<PAGE> 1
December 6, 1999
GT INTERACTIVE SOFTWARE CORP.
417 Fifth Avenue
New York, New York 10016
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14(f)-1 THEREUNDER
REPORT OF CHANGE IN MAJORITY OF DIRECTORS
IN CONNECTION WITH PENDING TRANSACTIONS
This statement is being mailed on or about December 6, 1999 to holders
of record on December 2, 1999 (the "Record Date") of shares of common stock, par
value $.01 per share (the "Common Stock"), of GT Interactive Software Corp., a
Delaware corporation ("GT"). This statement is being furnished in connection
with a proposed change in the majority of the board of directors of GT as a
result of the pending transaction described below.
THIS STATEMENT IS BEING PROVIDED FOR INFORMATIONAL PURPOSES ONLY. NO PROXIES ARE
BEING SOUGHT HEREBY AND STOCKHOLDERS ARE NOT BEING ASKED TO TAKE ANY ACTION IN
CONNECTION HEREWITH.
As of the Record Date, there were (i) 74,644,928 shares of GT's Common
Stock outstanding and (ii) 600,000 shares of GT's Series A Convertible Preferred
Stock, par value $.01 per share ("Series A Preferred Stock"), outstanding. Each
share of Common Stock is entitled to one vote and each share of Series A
Preferred Stock is entitled to ten votes.
DESCRIPTION OF TRANSACTION
On November 15, 1999, Infogrames Entertainment S.A. ("Infogrames"), a
societe anonyme organized under the laws of France; California U.S. Holdings,
Inc., a California corporation and a wholly-owned subsidiary of Infogrames
("Purchaser"); and GT entered into a Securities Purchase Agreement (the "GT
Purchase Agreement") pursuant to which, among other things, GT agreed to issue
to Purchaser and Purchaser agreed to purchase from GT: (1) 28,571,429 shares of
GT's Common Stock (the "GT Shares"), for an aggregate purchase price of $50.0
million, and (2) a 5% Convertible Subordinated Note due 2004 in the approximate
principal amount of $60.5 million and convertible into approximately 32,700,000
shares of GT Common Stock at a conversion price of $1.85 per share, subject to
adjustment in certain circumstances (the "GT Note" and together with
<PAGE> 2
the GT Shares, the "GT Securities"). The expected total purchase price for the
GT Securities is approximately $110.5 million.
Concurrently with the execution of the GT Purchase Agreement, Purchaser
entered into securities purchase and voting agreements (the "Cayre Purchase
Agreements"), with each of Joseph Cayre, Kenneth Cayre, Stanley Cayre and Jack
J. Cayre, their children and various associated trusts (collectively, the "Cayre
Family") pursuant to which Purchaser agreed to purchase from the Cayre Family
(1) an aggregate of 33,443,743 shares of GT Common Stock for an aggregate
purchase price of $25.0 million (approximately $0.74 per share) (the "Cayre
Shares"), and (2) 9% Subordinated Notes of GT in the aggregate principal amount
of $10.0 million, for a purchase price of $10.0 million plus accrued interest
(the "Cayre Notes," and together with the Cayre Shares, the "Cayre Securities").
The expected total purchase price for the Cayre Securities is approximately
$35.5 million. The Cayre Family has committed to provide Infogrames with a proxy
for approximately 1.3 million shares of Common Stock that will continue to be
owned by the Cayre Family upon the closing of the transaction described herein.
In addition, concurrently with the execution of the GT Purchase
Agreement and the Cayre Purchase Agreements, Purchaser entered into a securities
purchase and voting agreement (the "GAP Purchase Agreement"), with General
Atlantic Partners, LLC and certain of its affiliates (collectively, "GAP")
pursuant to which Purchaser agreed to acquire from GAP for nominal consideration
warrants to purchase 4,500,000 shares of GT Common Stock at a per share exercise
price of $.01. In addition, pursuant to an exchange agreement between GAP and
GT, GAP has agreed to exchange its 600,000 shares of GT's Series A Preferred
Stock and its $20.0 million in principal amount of 9% Subordinated Notes of GT,
due July 29, 2000, for $50.0 million in principal amount of Convertible
Subordinated Notes due 2004 to be issued by GT. The Convertible Subordinated
Notes are convertible into GT Common Stock at a conversion price of $4.00 per
share, subject to adjustment in certain circumstances.
In connection with the transactions described above, GT's Board of
Directors elected Mr. Bruno Bonnell and Mr. Thomas Schmider as directors of GT,
effective as of the closing of the transactions contemplated by the GT Purchase
Agreement (the "Closing"). In addition, pursuant to the terms of the GT Purchase
Agreement, GT agreed that its Board of Directors would, at the request of
Infogrames, prior to the Closing elect another director to be designated by
Infogrames effective as of the Closing, provided that the designee is reasonably
acceptable to GT's Board of Directors. Infogrames has designated Mr. Herve
Liagre for election as such director. Pursuant to the GT Purchase Agreement, GT
has agreed to procure the resignation of all current directors of GT other than
Mr. Thomas A. Heymann and Mr. Steven A. Denning, effective as of the Closing. GT
also agreed that, if requested by Infogrames, GT would secure the resignations
of or remove, effective as of the Closing, any member of the Board of Directors
of any subsidiary of GT. In addition, GT agreed that, if requested by
Infogrames, GT would exercise reasonable best efforts to cause Infogrames'
designees to be elected to the Boards of Directors of GT's subsidiaries,
effective as of the Closing. Certain information regarding Messrs. Bonnell,
Schmider and Liagre is set forth below.
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The consummation of the transactions contemplated by the Cayre Purchase
Agreements and the GAP Purchase Agreement is contingent upon satisfaction of the
closing conditions under the GT Purchase Agreement. The consummation of the
transactions contemplated by the GT Purchase Agreement is contingent upon, among
other things, the expiration or early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Infogrames
has also agreed that following the closing under the GT Purchase Agreement, it
will use its reasonable best efforts to elect directors in compliance with GT's
Certificate of Incorporation and rules for inclusion of GT Common Stock on the
Nasdaq National Market.
NEW DIRECTORS
The following table sets forth certain information with respect to each
of the persons who is expected to become a director of GT upon consummation of
the transactions described above.
<TABLE>
<CAPTION>
EXPECTED
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Bruno Bonnell 41 Director
Thomas Schmider 37 Director
Herve Liagre 40 Director
</TABLE>
The business experience of the new directors is as follows:
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND OTHER
- ---- -----------------------------
<S> <C>
Bruno Bonnell Mr. Bruno Bonnell is the founder of Infogrames and has been its Chairman of the Board of
Directors, President and Chief Executive Officer of Infogrames since its inception.
Thomas Schmider Mr. Thomas Schmider has been a Managing Director of Infogrames for over 15 years.
Herve Liagre Mr. Herve Liagre has served as Mergers and Acquisitions Director for Infogrames since
August 1998 and has been actively involved in all major acquisitions and divestitures by
Infogrames during such period. From March 1989 through July 1998, Mr. Liagre was an
investment manager with SIPAREX, S.C.A. one of the leading venture capital investment
firms in France.
</TABLE>
CURRENT BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Current Executive Officers
Certain information regarding GT's executive officers (as of December
1, 1999) is set forth below.
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<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas A. Heymann 41 Chairman of the Board of Directors and Chief
Executive Officer
John T. Baker IV 39 President and Chief Operating Officer
Harry M. Rubin 46 President, International Division
Charles F. Bond 43 President Value Products and Close-Outs Division
Jack J. Cayre 26 Executive Vice President and Director
Michael A. Ryder 47 Senior Vice President, Domestic Frontline Division
Frank Herman 66 Chairman, GT Interactive Software (Europe) Limited
</TABLE>
Thomas A. Heymann has been the Chairman of the Board of Directors and
Chief Executive Officer of GT since February 8, 1999. From November 1994 to
February 1999, Mr. Heymann was President of The Disney Store, Inc. Prior
thereto, Mr. Heymann served as Senior Vice President and General Manager, North
America of The Disney Store, Inc.
