<PAGE> 1
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
Filed by the registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INFOGRAMES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
INFOGRAMES, INC.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 25, 2000
------------------------
To the Stockholders of Infogrames, Inc.:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of
Infogrames, Inc. (the "Company") will be held at the Grand Hyatt New York, Park
Avenue at Grand Central, 109 East 42nd Street, New York, New York, on Tuesday,
July 25, 2000 at 9:30 a.m., local time, for the following purposes:
1. To elect two Class I directors and two Class II directors.
2. To ratify and approve the appointment of Deloitte & Touche LLP as
independent auditors for the fiscal year ended March 31, 2000, and,
in connection with the change of the Company's fiscal year end from
March 31 to June 30, the transitional fiscal year ending June 30,
2000 and the fiscal year ending June 30, 2001.
3. To approve and adopt the Infogrames, Inc. 2000 Stock Incentive Plan.
4. To transact other such business as may properly come before the
Annual Meeting.
The Board of Directors has fixed the close of business on June 22, 2000 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment thereof. Shares of
common stock can be voted at the Annual Meeting only if the holder is present at
the Annual Meeting in person or by valid proxy. A copy of the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2000 is being mailed
with this Notice and Proxy Statement on or about June 29, 2000 to all
stockholders of record on the record date.
By Order of the Board of Directors
DENIS GUYENNOT
Secretary
Dated: June 29, 2000
WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
YOU MAY REVOKE YOUR PROXY IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO
VOTE YOUR SHARES IN PERSON.
<PAGE> 3
INFOGRAMES, INC.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 2000
------------------------
GENERAL
This proxy statement is furnished by the board of directors (the "Board of
Directors" or the "Board") of Infogrames, Inc., a Delaware corporation (the
"Company"), in connection with the Company's annual meeting of stockholders (the
"Annual Meeting") to be held on July 25, 2000. The proxy materials are intended
to be mailed on or about June 29, 2000 to the Company's stockholders of record
at the close of business on June 22, 2000 (the "Record Date"). As of the Record
Date, there were 103,426,165 shares of the Company's common stock, $0.01 par
value per share (the "Common Stock"), issued and outstanding. Each holder of
shares of Common Stock issued and outstanding on the Record Date is entitled to
one vote for each such share held on each matter of business to be considered at
the Annual Meeting. The holders of a majority of the voting power of the issued
and outstanding Common Stock entitled to vote, present in person or represented
by proxy, shall constitute a quorum at the Annual Meeting.
On June 26, 2000, the Company effected a one-for-five reverse stock split
for stockholders of record as of May 8, 2000. References in this proxy statement
to share prices and the number of shares of Common Stock do not reflect the
reverse stock split.
The enclosed proxy is solicited by the Board of Directors of the Company. A
person giving the enclosed proxy has the power to revoke it at any time before
it is exercised by (i) attending the Annual Meeting and voting in person, (ii)
duly executing and delivering a proxy bearing a later date or (iii) sending a
written notice of revocation to the Company's Secretary.
If the enclosed proxy is properly executed and returned to the Company in
time to be voted at the Annual Meeting, it will be voted as specified on the
proxy, unless it is properly revoked prior thereto. Votes cast in person or by
proxy at the Annual Meeting will be tabulated by the inspectors of election
appointed for the meeting. If no specification is made on the proxy as to the
proposal, the shares represented by the proxy will be voted FOR the election of
the nominees for directors named herein, FOR the ratification of the appointment
of Deloitte & Touche LLP ("Deloitte & Touche") as the Company's independent
auditors for the fiscal year ended March 31, 2000, the transitional fiscal year
ending June 30, 2000 and the fiscal year ending June 30, 2001, FOR the
Infogrames, Inc. 2000 Stock Incentive Plan (the "2000 Plan") and, with respect
to any other matters that may come before the Annual Meeting, at the discretion
of the proxy holders.
The inspectors of election will treat abstentions and broker non-votes as
shares that are present and entitled to vote for purposes of determining the
presence or absence of a quorum.
Election as a director requires a plurality of votes eligible to be cast by
the Common Stock present in person or represented by proxy at the Annual Meeting
and entitled to vote on the subject matter (the "Votes Cast"). For other
proposals to be voted upon at the Annual Meeting, the affirmative vote of a
majority of the Votes Cast is required. For the election of directors, votes may
be cast in favor of or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions will be treated as
Votes Cast with respect to any other proposal set forth in this proxy statement.
Accordingly, abstentions will have the same effect as a vote against such
proposal. Broker non-votes will not be counted for the purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Therefore, broker non-votes will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular proposal.
<PAGE> 4
As of the Record Date, California U.S. Holdings, Inc. ("CUSH"), a
California corporation and wholly owned subsidiary of Infogrames Entertainment
SA ("Infogrames SA") beneficially owned approximately 60% of the Common Stock,
which gives it sufficient voting power to approve each of the proposals.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated By-laws (the "By-laws") permit the Board
of Directors to adjust the size of the Board from a minimum of four directors to
a maximum of fifteen. On December 16, 1999, pursuant to the agreement by
Infogrames SA to acquire its majority stake in the Company, seven out of the
nine members of the Board resigned (see "Certain Relationships and Related
Transactions -- Change of Control of the Company"). The remaining directors,
Thomas A. Heymann and Steven A. Denning, appointed Bruno Bonnell, the President
and Chief Executive Officer of Infogrames SA, and Thomas Schmider, the Managing
Director of Infogrames SA, as directors of the Company. On December 17, 1999,
the Board set the number of directors at five and appointed Herve Liagre, the
Mergers and Acquisitions Director of Infogrames SA, as a director. On February
10, 2000, Mr. Liagre resigned from the Board, and the Board set the size of the
Board at six and elected Ann E. Kronen and Denis Guyennot.
Pursuant to the By-laws, the Board of Directors is divided into three
classes, with each class currently consisting of two directors whose terms are
to expire at successive annual meetings. Unless otherwise directed, proxies in
the accompanying form will be voted FOR the nominees listed below. The Board has
no knowledge that any nominee will or may be unable to serve or will or may
withdraw from nomination. Certain information regarding the Company's directors
and director nominees is set forth below. Each director has served continuously
with the Company since his or her first election as indicated below.
NOMINEES
CLASS I DIRECTORS -- TERMS TO EXPIRE IN 2002
The following persons, if elected at the Annual Meeting, will serve as
Class I directors until the 2002 Annual Meeting or until their successors are
elected and qualified:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Denis Guyennot.............................................. 37 2000
Ann E. Kronen............................................... 42 2000
</TABLE>
DENIS GUYENNOT has served as a director of the Company since February 10,
2000. Since February 19, 2000, he has also served as President, Chief Operating
Officer and Secretary of the Company. From January 1999 to January 2000, Mr.
Guyennot served as President of Distribution for Infogrames Entertainment
Europe. From July 1998 to January 1999, Mr. Guyennot served as President of
Infogrames South of Europe. In 1988, Mr. Guyennot founded Ecudis, a distributor
of interactive software in Europe, which was acquired by Infogrames in July
1998.
ANN E. KRONEN has served as a director of the Company since February 10,
2000. Since 1996, Ms. Kronen has been an independent consultant specializing in
strategic planning and management development issues. Previously, she was Vice
President of Product Development for Disney Educational Publishing.
2
<PAGE> 5
CLASS II DIRECTORS -- TERMS TO EXPIRE IN 2003
The following persons, if elected at the Annual Meeting, will serve as
Class II directors until the 2003 Annual Meeting or until their successors are
elected and qualified:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Steven A. Denning........................................... 51 1995
Thomas Schmider............................................. 38 1999
</TABLE>
STEVEN A. DENNING has served as a director of the Company since February
1995. Mr. Denning is the Executive Managing Member of General Atlantic Partners,
LLC, a private equity investment firm focused exclusively on Internet and
information technology investments on a global basis. Mr. Denning is also an
employee of General Atlantic Service Corporation. Mr. Denning serves on the
Board of Directors of Eclipsys Corporation and Exult, Inc. as well as the boards
of several private companies in which affiliates of General Atlantic Partners,
LLC are investors.
THOMAS SCHMIDER has served as a director of the Company since December 16,
1999. Since June 1983, Mr. Schmider has been the Managing Director of Infogrames
SA, the Company's parent corporation. Mr. Schmider serves on the board of
directors of several private companies that are affiliates of Infogrames SA.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE NOMINEES TO THE BOARD OF DIRECTORS.
OTHER DIRECTORS
CLASS III DIRECTORS -- TERMS TO EXPIRE IN 2001
The following persons will continue to serve as directors until the 2001
Annual Meeting or until their successors are elected and qualified:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Bruno Bonnell............................................... 42 1999
Thomas A. Heymann........................................... 42 1999
</TABLE>
BRUNO BONNELL has served as a director since December 16, 1999 and has been
Chairman of the Board and Chief Executive Officer of the Company since February
11, 2000. Since June 1983, Mr. Bonnell has also been the Chairman of the Board
of Directors and Chief Executive Officer of Infogrames SA, the Company's parent
corporation.
THOMAS A. HEYMANN has served as a director since February 8, 1999. From
February 8, 1999 until February 10, 2000, he was Chairman of the Board and Chief
Executive Officer of the Company. From November 1994 to February 1999, Mr.
Heymann was President of The Disney Store, Inc.
FURTHER INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company directs the management of the
business and affairs of the Company, as provided by Delaware law, and conducts
its business through meetings of the Board and an Audit Committee. In addition,
from time to time, special committees may be established under the direction of
the Board when necessary to address specific issues.
The Board of Directors held ten meetings in the fiscal year ended March 31,
2000. During the period in which he or she 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 meetings of the committees of the
Board on which he or she served.
3
<PAGE> 6
The Audit Committee currently is composed of Mr. Denning, Mr. Heymann and
Ms. Kronen. Prior to December 16, 1999, the Audit Committee was composed of
Stanley Cayre, William Ford and Jordan Levy, former members of the Board of
Directors. The Audit Committee reviews the adequacy of internal controls, the
results and scope of annual audits and other services provided by the Company's
independent public accountants. The Audit Committee met once during the
Company's last fiscal year. The Board of Directors has adopted an Audit
Committee Charter, which sets forth the function and responsibilities of the
Audit Committee. The full text of the Audit Committee Charter is set forth in
Appendix A to this proxy statement.
The Company currently does not have a Compensation Committee. Following the
acquisition by Infogrames SA of its interest in the Company and the subsequent
reconstitution of the Board of Directors, the Board deferred the election of a
Compensation Committee and agreed to act in the interim as a whole with respect
to the Company's compensation plans, programs and policies for executive
officers, monitoring the performance and compensation of executive officers and
other key employees, and related decisions concerning matters of executive
compensation.
The Company 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 the By-laws. See "Submission of Stockholder
Proposals and Nominations."
DIRECTOR COMPENSATION
Directors who also serve as employees of the Company do not receive any
compensation for their service on the Board of Directors. The Company currently
does not have any standard arrangements with respect to the compensation of
non-employee directors.
Prior to December 16, 1999, each non-employee director of the Company was
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 attended. In the last fiscal
year, the Company agreed to pay Ms. Kronen $36,000 in consideration of her
service on the Board.
4
<PAGE> 7
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information concerning each of the current
executive officers of the Company. Further information concerning Bruno Bonnell
and Denis Guyennot is presented above under the caption "Election of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bruno Bonnell.............................. 42 Chief Executive Officer
Denis Guyennot............................. 37 President, Chief Operating Officer and
Secretary
David J. Fremed............................ 39 Chief Financial Officer
Harry M. Rubin............................. 47 President, International Division
</TABLE>
DAVID J. FREMED has served as Chief Financial Officer of the Company since
May 2000. From 1996 until May 2000, Mr. Fremed served in various financial
capacities, including Chief Financial Officer and Treasurer of Marvel
Enterprises, Inc. (formerly Toy Biz, Inc.). Prior to that, Mr. Fremed was Vice
President and Controller of Toy Biz, Inc.
HARRY M. RUBIN has served as President of the International Division of the
Company since April 1998. Prior to that, Mr. Rubin was Executive Vice President
and General Manager, International Division and Business Affairs of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the directors and executive officers of the Company
and persons who beneficially own more than ten percent of the Common Stock
(collectively, the "Reporting Persons") to report their ownership of and
transactions in the Common Stock to the Securities and Exchange Commission (the
"SEC"). Copies of these reports are also required to be supplied to the Company.
