Document:

Exhibit 10.3

 

BENEFICIAL MUTUAL SAVINGS BANK

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (the “Agreement”) by and between BENEFICIAL MUTUAL SAVINGS BANK, a Pennsylvania chartered savings bank (the “Bank”), JOANNE R. RYDER (the “Executive”) and BENEFICIAL MUTUAL BANCORP, INC.(the “Company”), the holding company of the Bank (solely as guarantor) is hereby entered into effective May 20, 2010 (the “Effective Date”).

 

WHEREAS, Executive serves in a position of substantial responsibility; and

 

WHEREAS, the Bank wishes to assure the services of Executive for the period provided in this Agreement; and

 

WHEREAS, Executive is willing to continue to serve in the employ of the Bank on a full-time basis for said period.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

 

1.                                      Employment.  Executive is employed as Senior Vice President and Director of Marketing of the Bank.  Executive shall perform all duties and shall have all powers which are commonly incident to the office of the Director of Marketing or which, consistent with the office, are delegated to her by the Chief Executive Officer of the Bank.

 

2.                                      Location and Facilities.  Executive will be furnished with the working facilities and staff as are necessary for her to perform her duties.  The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

 

3.                                      Term.

 

a.                                      The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on May 20, 2012, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

 

b.                                      Commencing on May 20, 2011 and continuing on each May 20th thereafter, the disinterested members of the Board of Directors may extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes two (2) years, unless Executive elects not to extend the term of this Agreement by giving proper written notice.  The Board of Directors will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement term and will include the rationale and results of its review in the minutes of the meetings.  The Board of Directors will notify Executive as

 

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soon as possible after each annual review whether it has determined to extend the Agreement.

 

4.                                      Base Compensation.

 

a.                                      The Bank agrees to pay Executive a base salary at the rate of $162,740 per year, payable in accordance with customary payroll practices.

 

b.                                      The Board shall review the rate of Executive’s base salary based upon factors it deems relevant, and may maintain or increase her salary, provided that no such action shall reduce the rate of salary below the rate set forth in paragraph a. of this Section 4.  All salary reviews will take place in connection with Executive’s annual performance review.

 

c.                                       In the absence of action by the Board, Executive shall continue to receive salary at the annual rate specified in paragraph a. of this Section 4. or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Board under the provisions of this Section 4.

 

5.                                      Bonuses.  Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise.

 

6.                                      Benefit Plans.  Executive shall also be eligible to participate in such medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees.

 

7.                                      Vacation and Leave.

 

a.                                      Executive shall be entitled to vacation and other leave in accordance with the Bank’s policy for senior executives, or otherwise as approved by the Board.

 

b.                                      In addition to paid vacations and other leave, Executive shall be entitled, without loss of pay, to absent herself voluntarily from the performance of her employment for such additional periods of time and for such valid and legitimate reasons as the Board may, in its discretion, determine.  Further, the Board may grant to Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board in its discretion may determine.

 

8.                                      Expense Payments and Reimbursements.  Executive shall be reimbursed for all reasonable out-of-pocket business expenses that she shall incur in connection with her services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

 

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9.                                      Club Membership.  In connection with the performance of her duties under this Agreement, the Bank shall provide Executive with a membership in the Union League.

 

10.                               Loyalty and Confidentiality.

 

a.                                      During the term of this Agreement Executive:  (i) shall devote all her time, attention, skill, and efforts to the faithful performance of her duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank.

 

b.                                      Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business.

 

c.                                       Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which she may be exposed during the course of her employment.  Executive further agrees that, unless required by law or specifically permitted by the Board in writing, she will not disclose to any person or entity, either during or subsequent to her employment, any of the above-mentioned information which is not generally known to the public, nor shall she employ such information in any way other than for the benefit of the Company and the Bank.

 

11.                               Termination and Termination Pay.  Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:

 

a.                                      Death.  Executive’s employment under this Agreement shall terminate upon her death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to Executive through the last day of the calendar month in which her death occurred.

 

b.                                      Retirement.  This Agreement will terminate on Executive’s Retirement Date.  For purposes of this Agreement, Retirement Date is defined as the date the Executive retires from the Bank under the retirement benefit plan or plans in which she participates pursuant to Section 6 of this Agreement.

 

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c.                                       Disability.

 

i.                                          The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability.  For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform her duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company and the Bank (or, if there are no such plans in effect, that impairs Executive’s ability to substantially perform her duties under this Agreement for a period of one hundred eighty (180) consecutive days).  The Board shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant.  As a condition to any benefits, the Board may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.

 

ii.                                       In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate.  The Bank will pay Executive, as Disability pay, an amount equal to sixty-six and two thirds percent (66 2/3%) of Executive’s bi-weekly rate of base salary in effect as of the date of her termination of employment due to Disability.  Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of:  (A) the date Executive returns to full-time employment at the Bank in the same capacity as she was employed prior to her termination for Disability; (B) Executive’s death; (C) Executive’s attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability.  Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company and the Bank.  In addition, during any period of Executive’s Disability, Executive and her dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company and the Bank, in which Executive participated prior to her Disability on the same terms as if Executive were actively employed by the Company and the Bank.

 

d.                                      Termination for Cause.

 

i.                                          The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate her employment at any time, for “Cause.”  Executive shall have no right to receive compensation

 

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or other benefits for any period after termination for Cause except for vested benefits.  Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:

 

(1)                                 Personal dishonesty;

 

(2)                                 Incompetence;

 

(3)                                 Willful misconduct;

 

(4)                                 Breach of fiduciary duty involving personal profit;

 

(5)                                 Intentional failure to perform stated duties under this Agreement;

 

(6)                                 Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Company and the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or

 

(7)                                 Material breach by Executive of any provision of this Agreement.

 

ii.                                       Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that, in the good faith opinion of the Board, Executive was guilty of the conduct described above and specifying the particulars thereof.

 

e.                                       Voluntary Termination by Executive.  In addition to her other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Board, in which case Executive shall receive only her compensation, vested rights and employee benefits up to the date of her termination.

 

f.                                        Without Cause or With Good Reason.

 

i.                                          In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate her employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days

 

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following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).

 

ii.                                       Subject to Section 12 of this Agreement, in the event of termination under this Section 11f., Executive shall be entitled to receive a severance benefit equal to two (2) times the sum of Executive’s (i) current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank.  Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll.  In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following her termination date.  In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis.  The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.

 

iii.                                    “Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective obligations under this Agreement.  Without limitation, such a material breach shall be deemed to occur upon any of the following:

 

(1)                                 A material reduction in Executive’s responsibilities or authority in connection with her employment with the Company or the Bank;

 

(2)                                 Assignment to Executive of duties of a non-executive nature or duties for which she is not reasonably equipped by her skills and experience;

 

(3)                                 A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts to which Executive was entitled prior to the Change in Control;

 

(4)                                 Termination of incentive and benefit plans (other than the Bank’s tax-qualified plans), programs or arrangements, or reduction of Executive’s participation to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;

 

(5)                                 A relocation of Executive’s principal business office by more than thirty (30) miles from its current location; or

 

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(6)                                 Liquidation or dissolution of the Company or the Bank.

 

iv.                                   Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits thereunder applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans are not available to other officers of the Company and the Bank, or any company that controls either of them, under a plan or plans in or under which Executive is not entitled to participate subsequent to such reduction or elimination of benefits.

 

v.                                      The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive).  However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code.  For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination.  The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination.  Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination.  “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

 

g.                                       Continuing Covenant Not to Compete or Interfere with Relationships.  Regardless of anything herein to the contrary, following a termination by the Company and the Bank or Executive pursuant to Section 11f.:

 

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i.                                          Executive’s obligations under Section 10c. of this Agreement will continue in effect; and

 

ii.                                       During the period ending one year after such termination of employment, Executive shall not serve as an officer, director or employee of any bank holding company, bank, savings bank, savings and loan holding company, or mortgage company (any of which, a “Financial Institution”) which Financial Institution offers products or services competing with those offered by the Bank from any office within thirty (30) miles from the main office or any branch of the Bank and shall not interfere with the relationship of the Company and the Bank and any of its employees, agents, or representatives.

 

12.                               Termination in Connection with a Change in Control.

 

a.                                      For purposes of this Agreement, a “Change in Control” means any of the following events:

 

i.                                          Merger:  The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation.

 

ii.                                       Acquisition of Significant Share Ownership:  There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.

 

iii.                                    Change in Board Composition:  During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period

 

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shall be deemed to have also been a director at the beginning of such period; or

 

iv.                                   Sale of Assets:  The Company or the Bank sells to a third party all or substantially all of its assets.

 

Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.

 

b.                                      Termination.  If within the period ending twelve (12) months after a Change in Control, (i) the Company and the Bank shall terminate Executive’s employment Without Cause, or (ii) Executive voluntarily terminates her employment With Good Reason, the Company and the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump-sum cash payment to her equal to three (3) times the sum of Executive’s (i) base salary and (ii) the most recent bonus paid by the Company and/or Bank.  Also, in such event, Executive shall, for a thirty-six (36) month period following her termination of employment, receive continued medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Bank during such period.  In the event that the Company or the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage under an individual policy.  The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive).  However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code.  For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination.  The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination.  Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination.  “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section

 

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416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

 

c.                                       The provisions of Section 12 and Sections 14 through 27, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one (1) year following a Change in Control.

 

13.                               Indemnification and Liability Insurance.

 

a.                                      Indemnification.  The Company and the Bank agree to indemnify Executive (and her heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities reasonably incurred by her in connection with or arising out of any action, suit, or proceeding in which she may be involved by reason of her having been a director or Executive of the Company, the Bank or any of their subsidiaries (whether or not she continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in her capacity as an Executive or director of the Company and the Bank or any of their subsidiaries.  Indemnification for expenses shall not extend to matters for which Executive has been terminated for Cause.  Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation.  Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

 

b.                                      Insurance.  During the period in which indemnification of Executive is required under this Section, the Company and the Bank shall provide Executive (and her heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior executives of the Company and the Bank.

 

14.                               Reimbursement of Executive’s Expenses to Enforce this Agreement.  The Company and the Bank shall reimburse Executive for all out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees, incurred by Executive in connection with successful enforcement by Executive of the obligations of the Company and the Bank to Executive under this Agreement.  Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement:  (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand.

 

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15.                               Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank.  In the event that the Company, the Bank and/or Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, which such opinion indicates there is a high probability do not result in any of such payments and benefits being non-deductible to the Company and the Bank and subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences.  Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to Executive’s approval prior to filing, which shall not be unreasonably withheld.  The Company, the Bank and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.  Nothing contained herein shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12 below zero.

 

16.                               Injunctive Relief.  If there is a breach or threatened breach of Section 11g. of this Agreement or the prohibitions upon disclosure contained in Section 10c. of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and that the Company and the Bank shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach.  The parties hereto likewise agree that Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank under this Agreement.

