The table below sets forth the outstanding equity awards for each of our named executive officers as of December 31, 2016:
For the impact of the termination of the employment of each named executive officer on his equity awards, please see “—Potential Payments upon Termination or Change of Control” below.
Option Exercises and Stock Vested for 2016
The table below sets forth details with respect to the stock options exercised by, and the restricted shares and restricted share units that vested for, or were otherwise transferred for value by, our named executive officers in 2016:
Name
|
Option Awards
|
|
Stock Awards
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized on
Exercise
($)
(1)
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized on
Vesting
($)
(2)
|
Robert A. Kotick
|
—
|
|
|
—
|
|
1,447,091
|
|
49,515,037
|
Dennis Durkin
|
37,500
|
|
|
1,110,124
|
|
177,500
|
|
5,752,775
|
Thomas Tippl
(3)
|
44,427
|
|
|
1,374,722
|
|
384,035
|
|
12,995,744
|
Michael Morhaime
|
1,150,000
|
|
|
27,084,168
|
|
136,666
|
|
5,127,743
|
Riccardo Zacconi
(4)
|
48,096
|
|
|
659,907
|
|
21,111
|
|
828,041
|
(1)
As each of these transactions involved a same-day sale, the “Value Realized on Exercise” is computed by multiplying the number of shares exercised by the difference between sale price of the shares and the exercise price of the underlying stock options.
(2)
The “Value Realized on Vesting” is computed by multiplying the number of shares of stock or units by the NASDAQ Official Closing Price of our Common Stock on the vesting date (or if that date is not a trading date, the immediately preceding trading date).
(3)
These awards were held by the Thomas and Laura Tippl Family Trust at the time of vesting.
(4)
During 2016, Mr. Zacconi also received cash payments for certain equity incentives with respect to King ordinary shares he held prior to the King Acquisition. As these were part of the consideration for the King Acquisition, and do not reflect any compensation decisions by Activision Blizzard, they are not included herein.
|
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Employment Agreements
The following is a summary of the material terms set forth in each employment agreement to which we were party with a named executive officer during 2016, with the exception of provisions regarding payments and benefits upon termination or a change of control, which are described under “—Potential Payments upon Termination or Change of Control” below and, as such, are not included in the following summary.
Robert A. Kotick
Term
&
Title
. Robert A. Kotick is party to an employment agreement with us, dated as of October 1, 2016 (the “Kotick Employment Agreement”), pursuant to which he serves as our Chief Executive Officer. Mr. Kotick’s term of employment under the Kotick Employment Agreement began on October 1, 2016, and continues through December 31, 2021.
Base
Salary
. Pursuant to the Kotick Employment Agreement, Mr. Kotick’s annual base salary was decreased to $1,750,000 as of January 1, 2017. For more information about Mr. Kotick’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Salary” above.
Annual
Bonus
. Pursuant to the Kotick Employment Agreement, Mr. Kotick is entitled to an annual bonus, with a target amount of 200% of his base salary. The form of such bonus shall be determined by the Compensation Committee in its discretion. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity
Awards
.
2016
Performance-Based
Restricted
Share
Units.
On November 22, 2016, Mr. Kotick was awarded performance-based vesting restricted share units, each representing the right to receive one share of our Common Stock. Target performance would result in the vesting of 605,327 restricted share units (the number of which was based on a target grant date value of approximately $22,500,000) and maximum performance would result in the vesting of 250% of the target, or 1,513,317 restricted share units. The target number of these restricted share units will vest on March 31, 2019, subject to Mr. Kotick’s continued employment through that date, if, and only if, the Company’s cumulative adjusted non-GAAP (as previously defined) diluted earnings per share for the period from October 1, 2016 through December 31, 2017 is at least $2.00. Further, if that metric is satisfied, there is an opportunity for the additional 907,990 restricted shares units to vest on that date, as follows:
•
up
to one-third of additional restricted share units, based upon the Company’s adjusted non-GAAP (as previously defined)
operating income objective set forth in our AOP for 2016;
•
up
to one-third of additional restricted share units, based upon the Company’s adjusted non-GAAP (as previously defined) operating income objective set forth
in our AOP for 2017;
•
up
to one-third of additional restricted share units, based upon the Company’s adjusted non-GAAP (as previously defined) operating income objective set forth
in our AOP for 2018; and
•
in each case and for each tranche, vesting of these additional restricted share units will occur as follows:
–
if actual performance is less than or equal to 100% of target, no additional restricted share units will vest;
–
if actual performance is 137.5% or more of target, the maximum number of additional restricted share units (i.e., 302,663) will vest; and
–
if actual performance falls between 100% and 137.5% of target, the number of additional restricted share units that will vest will be determined using straight-line interpolation between zero and 302,663.
For the sake of clarity, if our cumulative adjusted non-GAAP (as previously defined) diluted earnings per share for the period from October 1, 2016 through December 31, 2017 is not at least $2.00, Mr. Kotick’s 2016 restricted share unit award will be canceled and no shares will vest (unless Mr. Kotick’s employment is terminated in certain circumstances following a change of control prior to the end of that period).
2017,
2018
and
2019
Equity
Awards
. Subject to his continued employment, Mr. Kotick may also be granted equity awards in each of 2017, 2018 and 2019 (unless he receives the “shareholder value creation incentive” before any such grant, in which case he will receive a payment in lieu of such award, as described herein). The form, amount and terms and conditions of each award will be determined by the Compensation Committee in its discretion, after consultation with Mr. Kotick. Subject in all cases to its absolute discretion, the Compensation Committee will consider, in determining the grant date value of each such award, the Company’s and Mr. Kotick’s performance, our applicable comparator companies, any relevant changes in the business and market dynamics relevant to the Company, our projected performance relative to our long-term business plan and any other factors the Compensation Committee determines relevant. Without limiting the generality of the foregoing, the factors the Compensation Committee will consider, in using its absolute discretion, include: (1) the 50th percentile of the aggregate grant date values of the long-term incentive grants made to the chief executive officers of our then-applicable comparator group during the prior year; (2) the grant date value of the equity awards made to Mr. Kotick during the prior year; and (3) for the 2017 grant, an amount that bears the same general relationship that the value of long-term incentive grants made to the executive officers of our then-applicable comparator group during 2016 does to the value of Mr. Kotick’s 2016 restricted share unit award, after taking into account the average increase in the grant date value of the long-term incentive awards made to other executive officers by companies in our industry during 2016.
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Long-Term
Performance
Incentives.
2020
Long-Term
Performance
Incentive.
Subject to his continued employment, Mr. Kotick may be granted an incentive award (the “2020 long-term performance grant”) measured against our total TSR and, in certain circumstances, our relative TSR. The award will have a grant date value determined by the Compensation Committee in its discretion, after consultation with Mr. Kotick and upon consideration of the factors relevant to the 2017, 2018 and 2019 equity awards described above.
Subject to the Compensation Committee’s discretion, the amount payable at maximum performance will not be more than five times the amount payable at target performance.
The
award will be paid, in cash or shares of our Common Stock, in the Compensation Committee’s discretion, on or about
March 1, 2021. For the sake of clarity, the value, if any, of the 2020 long-term performance grant will be determined by
the Compensation Committee in 2021.
If the compound annual growth rate (“CAGR”) for our TSR for the period from 2017 through 2020 is at least 6%, the award will vest as follows (and if actual performance is between any two points, the amount earned will be determined using straight-line interpolation):
Cumulative TSR over 4-Year Period
|
CAGR for TSR during 4-Year Period
|
Payment as Percentage of Target Grant Value
|
26%
|
6%
|
90%
|
36%
|
8%
|
100%
|
63%
|
13%
|
200%
|
87%
|
17%
|
300%
|
118%
|
21.5%
|
400%
|
≥144%
|
≥25%
|
500%
|
If our annualized TSR for the period from 2017 through 2020 is below 6% but is positive (i.e., equal to or greater than 0%) and is greater than or equal to the median TSR of the companies which comprise the Standard and Poor’s 500 Index during that period (the “S&P 500 Median TSR”), the award will vest as follows:
•
if our annualized TSR for the period is 100% of the S&P 500 Median TSR, 90% of the target will be earned;
•
if our annualized TSR for the period is more than 100% but less than 110% of the S&P 500 Median TSR, 100% of the target will be earned; and
•
if our annualized TSR for the period is 110% or more of the S&P 500 Median TSR, 120% of the target will be earned.
