<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
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THQ 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:
Not applicable
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
Not applicable
--------------------------------------------------------------------------------
(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):
Not applicable
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not applicable
--------------------------------------------------------------------------------
(5) Total fee paid:
Not applicable
--------------------------------------------------------------------------------
[ ] 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:
Not applicable
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Not applicable
--------------------------------------------------------------------------------
(3) Filing Party:
Not applicable
--------------------------------------------------------------------------------
(4) Date Filed:
Not applicable
--------------------------------------------------------------------------------
<PAGE> 2
[THQ LETTERHEAD]
JUNE 23, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of THQ Inc. (the "Company") scheduled to be held at 1:00 p.m., Pacific Daylight
Time, on Friday, July 21, 2000 at the Hyatt Westlake Plaza, 880 South Westlake
Boulevard, Westlake Village, California. Your Board of Directors and management
look forward to greeting personally those stockholders able to attend.
At the meeting, stockholders will be asked to elect six directors to our
Board of Directors and to consider and act on approval of an amendment to our
1997 Stock Option Plan to (a) restrict the number of shares of common stock for
which new option grants may be made in any fiscal year to any one single person
to 300,000 shares, (b) authorize the Compensation Committee in limited
circumstances to grant replacement options for the tax and accounting benefit of
the Company; provided that such replacement options shall not include additional
benefits and shall have an exercise price that is not lower than the option
being replaced, and (c) make certain technical, clarifying changes to the tax
withholding and adjustment provisions of the Plan. Information regarding these
matters is set forth in the accompanying Notice of 2000 Annual Meeting of
Stockholders and Proxy Statement, to which you are urged to give your prompt
attention.
It is important that your shares of stock be represented and voted at
the meeting. Whether or not you plan to attend, please take a moment to sign,
date and promptly mail your proxy in the enclosed prepaid envelope. This will
not limit your right to vote in person, should you wish to attend the meeting.
We hope you can join us on July 21st and appreciate your continued
interest.
Very truly yours,
Brian J. Farrell
President and
Chief Executive Officer
<PAGE> 3
[THQ LETTERHEAD]
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 21, 2000
To the Stockholders of THQ Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of THQ Inc., a Delaware corporation (the "Company"), will be held at
1:00 p.m., Pacific Daylight Time, on Friday, July 21, 2000, at the Hyatt
Westlake Plaza, 880 South Westlake Boulevard, Westlake Village, California, for
the following purposes, all as set forth in the attached Proxy Statement:
1. To elect six directors to serve until the next annual meeting
and until their successors are elected and qualify;
2. To consider and act on approval of an amendment to our 1997
Stock Option Plan to (a) restrict the number of shares of common
stock for which new option grants may be made in any fiscal year
to any one single person to 300,000 shares, (b) authorize the
Compensation Committee in limited circumstances to grant
replacement options for the tax and accounting benefit of the
Company; provided that such replacement options shall not
include additional benefits and shall have an exercise price
that is not lower than the option being replaced, and (c) make
certain technical, clarifying changes to the tax withholding and
adjustment provisions of the Plan; and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 20, 2000
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the Meeting and any adjournment thereof.
By Order of the Board of Directors
Fred Gysi
Chief Financial Officer,
Vice President-Finance and Administration,
Treasurer and Secretary
Calabasas Hills, California
June 23, 2000
THE COMPANY URGES THAT AS MANY STOCKHOLDERS AS POSSIBLE BE REPRESENTED
AT THE MEETING. CONSEQUENTLY, WHETHER OR NOT YOU EXPECT TO BE PRESENT AT
THE MEETING, YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, AND
THEN FILL IN, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY TO THE
COMPANY IN THE ENCLOSED ENVELOPE. IF YOU ARE PRESENT IN PERSON AT THE
MEETING, YOU MAY VOTE IN PERSON AT THE MEETING. YOU MAY VOTE IN PERSON
REGARDLESS OF HAVING SENT IN YOUR PROXY. IT IS IMPORTANT THAT YOUR STOCK
BE REPRESENTED AT THE MEETING AND YOUR PROMPTNESS WILL ASSIST THE
COMPANY IN PREPARATION FOR THE MEETING. YOU MAY REVOKE THE PROXY AT ANY
TIME BEFORE THE AUTHORITY GRANTED THEREIN IS EXERCISED.
<PAGE> 4
[THQ LETTERHEAD]
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 21, 2000
----------------
This Proxy Statement is furnished to holders of shares of common stock,
par value $.01 per share ("Common Stock"), of THQ Inc., a Delaware corporation
(the "Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company from holders of Common Stock for use at the 2000 Annual
Meeting of Stockholders of the Company (the "Meeting"), for the purposes set
forth in the foregoing notice of the Meeting, and at any and all adjournments of
the Meeting. The Meeting will be held at 1:00 p.m., Pacific Daylight Time, on
Friday, July 21, 2000, at the Hyatt Westlake Plaza, 880 South Westlake
Boulevard, Westlake Village, California. All properly executed proxies in the
accompanying form received by us prior to the Meeting will be voted at the
Meeting. Any proxy may be revoked at any time before it is exercised by giving
notice in writing to our Secretary, by granting a proxy bearing a later date or
by voting in person at the Meeting.
This Proxy Statement and the enclosed proxy are first being mailed or
otherwise released to stockholders entitled to vote at the Meeting on or about
June 23, 2000. Our audited financial statements, together with the report
thereon of Deloitte & Touche LLP and certain other information concerning our
company, are included in our Annual Report for the year ended December 31, 1999,
which is being mailed with this Proxy Statement.
Our mailing address is 27001 Agoura Road, Suite 325, Calabasas Hills,
California 91301.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE RETURN ENVELOPE PROVIDED.
THE DATE OF THIS PROXY STATEMENT IS JUNE 23, 2000.
<PAGE> 5
INTRODUCTION
MATTERS TO BE CONSIDERED
At the Meeting, our stockholders will consider and vote upon (i) the
election of six directors to serve for one year and until their successors have
been elected and shall have qualified; (ii) the approval of an amendment to our
1997 Stock Option Plan to (a) restrict the number of shares of Common Stock for
which new option grants may be made in any fiscal year to any one single person
to 300,000 shares, (b) authorize the Compensation Committee in limited
circumstances to grant replacement options for the tax and accounting benefit of
the Company; provided that such replacement options shall not include additional
benefits and shall have an exercise price that is not lower than the option
being replaced, and (c) make certain technical, clarifying changes to the tax
withholding and adjustment provisions of the Plan; and (iii) such other business
as may properly come before the Meeting and any adjournment thereof. The Board
does not know of any matter to be presented at the Meeting other than those
described in the Proxy Statement.
VOTING RIGHTS AND VOTE REQUIRED
The Board of Directors (the "Board") has fixed June 20, 2000, as the
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Meeting. At the close of business on the Record
Date, 19,208,900 shares of Common Stock were outstanding (the "Shares").
A majority of the outstanding Shares must be represented in person or by
proxy at the Meeting in order to constitute a quorum for the transaction of
business. Abstentions and shares held by a broker or other nominee holding
shares for a beneficial owner that are not voted on a particular proposal
because the nominee does not have discretionary voting power with respect to
that proposal and has not received instructions from the beneficial owner (a
"broker non-vote") will be counted as present for purposes of determining the
presence of a quorum for the Meeting.
Each holder of record of Common Stock on the Record Date is entitled to
one vote for each share of Common Stock so held on each matter to be voted upon
at the Meeting.
The six directors to be elected at the Meeting will be elected by the
affirmative vote of the holders of a plurality of the shares of Common Stock
represented at the Meeting in person or by proxy. Because the six directors will
be elected by plurality vote (i.e., the six persons receiving the highest number
of favorable votes will be elected) and assuming such election is uncontested,
votes withheld from any one or more nominees and broker non-votes will not have
any effect on the outcome of the election of directors.
Approval of the Stock Option Proposal requires the affirmative vote of
the holders of a majority of the shares of Common Stock represented at the
Meeting in person or by proxy and entitled to vote on the matter. Abstentions
will be counted in determining the total number of shares present and entitled
to vote on each such proposal. Accordingly, although not counted as a vote "for"
or "against" a proposal, an abstention on any such proposal will have the same
effect as a vote "against" that proposal. Broker non-votes will not be counted
in determining the number of shares present and entitled to vote on each such
proposal, and will have no effect on the outcome.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In connection with the solicitation by the Board of proxies for use at
the Meeting, the Board has designated Brian J. Farrell and Fred A. Gysi as
proxies. Shares of Common Stock represented by proxies in the accompanying form,
properly executed, received prior to the Meeting and not revoked, will be voted
at the Meeting in accordance with the instructions specified thereon. IF NO
INSTRUCTIONS ARE SPECIFIED, SHARES OF COMMON STOCK REPRESENTED BY ANY SUCH PROXY
WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW UNDER
"ELECTION OF DIRECTORS" AND FOR THE PROPOSED AMENDMENT TO OUR 1997 STOCK OPTION
PLAN, AND IN ACCORDANCE WITH THEIR BEST JUDGMENT WITH REGARD TO ALL OTHER
MATTERS, IF ANY, THAT MAY BE PRESENTED AT THE MEETING AND MATTERS INCIDENT TO
THE CONDUCT OF THE MEETING. The Board is not aware of any matter that will come
before the Meeting other than as described above.
2
<PAGE> 6
A stockholder may revoke his or her proxy at any time prior to its
exercise by filing with our Secretary at our principal executive office at 27001
Agoura Road, Suite 325, Calabasas Hills, California 91301 a notice of revocation
or a duly executed proxy bearing a later date, or by attending the Meeting and
voting in person. Attendance at the Meeting will not, in itself, constitute a
revocation of a previously granted proxy.
In the event that the votes necessary to approve any one or more of the
foregoing proposals have not been obtained by the date of the Meeting, the
chairman of the Meeting may, in his discretion, adjourn the Meeting from time to
time to permit the solicitation of additional proxies by the Board.
The costs of this solicitation, including expenses in connection with
preparing and mailing this Proxy Statement and the enclosed proxy, will be paid
by us. Proxies may be solicited by any appropriate means by our directors,
officers and regular employees, who will receive no additional compensation
therefor. In addition to the use of the mails, solicitation may be made by our
employees personally or by mail or telephone, telecopier or other appropriate
means of communication. We intend to request brokerage houses, custodians,
nominees and others who hold stock in their names to solicit proxies from the
persons who own stock, and such brokerage houses, custodians, nominees and
others will be reimbursed for their out-of-pocket expenses and reasonable
clerical expenses.
