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As filed with the Securities and Exchange Commission on February 17, 1998.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________
ACTIVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware
94-2606438
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
3100 Ocean Park Boulevard
Santa Monica, California 90405
(310) 255-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
_________________________
Robert A. Kotick
Chairman of the Board and Chief Executive Officer
ACTIVISION, INC.
3100 Ocean Park Boulevard
Santa Monica, California 90405
(310) 255-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
______________________
Copies To:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Kenneth L. Henderson, Esq.
Telephone No.: (212) 541-2000
Facsimile No.: (212) 541-1357
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, 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 Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
To Be to be Price Offering Registration
Registered Registered Per Share(1) Price(1) Fee
- ---------- ---------- ----------- --------- ------------
- --------------------------------------------------------------------------
6 3/4% $60,000,000 100% $60,000,000 $18,182
Convertible
Subordinated
Notes Due
2005..........
Common Stock,
$.000001 par 3,178,808
value......... shares(2) N/A N/A None(2)
==========================================================================
(1) Determined pursuant to Rule 457(i) under the Securities Act of 1933, as
amended (the "Securities Act"), solely for the purpose of calculating
the registration fee.
(2) Represents the underlying shares of Common Stock originally issuable
upon conversion of the Notes, together with such additional
indeterminate number of shares as may become issuable upon conversion of
the Notes by reason of adjustments to the conversion price. Pursuant to
Rule 457(i), no separate registration fee is required for the Common
Stock issuable upon conversion of the Notes because such shares will be
issued for no additional consideration.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- ----------------------------------------------------------------------------
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
PRELIMINARY PROSPECTUS DATED FEBRUARY 17, 1998
ACTIVISION, INC.
$60,000,000
6 3/4% Convertible Subordinated Notes Due 2005
3,178,808 Shares of Common Stock
________________________________
This Prospectus relates to the resale of (i) up to $60,000,000 aggregate
principal amount of 6 3/4% Convertible Subordinated Notes Due 2005 (the
"Notes") of Activision, Inc., a Delaware corporation (the "Company"), and
(ii) up to 3,178,808 shares of Common Stock, $.000001 par value (the "Common
Stock"), of the Company, which are initially issuable upon conversion of the
Notes by any holders thereof (the "Shares" and together with the Notes, the
"Securities"). The Securities may be offered from time to time for the
accounts of holders named herein or in supplements to this Prospectus (the
"Selling Securityholders"). All of the Notes were originally sold by the
Company in an underwritten private placement to certain institutional
investors in December 1997.
The Notes are convertible, in whole or in part, at the option of the
Selling Securityholder at any time prior to the close of business on the
business day immediately preceding January 1, 2005, unless previously
redeemed or repurchased, into shares of Common Stock, at a conversion price
of $18.8750 per share (equivalent to a conversion rate of 52.9801 shares per
$1,000 principal amount of Notes), subject to adjustment in certain
circumstances. The Common Stock is traded on The Nasdaq National Market
("NASDAQ") under the symbol "ATVI." On February 12, 1998, the last sale
price for the Common Stock as reported on NASDAQ was $13.9375 per share.
The Notes are redeemable, in whole or in part, at the option of the
Company at any time on or after January 10, 2001 at the redemption prices set
forth in this Prospectus, plus accrued and unpaid interest to the date of
redemption. No sinking fund is provided for the Notes. If a Change in Control
(as defined herein) of the Company occurs, holders of Notes may elect to
require the Company to repurchase their Notes, in whole or in part, at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest through the date of repurchase. See "Description of Notes - Certain
Rights to Require Repurchase of Notes."
The Notes are general unsecured obligations of the Company, subordinated
in right of payment to the prior payment in full of all Senior Indebtedness
(as defined herein) of the Company and effectively subordinated in right of
payment to the prior payment in full of all indebtedness of the Company's
subsidiaries. The Indenture (as defined herein) does not restrict the
Company's ability to incur Senior Indebtedness or additional indebtedness or
the Company's subsidiaries' ability to incur additional indebtedness. At
December 31, 1997, Senior Indebtedness and indebtedness of the Company's
subsidiaries were approximately $3.0 million. See "Description of Notes -
Subordination."
The Notes currently trade in the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") market of the Nasdaq Stock Market, Inc.
However, Notes registered for resale pursuant to the Registration Statement
(of which this Prospectus is a part) will no longer by eligible for trading
on PORTAL.
The Company intends that the Registration Statement of which this
Prospectus is a part will remain effective for two years from the date of
this Prospectus, or such earlier date as of which such Registration Statement
is no longer required for the transfer of the Securities. The Company has
agreed to bear certain expenses in connection with the registration and sale
of the Securities being offered by the Selling Securityholders.
The Company will not receive any of the proceeds from the sale of the
Notes and the Shares being offered by the Selling Securityholders. The
Securities may be offered in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices. In addition,
the Shares may be offered from time to time through ordinary brokerage
transactions on NASDAQ. See "Plan of Distribution." The Selling
Securityholders and any brokers, dealers or agents that participate with the
Selling Securityholders in the distribution of the Notes or Shares may be
deemed to be "Underwriters" within the meaning of the Securities Act, in
which case any commissions received by such brokers-dealers, agents or
underwriters and any profit on the resale of the Notes or Shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
For a discussion of certain matters which should be considered by
prospective investors, see "Risk Factors" commencing on page 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
RISK FACTORS
Before purchasing any of the Securities offered hereby, prospective
investors should carefully consider the following factors in addition to the
other information in this Prospectus.
Fluctuations in Quarterly Results; Future Operating Results Uncertain;
Seasonality
The Company's quarterly operating results have varied significantly in
the past and will likely vary significantly in the future depending on
numerous factors, several of which are not under the Company's control. Such
factors include, but are not limited to, demand for the Company's products
and those of its competitors, the size and rate of growth of the interactive
entertainment software market, development and promotional expenses relating
to the introduction of new products, changes in computing platforms, product
returns, the timing of orders from major customers, delays in shipment, the
level of price competition, the timing of product introduction by the Company
and its competitors, product life cycles, software defects and other product
quality problems, the level of the Company's international revenues, and
personnel changes. In particular, during the past few fiscal years the
Company's operating results for the quarters ended June 30 have been less
favorable than in other quarters as a result of the release of fewer new
products during the June 30 quarters in accordance with the Company's product
release schedules. Products are generally shipped as orders are received,
and consequently, the Company operates with little or no backlog. Net
revenues in any quarter are, therefore, substantially dependent on orders
booked and shipped in that quarter.
The Company's expenses are based in part on the Company's product
development and marketing budgets. Product development and marketing costs
generally are expensed as incurred, which is often long before a product ever
is released. In addition, a large portion of the Company's expenses are
fixed. As the Company increases its development and marketing activities,
current expenses will increase and, if sales from previously released
products are below expectations, net income is likely to be
disproportionately affected.
Due to all of the foregoing, revenues and operating results for any
future quarter are not predictable with any significant degree of accuracy.
Accordingly, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied
upon as indications of future performance.
The Company's business has experienced and is expected to continue to
experience significant seasonality, in part due to consumer buying patterns.
Net revenues and net income typically are significantly higher during the
fourth calendar quarter, due primarily to the increased demand for consumer
software during the year-end holiday buying season. Net revenues and net
income in other quarters are generally lower and vary significantly as a
result of new product introductions and other factors. The Company expects
its net revenues and operating results to continue to reflect significant
seasonality.
Dependence On New Product Development; Product Delays
The Company's future success depends on the timely introduction of
successful new products to replace declining revenues from older products.
If, for any reason, revenues from new products were to fail to replace
declining revenues from older products, the Company's business, operating
results and financial condition would be materially and adversely affected.
In addition, the Company believes that the competitive factors in the
interactive entertainment software marketplace create the need for higher
quality, distinctive products that incorporate increasingly sophisticated
effects and the need to support product releases with increased marketing,
resulting in higher development, acquisition and marketing costs. The lack
of market acceptance or significant delay in the introduction of, or the
presence of a defect in, one or more products could have a material adverse
effect on the Company's business, operating results and financial condition,
particularly in view of the seasonality of the Company's business. Further,
because a large portion of a product's revenue generally is associated with
initial shipments, the delay of a product introduction expected near the end
of a fiscal quarter may have a material adverse effect on operating results
for that quarter.
The Company has, in the past, experienced significant delays in the
introduction of certain new products. The timing and success of interactive
entertainment products remain unpredictable due to the complexity of product
development, including the uncertainty associated with technological
developments. Although the Company has implemented substantial development
controls, there likely will be delays in developing and introducing new
products in the future. There can be no assurance that new products will be
introduced on schedule, or at all, or that they will achieve market
acceptance or generate significant revenues.
Reliance on Third Party Developers and Independent Contractors
The percentage of products published by the Company that are developed
by independent third party developers has increased over the last several
fiscal years. From time to time, the Company also utilizes independent
contractors for certain aspects of internal product development and
production. The Company has less control over the scheduling and the quality
of work by independent contractors and third party developers than that of
its own employees. A delay in the work performed by independent contractors
and third party developers or poor quality of such work may result in product
delays. Although the Company intends to continue to rely in part on products
that are developed primarily by its own employees, the Company's ability to
grow its business and its future operating results will depend, in
significant part, on the Company's continued ability to maintain
relationships with skilled independent contractors and third party
developers. There can be no assurance that the Company will be able to
maintain such relationships.
Uncertainty of Market Acceptance; Short Product Life Cycles
The market for entertainment systems and software has been characterized
by shifts in consumer preferences and short product life cycles. Consumer
preferences for entertainment software products are difficult to predict and
few entertainment software products achieve sustained market acceptance.
There can be no assurance that new products introduced by the Company will
achieve any significant degree of market acceptance, that such acceptance
will be sustained for any significant period, or that product life cycles
will be sufficient to permit the Company to recoup development, marketing and
other associated costs. In addition, if market acceptance is not achieved,
the Company could be forced to accept substantial product returns to maintain
its relationships with retailers and its access to distribution channels.
Failure of new products to achieve or sustain market acceptance or product
returns in excess of the Company's expectations would have a material adverse
effect on the Company's business, operating results and financial condition.
Product Concentration; Dependence On Hit Products
A key aspect of the Company's strategy is to focus its development and
acquisition efforts on selected, high quality entertainment software
products. The Company derives a significant portion of its revenues from a
select number of high quality entertainment software products released each
year, and many of these products have substantial production or acquisition
costs and marketing budgets. During fiscal 1996 and 1997, one title
accounted for approximately 49% and 23%, respectively, of the Company's
consolidated net revenues. In addition, during fiscal 1997, one other title
accounted for approximately 16% of the Company's consolidated net revenues.
The Company anticipates that a limited number of products will continue to
produce a disproportionate amount of revenues. Due to this dependence on a
limited number of products, the failure of one or more of the Company's
principal new releases to achieve anticipated results may have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company's strategy also includes as a key component developing and
releasing products that have franchise value, such that sequels, enhancements
and add-on products can be released over time, thereby extending the life of
the property in the market. While the focus on franchise properties, if
successful, results in extending product life cycles, it also results in the
Company depending on a limited number of titles for its revenues. There can
be no assurance that the Company's existing franchise titles can continue to
be exploited as successfully as in the past. In addition, new products that
the Company believes will have potential value as franchise properties may
not achieve market acceptance and therefore may not be a basis for future
releases.
Changes in Technology and Industry Standards
The consumer software industry is undergoing rapid changes, including
evolving industry standards, frequent new platform introductions and changes
in consumer requirements and preferences. The introduction of new
technologies, including operating systems such as Microsoft's Windows 95,
technologies that support multi-player games, and new media formats such as
on-line delivery and digital video disks ("DVD"), could render the Company's
previously released products obsolete or unmarketable. The development cycle
for products utilizing new operating systems, microprocessors or formats may
be significantly longer than the Company's current development cycle for
products on existing operating systems, microprocessors and formats and may
require the Company to invest resources in products that may not become
profitable. There can be no assurance that the mix of the Company's future
product offerings will keep pace with technological changes or satisfy
evolving consumer preferences, or that the Company will be successful in
developing and marketing products for any future operating system or format.
Failure to develop and introduce new products and product enhancements in a
timely fashion could result in significant product returns and inventory
obsolescence and could have a material adverse effect on the Company's
business, operating results and financial condition.
Limited Protection of Intellectual Property and Proprietary Rights; Risk of
Litigation
The Company holds copyrights on its products, manuals, advertising and
other materials and maintains trademark rights in the Company name, the
Activision logo, and the names of products owned by the Company. The Company
regards its software as proprietary and relies primarily on a combination of
trademark, copyright and trade secret laws, employee and third-party
nondisclosure agreements and other methods to protect its proprietary rights.