If our annualized TSR for the measurement period is negative (i.e., less than 0%) but is greater than or equal to the S&P 500 Median TSR, the award will vest as follows:
•
if the CAGR for our annualized TSR for the period is equal to the S&P 500 Median TSR, 85% of the target will be earned; and
•
if the CAGR for our annualized TSR for the period is more than the S&P 500 Median TSR, 100% of the target will be earned.
For the sake of clarity, if our annualized TSR for the measurement period is neither positive nor greater than the S&P 500 Median TSR, the 2020 long-term performance grant will be canceled and Mr. Kotick will not receive anything thereunder (unless Mr. Kotick’s employment is terminated in certain circumstances following a change of control prior to the end of that period).
2021
Long-Term
Performance
Incentive
. Subject to his continued employment, Mr. Kotick may also be granted an incentive award (the “2021 long-term performance grant”) measured against our cumulative operating income performance over the five-year period from 2017 to 2021. The award will have a grant date value determined by the Compensation Committee in its discretion, after consultation with Mr. Kotick and upon consideration of the factors relevant to the 2017, 2018 and 2019 equity awards described above (where, in considering these factors before the Compensation Committee’s use of its absolute discretion, it will be assumed that the average increase in the grant date fair value of the long-term incentive awards made to other chief executive officers by companies in our industry between 2016 and the grant date could be calculated by applying a multiple of 1.44 to the grant date value of the equity award made to Mr. Kotick in 2017). Subject to the Compensation Committee’s discretion, the amount payable at maximum performance will not be more than 1.5 times the amount payable at target performance. For the sake of clarity, the value, if any, of the 2020 long-term performance grant will be determined by the Compensation Committee in 2022.
The
award will be paid, in cash or shares of our Common Stock, in the Compensation Committee’s discretion, in 2022, if
either (X) our cumulative adjusted non-GAAP (as previously defined) operating income for the period from 2017 through 2021 is
at least 90% of the sum of the Company’s adjusted non-GAAP (as previously defined) operating income objective set forth
in our AOP for 2017, the Company’s adjusted non-GAAP (as previously defined) operating income objective set forth in
our AOP for 2018 and, for each of 2019, 2020 and 2021, a non-GAAP operating income objective for the Company to be determined
by the Committee in its discretion, after consultation with Mr. Kotick (which, for the sake of clarity, may differ from the
objective ultimately established pursuant to our AOP for any such year) or (Y) an alternative operating income objective
established by the Compensation Committee for that period has been met or exceeded.
The award will vest as follows:
•
if actual performance is at least 90% of target, 100% of the target will be earned;
•
if actual performance is 125% or more of target, 150% of the target will be earned; and
•
if actual performance falls between 100% and 125% of target, the amount earned will be determined using straight-line interpolation.
For the sake of clarity, if the cumulative operating income for the period from 2017 through 2021 is not at least 90% of the target, the
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2021 long-term performance grant will be canceled and Mr. Kotick will not receive anything thereunder (unless Mr. Kotick’s employment is terminated in certain circumstances following a change of control prior to the end of that period).
Shareholder
Value
Creation
Incentive
. Subject to his continued employment, if, at any time prior to December 31, 2021, the average closing price of our Common Stock is at least two times the average closing price of our Common Stock during the period from October 1, 2016 to December 31, 2016 (i.e., increasing from $39.98 to $79.96 per share, subject to adjustments by the Compensation Committee to prevent dilution or enlargement as a result of any dividend, stock split or substantially similar change in our capital structure), and remains at or above that price for at least 90 consecutive trading days:
•
all equity awards granted to Mr. Kotick during 2017, 2018 or 2019 pursuant to the Kotick Employment Agreement which are then outstanding will immediately vest (assuming, for all performance-based awards, maximum performance);
•
Mr. Kotick will receive a payment equal to the grant date value (as determined by the Compensation Committee in its discretion, after consultation with Mr. Kotick) of any annual equity grants remaining to be made pursuant to the Kotick Employment Agreement will be paid, in cash or shares of our Common Stock, in the Compensation Committee’s discretion, within 120 days (and he will not be granted the underlying awards); and
•
the 2021 long-term performance grant will be paid within 120 days, with the amount payable to be at least 150% of the 2021 long-term performance grant value.
For the sake of clarity, this would have no impact on either the 2016 equity award or the 2020 long-term performance grant.
Transformative
Transaction
Award
. Upon the Compensation Committee’s determination, in its discretion, that we have consummated a transformative transaction during the term of Mr. Kotick’s employment under the Kotick Employment Agreement, he will receive a special award, the form of which shall be determined by the Compensation Committee in its discretion. For a transaction (or series of transactions) to qualify as transformative, it (or they) must, at a minimum:
•
result in accretive value to our then-current shareholders of at least 15% over our market capitalization as of the date immediately prior to the public announcement of the transaction (or, for a series of transactions, the first transaction in the series); and
•
that accretion must be maintained for six consecutive months following the consummation of the transaction (or, for a series of transactions, the last transaction in the series).
The value of such award, as determined by the Compensation Committee, in its discretion, will be equal to between one hundred percent (100%) and one hundred fifty percent (150%) of the 2021 long-term performance grant value, as follows:
•
if the accretive value was at least 15%, 100% of the 2021 long-term performance grant value;
•
if the accretive value was 30% or more, 150% of the 2021 long-term performance grant value; and
•
if the accretive value was between 15% and 30%, the value of the award will be between 100% to 150% of the 2021 long-term performance grant value, determined using straight-line interpolation.
Other
Benefits
. Mr. Kotick is entitled to participate in all benefit plans generally available to our executive officers. In addition, we are required to maintain a supplemental term life insurance policy in the amount of $18 million for the benefit of his estate until March 15, 2022 and, from March 16, 2022 through the tenth anniversary of his employment agreement (i.e., October 2, 2026), to reimburse him for up to $80,000 per year of premiums in respect of his then-existing life insurance policies. Further, we will pay reasonable expenses related to Mr. Kotick’s use of non-commercial transportation services for business-related travel, including any such services provided by an FAA-certified charter operator indirectly owned and managed by him. Please see “Certain Relationships and Related Transactions—Relationships and Transactions—Relationships with Our Directors and Executive Officers—Business Use of Aircraft Indirectly Owned by Our Chief Executive Officer” for more information about our arrangement with this charter operator.
Restrictive
Covenants
. Pursuant to the Kotick Employment Agreement, until the second anniversary of the expiration of the term of his employment under the agreement, Mr. Kotick is restricted from soliciting the employment of anyone then employed by us or our affiliates (or anyone who was employed by us or them during the then-most recent six-month period). Mr. Kotick is also prohibited from competing with us during the term of his employment under the Kotick Employment Agreement.
In addition, during the term of his employment under the Kotick Employment Agreement, Mr. Kotick is prohibited from disclosing or using our confidential information except as required in the course of his employment and, until the second anniversary of the expiration of the term of his employment under the agreement, he cannot use such information to induce any of our employees or business partners to alter its relationship with us.
Dennis Durkin
Term
&
Title
. Dennis Durkin was party to an employment agreement with us, dated as of February 29, 2012 (the “Durkin Employment Agreement”), pursuant to which he served as our Chief Financial Officer. Mr. Durkin’s term of employment under the Durkin Employment Agreement began on March 1, 2012 and ended on March 15, 2017. As such, while he continues to serve as our Chief Financial Officer, he is not currently party to an employment agreement.
Base
Salary
. Pursuant to the Durkin Employment Agreement, Mr. Durkin’s annual base salary was $650,000 as of March 1, 2012 and was increased by at least 5% annually. For more information about Mr. Durkin’s base salary, see “—Compensation Discussion
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and Analysis—Elements of Our Executive Compensation Program for 2016—Salary” above.
Annual
Bonus
. Pursuant to the Durkin Employment Agreement, Mr. Durkin was eligible for an annual bonus under the CAIP with a target amount of 100% of his base salary, the actual amount of which was determined in our sole discretion based on his overall performance and the Company’s performance. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity
Awards.
As an inducement to enter into the Durkin Employment Agreement, in 2012 Mr. Durkin was awarded:
•
an option to purchase 300,000 shares of our Common Stock, which vested in four equal installments on each of March 14, 2014, 2015, 2016 and 2017;
•
350,000 restricted share units, which vested in four equal installments on each of March 14, 2014, 2015, 2016 and 2017; and
•
450,000 performance-based vesting restricted share units, which vested in five equal installments on each of March 14, 2013, 2014, 2015, 2016 and 2017, in each case following the achievement of the Company’s adjusted non-GAAP (as previously defined) diluted earnings per share objective set forth in our AOP for the prior year.
