and any
violation under the Securities Act or any federal or state securities law or
regulation, to the extent any of the violations occur in connection with written
information furnished by a selling stockholder in connection with this
prospectus or the registration statement of which it is a part. However, the
total amount payable in indemnity by any selling stockholder shall not exceed
net proceeds received by the selling stockholder in the registered offering out
of which the violation arises. The parties have also agreed to make contribution
in respect of any claims or damages for which indemnification is unavailable.
Expenses of this offering related to this registration statement,
estimated at $45,000, will be borne in full by Acclaim. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
26
LEGAL PROCEEDINGS
We and other companies in the entertainment industry were sued in an
action entitled James, et al. v. Meow Media, et al. filed in April 1999 in the
U.S. District Court for the Western District of Kentucky, Paducah Division,
Civil Action No. 5:99 CV96-J. The plaintiffs alleged that the defendants
negligently caused injury to the plaintiffs as a result of, in the case of
Acclaim, its distribution of unidentified "violent" video games, which induced a
minor to harm his high school classmates, thereby causing damages to plaintiffs,
the parents of the deceased individuals. The plaintiffs seek damages in the
amount of approximately $110,000,000. The U.S. District Court for the Western
District of Kentucky dismissed this action; however, it is currently on appeal
to the U.S. Court of Appeals for the Sixth Circuit. We intend to defend this
action vigorously.
We and other companies in the entertainment industry were sued in an
action entitled Sanders et al. v. Meow Media et al., filed in April 2001 in the
U.S. District Court for the District of Colorado, Civil Action No. 01-0728. The
complaint purports to be a class action brought on behalf of all persons killed
or injured by the shootings which occurred at Columbine High School on April 20,
1999. We are a named defendant in the action along with more than ten other
publishers of computer and video games. The complaint alleges that the video
game defendants negligently caused injury to the plaintiffs as a result of their
distribution of unidentified "violent" video games, which induced two minors to
kill a teacher related to the plaintiff and to kill or harm their high school
classmates, thereby causing damages to plaintiffs. The complaint seeks:
compensatory damages in an amount not less than $15,000 for each plaintiff in
the class, but up to $20,000,000 for some of the members of the class; punitive
damages in the amount of $5,000,000,000; statutory damages against certain other
defendants in the action; and equitable relief to address the marketing and
distribution of "violent" video games to children. We believe the plaintiffs'
claims are substantially similar to those dismissed by the U.S. District Court,
and are on appeal, in the James case discussed above. We filed a motion to
dismiss this action on July 9, 2001. We intend to defend this action vigorously.
We received a demand for indemnification from the defendant Lazer-Tron
Corporation in a matter entitled J. Richard Oltmann v. Steve Simon, No. 98 C1759
and Steve Simon v. J. Richard Oltmann, J Richard Oltmann Enterprises, Inc.,
d/b/a Haunted Trails Amusement Parks, and RLT Acquisitions, Inc., d/b/a
Lazer-Tron, No. A 98CA 426, consolidated as U.S. District Court Northern
District of Illinois Case No. 99 C 1055. The Lazer-Tron action involves the
assertion by plaintiff Simon that defendants Oltmann, Haunted Trails and
Lazer-Tron misappropriated plaintiff's trade secrets. Plaintiff alleges claims
for Lanham Act violations, unfair competition, misappropriation of trade
secrets, conspiracy, and fraud against all defendants, and seeks damages in
unspecified amounts, including treble damages for Lanham Act claims, and an
accounting. Pursuant to an asset purchase agreement made as of March 5, 1997, we
sold Lazer-Tron to RLT Acquisitions, Inc. Under the asset purchase agreement, we
assumed and excluded specific liabilities, and agreed to indemnify RLT for
certain losses, as specified in the asset purchase agreement. In an August 1,
2000 letter, counsel for Lazer-Tron in the Lazer-Tron action asserted that our
indemnification obligations in the asset purchase agreement applied to the
Lazer-Tron action, and demanded that we indemnify Lazer-Tron for any losses
which may be incurred in the Lazer-Tron action. In an August 22, 2000 response,
we asserted that any losses which may result from the Lazer-Tron action are not
assumed liabilities
27
under the asset purchase agreement for which we must indemnify Lazer-Tron. In a
November 20, 2000 letter, Lazer-Tron responded to Acclaim's August 22 letter and
reiterated its position that we must indemnify Lazer-Tron with respect to the
Lazer-Tron action. No other action with respect to this matter has been taken to
date.
On November 27, 2000, we were sued in the U.S. District Court for the
Southern District of New York, in an action entitled Comedy Partners vs. Acclaim
Entertainment, Inc. (00 Civ. 9051 (S.D.N.Y.) (AKH.) In addition, on or about
December 15, 2000, an action was commenced against us entitled Comedy Partners
v. Acclaim Entertainment, Inc., Index No. 605476/00 (Supreme Court, New York
County). On March 9, 2001, we reached an agreement with Comedy Partners to
settle all claims between the parties for $900,000 which amount was included in
accrued royalties payable at August 31, 2000 and March 3, 2001. Such amount was
paid in full in installments by Acclaim in the third and fourth quarters of
fiscal 2001.
We are also party to various litigations arising in the ordinary course of
our business, the resolution of none of which, we believe, will have a material
adverse effect on our liquidity or results of operations.
LEGAL MATTERS
Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022 will
pass upon the validity of the shares offered by this prospectus for Acclaim.
EXPERTS
The consolidated financial statements of Acclaim Entertainment, Inc.
and subsidiaries as of August 31, 2000 and 1999 and for each of the years in the
three-year period ended August 31, 2000 have been incorporated by reference in
this prospectus and in the registration statement of which it forms a part in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of that firm as experts
in accounting and auditing.
The report of KPMG LLP, dated November 29, 2000, contains an
explanatory paragraph that states that Acclaim has incurred losses from
operations, and has a working capital and stockholders' deficiency that raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
FORWARD-LOOKING STATEMENTS
This prospectus includes discussions of future expectations and
contains projections of results of operations or financial condition or other
"forward-looking" information. Those statements are subject to known and unknown
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the statements. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, see "Risk Factors." Given the significant risks and uncertainties
inherent in the forward-looking statements included in this prospectus, the
inclusion of these statements is not a representation by us or any other person
that our objectives and plans will be achieved.
28
WHERE YOU CAN FIND MORE INFORMATION
Acclaim is required to file periodic reports, proxy and information
statements and other information with the SEC. You may read any materials filed
by us at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. You may obtain information about the operation of the public reference room
by calling the SEC at 1-800-SEC-0330. Acclaim's SEC filings are also available
to the public on the SEC's Internet website located at http://www.sec.gov.
Acclaim has filed with the SEC a registration statement on Form S-3
under the Securities Act covering the issuance of the common stock. This
prospectus is part of that registration statement. As allowed by SEC rules, this
prospectus does not contain all of the information included in the registration
statement or in the exhibits to the registration statement. For further
information with respect to Acclaim and the securities offered by this
prospectus, you should read the registration statement and the exhibits filed
with the registration statement. You may obtain copies of the registration
statement and exhibits from the SEC upon payment of a fee prescribed by the SEC
or examine the documents, free of charge, at the public reference facilities
referred to above. A summary in this prospectus of any document filed as an
exhibit to the registration statement, although materially complete, does not
summarize all of the information in that document. You should read the exhibit
for a more complete understanding of the document or matter involved.
