SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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 only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-12
Take-Two Interactive Software, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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(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).
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
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[Take-Two Interactive Logo]
February 28, 2003
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of Take-Two Interactive Software, Inc. (the "Company") that will be held on
Thursday, April 17, 2003 at 10:00 A.M. local time at the Grand Hyatt, Conference
Level, 42nd Street between Lexington and Park Avenues, New York, New York 10017.
The Notice of Annual Meeting and Proxy Statement that follow describe
the business to be conducted at the meeting.
Your Board of Directors unanimously believes that the election of the
nominees as directors and the amendment to the Company's 2002 Stock Option Plan
are in the best interests of the Company and its stockholders and, accordingly,
recommends a vote "FOR" the nominees as directors and "FOR" the amendment to the
Company's 2002 Stock Option Plan on the enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, may I urge you to complete, sign,
date and return the enclosed proxy card in the envelope provided. If the address
on the accompanying material is incorrect, please advise our Transfer Agent,
American Stock Transfer & Trust Company, in writing, at 59 Maiden Lane, New
York, New York 10038.
Your vote is very important, and we will appreciate a prompt return of
your signed proxy card. We hope to see you at the meeting and appreciate your
continued support.
Sincerely yours,
Jeffrey C. Lapin
Chief Executive Officer
Take-Two Interactive Software Inc. 622 Broadway New York NY 10012 Tel
646-536-2842 Fax 646-536-2926
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway
New York, New York 10012
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, APRIL 17, 2003
--------------------
To the Stockholders of TAKE-TWO INTERACTIVE SOFTWARE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting ("Annual Meeting") of
Stockholders of Take-Two Interactive Software, Inc. (the "Company") will be held
on Thursday, April 17, 2003, at 10:00 A.M. local time at the Grand Hyatt,
Conference Level, 42nd Street between Lexington and Park Avenues, New York, New
York 10017 for the following purposes:
1. To elect eight directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors have been duly
elected and qualified;
2. To consider and vote on a proposal to amend the Company's 2002 Stock
Option Plan to increase the number of shares of the Company's Common Stock
reserved for issuance under the Plan by 1,000,000 shares; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on February 26,
2003 are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
By Order of the Board of Directors,
Jeffrey C. Lapin
Chief Executive Officer
February 28, 2003
-----------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway
New York, New York 10012
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, APRIL 17, 2003
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Take-Two Interactive Software, Inc. (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on Thursday, April 17, 2003, including any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Meeting.
Management intends to mail this proxy statement and the accompanying
form of proxy to stockholders on or about March 5, 2003.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
A proxy given pursuant to such solicitation may be revoked by the stockholder at
any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of
the Company are: 622 Broadway, New York, New York 10012, Telephone No.: (646)
536-2842.
The following questions and answers provide important information about
the Annual Meeting and this proxy statement:
Q. What am I voting on?
A. Election of directors: Ryan A. Brant, Jeffrey C. Lapin, Oliver R. Grace, Jr.,
Robert Flug, Todd Emmel, Mark Lewis, Steven Tisch and Richard W. Roedel.
A proposal to amend the Company's 2002 Stock Option Plan to provide for
an additional 1,000,000 shares of the Company's common stock to be reserved for
issuance under the plan.
Q. Who is entitled to vote?
A. Stockholders as of the close of business on February 26, 2003 are entitled to
vote at the Annual Meeting. Each stockholder is entitled to one vote for each
share of common stock held.
Q. How do I vote?
A. You may sign and date each paper proxy card you receive and return it in the
prepaid envelope. If you return your signed proxy but do not indicate your
voting preferences, we will vote on your behalf (1) FOR the election of the
directors and (2) FOR the adoption of the amendment to the Company's 2002 Stock
Option Plan. You have the right to revoke your proxy any time before the meeting
by (1) notifying the Company's Secretary, or (2) returning a later-dated proxy.
You may also revoke your proxy by voting in person at the Annual Meeting.
You may also vote by telephone or via the Internet. See Voting by
Telephone or via the Internet below for further details. Please note that there
are separate telephone and Internet voting arrangements depending upon whether
shares are registered in your name or in the name of a bank or broker.
Q. How do I sign the paper proxy card?
A. Sign your name exactly as it appears on the proxy card. If you are signing in
a representative capacity (for example, as an attorney, executor, administrator,
guardian, trustee, or the officer or agent of a company), you should indicate
your name and title or capacity. If the stock is held in custody for a minor
(for example, under the Uniform Transfers to Minors Act), the custodian should
sign the proxy card, not the minor. If the stock is held in joint ownership, one
owner may sign on behalf of all the owners.
Q. What does it mean if I receive more than one proxy card?
A. It may mean that you hold shares registered in more than one account. Sign
and return all proxy cards to ensure that all your shares are voted. You may
call American Stock Transfer & Trust Company at 1-800-937-5449 if you have any
questions regarding the share information or your address appearing on the paper
proxy card.
Q. Who will count the votes?
A. A representative of American Stock Transfer & Trust Company will tabulate the
votes and act as independent inspector of election.
Q. What constitutes a quorum?
A. A majority of the outstanding shares present or represented by proxy
constitutes a quorum for the Annual Meeting. As of February 26, 2003, 40,973,745
shares of the Company's common stock were issued and outstanding.
Q. How many votes are needed for the election of directors and the amendment to
the 2002 Stock Option Plan?
A. Directors will be elected by a plurality of the votes cast at the Annual
Meeting, meaning the nominees receiving the highest number of votes will be
elected directors. Only votes cast for a nominee will be counted, except that a
properly executed proxy that does not specify a vote with respect to the
nominees will be voted for the Company's nominees listed on the proxy card.
Abstentions and broker non-votes (as described below) will have no effect on the
election of directors.
The proposal to amend the 2002 Stock Option Plan will be approved if
the votes cast for the proposal exceed those cast against the proposal. Broker
non-votes will not be counted as votes cast either for or against the proposals.
Q. What is a "broker non-vote"?
A. A "broker non-vote" occurs when a broker submits a proxy that does not
indicate a vote for some of the proposals because the broker has not received
instructions from the beneficial owners of how to vote on such proposals and
does not have discretionary authority to vote in the absence of instructions.
-2-
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on February 26,
2003 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, there were issued and outstanding 40,973,745
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"). Each share of Common Stock entitles the holder to one vote on each
matter submitted to a vote at the Annual Meeting.
VOTING PROCEDURES AND PROXY INFORMATION
The directors will be elected by the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting, provided a quorum exists. A quorum is established if, as of the
Record Date, at least a majority of the outstanding shares of Common Stock are
present in person or represented by proxy at the Annual Meeting. The amendment
to the Company's 2002 Stock Option Plan requires the affirmative vote of a
majority of the votes cast by the holders of shares of Common Stock entitled to
vote on the matter at the Annual Meeting, provided a quorum exists. All other
matters at the meeting will be decided by the affirmative vote of a majority of
the shares of Common Stock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter, provided a quorum exists.
Votes will be counted and certified by one or more Inspectors of Election who
are expected to be employees of American Stock Transfer & Trust Company, the
Company's transfer agent.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares as to a matter with respect to which the brokers or nominees do not
have discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the subject matter as to which the non-vote is indicated. Abstentions
and broker non-votes will have no effect on the election of directors. Broker
non-votes will have no effect on the proposal to amend the 2002 Stock Option
Plan.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy and
any additional soliciting material furnished to stockholders, will be borne by
the Company. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials to the
beneficial owners of stock, and these entities may be reimbursed by the Company
for their expenses. Proxies also may be solicited by directors, officers or
employees of the Company in person or by telephone, telegram or other means. No
additional compensation will be paid to such individuals for these services.
VOTING BY TELEPHONE OR VIA THE INTERNET
For Shares Registered in the Name of a Brokerage Firm or Bank. A number
of brokerage firms and banks are participating in a program provided through ADP
Investor Communication Services that offers telephone and Internet voting
options. This program is different than the program provided by American Stock
Transfer & Trust Company for shares registered in the name of the stockholder.
If your shares are held in an account at a brokerage firm or bank participating
in the ADP program, you may vote those shares telephonically by calling the
telephone number referenced on your voting form. If your shares are held in an
account at a brokerage firm or bank participating in the ADP program, you are
offered the opportunity to elect to vote via the Internet. Votes submitted via
the Internet through the ADP program must be received by 11:59 p.m. (EDT) on
April 16, 2003. The giving of such proxy will not affect your right to vote in
person should you decide to attend the Annual Meeting.
-3-
For Shares Directly Registered in the Name of the Stockholder.
Stockholders with shares registered directly with American Stock Transfer &
Trust Company may vote telephonically by calling American Stock Transfer & Trust
Company at 1-800-776-9437 or you may vote via the Internet at www.voteproxy.com.
The telephone and Internet voting procedures are designed to
authenticate stockholders' identities, to allow stockholders to give their
voting instructions and to confirm that stockholders' instructions have been
recorded properly. Stockholders voting via the Internet through either American
Stock Transfer & Trust Company or ADP Investor Communication Services should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that must
be borne by the stockholder.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, directors will be
elected to hold office for a term expiring at the Annual Meeting of Stockholders
to be held in 2004. It is the intention of the Board of Directors to nominate
Ryan A. Brant, Jeffrey C. Lapin, Oliver R. Grace, Jr., Robert Flug, Todd Emmel,
Mark Lewis, Steven Tisch and Richard W. Roedel as directors. Each director will
be elected to serve until a successor is elected and qualified or until the
director's earlier resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a proxy specifies that it is not to
be voted in favor of a nominee for director. In the event any of the nominees
listed below shall be unable to serve, it is intended that the proxy will be
voted for such other nominees as are designated by the Board of Directors. Each
of the persons named below has indicated to the Board of Directors that he will
be available to serve.