John T. Baker IV has been President and Chief Operating Officer of GT
since April 26, 1999. From June 1997 to April 1999, Mr. Baker served as Senior
Vice President, Corporate Development of Activision, Inc. ("Activision"), a
publisher, developer and distributor of interactive entertainment and leisure
software. Prior to Activision, Mr. Baker worked in a private equity firm.
Harry M. Rubin has served as President of the International Division
since April 1998. From March 1995 to April 1998, Mr. Rubin served as Executive
Vice President and General Manager, International Division and Business Affairs
of GT. From June 1994 to August 1995, Mr. Rubin served as Chief Financial
Officer of GT.
Charles F. Bond has been President of the Value Products and Close-Outs
Division since the consolidation of the Slash Division with the operations of
WizardWorks Group, Inc., a wholly-owned subsidiary of GT ("WizardWorks"). Prior
thereto, Mr. Bond served as President of the Slash Division of GT from June
1995, when Slash Corporation was acquired by GT. From May 1991 to June 1995, Mr.
Bond was the President of Slash Corporation.
Jack J. Cayre has been Executive Vice President and a Director of GT
since its incorporation. From January 1993 to January 1995, Mr. Cayre was Vice
President of Licensing and Product Acquisition. From January 1990 to August
1992, Mr. Cayre was the President of Double J Records, a privately-held record
company.
Michael A. Ryder has been Senior Vice President of the Domestic
Frontline Division since October 1997. From 1994 to October 1997, when
SingleTrac Entertainment Technologies, Inc. ("SingleTrac") was acquired by GT,
Mr. Ryder was the Chairman, Chief Executive Officer and co-founder of
SingleTrac.
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Frank Herman has been Chairman of GT Interactive Software (Europe)
Limited since May 1995. Mr. Herman was also Managing Director of GT Interactive
Software (Europe) Limited from May 1995 to August 1997. From April to October
1995, Mr. Herman was Chairman of Probe Software Ltd., a software development
house. From July 1991 to April 1995, Mr. Herman was Deputy Chairman and Managing
Director of Sega (Europe) Ltd.
Each executive officer is elected annually by the Board of Directors of
GT and serves at the pleasure of the Board.
Current Directors
Certain information regarding GT's directors is set forth below. Each
director has served continuously with GT since his first election as indicated
below. Joseph J. Cayre and Stanley Cayre are brothers and Jack J. Cayre is the
son of Joseph J. Cayre.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE POSITION SINCE EXPIRES
- ---- --- -------- ----- -------
<S> <C> <C> <C> <C>
CLASS I DIRECTORS
William E. Ford(3)(4) 38 Director 1995 1999
Jordan A. Levy(1)(3) 43 Director 1996 1999
CLASS II DIRECTORS
Jack J. Cayre 26 Executive Vice President and 1992 2000
Director
Steven A. Denning (1)(2) 51 Director 1995 2000
Philip J. Riese(4) 49 Director 1998 2000
Alvin N. Teller (1)(2) 55 Director 1996 2000
CLASS III DIRECTORS
Joseph J. Cayre(1) 57 Chairman Emeritus of the Board 1992 2001
Stanley Cayre(3)(4) 63 Director 1992 2001
Thomas A. Heymann 41 Chairman of the Board of 1999 2001
Directors and Chief Executive
Officer
</TABLE>
- ---------------------------
(1) Member of the Compensation Committee.
(2) Member of the Executive Stock Option Subcommittee of the Compensation
Committee.
(3) Member of the Audit Committee.
(4) Member of the Finance Committee.
At the time of GT's initial public offering in December 1995, Joseph J.
Cayre,
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Kenneth Cayre, Stanley Cayre, the various trusts for the benefit of their
respective children, Jack J. Cayre (collectively, the "Cayre Family
Stockholders") and GT entered into a stockholders' agreement, which provides,
among other things, that the Cayre Family Stockholders will vote their
respective shares of Common Stock to elect as directors of GT (i) two
individuals designated by Mr. Joseph J. Cayre, (ii) one individual designated by
Mr. Kenneth Cayre and (iii) one individual designated by Mr. Stanley Cayre. Mr.
Kenneth Cayre resigned as a director of GT in June 1998 and has not designated
any individual to succeed him.
Steven A. Denning and William E. Ford are the Executive Managing Member
and a managing member, respectively, of General Atlantic Partners, LLC. In
connection with their acquisition of shares of Common Stock, certain affiliates
of General Atlantic Partners, LLC entered into a stockholders' agreement with GT
and certain other stockholders, pursuant to which Messrs. Denning and Ford were
elected to the Board of Directors in February 1995. This stockholders' agreement
automatically expired by its terms upon the effectiveness of GT's initial public
offering.
The name, principal occupation, business experience for at least the
past five years and certain other information concerning each director are set
forth below.
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE
- ---- -------------------
<S> <C>
Joseph J. Cayre Mr. Joseph J. Cayre, a co-founder of GT, is Chairman Emeritus of the Board of
Directors and, until April 28, 1998, had been Chairman of the Board of Directors of
GT since its incorporation in September 1992. Mr. Cayre also co-founded GoodTimes
Home Video Corp. ("GTHV"), a privately-held publisher and distributor of
pre-recorded video tapes, in 1984 and has served as its President since that time.
Thomas A. Heymann Mr. Heymann has served as Chairman of the Board of Directors and Chief Executive
Officer of GT since February 8, 1999. From November 1994 to February 1999, Mr.
Heymann was President of The Disney Store, Inc. Prior thereto, Mr. Heymann served
as Senior Vice President and General Manager, North America of The Disney Store, Inc.
Stanley Cayre Mr. Stanley Cayre, a co-founder of GT, has been a Director of GT since its
incorporation. Mr. Cayre is the Chairman of the Audit Committee. Mr. Cayre also
co-founded GTHV and has served as its Chairman since that time.
Jack J. Cayre Mr. Jack J. Cayre has been Executive Vice President and a Director of GT since its
incorporation. From January 1993 to January 1995, Mr. Cayre was Vice President of
Licensing and Product Acquisition. From January 1990 to August 1992, Mr. Cayre was
the President of Double J Records, a privately-held record company.
</TABLE>
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<TABLE>
<S> <C>
Steven A. Denning Mr. Denning has served as a Director of the Company since February 1995. Mr. Denning
is currently the Executive Managing Member of General Atlantic Partners, LLC, a
private equity firm that invests globally in software, Internet, services and
related information technology companies, and has been with General Atlantic (or its
predecessor) since 1980. Mr. Denning is a member of the Boards of Directors of
Eclipsys Corporation, a provider of clinical, financial and administrative software
solutions to the healthcare industry and several private companies in which General
Atlantic Partners, LLC or one of its affiliates is an investor.
William E. Ford Mr. Ford has served as a Director of the Company since February 1995. Mr. Ford is a
managing member of General Atlantic Partners, LLC, a private equity firm that
invests globally in software, Internet, services and related information technology
companies, and has been with General Atlantic (or its predecessor) since July 1991.
Mr. Ford is also a director of Priceline.com Incorporated, a publicly traded
buyer-driven e-commerce company whose "demand collection system" enables consumers
to use the Internet to save money on a wide range of products and services, E*Trade
Group, Inc., a provider of online investing services for self-directed investors,
Tickets.com, a provider of entertainment tickets, event information and related
products and services through retail stores, telephone sales centers, interactive
voice response systems and the Internet, LHS Group, Inc., a publicly-traded billing
solutions software company, Quintiles Transnational Corp., a publicly traded
provider of a full range of integrated product development and commercialization
services to the global pharmaceutical, biotechnology and medical device industries,
and Eclipsys Corporation, a provider of clinical, financial and administrative
software solutions to the health care industry, and several private software
companies in which General Atlantic Partners, LLC or one of its affiliates is an
investor.