Acclaim has also filed the following documents with the SEC under the
Securities Exchange Act and they are incorporated into this document by
reference:
(1) Acclaim's Annual Report on Form 10-K for the fiscal year ended
August 31, 2000 filed on November 29, 2000 (File No. 0-16986);
(2) Acclaim's Quarterly Report on Form 10-Q for the period ended
December 2, 2000 filed on January 16, 2001 (File No. 0-16986);
(3) Acclaim's Quarterly Report on Form 10-Q for the period ended
March 3, 2001 filed on April 16, 2001 (File No. 0-16986);
(4) Acclaim's Quarterly Report on Form 10-Q for the period ended June
2, 2001 filed on July 17, 2001 (File No. 0-16986);
(5) Current Report on Form 8-K, filed on March 22, 2001 (File No.
0-16986);
(6) Current Report on Form 8-K, filed on April 13, 2001 (File No.
0-16986);
(7) Current Report on Form 8-K, filed on July 3, 2001 (File No.
0-16986);
(8) Current Report on Form 8-K, filed on August 2, 2001 (File No.
0-16986);
(9) Current Report on Form 8-K, filed on August 14, 2001 (File No.
0-16986); and
29
(10) The information regarding Acclaim's common stock contained in the
Registration Statement on Form 8-A, filed on June 8, 1988 (File
No. 0-16986), as amended by the Current Report on Form 8-K, filed
on August 25, 1989 (File No. 33-9460-C), relating to the
one-for-two reverse stock split effected by Acclaim.
Any document Acclaim files with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the termination of this offering will be deemed to be incorporated by
reference into this prospectus and to be a part of this prospectus from the date
it is filed.
Acclaim will provide to each person to whom this prospectus is
delivered and who makes a written or oral request, free of charge, a copy of any
document referred to above which has been incorporated into this prospectus by
reference, except exhibits to the document. Requests for these documents should
be sent to the Secretary, Acclaim Entertainment, Inc., One Acclaim Plaza, Glen
Cove, New York 11542. Telephone requests for copies should be made to the
Secretary at (516) 656-5000.
You should rely only on the information provided in this prospectus or
incorporated by reference into this prospectus. No person has been authorized to
provide you with different information and you should not rely on any
information you receive or representations made that are not contained in, or
incorporated by reference into, this prospectus.
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.
The information in this prospectus is accurate as of the date on the
front cover. You should not assume that the information contained in this
prospectus is accurate after the date on the cover page.
30
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Acclaim will bear all expenses in connection with the preparation and
filing of this registration statement. Brokers or dealers may receive commission
or discounts from the selling stockholders in amounts to be negotiated
immediately prior to the sale; commission expenses and brokerage fees will be
paid by the selling stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article VII of Acclaim's by-laws, which are incorporated herein
by reference, Acclaim agrees to hold harmless and indemnify any of its officers,
directors, employees and agents from and against any judgments, fines,
liabilities, or amounts paid in settlement as a result of or in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative. Such action, suit, or proceeding must
have been initiated against the indemnified party in his or her capacity as an
officer, director, employee or agent of Acclaim. However, indemnification will
only be paid if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of Acclaim
and, in the case of a criminal proceeding, had no reasonable cause to believe
such conduct was unlawful. No indemnification shall be payable under this
provision if a court having jurisdiction in the matter shall determine that such
indemnification is not lawful.
II-1
ITEM 16. EXHIBITS
Exhibit
Number Description
------ -----------
4.1 -- Indenture dated as of February 26, 1997 between the Company and
IBJ Schroder Bank & Trust Company, as trustee (incorporated by
reference to Exhibit 4.3 to the Company's Current Report on Form
8-K, filed on March 14, 1997 (File No. 0-16986))
4.2 -- Specimen form of the Registrant's common stock certificate
(incorporated by reference to Exhibit 4 to the Registrant's Annual
Report on Form 10-K for the year ended August 31, 1989, as amended
(File No. 0-16986))
*4.3 -- Form of Share Purchase Agreement between the Registrant and the
Purchasers listed on Schedule 1 attached thereto
*4.4 -- Form of Registration Rights Agreement between the Registrant and
the Purchasers listed on Schedule 1 attached thereto
*5 -- Form of Opinion of Rosenman & Colin LLP
**23.1 -- Consent of KPMG LLP
*23.3 -- Consent of Rosenman & Colin LLP (included in Exhibit 5)
*24.1 -- Power of Attorney (included on page II-5)
---------
* FILED HEREWITH
** To be filed with a subsequent amendment.
II-2
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement 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.
The undersigned registrant hereby undertakes 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 hereof.
The undersigned registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Nassau and State of New York on September 24,
2001.
ACCLAIM ENTERTAINMENT, INC.
By /s/
---------------------------------
Gregory E. Fischbach
Chief Executive Officer
II-4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gregory E. Fischbach and James R.
Scoroposki, and each or either of them, his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all the exhibits thereto, and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises as fully, to all intents and purposes, as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Co-Chairman of the Board; Chief
----------------------- Executive Officer; President; September 24, 2001
Gregory E. Fischbach Director
/s/ Co-Chairman of the Board; Senior
----------------------- Executive Vice President; September 24, 2001
James R. Scoroposki Treasurer; Secretary; Director
/s/ Chief Financial Officer and
----------------------- Executive Vice President (Chief September 24, 2001
Gerard F. Agoglia Financial and Accounting Officer)
/s/ Director September 24, 2001
-----------------------
Kenneth L. Coleman
/s/ Director September 24, 2001
-----------------------
Bernard J. Fischbach
/s/ Director September 24, 2001
-----------------------
Robert H. Groman
/s/ Director September 24, 2001
-----------------------
James Scibelli
/s/ Director September 24, 2001
-----------------------
Michael Tannen
II-5
EX-4.3
3
file002.txt
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated as of July 27, 2001 (this
"Agreement"), is entered into by and between ACCLAIM ENTERTAINMENT INC., a
Delaware corporation (the "Company"), and those persons named on Schedule 1
hereto (together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers are executing and delivering
this Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, the Purchasers wish to purchase, and the Company wishes to
issue and sell, for an aggregate purchase price of $___________ (the "Purchase
Price"), upon the terms and conditions of this Agreement, a total of __________
shares (the "Shares") of the Company's Common Stock, par value $.02 per share
(the "Common Stock"); and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; CLOSING
(A) PURCHASE OF SHARES. Subject to the terms and conditions set forth
herein, the Company hereby agrees to issue and sell to each of the Purchasers,
and each Purchaser hereby agrees to purchase from the Company, such number of
Shares at the Closing (as such term is defined in Section 1(b) hereof) as is
listed opposite the name of such Purchaser on Schedule 1 hereto, at a purchase
price of $3.60 per share, for an aggregate purchase price of $_____________.