The Board of Directors recommends that stockholders vote FOR the
election of the nominees named below.
Following is information with respect to the nominees for directors:
Ryan A. Brant, age 31, has been Chairman of the Company since 1993. Mr.
Brant served as Chief Executive Officer of the Company from 1993 until February
2001. Mr. Brant received a B.S. degree in Economics from the University of
Pennsylvania's Wharton School of Business.
Jeffrey C. Lapin, age 46, has been a director of the Company since
November 2002 and Chief Executive Officer of the Company since January 2003. Mr.
Lapin served as Vice Chairman of THQ, Inc., a developer and publisher of
interactive entertainment software, from October 1998 to November 2002, and
served as Chief Operating Officer of THQ from August 2000 to November 2002. From
July 1996 to October 1998, Mr. Lapin served as President of House of Blues, Inc.
Hospitality and Executive Vice President of House of Blues, Inc. Entertainment.
From 1986 to June 1996, Mr. Lapin served in various executive capacities with
Starwood Hotels & Resorts, most recently from January 1995 to June 1996 as
President and Chief Operating Officer, and from May 1991 to January 1995 as
President and Chief Executive Officer. Prior to his employment by Starwood, Mr.
Lapin was an attorney at Mitchell, Silberberg & Knupp in Los Angeles. Mr. Lapin
serves as a director of eUniverse, Inc. a leading interactive entertainment
network. Mr. Lapin received a J.D. from Loyola Law School.
Oliver R. Grace, Jr., age 49, has been a director of the Company since
April 1997. Mr. Grace, a private investor, has been the Chairman of the Board of
Andersen Group, Inc., a dental products and video broadcasting equipment
manufacturing company, since 1990. Mr. Grace has also been a director of
Republic Automotive Parts, Inc., a distributor of replacement parts for the
automotive aftermarket, since 1982. Mr. Grace is a general partner of Anglo
American Security Fund, L.P., a private investment fund. Mr. Grace received a
B.A. in Business Administration from Vanderbilt University.
Robert Flug, age 55, has been a director of the Company since February
1998. Mr. Flug has been the President and Chief Operating Officer of S.L.
Danielle, a women's apparel company, since September 1987. Mr. Flug received a
B.S. in Business Administration from New York University.
-4-
Todd Emmel, age 40, has been a director of the Company since February
2002. From November 1999 until June 2002, Mr. Emmel was a First Vice President
at Ambac Assurance Corporation, a financial insurance company. From May 1999 to
November 1999, Mr. Emmel was Chief Credit Officer at Structured Credit Partners,
a private credit arbitrage firm. From March 1998 to May 1999, Mr. Emmel was a
Managing Director of DVI Private Capital Group, a private equity fund. From
April 1990 to March 1998, Mr. Emmel held various positions at Union Bank of
Switzerland, most recently as a Managing Director. Prior to this, Mr. Emmel was
an Associate at both Drexel Burnham Lambert, from June 1988 to February 1990,
and at E.F. Hutton from July 1987 to February 1988. Mr. Emmel received an M.B.A.
from Carnegie Mellon University and a B.S. in accounting from Miami University.
Mark Lewis, age 53, has been a director of the Company since May 2001.
For the fifteen years preceding February 2001, Mr. Lewis held various positions
with Electronic Arts, most recently as Senior Vice President of International
Operations. Mr. Lewis has been a director of Muse Communications Corp., a
broadband technology company, since November 1997. Mr. Lewis received a B.A. in
English and graduated Cum Laude from Yale University.
Steven Tisch, age 53, has been a director of the Company since April
2002. Since 1986, Mr. Tisch has been an independent motion picture producer. Mr.
Tisch is the Oscar Award winning producer of Forrest Gump, the 1994 winner for
Best Picture and the fourth-largest grossing domestic box office film of all
time. Since May 2000, Mr. Tisch has been a partner of Escape Artists, a private
independent film company, and a director of Classic Media, an owner of franchise
entertainment properties. Since June 2002, Mr. Tisch has been a director of Film
Roman, Inc., a publicly held television and motion picture production company.
From 1976 to 1986, Mr. Tisch was a principal of Tisch/Avnet Productions, a
production company with credits such as Risky Business. Mr. Tisch is a member of
the Board of Directors of the Tisch School of the Arts at New York University
and The Geffen Theatre in Los Angeles. Mr. Tisch received a B.A. in Sociology
from Tufts University.
Richard W. Roedel, age 53, has been a director of the Company and
Chairman of the Audit Committee since November 2002. From 1999 to 2000, Mr.
Roedel was Chairman and Chief Executive Officer of the accounting firm BDO
Seidman, LLP, the United States member firm of BDO International. Before
becoming Chairman and Chief Executive Officer, he was the Managing Partner of
BDO Seidman's New York Metropolitan Area from 1994 to 1999, the Managing Partner
of its Chicago office from 1990 to 1994 and an Audit Partner from 1985 to 1990.
Mr. Roedel is a co-founder and principal of Pinnacle Ventures LLC, which
provides funding and management expertise to privately held companies. Mr.
Roedel received a B.S. degree in accounting and economics from The Ohio State
University and is a Certified Public Accountant. Mr. Roedel is a director of
Brightpoint, Inc. a provider of outsourced services in the wireless
telecommunications and data industry, and Dade Behring Holdings, Inc., a medical
diagnostics equipment and related product manufacturer.
Following is information with respect to certain of the Company's
executive officers not listed above:
Paul Eibeler, age 46, has been President of the Company since July 2000
and a director since December 2000. Mr. Eibeler is not standing for reelection
as a director at the Annual Meeting. Prior to joining the Company, Mr. Eibeler
was a consultant to Microsoft's Xbox launch team, as well as W-Trade, Inc., an
online financial services provider, and Essential Realities, Inc. From 1998 to
1999, Mr. Eibeler served as Acclaim Entertainment's Executive Vice-President and
General Manager. During the seven years prior to that, Mr. Eibeler held various
executive positions with Impact, Inc., a leading supplier of licensed toys and
school supplies. Mr. Eibeler received a B.A. degree from Loyola College.
Karl H. Winters, age 44, has been Chief Financial Officer of the
Company since February 2002. From April 2000 to June 2001, Mr. Winters was the
Chief Financial Officer of ModelWire, Inc., a company engaged in marketing
imaging database products. From September 1993 to December 1999, Mr. Winters
served in various positions, most recently as Vice President of Trace
International Holdings, Inc., a private holding company that held significant
interests in United Auto Group, Inc., a consolidator of new car dealerships, and
Foamex International Inc., a manufacturer of polyurethane products. From 1993 to
1999, Mr. Winters held executive positions at United Auto and Foamex, most
recently as United Auto's Chief Financial Officer and Executive Vice President.
Trace International filed a petition under Chapter 11 of the United States
Bankruptcy Code in July 1999. From 1983 to 1993, Mr. Winters was a Senior Audit
Manager for Cooper's & Lybrand. Mr. Winters is a Certified Public Accountant and
received an M.B.A. from the University of Michigan and a B.A. in business
economics with a concentration in accounting from Calvin College.
-5-
Section 16(a) Beneficial Ownership Compliance. Based solely on a review
of Forms 3, 4 and 5 furnished to the Company with respect to its most recent
fiscal year, the Company believes that all reporting persons currently required
to file forms under the Securities Exchange Act of 1934 timely filed such
reports, except that Mr. Flug did not file a Form 5 (two transactions) and Mr.
Grace did not file a Form 5 (two transactions) on a timely basis.
Meetings of Directors and Committees. During the fiscal year ended
October 31, 2002, the Board of Directors held thirteen meetings. In addition,
the Board took other action by unanimous written consent. The Company has
established a Compensation Committee of the Board of Directors. The function of
the Compensation Committee is to review compensation policies and procedures of
the Company, evaluate the executive officers' compensation and make
recommendations to the Board of Directors regarding executive compensation. The
Compensation Committee is comprised of Messrs. Grace, Flug and Emmel. The
Compensation Committee held ten meetings during the fiscal year ended October
31, 2002. The Company recently established a Nominating/Corporate Governance
Committee comprised of Messrs. Roedel, Grace and Flug. Such Committee is
responsible for creating and maintaining overall corporate governance policies
for the Company and identifying, screening and recruiting director candidates to
the Board of Directors, and did not hold any meetings during the year ended
October 31, 2002. As described below, the Company has an Audit Committee that
held twelve meetings during the fiscal year ended October 31, 2002.
Audit Committee Report
The Company has established an Audit Committee of the Board of
Directors consisting of Messrs. Roedel, Grace, Flug and Emmel, each of whom is
an independent director as defined under the rules of the National Association
of Securities Dealers, Inc. Mr. Roedel qualifies as a "financial expert" under
federal securities laws. The Audit Committee supervises the audit and financial
procedures of the Company. The Board of Directors has adopted a written charter
for the Audit Committee, which is attached to this Proxy Statement as Exhibit A.
