MarketWatch columnist Herb Greenberg, who has long been critical of Take-Two, simplified a recent regulatory filing into plain English in a recent blog post.
In sum, he said that the day before Take-Two rejected EA's first offer in early February, Take-Two management, led by ZelnickMedia execs, amended its agreement with the company. Those amendments included:
* Upping ZelnickMedia's pay from $62,500 monthly to $208,633.
* Increasing ZelnickMedia's annual fiscal year bonus from $750,000 per year to $2.5 million
* A time-based award of 600,000 shares that will vest in equal installments over three years--that is, unless a change in control (e.g. an acquisition) occurs, in which case ZelnickMedia would vest immediately.
However, the 8-K filing added that management wouldn't vest immediately if:
* ...If Take-Two received "a bona fide indication of interest in, or offer to enter into, a business combination (an ?Offer?) from a third party."
* ..."If the Offer specifies, with some degree of particularity, the material terms thereof."
* ... If "the existence of the Offer is not publicly disclosed or confirmed by the Company or such third party prior to the Effective Date [Take-Two's annual meeting, expected in late March]." (Greenberg highlights this point.)
* ...If "the transaction proposed by such Offer is consummated prior to November 14, 2008 and the consummation of such transaction constitutes a Change in Control."
Greenberg's take on the situation?
"That?s right: Take-Two received a rich and serious offer from a substantial company. It didn?t disclose the offer, and hoped to keep it secret until at least after the annual meeting, when investors might have challenged the compensation package and attempts by the company to block the deal. Then, in a public filing, Take-Two in effect threatened EA not to make the offer public by giving ZelnickMedia a chance to enrich itself, at the expense of shareholders, by granting restricted stock that will vest immediately if EA made the deal public.
"Exercising my right as a columnist, who writes commentary, and who (by way of full disclosure) has been critical of Take-Two for at least five years: That?s beyond absurd. Makes you wonder which shareholders the company puts first."
Stern Agee analyst Arvind Bhatia said in a research note Monday, "We ... do not expect shareholders to approve Take Two's management?s recently (last week) proposed new, more lucrative compensation plan that includes new restricted stock with accelerated vesting in case of change of control.
"We are not sure how Take Two?s management was able to propose the new compensation plan without disclosing EA?s already pending acquisition proposal."
