UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Take-Two Interactive Software, Inc.
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July 28, 201626, 2018
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders ofTake-Two Interactive Software, Inc., that will be held on September 22, 2016,21, 2018, at 9:00 a.m. local time at the WGrand Hyatt Hotel, 201 Park Avenue South,109 East 42nd Street at Grand Central Terminal, New York, New York 10003.10017.
Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting of Shareholders and Proxy Statement, which you are urged to read carefully.
We are pleased to take advantage of Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their shareholders on the Internet. We believe these rules allow us to provide our shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On or about August 5, 2016,July 30, 2018, we expect to begin mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and Annual Report and vote online; however, shareholders of record will receive a copy of the Proxy Statement and Annual Report by mail instead of receiving the Notice of Internet Availability of Proxy Materials. The Proxy Statement and Notice of Internet Availability of Proxy Materials contain instructions on how you can receive a paper copy of the Proxy Statement and Annual Report if you only received a Notice of Internet Availability of Proxy Materials by mail.
Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted. After reading the Notice of Annual Meeting of Shareholders and Proxy Statement, we urge you to cast your vote via the Internet or, if you received a proxy card, complete, sign, date and return the proxy card in the envelope provided, or follow the instructions for voting by telephone that may be included therein. If the address on the Notice of Internet Availability of Proxy Materials or the accompanying material is incorrect, please advise our Transfer Agent, American Stock Transfer & Trust Company, in writing at 6201 15th Avenue, Brooklyn, New York 11219.
We hope to see you at the meeting and appreciate your continued support.
Sincerely,
Strauss Zelnick
Executive Chairman and Chief
Executive Officer
Take-Two Interactive Software, Inc., 622 Broadway,110 West 44th Street, New York, New York 10012,10036, USA
tel 646.536.2842 fax 646.536.2926 www.take2games.com
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway110 West 44th Street
New York, New York 1001210036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 22, 201621, 2018
To the Shareholders ofTAKE-TWO INTERACTIVE SOFTWARE, INC.:
NOTICE IS HEREBY GIVEN that the 20162018 Annual Meeting (the “Annual Meeting”) of Shareholders ofTake-Two Interactive Software, Inc. (the “Company”) will be held on September 22, 2016,21, 2018, at 9:00 a.m. local time at the WGrand Hyatt Hotel, 201 Park Avenue South,109 East 42nd Street at Grand Central Terminal, New York, New York 10003,10017, to consider and vote upon the following:
1. | Election of |
2. | Approval, on anon-binding advisory basis, of the compensation of the Company’s “named executive officers” as disclosed in the attached proxy statement; |
3. |
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, |
Other business that may properly come before the Annual Meeting or any adjournment thereof. |
The Board of Directors believes that the election of the nominated directors, the approval on an advisory basis of the compensation of the named executive officers, the approval of certain amendments to the Take-Two Interactive Software, Inc. 2009 Stock Incentive Plan and the ratification of the appointment of Ernst & Young LLP are in the best interests of the Company and its shareholders and, accordingly, recommends a vote “FOR” the approval offor each of these proposals.
Only shareholders of record at the close of business on July 26, 201625, 2018 are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
Matthew Breitman
Senior Vice President, Deputy General Counsel and
Corporate Secretary
July 28, 201626, 2018
Your vote is very important, regardless of the number of shares you own. Please read the attached proxy statement carefully and complete and submit your proxy card via the Internet or telephone (as instructed on your proxy card) or sign and date your paper proxy card as promptly as possible and return it in the enclosed envelope.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway110 West 44th Street
New York, New York 1001210036
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 22, 201621, 2018
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors ofTake-Two Interactive Software, Inc. (the “Company” or “Take-Two”) for use at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held on September 22, 201621, 2018 at 9:00 a.m. local time, including any adjournment or adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
The Company expects to either mail or provide notice and electronic delivery of this Proxy Statement and the enclosed form of proxy to shareholders on or about August 5, 2016.July 30, 2018.
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 may be revoked by the shareholder of record 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 of the principal executive offices of the Company is 622 Broadway,110 West 44th Street, New York, New York 10012,10036, and its telephone number is(646) 536-2842.
The rules of the Securities and Exchange Commission (“SEC”) require us to notify all shareholders, including those shareholders to whom we have mailed proxy materials, of the availability of our proxy materials through the Internet.
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be held on September 22, 201621, 2018
Our Proxy Statement and 20162018 Annual Report to Shareholders are available at
http://www.proxyvote.com
This summary highlights information contained elsewhere in this Proxy Statement and does not include all of the information that you should consider. You should read the entire Proxy Statement carefully before voting.
20162018 Annual Meeting of Shareholders
Date and Time | September | |
Location |
New York | |
Record Date | July |
Voting Matters and Board Recommendations
Item | Proposal | Board’s | Page | Proposal | Board’s Recommendation | Page Number | ||||||
1 | Election of six director nominees | FOR (each nominee) | 7 | Election of seven director nominees | FOR (each nominee) | 8 | ||||||
2 | Advisory vote to approve executive compensation | FOR | 16 | Advisory vote to approve executive compensation | FOR | 17 | ||||||
3 | Approval of amendments to the 2009 Stock Incentive Plan, including an increase in the available shares reserved thereunder | FOR | 63 |
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2019 (“fiscal 2019”) |
FOR |
69 | ||||||
4 | Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2017 | FOR | 74 |
Company Performance Highlights
The Company delivered strong financial results in our fiscal 2016year ended March 31, 2018 (“fiscal 2018”) and continued to execute successfully on our strategy of developing a select number of high-quality titles that make us a leader in our industry.
Board of Directors Highlights
Our sixseven nominees include fivesix independent, outside directors who as a group have extensive and diverse management and subject matter experience and knowledge that is critical to the Company.
| ✓Active and empowered lead independent director role ✓ Deliberate approach to Board refreshment, including the addition of new independent directors in 2017 and 2018 ✓ Annual election of all directors ✓ Majority vote standard for uncontested director elections ✓ 6 out of 7 current directors are independent (all except for our Chairman and CEO) ✓ Board membership marked by diversity, leadership and a variety of perspectives ✓ Annual performance review of CEO and Chairman by independent directors | |||||||||||||||
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| Independence | 86% | ||||||||||||||
Average Tenure | ~7.0 years | |||||||||||||||
Average Age | ~59 | |||||||||||||||
Committee Memberships | ||||||||||||||||||||
Name | Age | Director Since | Principal Occupation | Independent | Other Public | Audit | Compensation | Corporate Governance | Executive | |||||||||||
Michael Dornemann Lead Independent Director | 72 | March 2007 | Retired Chairman and CEO, Bertelsmann Entertainment | ✓ | — | ✓ | ✓ | ✓ | Chair | |||||||||||
J Moses | 59 | March 2007 | Principal, J Moses Projects | ✓ | — | ✓ | ✓ | Chair | ||||||||||||
Michael Sheresky | 50 | March 2007 | Partner, United Talent Agency | ✓ | — | Chair | ✓ | ✓ | ||||||||||||
LaVerne Srinivasan | 56 | March 2017 | Vice President, Carnegie Corporation of New York | ✓ | — | ✓ | ||||||||||||||
Susan Tolson | 56 | March 2014 | Retired Portfolio Manager, Capital Research and Management Company | ✓ | 3 | Chair | ||||||||||||||
Paul Viera | 59 | May 2018 | Chief Executive Officer, Earnest Partners LLC | ✓ | — | ✓ | ||||||||||||||
Strauss Zelnick | 61 | March 2007 | Chairman and CEO,Take-Two Interactive Software, Inc. | 1 | ✓ |
Shareholder Engagement
The boardBoard of directorsDirectors oversees and regularly participates, together with management, in an extensive, year-round shareholder engagement practice to actively seek shareholder feedback on the Company’s board, governance, and executive compensation practices. In the months leading up to the filing of this Proxy Statement, we sought discussions with holders of more than approximately 81.6%64% of our outstanding shares (percentage based on the Company’s investors’ most recent filings) and had discussions with a number of our top holders (percentage based on the Company’s investors’ most recent filings).holders. Investor perspectives gained through these discussions help to inform discussions in the boardroom and are considered by the boardBoard and its committees in decision-making.
Corporate Governance Highlights
Further, the Company’s sound governance practices and policies demonstrate the board’sBoard’s commitment to strong corporate governance, effective risk management and robust independent oversight of management by the board.Board. The Company’s governance highlights include:
Annual evaluation of the |
Annual review of |
Ongoing review and refreshment of Board composition |
✓ | Lead Independent Director with clearly defined role and responsibilities |
✓ | Board oversight of risk management |
Shareholder right to call special meetings |
Shareholder right to act by written consent |
No supermajority voting requirements |
Strong anti-hedging, anti-pledging and insider trading policies |
Robust Code of Business Conduct and Ethics for all directors and officers |
Independent Audit Committee, Compensation Committee and Corporate Governance Committee |
Executive Compensation Highlights
The Company maintains strong compensation governance practices that support ourpay-for-performance principles and align management incentives with the interests of our shareholders. A significant amountportion of our Company’s executive compensation is performance based.in fiscal 2018 was performance-based.
We have also adopted a number of “best practices” with respect to executive compensation, including:
Clawback policy with respect to incentive compensation (see page |
Caps on annual bonuses to NEOs |
Meaningful stock ownership requirements |
No repricing of stock options without shareholder approval |
Limited perquisites |
No tax gross ups for excise taxes on parachute payments |
Annual compensation risk assessment |
Retention of independent compensation consultants |
Balanced compensation approach between short- and long-term incentive opportunities |
Amendments to Stock Incentive Plan
We are asking that our shareholders approve several amendments to our 2009 Stock Incentive Plan, including an increase in the number of shares available for issuance under the plan by 1.4 million shares. The Board of Directors believes that the increase in the number of shares is necessary to allow the Company to continue to use equity to attract, retain and motivate the Company’s creative talent, which is critical to Take-Two’s long-term goals, and to align the interests of creative employees with the interests of the Company’s shareholders.
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Plan highlights include:
All members of the Board of Directors stand for election on an annual basis, and at the Annual Meeting sixseven directors will be elected to hold office for a term expiring at the 20172019 Annual Meeting of Shareholders. The Board of Directors, upon the recommendation of the Corporate Governance Committee, has nominated the individuals named below. Each director will be elected to serve until a successor is elected and qualified or until the director’s earlier resignation or removal.
The Corporate Governance Committee is responsible for evaluating the size and composition of the Board of Directors relative to the evolving needs of the Company at any given time, and actively identifying qualified individuals to become new director nominees as needed. The Corporate Governance Committee has developed criteria, including certain personal and professional qualities, it uses to evaluate whether the potential nominee would be a qualified director candidate for service onTake-Two’s Board of Directors. For further detail, please referencerefer to the “Board Committees” section.
Our sixseven nominees include fivesix independent, outside directors who as a group have extensive and diverse management and subject matter experience and knowledge that is critical to the Company. The average director tenure is eightapproximately 7.0 years, and the average age of the board members is 58.59.
At the Annual Meeting, the proxies given by shareholders will be voted individually for the election of the persons named herein as director nominees, unless a proxy card specifies that it is not to be voted in favor of any such nominee. If 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 may be designated by the Board of Directors. Each of the persons named herein has indicated to the Board of Directors that he or she will be available to serve as a director of the Company. In an uncontested election, the seven persons receiving the highest number of “FOR” votes at the Annual Meeting will be elected. However, the Company’s bylaws provide that any nominee for director who receives a greater number of votes “withheld” from the individual’s election than votes “for” such election promptly shall tender the individual’s resignation to the Corporate Governance Committee following certification of the shareholder vote. For more information regarding this policy, see “Policy on Majority Voting for Directors.”
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF
THE NOMINEES NAMED BELOW:
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Lead Independent Director
Director Beneficial owner of | Mr. Dornemann is an entertainment and marketing executive with more than 30 years of management consulting, corporate development, strategic advisory and media experience. Prior to 2001, Mr. Dornemann was an executive board member of Bertelsmann AG for 16 years and Chairman and Chief Executive Officer of Bertelsmann Entertainment (music and television division, BMG and RTL Group). Before that, he held positions with IBM and Boston Consulting Group.
Other boards: Mr. Dornemann has previously served on several boards, including as Chairman of Jet Set AG, a worldwide fashion company based in Switzerland, until 2009; as a director of Columbia Music Entertainment (CME) of Japan until 2010; and as vice-chairman and as an audit and compensation committee member of Access Worldwide Communications until 2013.
Key experience and qualifications: Mr. Dornemann’s highly relevant leadership, management, marketing and consulting experience, including his role as Chief Executive Officer of Bertelsmann Entertainment, strongly qualifies him to provide effective leadership to the independent directors, and to contribute to all aspects of board discussion and operations, including strong oversight of our management agreement with ZelnickMedia Corporation (“ZelnickMedia”). His accomplished history of service with fashion and entertainment companies, including as an outside director, provides an unusual level of insight into both our business and our governance. |
J Moses
Independent Director
Director Beneficial owner of | Mr. Moses is a media executive, entrepreneur and consultant with more than 30 years of experience in the television, radio, publishing, video game and digital media industries. Mr. Moses is currently
Prior executive roles: Mr. Moses was most recently an advisor to the President of KapanLagi Network, the largeston-line media business in Indonesia from August 2013 to May 2015. Mr. Moses was the Founder and, from October 1998 through July 2009, the Chief Executive Officer of UGO Networks, Inc., an online publisher delivering information and entertainment for gamers. Mr. Moses managed the sale of that company to the Hearst Corporation in August 2007. Mr. Moses previously served as President of MTV Russia and oversaw the successful establishment of MTV Networks in Russia in 1998. Mr. Moses also served as the President of BMG Interactive from 1993 to 1996, the former video game and new technologies division of BMG Entertainment. Most recently, Mr. Moses was the Founder and, from 2010 to 2014, President of Bagooba, a social media start up.
Other boards: Mr. Moses serves on advisory boards to Simulmedia, Inc. and Flow
Key experience and qualifications:Mr. Moses provides insight based on vast media experience and leadership history, including his roles as CEO of UGO Networks, President of MTV Russia and President of BMG Interactive, and his deep understanding of the interactive entertainment industry and its global opportunities. |
Michael Sheresky
Independent Director
Committee and Executive Committee
Director Beneficial owner of | Mr. Sheresky is a partner at United Talent Agency, where he has served as a motion picture talent agent since June 2009. Mr. Sheresky is responsible for structuring projects and deals in the areas of motion picture and television development, production and distribution.
Prior professional roles:From 1992 through 1995, and then from 1997 through May 2009, Mr. Sheresky held a number of positions at the William Morris Agency, a talent agency, most recently Senior Vice President in its Motion Picture Department. During that time, he represented authors, journalists, screenwriters, directors, producers and actors in the motion picture and television businesses.
Key experience and qualifications:Mr. Sheresky’s entertainment experience as a talent agent is an important asset to the Board of Directors, including his particularly strong insight into the development and compensation of creative talent and of management. |
Independent Director
Member: Corporate Governance Committee Age: 56 Director since: March 2017 Beneficial owner of 2,733 shares | Ms. Srinivasan is Vice President of the National Program and Program Director for Education at the Carnegie Corporation of New York, employing creative strategies and innovative thinking to strengthen urban education.Since 2014, she has overseen grant making and other activities aimed at engaging parents and communities, improving teaching and leadership for learning, advancing innovative learning environment designs, providingK-12 pathways to college and career success, and fostering integrated approaches to innovation and learning in the field of education. Prior professional roles: From 2012 through 2014, Ms. Srinivasan was theCo-Founder of Fiero Now, an education technology company. Prior to Fiero Now, she worked at various educational technology, urban district change, andnon-profit education reform companies, including Time to Know, Education Champions for All and New Leaders for New Schools. From 2003 through 2006, Ms. Srinivasan served as Deputy Chancellor for the New York City Department of Education. In addition, from 1993 through 2003, she served in various roles at BMG Entertainment, including as Senior Vice President and General Counsel. Other boards: Ms. Srinivasan serves on the board of Young Audiences New York and the national advisory board of College Promise Campaign, and was a founding member of the Consortium for Policy Research in Education’s task force on Strategic Management of Human Capital. Key experience and qualifications:Ms. Srinivasan brings to the Board of Directors strong leadership skills, extensive experience leveraging technology in the education and entertainment industries, and deep marketing expertise from her previous positions. | |
Susan Tolson Independent Director Chair: Audit Committee
Director Beneficial owner of | Ms. Tolson is a financial executive with more than 20 years of experience in the financial services industry. Ms. Tolson worked at Capital Research and Management Company and Capital Research Company, subsidiaries of The Capital Group Companies, Inc., from 1990 to 2010. She served in various capacities, including Senior Vice President and Portfolio Manager. Before joining Capital Research, Ms. Tolson was an Investment Officer at Aetna Investment Management Company, making private investments in media and entertainment companies.
Other boards: Ms. Tolson is a director of Groupe Lagardère (a global company operating in media, entertainment, sports and retail). She also serves as a board member,
Key experience and qualifications:Ms. Tolson brings to the Board of Directors significant experience in entertainment and financial/investment matters from her previous positions, together with her existing current service as a director of both for profit and nonprofit organizations. |
Independent Director Member: Audit Committee Age: 59 Director since: May 2018 Beneficial owner of 300 shares | Mr. Viera is the founder and chief executive officer of Earnest Partners, a global investment firm responsible for overseeing over $20 billion for municipalities, states, corporations, endowments, and universities. Prior to founding Earnest Partners in 1998, Mr. Viera was a Vice President at Bankers Trust in both New York and London and later joined Invesco, where he became a global partner and senior member of its investment team. Other boards: Mr. Viera serves as a Trustee of the Woodruff Arts Center in Atlanta, Georgia and as a member of its investment committee. He is also a member of the board of managers of Direct Scripts LLC, the Board of Dean’s Advisors for Harvard Business School, the Council on Foreign Relations, the Carter Center Board of Councilors, the National Center for Human & Civil Rights, the University of Michigan School of Information External Advisory Board, the Cristo Rey Atlanta Jesuit High School Board and the Emory University Board of Visitors. Key experience and qualifications:Mr. Viera brings to the Board of Directors proven leadership skills, vast business experience and financial acumen. | |
Strauss Zelnick
Chairman and CEO
Director Beneficial owner of | Mr. Zelnick has been Chairman of the Company since March 2007, Executive Chairman of the Board of Directors since February 2008 and Chief Executive Officer of the Company since January 2011. Mr. Zelnick also is a partner in ZelnickMedia. Mr. Zelnick serves as Executive Chairman of the Board of Directors and Chief Executive Officer of the Company pursuant to the terms of the
Prior executive roles: Mr. Zelnick served as Executive Chairman of Direct Holdings Worldwide, Inc., the parent company of Time Life and Lillian Vernon, until the company was sold to Reader’s Digest on March 2, 2007. Prior to forming ZelnickMedia, Mr. Zelnick was President and Chief Executive Officer of BMG Entertainment, a $4.7 billion music and entertainment company with more than 200 record labels and operations in 54 countries. Mr. Zelnick’s appointment as President and Chief Executive Officer of BMG Entertainment followed his tenure as President and Chief Executive Officer of BMG’s North American business unit from 1994 through 1998. Before joining BMG Entertainment, Mr. Zelnick was President and Chief Executive Officer of Crystal Dynamics, a leading producer and distributor of interactive game software. Prior to that, he spent four years as President and Chief Operating Officer of 20th Century Fox, where he managed all aspects of its worldwide motion picture and distribution business. Previously, he spent three years at Vestron Inc. as a senior executive, and rose to become President and Chief Operating Officer. Mr. Zelnick also served as Vice President, International Sales, Television for Columbia Pictures.
Other boards: Mr. Zelnick currently serves as a member of the board of directors, as a member of the compensation committee and the investment committee, and as the chairperson of the audit committee and the nominating and corporate governance committee of Starwood Property Trust, Inc., a public company. He also serves as a member of the boards of directors of
Key experience and qualifications:Mr. Zelnick provides the Company’s Board of Directors with valuable insight in organization and management obtained from his experiences, including acting as Executive Chairman and CEO of the Company. |
Each director nominee for our Board of Directors is highly qualified and brings a diversity of skills and experiences to our boardroom. These skills are relevant to our business and enable the Board of Directors to provide strong oversight and effectively oversee management’s execution of strategy.
Director Backgrounds & Expertise Management & Creative Talent Financial & Investment Experience Governance Marketing Insight Strategic Advisory Education Global Business Operations Leadership Consulting Experience Entertainment & Media Expertise Governmental Experience Technology
Corporate Governance and Board Practices
Shareholder Engagement.The Board of Directors oversees and regularly participates, together with management, in an extensive, year-round shareholder engagement practice. In the months leading up to the filing of this Proxy Statement, we sought discussions with holders of more than approximately 81.6%64% of our outstanding shares (percentage based on the Company’s investors’ most recent filings) and had discussions with a number of our top holders (percentage based on the Company’s investors’ most recent filings). These discussions included the Chair of the Compensation Committee and members of Take-Two’s senior management team.holders. Throughout these discussions, we sought shareholder feedback on a wide range of topics, including the ZelnickMedia management agreement, with ZelnickMedia, our executive compensation program, our Compensation Discussioncorporate governance and Analysis disclosure, and our use of equity as an incentive tool.Board composition matters. Feedback from shareholders was generally positive on our compensation policies, corporate governance and our enhanced disclosure in the 2015 proxy statement,Board composition matters, with some of our shareholders inquiring about the reasons for choosing the particular metrics indetails of our incentive plans, as well asnew management agreement with ZelnickMedia, how the Board of Directors thinks aboutwe retain creative talent, and manages dilution from equity plans.our policies on workplace diversity and sustainability.
Independent Directors. The Board of Directors has determined that Messrs. Bowman, Dornemann, Moses, and Sheresky and Ms.Viera and Mses. Srinivasan and Tolson are “independent” directors as defined under the rules of The NASDAQ Stock Market. During fiscal 20162018, the independent directors met in executive session (outside the presence of management) on eight (8)nine (9) occasions.
Board Structure. The Board of Directors is led by Mr. Zelnick in his role as Executive Chairman. Mr. Zelnick is also the Chief Executive Officer. The Board of Directors also has designated Mr. Dornemann as Lead Independent Director (as described below), a position that complements the Executive Chairman’s role, and serves as the principal liaison between the independent directors and the Executive Chairman.Chairman and Company management. Mr. Dornemann was also designated by the Board of Directors as the Chair of the Executive Committee.
The Board of Directors reviews its leadership structure annually. The Board of Directors has determined that in light of the Company’s clear strategy and the strength of its overall governance practices, at this time a combined Chairman/CEO role will more effectively unify the Board of Directors and management around the specific initiatives necessary to support the Company’s strategy. The Board of Directors continues to evaluate Mr. Zelnick annually in each of his roles and has retained the discretion to separate the Chairman/CEO roles at any time if the Board of Directors believes it would better serve the interests of the Company and its shareholders. The Board of Directors has also concluded that its Lead Independent Director position effectively balances any potential risk of concentration of authority that may exist with a combined Chairman/CEO position.
Lead Independent Director. As Lead Independent Director, Mr. Dornemann serves as the principal liaison between the independent directors and the Executive Chairman.
The Lead Independent Director is responsible for:
presiding at all Board of Directors meetings at which the Chairman of the Board is not present;
convening regular and special meetings of the independent directors;
developing the agenda for executive sessions of the independent directors and working with the Chairman to develop and approve the agenda for meetings of the full Board of Directors, including scheduling to ensure there is sufficient time for discussion;
coordinating feedback to the Chairman on behalf of the independent directors;
coordinating with the Company’s General Counsel to respond to shareholders who have addressed a communication to the independent directors;
making himself available for shareholder communication, as appropriate (other independent directors may also participate in such communication at times); and
handling any matters concerning an actual or potential conflict of interest involving any other director.
The Lead Independent Director meets separately with one or more of the Chief Executive Officer, the President, the Chief Financial Officer and the General Counsel approximatelybi-weekly to discuss the business strategy of the Company in greater detail and provide additional guidance to such members of management. These meetings enable the Lead Independent Director to gain a deeper understanding of any matters being handled by management which should be brought to the attention of the entire Board of Directors or a committee thereof, as well as an opportunity to obtain additional information on any matters which the Lead Independent Director believes may otherwise be of interest to the other directors and to provide advice to the other directors regarding such matters. The Lead Independent Director is a member of each committee of the Board of Directors.
Annual Evaluations. The Board of Directors and its committees conduct annual self-evaluations that include both the completion of a questionnaire as well as individual interviews of each director by outside counsel. These evaluations are utilized by the Board and each committee to determine whether itimprove communication, strategy and effectiveness, and to identify possible improvements that can be made to the performance and composition of the Board and each of its committees are functioning effectively and properly.committees. The Corporate Governance Committee assists the Board of Directors in its review.review and reports to the full Board regarding its findings and recommendations, which are considered and implemented as appropriate. Furthermore, the independent directors performCompensation Committee performs an annual performance review of the Chairman, CEO and other named executive officers.officers and reports its findings to the full Board.
Risk Oversight. The Board of Directors exercises direct oversight of strategic risks to the Company. The Audit Committee reviews the Company’s policies for risk assessment and risk management relating to financial reporting and internal controls, as well as operational risk relating to digital and physical security, including security controls over customer data, and assesses steps management has taken to control such risks and exposures. The Compensation Committee oversees risks relating to compensation programs and policies. See “Risk Assessment of Overall Compensation Program.” The Governance Committee oversees operational risk relating to insurance. In each case, management periodically reports to our Board of Directors or to the relevant committee, which provides guidance on risk appetite, assessment, and mitigation. Each committee charged with risk oversight reports to our Board of Directors on those matters.
Meetings of Directors. The Board of Directors held twelve (12)eleven (11) meetings during fiscal 2016.2018. Each of the incumbent directors attended at least 75% in the aggregate of all meetings of the Board of Directors and committees on which the individual served for the period of his or her service in the fiscal year.year, and Mr. Viera, who joined the Board of Directors in May 2018, has attended all of the meetings of the Board of Directors and
committee on which he serves since joining the Board of Directors. In addition, during fiscal 2016,2018, the Board of Directors convened at anoff-site strategic planning session, which included presentations and discussions with senior management, to review ourthe Company’s strategic, competitive and financial performance goals as well as to discuss the Company’s long-term strategic plan.
Attendance at Shareholder Meetings. The Board of Directors has adopted a policy whereby director nominees are strongly encouraged to attend the Company’s annual meeting of shareholders. FiveAll of our sixthen incumbent director nominees attended the last annual meeting of the Company’s shareholders in September 2015.
Policy on Majority Voting for Directors. In an uncontested election, any nominee for director who receives a greater number of votes “withheld” from the individual’s election than votes “for” such election promptly shall tender the individual’s resignation to the Corporate Governance Committee following certification of the shareholder vote. The Corporate Governance Committee promptly will consider the resignation offer and recommend to the Board of Directors the action to be taken with respect to such offered resignation. The Board of Directors will act on the Corporate Governance Committee’s recommendation within 90 days following the date of the Annual Meeting. Thereafter, the Board of Directors promptly will disclose promptly its decision whether to accept the director’s resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a Current Report onForm 8-K filed with the SEC. Any director tendering a resignation pursuant to this provision shall not participate in the Corporate Governance Committee recommendation or action of the Board of Directors regarding whether or not to accept the resignation offer. Abstentions and brokernon-votes with respect to a director’s election will not be counted as votes “withheld” for purposes of this policy.
Code of Business Conduct and Ethics. The Company has adopted a written Code of Business Conduct and Ethics that applies to directors, officers and employees of the Company, including the Company’s principal executive officer, principal financial officer, principal accounting officer and controller and any person performing similar functions. A copy of the Code of Business Conduct and Ethics is posted on the Company’s website at “www.take2games.com” and can be accessed by clicking on “Corporate,” then “Corporate Governance,” then “Highlights.”
Conflict of Interest Guidelines for Directors / Directors’ Code of Conduct. The Company has adopted a written Conflict of Interest Guidelines for Directors / Directors’ Code of Conduct that applies to directors of the Company. A copy of the Conflict of Interest Guidelines for Directors / Directors’ Code of Conduct is posted on the Company’s website at “www.take2games.com” and can be accessed by clicking on “Corporate,” then “Corporate Governance,” then “Highlights.”
The Board of Directors has three standing committees entirely comprised of independent directors: a Compensation Committee, a Corporate Governance Committee and an Audit Committee. The Board of Directors also has a standing Executive Committee, currently comprised of Messrs. Dornemann (Chair), Sheresky and Zelnick. These four committees are governed by written charters. The charters and the Company’s Code of Business Conduct and Ethics are posted on the Company’s website atwww.take2games.com and can be accessed by clicking on “Corporate,” then “Corporate Governance,” then “Highlights.���Highlights.”
Compensation Committee | Corporate Committee | Audit Committee | Executive Committee | Compensation Committee | Corporate Committee | Audit Committee | Executive Committee | |||||||||
Robert A. Bowman | Chair | |||||||||||||||
Michael Dornemann | ● | ● | ● | Chair | ✓ | ✓ | ✓ | Chair | ||||||||
J Moses | ● | Chair | ✓ | Chair | ✓ | |||||||||||
Michael Sheresky | Chair | ● | ● | Chair | ✓ | ✓ | ||||||||||
LaVerne Srinivasan | ✓ | |||||||||||||||
Susan Tolson | ● | Chair | ||||||||||||||
Paul Viera | ✓ | |||||||||||||||
Strauss Zelnick | ● | ✓ | ||||||||||||||
Number of Meetings in Fiscal 2016 | 6 | 5 | 4 | 5 | ||||||||||||
Number of Meetings in Fiscal 2018 | 7 | 6 | 4 | 5 |
Compensation Committee members are Messrs. Sheresky (Chair), Dornemann and Moses, each of whom is an independent director under NASDAQ’s Rule 5605, a “non-employee“non-employee director” as defined under the SEC rules and an “outside director” as defined under Section 162(m) of the Internal Revenue Code (the “Code”). The Compensation Committee, among other roles, reviews the compensation policies and procedures of the
Company, evaluates and approves executive officer compensation, and makes recommendations to the Board of Directors regarding executive compensation. During the fiscal year ending March 31, 2016 (“fiscal 2016”),2018, the Compensation Committee held six (6)seven (7) meetings.
Corporate Governance Committee members are Messrs. Moses (Chair), Dornemann and Sheresky.Sheresky and Ms. Srinivasan. This committee is responsible, among other things, for creating and maintaining overall corporate governance policies for the Company and identifying, screening and recruiting director candidates for the Board of Directors. The Corporate Governance Committee held five (5)six (6) meetings during fiscal 2016.2018.
The Corporate Governance Committee will consider nominees recommended by shareholders, provided that the recommendation contains sufficient information for the committee to assess the suitability of the candidate and such nomination complies with the Company’s bylaws. Candidates recommended by shareholders that comply with these procedures will receive the same consideration that candidates recommended by the committee receive.
When selecting directors, the Board of Directors reviews and considers many factors, including experience, business understanding, achievement, available time, diversity, skills and independence. It also will consider ethical standards, integrity and any conflict of interest. It considers recommendations primarily from shareholders of the Company and from members of the Board of Directors and management. The Corporate Governance Committee conducts interviews with candidates who meet the criteria of the Board of Directors, and has full discretion in considering its nominations to the Board of Directors. The Board of Directors adopted Corporate Governance Guidelines, which include criteria to assess the suitability of candidates for the Board of Directors. These Corporate Governance Guidelines are posted on the Company’s website at “www.take2games.com” and can be accessed by clicking on “Corporate,” then “Corporate Governance,” then “Highlights.”