(B) CLOSING. The closing (the "Closing") of the purchase and sale of
the Shares will take place at the offices of Rosenman & Colin LLP, 575 Madison
Avenue, New York, New York 10022 on July ___, 2001, or at such other place and
time as mutually agreed by the Purchasers and the Company. The date of the
Closing is referred to herein as a "Closing Date." At the Closing, the Company
will deliver to the Purchasers the applicable Shares purchased as set forth in
Schedule 1, against payment of the Purchase Price by wire transfer of
immediately available funds payable to the Company. The Shares shall be
registered in each Purchaser's name or the name of its nominee(s) in such
denominations as the Purchasers shall request
pursuant to instructions delivered to the Company not less than three business
days prior to the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
Each of the Purchasers severally represents and warrants to, and
covenants and agrees with, the Company as follows:
(a) The Purchaser is: (i) experienced in making investments of the kind
contemplated by this Agreement; (ii) able, by reason of the business and
financial experience of its management, to protect its own interests in
connection with the transactions contemplated by this Agreement; (iii) able to
afford the entire loss of its investment in the Shares; (iv) an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D; and (v) not a
broker-dealer or an affiliate of a broker-dealer as such terms are defined in
the Securities Exchange Act of 1934.
(b) The Purchaser is acquiring the Shares for its own account for
investment only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered under the Securities
Act. The Purchaser has not been organized for the purpose of investing in
securities of the Company, although such investment is consistent with its
purposes.
(c) All subsequent offers and sales of the Shares by the Purchasers
shall be made pursuant to an effective registration statement under the
Securities Act or pursuant to an applicable exemption from such registration.
(d) The Purchaser understands that the Shares are being offered and
sold to it in reliance upon exemptions from the registration requirements of the
United States federal securities laws, and that the Company is relying upon the
truth and accuracy of the Purchaser's representations and warranties, and the
Purchaser's compliance with its agreements, each as set forth herein, in order
to determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Shares.
(e) The Purchaser: (i) has been provided with information with respect
to the business of the Company, including, without limitation, the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 2, 2001 (the
"Quarterly Report") and Annual Report on Form 10-K for the period ended August
31, 2000 (the "Annual Report"); and (ii) has had access to management of the
Company and the opportunity to ask questions of the management of the Company.
(f) The Purchaser has the requisite corporate power and authority to
enter into this Agreement and the registration rights agreement in the form
attached hereto as Exhibit A (the "Registration Rights Agreement") between the
Company and the Purchasers relating to the Registrable Securities (as defined
therein).
2
(g) This Agreement, the Registration Rights Agreement and the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Purchaser and such agreements, when executed and delivered by
each of the other parties thereto will each be a valid and binding agreement of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, except to the extent that enforcement of such agreements may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to each of the Purchasers that:
(a) ORGANIZATION. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware. Each of the Company's
subsidiaries is a corporation duly organized and validly existing under the laws
of its respective jurisdiction of incorporation. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a Material Adverse Effect on the
Company (as hereinafter defined). Schedule 3(a) lists all subsidiaries of the
Company and, except as noted therein, all of the outstanding capital stock of
all such subsidiaries is owned of record and beneficially by the Company. The
Company and its subsidiaries have all requisite corporate power and authority,
and hold all licenses, permits and other required authorizations from
governmental authorities, necessary to conduct their business as it is now being
conducted or proposed to be conducted and to own or lease their properties and
assets as they are now owned or held under lease.
(b) CAPITALIZATION. On the date hereof, the authorized capital of the
Company consists of 100,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock, par value $.02 per share ("Preferred Stock"). As of July 16,
2001, 64,333,912 shares of Common Stock are issued and outstanding and no shares
of Preferred Stock are issued or outstanding. Schedule 3(b) sets forth all of
the options, warrants and convertible securities of the Company, and any other
rights to acquire securities of the Company (collectively, the "Derivative
Securities") which are outstanding on the date hereof, including in each case:
(i) the name and class of such Derivative Securities; and (ii) the number of
shares of Common Stock into which such Derivative Securities are convertible as
of the date hereof. All outstanding securities of the Company are validly
issued, fully paid and nonassessable. No stockholder of the Company is entitled
to any preemptive rights with respect to the purchase of or sale of any
securities by the Company. Except as set forth on Schedule 3(b) and as
contemplated herein, none of the shares of capital stock of the Company is
reserved for any purpose, and the Company is neither subject to any obligation
(contingent or otherwise), nor has any option, to repurchase or otherwise
acquire or retire any shares of its capital stock.
(c) CONCERNING THE SHARES. The Shares, when issued, will be duly and
validly issued, fully paid and non-assessable, will be free and clear of any
liens imposed by or through the
3
Company, will not be subject to preemptive rights and will not subject the
holder thereof to personal liability by reason of being such a holder. There are
currently no preemptive rights of any stockholder of the Company to acquire the
Shares.
(d) REPORTING COMPANY STATUS. The Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company files reports with the Commission pursuant to Section 12
and/or 15(d) of the Exchange Act. To the knowledge of the Company, the Company
has duly filed all materials and documents required to be filed pursuant to all
reporting obligations under either Section 13(a) or 15(d) of the Exchange Act,
other than certain hardware and software licenses which the Commission is
considering requesting the Company to file as exhibits. The Common Stock is
listed and traded on The Nasdaq SmallCap Stock Market ("Nasdaq") and the Company
is not aware of any pending or contemplated action or proceeding of any kind to
suspend the trading of the Common Stock.
(e) LEGALITY. The Company has the requisite corporate power and
authority to enter into this Agreement and the Registration Rights Agreement and
to issue and deliver the Shares.
(f) TRANSACTION AGREEMENTS. This Agreement and the Registration Rights
Agreement (collectively, the "Primary Documents") and the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Company; this Agreement and the other Primary Documents have been duly executed
and delivered by the Company and are each the legal, valid and binding agreement
of the Company, enforceable in accordance with their respective terms, except to
the extent that enforcement of each agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and to
general principles of equity.
(g) NON-CONTRAVENTION. The execution and delivery of this Agreement and
the other Primary Document, and the consummation by the Company of the
transactions contemplated by this Agreement and the other Primary Document, does
not (i) result in a violation of the Articles of Incorporation or By-laws of the
Company or its subsidiaries, or (ii) constitute a default under (or an event
which with notice or lapse of time or both could become a default) or give to
others any rights of termination, amendment or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (foreign or domestic and including federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any material property or asset of the Company or any of
its subsidiaries is bound or affected other than any of the foregoing which
would not have a Material Adverse Effect (as hereinafter defined). Neither the
filing of the registration statement required to be filed by the Company
pursuant to the Registration Rights Agreement nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied on or prior to the date hereof, for or
relating to the registration of any shares of the Common Stock.