The Audit Committee has: (1) reviewed and discussed the contents of the
Company's audited financial statements with management; (2) discussed with its
independent auditors the matters required to be discussed by SAS 61, as may be
modified or supplemented; (3) received the written disclosures from such auditor
as required by the Independent Standards Board; and (4) discussed with its
auditor its auditor's independence. Based on such review and discussions, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended October 31, 2002 filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Richard W. Roedel
Oliver R. Grace, Jr.
Robert Flug
Todd Emmel
-6-
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company during the fiscal years ended October 31, 2000, 2001 and 2002 to its
Chief Executive Officer and four most highly compensated executive officers
other than its Chief Executive Officer, each of whom was serving at the end of
the fiscal year ended October 31, 2002 and whose salary and bonus exceeded
$100,000 (the "Named Executives"):
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Award
------------------------------------------------------------------ --------------
Securities
Year Ended Other Annual Underlying
Name and Principal Position October 31, Salary($) Bonus($) Compensation(1) Options(#)
--------------------------- ----------- --------- -------- --------------- ------------
Ryan A. Brant
Chairman.............................. 2002 641,058 1,993,330 -- 200,000
2001 575,000 790,000 -- 479,560
2000 344,365 705,812 -- 200,000
Kelly Sumner
Chief Executive Officer(2).......... 2002 473,910 450,000 -- 100,000
2001 359,519 19,317 -- 480,000
2000 255,702 147,862 -- 180,000
Paul Eibeler
President........................... 2002 430,385 112,500 50,000
2001 353,819 95,000 -- 170,000
2000 80,208 70,000 275,000
Karl H. Winters
Chief Financial Officer (3)......... 2002 222,115 207,500 -- 200,000
Don Leeds
Executive Vice President/Special
Projects (4)........................ 2002 251,731 125,000 -- 400,000(5)
(1) The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the Named Executives.
(2) Mr. Sumner resigned as Chief Executive Officer in January 2003. Mr.
Sumner currently serves as president of the Company's Gathering
subsidiary, a non-executive position.
(3) Mr. Winters joined the Company in February 2002.
(4) Mr. Leeds became Executive Vice President/Special Projects in February
2002 and resigned in September 2002.
(5) Mr. Leeds forfeited 103,000 options upon his resignation as an officer
of the Company.
-7-
The following table sets forth information concerning options granted
in the fiscal year ended October 31, 2002 to the Named Executives:
Option Grants in Fiscal Year Ended October 31, 2002
Individual Grants(1)
------------------------------------------------------------------------------------
Name Number of Percent of Total Exercise Expiration Potential Realizable
Securities Options Granted to Price Date Value at Assumed
Underlying Employees in ($/Sh) Annual Rates of Stock
Options Fiscal Year (%) Price Appreciation for
Granted (#) Option Term (2)
-------------------- ------------ ------------------ -------- ---------- -----------------------
5%($) 10%($)
----- ------
Ryan A. Brant ........ 100,000 15.25 02/21/07 421,329 931,028
100,000 5.0 16.83 06/20/07 464,982 1,027,488
Kelly Sumner ......... 100,000 2.5 19.51 08/04/07 539,025 1,191,105
Paul Eibeler.......... 50,000 1.2 19.51 08/04/07 269,513 595,553
Karl Winters.......... 200,000 5.0 18.18 02/14/07 1,004,560 2,219,814
Don Leeds............. 400,000(3) 10.0 18.18 02/14/12 4,573,361 11,589,695
(1) All of the options have a term of five years and vest at various times
over the term of the options.
(2) The potential realizable value columns of the table illustrate values
that might be realized upon exercise of the options immediately prior
to their expiration, assuming the common stock appreciates at the
compounded rates specified over the term of the options. These numbers
do not take into account provisions of certain options providing for
termination of the option following termination of employment or
non-transferability of the options and do not make any provision for
taxes associated with exercise. Because actual gains will depend upon,
among other things, future performance of the common stock, there can
be no assurance that the amounts reflected in this table will be
achieved.
(3) Of such options, 103,000 were forfeited in September 2002. After giving
effect to the forfeiture, the potential realizable values of Mr. Leed
remaining options are $3,395,720 (5% appreciation) and $8,605,337 (10%
appreciation).
-8-
The following table sets forth information concerning the value of
options exercised during the fiscal year ended October 31, 2002 and the value of
unexercised stock options held by the Named Executives as of October 31, 2002:
Aggregated Option Exercises and Year End Values
Number of Securities
Shares Underlying Value of Unexercised
Acquired on Value Unexercised Options In-the-Money Options
Name Exercise (#) Realized ($) at October 31, 2002 (#) at October 31, 2002 ($)*
---- ------------ ------------ ----------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------- ------------- ----------- -------------
Ryan A. Brant............ 68,475 1,696,017 - - - -
Kelly Sumner............. 25,000 431,822 585,000 150,000 9,218,000 1,200,500
Paul Eibeler............. 50,000 941,973 355,000 - 5,046,525 -
Karl Winters............. - - 50,000 150,000 380,000 1,140,000
Don Leeds................ 339,500 3,328,500 - - - -
*Year-end values for unexercised in-the-money options represent the
positive spread between the exercise price of such options and the fiscal
year-end market value of the common stock, which was $25.78 on October 31, 2002.
Director Compensation
Non-employee directors received cash compensation of $20,000 per annum
for serving on the Board of Directors and $1,000 for each meeting attended in
person ($500 for each meeting attended by conference call) during the fiscal
year ended October 31, 2002. Non-employee directors are entitled to receive cash
compensation of $40,000 ($50,000 for committee members) for serving on the Board
of Directors during the fiscal year ending October 31, 2003. In January 2003,
the Company paid Mr. Flug $50,000 for services he provided as a member of the
Company's Compensation Committee in connection with the Company's engagement of
a new Chief Executive Officer. Non-employee directors are also eligible to
receive initial option grants of 25,000 shares and option grants of 10,000
shares for each year served thereafter. During fiscal 2002, Mr. Grace received
options to purchase 26,000 shares; Mr. Flug received options to purchase 41,000
shares; Mr. Lewis received options to purchase 10,000 shares; Mr. Emmel received
options to purchase 37,500 shares; Mr. Tisch received options to purchase 25,000
shares; and Mr. Roedel received options to purchase 35,000 shares.
Employment Agreements
The Company entered into an employment agreement, as amended, with Ryan
A. Brant for a five-year term ending July 2007. The Agreement provides that Mr.
Brant is entitled to receive an annual salary of $750,000 and a bonus of
$150,000 for each fiscal quarter and $250,000 for each fiscal year, provided
that such bonus is approved by the Compensation Committee of the Board of
Directors and the Company achieves its projected cash flow and net income
targets for each period.
The Company entered into an employment agreement with Jeffrey C. Lapin
for a three-year term commencing January 2003. The Agreement provides that Mr.
Lapin is entitled to receive an annual salary of $650,000 and a bonus of $50,000
for each fiscal quarter and $200,000 for each fiscal year, provided that the
Company achieves its business and financial plans for each period. Mr. Lapin is
also entitled to receive a bonus of $200,000 for each fiscal year.
-9-
The Company entered into an employment agreement, as amended, with
Kelly Sumner providing for a three-year term ending December 2005. Mr. Sumner
serves as president of the Company's Gathering subsidiary. The agreement
provides that Mr. Sumner is entitled to an annual salary of $625,000 and a bonus
of $37,500 for each fiscal quarter, provided that the Company achieves its
forecasted quarterly operating plans. Mr. Sumner is also entitled to receive
additional bonuses in the event that Gathering achieves certain operating
results.
The Company entered into an employment agreement, as amended, with Paul
Eibeler for a three-year term commencing July 2000. The agreement provides that
Mr. Eibeler is entitled to receive an annual salary of $525,000 and a bonus of
$25,000 for each fiscal quarter provided the Company achieves certain operating
results.
The Company entered into an employment agreement with Karl H. Winters
for a three-year term commencing February 2002. The agreement provides that Mr.
Winters is entitled to an annual salary of $300,000 and a bonus based on Mr.
Winter's performance in implementing certain objectives of the Audit Committee
of the Board of Directors.
Each employment agreement provides that if employment is terminated
under certain circumstances, including in the event of a change of control, the
executive will be entitled to certain severance compensation. The employment
agreements also contain confidentiality and non-competition provisions.
Compensation Committee Interlocks And Insider Participation
The Company has a Compensation Committee of the Board of Directors
comprised of non-employee directors and currently consisting of Messrs. Grace,
Flug and Emmel. Decisions as to executive compensation are made by the Board of
Directors, based primarily upon the recommendation of such Committee. The Board
of Directors (which includes such individuals) has not modified or rejected any
recommendations of the Compensation Committee as to the compensation of the
Company's executive officers. During the fiscal year ended October 31, 2002,
none of the executive officers of the Company has served on the board of
directors or the compensation committee of any other entity, any of whose
officers serves on the Company's Board of Directors or Compensation Committee.
Report On Executive Compensation
As noted above, compensation of the Company's executive officers is
determined by the Board of Directors pursuant to recommendations made by the
Compensation Committee. There is no formal compensation policy for the Company's
executive officers, other than the employment agreements described above.