Unauthorized copying is common within the software industry, and if a
significant amount of unauthorized copying of the Company's products were to
occur, the Company's business, operating results and financial condition
could be adversely effected. There can be no assurance that third parties
will not assert infringement claims against the Company in the future with
respect to current or future products. As is common in the industry, from
time to time the Company receives notices from third parties claiming
infringement of intellectual property rights of such parties. The Company
investigates these claims and responds as it deems appropriate. Any claims
or litigation, with or without merit, could be costly and could result in a
diversion of management's attention, which could have a material adverse
effect on the Company's business, operating results and financial condition.
Adverse determinations in such claims or litigation could also have a
material adverse effect on the Company's business, operating results and
financial condition.
Policing unauthorized use of the Company's products is difficult, and
while the Company is unable to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. In selling its products, the Company relies primarily on "shrink
wrap" licenses that are not signed by licensees and, therefore, may be
unenforceable under the laws of certain jurisdictions. Further, the Company
enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. Legal protections of the
Company's rights may be ineffective in such countries.
Risk of Software Defects
Software products such as those offered by the Company frequently
contain errors or defects. Despite extensive product testing, in the past
the Company has released products with defects and has discovered software
errors in certain of its product offerings after their introduction. In
particular, the PC hardware environment is characterized by a wide variety of
non-standard peripherals (such as sound cards and graphics cards) and
configurations that make pre-release testing for programming or compatibility
errors very difficult and time-consuming. There can be no assurance that,
despite testing by the Company, errors will not be found in new products or
releases after commencement of commercial shipments, resulting in a loss of
or delay in market acceptance, which could have a material adverse effect on
the Company's business, operating results and financial condition.
Industry Competition; Competition For Shelf Space
The interactive entertainment software industry is intensely
competitive. Competition in the industry is principally based on product
quality and features, the compatibility of products with popular platforms,
company or product line brand name recognition, access to distribution
channels, marketing effectiveness, reliability and ease of use, price and
technical support. Significant financial resources also have become a
competitive factor in the entertainment software industry, principally due to
the substantial cost of product development and marketing that is required to
support best-selling titles. In addition, competitors with broad product
lines and popular titles typically have greater leverage with distributors
and other customers who may be willing to promote titles with less consumer
appeal in return for access to such competitor's most popular titles.
The Company's competitors range from small companies with limited
resources to large companies with substantially greater financial, technical
and marketing resources than those of the Company. The Company's competitors
currently include Electronic Arts, LucasArts, Microsoft, Sega, Nintendo,
Sony, Cendant, GT Interactive, Broderbund, Midway, Interplay, Virgin and
Eidos, among many others.
As competition increases, significant price competition, increased
production costs and reduced profit margins may result. Prolonged price
competition or reduced demand would have a material adverse effect on the
Company's business, operating results and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current or future competitors or that competitive pressures faced by the
Company will not have a material adverse effect on its business, operating
results and financial condition.
Retailers typically have a limited amount of shelf space, and there is
intense competition among entertainment software producers for adequate
levels of shelf space and promotional support from retailers. As the number
of entertainment software products increases, the competition for shelf space
has intensified, resulting in greater leverage for retailers and distributors
in negotiating terms of sale, including price discounts and product return
policies. The Company's products constitute a relatively small percentage of
a retailer's sale volume, and there can be no assurance that retailers will
continue to purchase the Company's products or promote the Company's products
with adequate levels of shelf space and promotional support.
Dependence on Distributors; Risk of Customer Business Failure; Product
Returns
Certain mass market retailers have established exclusive buying
relationships under which such retailers will buy consumer software only from
one intermediary. In such instances, the price or other terms on which the
Company sells to such retailers may be adversely effected by the terms
imposed by such intermediary, or the Company may be unable to sell to such
retailers on terms which the Company deems acceptable. The loss of, or
significant reduction in sales attributable to, any of the Company's
principal distributors or retailers could materially adversely effect the
Company's business, operating results and financial condition.
Distributors and retailers in the computer industry have from time to
time experienced significant fluctuations in their businesses and there have
been a number of business failures among these entities. The insolvency or
business failure of any significant distributor or retailer of the Company's
products could have a material adverse effect on the Company's business,
operating results and financial condition. Sales are typically made on
credit, with terms that vary depending upon the customer and the nature of
the product. The Company does not hold collateral to secure payment.
Although the Company has obtained insolvency risk insurance to protect
against any bankruptcy filings that may be made by its customers, such
insurance contains a significant deductible as well as a co-payment
obligation, and the policy does not cover all instances of non-payment. In
addition, the Company maintains a reserve for uncollectible receivables that
it believes to be adequate, but the actual reserve which is maintained may
not be sufficient in every circumstance. As a result of the foregoing, a
payment default by a significant customer could have a material adverse
effect on the Company's business, operating results and financial condition.
The Company also is exposed to the risk of product returns from
distributors and retailers. Although the Company provides reserves for
returns that it believes are adequate, and although the Company's agreements
with certain of its customers place certain limits on product returns, the
Company could be forced to accept substantial product returns to maintain its
relationships with retailers and its access to distribution channels.
Product returns that exceed the Company's reserves could have a material
adverse effect on the Company's business, operating results and financial
condition.
Dependence on Key Personnel
The Company's success depends to a significant extent on the performance
and continued service of its senior management and certain key employees.
Competition for highly skilled employees with technical, management,
marketing, sales, product development and other specialized training is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. Specifically, the Company may
experience increased costs in order to attract and retain skilled employees.
Although the Company generally enters into term employment agreements with
its skilled employees and other key personnel, there can be no assurance that
such employees will not leave the Company or compete against the Company.
The Company's failure to attract or retain qualified employees could have a
material adverse effect on the Company's business, operating results and
financial condition.
Risks Associated With International Operations; Currency Fluctuations
International sales and licensing accounted for 28%, 23% and 26% of the
Company's total revenues in the fiscal years 1995, 1996 and 1997,
respectively. The Company intends to continue to expand its direct and
indirect sales, marketing and localization activities worldwide. Such
expansion will require significant management time and attention and
financial resources in order to develop adequate international sales and
support channels. There can be no assurance, however, that the Company will
be able to maintain or increase international market demand for its products.
International sales are subject to inherent risks, including the impact of
possible recessionary environments in economies outside the United States,
the costs of transferring and localizing products for foreign markets, longer
receivable collection periods and greater difficulty in accounts receivable
collection, unexpected changes in regulatory requirements, difficulties and
costs of staffing and managing foreign operations, and political and economic
instability. There can be no assurance that the Company will be able to
sustain or increase international revenues or that the foregoing factors will
not have a material adverse effect on the Company's future international
revenues and, consequently, on the Company's business, operating results and
financial condition. The Company currently does not engage in currency
hedging activities. Although exposure to currency fluctuations to date has
been insignificant, there can be no assurance that fluctuations in currency
exchange rates in the future will not have a material adverse impact on
revenues from international sales and licensing and thus the Company's
business, operating results and financial condition.
Risks Associated with Acquisitions
In November, 1997, the Company completed two significant acquisitions:
Combined Distribution (Holdings) Limited ("CDH"), a United Kingdom based
software distributor, and NBG EDV Handels & Verlags GmbH ("NBG") and Target
Software Vertriebs GmbH ("Target"), two affiliated German based software
distribution companies. CDH, through its subsidiaries, CentreSoft Limited
("CentreSoft") and PDQ Limited, distributes products throughout the United
Kingdom and, to a lesser extent, continental Europe. NBG and Target
distribute software products throughout Germany, Switzerland and Austria.
The Company intends to integrate the operations of these recently acquired
subsidiaries with its previously existing European operations. This process,
as well as the process of managing two significant new operations, will
require substantial management time and effort and could divert the attention
of management from other matters. In addition, there is a risk of loss of
key employees, customers and vendors of the newly acquired operations as well
as existing operations as this process is implemented. There is no assurance
that the Company will be successful in integrating these operations or that,
if the operations are combined, there will not be adverse effects on its
business.
Consistent with its strategy to enhance distribution and product
development capabilities, the Company intends to continue to pursue
acquisitions of companies and intellectual property rights and other assets
that can be acquired on acceptable terms and which the Company believes can
be operated or exploited profitably. Some of these acquisitions could be
material in size and scope. While the Company will continually be searching
for appropriate acquisition opportunities, there can be no assurance that the
Company will be successful in identifying suitable acquisitions. If any
potential acquisition opportunities are identified, there can be no assurance
that the Company will consummate such acquisitions or if any such acquisition
does occur, that it will be successful in enhancing the Company's business or
be accretive to the Company's earnings. As the entertainment software
business continues to consolidate, the Company faces significant competition
in seeking acquisitions and may in the future face increased competition for
acquisition opportunities, which may inhibit its ability to complete suitable
transactions. Future acquisitions could also divert substantial management
time, could result in short term reductions in earnings or special
transaction or other charges and may be difficult to integrate with existing
operations or assets.
The Company may, in the future, issue additional shares of Common Stock
in connection with one or more acquisitions, which may dilute its
shareholders, including investors in the offering. Additionally, with
respect to most of its future acquisitions, the Company's shareholders may
not have an opportunity to review the financial statements of the entity
being acquired or to vote on such acquisitions.
Risk of CentreSoft Vendor Defections; Vendor Concentration
The Company's recently acquired CentreSoft subsidiary performs software
distribution services in the United Kingdom and, via export, in other
European territories for a variety of entertainment software publishers, many
of which are competitors of the Company. These services are generally
performed under limited term contracts some of which provide for cancellation
in the event of a change of control. While the Company expects to use
reasonable efforts to retain these vendors, there can be no assurance that
the Company will be successful in this regard. The cancellation or non-
renewal of one or more of these contracts could have a material adverse
effect on the Company's business, operating results and financial condition.
Three of CentreSoft's vendors accounted for 37%, 14% and 10%, respectively,
of CentreSoft's net revenues in fiscal year 1997.
Subordination; Absence of Financial Covenants
The Notes are unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of
such subordination, in the event of bankruptcy, liquidation or reorganization
of the Company or upon acceleration of the Notes due to an Event of Default
under the Indenture and in certain other events, the assets of the Company
will be available to pay obligations on the Notes only after all Senior
Indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on the Notes then outstanding. The Indenture
does not contain financial covenants and does not prohibit or limit the
incurrence of Senior Indebtedness or the incurrence of other indebtedness and
other liabilities by the Company, and the incurrence of additional
indebtedness and other liabilities by the Company could adversely affect the
Company's ability to pay its obligations on the Notes. At December 31, 1997,
Senior Indebtedness and indebtedness of the Company's subsidiaries were
approximately $3.0 million. The Company anticipates that from time to time it
will incur additional indebtedness, including Senior Indebtedness. See
"Description of Notes - Subordination."
Absence of Public Market for the Notes
The Notes are a new issue of securities for which there is currently no
trading market. Although the Notes are eligible for trading in the PORTAL
market (except for Notes registered for resale pursuant to the Registration
Statement of which this Prospectus forms a part), the Company does not intend
to apply for listing of the Notes on a national securities exchange or
quotation of the Notes on NASDAQ. The initial purchasers of the Notes have
advised the Company that they currently intend to make a market in the Notes,
although they are not obligated to do so and may discontinue such market
making at any time without notice. In addition, such market making activity
will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, there can be no assurance that any market for the Notes will
develop or, if one does develop, that it will be maintained. If an active
market for the Notes fails to develop or be sustained, the trading price of
such Notes could be materially adversely affected.
Volatility of Price of Stock and Notes
There has been a history of significant volatility in the market prices
of companies engaged in the interactive entertainment software industry,
including the Company. It is likely that the market price of the shares of
the Company's Common Stock will continue to be highly volatile and the price
of the Company's Notes will also be subject to such fluctuations. Factors
such as the timing and market acceptance of new product introductions by the
Company, the introduction of new products by the Company's competitors, loss
of key personnel of the Company, variations in quarterly operating results or
changes in market conditions in the interactive entertainment software
industry generally may have a significant impact on the market price of the
Company's Common Stock and Notes. It is possible that in some future quarter
the Company's revenue or operating results will be below the expectations of,
and certain new products will not be introduced when anticipated by, public
market analysts and investors. In such event, the price of the Company's
Common Stock would likely be materially adversely affected. Volatility in
the price of the Company's Common Stock, changes in prevailing interests
rates and changes in perceptions of the Company's creditworthiness may in the
future adversely affect the price of the Notes offered hereby.
Limitations on Repurchase of Notes
Upon the occurrence of a Change in Control (as defined herein), each
holder of Notes will have certain rights, at the holder's option, to require
the Company to repurchase all or a portion of such holder's Notes. If a
Change in Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the repurchase price for all Notes
tendered by the holders thereof. The Company's repurchase of Notes as a
result of the occurrence of a Change in Control may be prohibited or limited
by, or create an event of default under, the terms or other agreements
relating to borrowings which constitute Senior Indebtedness as may be entered
into, amended, supplemented or replaced from time to time. Failure of the
Company to repurchase Notes at the option of the holder upon a Change in
Control would result in an Event of Default with respect to the Notes. No
Notes may be redeemed at the option of holders upon a Change in Control if
there has occurred and is continuing an Event of Default (other than a
default in the payment of the repurchase price with respect to such Notes on
the repurchase date). See "Description of Notes - Certain Rights to Require
Repurchase of Notes."