(h) APPROVALS. Except as set forth on Schedule 3(h), no authorization,
approval or consent of any court, governmental body, regulatory agency,
self-regulatory organization, stock
4
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
(i) SEC DOCUMENTS, FINANCIAL STATEMENTS. Since September 1, 2000, the
Company has filed all reports, schedules, forms and statements required to be
filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act (the "SEC Documents"), other than certain hardware and software
licenses which the Commission is considering requesting the Company to file as
exhibits. As of their respective dates, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents were prepared
in accordance with U.S. generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries and results of their operations and cash flows for the periods
covered thereby (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(j) UNDISCLOSED LIABILITIES. The Company has no material obligation or
liability (whether accrued, absolute, contingent, unliquidated, or otherwise,
whether due or to become due) arising out of transactions entered into at or
prior to the Closing of this Agreement, or any action or inaction at or prior to
the Closing of this Agreement, or any state of facts existing at or prior to the
Closing of this Agreement, except (a) liabilities reflected on the latest
balance sheet included in the SEC Documents (the "Company Balance Sheet"), (b)
liabilities incurred in the ordinary course of business since the date of the
Company Balance Sheet (none of which is a liability for breach of contract,
breach of warranty, torts, infringements, claims or lawsuits) and (c)
liabilities or obligations disclosed on Schedule 3(j) hereto.
(k) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents, since June 2, 2001, there has been no material adverse change nor any
material adverse development in the business, properties, operations, financial
condition, outstanding securities, employee relations, customer relations or
results of operations of the Company or its subsidiaries, taken as a whole
(each, a "Material Adverse Effect").
(l) TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company and its
subsidiaries have good and marketable title to all of their material properties
and assets, both real and personal, and have good title to all their leasehold
interests, in each case subject only to (x) mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges created in the
ordinary course of business and (y) the lien of the Company's lending
institution.
(m) PROPRIETARY RIGHTS. The Company and its subsidiaries have
sufficient title and
5
ownership of all trademarks, service marks, trade names, internet domain names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of their business as now conducted and as proposed to
be conducted, and, to the knowledge of the Company, such business does not
conflict with or constitute an infringement on the rights of others.
(n) GOVERNMENTAL PERMITS. The Company and its subsidiaries have all
governmental franchises, permits, licenses and any similar governmental
authority necessary for the conduct of their business as now conducted, the lack
of which could result in a Material Adverse Effect. The Company and its
subsidiaries are not in default in any respect under any of such governmental
franchises, permits, licenses or similar authority.
(o) ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents or
on Schedule 3(o), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, in which an unfavorable decision, ruling or finding
could have a Material Adverse Effect or adversely affect the transactions
contemplated by the Primary Documents or the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, the
Primary Documents.
(p) EMPLOYMENT MATTERS. The Company and its subsidiaries are in
material compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours. There are no pending investigations involving
the Company or any of its subsidiaries by the U.S. Department of Labor or any
other governmental agency responsible for the enforcement of such federal,
state, local or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company or any of its subsidiaries pending
before the National Labor Relations Board or any strike, picketing, boycott,
dispute, slowdown or stoppage pending or threatened against or involving the
Company or any of its subsidiaries. No representation question exists respecting
the employees of the Company or any of its subsidiaries and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company or any of its subsidiaries. No grievance or arbitration proceeding
is pending under any expired or existing collective bargaining agreements of the
Company or any of its subsidiaries. No material labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent.
(q) ERISA MATTERS. Neither the Company nor any ERISA Affiliate of the
Company (as defined below) maintains, administers, contributes to or is
obligated to contribute to any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including, without limitation, any multiemployer plan as defined in
Section 3(37) of ERISA; employee welfare benefit plan (as defined in Section
3(1) of ERISA); or bonus, deferred compensation, stock purchase, stock option,
severance plan, salary continuation, vacation, sick leave, fringe benefit,
incentive, insurance, welfare or similar arrangement with respect to any
employees of the Company or any of its subsidiaries. For these
6
purposes, "ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with the Company, are
treated as a single employer under any or all of section 414(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code") on either the date
of this Agreement or the Closing Date.
(r) INSURANCE. The Company and its subsidiaries maintain property and
casualty, general liability, personal injury and other similar types of
insurance that are reasonably adequate, consistent with industry standards and
their historical claims experience. The Company and its subsidiaries have not
received notice from, and have no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company or its subsidiaries) that such
insurer intends to deny coverage under or cancel, discontinue or not renew any
insurance policy covering the Company or any of its subsidiaries presently in
force.
(s) TAXES. All applicable U.S. federal, state and local income and
franchise tax returns ("Tax Returns") required to be filed by the Company and
each of its subsidiaries have been prepared and filed in compliance with all
applicable laws and were true, correct and complete in all material respects
when filed, or if not yet filed have been granted extensions of the filing dates
which extensions have not expired, and all taxes, assessments, fees and other
governmental charges upon the Company, its subsidiaries, or upon any of their
respective properties, income or franchises, required to be paid by the Company
or its subsidiaries to be due and payable have been paid, or adequate reserves
therefor have been set up if any of such taxes are being contested in good
faith; or if any of such Tax Returns have not been filed or if any such taxes
have not been paid or so reserved for, the failure to so file or to pay would
not in the aggregate have a Material Adverse Effect. All amounts required to be
withheld by the Company or any of its subsidiaries from employees for income,
social security and other payroll taxes have been collected and withheld and
have either been paid to the appropriate agency, set aside in accounts for such
purpose or accrued and reserved upon the books and records of the Company or the
appropriate subsidiary. There were no tax liens on any of the Company's or its
subsidiaries' assets that arose in connection with the failure, or alleged
failure, to pay any taxes except for liens for taxes not yet due and payable. No
taxing authority is asserting or threatening to assert against the Company or
any of its subsidiaries any deficiency or claim for additional taxes and no Tax
Return of Company or any of its subsidiaries is currently under audit by any tax
authority. The provision for taxes on the Company Balance Sheet adequately
reflects all tax liabilities in accordance with U.S. generally accepted
accounting principles.
(t) COMPLIANCE WITH LAW. To the best of their knowledge, the Company
and its subsidiaries have complied in all material respects with all applicable
statutes and regulations of the United States and of all states, municipalities
and applicable agencies and foreign jurisdictions or bodies in respect of the
conduct of its business and operations, and the failure, if any, by the Company
or its subsidiaries to have fully complied with any such statute or regulation
has not and will not result in a Material Adverse Effect.
(u) INVESTMENT COMPANY ACT. The Company and its subsidiaries are not
conducting,
7
and will not conduct, their business in a manner which would cause any of them
to become an "investment company," as defined in Section 3(a) of the Investment
Company Act of 1940, as amended.
(v) BROKERAGE FEES. Except as set forth on Schedule 3(v), the Company
and its subsidiaries have not incurred any liability for any consulting fees or
agent's commissions in connection with the offer and sale of the Shares and the
transactions contemplated by this Agreement.
(w) PRIVATE OFFERING. Subject to the accuracy of the Purchasers'
representations and warranties set forth in Section 2 hereof, the offer, sale
and issuance of the Shares, as contemplated by this Agreement, are exempt from
the registration requirements of the Securities Act. Prior to the effectiveness
of the registration statement contemplated by the Registration Rights Agreement,
the Company agrees that neither the Company nor anyone acting on its behalf will
offer any of the Shares, or any similar securities, for issuance or sale, or
solicit any offer to acquire any of the same from anyone so as to render the
issuance and sale of such securities subject to the registration requirements of
the Securities Act. The Company has not offered or sold the Shares by any form
of general solicitation or general advertising, as such terms are used in Rule
502(c) under the Securities Act.