3
<PAGE> 7
ELECTION OF DIRECTORS
(PROPOSAL. 1)
Pursuant to our Bylaws, the number of directors constituting the full
Board of Directors has been fixed by the Board at six. Accordingly, action will
be taken at the meeting to elect a Board of six directors to serve until the
next Annual Meeting of Stockholders and until their respective successors shall
be duly elected and shall qualify. It is the intention of the persons named in
the accompanying form of proxy, unless stockholders otherwise specify by their
proxies, to vote for the election of the nominees named below, each of whom is
now a director. The Board of Directors has no reason to believe that any of the
persons named will be unable or unwilling to serve as a director. Should any of
the nominees be unable or unwilling to serve, it is intended that the proxies
will be voted for the election of a substitute nominee or nominees selected by
the Board of Directors.
Certain information concerning each of the persons proposed by the Board
for election at the Meeting as a director is set forth below:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Brian J. Farrell 46 Director, President and Chief Executive Officer
Jeffrey C. Lapin 42 Director and Vice Chairman
Lawrence Burstein 57 Director
Bruce Jagid 60 Director
James L. Whims 45 Director
Greg Ballard 46 Director
</TABLE>
BRIAN J. FARRELL has been our President and Chief Executive Officer
since January 1995 and a director since March 1993. Between October 1992 and
January 1995, Mr. Farrell served as our Executive Vice President and Chief
Operating Officer. From July 1991 to October 1992, Mr. Farrell served as our
Vice President, Chief Financial Officer and Treasurer. From 1984 until joining
us, Mr. Farrell was Vice President and Chief Financial Officer of Starwood
Hotels & Resorts (then known as Hotel Investors Trust), a real estate investment
trust ("Starwood"). Mr. Farrell was employed by Deloitte Haskins & Sells, a
predecessor of Deloitte & Touche LLP, an international accounting firm and our
current auditors ("Deloitte"), from 1978 to 1984 and is a certified public
accountant.
JEFFREY C. LAPIN has been our Vice Chairman and an employee since
October 1998 and a director since April 1995. From July 1996 through October
1998, Mr. Lapin was the President and Chief Operating Officer of House of Blues,
Inc. Hospitality and Executive Vice President of House of Blues, Inc.
Entertainment. From January 1995 to June 1996, Mr. Lapin was the President and
Chief Operating Officer of Starwood, and from May 1991 to January 1995 Mr. Lapin
was the President and Chief Executive Officer of Starwood. Mr. Lapin was a Vice
President of Starwood from January 1988 to May 1991, the Secretary of Starwood
from September 1986 to May 1991, and served as a Trustee of Starwood from
September 1992 to June 1996. Prior to his employment by Starwood, Mr. Lapin was
an attorney at Mitchell, Silberberg & Knupp in Los Angeles.
LAWRENCE BURSTEIN has been a director since July 1991. Since March 1996,
Mr. Burstein has been President, director and a stockholder of Unity Venture
Capital Associates Ltd., a private investment company. From 1986 through March
1996, Mr. Burstein was President, a director and a principal stockholder of
Trinity Capital Corporation, a private investment company. Mr. Burstein is a
director of Brazil Fast Food Corp., CAS Medical Systems, Inc., MNI Group, Inc.,
I.D. Systems, Inc. and Quintel Communications, Inc.
BRUCE JAGID has been a director since April 1995. Mr. Jagid is an
investor and also serves as President of Brumar Industries and Coining
Technologies, Inc. From April 1991 to January 1999, Mr. Jagid was the Chairman
and Chief Executive Officer of Ultralife Batteries, Inc. ("Ultralife"), a
manufacturer of lithium batteries. From 1970 to 1989 Mr. Jagid was President of
Power Conversion Inc. Mr. Jagid is also a director of I.D. Systems, Inc. and
Ultralife.
4
<PAGE> 8
JAMES L. WHIMS has been a director since April 1997. Since 1996, Mr.
Whims has been a Managing Director of Techfund Capital I, L.P. and TechFund
Capital II, L.P., venture capital firms concentrating on high-technology
enterprises. From 1994 to 1996, Mr. Whims was Executive Vice President of Sony
Computer Entertainment of America. From 1990 to 1994, Mr. Whims was Executive
Vice President of The Software Toolworks Inc. Mr. Whims is also a director of
3Dfx Interactive, Inc. ("3Dfx"), which designs and develops 3D media processors
and software ("3Dfx"), as well as numerous private companies in his portfolio.
L. GREG BALLARD has been a director since April 1999. Since January
2000, Mr. Ballard has been the Chief Executive Officer at MyFamily.com, a
leading community internet company. Prior to that, from December 1996 until
November 1999, Mr. Ballard was the President and Chief Executive Officer of
3Dfx. From May 1995 to November 1996,
Mr. Ballard was the President of Capcom Entertainment, Inc., a videogame
and multimedia entertainment company. From 1994 to March 1995, Mr. Ballard
served as Chief Operating Officer and Chief Financial Officer of Digital
Pictures, Inc., a video game company. From 1991 to 1994, Mr. Ballard was
President and Chief Executive Officer of Warner Custom Music Corp., a multimedia
marketing division of Time Warner, Inc. Previously, Mr. Ballard was President
and Chief Operating Officer of Personics Corp., a predecessor to Warner Music.
In addition, Mr. Ballard has worked for Boston Consulting Group and as an
attorney in Washington, D.C. Mr. Ballard is also a director of 3Dfx,
MyFamily.com and Pinnacle Systems.
There are no family relationships between any of our directors and
executive officers. Directors are elected annually by the stockholders and hold
office until the next annual meeting and until their respective successors are
elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
We have an Audit Committee, a Compensation Committee and a Mergers and
Acquisitions Committee. The Board of Directors does not have a nominating
committee, and the usual functions of such committee are performed by the entire
Board of Directors.
AUDIT COMMITTEE. The functions of the Audit Committee include
recommendations to the Board of Directors with respect to the engagement of our
independent certified public accountants and the review of the scope and effect
of the audit engagement. The Audit Committee, whose current members are Messrs.
Burstein, Jagid and Ballard, met two times during 1999.
COMPENSATION COMMITTEE. The function of the Compensation Committee is to
make recommendations to the Board with respect to compensation of management
employees. In addition, the Compensation Committee determines the persons to
whom options should be granted under our stock option plans and the number of
options granted to each person, and administers plans and programs relating to
employee benefits, incentives and compensation. The current members of the
Compensation Committee are Messrs. Burstein and Whims. The Compensation
Committee met five times during 1999.
MERGERS AND ACQUISITIONS. The function of the Mergers and Acquisitions
Committee is to investigate, analyze, advise and make recommendations to the
Board with respect to potential acquisitions. The Mergers and Acquisitions
Committee, whose current members are Messrs. Burstein, Jagid and Whims, did not
meet during 1999.
MEETINGS OF THE BOARD OF DIRECTORS
In 1999, there were six meetings of the Board of Directors held in
person or by conference telephone call. Each Director attended at least 75% of
the aggregate of the meetings of the Board of Directors and of the committees of
the Board of which he was a member.
DIRECTOR COMPENSATION
Directors who are also employees and officers of our company are not
paid any compensation for service as directors. Non-employee directors are
compensated by cash payments comprised of $12,000 plus $1,500 for attendance at
each Board meeting held in person and $500 for attendance at each Board meeting
held by telephone, and the grant of
5
<PAGE> 9
options pursuant to our 1997 Stock Option Plan. Pursuant to such plan, each
non-employee director is granted options to purchase 3,750 shares of Common
Stock on the first day of each fiscal quarter at a per share exercise price
equal to the market price of a share of Common Stock on the date of grant.
During 1999, each of the non-employee directors received grants under
our 1997 Stock Option Plan of options exercisable for 22,500 shares of Common
Stock, with the exception of L. Greg Ballard who has been a director since April
1999 and received grants of options exercisable for 16,875 shares during 1999.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Exchange Act and the rules issued
thereunder, our executive officers and directors are required to file with the
SEC and the Nasdaq Stock Market reports of ownership and changes in ownership of
our Common Stock. Copies of such reports are required to be furnished to us.
Based solely on our review of the copies of such reports furnished to us or on
written representations to us that no such reports were required, we believe
that during the year ended December 31, 1999, all of our executive officers and
directors and all beneficial owners of more than 10% of our Common Stock filed
on a timely basis all reports, if any, required by Section 16(a) of the Exchange
Act.
6
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to all persons who are, to
our knowledge, the beneficial owners of 5% or more of our outstanding Common
Stock as of June 20, 2000.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS(1) OWNERSHIP CLASS
------------------- ------------- -------
<S> <C> <C>
Scudder Kemper Investments, Inc. 1,174,450 6.1%
345 Park Avenue, New York, New York 10154
</TABLE>
------------------
(1) Based on information set forth in Form 13F filed April 11, 2000 with the
Securities and Exchange Commission by Scudder Kemper Investments, Inc.
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of our Common Stock as of June 20, 2000 by each of our
directors as of that date, by each of our executive officers named in the
Summary Compensation Table and by all directors and executive officers as a
group. Unless otherwise indicated below, each individual named in the table has
sole voting power and sole investment power with respect to all the shares
beneficially owned, subject to community property laws, where applicable.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS(1) OWNERSHIP CLASS
------------------- ------------- ------
<S> <C> <C>
Brian J. Farrell 483,000(2) 2.5%
Jeffrey C. Lapin 220,000(3) 1.1%
Lawrence Burstein 135,753(4) *
Bruce Jagid 114,501(5) *
James L. Whims 148,005(6) *
L. Greg Ballard 24,375(7) *
Fred Gysi 16,751(8) *
Alison Locke 26,252(9) *
Tim F. Walsh 35,941(10) *
All Directors and Executive Officers 1,204,579(11) 6.2%
as a group (9 individuals)
</TABLE>
7
<PAGE> 11
-----------------
* Less than 1%.
(1) The address for each individual is c/o THQ Inc., 27001 Agoura Road,
Calabasas Hills, California 91301.
(2) Includes 450,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days.
(3) Includes 200,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days.
(4) Includes 108,755 shares of Common Stock issuable upon exercise of
options exercisable within 60 days.
(5) Includes 108,751 shares of Common Stock issuable upon exercise of
options exercisable within 60 days.