Shares Eligible for Future Sale.
Sales of substantial amounts of Common Stock in the public market could
have an adverse effect on the price of the Company's Common Stock and the
Notes. Of the approximately 18,894,500 shares of Common Stock outstanding as
of February 12, 1998, and the approximately 2,740,000 shares issuable upon
exercise of warrants and options that will have vested within sixty days
after February 12, 1998, approximately 21,634,500 are freely tradeable in the
public market, are registered for resale under currently effective
registration statements or are immediately eligible for sale in the public
market subject to compliance with Rule 144 or Rule 145. Sales of substantial
blocks of the Company's Common Stock by holders whose shares are currently
registered for resale could have an adverse effect on the market price of the
Common Stock.
THE COMPANY
Activision is a leading international publisher, developer and
distributor of interactive entertainment software. The Company's products
span a wide range of product genres, including action, adventure, strategy
and simulation, and have included best selling titles such as MechWarrior 2,
Hexen II, Nightmare Creatures, Heavy Gear, Dark Reign, Zork: Nemesis, Blood
Omen, Pitfall and Shanghai. Since its founding in 1979, the Company has
published hundreds of entertainment software products for a variety of
personal computer and console platforms.
Publish high quality titles. The Company seeks to differentiate its
titles through the highest quality production values and superior gaming
play, supported by comprehensive trade and consumer marketing programs
coordinated with product releases. Accordingly, the Company must support the
development, production, acquisition and marketing of its titles with the
resources necessary to create best selling products. In order to reduce the
financial risks associated with the higher development and marketing budgets
required to support this strategy, the Company pursues a balance between
internally and externally developed titles; between products based on proven
technology and newer technology; and between PC and console products.
Focus on franchise properties. The Company focuses its publishing and
developing activities principally on titles that are, or have the potential
to become, franchise properties with sustainable consumer appeal and brand
recognition. These titles can thereby serve as the basis for sequels,
prequesl, mission packs and other add-ons and related new titles that can be
released over an extended period of time. The Company believes that the
publishing and distribution of products based in large part on franchise
properties will enhance revenue predictability. The Company currently is
publishing products based on several franchise properties, including Quake,
Hexen, Zork, Pitfall and Shanghai. The Company also has rights to several
other properties that it believes will have franchise value, including Heavy
Gear, Dark Reign, Battlezone, Heretic and Nightmare Creatures.
Expand direct distribution capabilities. In North America, the
Company's products are sold primarily on a direct basis to major computer and
software retailing organizations, consumer electronic stores and discount
warehouses. In international territories, the Company's products are sold
both direct to retail and through third party distribution and licensing
arrangements. In order to maximize the revenues to be generated by each of
its products, the Company is expanding its worldwide direct distribution
capabilities. The Company believes that a dedicated internal sales force and
direct distribution to retailers provide significant competitive advantages,
including the ability to compete more effectively for shelf space, to create
additional point-of-sale promotional opportunities, to more properly manage
inventory levels, and to increase margins by eliminating third party
distributors. Consistent with this strategy, the Company has concluded
several acquisitions in recent months including the acquisitions of CDH, NBG
and Target, in an effort to bolster its direct distribution capabilities in
international markets.
Continue to grow OEM revenues. The Company also generates significant
revenue throughout the world as a result of arrangements with OEMs, in which
the Company's titles are sold together with hardware or peripheral devices
manufactured by the OEM. The Company believes that OEM bundle arrangements
expand the distribution of its titles to a broader and more diverse audience,
and it intends to continue aggressively pursuing these arrangements.
Enhance Product Flow. In order to expand the Company's library of
titles, intellectual property rights and talent base, the Company is actively
engaged in the exploration of acquisition opportunities in the software
development business. Consistent with this strategy, in August 1997 the
Company acquired Raven Software Corporation ("Raven"), an entertainment
software developer based in Madison, Wisconsin that has created numerous best
selling titles, including Heretic, Hexen: Beyond Heretic and Hexen II. In
addition, in order to create a closer relationship with independent
developers, the Company from time to time makes investments and acquires
minority equity interests in independent developers at the same time as it
acquires publishing rights to the developer's products.
The Company's principal executive offices are located at 3100 Ocean Park
Blvd., Santa Monica, California 90405, and its telephone number is (310) 255-
2000. The Company also maintains offices in London, Tokyo, Sydney, Germany
and Madison, Wisconsin. The Company's World Wide Web home page is located at
http://www.activision.com.
USE OF PROCEEDS
The Notes and shares of Common Stock offered by the Selling
Securityholders are not being sold by the Company, and the Company will not
receive any of the proceeds from the sale thereof.
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company in a private placement
and were resold by the initial purchasers thereof to qualified institutional
buyers (within the meaning of Rule 144A under the Securities Act) or other
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) in transactions exempt from registration under
the Securities Act, and in sales outside the United States to persons other
than U.S. persons in reliance upon Regulation S under the Securities Act.
The Notes and the Common Stock issuable upon conversion thereof that may be
offered pursuant to this Prospectus will be offered by the Selling
Securityholders.
Prior to any use of this Prospectus in connection with an offering of
the Notes and the Common Stock issuable upon the conversion thereof, this
Prospectus will be supplemented to set forth the names of each Selling
Securityholder, the principal amount of Notes and number of Shares that may
be offered and sold by such Selling Securityholder pursuant to this
Prospectus and (if one percent or more) the percentage of Notes outstanding,
and (if one percent or more) the percentage of Common Stock represented by
the Shares owned by each Selling Securityholder after conversion of the
Notes. The Prospectus Supplement will also disclose whether any Selling
Securityholder selling in connection with such Prospectus Supplement has,
other than their ownership of the Company's securities, had any material
relationship with the Company within the three years prior to the date of the
Prospectus Supplement, other than Credit Suisse First Boston Corporation,
Piper Jaffray, Inc. and UBS Securities LLC, which have acted an initial
purchasers and/or underwriters for the Company.
DESCRIPTION OF NOTES
The Notes have been issued under an Indenture dated as of December 22,
1997 (the "Indenture"), between the Company and State Street Bank & Trust
Company of California, N.A. as Trustee (the "Trustee"). The following summary
of certain provisions of the Indenture does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Indenture, copies of which will be available for inspection at the
Corporate Trust Office of the Trustee in Los Angeles, California. Capitalized
terms used in this section, unless otherwise defined in this Prospectus, are
defined in the Indenture, and such definitions are incorporated in their
entirety herein by reference.
General
The Notes are unsecured, subordinated general obligations of the
Company, will mature on January 1, 2005 and are limited to an aggregate
principal amount of $60,000,000. The Notes bear interest at the rate of
6 3/4% per annum from December 22, 1997, or from the most recent Interest
Payment Date on which interest has been paid or provided for, payable
semiannually on January 1 and July 1 of each year, commencing July 1, 1998,
to the Person in whose name the Note (or any predecessor Note) is registered
at the close of business on the preceding December 15 or June 15 (whether or
not a Business Day (as defined herein)), as the case may be. Interest on the
Notes will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Form, Denomination and Registration
The Notes were issued in the form of a single Global Note. The Global
Note was deposited with the Depositary and registered in the name of the
Depositary or its nominee. Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to the Depositary or another
nominee of the Depositary. Investors may hold their beneficial interests in
the Global Note directly through the Depositary if they have an account with
the Depositary or indirectly through organizations which have accounts with
the Depositary.
Notes that are (i) originally issued to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not Qualified Institutional Buyers (within the
meaning of Rule 144A) (the "Regulation D Notes") or (ii) issued as described
under "- Certificated Notes" will be issued in definitive form. Upon the
transfer of a Note in definitive form, such Note will, unless the Global Note
has previously been exchanged for Notes in definitive form, be exchanged for
an interest in the Global Note representing the principal amount of the Note
being transferred.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company and organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and "a clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary was created to hold securities for institutions that have
accounts with the Depositary ("participants") and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
the Depositary's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the
Notes represented by such Global Note to the accounts of participants. The
accounts to be credited shall be designated by the Initial Purchasers of such
Notes. Ownership of beneficial interests in the Global Note will be limited
to participants or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and
the transfer of those ownership interests will be effected only through,
records maintained by the Depositary (with respect to participants'
interests) and such participants (with respect to the owners of beneficial
interests in the Global Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may
impair the ability to transfer or pledge beneficial interests in the Global
Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for
all purposes of such Notes and the Indenture. Except as set forth below,
owners of beneficial interests in the Global Note will not be entitled to
have the Notes represented by the Global Note registered in their names, will
not receive or be entitled to receive physical delivery of certificated Notes
in definitive form and will not be considered to be owners or holders of any
Notes under the Global Note. The Company understands that under existing
industry practice, in the event an owner of a beneficial interest in the
Global Note desires to take any action that the Depositary, as the holder of
the Global Note, is entitled to take, the Depositary would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Payment of principal of and premium, if any, and interest on Notes
represented by the Global Note registered in the name of and held by the
Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and holder of the Global Note.
The Company expects that the Depositary or its nominee, upon receipt of
any payment of principal or of premium, if any, or interest on the Global
Note, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of the Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will
be governed by standing instructions and customary practices and will be the
responsibility of such participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global
Note for any Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of
the relationship between the Depositary and its participants or the
relationship between such participants and the owners of beneficial interests
in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated
Notes in definitive form, the Global Note may not be transferred except as a
whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or to another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order
to facilitate transfers of interests in the Global Note among participants of
the Depositary, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance
by the Depositary or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Transfers of beneficial interests in the Global Note may be made only in
accordance with the restrictions set forth under "Transfer Restrictions." The
Notes are not issuable in bearer form.
The Notes were issued only in fully registered form, without exception,
in denominations of $1,000 and integral multiples thereof. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Certificated Notes
If any depository is at any time unwilling or unable to continue as a
depository for the reasons set forth under "Form, Denomination and
Registration," the Company will issue certificates for the Notes in
definitive, fully registered form, without interest coupons, in exchange for
the Global Note. In addition, upon request, the Company will issue
certificates for Notes in definitive, fully registered form, without interest
coupons, in exchange for beneficial interests of like principal amount in the
Global Note, but only upon at least 60 days' prior written notice given to
the Trustee in accordance with DTC's customary procedures. Upon receipt of
such notice from the Trustee, the Company will cause the requested
certificates to be prepared for delivery. In all cases, certificates for
Notes delivered in exchange for the Global Note or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by DTC.
Certificated Notes will bear a legend imposing restrictions on transfer,
as set forth in the Indenture, (unless the Company determines otherwise in
accordance with applicable law), subject, with respect to such Notes, to the
provisions of such legend. The Holder of a registered individual Note may
transfer such Note by surrendering it at the office or agency maintained by
the Company for such purpose in New York, New York or Los Angeles,
California. Upon the transfer, exchange or replacement of Notes bearing the
legend, or upon specific request for removal of the legend on a Note, the
Company will deliver only Notes that bear such legend, or will refuse to
remove such legend, as the case may be, unless there is delivered to the
Company such satisfactory evidence, which may include an opinion of counsel,
as may reasonably be required by the Company that neither the legend nor the
restrictions on transfer set forth therein are required to ensure compliance
with the provisions of the Securities Act. Before any Note in certificated
form may be transferred to a Person who takes delivery in the form of an
interest in the Global Note, the transferor will first be required to provide
the Trustee with a written certificate, as specified in the Indenture, to the
effect that such transfer will comply with the appropriate transfer
restrictions applicable to such Notes.
Notwithstanding any statement herein, the Company and the Trustee
reserve the right to impose such transfer, certification, exchange or other
requirements, and to require such restrictive legends on certificates
evidencing Notes, as they may determine are necessary to ensure compliance
with the securities laws of the United States and the states therein and any
other applicable laws.
Payments and Paying Agents
Payments of principal of and interest on the Notes will be made at the
office of the Trustee in Los Angeles, California or the office of its
affiliate in New York, New York or, at the option of the Holder and subject
to any fiscal or other laws and regulations applicable thereto, at the
corporate trust office of the Trustee or any Paying Agent outside New York,
New York and Los Angeles, California. Payment in respect of principal on
Notes will be made only against surrender of such Notes and will be made by
U.S. dollar check drawn on a bank in New York City or Los Angeles, California
or, for Holders of at least $2,000,000 of Notes, by wire transfer to an
account maintained by the payee with a bank in the United States or Europe,
provided that a written request from such Holder to such effect is received
by the Trustee or any Paying Agent no later than 15 days prior to the
relevant payment date. Payment in respect of interest on each Interest
Payment Date with respect to any such Note will be made to the Person in
whose name such Note is registered on the relevant Record Date by U.S. dollar
check drawn on a bank in New York, New York or Los Angeles, California or,
for Holders of at least $2,000,000 of Notes, by wire transfer to an account
maintained by the payee with a bank in the United States, provided that a
written request from such Holder to such effect is received by the Trustee or
any Paying Agent no later than the relevant Record Date. Unless revoked, any
such designation made by such Person with respect to such Note will remain in
effect with respect to any future payments payable to such Person. The
Company will pay any administrative costs imposed by banks in connection with
payments by wire transfer.