(x) FULL DISCLOSURE. Neither this Agreement, the Primary Documents nor
any of the schedules, exhibits, written statements, documents or certificates
prepared or supplied by the Company with respect to the transactions
contemplated hereby contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which made. Except as disclosed
in the SEC Documents and except for matters affecting the industry of the
Company as a whole, there exists no fact or circumstance which, to the knowledge
of the Company upon due inquiry, could reasonably be anticipated to have a
Material Adverse Effect or could adversely affect the ability of the Company to
perform its obligations set forth in the Primary Documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
(a) TRANSFER RESTRICTIONS. Each of the Purchasers acknowledges that,
except as provided in the Registration Rights Agreement, (i) none of the Shares
have been, or are being, registered under the Securities Act, and such
securities may not be transferred unless (A) subsequently registered thereunder
or (B) they are transferred pursuant to an exemption from such registration; and
(ii) any sale of the Shares made in reliance upon Rule 144 under the Securities
Act may be made only in accordance with the terms of said Rule. The provisions
of Section 4(a) and 4(b) hereof, together with the rights and obligations of the
Purchasers under this Agreement and the other Primary Documents, shall be
binding upon any subsequent transferees of the Shares.
(b) RESTRICTIVE LEGEND. Each of the Purchasers acknowledges and agrees
that, until such time as the Shares shall have been registered under the
Securities Act or such Purchaser
8
demonstrates to the reasonable satisfaction of the Company that such
registration shall no longer be required, such Shares shall bear a restrictive
legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.
(c) FILINGS. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Shares to the Purchasers as
required by United States laws and regulations, or by any domestic securities
exchange or trading market, and if applicable, the filing of a notice on Form D
(at such time and in such manner as required by the Rules and Regulations of the
Commission), and to provide copies thereof to the Purchasers promptly after such
filing or filings.
(d) NASDAQ LISTING. The Company shall use its best efforts to promptly
secure the listing of the Shares upon each national securities exchange or
automated quotation system, if any, upon which the Common Stock is then listed.
The Company further agrees and covenants that it will not seek to have the
trading of its Common Stock on Nasdaq suspended or terminated, will use its best
efforts to maintain its eligibility for trading on Nasdaq and, if such trading
of its Common Stock is suspended or terminated, will use its best efforts to
requalify its Common Stock or otherwise cause such trading to resume.
(e) REPORTING STATUS. The Company shall timely file all reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act and shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
(f) STATE SECURITIES FILINGS. The Company shall from time to time
promptly take such action as either the Purchasers or any of their
representatives, if applicable, may request to qualify the Shares for offering
and sale under the securities laws (other than United States federal securities
laws) of the jurisdictions in the United States as shall be so identified to the
Company, and to comply with such laws so as to permit the continuance of sales
therein, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subsection (f) be
obligated to be so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction.
(g) USE OF PROCEEDS. The Company will use all of the net proceeds from
the sale of the
9
Shares for the Company's working capital, and the retirement of a portion of the
Company's 10% Convertible Notes due March 2002.
(h) REGISTRATION RIGHTS. The Company acknowledges that in order to
induce the Purchasers to enter into this Agreement, it has provided them with
certain registration rights under the Securities Act as set forth in the
Registration Rights Agreement. In this regard, the Company has agreed that if
the Registration Statement (as defined in the Registration Rights Agreement) is
not declared effective by the Effectiveness Deadline (as defined in the
Registration Rights Agreement), the Company shall pay to each Purchaser an
amount equal to one percent (1%) of the purchase price paid for the Shares
purchased by each Purchaser. Thereafter, for every 30 days that pass without the
Registration Statement being declared effective after the Effectiveness
Deadline, the Company shall pay to each Purchaser an additional amount equal to
one percent (1%) of the purchase price paid for the Shares purchased by each
Purchaser.
5. TRANSFER AGENT INSTRUCTIONS
The Company warrants that no instruction, other than the instructions
referred to in this Section 5, prior to the registration and sale under the
Securities Act of the Common Stock will be given by the Company to its transfer
agent and that the Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing in this Section shall
affect in any way the Purchasers' obligations and agreement to comply with all
applicable securities laws upon resale of the Shares. If a Purchaser provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Purchaser of any of the Shares in
accordance with Section 4(a) of this Agreement is not required under the
Securities Act, the Company shall permit the transfer of the Shares and promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without legend in such names and in such denominations as specified
by the Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SHARES
Each Purchaser understands that the Company's obligation to issue the
Shares on the Closing Date to the Purchasers pursuant to this Agreement is
conditioned upon the satisfaction or waiver by the Company of each of the
following conditions:
(a) The accuracy on the Closing Date of the representations and
warranties of the Purchasers contained in this Agreement as if made on the
Closing Date and the performance by the Purchasers on or before the Closing Date
of all covenants and agreements of the Purchasers required to be performed on or
before the Closing Date.
(b) The absence or inapplicability of any and all laws, rules or
regulations prohibiting
10
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
(c) The Purchasers shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(d) The Purchasers shall have delivered the full Purchase Price in
accordance with Section 1(a) above.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE THE SHARES
The Company understands that the Purchasers' obligation to purchase the
Shares on the Closing Date is conditioned upon the satisfaction or waiver by the
Purchasers of each of the following conditions:
(a) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date, and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date.
(b) The Company shall have executed this Agreement and the Registration
Rights Agreement and delivered same to the Company.
(c) On the Closing Date, the Purchasers shall have received an opinion
of counsel for the Company, dated the Closing Date, in the form attached as
Exhibit B hereto.
(d) On the Closing Date, the Purchasers shall have received a
certificate executed by the President or the Chief Executive Officer of the
Company and by the Chief Financial Officer of the Company, stating that all of
the representations and warranties of the Company set forth in this Agreement
and the other Primary Documents are accurate as of the Closing Date and that the
Company has performed all of its covenants and agreements required to be
performed under this Agreement and the other Primary Documents on or before the
Closing Date.
(e) The Purchasers shall have received an incumbency certificate, dated
the Closing Date, for the officers of the Company executing this Agreement, and
any other documents or instruments delivered in connection with this Agreement
at the Closing.
(f) The Purchasers shall have received a certificate of the Secretary
or Assistant Secretary of the Company, dated the Closing Date, as to the
continued and valid existence of the Company, certifying the attached copy of
the By-laws of the Company, the authorization of the execution, delivery and
performance of the Primary Documents, and the resolutions adopted by the Board
of Directors of the Company authorizing the actions to be taken by the Company
contemplated by he Primary Documents.
11
(g) The Purchasers shall have received a certified copy of the Articles
of Incorporation of the Company as filed with the Secretary of State of the
State of Delaware and any amendments thereto through the Closing Date.
(h) The Purchasers shall have received from the Company such other
certificates and documents as they or their representatives, if applicable,
shall reasonably request, and all proceedings taken by the Company in connection
with the Primary Documents contemplated by this Agreement and the other Primary
Documents and all documents and papers relating to such Primary Documents shall
be satisfactory to the Purchasers.