Jordan A. Levy Mr. Levy has served as a Director of GT since February 1996. Since January 1997, Mr.
Levy has served as Vice Chairman of ClientLogic Corporation (formerly doing business
as SOFTBANK Services Group) ("ClientLogic"), an international outsourcing services
company to the computer industry. From February 1991 to December 1996, Mr. Levy was
Co-Chief Executive Officer and President of ClientLogic. Mr. Levy is currently
Managing Partner of Seed Capital Partners, a ClientLogic affiliate. He is also a
director of Cobalt Networks, Inc., a publicly traded network server appliance
company.
</TABLE>
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<TABLE>
<S> <C>
Phillip J. Riese Mr. Riese has served as a Director of GT since January 1998. Since November 1998,
Mr. Riese has served as Chief Executive Officer of OptiMark Technologies, Inc., a
privately-held transaction services company relating to securities trading. Prior
thereto, Mr. Riese was President of the Consumer Card Services Group for American
Express Travel Related Services Company, Inc., a position to which he was appointed
in September 1995. Since joining American Express in 1980, Mr. Riese has served the
organization in various capacities, including as Executive Vice President/General
Manager of the Charge Card Group, President of the Cardmember Financial Services
Group, and Chairman of the Board and President of American Express Centurion Bank.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
GT has an Audit Committee, a Compensation Committee and a Finance
Committee. During the fiscal year ended March 31, 1999, the Board of Directors
held twelve meetings, the Compensation Committee met four times, the Audit
Committee met two times, and the Finance Committee met one time. The Audit
Committee reviews the adequacy of internal controls, the results and scope of
annual audits and other services provided by GT's independent public
accountants. During the fiscal year ended March 31, 1999, the Audit Committee
was comprised of Stanley Cayre, Jordan A. Levy and William E. Ford.
The Compensation Committee establishes salaries, bonuses and other
forms of compensation for officers of GT. During the fiscal year ended March 31,
1999, the Compensation Committee was comprised of Joseph J. Cayre, Steven A.
Denning, Jordan A. Levy and Alvin N. Teller. In January 1998, the Board of
Directors also established an Executive Stock Option Subcommittee of the
Compensation Committee, comprised of Messrs. Denning and Teller. The Executive
Stock Option Subcommittee may, without further approvals by the Board of
Directors or the Compensation Committee, consider and grant any stock-based
compensation permitted under GT's stock incentive plans, and modify or amend any
existing grants, to directors, executive officers and certain other employees of
GT. The full Board of Directors, however, retains the authority to make any such
grants, modifications or amendments, independent of the Executive Stock Option
Subcommittee or the Compensation Committee.
The Finance Committee reviews, and makes recommendations to the full
Board of Directors with respect to, the following matters: (i) the financial
position and results of operations of GT, (ii) the capital requirements and
financing policies and strategies of GT, (iii) the acquisition or divestiture of
major assets, including by merger or consolidation, (iv) the establishment and
review of annual budgets of GT, and (v) the domestic and foreign investment
policies of GT. During the fiscal year ended March 31, 1999, the Finance
Committee was comprised of Stanley Cayre, William E. Ford, Phillip J. Riese and,
until February 8, 1999, Ronald W. Chaimowitz.
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GT does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole. Any stockholder who wishes to make a nomination at an annual or special
meeting for the election of directors must do so in compliance with the
applicable procedures set forth in GT's By-laws. GT will furnish copies of such
By-law provisions upon written request to GT at its principal executive offices,
417 Fifth Avenue, New York, NY 10016, Attention: President.
During the period in which he served as a director, each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors plus the total number of all committees of the Board on which
he served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the directors and executive officers of GT and persons who beneficially
own more than ten percent of GT's Common Stock (collectively, the "Reporting
Persons") to report their ownership of and transactions in GT's Common Stock to
the Securities and Exchange Commission (the "Commission"). Copies of these
reports are also required to be supplied to GT. GT believes, upon a review of
the copies of such reports received by GT and written representations furnished
by the Reporting Persons to GT, that during the fiscal year ended March 31, 1999
the Reporting Persons complied with all applicable Section 16(a) reporting
requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by GT's Chief Executive Officer and its other
four most highly compensated executive officers during the fiscal year ended
March 31, 1999 (collectively, the "Named Executive Officers") for services
rendered in all capacities to GT during the twelve months ended December 31,
1996 and 1997, and the fiscal years ended March 31, 1998 and 1999.
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
--------------------------
ANNUAL
COMPENSATION
---------------------
Restricted Securities All Other
Salary Bonus Stock Underlying Compensation
Name and Principal Position Year ($) ($) Awards ($) Options (#) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Heymann 3/31/99 70,615 250,000 -- 3,000,000 --
Chairman of the Board and Chief
Executive Officer(1)
Ronald W. Chaimowitz 3/31/99 541,500 -- -- -- 1,404,800 (3)
Chairman of the Board 3/31/98(4) 425,962 251,988 (5) -- 1,000,000 (6) 4,750 (7)
and chief Executive Officer 1997 414,615 251,988 (8) -- 500,000 4,750 (7)
until February 8, 1999(2) 1996 365,000 -- (9) -- 250,000 (9) 1,500 (7)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
David I. Chemerow 3/31/99 350,769 -- -- 100,000 4,800 (7)
President and Chief 3/31/98(4) 256,145 94,583 (5) -- 350,000(11)
Operating Officer 1997 186,923 94,583 (8) -- 350,000(11)
until April 26, 1999(10) 1996 -- -- -- --
Harry M. Rubin 3/31/99 381,769 -- -- -- --
President, International 3/31/98(4) 300,000 151,800 (5) -- 250,000 --
Division 1997 299,808 151,800 (8) -- 150,000 --
1996 275,000 80,000 (8) -- -- --
Charles F. Bond 3/31/99 354,231 631,250(12) -- 200,000 4,800 (7)
President, Value Products 3/31/98(4) 308,078 825,000 (5) -- -- 4,750 (7)
and Close-Outs Division 1997 300,001 743,750(13) -- 50,000 4,750 (7)
1996 300,001 500,000(13) -- -- --
Andrew Gregor 3/31/99 277,475 -- -- -- 4,800 (7)
Chief Financial Officer and 3/31/98(4) 265,000 107,272 (5) -- 70,000(14) 4,750 (7)
Senior Vice President, 1997 265,000 107,272 (8) -- 100,000 4,750 (7)
Finance and Administration 1996 245,962 40,015 (8) -- --
until May 18, 1999
</TABLE>
- ---------------------------
(1) Mr. Heymann has served as Chairman of the Board and Chief Executive
Officer of GT since February 8, 1999. Because Mr. Heymann was
unaffiliated with GT prior to such time, compensation information with
respect to him is presented only with respect to the fiscal year ended
March 31, 1999.
(2) Mr. Chaimowitz left the employ of GT on March 31, 1999. From February
8, 1999 to March 31, 1999, Mr. Chaimowitz served as Chairman of the
Board and Chief Executive Officer of GT's subsidiary, One Zero Media,
Inc. From April 1998 until February 8, 1999, Mr. Chaimowitz served as
Chairman of the Board and Chief Executive Officer of GT. From February
1995 to April 1998, Mr. Chaimowitz served as President and Chief
Executive Officer of GT. From January 1994 to January 1995, Mr.
Chaimowitz served as Executive Vice President and General Manager of
GT.