(6) Includes 41,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days and 55,147 shares of Common Stock held of
record by TechFund Capital L.P. ("TechFund"). Mr. Whims is a managing
member of the general partner of TechFund and accordingly may be deemed
to share beneficial ownership of the shares of Common Stock held of
record by TechFund. Mr. Whims disclaims beneficial ownership of such
shares.
(7) Includes 24,375 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(8) Includes 11,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(9) Includes 13,127 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(10) Includes 26,595 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(11) Includes an aggregate of 984,103 shares of Common Stock issuable upon
exercise of options within 60 days.
8
<PAGE> 12
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
Our executive officers include Messrs. Farrell, Lapin, Gysi and Walsh
and Ms. Alison Locke. Information with respect to Messrs. Farrell and Lapin is
located elsewhere in this Proxy Statement. All of our executive officers are
appointed by and serve at the discretion of the Board of Directors.
FRED A. GYSI (age 45) has been our Vice President - Finance and
Administration, Chief Financial Officer, Treasurer and Secretary since November
1997. From October 1996 to October 1997, Mr. Gysi was the Chief Financial
Officer of HPM-Stadco, a manufacturing company. From August 1995 to October
1996, Mr. Gysi was the President and co-founder of GP Management Consulting, a
provider of financial, operations and systems consulting services to emerging
and middle market companies. From 1992 to 1995, Mr. Gysi was a partner at
Collett & Levy, an accounting firm. Mr. Gysi was employed by Deloitte from 1980
to 1992 and was a partner of that firm from 1988 to 1992.
ALISON LOCKE (age 45) was appointed Senior Vice President - Sales and
Marketing in February 1999. Ms. Locke is responsible for all sales and marketing
activities in North America. From January 1995 to January 1999, Ms. Locke served
as our Senior Vice President - Sales. From 1991 to January 1995, Ms. Locke
served as our Vice President - Sales. Previously, Ms. Locke served as Vice
President of Computer Product and Nintendo Game Sales for Data East USA
Incorporated, an interactive entertainment company, and in various sales
capacities with Activision Inc. and Broderbund Software, Inc.
TIM F. WALSH (age 36) has been our Vice President - International since
January 1998. From May 1997 to January 1998 he was our Director of
International. Mr. Walsh was Director of International and OEM Sales of
Accolade, a publisher of video and PC game software from January 1996 to May
1997. From September 1993 to December 1995, Mr. Walsh held various positions at
Time Warner Interactive.
COMPENSATION TABLE
The following tables summarizes the compensation for the fiscal years
ended December 31, 1997, 1998 and 1999 of our Chief Executive Officer and our
other most highly compensated executive officers whose cash compensation
exceeded $100,000 in 1999 (the "Named Executives")*:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS
------------------------------------------------- -----------
OTHER SHARES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS(3) COMPENSATION
------------------ ---- --------- ----- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Farrell 1999 $370,154 $360,000 -- 150,000 $ 6,000(4)
President and Chief 1998 $310,109 $300,000 -- 225,000 $ 6,000(4)
Executive Officer 1997 $308,769 $300,000 -- 112,500 $ 6,000(4)
Jeffrey C. Lapin(5) 1999 $225,866 $225,000 -- 75,000 $ 6,000(6)
Vice Chairman 1998 -- $ 25,000 -- 322,500 $ 40,000(7)
1997 -- -- -- 22,500 --
Fred A. Gysi 1999 $168,333 $ 50,000 -- 30,000 $ 6,000(8)
CFO, V.P. - Finance 1998 $149,380 $ 40,000 -- 33,750 $ 6,000(8)
and Administration, 1997 $ 24,038 $ 5,000 -- 90,000 --
Treasurer and
Secretary
</TABLE>
9
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Alison Locke 1999 $196,692 $250,198 -- 60,000 $ 6,000(8)
Senior V.P.- 1998 $147,335 $286,910 -- 39,375 $ 6,000(8)
Sales and Marketing 1997 $152,584 $166,497 -- 61,875 $ 6,000(8)
Tim F. Walsh 1999 $150,577 $146,876 -- 45,000 $ 6,000(9)
V.P.- International 1998 $110,039 $121,876 -- 33,750 $ 6,000(9)
1997 $ 60,769 $ 30,000 -- 90,000 $ 1,846(9)
</TABLE>
----------------
(1) Included in each Named Executive's salary are amounts that were deferred
by such Named Executive pursuant to our Defined Contribution Plan.
(2) Amounts shown do not include amounts expended by us pursuant to plans
(including group life and health) that do not discriminate in scope,
terms or operation in favor of our executive officers or directors and
that are generally available to all salaried employees. The value of
such benefits did not exceed the lesser of either $50,000 or 10% of the
total annual salary and bonus reported for any individual named.
(3) Awards of stock option grants have been adjusted to reflect the 50%
stock dividends distributed in August 1998 and December 1999.
(4) The amounts shown for 1997, 1998 and 1999 reflect matching contributions
in the amounts of $6,000 made by us in accordance with our Defined
Contribution Plan. This amount does not reflect special awards and
payments Mr. Farrell is entitled to receive if his employment is
terminated as a result of a change in control of our company, which
would have had a value of approximately $887,000 as of December 31, 1997
and 1998, and $1,196,000 as of December 31, 1999. See "Employment
Agreement with Brian J. Farrell."
(5) Mr. Lapin joined the Company in October 1998.
(6) The amount shown for 1999 reflects a matching contribution in the amount
of $6,000 made by us in accordance with our Defined Contribution Plan.
This amount does not reflect special awards and payments Mr. Lapin is
entitled to receive if his employment is terminated as a result of a
change in control of our company, which would have had a value of
approximately $822,250 as of December 31, 1999. See "Employment
Agreement Jeffrey C. Lapin."
(7) The amount shown reflects the amount paid to Mr. Lapin for consulting
services rendered by him prior to Mr. Lapin becoming an employee.
(8) The amounts shown for 1997, 1998 and 1999 reflect matching contributions
in the amount of $6,000 made by us in accordance with our Defined
Contribution Plan.
(9) The amounts shown for 1997, 1998 and 1999 reflect matching contributions
in the amount of $1,846, $6,000 and $6,000, respectively, made by us in
accordance with our Defined Contribution Plan.
* Named Executives does not include Mr. L. Michael Haller, who resigned on
December 15, 1999. In 1997 Mr. Haller earned $146,423 in salary and
$125,000 in bonus, and was granted options to purchase 67,500 shares of
Common Stock. In 1998 he earned $170,448 in salary and $140,000 in
bonus, and was granted options to purchase 76,875 shares of Common
Stock. In 1999 Mr. Haller earned $233,688 in salary. Matching
contributions in the amounts of $5,875, $6,000 and $6,000 were made by
us during 1997, 1998 and 1999, respectively, in accordance with our
Defined Contribution Plan.
10
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of stock options granted to
each of the Named Executives during the fiscal year ended December 31, 1999. The
table also sets forth the potential realizable value of such stock options in
the year of their expiration at arbitrarily assumed annualized rates of stock
price appreciation of five and ten percent over the full five-year term of the
stock options. No gain to the Named Executives is possible without an increase
in the price of our Common Stock, which will benefit all stockholders
proportionately. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of our Common Stock and
overall stock market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
PERCENT OF ASSUMING ANNUAL RATES OF
SHARES TOTAL OPTIONS EXERCISE OR STOCK APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE- OPTION TERM(2)
OPTIONS EMPLOYEES IN PER-SHARE EXPIRATION ----------------------------
GRANTED(1) FISCAL YEAR (1) DATE 5% 10%
----------- ------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Farrell 150,000 11% $ 25.79 11/03/04 $1,069,121 $2,362,139
Jeffrey C. Lapin 75,000 6% $ 25.79 11/03/04 $ 534,560 $1,181,084
Fred A. Gysi 30,000 2% $ 25.79 11/03/04 $ 213,824 $ 472,434
Alison Locke 60,000 5% $ 25.79 11/03/04 $ 427,648 $ 944,867
Tim F. Walsh 45,000 3% $ 25.79 11/03/04 $ 320,736 $ 708,651
</TABLE>
------------
(1) One third of these options vests on each of the first, second and third
anniversary of the date of grant of each option, November 4, 1999.
(2) For the stock options indicated, these amounts represent the exercise
price multiplied by the annual appreciation rate shown compounded
annually for the term of each option, less the exercise price,
multiplied by the number of options granted. The dollar amounts set
forth under this heading are the result of calculations at the 5% and
10% rates set by the SEC and therefore are not intended to forecast
possible future appreciation, if any, of our stock price.
11
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executives*,
certain information regarding the number of stock options exercised during the
fiscal year ended December 31, 1999 and the value of stock options held at
fiscal year end.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
---------------------------- ------------------------------
SHARES
ACQUIRED REALIZED
NAME ON EXERCISE VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Farrell 150,000 $3,972,896 450,001 337,500 $8,547,388 $2,630,910
Jeffrey C. Lapin 90,000 $2,031,458 200,000 175,000 $2,404,160 $1,202,080
Fred A. Gysi 30,000 $ 711,823 11,251 82,500 $ 150,248 $ 802,694
Alison Locke 49,840 $1,081,298 -- 106,873 -- $ 723,535
Tim F. Walsh 49,158 $1,129,343 346 97,497 $ 5,789 $ 852,345
</TABLE>
------------
(1) Calculated based on the excess of fair market value of our common stock
on December 31, 1999 over the respective exercise prices of the options.
* Named Executives does not include Mr. L. Michael Haller, who resigned on
December 15, 1999. As a result of his option exercises during the fiscal
year ended December 31, 1999, Mr. Haller acquired 87,500 shares of
Common Stock with a realized value of $1,762,884. He had no remaining
unexercised options at December 31, 1999.
12
<PAGE> 16
EMPLOYMENT AGREEMENT WITH BRIAN J. FARRELL
Mr. Farrell and we agreed on June 30, 1999 to amend and restate the
terms of his employment agreement effective as of December 31, 1996 (as amended
and restated, the "Employment Agreement") which provides for Mr. Farrell's
employment by us through December 31, 2001 (the "Employment Period").
The Employment Agreement provided for an annual base salary of $360,000
in 1999 and an annual bonus equal to the lesser of $360,000 or 4.5% of our
annual net income before taxes for such year. The annual base salary and bonus
is subject to annual review and may be increased for subsequent years. We also
are required to provide Mr. Farrell with life insurance and disability insurance
during, and for 12 months after, the Employment Period.