(i) No injunction, order, investigation, claim, action or proceeding
before any court or governmental body shall be pending or threatened wherein an
unfavorable judgment, decree or order would restrain, impair or prevent the
carrying out of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement or cause any
such transaction to be rescinded.
(j) The Company shall have obtained in writing or made all consents,
waivers, approvals, orders, permits, licenses and authorizations of, any
registrations, declarations, notices to and filings and applications with, any
governmental authority or any other person or entity (including, without
limitation, securityholders and creditors of the Company) required to be
obtained or made in order to enable the Company to observe and comply with all
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
8. INDEMNIFICATION
(A) Indemnification of Purchasers by the Company.
The Company hereby agrees to indemnify and hold harmless each of the
Purchasers, their affiliates and their respective officers, managers, members,
directors, partners, shareholders, employees and members (collectively, the
"Buyer Indemnitees"), from and against any and all losses, claims, damages,
judgments, penalties, liabilities and deficiencies (collectively, "Losses"), and
agrees to reimburse the Buyer Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Buyer Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's representations, warranties or covenants contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform any of its covenants, agreements,
undertakings or obligations set forth in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company
12
pursuant to this Agreement.
(B) Indemnification of the Company by Purchasers.
Each of the Purchasers hereby severally agrees to indemnify and hold
harmless the Company, its affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all Losses, and agrees to reimburse the Company Indemnitees for all
out-of-pocket expenses (including the fees and expenses of legal counsel), to
the extent arising out of or in connection with any breach of any of such
Purchaser's representations, warranties or covenants contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by such Purchaser pursuant to
this Agreement; provided, however, that the total amount payable in respect
thereto by each Purchaser under this Section 8(B) shall not exceed the purchase
price paid by such Purchaser.
(C) Third Party Claims.
Promptly after receipt by either party hereto seeking indemnification
pursuant to this Section 8 (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 8 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying
13
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld) settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
9. EXPENSES
The Company covenants and agrees with the Purchasers that the Company
shall pay or cause to be paid the following: (i) all expenses in connection with
registration or qualification of the Shares for offering and sale under federal
securities laws, and state securities laws as provided in Section 4(f) hereof;
and (ii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section, including the fees and disbursements of the Company's counsel,
accountants and other professional advisors, if any.
10. SURVIVAL
The agreements, covenants, representations and warranties of the
Company and the Purchasers, including indemnification obligations under Section
8, shall survive the execution and delivery of this Agreement and the delivery
of the Shares hereunder until the Company has satisfied in full its obligations
under the terms of the Registration Rights Agreement.
11. MISCELLANEOUS
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the internal laws of the State of New York.
Each of the parties submits to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(b) COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be deemed an original.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
14
(d) INTERPRETATION. This Agreement and each of the Primary Documents
have been entered into freely by each of the parties, following consultation
with their respective counsel, and shall be interpreted fairly in accordance
with its respective terms, without any construction in favor of or against
either party.
(e) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or unenforceability of this Agreement in any other jurisdiction.
(f) SUCCESSORS. This Agreement shall inure to the benefit of, and be
binding upon the successors and assigns of each of the parties hereto.
(g) AMENDMENTS. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement.
(h) MERGER. This Agreement, together with the other Primary Documents,
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(i) EQUITABLE RELIEF. The Company and the Purchasers each recognize
that in the event that any party fails to perform, observe, or discharge any or
all of its obligations under this Agreement or the other Primary Documents, any
remedy at law may prove to be inadequate relief to the aggrieved party. The
Company and the Purchasers therefore agree that an aggrieved party under this
Agreement or the other Primary Documents, if such party so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
(j) NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be effective upon
personal delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
COMPANY: Acclaim Entertainment, Inc.
One Acclaim Plaza
Glen Cove, New York 11542
ATTENTION: Gerald Agoglia
Chief Financial Officer
Tel.: (516) 656-5000
Fax: (516) 656-2039
with a copy to:
15
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
ATTENTION: Eric M. Lerner, Esq.
Tel.: (212) 940-8800
Fax: (212) 940-8776
PURCHASERS: At the addresses set forth on the signature pages hereto.
12. NON-DISCLOSURE.
The Purchasers acknowledge that the Company is a publicly-listed
company and, as such, is subject to strict regulation governing the disclosure
of information relating to corporate transactions. Except as required by law,
without the prior written consent of the Company, the Purchasers will not
directly or indirectly, make any public comment, statement or communication to
any individual or entity with respect to, or otherwise disclose the existence of
discussions regarding a possible transaction between the parties or any of the
terms, conditions, or other aspects of this Agreement until such time as the
transaction is completed, or any confidential information provided by the
Company to the Purchasers. Further, the Purchasers acknowledge that they may not
trade in the securities of the Company when they are in possession of material,
non-public information and that they agree that they will not do so. The
Purchasers will not use any confidential information provided by Company to the
Purchasers for any purpose other than evaluating an investment by the Purchasers
in the Shares. Confidential Information shall include all non-public information
provided by the Company to the Purchasers, but shall not include information
that (a) is now or subsequently becomes generally available to the public
through no wrongful act or omission of the Purchasers, (b) the Purchasers can
demonstrate to have had rightfully in their possession prior to disclosure to
the Purchasers by the Company, and (c) the Purchasers rightfully obtain from a
third party who has the right to transfer or disclose it. If the Purchasers are
required by law to make any such disclosure, they shall first provide to the
Company the content of the proposed disclosure, the reasons that such disclosure
is required by law, and the time and place that the disclosure will be made.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly
executed by each of the undersigned.
Dated: July 27, 2001
COMPANY:
ACCLAIM ENTERTAINMENT, INC.
By:
-------------------------------------------------
Name: Gregory E. Fischbach
Title: President and Chief Executive Officer
PURCHASERS:
[PURCHASER]
By:_______________
Name:
Title:
Address:
EXHIBIT INDEX
EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT B FORM OF OPINION OF COUNSEL
SCHEDULE 1
EX-4.4
4
file003.txt
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July ___, 2001 (this
"Agreement"), is made by and between ACCLAIM ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), and those persons named in Schedule 1 (together,
the "Purchasers").
W I T N E S S E T H:
WHEREAS, pursuant to a Share Purchase Agreement, dated as of the date
hereof, between the Company and the Purchasers (the "Share Purchase Agreement"),
the Company has agreed to issue and sell to the Purchasers, a total of
___________ shares (the "Shares" or the "Registrable Securities") of the
Company's common stock, par value $.02 per share (the "Common Stock");
WHEREAS, to induce the Purchasers to execute and deliver the Share
Purchase Agreement, the Company has agreed to provide to the Purchasers and
their permitted assigns certain registration rights under the Securities Act of
1933, as amended (the "Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchasers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Holder" or "Holders" mean a holder or holders of
Registrable Securities or securities convertible into or exercisable for
Registrable Securities.
(b) "Registration Statement" means a registration statement
or registration statements of the Company filed under the Securities Act
covering Registrable Securities.
(c) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
registration statement by the United States Securities and Exchange Commission
(the "Commission").
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Share Purchase Agreement.
2. MANDATORY REGISTRATION.
(i) The Company shall, as soon as practicable, prepare and file
with the Commission a Registration Statement or Registration Statements (as
necessary) on Form S-3 covering the resale of all of the Registrable Securities.