If the due date for payment of principal or interest on any Note is not
a Business Day at the place in which it is presented for payment, the Holder
thereof shall not be entitled to payment of the amount due until the next
succeeding Business Day at such place and shall not be entitled to any
further interest or other payment in respect of any such delay. As used in
the Indenture regarding payment, "Business Day" means a day on which banks
are open for business and carrying out transactions in U.S. dollars in the
relevant place of payment.
Subject to certain limitations set forth in the Indenture, the Company
reserves the right at any time to vary or terminate the appointment of the
Trustee or any Paying Agent with or without cause and to appoint another
Trustee or additional or other Paying Agents and to approve any change in the
specified offices through which any Paying Agent acts.
Conversion Rights
The Notes are convertible, in whole or in part, into shares of Common
Stock at the option of the Holder at any time following the date of original
issuance thereof and prior to the close of business on the Business Day
immediately preceding the maturity date, unless previously redeemed,
initially at the conversion price of $18.8750 per share. The right to convert
Notes called for redemption will terminate at the close of business on the
Business Day immediately preceding the Redemption Date unless the Company
defaults in making the payment due on the Redemption Date. See "Optional
Redemption."
The conversion price will be subject to adjustment upon the occurrence
of certain events, including (i) the payment of dividends (and other
distributions) of Common Stock on any class of capital stock of the Company;
(ii) the issuance to all holders of Common Stock of rights, warrants or
options entitling them to subscribe for or purchase Common Stock at less than
the current market price (as defined) thereof; (iii) subdivisions and
combinations of Common Stock; (iv) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock,
securities, cash or property (excluding any rights, warrants or options
referred to in clause (ii) above and any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in clause
(i) above); (v) distributions consisting exclusively of cash to all holders
of Common Stock in an aggregate amount that, together with (a) other all-cash
distributions made within the preceding 12 months and (b) any cash and the
fair market value, as of the expiration of the tender or exchange offer
referred to below, of consideration payable in respect of any tender or
exchange offer by the Company or a Subsidiary for the Common Stock concluded
within the preceding 12 months, exceeds 12.5% of the Company's aggregate
market capitalization (such aggregate market capitalization being the product
of the current market price of the Common Stock multiplied by the number of
shares of Common Stock then outstanding) on the date of such distribution;
and (vi) the successful completion of a tender or exchange offer made by the
Company or any Subsidiary for the Common Stock which involves an aggregate
consideration that, together with (a) any cash and the fair market value of
other consideration payable in respect of any tender or exchange offer by the
Company or a Subsidiary for Common Stock concluded within the preceding 12
months and (b) the aggregate amount of any all-cash distributions to all
holders of Common Stock made within the preceding 12 months, exceeds 12.5% of
the Company's aggregate market capitalization on the expiration of such
tender or exchange offer. No adjustment of the conversion price will be
required to be made until cumulative adjustments amount to 1% or more of the
conversion price as last adjusted.
If the Company, by means of dividend or otherwise, declares or makes a
distribution in respect of the Common Stock referred to in clause (iv) or (v)
above, the Holder of each Note, upon the conversion thereof subsequent to the
close of business on the date fixed for the determination of shareholders
entitled to receive such distribution and prior to the effectiveness of the
conversion price adjustment in respect of such distribution pursuant to
clause (iv) or (v) above, will be entitled to receive for each share of
Common Stock into which such Note is converted that portion of the evidences
of indebtedness, shares of capital stock, cash and other property so
distributed applicable to one share of Common Stock; provided, however, that
the Company may, with respect to all Holders so converting, in lieu of
distributing any portion of such distribution not consisting of cash or
securities of the Company, pay such Holder cash equal to the fair market
value thereof.
In the event that the Company distributes rights or warrants (other than
those referred to in clause (ii) of the preceding paragraph) pro rata to
holders of Common Stock, so long as any such rights or warrants have not
expired or been redeemed by the Company, the Holder of any Note surrendered
for conversion will be entitled to receive upon such conversion, in addition
to the shares of Common Stock issuable upon such conversion (the "Conversion
Shares"), a number of rights or warrants to be determined as follows: (i) if
such conversion occurs on or prior to the date for the distribution to the
holders of rights or warrants of separate certificates evidencing such rights
or warrants (the "Distribution Date"), the same number of rights or warrants
to which a holder of a number of shares of Common Stock equal to the number
of Conversion Shares is entitled to at the time of such conversion in
accordance with the terms and provisions of and applicable to the rights or
warrants, and (ii) if such conversion occurs after such Distribution Date,
the same number of rights or warrants to which a holder of the number of
shares of Common Stock into which such Note was convertible immediately prior
to such Distribution Date would have been entitled on such Distribution Date
in accordance with the terms and provisions of and applicable to the rights
or warrants. The conversion price of the Notes will not be subject to
adjustment on account of any declaration, distribution or exercise of such
rights or warrants.
In the case of certain reclassifications, consolidations, mergers, sales
or transfers of assets or other transactions pursuant to which the Common
Stock is converted into the right to receive other securities, cash or other
property, each Note then outstanding would, without the consent of any
Holders, become convertible only into the kind and amount of securities, cash
and other property receivable upon the transaction by a holder of the number
of shares of Common Stock which would have been received by such Holder
immediately prior to such transaction if such Holder had converted its Note.
Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon
market price.
Except as described in this paragraph, no Holder will be entitled, upon
conversion of a Note, to any actual payment or adjustment on account of
accrued and unpaid interest (although such accrued and unpaid interest will
be deemed paid by the appropriate portion of the Common Stock received by the
Holders upon such conversion) or on account of dividends on shares of Common
Stock issued in connection therewith. Notes surrendered for conversion during
the period from the close of business on any Regular Record Date to the
opening of business on the corresponding Interest Payment Date (except Notes
called for redemption on a Redemption Date within such period between and
including such Regular Record Date and such Interest Payment Date) must be
accompanied by payment to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount converted.
If at any time the Company makes a distribution of property to its
shareholders that would be taxable to such shareholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends or rights to
subscribe for capital stock) and, pursuant to the conversion price adjustment
provisions of the Indenture, the conversion price of the Notes is reduced,
such reduction may be deemed to be the receipt of taxable income to Holders
of Notes.
In addition, the Company may make such reductions in the conversion
price as the Company's Board of Directors deems advisable to avoid or
diminish any income tax to holders of shares of Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes or for any other reasons.
Optional Redemption
The Notes may be redeemed at the Company's option, in whole or in part,
on at least 20 but not more than 60 days' notice by mail to the registered
Holders thereof, at any time on or after January 10, 2001, through
December 31, 2001 at 103.3750% of the principal amount and thereafter at the
following Redemption Prices (expressed as percentages of principal amount),
if redeemed during the 12-month period beginning on January 1 of the years
set forth below:
Year Percentage
____ __________
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102.2500%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101.1250%
and thereafter at 100% of the principal amount thereof, in each case together
with accrued and unpaid interest to (but not including) the Redemption Date
(subject to the rights of Holders of record on any Regular Record Date to
receive interest due on any Interest Payment Date that is on or prior to such
Redemption Date). If less than all the Notes are to be redeemed, the Trustee
will select or cause to be selected the particular Notes to be redeemed by
such method as it deems fair and appropriate and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of any Note of a denomination
larger than $1,000.
No sinking fund is provided for the Notes.
Certain Rights to Require Repurchase of Notes
The Indenture provides that if a Change in Control (as defined below)
occurs, each Holder will have the right, at its option, to require the
Company to repurchase all or any part of such Holder's Notes on the date (the
"Repurchase Date") fixed by the Company that is not less than 30 days nor
more than 45 days after the date the Company gives notice of the Change in
Control, at a price (the "Repurchase Price") equal to 100% of the principal
amount thereof, together with accrued and unpaid interest through the
Repurchase Date. On or prior to the Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent an amount of money sufficient
to pay the aggregate Repurchase Price of the Notes which is to be paid on the
Repurchase Date.
The Company may not repurchase any Note pursuant to the preceding
paragraph at any time when the subordination provisions of the Indenture
otherwise would prohibit the Company from making payments of principal in
respect of the Notes. Failure by the Company to repurchase the Notes when
required under the preceding paragraph will constitute an Event of Default
under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture.
On or before the 15th day after the Company knows or reasonably should
know a Change in Control has occurred, the Company will be required to mail
to all Holders a notice (the "Company Notice") of the occurrence of such
Change in Control, the Repurchase Date, the date by which the repurchase
right must be exercised, the Repurchase Price for the Notes and the
procedures which the Holder must follow to exercise such right. To exercise
the repurchase right, the Holder will be required to deliver, on or before
the Repurchase Date, written notice to the Company (or an agent designated by
the Company for such purpose) of the Holder's exercise of such right,
together with the certificates evidencing the Note or Notes with respect to
which the right is being exercised, duly endorsed for transfer.
The term "Beneficial Owner" shall be determined in accordance with
Rules 13d-3 and 13d-5 promulgated by the Securities and Exchange Commission
(the "Commission") under the Exchange Act or any successor provision thereto,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
A "Change in Control" shall be deemed to have occurred at such time as
(i) any Person, or any Persons acting together in a manner which would
constitute a "group" (a "Group") for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto, together with any
Affiliates thereof, (a) become the Beneficial Owners, directly or indirectly,
of capital stock of the Company, entitling such Person or Persons and its or
their Affiliates to exercise more than 50% of the total voting power of all
classes of the Company's capital stock entitled to vote generally in the
election of the Company's directors or (b) shall succeed in having sufficient
of its or their nominees (who are not supported by a majority of the then
current Board of Directors of the Company) elected to the Board of Directors
of the Company such that such nominees, when added to any existing directors
remaining on the Board of Directors of the Company after such election who
are Affiliates of or acting in concert with such Persons, shall constitute a
majority of the Board of Directors of the Company, (ii) the Company shall be
a party to any transaction pursuant to which the Common Stock is converted
into the right to receive other securities (other than common stock), cash
and/or property (or the Company, by dividend, tender or exchange offer or
otherwise, distributes other securities, cash and/or property to holders of
Common Stock) and the value of all such securities, cash and/or property
distributed in such transaction and any other transaction effected within the
12 months preceding consummation of such transaction (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a board resolution) is more than 50% of the average of the daily
Closing Prices for the five consecutive Trading Days ending on the Trading
Day immediately preceding the date of such transaction (or, if earlier, the
Trading Day immediately preceding the "ex" date (as defined in the Indenture)
for such transaction), or (iii) the Company shall consolidate with or merge
into any other Person or sell, convey, transfer or lease its properties and
assets substantially as an entirety to any Person other than a Subsidiary, or
any other Person shall consolidate with or merge into the Company (other
than, in the case of this clause (iii), pursuant to any consolidation or
merger where Persons who are shareholders of the Company immediately prior
thereto become the Beneficial Owners of shares of capital stock of the
surviving company entitling such Persons to exercise more than 50% of the
total voting power of all classes of such surviving company's capital stock
entitled to vote generally in the election of directors); provided that a
Change in Control shall not be deemed to have occurred if either (a) at least
90% of the consideration (excluding cash payments for fractional shares) in
the transaction or transactions constituting the Change in Control consists
of common stock or securities convertible into common stock that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over-the-counter trading
market in the United States; or (b) the last sale price of the Common Stock
for any five trading days during the ten trading days immediately preceding
the Change of Control is at least equal to 110% of the conversion price in
effect on such day.
The effect of these provisions granting the Holders the right to require
the Company to repurchase the Notes upon the occurrence of a Change in
Control may make it more difficult for any Person or Group to acquire control
of the Company or to effect a business combination with the Company.
Moreover, under the Indenture, the Company will not be permitted to pay
principal of or interest on the Notes, or otherwise acquire the Notes
(including any repurchase at the election of the Holders upon the occurrence
of a Change in Control) if a payment default on Senior Indebtedness has
occurred and is continuing, or in the event of the insolvency, bankruptcy,
reorganization, dissolution or other winding up of the Company where Senior
Indebtedness is not paid in full. The Company's ability to pay cash to
Holders following the occurrence of a Change in Control may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
In the event a Change in Control occurs and the Holders exercise their
rights to require the Company to repurchase Notes, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 (other than Commission filing requirements, if not then
applicable) and 14e-1, as then in effect, with respect to any such purchase.