The Company believes, upon a review of the copies of such reports received by
the Company and written representations furnished by the Reporting Persons to
the Company, that during the last fiscal year the Reporting Persons complied
with all applicable Section 16(a) reporting requirements except that (i)
Infogrames SA, Mr. Bonnell and Mr. Schmider failed to timely file Forms 3; such
Forms 3 were subsequently filed on April 17, 2000 and (ii) Herve Liagre, a
former director of the Company, failed to timely file a Form 3; such Form 3 was
subsequently filed in May 2000.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation earned
by the Company's Chief Executive Officer, its two most highly compensated
executive officers as of March 31, 2000 and its two other most highly paid
executive officers during the fiscal year ended March 31, 2000 (collectively,
the "Named Executive Officers") for services rendered in all capacities to the
Company during the twelve months ended March 31, 1998 and the fiscal years ended
March 31, 1999 and 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ -----------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION AWARDS($) OPTIONS(#) SATION($)
--------------------------- ---- --------- -------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruno Bonnell.................... 2000 -- -- -- -- -- --
Chief Executive Officer(1)
Thomas A. Heymann................ 2000 576,692 -- 129,854(2) -- -- 1,008,888(3)
Former Chief Executive
Officer(1) 1999 70,615 250,000 -- -- 3,000,000(4) --
Denis Guyennot................... 2000 -- -- -- -- 500,000 --
President, Chief Operating
Officer and Secretary(5)
Harry M. Rubin................... 2000 420,385 58,000(6) -- -- -- --
President of the International 1999 381,769 -- -- -- -- --
Division 1998 300,000 151,800(7) -- -- 250,000(8) --
John T. Baker IV................. 2000 289,423 200,000 94,420(2) -- 750,000(10) 575,000(11)
Former President and Chief
Operating Officer(9)
David J. Fremed.................. 2000 -- -- -- -- -- --
Chief Financial Officer(12)
Charles F. Bond.................. 2000 344,262 327,083 -- -- -- 4,800(16)
Former President, Value
Products, 1999 354,231 631,250(14) -- -- 200,000(15) 4,800(16)
Close-outs Division(13) 1998 308,078 25,000(7) -- -- -- 4,750(16)
</TABLE>
---------------
(1) Mr. Heymann resigned as the Company's Chief Executive Officer effective
February 10, 2000, and Mr. Bonnell was appointed Chief Executive Officer
effective February 11, 2000. See "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements -- Severance Agreement with
Thomas A. Heymann." Mr. Bonnell did not receive any compensation from the
Company in the last fiscal year.
(2) Represents housing expenses paid by the Company.
(3) Represents (i) a severance payment of $1,000,000 paid to Mr. Heymann
pursuant to his severance agreement and (ii) $8,888 in life insurance
premiums.
(4) Pursuant to Mr. Heymann's severance agreement, Mr. Heymann forfeited
3,000,000 options and became fully vested in options to purchase 562,500
shares of common stock at an exercise price of $5.00. See "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements --
Severance Agreement with Thomas A. Heymann."
(5) Mr. Guyennot became President, Chief Operating Officer and Secretary on
February 19, 2000. Because Mr. Guyennot did not join the Company's payroll
until April 3, 2000, there is no salary or bonus information presented for
the fiscal year ended March 31, 2000.
(6) Represents bonus earned during the fiscal year ended March 31, 1999.
(7) Represents bonus earned during the fiscal year ended December 31, 1997.
6
<PAGE> 9
(8) These stock options fully vested on December 16, 1999 upon a change of
control of the Company.
(9) Mr. Baker was President and Chief Operating Officer of the Company from
April 12, 1999 until February 18, 2000.
(10) Mr. Baker was granted 750,000 options on April 28, 1999, which were
forfeited upon his resignation on February 18, 2000.
(11) Represents $575,000 paid to Mr. Baker pursuant to his severance agreement.
See "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements -- Severance Agreement with John T. Baker IV."
(12) Mr. Fremed became Chief Financial Officer of the Company in May 2000.
(13) Mr. Bond left the employ of the Company on January 31, 2000.
(14) Includes an annual bonus payable under the original employment agreement,
which the Company and Mr. Bond entered into in connection with the
acquisition of Slash Corporation. This bonus was earned in the year
indicated, but paid in the immediately subsequent year.
(15) Mr. Bond forfeited these options upon leaving the Company in January 2000.
(16) Represents Company contributions on behalf of the Named Executive Officers
to the Company's 401(k) Profit Sharing Plan.
Since April 2000, the Company has leased a house in New York for use by the
directors and executive officers of the Company at a cost of $10,000 per month.
Option Grants. Shown below is information regarding grants of stock
options under the Company's stock incentive plans to the Named Executive
Officers during the fiscal year ended March 31, 2000.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SH)(2) DATE
---- ---------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Bruno Bonnell............................. -- -- -- --
Thomas A. Heymann......................... -- -- -- --
Denis Guyennot............................ 500,000(1) 24.11 1.8755 1/4/11
Harry M. Rubin............................ -- -- -- --
John T. Baker IV.......................... -- -- -- --
David J. Fremed........................... -- -- -- --
Charles F. Bond........................... -- -- -- --
</TABLE>
---------------
(1) The option becomes exercisable in four equal annual installments commencing
on January 4, 2001.
(2) The exercise price per share of the options granted was equal to the fair
market value of the Common Stock on the date of grant.
7
<PAGE> 10
The following table shows the hypothetical value of the options granted at
the end of the option terms (ten years) if the stock price were to appreciate
annually by 5% and 10%, respectively. These assumed rates of growth are required
by the SEC for illustration purposes only and are not intended to forecast
possible future stock prices.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF APPRECIATION FOR
SECURITIES OPTION TERM(1)
UNDERLYING --------------------
NAME OPTIONS GRANTED 5%($) 10%($)
---- --------------- ------- ---------
<S> <C> <C> <C>
Bruno Bonnell........................................... -- -- --
Thomas A. Heymann....................................... -- -- --
Denis Guyennot.......................................... 500,000 589,589 1,494,134
Harry M. Rubin.......................................... -- -- --
John T. Baker IV........................................ -- -- --
David J. Fremed......................................... -- -- --
Charles F. Bond......................................... -- -- --
</TABLE>
---------------
(1) Represents the product of (i) the difference between (A) the product of the
per-share fair market value at the time of the 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.
Aggregated Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during the year ended
March 31, 2000 for each of the Company's Named Executive Officers and the
year-end value of unexercised options held by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT FISCAL YEAR-END (#) FY-END ($)(1)
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE) UNEXERCISABLE)
---- ------------ ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Bruno Bonnell...................... -- -- 0/0 0/0
Thomas A. Heymann.................. -- -- 562,500/0 0/0
Denis Guyennot..................... -- -- 0/500,000 0/656,250
Harry M. Rubin..................... -- -- 577,728/0 60,707/0
John Baker......................... -- -- 0/0 0/0
David J. Fremed.................... -- -- 0/0 0/0
Charles F. Bond.................... -- -- 31,000/0 0/0
</TABLE>
---------------
(1) Market value of underlying shares of Common Stock, based on the average of
the high and low sales price ($3.1875), on March 31, 2000, minus the
aggregate exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Severance Agreement with Thomas A. Heymann
Thomas A. Heymann resigned as Chief Executive Officer of the Company
effective February 15, 2000. The Company and Mr. Heymann entered into a
severance agreement dated February 15, 2000 (the "Heymann Severance Agreement"),
which provides for payments by the Company to Mr. Heymann of $2.0 million in two
equal installments by no later than January 6, 2001. Pursuant to the Heymann
Severance Agreement, Mr. Heymann received options to purchase 562,500 shares of
the Common Stock at an exercise price of $5.00 per share. The options are
exercisable immediately and have a term expiring two years from the date of
termination of his employment.
8
<PAGE> 11
In connection with Mr. Heymann's resignation, the Company entered into a
consulting agreement with Mr. Heymann effective through February 14, 2002 (the
"Heymann Consulting Agreement"). Pursuant to the Heymann Consulting Agreement,
Mr. Heymann will receive $1.2 million in two equal installments by no later than
January 6, 2001. In addition, Mr. Heymann and his dependents are entitled to
participate in the Company's health benefit plan for 18 months after the
effective date of the Heymann Consulting Agreement. The Heymann Consulting
Agreement contains a covenant not to compete with or solicit employees of the
Company for a period of two years.
Severance Agreement with John T. Baker IV
John T. Baker IV resigned as President of the Company effective February
18, 2000. The Company and Mr. Baker entered into a severance agreement dated
February 18, 2000 (the "Baker Severance Agreement"), which provides for payments
by the Company to Mr. Baker of $1.15 million in two equal installments by no
later than January 1, 2001.
Pursuant to the Baker Severance Agreement, Mr. Baker forfeited all options
to purchase Common Stock.
In connection with Mr. Baker's resignation, the Company entered into a
consulting agreement with Mr. Baker effective through February 14, 2002 (the
"Baker Consulting Agreement"). Pursuant to the Baker Consulting Agreement, Mr.
Baker will receive $1.15 million in two equal installments by no later than
January 6, 2001. In addition, Mr. Baker and his dependents are entitled to
participate in the Company's health benefit plan for 18 months after the
effective date of the Baker Consulting Agreement. The Baker Consulting Agreement
contains a covenant not to compete with or solicit employees of the Company for
a period of two years.
Severance Agreement with Jack J. Cayre
The Company and Jack J. Cayre entered into an agreement and release dated
March 7, 2000 (the "Cayre Severance Agreement") which terminates the employment
agreement dated August 18, 1998 (the "Cayre Employment Agreement") between the
Company and Mr. Cayre effective as of February 18, 2000. Pursuant to the Cayre
Severance Agreement, the Company will pay Mr. Cayre (1) severance payments equal
to his base salary from February 18, 2000 through February 18, 2002, payable at
the times and in the amounts such base salary would have been so paid under the
Cayre Employment Agreement; (2) a $2,000 per calendar month automobile allowance
from February 18, 2000 through June 30, 2002 and (3) in lieu of a bonus,
payments of $62,344.09 on July 1, 2001 and January 1, 2002; payments of
$65,210.92 on July 1, 2001 and January 1, 2002; and payments of $60,183.77 on
July 31, 2002 and January 1, 2003. Mr. Cayre will continue to participate in the
Company's medical plans through June 30, 2002.
Severance Agreement with Harry M. Rubin
The Company and Harry M. Rubin entered into an agreement and release dated
April 7, 2000 and a letter agreement dated June 15, 2000 (together, the "Rubin
Severance Agreement"), which will terminate certain provisions of the employment
agreement dated as of April 28, 1998 (the "Rubin Employment Agreement") between
the Company and Mr. Rubin if Mr. Rubin elects to resign from the Company on or
prior to September 30, 2000 (the "Termination Date"). Pursuant to the Rubin
Severance Agreement, if Mr. Rubin resigns from the Company on or prior to the
Termination Date, the Company will pay Mr. Rubin (1) severance payments equal to
his base salary for two years from the Termination Date, payable at the times
and in the amounts such base salary would have been so paid under the Rubin
Employment Agreement; (2) a $2,000 per calendar month automobile allowance for
two years from the Termination Date; (3) in lieu of a bonus, payments of
$101,250 on October 1, 2000 and January 1, 2001; payments of $107,625 on July 1,
2001 and January 1, 2002; and payments of $113,006 on July 1, 2002 and January
1, 2003; and (4) reimbursement for taxes payable by Mr. Rubin as a result of the
life insurance payments made by the Company prior to the Termination Date. Mr.
Rubin will also continue to participate in the Company's medical plans through
the second anniversary of the Termination Date.
9
<PAGE> 12
Employment Agreement with David J. Fremed
On April 20, 2000, the Company entered into an employment agreement with
David J. Fremed, appointing him as Senior Vice President, Finance and Chief
Financial Officer of the Company beginning May 8, 2000. Mr. Fremed received a
sign-on bonus of $20,000 and will receive an annual salary of $275,000. Mr.
Fremed will be eligible to participate in the Company's Corporate Incentive
Program, pursuant to which he may receive a bonus of up to 40% of his base
salary. In addition, Mr. Fremed will receive options to purchase 150,000 shares
of Common Stock, which will vest at a rate of 25% per year over a four-year
period. If Mr. Fremed's employment is terminated without cause within two years
of his employment with the Company, he will receive a severance payment equal to
six months of his base salary.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Following the acquisition by Infogrames SA of its interest in the Company
and the subsequent reconstitution of the Board of Directors, the Board deferred
the election of a Compensation Committee and agreed to act in the interim as a
whole with respect to the Company's compensation plans, programs and policies
for executive officers, monitoring the performance and compensation of executive
officers and other key employees, and related decisions concerning matters of
executive compensation.
Executive Compensation Philosophy and Policies. The Board recognizes the
critical role of its executive officers in the future growth and success of the
Company. Accordingly, the Company's executive compensation policies are designed
to: (i) align the interests of executive officers and stockholders by
encouraging stock ownership by executive officers and by making a significant
portion of executive compensation dependent upon the Company's financial
performance; (ii) provide compensation that will attract and retain superior
talent; (iii) reward individual results through base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, and various other benefits, including a 401(k) profit sharing plan and
life and medical insurance plans; and (iv) manage compensation based on the
level of skill, knowledge, effort and responsibility needed to perform a
particular job successfully.
In establishing salary, bonuses and long-term incentive compensation for
executive officers, the Board takes into account both the position and expertise
of the particular executive, as well as its understanding of competitive
compensation for similarly situated executives in the Company's industry. In
this regard, the Company retains consultants to advise it on compensation trends
and levels and to assure it that the Company's compensation policies and
guidelines are both competitive and appropriate for its size and industry
position. Annual increases to base salaries (as opposed to bonuses, which are
based upon guidelines established by the Board) for executive officers are based
on the terms of existing employment agreements, and in some cases the discretion
of the Board based on individual performance. For all other employees, the
Company has a formal Company-wide merit budget program pursuant to which the
Company establishes separate budgeted amounts for base salary increases due to
(a) merit and (b) promotions and market adjustments. Formal performance
appraisals are, and will continue to be, an integral part of the merit review
process.