(3) Includes (i) $1,400,000 as payment in lieu of certain severance payment
obligations under Mr. Chaimowitz's employment agreement and (ii) $4,800
as Company contribution, on behalf of the Mr. Chaimowitz, to GT's
401(k) Profit Sharing Plan.
(4) Represents the twelve months ended March 31, 1998. Effective January 1,
1998, GT changed its fiscal year end from December 31 to March 31.
Because of the nine month overlap with the prior fiscal year ended
December 31, 1997, certain information disclosed for the twelve months
ended March 31, 1998 also includes information disclosed for 1997.
(5) Includes bonus earned during the fiscal year ended December 31, 1997.
(6) Includes options to purchase 500,000 shares of Common Stock granted to
Mr. Chaimowitz in May 1997 and options to purchase 500,000 shares of
Common Stock granted to Mr. Chaimowitz in February 1998.
(7) Represents Company contributions, on behalf of the Named Executive
Officers, to GT's 401(k) Profit Sharing Plan.
(8) This bonus was earned in the year indicated, but paid in the
immediately subsequent year.
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(9) In lieu of cash bonus for 1996, in February 1997, Mr. Chaimowitz
received options to purchase 250,000 shares of Common Stock at an
exercise price of $14.00 per share. The closing sale price of GT's
Common Stock as reported on the Nasdaq National Market on the date of
the grant was $8.125 per share. Such options become exercisable in four
equal annual installments commencing on February 7, 1998.
(10) Mr. Chemerow joined GT in May 1997 and accordingly, the information
contained herein for the year ended December 31, 1997 reflects a
partial year. Mr. Chemerow served as a consultant to GT from May 1999
to September 1999. From May 1998 to April 26, 1999, Mr. Chemerow served
as President and Chief Operating Officer of GT. From May 1997 to April
1998, Mr. Chemerow served as Executive Vice President and Chief
Operating Officer of GT.
(11) Represents options to purchase 350,000 shares of Common Stock granted
to Mr. Chemerow in May 1997.
(12) Includes annual bonuses payable under the new employment agreement,
which GT and Mr. Bond entered into on July 1, 1998, and the original
employment agreement, which GT and Mr. Bond entered into in connection
with the acquisition of Slash Corporation ("Slash"). See "Employment
Agreements." These bonuses were earned in the year indicated, but a
portion thereof was paid in the immediately subsequent year.
(13) Includes an annual bonus payable under the original employment
agreement, which GT and Mr. Bond entered into in connection with the
acquisition of Slash. See "Employment Agreements." This bonus was
earned in the year indicated, but paid in the immediately subsequent
year.
(14) Includes options to purchase 30,000 shares of Common Stock granted to
Mr. Gregor in May 1997 and options to purchase 40,000 shares of Common
Stock granted to Mr. Gregor in December 1997.
Option Grants Table. Shown below is information regarding grants of
stock options under GT's stock incentive plans to the Named Executive Officers
during the fiscal year ended March 31, 1999.
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OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
NUMBER OF GRANTED TO TERMS (2)
SECURITIES EMPLOYEE IN ------------------------------
UNDERLYING FISCAL YEAR EXERCISE
OPTIONS (1) PRICE PER EXPIRATION
GRANTED SHARE DATE 0% 5% 10%
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas A. Heymann 2,250,000 (3) 39.44% $ 5.00 (3) 02/08/09 -- $7,075,065 $17,929,603
250,000 (3) 4.38% $10.00 (3) 02/08/09 -- -- $ 742,178
250,000 (3) 4.38% $15.00 (3) 02/08/09 -- -- --
250,000 (3) 4.38% $20.00 (3) 02/08/09 -- -- --
David Chemerow 100,000 (4) 1.75% $ 7.50 04/03/08 -- $ 471,671 $ 1,195,306
Charles F. Bond 200,000 (5) 3.51% $ 6.75 08/04/08 -- $ 849,007 $ 2,151,552
</TABLE>
- ---------------------------
(1) During the fiscal year ended March 31, 1999, GT granted options for an
aggregate of 5,705,132 shares to its employees.
(2) Represents the product of (1) difference between (A) the product of the
per-share fair market value at the time of grant compounded annually at the
assumed rate of appreciation over the term of the option, and (B) the per-share
exercise price of the option, and (ii) the number of shares underlying the grant
at the fiscal year end.
(3) The option is exercisable in four equal annual installments commencing on
February 8, 2000 at the following exercise prices: (i) 2,250,000 at $5.00 per
share (the fair market value of the Common Stock on the date of grant), (ii)
250,000 at $10.00 per share, (iii) $250,000 at $15.00 per share, and (iv)
250,000 at $20.00 per share.
(4) The option is exercisable in four equal annual installments commencing on
April 3, 1999. Mr. Chemerow left the employ of GT on September 3, 1999.
(5) The option is exercisable in three equal annual installments commencing on
June 29, 1999.
Aggregated Option Exercises and Fiscal Year-End Option Value Table.
Shown below is information relating to the exercise of stock options during the
fiscal year ended March 31, 1999 for each of GT's Named Executive Officers and
the year-end value of unexercised options held by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at Fiscal In-The-Money Options at
Acquired on Value Year-End Fiscal Year-End (1)
Name Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- -------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Thomas A. Heymann -- -- 0/3,000,000 --
Ronald W. Chaimowitz -- -- 2,155,000/0 $275,438/$0
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Harry M. Rubin -- -- 295,428/282,300 $87,887/$0
David I. Chemerow -- -- 87,500/362,500 --
Andrew Gregor -- -- 160,000/84,000 --
Charles F. Bond -- -- 29,500/226,500 --
</TABLE>
(1) Market value of underlying shares of Common Stock, based on the average of
the high and low sales price ($4.594), on March 31, 1999, minus the aggregate
exercise price.
COMPENSATION OF DIRECTORS
Each non-employee director of GT is paid an annual retainer of $15,000
and a fee of $1,000 for each meeting of the Board of Directors or any committee
thereof he attends.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended March 31, 1999, GT's Compensation
Committee consisted of Joseph J. Cayre, Steven A. Denning, Jordan A. Levy and
Alvin N. Teller. For certain transactions involving GT and the members of the
Compensation Committee or entities affiliated with such individuals, see
"Certain Relationships and Related Transactions."
EMPLOYMENT AGREEMENTS
GT entered into an employment agreement with Ronald W. Chaimowitz,
pursuant to which he would serve as President-Chief Executive Officer and/or
Chairman of the Board of Directors of GT, in each case as determined in the sole
discretion of GT's Board of Directors, for a five-year term ending on April 27,
2003. On April 28, 1998, Mr. Chaimowitz was appointed Chairman of the Board of
Directors and Chief Executive Officer of GT. The agreement provided that Mr.
Chaimowitz's annual salary would be $550,000. Such base salary would be
increased at the sole discretion of the Board of Directors, provided, however,
that if GT's net sales exceed $1 billion for any fiscal year ending during the
term of his employment, Mr. Chaimowitz's base salary would be increased to an
annual rate of $600,000. In addition, Mr. Chaimowitz would be eligible to
receive bonuses and stock option grants at the discretion of the Board of
Directors, provided that Mr. Chaimowitz would participate in GT's senior
executive bonus plan with a target bonus of 60% of his base salary. Mr.