The Employment Agreement provides that if Mr. Farrell's employment is
terminated by him voluntarily or by us for "cause," he will be precluded without
our consent during the subsequent 12 months from engaging, directly or
indirectly, in any business activity that competes with our business and from
detrimentally affecting any relationship between us and, or soliciting away from
us, any of our customers, suppliers or employees. If the Employment Agreement is
not renewed by either Mr. Farrell or by us prior to its scheduled expiration
date, the noncompetition restriction will expire on March 31, 2002.
The Employment Agreement also provides that in the event any person or
group of persons (i) acquires or obtains the right to acquire 30% or more of our
common stock, or (ii) (a) acquires at least 10% of our outstanding common stock,
or (b) 10% of the combined voting power of our outstanding voting securities and
the Board of Directors deems that the ownership of Common Stock by such person
or group of persons would cause a material adverse impact on our business (a
"Change of Control"):
1. If Mr. Farrell's employment is subsequently terminated other
than for cause or if he voluntarily terminates his employment
within 180 days after the Change of Control, he will be entitled
to receive a lump sum cash payment equal to 2.99 times the base
compensation paid to him at the time of such Change of Control;
and
2. All options, warrants and other rights ("Options") held by Mr.
Farrell to purchase Common Stock will immediately vest, or he
will be entitled to surrender all of such Options and receive an
amount in cash per share equal to the difference between the
exercise prices of the Options surrendered and the greater of
(i) the average price per share paid by the person acquiring
control of our company, (ii) the average price paid in
connection with a tender offer for our common stock, or (iii)
the average trading price of our common stock on the date of
termination of Mr. Farrell's employment.
EMPLOYMENT AGREEMENT WITH JEFFREY C. LAPIN
We entered into an employment agreement with Mr. Lapin dated January 1,
1999 (the "Employment Agreement") to employ Mr. Lapin as our Vice Chairman
through December 31, 2001 (the "Employment Period").
The Employment Agreement provided for an annual base salary of $225,000
in 1999 and an annual bonus equal to the lesser of $225,000 or 3.5% of our
annual net income before taxes for such year. The annual base salary and bonus
is subject to annual review and may be increased for subsequent years. We also
are required to provide Mr. Lapin with life insurance and disability insurance
during, and for 12 months after, the Employment Period.
The Employment Agreement provides that if Mr. Lapin's employment is
terminated by him voluntarily or by us for "cause," he will be precluded without
our consent during the subsequent 12 months from engaging, directly or
indirectly, in any business activity that competes with our business and from
detrimentally affecting any relationship between us and, or soliciting away from
us, any of our customers, suppliers or employees. If the Employment Agreement is
not renewed by either Mr. Lapin or by us prior to its scheduled expiration date,
the noncompetition restriction will expire on March 31, 2002.
The Employment Agreement also provides that in the event any person or
group of persons (i) acquires or obtains the right to acquire 30% or more of our
common stock, or (ii) (a) acquires at least 10% of our outstanding common stock,
or (b) 10% of the combined voting power of our outstanding voting securities and
the Board of Directors deems that the ownership of Common Stock by such person
or group of persons would cause a material adverse impact on our business (a
"Change of Control"):
13
<PAGE> 17
1. If Mr. Lapin's employment is subsequently terminated other than
for cause or if he voluntarily terminates his employment within
180 days after the Change of Control, he will be entitled to
receive a lump sum cash payment equal to 2.99 times the base
compensation payable to him at the time of such Change of
Control; and
2. All options, warrants and other rights ("Options") held by Mr.
Lapin to purchase Common Stock will immediately vest, or he will
be entitled to surrender all of such Options and receive an
amount in cash per share equal to the difference between the
exercise prices of the Options surrendered and the greater of
(i) the average price per share paid by the person acquiring
control of our company, (ii) the average price paid in
connection with a tender offer for our common stock, or (iii)
the average trading price of our common stock on the date of
termination of Mr. Lapin's employment.
SEVERANCE AGREEMENTS
The Company has entered into severance agreements (the "Severance
Agreements") with each of its executives except for Messrs. Farrell and Lapin.
Mr. Farrell's and Mr. Lapin's employment agreements provide for the payment of
benefits upon each individual's termination following a Change of Control as
discussed above in "Employment Agreement with Brian J. Farrell" and "Employment
Agreement with Jeffrey C. Lapin."
The Severance Agreements provide for the payment of benefits to the
executives upon a "Change in Control." The executives agree to not voluntarily
leave our company without "Good Reason" until the earlier of (a) such attempted
Change in Control terminates, or (b) if a Change in Control occurs, 90 days
following such Change in Control.
A "Change in Control" is defined, subject to certain exceptions, as an
acquisition by any person or group of persons of 30% or more of either (a) the
outstanding Common Stock, or (b) the combined voting power of the outstanding
securities entitled to vote for the election of directors.
"Good Reason" is defined to include any of the following events after a
Change in Control: (a) any removal or involuntary termination of the executive;
(b) a reduction of the executive's rate of annual base salary as in effect
immediately prior to the Change in Control or our failure to pay such salary;
(c) a requirement that the executive relocate; (d) our failure to provide the
executive with compensation, vacation and other fringe benefits, expense
reimbursement, and welfare benefits in accordance with the most favorable plans
and benefits in effect for the peer officers of our company after the Change in
Control; and (e) our failure to maintain the effectiveness of the Severance
Agreements after the Change in Control.
The Severance Agreements provide that if an executive's employment is
terminated within the year following a Change in Control for any other reason,
such executive will be entitled to receive, among other benefits, a cash amount
equal to (i) one times such executive's annual base salary paid to such
executive at the time of the Change in Control, plus (ii) one times such
executive's annual bonus paid or payable to such executive in respect of our
fiscal year immediately preceding the fiscal year in which the Change in Control
occurs. In addition, if on the date of termination such executive's stock
options are not fully vested, all such stock options shall become immediately
vested and exercisable for such period as provided in the plan and/or agreement
governing such options. If Messrs. Gysi and Walsh and Ms. Locke were terminated
in accordance with the foregoing they currently would receive $215,000, $300,000
and $375,000, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the members of the Compensation Committee in 1999, Messrs.
Burstein and Whims, are non-employee Directors and neither have any direct or
indirect material interest in, or relationship with, us outside of his position
as a Director. To our knowledge, there were no other interrelationships
involving members of the Compensation Committee or other Directors requiring
disclosure.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We believe that there were no relationships or transactions with
management during the year ended December 31, 1999 that need to be disclosed.
14
<PAGE> 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report was prepared by the Compensation Committee of the Board of
Directors (the "Committee"), which is composed of independent directors who are
not employees of the Company. The Committee has the responsibility for all
compensation matters for the Company's executive officers. The current members
of the Committee are Messrs. Burstein and Whims. The compensation of the
Company's executive officers is determined by the Committee, in consultation
with other members of the Board, based on the goals and policies established by
the Board.
The Company has an employment agreement with Mr. Farrell. In 1996, the
Board approved the Committee's recommendation to amend and restate Mr. Farrell's
employment agreement to extend its term for an additional four years at
substantially the same level of compensation Mr. Farrell had been entitled to
earn in 1997 under his prior employment contract. The Committee believes that
ensuring Mr. Farrell's long-term commitment to the Company is in the best
interest of its shareholders. In order to induce Mr. Farrell to make such
commitment and to align a substantial portion of Mr. Farrell's compensation with
the Company's results of operations, the amended employment agreement provides
that Mr. Farrell's annual cash bonus will be equal to the lower of $300,000 or a
percentage of net income earned by the Company. See "Employment Agreement with
Brian J. Farrell."
In January 1999, in recognition of the outstanding financial results of
the Company in 1998 and the growth of the company during recent years, the
Committee approved an increase in Mr. Farrell's base compensation to $360,000
per year commencing in 1999, and an increase in his maximum annual cash bonus,
payable commencing in 2000 based on the Company's net income in 1999, to
$360,000.
The other executive officers' base salaries and cash bonuses are based
on the level of responsibility and the job requirements of each such position.
The Committee also considers compensation paid to other persons with comparable
skills and experience in other companies in the interactive entertainment
industry as well as the Company's performance in comparison to its competitors.
The Committee reviews executive compensation annually based on the merit of each
executive officer's performance in such officer's specific area of
responsibility as well as the financial performance of the Company.
It is also a fundamental objective of the Committee to provide the
Company's executive officers with an opportunity to share in the success of the
Company by granting to the executive officers options to purchase shares of
Common Stock. The Committee has maintained a policy of rewarding the Company's
executive officers with options each year in respect of recent contributions
made by the executive officers to the Company. Special option grants are also
made to executive officers if in the determination of the Committee an executive
officer warrants additional compensation for such executive officer's efforts.
Respectfully submitted,
Lawrence Burstein
James L. Whims
15
<PAGE> 19
--------------------------------------------------------------------------------
PERFORMANCE GRAPH
--------------------------------------------------------------------------------
FISCAL YEAR ENDING DECEMBER 31
The following chart compares the cumulative total stockholder returns on
the shares of Common Stock since December 31, 1994 to the cumulative total
returns over the same period of the NASDAQ (US) Market Index and Hambrecht and
Quist High Technology Index. The Chart assumes that the value of the investment
in the shares of Common Stock and each index was $100 at December 31, 1994 and
that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
AMONG THQ INC., NASDAQ (US) MARKET INDEX AND
HAMBRECHT AND QUIST HIGH TECHNOLOGY INDEX
FISCAL YEAR ENDING DECEMBER 31
[INSERT GRAPH]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
THQ Inc. 100 58 100 245 448 556
NASDAQ (US) Market 100 141 174 213 300 542
Hambrecht and Quist High Technology 100 149 185 216 336 749
</TABLE>
16
<PAGE> 20
APPROVAL OF PROPOSED AMENDMENTS TO STOCK OPTION PLAN
(PROPOSAL NO. 2)
The Board of Directors is proposing for stockholder approval an
amendment to the Company's 1997 Stock Option Plan (the "1997 Plan"). The 1997
Plan was adopted by the Board of Directors in March 1997 and approved by the
stockholders of the Company in June 1997. The purposes of the 1997 Plan are to
provide directors, officers and key employees of the Company with an opportunity
to acquire an equity interest in the Company as a long-term incentive for them
to remain in the Company's service and to align those individuals' interests
with those of the Company's stockholders. The Board of Directors believes that
stock options are a significant factor in the ability of the Company and its
subsidiaries to attract and retain the services of key individuals who are
critical to the Company's long-range growth and success.