In the event that Form S-3 is unavailable and/or inappropriate for such a
registration, the Company shall use such other form as is available and
appropriate for such a registration. Any Registration Statement prepared
pursuant hereto shall register for resale at least that number of shares of
Common Stock equal to the Shares. The Company shall use its best efforts to
cause the Registration Statement to be declared effective not later than 60 days
following the Closing Date (the "Effectiveness Deadline"). If the Registration
Statement is not declared effective by the Effectiveness Deadline, the Company
shall pay to each Purchaser an amount equal to one percent (1%) of the purchase
price paid for the Shares purchased by each Purchaser. Thereafter, for every 30
days that pass without the Registration Statement being declared effective after
the Effectiveness Deadline, the Company shall pay to each Purchaser an
additional amount equal to one percent (1%) of the purchase price paid for the
Shares purchased by each Purchaser.
(ii) The Company shall use its best efforts to keep each
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Purchasers) may be immediately sold without
restriction (including without limitation as to volume by each holder thereof)
without registration under the Securities Act (the "Registration Period").
(iii) If any offering pursuant to a Registration Statement
pursuant to Section 2 hereof involves an underwritten offering (which may only
be with the consent of the Company), the Purchasers shall have the right to
select legal counsel and an investment banker or bankers and manager or managers
to administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
(iv) Notwithstanding the foregoing, if the Company shall furnish
to the Purchasers a certificate signed by the President or Chief Executive
Officer of the Company (a "Demand Deferral Notice") stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Registration Statement
to be filed and it is therefore essential to defer the filing of such
Registration Statement, then the Company shall have the right to defer such
filing for a period of not more than 120 days after receipt of the request of
the Purchasers; provided, however, that the Company may not utilize this right
more than once in any twelve-month period.
(v) If Registrable Securities are registered for sale under the
Securities Act, the Purchasers shall cease any distribution of such shares under
the Registration Statement not more than twice in any 12-month period, for up to
90 days each, upon the request of the
2
Company if: (x) such distribution would require the public disclosure of
material non-public information concerning any transaction or negotiations
involving the Company or any of its affiliates that, in the good faith judgment
of the Company's Board of Directors, would materially interfere with such
transaction or negotiations, (y) such distribution would otherwise require
premature disclosure of information that, in the good faith judgment of the
Company's Board of Directors, would adversely affect or otherwise be detrimental
to the Company or (z) the Company proposes to file a registration statement
under the Securities Act for the offering and sale of securities for its own
account in an underwritten offering and the managing underwriter therefor shall
advise the Company in writing that in its opinion the continued distribution of
the Registrable Securities would adversely affect the success of the offering of
the securities proposed to be registered for the account of the Company. The
Company shall promptly notify the Purchasers at such time as (i) such
transactions or negotiations have been otherwise publicly disclosed or
terminated, (ii) such non-public information has been publicly disclosed or
counsel to the Company has determined that such disclosure is not required due
to subsequent events or (iii) the completion of such underwritten offering.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:
(a) Prepare and file with the Commission the Registration
Statements required by Section 2 of this Agreement and such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectuses used in connection with the Registration
Statements, each in such form as to which the Purchasers and their counsel shall
not have objected, as may be necessary to keep the Registration current at all
times during the Registration Period, and, during the Registration Period,
comply with the provisions of the Securities Act with respect to the disposition
of all of the Registrable Securities until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statements;
(b) Furnish to the Purchasers, if the Registrable Securities of
the Purchasers are included in the Registration Statement, and their legal
counsel identified to the Company, promptly after the same is prepared and
publicly distributed, filed with the Commission, or received by the Company, a
copy of the Registration Statement, each preliminary prospectus, each final
prospectus, and all amendments and supplements thereto and such other documents,
as the Purchasers may reasonably request in order to facilitate the disposition
of their Registrable Securities;
(c) As soon as practicable, furnish to the Purchasers and their
counsel copies of any correspondence between the Company and the Commission with
respect to any registration statement or amendment or supplement thereto filed
pursuant to this Agreement;
(d) Use all best efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Purchasers may request,
(ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
3
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subsection
(d) be obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(e) List such securities on The Nasdaq SmallCap Market and all the
other national securities exchanges on which any securities of the Company are
then listed, and file any filings required by The Nasdaq SmallCap Market and/or
such other exchanges;
(f) Notify each Purchaser and (if requested by the Purchaser)
confirm such advice in writing, (i) when or if the prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (v) of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) If any fact contemplated by clause (v) of paragraph (f),
above, shall exist, prepare a supplement or post-effective amendment to the
Registration Statement or the related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchaser of the Registrable Securities the prospectus will not
contain an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(h) If the Company has consented to an underwritten offering and
such offering is underwritten, at the request of a Purchaser, to furnish on the
date that Registrable Securities are delivered to the underwriters for sale
pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters and to any Purchaser selling Registrable Securities in connection
with such underwriting, stating that such registration statement has become
effective under the Securities Act and that (A) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act and (B) the registration statement, the
4
related prospectus and each amendment or supplement thereof comply as to form in
all material respects with the requirements of the Securities Act (except that
such counsel need not express any opinion as to financial statements or other
financial data contained therein) and (ii) a letter dated such date from the
Company's independent public accountants addressed to the underwriters and to
such Purchasers, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters may reasonably request;
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and to enable such certificates
for the Registrable Securities to be in such denominations or amounts, as the
case may be, as the Purchasers may reasonably request, and registered in such
names as the Purchasers may request; and, within three business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Purchasers) an appropriate
instruction and opinion of such counsel;
(j) Enter into customary agreements (including, in the case of an
underwritten offering, underwriting agreements in customary form, and including
provisions with respect to indemnification and contribution in customary form
and consistent with the provisions relating to indemnification and contribution
contained herein) and take all other customary and appropriate actions in order
to expedite or facilitate the disposition of such Registrable Securities and in
connection therewith:
(i) make such representations and warranties to the
Purchasers and the underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in similar underwritten offerings;
(ii) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with the Purchasers and
such representative of the Purchasers as the Purchasers covered by any
Registration Statement shall select relating to the Registration and providing
for, among other things, the appointment of such representative as agent for the
selling Purchasers for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be customary in form, substance and scope and
shall contain customary representations, warranties and covenants; and
(iii) deliver such customary documents and certificates as
may be reasonably requested by the Purchasers whose Registrable Securities are
being sold or by the managing underwriters, if any.