Chaimowitz would be entitled to participate in GT's employee benefit plans
generally available to GT's senior executives. In addition, Mr. Chaimowitz
agreed not to engage in any competitive business until the later of April 27,
2003 or, if his employment with GT were terminated for disability, or other than
for cause, or he were to resign for Good Reason (as defined in the agreement),
then for so long as GT continues to pay him severance payments pursuant to the
agreement. If Mr. Chaimowitz's employment were not terminated prior to a Change
of Control (as defined below), then his obligation not to engage in any
competitive business would be limited to a period equal to the greater of (i)
one year from the date of such Change of Control or (ii) the period during which
he remains employed by GT or its successor and parent company, if any. In
addition, if, following a Change of Control, there would occur Good Reason (as
defined in the agreement), Mr. Chaimowitz was not the President-Chief Executive
Officer
13
<PAGE> 14
and/or Chairman of the Board of Directors of GT or its successor and parent
company, or if Mr. Chaimowitz's employment were terminated other than for cause,
then Mr. Chaimowitz could, within 90 days of any such event, terminate his
employment with GT or its successor and parent company and in such case he would
receive severance payments otherwise payable under the agreement with the same
effect as if he were terminated without cause or resigned with Good Reason. Upon
the happening of a Change of Control, or if Mr. Chaimowitz were terminated
without cause, or for disability, or he were to resign for Good Reason, or upon
his death, all options then held by Mr. Chaimowitz would immediately vest and
become exercisable. For purposes of the agreement, the term Change of Control
means any of the following: (a) any person, as that term is used in Sections
13(d) and 14(d) of the Exchange Act (other than GT, fiduciaries or trustees
under GT's employee benefit plan, members of the Cayre family, General Atlantic
Partners, LLC, entities controlled or managed by General Atlantic Partners, LLC,
or any entity more than 50% owned beneficially by any of the aforementioned),
becomes the beneficial owner, directly or indirectly, of 50% or more of the
voting power of GT's then outstanding securities; (b) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of GT (and any new director approved by such persons),
cease for any reason to constitute at least a majority of the Board of
Directors; (c) the approval by GT's stockholders of certain mergers or
consolidations of GT with any other entity; or (d) the approval by GT's
stockholders of a plan of complete liquidation of GT or an agreement for the
sale or distribution of all or substantially all of GT's assets.
On March 31, 1999, Mr. Chaimowitz left the employ of GT. GT paid Mr.
Chaimowitz an amount of $1.4 million on that date in lieu of certain severance
payment obligations under his existing employment agreement. Mr. Chaimowitz is
entitled to receive additional severance payments in lieu of (and in the same
amount as) his salary over the remainder of the term of such employment
agreement.
GT has entered into an employment agreement with Thomas A. Heymann,
pursuant to which he will serve as Chairman of the Board of Directors and Chief
Executive Officer of GT for a four-year term commencing on February 8, 1999. The
agreement provides that Mr. Heymann's annual salary is $612,000. Such base
salary will be increased annually by no less than 5%, and may be increased
further at the sole discretion of the Board of Directors. In addition, Mr.
Heymann is eligible to receive bonuses and stock option grants at the sole
discretion of the Board of Directors or the applicable committee thereof,
provided that Mr. Heymann will participate in GT's senior executive bonus plan
with a target bonus equal to 60% of his base salary and that for the fiscal year
ending March 31, 2000, Mr. Heymann will receive a minimum guaranteed bonus of no
less than $150,000. Mr. Heymann was granted options to purchase 3,000,000 shares
of Common Stock and was paid a one time commencement bonus of $250,000. Mr.
Heymann is entitled to participate in the employee benefit plans generally
available to GT's senior executives. With certain exceptions, Mr. Heymann has
agreed not to engage in any competitive business for the term of his agreement.
If his employment with GT is terminated other than for cause, death, retirement,
voluntary resignation or disability, or if he resigns for Good Reason (as
defined in the agreement),
14
<PAGE> 15
then GT will continue to pay him severance payments pursuant to the agreement.
If, following a Change of Control (as defined above), Mr. Heymann resigns for
Good Reason, or he is no longer Chairman of the Board of Directors and Chief
Executive Officer of GT, its successor or its parent, if any, or Mr. Heymann's
employment by GT, its successor or parent company, if any, is terminated for any
reason other than cause, then, at any time within 90 days of such event, Mr.
Heymann may terminate his employment with GT, its successor or parent company,
if any, and in such case he would receive severance payments otherwise payable
to him under the agreement, as if he were terminated without cause or he
resigned for Good Reason. Upon the happening of a Change of Control, or if Mr.
Heymann's employment with GT is terminated by GT for any reason other than for
cause, or if Mr. Heymann voluntarily resigns for Good Reason, then all options
previously granted to him will immediately vest and become exercisable.
On October 19, 1999, GT and Mr. Heymann amended his employment
agreement in light of GT's announcement in June 1999 that it was seeking a
recapitalization, sale or merger. The amendment provided that upon the "Sale"
(as defined in the amendment) of GT to an unrelated third party (defined in the
amendment generally to mean persons who are not affiliated with any member of
the GT's Board of Directors), Mr. Heymann would receive, at the closing of the
Sale, a Sale Bonus equal to the greater of $2,500,000 or 3% of the amount by
which the proceeds from such Sale (excluding debt assumed by an acquirer or debt
on GT's balance sheet) exceeds $3.00 per share of GT Common Stock (including
shares of Common Stock issuable upon conversion of GT's Series A Preferred
Stock). The proposed transaction with Infogrames described herein is not a
"Sale" within the meaning of the amendment. Should GT terminate Mr. Heymann's
employment without cause or if he resigns for good reason prior to June 30, 2000
and a "Sale" of GT is consummated on or before that date, Mr. Heymann would be
entitled to receive the Sale Bonus described above. If receipt of a Sale Bonus
results in excise tax under Section 280(G)(b)(2) of the Internal Revenue Code,
GT agreed to reimburse Mr. Heymann for such taxes in certain circumstances and
in certain amounts. Under the amendment, if GT were to liquidate following sales
to various third parties of individual divisions or subsidiaries, Mr. Heymann's
employment would be deemed to have terminated for Good Reason, and he would be
entitled to severance payments referred to above in a lump sum rather than
payable over the term of the agreement. The amendment also provided that in the
event Mr. Heymann receives a Sale Bonus, he would forfeit all options granted to
him upon commencement of his employment on February 8, 1999.
GT has entered into an employment agreement with Harry M. Rubin,
pursuant to which he serves as Executive Vice President and General Manager --
International Division and Business Affairs for a three-year term ending on
December 31, 2001. On April 28, 1998, Mr. Rubin was appointed President of the
International Division. The agreement provides that Mr. Rubin's annual salary is
$360,000 for the year ending December 31, 1998, subject to annual review during
the term of Mr. Rubin's agreement in increases of not less than 5% per year, but
otherwise in GT's discretion. In addition, Mr. Rubin is eligible to receive
bonuses and stock option grants at the discretion of the Board of Directors,
provided that Mr. Rubin will participate in GT's senior executive bonus plan
15
<PAGE> 16
with a target bonus of 50% of his base salary. Mr. Rubin is entitled to
participate in GT's employee benefit plans generally available to GT's senior
executives. In addition, Mr. Rubin has agreed not to engage in any competitive
business until the later of December 31, 2001 or, if his employment with GT is
terminated for disability, or other than for cause, or he resigns for Good
Reason (as defined in the agreement), then for so long as GT continues to pay
him severance payments pursuant to the agreement. If Mr. Rubin's employment is
not terminated prior to a Change of Control (as defined above), then his
obligation not to engage in any competitive business is limited to a period
equal to the greater of (i) two years from the date of such Change of Control or
(ii) the period during which he remains employed by GT or its successor and
parent company, if any. In addition, if, following a Change of Control, there
occurs Good Reason (as defined in the agreement), Mr. Rubin is not an Executive
Vice President of GT, its successor or parent company, or if Mr. Rubin's
employment is terminated other than for cause, then Mr. Rubin may, within 90
days of any such event, terminate his employment with GT or its successor and
parent company and in such case he will receive severance payments otherwise
payable under the employment agreement with the same effect as if he were
terminated without cause or resigned with Good Reason. Upon the happening of a
Change of Control, or if Mr. Rubin is terminated without cause, or for
disability, or he resigns for Good Reason or upon his death, all options then
held by Mr. Rubin will immediately vest and become exercisable.