Registration Rights
The Company has agreed pursuant to a registration rights agreement (the
"Registration Rights Agreement"), to file with the Commission a registration
statement (the "Shelf Registration Statement"), of which this Prospectus is a
part, to cover resales by Holders of the Notes and the Common Stock issuable
upon conversion thereof within 60 days after the first date of original
issuance of the Notes. Additionally, the Company will use its reasonable
best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act no later than 120 days after the first
date of original issuance of the Notes, and keep the Shelf Registration
Statement effective after its effective date for as long as shall be required
until the Notes and the Common Stock may be transferred freely pursuant to
Rule 144(k) under the Securities Act or any successor rule or regulation
thereto.
The Company will, among other things, provide to each Holder for whom
such Shelf Registration Statement was filed copies of the prospectus which is
a part of the Shelf Registration Statement, notify each such Holder when the
Shelf Registration Statement has become effective, and take certain other
actions as are required to permit unrestricted resales of the Notes and the
Common Stock issuable upon conversion of the Notes by such Holders to third
parties, other than through underwritten offerings. A Holder selling such
securities pursuant to the Shelf Registration Statement generally will be
(a) required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, (b) subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales, and (c) bound by the provisions of the Registration Rights
Agreement that are applicable to such Holder (including certain
indemnification obligations). If the Prospectus is unavailable for periods in
excess of those permitted under the Registration Rights Agreement, additional
interest will accrue on the Notes over and above the rate set forth in the
title of the Notes, from and including the date on which any Registration
Default shall occur but excluding the date on which all Registration Defaults
have been cured, at a rate of 0.50% per annum.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
Consolidation, Merger and Sale of Assets
The Indenture provides that the Company, without the consent of the
Holders, may consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to
any Person or may permit any Person to consolidate with or merge into, or
transfer or lease its properties substantially as an entirety to, the
Company, provided that (i) the successor, transferee or lessee is organized
under the laws of any United States jurisdiction; (ii) the successor,
transferee or lessee, if other than the Company, expressly assumes the
Company's obligations under the Indenture and the Notes by means of a
supplemental indenture entered into with the Trustee; (iii) after giving
effect to the transaction, no Event of Default and no event which, with
notice or lapse of time, or both, would constitute an Event of Default shall
have occurred and be continuing; and (iv) certain other conditions are met.
Under any consolidation by the Company with, or merger by the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety as described in the
preceding paragraph, the successor resulting from such consolidation or into
which the Company is merged or the transferee or lessee to which such
conveyance, transfer or lease is made will succeed to, and be substituted
for, and may exercise every right and power of, the Company under the
Indenture, and thereafter, except in the case of a lease, the predecessor (if
still in existence) will be released from its obligations and covenants under
the Indenture and the Notes.
Events of Default
An Event of Default is defined in the Indenture to be a (i) default in
the payment of any interest upon any of the Notes for 30 days or more after
such payment is due, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (ii) default in the payment of the
principal of and premium, if any, on any of the Notes when due, whether or
not such payment is prohibited by the subordination provisions of the
Indenture; (iii) default in the Company's obligation to provide notice of a
Change of Control or default in the payment of the repurchase price in
respect of any Note on the repurchase date therefor (whether or not such
payment is prohibited by the subordination provisions of the Indenture);
(iv) default by the Company in the performance or breach of any of its other
covenants in the Indenture which will not have been remedied by the end of a
60-day period after written notice to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount of
the Outstanding Notes; (v) failure to pay when due upon final maturity or
acceleration thereof any indebtedness for money borrowed by the Company or a
Subsidiary in an outstanding principal amount in excess of $5,000,000, if
such indebtedness is not discharged, or such acceleration is not waived or
annulled, within ten days after written notice as provided in the Indenture;
and (vi) certain events of bankruptcy, insolvency or reorganization of the
Company.
The Indenture provided that if an Event of Default (other than of a type
referred to in clause (vi) of the preceding paragraph) shall have occurred
and is continuing, either the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Notes may declare the principal amount of
all Notes to be immediately due and payable. Such declaration may be
rescinded if certain conditions are satisfied. If an Event of Default of the
type referred to in clause (vi) of the preceding paragraph shall have
occurred, the principal amount of the Outstanding Notes shall automatically
become immediately due and payable.
The Indenture further provides that the Holders of not less than a
majority in principal amount of the Outstanding Notes may direct the time,
method and place of conducting any proceedings for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided that such direction is not in conflict with any rule of law or with
the Indenture. The Trustee may take any other action deemed proper by it that
is not inconsistent with such direction.
The Indenture contains provisions entitling the Trustee, subject to its
duty during the continuance of an Event of Default to act with the required
standard of care, to be indemnified by the Holders before proceeding to
exercise any right or power under the Indenture at the request of the
Holders.
No Holder will have any right to institute any proceeding with respect
to the Indenture or for any remedy thereunder, unless such Holder shall have
previously given to the Trustee written notice of a continuing Event of
Default and unless the Holders of at least 25% in aggregate principal amount
of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within
60 days. However, such limitations do not apply to a suit instituted by a
Holder of a Note for enforcement of payment of the principal of and premium,
if any, or interest on such Note on or after the respective due dates
expressed in such Note or of the right to convert such Note in accordance
with the Indenture.
The Indenture requires the Company to file annually with the Trustee a
certificate, executed by a designated officer of the Company, stating to the
best of his knowledge that the Company is not in default under certain
covenants under the Indenture or, if he has knowledge that the Company is in
such default, specifying such default.
Modification and Waiver
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, to enter into one or more
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Holders of the Notes, except that no such modification or
amendment may, without the consent of the Holders of each of the Outstanding
Notes affected thereby, among other things, (i) change the Stated Maturity of
the principal of or any installment of interest on any Note; (ii) reduce the
principal amount thereof or any premium thereon or the rate of interest
thereon; (iii) adversely affect the right of any Holder to convert any Note
as provided in the Indenture; (iv) change the place of payment where, or the
coin or currency in which, the principal of any Note or any premium or
interest thereon is payable; (v) impair the right to institute suit for the
enforcement of any such payment on or with respect to any Note on or after
the Stated Maturity (or, in the case of redemption, on or after the
Redemption Date); (vi) modify the subordination provisions of the Indenture
in a manner adverse to the Holders; (vii) modify the redemption provisions of
the Indenture in a manner adverse to the Holders; (viii) modify the
provisions of the Indenture relating to the Company's requirement to offer to
repurchase Notes upon a Change in Control in a manner adverse to the Holders;
(ix) reduce the percentage in principal amount of the Outstanding Notes the
consent of whose Holders is required for any such modification or amendment
of the Indenture or for any waiver of compliance with certain provisions of,
or of certain defaults under, the Indenture; or (x) modify the foregoing
requirements.
The Holders of a majority in principal amount of the Outstanding Notes
may, on behalf of the Holders of all Notes, waive compliance by the Company
with certain restrictive provisions of the Indenture. The Holders of a
majority in principal amount of the Outstanding Notes may, on behalf of the
Holders of all Notes, waive any past default under the Indenture and its
consequences, except a default in the payment of the principal of or any
premium or interest on any Note or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holders of
each Outstanding Note affected.
Subordination
The payment of the principal of and premium, if any, and interest on the
Notes is, to the extent set forth in the Indenture, subordinated in right of
payment to the prior payment in full of all Senior Indebtedness. When there
is a payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will first
be entitled to receive payment in full of all amounts due or to become due
thereon, or provision for such payment in money or money's worth, before the
Holders will be entitled to receive any payment in respect of the principal
of or premium, if any, or interest on the Notes. No payments on account of
principal of, premium, if any, or interest on the Notes or on account of the
purchase or acquisition of Notes may be made if there has occurred and is
continuing a default in any payment with respect to Senior Indebtedness or if
any judicial proceeding is pending with respect to any such default. The
Notes are also effectively subordinated in right of payment to the prior
payment in full of all indebtedness of the Company's subsidiaries.
By reason of such subordination, in the event of insolvency, Holders of
the Notes and other creditors of the Company who are not holders of Senior
Indebtedness may recover less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined in the Indenture as the principal of
and premium, if any, and interest on all indebtedness of the Company for
borrowed money, other than the Notes, whether outstanding on the date of
execution of the Indenture or thereafter created, incurred, guaranteed or
assumed, except such indebtedness that by the terms of the instrument or
instruments by which such indebtedness was created or incurred expressly
provides that it (i) is junior in right of payment to the Notes or any other
indebtedness of the Company or (ii) ranks pari passu in right of payment to
the Notes. The term "indebtedness for borrowed money" when used with respect
to the Company is defined to mean (a) any obligation of, or any obligation
guaranteed by, the Company for the repayment of borrowed money, whether or
not evidenced by bonds, debentures, notes or other written instruments,
(b) all obligations of the Company with respect to interest rate hedging
arrangements to hedge interest rates relating to Senior Indebtedness of the
Company, (c) any deferred payment obligation of, or any such obligation
guaranteed by, the Company for the payment of the purchase price of property
or assets evidenced by a note or similar instrument, and (d) any obligation
of, or any such obligation guaranteed by, the Company for the payment of rent
or other amounts under a lease of property or assets, which obligation is
required to be classified and accounted for as a capitalized lease on the
balance sheet of the Company under generally accepted accounting principles.
At December 31, 1997, Senior Indebtedness and indebtedness of the
Company's Subsidiaries were approximately $3.0 million. The Company and its
Subsidiaries expect from time to time to incur additional indebtedness. The
Indenture does not limit or prohibit the incurrence of additional Senior
Indebtedness or additional indebtedness of the Company or its Subsidiaries.
Defeasance
The Indenture provides that (i) if applicable, the Company will be
discharged from any and all obligations in respect of the Outstanding Notes
(except for certain obligations to register the transfer or exchange of
Notes, to replace stolen, lost or mutilated Notes, to provide for conversion
of the Notes, to maintain Paying Agents and hold moneys for payment in trust
and to repurchase Notes in the event of a Change in Control) or (ii) if
applicable, the Company may decide not to comply with certain restrictive
covenants, but not including the obligation to provide for conversion of the
Notes or repurchase Notes in the event of a Change in Control, and that such
decision will not be deemed to be an Event of Default under the Indenture and
the Notes, in either of case (i) or (ii) upon irrevocable deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations that will
provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants expressed in written
opinions thereof to pay the principal of, premium, if any, and each
installment of interest on the Outstanding Notes. With respect to
clause (ii), the obligations under the Indenture other than with respect to
such covenants and the Events of Default other than the Event of Default
relating to such covenants will remain in full force and effect. Such trust
may only be established if, among other things (a) with respect to
clause (i), the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Company has received from, or there has been published
by, the U.S. Internal Revenue Service (the "IRS") a ruling or there has been
a change in law which, in the opinion of counsel to the Company, provides
that Holders will not recognize gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
had not occurred; or, with respect to clause (ii), the Company has delivered
to the Trustee an Opinion of Counsel to the effect that the Holders will not
recognize gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred; (b) no Event of Default (or
event that with notice or lapse of time, or both, would constitute an Event
of Default) shall have occurred or be continuing; (c) the Company has
delivered to the Trustee an Opinion of Counsel to the effect that such
deposit shall not cause the Trustee or the trust so created to be subject to
the Investment Company Act of 1940, as amended; and (d) certain other
customary conditions precedent are satisfied.
Regarding the Trustee
State Street Bank & Trust Company of California, N.A., the Trustee under
the Indenture, has been appointed by the Company as registrar, Paying Agent,
transfer agent and conversion agent of the Notes.
Governing Law
The Indenture and the Notes are governed by and construed in accordance
with the laws of the State of New York.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 55,000,000
shares of capital stock, $.000001 par value, consisting of 50,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock. As of February 12,
1998, approximately 18,894,500 shares of Common Stock were outstanding. The
Common Stock is listed on NASDAQ under the symbol "ATVI."
Each outstanding share of Common Stock entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
directors. There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding shares of Common
Stock can elect all of the directors then standing for election. Subject to
preferences which may be applicable to any outstanding shares of preferred
stock, holders of Common Stock are entitled to such distributions as may be
declared from time to time by directors of the Company out of funds legally
available therefor. The Company has not paid, and has no current plans to
pay, dividends on its Common Stock. The Company intends to retain all
earnings for use in its business.
Holders of Common Stock have no conversion, redemption or preemptive
rights to subscribe to any securities of the Company. All outstanding shares
of Common Stock are fully paid and nonassessable. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, holders
of Common Stock will be entitled to share ratably in the assets of the
Company remaining after provision for payment of liabilities to creditors and
preferences applicable to outstanding shares of preferred stock.
The rights, preferences and privileges of holders of Common Stock are
subject to the rights of the holders of any outstanding shares of preferred
stock. At present, no shares of preferred stock are outstanding. As of
February 12, 1998, the Company had approximately 5,000 stockholders of
record, excluding banks, brokers and depository companies that are
stockholders of record for the account of beneficial owners.
The transfer agent for the Common Stock of the Company is Continental
Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004.
