SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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|_| Definitive Proxy Statement
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|X| Soliciting Material Under Rule 14a-12
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MAJESCO ENTERTAINMENT COMPANY
(Name of Registrant as Specified in Its Charter)
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TRINAD CAPITAL MASTER FUND LTD.
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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TRINAD CAPITAL MASTER FUND LTD.
2121 Avenue of the Stars, Suite 1650
Los Angeles, California 90067
March 30, 2006
Majesco Entertainment Company
160 Raritan Center Parkway
Suite 1
Edison, New Jersey 08837
Attention: Board of Directors of Majesco Entertainment Company
Gentlemen:
We are once again disappointed by the Company's failure to act upon or
accept any of our offers to make fundamental changes with respect to the
Company's misuse of capital resources, board composition, management structure,
corporate governance and executive compensation. For the last 10 months, we have
sought to work constructively with the Company's Board of Directors to improve
shareholder value for all of the Company's shareholders. During this time, we
have continuously made ourselves available to meet with the Company's Board and
management to discuss our proposals to improve the performance and financial
condition of the Company and to establish a more appropriate corporate
governance structure. To date, all of our requests have been ignored, while at
the same time, the Company continues in a downward spiral. Our numerous
conversations with the Board to date have resulted in a complete lack of action
and a series of broken promises including, without limitation, representations
that the Sutton family would never regain management control of the business (in
light of the Company's poor performance under their direction) and reassurance
that the Company would not receive a "going concern" designation from its
auditors.
We are troubled by the statement in your letter to us that the Company has
sufficient capital resources to meet its capital needs. In the Company's
recently filed Form 10-K, the Company's independent accounting firm stated in
their report that "the Company has suffered losses that raise substantial doubt
about its ability to continue as a going concern." Furthermore, the Company
recently filed a Form 8-K disclosing that it has received a notice of delisting
from The NASDAQ Stock Market ("Nasdaq") advising the Company that it does not
comply with the Nasdaq's equity, market value and net income minimum
requirements. While we believe that the business operations of the Company may
have somewhat stabilized (as a result of the efforts of members of the Board who
have since resigned due to a disagreement with the Company on fundamental
matters discussed below), the Company still lacks the financial resources to
prudently manage its business and maintain its valuable Nasdaq listing. Based on
this disclosure as well as the Company's continuing net losses and increasing
expenses, we have serious reservations about the Board's determination that the
Company has sufficient capital resources to continue its operations. The Board's
comparison of the Company's performance over the past year to its
publicly-traded competitors is without foundation and demonstrates the extent to
which the Board is simply not carefully monitoring the Company's performance. To
our knowledge, none of these competitors have had a reduction in their market
capitalization of 90%, substantially eliminated available cash reserves (and in
the process received a "going concern" designation) and failed by a significant
margin to achieve publicly issued revenue guidance (including a net loss of
$70.9 million on $59.7 of revenues). Surely, the Company is unique in its
failures and the magnitude thereof, and it is simply a gross misstatement to
compare the Company to its competitors. It is not fair to lump this Board's and
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management's performance in with that of its peers; you should collectively
stand up and take a bow for your collective achievements.
We believe that Jessie and Joey Sutton, the President and the Executive
Vice President of Research and Development, respectively, do little to further
the Company's business and strategic objectives, and have been placed in
extraordinarily high-paying positions of management as a result of Morris
Sutton's selfish desire to compensate his own children at the expense of the
Company and its shareholders. Our belief is bolstered by the resignation of two
of the Company's independent directors in February because, according to
disclosure made by the Company in a Form 8-K, "[the independent directors]
believed Morris Sutton would not commit to continuing his association with the
Issuer if the independent directors were to insist upon the resignation of
certain other members of the Sutton family employed by the Company." We also
note that the Company has never disclosed the compensation to be paid to Morris
Sutton in his newly-appointed role as interim Chief Executive Officer or in
other capacities. We are of the view that the Company has in the past sought to
improperly characterize Mr. Sutton as someone other than an "executive officer,"
although he has clearly been serving in charge of a principal business unit and
has been performing a policy making function for the Company. We believe that
the failure to disclose such information was an intentional attempt to
circumvent the requirements of applicable securities laws. It is clearly in the
best interests of the Company's shareholders that a new executive management
team be assembled with appropriate industry experience that is guided by the
interests of shareholders and focused on the maximization of shareholder value.
