Take-Two Creates Takeover Severance Plan

SAN FRANCISCO -- Little progress has been made since video-games publisher Take-Two Interactive(TTWO) rejected a $2 billion unsolicited bid from its larger rival Electronic Arts(ERTS).

But that doesn't mean Take-Two isn't working to protect its interests in case a hostile takeover succeeds.

Take-Two, producer of the blockbuster Grand Theft Auto games franchise, has put into place an employee severance plan that kicks in case of a "change in control, " according to a company filing with the Securities and Exchange Commission.

The plan provides forces a certain minimum level of compensation for all employees in case an employee's position is terminated as a result of a change in control of the company. It covers all Take-Two employees with the exception of Chairman Strauss Zelnick, CEO Ben Feder, and Vice President Karl Slatoff.

A separate SEC filing last month showed that Take-Two had already created an increased payout for Zelnick, Feder and their firm ZelnickMedia in a case of a takeover. Take-Two nearly tripled ZelnickMedia's cash compensation for providing financial and management consulting services to $2.5 million a year from $750,000 previously. The maximum annual bonus for the firm soared to $2.5 million from $750,000 and it was also given 1.5 million additional Take-Two restricted shares.

According to the latest filing, Take-Two employees will receive severance payments equal to their base salary and bonus multiplied by a certain multiple depending on their positions and continued health coverage for a certain period. For directors and other principal stockholders, severance will be 1.5 times their base salary and bonus.

For company's senior vice presidents and studio heads, it will be a multiple of 1, while for vice presidents and other employees it is will be 0.5 times base salary and bonus.

All other employees will receive at a minimum severance payments equal to two weeks of base salary for every completed year of service (maximum of 26 weeks), paid in installments within a year of the change in control.

Employees will also receive accelerated vesting of all unvested equity held at the time of the change.

"We hope that this benefit will alleviate some of the concerns you may have, and allow you to remain fully focused on your responsibilities," wrote Zelnick and Feder in an email to employees.

Shares of Take-Two closed down 43 cents, or 1.6%, to $25.57. EA shares were down 47 cents, or 1%, to $46.31 Friday.

The employee severance plan was adopted by Take-Two on Monday. Zelnick and Feder also noted that other companies including EA and THQ(THQI) have similar change in control severance plans.

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