Base Salary. Compensation for executive officers consists of base
salary, bonus and stock option awards. The base salary of the Company's
executives are fixed pursuant to the terms of their respective employment
agreements with the Company. The Compensation Committee reviews the salary of
executive officers for reasonableness based on job responsibilities and a
limited review of compensation practices for comparable positions at
corporations which compete with the Company in its business or are of comparable
size and scope of operations. The Committee's recommendations to the Board of
Directors are based primarily on informal judgments reasonably believed to be in
the best interests of the Company. In determining the base salaries of the
Company's executives, the Committee considered the Company's significant and
rapid growth. Salaries are reevaluated by the Committee each year to determine
whether such salaries are reasonable in light of each executive's expected
duties.
Bonuses. In addition to bonuses provided under employment agreements,
bonuses for the Company's executive officers are not determined through the use
of specific criteria. Rather, the Committee determines bonuses based on the
Company's overall performance, profitability, working capital management and
other qualitative and quantitative measurements. In determining the amount of
bonuses awarded, the Committee considers the Company's revenues and
profitability for the applicable period and each executive's contribution to the
success of the Company. The Company's executive officers received bonuses which
were deemed appropriate based upon the Company's operating results during the
fiscal year.
-10-
Stock Options. Stock option awards are intended to attract, retain and
motivate personnel by affording them an opportunity to receive additional
compensation based upon the performance of the Company's Common Stock. The size
and grant of actual awards is determined by the Committee on an informal basis.
The Committee's determination as to the size of actual awards to individual
executives is subjective, after taking into account the relative
responsibilities and contributions of the individual executives. The number or
value of options or "restricted stock" currently held by an executive is not
taken into account in determining the number of stock options granted.
In reviewing Mr. Sumner's performance and determining compensation, the
Committee considered the Company's overall performance, including revenue growth
and the significantly expanded global scope of the Company's operations. Mr.
Sumner's salary, bonus and stock option awards for the year ended October 31,
2002 were based on the Company's overall performance, with no component of such
compensation based on any particular measure of performance.
COMPENSATION COMMITTEE
Oliver R. Grace, Jr.
Robert Flug
Todd Emmel
-11-
STOCK PERFORMANCE GRAPH
The following line graph compares, from October 31, 1997, through October
31, 2002, the cumulative total stockholder return on the Company's Common Stock
with the cumulative total return on the stocks comprising the NASDAQ Market
Value Index and the stocks comprising a Peer Group Index consisting of 3D0
Company, Acclaim Entertainment, Activision, Inc., Eidos PLC, Electronic Arts,
Inc., Infogrames Inc., Interplay Entertainment, Midway Games Inc. and THQ Inc.
The comparison assumes $100 was invested on November 1, 1997 in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
all cash dividends, if any, paid on such securities. The Company has not paid
any cash dividends and, therefore, the cumulative total return calculation for
the Company is based solely upon stock price appreciation and not upon
reinvestment of cash dividends. Historical stock price is not necessarily
indicative of future stock price performance.
[PERFORMANCE GRAPH]
10/31/97 10/31/98 10/31/99 10/31/00 10/31/01 10/31/02
-------- -------- -------- -------- -------- --------
Take-Two Interactive Software, Inc. $100.00 $96.30 $153.70 $184.27 $206.37 $381.93
Peer Group Index 100.00 101.76 188.65 172.11 199.76 205.83
NASDAQ Market Value Index 100.00 113.07 186.63 219.50 110.07 88.57
-12-
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
relating to the beneficial ownership of shares of the Company's Common Stock by
(i) each person or entity who is known by the Company to own beneficially 5% or
more of the outstanding common stock, (ii) each director, (iii) each of the
Named Executives who beneficially owned any shares of Common Stock and (iv) all
directors and executive officers as a group.
Number of Shares of Percentage of Outstanding
Name and Common Stock Common Stock
Address of Beneficial Owner(1) Beneficially Owned(2) Beneficially Owned
------------------------------ --------------------- ------------------
FMR Corp (3) ..................... 4,654,027 11.4%
Waddell & Reed Financial, Inc. (3) 2,652,026 6.5
Oliver R. Grace, Jr. (4) ......... 657,880 1.6
Kelly Sumner (5) ................. 580,000 1.4
Ryan A. Brant .................... 392,203 *
Paul Eibeler (5) ................. 355,000 *
Robert Flug (6) .................. 120,600 *
Mark Lewis (5) ................... 60,000 *
Todd Emmel (5) ................... 37,500 *
Steven Tisch (5) ................. 25,000 *
Karl H. Winters (5) .............. 100,000 *
Jeffrey C. Lapin ................. -- *
Richard W. Roedel(5) ............. 35,000 *
All directors and executive
officers as a group (ten
persons) (7) ..................... 1,783,183 4.3%
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is
Take-Two Interactive Software, Inc., 622 Broadway, New York, New York
10012.
(2) Unless otherwise indicated, the Company believes that all persons
named in the table have sole voting and investment power with respect
to all shares beneficially owned by them. A person is deemed to be the
beneficial owner of securities that may be acquired by such person
within 60 days from the Record Date upon the exercise of options. Each
beneficial owner's percentage ownership is determined by assuming that
options that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the Record Date
have been exercised.
-13-
(3) Based on Schedules l3G filed with the Securities and Exchange
Commission as of February 14, 2003. According to its Schedule 13G,
Wadell & Reed Financial, Inc. is a holding company and certain of the
securities reported as beneficially owned by it are also beneficially
owned by certain of its subsidiaries. The address of Wadell & Reed
Financial, Inc. is 6300 Lamar Avenue, Overland Park, KS 66202. The
address of FMR Corp. is 82 Devonshire Street, Boston, MA 02109.
(4) Includes: (i) 519,306 shares owned of record by Anglo American Security
Fund, L.P., of which Mr. Grace is a general partner (ii) 44,456 shares
owned by trusts of which Mr. Grace is a possible beneficiary, (iii)
18,118 shares held by Mr. Grace and (iv) options to purchase 76,000
shares held by Mr. Grace.
(5) Represents shares issuable upon the exercise of options.
(6) Includes 39,600 shares held by S/L/ Danielle, Inc. and 81,000 shares of
Common Stock issuable upon the exercise of options.
(7) Includes 769,500 shares issuable upon exercise of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's former principal executive and administrative office,
was located at 575 Broadway, New York, New York, in approximately 13,300 square
feet of office space under a five-year lease with 575 Broadway Corporation, a
company controlled by the father of Ryan A. Brant, the Company's Chairman. The
Company pays rent of $474,000 per annum under this lease, which expires in March
2004. The Company currently utilizes a portion of this office space and is
seeking to sublease the space. The Company believes that the terms of the lease
are no less favorable than those that could have been obtained from an
unaffiliated party.
-14-
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S 2002 STOCK OPTION PLAN
The Board of Directors unanimously proposes that the stockholders
approve an amendment to the Company's 2002 Stock Option Plan, increasing by
1,000,000 the number of shares of the Common Stock reserved for issuance under
such plan. Under the Option Plan currently in effect, 3,000,000 shares of Common
Stock have been reserved for issuance in connection with the grant of options.
As of the Record Date, only 348,045 shares remained available for issuance under
the 2002 Stock Option Plan. The Board of Directors believes that the proposed
increase in the number of shares available for issuance under the 2002 Stock
Option Plan is necessary in order to continue the effectiveness of the 2002
Stock Option Plan in attracting, motivating and retaining outside directors,
officers and key employees with appropriate experience and ability to increase
the grantees' alignment of interest with the Company's Stockholders.
The following summary of the 2002 Stock Option Plan does not purport to
be complete and is qualified in its entirety by reference to the full text of
the 2002 Stock Option Plan, a copy of which has been filed electronically with
the SEC with this Proxy Statement, but is not included as part of the printed
version of this Proxy Statement.
Summary of the 2002 Stock Option Plan
Pursuant to the 2002 Stock Option Plan, officers, directors, employees
and consultants of the Company are eligible to receive incentive stock options
and non-qualified stock options to purchase up to an aggregate of 3,000,000
shares of Common Stock. The number of shares of Common Stock that may be granted
and the timing of grants to executive officers and non-executive officers of the
Company under the 2002 Stock Option Plan is subject to the discretion of the
Board of Directors or a Committee of the Board that administers the plan. The
Plan is currently administered by the Compensation Committee of the Board of
Directors. On February 26, 2003, the closing price of the Company's Common Stock
as reported by NASDAQ was $19.30.
The 2002 Stock Option Plan provides that it will be administered by the
Board or a Committee appointed by the Board. The Board or Committee will
determine, among other things, the persons to whom options will be granted, the
types of options granted, the number of shares subject to options and the
exercise price, provided that the exercise price of all incentive and
non-qualified stock options granted must be at least equal to 100% of the fair
market value of the Common Stock on the date of grant (110% in the case of
incentive options granted to stockholders who own more than 10% of the
outstanding Common Stock) or earlier as determined by the Board or Committee or
as otherwise set forth in the plan. The Board or Committee also determines the
term of each option, the restrictions or limitations thereof and the manner in
which each option may be exercised. Options granted under the plan will expire
not later than the tenth anniversary of the date of grant (the fifth anniversary
in the case of incentive options granted to stockholders who own more than 10%
of the outstanding Common Stock). With certain limited exceptions, in the event
that an option holder ceases to be employed by the Company, such option holder's
options terminate. Pursuant to the provisions of the 2002 Stock Option Plan, the
aggregate fair market value, determined as of the date(s) of grant, for which
incentive stock options are first exercisable by an option holder during any
calendar year cannot exceed $100,000.