Currently, the Compensation Committee has the authority to grant options
for the entire 4,125,000 shares of Common Stock for which options may be granted
under the 1997 Plan to any one or more participants. The Board of Directors
believes that it is desirable to further limit the authority of the Committee to
grant options to a single participant. Accordingly, the Board of Directors has
adopted and is submitting for stockholder approval an amendment to the 1997 Plan
providing that the maximum aggregate number of shares of common stock for which
new option grants may be made in any one fiscal year to any one single
participant shall be 300,000 shares.
Due to the frequency of changes in the technical rules governing the tax
and accounting treatment of stock options, the Board of Directors also believes
that it is in the best interests of the Company and its stockholders for the
Compensation Committee to be able to grant replacement options under the Plan so
as to enable the Compensation Committee to effectively change the terms of
previously granted options in those situations where the Compensation Committee
deems it appropriate in order to preserve for the Company the most advantageous
tax and/or accounting treatment; provided, however, that the Compensation
Committee is not authorized to grant a replacement option with a lower exercise
price than the exercise price of the original option which is being replaced.
Accordingly, the Board of Directors has adopted and is submitting for
stockholder approval an amendment to the 1997 Plan providing that the
Compensation Committee has the authority to grant replacement options in any
fiscal year for up to 300,000 shares to any one single participant; provided
that such replacement options may not have a lower exercise price than the
original option being replaced.
The Board of Directors has also adopted and is submitting for
stockholder approval certain technical, clarifying amendments to those
provisions of the 1997 Plan that govern tax withholding and adjustments in the
event of a stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin off or
other similar change in capitalization or event or any distribution to holders
of common stock of the Company other than a regular cash dividend. Such
technical, clarifying amendments are intended to preserve favorable stock option
accounting treatment for the Company and to provide that the adjustments
described above apply to the automatic quarterly option grants to non-employee
directors of the Company and to the new limitations on the authority of the
Compensation Committee to grant options to a single participant as described
above. Included as Appendix A is a copy of the 1997 Plan as proposed to be
amended.
17
<PAGE> 21
1997 PLAN OPTION GRANTS
The following table sets forth certain information with respect to
options granted under the 1997 Plan since its inception to (i) each of the
Company's executive officers*, (ii) all current executive officers, as a group,
(iii) all current directors who are not executive officers, as a group, and (iv)
all employees who are not executive officers, as a group. The option grants
disclosed in the following table include those reflected in the two tables
included above under the caption "Executive Compensation."
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF SHARES
----------------- --------------- ----------------
<S> <C> <C>
Brian J. Farrell
President and Chief Executive Officer $ 595,470 487,501
Jeffrey C. Lapin
Vice Chairman $ 62,622 108,750
Fred Gysi
CFO, Vice President - Finance and
Administration, Treasurer and Secretary $ 383,436 153,751
Alison Locke
Senior Vice President - Sales and Marketing $ 357,107 161,251
Tim Walsh
Vice President - International $ 597,637 168,751
Executive Officers, as a group
(5 individuals) $1,996,272 1,080,004
Directors who are not Executive Officers, as a
group (4 individuals) $ 187,867 215,625
Employees who are not Executive Officers, as a
group (355 individuals) $2,736,656 2,523,191
</TABLE>
If the stockholders of the Company do not approve the proposed
amendments to the 1997 Plan the plan will continue in effect in its present
form. Except as described above, the amount of compensation that will accrue to
the Company's directors, executive officers and other employees pursuant to the
1997 Plan, if the proposed amendments are approved by the Company's
stockholders, cannot be determined at this time.
----------------------
(1) Dollar value is calculated by subtracting the exercise price from the
assumed fair market value of the Common Stock underlying the option and
multiplying the result by the number of shares of Common Stock for which
the exercise price is less than fair market value. Options with an
exercise price in excess of fair market value have been excluded from
this calculation. Fair market value was calculated based on the average
of the high and low sales price of the Common Stock as reported on the
Nasdaq National Market on June 20, 2000 which was $10.47 per share of
Common Stock. There is no guarantee that if and when any option is
exercised, it will have this value.
* Executive officers does not include Mr. L. Michael Haller, who resigned
on December 15, 1999. The dollar value and number of shares granted to
Mr. Haller under the 1997 Plan are $391,613 and 144,377, respectively.
18
<PAGE> 22
SUMMARY OF 1997 PLAN
The principal provisions of the 1997 Plan as proposed to be amended are
summarized below. This summary is in all respects qualified by the provisions of
the 1997 Plan itself.
Administration. The 1997 Plan is administered by the Board of Directors
or, if the Board so elects, by a committee (the "Committee") designated by the
Board consisting of two or more directors of the Board. Each member of the
Committee must be a "Non-Employee Director" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
an "outside director" within the meaning of Section 162(m) of the Code. As used
herein, the term "Committee" means the Board if no such committee is designated,
and means such stock option committee during such times as it is so designated.
Currently the 1997 Plan is administered by the Compensation Committee as
described above under the caption "Compensation Committee."
The Committee selects eligible persons for participation in the 1997
Plan and determines the number of shares of Common Stock subject to each option
granted, the exercise price of such option, whether such option is a
non-qualified stock option or an incentive stock option, the time and conditions
of exercise of such option and all other terms and conditions of such option,
including the form of the written option agreement between the Company and the
optionee that evidences each option and sets forth the terms and conditions of
such option (the "Agreement"). The Committee interprets the 1997 Plan and the
application thereof, establishes such rules and regulations it deems necessary
or desirable for the administration of the 1997 Plan and may impose, incidental
to the grant of an option, conditions with respect to the grant, such as
limiting competitive employment or other activities. The Committee may, subject
to the requirements imposed under Section 162(m) of the Code in the case of an
option intended to be qualified performance-based compensation, take action such
that any or all outstanding options shall become exercisable in part or in full.
The Committee may delegate some or all of its power and authority to the
Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate. However, the Committee may not delegate its power
and authority with regard to the selection for participation in the 1997 Plan of
an executive officer or other person subject to Section 16 of the Exchange Act
or decisions concerning the timing, pricing or amount of an option grant to such
an executive officer or other person.
Available Shares. Under the 1997 Plan, 4,125,000 shares of Common Stock
are available for option grants, subject to adjustment in the event of a stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
or event, or any distribution to stockholders other than a regular cash
dividend. The number of available shares will be reduced by the sum of the
aggregate number of shares of Common Stock which become subject to outstanding
options. To the extent that shares of Common Stock subject to an outstanding
option are not issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such options, then such shares of Common Stock
will again be available under the 1997 Plan. The maximum number of share of
Common Stock with respect to which new grants of options may be made during any
calendar year to any person is 300,000 and the maximum number of shares of
Common Stock with respect to which replacement options may be granted during any
calendar year to any person is 300,000, subject in each case to adjustment as
described above.
Effect of Certain Transactions. In the event that the Company enters
into an agreement to dispose of all or substantially all of its assets, to
consummate a merger or consolidation in which the Company is not the surviving
or resulting corporation (such distribution, merger, consolidation or sale being
hereinafter referred to as a "Transaction"), the Committee must provide, at its
election, for one or more of the following: (i) for each outstanding option,
whether or not then exercisable, to be replaced with a comparable option to
purchase shares of capital stock of a successor or purchasing corporation or a
parent thereof, or (ii) for each outstanding option, whether or not then
exercisable, to be assumed by a successor or purchasing corporation or a parent
thereof on the same terms and subject to the same conditions, or (iii) for each
outstanding option, whether or not then exercisable, to become exercisable
during such period prior to the scheduled consummation of such Transaction as
may be specified by the Committee.
Effective Date, Termination and Amendment. The 1997 Plan became
effective as of March 28, 1997 and will terminate ten years thereafter unless
terminated earlier by the Board of Directors. Termination of the 1997 Plan will
not affect the terms or conditions of any option granted prior to termination.
The Board may amend the 1997 Plan as it shall deem advisable, subject to
stockholder approval in certain circumstances. No amendment may be made without
19
<PAGE> 23
stockholder approval if the amendment would increase the maximum number of
shares of Common Stock available under the 1997 Plan or extend the term of the
1997 Plan. No option issued under the Plan may be repriced or regranted at a
lower exercise price or replaced by an option with a lower exercise price,
without prior stockholder approval except as a result of an adjustment in the
event of any stock split, stock dividend or similar change in capitalization.
Non-Qualified Stock Options. The exercise price of each non-qualified
stock option may not be less than 100% of the fair market value of the Common
Stock on the date the option is granted. The maximum term of each non-qualified
stock option is five years after the date of the grant.
Incentive Stock Options. The exercise price of each incentive stock
option may not be less than 100% of the fair market value of the Common Stock on
the date the option is granted; however, if the recipient of the incentive stock
option owns greater than ten percent of the voting power of all shares of
capital stock of the Company (a "Ten Percent Holder"), the exercise price will
be the price required by the Code, which is currently 110% of the fair market
value of the Common Stock on the date the option is granted. The maximum term of
each incentive stock option is five years after the date of the grant.
Replacement Stock Options. The exercise price of each replacement stock
option may not be less than the exercise price of the original option that is
replaced by such replacement stock option. A replacement stock option may not
include additional benefits.
Termination of Employment. Upon termination of an optionee's employment
with the Company by reason of the optionee's death or permanent and total
disability, each option then held by that optionee will be exercisable to the
extent that the option is exercisable on the effective date of such termination,
for a period of no more than one year after the date of such termination, but in
no event after the expiration date of such option. In the event of termination
for "cause," each stock option shall terminate on the date of termination.
"Cause" is defined in the 1997 Plan as (i) an optionee's termination of the
optionee's employment for any reason, (ii) the optionee's willful and continued
failure to substantially perform the optionee's duties with the Company, or
(iii) the optionee's willful engagement in conduct which is demonstrably
injurious to the Company or any Subsidiary, monetarily or otherwise, including
conduct that, in the reasonable judgment of the Company, does not conform to the
standard of the Company's executives, any act of dishonesty, commission of a
felony or a significant violation of any statutory or common law duty of loyalty
to the Company. Or if the optionee is subject to a written employment agreement
with the Company, "Cause" has the meaning ascribed thereto in such agreement and
(i) shall also include an optionee's termination of the optionee's employment
for any reason, but (ii) shall not include termination by reason of an
optionee's total disability notwithstanding any language to the contrary in such
employment agreement. In the event of termination by the Company for any other
reason, each option then held by that optionee will be exercisable to the extent
that the option is exercisable on the effective date of such termination for a
period of no more than three months after such termination, but in no event
after the expiration date of such option. If a holder dies during the applicable
one-year or three-month period following such termination, each option will be
exercisable only to the extent that such option was exercisable on the date of
the holder's death, and may thereafter be exercised for a period of no more than
one year from the date of death, but in no event after the expiration of such
option.