 

17.                               Successors and Assigns.

 

a.                                      This Agreement shall inure to the benefit of and be binding upon any corporate or other successor to the Company and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank.

 

b.                                      Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating her

 

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rights or duties hereunder without first obtaining the written consent of the Company and the Bank.

 

18.                               No Mitigation.  Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.

 

19.                               Notices.  All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company and/or the Bank at their principal business offices and to Executive at her home address as maintained in the records of the Company and the Bank.

 

20.                               No Plan Created by this Agreement.  Executive, the Company and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act or any other law or regulation, and each party expressly waives any right to assert the contrary.  Any assertion in any judicial or administrative filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

 

21.                               Amendments.  No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

 

22.                               Applicable Law.  Except to the extent preempted by federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

 

23.                               Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

 

24.                               Headings.  Headings contained herein are for convenience of reference only.

 

25.                               Entire Agreement.  This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6.

 

26.                               Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator’s award in any

 

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court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of her right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

 

27.                               Required Provisions.  In the event any of the foregoing provisions of this Section 27 are in conflict with the terms of this Agreement, this Section 27 shall prevail.

 

a.                                      The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement.  Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.

 

b.                                      If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Bank may in its discretion:  (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

 

c.                                       If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

 

d.                                      If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

 

e.                                       All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank:  (i) by the Director of the OTS (or his or her designee), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his or her designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.

 

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f.                                        Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

 

28.                               Source of Payments.  All payments provided for under this Agreement shall be timely paid in cash or check from the general funds of the Bank.  The Company, however, unconditionally guarantees payment and provision of all amounts and benefits due under this Agreement.  In the event the Bank does not pay such amounts or provide such benefits, they shall be paid or provided by the Company.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective May 20, 2010.

 

 

	
ATTEST:
    	
 
    	
BENEFICIAL MUTUAL SAVINGS BANK
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/   William J. Kline, Jr
    	
 
    	
By:
    	
/s/   Edward G. Boehne
    
	
Corporate   Secretary
    	
 
    	
 
    	
For   the Entire Board of Directors
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
WITNESS:
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/   Lisa Smalley
    	
 
    	
By:
    	
/s/   Joanne R. Ryder
    
	
 
    	
 
    	
 
    	
Joanne R. Ryder
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
BENEFICIAL MUTUAL BANCORP, INC.
    
	
 
    	
 
    	
(as guarantor)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/   William J. Kline, Jr
    	
 
    	
By:
    	
/s/   Edward G. Boehne
    
	
Corporate   Secretary
    	
 
    	
 
    	
For   the Entire Board of Directors
    

 

15

 

AMENDMENT TO THE EMPLOYMENT AGREEMENT

BY AND BETWEEN

BENEFICIAL MUTUAL BANCORP, INC., BENEFICIAL MUTUAL SAVINGS BANK

AND Joanne Ryder

 

THIS AMENDMENT is adopted this 15th day of March, 2012, by and between BENEFICIAL MUTUAL BANCORP, INC., a federal corporation, BENEFICAL MUTUAL SAVINGS BANK, a Pennsylvania savings bank (the “Bank”), and Joanne R. Ryder (the “Executive”).

 

WHEREAS, the Bank, the Company and the Executive entered into an employment agreement on January 7, 2008 (the “Agreement”); and

 

WHEREAS, the parties to the Agreement agreed to amend the Agreement to phase out the severance pay provided under Section 11(f) of the Agreement as of May 20, 2013.

 

NOW THEREFORE, the undersigned hereby amend the Agreement as follows:

 

Effective March 15, 2012, Section 11(f) shall be deleted in its entirety and replaced with the following new Section 11(f)

 

“f.                                                                                  Without Cause or With Good Reason.

 

i.                                          In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate her employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).

 

ii.                                       Subject to Section 12 of this Agreement, in the event of termination under this Section 11f. on or before May 20, 2013, Executive shall be entitled to receive a severance benefit equal to two (2) times the sum of Executive’s (i) current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank.  Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll.  In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following her termination date.  In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis.  The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.

 

16

 

IN WITNESS WHEREOF, the parties have duly executed and delivered this Amendment to the Agreement, or have caused this Amendment to the Agreement to be duly executed and delivered in their name and on their behalf, as of the day and year first above written.

 

 

	
 
    	
BENEFICIAL   MUTUAL SAVINGS BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gerard P. Cuddy
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BENEFICIAL   MUTUAL BANCORP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gerard P. Cuddy
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Joanne R. Ryder
    

 

17Exhibit 10.1

 

Execution Version

 

MANAGEMENT AGREEMENT

 

THIS MANAGEMENT AGREEMENT (this “Agreement”), dated as of March 10, 2014, which shall become effective on April 1, 2014 (the “Effective Date”), is by and between ZelnickMedia Corporation, a New York corporation (“ZelnickMedia”), and Take-Two Interactive Software, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, the Company desires to continue to receive financial and management consulting services from ZelnickMedia, and to obtain the benefit of the experience of ZelnickMedia in business and financial management of companies engaged in businesses similar to the Company’s;

 

WHEREAS, ZelnickMedia desires to continue to provide financial and management consulting services to the Company and the compensation arrangements set forth in this Agreement are designed to compensate ZelnickMedia for such services;

 

WHEREAS, ZelnickMedia and the Company are parties to that certain Management Agreement, dated as of May 20, 2011, by and between ZelnickMedia and the Company (the “2011 Agreement”), which sets forth the terms of the existing management services agreement between ZelnickMedia and the Company and which superseded and replaced that certain Management Agreement, dated as of March 30, 2007, by and between ZelnickMedia and the Company, as amended by that certain Amendment to Management Agreement, dated as of July 27, 2007, and that certain Second Amendment to Management Agreement, dated as of February 14, 2008 (as amended, the “Original Agreement”);

 

WHEREAS, ZelnickMedia and the Company desire to supersede and replace the 2011 Agreement in its entirety (except as otherwise expressly contemplated herein and therein and thereunder), effective as of the Effective Date; and

 

WHEREAS, until the Effective Date, the Company and ZelnickMedia will continue to abide by and operate under the terms and conditions of the 2011 Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the respective agreements hereinafter set forth, and the mutual benefits to be derived herefrom, ZelnickMedia and the Company agree as follows:

 

1.                                      Engagement.  The Company hereby engages ZelnickMedia as its financial and management consultant, and ZelnickMedia hereby agrees to provide financial and management consulting services to the Company, all on the terms and subject to the conditions set forth below.

 

2.                                      Services of ZelnickMedia.  ZelnickMedia hereby agrees during the term of this engagement to consult with the board of directors (the “Board”) and management of the Company and its subsidiaries in such manner and on such business, financial and operational matters as may be reasonably requested from time to time by the Board, including but not limited to:

 

 

(i)                                     oversee and supervise the operations of the Company and its subsidiaries in accordance with policies established by the Board and usual and customary standards of efficient operation and maintenance;

 

(ii)                                  assist in the preparation of operating budgets and business plans;

 

(iii)                               advise and assist the Company and its subsidiaries regarding their corporate and financial structure;

 

(iv)                              advise and assist the Company and its subsidiaries in formulating long-term business strategies;

 

(v)                                 assist the Company in recruiting senior management;

 

(vi)                              advise and assist the Company in securing equity and/or debt financing and negotiating and structuring the terms of such financing;

 

(vii)                           assist the Company and its subsidiaries with mergers and acquisitions with, and of, third party entities;

 

(viii)                        advise and assist the Company in evaluating potential sale or exit opportunities, structuring and negotiating a sale of the Company, or leveraged recapitalization;

 

(ix)                              provide consulting services in connection with the business and operations of the Company as requested by the Board; and

 

(x)                                 respond to Board requests concerning, and perform any other management services incidental to, the foregoing, or any other management or advisory services reasonably requested by the Board from time to time and to which ZelnickMedia agrees (such agreement not be unreasonably withheld, conditioned or delayed).

 

3.                                      Personnel.

 

(i)                                     ZelnickMedia shall provide and devote to the performance of this Agreement such employees, agents and representatives of ZelnickMedia, and for such time, as ZelnickMedia shall deem appropriate for the furnishing of the services required hereunder.  Notwithstanding the generality of the foregoing, it is agreed that in the performance of its duties hereunder, subject to Section 3(ii) below, ZelnickMedia shall make available the following individuals to provide the described services:

 

(A)                               During the term of this Agreement, Strauss Zelnick shall serve as the Executive Chairman of the Board and Chief Executive Officer of the Company, and shall devote a sufficient amount of his business time to the performance of his duties during the term of this Agreement, consistent with past practice.

 

(B)                               Karl Slatoff shall serve as President of the Company pursuant to the employment agreement by and between the Company and Mr. Slatoff, dated as of

 

2

 

February 14, 2008, and as amended from time to time by mutual agreement of the Company and Mr. Slatoff.

 

(C)                               Other ZelnickMedia personnel, as appropriate, shall provide services and serve as consultants to the Company on a project-by-project, as-needed basis.

 

(ii)                                  In the event that Mr. Zelnick, Mr. Slatoff or any other employee of ZelnickMedia acting in an executive capacity for the Company is unable or unavailable to serve in the applicable capacities set forth in Section 3(i) above, ZelnickMedia shall provide a qualified individual to serve in such capacity, who must be reasonably satisfactory to the Board.  If ZelnickMedia does not provide a qualified replacement reasonably acceptable to the Board within a reasonable period of time, the Company may fill such position with a person not affiliated with ZelnickMedia and deduct the costs of such person’s compensation (including cash and equity compensation) from ZelnickMedia’s compensation under this Agreement; provided, however, that such costs shall not be deducted from ZelnickMedia’s compensation hereunder if Mr. Zelnick, Mr. Slatoff or such other employee of ZelnickMedia, as applicable, is terminated by the Company without Cause or resigns for Good Reason (in the case of Mr. Zelnick, each as defined in Section 8 of this Agreement, or, in the case of Mr. Slatoff or any other employee of ZelnickMedia, each as defined in such person’s employment or consulting agreement with the Company); provided further, however, that (i) in no event shall any termination by the Company without Cause or resignation by an individual for Good Reason caused by any action or inaction taken not in good faith by ZelnickMedia, Mr. Zelnick, Mr. Slatoff or any other individual appointed by ZelnickMedia pursuant to Section 3(i) for the purpose of giving rise to such a termination by the Company without Cause or a resignation by an individual for Good Reason, be deemed a termination of such individual’s employment by the Company without Cause or a resignation by such individual for Good Reason, as applicable, in either case for purposes of this Section 3(ii), and (ii) no more than 60% of the cash and equity compensation payable to ZelnickMedia hereunder shall be deducted if the Company replaces Mr. Zelnick in accordance with this Section 3(ii) and no more than 40% of the cash and equity compensation payable to ZelnickMedia hereunder shall be deducted if the Company replaces Mr. Slatoff in accordance with this Section 3(ii).  The Compensation Committee of the Board (the “Committee”) shall reasonably and in good faith determine the value of the equity awarded to such replacement person and the appropriate deductions from the cash and equity compensation payable to ZelnickMedia (including the Management Fee and Annual Bonus and the equity awards pursuant to Section 6 below); provided, however, that, except as provided in Section 8 or Section 24 hereof, in no event shall ZelnickMedia be required to forfeit any cash compensation paid to ZelnickMedia or any vested equity awards, whether granted pursuant to Section 6 below or otherwise.