As of the Record Date, options to purchase 2,651,955 shares of Common
Stock were outstanding under the 2002 Stock Option Plan, and options to purchase
an additional 348,045 shares were available for future grant.
-15-
Equity Compensation Plan
The following table provides certain information with respect to all of
the Company's equity compensation plans in effect as of October 31, 2002.
Number of securities
remaining available for
Number of securities to be Weighted-average issuance under equity
issued upon exercise of exercise price of compensation plans (excluding
outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
--------------------------- -------------------- ----------------------------
Plan Category (a) (b) (c)
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders: 2,763,746 $15.65 1,463,545
Equity compensation plans not
approved by security holders
(1): 2,960,613(1) $12.30 -
Total 5,724,359 $13.92 1,463,545
(1) Represents the aggregate number of shares of common stock issuable upon
exercise of individual arrangements with option and warrant holders.
These options and warrants are five years in duration, expire at
various dates between December 2002 and July 2007, contain
anti-dilution provisions providing for adjustments of the exercise
price under certain circumstances and have termination provisions
similar to options granted under stockholder approved plans.
Certain Federal Income Tax Consequences of the 2002 Stock Option Plan
The following is a brief summary of the Federal income tax aspects of
grants made under the 2002 Stock Option Plan based upon statutes, regulations
and interpretations in effect on the date hereof. This summary is not intended
to be exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The participant will recognize no taxable
income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares after the later of two years from the date of grant
and one year after the transfer of the shares to the participant, (i) the
participant will recognize the difference, if any, between the amount realized
and the exercise price as long-term capital gain or long-term capital loss (as
the case may be) if the shares are capital assets in his or her hands; and (ii)
the Company will not qualify for any deduction in connection with the grant or
exercise of the options. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for his or her taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same taxable
year as the exercise where the amount realized on the disposition is less than
the fair market value of the shares on the date of exercise, there will be no
adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock Option
is disposed of prior to the expiration of the holding periods described above,
(i) the participant will recognize ordinary compensation income in the taxable
year of disposition in an amount equal to the excess, if any, of the lesser of
the fair market value of the shares on the date of exercise or the amount
realized on the disposition of the shares, over the exercise price paid for such
shares; and (ii) the Company will qualify for a deduction equal to any such
amount recognized, subject to the requirements of Section 162(m) of the Internal
Revenue Code of 1986 (the "Code") and that the compensation be reasonable. The
participant will recognize the excess, if any, of the amount realized over the
fair market value of the shares on the date of exercise, if the shares are
capital assets in his or her hands, as short-term or long-term capital gain,
depending on the length of time that the participant held the shares, and the
Company will not qualify for a deduction with respect to such excess.
-16-
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the participant's employment, the option will generally be taxed as a
Non-Qualified Stock Option.
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options (i) upon grant of the option, the participant will recognize no income;
(ii) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the participant will recognize ordinary compensation income
in an amount equal to the excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price, and the Company will qualify
for a deduction in the same amount, subject to the requirements of Section
162(m) of the Code and that the compensation be reasonable; (iii) the Company
will be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the participant; and (iv) on a sale of the shares, the participant
will recognize gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation income
recognized. Such gain or loss will be treated as short-term or long-term capital
gain or loss if the shares are capital assets in the participant's hands
depending upon the length of time that the participant held the shares.
The Board believes that the proposed Amendment to the 2002 Stock Option
Plan will help the Company attract and retain qualified officers, directors and
key employees. Accordingly, the Board believes that the Amendment to the 2002
Stock Option Plan is in the best interest of the Company and unanimously
recommends a vote FOR its approval.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP are the Company's independent auditors who
reported on the financial statements of the Company for the fiscal years ended
October 31, 2000, 2001 and 2002. It is currently anticipated that
PricewaterhouseCoopers LLP will be selected by the Board of Directors to examine
and report on the financial statements of the Company for the year ending
October 31, 2003. It is anticipated that a representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will have
an opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions. The aggregate fees billed by the
Company's independent auditor for the year ended October 31, 2002 are set forth
below. The Audit Committee believes that the services performed by its
independent auditor were compatible with maintaining its auditor's independence.
Audit Fees ................................. $ 1,131,500
Financial Information Systems Design and
Implementation Fees......................... -
All Other Fees (a).......................... $3,379,426.79
(a) Consists of forensic accounting service fees of $1,792,426.79; tax and
compliance service fees of $888,000; audit related service fees of
$539,000; and other transaction support fees of $160,000.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's Annual Meeting of Stockholders to be held in 2004
must submit the proposal in proper form and in satisfaction of the conditions
established by the Securities and Exchange Commission, to the Company at its
address set forth on the first page of this Proxy Statement not later than
October 31, 2003 in order for the proposition to be considered for inclusion in
the Company's proxy statement and form of proxy relating to such annual meeting.
Any such proposals, as well as any questions related thereto, should be directed
to the Secretary of the Company.
After the October 31, 2003 deadline, for any proposal that is not
submitted for inclusion in next year's proxy statement (as described in the
preceding paragraph) but is instead sought to be presented directly at next
year's annual meeting of stockholders, rules of the Securities and Exchange
Commission permit management of the Company to vote proxies in its discretion if
(a) the Company receives notice of the proposal before the close of business on
January 20, 2004 and advises stockholders in next year's proxy statement about
the nature of the matter and how management intends to exercise its discretion
to vote on the matter or (b) does not receive notice of the proposal prior to
the close of business on January 20, 2004.
-17-
OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED OCTOBER 31,
2002 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE
OF BUSINESS ON FEBRUARY 26, 2003. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 BROADWAY
NEW YORK, NEW YORK 10012
ATTENTION: KARL H. WINTERS, CHIEF FINANCIAL OFFICER
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors
Jeffrey C. Lapin
Chief Executive Officer
February 28, 2003
-18-
Exhibit A
TAKE TWO INTERACTIVE SOFTWARE INC.
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
independent auditor's qualifications and independence, (3) the Company's
internal accounting controls, (4) the performance of the Company's internal
audit function and independent auditors and (5) the compliance by the Company
with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of
the Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
Committee Membership
The Audit Committee shall consist of no fewer than three members. The
members of the Audit Committee shall meet the independence and experience
requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations of the Commission. The members of
the Audit Committee shall be able to read and understand financial statements.
At least one member of the Audit Committee shall be a financial expert as
defined by the Commission. Audit committee members shall not simultaneously
serve on the audit committees of more than two other public companies.
The members of the Audit Committee shall be appointed by a majority of
the independent members of the Board. No member of the Audit Committee shall be
removed or replaced except by a majority vote of the full Board.
Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
The Chair shall be responsible for presiding over meetings and, in
consultation with other members of the Committee, officers of the Company and
the Company's independent auditors shall set the length of each meeting and the
agenda of items to be addressed at each meeting and shall circulate the agenda
to each member of the Committee in advance of each meeting (at least three days
in advance in the case of the annual meeting).
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace
the independent auditor (subject, if applicable, to shareholder ratification).
The Audit Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or related
work. The independent auditor shall report directly to the Audit Committee.
1
The Audit Committee shall pre-approve all auditing services and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Company by its independent auditor, subject to the de minimus
exceptions for non-audit services described in Section 10A(i)(1)(B) of the
Exchange Act which are approved by the Audit Committee prior to the completion
of the audit. The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that decisions of such subcommittee to grant pre-approvals shall be
presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Audit Committee, for payment of compensation to the independent auditor for
the purpose of rendering or issuing an audit report and to any advisors employed
by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
Financial Statement and Disclosure Matters:
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
1. Review and discuss with management and the independent auditor the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form 10-Q,
including the results of the independent auditor's review of the quarterly
financial statements. The Chair shall have authority to represent the Audit
Committee for purposes of this paragraph 2.
3. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls and any special steps adopted
in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors
on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent auditor.
(c) Other material written communications between the
independent auditor and management, such as any management letter.
5. Discuss with management the Company's earnings press releases prior
to the release thereof, including the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be done generally (consisting
of discussing the types of information to be disclosed and the types of
presentations to be made). The Chair shall have authority to represent the Audit
Committee for purposes of this paragraph 5.
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet structures on
the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
-2-
8. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's CEO
and CFO during their certification process for the Form 10-K and Form 10-Q about
any significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor:
10. Review and evaluate the lead partner of the independent auditor
team.
11. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the preceding
five years respecting one or more independent audits carried out by the firm,
(c) any steps taken to deal with any such issues, and (d) all relationships
between the independent auditor and the Company. Evaluate the qualifications,
performance and independence of the independent auditor, including considering
whether the auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the auditor's
independence, and taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
12. Ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law. Consider whether, in order to assure
continuing auditor independence, it is appropriate to adopt a policy of rotating
the independent auditing firm on a regular basis.
13. Recommend to the Board policies for the Company's hiring of
employees or former employees of the independent auditor who participated in any
capacity in the audit of the Company.
14. Discuss with the national office of the independent auditor issues
on which they were consulted by the Company's audit team and matters of audit
quality and consistency.
15. Meet with the independent auditor prior to the audit to discuss the
scope, planning and staffing of the audit.