Other
Benefits
. Mr. Durkin was entitled to participate in all benefit plans generally available to our executive officers and we were required to maintain a $3 million supplemental term life insurance policy for the benefit of his estate throughout the term of his employment under the Durkin Employment Agreement.
Restrictive
Covenants
. Pursuant to the Durkin Employment Agreement, until the second anniversary of the expiration of the term of his employment, Mr. Durkin is restricted from soliciting the employment of anyone then-employed by us or our subsidiaries (or anyone who was employed by us or them during his final 90 days of employment). In addition, Mr. Durkin is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. Mr. Durkin is also prohibited from competing with us during the term of his employment under the Durkin Employment Agreement and is restricted from inducing any of our business partners to alter its relationship with us while he is our employee.
Thomas Tippl
Term
&
Title
. Thomas Tippl is party to an employment agreement with us, dated as of September 9, 2005, amended as of December 15, 2008, April 15, 2009, March 23, 2010, and December 5, 2013, and assigned to Activision Blizzard by Activision on April 15, 2009 (the “Tippl Employment Agreement”), pursuant to which he served as the Chief Financial Officer of Activision until the consummation of the Vivendi Games Combination, as the Chief Financial Officer of Activision Blizzard from the consummation of the Vivendi Games Combination until February 2009, as our Chief Corporate Officer and Chief Financial Officer from February 2009 until March 2010 and, since March 2010 serves as our Chief Operating Officer (and continued to serve as our Chief Financial Officer until a replacement was hired in March 2012). Mr. Tippl’s term of employment under the Tippl Employment Agreement began on October 1, 2005 and, following our exercise of the right to extend his contract by one year, continues through April 30, 2017.
Base
Salary
. Pursuant to the Tippl Employment Agreement, Mr. Tippl’s annual base salary was $1,250,000 as of December 5, 2013, and beginning in 2015, was and will be increased by an amount at least equal to the average percentage increase approved by the Compensation Committee for members of our executive leadership team with respect to that year (excluding any increase guaranteed to any such person by contract or due to such person’s significant promotion or modification in duties). For more information about Mr. Tippl’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Salary” above.
Annual
Bonus
. Pursuant to the Tippl Employment Agreement, Mr. Tippl is eligible for an annual bonus under the CAIP with a target amount of 150% of his base salary, the actual amount of which is determined in our sole discretion based on his overall performance and the Company’s performance. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity
Awards
. As an inducement to enter into the December 2013 amendment to the Tippl Employment Agreement, pursuant to which, among other things, the term of his employment was extended through April 2017 (following our exercise of the right to extend his contract by one year), on February 10, 2014, Mr. Tippl was awarded:
•
309,917 restricted share units, each representing the right to receive one share of our Common Stock and the number of which was based on a total grant date value of approximately $6,000,000, which vested or will vest (subject to his continued employment), as the case may be, in three equal installments on each of March 31, 2015, 2016, and 2017; and
•
restricted share units, each representing the right to receive one share of our Common Stock, where target performance would result in the vesting of 681,817 restricted share units (and maximum performance would result in the vesting of 1,022,728 restricted share units, the number of which was based on a total grant date value of approximately $19,800,000), up to one-third of which vested or will vest (subject to his continued employment), as the case may be, on each of March 31, 2015, 2016 and 2017 as follows:
–
approximately 45% (i.e., up to 464,876 restricted share units) by reference to the Company’s adjusted non-GAAP (as previously defined) diluted earnings per share objective set forth in our AOP for the prior year;
–
approximately 27% (i.e., up to 278,926 restricted share units) by reference to the Company’s adjusted non-GAAP (as
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previously defined) free cash flow objective set forth in our AOP for the prior year;
–
approximately 28% (i.e., up to 278,926 restricted share units) by reference to the adjusted non-GAAP (as previously defined) operating income objective for Blizzard set forth in our AOP for the prior year; and
–
in each case, vesting occurred, or will occur:
–
if actual performance is below 75% of target, no shares subject to the performance metrics would be earned; and
–
if actual performance is 75% or more of our performance objective for the year, then the number of shares that would be earned is equal to the target number of shares for the grant year multiplied by the ratio of the actual operating performance to the AOP operating performance objective for the year, up to a maximum of 150%.
–
On March 31, 2015, 290,396 out of a possible 340,911 of these performance-based vesting restricted share units vested, on March 31, 2016, 280,729 out of a possible 340,909 of these performance-based vesting restricted share units vested and on March 31, 2017, 307,660 out of a possible 340,908 of these performance-based vesting restricted share units vested, following the Compensation Committee’s determination with respect to our 2014, 2015 and 2016 performance, respectively.
Other
Benefits
. Mr. Tippl is entitled to participate in all benefit plans generally available to our executive officers and we are required to maintain a $9,375,000 supplemental term life insurance policy for the benefit of his estate throughout the term of his employment under the Tippl Employment Agreement.
Restrictive
Covenants
. Pursuant to the Tippl Employment Agreement, until the second anniversary of the termination of his employment, Mr. Tippl is restricted from soliciting the employment of anyone who was employed by us or our affiliates during the term of his employment and from inducing any of our business partners to alter its relationship with us. Mr. Tippl is also generally not permitted to seek or negotiate for other employment before the final six months of the term of his employment under the Tippl Employment Agreement. Mr. Tippl is also prohibited from competing with us during the term of his employment. In addition, Mr. Tippl is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment.
Michael Morhaime
Term
&
Title
. Michael Morhaime was party to an employment agreement with us, dated as of December 1, 2007 and amended as of December 15, 2008, March 31, 2009, November 4, 2009 and October 26, 2010 (the “Morhaime Employment Agreement”), pursuant to which he served as the President and Chief Executive Officer of Blizzard. Mr. Morhaime’s term of employment under the Morhaime Employment Agreement began on July 9, 2008 and ended on December 31, 2016. As such, while he continues to serve as the President and Chief Executive Officer of Blizzard, he is not currently party to an employment agreement.
Base
Salary
. Pursuant to the Morhaime Employment Agreement, Mr. Morhaime’s annual base salary was $763,900 as of August 31, 2010 and was reviewed annually. For more information about Mr. Morhaime’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Salary” above.
Annual
Bonuses
. Pursuant to the Morhaime Employment Agreement, Mr. Morhaime was eligible for an annual bonus under the CAIP with a target amount of 27% of his base salary, 10% of which was based on our financial performance and 90% of which was based on his performance and Blizzard’s financial performance. The actual amount of any such bonus paid to him was determined in our discretion. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Pursuant to the Morhaime Employment Agreement, Mr. Morhaime was also eligible for additional annual performance-based cash compensation based upon Blizzard’s earnings under the Morhaime Profit Sharing Plan. Specifically, Mr. Morhaime was entitled to 6% of the profit sharing pool created pursuant to the Blizzard Profit Sharing Plan. (The Compensation Committee was entitled to exercise discretion with respect to his actual annual percentage interest in the pool, subject to a specified minimum percentage.) Prior to October 2010, Mr. Morhaime was entitled to 5% of that pool. For more information about the Morhaime Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” above.
Mr. Morhaime was also eligible for an annual bonus under the Blizzard Holiday Plan. The target amount of such bonus was 37% of his base salary, but was otherwise in our Chief Executive Officer’s discretion. For more information about the Blizzard Holiday Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Other Cash Programs or Awards for 2016” above.
Equity
Awards
. As an inducement to enter into the Morhaime Employment Agreement, upon the consummation of the Vivendi Games Combination, Mr. Morhaime was awarded an option to purchase 600,000 shares of our Common Stock, which vested in 60 equal installments on the 9th day of each month in the five years following the date of grant, commencing with August 9, 2008.
As an inducement to enter into the October 2010 amendment to the Morhaime Employment Agreement, pursuant to which, among other things, the term of his employment was extended through December 2016, in 2010 Mr. Morhaime was awarded:
•
an option to purchase 300,000 shares of our Common Stock, which vested or will vest (subject to his continued employment), as the case may be, in six equal installments on each of December 31, 2011, 2012, 2013, 2014, 2015 and 2016; and
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•
400,000 restricted share units, which vested or will vest (subject to his continued employment), as the case may be, in six equal installments on each of December 31, 2011, 2012, 2013, 2014, 2015 and 2016.