 

4.                                      Management Fee.  In consideration for the services to be provided by ZelnickMedia hereunder, the Company shall, commencing on the Effective Date, pay to ZelnickMedia a management fee of $2,970,000 per annum during the term of this Agreement (the “Management Fee”) payable on the first day of each month during the term of this Agreement in equal monthly installments of $247,500 in immediately available funds.  The Management Fee shall not be increased or decreased during the term of this Agreement.

 

3

 

5.                                      Annual Bonus.  In addition to the Management Fee, ZelnickMedia shall have an annual bonus opportunity subject to performance goals (the “Annual Bonus”) for each of the fiscal years of the Company ending March 31, 2015, March 31, 2016, March 31, 2017, March 31, 2018 and March 31, 2019 (each, an “Applicable Fiscal Year” and collectively the “Applicable Fiscal Years”).  The target annual bonus opportunity has been set at 80% of the Management Fee, or $2,376,000 per annum (the “Target Bonus Amount”).  The actual amount of the Annual Bonus shall be determined reasonably and in good faith by the Committee with respect to each Applicable Fiscal Year subject to the terms set forth herein, and shall be paid within the 15-day period immediately following the Company’s receipt of its audited financial statements for the Applicable Fiscal Year, but in all events in the fiscal year immediately following the Applicable Fiscal Year to which the Annual Bonus relates and prior to August 15  of such subsequent fiscal year, as follows:

 

(i)                                     In the event actual results in an Applicable Fiscal Year are less than 80% of the Target (as defined below), the Annual Bonus shall be zero.

 

(ii)                                  In the event actual results in an Applicable Fiscal Year are equal to or greater than 80% of the Target but less than 100% of the Target, the Annual Bonus shall be between zero and the Target Bonus Amount, pro-rated on a straight-line basis between such amounts based upon the actual percentage of the Target achieved.

 

(iii)                               In the event actual results in an Applicable Fiscal Year are equal to or greater than 100% of the Target but less than 120% of the Target, the Annual Bonus shall be between Target Bonus Amount and $3,394,286 (the “120% Bonus Amount”), prorated on a straight-line basis between the Target Bonus Amount and the 120% Bonus Amount based upon the actual percentage of the Target achieved.

 

(iv)                              In the event actual results in an Applicable Fiscal Year are equal to or greater than 120% of the Target but less than 150% of the Target, the Annual Bonus shall be between the 120% Bonus Amount and $4,752,000 (the “Maximum Bonus Amount”), prorated on a straight-line basis between 120% Bonus Amount and the Maximum Bonus Amount based upon the actual percentage of the Target achieved.

 

(v)                                 In the event actual results in an Applicable Fiscal Year are equal to or greater than 150% of the Target, the Annual Bonus shall be the Maximum Bonus Amount.

 

For illustration, the following table sets forth the amount of Annual Bonus that would be payable to ZelnickMedia for each 10% increment of achievement of the Target:

 

	
Percentage of Target Obtained
    	
 
    	
Amount of Annual Bonus
    	
 
    
	
80
    	
%
    	
Zero
    	
 
    
	
90
    	
%
    	
$
    	
1,188,000
    	
 
    
	
100
    	
%
    	
$
    	
2,376,000
    	
 
    
	
110
    	
%
    	
$
    	
2,885,143
    	
 
    
	
120
    	
%
    	
$
    	
3,394,286
    	
 
    
	
130
    	
%
    	
$
    	
3,846,857
    	
 
    
	
140
    	
%
    	
$
    	
4,299,429
    	
 
    
	
150
    	
%
    	
$
    	
4,752,000
    	
 
    

 

4

 

The term “Target” shall mean budgeted EBITDA of the Company (or other measurement of financial performance reasonably determined by the members of the Board (excluding any member of the Board who is a shareholder, affiliate, member and/or partner of ZelnickMedia), on the one hand, and ZelnickMedia, on the other hand, with respect to an Applicable Fiscal Year), determined within 30 days of the beginning of that Applicable Fiscal Year by mutual agreement of the Company and ZelnickMedia, each acting reasonably and in good faith, and measured without giving effect to any payments under this Agreement.

 

For purposes of this Agreement, if budgeted EBITDA is used as the Target, the term “EBITDA” shall be calculated consistent with the Company’s past practices and on the same basis as utilized by the Company for other employee compensation purposes; and actual EBITDA with respect to each Applicable Fiscal Year shall be calculated by the Company acting reasonably and in good faith, after meaningful consultation with ZelnickMedia, in the same manner as the budgeted EBITDA for such Applicable Fiscal Year.

 

The Committee shall, acting reasonably and in good faith, after meaningful consultation with ZelnickMedia, make such adjustments to the calculation of actual or budgeted EBITDA as it deems equitable in the event the circumstances upon which budgeted EBITDA is initially calculated change during any Applicable Fiscal Year.

 

The Committee shall, acting reasonably and in good faith, after meaningful consultation with ZelnickMedia, make such adjustments to this Section 5 as it deems equitable in the event the Company changes its fiscal year during the term of this Agreement.

 

Notwithstanding anything herein to the contrary, the Company and ZelnickMedia hereby agree that this Agreement shall not supersede or otherwise have any affect on the Company’s obligation to pay ZelnickMedia any Annual Bonus for the fiscal year of the Company ending on March 31, 2014 in accordance with the terms and conditions of the 2011 Agreement.

 

6.                                      Company Equity.

 

(i)                                     Equity Award.  On the Effective Date, ZelnickMedia (or upon three (3) days prior written notice of ZelnickMedia to the Company, an affiliate or partner of ZelnickMedia that agrees to be bound by the provisions of this Section 6), shall be entitled to receive that number of time-based restricted units of the Company as is determined by dividing $3,850,000 by the average of the closing prices of the Company’s common stock for each 

 

5

 

trading day during the 10 trading day period immediately prior to the Effective Date and that number of performance-based restricted units of the Company as is 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 the Effective Date (such awards, the “Equity Awards”), pursuant to and in accordance with the terms and conditions of the agreement attached as Exhibit A hereto (the “New Grant Agreement”).  The New Grant Agreement, together with (i) any grant agreements entered into with respect to additional grants by the Company in accordance with this Section 6, (ii) the grant agreements relating to the restricted stock described in Section 6 of the 2011 Agreement and (iii) the grant agreements relating to the restricted stock described in Section 6 of the Original Agreement, shall be referred to collectively as the “Grant Agreements.”  Following the grant on the Effective Date, additional equity awards may be granted, in amounts determined at the discretion  of the Committee in accordance with Section 3 hereof, to ZelnickMedia (or an affiliate or partner thereof in accordance with this Section 6) annually on each anniversary of the Effective Date.

 

(ii)                                  Stock Ownership Requirement — 5X Management Fee.  Until the earlier of (A) March 31, 2019, (B) a Change in Control (as defined below) or (C) the termination of this Agreement pursuant to Section 8 below, ZelnickMedia shall not, and shall cause each Subject Person (as defined below) to agree in writing not to, sell or otherwise dispose of (other than, upon not less than three (3) days’ prior written notice to the Company, to a Subject Person that agrees to be bound by the provisions of this Section 6) any shares of the Company’s common stock if, after giving effect to such proposed sale or other disposition, the shares of Company common Stock (including options, restricted stock and restricted units, which restricted units will be counted at the target number of shares if subject to performance-based vesting) owned by ZelnickMedia and each Subject Person in the aggregate (collectively, “Applicable Shares”), as of the trading day immediately preceding the date of the proposed sale or disposition, would have a Market Value (as defined below) less than five times (5X) the Management Fee; provided, however, that the foregoing shall not limit the right of ZelnickMedia and/or the Subject Persons to sell or otherwise dispose of that number of shares of common stock of the Company necessary to satisfy any taxes imposed on ZelnickMedia or such Subject Person as a result of the exercise of options, vesting of restricted stock or restricted units, or in connection with the transfer by ZelnickMedia to a Subject Person of any Applicable Shares in accordance with this paragraph.

 

For purposes of this Agreement, (A) the term “Subject Person” shall mean shareholders, partners, members, employees and other affiliates of ZelnickMedia who hold any Applicable Shares, including any person to whom any Applicable Shares were transferred in accordance with this Section 6(ii) and (B) “Market Value” of a number of shares of the Company’s common stock shall equal the number of shares of common stock multiplied by the average of the closing prices of the Company’s common stock for each trading day during the 10 trading day period ending on the day as of which Market Value is being determined (which, in the case of a sale or other disposition, shall be the trading day immediately preceding the date of such sale or other disposition).

 

(iii)                               Securities Trading Policy.  ZelnickMedia hereby acknowledges the Company’s “Securities Trading Policy” (as in effect from time to time, the “Trading Policy”) and shall, and shall cause its Subject Persons who own Applicable Shares, and shall use

 

6

 

commercially reasonable efforts to cause its employees (including by making compliance a condition to the employees’ continued employment), to comply at all times with the Trading Policy as if such Persons (as defined below) were executive officers of the Company under the terms of the Trading Policy.

 

(iv)                              Allocation of Compensation.  In order to ensure that the persons providing services under this Agreement are properly incentivized, ZelnickMedia covenants and agrees that the aggregate compensation payable to ZelnickMedia or any person providing services on its behalf hereunder (whether in the form of Management Fee, Annual Bonus or Equity Awards) shall only be paid, payable or otherwise conveyed (directly or indirectly), whether by the Company, ZelnickMedia or otherwise, such that (i) no more than 60% of such aggregate compensation shall be received by or conveyed to Mr. Zelnick (or such other employee of ZelnickMedia that serves as Executive Chairman and Chief Executive Officer of the Company in accordance with Section 3(ii)) and (ii) 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 President of the Company in accordance with Section 3(ii)).

 

(v)                                 Plan Amendment.  The Company will include a proposal for the approval of an amendment of the Company’s 2009 Stock Incentive Plan, as amended and restated effective as of July 24, 2013 (the “Plan”) to amend the definition of “Consultants” in the Plan to include corporations, limited liability companies and other non-natural persons (in a form reasonably acceptable to ZelnickMedia) (the “Proposal”) in the proxy statement for the Company’s 2014 annual meeting of stockholders to consider and vote upon the Proposal.  In the event the Proposal is approved by the requisite vote of the Company’s stockholders, the Company may then elect to settle the Equity Awards in shares of the Company’s common stock in accordance with the New Grant Agreement which shares shall be issued under the Plan.