Audit Committee members are Messrs. BowmanMs. Tolson (Chair) and Messrs. Dornemann, Moses and Ms. Tolson.Viera. The Audit Committee oversees the accounting and financial reporting processes of the Company and audits of the financial statements of the Company. In addition, the Audit Committee assists the Board of Directors in its review and oversight of the Company’s key investment objectives, strategies and policies. The Board of Directors has determined that Mr. Bowman and Ms. Tolson and Mr. Viera each qualify as an “audit committee financial expert” under federal securities laws. The Audit Committee held four (4) meetings during fiscal 2016.2018.
Special Committees. From time to time, the Board of Directors may form a special committee for a particular purpose. Most recently in the fiscal year ended March 31, 2014 (“fiscal 2014”),2018, the Board of Directors appointed a special committee, comprised entirely of independent directors, to lead the negotiation of a new management agreement with ZelnickMedia, which is described under “Certain Relationships and Related Transactions—Management Agreement.”Agreement” beginning on page 62.
Each of the following executive officers, who are not also directors, will serve in such capacity until the next Annual Meeting of Shareholders or until earlier termination or removal from office.
Karl Slatoff, age 46,48, became President of the Company in May 2013 and served as Chief Operating Officer of the Company from October 2010 through April 2013. Mr. Slatoff serves as President of the Company pursuant to the terms of the 20142017 Management Agreement between the Company and ZelnickMedia. See “Certain Relationships and Related Transactions—Management Agreement.” From February 2008 to October 2010, Mr. Slatoff served as an Executive Vice President of the Company. Mr. Slatoff also is a partner in ZelnickMedia and serves as a director of Cannella Response Television, LLC.
Prior to joining ZelnickMedia in 2001, Mr. Slatoff served as Vice President, New Media for BMG Entertainment, where he was responsible for guiding BMG’s online digital strategies, including the development
of commercial digital distribution initiatives and new business models for the sale and syndication of online content. From 1994 to 1996, Mr. Slatoff worked in strategic planning at the Walt Disney Company, where he focused on the consumer products, studio and broadcast divisions, as well as several initiatives in the educational, publishing and new media sectors. From 1992 to 1994, Mr. Slatoff worked in the corporate finance and mergers and acquisitions units at Lehman Brothers where he focused on the consumer products and retail/merchandising industries.
Lainie Goldstein, age 48,50, was appointed Chief Financial Officer of the Company in June 2007, and is responsible for overseeing Finance, Investor Relations and Corporate Communications. Ms. Goldstein previously served as the Company’s Senior Vice President of Finance from November 2003.
Ms. Goldstein is a CPA with over 20 years of financial and business experience in the software, entertainment, retail and apparel industries, with proven success in managing the finance function of publicly traded companies. Prior to joining the Company, Ms. Goldstein held a number of positions of increasing responsibility with Nautica Enterprises, Inc., most recently serving as Vice President, Finance and Business Development. Earlier in her career, she held positions in the audit and reorganization departments at Grant Thornton LLP.
Daniel Emerson, age 44,46, became Executive Vice President and General Counsel of the Company in October 2014. Mr. Emerson joined the Company as a Vice President in June 2005 and served in various capacities of increasing responsibility within the legal department, including Senior Vice President, Corporate Secretary and Deputy General Counsel. In addition to serving as the General Counsel of the Company, Mr. Emerson oversees administrative management of Internal Audit on behalf of the Audit Committee.
Prior to joining the Company, Mr. Emerson was a partner in the New York office of the law firm Blank Rome LLP, where he represented public and private companies in mergers & acquisitions, securities law, financings and general corporate matters.
NON-BINDING ADVISORY VOTE TO APPROVE THE
COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
(Proposal 2)
In accordance with the SEC’s proxy rules, we are seeking approval, on anon-binding advisory basis, of the compensation of the Company’s “named executive officers” listed in the Summary Compensation Table (the “NEOs”) for fiscal year 2016,2018, as disclosed in this Proxy Statement pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosures. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. This vote is commonly known as a “say on pay” advisory vote. TheConsistent with the approval by our shareholders, on an advisory basis, of an annual advisory vote on the compensation of the named executive officers, the Board of Directors has adopted a policy providing for annual “say on pay” advisory votes.
The compensation of our NEOs is described in detail in the “Compensation Discussion and Analysis” section of this Proxy Statement beginning on page 17,18, which we encourage you to read for additional details on our executive compensation programs and compensation of our NEOs for fiscal 2016.2018.
Our executive compensation programs are based on three core principles that are designed to motivate our NEOs to achieve annual financial and strategic objectives to enhance the profitability of the Company and create long-term shareholder value. The fiscal 20162018 compensation of our NEOs reflected these core principles:
A significant portion of our NEOs’ compensation was based on the financial performance of the Company and therefore “at risk”;
The majority of each NEO’s total compensation was provided in the form of long-term equity, a significant portion of which was subject to stock price performance, to further align the interest of our NEOs and shareholders; and
• | The majority of each NEO’s total compensation was provided in the form of long-term equity, a significant portion of which was subject to total shareholder return (“TSR”) performance metrics, to further align the interest of our NEOs and shareholders; and |
The target total direct compensation package for each NEO was consistent with market practices for executive talent and each NEO’s individual experience, responsibilities and performance.
We believe that our compensation programs and policies for fiscal 20162018 were consistent with our core compensation principles, provided an effective incentive for the achievement of positive results, aligned with shareholders’ interests, supported by strong compensation governance practices and worthy of continued shareholder support. Accordingly, we ask for our shareholders to indicate their support for the compensation paid to our NEOs by voting “FOR” the followingnon-binding resolution at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve the compensation of the named executive officers for the fiscal year 2016,ended March 31, 2018, including the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosures as included in this Proxy Statement.”
Because your vote is advisory, the result will not be binding upon the Company. Although not binding, the Board of Directors values the opinions of our shareholders and will carefully review and consider the outcome of the vote, along with other relevant factors, in evaluating its compensation program for our NEOs.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE FOREGOING RESOLUTION ON THE COMPENSATION OF THE NEOS IS IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NEOS, AS STATED IN THE ABOVENON-BINDING RESOLUTION.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis section describes the material elements of our executive compensation program for fiscal 2016,2018, including the named executive officers (“NEOs”) as identified in the Summary Compensation Table and listed below:
Executive | Title | |
Strauss Zelnick | Executive Chairman and Chief Executive Officer | |
Karl Slatoff | President | |
Lainie Goldstein | Chief Financial Officer | |
Daniel Emerson | Executive Vice President and General Counsel |
Messrs. Zelnick and Slatoff serve in their executive positions pursuant to a management agreement with ZelnickMedia, discussed below.
Take-Two is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe.Take-Two develops games and operates primarily through two wholly-owned labels—Rockstar Games and 2K.2K, as well as its new Private Division label and Social Point, a leading developer of mobile games.
Top Sellers Include:
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We generate financial returns for our shareholders by pursuing a strategy of capitalizing on the widespread popularity of interactive entertainment and by focusing on publishing a select number of high quality titles for which we can create sequels and build successful franchises. We also seek to complement our core release schedule with digitally delivered offerings designed to drive recurrent consumer spending, including virtual currency,add-on content, and online games.in-game purchases.
Our management team and creative talent in our wholly-owned labels, Rockstar Games and 2K, as well as our Private Division label and Social Point, are essential to building and maintaining the strongest portfolio of intellectual property in the industry. Our compensation program is designed to reflect the importance of our creative talent, including through the use of equity awards to establish strong links between our creative teams and long-term value creation for shareholders.
Select Fiscal 20162018 Performance Highlights
Take-Two delivered strong financial results in fiscal 20162018 and continued to execute successfully on our strategy of developing a select number of high-quality titles that make us a leader in our industry.
Fiscal 2018 Financial Results Net Revenue $1.79 Billion Cash Provided by Operating Activities $393.9 Million Net Revenue from digitally delivered content $1.13 Billion | 23% y-o-y increase Recurrent Consumer Spending (virtual currency, add-on content, and in-game purchases) 41.6% of GAAP net revenue Continued to Strengthen our Balance Sheet Cash + Short Term Investments $1.42 Billion Undrawn Credit Line $98.3 Million Increased Total Shareholder Return by 65%
Business Highlights
• | Grand Theft Auto V continued its positive momentum and is one of the most critically-acclaimed and commercially successful video games |
• | Grand Theft Auto Online delivered record results and remained the largest contributor to recurrent consumer spending; |
• | NBA |
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• | TheNBA 2K League, the first official competitive gaming league that is jointly owned by a U.S. professional sports league, held the draft for the 17 participating teams in preparation for its inaugural season, which |
• | During fiscal 2018, the |
With ourOur strong financial performance in fiscal 2016, and with2018 reflects the strategic steps management has taken over the past several years to strengthen our balance sheet, grow and diversify the Company’s franchise portfolio, and reduce costs, our expectation is that we will achieve strong financial results each year forcosts. The table below illustrates the foreseeable future.Company’s share price growth over the last three years (284%) as compared to other industry peers.
Share Price Growth:3-Year Performance vs. Peers
Shareholder Outreach
As part of our regular governance practices, the Compensation Committee evaluates our compensation programs in light of market conditions, shareholder views, and governance considerations, and makes changes as appropriate for our business. We value the feedback of our shareholders, as expressed through votes and direct communications, and annually submit our executive compensation programs to anon-binding shareholder advisory “say-on-pay”“say-on-pay” vote. At our Annual Meeting held in September 2015,2017, our executive compensation program was approved by shareholders representing 98%98.5% of the votes cast on the proposal. As a result, we did not make any changes to our executive compensation program in fiscal 2016.
To enhance our understanding of our shareholder’s perspectives, we maintain a regular shareholder outreach program.program, including makingTake-Two’s management and Board of Directors available for discussions. In the months leading up to the filing of this Proxy Statement, we sought discussions with holders of more than approximately 81.6%64% of our outstanding shares (percentage based on the Company’s investors’ most recent filings) and had discussions with a number of our top holders (percentage based on the Company’s investors’ most recent filings). These discussions included the Chair of the Compensation Committee and members of Take-Two’s senior management team.holders. Throughout these discussions, we sought shareholder feedback on a wide range of topics, including the ZelnickMedia management agreement, with ZelnickMedia, our executive compensation program, our Compensation Discussioncorporate governance and Analysis disclosure, and our use of equity as an incentive tool.Board composition matters. Feedback from shareholders was generally positive on our compensation policies, corporate governance and our enhanced disclosure in the 2015 proxy statement,Board composition matters, with some of our shareholders inquiring about the reasons for choosing the particular metrics indetails of our incentive plans, as well asnew management agreement with ZelnickMedia, how the Board of Directors thinks aboutwe retain creative talent, and manages dilution from equity plans.
In responseThe Company has shown a willingness to shareholder feedback, as well as in consideration ofrespond to investor concerns and evolving market practices in the past, including eliminating the Adjusted EBITDA “catchup” metric in performance-based awards and our overarching compensation philosophy, the Compensation Committee made several changesadoption of a relative TSR metric in early fiscal 2015 to our executive compensation program. These changes included:the long-term incentive plan.
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The Committee also negotiated a number of changes in the ZelnickMedia Management Agreement in our fiscal year ended March 31, 2014 as a result of shareholder feedback, as detailed under “ZelnickMedia
Management Agreement” below. Based on the positive response from shareholders to these changes, we maintained them when we negotiated a new management agreement with ZelnickMedia in fiscal 2018, also as detailed under “ZelnickMedia Management Agreement” below.
ZelnickMedia Management Agreement
Executive Chairman and CEO Strauss Zelnick and President Karl Slatoff serve as executives of the Company under a management services agreement with ZelnickMedia, a partnership of private equity investors that focuses on the media and communications industry, of which they are partners. The Company first entered into a management services agreement with ZelnickMedia in 2007, and a new and amended management agreement was put in place in May 2011 (the “2011 Management Agreement”), which was originally anticipated to govern through May 31, 2015.2007. On March 10, 2014, the Company and ZelnickMedia entered into a new management agreement (the “2014 Management Agreement”) that superseded the 2011then existing management agreement.
On November 17, 2017, the Company and ZelnickMedia entered into a new management agreement (the “2017 Management Agreement”) that, effective on January 1, 2018, superseded the 2014 Management Agreement, under which ZelnickMedia will continue to provide management, consulting and executive level services to the Company through March 31, 2019.
The 2014 Management Agreement included several changes2024. In response to address feedback that the Board of Directors received from shareholders. Theseour shareholders, the 2017 Management Agreement includes a new operational metric based on recurrent consumer spending as one of the performance criteria for performance-based equity. The 2017 Management Agreement also maintains a number of changes included:that were made in the 2014 Management Agreement to address feedback from shareholders, including:
• | Increased disclosure. Enhanced disclosure |
• | Transitioned from a front-loaded equity grant to an annual grant structure. Previous ZelnickMedia management agreements included anup-front equity grant at the commencement of the agreement. The 2014 Management Agreement provided a smaller equity grant at the time of signing on April 1, 2014 and |
• | Eliminated |
• | Lengthened the performance measurement period of performance-based equity. |
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The Compensation Committee believes the Company’s management structure and relationship with ZelnickMedia has been critical to building the Company’s franchises, improving profitability and strengthening
the balance sheet, and providing disciplined management. In 2007, the Company faced multiple investigations and significant litigation including shareholder lawsuits, as well as financial challenges, including limited cash (the Company ended fiscal 2007 with only $78 million in cash) and significant operating losses. In March 2007, shareholders then holding approximately 46% of our outstanding shares of common stock negotiated the management agreement with ZelnickMedia on our behalf and, after their election at the 2007 annual meeting of shareholders, the Board of Directors of the Company approved the execution of the management agreement by the Company.
Since that time, the Company has been transformed from single franchise dependency into a diverse, financially strong, global interactive entertainment enterprise. The Company has launched 9 new brands since 2007 and has 11 franchises with individual titles that havesold-in to retail more than 5 million units each. The Company has also expanded geographically, in digital distribution and with new business models.
As part of its regular governance practices, the Board of Directors continuously reviews the relationship with ZelnickMedia to ensure that it remains the right management structure for the Company and our shareholders. At least annually, the Compensation Committee conducts interviews on a confidential basis with all direct reports to Messrs. Zelnick and Slatoff, and other members of management, to seek feedback on the performance of the ZelnickMedia executives and to evaluate the effectiveness of the ZelnickMedia relationship broadly. The Compensation Committee’s feedback from these360-degree interviews is then discussed at executive sessions of independent board members. This feedback was taken into consideration during the most recent ZelnickMedia management agreement negotiation process.negotiation. The Lead Independent Director also engages routinely with members of the executive team, includingnon-ZelnickMedia members of management, on an approximatelybi-weekly basis.
NEO Compensation Structure andPay-for-Performance Principles
The Compensation Committee of Take-Two has developed compensation programs and arrangements designed to place a significant portion of our executives’ compensation at risk based on Company performance. Equity awards are a key element in the compensation of our executives, as well as creative talent throughout the organization. The Compensation Committee believes equity awards create strong linkage between our executives and the long-term performance of our Company as well as the interestinterests of our shareholders. Refer toAnnex B herein for a reconciliation of GAAP net income to the Non-GAAP EBITDA measure discussed below.
Compensation of Mr. Zelnick and Mr. Slatoff
Mr. Zelnick and Mr. Slatoff serve in their executive roles atTake-Two under the Management Agreement with ZelnickMedia. Mr. Zelnick and Mr. Slatoff are compensated directly by ZelnickMedia and notTake-Two (except for $1 received annually by each of Mr. Zelnick and Mr. Slatoff from Take-Two to provide them the opportunity to receive certain health and other plan benefits). To provide greater disclosure and fuller understanding of the compensation received by Messrs. Zelnick and Slatoff individually, both the 2014 Management Agreement includesand 2017 Management Agreement include a requirement that no more than 60 percent of the compensation the Company pays to ZelnickMedia shall be received by or conveyed to Mr. Zelnick (or other such employee of ZelnickMedia that serves as Executive Chairman and Chief Executive Officer of the Company), and no more than 40 percent of the compensation the Company pays to ZelnickMedia shall be received by or conveyed to Mr. Slatoff (or other such employee of ZelnickMedia that serves as President of the Company). See “Certain Relationships and Related Transactions—Management Agreement” for additional detail.
TheBoth the 2014 Management Agreement emphasizesand the 2017 Management Agreement emphasize performance-based,at-risk compensation and equity with greater thanone-year vesting, to ensure it is closely alignedclose alignment with the compensation of otherTake-Two executives, the performance of the Company and the interests of our shareholders. Performance measures are designed to be challenging but achievable.
Our Compensation Committee establishes the annual cash incentive fee based solely on performance against a budgeted Non-GAAPAdjusted EBITDA (calculated using(anon-GAAP measure calculated by taking GAAP net income recorded for the
Company, adding back or subtracting the net effect from deferral in net revenues and related costs of goods sold, impact of business reorganization,one-time gains or losses on long-term investments, and adding back stock based compensation, interest, depreciation, amortization and tax expenses) goal set at the beginning of each fiscal year; thereyear. Refer toAnnex A herein for a reconciliation of GAAP net income to the Adjusted EBITDA measure discussed above. There is no discretionary element. Theelement to this goal, and the Compensation Committee uses the same specific Non-GAAPAdjusted EBITDA goal in our internal executive pay program. We believe Non-GAAPAdjusted EBITDA focuses our executives on operating growth and profitability. TheBoth the 2014 Management Agreement providesand the 2017 Management Agreement provide for an absolute cap on the annual incentive opportunity. Non-GAAPAdjusted EBITDA goals were met in each of the last foursix fiscal years.
TheOur Compensation Committee establishes the long-term incentive includesopportunity to motivate sustained performance over a multi-year period and to strengthen the alignment with long-term shareholder value creation. To that end, our long-term incentives in the 2014 Management Agreement included performance-based shares that vest based on TSR performance, “New IP” performance and “Major IP” performance as indicated in the table below. Relative TSR performance alignsaligned the interests of ZelnickMedia and our executives with our shareholders generally. We seeksought to incentivize strong sales performance of “New IP” (new interactive entertainment products) to foster creation of additional strongsuccessful franchises. The “Major IP” category iswas broader, including existing interactive entertainment products and products derived from existing products, as well as new products, as we seeksought to build on our major, most profitable franchises. For the long-term incentive RSUs granted under the 2014 Management Agreement that were eligible to vest in fiscal 2018, for the two (2)-year measurement period ended March 31, 2017, the maximum relative TSR and Major IP performance goals were met, but the New IP performance goal was not achieved.
The 2017 Management Agreement continues to include performance-based shares that vest based on TSR performance and “IP” performance and introduces a new metric—“Recurrent Consumer Spending” performance. The Recurrent Consumer Spending metric incentivizes an increased focus on revenue from virtual currency,add-on content andin-game purchases.
While we believe the short-term and long-term incentives are balanced to help incentivize optimal performance, we also note that there is no duplication in use of performance metrics between short-term and long-term programs.
2014 Management Agreement
The following table summarizes the compensation components of the 2014 Management Agreement:Agreement for compensation in fiscal 2018 (except for the annual base fee and annual incentive compensation for the period from January 1, 2018 to March 31, 2018, which were determined under the new 2017 Management Agreement):
Compensation Component | % Linked to Performance | Delivery Form | Performance Link | |||
Annual Base Fee | Cash | |||||
Annual Incentive | 100% | Cash | ||||
Long-Term Incentive (Equity Grants) | 55% at target
71% at maximum | Time-Based Awards(2) | ||||
Performance-Based Awards | 75%: Relative TSR Performance(3)
12.5%: New IP Performance(4)
12.5% Major IP Performance(5) |
(1) | The annual incentive is |
Percentage of Non-GAAP EBITDA Target Obtained | Amount of Annual Bonus | |||||||
Percentage of Adjusted EBITDA Target Obtained | Amount of Annual Bonus | |||||||
80% or less | $0 | $0 | ||||||
90% | $ | 1,188,000 | $ | 1,188,000 | ||||
100% | $ | 2,376,000 | $ | 2,376,000 | ||||
110% | $ | 2,885,143 | $ | 2,885,143 | ||||
120% | $ | 3,394,286 | $ | 3,394,286 | ||||
130% | $ | 3,846,857 | $ | 3,846,857 | ||||
140% | $ | 4,299,429 | $ | 4,299,429 | ||||
150% | $ | 4,752,000 | $ | 4,752,000 | ||||
Above 150% | $ | 4,752,000 | $ | 4,752,000 |
(2) | Time-based awards will vest on April |
(3) | Relative TSR performance-based vesting is a function of the Company’s total shareholder return during the performance period, as compared to the total shareholder return generated by the Company’s peer group, which consists of the companies that comprise the NASDAQ Composite Index on the first day of the performance period. We use the NASDAQ Composite Index for this purpose, rather than a narrow peer group, given the small size of our public company peer group and the stock price volatility of those peers. The table below describes the vesting schedule for the performance-based equity based on achievement of relative TSR over atwo-year performance period: |
TSR Percentile Rank | TSR Vesting Percentage | |
Less than 40th Percentile | 0% of target shares | |
40th Percentile | 50% of target shares | |
50th Percentile | 100% of target shares | |
75th Percentile | 200% of target shares |
(4) | New IP performance-based vesting is a function of the revenue generated by sales performance or the number of units |
(5) | Major IP performance-based vesting is a function of the sales performance or thesell-in performance with respect to certain releases of Major IP during the performance period. Major IP consists of New IP, existing interactive entertainment products that were commercially released prior to April 1, 2014, and products that are derived from such existing products, in any case that are released on or after April 1, 2014. This metric underscores and promotes our long-term strategy of building game franchises through game sequels. Whether vesting is based on sales performance orsell-in performance depends on whether the Major IP that is released constitutes a regular price, reduced price, or other type of interactive entertainment product. In any case, the vesting percentage applicable to the Major IP performance-based shares will be determined by comparing the Company’s performance against thepre-determined performance criteria set out in the Restricted Unit Agreements. |
2017 Management Agreement
The following table summarizes the compensation components of the 2017 Management Agreement for compensation in fiscal 2019 (and, with respect to the annual base fee and annual incentive compensation, also for the period from January 1, 2018 to March 31, 2018):
Compensation Component | % Linked to Performance | Delivery Form | Performance Link | |||
Annual Base Fee | — | Cash | — | |||
Annual Incentive | 100% | Cash | Adjusted EBITDA(1) | |||
Long-Term Incentive (Equity Grants) | 55% at target 71% at maximum | Time-Based Awards(2) | — | |||
Performance- Based Awards | 75%: Relative TSR Performance(3) 12.5%: Recurrent Consumer Spending Performance(4) 12.5% IP Performance(5) |
(1) | The annual incentive is based solely on a financial performance metric; there is no individual performance element. The table below describes the payout schedule for the annual incentive opportunity based on achievement of Adjusted EBITDA (with payouts being prorated on a straight-line basis between the amounts listed below based on the actual percentage of Adjusted EBITDA target obtained): |
Percentage of Adjusted EBITDA Target Obtained | Amount of Annual Bonus | |||
80% or less | $0 | |||
90% | $ | 1,860,000 | ||
100% | $ | 3,720,000 | ||
110% | $ | 4,517,143 | ||
120% | $ | 5,314,286 | ||
130% | $ | 6,022,857 | ||
140% | $ | 6,731,429 | ||
150% | $ | 7,440,000 | ||
Above 150% | $ | 7,440,000 |
(2) | Time-based awards will vest on April 13, 2020 for the grant made on April 13, 2018, provided that the 2017 Management Agreement has not been terminated prior to such date. |
(3) | Relative TSR performance-based vesting under the 2017 Management Agreement is the same as under the 2014 Management Agreement, as described above. |
(4) | Recurrent Consumer Spending performance-based vesting is determined by comparing the following two measurements and using the measurement that results in the greatest number of RSUs vesting: (i) the percentage change between the Recurrent Consumer Spending for fiscal 2018 and thetwo-year average Recurrent Consumer Spending for fiscal 2019 and the fiscal year ending March 31, 2020 (“fiscal 2020”) and (ii) thetwo-year average Recurrent Consumer Spending for fiscal 2019 and fiscal 2020 as a percentage of thetwo-year average total net bookings for the same period. Recurrent Consumer Spending consists of the consolidated net bookings generated by the Company from the sale of virtual currency,add-on content,in-game purchases and similar items that are supplemental to the sale of any full game release. The vesting percentage applicable to the Recurrent Consumer Spending performance-based shares will be determined by comparing the Company’s performance against thepre-determined performance criteria set out in the Restricted Unit Agreements. |
(5) | IP performance-based vesting is a function of the number of units“sold-in”(sell-in performance) with respect to certain releases of IP during the performance period. IP consists of any commercially-released interactive entertainment products, and products that are derived from such existing products. This metric underscores and promotes our long-term strategy of creating additional strong franchises and building game franchises through game sequels. The vesting percentage applicable to the IP performance-based shares will be determined by comparing the Company’s performance against thepre-determined performance criteria set out in the Restricted Unit Agreements. |
Compensation of Other Named Executive Officers
Our other NEOs in fiscal 2016,2018, who were Ms. Goldstein and Mr. Emerson, were compensated through three primary components: base salary, annual incentivesincentive and long-term incentives. The majority of Ms. Goldstein’s and Mr. Emerson’s compensation was performance-based and weighted toward long-term incentives. In early fiscal 2015, the Compensation Committee made several enhancements to the compensation structure of NEOs based on shareholder feedback. These changes are detailed in the section above, “Shareholder Outreach and Compensation Program Changes.”
The compensation structure for NEOs in fiscal 20162018 was as follows:
Compensation Component | % Linked to Performance | Delivery Form | Performance Link | |||||||||
Annual Base Salary | Cash | |||||||||||
Annual Incentive | 100% | Cash | ||||||||||
Long-Term Incentive (RSUs) | 66.7% at target
80% at maximum | Time-Based Awards(1) | ||||||||||
Performance-Based Awards(2) | Relative TSR |
(1) | Time-based awards will vest, subject to |
(2) | Performance-based awards that are earned (based on relative TSR performance over atwo-year performance period, determined in the same manner as under the |
Structural Pay and Performance Alignment for All NEOs
Our NEOs receive a mix of compensation that is appropriately weighted towardsat-risk pay in the form of annual incentives and long-term incentives. The Compensation Committee believes this creates strong alignment with the Company’s stated compensation philosophy of providing compensation commensurate with individual and corporate performance. The majority of incentive compensation is also delivered in the form of equity, which provides strong alignment between executives’ incentives and the interests of our shareholders. ZelnickMedia’s compensation under the 20142017 Management Agreement is also weighted towardsat-risk compensation, as ZelnickMedia’s compensation consists of: (1) RSUs, of which 55% vest subject to the satisfaction of performance criteria, and (2) cash compensation, with 60%over 70% of the maximum aggregate cash compensation in the form of an annual incentive based upon the Company’s performance.
The following chart illustrates the fiscal 2018 compensation mix, based on maximum compensation opportunities, under the 2014 Management Agreementfor ZelnickMedia and for our current NEOs.
Fiscal 20162018 Variable Compensation Targets and Performance Achievement
Annual and long-term incentives for ZelnickMedia and our NEOs (other than Messrs. Zelnick and Slatoff) are based on measurable financial and share price performance metrics. The following tables summarizetable summarizes the company-wideCompany-wide targets and actual results for both ZelnickMedia and NEO performance-based cash compensation paid and equity compensation granted in fiscal 2016.2018.
ZelnickMedia’s 2016and NEO’s 2018 Variable Compensation Targets and resulting Fiscal 20162018 Performance Achievements:
Incentive Component | Financial Metrics | Threshold |
Target | Maximum |
Performance | |||||
Annual Incentive | EBITDA | $ | $ | $ | ||||||
Performance- Based RSUs
(Fiscal Grant) | Relative TSR | 40th Percentile | 50th Percentile | 75th Percentile | N/A: Relative TSR is measured over the approximatetwo-year period ending on the last trading day of the fiscal year ending March 31, |
Other NEOs’ 2016 Variable Compensation TargetsFor a description of the results and resultingpayout levels for performance-based RSUs previously granted to ZelnickMedia and the NEOs that vested, or failed to vest, in fiscal 2018, see “Detailed Discussion and Analysis—Principal Elements of Executive Compensation—Long Term Equity Incentives—NEO Long-Term Incentive Awards Vested in Fiscal 2016 Performance Achievements:2018” and “Certain Relationships and Related Transactions—Management Agreement—Awards under the 2014 Management Agreement.”
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Highlights of Compensation Governance Practices
Take-Two maintains strong compensation governance practices that support ourpay-for-performance principles and align management incentives with the interests of our shareholders. We have adopted a number of “best practices” with respect to executive compensation, including:
Clawback policy applicable to NEOs, including those under the |
Incentive caps on annual bonuses to NEOs |
Strong anti-hedging and anti-pledging policies |
Meaningful stock ownership requirements |
Equity incentive plan provisions that prohibitre-pricing of stock options without shareholder approval |
Limited perquisites |
No tax gross ups in respect of any excise taxes on parachute payments |
Annual compensation risk assessment for employee plans |
Retention of independent compensation consultants by the Compensation Committee |
Balanced compensation approach between short- and long-term incentive opportunities |
DETAILED DISCUSSION AND ANALYSIS
The main body of this Compensation Discussion and Analysis provides details on the principles and objectives of our executive compensation program and the Compensation Committee’s key fiscal 20162018 compensation-related decisions. This section is organized into the following categories:
I. | Objectives and Philosophy of Executive Compensation |
II. | Compensation to Executive Chairman and CEO and President |
III. | Other NEO Compensation |
IV. | Competitive Market Positioning |
V. | Principal Elements of Executive Compensation |
VI. | Operation of the Compensation Committee |
VII. | Compensation Governance Practices |
I. Objectives and Philosophy of Executive Compensation
Our executive compensation program is designed to driveTake-Two’s mission of producing strong financial results for its shareholders by pursuing a strategy of capitalizing on the widespread popularity of interactive entertainment. We focus on publishing a select number of high quality titles for which we can create sequels and build successful franchises. To achieve this, it is critical that we have the resources available to attract and retain executives who are committed to creativity, efficiency and innovation.
Accordingly, the Compensation Committee has established a compensation plan for our NEOs that is designed to:
Enhance the profitability of the Company and drive shareholder value creation; |
Link a significant portion of compensation to the Company’s long-term financial and stock price performance, thereby creating long-term shareholder value; |
Attract, motivate, and retain highly qualified individuals; |
Reward each NEO’s contribution to the Company’s profitability and growth; individual initiative, leadership and achievements; and management of risks; and |
Motivate NEOs to build a career at the Company and to contribute to our future success. |
The Company seeks to provide competitive compensation that is commensurate with performance and integrates individual efforts, Company and business unit results, and financial rewards. Accordingly, a significant portion of the total compensation paid to NEOs is placed at risk through annual and long-term incentives, which combination of incentives is designed to align the performance of NEOs and the Company’s annual operating objectives and earnings performance with long-term shareholder value creation.