In addition, the Morhaime Employment Agreement provided that we would recommend to the Compensation Committee that Mr. Morhaime be awarded an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units once per year during the term of the agreement to the extent awards are being made to our other senior executives during that year. Accordingly, the Compensation Committee, upon our recommendation, awarded Mr. Morhaime:
•
in 2010, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which vested on each of November 7, 2011, 2012 and 2013;
•
in 2011, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which vested on each of November 9, 2012, 2013 and 2014;
•
in 2012, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which vested on each of November 8, 2013, 2014 and 2015;
•
in 2013, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which vested or will vest (subject to his continued employment), as the case may be, on each of November 14, 2014, 2015 and 2016;
•
in 2014, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which vested or will vest (subject to his continued employment), as the case may be, on each of November 13, 2015, 2016 and 2017;
•
in 2015, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which will vest (subject to his continued employment) on each of November 12, 2016, 2017 and 2018; and
•
in 2016, an option to purchase 200,000 shares of our Common Stock and 70,000 restricted share units, one-third of both of which will vest (subject to his continued employment) on each of November 6, 2017, 2018 and 2019.
Other
Benefits
. Mr. Morhaime was entitled to participate in all benefit plans generally available to Blizzard’s senior executive officers (provided that in any case his benefits were in the aggregate at least as favorable to him as those provided to him by Blizzard as of October 15, 2007). Mr. Morhaime was entitled to reimbursement of any legal fees he incurred in connection with the negotiation of the Morhaime Employment Agreement.
Restrictive
Covenants
. Pursuant to the Morhaime Employment Agreement, while he was our employee and during any period following the termination of his employment in which he was receiving severance from us (as well as for any period corresponding to any lump-sum severance payment he receives from us), Mr. Morhaime was restricted from soliciting the employment of anyone then-employed by us or Blizzard and from inducing any of our business partners or Blizzard’s business partners to terminate its relationship with us or them. Mr. Morhaime was also prohibited from competing with us while he is our employee. In addition, Mr. Morhaime is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. Further, during any period in which he was receiving severance from us (as well as for any period corresponding to any lump-sum severance payment he receives from us), he was required to make himself reasonably available to us to provide any information or other assistance we may have reasonably requested with respect to matters relating to Blizzard’s business about which he has knowledge as a result of his employment. For information about the severance Mr. Morhaime may have received under the Morhaime Employment Agreement, see “—Potential Payments upon Termination or Change of Control” below.
Riccardo Zacconi
Term
&
Title
. Riccardo Zacconi is party to an employment agreement with us, dated as of November 2, 2015 (the “Zacconi Employment Agreement”), pursuant to which he serves as the Chief Executive Officer of King. The initial term of Mr. Zacconi’s employment under the Zacconi Employment Agreement began on February 23, 2016 (i.e., the date on which we closed the King Acquisition) and continues through February 23, 2019. Thereafter, Mr. Zacconi will continue to be employed under the Zacconi Employment Agreement until either party provides the other with 12 months’ prior notice of its intent to terminate (so that the earliest his term of employment with us will expire is February 23, 2020).
Base
Salary
. Pursuant to the Zacconi Employment Agreement, Mr. Zacconi’s annual base salary was £400,000 as of February 23, 2016 and was and will be reviewed annually. It may be increased in our discretion and any higher base salary paid to Mr. Zacconi will then be deemed to be the annual rate for purposes of the Zacconi Employment Agreement. For more information about Mr. Zacconi’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Salary” above.
Annual
Bonus
. Pursuant to the Zacconi Employment Agreement, Mr. Zacconi is eligible for annual performance-based cash compensation based upon King’s earnings under the King Profit Sharing Plan. Specifically, Mr. Zacconi is entitled to 6% of the profit sharing pool created pursuant to the King Profit Sharing Plan. (The Compensation Committee may exercise discretion with respect to his actual annual percentage interest in the pool, subject to a specified minimum percentage.) For more information about the King Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2016—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” above.
Equity
Awards
. Upon the consummation of the King Acquisition, the unvested awards with respect to King ordinary shares Mr. Zacconi held prior to then were converted into awards of the same type with respect to shares of our Common Stock. In addition,
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pursuant to the Zacconi Employment Agreement, the performance metrics underlying a portion of his options were replaced with metrics with respect to King’s post-acquisition performance. As such, Mr. Zacconi held the following at the beginning of his term of employment under the Zacconi Employment Agreement:
•
an option to purchase 192,392 shares of our Common Stock, which vested or will vest (subject to his continued employment), as the case may be, in 12 equal installments beginning on May 16, 2016;
•
an option to purchase 903,251 shares of our Common Stock, which vest as follows:
–
one-half of which vest in three equal installments on February 22, 2019: one-third if the adjusted non-GAAP (as previously defined) operating income objective for King set forth in the 2016 AOP had been met or exceeded; one-third if the adjusted non-GAAP (as previously defined) operating income objective for King set forth in the 2017 AOP had been met or exceeded; and one-third if the adjusted non-GAAP (as previously defined) operating income objective for King set forth in the 2018 AOP had been met or exceeded; and
–
one-half of which vest in three equal installments on each of February 22, 2017, 2018 and 2019, in each case, if the EBITDA objective for King for the prior year set forth in the plan established by the King management in connection with the King Acquisition has been met or exceeded;
–
150,542 of these performance-based vesting stock options will vest on February 22, 2019, subject to Mr. Zacconi’s continued employment through such date, following the achievement of the adjusted non-GAAP (as previously defined) operating income objective for King set forth in the 2016 AOP;
–
On February 22, 2017, 150,542 of these performance-based vesting stock options were canceled, following the Compensation Committee’s determination that the 2016 EBITDA objective for King set forth in the plan established by the King management in connection with the King Acquisition had not been met; and
•
84,453 restricted share units, which vested or will vest (subject to his continued employment), as the case may be, in 12 equal installments beginning on May 16, 2016.
Further, the unvested “linked options” and King ordinary shares linked to those options Mr. Zacconi held prior to the closing of the King Acquisition
were converted into the right to receive the cash consideration to which Mr. Zacconi would have been entitled upon consummation of the King Acquisition if he had then held the underlying shares, less any applicable taxes, paid to him on the dates on which the underlying options would have vested had the acquisition not occurred.
Other
Benefits
. Mr. Zacconi is generally entitled to receive the same level of benefits as he did prior to the King Acquisition. He is also entitled to participate in King’s qualified defined contribution retirement plan.
Restrictive
Covenants
. During the term of his employment under the Zacconi Employment Agreement, Mr. Zacconi is restricted from: (1) being employed by any other business; (2) from holding any material interest in any entity which competes with us or our business partners, impairs, or might reasonably be thought by us to impair, his ability to always act in our best interest or requires, or might reasonable be thought to require, him to make use of any of our confidential information in order to properly discharge his duties to, or further his interests in, that entity; (3) preparing to engage in any competing business; and (4) knowingly making untrue or misleading statements about us. Mr. Zacconi is also prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. In addition, during the 12 months following the termination of his employment (less any time prior to then he was on “garden leave” or his employment was otherwise suspended), Mr. Zacconi is restricted from: (1) competing with us in any country in which we did, or intended to do, business during the final year of his employment; (2) employing, or soliciting the employment of, anyone then-employed by us or our subsidiaries in a relatively senior position and with whom Mr. Zacconi had material dealings in the 12 months prior to his termination; and (3) interfering with the relationship between us and our business partners or any of our subsidiaries and its business partners.
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Potential Payments upon Termination or Change of Control
The table below outlines the potential payments to our named executive officers upon the occurrence of certain termination events or a change of control. The calculations assume that each of these events occurred on December 31, 2016.
Name and Type of Payment/Benefit
|
Death
(1)(2)
($)
|
Disability
(1)(2)
($)
|
Termination by
Activision Blizzard
For Cause or
Performance
Termination
(1)(3)
($)
|
Termination by
Activision
Blizzard Without
Cause or
Termination by
Employee for
Good Reason
(1)(4)
($)
|
Termination by
Activision Blizzard
Without Cause or
Termination by
Employee for Good
Reason Following a
Change of Control
(4)(5)
($)
|
Robert
A.