 

7.                                      Expenses.  The Company shall (i) promptly reimburse ZelnickMedia for all reasonable out-of-pocket fees and expenses as have been or may be incurred (before or after the date of this Agreement) by ZelnickMedia, its partners, shareholders, members, officers, employees, affiliates, counsel, agents and representatives in connection with ZelnickMedia’s engagement hereunder and the rendering of services hereunder (including, but not limited to, attorneys’ fees in connection with the negotiation and performance of this Agreement and fees and expenses incurred in attending Company-related meetings) and (ii) reimburse ZelnickMedia for all travel expenses in accordance with the Company’s “Travel and Entertainment Policy”.  The Company shall reimburse ZelnickMedia for all reasonable and documented attorneys’ fees incurred by ZelnickMedia in connection with the negotiation of this Agreement as soon as practicable after the date hereof.

 

8.                                      Term.  This Agreement will continue from the Effective Date through March 31, 2019 (the “Initial Term”), unless earlier terminated by either ZelnickMedia or the Company in accordance with this Section 8.  This Agreement may be terminated immediately by the Company for Cause (as defined below) or by ZelnickMedia for Good Reason (as defined below), and may be terminated by the Company without Cause or by ZelnickMedia without Good Reason, in each case upon 30 days’ written notice (which notice requirement will be waived following a Change in Control).  If this Agreement is terminated by the Company or ZelnickMedia prior to March 31, 2019, ZelnickMedia will be entitled to the following: (a) if this

 

7

 

Agreement is terminated by the Company for Cause or by ZelnickMedia without Good Reason, all unvested equity granted under the Grant Agreements shall be forfeited for no consideration and ZelnickMedia shall be paid on the date of termination (i) the earned but unpaid portion of the Management Fee and (ii) any accrued but unpaid Annual Bonus for a completed fiscal year, and ZelnickMedia and/or any Subject Persons, as applicable, shall retain the vested portion of all equity granted pursuant to the Grant Agreements; (b) if this Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason (whether before or after a Change in Control), (i) ZelnickMedia shall be paid on the date of termination (x) the earned but unpaid portion of the Management Fee, (y) any accrued but unpaid Annual Bonus for a completed fiscal year, and (z) three times (3X) the sum of (A) the Management Fee plus (B) the Target Bonus Amount; (ii) all unvested time-based restricted stock or restricted units granted pursuant to the Grant Agreements shall vest; and (iii) all performance-based restricted stock or restricted units granted pursuant to the Grant Agreements will vest in accordance with the terms of the applicable Grant Agreement, provided that the vesting of any such performance-based restricted stock or restricted units granted on or following the Effective Date shall be determined 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 performance-based restricted stock or restricted units that vest based on Total Shareholder Return, based on the actual level of performance achieved for each applicable performance measure as of the date of termination.  Notwithstanding anything to the contrary contained in this Agreement, if the parties fail to enter into a new agreement with respect to services by ZelnickMedia provided hereunder on substantially similar terms in the aggregate upon the expiration of the Initial Term or otherwise agree to extend the Initial Term, all unvested time-based restricted stock and time-based restricted units granted pursuant to the Grant Agreements shall vest, and all performance-based restricted units granted pursuant to the Grant Agreements shall vest upon such expiration; provided that the vesting of any such performance-based restricted stock or restricted units granted on or following the Effective Date shall be determined 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 performance-based restricted stock or restricted units that vest based on Total Shareholder Return, based on the actual level of performance achieved for each applicable performance measure as of such vesting date. Upon a Change in Control, (i) this Agreement shall not terminate, and any termination of this Agreement shall only be in accordance with this Section 8, and (ii) all unvested restricted stock or restricted units granted pursuant to the Grant Agreements (including time-based and performance-based restricted stock or restricted units) will vest in accordance with the terms of the applicable Grant Agreement; provided, that (a) the vesting of any such restricted stock or restricted units granted on or following the Effective Date shall occur upon the earlier of (x) a termination of this Agreement by the Company without Cause or by ZelnickMedia for Good Reason or (y) the second anniversary of the date such awards were granted pursuant to the Grant Agreements (irrespective of whether this Agreement has been terminated for any reason after such date) and (b) the vesting of any such performance-based restricted stock or restricted units granted on or following the Effective Date shall be determined based on the assumption that the applicable performance measure was achieved at the target level of performance for the applicable performance period.

 

“Cause” means (a) the conviction of, or a plea of guilty or nolo contendere by any of the individuals provided by ZelnickMedia to serve in the positions set forth in Section 3(i)(A)-(B)

 

8

 

(which positions are currently filled by Strauss Zelnick or Karl Slatoff, respectively) of any felonious criminal act (other than traffic-related offenses or as a result of vicarious liability), (b) fraud, or (c) any act or omission involving malfeasance or gross negligence by ZelnickMedia in the performance of its obligations hereunder, in the case of each of clauses (b) through (c) above, that relates to and damages the Company and, if capable of being cured so that the Company is not materially damaged, is not so cured within 15 days after receipt by ZelnickMedia of written notice thereof.

 

“Good Reason” means (a) a condition that materially impairs the ability of ZelnickMedia, Strauss Zelnick, Karl Slatoff or any other individual appointed by ZelnickMedia pursuant to Section 3(i)(A)-(B) to perform their respective duties or responsibilities, as applicable, as contemplated herein, (b) assigning Strauss Zelnick, Karl Slatoff or any other individual appointed by ZelnickMedia pursuant to Section 3(i)(A)-(B) duties materially inconsistent with their respective positions (including status, offices, titles and reporting requirements), authorities or responsibilities or any other action by the Company which results in a material diminution of their respective positions, authorities, duties or responsibilities (and in making this determination with respect to Mr. Zelnick, factors may include Mr. Zelnick ceasing to be the most senior executive in any controlled group containing the Company), (c) the failure by the Company to perform any of its material obligations under this Agreement or (d) the requirement that ZelnickMedia’s place of service be located outside a 30-mile radius of New York City, NY; provided, however, that in each ZelnickMedia provides not less than 30 days’ written notice to the Company (within 60 days of ZelnickMedia, Strauss Zelnick, Karl Slatoff or any other individual appointed by ZelnickMedia pursuant to Section 3(i)(A)-(B) becoming aware of the initial existence of the facts or circumstances constituting Good Reason) of its intention to terminate this Agreement for Good Reason, such notice to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Good Reason is based, and such termination shall be effective at the expiration of such 30 day notice period only if the Company has not fully cured such act or acts or failure or failures to act that give rise to Good Reason during such period.

 

A “Change in Control” means any transaction or occurrence (or series of related transactions or occurrences) which results at any time in any of (i) a sale of all or substantially all of the consolidated assets of the Company and of its subsidiaries, or a consolidation, reorganization, merger, or other business combination of the Company with or into, any other Person (as defined below) if, after such transaction the stockholders of the Company immediately prior to such transaction beneficially hold, directly or indirectly, less than a majority of the outstanding voting units of the purchasing or surviving parent entity in such transaction, on a fully diluted basis, (ii) a change in the majority of the members of the Board to Persons who were neither (x) nominated or appointed by the current Board nor (y) nominated or appointed by directors so nominated or appointed, or (iii) an acquisition by any individual, general partnership, limited partnership, limited liability company, corporation, trust, estate, real estate investment trust association or any other entity (each, a “Person”) or group of Persons (other than the Company or any subsidiary of the Company or any of their affiliates) of the outstanding securities of the Company in a transaction or series of transactions, if immediately thereafter such acquiring Person or group has, or would have, beneficial ownership of more than fifty percent (50%) of the combined equity interests or voting power of the Company; provided that mere formation of a group will not itself constitute a Change in Control.  A Change in Control shall be deemed to occur as of the

 

9

 

effective date of the first event, action or transaction leading to one of the results described above.

 

As the parties hereto do not intend that actions taken by ZelnickMedia or any of its employees, shareholders, members, partners or other affiliates could give rise to a right on the part of ZelnickMedia to terminate this Agreement for Good Reason, the Company and ZelnickMedia hereby agree that, in no event shall any conduct or actions undertaken by ZelnickMedia or any of its employees, shareholders, members, partners or other affiliates, or any failure by such Persons to act, give rise to or constitute Good Reason hereunder or, to the extent that such conduct, actions, or failure to act results in a termination of this Agreement, be deemed a termination of this Agreement by the Company without Cause.

 

No termination of this Agreement shall affect the Company’s obligations with respect to any and all reasonable fees, costs and expenses incurred by ZelnickMedia in rendering services hereunder and not reimbursed by the Company as of the effective date of such termination or the Company’s indemnification and contribution obligations.

 

9.                                      Confidentiality; Non-Solicitation.  ZelnickMedia shall not at any time during or after the term of this Agreement, directly or indirectly, except as in good faith deemed necessary or desirable to perform any of its obligations hereunder, to defend its own rights or as required by applicable law or legal process, disclose or use for its own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other information, including, without limitation, relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of the Company, or of any subsidiary or affiliate of the Company; provided, that the foregoing shall not apply to information which is generally known to the industry or the public (other than as a result of ZelnickMedia’s breach of this covenant) or information obtained by ZelnickMedia prior to March 30, 2007 or not in connection with its performance of its obligations under this Agreement.  ZelnickMedia agrees that upon termination of this Agreement, upon the Company’s request, it shall immediately return to the Company all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company and its affiliates, except that ZelnickMedia may retain such personal notes, notebooks and diaries that do not contain confidential information of the type described above.  For a period beginning on March 30, 2007 and ending one year after the date of termination of this Agreement, except in the event this Agreement is terminated by the Company without Cause or by ZelnickMedia for Good Reason, ZelnickMedia shall not in any capacity, either individually or in association with others, employ or solicit for employment (other than in any general solicitation) any person who is an employee of the Company or its affiliates at the level of vice president or higher immediately prior to such employment or during such solicitation.

 

10.                               Liability.  Neither ZelnickMedia nor any of its affiliates, directors, officers, employees, counsel, agents or representatives shall be liable to the Company or its subsidiaries or affiliates for any loss, claim, liability, damage or expense arising out of or in connection with the performance of services contemplated by this Agreement, other than any

 

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loss, claim, liability, damage or expense to the extent determined by the final judgment of a court of competent jurisdiction to have been caused from the gross negligence, fraud, bad faith or willful misfeasance of ZelnickMedia or its affiliates.