Oversight of the Company's Internal Audit Function:
16. Review the appointment and replacement of the senior internal
auditing executive.
17. Review the significant reports to management prepared by the
internal auditing department and management's responses.
18. Discuss with the independent auditor and management the internal
audit department responsibilities (including reporting responsibilities), budget
and staffing and any recommended changes in the planned scope of the internal
audit.
19. Review the effectiveness of the internal audit function in
accordance with the Institute of Internal Auditors Standards for the
Professional Practice of Internal Auditing.
20. Initially, the internal audit function of the Company shall
directly report to the chief financial officer of the Company. The principal and
administrative reporting responsibilities of the internal audit function shall
be reviewed from time to time by the Audit Committee.
-3-
Compliance Oversight Responsibilities:
21. Obtain from the independent auditor assurance that Section 10A(b)
of the Exchange Act has not been implicated.
22. Obtain reports from management, the Company's senior internal
auditing executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with applicable legal
requirements and the Company's Code of Business Conduct and Ethics. Review
reports and disclosures of insider and affiliated party transactions. Advise the
Board with respect to the Company's policies and procedures regarding compliance
with applicable laws and regulations and with the Company's Code of Business
Conduct and Ethics.
23. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
24. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any published
reports that raise material issues regarding the Company's financial statements
or accounting policies.
25 Discuss with the Company's General Counsel legal matters that may
have a material impact on the financial statements or the Company's compliance
policies.
26. Establish such other procedures and policies as may be requested by
the Board.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
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Appendix A
Explanatory Note: the 2002 Stock Option Plan of Take-Two Interactive Software,
Inc., as amended, is filed herewith pursuant to Instruction 3 to Item 10 of
Schedule 14A and is not part of the proxy statement.
2002 STOCK OPTION PLAN
OF
TAKE-TWO INTERACTIVE SOFTWARE, INC., as amended
1. Purpose. Take-Two Interactive Software, Inc. (the "Company") desires to
attract and retain the best available talent and encourage the highest level of
performance in order to continue to serve the best interests of the Company, and
its stockholders. By affording key personnel and other persons who are expected
to contribute to the success of the Company the opportunity to acquire
proprietary interests in the Company and by providing them incentives to put
forth maximum efforts for the success of the Company, the 2002 Stock Option Plan
of the Company (the "2002 Plan") is expected to contribute to the attainment of
those objectives.
The word "Subsidiary" or "Subsidiaries", as used herein, shall have the
meaning set forth in Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor thereto.
The word "Parent" as used herein, shall have the meaning set forth in
Section 424(e) of the Code, or any successor thereto.
2. Scope and Duration. Options under the 2002 Plan may be granted in the form of
incentive stock options ("Incentive Options") as provided in Section 422 of the
Code, or in the form of nonqualified stock options ("Non-Qualified Options").
(Unless otherwise indicated, references in the 2002 Plan to "options" include
Incentive Options and Non-Qualified Options.) The maximum aggregate number of
shares as to which options may be granted from time to time under the 2002 Plan
is 4,000,000 shares of the common stock of the Company ("Common Stock"), which
shares may be, in whole or in part, authorized but unissued shares or shares
reacquired by the Company. The maximum number of shares with respect to which
options may be granted under the 2002 Plan to any individual employee of the
Company or a subsidiary of the Company during the term of the 2002 Plan is
500,000. If an option shall expire, terminate or be surrendered for cancellation
for any reason without having been exercised in full, the shares represented by
the option or portion thereof not so exercised shall (unless the 2002 Plan shall
have been terminated) become available for subsequent option grants under the
2002 Plan. As provided in Paragraph 13 hereof, the 2002 Plan shall become
effective on April 25, 2002, and unless terminated sooner pursuant to Paragraph
14 hereof, the 2002 Plan shall terminate on April 24, 2012, and no option shall
be granted hereunder after that date.
3. Administration. The 2002 Plan shall be administered by the Board of Directors
of the Company, or, at their discretion, by a committee that is appointed by the
Board of Directors to perform such function (the "Committee"). The Committee
shall consist solely of at least two members of the Board of Directors, each of
whom shall serve at the pleasure of the Board of Directors and shall be a
"Non-Employee Director" as defined in Rule l6b-3 pursuant to the Securities
Exchange Act of 1934 (the "Act") or any successor rule and, if practicable,
shall be "outside directors" as defined in Section 162(m) of the Code. Vacancies
occurring in the membership of the Committee shall be filled by appointment by
the Board of Directors.
The Board of Directors or the Committee, as the case may be, shall have
plenary authority in its sole discretion, subject to and not inconsistent with
the express provisions of the 2002 Plan, to grant options, to determine the
purchase price of the Common Stock covered by each option, the term of each
option, the persons to whom, and the time or times at which, options shall be
granted and the number of shares to be covered by each option; to designate
options as Incentive Options or Non-Qualified Options; to interpret the 2002
Plan; to prescribe, amend and rescind rules and regulations relating to the 2002
Plan; to determine the terms and provisions of the option agreements (which need
not be identical) entered into in connection with options under the 2002 Plan;
and to make all other determinations deemed necessary or advisable for the
administration of the 2002 Plan. The Board of Directors or the Committee, as the
case may be, may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Board of Directors
or the Committee, as the case may be, or any person to whom it has delegated
duties as aforesaid may employ or engage one or more persons to render advice
with respect to any responsibility the Board of Directors or the Committee, as
the case may be, or such person may have under the 2002 Plan.
4. Eligibility; Factors to be Considered in Granting Options. Incentive Options
shall be limited to persons who are employees of the Company or its present and
future Subsidiaries or, if applicable, its present and future Parent and at the
date of grant of any option are in the employ of the Company or its present and
future Subsidiaries or Parent. In determining the employees to whom Incentive
Options shall be granted and the number of shares to be covered by each
Incentive Option, the Board of Directors or the Committee, as the case may be,
shall take into account the nature of employees' duties, their present and
potential contributions to the success of the Company and such other factors as
it shall deem relevant in connection with accomplishing the purposes of the 2002
Plan. An employee who has been granted an option or options under the 2002 Plan
may be granted an additional option or options, subject, in the case of
Incentive Options, to such limitations as may be imposed by the Code on such
options. Except as provided below, a Non-Qualified Option may be granted to any
person, including, but not limited to, employees, independent agents,
consultants, attorneys and advisors, who the Board of Directors or the
Committee, as the case may be, believes has contributed, or will contribute, to
the success of the Company.
5. Option Price. The purchase price of the Common Stock covered by each option
shall be determined by the Board of Directors or the Committee, as the case may
be, and shall not be less than 100% of the Fair Market Value (as defined in
Paragraph 15 hereof) of a share of the Common Stock on the date on which the
option is granted. Such price shall be subject to adjustment as provided in
Paragraph 12 hereof. The Board of Directors or the Committee, as the case may
be, shall determine the date on which an option is granted; in the absence of
such a determination, the date on which the Board of Directors or the Committee,
as the case may be, adopts a resolution granting an option shall be considered
the date on which such option is granted.
6. Term of Options. The term of each option shall be not more than 10 years from
the date of grant, as the Board of Directors or the Committee, as the case may
be, shall determine, subject to earlier termination as provided in Paragraphs 10
and 11 hereof.
7. Exercise of Options. (a) Subject to the provisions of the 2002 Plan, options
granted under the 2002 Plan shall become exercisable as determined by the Board
of Directors or Committee, as the case may be. In its sole discretion, the Board
of Directors or the Committee, as the case may be, may, in any case or cases,
prescribe that options granted under the 2002 Plan become exercisable in
installments or provide that an option may be exercisable in full immediately
upon the date of its grant or at a later date. The Board of Directors or the
Committee, as the case may be, may, in its sole discretion, also provide that an
option granted pursuant to the 2002 Plan shall immediately become exercisable in
full upon the happening of any of the following events or such other events as
the Board of Directors or the Committee, as the case may be, determines: (i) a
"change in control" of the Company as hereafter defined; or (ii) with respect to
an employee, on his 65th birthday. In the event of a question or controversy as
to whether or not any of the events hereinabove described has taken place, a
determination by the Board of Directors or the Committee, as the case may be,
that such event has or has not occurred shall be conclusive and binding upon the
Company and participants in the 2002 Plan.