Kotick
|
|
|
|
|
|
Bonus severance
|
4,844,383
|
4,844,383
|
—
|
5,590,414
|
5,590,414
|
Severance payment
|
—
|
2,366,757
|
—
|
14,187,933
|
21,281,900
|
Benefits continuation
(6)
|
29,563
|
442,238
|
425,120
|
442,238
|
442,238
|
Value of accelerated equity awards
(7)
|
21,858,358
|
21,858,358
|
—
|
21,858,358
|
21,858,358
|
TOTAL
|
26,732,304
|
29,511,736
|
425,120
|
42,078,943
|
49,172,910
|
Dennis
Durkin
|
|
|
|
|
|
Bonus severance
|
941,451
|
941,451
|
—
|
941,451
|
941,451
|
Lump-sum payment
|
1,580,158
|
—
|
—
|
—
|
—
|
Salary continuation
|
—
|
164,600
|
—
|
164,600
|
164,600
|
Benefits continuation
(6)
|
12,865
|
13,128
|
—
|
13,128
|
13,128
|
TOTAL
|
2,534,474
|
1,119,179
|
0
|
1,119,179
|
1,119,179
|
Thomas
Tippl
|
|
|
|
|
|
Bonus severance
|
2,399,207
|
2,399,207
|
—
|
2,399,207
|
2,399,207
|
Lump-sum payment
|
3,907,644
|
3,907,644
|
—
|
—
|
—
|
Salary continuation
|
—
|
—
|
—
|
455,000
|
455,000
|
Benefits continuation
(6)
|
21,350
|
26,409
|
—
|
—
|
—
|
TOTAL
|
6,328,201
|
6,333,260
|
0
|
2,854,207
|
2,854,207
|
Michael
Morhaime
|
|
|
|
|
|
Bonus severance
|
5,685,192
|
5,685,192
|
—
|
5,685,192
|
5,685,192
|
Lump-sum payment
|
—
|
—
|
—
|
10,223,970
|
10,223,970
|
TOTAL
|
5,685,192
|
5,685,192
|
0
|
15,909,162
|
15,909,162
|
Riccardo
Zacconi
|
|
|
|
|
|
Bonus severance
|
7,700,057
|
7,700,057
|
—
|
7,700,057
|
7,700,057
|
Salary and benefits continuation
|
500,059
|
250,030
|
—
|
1,573,797
|
1,573,797
|
Value of accelerated equity awards
(7)
|
25,112,065
|
25,112,065
|
—
|
25,112,065
|
25,112,065
|
TOTAL
|
33,312,181
|
33,062,152
|
0
|
34,385,919
|
34,385,919
|
Footnotes for this table can be found on the pages immediately following (pages 65-71).
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(1) Bonus Payments upon Termination
In the event of a termination by us without cause or by him for good reason (including, for Mr. Kotick, such a termination during the 12-month period following a change of control), or in the event of a termination of his employment due to death or disability, each of our named executive officers would have received any earned but unpaid bonuses for prior years (of which there were none as of December 31, 2016), as well as a pro rata bonus for the year in which the termination occurred, as follows:
(a) Mr. Kotick would have received, subject to his execution of an effective and irrevocable release (other than in the event of a termination of his employment due to death):
•
in the event of his termination due to death or disability, a lump-sum payment equal to the annual bonus for the year immediately preceding the year in which the termination occurred, multiplied by a fraction, the numerator of which is the number of days worked during the year in which the termination occurred and the denominator of which is 365; or
•
in the event of the termination by us without cause or by him for good reason, a lump-sum payment equal to the annual bonus for the year in which the termination occurred (where all goals would have been measured by actual performance), multiplied by a fraction, the numerator of which is the number of days worked during the year in which the termination occurred and the denominator of which is 365;
(b) Messrs. Durkin and Tippl would have each received, subject to his or his legal representative’s execution of an effective and irrevocable release (other than in the event of a termination of his employment due to death):
•
a lump-sum payment equal to the annual bonus for the year in which the termination occurred (where all goals would have been measured by actual performance), multiplied by a fraction, the numerator of which is the number corresponding to the month in which the termination occurred and the denominator of which is 12;
(c) Mr. Morhaime would have received:
•
a lump-sum payment equal to any amounts he would have received under the CAIP, Morhaime Profit Sharing Plan and Blizzard Holiday Plan for the year in which the termination occurred (where any goals would have been measured by actual performance), multiplied by a fraction, the numerator of which is the number of days prior to and including his termination date in the year in which the termination occurred and the denominator of which is 365; and
(d) Mr. Zacconi would have received, subject to his or his legal representative’s execution of a release:
•
a lump-sum payment equal to any amount he would have received under the King Profit Sharing Plan for the year in which the termination occurred (based on actual performance), multiplied by a fraction, the numerator of which is the number corresponding to the month in which the termination occurred and the denominator of which is 12.
None of our named executive officers is entitled to a bonus with respect to the year of termination of his employment in connection with a termination for cause, although Mr. Kotick would have received any earned but unpaid bonus for prior years (of which there were none as of December 31, 2016).
In the event of a termination due to death or disability on December 31, 2016 (which termination due to disability is, for Mr. Kotick, subject to certain advance notice requirements, as is a termination of Mr. Zacconi’s employment due to his mental disorder), each of our named executive officers or his estate would have received, in addition to any amounts to which he was entitled under applicable law, such as earned but unpaid salary, accrued but unused vacation, unreimbursed business expenses and any amounts then due under our benefit plans, programs or policies (collectively, “accrued obligations”) (which for purposes of this table, are assumed to have been paid or reimbursed in full as of December 31, 2016), the following:
(a) Mr. Kotick would have received:
•
in the event of his termination due to disability, subject to his execution of an effective and irrevocable release, an amount equal to 100% of his annual base salary in effect on his termination date, which amount would have been paid to him in equal installments over the 12-month period following his termination date;
•
in the event of his termination due to death or disability, subject to, in the event of a termination of his employment due to disability, his execution of an effective and irrevocable release, continuation of health/medical insurance benefits for him and his then-current spouse and minor children, as applicable, for a period of two years following his termination date; and
•
in the event of his termination due to disability, continuation of his supplemental life insurance benefits via our reimbursement of the premiums in respect of his existing policy through its expiration on March 15, 2022 and, from March 16, 2022 through the tenth anniversary of his employment agreement (i.e., October 1, 2026), of up to $80,000 per year of premiums in respect of his then-existing policies;
(b) Mr. Durkin would have received, subject to, in the event of a termination of his employment due to disability, his or his legal representative’s execution of an effective and irrevocable release:
•
in the event of his termination due to death, a lump-sum payment equal to 200% of his annual base salary in effect on his termination date, less any payments received or to which he became entitled under company-provided life insurance (which payments, for purposes of this table, are assumed to be zero);
•
in the event of his termination due to disability, salary continuation through the expiration date of his employment agreement in an amount equal to 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period, less any payments received or to which he became entitled under company-provided long-term disability insurance (which payments, for purposes of this table, are assumed to be zero); and
•
in the event of his termination due to death or disability, continuation of health/medical insurance benefits for him and his then-current spouse and minor children, as applicable, for a period of one year following his termination date, provided that
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he does not become eligible for another company’s group health/medical insurance or coverage program, in which case he and his then-current spouse and minor children, as applicable, would cease to be eligible for continuation of health/medical insurance benefits;
(c) Mr. Tippl would have received, subject to, in the event of a termination of his employment due to disability, his or his legal representative’s execution of an effective and irrevocable release:
•
in the event of his termination due to death or disability, a lump-sum payment equal to 300% of the base salary paid or payable to him for the most recent year immediately prior to termination; and
•
in the event of his termination due to death or disability, continuation of health/medical insurance benefits for him and his then-current spouse and minor children, as applicable, for a period of two years following his termination date; and
(d) Mr. Zacconi would have received, subject to his or his legal representative’s execution of a release:
•
in the event of his termination due to death, (x) salary continuation through the first anniversary of such termination date, in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for his then-current spouse and minor children, as applicable, during that period or (y) if greater, any payments received or to which he became entitled under company-provided life insurance (which payments, for purposes of this table, are assumed to be zero); and
•
in the event of a termination due to his mental incapacity, (x) salary continuation through that date which is six months after such termination date, in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for him and his then-current spouse and minor children, as applicable, during that period or (y) if greater, any payments received or to which he became entitled under company-provided long-term disability insurance (which payments, for purposes of this table, are assumed to be zero);
Mr. Zacconi does not have any specific rights in connection with a termination due to any disability other than his mental capacity. Such a termination would be treated as a termination by us without cause, discussed in footnote (4).
With the exception of a payment in respect of a bonus, discussed in footnote (1), Mr. Morhaime would not have received anything other than accrued obligations in connection with his termination due to death or disability.