Our compensation program’s design, and in particular the use of equity awards as a key incentive element, establishes strong links between our creative teams and long-term value creation for shareholders. Our compensation program reflects the importance of creative talent to our business and enables us to retain and incentivize these groups. As a result of the importance we place on equity incentives,Take-Two may have higher equity usage for share plans than some of our peers. The Board of Directors periodically authorizes share repurchases when such actions are in the best interests of the shareholders; these repurchases directly reduce the number of the Company’s outstanding shares.
II. Compensation to Executive Chairman and CEO and President
Take-Two has had a long-standing management relationship with ZelnickMedia, under which ZelnickMedia provides executive management and other services toTake-Two. This relationship was first established in 2007 and has been maintained, with a number ofseveral amendments and restatements, since that time. Our Executive Chairman and CEO, Strauss Zelnick, and our President, Karl Slatoff, serve in their current roles pursuant to the 20142017 Management Agreement with ZelnickMedia. Mr. Zelnick has been our Executive Chairman since 2008 and our CEO since 2011. Mr. Slatoff has been our President since May 2013 and previously served in other executive roles at the Company.
On March 10, 2014,November 17, 2017, the Company and ZelnickMedia entered into the 20142017 Management Agreement, effective AprilJanuary 1, 20142018 which superseded the prior 20112014 Management Agreement. TheLike the 2014 Management Agreement, the 2017 Management Agreement emphasizes performance-based,at-risk compensation and equity with greater thanone-year vesting, to ensure it is closely aligned with the compensation of otherTake-Two executives, the performance of the Company and the interests of our shareholders. Fees and incentives paid to ZelnickMedia during fiscal 20162018 are detailed below under “Fiscal 20162018 Fees and Incentives to ZelnickMedia.”
The target compensation opportunity for ZelnickMedia under the 20142017 Management Agreement considered the Company’s need for a senior leadership team that can provide financial and technology acumen as well as management of creative talent. This is a unique combination of skills that creates a limited pool of candidates, and has resulted in the Board of Directors’ decision to provide a competitive compensation opportunity for ZelnickMedia. However, this compensation opportunity is contingent on achieving superior performance.
Services Provided by ZelnickMedia
The provisions of the 20142017 Management Agreement establish the payments and benefits to which ZelnickMedia is entitled as consideration for providing certain valuable and unique services. These services include:
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The Board of Directors and Compensation Committee believe that the services provided by ZelnickMedia, inclusive of the services of Mr. Zelnick and Mr. Slatoff, are a competitive advantage toTake-Two. The Board of Directors and the Compensation Committee regularly evaluate the relationship with ZelnickMedia to ensure it is still the appropriate management structure for the Company. To facilitate this review:
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The Lead Independent Director meets with members of the senior management team on an approximatelybi-weekly basis to discuss the business strategy of the Company in greater detail and provide additional guidance to such members of management. |
Fiscal 20162018 Fees and Incentives to ZelnickMedia
During fiscal 2016, in accordance with the 2014 Management Agreement,2018, ZelnickMedia received an annual management fee, had the opportunity to receive an annual performance-based incentive, the payment of which is linked solely to an objective company performance measure, and received a long-term incentive equity grant in a combination of time-based vesting RSUs and performance-based vesting RSUs. The annual management fee and annual performance-based incentive were received in accordance with the 2014 Management Agreement for the period from April 1, 2017 to December 31, 2017 and in accordance with the 2017 Management Agreement for the period from January 1, 2018 to March 31, 2018, and the long-term incentive equity grant was received in accordance with the 2014 Management Agreement.
Compensation to ZelnickMedia in fiscal 20162018 under the 2014 Management Agreement and the 2017 Management Agreement, as applicable, is summarized below:
Annual Management Fee | Annual Incentive Compensation | Performance- Based RSUs | Time-Based RSUs | Total Compensation | Annual Incentive Compensation | Performance- Based RSUs | Time-Based RSUs | Total Compensation | ||||||||
$2,970,000(1) | $4,752,000(2) | $4,750,000(3) | $3,850,000 | $16,322,000 | ||||||||||||
$3,002,500(1) | $5,424,000(2) | $4,750,000(3) | $3,850,000 | $17,026,500 |
(1) |
(2) |
(3) | Grant made on May |
20142017 ZelnickMedia Management Agreement
As previously noted, on March 10, 2014,November 17, 2017, the Company and ZelnickMedia entered into the 20142017 Management Agreement, effective AprilJanuary 1, 2014,2018, which superseded the prior 20112014 Management Agreement. For a full description of the 20142017 Management Agreement, refer to “Certain Relationships and Related Transactions—Management Agreement.”
Compensation of Mr. Zelnick and Mr. Slatoff
Under the 2017 Management Agreement, as was the case under the 2014 Management Agreement, Mr. Zelnick may not receive more than 60% of the aggregate compensation paid to ZelnickMedia and Mr. Slatoff may not receive more than 40% of the aggregate compensation paid to ZelnickMedia. ZelnickMedia and the Compensation Committee incorporated theseThese individual caps into the 2014 Management Agreementcontinue to provide greater transparency with respect to the maximum compensation payable to Messrs. Zelnick and Slatoff. Beyond this provision, the allocation of any revenues of ZelnickMedia among its principals is not set forth in the 20142017 Management Agreement or determined by means of any process in which the Company participates. In connection with their provision of services to the Company pursuant to the 20142017 Management Agreement, and subject to the limitations above, the actual amount of compensation received by Messrs. Zelnick and Slatoff is determined in the sole discretion of ZelnickMedia.
Mr. Zelnick and Mr. Slatoff continue to both receive $1 annually in compensation from the Company, to provide them the opportunity to receive certain health and other plan benefits, the value of which is described in the Summary Compensation Table below. Mr. Slatoff receives his $1 of annual compensation pursuant to an
employment agreement entered into with the Company in February 2008, the terms of which are described under “Executive Compensation—Narrative Disclosure Regarding Equity Plans and Employment Agreements—Employment Agreements—Karl Slatoff” below.
Fees and Incentives to ZelnickMedia under the 2014 Management Agreement and the 2017 Management Agreement, as Applicable
Under the 2014 Management Agreement, fees and incentives paid to ZelnickMedia in fiscal 2018 were comprised of the following:
Under the 2017 Management Agreement, fees and incentives paid to ZelnickMedia in fiscal 2018 and payable for future fiscal years are comprised of the following:
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For illustrative purposes only, for fiscal 2019 and future fiscal years, assuming that ZelnickMedia allocated the maximum 60% of the payments under the 20142017 Management Agreement to Mr. Zelnick and the maximum 40% of the payments under the 20142017 Management Agreement to Mr. Slatoff, the compensation set forth above to Messrs. Zelnick and Slatoff would be as follows:
Minimum | Target | Maximum | Minimum | Target | Maximum | |||||||
• >80% EBITDA Goal • >40th Percentile Relative TSR • Min IP Goal | • 100% EBITDA Goal • 50th Percentile Relative TSR • Target IP Goal | • 150% EBITDA Goal • 75th Percentile Relative TSR • Max IP Goal | • >80% Adjusted EBITDA Goal • >40th Percentile Relative TSR • Min IP Goal • Min Recurrent Consumer Spending Goal | • 100% Adjusted EBITDA Goal • 50th Percentile Relative TSR • Target IP Goal • Target Recurrent Consumer Spending Goal | • 150% Adjusted EBITDA Goal • 75th Percentile Relative TSR • Max IP Goal • Max Recurrent Consumer Spending Goal | |||||||
Annual Management Fee | $2,970,000 | $2,970,000 | $2,970,000 | $3,100,000 | $3,100,000 | $3,100,000 | ||||||
Annual Incentive Metric: EBITDA | $0 | $2,376,000 | $4,752,000 | |||||||||
Annual Incentive Metric: Adjusted EBITDA | $0 | $3,720,000 | $7,440,000 | |||||||||
Time-Based RSUs | $3,850,000 | $3,850,000 | $3,850,000 | $8,775,000 | $8,775,000 | $8,775,000 | ||||||
Performance-Based RSUs Metrics: TSR and IP Performance | $0 | $4,750,000 | $9,500,000 | |||||||||
Performance-Based RSUs Metrics: TSR, IP and Recurrent Consumer Spending Performance | $0 | $10,725,000 | $21,450,000 | |||||||||
Total Compensation Opportunity | $6,820,000 | $13,946,000 | $21,072,000 | $11,875,000 | $26,320,000 | $40,765,000 | ||||||
Maximum Opportunity at Each Performance Level | Maximum Opportunity at Each Performance Level | Maximum Opportunity at Each Performance Level | ||||||||||
Strauss Zelnick | $4,092,000 | $8,367,600 | $12,643,200 | $7,125,000 | $15,792,000 | $24,459,000 | ||||||
Karl Slatoff | $2,728,000 | $5,578,400 | $8,428,800 | $4,750,000 | $10,528,000 | $16,306,000 |
Historically, the targets set by the Board of Directors in ZelnickMedia management agreements have been sufficiently challenging that payouts to ZelnickMedia have varied. For example, on May 20, 2015, and May 20, 2016, April 4, 2017 and April 2, 2018, ZelnickMedia forfeited 24,750, 27,578, 46,752 and 27,57833,174 shares, respectively, of performance-based RSUs due to the failure to meet maximum performance conditions.
Other NEOs for fiscal 20162018 were Ms. Goldstein, our Chief Financial Officer and Mr. Emerson, our Executive Vice President and General Counsel. Pay opportunities for specific individuals vary based on a number of factors, such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new executive. Actual total compensation and the mix of such compensation in a given year will vary above or below the target compensation levels based primarily on the attainment of operational goals and the creation of shareholder value. The Compensation Committee believes that each of the compensation packages to Ms. Goldstein and Mr. Emerson are within the competitive range of practices when compared to the objective comparative data.
Compensation Overview
In September 2012,May 2018 and January 2015, the Company entered into amended employment agreements with Ms. Goldstein and Mr. Emerson, respectively, which provide for an annual base salary, annual cash bonus opportunity, and long-term incentive compensation opportunities. The details of those employment agreements are discussed below under “Executive Compensation—Narrative Disclosure Regarding Equity Plans and Employment Agreements—Employment Agreements.”
Ms. Goldstein’s and Mr. Emerson’s fiscal 20162018 target compensation was comprised of:
Base Salary | Target Annual Cash Bonus Opportunity (based on Non-GAAP EBITDA) | Target Equity Incentive Opportunity (66.7% subject to performance vesting) | ||||||||
Ms. Goldstein | $ | 663,255 | $464,279 (70% of base salary) | $700,000 | ||||||
Mr. Emerson | $ | 435,000 | $217,500 (50% of base salary) | $700,000 |
Target Annual Cash Bonus Opportunity (based on Adjusted EBITDA) Target Equity Incentive Opportunity (66.7% subject to performance vesting) Ms. Goldstein Mr. Emerson Base Salary $ 690,051 $483,036 (70% of base salary) $700,000 $ 515,000 $360,500 (70% of base salary) $700,000
As a result of the Company’s Non-GAAPAdjusted EBITDA performance for fiscal 2016,2018, Ms. Goldstein and Mr. Emerson each received a maximum cash bonus for such period in the following amounts: Ms. Goldstein $928,557;$966,071; Mr. Emerson $326,250. As discussed below under “Principal Elements of Executive Compensation��Long-Term Equity Incentives,” in June 2016, Ms. Goldstein and Mr. Emerson each received an equity award based on a value of $1,050,000 (based in part on peer benchmarking), which was granted in recognition of performance during fiscal 2016.$721,000.
IV. Competitive Market Positioning
The Compensation Committee determines pay levels for our NEOs based on a number of factors, including the individual’s role and responsibilities within the Company, the individual’s experience and expertise, historical compensation actually realized by the individual, pay levels in the marketplace for similar positions, and performance of the individual and the Company as a whole. In determining pay levels, the Compensation Committee considers all forms of compensation and benefits, including the mix thereof.
After consideration of data collected on external competitive levels of compensation and internal relationships within the executive group, the Compensation Committee makes decisions regarding each individual NEO’s target total compensation opportunity based on the need to attract, motivate and retain an experienced and effective management team.
Each year, the Compensation Committee reviews and approves the peer group companies that are used to evaluate competitive market compensation. In doing so, the Compensation Committee seeks to approve a peer group that is representative of the sector in which we operate and includes companies with similar revenue and market capitalization asTake-Two.
Fiscal 20162018 Peer Group
The peer group used to evaluate competitive market compensation of NEOs for fiscal 20162018 was composed of the following 16 companies:
Videogame | Internet & Technology | Entertainment & Leisure | ||||
• Activision Blizzard Inc.
• Electronic Arts Inc.
• Zynga Inc. | • Autodesk Inc.
• Fair Isaac Corporation
• IAC/InterActiveCorp
• | • Nuance Communications, Inc.
• Red Hat, Inc.
• TiVo Corporation (f/k/a Rovi
• WebMD Health Corp. | • AMC Networks, Inc.
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• Hasbro, Inc.
• Lions Gate Entertainment Corp.
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ThisThe fiscal 2018 peer group is the same as the peer group analyzed for our fiscal 2015year ended March 31, 2017 (“fiscal 2017”) incentive program.program, except that one company was removed from the peer group (Mentor Graphics Corporation) due to the sale of its business to Siemens AG which resulted in executive compensation information about the company no longer being publicly available; one company was removed (Scholastic Corporation) because it is notcomparably-sized toTake-Two and is engaged in a business that is not as similar to the Company’s business as the other companies in the peer group; and one company was added to the group (Mattel, Inc.) because it iscomparably-sized toTake-Two and is engaged in entertainment or other consumer content businesses similar to the Company’s business.
Fiscal 20172019 Peer Group
Peer groups require periodic review for fit to ensure that the peer framework continues to provide an appropriate benchmark for executive pay levels and other policies and practices. As such, to support development of our incentive program for the fiscal year ending March 31, 2017 (“fiscal 2017”),2019, Frederic W. Cook & Co., Inc. performed a peer group analysis in June 20162018 and recommended certain adjustments to the peer group, which were adopted by our Compensation Committee.
The peer group used for competitive compensation analysis for fiscal 20172019 is composed of the following 1716 companies (shaded companies indicate new peers for 2017)fiscal 2019):
Videogame | Internet & Technology | Entertainment & Leisure | ||||
• Activision Blizzard Inc.
| • Autodesk Inc.
| • Nuance Communications, Inc.
| • AMC Networks, Inc.
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• Electronic Arts Inc. | • Fair Isaac Corporation
| • Red Hat, Inc. | • Scientific Games Corporation
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• Zynga Inc. | • IAC/InterActiveCorp | • TiVo Corporation (f/k/a Rovi Corporation)
| • Hasbro, Inc. | |||
• Pandora Media, Inc. | • j2 Global, Inc. | • Lions Gate Entertainment Corp. | ||||
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The Compensation Committee determined that the following changes should be made to the peer group for purposes of compensation planning for fiscal 2017:2019, as compared to the peer group used for purposes of compensation planning for fiscal 2018: one company was removed from the peer group (DreamWorks Animation SKG, Inc.(WebMD Health Corp.) due to the announced sale of its business to Comcast CorporationKKR & Co. L.P. which will resultresulted in executive compensation information about the company no longer being publicly available once the transaction is completed,available; and two companies wereone company was added to the group (Scientific Games and Pandora Media)(j2 Global, Inc.) because each of the companiesit iscomparably-sized toTake-Two and is engaged in entertainment or other consumer content businesses similar to the Company’s business.
While the Compensation Committee believes that this peer group consists of those companies for which executive compensation information is publicly available that are most comparable to the Company, the Compensation Committee understands thatTake-Two has a limited number of direct competitors in the videogame industry and that many of the Company’s competitors are either privately held and/or incorporated in foreign jurisdictions which do not require public disclosure of executive compensation. This dynamic creates added challenges when constructing a statistically reliable set of peers and requires that the Company expand its pool of potential peer companies to those that are tangentially related to the Company (i.e., internet and technology, and entertainment and leisure companies) and with which the Company may not compete directly to attract and retain talent. While imperfect, the Compensation Committee believes the peer group selected is representative of the sector in which the Company operates, and includes companies with similar revenue and market capitalization asTake-Two.
Target Determinations
The Compensation Committee annually reviews total NEO compensation as compared to competitive market data. For purposes of calculating annual target compensation for any fiscal year, the Compensation Committee includes annual base salary, annual target cash bonus, annual target long-term incentive compensation and any special awards.
Ms. Goldstein’s and Mr. Emerson’s annual pay targets in fiscal 20162018 are both belowclose to the median of the peer group used by the Company in considering executive compensation.
V. Principal Elements of Executive Compensation
The following describes compensation processes and programs with respect to the NEOs other than the Executive Chairman and CEO and the President.
Pay Elements—Overview
Executive compensation for our NEOs consists of the following elements:
Direct Compensation Elements | Indirect Compensation Elements | |
Base Salary | Other Compensation/Employee Benefits | |
Annual Cash Incentive | Severance and Change in Control Protection | |
Long-Term Equity Incentives |
Base Salary
The baseBase salary component is intended to provide fixed pay that takes into account an NEO’s role and responsibilities, experience, expertise, marketplace comparables and individual performance, and although established by the NEOs’ employment agreements, is subject to annual review by the Compensation Committee, including for discretionaryyear-to-year increases. Ms. Goldstein’s base salary increased from $650,250$676,520 to $663,255$690,051 in fiscal 20162018 because, as discussed below under “Executive Compensation—Narrative Disclosure Regarding Equity Plans and Employment Agreements,” the amended employment agreement with Ms. Goldstein providesin effect for anfiscal 2018 provided for automatic, annual cost of living increase in base salaryincreases of 2% each year commencing on and after April 1, 2013, which was consistent with the average Company-wide increase in base salary. Mr. Emerson receivedOn May 17, 2018, the Company entered into a third amendment to its employment agreement with Ms. Goldstein to extend the term of the agreement through March 31, 2023. In connection with this amendment, effective as of April 1, 2018, Ms. Goldstein’s base salary was increased to a fixed salary of $435,000 during fiscal 2016, while $850,000 for the remainder of the term of the agreement, subject to increase from time to time, as determined by the Company, but with no automatic, annual cost of living increases.
Mr. Emerson’s fiscal 2015 base salary of $397,781 reflectedincreased from $500,000 in fiscal 2017 to $515,000 in fiscal 2018 based on peer benchmarking, as well as Mr. Emerson’s strong individual performance and value to the organization as a combination of his base salary prior to becoming General Counsel effective October 2014 and a base salary of $435,000 after becoming General Counsel effective October 2014.key senior leader. On May 26, 2016,23, 2018, the Compensation Committee approved an increase to Mr. Emerson’s base salary for fiscal 2019, effective April 1, 2016,2018, to $500,000$540,000 based in part on peer benchmarking.the same factors.
Annual Cash Incentive
The Compensation Committee has the authority to award annual performance-based cash bonuses to the NEOs pursuant to their employment agreements with the Company. The Compensation Committee believes that an annual performance-based bonus opportunity provides the incentives necessary to retain our NEOs and reward them for their attainment of the Company’s business goals. In fiscal 2016,2018, Ms. Goldstein and Mr. Emerson were eligible to receive an annual cash bonus pursuant to the terms of their employment agreements.
Pursuant to her amended employment agreement, Ms. Goldstein’s target contractual bonus ranges from 0% to 140% of base salary. Annual bonus targets are set at 70% of base salary, so achievement of 100% of the Company’s target Non-GAAP EBITDA would result in a bonus of 70% of base salary. Maximum bonus amounts are capped at 140% of base salary.
Pursuant to his employment agreement, Mr. Emerson is entitled to a target bonus equal to 50% of base salary. The maximum bonus amount is capped at 150% of his target bonus amount in fiscal 2016.
Annual bonus awards for Ms. Goldstein and Mr. Emerson are performance-based and primarily dependent on achievement of budgeted Non-GAAPAdjusted EBITDA over the applicable fiscal year. Budgeted Non-GAAPAdjusted EBITDA targets arepre-determined at the beginning of the applicable fiscal year and EBITDA is calculated using GAAP net income recorded for the Company, adding back or subtracting the net effect from deferral in net revenues and related costs of goods sold, impact of business reorganization, one-time gains or losses onlong-term investments, and adding back stock based compensation, interest, depreciation, amortization and tax expenses.year. The Compensation Committee believes that using budgeted Non-GAAPAdjusted EBITDA as the core performance metric in the annual bonus design represents an appropriate measure of the Company’s performance and an appropriate way to align NEOs’ short-term incentives with our shareholders’ interests.
Pursuant to her amended employment agreement in effect during fiscal 2018, Ms. Goldstein’s target contractual bonus was set at 70% of base salary (with a range from 0% to 140% of base salary), so achievement of 100% of the Company’s target Adjusted EBITDA would result in a bonus of 70% of base salary. Maximum bonus amounts were capped at 140% of base salary. For fiscal 2018, Mr. Emerson’s bonus structure was the same as Ms. Goldstein’s.
Bonus amounts for Ms. Goldstein areand Mr. Emerson in fiscal 2018 were a function of Non-GAAPAdjusted EBITDA relative to target, as set forth in the following table:
| Annual Bonus | |
Less than 80% of the budget | No bonus earned | |
80% - 100% of the budget | 0% - 70% of base salary | |
100% - 120% of the budget | 70% - 100% of base salary | |
120% - 150% of the budget | 100% - 140% of base salary | |
Greater than 150% of the budget | Capped at 140% of base salary |
Budgeted Non-GAAPAdjusted EBITDA for fiscal 20162018 was $101$236.9 million and the Company achieved actual Non-GAAPAdjusted EBITDA of $266.1$523.2 million. This Non-GAAPAdjusted EBITDA achievement was greater than 150% of the budgeted Non-GAAPAdjusted EBITDA, and so Ms. Goldstein and Mr. Emerson each received the maximum annual cash bonus as follows:
Annual Salary | Target Bonus | Maximum Bonus | Actual Bonus | Annual Salary | Target Bonus | Maximum Bonus | Actual Bonus | |||||||||||||||||
Ms. Goldstein | $663,255 | $464,279 (70% of base salary) | $928,557 (140% of base salary) | $928,557 | $ | 690,051 | $483,036 (70% of base salary) | $966,071 (140% of base salary) | $ | 966,071 | ||||||||||||||
Mr. Emerson | $435,000 | $217,500 (50% of base salary) | $326,250 (75% of base salary) | $326,250 | $ | 515,000 | $360,500 (70% of base salary) | $721,000 (140% of base salary) | $ | 721,000 |
Long-Term Equity Incentives
We believe that equity-based awards are an important factor in aligning the long-term financial interests of the NEOs and certain other employees of the Company with its shareholders. The Compensation Committee continually evaluates the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering the Company’s compensation program. Equity-based awards are generally
granted to new key employees on a quarterly basis following the commencement of employment and to existing key employees on an annual basis and following a significant change in job responsibilities or to meet other special retention objectives.
Our compensation program design, in particular the use of equity awards as a key incentive element, establishes strong links between our creative teams and long-term value creation for shareholders. Our long-term equity incentive program reflects the importance of creative talent to our business and allows forTake-Two to retain and incentivize key talent.
All grants made to employees, including the NEOs, are approved by the Compensation Committee and issued during the 45-day period following the Company’s filing with the SEC of our next quarterly report on Form 10-Q or the 30-day period following the Company’s filing of our next annual report on Form 10-K, as applicable.Committee. The current outstanding awards granted to our NEOs were made underare governed by the Company’s 2009 Stock Incentive Plan, as amended and restated (the “2009 Plan”) or the Company’s 2017 Stock Incentive Plan, as amended and restated (the “2017 Plan”), which is discussed further in “Executive Compensation—Narrative Disclosure Regarding Equity Plans and Employment Agreements.”
The Company generally uses a mix of time-based and performance-based vesting for NEO long-term equity incentive grants to achieve separate and distinct purposes. Time-based vesting awards emphasize the retention of skilled executives, while performance-based vesting awards support the goal of retention as well as alignment of the executives’ incentives with the interests of the Company’s shareholders.
NEO Long-Term Incentives Awarded in Fiscal 20162018
In June 2015,May 2017, the Compensation Committee determined that the Company would issue an award of 38,79914,369 RSUs, based on a value of $1,050,000 (based in part on peer benchmarking) divided by the average of the closing prices of the Company’s common stock on the ten trading days immediately prior to June 1, 2017, to each of Ms. Goldstein and Mr. Emerson based in part on peer benchmarking.recognition of the achievement of their individual performance goals and targets during fiscal 2017. The Compensation Committee made the fiscal 20162018 grants in the form of RSUs in June 2015,
2017, rather than in the form of restricted stock, in order to preserve flexibility to settle the awards in stock, cash or a combination of stock and cash. One grant, equal to 66.7% of the value at target, was a performance-based grant subject to satisfaction of TSR performance criteria during the vesting period (described in more detail below). A second grant, equal to 33.3% of the value at target, consisted of time-based RSUs and vests in three (3) equal annual installments commencing on June 1, 20162018 based on Ms. Goldstein’s and Mr. Emerson’s, as applicable, continued service with the Company. The number of shares of common stock that may be issued upon vesting of the performance-based RSUs included in the award amounts stated above assumes the achievement of the target performance criteria established by the Compensation Committee; however, the actual number of such shares for each grant may range from zero to a maximum of 51,73219,168 (equal to 200% of target), with the number of shares at target performance equal to 25,866.9,584.
The awards wererelative TSR metric is measured against the NASDAQ Composite Index over a period of two years to determine achievement of TSR goals. The TSR performance schedule is as follows:
Time-Based RSUs (#) | Time Based RSUs ($) | Performance Based RSUs (#) (at target) | Performance Based RSUs ($) (at target) | Performance Based RSUs (#) (at max) | Performance Based RSUs ($) (at max) | |||||
12,933 | $350,000 | 25,866 | $700,000 | 51,732 | $1,400,000 |
In early fiscal 2015, the Compensation Committee approved a number of changes to the long-term incentive program that became effective with fiscal 2015 equity grants. These changes included:
|
|
TSR Percentile Rank | Shares Earned as % of Target | |||
Less than | 0 | % | ||
| 50 | % | ||
| 100 | % | ||
| 200 | % |
The awards for fiscal 2018 were as follows:
Time-Based RSUs (#) | Time Based RSUs ($) | Performance-Based RSUs (#) (at target) | Performance Based RSUs ($) (at target) | Performance-Based RSUs (#) (at max) | Performance Based RSUs ($) (at max) | |||||
4,785 | $350,000 | 9,584 | $700,000 | 19,168 | $1,400,000 |
NEO Long-Term Incentives Awarded in Fiscal 20172019
In May 2016,2018, the Compensation Committee determined that the Company would issue an award of 28,49910,291 RSUs, based on a value of $1,050,000 (based in part on peer benchmarking) divided by the average of the closing prices of the Company’s common stock on the ten trading days immediately prior to April 1, 2018, to Mr. Emerson. Based on the revised target annual equity range included in the May 2018 amendment to Ms. Goldstein’s employment agreement, in May 2018, the Compensation Committee determined that the Company would issue 29,405 RSUs, based on a value of $3,000,000 (based in part on peer benchmarking) divided by the average of the closing prices of the Company’s common stock on the ten trading days immediately prior to April 1, 2018, to Ms. Goldstein. In each of Ms. Goldstein and Mr. Emersoncase, the incentive awards were made in recognition of the achievement of their individual performance goals and targets during fiscal 2016.2018 and a desire to incentivize continued strong performance. The RSUs are comprised of:
(i) |
(ii) |
The number of RSUs was determined based on the dollar value of the award and the average of the closing prices of the Company’s common stock on the ten trading days prior to May 26, 2016, the fifth trading day following the filing of the Company’s Annual Report on Form 10-K. The number of shares of common stock that
may be issued upon vesting of the performance-based RSUs assumes the achievement of the target performance criteria established by the Compensation Committee; however, the actual number of such shares may range from zero to a maximum of 37,998 (equal13,728 for Mr. Emerson and 39,226 for Ms. Goldstein (in each case equal to 200% of target), with the number of shares at target performance equal to 18,999.6,864 for Mr. Emerson and 19,613 for Ms. Goldstein.
SEC regulations generally require that the grant date fair value of equity awards be disclosed in the Summary Compensation Table for the year in which the equity awards were granted, not the year to which the services relate. As a result, the grant date value for equity grants made in June 20152017 are shown in the Summary Compensation Table on page 43,46, and the grant date value for the equity grants made in June 20162018 will be reflected in the Summary Compensation Table in our proxy statement for the 20172019 Annual Meeting of Shareholders.
NEO Long-Term Incentive Awards Vested in Fiscal 2018
The results and payout levels for the performance-based RSUs and/or restricted stock previously granted to Ms. Goldstein and Mr. Emerson that vested, or failed to vest, in fiscal 2018, are as follows:
Performance-Based RSUs and/or Restricted Stock (#) | Performance-Based RSUs and/or Restricted Stock (#) | |||
Ms. Goldstein | 212,171 (1) | 0 | ||
Mr. Emerson | 33,374 (2) | 0 |
(1) | Represents (i) 35,038 performance-based RSUs originally granted on September, 23, 2014, which vested on May 26, 2017, (ii) 25,866 performance-based RSUs originally granted on June 1, 2015, which vested on June 1, 2017, and (iii) 151,267 shares of performance-based restricted stock originally granted on November 7, 2012, which vested on March 31, 2018, in each case for which the maximum performance criteria was achieved. |
(2) | Represents (i) 7,508 shares of performance-based RSUs originally granted on September 17, 2014, which vested on May 26, 2017, and (ii) 25,866 performance-based RSUs originally granted on June 1, 2015, which vested on June 1, 2017, in each case for which the maximum performance criteria was achieved. |
For a description of the results and payout levels for performance-based RSUs previously granted to ZelnickMedia that vested, or failed to vest, in fiscal 2018, see “Certain Relationships and Related Transactions—Management Agreement—Awards under the 2014 Management Agreement.”
Other Compensation
401(k) Plan
We maintain a 401(k) savings plan and trust for our eligible employees, including our NEOs (other than Messrs. Zelnick and Slatoff). The plan permits each participant to make voluntarypre-tax contributions,post-tax “Roth” contributions or a combination of the two, and intwo. In addition, we make matching contributions equal to 50% of the participant’s eligible elective deferral (excludingcatch-up contributions) contributed to the 401(k) savings plan, but not more than an amount equal to 50% of the first 6% of the participant’spre-tax and/or Roth contributions will be matched. See the “All Other Compensation” column in the Summary Compensation Table for further information regarding these benefits.
Medical Expenses Reimbursement Plan
We maintain a medical expenses reimbursement plan (the “MERP”) for all of the NEOs, including for this purpose Messrs. Zelnick and Slatoff. Pursuant to the MERP, the participating NEOs are reimbursed for medical, dental and vision expenses that are not otherwise reimbursed by our group health insurance program.
Other Benefits and Perquisites
We provide health insurance, dental insurance, life and accidental death and dismemberment insurance and short-term and long-term disability benefits for our NEOs, including for this purpose Messrs. Zelnick and Slatoff, on the same basis as such benefits are generally provided to our employees. In addition, we pay a club membership fee on behalf of Mr. Zelnick, which is used primarily for general corporate and corporate development purposes.purposes, for a parking spot at our office located at 110 West 44th Street, New York, New York, 10036, and for the installation of home security measures for Mr. Zelnick. We consider the security measures provided to Mr. Zelnick to be a reasonable and necessary expense for the Company’s benefit. Other than the MERP, and the club membership fee, and the parking spot and home security for Mr. Zelnick, no material perquisites are provided to our NEOs. We do not have a formal perquisite policy and do not emphasize special perquisites for our executive officers, although the Compensation Committee periodically reviews perquisites for our executive officers in its review of compensation.