 

11.                               Indemnification; D&O Insurance.  To the fullest extent permitted by applicable law, the Company shall indemnify and hold harmless ZelnickMedia and its affiliates, and each of their respective members, managers, directors, officers, employees, counsel, agents, representatives, contractors and affiliates (each such individual or entity to be referred to hereinafter as an “Indemnified Person”), from and against any loss, claim, damage or liability, joint or several, and any action in respect thereof, whether or not involving a third party, to which an Indemnified Person may be subject, insofar as such loss, claim, damage, liability or action relates to, arises out of or results from any Covered Event (as such term is defined below) or alleged Covered Event, and will reimburse such Indemnified Person upon request for all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by such Indemnified Person in connection with investigating, defending or preparing to defend against any such loss, claim, damage, liability or action, as such expenses are incurred or paid.  The term “Covered Event” shall mean (a) any action taken, or services performed, by an Indemnified Person, related to or consistent with the terms of this Agreement or the Original Agreement, or (b) any action taken, or omitted to be taken, by the Company or any of its managers, directors, officers, employees, agents or affiliates, in connection with any matter in which an Indemnified Person has been involved pursuant to this Agreement or the Original Agreement; provided, that the term “Covered Event,” with respect to an Indemnified Person, shall exclude any loss, claim, damage, liability or expense to the extent determined by the final judgment of a court of competent jurisdiction to have been caused from the gross negligence, fraud, bad faith or willful misfeasance of such Indemnified Person or any affiliate thereof.  The Company shall cover the designees of ZelnickMedia under directors and officers’ liability insurance both during and, while potential liability exists, after the term of this Agreement in amounts reasonably requested by ZelnickMedia.

 

12.                               Independent Contractor.  ZelnickMedia and the Company agree that ZelnickMedia shall perform services hereunder as an independent contractor, retaining control and direction over and responsibility for its own operations and personnel.  Neither ZelnickMedia nor their directors, officers or employees shall be considered employees or agents of the Company or its subsidiaries as a result of this Agreement nor shall any of them have authority to contract in the name of or bind the Company, except as expressly agreed to in writing by the Company, including as provided in this Agreement.

 

13.                               Notices.  Any notice, report or payment required or permitted to be given or made under this Agreement by one party to the other shall be deemed to have been duly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid, to the other party at the following addresses (or at such other address as shall be given in writing by one party to the other):

 

If to ZelnickMedia:

 

ZelnickMedia Corporation

19 West 44th Street, 18th Floor

 

11

 

New York, NY 10036

Telephone:  (212) 223-1383

Facsimile:  (212) 223-1384

Attention:  Strauss Zelnick

 

with a copy to (which shall not constitute notice):

 

Simpson Thacher & Bartlett LLP

1999 Avenue of the Stars — 29th Floor

Los Angeles, CA 90067

Telephone:  (310) 407-7500

Facsimile:  (310) 407-7502

Attention:  Daniel Clivner

 

If to the Company:

 

Take-Two Interactive Software, Inc.

622 Broadway

New York, NY 10012

Telephone:  (646) 536-2842

Facsimile:  (646) 536-2926

Attention:  General Counsel

 

with a copy to (which shall not constitute notice):

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Telephone:  (212) 728-8129

Facsimile:  (212) 728-9129

Attention:  Adam Turteltaub

 

14.                               Entire Agreement; Modification.  Effective as of the Effective Date, this Agreement and the Grant Agreements shall (a) contain the complete and entire understanding and agreement of ZelnickMedia and the Company with respect to the subject matter hereof; and (b) supersede all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of ZelnickMedia in connection with the subject matter hereof, including the 2011 Agreement and the Original Agreement; provided that, notwithstanding the foregoing, (i) ZelnickMedia shall be entitled to receive such Annual Bonus for the fiscal year of the Company ending March 31, 2014 as ZelnickMedia would have been entitled to receive pursuant to Section 5 of the 2011 Agreement, (ii) Section 23 (Registration Statement) of the 2011 Agreement shall survive the execution of the this Agreement and (iii) to the extent expressly provided therein, each of the grant agreements attached as Exhibit A and Exhibit B to the 2011 Agreement relating to restricted stock described in Section 6 of the 2011 Agreement and the grant agreements attached as Exhibit A and Exhibit B to the Original Agreement relating to restricted stock described in Section 6 of the Original Agreement shall remain in full force and effect in accordance with the terms thereof and shall not be superseded

 

12

 

by this Agreement or by the New Grant Agreement, including without limitation with respect to the grant, vesting or termination of any equity awards contemplated therein.  This Agreement may be amended or modified, or any of the terms, covenants or conditions hereof may be waived, only by a written instrument executed by ZelnickMedia and the Company, or in the case of a waiver, by the party or parties waiving compliance.  Any waiver by any party of any condition, or of the breach of any provision, term or covenant contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as a further or continuing waiver of any such condition, or the breach of any other provision, term or covenant of this Agreement.

 

15.                               Waiver of Breach.  The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of that provision or any other provision hereof.

 

16.                               Assignment.  ZelnickMedia may assign its rights or obligations under this Agreement only with the express written consent of the Company, such consent not to be unreasonably withheld.  The Company may not assign its rights or obligations under this Agreement.  The Company hereby agrees to the assignment by ZelnickMedia of all of its rights and obligations under this Agreement to ZM Capital Advisors, LLC, a Delaware limited liability company (“ZM Capital”); provided, however, that ZelnickMedia shall remain liable for all of the obligations hereunder and under this Agreement.  In the event ZelnickMedia elects to effect such assignment to ZM Capital, it shall cause ZM Capital to execute a joinder agreement to this Agreement in form and substance reasonably acceptable to the Company.

 

17.                               Successors.  This Agreement and all the obligations and benefits hereunder shall inure to the successors and permitted assigns of the parties.

 

18.                               Failure to Pay.  If for any reason the Company does not pay the Management Fee, Annual Bonus or any other amount due under this Agreement when due, then such amount shall accrue interest at a rate of 1% per month and shall continue to be payable and shall be paid by the Company as soon as it can be paid.  The preceding sentence shall not limit any other remedies of ZelnickMedia in the event amounts are not paid when due.

 

19.                               Counterparts.  This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and both of which taken together shall constitute one and the same agreement.

 

20.                               Choice of Law.  This Agreement and any dispute arising hereunder shall be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.  Each party consents to the in personam jurisdiction of the Court of Chancery or other courts of the State of Delaware and the United States District Court located in the State of Delaware in connection with any claim or dispute arising under or in connection with this Agreement.

 

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21.                               Severability.  If any provision of this Agreement is or becomes illegal, invalid or unenforceable under any law or regulation of any jurisdiction, it shall, as to such jurisdiction, be deemed modified to the least degree necessary to conform to the requirements of such law or regulation, or if for any reason it is not deemed so modified, it shall be illegal, invalid or unenforceable only to the extent set forth in the law or regulation without affecting the legality, validity or enforceability of such provision in any other jurisdiction or the remaining provisions of this Agreement.

 

22.                               Section 409A.  Notwithstanding anything to the contrary contained in this Agreement, in the event that one or more payments under this Agreement are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and would cause ZelnickMedia to incur any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, the Company shall, at no additional cost to the Company, after consulting with ZelnickMedia and receiving ZelnickMedia’s approval, reform and appropriately adjust such provision; provided that the Company agrees to maintain, to the maximum extent practicable without any such additional cost to the Company, the original intent and economic benefit to ZelnickMedia of the applicable provision without violating the provisions of Section 409A of the Code.

 

23.                               Registration Statement.  Subject to reasonable blackout periods and the receipt of necessary information from ZelnickMedia (or any Subject Person, if applicable) for inclusion in such filing, the Company shall, at any time following the first anniversary of the date hereof and within 45 days following the written request of ZelnickMedia, file a registration statement on Form S-3 (or any applicable successor registration form) (the “Registration Statement”) covering the shares of the common stock granted to ZelnickMedia pursuant to the New Grant Agreement.  Subject to reasonable blackout periods, the Company shall use its reasonable best efforts to prepare and file with the Securities and Exchange Commission (“SEC”) such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective and free from any material misstatement or omission to state a material fact until such time as all such shares of common stock have been sold pursuant to a registration statement or are otherwise freely tradable.

 

24.                               Dodd-Frank.  ZelnickMedia hereby acknowledges (i) the section in the Company’ Corporate Governance Guidelines entitled “Recovery of Improperly-Awarded Incentive Compensation”, a copy of which is attached hereto as Annex A (the “Clawback Policy”) and (ii) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), which requires that the SEC, by rule, direct the national securities exchanges and national securities associates to prohibit the listing of any security of an issuer that fails to implement a “clawback” policy providing that “in the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws, the issuer will recover from any current or former executive of the issuer who received incentive-based compensation (including stock options awarded as compensation) during the three-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement.”  ZelnickMedia shall, and shall cause its shareholders, partners, employees,

 

14

 

members and other affiliates who are deemed “Executives” under the Clawback Policy or who receive any portion of the Equity Awards, to comply with the Clawback Policy, including as may be amended or superseded by the Board after the date hereof to the extent required to comply with any rules adopted by the SEC in response to Section 954 of the Dodd-Frank Act.

 

*  *  *  *  *

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Management Agreement to be duly executed and delivered on the date and year first above written.

 

	
 
    	
ZELNICKMEDIA CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Strauss Zelnick
    
	
 
    	
 
    	
Name:
    	
Strauss Zelnick
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TAKE-TWO INTERACTIVE SOFTWARE, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Seth D. Krauss
    
	
 
    	
 
    	
Name:
    	
Seth D. Krauss
    
	
 
    	
 
    	
Title:
    	
EVP and General Counsel
    

 

[Signature Page to 2014 Management Agreement]

 

 

ANNEX A

 

Clawback Policy

 

Recovery of Improperly-Awarded Incentive Compensation

 

The Company will use commercially reasonable efforts to implement the following policy through the insertion of contractual provisions in new agreements with applicable employees and through any amendments that may be entered into after the date of the adoption of this policy on November 12, 2010 to existing agreements with Executives (as defined below).

 

The Board may require the reimbursement of any bonus or incentive compensation awarded to an Executive and/or effect the cancellation of unvested restricted stock or outstanding stock option awards previously granted to an Executive, in each case, on or after the adoption of this policy on November 12, 2010, but in no event more than four years after the award of such compensation where: (1) they payment was predicated upon achieving certain financial results that were subsequently determined to have been erroneously reported; (2) the Board determines that the Executive 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 Executive based upon the corrected financial results. In each instance, the Board may, to the extent practicable under applicable law, seek to recover from such Executive on or after the adoption of this policy that was subsequently reduced due to the correction of erroneous reporting and/or effect the cancellation of outstanding restricted stock or stock option awards previously granted to such Executive on or after the date of the adoption of this policy in the amount by which such Executive’s bonus or incentive payments for the relevant period exceeded the lower payment that would have been made based on the corrected financial results.