Director Options. On each January, April, July and October, each
director who is not an employee of the Company is granted an option to purchase
3,750 shares of Common Stock at an exercise price per share equal to the fair
market value of the Common Stock on the date of the grant of such option. Such
options are fully exercisable on and after their date of grant and expire five
years thereafter.
If a director ceases to be a director by reason of death or permanent
and total disability, each option will be exercisable on the effective date of
such cessation for a period of no more than one year after such date, but in no
event after the expiration date of such option. In the event a director is
removed from the Board of Directors for cause, each option held by such
non-employee director shall terminate on the date of such removal. If a director
ceases to be a director for any other reason, each option will be exercisable
for a period of no more than three months after such cessation, but in no event
after the expiration of such option. In the event a director dies during the
applicable one-year or three-month period following cessation of his
directorship, then each option may be exercised for a period of no more than one
year from the date of death, but in no event after the expiration of such
option.
Federal Income Tax Consequences. The following is a brief overview of
the U.S. federal income tax consequences generally arising with respect to
options granted under the 1997 Plan.
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<PAGE> 24
A participant receiving a non-qualified stock option under the 1997 Plan
will not recognize taxable income upon the grant of the option, but will
recognize taxable compensation at the time of exercise in the amount of the
difference between the purchase price and the fair market value of the shares of
Common Stock purchased on the date of exercise. At that time, the Company will
be entitled to a deduction as compensation expense in an amount equal to the
amount taxable to the participant as income.
A participant receiving an incentive stock option will not recognize
income at the time of grant or (except for purposes of the alternative minimum
tax) exercise of the option, but will recognize income or loss upon disposition
of the shares, which may be ordinary income or capital gain (or loss) depending
on the length of time the shares have been held. The Company will not be
entitled to any deduction with respect to the grant or exercise of a
participant's incentive stock option. However, if the participant disposes of
the shares acquired pursuant to the exercise of the option before the later of
two years from the date of grant of the option and one year from the date of
exercise, the Company will be entitled to a deduction as compensation expense in
an amount equal to the amount taxable to the participant as ordinary income and
not capital gain.
The affirmative vote of holders of a majority of the Shares represented
at the Meeting in person or by proxy and entitled to vote will be necessary for
shareholder approval of the amendment to the 1997 Plan. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1997 PLAN. Unless otherwise
instructed, the proxy holders will vote the proxies received by them FOR the
proposal to amend the 1997 Plan.
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<PAGE> 25
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INDEPENDENT AUDITORS
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Our consolidated financial statements have been audited by Deloitte &
Touche LLP ("Deloitte") through the fiscal year ending December 1999. Deloitte
has been our independent auditors since 1991 and the Board of Directors intends
to appoint Deloitte to be our independent auditors for the fiscal year ending
December 31, 2000. Representatives of Deloitte are expected to be present at the
Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.
--------------------------------------------------------------------------------
OTHER BUSINESS
--------------------------------------------------------------------------------
We know of no business, other than as stated in the Notice of Annual
Meeting of Stockholders, to be brought before the Meeting. If other matters
should properly come before the meeting, proxies will be voted on such matters
in accordance with the best judgment and discretion of the persons appointed by
the proxies.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
--------------------------------------------------------------------------------
Stockholder proposals to be presented at the 2001 Annual Meeting of
Stockholders must be received by us at our principal executive offices at 27001
Agoura Road, Suite 325, Calabasas Hills, California 91301, addressed to the
attention of the Secretary, not later than February 23, 2001 in order to be
included in our proxy statement and form of proxy related to such meeting.
By Order of the Board of Directors
Fred Gysi
Chief Financial Officer,
Vice President-Finance and Administration,
Treasurer and Secretary
June 23, 2000
PLEASE COMPLETE, DATE, SIGN AND
RETURN YOUR PROXY PROMPTLY
22
<PAGE> 26
EXHIBIT A
THQ INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
(AMENDED AS OF JUNE 14, 2000)
I. INTRODUCTION
1.1. PURPOSES. The purposes of the 1997 Stock Option Plan (this "Plan")
of THQ Inc. (the "Company"), and its subsidiaries (individually a "Subsidiary"
and collectively the "Subsidiaries") are (i) to align the interests of the
Company's stockholders and the recipients of options under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining officers, other employees, consultants, advisors and well-qualified
persons who are not officers or employees of the Company for service as
directors of the Company, and (iii) to motivate such persons to act in the
long-term best interests of the Company's stockholders. For purposes of this
Plan, references to employment by the Company shall also mean employment by a
Subsidiary.
1.2. ADMINISTRATION. This Plan shall be administered either by the Board
of Directors of the Company (the "Board") or by a committee (the "Committee")
designated by the Board consisting of two or more members of the Board each of
whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (if
the Board wishes to qualify under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") an "outside director" within the meaning of
Section 162(m) of the Code. As used herein, the term "Committee" shall mean the
Board if no such committee is designated, and shall mean such committee during
such times as it is so designated.
The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and shall determine the number of shares
of Common Stock subject to each option granted hereunder, the exercise price of
such option, the time and conditions of exercise of such option and all other
terms and conditions of such option, including, without limitation, the form of
the written option agreement between the Company and the optionee that evidences
each option and sets forth the terms and conditions of such option (the
"Agreement"). The Committee shall, subject to the terms of this Plan, interpret
this Plan and the application thereof, establish such rules and regulations it
deems necessary or desirable for the administration of this Plan and may impose,
incidental to the grant of an option, conditions with respect to the grant, such
as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive. The Committee may, in its sole discretion and for any reason at any
time, subject to the requirements imposed under Section 162(m) of the Code and
regulations promulgated thereunder in the case of an option intended to be
qualified performance-based compensation, take action such that any or all
outstanding options shall become exercisable in part or in full.
<PAGE> 27
The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to the selection
for participation in this Plan of an officer or other person subject to Section
16 of the Exchange Act or decisions concerning the timing, pricing or amount of
an option grant to such an officer or other person.
No member of the Board of Directors or the Committee, and neither the
Chief Executive Officer nor other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the full extent permitted by law and under any directors' and officers'
liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.3. ELIGIBILITY. Participants in this Plan shall consist of such
officers, other employees, consultants and advisors of the Company and its
Subsidiaries from time to time as the Committee in its sole discretion may
select from time to time. The Committee's selection of a person to participate
in this Plan at any time shall not require the Committee to select such person
to participate in this Plan at any other time. Non-employee directors of the
Company shall be eligible to participate in this Plan in accordance with Article
III.
1.4. SHARES AVAILABLE. Subject to adjustment as provided in Section 4.7,
4,125,000 shares of the common stock, par value $0.01 per share, of the Company
("Common Stock"), shall be available for grants of options under this Plan,
reduced by the sum of the aggregate number of shares of Common Stock which
become subject to outstanding options. To the extent that shares of Common Stock
subject to an outstanding option are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of such option, then such
shares of Common Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
The maximum aggregate number of shares of Common Stock for which new
option grants may be made in any one fiscal year to any one single participant
shall be three hundred thousand (300,000) and the maximum aggregate number of
shares of Common Stock for which replacement option grants may be made in any
one fiscal year to any one single participant shall be three hundred thousand
(300,000).
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II. STOCK OPTIONS
2.1. GRANTS OF STOCK OPTIONS. The Committee may, in its discretion,
grant options to purchase shares of Common Stock to such eligible persons as may
be selected by the Committee. Each option, or portion thereof, that is not an
incentive stock option, shall be a non-qualified stock option. An incentive
stock option shall mean an option to purchase shares of Common Stock that meets
the requirements of Section 422 of the Code, or any successor provision, which
is intended by the Committee to constitute an incentive stock option. Each
incentive stock option shall be granted within ten years of the effective date
of this Plan. To the extent that the aggregate Fair Market Value (determined as
of the date of grant) of shares of Common Stock with respect to which options
designated as incentive stock options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any Subsidiary as defined in Section 424 of the Code) exceeds the
amount (currently $100,000) established by the Code, such options shall
constitute non-qualified stock options. "Fair Market Value" shall mean the
closing transaction price of a share of Common Stock as reported in the NASDAQ
National Market System, or other exchange where the Common Stock is listed, on
the date as of which such value is being determined or, if there shall be no
reported transactions on such date, on the next preceding date for which
transactions were reported; provided that if Fair Market Value for any date
cannot be determined as above provided, Fair Market Value shall be determined by
the Committee by whatever means or method as the Committee, in the good faith
exercise of its discretion, shall at such time deem appropriate.
2.2. TERMS OF STOCK OPTIONS. Options shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that such purchase price shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant of such
option; provided further, that if an incentive stock option shall be granted to
any person who, at the time such option is granted, owns capital stock
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Company (or of any Subsidiary) (a "Ten Percent
Holder"), the purchase price per share of Common Stock shall be the price
(currently 110% of Fair Market Value) required by the Code in order to
constitute an incentive stock option; provided further, that the purchase price
per share of Common Stock purchasable upon exercise of a replacement option
shall not be less than 100% of the purchase price per share of Common Stock
purchasable upon exercise of the original option that is replaced by such
replacement option.
(b) Option Period and Exercisability. The period during which an option
may be exercised shall be determined by the Committee; provided, however, that
no stock option shall be exercisable later than five years after its date of
grant. The Committee may, in its discretion, establish performance measures or
other criteria which shall be satisfied or met as a condition to the grant of an
option or to the exercisability of all or a portion of an option. The Committee
shall determine whether an option shall become exercisable in cumulative or
non-
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<PAGE> 29
cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of Common Stock. Notwithstanding Section 2.3 hereof or the provisions of any
Agreement, the Committee may in its sole and absolute discretion extend the time
for the exercise of any option.