Severance and Change in Control Benefits
Severance and Change in Control Benefits for ZelnickMedia
Pursuant to the 20142017 Management Agreement, ZelnickMedia would receive the following cash payments and benefits upon a termination by the Company without “cause” or by ZelnickMedia for “good reason” (whether before or after a change in control): (i) the earned but unpaid portion of the management fee, (ii) any accrued but unpaid annual bonus for a completed fiscal year and (iii) three times the sum of the per annum management fee plus the target bonus amount. See “Certain Relationships and Related Transactions—Management Agreement” for more details. In addition, the 20142017 Management Agreement provides for accelerated vesting of outstanding and unvested equity awards upon such a termination (with vesting of TSR performance-based awards determined according to actual performance through the date of termination, and vesting of New IPRecurrent Consumer Spending and Major IP performance-based awards determined at target levels).
The cash payments described above remain consistent whether the termination occurs before or after a change in control, so ZelnickMedia is not entitled to receive any enhanced cash payments in connection with a change in control. With respect to vesting of equity awards in connection with a change in control, the 2014 2017
Management Agreement provides for “double trigger”“double-trigger” vesting. Accordingly, if a change in control occurs during the term of the 20142017 Management Agreement, outstanding and unvested equity awards will continue to vest (and performance-based RSUs will continue to vest at target levels) in accordance with the original vesting schedule, subject to earlier vesting upon a termination of the 20142017 Management Agreement without cause or for good reason.
Severance and Change in Control Benefits for Other NEOs
In March 2008, the Compensation Committee approved theTake-Two Interactive Software, Inc. Change in Control Employee Severance Plan (the “CIC Severance Plan”), a change in control plan pursuant to which certain eligible employees, including the NEOs other than Messrs. Zelnick and Slatoff, may receive certain “double-trigger” cash severance benefits upon a termination of employment either by the Company without “cause” or voluntarily for “good reason,” in either case during the12-month period following a change in control of the Company, as well as vesting of outstanding and unvested equity awards in connection with a change in control of the Company, as described under “Executive Compensation—Potential Payments Upon Termination or Change in Control” below. The employment agreements with Ms. Goldstein (as amended in May 2018) and Mr. Emerson provide for severance payments in the event of a separation from service from the Company under certain conditions, as well as payments in the event of a change in control of the Company. See “Executive Compensation—Narrative Disclosure Regarding Equity Plans and Employment Agreements” and “Executive Compensation—Potential Payments Upon Termination or Change in Control” below for more information. We believe that these severance benefits assist us in recruiting talented individuals to join and remain a part of our management team. From time to time, we may recruit executives from other companies where they have job security, tenure and career opportunities. Accepting a position with us may entail foregoing an otherwise secure position at another employer, and the benefits provided by the CIC Severance Plan help to mitigate the risk of harm that the executive may suffer in connection with adverse actions taken by a successor to the Company. Severance benefits also allow our NEOs to focus on the Company’s business without being unduly distracted by concerns about their job security in the event of a separation from service or a change in control. Our NEOs are not entitled to anygross-up payments to cover excise taxes imposed by the “golden parachute” regulations under Sections 280G and 4999 of the Code.
VI. Operation of the Compensation Committee
General
The Compensation Committee annually reviews compensation policies and procedures of the Company and evaluates and approves the NEOs’ compensation. The Compensation Committee also annually reviews the ZelnickMedia relationship. This review includes annual individual interviews with a broad group of executives, excluding our Executive Chairman and CEO and our President, to seek feedback on the ZelnickMedia relationship.
The Compensation Committee held six (6)seven (7) meetings during fiscal 2016.2018. The Compensation Committee regularly meets at least four times during the fiscal year.
Role of Management
When determining theNEO compensation, of the NEOs, the Compensation Committee solicits from the Executive Chairman and CEO an evaluation of the performance of, and recommendations with respect to compensation decisions for, each of the NEOs other than himself. In addition, with respect to setting compensation for fiscal 2016,2018, the Compensation Committee interviewed all of the NEOs, including the CEO and President, and members
of our management team who report to the NEOs in order to better assess each NEO’s performance during such period. The Compensation Committee also interviewed certain of the foregoing individuals in connection with its annual review, in conjunction with the Board of Directors, of ZelnickMedia’s performance during such period.
Use of Outside Advisors
The Compensation Committee has historically engaged the services of independent compensation consulting firms in connection with making executive compensation determinations. Consistent with our practice, the Compensation Committee retained Frederic W. Cook & Co., Inc. to review the compensation programs for our NEOs and our Board of Directors for fiscal 2016,2018, and to develop recommendations regarding our compensation programs for our fiscal years ending March 31, 20162018 and March 31, 2017.fiscal 2019.
The Compensation Committee has the authority to retain, terminate and set the terms of the Company’s relationship with any outside advisors that assist the Compensation Committee in carrying out its responsibilities.
The Compensation Committee assessed the independence of Frederic W. Cook & Co., Inc. pursuant to SEC and NASDAQ rules and was satisfied that the firm is independent and that no conflict of interest exists that would prevent it from serving as an independent advisor to the Compensation Committee. The Compensation Committee, among other things, reviewed and was satisfied with the consultant’s policies and procedures to prevent or mitigate conflicts of interest. The Compensation Committee also reviewed and was satisfied that there were no business or personal relationships between members of the Compensation Committee and the individuals at the consulting firm supporting the Compensation Committee.
VII. Compensation Governance Practices
Clawback Policy
Our Corporate Governance Guidelines includes a section entitled “Recovery of Improperly-Awarded Incentive Compensation” which is our “Clawback Policy.” Our NEOs (including ZelnickMedia and its shareholders, partners, employees, members and other affiliates who are deemed “Executives” under the Clawback Policy) are subject to the Clawback Policy. Our Corporate Governance Guidelines, including our Clawback Policy, are available on the Company’s website atwww.take2games.com by clicking on the “Corporate” tab, and then clicking on the “Corporate Governance” link.
Our Clawback Policy includes any amendments that may be required to comply with any rules adopted by the SEC in response to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This policy requires the reimbursement of any bonus or incentive compensation, including cash bonuses, awarded to a covered person and/or the cancellation of unvested restricted stock or outstanding stock option awards previously granted to a covered person, in each case, where: (1) the payment was predicated upon achieving certain financial results that were subsequently determined to have been erroneously reported; (2) the Board of Directors determines that the person engaged in knowing or intentional fraudulent or illegal conduct that caused or substantially caused such erroneous reporting to have occurred; and (3) a lower payment would have been made to the person based upon the corrected financial results.
Executive Officer Stock Ownership Requirements and Holding Requirement
The Company has adopted stock ownership requirements for executive officers of the Company as follows:
Executive Chairman and CEO and President
As discussed elsewhere in this Proxy Statement, our Executive Chairman and CEO and our President are compensated through the operation of the 20142017 Management Agreement, which containcontains certain provisions relating to stock ownership applicable to ZelnickMedia and its affiliates. In July 2016, the Board of Directors also adopted a policy relating to stock ownership guidelines applicable to any individual who serves as an
executive officer of the Company pursuant to an agreement with a third party consultant, which currently includes our Executive Chairman and CEO and our President. The 20142017 Management Agreement and the stock ownership guidelines policy adopted by the Board of Directors both prohibit, prior to March 31, 2019, 2024,
ZelnickMedia and any Subject Person (as defined in the 20142017 Management Agreement and which includes Messrs. Zelnick and Slatoff) from selling or otherwise disposing of any shares of common stock of the Company, if the Market Value (as defined in the 20142017 Management Agreement) of all shares of common stock of the Company (including any options, restricted stock and RSUs), after giving effect to such proposed sale or other disposition, owned by ZelnickMedia and each Subject Person, including Messrs. Zelnick and Slatoff, in the aggregate as of the trading day immediately preceding the date of the proposed sale or disposition, would be less than fivesix (6) times the per annum management fee (excluding any bonuses).
Other NEOs
Under the Company’s stock ownership requirements, NEOs (other than the Executive Chairman and CEO and President (who are currently subject to the stock ownership requirements described above)) shall own shares of common stock having a value equal to three (3) times the annual base salary paid by the Company to its NEOs. Such NEOs shall achieve such stock position within five (5) years after the date of the adoption of the requirements and future NEOs shall achieve such ownership position within five (5) years after the date of their appointment as NEOs. For purposes of determining compliance with the stock ownership requirements, all shares that are directly owned by the NEO, shares that are beneficially owned by the NEO, such as shares held in “street name” through a broker or shares held in trust, and vested and unvested shares of restricted stock and RSUs are counted toward satisfying the requirements.
The policy adopted by the Board of Directors in July 2016 also includes stock retention guidelines for all NEOs requiring such officers to retain at least 50% of the total equity credited from grants of equity awards (net of amounts required to pay taxes and exercise prices) until compliance with the applicable stock ownership requirement is achieved. All NEOs are in compliance with the applicable stock ownership requirements as of the date of this proxy filing.
Anti-Hedging Policy
The Company has adopted a Securities Trading Policy whichthat prohibits, among other things, officers, directors, employees and consultants of the Company, as well as the shareholders, partners, employees, members, and other affiliates of ZelnickMedia who are service providers to the Company subject to such policy, from engaging in the following transactions:
In and Out Trading. (All purchases of the Company’s securities in the open market must be held for a minimum of six months, with exceptions relating to the exercise of stock options.)
Purchases of Company securities on margin or holding any Company securities in margin accounts.
Pledging Company securities as collateral for a loan.
Short sales of the Company’s securities.
Transactions in puts, calls or other derivatives on the Company’s securities, as well as any other derivative or hedging transactions on Company securities.
The anti-hedging restrictions contained in the Securities Trading Policy were adopted by our Board of Directors in 2014.
Anti-Pledging Policy
As a matter of good corporate governance, our Board of Directors has adopted a formal policy against pledging common stock pursuant to which members of the Board of Directors and executive officers may not hold common stock in margin accounts and may not pledge common stock as collateral for a loan. None of our directors or executive officers has pledged any shares of our common stock.
Impact of Tax and Accounting Rules
As a general matter, the Compensation Committee reviews and considers the various tax and accounting implications of compensation vehicles utilized by the Company.
With respect to accounting considerations, the Compensation Committee examines the accounting cost associated with equity compensation in light of requirements under the Accounting Standards Codification (“ASC”) Stock Compensationstock compensation guidance, which generally requires the Company to recognize compensation expense relating to equity awards based upon the grant date fair value of those awards. The Company also considers the accounting impact of preserving flexibility to settle RSUs awards in cash, shares, or a combination of cash and shares.
With respect to taxes, the Compensation Committee may consider the anticipated tax treatment of various payments and benefits to the Company and, when relevant, to its executives. Section 162(m) of the Code generally prohibitsprohibited any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the NEOs (other than our chief financial officer), subject to certain exceptions. However, the Company generally believesbelieved that it iswas in our best interest and that of our shareholders to have the flexibility to pay compensation that iswas not deductible under the limitations of Section 162(m) of the Code to provide a compensation package consistent with our program and objectives.
The Tax Cuts and Jobs Act, enacted on December 22, 2017, substantially modified Section 162(m) of the Code and, among other things, eliminated the performance-based exception to the $1 million deduction limit effective as of January 1, 2018. As a result, beginning in 2018, compensation paid to certain executive officers in excess of $1 million will generally be nondeductible, whether or not it is performance-based. In addition, beginning in 2018, the executive officers subject to Section 162(m) of the Code (the “Covered Employees”) will include any individual who served as the Chief Executive Officer and Chief Financial Officer at any time during the taxable year and the three other most highly compensated officers (other than the Chief Executive Officer and Chief Financial Officer) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual will remain a Covered Employee for all future years, including following any termination of employment.
The Tax Cuts and Jobs Act includes a transition rule under which the changes to Section 162(m) of the Code described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and is not materially modified after that date. To the extent applicable to our existing contracts and awards, the Compensation Committee may avail itself of this transition rule. However, because of uncertainties as to the application and interpretation of the transition rule, no assurances can be given at this time that our existing contracts and awards, even if in place on November 2, 2017, will meet the requirements of the transition rule. Moreover, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals in the best interest of the Company, the Compensation Committee does not limit its actions with respect to executive compensation to preserve deductibility under Section 162(m) of the Code if the Compensation Committee determines that doing so is in the best interests of the Company and its shareholders.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors of the Company that the Compensation Discussion and Analysis be included in this Proxy Statement.
Submitted by the Compensation Committee | ||
of the Board of Directors: | ||
Michael Sheresky (Chair) | ||
Michael Dornemann | ||
July | J Moses |
RISK ASSESSMENT OF OVERALL COMPENSATION PROGRAM
The Compensation Committee regularly reviews senior executive compensation and Company-wide compensation programs and policies in an ongoing effort to seek to eliminate or mitigate potential risks arising from such programs and policies and to ensure that our compensation structure, elements and incentives are not reasonably likely to have a material adverse effect on the Company.
The Compensation Committee seeks to design our compensation plans, including our incentive compensation programs, to incorporate a range of components that we believe help to mitigate potential risks, while rewarding employees for pursuing our strategic and financial objectives through appropriate risk taking, risk management, and prudent tactical and strategic decision making. For example, the design of our compensation plans is intended to encourage employees to remain focused on both the short-termnear-term and long-termlonger-term goals of the Company by using a mix of short-term and long-term incentives to motivate employees to produce superior short-term and long-term results and weover varying time frames. We believe that the use of long-term incentives for executives provides a safeguard against excessive risk-taking. Our long-term incentives are designed to deter unnecessary risk-taking by aligning our employees’ interests with those of shareholders by incorporating equity-based compensation that vestvests over time and, in some cases, include a market-based performance metric, which we believe is not susceptible to manipulation by employees and encourages employees to remain focused on sustained stock price appreciation. Individual bonus caps for senior executives further mitigate risk.
We have also sought to deter unnecessary risk-taking by applying aour clawback policy to certainthe senior executives of the Company, which requires the reimbursement of any bonus or incentive compensation awarded to a covered person and/or the cancellation of unvested restricted stock or outstanding stock option awardsequity previously granted to a covered person underin certain conditions, in each case, where (1) the payment was predicated upon achieving certain financial results that were subsequently determined to have been erroneously reported, (2) the Board of Directors determines that the person engaged in knowing or intentional fraudulent or illegal conduct that caused or substantially caused such erroneous reporting to have occurred, and (3) a lower payment would have been made to the person based upon the corrected financial results.cases.
In addition, our stock ownership guidelines require that our executive officers hold a significant amount of common stock to further align their interests with shareholders over the long term by having a portion of their personal investment portfolio consist of common stock. We expect this component to mitigate risk on a prospective basis. We also prohibit transactions designed to limit or eliminate economic risks to our employees of owning our common stock, such as options, puts, and calls, so our executives cannot insulate themselves from the effects of poor stock price performance.
Senior executives from our risk, compliance, administrative, and finance functions, as well as the outside compensation consultant to our Compensation Committee, are involved in this annual review process. With respect to fiscal 20162018 and the compensation programs in place for fiscal 2016,2018, based in part on the information and analyses provided by management and its own advisors, the Compensation Committee concluded that the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company.
The following table sets forth summary information for the fiscal years ended March 31, 2016,2018, March 31, 2015,2017, and March 31, 2014,2016, with respect to cash and all other compensation paid by the Company to, or earned by, the Company’s NEOs.
Summary Compensation Table
Name and Principal Position | Fiscal Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | Fiscal Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||||||||||||||||
Strauss Zelnick(4) | 2016 | 1 | — | — | 22,873 | 22,874 | 2018 | 1 | — | — | 42,628 | 42,629 | ||||||||||||||||||||||||||||||||||||
Executive Chairman and Chief Executive Officer | 2015 | 1 | — | — | 20,913 | 20,914 | 2017 | 1 | — | — | 23,269 | 23,270 | ||||||||||||||||||||||||||||||||||||
2014 | 1 | — | — | 19,092 | 19,093 | 2016 | 1 | — | — | 22,873 | 22,874 | |||||||||||||||||||||||||||||||||||||
Lainie Goldstein | 2016 | 663,255 | 1,395,729 | 928,557 | 14,286 | 3,001,827 | 2018 | 690,051 | 1,732,624 | 966,071 | 14,704 | 3,403,450 | ||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2015 | 650,250 | 1,686,554 | 910,350 | 14,284 | 3,261,438 | 2017 | 676,520 | 1,427,984 | 947,128 | 14,720 | 3,066,352 | ||||||||||||||||||||||||||||||||||||
2014 | 637,500 | 991,582 | 892,500 | 22,115 | 2,543,697 | 2016 | 663,255 | 1,395,729 | 928,557 | 14,286 | 3,001,827 | |||||||||||||||||||||||||||||||||||||
Karl Slatoff(4) | 2016 | 1 | — | — | 19,824 | 19,825 | 2018 | 1 | — | — | 20,628 | 20,629 | ||||||||||||||||||||||||||||||||||||
President | 2015 | 1 | — | — | 19,824 | 19,825 | 2017 | 1 | — | — | 20,220 | 20,221 | ||||||||||||||||||||||||||||||||||||
2014 | 1 | — | — | 33,559 | 33,560 | 2016 | 1 | — | — | 19,824 | 19,825 | |||||||||||||||||||||||||||||||||||||
Daniel Emerson | 2016 | 435,000 | 1,395,729 | 326,250 | 229,770 | (6) | 2,386,749 | 2018 | 515,000 | 1,732,624 | 721,000 | 28,682 | 2,997,306 | |||||||||||||||||||||||||||||||||||
Executive Vice President and General Counsel | 2015 | 397,781 | 447,101 | 299,063 | 89,209 | (7) | 1,233,154 | 2017 | 500,000 | 1,427,984 | 375,000 | 28,770 | 2,331,754 | |||||||||||||||||||||||||||||||||||
Executive Vice President and General Counsel | 2016 | 435,000 | 1,395,729 | 326,250 | 197,786 | (5) | 2,354,765 |
(1) | Represents the aggregate grant date fair value of stock awards granted to our NEOs in each of the reporting periods, determined under FASB ASC Topic 718,Compensation—Stock |
Name | Fiscal Year | Probable Outcome ($) | Maximum Performance ($) | Fiscal Year | Probable Outcome ($) | Maximum Performance ($) | ||||||||||||||||||
Lainie Goldstein | 2016 | 1,042,917 | 1,411,249 | 2018 | 1,358,820 | 1,497,404 | ||||||||||||||||||
2015 | 1,280,989 | 1,622,259 | 2017 | 1,062,234 | 1,462,923 | |||||||||||||||||||
2014 | 634,682 | 713,800 | 2016 | 1,042,917 | 1,411,249 | |||||||||||||||||||
Daniel Emerson | 2016 | 1,042,917 | 1,411,249 | 2018 | 1,358,820 | 1,497,404 | ||||||||||||||||||
2015 | 274,492 | 345,218 | 2017 | 1,062,234 | 1,462,923 | |||||||||||||||||||
2016 | 1,042,917 | 1,411,249 |
(2) | These amounts represent annual cash incentive payments. For more information, refer to “Compensation Discussion and Analysis—Annual Cash Incentive” above and the “Grants of Plan-Based Awards” table below. |
(3) | The amounts set forth in this column for fiscal |
used primarily for general corporate and corporate development |
(4) | As discussed in more detail below, Messrs. Zelnick and Slatoff were compensated for their respective services to the Company during fiscal years |
(5) |
Includes net tax gross ups of |
Grants of Plan-Based Awards
The following table sets forth information concerning awards under the Company’s equity andnon-equity incentive plans granted to each of the NEOs during fiscal 2016,2018, including performance-based awards and those using time-based vesting. Assumptions used in the calculation of certain dollar amounts are included in Note 15 to the Company’s audited consolidated financial statements included in the Company’s Annual Report onForm 10-K for fiscal 2016.2018.
Grant Date | Approval Date | Estimated Future Payouts Under | Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock or Units(2) (#) | Grant Date Fair Value of Stock Awards ($)(4) | Grant Date | Approval Date | Estimated Future Payouts Under | Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock or Units(2) (#) | Grant Date Fair Value of Stock Awards ($)(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#)(3) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#)(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strauss Zelnick(5) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lainie Goldstein | 6/1/2015 | 6/1/2015 | — | — | 25,866 | 51,732 | — | 1,042,917 | 06/1/2017 | 5/23/2017 | — | — | 9,584 | 19,168 | — | 1,358,820 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/1/2015 | 6/1/2015 | — | — | — | — | — | — | 12,933 | 352,812 | 06/1/2017 | 5/23/2017 | — | — | — | — | — | — | 4,785 | 373,804 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | 464,279 | 928,557 | — | — | — | — | — | — | — | — | 483,036 | 966,071 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Karl Slatoff(5) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daniel Emerson | 6/1/2015 | 6/1/2015 | — | — | — | — | 25,866 | 51,732 | — | 1,042,917 | 06/1/2017 | 5/23/2017 | — | — | — | — | 9,584 | 19,168 | — | 1,358,820 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/1/2015 | 6/1/2015 | — | — | — | — | — | — | 12,933 | 352,812 | 06/1/2017 | 5/23/2017 | — | — | — | — | — | — | 4,785 | 373,804 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | 217,500 | 326,250 | — | — | — | — | — | — | — | — | 360,500 | 721,000 | — | — | — | — | — |
(1) | Represents cash performance bonus opportunities ranging from 0% to 140% of base salary for Ms. Goldstein and |
(2) | For Ms. Goldstein and Mr. Emerson, 66.7% of the RSUs vest in two (2) equal annual installments commencing in the second year following the year in which such grants were made on a date determined by the Compensation Committee at the time of grant, subject to the satisfaction of certain performance criteria based on the Company’s TSR performance measured against the NASDAQ Composite Index over a period of two (2) years. The remaining 33.3% of the RSUs vest in three (3) equal annual installments commencing in the year following the year in which such grants were made on a date determined by the Compensation Committee at the time of grant based on the NEO’s continued service with the Company. |
(3) | Represents the maximum shares of |
(4) | These amounts are valued based on the aggregate grant date fair market value of the award. For additional information with respect to stock awards granted during fiscal |
(5) | Messrs. Zelnick and Slatoff have not received grants of restricted stock, RSUs or option awards. Messrs. Zelnick and Slatoff are partners in ZelnickMedia, to which the Company has previously granted restricted stock, RSUs and options pursuant to the Management Agreements. For information regarding the grants made to ZelnickMedia, see “Certain Relationships and Related Transactions.” |
Narrative Disclosure Regarding Equity Plans and Employment Agreements
20092017 Stock Incentive Plan
TheTake-Two Interactive Software, Inc. 20092017 Stock Incentive Plan was approved by shareholders on April 23, 2009.September 15, 2017. Under the 20092017 Plan, the Company may grant stock-based incentive compensation awards to eligible employees (including officers),non-employee directors and consultants in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.
On April 23,The 2017 Plan replaced the 2009 Plan, which terminated effective upon shareholder approval of the Board2017 Plan. From and after the date of Directors approved and adopted amendmentssuch shareholder approval, no additional awards will be made under the 2009 Plan. However, any awards granted pursuant to the 2002 Stock Option2009 Plan prior to the approval and adoption of the 2017 Plan shall continue to be governed by the 2009 Plan.
Under the 2017 Plan, as of September 15, 2017, the date the Company’s Incentive Stockshareholders approved the 2017 Plan, the Company was authorized to provide that allissue up to 7,603,745 shares of common stock. In addition, the number of shares of common stock remaining available for grantissuance under such plans as of the close of business on that date would be transferred2017 Plan are subject to the 2009 Plan; noincrease by any shares of common stock would besubject to an award outstanding under the 2009 Plan after September 15, 2017 that become eligible for reuse pursuant to the share recycling provisions of the 2017 Plan. Stock-based awards assumed or substituted by the Company or its affiliates as part of a corporate transaction (including from an entity that the Company merges with or into, acquires, or engages with in a similar corporate transaction) will not count against the number of shares of common stock reserved and available for issuance pursuant to the grant2017 Plan (except as may be required by Section 422 of awardsthe Code). In addition, shares of common stock will not be deemed to have been issued pursuant to the 2017 Plan with respect to any portion of an award that is settled in cash.
2017 Global Employee Stock Purchase Plan
TheTake-Two Interactive Software, Inc. 2017 Global Employee Stock Purchase Plan (the “2017 Global ESPP”) was approved by shareholders on September 15, 2017. The adoption of the 2017 Global ESPP allows the Company to provide its employees and employees of certain designated subsidiaries and affiliates an opportunity to obtain a proprietary interest in the continued growth and prosperity of the Company through ownership of its shares of common stock. For employees of participating affiliates in countries outside of the United States, the 2017 Global ESPP will be effectuated via separate offerings under one or moresub-plans of the 2017 Global ESPP in order to achieve tax, employment, securities law or other purposes and objectives, and to conform the terms of thesub-plans with the laws and requirements of such plans followingcountries. Subject to adjustment for certain changes in recapitalization or reorganization, the closemaximum aggregate number of business on that date; andthe Company’s shares of common stock that were subject to any award under either such plan that were forfeited after the close of business on that date would not be available for grant under such plan. Pursuant to those amendments, 1,508,954 “carryover shares” became available for issuance under the 2009 Plan.
On April 15, 2010, the shareholders of the Company approved an amendment to the 2009 Plan, which increased the number of shares that may be issued to participants under the 2009 Plan in connection with awards granted from 4,900,000 to 7,650,000 (excluding the carryover shares). On September 26, 2011, the shareholders2017 Global ESPP is 9,000,000 shares. The 2017 Global ESPP became effective as of the Company approved an amendment to the 2009 Plan,first available offering date, which increased the number of shares that may be issued to participants under the 2009 Plan in connection with awards granted to 12,650,000 (excluding the carryover shares). On September 20, 2012, the shareholders of the Company approved and adopted an amendment to the 2009 Plan, which increased the number of shares that may be issued to participants in connection with awards granted to 15,450,000 (excluding the carryover shares). On September 18, 2013, the shareholders of the Company approved and adopted an amendment to the 2009 Plan, which increased the number of shares that may be issued to participants in connection with awards granted to 20,700,000 (excluding the carryover shares). On September 16, 2014, the shareholders of the Company approved and adopted an amendment to the 2009 Plan, which increased the number of shares that may be issued to participants in connection with awards granted to 25,700,000 (excluding the carryover shares). On July 21, 2016, the Board of Directors approved and adopted the proposed amendments to the 2009 Plan. If the amendments to the 2009 Plan are approved by the shareholders, the number of shares that may be issued to participants in connection with awards granted will be increased to 27,100,000 (excluding the carryover shares). For a more detailed description of the 2009 Plan, see Proposal 3 (“Amendments to the 2009 Stock Incentive Plan”) of this Proxy Statement.was on May 1, 2018.
Employment Agreements
Lainie Goldstein
Ms. Goldstein serves as Chief Financial Officer of the Company pursuant to an employment agreement between the Company and Ms. Goldstein, dated May 12, 2010, as amended on October 25, 2010, and August 27, 2012.2012 and May 17, 2018. Pursuant to the employment agreement, Ms. Goldstein will continue to serve as Chief Financial Officer of the Company until March 31, 2013,2023, and thereafter for successiveone-year periods until either party elects not to renew the term of the agreement (each, a “renewal term”).
Pursuant to the terms of the employment agreement, Ms. Goldstein received an annual base salary of $625,000 through March 31, 2013. Ms. Goldstein’s$690,051 in fiscal 2018, which base salary increased to $637,500 on April 1, 2013, to $650,250 on April 1, 2014, and to $663,255 on April 1, 2015, in each case pursuant to her employment agreement, which was amended in 2012 to provide that her salary will be increased byhad been increasing 2% at the start of each renewal term commencing
on and after April 1, 2013. On May 17, 2018, the Company entered into a third amendment to its employment agreement with Ms. Goldstein to extend the term of the agreement through March 31, 2023. In connection with this amendment, effective as of April 1, 2018, Ms. Goldstein’s base salary was increased to a fixed salary of $850,000 for the remainder of the term of the agreement, subject to increase from time to time, as determined by the Company, but with no automatic, annual cost of living increases. Ms. Goldstein will also be eligible to receive an annual bonus during each fiscal year of her employment at target in the amount of 70%100% of her base salary, based on the achievement of certain financial targets by the Company, as set forth in the employment agreement. Additionally, Ms. Goldstein is eligible to participate in the Company’s annual long-term incentive compensation program at a level commensurate with the Company’s other senior executives.program.
The employment agreement also provides for severance benefits upon termination by the Company without cause or a change in control. For more information regarding these severance and change in control benefits, please refer to “Potential Payments Upon Termination or Change in Control” below.
Ms. Goldstein has agreed not to compete with the Company or solicit any of the Company’s customers or personnel during her employment and for one year following any termination of her employment, all on the terms set forth in the employment agreement.
Karl Slatoff
On February 14, 2008, the Company entered into an employment agreement with Mr. Slatoff, pursuant to which Mr. Slatoff initially served as Executive Vice President of the Company.President. Effective October 25, 2010, Mr. Slatoff was named to the role of Chief Operating Officer of the Company.Officer. Effective May 1, 2013, Mr. Slatoff was appointed to the newly created role of President. Pursuant to the agreement, Mr. Slatoff will continue to serve as President of the Company until termination of the 20142017 Management Agreement, unless earlier terminated upon his death or resignation, or by the Board of Directors for any reason. Pursuant to the terms of the employment agreement, Mr. Slatoff receives an annual salary of $1.00. Additionally, Mr. Slatoff is eligible to participate in all benefits and plans which the Company may institute from time to time for its executive officers and employees (other than the 401(k) savings plan). The employment agreement with Mr. Slatoff provides that he is not entitled to receive an annual bonus from the Company. The employment agreement does not provide for any continued obligations of the Company following a termination of Mr. Slatoff’s employment other than continued indemnification rights and coverage under the Company’s directors’ and officers’ liability insurance policies.
Mr. Slatoff has agreed not to compete with the Company, ornor to solicit any of the Company’s customers or personnel during his employment and for one year following his termination for “cause” or without “good reason,” all on the terms set forth in the employment agreement.
Daniel Emerson
Mr. Emerson serves as Executive Vice President and General Counsel of the Company pursuant to an employment agreement between the Company and Mr. Emerson, dated January 28, 2015, effective as of October 24, 2014. Pursuant to the employment agreement, Mr. Emerson will continue to serve as Executive Vice President and General Counsel of the Companyin this capacity until his employment is terminated by him or the Company in accordance with the provisions of the employment agreement.
Pursuant to the terms of the employment agreement, Mr. Emerson receivesreceived an annual base salary of $435,000.$515,000 for fiscal 2018, based in part on peer benchmarking, as well as Mr. Emerson’s strong individual performance and value to the organization as a key senior leader. On May 23, 2018, the Compensation Committee approved an increase to Mr. Emerson’s base salary, effective April 1, 2018, to $540,000 based in part on peer benchmarking. Mr. Emerson will also be eligible to receive an annual bonus during each fiscal year of his employment at target in the amount of 50%70% of his base salary, based on the achievement of certain financial targets by the Company. Additionally, Mr. Emerson is eligible to participate in the Company’s annual long-term incentive compensation program.