GT has entered into an amended employment agreement with David I.
Chemerow, pursuant to which he would serve as President and Chief Operating
Officer of GT for a three-year term ending on May 14, 2000. The agreement
provided that Mr. Chemerow's annual salary would be $360,000, that his base
salary would be subject to discretionary increase by GT's Board of Directors and
that Mr. Chemerow would be eligible to receive annual bonuses not to exceed an
amount equal to 50% of his base salary in effect at such time, in such amounts
as determined by GT's Chief Executive Officer and the Board of Directors. Mr.
Chemerow would be entitled to participate in GT's employee benefit plans
generally available to GT's senior executives. In addition, Mr. Chemerow agreed
not to engage in any competitive business until the later of May 14, 2000 or, if
his employment with GT were terminated for disability or other than for cause,
then for so long as GT continued to pay him severance payments pursuant to the
agreement. If Mr. Chemerow's employment were not terminated prior to a Change of
Control (as defined above), then his obligation not to engage in any competitive
business would be limited to a period equal to the greater of (i) two years from
the date of such Change of Control or (ii) the period during which he remained
employed by GT or its successor and parent company, if any. If, following a
Change of Control, (i) Mr. Chemerow's employment were terminated other than for
cause (including a deemed termination as defined in the agreement) or (ii) Mr.
Chemerow were required to relocate as described in the agreement, then at any
time within 90 days of any such event, Mr. Chemerow would be able to terminate
his employment with GT or its successor and parent company and in such case he
would receive severance payments otherwise payable under the agreement with the
same effect as if he were terminated without cause. Upon the happening of a
Change of Control, or if Mr. Chemerow's employment were terminated without
cause, all options then held by Mr.
16
<PAGE> 17
Chemerow would immediately vest and become exercisable. On May 5, 1999, GT
amended the employment agreement, pursuant to which GT and Mr. Chemerow
acknowledged that as a result of Mr. Baker's appointment as President and Chief
Operating Officer of GT in April 1999, Mr. Chemerow would be entitled to
severance benefits and rights upon a Change of Control set forth above, and Mr.
Chemerow agreed to remain as a consultant of the Company until September 3,
1999. Mr. Chemerow left the employ of GT on such date.
GT has entered into a severance pay agreement with Andrew Gregor. The
agreement terminates on the earlier of (i) the date GT terminates his employment
by written notice for any reason, (ii) the date he voluntarily resigns from his
employment, or (iii) the date the agreement is superseded by any other written
agreement between GT and Mr. Gregor. Upon the termination of his employment with
GT, Mr. Gregor will receive severance payments payable under the agreement. The
agreement was amended in October 1998 to provide that in the event of a change
of control, GT will terminate his employment and he will receive severance
payments otherwise payable under the agreement with the same effect as if he
were terminated for any reason other than for Cause (as defined in the
agreement) or for Disability (as defined in the agreement). The amendment
further provides that GT will, on the earlier of (i) March 31, 1999 or (ii) the
date the change of control becomes effective, waive all payments of principal
and interest which are or will be due under Mr. Gregor's Amended and Restated
Promissory Note date March 13, 1998 in the principal amount of $250,000. In
March 1999, GT further amended the severance pay agreement to, among other
things, (i) extend his severance period (with benefits) to 18 months from the
date of termination and (ii) extend the expiration date of his option agreement
to the later of March 3, 2002 and the first anniversary of the date of
termination. On August 5, 1999, Mr. Gregor agreed to cease his employment with
GT as of September 3, 1999 and received severance benefits set forth above.
GT has entered into an employment agreement with Charles F. Bond for a
two-year term ending on June 30, 2000. The agreement also establishes a base
salary of $375,000 per annum through June 30, 1999 and $400,000 per annum
thereafter for the term of employment and provides that Mr. Bond will receive an
annual bonus of $375,000 for the period ending June 30, 1999 and $400,000 for
the period ending June 30, 2000. In addition, upon execution of his current
employment agreement in August 1998, Mr. Bond was granted options to purchase
200,000 shares of Common Stock and was paid a one-time signing bonus of
$100,000. Mr. Bond is entitled to participate in GT's employee benefit plans
generally available to GT's senior executives. In addition, in connection with
the purchase of Slash by GT, as of June 23, 1995, GT entered into a
Non-Competition Agreement with Mr. Bond, pursuant to which he has agreed not to
be involved in any competing business in the United States until the earlier of
one year following termination without cause or June 23, 2000.
Each of the employment agreements prohibits disclosure of proprietary
and confidential information regarding GT and its business to anyone outside GT
both during and subsequent to employment.
17
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 1, 1999,
concerning the Common Stock of GT beneficially owned (i) by each director and
each Named Executive Officer of GT, (ii) by all directors and executive officers
of GT as a group, and (iii) by each stockholder known by GT to be the beneficial
owner of more than 5% of the outstanding Common Stock. Unless otherwise
indicated in the footnotes to the table, the beneficial owners named have, to
the knowledge of GT, sole voting and dispositive power with respect to the
shares beneficially owned, subject to community property laws where applicable.
The following table does not give effect to the transactions discussed
above in "Description of Transaction." Upon consummation of such transactions,
Purchaser will own 99,265,172 shares of GT Common Stock. This number will
include 28,571,429 shares of GT Common Stock which Purchaser has the right to
acquire pursuant to the GT Purchase Agreement, 33,443,743 shares of GT Common
Stock which Purchaser has the right to acquire pursuant to the Cayre Purchase
Agreements, 4,500,000 shares issuable upon exercise of warrants to purchase GT
Common Stock which purchaser will acquire pursuant to the GAP Purchase
Agreement, 50,000 shares of GT Common Stock which Purchaser has the right to
acquire pursuant to a warrant issued in connection with the transactions
described above in "Description of Transactions" and approximately 32,700,000
shares of GT Common Stock which Purchaser will have the right to acquire
pursuant to the GT Note. This last number is an approximate number as the
principal amount of the GT Note varies depending upon the closing date of the
transactions. Infogrames may be deemed to beneficially own all of the shares
held by Purchaser because Purchaser is a wholly-owned subsidiary of Infogrames.
Mr. Bonnell may be deemed to beneficially own all of the shares held by
Purchaser because he is the President and Chief Executive Officer of Purchaser.
Mr. Schmider may be deemed to beneficially own all of the shares held by
Purchaser because he is a director of Purchaser. Mr. Liagre may be deemed to
beneficially own all of the shares held by Purchaser because he is a director of
Purchaser. Each of Mr. Bonnell, Mr. Schmider and Mr. Liagre disclaims beneficial
ownership of such shares.