During the fiscal year ended March 31, 2000, the Board did not implement a
formal bonus program for executives or other employees of the Company. The Board
has the ability to grant discretionary bonuses to employees for significant
individual accomplishments.
Compensation of the Chief Executive Officer. Thomas A. Heymann served as
the Company's Chief Executive Officer from February 8, 1999 until February 10,
2000. Mr. Heymann was compensated pursuant to his employment agreement with the
Company, which provided for a base salary that the Company believes was
competitive for the industry in which the Company operates. Bruno Bonnell, the
Company's current Chief Executive Officer, has not received any cash
compensation. The Board of Directors may consider granting cash compensation to
Mr. Bonnell in the future.
Stock Incentive Plans. Stock options are granted under the provisions of
the Company's 1995 and 1997 Stock Incentive Plans and will be granted under the
2000 Stock Incentive Plan (the "Stock Incentive Plans"). Stock options are an
important part of the Company's long-term incentive strategy and are granted to
10
<PAGE> 13
reinforce the importance of improving stockholder value over the long term by
directly linking executive compensation to Company performance. Option grant
levels have been patterned after industry-competitive long-term incentive
compensation practices and criteria established by the Board, including but not
limited to, responsibility level and salary. Stock options are granted at 100%
of the fair market value of the stock on the date of grant to ensure the
executives can only be rewarded for appreciation in the price of the common
stock of the Company when the Company's stockholders are similarly benefited.
401(k) Profit Sharing Plan. The Company sponsors a tax-qualified employee
profit sharing and savings plan (the "401(k) Plan"), which covers all of the
Company's non-union employees with six months of service who are at least 18
years of age. The Company may limit participation by highly compensated
employees to comply with the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to the Code's nondiscrimination requirements. Pursuant to
the 401(k) Plan, employees may elect to contribute up to 15% of their current
compensation, subject to statutorily prescribed limitations to the 401(k) Plan.
The 401(k) Plan also permits the Company to provide a 50% matching contribution
for full-time employees who are employed as of December 31 of the applicable
year, up to a maximum matching contribution of 3% of an employee's compensation,
subject to statutory limitations. The Company may also make a discretionary
contribution to the 401(k) Plan which will be allocated to the accounts of
participants, based on their relative compensation levels, who are employed on
December 31 and who have 1,000 hours of service in the year.
The Board of Directors
Bruno Bonnell, Chairman
Steven A. Denning
Denis Guyennot
Thomas A. Heymann
Ann E. Kronen
Thomas Schmider
June 27, 2000
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no compensation committee interlocks between any of the members
of the Board of Directors during the fiscal year ended March 31, 2000 and any
other entity. Messrs. Bonnell, Guyennot and Schmider are executive officers of
Infogrames SA, an indirect parent corporation and an affiliate of the Company
under the rules and regulations of the SEC. During the fiscal year ended March
31, 2000, Infogrames SA and certain of its subsidiaries engaged in certain
transactions with the Company which are described in "Certain Relationships and
Related Transactions."
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the Nasdaq National
Market index and a peer group selected by the Company on an industry and
line-of-business basis. Such peer group consists of Electronic Arts, Inc.,
Acclaim Entertainment, Inc., Intuit Inc., The 3DO Company and Activision, Inc.
("Activision"). The peer group index is identical to the index that the Company
has used in previous years' proxy statements except that The 3DO Company and
Activision replace Broderbund Software, Inc. and The Learning Company, Inc.,
which are no longer publicly traded. The graph assumes an investment of $100 on
December 14, 1995, when the Company's Common Stock was first traded in a public
market. Reinvestment of dividends is assumed in all cases.
[INFOGRAMES performance graph]
<TABLE>
<CAPTION>
GT INTERACTIVE SOFTWARE THE NASDAQ NATIONAL
CORP PEER GROUP MARKET INDEX
----------------------- ---------- -------------------
<S> <C> <C> <C>
12/14/95 100.00 100.00 100.00
12/31/95 100.00 105.28 102.10
3/31/96 76.79 91.51 106.88
6/30/96 119.64 93.28 115.00
9/30/96 162.50 92.82 119.06
12/31/96 50.89 75.58 125.28
3/31/97 50.89 65.26 118.56
6/30/97 84.82 77.91 139.94
9/30/97 83.93 90.25 163.58
12/31/97 45.54 92.66 152.39
3/31/98 50.89 102.38 178.14
6/30/98 53.79 115.53 183.87
9/30/98 32.14 98.23 164.37
12/31/98 35.71 133.58 212.78
3/31/99 33.04 133.08 238.86
6/30/99 25.00 135.27 260.67
9/30/99 20.76 168.55 266.49
12/31/99 11.83 213.61 394.89
3/31/00 22.32 185.48 443.76
</TABLE>
12
<PAGE> 15
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of May 15, 2000, concerning
the Common Stock of the Company beneficially owned by (i) each director and
nominee of the Company, (ii) the Named Executive Officers and all executive
officers and directors as a group and (iii) each stockholder known by the
Company 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 the Company, sole voting and dispositive
power with respect to the shares beneficially owned, subject to community
property laws where applicable. The number of shares of Common Stock do not
reflect the one-for-five reverse stock split effected on June 26, 2000.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP OF SHARES
NAME OF BENEFICIAL OWNER OF COMMON STOCK(1) PERCENTAGE**
------------------------ ------------------- ------------
<S> <C> <C>
General Atlantic Partners, LLC.............................. 19,928,525(2) 17.2
3 Pickwick Plaza, Greenwich, CT 06830
Steven A. Denning........................................... 19,928,525(3) 17.2
California U.S. Holdings, Inc. ............................. 101,427,359(4) 71.8
84, rue du ler Mars 1943, Villeurbanne, 69100 France
Infogrames Entertainment SA ................................ 101,427,359(5) 71.8
84, rue du ler Mars 1943, Villeurbanne, 69100 France
Bruno Bonnell............................................... 101,427,359(5) 71.8
Thomas Schmider............................................. 101,427,359(5) 71.8
Thomas A. Heymann........................................... 562,500(6) *
Ann E. Kronen............................................... 0(7) *
Denis Guyennot.............................................. 0(8) *
Charles F. Bond............................................. 31,000(9) *
Harry M. Rubin.............................................. 577,728(10) *
John T. Baker IV............................................ 0(11) *
David J. Fremed............................................. 1,700(12) *
All executive officers and directors as a group (9
persons).................................................. 122,528,812(13) 79.0%
</TABLE>
---------------
* Less than 1%
** As of May 15, 2000, 103,376,165 shares of Common Stock were outstanding,
excluding shares issuable upon exercise or conversion of outstanding
options, warrants, convertible notes and other convertible securities.
(1) For purposes of this table, beneficial ownership of securities is defined
in accordance with the rules of the SEC and means generally the power to
vote or exercise investment discretion with respect to securities,
regardless of any economic interests therein. Except as otherwise
indicated, the beneficial owners of shares of Common Stock listed above
have sole investment and voting power with respect to such shares, subject
to community property laws where applicable. In addition, for purposes of
this table, a person or group is deemed to have "beneficial ownership" of
any shares that such person has the right to acquire by July 14, 2000. For
purposes of calculating the percentage of outstanding shares held by each
person listed above, any shares which such person has the right to acquire
by July 14, 2000 are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person.
(2) 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"), and (ii) 10,203,000 shares of Common Stock issuable upon
conversion of a convertible note held by General Atlantic Partners 54, L.P.
("GAP 54") and 2,297,000 shares of Common Stock issuable upon conversion of
a convertible note held by GAP Coinvestment Partners II, L.P. ("GAP
13
<PAGE> 16
Coinvestment II"). 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 also the general
partners of GAP Coinvestment and GAP Coinvestment II. Mr. Denning, a
director of the Company, is the Executive Managing Member of General
Atlantic Partners, LLC and a general partner of GAP Coinvestment and GAP
Coinvestment II. Mr. Denning disclaims beneficial ownership of shares owned
by GAP 16, GAP 19, GAP 54 and GAP Coinvestment, GAP Coinvestment II and GAP
II, except to the extent of his pecuniary interest therein.
(3) See footnote 2.
(4) Includes a proxy for the vote of 1,300,000 shares of Common Stock held by
the Cayre family; 4,775,000 shares of Common Stock issuable upon exercise
of warrants; and 33,222,399 shares of Common Stock issuable upon conversion
of a convertible note. Infogrames SA may be deemed to beneficially own all
of the shares held by CUSH because CUSH is a wholly-owned subsidiary of
Infogrames SA. Mr. Bruno Bonnell may be deemed to beneficially own all of
the shares held by CUSH because he is the Chairman of the Board of
Directors, President and Chief Executive Officer of Infogrames SA. Mr.
Thomas Schmider may be deemed to beneficially own all of the shares held by
CUSH because he is the Managing Director of Infogrames SA. Each of Mr.
Bonnell and Mr. Schmider disclaims beneficial ownership of such shares.
(5) See footnote 4. Messrs. Bonnell and Schmider were elected to serve as
members of the Board of Directors of the Company on December 16, 1999. Mr.
Bonnell was elected Chairman of the Board and Chief Executive Officer of
the Company effective February 11, 2000. Mr. Bonnell is the beneficial
owner of approximately 9% of Infogrames SA. Mr. Schmider is the beneficial
owner of approximately 8% of Infogrames SA.
(6) Mr. Heymann is a Director of the Company. Mr. Heymann resigned as Chairman
of the Board and Chief Executive Officer of the Company effective February
11, 2000. Represents 526,500 shares underlying options exercisable within
60 days.
(7) Ms. Kronen is a Director of the Company.
(8) Mr. Guyennot is a Director and the President and Chief Operating Officer of
the Company.
(9) Mr. Bond resigned as President, Value Products, Close-Outs Division
effective January 31, 2000. Represents 31,000 shares underlying options
exercisable within 60 days.
(10) Mr. Rubin is President, International Division of the Company. Represents
577,728 shares underlying options exercisable within 60 days.
(11) Mr. Baker resigned as President and Chief Operating Officer of the Company
effective February 18, 2000.
(12) Mr. Fremed is Senior Vice President, Finance and Chief Financial Officer of
the Company. Represents 1,700 shares owned by Mr. Fremed.
(13) See footnote 1. Includes (i) 4,775,000 shares issuable upon the exercise of
warrants to purchase Common Stock; (ii) 33,222,399 shares issuable upon
conversion of the note held by CUSH; (iii) 12,500,000 shares issuable upon
conversion of the notes held by GAP Coinvestment II and GAP 54; and (iv)
1,171,228 shares subject to options exercisable within 60 days.
14
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CHANGE OF CONTROL OF THE COMPANY
On December 16, 1999, pursuant to a Securities Purchase Agreement (the
"Purchase Agreement"), dated as of November 15, 1999, by and among the Company,
Infogrames SA and CUSH, the Company issued to CUSH and CUSH acquired from the
Company: (i) 28,571,429 shares of Common Stock, at a purchase price of $1.75 per
share and (ii) a 5% subordinated convertible note in the aggregate principal
amount of $60,587,206.72 (the "Note"), which as of May 15, 2000 is convertible
into an aggregate of 33,222,399 shares of Common Stock at a conversion price of
$1.85 per share, subject to antidilution adjustments (such transaction, the
"Purchase").
Concurrently with the consummation of the Purchase, CUSH acquired (i) an
aggregate of 33,558,531 shares of Common Stock from Joseph J. Cayre, Kenneth
Cayre, Stanley Cayre, Jack J. Cayre, their children and various associated
trusts (together, the "Cayre family") for an aggregate purchase price of $25
million and (ii) subordinated notes of the Company in the principal amount of
$10 million, plus accrued interest, held by the Cayre family. Joseph J. Cayre,
Kenneth Cayre, Stanley Cayre and Jack J. Cayre are former directors of the
Company.
Also concurrently with the consummation of the Purchase, CUSH acquired from
General Atlantic Partners 54, L.P. and GAP Coinvestment Partners II, L.P.
(together, "GAP") warrants to purchase 4,500,000 shares of Common Stock, at an
exercise price of $0.01 per share (the "GAP Warrants"), for nominal
consideration.
In addition, pursuant to a Securities Exchange Agreement, dated as of
November 15, 1999, by and among the Company and GAP (the "Securities Exchange
Agreement"), the Company issued to GAP non-interest-bearing subordinated
convertible notes in the aggregate principal amount of $50 million, which are
convertible into an aggregate of 12,500,000 shares of Common Stock at a
conversion price of $4.00 per share, subject to antidilution adjustments (the
"GAP Notes"), in exchange for 600,000 shares of the Company's Series A
Convertible Preferred Stock with a liquidation preference of $30 million and
subordinated notes of the Company in the principal amount of $20 million, plus
accrued interest, held by GAP.
After consummation of the above described transactions, Infogrames SA and
CUSH may be deemed to beneficially own an aggregate of approximately 100.7
million shares of Common Stock on a fully diluted basis, or 71.7% of the voting
securities of the Company. Infogrames SA acquired these securities using funds
from its working capital.