The employment agreement also provides for severance benefits upon termination by the Company without cause or a change in control. For more information regarding these severance and change in control benefits, please refer to “Potential Payments Upon Termination or Change in Control” below.
Mr. Emerson has agreed not to solicit any of the Company’s customers or personnel during his employment and for one year following any termination of his employment, all on the terms set forth in the employment agreement.
Outstanding Equity Awards at FiscalYear-End
The following table sets forth information concerning shares of restricted stock and RSUs outstanding for each of the NEOs as of March 31, 2016:2018:
Stock Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Stock Award Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock That Have Not Vested ($) | Stock Award Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock That Have Not Vested ($)(2) | ||||||||||||||||||||||||||||||
Strauss Zelnick(3) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Lainie Goldstein | 6/1/2015 | 12,933 | 487,186 | 25,866 | 974,372 | 6/1/2017 | 4,785 | 467,877 | 19,168 | 1,874,247 | ||||||||||||||||||||||||||||||
9/23/2014 | 81,756 | 3,079,749 | — | — | 6/1/2016 | 25,332 | 2,476,963 | — | — | |||||||||||||||||||||||||||||||
6/10/2013 | 21,578 | 812,843 | — | — | 6/1/2015 | 30,177 | 2,950,707 | — | — | |||||||||||||||||||||||||||||||
11/7/2012 | 258,993 | 9,756,266 | — | — | ||||||||||||||||||||||||||||||||||||
Karl Slatoff(3) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Daniel Emerson | 6/1//2015 | 12,933 | 487,186 | 25,866 | 974,372 | 6/1/2017 | 4,785 | 467,877 | 19,168 | 1,874,247 | ||||||||||||||||||||||||||||||
9/17/2014 | 20,022 | 754,229 | — | — | 6/1/2016 | 25,332 | 2,476,963 | — | — | |||||||||||||||||||||||||||||||
6/10/2013 | 6,165 | 232,236 | — | — | 6/1/2015 | 30,177 | 2,950,707 | — | — | |||||||||||||||||||||||||||||||
4/1/2013 | 10,913 | 411,093 | — | — |
(1) | Time-based awards and performance-based awards with respect to which the performance criteria have been satisfied, in each case made under the 2009 Plan, which time-based awards vest, subject to continuing employment, in three (3) equal annual installments commencing in the year following the year in which such grants were made on a date determined by the Compensation Committee at the time of grant and which performance-based awards will vest, if at all, in two (2) equal annual installments commencing in the second year following the year in which such grants were made on a date determined by the Compensation Committee at the time of |
(2) | Value determined based on the closing price of the Company’s common stock of |
(3) | Messrs. Zelnick and Slatoff have not received grants of stock or option awards. Messrs. Zelnick and Slatoff are partners in ZelnickMedia, to which the Company has previously granted restricted stock, RSUs and options pursuant to the Management Agreements. Of these grants, no options or shares of restricted stock remained outstanding and an aggregate of |
Stock Vested During 20162018 Fiscal Year
The following table sets forth information concerning the vesting of shares of restricted stock held by each of the NEOs during fiscal 2016.2018. The value realized from vested restricted stock is deemed to be the market value of the common stock on the date of vesting multiplied by the number of shares.
Stock Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Strauss Zelnick(1) | — | — | — | — | ||||||||||||
Lainie Goldstein | 150,359 | 5,013,734 | 225,489 | (2) | $ | 20,546,188 | ||||||||||
Karl Slatoff(1) | — | — | — | — | ||||||||||||
Daniel Emerson | 27,774 | 763,328 | 43,355 | (3) | $ | 3,376,381 |
(1) | As discussed above, Messrs. Zelnick and Slatoff have not received grants of stock or option awards but are partners in ZelnickMedia, which has received certain grants. On |
(2) | Represents (i) 35,038 performance-based RSUs and 5,840 time-based RSUs originally granted on September, 23, 2014, which vested on May 26, 2017, (ii) 25,866 performance-based RSUs and 4,311 time-based RSUs originally granted on June 1, 2015, which vested on June 1, 2017, (iii) 3,167 time-based RSUs originally granted on June 1, 2016, which vested on June 1, 2017, and (iv) 151,267 shares of performance-based restricted stock originally granted on November 7, 2012, which vested on March 31, 2018. Maximum performance criteria was achieved for all such performance-based RSUs. |
(3) | Represents (i) 7,508 shares of performance-based RSUs and 2,503 time-based RSUs originally granted on September 17, 2014, which vested on May 26, 2017, (ii) 25,866 performance-based RSUs and 4,311 time-based RSUs originally granted on June 1, 2015, which vested on June 1, 2017 and (iii) 3,167 time-based RSUs originally granted on June 1, 2016, which vested on June 1, 2017. Maximum performance criteria was achieved for all such performance-based RSUs. |
Pension Benefits
We do not currently sponsor or maintain any defined benefit pension or retirement plans providing specified retirement payments and benefits for our employees.
Nonqualified Deferred Compensation Plan Benefits
We do not currently sponsor or maintain any nonqualified defined contribution or other nonqualified deferred compensation plans for the benefit of our employees.
Potential Payments Upon Termination or Change in Control
Ms. Goldstein and Mr. Emerson are entitled to receive certain amounts and benefits upon termination of their employment or a change in control pursuant to their employment agreements. Additionally, Ms. Goldstein and Mr. Emerson are eligible to participate in the CIC Severance Plan, to the extent they would be entitled to receive greater amounts and benefits under the CIC Severance Plan than under their employment agreements. Messrs. Zelnick and Slatoff are not entitled to receive directly any severance benefits from the Company upon a termination of employment or change in control.
Employment Agreements
Lainie Goldstein
Pursuant to the terms of Ms. Goldstein’s employment agreement in effect for fiscal 2018, Ms. Goldstein will bewas entitled to receive the following severance benefits upon a termination by the Company without cause (including anon-renewal of the agreement as well as her resignation following certain events that will be deemed a termination without cause): (i) a lump sum payment within 30 days of termination equal to the sum of (w) 1.5 times her then-current base salary, (x) 1.5 times her target bonus of 70% of base salary, (y) a prorated target bonus for the year of termination (equal to 50% of target if such termination occurs during the first half of the year, and 100% of target if such termination occurs during the second half of the year), and (z) any unpaid bonuses earned in respect of prior years; (ii) reimbursement for the cost of continued medical health insurance coverage under COBRA for 18 months (or until Ms. Goldstein becomes entitled to coverage with a subsequent employer); and (iii) immediate vesting in all outstanding and unvested options and shares of restricted stock then held by her. Ms. Goldstein has
On May 17, 2018, the Company entered into a third amendment to its employment agreement with Ms. Goldstein, effective April 1, 2018, which, among other things, amended certain of the benefits she is entitled to receive upon termination of her employment. Pursuant to the terms of Ms. Goldstein’s amended employment agreement in effect for fiscal 2019 and future fiscal years, she will be entitled to receive the following severance benefits upon a termination by the Company without cause (including anon-renewal of the agreement as well as her resignation following certain events that will be deemed a termination without cause): (i) (w) a continuation of Ms. Goldstein’s then-current base salary for 24 months, (x) 2 times her target bonus of 100% of base salary, (y) a prorated target bonus for the year of termination (equal to 50% of target if such termination occurs during the first half of the year, and 100% of target if such termination occurs during the second half of the year), and (z) any unpaid bonuses earned in respect of the prior full fiscal year, (ii) reimbursement for the cost of continued health insurance coverage under COBRA or its equivalent for 24 months (or until Ms. Goldstein becomes entitled to coverage with a subsequent employer); and (iii) immediate vesting in all outstanding and unvested restricted equity then held by her. Ms. Goldstein has agreed not to compete with the Company or solicit any of the Company’s customers or personnel during her employment and for one year following any termination of her employment, all on the terms set forth in the employment agreement.
The employment agreement (both prior to and after the May 17, 2018 amendment) also provides that, upon a change in control of the Company, Ms. Goldstein will be entitled to a retention bonus equal to three months’ base salary upon the closing of the transaction, and three months’ base salary upon the six month anniversary thereof, in each case subject to her continued employment with the Company through the applicable payment date (or an earlier termination by the Company without cause (including anon-renewal of the employment agreement as well as her resignation following certain events that will be deemed a termination without cause)). The employment agreement also provides that any amounts received by her in connection with a change in control will be reduced if, pursuant to the excise tax provisions of the Code relating to “parachute payments,” such reduction would result in a greaterafter-tax benefit to her.
Daniel Emerson
Pursuant to the terms of Mr. Emerson’s employment agreement, Mr. Emersonhe will be entitled to receive the following severance benefits following a termination by the Company without cause (including his resignation following certain events that will be deemed a termination without cause): (i) for a period of 12 months following such termination of employment, continuation of his base salary and continued participation in Company welfare benefit plans (including, without limitation, any medical benefits in which he participates) on the same terms and conditions as in effect at the time of the event triggering his entitlement to severance; (ii) immediate vesting of all restricted equity previously granted to him; (iii) subject to the effective date of Mr. Emerson’s termination,
payment of the following lump sum amounts: (x) any accrued but unpaid bonuses earned in respect of prior years; (y) if the termination is effective during the first half of the year, a lump sum payment equivalent to the sum of (1) the accrued but unpaid bonus for the prior fiscal year and (2) 50% of the target bonus for which Mr. Emerson would otherwise have been eligible in the current fiscal year; or (z) if such termination occurs during the second half of the year, a lump sum payment equivalent to the sum of (1) the accrued but unpaid bonus for the prior fiscal year and (2) the target bonus for which Mr. Emerson would otherwise have been eligible in the current fiscal year. Mr. Emerson has agreed not to solicit any of the Company’s customers or personnel during his employment and for one year following any termination of his employment, all on the terms set forth in the employment agreement.
CIC Severance Plan
Pursuant to the CIC Severance Plan, certain eligible employees, including Ms. Goldstein and Mr. Emerson may receive certain benefits upon a termination of employment either by the Company without “cause” or voluntarily for “good reason,” in either case during the12-month period following a change in control of the Company. The benefits that Ms. Goldstein and Mr. Emerson would be entitled to receive upon a qualifying termination of employment under the CIC Severance Plan consist of the following:
a cash severance payment equal to 150% of the sum of the NEO’s annual base salary and target annual bonus or incentive opportunity;
continued health benefits for a period of 18 months; and
full and immediate vesting of all outstanding and unvested equity awards.
For purposes of the CIC Severance Plan, Ms. Goldstein and Mr. Emerson will be deemed to have resigned for “good reason” if the resignation occurs or occurred, as applicable, in connection with any of the events specified in the employment agreements, such that the resignation would be or would have been, as applicable, tantamount to a termination without cause under the terms of the employment agreements. For purposes of the CIC Severance Plan, “cause” generally means a participant’s continued failure to substantially perform the
participant’s duties after receipt of notice from the Company, a participant’s criminal conviction which is demonstrably injurious to the Company, a participant’s felony conviction, a participant’s gross negligence which affects the Company or a participant’s failure to adhere to the Company’s written policies or to cooperate in any investigation or inquiry involving the Company.
Severance benefits provided under the CIC Severance Plan are subject to reduction to avoid any excise tax on “parachute payments” under Section 280G of the Code if the employee would benefit from such reduction as opposed to receiving the full severance benefits and paying the excise tax. All employees who accept severance payments and, if applicable, the continued health coverage under the CIC Severance Plan are required to sign a release and are subject to restrictions on the solicitation of employees and customers of the Company for a period of six months following termination as well as anon-disparagement obligation. In addition, all employees who accept any benefits under the CIC Severance Plan are subject to a duty to cooperate reasonably with the Company in any litigation relating to matters in which the employee was personally involved. We do not provide for any taxgross-ups in respect of any excise taxes on parachute payments.
The tables below set forth amounts to be paid or benefits received by those NEOs entitled to receive any amounts or benefits upon termination of their employment or a change in control, assuming the applicable triggering event occurred on March 31, 2016.2018.
Lainie Goldstein | Termination Without Cause ($)(1) | Death or Disability ($) | Change in Control Termination Without Cause or for Good Reason ($) | Change in Control Without Termination ($) | Termination Without Cause ($)(1) | Death or Disability ($) | Change in Control Termination Without Cause or for Good Reason ($) | Change in Control Without Termination ($) | ||||||||||||||||||||||||
Cash Payment | 1,691,301 | — | 1,691,301 | — | ||||||||||||||||||||||||||||
Salary Payment(2) | 1,035,077 | — | 1,035,077 | — | ||||||||||||||||||||||||||||
Continuation of Medical Insurance | 14,439 | — | 14,439 | — | 11,982 | — | 11,982 | — | ||||||||||||||||||||||||
Acceleration of Equity Awards | 15,110,416 | 15,110,416 | 15,110,416 | — | 5,895,547 | 5,895,547 | 5,895,547 | — | ||||||||||||||||||||||||
Pro-rated Bonus | 464,279 | 464,279 | 696,418 | — | ||||||||||||||||||||||||||||
Bonus Payment(5) | 1,207,589 | 483,036 | 1,207,589 | — | ||||||||||||||||||||||||||||
Stay Bonus | — | — | 331,628 | 331,628 | — | — | 345,026 | 345,026 | ||||||||||||||||||||||||
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Total Termination Benefits | 17,280,435 | 15,574,695 | 17,844,202 | (3) | 331,628 | (3) | 8,150,195 | 6,378,583 | 8,495,221 | (8) | 345,026 | (8) | ||||||||||||||||||||
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Daniel Emerson | Termination Without Cause ($)(1) | Death or Disability ($) | Change in Control Termination Without Cause or for Good Reason ($) | Change in Control Without Termination ($) | Termination Without Cause ($)(1) | Death or Disability ($) | Change in Control Termination Without Cause or for Good Reason ($) | Change in Control Without Termination ($) | ||||||||||||||||||||||||
Cash Payment | 435,000 | — | 652,500 | — | ||||||||||||||||||||||||||||
Salary Payment | 515,000 | — | 772,500 | — | ||||||||||||||||||||||||||||
Continuation of Welfare Benefits | 15,938 | — | 43,924 | — | 11,527 | — | 28,823 | — | ||||||||||||||||||||||||
Acceleration of Equity Awards | 2,859,115 | — | 2,859,115 | — | 5,895,547 | — | 5,895,547 | — | ||||||||||||||||||||||||
Pro-rated Bonus | 217,500 | — | 326,250 | — | ||||||||||||||||||||||||||||
Bonus Payment | 360,500 | — | 540,750 | — | ||||||||||||||||||||||||||||
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Total Termination Benefits | 3,527,553 | — | 3,881,789 | (3) | — | 6,782,574 | — | 7,237,620 | (8) | — | ||||||||||||||||||||||
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(1) | Under Ms. Goldstein’s and Mr. Emerson’s employment agreements, a termination without cause includes a resignation following certain events so as to be deemed a |
by the Company, a material diminution in such person’s title, status, position or responsibilities, the Company’s failure to timely pay compensation due under the employment agreement, a material reduction in such person’s salary or any reduction in target bonus, assignment of duties to such person which are materially inconsistent with the duties set forth in the employment agreement, relocation of such person’s principal place of employment beyond 10 miles from its then-current location or the failure of any successor to assume the Company’s obligations under the employment agreement. |
(2) | Reflects the amounts that Ms. Goldstein would have received under her employment agreement as it existed on March 31, 2018 and prior to the May 17, 2018 amendment. After giving effect to the May 17, 2018 amendment, the amounts in both the “Termination Without Cause” and the “Change in Control Termination Without Cause or for Good Reason” columns would be $1,700,000. |
(3) | Reflects the amounts that Ms. Goldstein would have received under her employment agreement as it existed on March 31, 2018 and prior to the May 17, 2018 amendment. After giving effect to the May 17, 2018 amendment, the amounts in both the “Termination Without Cause” and the “Change in Control Termination Without Cause or for Good Reason” columns would be $15,975. |
(4) | The value of the equity awards is calculated by multiplying the number of shares of restricted stock and RSUs that accelerate by the per share closing price of the Company’s common stock of |
(5) | Reflects the amounts that Ms. Goldstein would have received under her employment agreement as it existed on March 31, |
Reflects the amounts that Ms. Goldstein would have received under her employment agreement as it existed on March 31, 2018 and prior to the May 17, 2018 amendment. After giving effect to the May 17, 2018 amendment, the amounts in both the “Change in Control Termination Without Cause or for Good Reason” and “Change in Control Without Termination” columns would be $425,000. |
(7) | Reflects the amounts that Ms. Goldstein would have received under her employment agreement as it existed on March 31, 2018 and prior to the May 17, 2018 amendment. After giving effect to the May 17, 2018 amendment, the amount in the “Termination Without Cause” column would be $10,161,523, the amount in the “Death or Disability” column would be $6,745,547, the amount in the “Change in Control Termination Without Cause or for Good Reason” column would be $10,586,523, and the amount in the “Change in Control Without Termination” column would be $425,000. |
(8) | In the event that the total amounts payable in connection with a change in control to Ms. Goldstein or Mr. Emerson would trigger an excise tax on “parachute payments” under Section 280G of the Code, then the total amounts payable in the scenarios illustrated in this table would be reduced in order to avoid triggering the excise tax if they would benefit from such reduction as opposed to paying the excise tax. |
CEO Pay Ratio
Under SEC rules, we are required to provide information regarding the relationship between the annual total compensation of Mr. Strauss Zelnick, the Company’s Chairman and Chief Executive Officer, and the annual total compensation of the Company’s median employee (excluding Mr. Zelnick) for fiscal 2018. With respect to the annual total compensation of Mr. Zelnick, we used both the amount reported in the Summary Compensation Table, as required by Item 402(u) or RegulationS-K, and, because such amount does not reflect the amount Mr. Zelnick receives from our payments to ZelnickMedia, the maximum amount Mr. Zelnick was eligible to receive from ZelnickMedia in connection with the fees paid by us to ZelnickMedia under the 2014 Management Agreement and 2017 Management Agreement for fiscal 2018. We believe this provides a better understanding than the ratio based solely on the amount of Mr. Zelnick’s compensation reported in the “Total” column in the “Summary Compensation Table” included in this proxy statement.
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K under the Securities Act of 1933, as amended. We determined the median of the annual total cash compensation of our employees as of January 1, 2018, at which time we had approximately 4,504 regular, temporary, and seasonal individuals employed on a full or part-time basis, globally, approximately 2,005 of whom are U.S. employees, and approximately 2,499 (or approximately 55% of our total employee population) of whom are located outside of the United States. We did not exclude any of the employees who are located outside of the United States from the pool used to identify the median employee.
We then compared the annualized base salaries, bonuses earned and commissions earned by our employees (other than Mr. Zelnick) to determine the median employee. Once we identified our median employee, we estimated such employee’s annual total compensation in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, yielding the median annual total compensation disclosed above.
There are a wide variety of job functions within our company, across numerous global jurisdictions. Accordingly, the compensation paid to our employees differs greatly between departments, experience levels, and locations. We believe that our employees are fairly compensated and appropriately incentivized.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Compensation of Directors During 20162018 Fiscal Year
The Compensation Committee reviews and makes recommendations to the Board regarding the form and amount of compensation fornon-employee directors. Typically, on an annual basis, the Committee considers a board compensation study by its independent compensation consultant to support the Committee in its deliberations.
Such compensation may include, but is not limited to, the following elements: board or committee retainer, board or committee meeting fees, committee chair retainer or fees, equity compensation, benefits and perquisites.
All directors, other than Mr. Zelnick, are regarded asnon-employee directors. The key elements of the compensation payable to ournon-employee directors are as follows:
Component | Value of Award Under Current Policy | Notes | ||||||
Annual Retainer | For Each Non-Employee Director | $ | $ | |||||
Lead Independent Director Additional Fees | For Lead Independent Director | $200,000 | $100,000 restricted stock / $100,000 cash | |||||
Committee Fees | Audit Committee | Chair | $35,000 | — | ||||
Other Members | $17,500 | |||||||
Compensation Committee | Chair | $25,000 | — | |||||
Other Members | $12,500 | |||||||
Corporate Governance Committee | Chair | $20,000 | — | |||||
Other Members | $10,000 | |||||||
Executive Committee | Chair | N/A | Lead Independent Director | |||||
Other Independent Members | $25,000 | — |
(1) | On December |
Eachnon-employee director may make an irrevocable election to receive 100% of annual retainer and committee fees in shares of restricted stock. For fiscal 2016,2018, Mr. Bowman received 100% of these fees in restricted stock. Commencing in the fourth quarter of fiscal 2018, Mr. Moses elected to receive 100% of these fees in restricted stock.
The restricted stock portion of the annual retainer is granted to thenon-employee directors in four equal quarterly installments and such shares vest on the first anniversary of the grant date (discussed below). Grants of restricted stock are generally made on the fifth trading day following the filing of the Company’s Annual Report on Form10-K or Quarterly Report on Form10-Q, as applicable. The number of shares of restricted stock granted is determined by dividing the dollar value of the restricted stock to be delivered by the average of the closing prices of our common stock on the ten trading days prior to the fifth trading day following the filing of the Company’s Annual Report on Form10-K or Quarterly Report on Form10-Q, as applicable.
Under theTake-Two Interactive Software, Inc. 2017 Stock Incentive Plan, the maximum value of awards granted tonon-employee directors in any one calendar year, together with any cash fees paid to such directors
during such calendar year in respect of such director’s service as a member of the Board of Directors during such year, may not, absent extraordinary circumstances, exceed $750,000 in total value. As determined by the Compensation Committee in its discretion, this limit may be increased for anon-executive chair of the Board of Directors or, in extraordinary circumstances, for other individualnon-employee directors; provided that thenon-employee director receiving such additional compensation may not participate in the decision to award such compensation.
Reimbursement of Certain Expenses.Non-employee directors are reimbursed for travel expenses to attend Board of Directors and committee meetings and to attend director education seminars in accordance with policies approved from time to time.
Director Stock Ownership Requirements. The Board of Directors updated its existingUnder the stock ownership requirements fornon-employee directors of the Company, in December 2014. Under these requirements, non-employee directors are required to own shares of common stock having a value equal to five times the annual cash retainer. Before December 2014, Currentnon-employee directors were required to own shares of common stock having a value equal to three times the annual cash retainer. Current non-employee directors are required to achieve such stock position within five years after the date of the adoption of the requirements and futurenon-employee directors shall achieve such ownership position within five years after the date of their election to the Board of Directors. Information regarding executive officer stock ownership requirements is set forth in this Proxy Statement under “Compensation Discussion and Analysis.” Each independent director serving on the Board of Directors for more than one year actually owned shares in excess of the requirements as of record date.
Director Compensation Table
The following table sets forth information concerning the compensation of the Company’snon-employee directors during fiscal 2016.2018.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | ||||||||||||||||||
Robert A. Bowman | 95,000 | (2) | 165,000 | 260,000 | 82,597 | (3) | 157,450 | 240,047 | ||||||||||||||||
Michael Dornemann | 200,000 | 265,000 | 465,000 | 200,000 | 307,575 | 507,575 | ||||||||||||||||||
J Moses | 92,500 | 165,000 | 257,500 | 94,833 | (4)(5) | 205,039 | 299,872 | |||||||||||||||||
Michael Sheresky | 120,000 | 165,000 | 285,000 | 120,000 | 205,039 | 325,039 | ||||||||||||||||||
LaVerne Srinivasan | 72,917 | (6) | 213,476 | 286,393 | ||||||||||||||||||||
Susan Tolson | 77,500 | 165,000 | 242,500 | 79,833 | (7) | 205,039 | 284,872 | |||||||||||||||||
Strauss Zelnick | — | — | — | — | — | — |
(1) | Represents the aggregate grant date fair value of awards granted to our directors during fiscal |
the actual value that might be recognized by the directors. As of March 31, |
(2) | Effective February 12, 2018, Mr. Bowman resigned from the Company’s Board and as a member and Chair of its Audit Committee. |
(3) | For fiscal |
$25,389, $24,641, and |
(4) | Starting in the fourth quarter of fiscal 2018, Mr. Moses elected to receive all of his annual retainer and committee fees in shares of common stock. In accordance with SEC regulations, these amounts are reported in the table as fees earned or paid in cash, rather than as stock awards. On February 15, 2018, 203 shares of stock were granted to Mr. Moses with a grant date fair value of $21,956, as computed in accordance with FASB ASC 718,Compensation—Stock Compensation. |
(5) | Includes $2,333 of fees earned by Mr. Moses in fiscal 2018 after he was appointed as a member of the Company’s Audit Committee on February 12, 2018, which fees were paid to Mr. Moses on April 1, 2018. |
(6) | Includes $2,917 of fees paid to Ms. Srinivasan on April 1, 2017, which fees were earned by Ms. Srinivasan in fiscal 2017 after she was appointed to the Board of Directors effective March 17, 2017. |
(7) | Includes $2,333 of fees earned by Ms. Tolson in fiscal 2018 after she was appointed as the Chair of the Company’s Audit Committee on February 12, 2018, which fees were paid to Ms. Tolson on April 1, 2018. |
Equity Compensation Plan Information
The following table presents information concerning our equity compensation plans as of March 31, 2018:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)(2) | Weighted-Average Remaining Contractual Life of Outstanding Options, Warrants and Rights (years) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | ||||||||||||
Equity compensation plans approved by shareholders | 4,293,157 | (3) | — | — | 5,752,685 | |||||||||||
Equity compensation plans not approved by shareholders | — | — | — | — | ||||||||||||
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Total | 4,293,157 | — | — | 5,752,685 | ||||||||||||
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(1) | As of March 31, 2018, the Company also had 11,966 shares of outstanding restricted stock, which are not reflected in the table because they are treated as issued and outstanding and will not have additional dilutive impact on the Company when the awards vest. |
(2) | No weighted-average exercise price is reported for the awards reported because shares of common stock are issued under all of the outstanding awards without any cash payment. |
(3) | Consists of 4,293,157 RSUs originally granted under the 2009 Plan or the 2017 Plan that may be settled in cash or, in the discretion of the Company, in shares of common stock issued under the 2017 Plan. |
Compensation Committee Interlocks and Insider Participation
During fiscal 2016,2018, Messrs. Dornemann, Moses and Sheresky served as members of the Compensation Committee. During fiscal 2016:2018:
none of the members of the Compensation Committee was an officer (or former officer) or employee of the Company or any of its subsidiaries;
none of the members of the Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant and the amount involved exceeded $120,000;
none of the Company’s executive officers served on the compensation committee (or another Board of Directorsboard committee with similar functions or, if none, the entire Board of Directors)board) of another entity where one of that entity’s executive officers served on the Company’s Compensation Committee;
none of the Company’s executive officers was a director of another entity where one of that entity’s executive officers served on the Company’s Compensation Committee; and
none of the Company’s executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served as a director on the Board of Directors.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 18, 201616, 2018 (unless otherwise noted) relating to the beneficial ownership of shares of the common stock by (i) each person or entity who is known by the Company to own beneficially five percent or more of the outstanding common stock, (ii) each current director, (iii) each director nominee, (iv) each of the NEOs and (v) all current directors and executive officers as a group.
Name and Address of Beneficial Owner(1) | Number of Shares of Common Stock Beneficially Owned(2) | Percentage of Outstanding Common Stock Beneficially Owned | ||||||
BlackRock, Inc.(3) | 8,508,488 | 9.89 | % | |||||
The Vanguard Group, Inc.(4) | 6,132,508 | 7.13 | % | |||||
AJO, LP(5) | 5,118,942 | 5.95 | % | |||||
Eminence Capital, LP(6) | 4,576,563 | 5.32 | % | |||||
Strauss Zelnick(7) | 1,291,807 | 1.49 | % | |||||
Karl Slatoff(8) | 898,526 | 1.03 | % | |||||
Lainie Goldstein(9) | 541,333 | * | ||||||
Daniel Emerson(10) | 122,633 | * | ||||||
Robert A. Bowman | 127,393 | * | ||||||
J Moses | 8,720 | * | ||||||
Michael Sheresky | 66,727 | * | ||||||
Michael Dornemann | 10,738 | * | ||||||
Susan Tolson | 14,134 | * | ||||||
All directors and executive officers as a group (9 persons)(11) | 2,183,485 | 2.50 | % |
Name and Address of Beneficial Owner(1) | Number of Shares of Common Stock Beneficially Owned(2) | Percentage of Outstanding Common Stock Beneficially Owned | ||||||
BlackRock, Inc.(3) | 10,871,963 | 9.55 | % | |||||
The Vanguard Group, Inc.(4) | 11,877,488 | 10.43 | % | |||||
Strauss Zelnick(5) | 749,826 | * | ||||||
Karl Slatoff(6) | 525,538 | * | ||||||
Lainie Goldstein(7) | 291,362 | * | ||||||
Daniel Emerson(8) | 74,948 | * | ||||||
J Moses | 14,852 | * | ||||||
Michael Sheresky | 68,717 | * | ||||||
Michael Dornemann | 6,756 | * | ||||||
LaVerne Srinivasan | 2,733 | * | ||||||
Susan Tolson | 19,792 | * | ||||||
Paul Viera | 300 | * | ||||||
All directors and executive officers as a group (10 persons)(9) | 1,229,286 | 1.07 | % |
* | Less than 1%. |
(1) | Unless otherwise indicated, the address of each beneficial owner isTake-Two Interactive Software, Inc., |
(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 after July |
(3) | Based on information contained in a report on Schedule 13G/A filed with the SEC on January |
(4) | Based on information contained in a report on Schedule 13G/A filed with the SEC on |
(5) |
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Mr. Zelnick is a partner at ZelnickMedia. The shares listed include |
grant is subject to time-based vesting and the other portion is subject to performance-based vesting. The |
Mr. Slatoff is a partner at ZelnickMedia. The shares listed include |
The shares listed include (i) |
The shares listed include (i) |
The |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement
The Company is party to a Management Agreement, dated as of March 10, 2014,November 17, 2017, and effective AprilJanuary 1, 20142018 (the“20142017 Management Agreement”), with ZelnickMedia. The 20142017 Management Agreement replaced the Company’s previous Management Agreement with ZelnickMedia, dated as of May 20, 2011March 10, 2014 (the“2011 Management Agreement”), which in turn had superseded the Company’s original Management Agreement with ZelnickMedia, dated as of March 30, 2007, as amended as of July 27, 2007 and February 14, 2008 (the “Original2014 Management Agreement”). Upon its effectiveness, the 20142017 Management Agreement superseded and replaced the 2011 Management Agreement and the Original2014 Management Agreement, except as otherwise contemplated in the 20142017 Management Agreement.
Under the terms of the 20142017 Management Agreement, ZelnickMedia provides financial and management consulting services to the Company.
Term and Personnel. The 20142017 Management Agreement provides for a term through March 31, 2019,2024, unless earlier terminated in accordance with its terms. Under the 20142017 Management Agreement, ZelnickMedia continues to provide certain individuals as it deems appropriate for the performance of the 20142017 Management Agreement. Specifically (i) Mr. Zelnick serves as Executive Chairman of the Board of Directors and CEO of the Company, (ii) Mr. Slatoff serves as the Company’s President, and (iii) other ZelnickMedia personnel as appropriate provide services to the Company on aproject-by-project, as needed basis.