PLAN OF DISTRIBUTION
The Selling Securityholders may sell all or a portion of the Notes and
shares of Common Stock beneficially owned by them and which may be offered
hereby from time to time on any exchange or market on which the Securities
are listed or quoted, as applicable, on terms to be determined at the times
of such sales. The Selling Securityholders may also make private sales
directly or through a broker or brokers. Alternatively, any of the Selling
Securityholders may from time to time offer the Notes or shares of Common
Stock which may be offered hereby through dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions from the
Selling Securityholders and the purchasers of the Notes or shares of Common
Stock for whom they may act as agent. Such dealers or agents may include the
initial purchasers of the Notes, which may perform investment banking or
other services for or engage in other transactions with the Company from time
to time in the future.
To the extent required, the aggregate principal amount of Notes and
number of shares of Common Stock to be sold hereby, the names of the Selling
Securityholders, the purchase price, the name of any such agent or dealer and
any applicable commissions, discounts or other terms constituting
compensation with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or shares of Common Stock offered
by them hereby will be the purchase price of such Notes or shares of Common
Stock less discounts and commissions, if any.
The Notes and the shares of Common Stock which may be offered hereby may
be sold from time to time in one or more transactions at fixed offering
prices, which may be changed, or at varying prices determined at the time of
sale or at negotiated prices. Such prices will be determined by the holders
of such securities or by agreement between such holders and brokers or
dealers who receive fees or commissions in connection therewith.
The outstanding Common Stock is listed for trading on NASDAQ, and the
Company intends that the shares of Common Stock issuable upon conversion of
the Notes will be authorized for listing on NASDAQ. There is no assurance as
to the development or liquidity of any trading market that may develop for
the Notes.
In the order to comply with the securities laws of certain states, if
applicable, the Notes and shares of Common Stock offered hereby will be sold
in such jurisdictions only through registered or licensed brokers or dealers.
In addition, in certain states, the Notes and shares of Common Stock offered
hereby may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or
qualification requirement is available and compliance with same is effected.
The Selling Securityholders and any broker-dealers or agents that
participate with the Selling Securityholders in the distribution of the Notes
or shares of Common Stock offered hereby may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any commissions or
discounts received by such broker-dealers or agents and any profit on the
resale of the Notes or shares of Common Stock offered hereby and purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
Pursuant to the Registration Rights Agreement, the Company has agreed to
indemnify the Selling Securityholders against certain liabilities arising
under the Securities Act. The Company has agreed to pay certain expenses
incident to the offer and sale of the Notes and Common Stock offered hereby
by the Selling Securityholders to the public, other than underwriting
discounts and selling commissions or fees, if any.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of
the Notes or the Common Stock. This discussion is a summary for general
information only and does not consider all aspects of U.S. federal income tax
that may be relevant to the purchase, ownership and disposition of the Notes
or the Common Stock by a prospective investor in light of such investor's
personal circumstances.
For purposes of this discussion, the term "U.S. Holder" means a
beneficial owner of the Notes or the Common Stock that is (i) a citizen or
resident (as defined in Section 7701(b)(1) of the Code) of the United States,
(ii) treated as a domestic corporation or a domestic partnership, or (iii) an
estate or trust other than a "foreign estate" or "foreign trust" as defined
in Section 7701(a)(31) of the Code (a "U.S. Holder"). Except as expressly
described herein, this discussion does not address the tax consequences to a
Holder that is not a U.S. Holder (a "Foreign Holder"). This discussion also
does not address the U.S. federal income tax consequences of ownership of
Notes or Common Stock not held as capital assets within the meaning of
Section 1221 of the Code, or the U.S. federal income tax consequences to
investors subject to special treatment under the U.S. federal income tax
laws, such as dealers in securities or foreign currency, tax-exempt entities,
banks, thrift institutions, insurance companies or other financial
institutions, persons that hold the Notes or the Common Stock as part of a
"straddle," a "hedge" against currency risk or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar, persons
who enter into certain "constructive sales" involving the Notes or the Common
Stock or substantially identical property, and investors in pass-through
entities. Moreover, the effect of any applicable state, local or foreign tax
laws is not discussed.
This discussion is based on the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All the
foregoing is subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
EACH PERSON CONSIDERING THE PURCHASE OF A NOTE IS STRONGLY URGED TO
CONSULT ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION,
TO ITS PARTICULAR SITUATIONS. THE CONTENTS OF THIS OFFERING CIRCULAR ARE NOT
TO BE CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE PURCHASER
SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND/OR TAX ADVISOR AS TO
LEGAL, BUSINESS OR TAX ADVICE.
Stated Interest
This discussion assumes that the Notes will be treated as debt, not
equity, for federal income tax purposes. Each U.S. Holder of a Note and the
Company must report the Note as debt for such purposes. The stated interest
on a Note therefore will be taxable to a U.S. Holder as ordinary interest
income either at the time it accrues or is received, depending on such U.S.
Holder's method of accounting for federal income tax purposes.
The Company intends to take the position (which generally will be
binding on all U.S. Holders) that the Notes were not issued with original
issue discount for federal income tax purposes and thus that no amounts other
than stated interest will be treated as interest under the original issue
discount rules of the Code. This position is based on the presumption in the
Regulations that an optional redemption of the Notes at a price not less than
their face amount will not occur and the assumptions that the interest rate
on the Notes will not be increased pursuant to the Registration Rights
Agreement, and that the price at which the Notes were sold to the public was
equal to their face amount (or was within the de minimis exception for
original issue discount).
Market Discount
Generally, the market discount rules discussed below will not apply to a
U.S. Holder who acquired a Note when it was originally issued. These rules
would apply, however, to any Note purchased after original issue at a price
less than its stated redemption price at maturity.
Gain recognized on the disposition (including a redemption) of a Note
that has accrued market discount will be treated as ordinary income, not
capital gain, to the extent of the accrued market discount, provided that the
amount of market discount exceeds a statutory de minimis amount. "Market
discount" is defined as the excess, if any, of (i) the stated redemption
price at maturity over (ii) the tax basis of the debt obligation in the hands
of the Holder immediately after its acquisition.
Unless a U.S. Holder elects to compute market discount on a constant
interest rate basis, the accrued market discount would be the amount
calculated by multiplying the market discount by a fraction, the numerator of
which is the number of days the obligation has been held by the U.S. Holder
and the denominator of which is the number of days after the U.S. Holder's
acquisition of the obligation up to and including its maturity date. A U.S.
Holder of a Note acquired at market discount also may be required to defer
the deduction of all or a portion of the interest on an indebtedness incurred
or maintained to carry the Note until it is disposed of in a taxable
transaction.
If a U.S. Holder of a Note acquired at market discount disposes of such
Note in any transaction other than a sale, exchange or involuntary
conversion, even though otherwise nontaxable (e.g., a gift) such U.S. Holder
will be deemed to have realized an amount equal to the fair market value of
the Note and would be required to recognize the deemed gain as ordinary
income to the extent of any accrued market discount.
A U.S. Holder of a Note acquired at market discount may elect to include
the market discount in income as it accrues, either on a straight-line basis
or, if elected, on a constant interest rate basis. The current income
inclusion election would apply to all market discount obligations acquired by
the electing U.S. Holder on or after the first day of the first taxable year
to which the election applies. The election may be revoked only with the
consent of the Service. If a U.S. Holder of a Note so elects to include
market discount in income currently, the above-discussed rules with respect
to ordinary income recognition resulting from sales and certain other
disposition transactions and to deferral of interest deductions would not
apply.
Amortizable Bond Premium
If a U.S. Holder of a Note purchases it at a cost that is in excess of
the amount payable on maturity of the Note, that excess may be treated as
"amortizable bond premium" that is allocated among the interest payments on
the Note using a constant interest rate method over the remaining term of the
Note. The amount allocated to each interest payment would be applied against
and offset a portion of the income from that interest payment, with a
corresponding reduction in the U.S. Holder's basis in the Note. The interest
offset would be available only if an election under Section 171 of the Code
is made or is in effect. The election would apply to all debt instruments
held or subsequently acquired by the electing U.S. Holder on or after the
first day of the first taxable year to which the election applies and may not
be revoked without the consent of the IRS. The amount of the premium
attributable to the conversion feature of the Note must be eliminated in
determining the amount of any amortizable bond premium.
Tax Basis
A U.S. Holder's initial tax basis in a Note will be equal to the
purchase price paid by such U.S. Holder for such Note.
Sale or Redemption
Unless a nonrecognition provision applies, the sale, exchange,
redemption (including pursuant to an offer by the Company) or other
disposition of a Note (other than conversion) will be a taxable event for
federal income tax purposes. In such event, a U.S. Holder will recognize gain
or loss equal to the difference between (i) the amount of cash plus the fair
market value of any property received upon such sale, exchange, redemption or
other taxable disposition (other than in respect of accrued and unpaid
interest thereon, which will be ordinary income) and (ii) the U.S. Holder's
adjusted tax basis therein, which will generally equal such Holder's cost for
the Note, less any principal payments received. Such gain or loss should be
capital gain or loss and will be long-term capital gain or loss if the Note
had been held by the U.S. Holder for more than one year at the time of such
sale, exchange, redemption or other disposition (which, in the case of
individuals who have held their Notes for more than 18 months will be taxed
at a rate of not more than 20%).
Deemed Dividends
Section 305 of the Code treats as a distribution taxable as a dividend
(to the extent of the issuing corporation's current or accumulated earnings
and profits) certain actual or constructive distributions of stock with
respect to stock or convertible securities. Under U.S. Treasury regulations,
an adjustment in the conversion price, or the failure to make such an
adjustment, may, under certain circumstances, be treated as a constructive
dividend. Generally, a U.S. Holder's tax basis in a Note will be increased by
the amount of any such constructive distribution.
Conversion of Note into Common Stock
No gain or loss will be recognized for federal income tax purposes on
conversion of Notes into shares of Common Stock, except with respect to any
cash received in lieu of a fractional share. The tax basis for the shares of
Common Stock received upon conversion will be equal to the tax basis of the
Notes converted into Common Stock, and the holding period of the shares of
Common Stock will include the holding period of the Notes converted. A U.S.
Holder will recognize taxable gain or loss on cash received in lieu of
fractional shares of Common Stock in an amount equal to the difference
between the amount of cash received and the U.S. Holder's tax basis in such
fractional shares. Subject to the market discount rules discussed above, such
gain or loss should be capital gain or loss if the fractional shares are
capital assets in the hands of the U.S. Holder and long-term capital gain or
loss if the fractional shares have been deemed held for more than one year
which, in the case of individuals who have held their Notes for more than
18 months will be taxed at a rate of not more than 20%.
Dividends
Dividends paid on the Common Stock generally will be includable in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits.
Sale of Common Stock
Upon the sale or exchange of Common Stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received
upon the sale or exchange and (ii) such Holder's adjusted tax basis in the
Common Stock. Such capital gain or loss will be long-term if the United
States Holder's holding period in the Common Stock is more than one year at
the time of the sale or exchange, and in the case of individuals who have
held their Common Stock for more than 18 months, will be taxed at a rate of
not more than 20%. A United States Holder's basis and holding period in
Common Stock received upon conversion of a Note are determined as discussed
above under "Conversion of the Note into Common Stock."
Backup Withholding
A U.S. Holder of Notes or Common Stock may be subject to "backup
withholding" at a rate of 31% with respect to certain "reportable payments,"
including interest payments, dividend payments and, under certain
circumstances, principal payments on the Notes or proceeds from the
disposition of Common Stock. These backup withholding rules apply if the U.S.
Holder, among other things, (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes
an incorrect TIN, (iii) fails to report properly interest or dividends, or
(iv) under certain circumstances, fails to provide a certified statement,
signed under penalties of perjury, that the TIN furnished is the correct
number and that such U.S. Holder is not subject to backup withholding. A U.S.
Holder who does not provide the Company with its correct TIN also may be
subject to penalties. Any amount withheld from a payment to a U.S. Holder
under the backup withholding rules is creditable against the U.S. Holder's
federal income tax liability, provided the required information is furnished
to the Service. Backup withholding will not apply, however, with respect to
payments made to certain holders, including corporations and tax-exempt
organizations, provided their exemption from backup withholding is properly
established.
The Company will report to the U.S. Holders of Notes and Common Stock
and to the Service the amount of any "reportable payments" for each calendar
year and the amount of tax withheld, if any, with respect to such payments.
Certain U.S. Tax Consequences to Foreign Holders
General. The following is a general discussion of certain U.S. federal
income tax consequences of the acquisition, ownership and disposition of the
Notes and Common Stock by a Foreign Holder. This discussion does not address
tax consequences arising under the laws of any foreign, state or local
jurisdiction. The tax treatment of Foreign Holders of the Notes may vary
depending on their particular situations. Certain Foreign Holders (including
insurance companies, tax-exempt organizations, financial institutions and
broker-dealers) may be subject to special rules not discussed below.