RELATED PARTY TRANSACTIONS
GAP. On February 23, 1999, GAP purchased an aggregate of 600,000 shares of
Series A Convertible Preferred Stock (the "Preferred Stock") for an aggregate
purchase price of $30,000,000. Each share of Preferred Stock was convertible
into 10 shares of common stock.
On June 29, 1999, GAP entered into a Subordinated Loan Commitment Letter
(the "Commitment Letter") pursuant to which GAP agreed to loan to the Company on
July 30, 1999 an aggregate of $20,000,000 if the Company had not paid in full on
July 30, 1999 certain amounts owed pursuant to the Credit Agreement, dated as of
September 11, 1998 (the "Credit Agreement"), among the Company, certain lenders
party thereto and First Union National Bank, as administrative agent.
On June 29, 1999, pursuant to a Warrant Agreement, dated as of June 29,
1999 (the "Warrant Agreement"), among the Company, GAP, Joseph J. Cayre, Kenneth
Cayre and Stanley Cayre, the Company issued to GAP warrants to purchase, at an
exercise price equal to $0.01 per share, 500,000 shares of Common Stock, in
consideration of the execution by GAP of the Commitment Letter. Pursuant to the
Warrant Agreement, the aggregate number of warrants was subject to automatic
increase by the following number of warrants (the "Additional Warrants") on the
following dates upon the occurrence of the following events (the "Triggering
Events"): (i) 1,500,000 on July 30, 1999, if the parties to the Warrant
Agreement made the subordinated loans under the Commitment Letter, (ii)
2,500,000 on November 1, 1999, if the Company had not executed on or prior to
October 31, 1999, an agreement (a "Sale Agreement") relating to a
15
<PAGE> 18
recapitalization, reorganization, merger, sale or other business combination
transaction after the consummation of which the stockholders of the Company did
not hold at least a majority of the voting power of the surviving person, (iii)
2,500,000 on the date of termination of such Sale Agreement if the Company
entered into such an agreement on or prior to October 31, 1999, but such Sale
Agreement thereafter terminated for any reason, (iv) 3,000,000 on February 29,
2000 if the Company had not closed the transactions contemplated by the Sale
Agreement on or prior to February 28, 2000 and repaid in full the subordinated
loans made pursuant to the Commitment Letter and (v) 3,000,000 on June 30, 2000,
and the last day of each fiscal quarter thereafter if the Company had not repaid
in full during such quarter the subordinated loans made pursuant to the
Commitment Letter. The Additional Warrants have an exercise price of $.01 per
share.
On July 29, 1999, in accordance with the Commitment Letter, GAP made a
$20,000,000 unsecured subordinated loan to the Company. Concurrently, in
accordance with the Warrant Agreement, the Company issued to GAP 1,500,000
Additional Warrants to purchase shares of Common Stock. On October 31, 1999, in
accordance with the Warrant Agreement, the Company issued to GAP 2,500,000
Additional Warrants to purchase shares of Common Stock.
On December 16, 1999, pursuant to the Securities Exchange Agreement, the
Company issued to GAP the GAP Notes in consideration of the surrender to the
Company by GAP of the Preferred Stock and its subordinated note of the Company
with a face value of $20,000,000.
On December 16, 1999, pursuant to the Equity Purchase and Voting Agreement,
dated as of November 15, 1999, among Infogrames SA, CUSH and GAP, GAP
transferred to CUSH the GAP Warrants in consideration of $990.
Infogrames SA. As of February 15, 2000, Infogrames SA, through CUSH,
entered into an agreement with First Union National Bank, as agent for a
syndicate of banks (together, the "Banks"), pursuant to which Infogrames SA
assumed the Banks' interest in the Company's Credit Agreement. In connection
with the assumption by Infogrames SA of the Credit Agreement, warrants to
acquire 225,000 shares of the Company's Common Stock, at an exercise price of
$0.01 per share, were issued to Infogrames.
In connection with the Infogrames transaction, the Company has entered into
an agreement effective as of December 16, 1999, with Infogrames SA to provide
distribution of the Company's products in Europe pursuant to which the Company
is entitled to receive 30% of the gross profit on such products.
In connection with the Infogrames transaction, the Company has an
arrangement with Infogrames SA pursuant to which Infogrames SA has been
providing certain management and support services to the Company on a costs plus
expenses basis. The parties intend in the near future to enter into a written
agreement to formalize this arrangement.
In connection with change of the Company's name to Infogrames, Inc., the
Company entered into an agreement, effective as of May 10, 2000 pursuant to
whether the Company has received from Infogrames SA a non-exclusive,
royalty-free license to use the name Infogrames, which license may not be
canceled on less than one year's notice unless the Company breaches its
obligations under the license.
Infogrames North America, Inc. In connection with the Infogrames
transaction, effective as of December 16, 1999, the Company has the
non-exclusive right in the U.S. and Canada to act as the sales agent for
Infogrames North America, Inc. ("INA"), a wholly owned subsidiary of Infogrames
SA, for INA's products. The Company will receive a fixed percentage of net
receipts for sales of such products. The parties intend in the near future to
enter into a written agreement to formalize this arrangement.
During the fiscal year ended March 31, 2000, the Company purchased $1.2
million of product from Infogrames SA, of which $1.1 million remains payable,
representing approximately 1% of total products purchased by the Company for
such period.
Transactions between Infogrames UK Limited and GT Interactive Software
Europe (Limited). GT Interactive Software Europe (Limited) ("GT UK") entered
into a number of transactions with Infogrames UK Limited ("Infogrames UK")
relating to the consolidation of its operations with Infogrames UK. Fixed assets
having a net book value of $722,000 were transferred to Infogrames UK for
$626,000. The resulting loss
16
<PAGE> 19
is included in restructuring charges. Inventory having a cost of $270,000 was
transferred at original cost. Infogrames UK agreed to assume the ongoing costs
of running GT UK's office from March 1, 2000, including the salary costs of a
number of employees who transferred to Infogrames UK. Such salary charges
totaled $265,000 and such charges that relate to ongoing operations other than
salaries totaled $94,000 for the month of March 2000. The lease on the UK office
was formally assigned to Infogrames UK in June 2000, although the rent for this
office has been borne by Infogrames UK from March 1, 2000. $38,000 of such rent
was re-charged to Infogrames UK for the month of March 2000. A deferred rent
liability of $203,000 arising from an initial rent free period on the office was
transferred to Infogrames UK.
The following transactions occurred during the fiscal year 2000 between the
Company and former directors and officers of the Company. Information is
presented through the former directors' date of resignation, December 16, 1999.
Leases. In May 1995, G.T. Interactive Software (Europe) Limited, the
Company's European subsidiary, entered into a lease with respect to its then
principal executive offices with Marylebone 248 Realty LLC ("Marylebone 248"),
an entity controlled by Joseph J. Cayre, former Chairman Emeritus of the Board
of Directors and Jack J. Cayre, former Executive Vice President and director of
the Company. This lease was terminated in August 1999. From April 1, 1999
through August 15, 1999, the Company paid approximately $119,000 in rent to
Marylebone 248.
GoodTimes Home Video Corp. GoodTimes Home Video Corp. ("GTHV"), a majority
of whose stock was formerly owned by Joseph J. Cayre, Stanley Cayre and Kenneth
Cayre, performed certain assembly and packaging services for the Company. As of
March 31, 2000, the Company had commitments outstanding to GTHV of approximately
$2.1 million.
REPS. In servicing its mass merchant accounts, the Company uses field
representatives supplied by REPS, a company owned by Joseph J. Cayre, Stanley
Cayre and Kenneth Cayre. REPS provides such services to the Company as well as
to third parties not affiliated with the Cayre family. The Company had an
agreement with REPS pursuant to which REPS supplied such services through May 1,
2000. The Company is currently operating on a month-to-month basis under the
terms of the expired agreement. From April 1, 1999 through December 16, 1999,
the Company paid approximately $2,686,000 in fees to REPS.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche to audit the
financial statements of the Company for the fiscal year ended March 31, 2000,
and, in connection with the change of the Company's fiscal year end from March
31 to June 30, the transitional fiscal year ending June 30, 2000 and the fiscal
year ending June 30, 2001. Such appointment is being presented to the
stockholders for ratification at the Annual Meeting. To the Company's knowledge,
no member of Deloitte & Touche or any of its associates has any financial
interest in the Company or its affiliates.
On March 20, 2000, the Board of Directors named Deloitte & Touche as the
Company's independent auditors, replacing Arthur Andersen LLP ("Arthur
Andersen"). During the Company's two most recent fiscal years, there were no
disagreements with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen, would
have caused them to make reference to the subject matter of the disagreement in
their report. None of Arthur Andersen's reports on the Company's financial
statements for either of the past two years contained an adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles. Deloitte & Touche also serves as Infogrames
SA's independent auditors.
In addition, there were no reportable events in accordance with Item
304(a)(1)(v) (A)-(D) of Regulation S-K.
17
<PAGE> 20
The Company has been advised that a representative of Deloitte & Touche
will be present at the Annual Meeting, will have the opportunity to make a
statement, and is expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE
AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSAL 3
APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
In 1997, the Company's Board of Directors adopted and the Company's
stockholders approved the 1997 Stock Incentive Plan (the "1997 Plan") which
permitted the issuance of up to 4,000,000 shares of Common Stock. In 1998, the
Company's Board of Directors and the Company's stockholders approved an
amendment to the 1997 Plan increasing the number of shares reserved for issuance
thereunder by 4,000,000 to 8,000,000 shares. As of March 31, 2000, a total of
approximately 4,280,289 shares of Common Stock were issued or reserved for
issuance under the 1997 Plan, and accordingly, an aggregate of approximately
3,719,711 shares remained available for grants under the 1997 Plan.
The Board of Directors believes that in light of the Company's need to
remain competitive in its industry in attracting and retaining talented
employees, including senior executives, the Company will need the authority to
make grants covering a greater number of shares in the next several years than
remain authorized under the 1997 Plan. The failure to make available such grants
when necessary would, in the Board of Directors' judgment, negatively impact the
Company's future growth and profitability and, therefore, its ability to enhance
stockholder value.
Consequently, the Board of Directors has adopted, and is submitting to the
stockholders for approval, the 2000 Plan, the full text of which is set forth in
Appendix B hereto. Directors, officers and other employees of the Company and
its subsidiaries, as well as consultants to the Company and its subsidiaries,
are eligible to participate under the 2000 Plan. Approximately 600 persons are
eligible to participate in the 2000 Plan. Stockholder approval of the 2000 Plan
is necessary to comply with the provisions of the performance-based compensation
exemption from the tax deduction limit imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), as well as to ensure that
additional incentive stock options, if ever required, are available for
issuance.
The main features of the 2000 Plan are outlined below, but the outline is
qualified by reference to the complete text of the plan.
General. On June 27, 2000, the Board of Directors adopted, subject to
stockholder approval, the 2000 Plan. The 2000 Plan provides initially for the
issuance of a total of up to 15,000,000 (before the one-for-five reverse stock
split effected on June 26, 2000) authorized and unissued shares of Common Stock,
treasury shares and/or shares acquired by the Company for purposes of the 2000
Plan, and may be increased annually commencing January 1, 2001, at the
discretion of the Board of Directors, by an amount up to 1% of the shares of
Common Stock then outstanding. Generally, shares subject to an award that remain
unissued upon expiration or cancellation of the award are available for other
awards under the 2000 Plan. In the event of a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, the
Compensation Committee of the Board of Directors (the "Compensation Committee"),
or the Company's Board of Directors if there is no Compensation Committee, will
proportionately adjust for any resulting increase or decrease in the number of
issued shares of Common Stock.
Awards under the 2000 Plan may be made in the form of (i) incentive stock
options, (ii) non-qualified stock options (incentive and non-qualified stock
options are collectively referred to as "options"), (iii) stock
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appreciation rights, (iv) restricted stock, (v) restricted stock units, (vi)
dividend equivalent rights, and (vii) other stock based awards. Awards may be
made to such directors, officers and other employees of the Company and its
subsidiaries (including employees who are directors and prospective employees
who become employees), and to such consultants to the Company and its
subsidiaries, as the Compensation Committee shall in its discretion select
(collectively, "key persons").
Administration. The 2000 Plan is to be administered by the Compensation
Committee, composed of not fewer than two "non-employee" directors as defined
under Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee
is authorized to construe, interpret and implement the provisions of the 2000
Plan, to select the key persons to whom awards will be granted, to determine the
terms and provisions of such awards, and to amend outstanding awards. The
determinations of the Compensation Committee are made in their sole discretion
and are conclusive. If there is no Compensation Committee, the Board of
Directors will administer the Plan and all references to the "Compensation
Committee" will be deemed to refer to the "Board of Directors."