5
The above shall be done (i) at the effectiveness of such Registration Statement
(and each post-effective amendment thereto) in connection with any registration,
and (ii) at each closing under any underwriting or similar agreement as and to
the extent required thereunder;
(k) The Company shall, at the request of the Purchasers, make
generally available to its security holders as soon as practicable, but not
later than ninety (90) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a 12 month period beginning not later than the first
day of the Company's fiscal quarter next following the effective date of a
Registration Statement;
(l) The Company shall make available for inspection by (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Purchasers, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collective, the "Records"), as shall be reasonably deemed necessary
by each Inspector to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to the Inspectors) of any
Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(l). Each Purchaser agrees
that upon learning that the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction, it shall give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. Nothing herein
shall be deemed to limit the Purchasers' ability to sell Registrable Securities
in a manner which is otherwise consistent with applicable laws and regulations;
and
(m) The Company shall hold in confidence and not make any
disclosure of information concerning a Purchaser provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other
6
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Purchaser is sought in or by a court or
governmental body of competent jurisdiction or though other means, give prompt
notice to such Purchaser prior to making such disclosure, and allow the
Purchaser, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
4. OBLIGATIONS OF THE PURCHASERS TO PROVIDE INFORMATION. In connection
with the registration of the Registrable Securities, each Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities, and each Purchaser shall execute such documents
in connection with such registration as the Company may reasonably request. At
least ten days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify the Purchasers of the information the
Company included in the Registration Statement.
5. EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions and other fees and expenses of investment bankers and
other than brokerage commissions, incurred in connection with registrations,
filings or qualifications pursuant to Section 3, but including, without
limitation, all registration, listing, and qualification fees, printing and
accounting fees, and the fees and disbursements of counsel for the Company, and
the fees of one counsel to the Purchasers with respect to each Registration
Statement filed pursuant hereto, shall be borne by the Company provided, that
the expenses of such Purchasers' counsel shall not exceed $[15,000].
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) The Company will indemnify and hold harmless each Purchaser,
each of its officers, directors, partners and shareholders, and each person, if
any, who controls each Purchaser within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the
Commission) or the omission to state therein any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state or
foreign securities law or any rule or regulation under the Securities
7
Act, the Exchange Act or any state or foreign securities law (the matters in
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall, subject to the provisions of Section 6(b) below, reimburse each
Purchaser, promptly as such expenses are incurred and are due and payable, for
any legal and other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise, including without
limitation, the costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which the
Purchaser is a party), incurred by it in connection with the investigation or
defense of any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to any Claim arising out of or based upon a modification which occurs
in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the final prospectus, as then amended or
supplemented, if such final prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (iii) be available to the extent that such
Claim is based upon a failure of the Purchaser to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; or (iv)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Purchaser
pursuant to Section 9. Each Purchaser will indemnify the Company and its
officers and directors against any Claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of the Purchaser, expressly
for use in connection with the preparation of the Registration Statement
(including any modifications, amendments or supplements thereto), subject to
such limitations and conditions as are applicable to the Indemnification
provided by the Company in this Section 6; provided, however, that in no event
shall any indemnity by any Purchaser under this Section 6 exceed the amount of
the net proceeds received by such Purchaser in connection with the offering
effected through such Registration Statement.
(b) Promptly after receipt by an Indemnified Person under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and to the
extent that the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person, provided, however, that an Indemnified
8
Person shall have the right to retain its own counsel with the reasonable fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Purchasers, and such legal counsel shall be selected by the
Purchasers. The failure to deliver written notice to an indemnifying party
within a reasonable time after the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person under
this Section 6, except to the extent that the indemnifying party is materially
prejudiced in its ability to such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
(c) No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any
provisions relating to indemnification or contribution contained in the
underwriting agreements entered into among the Company, the underwriters and the
Purchasers in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in such underwriting agreements
shall be controlling as to the Registrable Securities included in the public
offering; provided, however, that if, as a result of this Section 6(d), a
Purchaser, its officers, directors, partners, shareholders or any person
controlling the Purchaser is or are held liable with respect to any Claim for
which they would be entitled to indemnification hereunder but for this Section
6(d) in an amount which exceeds the aggregate proceeds received by the Purchaser
from the sale of Registrable Securities included in a registration pursuant to
such underwriting agreement (the "Excess Liability"), the Company shall
reimburse the Purchasers for such Excess Liability.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited under applicable law, the indemnifying party
agrees to contribute to the amount paid or payable by such indemnified party as
a result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information supplied by
the indemnifying party or by the Indemnified Person, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the forgoing, (a) no contribution
shall be made under circumstances where the payor would not have been liable for
indemnification under the fault
9
standards set forth in Section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net proceeds received by such seller from the sale of such Registrable
Securities. The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Purchasers and any other party were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in this Section.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Purchasers the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the Commission that may at any time permit
the Purchasers to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to each Purchaser so long as such Purchaser owns
Shares promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or periodic report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Purchaser to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by a Purchaser to any transferee of the Shares held by
such Purchaser if: (a) such Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee; (c) at or
before the time the Company receives the written notice contemplated by clause
(b) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (d) the
transfer of the relevant Shares complies with the restrictions set forth in
Section 4 of the Share Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Purchasers holding two thirds (2/3) of
the outstanding Registrable Securities. Any amendment or
10
waiver effected in accordance with this Section 10 shall be binding upon the
Purchasers and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten (10) days advance
written notice to each of the other parties hereto.
COMPANY: Acclaim Entertainment, Inc.
One Acclaim Plaza
Glen Cove, New York 11542
Attention: Mr. Gerard Agoglia
Chief Financial Officer
Tel.: (516) 656-5000
Fax: (516) 656-2039
WITH COPIES TO:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Eric M. Lerner, Esq.
Tel.: (212) 940-8800
Fax: (212) 940-8776
PURCHASERS: to the addresses set forth on the signatures pages hereto.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties agrees to
the jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this
11
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. This Agreement may be
signed in two or more counterparts, each of which shall be deemed an original.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
validity or unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. Subject to the provisions of Section 10
hereof, this Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement.
(e) This Agreement, together with the Share Purchase Agreement,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure for the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The Company acknowledges that any failure by the Company to
perform its obligations under Section 2, or any delay in such performance could
result in direct and indirect damages to the Purchasers, and the Company agrees
that, in addition to any other liability the Company may have by reason of any
such failure or delay, the Company shall be liable for all direct and
consequential damages caused by any such failure or delay. Nothing herein shall
limit the Purchasers' right to pursue any claim seeking such direct or
consequential damages.
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the undersigned.
Dated: July ___, 2001
"COMPANY"
ACCLAIM ENTERTAINMENT, INC.
By:
---------------------------------
Name:
Title:
"PURCHASERS"
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By:
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Name:
Title:
Address:
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By:
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Name:
Title:
Address:
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By:
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Name:
Title:
Address:
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By:
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Name:
Title:
Address
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SCHEDULE 1
Purchasers
EX-5
5
file004.txt
OPINION OF ROSENMAN & COLIN LLP
EXHIBIT 5
Form of Opinion
_______ __, 2001
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have been requested by Acclaim Entertainment, Inc. (the "Company"),
a Delaware corporation, to furnish our opinion in connection with the Company's
Registration Statement (the "Registration Statement") on Form S-3 (Registration
No. ____________) covering an aggregate of 9,898,106 shares (the "Shares") of
common stock, par value $0.02 per share, of the Company to be offered and sold
by the selling stockholders named therein.
In connection with the foregoing, we have made such examination as we
have deemed necessary for the purpose of rendering this opinion. Based upon such
examination, it is our opinion that the Shares have been duly authorized and, to
the extent issued as of the date hereof, are validly issued, fully paid and
non-assessable, and when issued in accordance with the terms of the warrant
described in the Registration Statement will be fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
Rosenman & Colin LLP
By
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A Partner