Form of Management Agreement] MANAGEMENT AGREEMENT
EXHIBIT
99.4
[Form
of Management Agreement]
THIS
MANAGEMENT AGREEMENT (this “Agreement”),
dated
as of March ____, 2007, is by and between ZelnickMedia Corporation, a New York
corporation (“ZelnickMedia”),
and
Take-Two Interactive Software, Inc., a Delaware corporation (the “Company”).
WHEREAS,
the Company desires to receive financial and management consulting services
from
ZelnickMedia, and to obtain the benefit of the experience of ZelnickMedia in
business and financial management of companies engaged in businesses similar
to
the Company’s; and
WHEREAS,
ZelnickMedia desires to provide financial and management consulting services
to
the Company and the compensation arrangements set forth in this Agreement are
designed to compensate ZelnickMedia for such services.
NOW,
THEREFORE, in consideration of the foregoing and the respective agreements
hereinafter set forth, and the mutual benefits to be derived herefrom,
ZelnickMedia and the Company agree as follows:
1. Engagement.
The
Company hereby engages ZelnickMedia as its financial and management consultant,
and ZelnickMedia hereby agrees to provide financial and management consulting
services to the Company, all on the terms and subject to the conditions set
forth below.
2. Services
of ZelnickMedia.
ZelnickMedia hereby agrees during the term of this engagement to consult with
the board of directors (the “Board”)
and
management of the Company and its subsidiaries in such manner and on such
business and financial matters as may be reasonably requested from time to
time
by the Board, including but not limited to:
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(i)
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oversee
and supervise the operations of the Company and its subsidiaries
in
accordance with policies established by the Board and usual and customary
standards of efficient operation and
maintenance;
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(ii)
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assist
in the preparation of operating budgets and business
plans;
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(iii)
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advise
and assist the Company and its subsidiaries regarding their corporate
and
financial structure;
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(iv)
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advise
and assist the Company and its subsidiaries in formulating long-term
business strategies;
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(v)
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assist
the Company in recruiting senior
management;
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(vi)
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advise
and assist the Company in securing equity and/or debt financing and
negotiating and structuring the terms of such
financing;
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(vii)
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assist
the Company and its subsidiaries with controlled mergers and acquisitions
with, and of, third party entities;
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(viii)
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advise
and assist the Company in evaluating potential sale or exit opportunities,
structuring and negotiating a sale of the Company, or leveraged
recapitalization;
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(ix)
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assist
the Company in its attempts to resolve the investigations and litigations
currently pending against the Company;
and
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(x)
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respond
to Board requests concerning, and perform any other management services
incidental to, the foregoing, or any other management or advisory
services
reasonably requested by the Board from time to time and to which
ZelnickMedia agrees.
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3. Personnel;
Non-Executive Chairman.
ZelnickMedia shall provide and devote to the performance of this Agreement
such
employees, agents and representatives of ZelnickMedia, and for such time, as
ZelnickMedia shall deem appropriate for the furnishing of the services required
hereunder. In addition, during the term of this Agreement, Xxxxxxx Xxxxxxx
will
be entitled to serve as the non-executive chairman of the Company so long as
(x)
he is alive and not incapacitated and (y) this Agreement has not been terminated
for Cause (as defined below); provided that nothing herein shall prohibit the
removal of Xx. Xxxxxxx for Cause at any time. As non-executive chairman, Xx.
Xxxxxxx will interact with the full Board, and will be delegated authority
to
hire and/or terminate the employment of, from time to time, the chief executive
officer and the chief financial officer of the Company. The chief executive
officer of the Company will report to the non-executive chairman, as well as
to
the Board. At the request of ZelnickMedia, the Company will take all actions
as
may be permitted under applicable law to cause two designees of ZelnickMedia,
initially Xxxxxxx Xxxxxxx and Xxxxxxxx Xxxxx, to be elected to the
Board.
4. Management
Fee.
On the
date hereof and on the first day of each month during the term of this Agreement
(each, a “Payment
Date”),
the
Company shall pay to ZelnickMedia a monthly management fee of $62,500 ($750,000
per annum) in immediately available funds (the “Management
Fee”).
During the first 12 months of the term of this Agreement, neither the Management
Fee nor the Annual Bonus payable in respect thereof shall be increased, except
as provided in Section 18 below; provided, however, that nothing in the
preceding clause shall require the Company to increase either of such payments
following the end of such 12-month period.
5. Annual
Bonus.