Except as otherwise indicated, the amounts reflected in the table are in addition to (or, in the case of Mr. Zacconi, in lieu of) any proceeds from company-provided insurance the executive or his estate would have received upon death or disability, as the case may be.
Any payment in respect of a bonus that any of our named executive officers would have received in connection with a termination due to death or disability is discussed in footnote (1). The effects of a termination due to death or disability on outstanding equity and, in the case of Mr. Kotick, other incentive awards, are discussed in footnote (7).
The employment of each of our named executive officers may, subject to certain advanced notice requirements, be terminated for “cause” if any of the following occur:
•
For Mr. Kotick, a determination by our Board that he: (1) engaged in an act of fraud or embezzlement in respect of us or our funds, properties or assets; (2) was convicted of, or pled guilty or
nolo
contendere
to, a felony under the laws of the United States or any state thereof; (3) engaged in willful misconduct or gross negligence in connection with the performance of his duties that has caused or is highly likely to cause severe harm to us; (4) was intentionally dishonest in the performance of his duties under his employment agreement and such dishonesty had a material adverse effect on us; or (5) subject to his right to cure, materially breached his material obligations under his employment agreement;
•
For Mr. Durkin, our good-faith determination that he: (1) engaged in willful, reckless or gross misconduct that caused, or is reasonably likely to cause, harm to us or our subsidiaries; (2) subject to his right to cure, was grossly negligent in the performance of his duties or willfully and continuously failed or refused to perform any duties reasonably requested in the course of his employment; (3) engaged in fraud or dishonesty that caused, or is likely to cause, severe harm to us or our subsidiaries, including our business or reputation; (4) subject to his right to cure, violated any of our lawful and reasonable directives or policies, any such directives or policies of our subsidiaries or any applicable laws, rules or regulations in connection with the performance of his duties that caused, or is reasonably likely to cause, harm to us or our subsidiaries; (5) subject to his right to cure, materially breached his employment agreement; (6) subject to his right to cure, materially breached any proprietary information or confidentiality agreement with us or our subsidiaries; (7) was convicted of, or pled guilty or no contest to, a felony or crime involving dishonesty or moral turpitude; or (8) subject to his right to cure, breached his fiduciary duties to us or our subsidiaries;
•
For Mr. Tippl, that he: (1) engaged in willful, reckless or gross misconduct; (2) subject to his right to cure, materially breached his employment agreement or the proprietary information agreement with us; (3) was convicted of, or pled no contest to, a felony or crime involving dishonesty or moral turpitude; (4) breached his duty of loyalty to us; or (5) violated our corporate governance policies;
•
For Mr. Morhaime, that he: (1) subject to his right to cure, failed to perform his primary duties or breached his previous
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employment agreement, in either case resulting in material and demonstrable damage to us or our affiliates; (2) subject to his right to cure, intentionally and materially failed to comply with our material policies of which he had been provided written notice and the terms of which are equally and uniformly applied to all of our executive employees; or (3) was convicted of a felony or other crime involving dishonesty or fraud or that results or would reasonably be expected to result in our becoming subject to public reprimand or sanction; and
•
For Mr. Zacconi, that he: (1) subject to his right to cure, seriously, repeatedly or continuously breached his employment agreement with us; (2) was guilty of serious misconduct or was convicted of any crime involving dishonesty or where a custodial penalty was imposed; (3) subject to his right to cure, was guilty of fraud or dishonesty, or acted in any manner which, in our reasonable opinion, brought, or is likely to bring, him, us or any of our subsidiaries into serious disrepute or is materially adverse to our interests or the interests of any of our subsidiaries; (4) subject to his right to cure, was, in our reasonable opinion, seriously negligent or incompetent in the performance of his duties; (5) subject to his right to cure, became or was declared insolvent, committed any act of bankruptcy or convened a meeting of, or made or proposed to make any arrangement or composition with, creditors; (6) subject to his right to cure, in our reasonable belief, failed to perform his duties to a satisfactory standard; (7) subject to his right to cure, was disqualified from being a director by reason of any order made under the English Company Directors Disqualification Act 1986 or any other enactment; (8) subject to his right to cure, seriously breached any of our rules or the rules of our subsidiaries regarding our electronic communications systems; (9) subject to his right to cure, ceased to be entitled to work in the relevant jurisdiction in which he is expected to conduct his duties (currently, the United Kingdom); or (10) subject to his right to cure, was guilty of a serious breach of any of our rules, regulations or codes of practice applicable to the dealing min securities and inside information.
Each of our named executive officers would have received accrued obligations in connection with a termination for cause on December 31, 2016, and none of them would have received any salary-related severance or bonus with respect to the year of termination in connection with a termination for cause.
In addition, in the event of a termination by us for cause, Mr. Kotick would have received:
•
any earned but unpaid bonuses for prior years (of which there were none as of December 31, 2016); and
•
continuation of his supplemental life insurance benefits via our reimbursement of the premiums in respect of his existing policy through its expiration on March 15, 2022 and, from March 16, 2022 through the tenth anniversary of his employment agreement (i.e., October 1, 2026), of up to $80,000 per year of premiums in respect of his then-existing policies.
The effects of a termination in connection with a termination for cause on outstanding equity and, in the case of Mr. Kotick, other incentive awards are discussed in footnote (7).
As described below, each named executive officer may terminate his employment for “good reason” upon the occurrence of any of the following without his consent:
•
For Mr. Kotick, subject to certain advance notice requirements and our right to cure: (1) a reduction in his base salary or target annual bonus; (2) a material reduction in certain benefits to which he is contractually entitled; (3) the assignment to him of any duties materially inconsistent with his position, duties, responsibilities, authority or status with us or a material adverse change in his duties, responsibilities, authorities, reporting responsibilities, titles or offices as in effect prior to such assignment or change (including, without limitation, his ceasing to have the title of chief executive officer of Activision Blizzard (or, following a change of control, our successor or ultimate parent entity)); (4) his failure to be nominated for election as a member of our Board; (5) our material breach or failure to perform, when due, any of our obligations under his employment agreement; (6) any purported termination of his employment in contravention of the notice provision of his employment agreement; (7) a good faith determination by him that he is not able to discharge his duties effectively by reason of directives from our Board requiring him to perform duties not directly related to our operations; or (8) any purported termination of his employment in violation of our Bylaws;
•
For Mr. Durkin, subject to certain advance notice requirements and our right to cure: (1) a relocation of his principal place of business to a location more than 50 miles from our current headquarters that materially and adversely affects his commute or (2) his being assigned to serve in a position that results in a material diminution of his responsibilities, duties or title;
•
For Mr. Tippl, subject to our right to cure: our relocation to a location more than 25 miles from Los Angeles County that is materially adverse to him;
•
For Mr. Morhaime, subject to certain advance notice requirements and our right to cure: (1) a reduction in his base salary or any contractually guaranteed minimum bonuses or bonus opportunities; (2) a material reduction in certain benefits to which he is contractually entitled; (3) any change to the CAIP, the Blizzard Holiday Plan or the Morhaime Profit Sharing Plan that materially reduces his opportunity to earn compensation under those plans, when taken as a whole; (4) any change to the Blizzard Profit Sharing Plan that materially reduces the aggregate compensation opportunities available to Blizzard’s employees under that plan; (5) a material default by us in paying or providing him with any compensation or benefits required or any material obligations owed to him under his previous employment agreement; (6) our termination without cause of any member of Blizzard’s management team; (7) a change in location of his primary place of employment to a location more than 15 miles from Blizzard’s existing office in Irvine, California; (8) a change in title that conveys lesser responsibility or lower status, or the imposition of any restriction or constraint upon him or the undertaking of any other act that materially diminishes his position, office, responsibility, duties or authority; (9) a change in his reporting structure and responsibilities as set forth in his previous employment
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agreement; (10) a change of control of Blizzard; or (11) subject to certain exceptions and limitations on his authority, our engaging in conduct with respect to the operations or activities of Blizzard that, taken individually or as a whole, prevent or materially interfere with him having authority, ability, accountability and control over the conduct of Blizzard’s strategic, operational and daily business activities, or otherwise prevent him from effectively acting as Blizzard’s chief executive officer; and
•
For Mr. Zacconi, subject to certain notice requirements and our right to cure: (1) a relocation which lasts longer than four consecutive weeks in any 12-month period of his principal place of business to a location outside of the “London Transport Zone One”; (2) our unilateral and material reduction of his total compensation below a specified minimum; (3) our material breach of his employment agreement; (4) a material reduction in either the scope of his role or authority or the level or status attached to his role; (5) a reduction in his total compensation following a change of control.