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(b) For purposes of the 2002 Plan, a "change in control of the Company"
shall be deemed to occur, unless previously consented to in writing by the
optionee or any person entitled to act under Paragraph 11 hereof, upon (i) the
actual acquisition or the execution of an agreement to acquire 50% or more of
the voting securities of the Company by any person or entity not affiliated with
the grantee, or any person entitled to act under Paragraph 11 hereof (other than
pursuant to a bona fide underwriting agreement relating to a public distribution
of securities of the Company), (ii) the commencement of a tender or exchange
offer for more than 50% of the voting securities of the Company by any person or
entity not affiliated with the grantee, or any persons entitled to act under
Paragraph 11 hereof, (iii) the commencement of a proxy contest against the
management for the election of a majority of the Board of Directors of the
Company if the group conducting the proxy contest owns, has or gains the power
to vote at least 50% of the voting securities of the Company, (iv) a vote by the
Board of Directors to merge, consolidate, sell all or substantially all of the
assets of the Company to any person or entity not affiliated with the grantee,
or any persons entitled to act under Paragraph 11 hereof, or (v) the election of
directors constituting a majority of the Board of Directors who have not been
nominated or approved by the Company; provided, however, for purposes of the
2002 Plan, it shall not be deemed a change in control of the Company if such
person or entity acquires 50% or more of the voting securities of the Company
(A) as a result of a combination of the Company or a wholly-owned subsidiary of
Company with another entity owned or controlled by such persons or entity
(whether effected by a merger, sale of assets or exchange of stock or otherwise)
(the "Combination") and (B) after completion of the Combination and for a
continuous period of not less than twelve (12) months thereafter (I) executive
officers of the Company (as designated in the Company's most recent Annual
Report on Form 10-K or its most recent Proxy Statement filed with the Securities
and Exchange Commission with respect to its Annual Meeting of Stockholders)
immediately prior to the Combination constitute not less than 50% of the
executive officers of the Company after the Combination or (II) the members of
the Board of Directors of Company immediately prior to the Combination
constitute not less than 50% of the membership of the Board of Directors of the
Company after the Combination. For purposes of calculating the executive
officers of the Company after the Combination, those executive officers who are
terminated by the Company for cause or who terminate their employment without
good reason, as determined by the Board of Directors or Committee shall be
excluded from the calculation entirely.
(c) Any option at any time granted under the 2002 Plan may contain a
provision to the effect that the optionee (or any persons entitled to act under
Paragraph 11 hereof) may, at any time at which Fair Market Value is in excess of
the exercise price and prior to exercising the option, in whole or in part,
request that the Company purchase all or any portion of the option as shall then
be exercisable at a price equal to the difference between (i) an amount equal to
the option price multiplied by the number of shares subject to that portion of
the option in respect of which such request shall be made and (ii) an amount
equal to such number of shares multiplied by the fair market value of the
Company's Common Stock (within the meaning of Section 422 of the Code and the
treasury regulations promulgated thereunder) on the date of purchase. The
Company shall have no obligation to make any purchase pursuant to such request,
but if it elects to do so, such portion of the option as to which the request is
made shall be surrendered to the Company. The purchase price for the portion of
the option to be so surrendered shall be paid by the Company, less any
applicable withholding tax obligations imposed upon the Company by reason of the
purchase, at the election of the Board of Directors or the Committee, as the
case may be, either in cash or in shares of Common Stock (valued as of the date
and in the manner provided in clause (ii) above), or in any combination of cash
and Common Stock, which may consist, in whole or in part, of shares of
authorized but unissued Common Stock or shares of Common Stock held in the
Company's treasury. No fractional share of Common Stock shall be issued or
transferred and any fractional share shall be disregarded. Shares covered by
that portion of any option purchased by the Company pursuant hereto and
surrendered to the Company shall not be available for the granting of further
options under the 2002 Plan. All determinations to be made by the Company
hereunder shall be made by the Board of Directors or the Committee, as the case
may be.
Any option granted under the 2002 Plan may also contain a provision to
the effect that the payment of the exercise price may be made by delivery to the
Company by the optionee of an executed exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of the
shares sold or margined and deliver the sale or margin loan proceeds directly to
the Company to pay for the exercise price.
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(d) An option may be exercised, at any time or from time to time
(subject, in the case of Incentive Options, to such restrictions as may be
imposed by the Code), as to any or all full shares as to which the option has
become exercisable until the expiration of the period set forth in Paragraph 6
hereof, by the delivery to the Company, at its principal place of business, of
(i) written notice of exercise in the form specified by the Board of Directors
or the Committee, as the case may be, specifying the number of shares of Common
Stock with respect to which the option is being exercised and signed by the
person exercising the option as provided herein, (ii) payment of the purchase
price; and (iii) in the case of Non-Qualified Options, payment in cash of all
withholding tax obligations imposed on the Company by reason of the exercise of
the option. Upon acceptance of such notice, receipt of payment in full, and
receipt of payment of all withholding tax obligations, the Company shall cause
to be issued a certificate representing the shares of Common Stock purchased. In
the event the person exercising the option delivers the items specified in (i)
and (ii) of this Subsection (d), but not the item specified in (iii) hereof, if
applicable, the option shall still be considered exercised upon acceptance by
the Company for the full number of shares of Common Stock specified in the
notice of exercise but the actual number of shares issued shall be reduced by
the smallest number of whole shares of Common Stock which, when multiplied by
the Fair Market Value of the Common Stock as of the date the option is
exercised, is sufficient to satisfy the required amount of withholding tax.
(e) If the payment of the purchase price is to be made in cash, the
cash purchase price of the shares as to which an option is exercised shall be
paid in full at the time of exercise. Payment shall be made in cash, which may
be paid by check or other instrument acceptable to the Company; in addition,
subject to compliance with applicable laws and regulations and such conditions
as the Board of Directors or the Committee, as the case may be, may impose, the
Board of Directors or the Committee, as the case may be, in its sole discretion,
may on a case-by-case basis elect to accept payment in shares of Common Stock of
the Company which are already owned by the option holder and have been owned by
the option holder for at least six months (or such other period as the Board or
Committee, as the case may be, determines), valued at the Fair Market Value
thereof (as defined in Paragraph 15 hereof) on the date of exercise; provided,
however, that with respect to Incentive Options, no such discretion may be
exercised unless the option agreement permits the payment of the purchase price
in that manner.
(f)Except as provided in Paragraphs 10 and 11 hereof, no option granted
to an employee may be exercised at any time by such employee unless such
employee is then an employee of the Company or a Subsidiary or Parent.
8. Incentive Options.
(a) With respect to Incentive Options granted, the aggregate Fair
Market Value (determined in accordance with the provisions of Paragraph 15
hereof at the time the Incentive Option is granted) of the Common Stock or any
other stock of the Company or its current or future Subsidiaries or Parent with
respect to which incentive stock options, as defined in Section 422 of the Code,
are exercisable for the first time by any employee during any calendar year
(under all incentive stock option plans of the Company and its parent and
subsidiary corporations, as those terms are defined in Section 424 of the Code)
shall not exceed $100,000.
(b) No Incentive Option may be awarded to any employee who immediately
prior to the date of the granting of such Incentive Option owns more than 10% of
the combined voting power of all classes of stock of the Company or any of its
Subsidiaries unless the exercise price under the Incentive Option is at least
110% of the Fair Market Value of the Common Stock on the date of grant and the
option expires within 5 years from the date of grant.
(c) In the event of amendments to the Code or applicable regulations
relating to Incentive Options subsequent to the date hereof, the Company may
amend the provisions of the 2002 Plan, and the Company and the employees holding
options may agree to amend outstanding option agreements, to conform to such
amendments.
9. Non-Transferability of Options. Except as may be otherwise provided by the
Board or Committee at or after the date of grant with respect to a Non-Qualified
Option, options granted under the 2002 Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, and options may be
exercised during the lifetime of the optionee only by the optionee. No transfer
of an option by the optionee by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of the will and such other
evidence as the Company may deem necessary to establish the validity of the
transfer and the acceptance by the transferor or transferees of the terms and
conditions of such option.
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10. Termination of Employment. In the event that the employment of an employee
to whom an option has been granted under the 2002 Plan shall be terminated
(except as set forth below or in Paragraph 11 hereof), such option may be,
subject to the provisions of the 2002 Plan, exercised (to the extent that the
employee was entitled to do so at the termination of his employment) at any time
within ninety (90) days after such termination (or such longer or shorter period
as may be determined by the Board or Committee, as the case may be, at or at any
time after the date of grant of the option), but not later than the date on
which the option terminates; provided, however, that any option which is held by
an employee whose employment is terminated for cause or voluntarily without the
consent of the Company (for purposes of the 2002 Plan termination due to
retirement at or after age 65 shall be deemed to be with the consent of the
Company) shall, to the extent not theretofore exercised, automatically terminate
as of the date of termination of employment. As used herein, "cause" shall mean
conduct amounting to fraud, dishonesty, negligence, or engaging in competition
or solicitations in competition with the Company and breaches of any applicable
employment agreement between the Company or any Subsidiary or Parent and the
optionee. Options granted to employees under the 2002 Plan shall not be affected
by any change of duties or position so long as the holder continues to be a
regular employee of the Company or any of its current or future Subsidiaries.
Any option agreement or any rules and regulations relating to the 2002 Plan may
contain such provisions as the Board of Directors or the Committee, as the case
may be, shall approve with reference to the determination of the date employment
terminates and the effect of leaves of absence. The Board of Directors, or
Committee, as the case may be, shall, in its sole discretion, determine for
purposes of the 2002 Plan whether the Company has consented to the departure of
an employee who voluntarily leaves the employ of the Company.
Notwithstanding the foregoing, the Board of Directors or Committee, as
the case may be, either at or any time after the date of grant of an option,
may, in its discretion, provide for longer or shorter periods than the periods
specified above during which an option held by an employee may be exercised by
the employee after the employee ceases to be employed by the Company or a
Subsidiary or Parent. Any such determination shall be based upon such factors as
the Board of Directors or the Committee, as the case may be, shall determine,
provided, however, that no such discretion shall be exercised with respect to an
employee whose employment with the Company or Subsidiary or Parent has been
terminated for cause.