In
addition to the Management Fee, ZelnickMedia shall receive an annual bonus
of up
to $750,000 per year (the “Annual
Bonus”),
determined with respect to each fiscal year ending after the date hereof, and
payable within 15 days of the Company’s receipt of its audited financial
statements for the applicable fiscal year, as follows:
(i) In
the
event actual results in a given fiscal year during the term of this Agreement
are less than 80% of the Target (as defined below), the Annual Bonus shall
be
zero.
(ii)
In the
event actual results in a given fiscal year during the term of this Agreement
are equal to or greater than 80% of the Target but less than 100% of the Target,
the Annual Bonus shall be between zero and $375,000, pro rated on a
straight-line basis between 80% and 100% based upon the actual percentage of
Target achieved.
(iii)
In
the
event actual results in a given fiscal year during the term of this Agreement
are equal to or greater than 100% of the Target but less than 120% of the
Target, the Annual Bonus shall be between $375,000 and $750,000, pro rated
on a
straight-line basis between 80% and 100% based upon the actual percentage of
Target achieved.
(iv) In
the
event actual results in a given fiscal year during the term of this Agreement
are equal to or greater than 120% of the Target, the Annual Bonus shall be
$750,000.
The
term
“Target” shall mean budgeted EBITDA of the Company (or other measurement of
financial performance reasonably determined by the members of the Board,
excluding the designees of ZelnickMedia pursuant to Section 3 above, and agreed
with ZelnickMedia for a particular year), determined within 30 days of the
beginning of that year (and with respect to the current year, within 60 days
from the date Xxxxxxx Xxxxxxx takes office as non-executive chairman) by mutual
agreement of the Company and ZelnickMedia, each acting reasonably and in good
faith, and measured without giving effect to any payments under this
Agreement.
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6. Equity
Award.
No
earlier than [90] days nor later than [150] days from March 23, 2007, the
Company shall simultaneously issue to ZelnickMedia or any designated affiliate
thereof:
(i)
an
option, transferable to any affiliate of ZelnickMedia, to purchase a number
of
shares of common stock of the Company representing 2.5% of the outstanding
common stock of the Company on a fully diluted basis on the date of issuance,
such options to have a ten (10)-year term, to vest monthly in equal portions
over three (3) years (with accelerated vesting in full upon (x) a Change of
Control, (y) termination of this Agreement by the Company (except for Cause
(as
defined below), in which case the unvested portion of such options shall not
vest and shall automatically terminate), or (z) termination of this Agreement
by
ZelnickMedia (except without Good Reason (as defined below), in which case
the
unvested portion of such options shall not vest and shall automatically
terminate)), to have a strike price equal to the closing price of the common
stock on the date of issuance and to have such other customary terms as are
reasonably acceptable to ZelnickMedia; and
(ii) a
number
of shares (not less than zero) of restricted common stock equal to the quotient
of A[B-C]/B, where A= 2.5% of the outstanding common stock of the Company on
a
fully diluted basis on the date of issuance, B= the closing price of the common
stock on the date of issuance of the restricted common stock and C=$16.00 (A
and
C to be adjusted proportionately for any stock split, stock combination or
similar event prior to the date of issuance), such shares to be subject to
vesting upon the earliest to occur of (w) three (3) years from the date hereof,
(x) a Change of Control, (y) termination of this Agreement by the Company
(except for Cause (as defined below), in which case such shares shall not vest
and shall automatically terminate), or (z) termination of this Agreement by
ZelnickMedia (except without Good Reason (as defined below), in which case
such
shares shall not vest and shall automatically terminate).
Until
October 31, 2011 or earlier if this Agreement is earlier terminated pursuant
to
Section 8 below, ZelnickMedia shall not sell or otherwise dispose of any shares
of common stock of the Company acquired upon exercise of its option granted
pursuant to clause (i) above or vested pursuant to clause (ii) above and the
preceding restriction shall not be waivable by the Company without the approval
of stockholders holding a majority of the Company’s outstanding voting
securities at the time such approval is given. For the avoidance of doubt,
the
option issued pursuant to clause (i) above and the shares issued pursuant to
clause (ii) above shall be issued on the same day.
7. Expenses.
The
Company shall promptly reimburse ZelnickMedia for all reasonable travel expenses
(business class airfare in the case of domestic travel and first class airfare
in the case of any international travel, if applicable) and other reasonable
out-of-pocket fees and expenses as have been or may be incurred (before or
after
the date of this Agreement) by ZelnickMedia, its directors, officers, employees,
counsel, agents and representatives in connection with any and all transactions
relating to this Agreement, ZelnickMedia’s engagement hereunder, and the
rendering of services hereunder (including, but not limited to, attorneys’ fees,
other advisors’ fees and fees and expenses incurred in attending Company-related
meetings).