If Mr. Zelnick or any other employee of ZelnickMedia acting in an executive capacity for the Company pursuant to the 20142017 Management Agreement is unable or unavailable to serve in such capacity (other than due to a termination by the Company without Cause or their resignation for Good Reason (as such terms are defined in such person’s employment agreement with the Company or, in the case of Mr. Zelnick, in the 20142017 Management Agreement)), and ZelnickMedia is unable to provide a qualified individual within a reasonable period of time to serve in such capacity who is reasonably satisfactory to the Board of Directors, then the Company may fill such position with a person not affiliated with ZelnickMedia and deduct the costs of such person’s compensation from ZelnickMedia’s compensation under the 20142017 Management Agreement (with such deduction limited to no more than 60% of the aggregate compensation payable to ZelnickMedia if such person replaces Mr. Zelnick and no more than 40% of the aggregate compensation payable to ZelnickMedia if such person replaces Mr. Slatoff).
Management Fee and Annual Bonus Opportunity. Under the 20142017 Management Agreement, the Company pays a monthly management fee equal to $247,500$258,333.33 per month ($2,970,0003,100,000 annualized). The management fee will not be increased or decreased during the term of the 20142017 Management Agreement. In addition to the monthly management fee, ZelnickMedia receives an annual bonus, subject to the achievement by the Company of certain performance thresholds in respect of each of the five fiscal years ending March 31, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023 and 2019.2024. For each fiscal year (other than for the nine-month period from March 31, 2017 to December 31, 2017), the annual bonus opportunity ranges from $0 (at 80% of the Target, as defined in the 20142017 Management Agreement) to $4,752,000$7,440,000 (at 150% of the Target or greater). The annual bonus opportunity will not be increased or decreased during the term of the 20142017 Management Agreement. If the 20142017 Management Agreement is terminated by the Company without Cause (as defined in the 20142017 Management Agreement) or by ZelnickMedia for Good Reason (as defined in the 20142017 Management Agreement) (whether before or after a Change in Control (as defined in the 20142017 Management Agreement)), ZelnickMedia is entitled to be paid on the date of termination an amount equal to the sum of (i) the earned but unpaid portion of the management fee, (ii) any accrued but unpaid annual bonus for a completed fiscal year and (ii) three times the sum of the per annum management fee plus the Target bonus amount.
Expense Reimbursement. Under the 20142017 Management Agreement, ZelnickMedia is entitled to the reimbursement of reasonableout-of-pocket expenses in connection with the 20142017 Management Agreement and the rendering of services thereunder.
Limits on Compensation. Under the 20142017 Management Agreement, no more than 60% of the aggregate compensation payable to ZelnickMedia under the 20142017 Management Agreement (whether in the form of the management fee, the annual bonus or the RSU awards) shall be received by or conveyed to Mr. Zelnick (or such other employee of ZelnickMedia that serves as Executive Chairman and CEO of the Company) and no more than 40% of such aggregate compensation shall be received by or conveyed to Mr. Slatoff (or such other employee of ZelnickMedia that serves as the President of the Company).
Restrictions on Sale of Vested Stock. Under the 20142017 Management Agreement, prior to March 31, 20192024 (or earlier in the event of a Change in Control) ZelnickMedia and any Subject Person (as defined in the 20142017 Management Agreement) are prohibited from selling or otherwise disposing of any shares of common stock of the Company, if the Market Value (as defined in the 20142017 Management Agreement) of all shares of common stock of the Company (including any options, restricted stock and RSUs), after giving effect to such proposed sale or other disposition, owned by ZelnickMedia and each Subject Person in the aggregate as of the trading day immediately preceding the date of the proposed sale or disposition, would be less than fivesix times (5x)(6x) the per annum management fee (excluding any bonuses).
Awards under the 2017 Management Agreement
Under the 2017 Management Agreement, as further described below, the Company granted RSUs to ZelnickMedia on April 13, 2018 (the “2018 Restricted Units”) under the 2017 Plan. The 2018 Restricted Units, comprised of both time-based and performance-based RSUs as described below, were granted pursuant to the terms of a Restricted Unit Agreement, dated April 13, 2018, by and between the Company and ZelnickMedia (the “2018 Restricted Unit Agreement”). Under the 2017 Management Agreement, the Company, in its discretion, may grant additional annual equity awards to ZelnickMedia over the course of the term of the 2017 Management Agreement.
2018 Restricted Units.
Time-Based Award. The Company issued to ZelnickMedia 86,010 time-based RSUs (such number determined by dividing $8,775,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2018), which units will vest on April 13, 2020, provided that the 2017 Management Agreement has not been terminated prior to such date (the “2018 Time-Based Award”). Notwithstanding the foregoing, the 2018 Time-Based Award will immediately vest in full if the 2017 Management Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason. Conversely, ZelnickMedia will forfeit to the Company all 2018 Restricted Units under the 2018 Time-Based Award if the 2017 Management Agreement is terminated by the Company for Cause or by ZelnickMedia without Good Reason prior to April 13, 2020.
Performance-Based Award. The Company granted ZelnickMedia 210,246 performance-based RSUs (the “2018 Performance Award”), which represents the maximum number of performance-based RSUs that are eligible to vest (with the target number of performance-based RSUs of 105,123 determined by dividing $10,725,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2018) and which have been divided into three categories of vesting as follows: (i) on April 13, 2020, a number of IP Performance-Based Units (as defined in the 2018 Restricted Unit Agreement) will vest equal to the product of (x) the target number of IP Performance-Based Units in such vesting tranche (13,140) multiplied by (y) the IP Vesting Percentage (as defined in the 2018 Restricted Unit Agreement) on March 31, 2020, which ranges from 0% to 200%, (ii) on April 13, 2020, a number of Recurrent Consumer Spending Performance-Based Units (as defined in the 2018 Restricted Unit Agreement) will vest equal to the product of (x) the target number of Recurrent Consumer Spending Performance-Based Units in such vesting tranche (13,141) multiplied by (y) the Recurrent Consumer Spending Vesting Percentage (as defined the 2018 Restricted Unit Agreement) on March 31, 2020, which ranges from 0% to 200%, and (iii) on April 13, 2020, a number of TSR Performance-Based Units (as defined in the 2018 Restricted Unit Agreement)
will vest equal to the product of (x) the target number of TSR Performance-Based Units in such vesting tranche (78,842) multiplied by (y) the TSR Vesting Percentage (as defined in the 2018 Restricted Unit Agreement) on March 31, 2020, which ranges from 0% to 200%.
In the event that any portion of the 2018 Performance Award will not have vested as of April 13, 2020 or upon a termination of the 2017 Management Agreement by the Company for Cause or by ZelnickMedia without Good Reason, ZelnickMedia will forfeit to the Company any and all 2018 Restricted Units that have not vested as of such date.
Awards under the 2014 Management Agreement
Under the 2014 Management Agreement, as further described below, the Company has granted RSUs to ZelnickMedia on April 1, 2014 (the “2014 Restricted Units”), May 20, 2015 (the “2015 Restricted Units”), and May 20, 2016 (the “2016 Restricted Units”) and May 25, 2017 (the “2017 Restricted Units”,” and together with the 2014 Restricted Units, the 2015 Restricted Units, the 2016 Restricted Units, and the 20152018 Restricted Units, the “Restricted Units”) under the 2009 Plan. The 2014 Restricted Units, comprised of both time-based and performance-based RSUs, as described below, were granted pursuant to the terms of a Restricted Unit Agreement, dated April 1, 2014, as amended, by and between the Company and ZelnickMedia (the “2014 Restricted Unit Agreement”). The 2015 Restricted Units, comprised of both time-based and performance-based RSUs, as described below, were granted pursuant to the terms of a Restricted Unit Agreement, dated May 20, 2015, as amended, by and between the Company and ZelnickMedia (the “2015 Restricted Unit Agreement”). The 2016 Restricted Units, comprised of both time-based and performance-based RSUs, as described below, were granted pursuant to the terms of a Restricted Unit Agreement, dated May 20, 2016, by and between the Company and ZelnickMedia (the “2016 Restricted Unit Agreement”). The 2017 Restricted Units, comprised of both time-based and performance-based RSUs as described below, were granted pursuant to the terms of a Restricted Unit Agreement, dated May 25, 2017, by and between the Company and ZelnickMedia (the “2017 Restricted Unit Agreement”,” and together with the 2014 Restricted Unit Agreement, the 2015 Restricted Unit Agreement, the 2016 Restricted Unit Agreement and the 20152018 Restricted Unit Agreement, the “Restricted Unit Agreements”). UnderAs of the date of this Proxy Statement the 2014 Management Agreement, the Company, in its discretion, may grant additional annual equity awards to ZelnickMedia over the course of the term of the 2014 Management Agreement.
2014 Restricted Units.
Time-Based Award. The Company issued to ZelnickMedia 178,654 time-based RSUs (such number determined by dividing $3,850,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2014), all of which units vested on May 20, 2016 (the “2014 Time-Based Award”).
Performance-Based Award. The Company granted ZelnickMedia 440,836 performance-based RSUs (the “2014 Performance Award”), which represents the maximum number of performance-based RSUs that are eligible to vest (with the target number of performance-based RSUs of 220,418 determined by dividing $4,750,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2014). 413,258 of such units vested as of May 20, 2016Units and 27,578 units were forfeited as of May 20, 2016 due to the failure to meet performance conditions.
2015 Restricted Units.
Time-Based Award. The Company issued to ZelnickMedia 151,575 time-based RSUs (such number determined by dividing $3,850,000 by the average of the closing prices of the Company’s common stock for each
trading day during the 10 trading day period immediately prior to April 1, 2015), which units will vest on April 1, 2017, provided that the 2014 Management Agreement has not been terminated prior to such date (the “2015 Time-Based Award”). Notwithstanding the foregoing, the 2015 Time-Based Award will immediately vest in full if the 2014 Management Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason. Conversely, ZelnickMedia will forfeit to the Company all 2015 Restricted Units under the 2015 Time-Based Award if the 2014 Management Agreement is terminated by the Company for Causeboth vested, or by ZelnickMedia without Good Reasonfailed to vest, in accordance with their terms prior to April 1, 2017.fiscal 2018.
Performance-Based Award. The Company granted ZelnickMedia 374,016 performance-based RSUs (the “2015 Performance Award”), which represents the maximum number of performance-based RSUs that are eligible to vest (with the target number of performance-based RSUs of 187,008 determined by dividing $4,750,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2015) and which have been divided into three categories of vesting as follows: (i) on April 1, 2017, a number of New IP Performance-Based Units (as defined in the 2015 Restricted Unit Agreement) will vest equal to the product of (x) the target number of New IP Performance-Based Units in such vesting tranche (23,376) multiplied by (y) the New IP Vesting Percentage (as defined in the 2015 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2017, which ranges from 0% to 200%, (ii) on April 1, 2017, a number of Major IP Performance-Based Units (as defined in the 2015 Restricted Unit Agreement) will vest equal to the product of (x) the target number of Major IP Performance-Based Units in such vesting tranche (23,376) multiplied by (y) the Major IP Vesting Percentage (as defined the 2015 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2017, which ranges from 0% to 200%, and (iii) on April 1, 2017, a number of TSR Performance-Based Units (as defined in the 2015 Restricted Unit Agreement) will vest equal to the product of (x) the target number of TSR Performance-Based Units in such vesting tranche (140,256) multiplied by (y) the TSR Vesting Percentage (as defined in the 2015 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2017, which ranges from 0% to 200%. See “Compensation Discussion and Analysis—NEO Compensation Structure and Pay-for-Performance Principles—Compensation of Mr. Zelnick and Mr. Slatoff” for more information on the performance-based vesting criteria.
In the event that any portion of the 2015 Performance Award will not have vested as of April 1, 2017 or upon a termination of the 2014 Management Agreement by the Company for Cause or by ZelnickMedia without Good Reason, ZelnickMedia will forfeit to the Company any and all 2015 Restricted Units that have not vested as of such date.
2016 Restricted Units.
Time-Based Award. The Company issued to ZelnickMedia 107,551 time-based RSUs (such number determined by dividing $3,850,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2016), all of which units will vestvested on April 1,2, 2018 provided that the 2014 Management Agreement has not been terminated prior to such date (the “2016 Time-Based Award”, and together with the 2014 Time-Based Award and the 2015 Time-Based Award, the “Time-Based Awards”). Notwithstanding the foregoing, the 2016 Time-Based Award will immediately vest in full if the 2014 Management Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason. Conversely, ZelnickMedia will forfeit to the Company all 2016 Restricted Units under the 2016 Time-Based Award if the 2014 Management Agreement is terminated by the Company for Cause or by ZelnickMedia without Good Reason prior to April 1, 2018.
Performance-Based Award. The Company granted ZelnickMedia 265,384 performance-based RSUs (the “2016 Performance Award”, and together with the 2014 Performance Award and the 2015 Performance Award, the “Performance Awards”), which represents the maximum number of performance-based RSUs that are eligible to vest (with the target number of performance-based RSUs of 132,692 determined by dividing $4,750,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2016). The 2016 Performance Award was divided into the following three categories based on the applicable performance-vesting criteria (as described in the 2016 Restricted Unit Agreement): New IP Performance-Based Units, Major IP Performance-Based Units, and TSR Performance-Based Units. The results and payout levels for the 2016 Performance Award, which vested, or failed to vest, on April 2, 2018, are as follows:
2016 Performance Award Vested (#) | 2016 Performance Award Forfeited (#) | |||||||||
Based on Performance- Vesting Criteria | Based on Achievement of Major IP Performance- Vesting Criteria | Based on Performance- | Based on Achievement of New IP Performance- Vesting Criteria | Based on Achievement of Major IP Performance- Vesting Criteria | Based on Performance- | |||||
0 | 33,172 | 199,038 | 33,174 | 0 | 0 |
2017 Restricted Units.
Time-Based Award. The Company issued to ZelnickMedia 66,122 time-based RSUs (such number determined by dividing $3,850,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2017), which units will vest on April 4, 2019, provided that the 2017 Management Agreement has not been terminated prior to such date (the “2017 Time-Based Award”, and together with the 2016 Time-Based Award and the 2018 Time-Based Awards, the “Time-Based Awards”). Notwithstanding the foregoing, the 2017 Time-Based Award will immediately vest in full if the 2017 Management Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason. Conversely, ZelnickMedia will forfeit to the Company all 2017 Restricted Units under the 2017 Time-Based Award if the 2017 Management Agreement is terminated by the Company for Cause or by ZelnickMedia without Good Reason prior to April 4, 2019.
Performance-Based Award. The Company granted ZelnickMedia 163,160 performance-based RSUs (the “2017 Performance Award”, and together with the 2016 Performance Award and the 2018 Performance Award, the “Performance Awards”), which represents the maximum number of performance-based RSUs that are eligible to vest (with the target number of performance-based RSUs of 81,580 determined by dividing $4,750,000 by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period immediately prior to April 1, 2017) and which have been divided into three categories of
vesting as follows: (i) on April 1, 2018,4, 2019, a number of New IP Performance-Based Units (as defined in the 20162017 Restricted Unit Agreement) will vest equal to the product of (x) the target number of New IP Performance-Based Units in such vesting tranche (16,587)(10,198) multiplied by (y) the New IP Vesting Percentage (as defined in the 20162017 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2018,March 29, 2019, which ranges from 0% to 200%, (ii) on April 1, 2018,4, 2019, a number of Major IP Performance-Based Units (as defined in the 20162017 Restricted Unit Agreement) will vest equal to the product of (x) the target number of Major IP Performance-Based Units in such vesting tranche (16,586)(10,197) multiplied by (y) the Major IP Vesting Percentage (as defined the 20162017 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2017,March 29, 2019, which ranges from 0% to 200%, and (iii) on April 1, 2018,4, 2019, a number of TSR Performance-Based Units (as defined in the 20162017 Restricted Unit Agreement) will vest equal to the product of (x) the target number of TSR Performance-Based Units in such vesting tranche (99,519)(61,185) multiplied by (y) the TSR Vesting Percentage (as defined in the 20162017 Restricted Unit Agreement) on the trading day immediately preceding April 1, 2018,March 29, 2019, which ranges from 0% to 200%.
In the event that any portion of the 20162017 Performance Award will not have vested as of April 1, 20184, 2019 or upon a termination of the 20142017 Management Agreement by the Company for Cause or by ZelnickMedia without Good Reason, ZelnickMedia will forfeit to the Company any and all 20162017 Restricted Units that have not vested as of such date.
Treatment of Awards.
Upon a termination of the 20142017 Management Agreement by the Company without Cause or by ZelnickMedia for Good Reason, any then-unvested restricted stock or units granted pursuant to the Performance Awards (including any restricted stock or units granted to ZelnickMedia during the term of the 20142017 Management Agreement on or after AprilJanuary 1, 2014)2018) will vest on the assumption that the applicable performance measure was achieved at the target level of performance for the applicable performance period or, prior to a Change in Control (as defined in the 20142017 Management Agreement), for TSR Performance-Based Units (as defined in the applicable Restricted Unit Agreement), based on the actual level of performance achieved for each applicable performance measure as of the date of termination.
If the Company and ZelnickMedia fail to enter into a new management agreement on substantially similar terms in the aggregate as those provided under the 20142017 Management Agreement upon the expiration of the term of the 20142017 Management Agreement or otherwise fail to agree to extend the term of the 20142017 Management Agreement, all unvested time-vesting restricted stock or units granted during the term of the 20142017 Management Agreement on or after AprilJanuary 1, 20142018 will vest upon such expiration and all then-unvested performance-vesting
restricted stock or units will vest based on the assumption that the applicable performance measure was achieved at the target level of performance for the applicable performance period or, prior to a Change in Control, for TSR Performance-Based Units (as defined in the applicable Restricted Unit Agreement), based on the actual level of performance achieved for each applicable performance measure as of the date of termination.
If a Change in Control occurs during the term of the 20142017 Management Agreement, the 20142017 Management Agreement will not automatically terminate and all unvested RSUs granted pursuant to the applicable Restricted Unit Agreement will vest as set forth in the applicable Restricted Unit Agreement, except that any restricted stock or units granted to ZelnickMedia on or after April 1, 2014 will vest upon the earlier to occur of (x) a termination of the 20142017 Management Agreement by the Company without Cause or by ZelnickMedia for Good Reason or (y) the second anniversary of the applicable date of grant, and, with respect to any performance-based restricted stock or units, in each case, based on the assumption of that the applicable performance measure was achieved at the target level of performance for the applicable performance period. As of March 31, 2016,2018, all shares of restricted stock or units granted prior to April 1, 2014 (including any awards granted pursuant to the 2011 Management Agreement or the Original Management Agreement) have vested and/or have been forfeited pursuant to their terms.
Settlement of Restricted Units.
Pursuant to the 20142017 Management Agreement, the Company will have the right to elect to settle the RSUs granted to ZelnickMedia pursuant to the 20142017 Management Agreement in shares of the Company’s common stock that will be issued pursuant to the 20092017 Plan.
Registration Statement. Pursuant to the 20142017 Management Agreement, within 45 days following the request of ZelnickMedia, the Company will file a Registration Statement on FormS-3 registering for resale any of the shares of the Company’s common stock issuable pursuant to awards granted to ZelnickMedia under the Restricted Unit Agreements. The Company filed a registration statement on FormS-3 on May 20, 2016April 13, 2018 covering the resale of certain of such shares.
The foregoing descriptions of the 2017 Management Agreement, the 2014 Management Agreement and the Restricted Unit Agreements (including the Time-Based Awards and the Performance Awards issuable to ZelnickMedia thereunder) are only a summary and are qualified in their entirety by reference to the full text of the 2017 Management Agreement (and the 2018 Restricted Unit Agreement attached as Exhibit A thereto), which is attached as Exhibit 10.1 to the Company’s Current Report on Form8-K dated November 22, 2017 and incorporated herein by reference, the 2014 Management Agreement (and the 2014 Restricted Unit Agreement attached as Exhibit A thereto), which is attached as Exhibit 10.1 to the Company’s Current Report on Form8-K dated March 10, 2014 and incorporated herein by reference, the 2015 Restricted Unit Agreement, which is attached as Exhibit 10.2 to the Company’s Registration Statement on FormS-3 dated May 20, 2015 and incorporated herein by reference, and the 2016 Restricted Unit Agreement, which is attached as Exhibit 10.2 to the Company’s Registration Statement on FormS-3 dated May 20, 2016 and incorporated herein by reference.
Awards Under the 2011 Management Agreement
Restricted Stock Awards.Pursuant to the 2011 Management Agreement, the Company issued time-based and performance-based restricted stock to ZelnickMedia in November 2011, as further described below.
Time-Based Award. The Company granted ZelnickMedia a restricted stock award of 1,100,000 shares of common stock that vested in four equal installments on each of the first, second and third anniversaries of April 1, 2011, and then on May 20, 2015.
Performance-Based Award. The Company granted ZelnickMedia a restricted stock award of 1,650,000 shares of common stock. Twenty-five percent of such award vested on each of the first three anniversaries of April 1, 2011reference, and the remaining twenty-five percent vested, in the aggregate, on May 20, May 21, May 22 and May 26, 2015, respectively (which aggregate number of shares that vested on May 20, May 21, May 22 and May 26, 2015, respectively, equal to the number of shares eligible to vest on each of the first three anniversaries on April 1, 2011), respectively, based on the Company’s total shareholder return relative to the total shareholder return of the companies that constitute the NASDAQ Composite Index (the “Peer Companies”) during each of the four fiscal years of the Company ending March 31, 2012, 2013, 2014, and 2015. To earn all of the shares, the Company needed to perform at the 75th percentile, or top quartile, of the NASDAQ Composite Index.
On April 1, 2012, the first vesting tranche included 305,250 shares, reflecting the Company’s total shareholder return relative to the total shareholder return of the Peer Companies in the 62nd percentile. On April 1, 2013, no vesting of shares occurred reflecting the Company’s total shareholder return relative to the total shareholder return of the Peer Companies below the 50th percentile. On April 1, 2014, 486,750 shares vested, reflecting the Company’s total shareholder return relative to the total shareholder return of the Peer Companies in the 59th percentile for the third vesting tranche (using reference date of April 1, 2013), and the 50th percentile for the previously unvested portions of the first and second tranches (using reference date of April 1, 2011). On May 20, May 21, May 22 and May 26, 2015, an aggregate of 833,250 shares vested, reflecting the Company’s total shareholder return relative to the total shareholder return of the Peer Companies in the 91st percentile for the fourth vesting tranche (using reference date of April 1, 2014), and the 74th percentile for the previously unvested portions of the first, second and third tranches (using reference date of April 1, 2011).
Registration Statement. Pursuant to the 2011 Management2017 Restricted Unit Agreement, within 45 days following the request of ZelnickMedia, the Company will file a Registration Statement on Form S-3 registering for resale any shares of the Company’s common stock issuable pursuant to awards granted to ZelnickMedia under the 2011 Management Agreement. The Company filed a registration statement on Form S-3 on May 20, 2015 covering the resale of certain of such shares.
The foregoing descriptions of the 2011 Management Agreement and the related restricted stock award agreements are only a summary and are qualified in their entirety by reference to the full text of the 2011 Management Agreement (and the restricted stock award agreements attached as Exhibit A thereto), which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 24, 2011 and incorporated herein by reference, and the amendments to the restricted stock award agreements, which are filed as Exhibits 10.2 and 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 6, 2015 and Exhibits 10.5 and 10.6 to the Company’s Registration Statement on FormS-3 dated May 20, 201525, 2017 and incorporated herein by reference.
Policy on Transactions with Related Persons
The Board of Directors has adopted a policy requiring that any transaction: (1) involving the Company or any of its subsidiaries and (2) in which one of our directors, nominees for director, executive officers, or greater than five percent shareholders, or their immediate family members, have a direct or indirect material interest; be approved or ratified by a majority of the independent directors of the full Board of Directors.
In determining whether to approve or ratify any such transaction, the independent directors of the Board of Directors must consider, in addition to other factors deemed appropriate, whether the transaction is on terms no less favorable to the Company than those for transactions involving unrelated parties. No director may participate in any review, approval or ratification of any transaction if the director, or an immediate family member of such director, has a direct or indirect material interest in the transaction.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
The members of our Board of Directors, our executive officers and persons who beneficially own more than 10% of our outstanding common stock are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, which requires them to file reports with respect to their ownership of our common stock and their transactions in such common stock. Based solely upon a review of the copies of Section 16(a) reports that we have received from such persons or entities for transactions in our common stock and their common stock holdings for fiscal 2016,2018, we believe that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by our directors, executive officers and persons who beneficially own more than 10% of our outstanding common stock.
AMENDMENTS TO THE 2009 STOCK INCENTIVE PLAN
(Proposal 3)
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Minimum vesting periods for certain awards
No repricing of stock options without shareholder approval
No discounted stock options or SARs
Clawback provisions included
Non-liberal change in control provisions
No automatic grants
Double trigger acceleration of vesting for equity assumed or substituted for in connection with a change in control
Dividends on performance-based awards granted after July 2014 do not vest and are not paid until the performance award is earned and vested.
Proposed Amendments to the 2009 Plan
At the Annual Meeting, the Company’s shareholders will be asked to approve certain amendments to the Take-Two Interactive Software, Inc. 2009 Stock Incentive Plan (as amended, the“Plan”). The amendments were approved unanimously by the Board of Directors at its meeting on July 21, 2016. We propose to:
No other changes that are subject to shareholder approval are contemplated by the proposed amendments to the 2009 Plan, other than those noted above. Additional changes made to the 2009 Plan include the addition of annual compensation limits for the Company’s non-employee directors, and minimum vesting requirements for stock options and SARs, as described in more detail below, as well as certain other clarifying and administrative modifications.
Approved by shareholders in 2009, and amended in 2016, the 2009 Plan is designed to enable the Company to offer eligible employees, consultants and non-employee directors, stock-based incentives in the Company to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s shareholders.
As discussed below, the 2009 Plan serves a critical role in retaining the Company’s key talent and motivating such individuals to enhance the Company’s growth and profitability. Accordingly, the Company anticipates granting additional equity to the Company’s employees, consultants and non-employee directors as retention and performance incentive awards, which management believes would be best settled in common stock to most closely align the interests of such individuals with the Company’s shareholders. As of June 30, 2016, there were 695,695 shares available for grant under the 2009 Plan. The Company has determined that an increase to the shares reserved under the 2009 Plan by 1,400,000 shares, and an amendment to the share counting provisions under the 2009 Plan to provide that shares covered by awards that are settled in cash, as well as shares used to pay tax withholding obligations in respect of any full value award, will be added back to the share reserve, will allow the Company to continue providing meaningful incentives to its service providers under the 2009 Plan. If shareholders do not approve the amendments to increase the number of shares issuable under the 2009 Plan and to modify the share counting provisions under the 2009 Plan, the amendments will not take effect, but the Company may continue to grant awards under the 2009 Plan in accordance with the current terms and conditions to the extent that shares become available for grant in the future (generally as a result of cancellation, expiration or termination of awards, as discussed below). However, the Company does not anticipate that sufficient shares will be available for significant long-term stock-based incentive grants to employees if the amendments are not approved by the Company’s shareholders.
Alignment of the 2009 Plan with the Interests of the Company and Shareholders
More generally, the use of equity to retain and motivate the Company’s key talent is critical to the Company’s long-term goals. Affording the Company’s employees, consultants and non-employee directors the benefits of the 2009 Plan serves the following critical interests of the Company and its shareholders:
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In addition, the Board of Directors believes that the 2009 Plan contains several key features that enhance our commitment to shareholders’ long-term interests and sound corporate governance, including:
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The following description of the 2009 Plan, as amended by the amendments to the 2009 Plan, is a summary and is qualified in its entirety by reference to the amended and restated Plan, a copy of which is attached asAnnex A to this Proxy Statement.
Administration.The 2009 Plan is administered by a committee (the “Committee”) which, with respect to eligible employees and consultants, will be the Compensation Committee, or such other committee or subcommittee of the Board of Directors appointed from time to time by the Board of Directors, consisting of two or more non-employee directors, each of whom is intended to be, to the extent required, a non-employee director as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an outside director as defined under Section 162(m) of the Code and an independent director for the purposes of the applicable stock exchange rules. The Board of Directors will be the Committee with respect to the application of the 2009 Plan to non-employee directors.
Generally, the Committee has full authority to administer and interpret the 2009 Plan, to grant discretionary awards under the 2009 Plan, to delegate authority to others or other committees, and to determine:
the persons to whom awards will be granted;
the types of awards to be granted;
the terms and conditions of each award;
the number of shares of common stock to be covered by each award;
when an award may be granted (however, awards may be granted only during the 45-day period following the filing of a quarterly report by the Company or the 30-day period following the filing of the Company’s annual report, or immediately prior to a change in control that occurs outside of such periods); and
all other matters arising in connection with the 2009 Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the 2009 Plan.
The terms and conditions of individual awards will be set forth in written agreements that are consistent with the terms of the 2009 Plan. Awards under the 2009 Plan may not be made on or after the tenth anniversary of the 2009 Plan’s adoption by the Board of Directors, except that awards (other than any stock options or SARs) that are intended to be “performance-based” under Section 162(m) of the Code will not be made after the fifth anniversary of the date of the last approval by the Company’s shareholders of the performance goals set forth in the 2009 Plan.
Eligibility and Types of Awards. All employees and consultants of the Company and its affiliates as well as non-employee directors of the Company are eligible to be granted nonqualified stock options, SARs, restricted stock and other stock-based awards. In addition, the Company’s employees and employees of the Company’s affiliates that qualify as subsidiaries or parent corporations (as defined under Section 424 of the Code) are eligible to be granted incentive stock options under the 2009 Plan. As of the date of this proposal, approximately 1,600 employees are eligible to participate in the 2009 Plan.
Available Shares. As of June 30, 2016, 695,695 shares of common stock were available for issuance or for reference purposes under the 2009 Plan, subject to adjustment as provided in the 2009 Plan. Starting in fiscal year 2015, the Committee chose to count certain restricted units against the shares available under the 2009 Plan in full on the grant date, rather than incrementally as each tranche vests and is settled in shares of common stock. If the proposed amendments to the 2009 Plan are approved by shareholders, an additional 1,400,000 shares of our common stock will be available for future issuance under the 2009 Plan.
Awards of common stock under the 2009 Plan may either be authorized and unissued shares of common stock or shares of common stock held in treasury by the Company. In general, if awards under the 2009 Plan are cancelled, expire or terminate unexercised for any reason, the shares covered by such awards will be available again for the grant of awards under the 2009 Plan. If the proposed amendments to the 2009 Plan are approved by shareholders, shares covered by awards that are settled in cash, as well as shares used to pay tax withholding obligations in respect of any full value award, will again be available for issuance under the 2009 Plan. In addition, equity-based awards assumed or substituted by us or our affiliates in connection with a corporate transaction, or substitute awards, will not count against the share reserve under the 2009 Plan, as amended.
The number of shares of common stock available for awards under the 2009 Plan will be reduced by the total number of stock options, SARs or similar exercisable awards exercised (regardless of whether the shares of common stock underlying such awards are actually issued as the result of net settlement), any shares of common stock used to pay any exercise price or tax withholding obligation with respect to any stock options, SARs or similar exercisable awards, and any shares of common stock repurchased in the open market with the proceeds of a stock option exercise. The closing price of the common stock on the NASDAQ on July 18, 2016, was $40.66 per share.