Prospective investors who are Foreign Holders are urged to consult their tax
advisors regarding the U.S. federal tax consequences of acquiring, holding
and disposing of Notes, as well as any tax consequences that may arise under
the laws of any foreign, state, local or other taxing jurisdiction.
Interest on Notes. Interest paid by the Company to a Foreign Holder will
qualify for the portfolio interest exemption and will not be subject to U.S.
federal income or withholding tax if (i) such interest is not effectively
connected with the conduct of a trade or business within the United States by
such Foreign Holder, (ii) the Foreign Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (iii) the Foreign Holder is
not a controlled foreign corporation with respect to which the Company is a
"related person" within the meaning of the Code, and (iv) either (a) the
Foreign Holder of the Notes certifies to the Company, under penalties of
perjury, that the Foreign Holder is not a U.S. person and provides the
beneficial owner's name and address on a U.S. Treasury Form W-8 (or suitable
substitute form) or (b) a securities clearing organization, bank or other
financial institution that holds the Note certifies, under penalties of
perjury, that such Form W-8 (or suitable substitute form) has been received
from the Foreign Holder by it or by a financial institution between it and
the Foreign Holder and furnishes the payor with a copy thereof.
Except to the extent that an applicable treaty otherwise provides, a
Foreign Holder generally will be taxed in the same manner as a United States
Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Foreign Holder.
Effectively connected interest received by a corporate Foreign Holder may
also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate (or, if applicable, a lower treaty rate). Even
though such effectively connected interest is subject to income tax, and may
be subject to the branch profits tax, it is not subject to withholding tax if
the Holder delivers an appropriate form to the payor, which form includes,
among other things, a representation that the amounts for which the form is
furnished are effectively connected with the conduct of a trade or business
in the United States.
Interest income of a Foreign Holder that is not effectively connected
with a United States trade or business and that does not qualify for the
portfolio interest exemption described above will generally be subject to a
withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
Conversion of Notes. A Foreign Holder generally will not recognize gain or
loss upon any conversion of a Note into Common Stock, except with respect to
the receipt of cash in lieu of fractional shares where any of the conditions
exist that result in taxation as described below under "Gain on Disposition
of Notes or Common Stock."
Dividends on Common Stock. In the event that dividends are paid to a
Foreign Holder of Common Stock, unless such dividends are effectively
connected with the conduct of a trade or business of the Foreign Holder
within the United States, such dividends will be subject to withholding of
U.S. federal income tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty. Under current U.S. Treasury Regulations,
dividends paid to an address in a country outside the United States are
presumed to be paid to a resident of such country and are subject to 30%
withholding unless the recipient establishes that the recipient is entitled
to a reduced tax treaty rate.
In order to be exempt from withholding on effectively connected income
under current Treasury Regulations certain certification and disclosure
requirements must be satisfied. If the dividend is effectively connected with
the conduct of a trade or business of the Foreign Holder within the United
States, the dividend would, unless exempted by treaty, be subject to U.S.
federal income tax on a net income basis at applicable graduated individual
or corporate rates. Any such effectively connected dividends received by a
foreign corporation may, under certain circumstances, be subject to an
additional "branch profits" tax at a rate of 30% or such lower rate as may be
specified by an applicable treaty.
Under recently adopted Treasury Regulations which will become effective
January 1, 1999 (the "Final Regulations"), a Foreign Holder seeking an
exemption from withholding under the effectively connected income exemption
described above, or a reduced rate of withholding pursuant to a treaty,
generally will be required to provide the company (or other payor) a foreign
beneficial owner certificate on Form W-8, which form may include, among other
things, the Foreign Holder's taxpayer identification number, country of
residence and certain other information and representations. The Final
Regulations also provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty, interest paid to a Foreign
Holder that is an entity should be treated as paid to the entity itself, or
to those holding an interest in the entity.
A Foreign Holder of Common Stock that is eligible for a reduced U.S.
withholding tax pursuant to a tax rate treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund
with the Service.
Gain on Disposition of Notes or Common Stock. Except for amounts received
with respect to accrued but unpaid interest that would be taxable to the
Foreign Holder if paid by the Company (see "Certain U.S. Tax Consequences to
Foreign Holders - Interest on Notes" above) a Foreign Holder generally will
not be subject to U.S. federal income tax on any gain recognized on a
disposition of a Note or a share of Common Stock unless (i) subject to the
exception discussed below, the Company is or has been a "United States real
property holding corporation" (a "USRPHC") within the meaning of
Section 897 (c)(2) of the Code at any time within the shorter of (a) the
Foreign Holder's holding period for the Common Stock or (b) the five-year
period ending on the date of disposition (the "Required Holding Period"),
(ii) the gain is effectively connected with the conduct of a trade or
business within the United States of the Foreign Holder and, if a tax treaty
applies, attributable to a permanent establishment maintained by the Foreign
Holder, (iii) the Foreign Holder is an individual who holds the Note or
Common Stock as a capital asset and is present in the United States for
183 days or more in the taxable year of the disposition and certain other
conditions are met; or (iv) the Foreign Holder is subject to tax pursuant to
the provisions of the Code applicable to certain expatriates. If a Foreign
Holder that is a foreign corporation falls under clause (ii) above, it will
be taxed on its gain under regular graduated U.S. federal income tax rates
and will, under certain circumstances, be subject to branch profits tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.
A corporation is generally a USRPHC if the fair market value of its U.S.
real property interests equals or exceeds 50% of the sum of the fair market
value of its worldwide real property interests plus its other assets used or
held for use in a trade of business. The Company believes that it currently
is not a USRPHC. Even if it were, a Foreign Holder would generally not be
subject to tax or withholding in respect of such tax on gain from a sale or
other disposition of a share of Common Stock by reason of the Company's
USRPHC status if the Common Stock is regularly traded on an established
securities market ("regularly traded") during the calendar year in which such
sale or other disposition of the Common Stock occurs, provided that such
foreign Holder is not a "5% Holder" (i.e., the Foreign Holder beneficially
own more than 5% of the Common Stock at any time during the required Holding
Period). The Company believes that the Common Stock will be treated as
regularly traded.
The "regularly-traded" exception will also apply to a "non-regularly
traded class of interests" in a United States corporation that is convertible
into a regularly traded class of interests in the corporation unless, on the
date such non-regularly traded interest was acquired by its present holder,
such interest had a fair market value greater than the fair market value on
that date of 5% of the regularly traded class of the corporation's stock into
which it is convertible. (Interests of a non-regularly traded class acquired
over a period of time will be aggregated and valued as of the date of the
subsequent acquisition for purposes of applying the 5% test described above.)
Accordingly, except with respect to the sale, exchange, conversion or
redemption of the Notes by a Foreign Holder whose aggregate actual or
constructive ownership of such Notes on an applicable determination date had
a fair market value greater than 5% of the Common Stock, no withholding or
income taxation under the FIRPTA rules should be required with respect to the
sale, exchange, conversion or redemption of Notes by a Foreign Holder.
The foregoing discussion assumes that the Notes constitute interests
that are non-regularly traded interests convertible into a regularly traded
class of interests. If the Notes were to become regularly traded, the
regularly traded exemption might not apply to Notes owned by a person who
beneficially owns (actually or constructively) more than 5% of the total fair
market value of the Notes at any time during the five year period ending on
the date of disposition of the Notes or other applicable determination date.
If the Company is or has been a USRPHC within the Required Holding
Period, and if the "regularly traded" exception discussed above were
inapplicable, a Foreign Holder of Notes or Common Stock (without regard to
the Foreign Holder's ownership percentage) generally would be subject to
FIRPTA tax on gain recognized on a sale or other disposition of the Notes or
Common Stock. Any amount withheld pursuant to such withholding tax would be
credited against such Foreign Holder's U.S. federal income tax liability.
Any Foreign Holder that may approach or exceed any of the 5% ownership
thresholds discussed above, either alone or in conjunction with related
persons, should consult its own tax advisor concerning the United States tax
consequences that may result. A Foreign Holder who sells or otherwise
disposes of Notes may be required to inform its transferee whether such Notes
constitute a United States real property interest.
Federal Estate Taxes. If interest on the Notes qualifies for the portfolio
interest exemption and is, therefore, exempt from withholding of U.S. federal
income tax under the rules described above, the Notes will not be included in
the estate of a deceased Foreign Holder for U.S. federal estate tax purposes.
Common Stock owned, or treated as owned, by a Foreign Holder (as specifically
determined for U.S. federal estate tax purposes) at the time of death will be
included in such Foreign Holder's gross estate for U.S. federal income tax
liability. Foreign Holders are urged to consult their tax advisors concerning
the potential applicability of these provisions.
Information Reporting and Backup Withholding. The Company must report
annually to the Service and to each Foreign Holder the amount of interest and
dividends paid to such Foreign Holder and the amount of any tax withheld.
These information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
interest and dividends may also be made available to the tax authorities of
the country in which the Foreign Holder resides under the provisions of an
applicable income tax treaty.
In the case of payments of interest to Foreign Holders, current U.S.
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the certification of foreign status on IRS Form W-8 has been received
or an exemption has otherwise been established, provided that neither the
Company nor its Paying Agent has actual knowledge that the Holder is a U.S.
person or that the conditions of any other exemption are not in fact
satisfied. Under current U.S. Treasury regulations, these information
reporting and backup withholding requirements will apply, however, to the
gross proceeds paid to a Foreign Holder on the disposition of the Notes by or
through a U.S. office of a U.S. or foreign broker, unless the Foreign Holder
certifies to the broker under penalties or perjury as to its name, address
and status as a foreign person or the Foreign Holder otherwise establishes an
exemption. The information reporting requirement, but not backup withholding,
will also apply to a payment of the proceeds of a disposition of the Notes by
or through a foreign office of a U.S. broker or foreign brokers with certain
types of relationships to the U.S. unless the broker has in its records
documentary evidence that the beneficial owner is not a U.S. person and
certain other conditions are met, or the beneficial owner otherwise
establishes an exemption.
Under current U.S. Treasury Regulations, United States backup
withholding tax generally will not apply to (i) the payment of dividends paid
on Common Stock to a Foreign Holder at an address outside the United States
or (ii) the payment of the proceeds of the sale of Common Stock to or through
the foreign office of a broker. In the case, however, of the payment of
proceeds from such a sale of Common Stock through a foreign office of a
broker that is a U.S. person or "U.S. related person," information reporting
(but not backup withholding) is required with respect to the payment unless
the broker has documentary evidence in its files that the owner is a Foreign
Holder and certain other requirements are met or the Holder otherwise
establishes an exemption. For this purpose, a "U.S. related person" is a
controlled foreign corporation or a foreign person 50% or more of whose gross
income from all sources for the three-year period ending with the close of
its taxable year preceding the payment (or for such part of the period that
the broker has been in existence) is derived from activities that are
effectively connected with the conduct of a U.S. trade or business. The
payment of the proceeds of a sale or shares of Common Stock to or through a
U.S. office of a broker is subject to information reporting and possible
backup withholding unless the owner certifies its non-U.S. status under
penalties of perjury or otherwise establishes an exemption.
Under the Final Regulations (effective January 1, 1999), information
reporting and backup withholding will not apply to payments of interest or
dividends to a Foreign Holder provided (i) the withholding agent can reliably
associate such payments with Form W-8 timely furnished by the Foreign Holder
in which the Foreign Holder represents that it is a foreign person, and
(ii) certain other requirements are satisfied. Also, information reporting
and backup withholding will not apply under the Final Regulations to payments
of proceeds from a sale or disposition of the Notes or Common Stock provided
the sale is (i) effected at an office outside the United States by a payor
that is not a U.S. person or a U.S. related person as defined above, or
certain other entities, (ii) effected at an office of a U.S. broker either
inside or outside the United States and the broker can associate such
payments with documentation upon which it can rely in order to treat the
payee as a foreign beneficial owner, including a certification that the
beneficial owner has not been and reasonably expects not to be present in the
United States for a period aggregating 183 days or more during each calendar
year to which the certificate pertains, and certain other requirements are
satisfied. Discussions herein concerning the Final Regulations are not
intended to be a complete discussion thereof, and Foreign Holders are urged
to consult their tax advisors concerning the application of the Final
Regulations in light of their own circumstances.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the Foreign
Holder's U.S. federal income tax liability, provided that the required
information is furnished to the Service.
