01—Abstract
Summary
Summary of the 8-K filed March 10, 2014. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) has entered into a new Management Agreement with ZelnickMedia Corporation, effective April 1, 2014, and running through March 31, 2019.
This agreement supersedes a previous agreement from May 2011 and outlines the continued provision of financial and management consulting services by ZelnickMedia, with key personnel Strauss Zelnick serving as Executive Chairman and CEO, and Karl Slatoff as President. The new agreement details a fixed monthly management fee of $247,500a and introduces an annual bonus opportunity for ZelnickMedia, ranging from $0 to $4,752,000 based on company performance thresholds.
Additionally, the agreement includes the issuance of time-based and performance-based restricted unit awards to ZelnickMedia, which can be settled in cash or, subject to stockholder approval of an amendment to the 2009 Stock Incentive Plan, in company stock. The agreement also imposes certain restrictions on the sale of TTWO stock by ZelnickMedia and its associated persons.
02—Key points
Key Highlights
- New 5-year Management Agreement signed with ZelnickMedia Corporation, effective April 1, 2014, through March 31, 2019.
- Strauss Zelnick to continue as Executive Chairman and CEO, and Karl Slatoff as President, under the new agreement.
- Annual management fee of $247,500 per month ($2,970,000 annually) with no increase during the term.
- Introduction of an annual bonus opportunity for ZelnickMedia, ranging from $0 to $4,752,000, tied to performance thresholds.
- Issuance of significant time-based and performance-based restricted unit awards to ZelnickMedia, with potential settlement in cash or stock.
- Stockholder approval will be sought to amend the 2009 Stock Incentive Plan to allow for stock settlement of restricted units.
- Restrictions are placed on ZelnickMedia's ability to sell TTWO stock, linked to market value and management compensation.
03—Questions
Frequently Asked Questions
What is the primary purpose of this Form 8-K filing?
This Form 8-K reports on the entry into a material definitive agreement, specifically a new Management Agreement between Take-Two Interactive Software, Inc. and ZelnickMedia Corporation. This agreement governs the provision of management and consulting services to the company.
What are the key financial terms of the new Management Agreement?
The agreement includes a fixed monthly management fee of $247,500, totaling $2,970,000 annually, with no increases planned. It also introduces an annual bonus opportunity for ZelnickMedia, which can range from $0 to $4,752,000, contingent upon the company achieving specific performance targets.
What are the implications of the restricted unit awards for investors?
The restricted unit awards represent a significant compensation component for ZelnickMedia, valued at $3,850,000 for time-based awards and $4,750,000 for performance-based awards (based on initial grant calculations). The potential for these units to be settled in TTWO stock, if approved by shareholders, could lead to stock dilution. Investors should monitor the vesting and settlement of these awards.
What are the conditions under which ZelnickMedia's compensation could be reduced or replaced?
If Mr. Zelnick or Mr. Slatoff are unable to serve in their roles (and ZelnickMedia cannot provide a satisfactory replacement), and the company needs to appoint an external individual, a portion of ZelnickMedia's compensation could be deducted. The deduction is limited to 60% if Mr. Zelnick is replaced and 40% if Mr. Slatoff is replaced.
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