<TABLE>
<CAPTION>
Shares Beneficially
Owned+
Name Shares Percent
- ---- ------ -------
<S> <C> <C>
Joseph J. Cayre (1) ........................................................... 13,908,388 18.6
Jack J. Cayre (2) ............................................................. 3,815,585 5.1
Stanley Cayre (3) ............................................................. 8,729,265 11.7
Kenneth Cayre (4) ............................................................. 8,595,135 11.5
Ronald W. Chaimowitz (5) ...................................................... 2,874,834 3.7
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
General Atlantic Partners, LLC (6) ............................................ 18,761,858 22.0
3 Pickwick Plaza, Greenwich, CT 06830
Steven A. Denning (7) ......................................................... 18,761,858 22.0
William E. Ford (8) ........................................................... 18,761,858 22.0
Jordan A. Levy (9) ............................................................ 96,000 *
Harry M. Rubin (10) ........................................................... 315,228 *
Alvin N. Teller (11) .......................................................... 61,250 *
Phillip J. Riese (12) ......................................................... 28,000 *
Various trusts for the benefit of the children of Joseph J. Cayre ............. 8.5
417 Fifth Avenue, New York, NY 10016 ..................................... 6,380,000
Various trusts for the benefit of the children of Stanley Cayre ............... 4,720,670 6.3
417 Fifth Avenue, New York, NY 10016 ......................................
Various trusts for the benefit of the children of Kenneth and Lilian Cayre .... 6,769,689 9.1
417 Fifth Avenue, New York, NY 10016 ......................................
Charles F. Bond (13) .......................................................... 2,105,796 2.8
Frank Herman (14) ............................................................. 157,000 *
Michael A. Ryder (15) ......................................................... 193,598 *
All executive officers and directors as a group (13 persons) (16) ............. 48,171,968 63.6
</TABLE>
- ---------------------------
+ This table does not include (i) Thomas A. Heymann, Chairman of the Board of
Directors and Chief Executive Officer of GT, who joined GT on February 8, 1999;
(ii) John T. Baker IV, President and Chief Operating Officer of GT, who joined
GT on April 26, 1999; and (iii) Messrs. David I. Chemerow and Andrew Gregor,
both of whom left the employ of GT on September 3, 1999 and each of whom owned
less than 1% of GT Common Stock as of December 1, 1999. GT has been informed
that neither of Messrs. Heymann or Baker beneficially owned any shares of Common
Stock of GT as of December 1, 1999.
* Less than 1%
(1) Includes 6,380,000 shares in the aggregate held in various trusts for the
benefit of Joseph J. Cayre's children, for which trusts his wife serves as
trustee. Also includes 1,759,388 shares held by a charitable foundation for
which Joseph J. Cayre and his wife serve as trustees. Joseph J. Cayre disclaims
beneficial ownership of the shares held by such trusts and such foundation.
19
<PAGE> 20
(2) Includes 475,085 held by a charitable foundation for which he serves as
trustee, and 305,500 shares subject to options exercisable within 60 days. Jack
J. Cayre disclaims beneficial ownership of the shares held by such foundation.
(3) Includes 4,720,670 shares in the aggregate held in various trusts for the
benefit of Stanley Cayre's children, for which trusts his wife serves as
trustee. Also includes 633,000 shares held by a charitable foundation for which
Stanley Cayre and his wife serve as trustees. Stanley Cayre disclaims beneficial
ownership of the shares held by such trusts and such foundation.
(4) Includes 6,769,689 shares in the aggregate held in various trusts for the
benefit of Kenneth and Lillian Cayre's children, for which trusts Lillian Cayre
serves as trustee. Also includes 500,000 shares held by a charitable foundation
for which Kenneth Cayre and Lillian Cayre serve as trustees. Kenneth Cayre
disclaims beneficial ownership of the shares held by such trusts and such
foundation.
(5) Includes 84,380 shares held in a trust for the benefit of Mr. Chaimowitz's
daughter, for which trust Mr. Chaimowitz's wife serves as trustee. Mr.
Chaimowitz disclaims beneficial ownership of such shares. Also includes
2,155,000 shares subject to options exercisable within 60 days.
(6) Includes (i) 4,184,545 shares held by General Atlantic Partners 16, L.P.
("GAP 16"), 2,092,273 shares held by General Atlantic Partners 19, L.P. ("GAP
19"), 647,707 shares held by GAP Coinvestment Partners, L.P. ("GAP
Coinvestment") and 504,000 shares held by General Atlantic Partners II, L.P.
("GAP II"), (ii) 4,897,440 shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock held by General Atlantic Partners 54, L.P.
("GAP 54") and 1,102,560 shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock held by GAP Coinvestment Partners II, L.P.
("GAP Coinvestment II"), (iii) warrants held by GAP 54 exercisable for 3,673,080
shares of Common Stock and warrants held by GAP Coinvestment II exercisable for
826,920 shares of Common Stock, and (iv) options held by GAP 54 to purchase
680,200 shares of Common Stock held by Joseph J. Cayre, Kenneth Cayre and
Stanley Cayre and options held by GAP Coinvestment II to purchase 153,133 shares
of Common Stock held by Joseph J. Cayre, Kenneth Cayre and Stanley Cayre. The
general partner of GAP 16, GAP 19, GAP II and GAP 54 is General Atlantic
Partners, LLC, a Delaware limited liability company. The managing members of
General Atlantic Partners, LLC are Steven A. Denning, David C. Hodgson, William
O. Grabe, William E. Ford, Peter L. Bloom and Franchon M. Smithson. The same
individuals are the general partners of GAP Coinvestment and GAP Coinvestment
II. Messrs. Denning and Ford, directors of the Company, are the Executive
Managing Member and a managing member, respectively, of General Atlantic
Partners, LLC and general partners of GAP Coinvestment and GAP Coinvestment II.
Messrs. Denning and Ford disclaim beneficial ownership of shares owned by GAP
16, GAP 19, GAP 54, GAP Coinvestment, GAP Coinvestment II and GAP II, except to
the extent of their respective pecuniary interests therein.
(7) See Footnote 6.
20
<PAGE> 21
(8) See Footnote 6.
(9) Includes 87,500 shares subject to options exercisable within 60 days.
(10) Represents 315,228 shares subject to options exercisable within 60 days.
(11) Includes 28,750 shares subject to options exercisable within 60 days.
(12) Includes 15,000 shares subject to options exercisable within 60 days.
(13) Includes 50,000 shares held by Mr. Bond's wife (as to which shares he
disclaims beneficial ownership), 89,882 shares held in a grantor retained
annuity trust, and 97,667 shares subject to options exercisable within 60 days.
(14) Includes 157,000 shares subject to options exercisable within 60 days.
(15) Includes 50,000 shares subject to options exercisable within 60 days. Also
includes 21,450 shares which are held in escrow subject to certain
indemnification rights of GT.
(16) Does not include Mr. Chaimowitz, who left the employ of GT on March 31,
1999, and Messrs. Chemerow and Gregor, both of whom left the employ of GT on
September 3, 1999. Includes an aggregate of 1,056,645 shares subject to options
exercisable within 60 days. Also includes 21,450 shares which are held in escrow
and subject to certain indemnification rights of GT.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leases. In May 1995, G.T. Interactive Software (Europe) Limited, GT's
European subsidiary, entered into a lease with respect to its principal
executive offices with Marylebone 248 Realty LLC ("Marylebone 248"), an entity
controlled by Joseph J. Cayre and Jack J. Cayre, an Executive Vice President and
a director of GT. This lease was terminated on August 16, 1999. During the
fifteen months ended June 30, 1999, and one and one-half months ended August 16,
1999, GT paid approximately $333,000 and $32,000 respectively, in rent to
Marylebone 248.
Transactions with GoodTimes Home Video Corp. ("GTHV"). During the year
ended December 31, 1996, GT sold approximately $3,488,000 of software products
to GTHV, a majority of whose stock is owned by Joseph J. Cayre, StanleyCayre and
Kenneth Cayre, a stockholder and former director of GT. In connection with the
sales of such products, GT had a receivable from GTHV for approximately
$2,996,000 at December 31, 1997. In February 1998, $2,869,000 of such receivable
was paid. The balance due GT remained open as of October 29, 1999.
GTHV also performs certain assembly and packaging services for GT.
During the fifteen months ended June 30, 1999, and the four months ended October
29, 1999, GT charged to operations approximately $1,254,000 and $247,000,
respectively, in fees for such services.
REPS Agreement. In servicing its mass merchant accounts, GT uses field
representatives supplied by REPS, a company owned by Joseph J. Cayre,
Stanley Cayre
21
<PAGE> 22
and Kenneth Cayre. REPS provides such services to GT as well as to third parties
not affiliated with the Cayre family. GT had an agreement with REPS pursuant to
which REPS supplied such services, at its cost, which expired on December 31,
1997. Until June 28, 1999, GT operated on a month to month basis under the terms
of the expired agreement, and on June 28, 1999 GT entered into a new agreement
with REPS effective as of May 1, 1999. During the fifteen months ended June 30,
1999, GT charged to operations approximately $5,186,000 and $932,880,
respectively, in fees to REPS.