 

The Board shall render a determination pursuant to this policy in each instance where both an erroneous report of financial results has affected the size of a bonus or incentive compensation awarded to an Executive, and where the Board is aware of credible evidence that the Executive may have engaged in such fraudulent or illegal conduct. In determining whether to recover a payment, the Board shall take into account such considerations as it deems appropriate, including, without limitation, whether the assertion of a claim against the Executive could violate applicable law or prejudice the Company’s overall interests and whether other penalties or punishments are being imposed on the Executives, including by third parties, such as law enforcement agencies, regulators or other authorities. The Board shall have sole discretion in determining whether an Executive’s conduct has or has not met any particular standard of conduct under law of Company policy. Any recovery under this policy may be in addition to any other remedies that may be available to the Company under applicable law, including disciplinary actions up to and including termination of employment.

 

For purposes of this policy, the term “Executive” means an “executive officer” as defined in Rule 3b-7 of the Securities Exchange Act of 1934. The right of the Board to assert a recovery claim under this policy shall not survive the occurrence of a change in control of the Company as defined in the relevant incentive compensation plan. This policy shall apply in addition to any right of recovery against the Chief Executive Officer and the Chief Financial Officer under Section 304 of the Sarbanes-Oxley Act of 2002. The Board may delegate one or more of the duties or powers described in this policy to one or more committees of the Board consisting of solely independent directors.

 

 

EXHIBIT A

 

 

FORM OF RESTRICTED UNIT AGREEMENT

 

This Restricted Unit Agreement (this “Agreement”), dated as of April 1, 2014 (the “Grant Date”), is made by and between Take-Two Interactive Software, Inc. (the “Company”) and ZelnickMedia Corporation (the “Participant”).

 

WITNESSETH:

 

WHEREAS, pursuant to the Management Agreement between the Participant and the Company, effective as of April 1, 2014 (the “Management Agreement”), the Company has agreed to grant to the Participant restricted units (“Restricted Units”), each representing the right to receive, upon vesting, an amount equal the Fair Market Value (as defined below) of one (1) share of the common stock, par value $0.01 per share (the “Common Stock”) of the Company (a “Share”).

 

NOW, THEREFORE, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                      Grant of Restricted Units.  Subject to the restrictions, terms and conditions of this Agreement, the Company hereby awards to the Participant [                   ] Restricted Units, subject to adjustment, forfeiture and the other terms and conditions set forth below.  The Restricted Units constitute an unfunded and unsecured promise of the Company to deliver (or cause to be delivered) to the Participant, subject to the terms of this Agreement, cash on the applicable vesting date for such Restricted Units as provided herein.  Until such delivery, the Participant shall have only the rights of a general unsecured creditor; provided, that if prior to the settlement of any Restricted Unit, (a) the Company pays a cash dividend (whether regular or extraordinary) or otherwise makes a cash distribution to a shareholder in respect of a Share, then the Company shall credit, in respect of each then-outstanding Restricted Unit held by the Participant, an amount equal to any such cash dividend or distribution to a book entry account on behalf of the Participant, provided that such cash dividend or distribution shall not be deemed to be reinvested in shares of Common Stock and will be held uninvested and without interest and paid in cash at the same time as such Restricted Unit vests and is settled under Section 2 below (and the Participant shall forfeit any such right to such cash if such Restricted Unit is forfeited prior to vesting), and (b) the Company pays a non-cash dividend (whether regular or extraordinary) or otherwise makes a non-cash distribution in Shares or other property to a shareholder in respect of a Share, then the Company shall provide the Participant, in respect of each then-outstanding Restricted Unit held by the Participant, an amount equal to the Fair Market Value (as defined in the Take-Two Interactive Software, Inc. 2009 Stock Incentive Plan, as amended through the date hereof (the “Plan”)) of such Shares or an amount equal to the fair market value of such other property as reasonably determined by the Company in good faith, as applicable, at the same time as such Restricted Unit vests and is settled under Section 2 below (and the Participant shall forfeit any such right to such amount if such Restricted Unit is forfeited prior to vesting).

 

2.                                      Vesting.  The Restricted Units shall become vested and settled in accordance with the terms set forth on Annex A attached hereto.

 

 

3.                                      Taxes.  The Participant shall be solely responsible for all applicable federal, state, local, and foreign taxes the Participant incurs from the grant, vesting or settlement of the Restricted Units.

 

4.                                      No Obligation to Continue Service.  This Agreement is not an agreement of consultancy.  This Agreement does not guarantee that the Company or its affiliates will retain, or continue to retain, the Participant during the entire, or any portion of the, term of this Agreement, including but not limited to any period during which the Restricted Units are outstanding, nor does it modify in any respect the Company or its affiliate’s right to terminate or modify the Participant’s consultancy or compensation.

 

5.                                      Power of Attorney.  The Company, and its successors and assigns, is hereby appointed the attorney-in-fact, with full power of substitution, of the Participant for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments which such attorney-in-fact may reasonably deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.  The Company, as attorney-in-fact for the Participant, may in the name and stead of the Participant, make and execute all conveyances, assignments, and transfers of the Restricted Units, Shares, and property provided for herein, and the Participant hereby ratifies and confirms all that the Company, as said attorney-in-fact, shall do by virtue hereof.  Nevertheless, the Participant shall, if so requested by the Company, execute and deliver to the Company all such instruments as may, in the reasonable judgment of the Company, be advisable for the purpose.

 

6.                                      Uncertificated Shares.  Notwithstanding anything else herein, to the extent permitted under applicable law, the Company may issue Shares in the form of uncertificated shares.  Such uncertificated Shares shall be credited to a book entry account maintained by the Company (or its designee) on behalf of the Participant.  If thereafter certificates are issued with respect to the uncertificated Shares, such issuance and delivery of certificates shall be in accordance with the applicable terms of this Agreement.

 

7.                                      Adjustments.  The Company shall make any adjustments to the Restricted Units upon any changes in capital structure of the Company, as determined by the Company’s Board of Directors (the “Board”) in good faith and in a manner consistent with adjustments made to Awards (as defined in the Plan) granted under the Plan.  The Company hereby agrees that in the event that the Company takes any action with respect to outstanding Awards under the Plan pursuant to Section 4.2 of the Plan, the Restricted Units shall receive the same treatment as applied to all other Shares or Awards in respect of Shares.

 

8.                                      Notices.  Any notice or communication given hereunder (each a “Notice”) shall be in writing and shall be sent by personal delivery, by courier or by United States mail (registered or certified mail, postage prepaid and return receipt requested), to the appropriate party at the address set forth below:

 

If to the Company, to:

 

 

Take-Two Interactive Software, Inc.
 622 Broadway
 New York, New York 10012
 Attention: General Counsel

 

If to the Participant, to:

 

ZelnickMedia Corporation
 19 West 44th Street, 18th Floor
 New York, NY 10036
 Telephone:  (212) 223-1383
 Facsimile:  (212) 223-1384
 Attention:  Strauss Zelnick

 

or such other address or to the attention of such other person as a party shall have specified by prior Notice to the other party.  Each Notice will be deemed given and effective upon actual receipt (or refusal of receipt).

 

9.                                      Governing Law.  All questions concerning the construction, validity, and interpretation of this Agreement will be governed by, and construed in accordance with, the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

10.                               Consent to Jurisdiction.  In the event of any dispute, controversy, or claim between the Company or any affiliate and the Participant in any way concerning, arising out of or relating to this Agreement (a “Dispute”), including without limitation any Dispute concerning, arising out of, or relating to the interpretation, application, or enforcement of this Agreement, the parties hereby (a) agree and consent to the personal jurisdiction of the courts of the State of New York located in New York County and/or the Federal Courts of the United States of America located in the Southern District of New York (collectively, the “Agreed Venue”) for resolution of any such Dispute, (b) agree that those courts in the Agreed Venue, and only those courts, shall have exclusive jurisdiction to determine any Dispute, including any appeal, and (c) agree that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York.  The parties also hereby irrevocably (i) submit to the jurisdiction of any competent court in the Agreed Venue (and of the appropriate appellate courts therefrom), (ii) to the fullest extent permitted by law, waive any and all defenses the parties may have on the grounds of lack of jurisdiction of any such court and any other objection that such parties may now or hereafter have to the laying of the venue of any such suit, action, or proceeding in any such court (including without limitation any defense that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum), and (iii) consent to service of process in any such suit, action, or proceeding anywhere in the world, whether within or without the jurisdiction of any such court, in any manner provided by applicable law.  Without limiting the foregoing, each party agrees that service of process on such party pursuant to a Notice as provided in Section 8 hereof shall be deemed effective service of process on such party.  Any action for enforcement or recognition of

 

 

any judgment obtained in connection with a Dispute may be enforced in any competent court in the Agreed Venue or in any other court of competent jurisdiction.

 

11.                               Counterparts.  This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

 

12.                               Amendment.  The Board may, at any time and from time to time amend, in whole or in part, any or all of the provisions of this Agreement, and may also suspend or terminate this Agreement, in any manner which is consistent with the terms of the Plan with respect to the amendment, suspension or termination thereof or of Awards granted pursuant thereto.  No modification or waiver of any of the provisions of this Agreement shall be effective unless in writing by the party against whom it is sought to be enforced, unless such modification or waiver would be permitted without such a writing pursuant to the Plan with respect to its provisions or the provisions of Awards granted pursuant thereto.

 

13.                               Miscellaneous.

 

(i)                                     This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives, successors, and assigns.

 

(ii)                                  This Agreement, the Management Agreement and, to the extent referenced herein, the Plan, contain the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior agreements between the Company and the Participant with respect to the subject matter hereof.  By signing and returning this Agreement, the Participant agrees to comply with its terms and all applicable laws and regulations.

 

(iii)                               The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement.

 

(iv)                              Although the Company makes no guarantee with respect to the tax treatment of the Restricted Units, the Company intends that the Restricted Units shall not constitute “nonqualified deferred compensation” subject to Section 409A of the Internal Revenue Code of 1986, as amended, and any successor provision or any Treasury Regulation promulgated thereunder (“Section 409A”) and this Agreement shall be interpreted, administered and construed consistent with such intent.  If, and only to the extent that, (i) the Restricted Units constitute “deferred compensation” within the meaning of Section 409A and (ii) the Participant is deemed to be a “specified employee” (as such term is defined in Section 409A and as determined by the Company), the payment of Restricted Units on termination of the Management Agreement shall not be made until the first business day of the seventh month following such termination or, if earlier, the date of the Participant’s death.

 

(v)                                 Except to the extent the Proposal is approved by the Company’s stockholders and any Shares become deliverable to the Participant hereunder as contemplated in Section E of Annex A attached hereto, the Restricted Units are not intended to be an award made

 

 

under any stock incentive plan adopted by the Company, including the Plan as in effect on the date hereof. Notwithstanding the preceding sentence, this Agreement and the Restricted Units shall be construed as if this grant had been granted under the Plan in accordance with and consistent with, and subject to, the provisions of the Plan, a copy of which has been made available to the Participant, and the terms of which are incorporated into this Agreement, except as otherwise specifically stated herein.  The Participant agrees to be bound by the terms and conditions of this Agreement and the Plan and any future amendments to the Plan which do not materially impair the Participant’s rights hereunder.  Notwithstanding the foregoing, for the avoidance of doubt, in the event of any inconsistency between the Plan and this Agreement, the provisions of this Agreement shall govern, and in the event of any inconsistency between this Agreement and the Management Agreement, the provisions of the Management Agreement shall govern.  References in this Agreement to any specific Plan provision will not be construed as limiting the applicability of any other Plan provision.