LEGAL MATTERS
Certain legal matters in connection with the Notes and the shares of
Common Stock offered hereby have been passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule
of the Company and its subsidiaries as of March 31, 1996 and for the years
ended March 31, 1996 and 1995 incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 have been audited by Coopers & Lybrand LLP, independent accountants, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements and financial statement schedule
of the Company and its subsidiaries as of March 31, 1997 and for the year
ended March 31, 1997, appearing in the Company's March 31, 1997 annual report
on Form 10-K, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Combined Distribution
(Holdings) Limited and subsidiaries as of April 30, 1997 and the period June
28, 1996 (inception) to April 30, 1997 have been incorporated by reference
herein and in the Registration Statement in reliance on the report of Grant
Thornton, independent auditors, incorporated by reference herein, and upon
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Company and its
subsidiaries as of March 31, 1996 and for the years ended March 31, 1996 and
1995 incorporated in this Prospectus by reference to the Company's Current
Report on Form 8-K dated January 6, 1998 have been audited by Coopers &
Lybrand LLP, independent accountants, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The supplemental consolidated financial statements of the Company and
its subsidiaries as of March 31, 1997 and for the year ended March 31, 1997,
appearing in the Company's Form 8-K dated January 6, 1998, have been
incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, and Grant Thornton, independent auditors, incorporated by
reference herein, and upon the authority of said firms as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Seven World Trade Center, New York,
New York 10048 and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained by mail from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates,
and can also be obtained electronically through the SEC's Electronic Data
Gathering, Analysis and Retrieval system at the SEC's Web site
(http://www.sec.gov). The Company's Common Stock is listed on The Nasdaq
National Market and copies of such reports and other information can also be
inspected at the offices of The Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, with
respect to the Notes and the Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto, as permitted by the rules and regulations of the SEC.
For further information with respect to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedules filed
as a part thereof, which may be inspected and copied at the public reference
facilities of the SEC referred to above. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the full text
of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company furnishes stockholders with annual reports containing
audited financial statements and with proxy material for its annual meetings
complying with the proxy requirements of the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have been filed by the Company with the
SEC are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended March
31, 1997, which contains audited consolidated balance sheets of the Company
and subsidiaries as of March 31, 1997 and 1996, and related consolidated
statements of income, shareholders equity and cash flows for the years ended
March 31, 1997, 1996 and 1995.
2. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended June 30, 1997 and September 30, 1997.
3. The Company's Current Report on Form 8-K filed December 5, 1997,
with respect to the acquisition of CDH and NBG.
4. Amendment No. 1 to the Company's Current Report on Form 8-K, filed
on December 12, 1997, containing certain financial statements relating to CDH
and the acquisition of CDH.
5. The Company's Current Report on Form 8-K, filed December 23, 1997,
with respect to the Company's $60,000,000 Convertible Subordinated Notes
issuance.
6. The Company's Current Report on Form 8-K, dated January 6, 1998,
containing certain restated financial statements.
7. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since March 31, 1997.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in and to
be a part of this Prospectus from the date of filing of such reports and
documents.
Any statement contained herein or in a document which is incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement in any subsequently filed
document that is also deemed to be incorporated by reference herein modifies
or supersedes such prior statement.
This Prospectus incorporates documents by reference which are not
presented or delivered herewith. These documents are available upon written
or oral request from the Company, without charge, to each person to whom a
copy of this Prospectus has been delivered, other than exhibits to those
documents. Requests should be directed to the Office of the Secretary,
Activision, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405
(telephone (310) 255-2000).
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such forward-
looking statements. Such factors include the various matters described
herein under "Risk Factors" and various other factors described in the
Company's other filings with the Commission.
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No dealer, salesman or other person has been authorized to give any
information or to make representations other than those contained in this
Prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by the Company or the Selling
Securityholders. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that the
information herein is correct as of any time subsequent to its date. This
Prospectus does not constitute an offer of solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer of solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer or solicitation.
______________________________________
TABLE OF CONTENTS
Page
____
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selling Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 25
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Certain United States Federal Tax Considerations . . . . . . . . . . . . . 26
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Documents Incorporated by Reference. . . . . . . . . . . . . . . . . . . . 35
Special Note Regarding Forward Looking Statements. . . . . . . . . . . . . 36
_______________________________________
=============================================================================
ACTIVISION, INC.
$60,000,000
6 3/4 Convertible Subordinated Notes
due 2005
3,178,808 Shares of Common Stock
____________
PROSPECTUS
____________
__________, 1998
=============================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Company
in connection with the offering of the Common Stock being registered. All
the amounts shown are estimates except the Securities and Exchange Commission
(the "Commission") registration fee.
Item Amount
____ ______
Registration Fee - Securities and Exchange Commission......$18,182
Legal Fees and Expenses.................................... 15,000
Accounting Fees and Expenses............................... 15,000
TOTAL.............................................$48,182
======
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL"), paragraph
B of Article SIXTH of the Company's Amended and Restated Certificate of
Incorporation and paragraph 5 of Article VII of the Company's By-laws provide
for the indemnification of the Company's directors and officers in a variety
of circumstances, which may include liabilities under the Securities Act of
1933, as amended (the "Securities Act").
Paragraph B of Article SIXTH of the Amended and Restated Certificate of
Incorporation provides mandatory indemnification rights to any officer or
director of the Company who, by reason of the fact that he or she is an
officer or director of the Company, is involved in a legal proceeding of any
nature. Such indemnification rights shall include reimbursement for expenses
incurred by such officer or director in advance of the final disposition of
such proceeding in accordance with the applicable provisions of the DGCL.
Paragraph 5 of Article VII of the Company's By-laws currently provide that
the Company shall indemnify its directors and officers to the fullest extent
permitted by the DGCL.
Paragraph A of Article SIXTH of the Amended and Restated Certificate of
Incorporation contains a provision which eliminates the personal liability of
a director to the Company and its stockholders for certain breaches of his or
her fiduciary duty of care as a director. This provision does not, however,
eliminate or limit the personal liability of a director (i) for any breach of
such director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under the Delaware statutory provision
making directors personally liable, under a negligence standard, for unlawful
dividends or unlawful stock repurchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit.
This provision offers persons who serve on the Board of Directors of the
Company protection against awards of monetary damages resulting from
negligent (except as indicated above) and "grossly" negligent actions taken
in the performance of their duty of care, including grossly negligent
business decisions made in connection with takeover proposals for the
Company. As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director
for a breach of his duty of care has been limited. However, the provision
does not affect the availability of equitable remedies such as an injunction
or rescission based upon a director's breach of his duty of care.
It is currently unclear as a matter of law what impact these provisions
will have regarding securities law violations. The Commission takes the
position that indemnification of directors, officers and controlling persons
against liabilities arising under the Securities Act is against public policy
as expressed in the Securities Act and therefore is unenforceable.
Item 16. Exhibits
(a) Exhibits:
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP as to
legality of securities being registered.
23.1 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP (included
as part of Exhibit 5.1).
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Grant Thornton.
24.1 Power of attorney (included on signature page).
25.1 Form T-1 Statement of Eligibility and Qualification of State Street
Bank and Trust Company of California, N.A. under the Trust Indenture
Act of 1939.*
___________________
* To be filed by amendment.
Item 17. Undertakings
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by
the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby further undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The Company hereby further undertakes to deliver or cause to be delivered
with the Prospectus, to each person to whom the Prospectus is sent or given,
the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Prospectus, to deliver, or cause to
be delivered to each person to whom the Prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 City of Los Angeles, State of California, on
February 12, 1998.
ACTIVISION, INC.
By:/s/ Robert A. Kotick
__________________________
Robert A. Kotick, Chairman
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert A. Kotick and Brian G. Kelly,
and each or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments
(including post-effective documents in connection therewith), with the
Securities and Exchange Commission, granting unto each said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or either of them, or their 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, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
____ _____ ____
/s/ Robert A. Kotick Chairman, Chief Executive February 12, 1998
____________________ Officer (Principal Executive
(Robert A. Kotick) Officer) and Director
/s/ Brian G. Kelly Chief Operating Officer, February 12, 1998
____________________ President and Director
(Brian G. Kelly)
/s/ Barry J. Plaga Chief Financial Officer February 12, 1998
_____________________ (Principal Financial and
(Barry J. Plaga) Accounting Officer)
/s/ Harold A. Brown Director February 12, 1998
_____________________
(Harold A. Brown)
/s/ Barbara S. Isgur Director February 12, 1998
_____________________
(Barbara S. Isgur)
_____________________ Director February , 1998
(Steven T. Mayer)
/s/ Robert J. Morgado Director February 12, 1998
_____________________
(Robert J. Morgado)
EXHIBIT INDEX
Page Number in Signed
Exhibit No. Description Registration Statement
___________ ___________ _______________________
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman
LLP as to legality of securities being registered
23.1 Consent of Robinson Silverman Pearce Aronsohn & Berman
LLP (included as part of Exhibit 5.1)
23.2 Consent of Coopers & Lybrand LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Grant Thornton
24.1 Power of attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility and Qualification of State Street
Bank and Trust Company of California, N.A. under the Trust
Indenture Act of 1939.*
__________________
* To be filed by amendment.
Exhibit 5.1
February 12, 1998
Activision, Inc.
3100 Ocean Park Blvd.
Santa Monica, CA 90405
Re: Activision, Inc.
Registration Statement on Form S-3
__________________________________
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by Activision, Inc., a Delaware
corporation (the "Company"), on or about the date hereof with the Securities
and Exchange Commission (the "Commission") in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), with
respect to an offering by certain selling securityholders named therein from
time to time of (i) $60,000,000 aggregate principal amount of 6 3/4%
Convertible Subordinated Notes Due 2005 (the "Notes"), and (ii) 3,178,808
shares of the Company's common stock, par value $.000001 per share (the
"Common Stock").
We are familiar with the Amended and Restated Certificate of
Incorporation, as amended, and the By-laws of the Company and have examined
originals or copies, certified or otherwise identified to our satisfaction,
of such other documents, evidence of corporate action, certificates and other
instruments, and have made such other investigations of law and fact, as we
have deemed necessary or appropriate for the purposes of this opinion.
Based upon the foregoing, it is our opinion that:
(a) The Company has been duly incorporated and is validly existing
under the laws of the State of Delaware.
(b) The Notes have been duly authorized and validly issued and
constitute valid and binding obligations of the Company, except as such
obligations are subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance and similar laws relating to or affecting creditors
rights generally, and general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
(c) The 3,178,808 shares of Common Stock being registered have
been duly authorized and when issued and delivered upon conversion of the
Notes in accordance with the terms of the Notes, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of our name wherever appearing in
such Registration Statement, including the Prospectus consisting a part
thereof, and any amendment thereto. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act, or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
/s/ Robinson Silverman Pearce Aronsohn &
Berman LLP
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Activision, Inc. on Form S-3 of our report dated May 15, 1996, except for
Note 9, as to which the date is June 10, 1997, on our audits of the
consolidated financial statements and financial statement schedule of
Activision, Inc. and Subsidiaries as of March 31, 1996 and for the years
ended March 31, 1996 and 1995, which report is included in the annual report
on Form 10-K of Activision, Inc. for the fiscal year ended March 31, 1997.
In addition, we consent to the incorporation by reference in this
Registration Statement of Activision, Inc. on Form S-3 of our report dated
May 15, 1996, except for Note 12, as to which the date is June 10, 1997, on
our audits of the consolidated financial statements of Activision, Inc. and
Subsidiaries as of March 31, 1996 and for the years ended March 31, 1996 and
1995, which report is included on Form 8-K Current Report of Activision,
Inc., dated January 6, 1998.
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND LLP
Los Angeles, California
February 12, 1998
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Activision, Inc.
We consent to the incorporation by reference in the registration statement on
Form S-3 of Activision, Inc. of our report dated May 8, 1997, with respect to
the consolidated balance sheet of Activision, Inc. and subsidiaries as of
March 31, 1997, and the related consolidated statements of operations,
changes in shareholders' equity, and cash flows for the year then ended,
which report appears in the March 31, 1997 annual report on Form 10-K of
Activision, Inc. and to the reference to our firm under the heading "Experts"
in the prospectus.
KPMG Peat Marwick LLP
Los Angeles, California
February 11, 1998
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Activision, Inc.
We consent to the incorporation by reference in the registration statement on
From S-3 of Activision, Inc. of our report, based on our audit and the report
of other auditors, dated May 8, 1997, except as to note 2 which is as of
November 26, 1997 and note 15 which is as of December 22, 1997, with respect
to the supplemental consolidated balance sheet of Activision, Inc. and
subsidiaries as of March 31, 1997, and the related supplemental consolidated
statements of operations, changes in shareholders' equity, and cash flows for
the year then ended, which report appears in the Form 8-K of Activision, Inc.
dated January 6, 1998 and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG Peat Marwick LLP
Los Angeles, California
February 11, 1998
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated August 7, 1997 (except for Note 16 as
to which the date is November 26, 1997) accompanying the financial statements
of Combined Distribution (Holdings) Limited for the period June 28, 1996
(inception) to April 30, 1997 included in Form 8-K (amendment No. 1 filed on
December 12, 1997) of Activision, Inc. which is incorporated by reference in
this Registration Statement of Activision, Inc. on Form S-3. We consent to
the incorporation by reference in the Registration Statement and Prospectus
of the aforementioned report and to the use of our name as it appears under
the caption "Experts."
GRANT THORNTON
Central Milton Keynes, United Kingdom
February 13, 1998