Travel Services. GT occasionally hires JT Aviation Corp. ("JTAC"), a
company owned by Joseph J. Cayre, and Excel Aire Service, Inc. ("Excel") to
provide business travel services for its officers and employees Excel leases its
planes from JTAC. Excel is not owned in whole or in part by any member of the
Cayre family. JTAC and Excel provide air travel to GT at an hourly rate and on
an as needed as available basis. During the fifteen months ended June 30, 1999,
and the four months ended October 29, 1999, GT paid approximately $235,000 and
$347,000 to JTAC and Excel, respectively. During the four months ended October
29, 1999, the Company made no payments to JTAC and approximately $20,000 to
Excel.
Transactions with ClientLogic. GT has entered into agreements with
ClientLogic pursuant to which ClientLogic (i) provides toll-free customer
support for some of GT's published products and (ii) takes direct customer
orders and provides fulfillment services for GT, in each case on a per service
basis. Both agreements provide for automatic renewal on a month to month basis
upon expiration unless terminated by either party. Pursuant to their terms, the
agreements have been renewed on a month to month basis since the expiration of
the agreement providing for customer support service on December 17, 1996 and
the expiration of the agreement providing for the fulfillment service on August
2, 1997. During the fifteen months ended June 30, 1999, and the four months
ended October 29, 1999, GT paid approximately $252,000 and $1,000, respectively,
in fees to ClientLogic. Jordan A. Levy is Vice Chairman of ClientLogic. During
the fifteen months ended June 30, 1999, GT paid $10,000 to Jordan A. Levy for
consulting services. The Company made no payments to Jordan A. levy for
consulting services during the four months ended October 29, 1999.
Purchases of Computer Equipment. From time to time, GT purchases
computer equipment from and sells computer software to RCS Computer Experience,
LLC ("RCS"). In June 1998, Rockwell Computer Services, LLC, a company controlled
by Joseph J. Cayre, purchased approximately a 70% interest in RCS. During the
fifteen months ended June 30, 1999, GT paid approximately $24,000 to RCS and
generated approximately $54,000 in net revenues from RCS. The Company made no
payment to RCS and generated no revenues from RCS in the four months ended
October 29, 1999.
Leasing Transactions. GT has entered into agreements with an
unaffiliated leasing company for computer equipment. This leasing company
purchases computer equipment from various vendors including RCS. During the
fifteen months ended June 30, 1999, the leasing company paid approximately
$231,000 to RCS for equipment leased by GT. No such payments were made for the
four months ended October 29, 1999.
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GT believes that the terms of the foregoing transactions are no less
favorable to GT than could be obtained by GT from unrelated parties on an
arm's-length basis.
Gregor Loan. On August 31, 1996, GT extended a loan to Andrew Gregor in
the principal amount of $250,000. Such loan accrued interest at the rate of
6.15% per annum and was amended in March 1998 to extend the maturity date from
August 31, 1998 to August 31, 2000. In October 1998, GT amended a severance pay
agreement with Mr. Gregor to provide that GT would, on the earlier of (i) March
31, 1999 or (ii) the date the change of control becomes effective, waive all
payments of principal and interest which would be due under the loan.
SingleTrac Loans. GT has extended non-interest bearing loans to three
employees of GT who were former stockholders of SingleTrac, including Michael A.
Ryder, Senior Vice President of the Domestic Frontline Division of GT. The
principal amount of each such loan is $100,000. Such loans become due and
payable at the earliest of the sale of their stock of GT, in November 1999 or
six months following termination of the borrowers' respective employment with
GT. Each of the borrowers has pledged 20,000 shares of GT's Common Stock, as
collateral security for the loans.
Transactions with General Atlantic and the Cayre Family. On February
23, 1999, GAP purchased from GT 600,000 shares of GT's Series A Convertible
Preferred Stock (the "Preferred Stock") for an aggregate purchase price of $30.0
million. These shares of Preferred Stock are convertible into 6.0 million shares
of GT's common stock at a conversion price of $5.00 per share.
On June 29, 1999, as a further condition to the agreement by GT's
lenders to amend GT's $125 million credit facility (the "Line"), GT received
Commitments from General Atlantic and certain members of the Cayre family
(together with General Atlantic, the "Junior Debtholders") to loan to GT an
aggregate of $30.0 million (the "Junior Debt"). Certain members of the Cayre
family and affiliates of General Atlantic own, in the aggregate, a significant
percentage of GT's Common Stock. The Junior Debt was made available to GT on
July 29, 1999. Of the $30.0 million which the Junior Debtholders are obligated
to loan GT, $20.0 million would be funded by General Atlantic and $10.0 million
would be funded by the Cayre family. The Junior Debt would be evidenced by
promissory notes (the "Notes") from GT to the Junior Debtholders. GT will use
the borrowings under the Notes to prepay a portion of the amount borrowed under
the New Credit Agreement, which may be reborrowed.
To induce General Atlantic to enter into the Commitments, GT amended
the terms of the Certificate of Designation designating its Series A Convertible
Preferred Stock to provide that in the event of a change of control, the holders
of the Preferred Stock will receive, before any payment or distribution is made
on any other equity securities of GT, an amount equal to the liquidation
preference set forth in the Certificate of Designation plus all accrued and
unpaid dividends thereon to the date fixed for such change of control. Further,
GT issued to General Atlantic warrants (the "Commitment Warrants") to purchase,
at an exercise price equal to $0.01 per share, an aggregate of 500,000 shares
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(subject to anti-dilution adjustments) of GT's Common Stock. In addition, the
Company will amend the Registration Rights Agreement, dated February 22, 1999
(the "Registration Rights Agreement"), between the Company and General Atlantic,
to extend those registration rights to the shares of Common Stock issuable upon
exercise of the Commitment Warrants and any additional warrants issued to
General Atlantic, as described below.
The Cayre family has granted to General Atlantic an option to purchase
a total of 1,333,333 shares of Common Stock owned by them. One-third of the
Commitment Warrants will be credited against this option. Concurrently with the
issuance of the Commitment Warrants, GT will amend the Registration Rights
Agreement, dated February 23, 1999, between GT and General Atlantic, to extend
those registration rights to the shares of Common Stock issuable upon exercise
of the Commitment Warrants and any additional warrants issued to General
Atlantic, as described below.
The Notes will mature on July 30, 2000 (the "Maturity Date") and will
bear cumulative interest, compounding quarterly, at the rate of 9% per year
until January 1, 2000, on which date the rate will increase to 12% per year. All
accrued and unpaid interest will be due and payable in cash on the earlier of
(i) the Maturity Date and (ii) the first business day after the Line has been
repaid in full. In the event of a change in control of GT, GT is required to
prepay the aggregate unpaid principal amount of the Notes plus all accrued and
unpaid interest thereon. After the Line has been repaid in full, GT may prepay
the Notes in whole or in part. The Notes, including all unpaid principal of and
interest thereunder, are subordinate and junior in right of payment to all
amounts owed under the Line. Concurrently with the issuance of the Notes, the
Company issued to the Junior Debtholders warrants to purchase, at an exercise
price of $0.01 per share, an aggregate of 1,500,000 shares of the Company's
Common Stock. On November 1, 1999, the Company issued warrants to purchase, at
an exercise price of $0.01 per share, an aggregate of 2,500,000 shares of Common
Stock to the Junior Debt Holders. The Cayre family assigned their pro rata share
of the warrants to General Atlantic. Under certain circumstances, the Company
may be obligated to issue additional warrants to the Junior Debtholders.
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