 

[End of text.  Signature page follows.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
TAKE-TWO INTERACTIVE SOFTWARE, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
PARTICIPANT:
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    

 

 

Annex A

 

Vesting

 

A.                                    Time Based Vesting.

 

Subject to Section C, [          ] of the Restricted Units shall become vested on the second (2nd) anniversary of the Grant Date (the “Time-Based Units”).

 

B.                                    Performance Based Vesting.

 

Subject to Section C, certain of the Restricted Units shall be subject to performance-based vesting in accordance with Section (B)(i) (the “TSR Performance-Based Units”), Section (B)(ii) (the “New IP Performance-Based Units”), and Section (B)(iii) (the “Major IP Performance-Based Units,” and together with the TSR Performance-Based Units and the New IP Performance-Based Units, the “Performance-Based Units”).

 

(i)                                     TSR Performance-Based Units.  The target number of TSR Performance-Based Units that shall be eligible to vest pursuant to this Section B(i) shall be [          ], and the maximum number of TSR Performance-Based Units that shall be eligible to vest pursuant to this Section B(i) shall be [          ]. Subject to Section C, on the second (2nd) anniversary of the Grant Date, a number of TSR Performance-Based Units shall become vested equal to the product of (x) the target number of TSR Performance-Based Units eligible to vest pursuant to this Section B(i) multiplied by (y) the TSR Vesting Percentage, rounded down to the nearest whole TSR Performance-Based Unit.

 

(ii)                                  New IP Performance-Based Units.  The target number of New IP Performance-Based Units that shall be eligible to vest pursuant to this Section B(ii) shall be [          ], and the maximum number of New IP Performance-Based Units that shall be eligible to vest pursuant to this Section B(ii) shall be [          ].  Subject to Section C, on the second (2nd) anniversary of the Grant Date, a number of New IP Performance-Based Units shall become vested equal to the product of (x) the target number of New IP Performance-Based Units in such vesting tranche multiplied by (y) the New IP Vesting Percentage, rounded down to the nearest whole New IP Performance-Based Unit.

 

(iii)                               Major IP Performance-Based Units.  The target number of Major IP Performance-Based Units that shall be eligible to vest pursuant to this Section B(iii) shall be [          ], and the maximum number of Major IP Performance-Based Units that shall be eligible to vest pursuant to this Section B(iii) shall be [          ].  Subject to Section C, on the second (2nd) anniversary of the Grant Date, a number of Major IP Performance-Based Units shall become vested equal to the product of (x) the target number of Major IP Performance-Based Units in such vesting tranche multiplied by (y) the Major IP Vesting Percentage, rounded down to the nearest whole Major IP Performance-Based Unit.

 

C.                                    Qualifying Termination; Change in Control.

 

(i)                                     Termination.  In the event of a Qualifying Termination prior to the earlier of (x) the second (2nd) anniversary of the Grant Date or (y) a Change in Control (as defined in the

 

 

Management Agreement): (a) the effective date of such Qualifying Termination shall serve as the vesting date for all Time-Based Units hereunder, and all such Time-Based Units shall vest as of such date; (b) the effective date of such Qualifying Termination shall serve as the vesting date for all TSR Performance-Based Units hereunder and the given date for purposes of the Measurement Price, and the number of such TSR Performance-Based Units that shall vest as of such date shall be calculated in accordance with Section B(i) above based upon the Percentile Rank through the effective date of such Qualifying Termination, and (c) the effective date of such Qualifying Termination shall serve as the vesting date for all New IP Performance-Based Units and Major IP Performance-Based Units hereunder, and the target number of such New IP Performance-Based Units and Major IP Performance-Based Units (as set forth in Sections B(ii) and B(iii), as applicable) shall vest as of such date without regard to the application of the Applicable Vesting Percentage.

 

(ii)                                  Change in Control.  If a Change in Control occurs while the Management Agreement remains in effect, in any case prior to the earlier of (x) the second (2nd) anniversary of the Grant Date or (y) a Qualifying Termination, all Time-Based Units and the target number of Performance-Based Units (as set forth in Sections B(i), B(ii) and B(iii), as applicable) shall remain eligible to vest and shall vest (without regard to the application of the Applicable Vesting Percentage, in the case of Performance-Based Units), in each case, as of the earlier of (a) a Qualifying Termination or (b) the second (2nd) anniversary of the Grant Date.  Each Restricted Unit that remains eligible to vest following a Change in Control pursuant to the foregoing sentence shall be referred to as a “Vesting-Eligible Unit.”  Upon the occurrence of a Change in Control, each Vesting-Eligible Unit shall be converted into an amount in cash equal to the Market Value of the consideration payable in the Change in Control in respect of each such Vesting-Eligible Unit, and such consideration shall be paid to the Participant promptly following the satisfaction of the vesting conditions set forth in this Section C(ii) (i.e., in full on the second (2nd) anniversary of the Grant Date, or if earlier, upon a Qualifying Termination), and shall automatically be forfeited and shall revert back to the Company if such vesting conditions are not satisfied.

 

D.                                    Forfeiture.

 

(i)                                     Any Restricted Units that have not vested as of the termination of the Management Agreement for any reason other than a Qualifying Termination shall automatically be forfeited and shall revert back to the Company without compensation to the Participant.

 

(ii)                                  Any Performance-Based Units that (x) have not vested as of the earlier of (a) the second (2nd) anniversary of the Grant Date or (b) the effective date of a Qualifying Termination, or (y) do not become Vesting-Eligible Units upon the occurrence of a Change in Control (i.e., any Performance-Based Units above the target numbers set forth in Sections B(i), B(ii) and B(iii), as applicable), shall automatically be forfeited and shall revert back to the Company without compensation to the Participant.

 

E.                                     Settlement.  Subject to the last sentence of Section C(ii), upon vesting pursuant to Sections A, B, and C, the Company shall deliver to the Participant an amount in cash having a value equal to the aggregate value of a number of Shares equal to the number of Restricted Units vesting on such date, based on the closing price of the Shares on such settlement date on the 

 

 

principal national securities exchange on which the Shares are traded on such date (or if the Shares are not traded on such date, the immediately preceding trading date), provided that the Participant has satisfied any tax withholding obligations as described in this Agreement.  Notwithstanding anything herein to the contrary, but subject to the last sentence of Section C(ii), if and only to the extent that the Company’s stockholders approve the Proposal (as defined in the Management Agreement), each Restricted Unit (including any amount provided for pursuant to Section 1(a) of the Agreement) may, at the election of the Company, be settled in Shares issued pursuant to the Plan (subject to any required delay in issuance as required under the Plan).  To the extent the Proposal is approved by the Company’s stockholders and any Shares become deliverable to the Participant hereunder the Participant shall be deemed the beneficial owner of any Share issued upon settlement of a Restricted Unit at the close of business on any settlement date and shall be entitled to any dividend or distribution that has not already been made with respect to such Share if the record date for such dividend or distribution is after the close of business on such settlement date, and the Company shall promptly issue and deliver, unless the Company is using a book entry or similar method pursuant to Section 6 of the Agreement (in which case the Company shall upon request promptly issue and deliver upon the Participant’s request), to the Participant a new stock certificate registered in the name of the Participant for any Shares issued upon settlement of Restricted Units and deliver to the Participant such Shares, in each case free of all liens, claims and other encumbrances (other than those created by the Participant).

 

F.                                      Definitions.

 

“Add-On Content” in respect of any IP means all interactive software entertainment products that are ancillary to such IP, either in the form of expansion packs or micro-content and which are not playable separately from such IP, but excluding any Sequel of such IP.

 

“Applicable Vesting Percentage” means (i) with respect to TSR Performance-Based Units, the TSR Vesting Percentage, (ii) with respect to New IP Performance-Based Units, the New IP Vesting Percentage, and (iii) with respect to Major IP Performance-Based Units, the Major IP Vesting Percentage.

 

“Existing IP” means any IP commercially released prior to April 1, 2014 and any products released on or after April 1, 2014 that are derived from or use the branding, environments or characters of such products (e.g., Sequels and subsequent Individual Releases).

 

“Individual Release” means any IP released across any and all gaming platforms and all SKUs released of any IP, including, for the avoidance of doubt, any bundles, anniversary editions or “game of the year” editions of such IP but excluding (i) any Add-On Content in respect of such IP and (ii) any expansion packs that are playable separately from such IP, with each such expansion pack being deemed to be a separate Individual Release.

 

“IP” means any interactive entertainment product.

 

“Major IP” means Existing IP or New IP.

 

 

“Major IP Vesting Percentage” as of a given date is a function of the Company’s Sell-In Performance or Sales Performance, as applicable, for any Individual Release of Major IP calculated as of such date, determined by reference to the following tables.  For the avoidance of doubt, the Major IP Vesting Percentage shall be determined based on the Company’s Sell-In Performance or Sales Performance, as applicable, with respect to one Individual Release of Major IP.  If multiple Individual Releases of Major IP occur during the relevant measurement period, the Major IP Vesting Percentage shall be determined based on the Individual Release of Major IP (whether Regular Price IP, Reduced Price IP or Other IP) that results in the highest Major IP Vesting Percentage.  Without limiting the generality of the foregoing, in no event shall (i) the Company’s Sell-In Performance and/or Sales Performance with respect to multiple Individual Releases of Major IP or (ii) the Major IP Vesting Percentages attributable to multiple Individual Releases of Major IP, be aggregated for purposes of determining the Major IP Vesting Percentage.  By way of example, if, during the relevant measurement period, the Company has an Individual Release of Major IP that is Regular Price IP that results in a Sell-In Performance of 4,000,000 units, as well as an Individual Release of Major IP that is Other IP that results in Sales Performance of $150,000,000, the Major IP Vesting Percentage will be 100% (i.e., the highest Major IP Vesting Percentage attributable to an Individual Release of Major IP).