The following share limits apply under the 2009 Plan with respect to awards granted to employees and consultants during any given fiscal year:
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The Committee will adjust the above individual maximum share limitations, the aggregate number of shares of common stock available for the grant of awards and the exercise price of an award to reflect certain changes in the Company’s capital structure or business by reason of certain corporate transactions or events as provided in the 2009 Plan.
In addition, the 2009 Plan, as amended, provides that the maximum value of awards granted to non-employee directors in any one calendar year, together with any cash fees paid to such directors during such calendar year, may not, absent extraordinary circumstances, exceed $750,000. As determined by the Committee in its discretion, this limit may be increased for a non-executive chair of the Board of Directors or, in extraordinary circumstances, for other individual non-employee directors; provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
Awards Under the 2009 Plan. The following types of awards are available under the 2009 Plan:
Stock Options. The Committee may grant incentive stock options (only to eligible employees) and nonqualified stock options to purchase shares of common stock. The Committee will determine the number of shares of common stock subject to each option, the term of each option (which may not exceed 10 years (or five years in the case of an incentive stock option granted to a 10% shareholder)), the exercise price, the vesting schedule (if any), and the other material terms of each option. No stock option, other than a substitute award,
may have an exercise price less than the fair market value of the common stock at the time of grant (or, in the case of an incentive stock option granted to a 10% shareholder, 110% of fair market value). The 2009 Plan, as amended, provides that no stock options, other than substitute awards, may vest over a period that is less than one year from the date of grant, except in the event of a recipient’s termination of employment without cause, or due to death, disability or retirement. Unless otherwise determined by the Committee at the time of grant, (i) stock options are subject to termination if prior to exercise the recipient engages in certain defined types of detrimental activity, and (ii) if the recipient engages in detrimental activity during the one-year period following the later of the date the stock option is exercised and the date the stock option becomes vested, the Company may recover at any time within the one-year period following such date, and upon request the recipient will pay to the Company, an amount equal to any gain realized as a result of the exercise (collectively, the “Detrimental Activity Provisions”).
Options will be exercisable at such time or times and subject to such terms and conditions as determined by the Committee at the time of grant, and the exercisability of such options may be accelerated by the Committee in its sole discretion. Upon the exercise of an option, the participant must make payment of the full exercise price, either (i) in cash, check, bank draft or money order; (ii) solely to the extent permitted by law, through the delivery of irrevocable instructions to a broker reasonably acceptable to the Company to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee.
Stock Appreciation Rights. The Committee may grant SARs either with a stock option, which SARs may be exercised only at such times and to the extent the related option is exercisable (“Tandem SARs”), or independent of a stock option (“Non-Tandem SARs”). A SAR is a right to receive a payment in common stock or cash (as determined by the Committee) equal in value to the excess of the fair market value of one share of common stock on the date of exercise over the exercise price per share established in connection with the grant of the SAR. The exercise price per share covered by a SAR will be the exercise price per share of the related option in the case of a Tandem SAR and, other than with respect to a substitute award, will be no less than the fair market value of the common stock on the date of grant in the case of a Non-Tandem SAR. The Committee may also grant “limited SARs,” either as Tandem SARs or Non-Tandem SARs, which become exercisable only upon the occurrence of a change in control of the Company or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. The 2009 Plan, as amended, provides that no SAR, other than a substitute award, may vest over a period that is less than one year from the date of grant, except in the event of a recipient’s termination of employment without cause, or due to death, disability or retirement. Unless otherwise determined by the Committee at the time of grant, SARs are subject to the Detrimental Activity Provisions.
Restricted Stock. The Committee may award shares of restricted stock. Except as otherwise provided by the Committee upon the award of restricted stock, the recipient generally has the rights of a shareholder with respect to the shares, including the right to receive dividends, the right to vote the shares of restricted stock and, conditioned upon full vesting of shares of restricted stock, the right to tender such shares in the event of a merger, recapitalization, reorganization or similar event involving the Company, subject to the conditions and restrictions generally applicable to restricted stock or specifically set forth in the recipient’s restricted stock agreement. The Committee may determine at the time of grant that the payment of dividends, if any, will be deferred until the expiration of the applicable restriction period, and, except as otherwise provided by the Committee in an award agreement, the payment of dividends with respect to shares of restricted stock that are earned or vest based on the attainment of performance goals will be withheld, without interest, for the recipient’s account, and will be subject to forfeiture to the same degree as the underlying shares of restricted stock.
Recipients of restricted stock are required to enter into a restricted stock agreement with the Company that states the restrictions to which the shares are subject, which may include satisfaction of pre-established performance goals and the criteria or date or dates on which such restrictions will lapse.
If the grant of restricted stock or the lapse of the relevant restrictions is based on the attainment of performance goals, the Committee will establish for each recipient the applicable performance goals, formulas or
standards and the applicable vesting percentages with reference to the attainment of such goals or satisfaction of such formulas or standards while the outcome of the performance goals is substantially uncertain. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar events or circumstances. Section 162(m) of the Code requires that performance awards be based upon objective performance measures. The performance goals for performance-vesting restricted stock will be based on one or more of the objective performance goals discussed below.
Other Stock-Based Awards. The Committee may, subject to limitations under applicable law, make a grant of such other stock-based awards (including, without limitation, performance units, dividend equivalent units, stock equivalent units, RSUs and deferred stock units) under the 2009 Plan that are payable in cash or denominated or payable in or valued by shares of common stock or factors that influence the value of such shares. The Committee will determine the terms and conditions of any such other awards, which may include the achievement of certain minimum performance goals for purposes of compliance with Section 162(m) of the Code and/or a minimum vesting period. The performance goals for other stock-based awards will be based on one or more of the objective performance goals discussed below. Except as otherwise provided by the Committee in an award agreement, the payment of dividends or dividend equivalents with respect to an award that is earned or vests based on the attainment of performance goals will be withheld, without interest, for the recipient’s account, and will be subject to forfeiture to the same degree as the underlying award.
Performance Goals. The following is a list of the performance goals from which the Committee may select in establishing the grant, vesting and/or payment provisions of awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, to be applied, where applicable and in the discretion of the Committee, on a Company-wide, divisional, or individual basis:
earnings per share;
earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization;
gross profit or gross profit return on investment;
gross margin or gross margin return on investment;
operating income, operating profit margin, net income, cash flow or economic value added;
revenue growth;
working capital;
specified objectives with regard to limiting the level of increase in all or a portion of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of cash balances and/or other offsets and adjustments as may be established by the Committee;
return on equity, assets or capital;
return on invested capital;
net revenues;
gross revenues;
total shareholder return;
fair market value of the shares of the common stock;
the growth in the value of an investment in the common stock assuming the reinvestment of dividends; and
reduction in expenses.
To the extent permitted by law, the Committee may also exclude, or make adjustments to reflect, the impact of an event or occurrence that the Committee determines should be appropriately excluded or a cause for adjustment, including:
restructurings, discontinued operations, extraordinary items or events and other unusual or non-recurring charges;
events either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; and
changes in tax law or a change in accounting standards required by generally accepted accounting principles.
Change in Control. With respect to any award granted on or after July 2014, no employment agreement or award agreement may provide that the vesting, payment, purchase or distribution of an award will be accelerated by reason of a change in control of the Company for any Plan participant unless the participant’s employment is involuntarily terminated within the one-year period following such change in control (or, if applicable, such longer post-change in control period as may be determined by the Committee). With respect to any award granted prior to July 2014, unless otherwise determined by the Committee at the time of grant, in a written employment agreement, or by an affirmative vote of a majority of the members of the Board of Directors prior to the occurrence of a change in control of the Company, awards subject to vesting and/or restrictions will accelerate and vest, or restrictions will lapse, upon a change in control of the Company. In addition, in the discretion of the Committee, awards may be (i) assumed and continued or substituted in accordance with applicable law, (ii) to the extent not assumed or substituted for in connection with a change in control, purchased by the Company for an amount equal to the price of the common stock paid in a change in control (less the aggregate exercise price of the awards) (or cancelled and extinguished pursuant to the terms of a merger or other purchase agreement), (iii) with respect to awards subject to exercise, to the extent not assumed or substituted for in connection with a change in control, terminated following expiration of a minimum 20 day advanced notice period, during which participants may exercise such awards, or (iv) cancelled if the price of the common stock paid in a change in control is less than the exercise price of the award.
Amendment and Termination. Notwithstanding any other provision of the 2009 Plan, the Board of Directors or the Committee may at any time amend any or all of the provisions of the 2009 Plan, or suspend or terminate it entirely, retroactively or otherwise;provided, however, that unless otherwise required by law or specifically provided in the 2009 Plan, the rights of a participant with respect to awards granted prior to such amendment, suspension or termination may not be materially impaired without the consent of such participant and,provided,further, that the effectiveness of any amendment is subject to the approval of our shareholders to the extent required by Delaware law, Section 162(m) or 422 of the Code, or the rules of the applicable stock exchange, as specified in the 2009 Plan.
Clawback/Recoupment Policy. All awards granted under the 2009 Plan are subject to any incentive compensation clawback or recoupment policies of the Company in effect or as may be amended or adopted from time to time.
Miscellaneous.Awards granted under the 2009 Plan are generally nontransferable (other than by will or the laws of descent and distribution), except that the Committee may provide for the transferability of nonqualified stock options at the time of grant or thereafter to certain family members.
Certain U.S. Federal Income Tax Consequences. The rules concerning the federal income tax consequences with respect to options granted and to be granted pursuant to the 2009 Plan are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the federal income tax consequences. In addition, the following discussion does not set forth
any gift, estate, social security or state or local tax consequences that may be applicable, and such discussion is limited to the U.S. federal income tax consequences to individuals who are citizens or residents of the U.S., other than those individuals who are taxed on a residence basis in a foreign country.
Incentive Stock Options. In general, an employee will not realize taxable income upon either the grant or the exercise of an incentive stock option and the Company will not realize an income tax deduction at either such time. In general, however, for purposes of the alternative minimum tax, the excess of the fair market value of the shares of common stock acquired upon exercise of an incentive stock option (determined at the time of exercise) over the exercise price of the incentive stock option will be considered income. If the recipient was continuously employed on the date of grant until the date three months prior to the date of exercise and such recipient does not sell the common stock received pursuant to the exercise of the incentive stock option within either (i) two years after the date of the grant of the incentive stock option or (ii) one year after the date of exercise, a subsequent sale of the common stock will result in long-term capital gain or loss to the recipient and will not result in a tax deduction to the Company.
If the recipient is not continuously employed on the date of grant until the date three months prior to the date of exercise or such recipient disposes of the common stock acquired upon exercise of the incentive stock option within either of the above-mentioned time periods, the recipient will generally realize as ordinary income an amount equal to the lesser of (i) the fair market value of the common stock on the date of exercise over the exercise price and (ii) the amount realized upon disposition over the exercise price. In such event, subject to the limitations under Sections 162(m) and 280G of the Code (as described below), we will generally be entitled to an income tax deduction equal to the amount recognized as ordinary income. Any gain in excess of such amount realized by the recipient as ordinary income would be taxed at the rates applicable to short-term or long-term capital gains (depending on the holding period).
Nonqualified Stock Options. A recipient will not realize any taxable income upon the grant of a nonqualified stock option, and the Company will not receive a deduction at the time of such grant unless such option has a readily ascertainable fair market value (as determined under applicable tax law) at the time of grant. Upon exercise of a nonqualified stock option, the recipient will generally realize ordinary income in an amount equal to the excess of the fair market value of the common stock on the date of exercise over the exercise price. Upon a subsequent sale of the common stock by the recipient, the recipient will recognize short-term or long-term capital gain or loss depending upon the individual’s holding period for the common stock. Subject to the limitations under Sections 162(m) and 280G of the Code (as described below), the Company will generally be allowed a deduction equal to the amount recognized by the recipient as ordinary income.
All Options. With regard to both incentive stock options and nonqualified stock options, the following also apply: (i) any of our officers and directors subject to Section 16(b) of the Exchange Act may be subject to special tax rules regarding the income tax consequences concerning their stock options, (ii) any entitlement to a tax deduction on the part of the Company is subject to the applicable tax rules (including, without limitation, Section 162(m) of the Code regarding the $1 million limitation on deductible compensation), and (iii) in the event that the exercisability or vesting of any award is accelerated because of a change in control, payments relating to the awards (or a portion thereof), either alone or together with certain other payments, may constitute parachute payments under Section 280G of the Code, which excess amounts may be subject to excise taxes and may be nondeductible by the Company.
In general, Section 162(m) of the Code denies a publicly held corporation a deduction for federal income tax purposes for compensation in excess of $1 million per year per person to its chief executive officer and the three highest compensated executive officers whose compensation is disclosed in its proxy statement other than the chief financial officer (or, if fewer, the number of executive officers whose compensation is disclosed in its proxy statement other than the chief executive officer and chief financial officer), subject to certain exceptions. Options will generally qualify under one of these exceptions if they are granted under a plan that has been
approved by shareholders, is administered by a committee of outside directors, and states the maximum number of shares with respect to which options may be granted to any recipient during a specified period. The 2009 Plan is intended to satisfy these requirements with respect to options.
The 2009 Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The 2009 Plan is not, nor is it intended to be, qualified under Section 401(a) of the Code.
Future Plan Awards. No awards have been granted to any employee, officer, non-employee director or consultant pursuant to the 2009 Plan that are contingent upon the approval by our shareholders of the amendments to the 2009 Plan. We anticipate that other equity-based awards may be granted in the discretion of the Committee under the 2009 Plan out of the additional shares of our common stock to be reserved for issuance in connection with the approval of the amendments to the 2009 Plan; however, the number of shares of our common stock that may be so granted will be based upon various prospective factors, including the nature of services to be rendered by our employees, officers, non-employee directors and consultants, and their potential contributions to our success. Accordingly, the number, type, and grantee(s) of actual future awards cannot be determined at this time.
Equity Compensation Plan Information
The following table presents information concerning our equity compensation plans as of March 31, 2016:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)(2) | Weighted-Average Remaining Contractual Life of Outstanding Options, Warrants and Rights (years) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | ||||||||||||
Equity compensation plans approved by shareholders | 5,316,208 | (3) | — | — | 1,721,568 | (4) | ||||||||||
Equity compensation plans not approved by shareholders | — | — | — | — | ||||||||||||
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Total | 5,316,208 | — | — | 1,721,568 | ||||||||||||
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The following table presents information concerning our equity compensation plans as of June 30, 2016:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)(2) | Weighted-Average Remaining Contractual Life of Outstanding Options, Warrants and Rights (years) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | ||||||||||||
Equity compensation plans approved by shareholders | 4,516,784 | — | — | 695,695 | (3) | |||||||||||
Equity compensation plans not approved by shareholders | — | — | — | — | ||||||||||||
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Total | 4,516,784 | — | — | 695,695 | ||||||||||||
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THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AMENDMENTS TO THE 2009 STOCK INCENTIVE PLAN ARE IN THE BEST INTERESTS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENTS TO THE 2009 STOCK INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 4)3)
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP (“Ernst & Young”) as the Company’s independent registered public accounting firm to audit its consolidated financial statements for its fiscal year ending March 31, 2017.2019. Although action by the shareholders on this matter is not required, the Audit Committee believes it is appropriate to seek shareholder ratification of the appointment of the independent registered public accounting firm to provide a forum for shareholders to express their views with regard to the Audit Committee’s appointment. If the shareholders do not ratify the appointment of Ernst & Young, the selection of independent registered public accounting firms may be reconsidered by the Audit Committee;provided, however, that the Audit Committee retains the right to continue to engage Ernst & Young. In addition, notwithstanding the ratification of Ernst & Young as the Company’s independent registered public accounting firm for the year ending March 31, 2017,2019, the Audit Committee retains the right to replace Ernst & Young at any time without shareholder approval.
THE BOARD OF DIRECTORS BELIEVES THAT RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP IS IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” SUCH RATIFICATION.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Ernst & Young has been the Company’s independent registered public accounting firm and has audited the Company’s financial statements since April 2006. The Company has been advised that representatives of Ernst & Young will be present at the Annual Meeting with the opportunity to make a statement if the representatives desire to do so. It is expected that the representatives will be available to respond to appropriate questions.
Pre-Approval Policies and Procedures
Pursuant to its charter, the Audit Committee is responsible for reviewing andpre-approving all audit andnon-audit services. The Audit Committee may delegatepre-approval authority to the chair or another member of the Audit Committee, in which case such approval must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committeepre-approved all audit, audit-related and tax services provided by Ernst & Young for the recently completed fiscal year.
Independent Auditor Fee Information
The aggregate fees billed by Ernst & Young for fiscal 20162018 and fiscal 20152017 are set forth below. The Audit Committee believes that the services performed by Ernst & Young were compatible with maintaining Ernst & Young’s independence.
3/31/2016 | 3/31/2015 | 3/31/2018 | 3/31/2017 | |||||||||||||
Audit(1) | $ | 2,911,900 | $ | 3,579,642 | $ | 3,247,451 | $ | 3,116,740 | ||||||||
Audit-Related | 75,535 | 2,500 | 188,642 | 59,700 | ||||||||||||
Tax(2) | 919,000 | 728,875 | 1,944,419 | 1,420,000 | ||||||||||||
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Total | $ | 3,906,435 | $ | 4,311,017 | $ | 5,380,512 | $ | 4,596,440 | ||||||||
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(1) | Audit |
(2) | Tax |
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Proxy Statement or future filings with the SEC, in whole or in part, the following report shall not be deemed to be “soliciting material” or “filed” with the SEC and shall not be deemed to be incorporated by reference into any such filing.
Review of the Company’s Audited Financial Statements for the Fiscal Year Ended March 31, 20162018
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements included in the Annual Report on Form10-K for the year ended March 31, 20162018 with Company management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with U.S. generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee by Auditing Standards No. 16,1301,Communication With Audit Committees (as amended), other standards of the Public Company Accounting Oversight Board (United States), rules of the SEC, and other applicable regulations. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence.
The Audit Committee also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered public accounting firm’s report on the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control, including internal control over financial reporting, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, that the audited consolidated financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in the Annual Report onForm 10-K for the year ended March 31, 20162018 filed by the Company with the SEC. The Audit Committee also has appointed Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2017.2019.
Submitted by the Audit Committee
of the Board of Directors:
Robert BowmanSusan Tolson (Chair)
Michael Dornemann
Susan TolsonJ Moses
Paul Viera
Dated: July 28, 201626, 2018
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
The statements contained in this Proxy Statement which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company’s future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties. Important risk factors and other information are contained in the Company’s most recent Annual Report on Form 10-K, including the risks summarized in the section titled “Risk Factors,” the Company’s most recent Quarterly Report on Form 10-Q, and the Company’s other periodic filings with the SEC, which can be accessed at www.take2games.com. All forward-looking statements are qualified by these cautionary statements and speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
What matters will be considered at the Annual Meeting?
the election as directors of the sixseven nominees named in the attached Proxy Statement;
the approval, on anon-binding advisory basis, of the compensation of the Company’s “named executive officers” as disclosed in this Proxy Statement;
the approval of certain amendments to the 2009 Plan, including an increase in the available shares reserved thereunder;
the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2017;2019; and
such other business that may properly come before the Annual Meeting or any adjournment thereof.
How does the Board of Directors recommend that shareholders vote on these matters?
The Board of Directors believes that the election of the nominated directors, the approval on an advisory basis of the compensation of the named executive officers the approval of certain amendments to the 2009 Plan and the ratification of the appointment of Ernst & Young are in the best interests of the Company and its shareholders and, accordingly, recommends a vote “FOR” the approval offor each of these proposals.
Who is entitled to vote?
Shareholders of record as of the close of business on July 26, 201625, 2018 (the “Record Date”) are entitled to attend and vote at the Annual Meeting. Each shareholder is entitled to one vote for each share of common stock held on each matter submitted to a vote at the Annual Meeting.
Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
The rules of the SEC permit us to make our proxy materials available to beneficial owners of our stock electronically over the Internet without mailing printed copies of the proxy materials. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to our beneficial owners. All beneficial owners will have the ability to access the proxy materials, including this Proxy Statement and our 20162018 Annual Report, on the website referred to in the Notice of Internet Availability or to request a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or how to request a printed copy can be found in the Notice of Internet Availability. In addition, beneficial owners may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
What does it mean if I receive more than one Notice of Internet Availability or proxy card?
It may mean that you hold shares registered in more than one account. Follow the voting instructions provided on each Notice of Internet Availability that you received to ensure that all of your shares are voted. If you received paper proxy cards, sign and return all proxy cards to ensure that all of your shares are voted. You may call American Stock Transfer & Trust Company at1-800-937-5449 if you have any questions regarding the share information or your address appearing on the paper proxy card.
How do I vote?
You can vote by proxy over the Internet by following the instructions provided in the Notice of Internet Availability.
If you received a full set of proxy materials and your shares are registered directly with American Stock Transfer & Trust Company, you may vote via the Internet at www.proxyvote.com. Although we encourage you to vote via the Internet, you may also sign and date each paper proxy card you receive and return it in the prepaid envelope; the paper proxy card may also contain instructions for voting by telephone. The enclosed proxy 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 in the manner described above.
If you hold your shares through a stock broker, nominee, fiduciary or other custodian you may also be able to vote through a program provided through Broadridge Financial Solutions (“Broadridge”) that offers Internet voting options. If your shares are held in an account at a brokerage firm or bank participating in the Broadridge program, you are offered the opportunity to elect to vote via the Internet. Votes submitted via the Internet through the Broadridge program must be received by 11:59 p.m. (Eastern Time) on September 21, 2016.20, 2018.
What happens if I do not give specific voting instructions?
For Shares Directly Registered in the Name of the Shareholder: If you return your signed proxy but do not indicate your voting preferences, the Company will vote on your behalf “FOR” the election of the nominated directors, “FOR” the approval on an advisory basis of the compensation of the named executive officers “FOR” the amendments to the 2009 Plan and “FOR” the ratification of the appointment of Ernst & Young. If any other matter properly comes before the shareholders for a vote at the Annual Meeting, the proxy holders will vote your shares in accordance with their best judgment.
For Shares Registered in the Name of a Brokerage Firm or Bank: If your shares are held in street name, your broker or nominee will ask you how you want your shares to be voted. If you provide voting instructions, your shares must be voted as you direct. If you do not furnish voting instructions, one of two things can happen, depending upon whether a proposal is “routine.” Under the rules that govern brokers that have record ownership of shares beneficially owned by their clients, brokers have discretion to cast votes on routine matters, such as the ratification of the appointment of independent registered public accounting firms, without voting instructions from their clients. Brokers are not permitted, however, to cast votes on “non-routine”“non-routine” matters, such as the election of directors and thenon-binding advisory vote to approve the compensation of the Company’s “named executive officers” as disclosed in this Proxy Statement, and the approval of the amendments to the 2009 Plan without such voting instructions. A “brokernon-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that proposal and has not received voting instructions from the beneficial owner.
What is an abstention?
An abstention is a properly signed proxy card that is marked “abstain” or properly completed instructions via the Internet to the same effect.
How do I sign the paper proxy card?
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, both owners must sign.
May I vote my shares in person at the Annual Meeting?
For Shares Directly Registered in the Name of the Shareholder: Yes, however, we encourage you to vote by proxy card or the Internet even if you plan to attend the meeting. If you wish to give a proxy to someone other than the individuals named as proxies on the enclosed proxy card, you may cross out the names appearing on the enclosed proxy card, insert the name of some other person, sign the card and give the proxy card to that person for use at the meeting.
For Shares Registered in the Name of a Brokerage Firm or Bank: Yes, but in order to do so you will first have to ask your bank, broker or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting, and hand it in with a signed ballot that you can request at the meeting. You will not be able to vote your shares at the meeting without a legal proxy and a signed ballot.
Your attendance at the Annual Meeting in and of itself will not automatically revoke a proxy that was submitted via the Internet or telephone or by mail.
Who will count the votes?
A representative of Broadridge will tabulate the votes and act as independent inspector of election.
What constitutes a quorum?
The holders of a majority of the outstanding shares of common stock on the Record Date present in person or represented by proxy constitutes a quorum for the Annual Meeting. As of the close of business on July 26, 2016, 86,015,31225, 2018, 113,828,217 shares of common stock were issued and outstanding. Subject to the rules regarding the votes necessary to adopt the proposals discussed below, abstentions and brokernon-votes (as described above) will be counted for purposes of determining whether a quorum is present. Once a share is represented for any purpose at the Annual Meeting, it will be deemed present for quorum purposes for the remainder of the Annual Meeting (including any meeting resulting from an adjournment or postponement of the Annual Meeting, unless a new record date is set).
What vote is needed to approve the matters to be presented at the Annual Meeting?
In an uncontested election for directors, the sixseven persons receiving the highest number of “FOR” votes at the Annual Meeting will be elected. However, the Company’s bylaws provide that any nominee for director who receives a greater number of votes “withheld” from the individual’s election than votes “for” such election promptly shall tender the individual’s resignation to the Corporate Governance Committee for consideration following certification of the shareholder vote. See above under the heading “Election of Directors (Proposal 1)—Policy on Majority Voting for Directors.” A “FOR” vote by a majority of the votes cast is required to approve, on anon-binding advisory basis, the compensation of the Company’s “named executive officers” as disclosed in this Proxy Statement; a “FOR” vote by a majority of the votes cast is required to approve the amendments to the 2009 Plan pursuant to applicable NASDAQ rules; and a “FOR” vote by the holders of a majority of the shares present in person or represented by proxy and entitled to vote is required to ratify the appointment of Ernst & Young and to approve any shareholder proposal. For purposes of determining approval of a matter presented at the Annual
Meeting, abstentions will be deemed present and entitled to vote (but not cast), other than for purposes of thenon-binding advisory vote to approve the compensation of the Company’s “named executive officers” as disclosed in this Proxy Statement, the proposal to approve the amendments to the 2009 Plan, for which an abstention will have the effect of a vote “against” such proposal, while brokernon-votes will not be deemed present and entitled to vote. An abstention will also have the effect of a vote “against” the proposal to ratify the appointment of Ernst & Young. Both abstentions and brokernon-votes will be counted for purposes of determining whether a quorum is present.
Will any other matters be acted on at the Annual Meeting?
If any other matters are properly presented at the Annual Meeting or any adjournment, the persons named in the proxy will have discretion to vote on those matters. As of the date by which shareholder proposals must have been received by the Company to be presented at the Annual Meeting, and as of the date of this Proxy Statement, the Company did not know of any other matters to be presented at the Annual Meeting.
Who pays for this proxy solicitation?
The Company will bear 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 shareholders. The Company has retained MacKenzie Partners, Inc., a proxy solicitation firm, to solicit proxies for a fee of $20,000, plus reimbursement of itsout-of-pocket expenses. 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,e-mail or other means. No additional compensation will be paid to such individuals for these services.
How may I communicate with the Board of Directors?
Shareholders wishing to send communications to the Board of Directors individually or as a group may do so by writing to: The Board of Directors ofTake-Two Interactive Software, Inc., 622 Broadway,110 West 44th Street, New York, New York 10012,10036, Attention: Investor Relations. You should identify your communication as being from a shareholder of the Company. The Company may require reasonable evidence that your communication or other submission is made by a shareholder of the Company before transmitting your communication to the Board of Directors.
AVAILABILITY OF CERTAIN DOCUMENTS
Householding of Annual Meeting materials
Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements and their accompanying documents and/or Notices of Internet Availability. This means that only one copy of our Proxy Statement and/or Notice of Internet Availability is sent to multiple shareholders in your household. We will promptly deliver a separate copy of these documents without charge to you upon written request toTake-Two Interactive Software, Inc., 622 Broadway,110 West 44th Street, New York, New York 10012,10036, Attn: Investor Relations; our main telephone number is(646) 536-2842. If you want to receive separate copies of our proxy statements and/or Notice of Internet Availability in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address.
Additional information
We are required to file annual, quarterly and current reports, proxy statements and other reports with the SEC. Copies of these filings are available through our Internet website atwww.take2games.com or the SEC’s website atwww.sec.gov. We will furnish copies of our SEC filings (without exhibits), including our Annual Report onForm 10-K for the year ended March 31, 2016,2018, without charge to any shareholder upon written request toTake-Two Interactive Software, Inc., 622 Broadway,110 West 44th Street, New York, New York 10012,10036, Attn: Investor Relations.
In its filings with the SEC, the Company sometimes “incorporates by reference” certain information. This means that we are referring you to information that has previously been filed with the SEC and the information should be considered as part of the particular filing. As provided under SEC regulations, the “Report of the Audit Committee of the Board of Directors” and the “Report of the Compensation Committee of the Board of Directors” contained in this Proxy Statement specifically are not incorporated by reference into any other filings with the SEC and shall not be deemed to be “soliciting material.”
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company currently anticipates holding its Annual Meeting of Shareholders for its fiscal year ending March 31, 20172019 in September 2017.2019. Accordingly, shareholders who wish to present proposals, nominate directors or present other business appropriate for consideration at the Company’s Annual Meeting of Shareholders to be held in 20172019 must submit the proposal in proper form and in satisfaction of the conditions established by the SEC, to the Company at its address set forth on the first page of this Proxy Statement not later than April 7, 20171, 2019 in order for the proposal to be considered for inclusion in the Company’s proxy statement and form of proxy relating to such annual meeting.
As provided in the Company’s bylaws, for any proposal, director nomination or other business that is not submitted for inclusion in next year’s proxy statement, but is instead sought to be presented directly at the 20172019 Annual Meeting of Shareholders, notice of intention to present the proposal, nominate directors or present other appropriate business must be received in writing by the Company by no earlier than May 25, 201724, 2019 and no later than June 24, 2017.23, 2019. Address all notices of intention to present proposals at the 20172019 Annual Meeting of Shareholders toTake-Two Interactive Software, Inc., 622 Broadway,110 West 44th Street, New York, New York 10012,10036, Attn: Investor Relations.
A notice for a director nomination is required to contain information about both the nominee and the shareholder making the nomination, including information specific to the recommended candidate that is relevant to a determination of whether the recommended candidate would be considered independent under the applicable rules of The NASDAQ Stock Market. A nomination that does not comply with these requirements will not be considered.
The Board of Directors is aware of no other matter, except for those incident to the conduct of the Annual Meeting, that are to be presented to shareholders for formal action at the Annual Meeting. If, however, any other matter properly comes before the Annual Meeting or any adjournment thereof, it is the intention of the persons named in the proxy to vote the proxy in accordance with their judgment.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
2009 STOCK INCENTIVE PLAN
Amended and Restated Effective July 21, 2016
ARTICLE I
PURPOSE AND HISTORY
The purpose of the Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Eligible Employees, Consultants and Non-Employee Directors stock-based incentives in the Company to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders.
This Plan was originally adopted on April 23, 2009, amended on February 18, 2010, July 12, 2011, July 11, 2012 and July 24, 2013, and amended and restated on July 23, 2014 and amended and restated in its present form on July 21, 2016, subject to the approval by the stockholders of the Company of an increase in the number of shares reserved for issuance under the Plan and certain other amendments to Section 4.1(a) at the annual meeting of such stockholders on September 22, 2016;provided,however, that if such approval is not received, all other provisions of this amended and restated Plan shall remain in effect.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
2.1“Affiliate” means each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) that is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company; (d) any corporation, trade or business (including, without limitation, a partnership or limited liability company) that directly or indirectly controls 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which the Company or any of its Affiliates has a material equity interest and that is designated as an “Affiliate” by resolution of the Committee;provided,however, that if the Common Stock subject to any Award does not constitute “service recipient stock” for purposes of Section 409A of the Code, such Award shall be designed in a manner intended to comply with Section 409A of the Code.