11. Death or Disability of Employee. If an employee to whom an option has been
granted under the 2002 Plan shall die while employed by the Company or a
Subsidiary or Parent or within ninety (90) days (or such longer or shorter
period as the Board of Directors, or the Committee, as the case may be, shall
determine at or any time after the date of grant of the option) after the
termination of such employment (other than termination for cause or voluntary
termination without the consent of the Company), such option may be exercised,
to the extent exercisable by the employee on the date of death, by a legatee or
legatees of the employee under the employee's last will, or by the employee's
personal representative or distributees, at any time within one year after the
date of the employee's death, but not later than the date on which the option
terminates. In the event that the employment of an employee to whom an option
has been granted under the 2002 Plan shall be terminated as the result of a
disability (the determination of which shall be made by the Board of Directors
or Committee, as the case may be), such option may be exercised, to the extent
exercisable by the employee on the date of such termination, at any time within
one year after the date of such termination, but not later than the date on
which the option terminates.
Notwithstanding the foregoing, the Board of Directors, or Committee, as
the case may be, either at or at any time after the date of grant of an option,
may, in its discretion, provide for longer or shorter periods than the one year
period specified above in which an option held by an employee who ceases to be
employed by the Company as a result of death or disability may be exercised. Any
such determination shall be based upon such factors as the Board or the
Committee, as the case may be, shall determine, provided, however, that no such
discretion shall be exercised with respect to an employee who dies after the
employee's employment with the Company or Parent or Subsidiary has been
terminated for cause.
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12. Adjustments Upon Changes in Capitalization, Etc. Notwithstanding any other
provision of the 2002 Plan, the Board of Directors or the Committee, as the case
may be, may, at any time, make or provide for such adjustments to the 2002 Plan,
to the number and class of shares issuable thereunder or to any outstanding
options as it shall deem appropriate to prevent dilution or enlargement of
rights, including adjustments in the event of changes in the outstanding Common
Stock by reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like. In the event of any offer to holders
of Common Stock generally relating to the acquisition of their shares, the Board
of Directors or the Committee, as the case may be, may make such adjustment as
it deems equitable in respect of outstanding options and rights, including in
its sole discretion revision of outstanding options and rights so that they may
be exercisable for the consideration payable in the acquisition transaction. Any
such determination by the Board of Directors or the Committee, as the case may
be, shall be conclusive and binding upon the Company and the participants in the
2002 Plan. Any fractional shares resulting from such adjustments shall be
eliminated.
13. Effective Date. The 2002 Plan shall become effective on April 25, 2002, the
date of adoption by the Board of Directors of the Company, subject to approval
by the stockholders of the Company on or before April 24, 2003.
14. Termination and Amendment. The Board of Directors of the Company may
suspend, terminate, modify or amend the 2002 Plan, provided that any amendment
that would increase the aggregate number of shares which may be issued under the
2002 Plan or materially modify the requirements as to eligibility for
participation in the 2002 Plan, shall be subject to the approval of the
Company's stockholders, except that any such increase or modification that may
result from adjustments authorized by Paragraph 12 hereof does not require such
approval. No suspension, termination, modification or amendment of the 2002 Plan
may, without the consent of the person to whom an option shall theretofore have
been granted, adversely affect the rights of such person under such option.
15. Miscellaneous. As said term is used in the 2002 Plan, the "Fair Market
Value" of a share of Common Stock on any day means: (a) if the principal market
for the Common Stock is a national securities exchange or the National
Association of Securities Dealers Automated Quotations System ("NASDAQ), the
closing sales price of the Common Stock on such day as reported by such exchange
or market system, or on a consolidated tape reflecting transactions on such
exchange or market system, or (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is not quoted on
NASDAQ, the mean between the highest bid and lowest asked prices for the Common
Stock on such day as reported by the National Quotation Bureau, Inc.; provided
that if clauses (a) and (b) of this paragraph are both inapplicable, or if no
trades have been made or no quotes are available for such day, the Fair Market
Value of the Common Stock shall be determined by the Board of Directors or the
Committee, as the case may be, and shall be conclusive as to the Fair Market
Value of the Common Stock.
In the event the Company is the subject of an acquisition, merger or
consolidation or similar transaction where the Company is not the surviving
entity, the Board or Committee, as the case may be, may in its sole discretion,
but shall not be required to, request that as a condition of the transaction the
surviving entity assume the obligations of the Company with respect to the
options then outstanding under the 2002 Plan.
The Board of Directors or the Committee, as the case may be, may
require, as a condition to the exercise of any options granted under the 2002
Plan, that to the extent required at the time of exercise, (i) the shares of
Common Stock reserved for purposes of the 2002 Plan shall be duly listed, upon
official notice of issuance, upon stock exchange(s) on which the Common Stock is
listed, (ii) a Registration Statement under the Securities Act of 1933, as
amended, with respect to such shares shall be effective, and/or (iii) the person
exercising such option deliver to the Company such documents, agreements and
investment and other representations as the Board of Directors or the Committee,
as the case may be, shall determine to be in the best interests of the Company.
During the term of the 2002 Plan, the Board of Directors or the
Committee, as the case may be, in its sole discretion, may offer one or more
option holders the opportunity to surrender any or all unexpired options for
cancellation or replacement. If any options are so surrendered, the Board of
Directors or the Committee, as the case may be, may then grant new Non-Qualified
or Incentive Options to such holders for the same or different numbers of shares
at higher or lower exercise prices than the surrendered options. Such new
options may have a different term and shall be subject to the provisions of the
2002 Plan the same as any other option.
-6-
Anything herein to the contrary notwithstanding, the Board of Directors
or the Committee, as the case may be, may, in its sole discretion, impose more
restrictive conditions on the exercise of an option granted pursuant to the 2002
Plan, including the ability of an option holder to exercise an option after
cessation of employment; however, any and all such conditions shall be specified
in the option agreement limiting and defining such option. The Board of
Directors or the Committee, as the case may be, may also amend the terms of any
option previously granted under the 2002 Plan, provided that the terms of any
such amended option are not inconsistent with any provisions of the 2002 Plan
and that no such amendment shall adversely affect the rights of the person to
whom the option has been granted without the consent of such person or, if
applicable, the permitted transferee of such optionee or any person entitled to
act under Paragraph 11 hereof.
NOTHING IN THE 2002 PLAN OR IN ANY OPTION GRANTED PURSUANT TO THE 2002
PLAN SHALL CONFER UPON ANY EMPLOYEE ANY RIGHT TO CONTINUE IN THE EMPLOY OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR PARENT OR AFFILIATED COMPANIES OR
INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY OR ANY SUCH SUBSIDIARY OR
PARENT OR AFFILIATED COMPANIES TO TERMINATE SUCH EMPLOYMENT AT ANY TIME.
16. Compliance with SEC Regulations. It is the Company's intent that the 2002
Plan comply in all respects with Rule 16b-3 of the Act or any successor rule and
any regulations promulgated thereunder. If any provision of the 2002 Plan is
later found not to be in compliance with said Rule, the provisions shall be
deemed null and void.
-7-
PROXY
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway
New York, New York 10012
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RYAN A. BRANT and JEFFREY C.
LAPIN and each of them, Proxies, with full power of substitution in each of
them, in the name, place and stead of the undersigned, to vote at the Annual
Meeting of Stockholders of Take-Two Interactive Software, Inc. (the "Company")
on Thursday April 17, 2003, at the Grand Hyatt, Conference Level, 42nd Street
between Lexington and Park Avenues, New York, NY 10017 or at any adjournment or
adjournments thereof, according to the number of votes that the undersigned
would be entitled to vote if personally present upon the following matters:
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
TAKE-TWO INTERACTIVE SOFTWARE, INC.
April 17, 2003
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PROXY VOTING INSTRUCTIONS
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-------------------------
MAIL - Date, sign and mail your proxy card in the COMPANY NUMBER
envelope provided as soon as possible.
-OR- -------------------------
TELEPHONE -Call toll-free 1-800-PROXIES from any ACCOUNT NUMBER
touch-tone telephone and follow the instructions.
Have your control number and proxy card available
when you call.
-OR-
-------------------------
NUMBER OF SHARES
-------------------------
INTERNET - Access www.voteproxy.com and follow the CONTROL NUMBER
on-screen instructions. Have your control number
available when you access the web page.
-------------------------
| Please detach and mail in the envelope provided IF you are not voting via
telephone or the Internet |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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FOR AGAINST ABSTAIN
1. Election of Directors: 2. Approval of Amendment to the |_| |_| |_|
NOMINEES Company's 2002 Stock Option Plan
|_| FOR ALL NOMINEES o Ryan A. Brant
o Jeffrey C. Lapin In their discretion, the Proxies are authorized
|_| WITHHOLD AUTHORITY o Oliver R. Grace, Jr. to vote upon such other business as may
FOR ALL NOMINEES o Robert Flug properly come before the meeting.
o Todd Emmel
|_| FOR ALL EXCEPT o Mark Lewis The proxy will be voted in accordance with the
(See instructions below) o Steven Tisch instructions given above. If no instructions are given,
o Richard W. Roedel this proxy will be voted for those nominees and the
proposals listed above.
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT" and fill Please mark, sign, date and return this proxy card
in the circle next to each nominee you wish to using the enclosed envelope
withhold, as shown here: o
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To change the address on your account please check the box at right and |_|
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
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Signature of Signature of
Stockholder: Date: Stockholder: Date:
---------------------- ------------ ------------------------- ------------
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Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporation name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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