8. Term.
This
Agreement will continue from the date hereof until October 31, 2011, unless
earlier terminated by either ZelnickMedia or the Company in accordance with
this
Section 8, with automatic renewal for successive one-year periods unless either
party gives written notice to the other at least 90 days prior to the expiration
of the initial term or any one-year period, as applicable, of such party’s
intention to terminate this Agreement at the end of such initial term or
one-year period. This Agreement may be terminated by the Company for Cause
(as
defined below) or by ZelnickMedia for Good Reason (as defined below) or upon
a
Change in Control and may be terminated upon 30 days’ written notice by the
Company without Cause or by ZelnickMedia without Good Reason. If this Agreement
is terminated by the Company or ZelnickMedia prior to October 31, 2011,
ZelnickMedia will be entitled to the following: (a) if this Agreement is
terminated by the Company for Cause or by ZelnickMedia without Good Reason,
ZelnickMedia shall be paid on the date of termination all earned but unpaid
Management Fees and all accrued but unpaid Annual Bonus, and shall retain the
vested portion of the equity described in Section 6 above; (b) if this Agreement
is terminated by the Company without Cause, by ZelnickMedia for Good Reason
or
upon a Change in Control (as defined below), ZelnickMedia shall be paid on
the
date of termination all earned but unpaid Management Fees and accrued but unpaid
Annual Bonus, all Management Fees that would have been paid through October
31,
2011, and the amount of the Annual Bonus that would have been paid for the
current year based on the year-to-date performance of the Company, and all
unvested equity described in Section 6 above shall vest. In addition, if this
Agreement is terminated in connection with a Change in Control, ZelnickMedia
shall be paid on the date of termination all Annual Bonus payments that would
have been payable through October 31, 2011, assuming 50% of the maximum Annual
Bonus would be payable in each future fiscal year. If this Agreement is
terminated on or after October 31, 2011, ZelnickMedia shall be paid on the
date
of termination all earned but unpaid Management Fees and accrued but unpaid
Annual Bonus, all Management Fees that would have been paid through the end
of
the then current term, and the amount of the Annual Bonus that would have been
paid for the current year based on the year-to-date performance of the Company.
Notwithstanding the foregoing, upon any termination for Cause pursuant to clause
(a) of the definition thereof all equity granted under Section 6 above shall
be
unvested and subject to forfeiture.
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For
purposes of this Section 8, “Cause”
means
(a) the conviction of, or a plea of guilty or nolo contendere by, either Xxxxxxx
Xxxxxxx or Xxxxxxxx Xxxxx of any felonious criminal act (other than
traffic-related offenses or as a result of vicarious liability), (b) fraud,
or
(c) any act or omission involving malfeasance or gross negligence by
ZelnickMedia in the performance of its obligations hereunder, in the case of
each of clauses (b) through (c) above, that relates to and damages the Company
and, if capable of being cured so that the Company is not materially damaged,
is
not so cured within 15 days after receipt by ZelnickMedia of written notice
thereof. “Good
Reason”
means
(x) a condition that materially impairs the ability of ZelnickMedia or Xxxxxxx
Xxxxxxx to perform the duties or responsibilities of ZelnickMedia or Xxxxxxx
Xxxxxxx, as applicable, as contemplated herein, (y) the failure by the Company
to perform any of its material obligations under this Agreement (including
without limitation its obligations to cause two designees of ZelnickMedia to
be
elected to the Board, if requested by ZelnickMedia), or (z) the requirement
that
ZelnickMedia’s place of service be located outside a 00-xxxx xxxxxx xx Xxx Xxxx
Xxxx, XX. A “Change
in Control”
means
any transaction or occurrence (or series of related transactions or occurrences)
which results at any time in any of (i) a sale of all or substantially all
of
the consolidated assets of the Company and of its subsidiaries, or a
consolidation, reorganization, merger, or other business combination of the
Company with or into, any other person or entity if, after such transaction
the
stockholders of the Company immediately prior to such transaction beneficially
hold, directly or indirectly, less than a majority of the outstanding voting
units of the purchasing or surviving parent entity in such transaction, on
a
fully diluted basis, (ii) a change in the majority of the members of the board
of directors of the Company to Persons who were neither (x) nominated or
appointed by the current board of directors of the Company nor (y) nominated
or
appointed by directors so nominated or appointed, or (iii) an acquisition by
any
individual, general partnership, limited partnership, limited liability company,
corporation, trust, estate, real estate investment trust association or any
other entity (each, a "Person")
or
group of Persons (other than the Company or any subsidiary of the Company or
any
of their affiliates) of the outstanding securities of the Company in a
transaction or series of transactions, if immediately thereafter such acquiring
Person or group has, or would have, beneficial ownership of more than fifty
percent (50%) of the combined equity interests or voting power of the Company;
provided that mere formation of a group will not itself constitute a Change
of
Control. A Change of Control shall be deemed to occur as of the effective date
of the first event, action or transaction leading to one of the results
described above. Notwithstanding the foregoing, the actions taken at the annual
meeting of the Company to be held on or about March 23, 2007 (or any adjournment
thereof) shall not constitute a Change in Control under this Agreement.