2.2“Award” means any grant under the Plan of any Stock Option, Stock Appreciation Right, Restricted Stock or Other Stock-Based Award. All Awards shall be evidenced by, and subject to the terms of, a written agreement executed by the Company and the Participant. Any reference herein to an agreement in writing shall be deemed to include an electronic writing to the extent permitted by applicable law.
2.3“Board” means the Board of Directors of the Company.
2.4“Cause” means with respect to a Participant’s Termination of Employment or Termination of Consultancy, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to: (i) a Participant’s conviction of, or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a Participant of an illegal act that could cause significant economic injury to the Company; (iii) a Participant’s insubordination, dishonesty, fraud, incompetence, moral turpitude, misconduct, refusal to perform his or her duties or responsibilities for any reason other than illness or incapacity or materially unsatisfactory performance of his or her duties for the Company or an Affiliate as determined by the Company in its sole discretion; (iv) continuing willful and deliberate failure by the Participant to perform the Participant’s duties in any material respect, provided that the Participant is given notice and a reasonable opportunity (not to exceed 30 days) to effectuate a cure as determined by the Company; or (v) a Participant’s material failure to adhere to the Company’s written policies or to cooperate in any investigation or inquiry involving the Company, provided that the Participant is given notice and a reasonable opportunity (not to exceed 30 days) to effectuate a cure as determined by the Company; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), “cause” as defined under such agreement;provided,however, that with regard to any agreement under which the definition of “cause” only applies on occurrence of a change in control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. With respect to a Participant’s Termination of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.
2.5“Change in Control” has the meaning set forth inSection 11.2.
2.6“Change in Control Price” has the meaning set forth inSection 11.1.
2.7“Code” means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.
2.8“Committee” means: (a) with respect to the application of the Plan to Eligible Employees and Consultants, the Compensation Committee of the Board or such other committee or subcommittee of the Board appointed from time to time by the Board, which committee or subcommittee shall consist of two or more non-employee directors, each of whom it is intended to be (i) a “non-employee director” as defined in Rule 16b-3; (ii) to the extent required by Section 162(m) of the Code, an “outside director” as defined under Section 162(m) of the Code; and (iii) an “independent director” as defined under NASD Rule 5605(a)(2) or such other applicable stock exchange rule; and (b) with respect to the application of the Plan to Non-Employee Directors, the Board. To the extent that no Committee exists that has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance shall not affect the validity of Awards, grants, interpretations or other actions of the Committee.
2.9“Common Stock” means the common stock, $0.01 par value per share, of the Company.
2.10“Company” means Take-Two Interactive Software, Inc., a Delaware corporation, and its successors by operation of law.
2.11“Consultant” means any Person who provides bona fide consulting or advisory services to the Company or its Affiliates, which are not in connection with the offer and sale of securities in a capital-raising transaction, and do not, directly or indirectly, promote or maintain a market for the Company’s or its Affiliates’ securities.
2.12“Detrimental Activity” means:
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Unless otherwise determined by the Committee at grant and set forth in an Award agreement, Detrimental Activity shall not be deemed to occur after the end of the one-year period following the Participant’s Termination. For purposes of subsections (a), (c) and (e) above, the Chief Executive Officer of the Company (or the Committee, in the case of the Chief Executive Officer of the Company) has the authority to provide the Participant with written authorization to engage in the activities contemplated thereby and no other person shall have authority to provide the Participant with such authorization. If it is determined by a court of competent jurisdiction that any provision in the Plan in respect of Detrimental Activities is excessive in duration or scope or otherwise is unenforceable, then such provision may be modified or supplemented by the court to render it enforceable to the maximum extent permitted by law.
2.13“Disability” means(a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “disability” (or words of like import)), a permanent and total disability as defined in Section 22(e)(3) of the Code; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “disability” (or words of like import), “disability” as defined under such agreement. A Disability shall only be deemed to occur at the time of the determination by the Company of the Disability. Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.
2.14“Disparagement” means making comments or statements to the press, the Company’s or its Affiliates’ employees, consultants or any individual or entity with whom the Company or its Affiliates has a business relationship that could reasonably be expected to adversely affect in any manner: (a) the conduct of the business of the Company or its Affiliates (including, without limitation, any products or business plans or prospects); or (b) the business reputation of the Company or its Affiliates, or any of their products, or their past or present officers, directors or employees.
2.15“Effective Date” means the effective date of the Plan as defined inArticle XV.
2.16“Eligible Employee” means each employee of the Company or an Affiliate.
2.17“Exchange Act” means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder. Any references to any section of the Exchange Act shall also be a reference to any successor provision.
2.18“Exercisable Awards” means Stock Options or Stock Appreciation Rights or similar Other Stock Based Award that provides for a Participant to receive the excess (if any) of the Fair Market Value of the Common Stock on the date of exercise over the Fair Market Value on the date of grant.
2.19“Fair Market Value” means, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the last sales price reported for the Common Stock on the applicable date: (a) as reported on the principal national securities exchange in the United States on which it is then traded; or (b) if not traded, listed or otherwise reported or quoted, the Committee shall determine in good faith the Fair Market Value in whatever manner it considers appropriate taking into account the requirements of Section 409A of the Code. For purposes of the grant of any Award, the applicable date shall be the trading day on which the Award is granted, or if such grant date is not a trading day, the trading day immediately prior to the date on which the Award is granted. For purposes of the exercise of any Award, the applicable date shall be the date a notice of exercise is received by the Company or, if not a day on which the applicable market is open, the next day that it is open.
2.20“Family Member” means “family member” as defined in Section A.1.(5) of the general instructions of Form S-8, as may be amended from time to time.
2.21“Full Value Award” means an Award other than an Exercisable Award, and which is settled by the issuance of shares of Common Stock.
2.22“Incentive Stock Option” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries or its Parent (if any) under the Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.
2.23“Limited Stock Appreciation Right” has the meaning set forth inSection 7.5.
2.24“Non-Employee Director” means a director of the Company who is not an active employee of the Company or an Affiliate.
2.25“Non-Qualified Stock Option” means any Stock Option awarded under the Plan that is not an Incentive Stock Option.
2.26“Non-Tandem Stock Appreciation Rights” has the meaning set forth inSection 7.3.
2.27“Other Extraordinary Event” has the meaning set forth inSection 4.2(b).
2.28“Other Stock-Based Award” means an Award underArticle IX of the Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock, including, without limitation, a restricted stock unit or an Award valued by reference to an Affiliate.
2.29“Parent” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.
2.30“Participant” means an Eligible Employee, Non-Employee Director or Consultant to whom an Award has been granted pursuant to the Plan.
2.31“Performance Period” means the duration of the period determined by the Committee in its sole discretion, and set forth in an Award agreement, during which receipt of an Award is subject to the satisfaction of performance criteria.
2.32“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, incorporated organization, governmental or regulatory or other entity.
2.33“Plan” means this Take-Two Interactive Software, Inc. 2009 Stock Incentive Plan, as amended from time to time.
2.34“Reference Stock Option” has the meaning set forth inSection 7.1.
2.35“Restricted Stock” means a share of Common Stock issued under the Plan that is subject to restrictions underArticle VIII.
2.36“Restriction Period” has the meaning set forth inSection 8.3(a).
2.37“Retirement” means a voluntary Termination of Employment or Termination of Consultancy at or after age 65 or such earlier date after age 50 as may be approved by the Committee, in its sole discretion, at the time of grant, or thereafter provided that the exercise of such discretion does not make the applicable Award subject to Section 409A of the Code, except that Retirement shall not include any Termination with or without Cause. With respect to a Participant’s Termination of Directorship, Retirement means the failure to stand for reelection or the failure to be reelected on or after a Participant has attained age 65 or, with the consent of the Board, provided that the exercise of such discretion does not make the applicable Award subject to Section 409A of the Code, before age 65 but after age 50.
2.38“Rule 16b-3” means Rule16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision.
2.39“Section 162(m) of the Code” means the exception for performance-based compensation under Section 162(m) of the Code and any applicable Treasury regulations thereunder.
2.40“Section 409A of the Code”means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable Treasury regulations thereunder.
2.41“Section 4.2 Event” has the meaning set forth inSection 4.2(b).
2.42“Securities Act” means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder. Any reference to any section of the Securities Act shall also be a reference to any successor provision.
2.43“Stock Appreciation Right” means the right pursuant to an Award granted underArticle VII. A Tandem Stock Appreciation Right shall mean the right to surrender to the Company all (or a portion) of a Stock Option in exchange for a number of shares of Common Stock and/or cash (as determined by the Committee, in its sole discretion, on the date of grant) with a value equal to the difference between (a) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), and (b) the aggregate exercise price of such Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation Right shall mean the right to receive a number of shares of
Common Stock and/or cash (as determined by the Committee, in its sole discretion, on the date of grant) with a value equal to the difference between (i) the Fair Market Value of a share of Common Stock on the date such right is exercised, and (ii) the aggregate exercise price of such right, otherwise than on surrender of a Stock Option.
2.44“Stock Option” or“Option” means any option to purchase shares of Common Stock granted to Eligible Employees, Non-Employee Directors or Consultants pursuant toArticle VI.
2.45“Subsidiary” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.
2.46“Substitute Award” has the meaning set forth inSection 4.1(a).
2.47“Tandem Stock Appreciation Rights” has the meaning set forth inSection 7.1.
2.48“Ten Percent Stockholder” means a person owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.
2.49“Termination” means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.
2.50“Termination of Consultancy” means: (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; or (b) when an entity that is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that a Consultant becomes an Eligible Employee or aNon-Employee Director upon the termination of his or her consultancy, unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant, an Eligible Employee or aNon-Employee Director. Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Consultancy in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter.
2.51“Termination of Directorship” means that theNon-Employee Director has ceased to be a director of the Company; except that if aNon-Employee Director becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, his or her ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant has a Termination of Employment or Termination of Consultancy, as the case may be. Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Directorship in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Directorship thereafter.
2.52“Termination of Employment” means: (a) a termination of employment (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity that is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant or aNon-Employee Director upon the termination of his or her employment, unless otherwise determined by the Committee, in its sole discretion, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or aNon-Employee Director. Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Employment in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter.
2.53“Transfer” means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition (including the issuance of equity in a Person), whether for value or no value and whether voluntary or involuntary (including by operation of law), and (b) when used as a verb, to
directly or indirectly transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in a Person) whether for value or for no value and whether voluntarily or involuntarily (including by operation of law). “Transferred” and “Transferable” shall have a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1The Committee.The Plan shall be administered and interpreted by the Committee.
3.2Grants of Awards. The Committee shall have full authority to grant, pursuant to the terms of the Plan, to Eligible Employees, Consultants and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, and (iv) Other Stock-Based Awards. In particular, the Committee shall have the authority:
3.3Guidelines. Subject toArticle XII, the Committee shall, in its sole discretion, have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. The Committee may, in its sole discretion, correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. The Committee may, in its sole discretion, adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions. The Plan is intended to comply with the applicable requirements of Rule 16b-3 and with respect to Awards intended to be “performance-based,” the applicable provisions of Section 162(m) of the Code, and the Plan shall be limited, construed and interpreted in a manner so as to comply therewith.
3.4Decisions Final. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.
3.5Procedures. If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable, including, without limitation, by telephone conference or by written consent to the extent permitted by applicable law. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company shall be as fully effective as if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
3.6 Designation of Consultants/ Delegation of Authority/ Liability.
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3.7Indemnification. To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company and to the extent not covered by insurance directly insuring such person, each officer or employee of the Company or any Affiliate and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the administration of the Plan, except to the extent arising out of such officer’s, employee’s, member’s or former member’s fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the officers, employees, directors or members or former officers, directors or members may have under applicable law, under the Certificate of Incorporation or By-Laws of the Company or any Affiliate, by contract or otherwise. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to him or her under the Plan.
ARTICLE IV
SHARE LIMITATION
4.1 Shares.
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(i) The maximum number of shares of Common Stock subject to any Award of Stock Options, Stock Appreciation Rights or Other Stock-Based Awards or shares of Restricted Stock for which the grant of such Award or the lapse of the relevant Restriction Period is subject to the attainment of Performance Goals in accordance withSection 8.3(a)(ii), which may be granted under the Plan during any fiscal year of the Company to each Eligible Employee or Consultant shall be 1,000,000 shares per type of Award (which shall be subject to any further increase or decrease pursuant toSection 4.2), provided that the maximum number of shares of Common Stock for all such foregoing types of Awards does not exceed 4,000,000 (which shall be subject to any further increase or decrease pursuant toSection 4.2) with respect to any fiscal year of the Company. If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is granted in tandem with a Stock Option, it shall apply against the Eligible Employee’s or Consultant’s individual share limitations for both Stock Appreciation Rights and Stock Options.
(ii) There are no annual individual Eligible Employee or Consultant share limitations on Restricted Stock for which the grant of such Award or the lapse of the relevant Restriction Period is not subject to attainment of Performance Goals in accordance withSection 8.3(a)(ii).
4.2Changes.
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4.3Minimum Purchase Price. Notwithstanding any provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.
4.4Minimum Vesting Period. Other than with respect to a Substitute Award, no Award of Stock Options or Stock Appreciation Rights may vest over a period that is less than one (1) year from the date of grant;provided,however, that the foregoing minimum vesting period shall not apply in the event of a Participant’s Termination without Cause or a Participant’s Termination due to death, Disability or the Participant’s Retirement.
ARTICLE V
ELIGIBILITY AND GENERAL REQUIREMENTS FOR AWARDS
5.1General Eligibility. All Eligible Employees, Consultants, Non-Employee Directors and prospective employees and consultants are eligible to be granted Awards, subject to the terms and conditions of the Plan. Eligibility for the grant of Awards and actual participation in the Plan shall be determined by the Committee in its sole discretion.
5.2Incentive Stock Options. Notwithstanding anything herein to the contrary, only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan. Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be determined by the Committee in its sole discretion.
5.3General Requirement. The vesting and exercise of Awards granted to a prospective employee or consultant is conditioned upon such individual actually becoming an Eligible Employee or Consultant.
ARTICLE VI
STOCK OPTIONS
6.1Options. Each Stock Option granted under the Plan shall be one of two types: (a) an Incentive Stock Option; or (b) a Non-Qualified Stock Option.
6.2Grants. The Committee shall, in its sole discretion, have the authority to grant to any Eligible Employee (subject toSection 5.2) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. The Committee shall, in its sole discretion, have the authority to grant any Consultant or Non-Employee Director Non-Qualified Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof that does not qualify shall constitute a separate Non-Qualified Stock Option.
6.3Terms of Options. Options granted under the Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee, in its sole discretion, shall deem desirable:
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ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1Tandem Stock Appreciation Rights. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under the Plan (“Tandem Stock Appreciation Rights”). In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option.
7.2Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee in its sole discretion, and the following:
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7.3Non-Tandem Stock Appreciation Rights. Stock Appreciation Rights may also be granted without reference to any Stock Options granted under the Plan (“Non-Tandem Stock Appreciation Rights”).
7.4Terms and Conditions of Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee in its sole discretion, and the following:
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7.5Limited Stock Appreciation Rights. The Committee may, in its sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a general Stock Appreciation Right or as a limited stock appreciation right (a “Limited Stock Appreciation Right”). Limited Stock Appreciation Rights may be exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award agreement, the Participant shall receive in cash or Common Stock, as determined by the Committee, an amount equal to the amount (a) set forth inSection 7.2(e) with respect to Tandem Stock Appreciation Rights, or (b) set forth inSection 7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as applicable.
ARTICLE VIII
RESTRICTED STOCK
8.1Awards of Restricted Stock. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price (if any) to be paid by the Participant (subject toSection 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards. The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets (including, the Performance Goals specified inExhibit A attached hereto) or such other factors as the Committee may determine, in its sole discretion, including to comply with the requirements of Section 162(m) of the Code.
8.2Awards and Certificates. Eligible Employees, Consultants and Non-Employee Directors selected to receive Restricted Stock shall not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement evidencing the Award to the Company and has otherwise complied with the applicable terms and conditions of such Award. Further, such Award shall be subject to the following conditions:
“The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Take-Two Interactive Software, Inc. (the “Company”) 2009 Stock Incentive Plan (as the same may be amended or supplemented from time to time, the “Plan”) and an agreement entered into between the registered owner and the Company dated . Copies of such Plan and agreement are on file at the principal office of the Company.”
8.3Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions:
(ii) Objective Performance Goals, Formulae or Standards. If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of Performance Goals, the Committee shall establish the Performance Goals and the applicable vesting percentage of the Restricted Stock Award applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee and while the outcome of the Performance Goals are substantially uncertain. To the extent provided in a Restricted Stock Award agreement, such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. With regard to a Restricted Stock Award that is intended to comply with Section 162(m) of the Code, to the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect. The applicable Performance Goals shall be based on one or more of the performance criteria set forth inExhibit A hereto.
ARTICLE IX
OTHER STOCK-BASED AWARDS
9.1Other Awards. The Committee, in its sole discretion, is authorized to grant to Eligible Employees, Consultants and Non-Employee Directors OtherStock-Based Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock, including, but not limited to, shares of Common Stock awarded purely as a bonus and not subject to any restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an Affiliate, performance units, dividend equivalent units, stock equivalent units, restricted stock units and deferred stock units. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under the Plan.
Subject to the provisions of the Plan, the Committee shall, in its sole discretion, have authority to determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, and the time or times at which, such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period.
The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified Performance Goals set forth onExhibit A as the Committee may determine, in its sole discretion; provided that to the extent that such Other Stock-Based Awards are intended to comply with Section 162(m) of the Code, the Committee shall establish the objective Performance Goals for the vesting of such Other Stock-Based Awards based on a performance period applicable to each Participant or class of Participants in writing prior to the beginning of the applicable performance period or at such later date as permitted under Section 162(m) of the Code and while the outcome of the Performance Goals are substantially uncertain. Such Performance Goals may incorporate, if and only to the extent permitted under Section 162(m) of the Code, provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. To the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect. The applicable Performance Goals shall be based on one or more of the performance criteria set forth inExhibit A hereto.
9.2Terms and Conditions. Other Stock-Based Awards made pursuant to thisArticle IX shall be subject to the following terms and conditions:
ARTICLE X
TERMINATION
10.1Termination. The following rules apply with regard to the Termination of a Participant.
(i) Termination by Reason of Death, Disability or Retirement. If a Participant’s Termination is by reason of death, Disability or the Participant’s Retirement (other than a Retirement described inSection 10.2(a)(iii)(z) below), all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination (including pursuant toSection 6.3(d)) may be exercised by the Participant (or, in the case of death, by the legal representative of the Participant’s estate) at any time within a one-year period from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights;provided,however, if the Participant dies within such exercise period, all unexercised Stock Options or Stock Appreciation Rights held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights.
(ii) Involuntary Termination Without Cause.If a Participant’s Termination is by involuntary termination without Cause, all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination (including pursuant toSection 6.3(d)) may be exercised by the Participant at any time within a period of 90 days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights;provided,however, if the Participant dies within such exercise period, all unexercised Stock Options or Stock Appreciation Rights held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights.
(iii) Termination for Cause or Voluntary Termination. If a Participant’s Termination: (x) is for Cause, (y) is a voluntary Termination (other than a Retirement), or (z) is a Retirement after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options or Stock Appreciation Rights, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such Termination. Notwithstanding the foregoing, if a Participant’s Termination is voluntary with the consent of the Company, then the Company may provide that all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination (including pursuant toSection 6.3(d)) may be exercised by the Participant at any time within a period not to exceed 90 days from the date of such Termination, but in no event beyond the expiration of the stated terms of such Stock Options or Stock Appreciation Rights.
(iv) Unvested Stock Options and Stock Appreciation Rights. Stock Options or Stock Appreciation Rights that are not vested as of the date of a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination.
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
11.1Benefits. In the event of a Change in Control of the Company, and except as otherwise provided by the Committee in an Award agreement or in a written employment agreement between the Company and a Participant, the Participant’s Award shall be treated in accordance with one of the following methods as determined by the Committee in its sole discretion:
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Notwithstanding any other provisions of the Plan or an Award agreement to the contrary, with respect to any Award granted on or after July 23, 2014, no Award agreement or written employment agreement between the Company and the Participant shall provide that the vesting, payment, purchase or distribution of an Award will be accelerated by reason of a Change in Control for any Participant unless the Participant’s employment is involuntarily terminated as a result of the Change in Control. For purposes of thisSection 11.1, a Participant’s employment will be deemed to have been involuntarily terminated as a result of a Change in Control if it is involuntarily terminated other than for Cause (including the Participant’s resignation for “good reason” or “constructive termination” (or similar term) as defined in the applicable Award agreement, in a written employment, change in control, retention, severance or similar agreement between the Company and a Participant, or in a change in control, retention, severance or similar plan maintained by the Company in which the Participant participates), or is terminated under circumstances which entitle the Participant to mandatory severance payment(s) pursuant to applicable law, at any time beginning on the date of the Change in Control up to and including the first (1st) anniversary of the Change in Control (or, if applicable, such longer post-Change in Control period as may be determined by the Committee).
11.2Change in Control. Unless otherwise determined by the Committee at grant as set forth in an Award agreement, a “Change in Control” shall be deemed to have occurred:
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Notwithstanding anything herein to the contrary, in no event shall stockholder approval of a transaction which, if consummated, would constitute a Change in Control, constitute a Change in Control.
ARTICLE XII
TERMINATION OR AMENDMENT OF PLAN
12.1Termination or Amendment. Notwithstanding any other provision of the Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to inArticle XIV), or suspend or terminate it entirely, retroactively or otherwise;provided,however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination (including rights under any Award agreement), may not be materially impaired without the consent of such Participant and, provided further, without the approval of the stockholders of the Company in accordance with the laws of the State of Delaware, to the extent required by the applicable provisions of Rule 16b-3 or Section 162(m) of the Code, pursuant to the requirements of NASD Rule 5635(c) or such other applicable stock exchange rule, or, to the extent applicable to Incentive Stock Options, Section 422 of the Code, no amendment may be made that would:
The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject toArticle IV above or as otherwise specifically provided herein, no such amendment or other action by the Committee shall materially adversely impair the rights of any holder without the holder’s consent.
ARTICLE XIII
UNFUNDED PLAN
13.1Unfunded Status of Plan. The Plan is an “unfunded” plan for incentive and deferred compensation. With respect to any payments as to which a Participant has a fixed and vested interest but that are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.
ARTICLE XIV
GENERAL PROVISIONS
14.1Legend. If set forth in an Award agreement, the Committee may require each person receiving shares of Common Stock pursuant to an Award granted under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof and such other securities law-related representations as the Committee shall request. If set forth in an Award agreement, in addition to any legend required by the Plan, the certificates and/or book entry accounts for such shares may include any legend that the Committee, in its sole discretion, deems appropriate to reflect any restrictions on Transfer.
To the extent permitted in an Award agreement, all certificates and/or book entry accounts for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may, in its sole discretion, deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any national securities exchange system upon whose system the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
14.2Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
14.3No Right to Employment/Directorship/Consultancy. Neither the Plan nor the grant of any Option or other Award hereunder shall give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, consultancy or directorship by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her employment, consultancy or directorship at any time.
14.4Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to the Plan, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding to the Company. Any statutorily required withholding obligation with regard to any Participant may be satisfied, subject to the advanced consent of the Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned;provided,however, that the aggregate Fair Market Value of the number of shares of Common Stock that may be used to satisfy tax withholding requirements may not exceed the minimum statutorily required withholding amount with respect to any Award (unless the Committee determines, in its discretion, that a greater number of shares of Stock may be used to satisfy tax withholding requirements (but not in excess of the maximum statutorily required withholding amount) without resulting in an Award being classified as a liability award under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)). Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.
14.5No Assignment of Benefits. No Award or other benefit payable under the Plan shall, except as otherwise specifically provided by law or provided herein or permitted by the Committee as set forth in an Award agreement, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
14.6Listing and Other Conditions. Unless otherwise provided in an Award agreement:
14.7Clawback/Recoupment Policy. Notwithstanding anything contained herein to the contrary, all Awards granted under the Plan shall be and remain subject to any incentive compensation clawback or recoupment policy currently in effect or as may be adopted by the Board and, in each case, as may be amended from time to time. No such policy adoption or amendment shall in any event require the prior consent of any Participant.
14.8Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws).
14.9Construction. Wherever any words are used in the Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.
14.10Other Benefits. No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation.
14.11Costs. The Company shall bear all expenses associated with administering the Plan, including expenses of issuing Common Stock pursuant to any Awards hereunder.
14.12No Right to Same Benefits. The provisions of Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years.
14.13Death/Disability. The Committee may in its sole discretion require the transferee of a Participant to supply it with written notice of the Participant’s death or Disability and to supply it with a copy of the will (in the case of the Participant’s death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may, in its discretion, also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan.
14.14Section 16(b) of the Exchange Act. All elections and transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3. The Committee may, in its sole discretion, establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.
14.15Section 409A of the Code. Although the Company does not guarantee the particular tax treatment of an Award granted under the Plan, Awards made under the Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A of the Code and the Plan and any Award agreement hereunder shall be limited, construed and interpreted in accordance with such intent. In no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.
14.16Successor and Assigns. The Plan shall be binding on all successors and permitted assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate.
14.17Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
14.18Payments to Minors, Etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.
14.19Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
14.20Vesting of Awards. Notwithstanding any other provisions of the Plan or an Award agreement to the contrary, in the event that the vesting date for all or a portion of an Award occurs on a date which is not a trading day on the principal national securities exchange in the United States on which the shares of Common Stock are then traded, such portion of the Award will vest on the trading day immediately prior to the vesting date for the Award.
14.21Electronic Delivery. Any reference herein to a “written” agreement or document or “writing” will include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled or authorized by the Company to which the Participant has access) to the extent permitted by applicable law.
ARTICLE XV
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board or such later date as provided in the adopting resolution, subject to the approval of the Plan by the stockholders of the Company within 12 months before or after adoption of the Plan by the Board in accordance with the requirements of the laws of the State of Delaware.
ARTICLE XVI
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date the Plan is adopted by the Board and the date of stockholder approval, but Awards granted prior to such tenth anniversary may, and the Committee’s authority to administer the terms of such Awards shall, extend beyond that date;provided,however, that no Award (other than a Stock Option or Stock Appreciation Right) that is intended to be “performance-based” under Section 162(m) of the Code shall be granted on or after the fifth anniversary of the stockholder approval of the Plan unless the Performance Goals set forth onExhibit A are reapproved (or other designated performance goals are approved) by the stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which stockholders approve the Performance Goals set forth onExhibit A.
ARTICLE XVII
NAME OF PLAN
The Plan shall be known as the “Take-Two Interactive Software, Inc. 2009 Stock Incentive Plan.”
EXHIBIT A
PERFORMANCE GOALS
To the extent permitted under Section 162(m) of the Code, performance goals established for purposes of the grant or vesting of Awards of Restricted Stock and/or Other Stock-Based Awards, each intended to be “performance-based” under Section 162(m) of the Code, shall be based on the attainment of certain target levels of, or a specified increase or decrease (as applicable) in one or more of the following performance goals (“Performance Goals”):
To the extent permitted under Section 162(m) of the Code, the Committee may, in its sole discretion, also exclude, or adjust to reflect, the impact of an event or occurrence that the Committee determines should be appropriately excluded or adjusted, including:
(i) restructurings, discontinued operations, and other unusual or non-recurring charges as described in Accounting Principles Board Opinion No. 30 and/or management’s discussion and analysis of financial condition and results of operations appearing or incorporated by reference in the Company’s Form 10-K for the applicable year;
(ii) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; or
(iii) a change in tax law or accounting standards required by generally accepted accounting principles.
Performance goals may also be based upon individual Participant performance goals, as determined by the Committee, in its sole discretion.
In addition, such Performance Goals may be based upon the attainment of specified levels of Company (or subsidiary, division, other operational unit or administrative department of the Company) performance under one or more of the measures described above relative to the performance of other corporations. To the extent permitted under Section 162(m) of the Code, but only to the extent permitted under Section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval), the Committee may also (a) designate additional business criteria on which the performance goals may be based; or (b) adjust, modify or amend the aforementioned business criteria.
Reconciliation of GAAP Net Income to Non-GAAPAdjusted EBITDA
(in millions, except share data) | Fiscal Year Ended March 31, 2016 | |||||||
(in thousands) | Fiscal Year Ended March 31, 2018 | |||||||
GAAP Net Income | $ | (8,302 | ) | $ | 173,533 | |||
Net effect from deferral in net revenues and related cost of goods sold | 106,531 | 190,710 | ||||||
Stock-based compensation | 69,996 | 116,349 | ||||||
Impact of business reorganization | 72,513 | |||||||
Gain on long-term investments, net | (2,683 | ) | ||||||
(Benefit from) provision for income taxes | (30,048 | ) | ||||||
Acquisition related expenses | (7,080 | ) | ||||||
Business reorganization | 12,318 | |||||||
Interest expense (income) | 29,294 | (3,986 | ) | |||||
Depreciation and amortization | 28,800 | 43,969 | ||||||
Non-GAAP EBITDA | $ | 266,101 | ||||||
Amortization of intangible assets | 34,320 | |||||||
(Benefit from) provision for income taxes | (36,908 | ) | ||||||
Adjusted EBITDA | $ | 523,225 |
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on September | ||
TAKE-TWO INTERACTIVE SOFTWARE, INC.
NEW YORK, NY |
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VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |||||||||||||||
The Board of Directors recommends you vote “FOR” the following: | ||||||||||||||||||
1. | Election of Directors |
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Nominees |
01 | Strauss Zelnick | 02 | Robert A. Bowman | 03 | Michael Dornemann | 04 | J Moses | 05 | Michael Sheresky | |||||||||||||
06 | Susan Tolson |
01 | Strauss Zelnick | 02 | Michael Dornemann | 03 | J Moses | 04 | Michael Sheresky | 05 | LaVerne Srinivasan | |||||||||||||
06 | Susan Tolson | 07 | Paul Viera |
The Board of Directors recommends you vote “FOR” proposals 2 | For | Against | Abstain | |||||||||||
2. |
Approval, on a non-binding advisory basis, of the compensation of the Company’s “named executive officers” as disclosed in the Proxy Statement. |
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| Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, |
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NOTE: Such other business as may properly come before the meeting or any adjournment thereof. |
For address change/comments, mark here. (see reverse for instructions) | | |||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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TAKE-TWO INTERACTIVE SOFTWARE, INC. Annual Meeting of Shareholders September This proxy is solicited by the Board of Directors
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The shareholder(s) hereby appoint(s) Daniel Emerson and Matthew Breitman, or any one of them acting individually, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot and in the discretion of the proxies on such other matters as may properly come before the meeting, all of the shares of common stock ofTake-Two Interactive Software, Inc. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 9:00 a.m., local time on September
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE OF THIS BALLOT FOR THE BOARD OF DIRECTORS, AND | ||||||
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(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) |
Continued and to be signed on reverse side