GRANTS UNDER THE 2000 PLAN
Stock Options. Unless the Compensation Committee expressly provides
otherwise, an option or stock appreciation right will become exercisable in
installments. The first installment of 25% of the total shares will become
exercisable on the first anniversary of the date of grant. The remaining 75% of
the total shares will be exercisable in equal installments of 6.25% of the total
shares on the last day of each full calendar quarter beginning after the first
anniversary of the grant date until all shares are fully exercisable on the
fourth anniversary of the grant date. The purchase price per share payable upon
the exercise of an option (the "option exercise price") will be established by
the Compensation Committee, provided that the option exercise price shall be no
less than 100% of the fair market value of a share of the Common Stock on the
date of grant in the case of an incentive stock option. The option exercise
price is payable by certified or official bank check, with the consent of the
Compensation Committee, by surrender of shares of Common Stock having a fair
market value on the date of the exercise equal to part or all of the option
exercise price or by such other payment method as the Compensation Committee may
prescribe.
The total number of shares of Common Stock with respect to which options
may be granted to any one employee during any one year period may not exceed
1,500,000 (before the one-for-five reverse stock split).
Stock Appreciation Rights. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the 2000 Plan. Generally, stock appreciation rights will be exercisable at
the same time as any option to which they relate are exercisable. The grantee of
a stock appreciation right has the right to surrender the stock appreciation
right and to receive from the Company an amount equal to the aggregate
appreciation since the date of the grant (or the excess of the fair market value
over the option exercise price if the stock appreciation right is granted in
connection with an option) in the shares of Common Stock in respect of which
such stock appreciation right is being exercised. Payment due upon exercise of a
stock appreciation right may be in cash, in Common Stock, or partly in each, as
determined by the Compensation Committee in its discretion.
Restricted Stock. The Compensation Committee may grant or sell restricted
shares of Common Stock to such key persons, in such amounts, and subject to such
terms and conditions as the Compensation Committee shall determine in its
discretion. Certificates for the shares of Common Stock covered by a restricted
stock award will remain in the possession of the Company until such shares are
free of restrictions. Subject to the applicable restrictions, the grantee has
the rights of a stockholder with respect to the restricted stock.
Restricted Stock Units. The Compensation Committee may grant restricted
stock units to such key persons, in such amounts, and subject to such terms and
conditions as the Compensation Committee shall determine in its discretion.
Restricted stock units are intended to give the recipient the economic
equivalent of actual restricted shares of stock, while postponing the tax
consequences. A restricted stock unit is an
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<PAGE> 22
unsecured promise to transfer an unrestricted share of stock at a specified
future maturity date (which can be later than the vesting date at which the
right to receive the shares becomes nonforfeitable) selected by the recipient of
the unit at the time of grant or subsequent thereto.
Dividend Equivalent Rights. The Compensation Committee may include in any
award a dividend equivalent right entitling the recipient to receive amounts
equal to the ordinary dividends that would have been paid, during the time such
award is outstanding and unexercised, on the shares of Common Stock covered by
such award if such shares were then outstanding.
Other Stock Based Awards. The 2000 Plan permits the Compensation Committee
to grant other stock based awards, such as unrestricted stock, subject to such
terms and conditions as the Compensation Committee deems appropriate.
TERMINATION OF EMPLOYMENT OR SERVICE
Options and Stock Appreciation Rights. Unless the Compensation Committee
otherwise specifies, all options and stock appreciation rights will terminate in
connection with the grantee's termination of employment or services with the
Company or any of its subsidiaries as follows:
(a) If the termination is for any reason, all unvested options and/or
unvested stock appreciation rights will terminate on the date of such
termination.
(b) If the termination is initiated by the Company or any of its
subsidiaries for "cause," the grantee's vested options and/or vested stock
appreciation rights will terminate immediately.
(c) If the termination is initiated by the Company or any of its
subsidiaries other than for "cause," the grantee's vested options and/or
vested stock appreciation rights generally will be exercisable for 90 days
after termination.
(d) If the termination is initiated by the grantee for any reason, the
grantee's vested options and/or vested stock appreciation rights generally
will be exercisable for 30 days after termination.
(e) If the termination is because of a "disability," the grantee's
vested outstanding options and/or vested stock appreciation rights will
generally remain exercisable for one year after the termination.
(f) If the grantee dies while still employed with or providing service
to the Company or any of its subsidiaries or during the period of time when
the vested options and/or vested stock appreciation rights are still
exercisable under (b)-(e), the grantee's vested options and/or vested stock
appreciation rights will be exercisable for 90 days after the grantee's
death by the grantee's executor, administrator or designated beneficiary.
In no event will any options or stock appreciation rights be exercisable more
than ten years after the date of the grant.
For purposes of the 2000 Plan, the term "cause" will have the meaning in
any then-effective employment agreement between the grantee and the Company or
any of its subsidiaries. If there is no such definition of "cause," "cause"
means the grantee's : (a) conviction or pleading guilty or no contest to any
crime (whether or not involving the Company or any of its subsidiaries)
constituting a felony in the jurisdiction involved; (b) engaging in any
substantiated act involving moral turpitude; (c) engaging in any act which, in
each case, subjects, or if generally known would subject, the Company or any of
its subsidiaries to public ridicule or embarrassment; (d) material violation of
the Company's or any of its subsidiaries' policies, including, without
limitation, those relating to sexual harassment or the disclosure or misuse of
confidential information; (e) serious neglect or misconduct in the performance
of the grantee's duties for the Company or any of its subsidiaries or willful or
repeated failure or refusal to perform such duties; in each case as determined
by the Compensation Committee, which determination will be final, binding and
conclusive. The term "disability," in
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<PAGE> 23
the case of an incentive stock option will have the meaning given to it by
Section 22(e) of the Code. In the case of nonqualified options and stock
appreciation rights, "disability" will have the meaning contained in the
then-existing employment agreement, if any, or, if there is no such definition,
"disability" means the grantee's physical or mental disability, whether total or
partial, and either permanent or so that the grantee, in the good faith judgment
of the Compensation Committee, is unable to substantially and competently
perform his duties hereunder for a period of 90 consecutive days or for 90 days
during a six-month period.
Restricted Stock. If a grantee's employment or service terminates for any
reason, the Company will have the right to require forfeiture of restricted
shares in exchange for any amount paid by the grantee for such shares.
Other Features of the 2000 Plan. The Compensation Committee may amend any
outstanding award, including, without limitation any amendment which would
accelerate the time or times at which the award becomes unrestricted or may be
exercised, or waive or amend any goals, restrictions or conditions on the award.
The Board of Directors may, without stockholder approval, suspend, discontinue,
revise or amend the 2000 Plan at any time or from time to time; provided,
however, that stockholder approval shall be obtained to the extent necessary to
comply with Section 422 of the Code (relating to the grant of incentive stock
options) and other applicable law. Unless sooner terminated by the Board of
Directors, the provisions of the 2000 Plan respecting the grant of incentive
stock options shall terminate on the tenth anniversary of the adoption of the
2000 Plan by the Board of Directors. All awards made under the 2000 Plan prior
to its termination shall remain in effect until they are satisfied or
terminated.
In the event of a merger or consolidation of the Company with or into any
other corporation or entity, outstanding awards may be assumed or an equivalent
option or right may be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Compensation Committee
determines, in the exercise of its sole discretion, to accelerate the date on
which an award becomes exercisable or fully vested. In the absence of an
assumption or substitution of awards, awards shall, to the extent not exercised,
terminate as of the date of the closing of the merger.
Tax Consequences. The following description of the tax consequences of
awards under the 2000 Plan is based on present Federal tax laws, and does not
purport to be a complete description of the tax consequences of the 2000 Plan.
There are generally no Federal tax consequences either to the optionee or
to the Company upon the grant of a stock option. On exercise of an incentive
stock option, the optionee will not realize any income, and the Company will not
be entitled to a deduction for tax purposes, although such exercise may give
rise to liability for the optionee under the alternative minimum tax provisions
of the Code. However, if the optionee disposes of shares acquired upon exercise
of an incentive stock option within two years of the date of grant or one year
of the date of exercise, the optionee will recognize compensation income, and
the Company will be entitled to a deduction in the amount of the excess of the
fair market value of the shares of Common Stock on the date of exercise over the
option exercise price (or the gain on sale, if less); the remainder of any gain
to the optionee will be treated as capital gain. On exercise of a non-qualified
stock option, the amount by which the fair market value of the Common Stock on
the date of exercise exceeds the option exercise price will generally be taxable
to the optionee as compensation income and will generally be deductible for tax
purposes by the Company.
The grant of a stock appreciation right or restricted stock unit award will
not result in income for the grantee or in a tax deduction for the Company. Upon
the settlement of such a right or award, the grantee will include in gross
income an amount equal to the fair market value of any shares of Common Stock
and/or any cash received, and the Company will be entitled to a tax deduction in
the same amount. An award of restricted shares of Common Stock will not result
in income for the grantee or in a tax deduction for the Company until such time
as the shares are no longer subject to a substantial risk of forfeiture unless
the grantee elects otherwise. At that time, the grantee generally will include
in gross income an amount equal to the fair market value of the shares of Common
Stock less any amount paid for them, and the Company will be entitled to a tax
deduction in the same amount.
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Limitations on the Company's Compensation Deduction. Section 162(m) of the
Code limits the deduction which the Company may take for otherwise deductible
compensation payable to certain executive officers to the extent that
compensation paid to such officers for a year exceeds $1.0 million, unless such
compensation meets certain criteria. The Company believes that compensation
realized from stock options and stock appreciation rights granted under the 2000
Plan generally will satisfy the requirements of Section 162(m) of the Code if
the options or stock appreciation rights are granted by a committee of "outside
directors" (as defined under Section 162(m)); however, there is no assurance
that such awards will satisfy such requirements. In addition, because other
awards under the 2000 Plan will generally not meet the requirements of Section
162(m) of the Code, the deduction attributable to any compensation realized
under any such awards to the affected executive officers may be limited.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 2000 PLAN.
MISCELLANEOUS
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SEC
FOR ITS LAST FISCAL YEAR, INCLUDING ANY FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES THERETO, HAS BEEN MAILED WITH THIS PROXY STATEMENT TO
STOCKHOLDERS OF THE COMPANY. THE COMPANY WILL FURNISH ANY EXHIBITS TO THE FORM
10-K TO EACH STOCKHOLDER REQUESTING THEM UPON WRITTEN REQUEST TO THE DIRECTOR,
INVESTOR RELATIONS, INFOGRAMES, INC., 417 FIFTH AVENUE, NEW YORK, NY 10016 AND
PAYMENT OF A FEE OF $.10 PER PAGE TO COVER COSTS.
The cost of soliciting proxies will be paid by the Company. The Company has
also arranged for reimbursement of brokerage houses, nominees, custodians and
fiduciaries for the forwarding of proxy materials to the beneficial owners of
shares held of record. Proxies may also be solicited by directors, officers and
employees of the Company, but such persons will not be specially compensated for
such services.
SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONS
The By-laws contain procedures for stockholder nomination of directors and
for other stockholder proposals to be presented before annual stockholder
meetings. The By-laws provide that any record owner of stock entitled to be
voted generally in the election of directors may nominate one or more persons
for election as a director at a stockholders' meeting only if written notice is
given to the Secretary of the Company of the intent to make such nomination. The
notice must be given not later than the close of business on the 75th day nor
earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the later of: (i) the 75th day prior to the scheduled date of such
annual meeting or (ii) the 15th day following the day on which public
announcement of the date of such annual meeting is first made by the Company.
Such stockholder's notice shall set forth as to each person whom the stockholder
proposes to nominate for election or reelection as a Director: (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Company's capital stock which are beneficially owned by such person on the
date of such stockholder notice, (iv) the consent of each nominee to serve as a
Director if elected, and (v) such information concerning such person as is
required to be disclosed concerning a nominee for election as a Director of the
Company pursuant to the rules and regulations under the Exchange Act. A
stockholder's notice to the Secretary further shall set forth as to the
stockholder giving such notice: (i) the name and address, as they appear on the
Company's stock transfer books, of such stockholder and of the beneficial owners
(if any) of the Company's capital stock registered in such stockholder's name
and the name and address of other stockholders known by such stockholder to be
supporting such nominee(s), (ii) the class and number of shares of the Company's
capital stock which are held of record, beneficially owned or represented by
proxy by such stockholder and by any other stockholders known by such
stockholder to be supporting such nominee(s) on the record date for the annual
meeting in question (if such date shall then have been made publicly available)
and on the date of such stockholder's
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notice, and (iii) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by such stockholder or in connection therewith.
Notwithstanding the foregoing provisions, stockholders wishing to have a
proposal included in the Company's proxy statement shall comply with the
applicable requirements of the Exchange Act, and the rules and regulations
thereunder and shall have the rights provided by Rule 14a-8 under the Exchange
Act. In order to be eligible under Rule 14a-8 for inclusion in the Company's
proxy statement and accompanying proxy at the next annual meeting of
stockholders, stockholder proposals must be received by the Company on or before
February 28, 2001.
A copy of the By-law provisions described above is available upon written
request to the Director, Investor Relations, Infogrames, Inc., 417 Fifth Avenue,
New York, NY 10016. The person presiding at the meeting is authorized to
determine if a proposed matter is properly before the meeting or if a nomination
is properly made.
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OTHER MATTERS
The Board knows of no matters other than those listed in the attached
Notice of Annual Meeting which are likely to be brought before the Meeting.