 

(x)                                 For any Individual Release of Major IP that is Regular Price IP:

 

	
Major IP Sell-In Performance
    	
 
    	
Major IP Vesting Percentage
    	
 
    
	
Less   than 4,000,000 units
    	
 
    	
0%
    	
 
    
	
4,000,000   units
    	
 
    	
50%
    	
 
    
	
5,000,000   units
    	
 
    	
100%
    	
 
    
	
6,000,000   units
    	
 
    	
200%
    	
 
    

 

In the event that the Major IP Sell-In Performance is less than 4,000,000 units, the Major IP Vesting Percentage shall be zero percent (0%).  In the event that the Major IP Sell-In Performance falls between any of the values listed in the table above, the Major IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

(y)                                 For any Individual Release of Major IP that is Reduced Price IP:

 

	
Major IP Sell-In Performance
    	
 
    	
Major IP Vesting Percentage
    	
 
    
	
Less   than Reduced Price Major IP Minimum Number
    	
 
    	
0%
    	
 
    
	
Reduced   Price Major IP Minimum Number
    	
 
    	
50%
    	
 
    
	
Reduced   Price Major IP Target Number
    	
 
    	
100%
    	
 
    
	
Reduced   Price Major IP Maximum Number
    	
 
    	
200%
    	
 
    

 

In the event that the Major IP Sell-In Performance is less than the Reduced Price Major IP Minimum Number, the Major IP Vesting Percentage shall be zero percent (0%).  In the event that the Major IP Sell-In Performance falls between any of the values listed in the table above, the Major IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

(z)                                  For any Individual Release of Major IP that is Other IP:

 

 

	
Major IP Sales Performance
    	
 
    	
Major IP Vesting Percentage
    	
 
    
	
Less   than $120,000,000
    	
 
    	
0%
    	
 
    
	
$ 120,000,000
    	
 
    	
50%
    	
 
    
	
$ 150,000,000
    	
 
    	
100%
    	
 
    
	
$ 180,000,000
    	
 
    	
200%
    	
 
    

 

In the event that the Major IP Sales Performance is less than $120,000,000, the Major IP Vesting Percentage shall be zero percent (0%).  In the event that the Major IP Sales Performance falls between any of the values listed in the table above, the Major IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

“Measurement Price” as of a given date means the average of the closing prices of the Common Stock or the common stock of a Peer Group company, as applicable, for each of the 30 trading days ending on (and including) such date.

 

“New IP” means any IP commercially released on or after April 1, 2014 that is not Existing IP.  Sequels and subsequent Individual Releases of New IP occurring after April 1, 2014 shall qualify as New IP for purposes of this Agreement.

 

“New IP Vesting Percentage” as of a given date is a function of the Company’s Sell-In Performance or Sales Performance, as applicable, for any Individual Release of New IP calculated as of such date, determined by reference to the following tables.  For the avoidance of doubt, the New IP Vesting Percentage shall be determined based on the Company’s Sell-In Performance or Sales Performance, as applicable, with respect to one Individual Release of New IP.  If multiple Individual Releases of New IP occur during the relevant measurement period, the New IP Vesting Percentage shall be determined based on the Individual Release of New IP (whether Regular Price IP, Reduced Price IP, or Other IP) that results in the highest New IP Vesting Percentage.  Without limiting the generality of the foregoing, in no event shall (i) the Company’s Sell-In Performance and/or Sales Performance with respect to multiple Individual Releases of New IP or (ii) the New IP Vesting Percentages attributable to multiple Individual Releases of New IP, be aggregated for purposes of determining the New IP Vesting Percentage.  By way of example, if, during the relevant measurement period, the Company has an Individual Release of New IP that is Regular Price IP that results in a Sell-In Performance of 2,000,000 units, as well as an Individual Release of New IP that is Other IP that results in Sales Performance of $90,000,000, the New IP Vesting Percentage will be 100% (i.e., the highest New IP Vesting Percentage attributable to an Individual Release of New IP).

 

(x)                                 For any Individual Release of New IP that is Regular Price IP:

 

	
New IP Sell-In Performance
    	
 
    	
New IP Vesting Percentage
    	
 
    
	
Less   than 2,000,000 units
    	
 
    	
0%
    	
 
    
	
2,000,000   units
    	
 
    	
50%
    	
 
    
	
3,000,000   units
    	
 
    	
100%
    	
 
    
	
4,000,000   units
    	
 
    	
200%
    	
 
    

 

In the event that the New IP Sell-In Performance is less than 2,000,000 units, the New IP Vesting Percentage shall be zero percent (0%).  In the event that the New IP Sell-In 

 

 

Performance falls between any of the values listed in the table above, the New IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

(y)                                 For any Individual Release of New IP that is Reduced Price IP:

 

	
New IP Sell-In Performance
    	
 
    	
New IP Vesting Percentage
    	
 
    
	
Less   than Reduced Price New IP Minimum Number
    	
 
    	
0%
    	
 
    
	
Reduced   Price New IP Minimum Number
    	
 
    	
50%
    	
 
    
	
Reduced   Price New IP Target Number
    	
 
    	
100%
    	
 
    
	
Reduced   Price New IP Maximum Number
    	
 
    	
200%
    	
 
    

 

In the event that the New IP Sell-In Performance is less than the Reduced Price New IP Minimum Number, the New IP Vesting Percentage shall be zero percent (0%).  In the event that the New IP Sell-In Performance falls between any of the values listed in the table above, the New IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

(z)                                  For any Individual Release of New IP that is Other IP:

 

	
New IP Sales Performance
    	
 
    	
New IP Vesting Percentage
    	
 
    
	
Less   than $60,000,000
    	
 
    	
0%
    	
 
    
	
$ 60,000,000
    	
 
    	
50%
    	
 
    
	
$ 90,000,000
    	
 
    	
100%
    	
 
    
	
$ 120,000,000
    	
 
    	
200%
    	
 
    

 

In the event that the New IP Sales Performance is less than $60,000,000, the New IP Vesting Percentage shall be zero percent (0%).  In the event that the New IP Sales Performance falls between any of the values listed in the table above, the New IP Vesting Percentage shall be based on a straight line interpolation between such two values.

 

“Other IP” means any IP that is not Reduced Price IP or Regular Price IP, which has a primary business model of not charging for the basic release and is meant to create revenue based on follow-on transactions as the primary business model.

 

The “Peer Group” shall consist of the companies that comprise The NASDAQ Composite Index on the Grant Date; provided, that (i) subject to clause (ii) below, if a member of the Peer Group ceases to be publicly traded for any reason following the Grant Date and prior to the applicable date on which the Measurement Price is calculated, that member of the Peer Group shall be deleted as a member of the Peer Group and shall not be counted for purposes of the TSR Vesting Percentage and related calculations and (ii) if a member of the Peer Group becomes bankrupt following the Grant Date and prior to the applicable date on which the Measurement Price is calculated, that member of the Peer Group shall remain a member of the Peer Group and shall be attributed a Total Shareholder Return of -100% for purposes the TSR Vesting Percentage and related calculations.

 

 

 

The “Percentile Rank” of the Company’s Total Shareholder Return is defined as the percentage of the Peer Group companies’ returns falling at or below the Company’s Total Shareholder Return.  The formula for calculating the Percentile Rank is as follows:

 

Percentile Rank = (N - R + 1) ÷ N × 100

 

Where:

 

N =          total number of companies in the Peer Group

 

R =          the numeric rank of the Company’s Total Shareholder Return relative to the Peer Group, where the highest Total Shareholder Return in the Peer Group is ranked number 1

 

The Percentile Rank shall be rounded to the nearest whole percentage, with (0.5) rounded up.

 

To illustrate, if the Company’s Total Shareholder Return is the 25th highest in a Peer Group comprised of 100 companies, its Percentile Rank would be 76.  The calculation is (100 - 25 + 1) ÷ 100 × 100 = 76.

 

The “Port” of an IP means a substantially similar version of such IP developed to operate on a platform other than the platform for which such IP had theretofore been developed to operate.

 

“Qualifying Termination” means a termination of the Management Agreement by the Company without Cause (as defined in the Management Agreement) or by ZelnickMedia or its assignee for Good Reason (as defined in the Management Agreement).(1)

 

“Reduced Price IP” means any IP that is not Regular Price IP or Other IP.

 

“Reduced Price Major IP Target Number” means, for any Individual Release of Reduced Price Major IP, a number of units equal to the product of (i) 5,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

“Reduced Price Major IP Maximum Number” means, for any Individual Release of Reduced Price Major IP, a number of units equal to the product of (i) 6,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

“Reduced Price Major IP Minimum Number” means, for any Individual Release of Reduced Price Major IP, a number of units equal to the product of (i) 4,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

(1)  For future grants, non-renewal of the Management Agreement will be included as a Qualifying Termination event.

 

 

“Reduced Price New IP Maximum Number” means, for any Individual Release of Reduced Price New IP, a number of units equal to the product of (i) 4,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

“Reduced Price New IP Minimum Number” means, for any Individual Release of Reduced Price New IP, a number of units equal to the product of (i) 2,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

“Reduced Price New IP Target Number” means, for any Individual Release of Reduced Price New IP, a number of units equal to the product of (i) 3,000,000 and (ii) a fraction, the numerator of which is 29.99 and the denominator of which is the numeric value of the original wholesale price in the United States per unit.

 

“Reference Price” means the average of the closing prices of the Common Stock or the common stock of a Peer Group company, as applicable, for each of the 30 trading days ending on (and including) the Grant Date.

 

“Regular Price IP” means any IP that is not Reduced Price IP or Other IP, with a SKU that had an original wholesale price in the United States per unit equal to or in excess of $29.99.

 

“Sales Performance” as of a given date means, with respect to any Individual Release of Other IP, the revenue generated during the period beginning on the Grant Date and ending on the second (2nd) anniversary of the Grant Date.

 

“Sell-In Performance” as of a given date means, with respect to any Individual Release of Regular Price IP or Reduced Price IP, as applicable, the number of units “sold-in” during the period beginning on the Grant Date and ending on the second (2nd) anniversary of the Grant Date.

 

“Sequel” means with respect to any IP, any game software program, other than any Port or Add-On Content, in any medium that is derived from such IP within the same genre, utilizing the same game play, and based on the same themes and using the same brand name as such IP where the visual display(s), character(s), background(s), virtual environment(s), or other visual or video elements accessible to the end-user of the game software program are derived from comparable elements of such IP.

 

“Total Shareholder Return” as of a given date means the percentage change in the value of the Common Stock or the common stock of a Peer Group company, as applicable, from the Reference Price to the Measurement Price on such date.

 

“TSR Vesting Percentage” as of a given date is a function of the Company’s Percentile Rank among the Peer Group calculated as of such date, determined by reference to the following table:

 

 

	
Percentile Rank
    	
 
    	
TSR Vesting Percentage
    
	
Less than 40th Percentile
    	
 
    	
0%
    
	
40th Percentile
    	
 
    	
50%
    
	
50th Percentile
    	
 
    	
100%
    
	
75th Percentile
    	
 
    	
200%
    

 

In the event that the Percentile Rank is less than 40th Percentile, the TSR Vesting Percentage shall be zero percent (0%).  In the event that the Percentile Rank falls between any of the values listed in the table above, the TSR Vesting Percentage shall be based on a straight line interpolation between such two values.

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