Upon a termination of the employment of one of our named executive officers by us without cause or by one of our named executive officers for good reason on December 31, 2016 (including, for Mr. Kotick, such a termination during the 12-month period following a change of control), that named executive officer would have received, in addition to any accrued obligations, the following:
(a) Mr. Kotick:
•
subject to his execution of an effective and irrevocable release, an amount equal to 200% of the sum of his base salary in effect on his termination date and his target annual bonus for 2016 (i.e., $4,727,210) (unless such termination had been during the 12-month period following a change of control, in which case the amount would have been equal to 300% of that sum), which amount would have been paid to him in equal installments over the 12-month period following his termination date;
•
subject to his execution of an effective and irrevocable release, continuation of health/medical insurance benefits for him and his then-current spouse and minor children for a period of two years following his termination date; and
•
continuation of his supplemental life insurance benefits via our reimbursement of the premiums in respect of his existing policy through its expiration on March 15, 2022 and, from March 16, 2022 through the tenth anniversary of his employment agreement (i.e., October 1, 2026), of up to $80,000 per year of premiums in respect of his then-existing policies;
(b) Mr. Durkin:
•
subject to his or his legal representative’s execution of an effective and irrevocable release, salary continuation through the expiration date of his employment agreement in an amount equal to 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period; and
•
subject to his or his legal representative’s execution of an effective and irrevocable release, continuation of health/medical insurance benefits for him and his then-current spouse and minor children for a period of one year following his termination date, provided that he does not become eligible for another company’s group health/medical insurance or coverage program, in which case he and his then-current spouse and minor children, as applicable, would cease to be eligible for continuation of health/medical insurance benefits;
(c) Mr. Tippl:
•
subject to his or his legal representative’s execution of an effective and irrevocable release, salary continuation through the expiration date of his employment agreement in an amount equal to 100% of the base salary that would have been payable to him during that period (Mr. Tippl would also have received these amounts if his employment had been terminated as a result of his loss of immigration status and legal ability to work for us in the United States, unless such loss resulted from his action or inaction);
(d) Mr. Morhaime:
•
a lump-sum payment equal to the sum of:
–
100% of the base salary (at the rate in effect on his termination date) payable to him for the two years following his termination date;
–
the sum of the following components for the two years following his termination date:
–
an amount equal to the actual annual bonus paid under each of the CAIP and Blizzard Holiday Plan for the year immediately preceding the year of termination; and
–
the value of his health/medical insurance, life insurance and disability insurance benefits based upon his coverage as of December 31, 2016;
–
200% of the actual annual bonus compensation paid to Mr. Morhaime under the Morhaime Profit Sharing Plan for the year immediately prior to termination; and
(e) Mr. Zacconi:
•
in
the event of a termination by us without cause, subject to his or his legal representative’s execution of a
release, salary continuation through the fourth anniversary of the effective date of his employment agreement (i.e., February
23, 2020) (whether or not such termination had been during a change of control period) in an amount equal to the sum of (i)
100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that
period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for him and his then-current
spouse and minor children, as applicable, during that period; and
•
in the event of a termination by him for good reason, subject to his or his legal representative’s execution of a release, salary continuation through the first anniversary of such termination date (unless such termination had been during a change of control period, in which case it would have continued until fourth anniversary of the effective date of his employment agreement) in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for him and his then-current spouse and minor children, as applicable, during that period.
The salary continuation payment in the table represents the amount Mr. Zacconi would have received had he been terminated without cause. Had he terminated his employment
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for
good reason (other than during a change of control period), the salary and benefit continuation would have been $500,059
(and, as such, the total amount he would have received would have been $33,312,180).
Any payment in respect of a bonus that any of our named executive officers would have received in connection with a termination by us without cause or by that named executive officer for good reason is discussed in footnote (1). The effects of a termination of the employment of one of our named executive officers by us without cause or by that named executive officer for good reason on outstanding equity awards and, in the case of Mr. Kotick other incentive awards, are discussed in footnote (7).
Pursuant to the terms of Mr. Durkin’s employment agreement, all payments and benefits to which he is otherwise entitled upon a termination by us without cause or by him for good reason, with the exception of the accrued obligations, would cease if he breaches the post-termination provisions of his employment agreement. Please see “—Employment Agreements—Dennis Durkin” above for a description of those obligations.
In addition, pursuant to the terms of each of Messrs. Durkin’s and Zacconi’s employment agreements, if he obtains any subsequent employment, any severance payable to him in the form of salary continuation would be offset by the amount of his salary from his then-current employer (which payments, for the purposes of this table, are assumed to be zero).
For Mr. Kotick, in the event of a change of control:
(a) As noted in footnotes (1) and (4), upon a termination by us without cause or by Mr. Kotick for good reason during the 12-month period following the effective date of that change of control, he would have received, in addition to any accrued obligations, the following:
•
subject to his execution of an effective and irrevocable release, a lump-sum payment equal to the annual bonus earned for the year in which the termination occurred, multiplied by a fraction, the numerator of which is the number of days worked during the year in which the termination occurred and the denominator of which is 365;
•
subject to his execution of an effective and irrevocable release, an amount equal to 300% of the sum of his base salary in effect on his termination date and his target annual bonus for 2016 (i.e., $4,727,210), which amount would have been paid to him in equal installments over the 12-month period following his termination date;
•
subject to his execution of an effective and irrevocable release, continuation of health/medical insurance benefits for him and his then-current spouse and minor children, as applicable, for a period of two years following his termination date; and
•
continuation of his supplemental life insurance benefits via our reimbursement of the premiums in respect of his existing policy through its expiration on March 15, 2022 and, from March 16, 2022 through the tenth anniversary of his employment agreement (i.e., October 1, 2026), of up to $80,000 per year of premiums in respect of his then-existing policies.
(b) As discussed in footnote (7), upon a termination by us without cause or by Mr. Kotick for good reason during the 12-month period following the effective date of that change of control, his unvested restricted share units (all of which have vesting tied to performance) would have immediately vested based upon, for each tranche, the greater of target and actual performance, as determined by the Compensation Committee immediately prior to the change of control, based upon the committee’s assessment of the projected performance through the end of the applicable period. The amounts shown represent the value of the restricted share units that would have vested upon Mr. Kotick’s termination, measured as the NASDAQ Official Closing Price of $36.11 per share of our Common Stock on December 30, 2016, assuming target performance for each tranche.
In addition, if there had been a change of control on December 31, 2016 (whether or not he was subsequently terminated), if the NASDAQ Official Closing Price of our Common Stock on the date of the change of control was greater than the exercise price of any of his vested stock options, Mr. Kotick would have had the right to forfeit those stock options in exchange for a cash payment equal in value to the number of shares of our Common Stock underlying those stock options multiplied by the amount that the NASDAQ Official Closing Price exceeded the exercise price of the stock options. For purposes of this table, no value is attributed to this provision of his employment agreement, as Mr. Kotick could have obtained the same value by exercising those stock options and selling the shares purchased upon exercise in the open market.
Other than as described in this footnote (5), Mr. Kotick’s termination following a change of control, whether or not in the 12-month period thereafter, would have no impact on his outstanding equity awards.
Upon a termination by us without cause or by Mr. Kotick for good reason during the 12-month period following the effective date of that change of control, as discussed in footnote (7), both of his long-term performance grants would have immediately vested based upon, for each tranche, the greater of target and actual performance, as determined by the Compensation Committee, in its discretion, immediately prior to the change of control, based upon the committee’s assessment of the projected performance through the end of the applicable period. For purposes of this table, no value is attributable to either grant, because of the discretion given to the Compensation Committee in the Kotick Employment Agreement with respect to the value of these awards and the targets relating thereto. Please see “—Employment Agreements—Robert A. Kotick” above.
(c) For purposes of Mr. Kotick’s employment agreement, a “change of control” is defined to include: (a) the acquisition of 25% or more of our outstanding voting stock; (b) the failure of the directors who constituted our Board as of the effective date of his employment agreement (i.e., October 1, 2016) (or replacements who are approved by a majority of such directors) to constitute a majority of our Board, other than as a result of (x) voluntary resignations or removals for good cause or (y) appointments as a result of an actual or threatened proxy contest; or (c) a consolidation, merger or sale of all or substantially all of our assets in which our stockholders immediately prior to such transaction do not retain in excess of 65% of the combined voting power of the corporation or other person or entity resulting from that transaction in substantially the same proportion as their ownership of the voting securities of Activision Blizzard immediately before the transaction.