However, if any other matter properly comes before the Meeting, the persons
named on the enclosed proxy card will vote the proxy in accordance with their
best judgment on such matter.
By Order of the Board of Directors
DENIS GUYENNOT
Secretary
New York, New York
June 29, 2000
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APPENDIX A
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
This Audit Committee Charter ("Charter") has been adopted by the Board of
Directors (the "Board") of Infogrames, Inc. (the "Company"). The Audit Committee
of the Board (the "Audit Committee") shall be appointed by the Board and shall
be constituted and have the authority and responsibility described herein. The
Audit Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board for approval.
ROLE AND INDEPENDENCE; ORGANIZATION
The Audit Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing and financial
reporting practices of the Company and the independence and performance of the
Company's internal and external auditors. It may also have such other duties as
may from time to time be assigned to it by the Board. The membership of the
Audit Committee shall consist of at least three directors who are each free of
any relationship that, in the opinion of the Board, may interfere with such
member's individual exercise of independent judgment. Each Audit Committee
member shall also meet the independence and financial literacy requirements for
serving on audit committees, and at least one member should have past employment
experience in finance or accounting, requisite professional certification in
accounting, or other comparable experience or background, including having been
a CEO, CFO or other senior officer with financial oversight responsibilities,
all as set forth, and subject to the "phase-in" periods reflected in, the
applicable rules of the National Association of Securities Dealers, Inc. (the
"NASD"), as may be in effect from time to time.
The Audit Committee shall maintain free and open communication with the
independent auditors, the internal auditors and Company management and shall
meet at least annually with the chief financial officer, the senior internal
auditing executive and the independent auditor in separate executive sessions.
In discharging its oversight role, the Audit Committee shall have full access to
all Company books, records, facilities, personal and outside professionals. The
Audit Committee may retain special legal, accounting or other consultants as
advisors.
The Audit Committee shall meet at least four times a year and make a report
to the Board following each meeting. Such meetings may be in conjunction with
the review of quarterly reports or otherwise and may be in person or telephonic.
One member of the Audit Committee shall be appointed as chair. The chair shall
be responsible for leadership of the Audit Committee, including scheduling and
presiding over meetings, preparing agendas and making regular reports to the
Board. The chair will also maintain regular liaison with the CEO, CFO, the lead
independent audit partner and the director of internal audit.
RESPONSIBILITIES
While the Audit Committee has the responsibility and authority set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
Management is responsible for the preparation of the Company's financial
statements and the independent auditors are responsible for auditing those
financial statements. The Audit Committee and the Board recognize that
management (including the internal audit staff) and the independent auditors
have more resources and time, and more detailed knowledge and information
regarding the Company's accounting, financial and auditing practices than do
Audit Committee members; accordingly, the Audit Committee's oversight role does
not provide any expert or special assurance as to the Company's financial
statements or any certification as to the work of the independent auditors. Nor
is it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors or to
assure compliance with laws and regulations.
A-1
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Although the Audit Committee may wish to consider other duties from time to
time, the general recurring activities of the Audit Committee in carrying out
its oversight role are described below. The Audit Committee shall be responsible
for:
- Recommending to the Board, in advance of the annual meeting of
stockholders, the independent auditors to be retained (or nominated for
stockholder approval) to audit the books, records, accounts and financial
statements of the Company, which auditors are ultimately accountable to
the Board and the Audit Committee, as representatives of the
stockholders.
- Evaluating, together with the Board, the performance of the independent
auditors and, where appropriate, recommending the replacement of such
auditors.
- Annually obtaining from the independent auditors a formal written
statement describing all relationships between the auditors and the
Company, consistent with Independence Standards Board No. 1. The Audit
Committee shall actively engage in a dialogue with the independent
auditors with respect to any disclosed relationship that may impact the
objectivity and independence of the auditors and shall take or recommend
that the Board take appropriate actions to oversee the auditors'
independence.
- Inquiring of the independent auditors whether the auditors believe that
there are any material issues in connection with their audits arising out
of Section 10A of the Securities Exchange Act of 1934.
- Reviewing the financial statements on both a quarterly and annual basis
and discussing them with management and the independent auditors prior to
the publication of such statements. These discussions shall include the
matters required to be discussed under Statement of Auditing Standards
No. 61 and consideration of the quality of the Company's accounting
principles as applied in its financial reporting. Such discussions may
include a review of particularly sensitive accounting estimates, reserves
and accruals, review of judgmental areas, review of audit adjustments
(whether or not recorded), review of risk exposures that may have a
material impact on the Company's financial statements and the steps
management has taken to monitor and control such exposures and other such
inquiries as the Audit Committee or the independent auditors shall deem
appropriate. Based on its review, the Audit Committee shall make its
recommendation to the Board as to the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K (or the
Annual Report to Stockholders, if distributed prior to the filing of the
Form 10-K).
- Issuing annually a report to be included in the Company's proxy statement
as required by the rules of the Securities and Exchange Commission (the
"SEC").
- Overseeing the relationship with the independent auditors, including
discussing with the auditors prior to the audit the planning and staffing
of the audit and the nature and rigor of the audit process, receiving and
reviewing the audit reports; reviewing with the auditors any problems or
difficulties the auditors may have encountered in carrying out their
responsibilities, including any restrictions on the scope of the
activities or access to required information, any changes recommended in
the planned scope of the internal audit, and any management letters
provided by the auditors and the Company's response to such letters; and
providing the auditors full access to the Audit Committee and the Board
to report on all appropriate matters.
- Reviewing significant changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditors,
internal auditors or management.
- Reviewing and approving the fees to be paid to the independent auditors
and any required special services.
- Reviewing with management and the independent auditors the interim
financial information prior to the Company's filing of each Form 10-Q;
this review shall be done by the Audit Committee as a whole or through
the Audit Committee chair.
- Discussing with the independent auditors and management the acceptability
and quality of accounting principles and underlying estimates in the
financial statements on both an annual and quarterly basis.
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- Discussing with management, the internal auditors and the independent
auditors the quality and adequacy of the Company's internal controls and
the internal audit function's organization, responsibilities, plans,
results, budget and staffing, as well as providing oversight to internal
audit activities, including review of significant reports prepared by the
internal auditors and management's responses.
- Discussing with management and/or the Company's general counsel any legal
matters (including the status of pending litigation) that may have a
material impact on the Company's financial statements, the Company's
compliance policies and any material reports or inquiries from regulatory
or governmental agencies.
PHASE-IN PERIOD
The Audit Committee shall take all necessary steps to implement fully the
provisions of this Charter by the applicable deadlines set by the NASD and the
SEC. Subject to the foregoing, the Audit Committee may implement any of the
provisions of this Charter at such times as it may reasonably determine
practicable.
A-3
<PAGE> 30
APPENDIX B
INFOGRAMES, INC.
2000 STOCK INCENTIVE PLAN
JUNE 2000
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I -- GENERAL................................................ B-2
1.1 Purpose..................................................... B-2
1.2 Administration.............................................. B-2
1.3 Persons Eligible for Awards................................. B-2
1.4 Types of Awards Under Plan.................................. B-3
1.5 Shares Available for Awards................................. B-3
1.6 Definitions of Certain Terms................................ B-3
ARTICLE II -- AWARDS UNDER THE PLAN................................. B-4
2.1 Agreements Evidencing Awards................................ B-4
2.2 No Rights as a Shareholder.................................. B-4
2.3 Grant of Stock Options, Stock Appreciation Rights and
Dividend Equivalent Rights.................................. B-5
2.4 Exercise of Options and Stock Appreciation Rights........... B-6
2.5 Termination of Employment................................... B-7
2.6 Grant of Restricted Stock................................... B-7
2.7 Grant of Restricted Stock Units............................. B-8
2.8 Other Stock-Based Awards.................................... B-8
2.9 Grant of Dividend Equivalent Rights......................... B-8
2.10 Forfeiture and Repayment of Awards.......................... B-9
ARTICLE III -- MISCELLANEOUS........................................ B-9
3.1 Amendment of the Plan; Modification of Awards............... B-9
3.2 Tax Withholding............................................. B-9
3.3 Restrictions................................................ B-10
3.4 Nonassignability............................................ B-10
3.5 Requirement of Notification of Election Under Code Section
83(b)....................................................... B-10
3.6 Requirement of Notification Upon Disqualifying Disposition
Under Code Section 421(b)................................... B-10
3.7 Dissolution, Liquidation or Merger.......................... B-10
3.8 Right of Discharge Reserved................................. B-11
3.9 Nature of Payments.......................................... B-11
3.10 Non-Uniform Determinations.................................. B-11
3.11 Other Payments or Awards.................................... B-11
3.12 Section Headings............................................ B-11
3.13 Effective Date and Term of Plan............................. B-11
3.14 Governing Law............................................... B-12
</TABLE>
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ARTICLE I
GENERAL
1.1 PURPOSE
The purpose of the Infogrames, Inc. 2000 Stock Incentive Plan (the "Plan")
is to provide officers, other employees and directors of, and consultants to,
Infogrames, Inc. (the "Company") and any of its subsidiaries an incentive (a) to
enter into and remain in the service of the Company or its subsidiaries, (b) to
enhance the long-term performance of the Company or its subsidiaries, and (c) to
acquire a proprietary interest in the success of the Company or its
subsidiaries.
1.2 ADMINISTRATION
1.2.1 Subject to Section 1.2.6, the Plan will be administered by the
Compensation Committee (the "Committee") of the board of directors of the
Company (the "Board"), which will consist of not less than two directors. The
members of the Committee will be appointed by, and serve at the pleasure of, the
Board. To the extent required for transactions under the Plan to qualify for the
exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act will be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to Section 162(m) of the Internal Revenue
Code of 1986 (the "Code"), the members of the Committee will be "outside
directors" within the meaning of Code Section 162(m). In the absence of a
Committee, the Board will administer the Plan and all references to the
"Committee" will be deemed to refer to the "Board".
1.2.2 The Committee will have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee will be taken by the vote of a majority of
its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken will be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement will be final, binding and conclusive.
1.2.5 No member of the Committee will be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained in the Plan: (a)
until the Board appoints the members of the Committee, the Plan will be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, grant awards or resolve to administer the Plan. In
either of such foregoing events, the Board will have all of the authority and
responsibility granted to the Committee herein.
1.3 PERSONS ELIGIBLE FOR AWARDS
Awards under the Plan may be made to such directors, officers and other
employees of the Company and its subsidiaries (including prospective employees
conditioned on their becoming employees), and to such consultants to the Company
and its subsidiaries (collectively, "key persons") as the Committee in its
discretion selects.
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1.4 TYPES OF AWARDS UNDER PLAN
Awards may be made under the Plan in the form of (a) incentive stock
options (within the meaning of Code Section 422), (b) nonqualified stock
options, (c) stock appreciation rights, (d) dividend equivalent rights, (e)
restricted stock, (f) restricted stock units, and (g) other stock-based awards,
all as described in Article II. The term "award" means any of the foregoing. No
incentive stock option (other than an incentive stock option that may be assumed
or issued by the Company in connection with a transaction to which Code Section
424(a) applies) may be granted to a person who is not an employee of the Company
or any of its subsidiaries on the date of grant.
1.5 SHARES AVAILABLE FOR AWARDS
1.5.1 The total number of shares of common stock of the Company, par value
$.01 per share ("Common Stock"), which may be transferred pursuant to awards
granted under the Plan will be initially 15,000,000 shares (before the
one-for-five reverse stock split) and may be increased annually, commencing
January 1, 2001 at the discretion of the Board, by an amount up to 1% of the
shares of Common Stock then outstanding. Such shares may be authorized but
unissued Common Stock or authorized and issued Common Stock held in the
Company's treasury or acquired by the Company for the purposes of the Plan. The
Committee may direct that any stock certificate evidencing shares issued
pursuant to the Plan will bear a legend setting forth such restrictions on
transferability as may apply to such shares pursuant to the Plan.
1.5.2 The total number of shares of Common Stock with respect to which
stock options and stock appreciation rights may be granted to any one employee
of the Company or any of its subsidiaries during any one-year period will not
exceed 1,500,000, prior to the reverse stock split.
1.5.3 Subject to any required action by the shareholders of the Company,
the number of shares of Common Stock covered by each outstanding award, the
number of shares available for awards, the number of shares that may be subject
to awards to any one employee, and the price per share of Common Stock covered
by each such outstanding award automatically will be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company will not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, will affect, and no adjustment by
reason thereof will be made with respect to, the number or price of shares of
Common Stock subject to an award. After any adjustment made pursuant to this
Section 1.5.3, the number of shares subject to each outstanding award will be
rounded to the nearest whole number.
1.5.4 Except as provided in this Section 1.5 and in Section 2.3.8, there
will not be any limit on the number or the value of the shares of Common Stock
that may be subject to awards to any individual under the Plan.