Incremental changes cannot save the Company at this time. We are confident
that our slate of nominees will add value to the Board's decision-making process
and enhance the Board's ability to maximize shareholder value. We have selected
nominees with the financial, operating and marketing experience that we believe
is necessary to improve the Company's operating performance. Our board nominees
are committed to working with management to reduce annual operating expenses and
to improve profitability for the benefit of the Company's shareholders. Also,
given that none of our nominees is currently affiliated with the Company other
than through their respective stock ownership, it is clear that they will each
be capable of making decisions on a far more independent basis than the Board
has been able to do in the past. We also continue to believe that our equity
investment proposal is generous, reasonable and serves the interests of the
Company's shareholders, as evidenced by the premium offered compared to the
recent trading price of the Company's equity securities. We are not aware of any
other proposals to purchase equity securities of the Company at this time,
notwithstanding the Company's response to our offer that it is "confident we
can, if necessary, obtain additional financing on terms more favorable than
those you have proposed."
In light of the foregoing, it is clear that the response that you elected
to make publicly-available was not founded on a correct factual or legal
analysis, but rather, represents yet another poorly-veiled and ill-conceived
attempt to continue to operate the Company for the primary benefit of the Sutton
family while the Company continues to deteriorate, without regard to your
fiduciary duties to all of the Company's shareholders. Further, we hereby
request the immediate resignation of Louis Lipschitz from the Company's Audit
and Compensation Committees and from the entire Board. It is abundantly clear
that--under his auspices--the Company has (i) agreed to compensate the members
of the Sutton family in entirely excessive amounts given, in particular, the
Company's current financial position and results of operations and (ii) failed
to disclose the substantial compensation paid to Morris Sutton that should have
been disclosed in the Company's filings with the Securities and Exchange
Commission. It is entirely inappropriate for Mr. Lipschitz to serve on any of
these important committees when in fact his actions have been directed to
protecting and compensating members of the Sutton family at the expense of all
shareholders. The excessive compensation paid to members of the Sutton family
has only deprived the Company of much-needed earnings that could be instrumental
to reverse the Company's current plight. Mr. Lipschitz's ill-advised actions
have consistently demonstrated a blatant disregard for the public
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shareholders of the Company. In light of the foregoing, and as previously
announced, we are expeditiously proceeding to take legal action against the
current members of the Board and certain members of the Company's management.
Unfortunately, we anticipate that we will only obtain suitable relief for the
Company's shareholders and ourselves at such time as a court of law evaluates
this situation and provides for a suitable and appropriate remedy.
Very truly yours,
TRINAD CAPITAL MASTER FUND LTD.
By: Trinad Capital L.P.
By: Trinad Advisors GP LLC
By: /s/ Robert S. Ellin
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Name: Robert S. Ellin
Title: Managing Member
* * * * *
Trinad Capital Master Fund Ltd. ("Trinad") intends to make a preliminary
filing with the Securities and Exchange Commission (the "SEC") of a proxy
statement to be used to solicit votes for the election of its nominees at the
2006 Annual Meeting of Stockholders of Majesco Entertainment Company, a Delaware
corporation (the "Company").
The following persons, which have joined with Trinad in filing a Statement
on Schedule 13D with respect to the Company's common stock, are anticipated to
be, or may be deemed to be, participants in any such proxy solicitation: Robert
S. Ellin, Trinad Advisors GP, LLC, Trinad Capital L.P., Atlantis Equities, Inc.,
Nancy J. Ellin and the Robert S. Ellin Profit Sharing Plan.
TRINAD STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY
STATEMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION,
INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN THE PROXY SOLICITATION.
SUCH PROXY STATEMENT, WHEN FILED, AND ANY OTHER RELEVANT DOCUMENTS WILL BE
AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
STOCKHOLDERS MAY ALSO OBTAIN A COPY OF THE PROXY STATEMENT, WHEN FILED, WITHOUT
CHARGE, BY CONTACTING JENNY BREYER AT TRINAD'S OFFICE AT (310) 601-2500.
INFORMATION REGARDING THE DIRECT OR INDIRECT INTERESTS OF CERTAIN PERSONS
ANTICIPATED TO BE, OR WHO MAY BE DEEMED TO BE, PARTICIPANTS IN SUCH PROXY
SOLICITATION IS AVAILABLE IN THE SCHEDULE 13D FILED BY TRINAD AND OTHERS WITH
THE SEC ON MAY 11, 2005, AS THE SAME HAS BEEN AND MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH IS AVAILABLE AT NO CHARGE ON THE SEC'S WEBSITE AT
HTTP://WWW.SEC.GOV.
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