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery of previously owned whole shares of Common Stock (which the optionee
has held for at least six months prior to the delivery of such shares or which
the optionee purchased on the open market and in each case for which the
optionee has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise, or (D) a combination of (A), (B) and (C), in
each case to the extent not prohibited by the Agreement relating to the option
and (ii) by executing such documents as the Company may reasonably request;
provided, however, that notwithstanding the foregoing or anything in the
Agreement relating to such option to the contrary, the Company shall have sole
discretion to disapprove of an election pursuant to clauses (B)-(D). Any
fraction of a share of Common Stock which would be required to pay such purchase
price shall be disregarded and the remaining amount due shall be paid in cash by
the optionee. No certificate representing Common Stock shall be delivered until
the full purchase price therefor has been paid (or arrangement made for such
payment to the Company's satisfaction).
2.3. TERMINATION OF EMPLOYMENT.
(a) Total Disability. Unless otherwise specified in the Agreement
relating to an option, if an optionee's employment with the Company terminates
by reason of Total Disability, each option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the effective
date of such optionee's termination of employment and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earliest to occur of (i) the date which is one
year (or such other period as set forth in the Agreement relating to such
option) after the effective date of such optionee's termination of employment,
and (ii) the expiration date of the term of such option. For purposes of this
Plan, "Total Disability" shall, with respect to any optionee who at such time is
employed by the Company, mean the permanent and total disability of such
optionee as described in such optionee's written employment agreement; and
otherwise shall mean the inability of such optionee substantially to perform
such optionee's duties and responsibilities for a continuous period of six
months.
(b) Death. Unless otherwise specified in the Agreement relating to an
option, if an optionee's employment with the Company terminates by reason of
death, each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the date of such optionee's death and may
thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement
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<PAGE> 30
relating to such option) after the date of death and (ii) the expiration date of
the term of such option.
(c) Termination for Cause. Unless otherwise specified in the Agreement
relating to an option, if the employment of the holder of such option is
terminated by the Company for Cause, such option shall terminate automatically
on the date of such termination. For purposes of this Plan, "Cause" shall, with
respect to any optionee who at such time has a written employment agreement with
the Company, have the meaning ascribed thereto in such agreement and (i) shall
also include an optionee's termination of his employment for any reason, but
(ii) shall not include termination by reason of an optionee's Total Disability
notwithstanding any language to the contrary in such employment agreement; and
otherwise shall mean the willful and continued failure to substantially perform
the duties with the Company (other than a failure resulting from the optionee's
Total Disability), the willful engaging in conduct which is demonstrably
injurious to the Company or any Subsidiary, monetarily or otherwise, including
conduct that, in the reasonable judgment of the Company, does not conform to the
standard of the Company's executives, any act of dishonesty, commission of a
felony or a significant violation of any statutory or common law duty of loyalty
to the Company, or such optionee's termination of his employment for any reason.
(d) Other Termination. Unless otherwise specified in the Agreement
relating to an option, if an optionee's employment with the Company is
terminated by the Company for any reason other than Total Disability, death or
for Cause, each option held by such optionee shall be exercisable only to the
extent that such option is exercisable on the effective date of such optionee's
termination of employment and may thereafter be exercised by such optionee (or
such optionee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months (or such other period as
set forth in the Agreement relating to such option) after the effective date of
such optionee's termination of employment, and (ii) the expiration date of the
term of such option; provided, however, that if the optionee's employment with
the Company is terminated by the Company within the nine-month period following
the consummation of a Transaction (as defined in Section 4.8(a)) for any reason
other than Total Disability, death or for Cause, each option held by such
optionee shall become fully exercisable, and may thereafter be exercised by such
holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (i) the date which is three months after the
effective date of such optionee's termination of employment and (ii) the
expiration date of the term of such option; provided further, that if the
optionee's employment with the Company is terminated by the Company at any other
time for any reason other than Total Disability, death or for Cause, the
Committee may, in its sole and absolute discretion, provide that each option
held by such optionee shall become fully exercisable and may thereafter be
exercised by such holder (or such holder's legal representative or similar
person) until and including the earliest to occur of (i) the date which is three
months after the effective date of such optionee's termination of employment and
(ii) the expiration date of the term of such option.
(e) Death Following Termination of Employment. Unless otherwise
specified in the Agreement relating to an option, if an optionee dies during the
period set forth in Section 2.3(a) following termination of employment by reason
of Total Disability, or if an optionee dies during the period set forth in
Section 2.3(d) following termination of employment by the Company for any other
reason other than Total Disability, death or for Cause, each option held
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<PAGE> 31
by such optionee shall be exercisable only to the extent that such option is
exercisable on the date of such optionee's death and may thereafter be exercised
by such optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be, until and including the earliest to occur of
(i) the date which is one year (or such other period as set forth in the
Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.
III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
3.1. ELIGIBILITY. Each member of the Board of Directors of the
Company who is not an employee, either full-time or part-time, of the Company or
any Subsidiary (a "non-employee director") shall be granted options to purchase
shares of Common Stock in accordance with this Article III. All options granted
under this Article III shall constitute non-qualified stock options.
3.2. GRANTS OF STOCK OPTIONS. Each non-employee director shall be
granted non-qualified stock options as follows:
(a) Time of Grant. Commencing on July 1, 1997 (or, if later, on the
date on which a person is first elected or begins to serve as a non-employee
director other than by reason of termination of employment with the Company or
any Subsidiary), and, on each January, April, July and October thereafter, each
person who is a non-employee director on such date shall be granted an option to
purchase 3,750 shares of Common Stock (which amount shall be pro-rated if such
person is first elected or begins to serve as a non-employee director on a date
other than the dates set forth above) at a purchase price per share equal to the
Fair Market Value of the Common Stock on the date of grant of such option.
(b) Option Period and Exercisability. Each option granted under
this Article III shall be fully exercisable on and after its date of grant. Each
option granted under this Article III shall expire five years after its date of
grant. An exercisable option, or portion thereof, may be exercised in whole or
in part only with respect to whole shares of Common Stock. Options granted under
this Article III shall be exercisable in accordance with Section 3.2(c).
(c) Termination of Directorship.
(i) Total Disability. Unless otherwise specified in the
Agreement relating to an option, if an optionee's directorship with the
Company terminates by reason of Total Disability, each option held by
such optionee shall be exercisable only to the extent that such option
is exercisable on the effective date of such optionee's termination of
directorship and may thereafter be exercised by such optionee (or such
optionee's legal representative or similar person) until and including
the earliest to occur of (i) the date which is one year (or such other
period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of directorship and (ii)
the expiration date of the term of such option. For purposes of this
Plan, "Total Disability" of a non-employee director shall mean the
inability of such optionee substantially to
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<PAGE> 32
perform such optionee's duties and responsibilities as a director for a
continuous period of six months.
(ii) Death. Unless otherwise specified in the Agreement
relating to an option, if an optionee's directorship with the Company
terminates by reason of death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the
date of such optionee's death and may thereafter be exercised by such
optionee's executor, administrator, legal representative, beneficiary or
similar person until and including the earliest to occur of (i) the date
which is one year (or such other period as set forth in the Agreement
relating to such option) after the date of death and (ii) the expiration
date of the term of such option.
(iii) Termination for Cause. Unless otherwise specified in the
Agreement relating to an option, if the holder of such option is removed
from the Board of Directors for Cause, such option shall terminate
automatically on the date of such termination.
(iv) Other Termination. Unless otherwise specified in the
Agreement relating to an option, if an optionee's directorship with the
Company is terminated by the Company for any reason other than Total
Disability, death or for Cause, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the
effective date of such optionee's termination of directorship and may
thereafter be exercised by such optionee (or such optionee's legal
representative or similar person) until and including the earliest to
occur of (i) the date which is three months (or such other period as set
forth in the Agreement relating to such option) after the effective date
of such optionee's termination of directorship and (ii) the expiration
date of the term of such option.
(v) Death Following Termination. Unless otherwise specified in
the Agreement relating to an option, if an optionee dies during the
period set forth in Section 3.2(c)(i) following termination of
directorship by reason of Total Disability, or if an optionee dies
during the period set forth in Section 3.2(c)(iv) following termination
of directorship by the Company for any other reason other than Total
Disability, for Cause or death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the
date of such optionee's death and may thereafter be exercised by such
optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be, until and including the earliest to
occur of (i) the date which is one year (or such other period as set
forth in the Agreement relating to such option) after the date of death
and (ii) the expiration date of the term of such option.
IV. GENERAL
4.1. EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to
the stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1997 annual
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meeting of the stockholders, shall become effective as of March 28, 1997, the
date of approval of this Plan by the Board of Directors. No option may be
exercised prior to the date of such stockholder approval. This Plan shall
terminate ten years after its effective date, unless terminated earlier by the
Board. Termination of this Plan shall not affect the terms or conditions of any
option granted prior to termination.
4.2. AMENDMENTS.
(a) The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation; provided, however, that no amendment shall be made without
stockholder approval if such amendment would (a) increase the maximum number of
shares of Common Stock available under this Plan (subject to Section 4.7), or
(b) extend the term of this Plan; and, provided, further, that this Plan shall
not be amended in a manner which fails to comply with Rule 16b-3(c)(2)(ii)(B)
under Section 16 of the Exchange Act. No amendment may impair the rights of a
holder of an outstanding option without the consent of such holder or effect any
change inconsistent with Section 422 of the Code; provided further, that the
number of shares of Common Stock subject to an option granted to non-employee
directors pursuant to Article III, the purchase price therefor, the date of
grant of any such option, the termination provisions relating thereto, and the
category of persons eligible to be granted such options shall not be amended
more than once every six months, other than to comply with changes in the Code,
or the rules and regulations thereunder.
(b) Without the prior approval of the stockholders of the Company,
except as provided in Section 4.7 hereof, no option issued under this Plan shall
be repriced or regranted at a lower option price or replaced by an option with a
lower option price.
4.3. AGREEMENT. No option shall be valid until an Agreement is
executed by the Company and the optionee and, upon execution by the Company and
the optionee and delivery of the Agreement to the Company, such option shall be
effective as of the effective date set forth in the Agreement.
4.4. NON-TRANSFERABILITY. No option hereunder shall be transferable
other than (i) by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company or (ii) as otherwise
permitted under Rule 16b-3 under the Exchange Act as set forth in the Agreement
relating to such option. Except to the extent permitted by the foregoing
sentence, each option may be exercised during the optionee's lifetime only by
the optionee or the optionee's legal representative or similar person. Except as
permitted by the second preceding sentence, no option hereunder shall be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option hereunder, such
option and all rights thereunder shall immediately become null and void.