1.6 DEFINITIONS OF CERTAIN TERMS
1.6.1 The "Fair Market Value" of a share of Common Stock on any day will
be determined as follows:
(a) If the principal market for the Common Stock (the "Market") is a
national securities exchange or the NASDAQ Stock Exchange, the last sale price
or, if no reported sales take place on the applicable date, the average of the
high bid and low asked price of Common Stock as reported for such Market on such
date or, if no such quotation is made on such date, on the next preceding day on
which there were quotations, provided that such quotations will have been made
within the ten (10) business days preceding the applicable date;
(b) If the Market is the NASDAQ National List, the NASDAQ Supplemental List
or another market, the average of the high bid and low asked price for Common
Stock on the applicable date, or, if no such
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quotations will have been made on such date, on the next preceding day on which
there were quotations, provided that such quotations were made within the ten
(10) business days preceding the applicable date; or
(c) If neither paragraph (a) nor (b) applies, the Fair Market Value of a
share of Common Stock on any day will be determined in good faith by the
Committee.
1.6.2 The term "incentive stock option" means an option that is intended
to qualify for special federal income tax treatment pursuant to Code Sections
421 and 422, as now constituted or subsequently amended, or pursuant to a
successor provision of the Code, and which is so designated in the applicable
Plan Agreement. Any option that is not specifically designated as an incentive
stock option will under no circumstances be considered an incentive stock
option. Any option that is not an incentive stock option is referred to in the
Plan as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an award
under the Plan who is not an employee of the Company or any of its subsidiaries,
the grantee's association with the Company or any of its subsidiaries as a
director, consultant or otherwise.
1.6.4 A grantee will be deemed to have a "termination of employment" upon
ceasing employment with the Company and all of its subsidiaries or by a
corporation assuming awards in a transaction to which Code Section 424(a)
applies. The Committee may in its discretion determine (a) whether any leave of
absence constitutes a termination of employment for purposes of the Plan, (b)
the impact, if any, of any such leave of absence on awards made under the Plan,
and (c) when a change in a non-employee's association with the Company or any of
its subsidiaries constitutes a termination of employment for purposes of the
Plan. The Committee will have the right to determine whether the termination of
a grantee's employment is a dismissal for "cause" and the date of termination.
The Committee may retroactively deem such a date to be the date of the action
that is cause for dismissal. Such determinations of the Committee will be final,
binding and conclusive.
1.6.5 The term "cause", when used in connection with termination of a
grantee's employment, will have the meaning set forth in any then-effective
employment agreement between the grantee and the Company or any of its
subsidiaries. In the absence of such an employment agreement provision, "cause"
means: (a) conviction or pleading guilty or no contest to any crime (whether or
not involving the Company or any of its subsidiaries) constituting a felony in
the jurisdiction involved; (b) engaging in any substantiated act involving moral
turpitude; (c) engaging in any act which, in each case, subjects, or if
generally known would subject, the Company or any of its subsidiaries to public
ridicule or embarrassment; (d) material violation of the Company's or any of its
subsidiaries' policies, including, without limitation, those relating to sexual
harassment or the disclosure or misuse of confidential information; (e) serious
neglect or misconduct in the performance of the grantee's duties for the Company
or any of its subsidiaries or willful or repeated failure or refusal to perform
such duties; in each case as determined by the Committee, which determination
will be final, binding and conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 AGREEMENTS EVIDENCING AWARDS
Each award granted under the Plan (except an award of unrestricted stock)
will be evidenced by a written agreement ("Plan Agreement") which will contain
such provisions as the Committee in its discretion deems necessary or desirable.
By accepting an award pursuant to the Plan, a grantee thereby agrees that the
award will be subject to all of the terms and provisions of the Plan and the
applicable Plan Agreement.
2.2 NO RIGHTS AS A SHAREHOLDER
No grantee of an option or stock appreciation right (or other person having
the right to exercise such award) will have any of the rights of a shareholder
of the Company with respect to shares subject to such
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award until the issuance of a stock certificate to such person for such shares.
Except as otherwise provided in Section 1.5.3, no adjustment will be made for
dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
2.3 GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND DIVIDEND EQUIVALENT
RIGHTS
2.3.1 The Committee may grant incentive stock options and nonqualified
stock options (collectively, "options") to purchase shares of Common Stock from
the Company, to such key persons, in such amounts and subject to such terms and
conditions, as the Committee determines in its discretion, subject to the
provisions of the Plan.
2.3.2 The Committee may grant stock appreciation rights to such key
persons, in such amounts and subject to such terms and conditions, as the
Committee determines in its discretion, subject to the provisions of the Plan.
Stock appreciation rights may be granted in connection with all or any part of,
or independently of, any option granted under the Plan. A stock appreciation
right granted in connection with a nonqualified stock option may be granted at
or after the time of grant of such option. A stock appreciation right granted in
connection with an incentive stock option may be granted only at the time of
grant of such option.
2.3.3 The grantee of a stock appreciation right will have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to receive
from the Company an amount equal to (a) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise of the stock appreciation right
over (b) the exercise price of such right as set forth in the Plan Agreement (or
over the option exercise price if the stock appreciation right is granted in
connection with an option), multiplied by (c) the number of shares with respect
to which the stock appreciation right is exercised. Payment upon exercise of a
stock appreciation right will be in cash or in shares of Common Stock (valued at
their Fair Market Value on the date of exercise of the stock appreciation right)
or both, all as the Committee determines in its discretion. Upon the exercise of
a stock appreciation right granted in connection with an option, the number of
shares subject to the option will be correspondingly reduced by the number of
shares with respect to which the stock appreciation right is exercised. Upon the
exercise of an option in connection with which a stock appreciation right has
been granted, the number of shares subject to the stock appreciation right will
be correspondingly reduced by the number of shares with respect to which the
option is exercised.
2.3.4 Each Plan Agreement with respect to an option will set forth the
amount (the "option exercise price") payable by the grantee to the Company upon
exercise of the option evidenced thereby. The option exercise price per share
will be determined by the Committee in its discretion; provided, however, that
the option exercise price of an incentive stock option will be at least 100% of
the Fair Market Value of a share of Common Stock on the date the option is
granted (except as permitted in connection with the assumption or issuance of
options in a transaction to which Code Section 424(a) applies), and provided
further that in no event will the option exercise price be less than the par
value of a share of Common Stock.
2.3.5 Each Plan Agreement with respect to an option or stock appreciation
right will set forth the periods during which such award is exercisable, whether
in whole or in part. Such periods will be determined by the Committee in its
discretion; provided, however, that no incentive stock option (or a stock
appreciation right granted in connection with an incentive stock option) will be
exercisable more than 10 years after the date of grant.
2.3.6 The Committee may in its discretion include in any Plan Agreement
with respect to an option (the "original option") a provision that an additional
option (the "additional option") will be granted to any grantee who, pursuant to
Section 2.4.3(b), delivers shares of Common Stock in partial or full payment of
the exercise price of the original option. The additional option will be for a
number of shares of Common Stock equal to the number thus delivered, will have
an exercise price equal to the Fair Market Value of a share of Common Stock on
the date of exercise of the original option, and will have an expiration date no
later than the expiration date of the original option. If a Plan Agreement
provides for the grant of an additional option, such Agreement will also provide
that the exercise price of the original option be no less than the Fair Market
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Value of a share of Common Stock on its date of grant, and that any shares that
are delivered pursuant to Section 2.4.3(b) in payment of such exercise price
will have been held for at least six months.
2.3.7 To the extent that the aggregate Fair Market Value (determined as of
the time the option is granted) of the stock with respect to which incentive
stock options granted under this Plan and all other plans of the Company and any
of its subsidiaries are first exercisable by any employee during any calendar
year will exceed the maximum limit (currently, $100,000), if any, imposed from
time to time under Code Section 422, such options will be treated as
nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5, to the
extent required under Code Section 422, an incentive stock option may not be
granted under the Plan to an individual who, at the time the option is granted,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of his employer corporation or of its parent or subsidiary
corporations (as such ownership may be determined under Code Section 422(b)(6))
unless (a) at the time such incentive stock option is granted the option
exercise price is at least 110% of the Fair Market Value of the shares subject
thereto and (b) the incentive stock option by its terms is not exercisable after
the expiration of five years from the date it is granted.
2.4 EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
Subject to the provisions of this Article II, each option or stock
appreciation right granted under the Plan will be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides, an option
or stock appreciation right will become exercisable in installments. The first
installment of 25% of the total shares will become exercisable on the first
anniversary of the date of grant. The remaining 75% of the total shares will be
exercisable in equal installments of 6.25% of the total shares on the last day
of each full calendar quarter beginning after the first anniversary of the grant
date until all shares are fully exercisable on the fourth anniversary of the
grant date. Each installment, once it becomes exercisable, will remain
exercisable until expiration, cancellation or termination of the award unless
the grantee is terminated for "cause". If the grantee is terminated for "cause",
all exercisable options will be forfeited immediately.
2.4.2 Unless the applicable Plan Agreement provides otherwise, an option
or stock appreciation right may be exercised from time to time as to all or part
of the shares as to which such award is then exercisable (but, in any event,
only for whole shares). A stock appreciation right granted in connection with an
option may be exercised at any time when, and to the same extent that, the
related option may be exercised. An option or stock appreciation right must be
exercised by the filing of a written notice with the Company, on such form and
in such manner as the Committee prescribes.
2.4.3 Any written notice of exercise of an option must be accompanied by
payment for the shares being purchased. Such payment will be made: (a) by
certified or official bank check (or the equivalent thereof acceptable to the
Company) for the full option exercise price; or (b) unless the applicable Plan
Agreement provides otherwise, by delivery of shares of Common Stock acquired at
least six months prior to the option exercise date and having a Fair Market
Value (determined as of the exercise date) equal to all or part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by
law, by such other provision as the Committee may from time to time prescribe.
Notwithstanding the foregoing, payment methods (a) and (b) are only available
while the Common Stock is listed on a national securities exchange or the NASDAQ
Stock Exchange.
2.4.4 Promptly after receiving payment of the full option exercise price,
or after receiving notice of the exercise of a stock appreciation right for
which payment will be made partly or entirely in shares, the Company will,
subject to the provisions of Section 3.3 (relating to certain restrictions),
deliver to the grantee or to such other person as may then have the right to
exercise the award, a certificate or certificates for the shares of Common Stock
for which the award has been exercised. If the method of payment employed upon
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option exercise so requires, and if applicable law permits, an optionee may
direct the Company to deliver the certificate(s) to the optionee's stockbroker.
2.5 TERMINATION OF EMPLOYMENT
2.5.1 All options and stock appreciation rights not previously exercised
will terminate in accordance with Sections 2.5.2 through 2.5.6 upon termination
of the grantee's employment, unless otherwise provided in the Plan Agreement.
2.5.2 If the grantee's employment terminates because of a dismissal by the
Company or any of its subsidiaries for "cause", all outstanding exercisable and
nonexercisable options will be forfeited immediately.
2.5.3 If the grantee's employment terminates because of a dismissal by the
Company or any of its subsidiaries not for "cause", the grantee may exercise all
outstanding exercisable options and stock appreciation rights for 90 days after
the termination, but in no event after the expiration of the award set forth in
the Plan Agreement.
2.5.4 If the grantee's employment is terminated because of a "disability",
the grantee may exercise all outstanding exercisable options and stock
appreciation rights for 12 months after the termination, but in no event after
the expiration of the award set forth in the Plan Agreement. In the case of an
incentive stock option, the term "disability" for purposes of the preceding
sentence will have the meaning given to it by Code Section 22(e). In the case of
nonqualified options and stock appreciation rights, the term "disability" for
purposes of the first sentence will mean the definition thereof contained in the
then-existing employment agreement, if any, or, in the event that no definition
is so provided, the date the grantee becomes physically or mentally disabled,
whether totally or partially, either permanently or so that the grantee, in the
good faith judgment of the Committee, is unable to substantially and competently
perform his duties hereunder for a period of 90 consecutive days or for 90 days
during a six-month period.
2.5.5 If the grantee's employment terminates by action of the grantee for
any reason, the grantee may exercise all outstanding exercisable options and
stock appreciation rights for 30 days after the date of termination, but in no
event after the expiration of the award set forth in the Plan Agreement.
2.5.6 If the grantee dies while employed by the Company or any of its
subsidiaries, or during the period in which the grantee's awards are exercisable
pursuant to Section 2.5.3, 2.5.4 or 2.5.5, the grantee's estate may exercise all
outstanding exercisable options and stock appreciation rights for 90 days after
the grantee's death, but in no event after the expiration of the award set forth
in the Plan Agreement. Any such exercise of an award following a grantee's death
will be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
will be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will is entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient will be bound by all the terms and
conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.7 of the Plan.
2.6 GRANT OF RESTRICTED STOCK
2.6.1 The Committee may grant restricted shares of Common Stock to such
key persons, in such amounts, and subject to such terms and conditions as the
Committee determines in its discretion, subject to the provisions of the Plan.
Restricted stock awards may be made independently of or in connection with any
other award under the Plan. A grantee of a restricted stock award will have no
rights with respect to such award unless such grantee accepts the award within
such period as the Committee specifies by executing a Plan Agreement in such
form as the Committee determines and, if the Committee requires, makes payment
to the Company by certified or official bank check (or the equivalent thereof
acceptable to the Company) in such amount as the Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock award, the
Company will issue in the grantee's name a certificate or certificates for the
shares of Common Stock covered by the award. Upon the issuance of
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such certificate(s), the grantee will have the rights of a shareholder with
respect to the restricted stock, subject to the nontransferability restrictions
and Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such
other restrictions and conditions as the Committee in its discretion may include
in the applicable Plan Agreement.