No
termination of this Agreement, whether pursuant to this paragraph or otherwise,
shall affect the Company’s obligations with respect to any and all reasonable
fees, costs and expenses incurred by ZelnickMedia in rendering services
hereunder and not reimbursed by the Company as of the effective date of such
termination or the Company’s indemnification and contribution
obligations.
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9. Confidentiality;
Non-Solicitation.
ZelnickMedia shall not at any time during or after the term of this Agreement,
directly or indirectly, except as in good faith deemed necessary or desirable
to
perform any of its obligations hereunder, to defend its own rights or as
required by applicable law or legal process, disclose or use for its own benefit
or purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization, entity
or enterprise other than the Company and any of its subsidiaries or affiliates,
any trade secrets, information, data, or other information, including, without
limitation, relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans, or the business and affairs
of the Company, or of any subsidiary or affiliate of the Company; provided,
that
the foregoing shall not apply to information which is generally known to the
industry or the public other than as a result of ZelnickMedia’s breach of this
covenant or information obtained by ZelnickMedia prior to the execution of
this
Agreement or not in connection with its performance of its obligations under
this Agreement. ZelnickMedia agrees that upon termination of this Agreement,
upon the Company’s request, it shall immediately return to the Company all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
and its affiliates, except that ZelnickMedia may retain such personal notes,
notebooks and diaries that do not contain confidential information of the type
described above. For a period beginning on the date hereof and ending one year
after the date of termination of this Agreement, except in the event this
Agreement is terminated upon a Change in Control, by the Company without Cause
or by ZelnickMedia for Good Reason, ZelnickMedia shall not in any capacity,
either individually or in association with others, employ or solicit for
employment (other than in any general solicitation) any person who is an
employee of the Company or its affiliates at the level of vice president or
higher immediately prior to such employment or during such
solicitation.
10. Liability.
Neither
ZelnickMedia nor any of its affiliates, directors, officers, employees, counsel,
agents or representatives shall be liable to the Company or its subsidiaries
or
affiliates for any loss, claim, liability, damage or expense arising out of
or
in connection with the performance of services contemplated by this Agreement,
other than any loss, claim, liability, damage or expense to the extent
determined by the final judgment of a court of competent jurisdiction to have
been caused from the gross negligence, fraud, bad faith or willful misfeasance
of ZelnickMedia or its affiliates.
11. Indemnification;
D&O Insurance.
To the
fullest extent permitted by applicable law, the Company shall indemnify and
hold
harmless ZelnickMedia and its affiliates, and each of their respective members,
managers, directors, officers, employees, counsel, agents, representatives,
contractors and affiliates (each such individual or entity to be referred to
hereinafter as an "Indemnified
Person"),
from
and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, whether or not involving a third party, to which
an
Indemnified Person may be subject, insofar as such loss, claim, damage,
liability or action relates to, arises out of or results from any Covered Event
(as such term is defined below) or alleged Covered Event, and will reimburse
such Indemnified Person upon request for all expenses (including, without
limitation, reasonable attorneys’ fees and disbursements) incurred by such
Indemnified Person in connection with investigating, defending or preparing
to
defend against any such loss, claim, damage, liability or action, as such
expenses are incurred or paid. The
term
"Covered
Event"
shall
mean (a) any action taken, or services performed, by an Indemnified Person,
related to or consistent with the terms of this Agreement, or (b) any action
taken, or omitted to be taken, by the Company or any of its managers, directors,
officers, employees, agents or affiliates, in connection with any matter in
which an Indemnified Person has been involved pursuant to this Agreement;
provided, that the term "Covered Event," with respect to an Indemnified Person,
shall exclude any loss, claim, damage, liability or expense to the extent
determined by the final judgment of a court of competent jurisdiction to have
been caused from the gross negligence, fraud, bad faith or willful misfeasance
of such Indemnified Person or any affiliate thereof. The Company shall cover
the
designees of ZelnickMedia under directors and officers liability insurance
both
during and, while potential liability exists, after the term of the Agreement
in
amounts reasonably requested by ZelnickMedia.