For Mr. Zacconi, in the event of a change of control:
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(a)
As noted in footnote (4), upon a termination by us without cause or by him with good reason during a change of control
period, he would have received, subject to his or his legal representative’s execution of a release and in addition to
any accrued obligations, salary continuation through the fourth anniversary of the effective date of his employment agreement
(i.e., February 23, 2020), in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his
termination date) that would have been payable to him during that period and (ii) the cost we would have incurred providing
him health/medical insurance and retirement benefits during that period.
(b) As noted in footnote (7), in the event of a termination of his employment by us without cause during the change of control period:
•
his unvested stock options would have vested (as if the relevant performance conditions were met, but not exceeded) and would generally have remained exercisable for three months; and
•
his unvested restricted share units would have vested.
(c) For purposes of Mr. Zacconi’s employment agreement:
•
a “change of control” is defined to mean: our and our affiliates ceasing to control King, where “control” means the power of a person, whether directly or indirectly, to secure that the affairs of King are conducted in accordance of the wishes of that person, whether (i) by means of holding of shares, or the possession of voting power, in or in relation to King or (ii) as a result of any powers conferred by the articles of association or any other document regulating King; and
•
the “change of control period” is a period that begins on the date that falls three months prior to the execution and exchange of the agreement in relation to the transaction giving rise to a change of control and ends on the date that is 18 months after the completion of such transaction.
The
amounts shown represent the estimated cost to us for continuation of health/medical insurance benefits and, if applicable,
life insurance benefits for the required period, based on the cost to us of providing those benefits as of December 31, 2016.
Please see footnotes (2), (3), (4) and (5) for a description of the termination scenarios for which these amounts are
relevant. In place of the continuation of benefits, Mr. Zacconi’s employment agreement provides for an additional cash
severance payment equal to the cost we would have incurred from continuing to provide health/medical insurance and retirement
benefits. As such, these payments are included in the table above in the “salary and benefits continuation”
row.
The amounts shown represent the value of any restricted share units that would have vested upon termination, measured as the NASDAQ Official Closing Price of $36.11 per share of our Common Stock on December 30, 2016.
The outstanding equity awards that would have continued to vest in accordance with their vesting schedules do not have any additional value attributed to them in this table over the value based on the $36.11 stock price on December 30, 2016 because the market price of our Common Stock at the time of vesting cannot be determined.
Similarly, because of the discretion given to the Compensation Committee in the Kotick Employment Agreement with respect to the value of these awards and the targets relating thereto, no value is attributed to the continued vesting of Mr. Kotick’s long-term performance grants. Please see “—Employment Agreements—Robert A. Kotick” above for further information about these long-term performance grants.
The effects of termination as of December 31, 2016 on the outstanding equity and other incentive awards held by each named executive officer on that date and information with respect to the outstanding awards held by him (assuming target performance, in the case of all performance-based awards) are as follows:
(a) For Mr. Kotick, on the date of termination:
•
in the event of a termination of his employment due to death or disability, subject to, in the event of termination due to disability, his execution of an effective and irrevocable release:
–
his
stock options (all of which were vested) would have remained exercisable until their original expiration date; and
–
his unvested restricted share units (all of which have vesting tied to performance) would have remained outstanding and would have vested based on the actual attainment of the underlying performance targets, as if his employment had not been terminated;
•
in the event of a termination of his employment by us without cause or by Mr. Kotick for good reason, subject to his execution of an effective and irrevocable release:
–
his stock options (all of which were vested) would have remained exercisable until their original expiration date;
and
–
his unvested restricted share units (all of which have vesting tied to performance) would have remained outstanding and would have vested based on the actual attainment of the underlying performance targets, as if his employment had not been terminated (unless such termination had been during the 12-month period following a change of control, in which case they would have immediately vested based upon, for each tranche, the greater of target and actual performance);
•
in the event of a termination by us for cause:
–
his stock options would have been canceled; and
–
his unvested restricted share units would have been canceled; and
•
in the event of a termination for any other reason:
–
his stock options (all of which were vested) would have generally remained exercisable for 90 days; and
–
his unvested restricted share units would have been canceled.
For the effects of a change of control and any subsequent termination on Mr. Kotick’s outstanding equity and other incentive awards, see footnote (5).
As of December 31, 2016, the following equity awards made to Mr. Kotick were outstanding: (1) vested options to purchase 3,962,998 shares of our Common Stock; and (2) 605,327 restricted share units (all of which have vesting tied to performance). Please see “—Outstanding Equity Awards at December 31, 2016” above for further details about these awards. For more information on the equity awards and long-term incentive grants to be made to Mr. Kotick in the future, see “—Employment Agreements—Robert A. Kotick” above.
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(b) For Mr. Durkin:
•
in the event of a termination due to death, on the date of termination:
–
his stock options would have ceased to vest and, to the extent vested, would have generally remained exercisable for one year; and
–
his unvested restricted share units would have been canceled;
•
in the event of a termination by us for cause, on the date of termination:
–
his stock options, whether or not vested, would have been canceled; and
–
his unvested restricted share units would have been canceled; and
•
in the event of a termination for any other reason, on the date of termination:
–
his stock options would have ceased to vest and, to the extent vested, would have generally remained exercisable for 30 days; and
–
his unvested restricted share units would have been canceled.
As of December 31, 2016, the following equity awards made to Mr. Durkin were outstanding: (1) vested options to purchase 150,000 shares of our Common Stock; (2) unvested options to purchase 75,000 shares of our Common Stock; and (3) 177,500 unvested restricted share units (90,000 of which have vesting tied to performance). Please see “—Outstanding Equity Awards at December 31, 2016” above for further details about these awards.
(c) For Mr. Tippl:
•
in the event of a termination for any reason, on the date of termination, his unvested restricted share units would have been canceled.
As of December 31, 2016, the following equity awards made to Mr. Tippl were outstanding: 330,576 restricted share units (227,271 of which have vesting tied to performance). Please see “—Outstanding Equity Awards at December 31, 2016” above for further details about these awards.
(d) For Mr. Morhaime:
•
in the event of a termination due to death or disability, on the date of termination:
–
his stock options would have ceased to vest and, to the extent vested, would have generally remained exercisable for one year; and
–
his unvested restricted share units would have been canceled;
•
in the event of a termination by us for cause, on the date of termination:
–
his stock options, whether or not vested, would have been canceled; and
–
his unvested restricted share units would have been canceled; and
•
in the event of a termination for any other reason, on the date of termination:
–
his stock options would have ceased to vest and, to the extent vested, would have generally remained exercisable for 30 days; and
–
his unvested restricted share units would have been canceled.
As of December 31, 2016, the following equity awards made to Mr. Morhaime were outstanding: (1) unvested options to purchase 399,999 shares of our Common Stock; (2) vested options to purchase 250,000 shares of our Common Stock; and (3) 139,999 unvested restricted share units. Please see “—Outstanding Equity Awards at December 31, 2016” above for further details about these awards.
(e) For Mr. Zacconi:
•
in the event of a termination of his employment due to death or disability (including due to his mental incapacity), subject to his or his legal representative’s execution of a release:
–
his unvested stock options would have vested (as if the relevant performance conditions were met, but not exceeded) and would generally have remained exercisable for one year; and
–
his unvested restricted share units would have vested;
•
in the event of a termination of his employment by us without cause or by Mr. Zacconi for good reason (whether or not during a change of control period), subject to his or his legal representative’s execution of a release:
–
his unvested stock options would have vested (as if the relevant performance conditions were met, but not exceeded) and would generally have remained exercisable for three months; and
–
his unvested restricted share units would have vested;
•
in the event of a termination for cause, on the date of termination:
–
his stock options, whether or not vested, would been canceled; and
–
his unvested restricted share units would have been canceled; and
•
in the event of a termination for any other reason, on the date of termination:
–
his stock options would have ceased to vest and, to the extent vested, would have generally remained exercisable for three months; and
–
his unvested restricted share units would have been canceled.
For the effects of a change of control and any subsequent termination on Mr. Zacconi’s outstanding equity awards, see footnote (5).
As of December 31, 2016, the following equity awards made to Mr. Zacconi were outstanding: (1) unvested options to purchase 1,047,547 shares of our Common Stock (903,251 of which have vesting tied to performance); and (2) 63,342 unvested restricted share units. Please see “—Outstanding Equity Awards at December 31, 2016” above for further details about these awards.
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