2.6.3 Unless the Committee otherwise determines, any certificate issued
evidencing shares of restricted stock will remain in the possession of the
Company until such shares are free of any restrictions specified in the
applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
in this Plan or the applicable Plan Agreement. The Committee at the time of
grant will specify the date or dates (which may depend upon or be related to the
attainment of performance goals and other conditions) on which the
nontransferability of the restricted stock will lapse. Unless the applicable
Plan Agreement provides otherwise, additional shares of Common Stock or other
property distributed to the grantee in respect of shares of restricted stock, as
dividends or otherwise, will be subject to the same restrictions applicable to
such restricted stock.
2.6.5 During the 120 days following termination of the grantee's
employment for any reason, the Company will have the right to require the return
of any shares to which restrictions on transferability apply, in exchange for
which the Company will repay to the grantee (or the grantee's estate) any amount
paid by the grantee for such shares.
2.7 GRANT OF RESTRICTED STOCK UNITS
2.7.1 The Committee may grant awards of restricted stock units to such key
persons, in such amounts, and subject to such terms and conditions as the
Committee determines in its discretion, subject to the provisions of the Plan.
Restricted stock units may be awarded independently of or in connection with any
other award under the Plan.
2.7.2 At the time of grant, the Committee will specify the date or dates
on which the restricted stock units become fully vested and nonforfeitable, and
may specify such conditions to vesting as it deems appropriate. If the grantee's
employment by the Company and any of its subsidiaries terminates for any reason,
restricted stock units that have not become nonforfeitable will be forfeited and
canceled immediately. The Committee at any time may accelerate vesting dates and
otherwise waive or amend any conditions of an award of restricted stock units.
2.7.3 At the time of grant, the Committee will specify the maturity date
applicable to each grant of restricted stock units, which may be determined at
the election of the grantee. Such date may be later than the vesting date or
dates of the award. On the maturity date, the Company will transfer to the
grantee one unrestricted, fully transferable share of Common Stock for each
restricted stock unit scheduled to be paid out on such date and not previously
forfeited. The Committee will specify the purchase price, if any, to be paid by
the grantee to the Company for such shares of Common Stock.
2.8 OTHER STOCK-BASED AWARDS
The Board may authorize other types of stock-based awards (including the
grant of unrestricted shares), which the Committee may grant to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee in its discretion determines, subject to the provisions of the Plan.
Such awards may entail the transfer of actual shares of Common Stock to Plan
participants, or payment in cash or otherwise of amounts based on the value of
shares of Common Stock.
2.9 GRANT OF DIVIDEND EQUIVALENT RIGHTS
The Committee may in its discretion include in the Plan Agreement with
respect to any award a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time such award is outstanding and unexercised, on the shares of Common Stock
covered by such award if such shares were then outstanding. In the event such a
provision is included in a Plan Agreement, the
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Committee will determine whether such payments will be made in cash, in shares
of Common Stock or in another form, whether they will be conditioned upon the
exercise of the award to which they relate, the time or times at which they will
be made, and such other terms and conditions as the Committee will deem
appropriate.
2.10 FORFEITURE AND REPAYMENT OF AWARDS
Notwithstanding any other provision of this Plan to the contrary, the
Committee may provide in any Plan Agreement that any award will be forfeited and
any amounts received in connection with any award must be repaid to the Company
or any of its subsidiaries upon the occurrence of certain events (including, but
not limited to, the grantee's breach of such grantee's employment or service
agreement with the Company or any of its subsidiaries or the optionee's
violation of covenants relating to employment or service with the Company or any
of its subsidiaries).
ARTICLE III
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS
3.1.1 The Board may from time to time suspend, discontinue, revise or
amend the Plan in any respect whatsoever including the substitution of classes
of stock or other securities, in their discretion, except that no such action
will materially impair any rights or materially increase any obligations under
any award theretofore made under the Plan without the consent of the grantee
(or, after the grantee's death, the person having the right to exercise the
award). For purposes of this Section 3.1, any action of the Board or the
Committee that alters or affects the tax treatment of any award will not be
considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment will be obtained to the extent
necessary to comply with Code Section 422 (relating to incentive stock options)
or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding Plan Agreement, including,
without limitation, by amendment which would accelerate the time or times at
which the award becomes unrestricted or may be exercised, or waive or amend any
goals, restrictions or conditions set forth in the Agreement. However, any such
amendment (other than an amendment pursuant to Section 3.7) that materially
impairs the rights or materially increases the obligations of a grantee under an
outstanding award will be made only with the consent of the grantee (or, upon
the grantee's death, the person having the right to exercise the award).
3.2 TAX WITHHOLDING
3.2.1 As a condition to the receipt of any shares of Common Stock pursuant
to any award or the lifting of restrictions on any award, or in connection with
any other event that gives rise to a federal or other governmental tax
withholding obligation on the part of the Company relating to an award
(including, without limitation, FICA tax), the Company will be entitled to
require that the grantee remit to the Company an amount sufficient in the
opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a transfer
of shares of Common Stock, then, unless otherwise specified in the applicable
Plan Agreement, the grantee may satisfy the withholding obligation imposed under
Section 3.2.1 by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of tax to be withheld. For this
purpose, Fair Market Value will be determined as of the date on which the amount
of tax to be withheld is determined (and any fractional share amount will be
settled in cash).
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3.3 RESTRICTIONS
3.3.1 If the Committee at any time determines that any consent (as defined
in Section 3.2.2) is necessary or desirable as a condition of, or in connection
with, the granting of any award under the Plan, the issuance or purchase of
shares or other rights thereunder, or the taking of any other action thereunder
(each such action being hereinafter referred to as a "plan action"), then such
plan action will not be taken, in whole or in part, unless and until such
consent will have been effected or obtained to the full satisfaction of the
Committee.
3.3.2 The term "consent" as used herein with respect to any plan action
means (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (b) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee deems necessary or desirable to comply with
the terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of a plan action by any governmental or other regulatory bodies.
3.4 NONASSIGNABILITY
Except to the extent otherwise provided in the applicable Plan Agreement,
no award or right granted to any person under the Plan will be assignable or
transferable other than by will or by the laws of descent and distribution, and
all such awards and rights will be exercisable during the life of the grantee
only by the grantee or the grantee's legal representative.
3.5 REQUIREMENT OF NOTIFICATION OF ELECTION UNDER CODE SECTION 83(b)
If any grantee, in connection with the acquisition of shares of Common
Stock under the Plan, makes an election permitted under Code Section 83(b) (that
is, an election to include in gross income in the year of transfer the amounts
specified in Section 83(b)), such grantee must notify the Company of such
election within 10 days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83(b).
3.6 REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER CODE
SECTION 421(b)
If any grantee makes any disposition of shares of Common Stock issued
pursuant to the exercise of an incentive stock option under the circumstances
described in Code Section 421(b) (relating to certain disqualifying
dispositions), such grantee must notify the Company of such disposition within
10 days thereof.
3.7 DISSOLUTION, LIQUIDATION OR MERGER
3.7.1 In the event of the proposed dissolution or liquidation of the
Company, all outstanding awards will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, accelerate the date on which any award becomes exercisable or fully
vested and/or declare that any award will terminate as of a specified date.
3.7.2 In the event of a merger or consolidation ("Merger") of the Company
with or into any other corporation or entity ("Successor Corporation"),
outstanding awards may be assumed or an equivalent option or right may be
substituted by such Successor Corporation or a parent or subsidiary of such
Successor Corporation, unless the Committee determines, in the exercise of its
sole discretion, to accelerate the date on which an award becomes exercisable or
fully vested. In the absence of an assumption or substitution of awards, awards
will, to the extent not exercised, terminate as of the date of the closing of
the Merger. For the purposes of this Section 3.7.2, an award will be considered
assumed if, for every share of Common Stock subject thereto immediately prior to
the Merger, the grantee has the right, following the Merger, to acquire an
amount equivalent to the consideration received in the Merger transaction by
holders of shares of Common Stock (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
B-10
<PAGE> 41
of the outstanding shares); provided, however, that if such consideration
received in the Merger was not solely common stock of the Successor Corporation
or its parent, the Committee may, with the consent of the Successor Corporation
and the grantee, provide for the consideration to be acquired pursuant to the
award, for each share of Common Stock subject thereto, to be solely common stock
of the Successor Corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the Merger. For
purposes hereof, the term "Merger" will include any transaction in which another
corporation acquires all of the issued and outstanding Common Stock of the
Company.
3.7.3 If the Common Stock is no longer listed on the NASDAQ stock exchange
or any other national securities exchange, the Committee will be authorized to
make such amendments to the Plan as are deemed necessary and appropriate in such
circumstances, including determining the Fair Market Value of the Common Stock
of the Company for purposes of the Plan in accordance with Section 1.6.1(c).
3.8 RIGHT OF DISCHARGE RESERVED
Nothing in the Plan or in any Plan Agreement will confer upon any grantee
the right to continue in the employ of the Company or any of its subsidiaries or
affect any right which the Company or any of its subsidiaries may have to
terminate such employment.
3.9 NATURE OF PAYMENTS
3.9.1 Any and all grants of awards and issuances of shares of Common Stock
under the Plan will be in consideration of services performed by the grantee for
the Company or any of its subsidiaries.
3.9.2 All such grants and issuances will constitute a special incentive
payment to the grantee and will not be taken into account in computing the
amount of salary or compensation of the grantee for the purpose of determining
any benefits under any pension, retirement, profit-sharing, bonus, life
insurance or other benefit plan of the Company or any of its subsidiaries or
under any agreement between the Company or any of its subsidiaries and the
grantee, unless such plan or agreement specifically provides otherwise.
3.10 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan need not be uniform and may
differ among persons who receive, or are eligible to receive, awards under the
Plan (whether or not such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee will be entitled, among other things,
to make non-uniform and different determinations, and to enter into non-uniform
and different Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, and (c) the
treatment of leaves of absence pursuant to Section 1.6.4.
3.11 OTHER PAYMENTS OR AWARDS
Nothing contained in the Plan will be deemed in any way to limit or
restrict the Company or any of its subsidiaries from making any award or payment
to any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.
3.12 SECTION HEADINGS
The section headings contained in this Plan are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
3.13 EFFECTIVE DATE AND TERM OF PLAN
3.13.1 The Plan was adopted by the Board on June 27, 2000, subject to
approval by the Company's shareholders. All awards under the Plan prior to such
shareholder approval are subject in their entirety to such approval. If such
approval is not obtained prior to the first anniversary of the date of adoption
of the Plan, the Plan and all awards thereunder will terminate on that date.
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<PAGE> 42
3.13.2 Unless sooner terminated by the Board, the provisions of the Plan
relating to the grant of incentive stock options will terminate on the day
before the tenth anniversary of the adoption of the Plan by the Board, and no
incentive stock option awards will thereafter be made under the Plan. All awards
made under the Plan prior to its termination will remain in effect until such
awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan Agreements.
3.14 GOVERNING LAW
All rights and obligations under the Plan will be construed and interpreted
in accordance with the laws of the State of New York, without giving effect to
principles of conflict of laws.
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<PAGE> 43
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
INFOGRAMES, INC.
July 25, 2000
* Please Detach and Mail in the Envelope Provided *
--------------------------------------------------------------------------------
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
listed at right (except AUTHORITY to
as marked to the vote for all nominees
contrary at right) listed at right
1. ELECTION OF [ ] [ ]
DIRECTORS:
To elect the nominees listed at right to Class I and Class II of the Board of
Directors:
(INSTRUCTION: To withhold authority to Nominees:
vote for any individual nominee, strike Class I
a line through the nominee's name in the DENIS GUYENNOT
list at right.) ANNE E. KRONEN
Class II
STEVEN A. DENNING
THOMAS SCHMIDER
2. APPROVAL OF AUDITORS: To ratify and FOR AGAINST ABSTAIN
approve the appointment of Deloitte & [ ] [ ] [ ]
Touche LLP as the independent auditors
for the fiscal year ended March 31,
2000, the transitional fiscal year
ending June 30, 2000 and the fiscal
year ending June 30, 2001.
3. APPROVAL OF THE 2000 STOCK INCENTIVE
PLAN: To approve and adopt the [ ] [ ] [ ]
Company's 2000 Stock Incentive Plan.
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR ELECTION AND
FOR PROPOSALS 2 AND 3.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED UNDER ELECTION OF DIRECTORS
AND FOR PROPOSALS 2 AND 3.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and Annual
Report on Form 10-K for the fiscal year ended March 31, 2000 of the Company
accompanying the same is hereby acknowledged.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated: , 2000
---------------------------------------------------- -----------
(SIGNATURE OF STOCKHOLDER)
----------------------------------------------------
(SIGNATURE OF STOCKHOLDER)
NOTE: Please sign exactly as your name(s) appears on your stock certificate.
If signing as attorney, executor, administrator, trustee or guardian,
please indicate the capacity in which you are signing. When signing as
joint tenants, all parties to the joint tenancy must sign. When the proxy
is given by a corporation, it should be signed by an authorized officer.
--------------------------------------------------------------------------------