4.5. TAX WITHHOLDING. The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock, payment by the
optionee of any Federal, state, local or other taxes which may be required to be
withheld or paid in connection
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with an option hereunder. Unless otherwise provided in an Agreement relating to
an option, the optionee may elect that (i) the Company shall withhold whole
shares of Common Stock which would otherwise be delivered upon exercise of the
option having an aggregate Fair Market Value determined as of the date the
obligation to withhold or pay taxes arises in connection with the option (the
"Tax Date") in the minimum statutory amount necessary to satisfy any such
obligation or (ii) the optionee satisfy any such obligation by any of the
following means: (A) a cash payment to the Company, (B) delivery to the Company
of previously owned whole shares of Common Stock (which the optionee has held
for at least six months prior to the delivery of such shares or which the
optionee purchased on the open market and in each case for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value determined as of the Tax Date, equal to the minimum
statutory amount necessary to satisfy any such obligation, (C) a cash payment by
a broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise, or (D) any combination of (A), (B) and (C), in
each case to the extent not prohibited by the Agreement relating to the option.
Any fraction of a share of Common Stock which would be required to satisfy such
an obligation shall be disregarded and the remaining amount due shall be paid in
cash by the optionee; provided, however, that the Committee shall have sole
discretion to disapprove of an election pursuant to any of clauses (B)-(D) and
that in the case of an optionee who is subject to Section 16 of the Exchange
Act, the Company may require that the method of satisfying any such obligation
be in compliance with Section 16 and the rules and regulations thereunder. Any
fraction of a share of Common Stock which would be required to satisfy such an
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the optionee.
4.6. RESTRICTIONS ON SHARES. Each option hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any option hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
4.7. ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
limitation on option grants set forth in Section 1.4, the number and class of
securities for which options are to be granted to non-employee directors
pursuant to Article III, the number and class of securities subject to each
outstanding option and the purchase price per security shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options without an increase in the aggregate purchase price. The
decision of the Committee regarding any such adjustment shall be final and
binding. If any adjustment would result in a fractional security being (a)
available under this Plan, such
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fractional security shall be disregarded, or (b) subject to an option under this
Plan, the Company shall pay the optionee, in connection with the first exercise
of the option in whole or in part occurring after such adjustment, an amount in
cash determined by multiplying (A) the fraction of such security (rounded to the
nearest hundredth) by (B) the excess, if any, of (x) the Fair Market Value on
the exercise date over (y) the exercise price of the option.
4.8. EFFECT OF CERTAIN TRANSACTIONS.
(a) In the event that the Company enters into an agreement (a) to
dispose of all or substantially all of its assets, in contemplation of the
distribution of the net proceeds of such sale to the Company's shareholders, or
(b) to consummate a merger or consolidation in which the Company is not the
surviving or resulting corporation, or in the event the persons who, as of the
date of the adoption of this Plan by the Board of Directors, hold 60% or more of
the outstanding capital stock of the Company enter into an agreement to sell all
of such stock (such distribution, merger, consolidation or sale being
hereinafter referred to as a "Transaction"), then (unless otherwise specified in
the Agreement relating to an option), the Committee shall provide, at its
election made in its sole and absolute discretion, for one or more of the
following: (i) for each outstanding option, whether or not then exercisable, to
be replaced with a comparable option to purchase shares of capital stock of a
successor or purchasing corporation or parent thereof, or (ii) for each
outstanding option, whether or not then exercisable, to be assumed by a
successor or purchasing corporation or parent thereof (and, in the event of such
assumption, each outstanding option shall continue to be exercisable, on the
terms and subject to the conditions set forth in, and in cumulative amounts at
the times provided in, the Agreement relating to such option but shall, from and
after the consummation of such Transaction, be exercisable for the capital
stock, cash and/or other property received by the common stockholders of the
Company in such Transaction in an amount equal to what the holder of such option
would have received had he exercised such option immediately prior to the
consummation of such Transaction), or (iii) for each outstanding option, whether
or not then exercisable, to become exercisable during such period prior to the
scheduled consummation of such Transaction as may be specified by the Committee;
provided, however, that such elections of the Committee shall apply identically,
by their terms, to all holders of options granted under this Plan (unless
otherwise required by an Agreement). In the event the Committee elects to cause
the options not then otherwise exercisable to become exercisable prior to such
Transaction (an "Accelerated Option"), any exercise of an Accelerated Option
shall be conditioned upon, and shall be effective only concurrently with, the
consummation of such Transaction; and if such Transaction is not consummated,
the exercise of such Accelerated Options shall be of no further force or effect
(and an optionee may elect, with respect to the exercise during such period of
an option that was otherwise exercisable, to so condition such exercise upon the
consummation of the Transaction). All options not exercised prior to the
consummation of such Transaction (and which are not being assumed by a successor
or purchasing corporation or parent thereof) shall terminate and be of no
further force or effect as of the consummation of such Transaction.
(b) With respect to any optionee who is subject to Section 16 of
the Exchange Act, (i) notwithstanding the exercise periods set forth in Section
2.3 and 3.2(c), or as set forth pursuant to such Section in any Agreement to
which such optionee is a party, and (ii) notwithstanding the expiration date of
the term of such option, in the event the Company is involved in a business
combination that is intended to be treated as a pooling of interests for
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<PAGE> 36
financial accounting purposes (a "Pooling Transaction") or pursuant to which
such optionee receives a substitute option to purchase securities of any entity,
including an entity directly or indirectly acquiring the Company, then each
option (or option in substitution thereof) held by such optionee shall be
exercisable to the extent set forth in the Agreement evidencing such option
until and including the latest of (x) the date set forth pursuant to the then
applicable paragraph of Section 2.3, 3.2(c) or the expiration date of the term
of the option, as the case may be, (y) the date which is six months and one day
after the consummation of such business combination and (z) the date which is
ten business days after the date of expiration of any period during which such
optionee may not dispose of a security issued in the Pooling Transaction in
order for the Pooling Transaction to be accounted for as a pooling of interests.
4.9. NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have
any right to participate in this Plan. Neither this Plan nor any option granted
hereunder shall confer upon any person any right to continued employment by the
Company, any Subsidiary or any affiliate of the Company or affect in any manner
the right of the Company, any Subsidiary or any affiliate of the Company to
terminate the employment of any person at any time without liability hereunder.
4.10. RIGHTS AS STOCKHOLDER. No person shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock which are
subject to an option hereunder until such person becomes a stockholder of record
with respect to such shares of Common Stock.
4.11. DESIGNATION OF BENEFICIARY. If permitted by the Company, an
optionee may file with the Committee a written designation of one or more
persons as such optionee's beneficiary or beneficiaries (both primary and
contingent) in the event of the optionee's death. To the extent an outstanding
option granted hereunder is exercisable, such beneficiary or beneficiaries shall
be entitled to exercise such option.
Each beneficiary designation shall become effective only when filed
in writing with the Committee during the optionee's lifetime on a form
prescribed by the Committee. The spouse of a married optionee domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Committee of a new beneficiary
designation shall cancel all previously filed beneficiary designations.
If an optionee fails to designate a beneficiary, or if all
designated beneficiaries of an optionee predecease the optionee, then each
outstanding option hereunder held by such optionee, to the extent exercisable,
may be exercised by such optionee's executor, administrator, legal
representative or similar person.
4.12. GOVERNING LAW. This Plan, each option hereunder and the
related Agreement, and all determinations made and actions taken pursuant
thereto, to the extent not otherwise governed by the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
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<PAGE> 37
4.13. FOREIGN EMPLOYEES. Without amending this Plan, the Committee
may grant options to eligible persons who are foreign nationals on such terms
and conditions different from those specified in this Plan as may in the
judgment of the Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Committee may make such modifications, amendments, procedures, subplans and
the like as may be necessary or advisable to comply with provisions of laws in
other countries or jurisdictions in which the Company or its Subsidiaries
operates or has employees.
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THQ INC.
27001 AGOURA ROAD, SUITE 325
CALABASAS HILLS, CALIFORNIA 91301
2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and constitutes Brian J. Farrell and Fred Gysl,
and each of them the true and lawful attorneys, agents and proxies of the
undersigned, with full power of substitution, to represent and vote with all
the shares of Common Stock of THQ Inc. ("the Company"), standing in the name of
the undersigned, at the Annual Meeting of Stockholders of the Company to be
held on July 21, 2000 at the Hyatt Westlake Plaza, 880 South Westlake
Boulevard, Westlake Village at 1:00 p.m., Pacific Daylight Time and any
postponement or adjournment thereof, with all the powers the undersigned would
possess if personally present, and especially (but without limiting the general
authorization and power hereby given) to vote as follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 39
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<CAPTION>
<S> <C> <C>
FOR 2. STOCK OPTION PLAN PROPOSAL:
all the WITHHOLD To approve the amendment to the
nominees ABSTAIN AUTHORITY Company's 1997 Stock Option Plan to (a)
1. ELECTION [ ] [ ] [ ] restrict the number of shares of Common FOR AGAINST ABSTAIN
OF DIRECTORS: Stock for which new option grants may [ ] [ ] [ ]
be made in any fiscal year to any one
NOMINEES: L. Greg Ballard single person to 300,000 shares, (b) authorize the Compensation
Lawrence Burstein Committee in limited circumstances to grant replacement options
Brian J. Farrell for the tax and accounting benefit of the Company; provided that
Bruce Jagid such replacement options shall not include additional benefits and
Jeffrey C. Lapin shall have an exercise price that is not lower than the option being
James L. Whims replaced, (c) make certain technical, clarifying changes to the tax
withholding and adjustment provisions of the Plan:
FOR, except vote withheld from the following
nominees:
____________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE THE BOARD OF DIRECTORS RECOMMENDS A VOTE
ELECTION OF DIRECTORS. FOR THE APPROVAL OF THE STOCK OPTION PLAN PROPOSAL
3. For the proxies, in their discretion, to vote upon such other
matters as may properly come before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned shareholder, if no direction is made,
this proxy will be voted FOR the election of the nominees listed above
under Election of Directors and FOR the Stock Option Plan Proposal.
</TABLE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND THE
PROXY STATEMENT.
Signature(s) ____________________________________ Dated: ________________, 2000
Please sign exactly as the name(s) appears hereon. When shares are held by join
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the authorized officer. If a partnership or
limited liability company, or any other entity, please sign entity's name by
authorized person.