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12. Independent
Contractor.
ZelnickMedia and the Company agree that ZelnickMedia shall perform services
hereunder as an independent contractor, retaining control and direction over
and
responsibility for its own operations and personnel. Neither ZelnickMedia nor
their directors, officers or employees shall be considered employees or agents
of the Company or its subsidiaries as a result of this Agreement nor shall
any
of them have authority to contract in the name of or bind the Company, except
as
expressly agreed to in writing by the Company, including as provided in this
Agreement.
13. Notices.
Any
notice, report or payment required or permitted to be given or made under this
Agreement by one party to the other shall be deemed to have been duly given
or
made if personally delivered or, if mailed, when mailed by registered or
certified mail, postage prepaid, to the other party at the following addresses
(or at such other address as shall be given in writing by one party to the
other):
If
to
ZelnickMedia:
ZelnickMedia
Corporation
000
0xx
Xxxxxx
Xxx
Xxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxxx Xxxxx
If
to
the Company:
Take-Two
Interactive Software, Inc.
000
Xxxxxxxx
Xxx
Xxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
Attention:
14. Entire
Agreement; Modification.
This
Agreement (a) contains the complete and entire understanding and agreement
of
ZelnickMedia and the Company with respect to the subject matter hereof; and
(b)
supersedes all prior and contemporaneous understandings, conditions and
agreements, oral or written, express or implied, respecting the engagement
of
ZelnickMedia in connection with the subject matter hereof. This Agreement may
not be amended or modified except by written instrument executed by both
ZelnickMedia and the Company.
15. Waiver
of Breach.
The
waiver by either party of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any subsequent
breach of that provision or any other provision hereof.
16. Assignment.
ZelnickMedia may assign its rights or obligations under this Agreement only
with
the express written consent of the Company, such consent not to be unreasonably
withheld. The Company may not assign its rights or obligations under this
Agreement.
17. Successors.
This
Agreement and all the obligations and benefits hereunder shall inure to the
successors and permitted assigns of the parties.
18. Failure
to Pay.
If for
any reason the Company does not pay the Management Fee, Annual Bonus or any
other amount due under this Agreement when due, then such amount shall accrue
interest at a rate of 1% per month and shall continue to be payable and shall
be
paid by the Company as soon as it can be paid. The preceding sentence shall
not
limit any other remedies of ZelnickMedia in the event amounts are not paid
when
due.
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19. Counterparts.
This
Agreement may be executed and delivered by each party hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
an
original and both of which taken together shall constitute one and the same
agreement.
20. Choice
of Law.
This
Agreement and any dispute arising hereunder shall be governed by and construed
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of laws provision or rule (whether
of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Each party consents to the in
personam
jurisdiction of the Court of Chancery or other courts of the State of Delaware
and the United States District Court located in the State of Delaware in
connection with any claim or dispute arising under or in connection with this
Agreement.
21. Severability.
If any
provision of this Agreement is or becomes illegal, invalid or unenforceable
under any law or regulation of any jurisdiction, it shall, as to such
jurisdiction, be deemed modified to the least degree necessary to conform to
the
requirements of such law or regulation, or if for any reason it is not deemed
so
modified, it shall be illegal, invalid or unenforceable only to the extent
set
forth in the law or regulation without affecting the legality, validity or
enforceability of such provision in any other jurisdiction or the remaining
provisions of this Agreement.
22. Section
409A.
Notwithstanding anything to the contrary contained in this Agreement, in the
event that one or more payments under this Agreement are subject to Section
409A
of the Internal Revenue Code of 1986, as amended (the “Code”)
and
would cause ZelnickMedia to incur any additional tax or interest under Section
409A of the Code or any regulations or Treasury guidance promulgated thereunder,
the Company shall, at no additional cost to the Company, after consulting with
ZelnickMedia and receiving ZelnickMedia’s approval, reform and appropriately
adjust such provision; provided that the Company agrees to maintain, to the
maximum extent practicable without any such additional cost to the Company,
the
original intent and economic benefit to ZelnickMedia of the applicable provision
without violating the provisions of Section 409A of the Code.
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IN
WITNESS WHEREOF, the parties hereto have caused this Management Agreement to
be
duly executed and delivered on the date and year first above
written.
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Name:
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