Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On January 18, 2022, Activision Blizzard, Inc., a Delaware
corporation (the “Company” or “we”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with Microsoft Corporation (“Parent”), a Washington corporation, and Anchorage Merger Sub Inc. (“Merger Sub”),
a Delaware corporation and a wholly owned subsidiary of Parent.
The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company
surviving as a subsidiary of Parent. Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the
Merger (the “Effective Time”), each of the Company’s issued and outstanding shares of common stock, par value $0.000001
per share (the “Shares”) (other than Shares (i) held by the Company as treasury stock (excluding certain Shares held
by a wholly owned subsidiary of the Company, which shares will remain outstanding and unaffected by the Merger), (ii) owned by Parent
or Merger Sub, (iii) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub or (iv) held by stockholders
who have neither voted in favor of adoption of the Merger Agreement nor consented thereto in writing and who have properly and validly
exercised their statutory rights of appraisal in respect of such Shares in accordance with Section 262 of the Delaware General Corporation
Law, in each case immediately prior to the Effective Time), will be cancelled and automatically converted into the right to receive from
Parent $95.00 in cash per Share (the “Merger Consideration”), without interest.
In addition, at the Effective Time:
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Each option to purchase Shares granted pursuant to the Company’s equity incentive plans (each, a “Company Option”)
that (i) is vested as of immediately prior to the Effective Time or (ii) will become vested by its terms at the Effective Time
will be cancelled and converted into the right to receive the Merger Consideration for each Share that would have been issuable upon exercise
of such option immediately prior to the Effective Time, less the applicable option exercise price and any applicable withholding taxes.
In the event that the exercise price per Share under any option is equal to or greater than the Merger Consideration, such option shall
be cancelled as of the Effective Time without payment therefor and shall have no further force or effect.
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Each outstanding award of restricted stock units or performance restricted stock units granted pursuant to the Company’s equity
incentive plans (each, a “Company Stock-Based Award”) that (i) is vested as of immediately prior to the Effective Time,
(ii) will become vested by its terms at the Effective Time or (iii) is granted to a non-employee member of the Board of the
Company (“Company Board”), will, as of the Effective Time, be cancelled and converted into the right to receive the Merger
Consideration with respect to each Share subject to such Company Stock-Based Award, less any applicable withholding taxes.
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Each Company Option that is not cancelled and converted as described above (each, an “Assumed Company Option”) will, as
of the Effective Time, be, as determined by Parent (x) assumed by Parent and converted into a nonqualified stock option or (y) converted
into a nonqualified stock option granted pursuant to the Parent Stock Plan, in either case, in respect of a number of shares of common
stock of Parent equal to the product (rounded down to the nearest whole share) of (i) the number of Shares subject to such Assumed
Company Option as of immediately prior to the Effective Time (determined based on target performance levels, as applicable) multiplied
by (ii) a fraction (A) the numerator of which is the Merger Consideration and (B) the denominator of which is the Parent
Stock Price (i.e., the volume weighted average price per share of common stock of Parent on NASDAQ for the five consecutive trading days
ending with the last trading day ending immediately prior to the Closing Date) (such ratio, the “Exchange Ratio”), at an exercise
price per share of common stock of Parent equal to (i) the exercise price of such Company Option divided by (ii) the Exchange
Ratio (rounded up to the nearest whole cent).
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Each Company Stock-Based Award that is not cancelled and converted as described above (each, an “Assumed Company Stock-Based
Award”) will, as of the Effective Time, be, as determined by Parent (x) assumed by Parent and converted into a stock-based
award or (y) converted into a stock-based award pursuant to the Parent Stock Plan, in either case, subject to solely time-based vesting
and in respect of a number of shares of common stock of Parent equal to the product (rounded down to the nearest whole share) of (i) the
number of Shares subject to such Assumed Company Option as of immediately prior to the Effective Time (determined based on target performance
levels, as applicable) multiplied by the Exchange Ratio.
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The obligation of the parties to consummate the Merger is subject to
customary conditions, including, among others, (i) the approval and adoption of the Merger Agreement by the Company’s stockholders,
(ii) the absence of any court order or law prohibiting (or seeking to prohibit) the consummation of the Merger or which imposes or
seeks to impose a Burdensome Condition (as defined in the Merger Agreement), (iii) the early termination or expiration of any applicable
waiting period or periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) and specified approvals under certain
other antitrust and foreign investment laws without the imposition, individually or in the aggregate, of a Burdensome Condition, (iv) compliance
by Parent and the Company in all material respects with their respective obligations under the Merger Agreement, (v) subject to specified
exceptions and qualifications for materiality or Company Material Adverse Effect (as defined in the Merger Agreement), the accuracy of
representations and warranties made by the Company and Parent, respectively, as of the closing date of the Merger except as would not
have a Company Material Adverse Effect, and (vi) no Company Material Adverse Effect having occurred after the execution of the Merger
Agreement which is continuing.
The Merger Agreement contains various customary representations, warranties
and covenants, including, among others, covenants with respect to the conduct of the Company’s business prior to the Effective Time.
The Company has also agreed not to (a) solicit proposals relating
to alternative transactions or (b) enter into discussions or negotiations or provide non-public information in connection with any
proposal for an alternative transaction from a third party, subject to certain exceptions to permit the Company Board to comply with its
fiduciary obligations. The Company has also agreed to cease and cause to be terminated any existing discussions or negotiations, if any,
with regard to alternative transactions. However, subject to satisfaction of certain conditions and under the circumstances specified
in the Merger Agreement prior to the adoption of the Merger Agreement by the Company’s stockholders, the Company Board may change
its recommendation and may terminate the Merger Agreement in response to a bona fide alternative acquisition proposal that the Company
Board determines in good faith constitutes a Superior Proposal (as defined in the Merger Agreement), subject to customary match rights.
The Company Board may also change its recommendation in response to an Intervening Event (as defined in the Merger Agreement).
The Merger Agreement also contains customary termination provisions
for each of Parent and the Company. Upon termination of the Merger Agreement, (A) the Parent, under specified circumstances, including
termination pursuant to an injunction arising from Antitrust Laws when the Company is not then in material breach of any provision of
the Merger Agreement, will be required to pay the Company a termination fee of (i) if such termination notice is provided prior to
January 18, 2023, an amount equal to $2,000,000,000, (ii) if such termination notice is provided after January 18, 2023,
and prior to April 18, 2023, an amount equal to $2,500,000,000 or (iii) if such termination notice is provided at any time after
April 18, 2023, an amount equal to $3,000,000,000; and (B) the Company, under specified circumstances, including termination
of the Merger Agreement by the Company to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined
in the Merger Agreement) or by Parent upon a Company Board Recommendation Change (as defined in the Merger Agreement), will be required
to pay Parent a termination fee of $2,270,100,000. The Company Board has unanimously approved and adopted the Merger Agreement and recommended
that the Company’s stockholders vote in favor of adoption of the Merger Agreement.
The foregoing description of the Merger Agreement is not complete and
is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by
reference.
The Merger Agreement, and the foregoing description of the Merger Agreement,
have been included to provide investors and our stockholders with information regarding the terms of the Merger. The assertions embodied
in the representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement,
were solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed upon by the contracting parties,
including being qualified by information in a confidential disclosure letter provided by the Company to Parent in connection with the
signing of the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were made as of a specified
date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders, or may
have been used for the purpose of allocating risk between the parties to the Merger Agreement. Accordingly, the representations and warranties
in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts and circumstances about
the Company, Parent or Merger Sub at the time they were made or otherwise, and information in the Merger Agreement should be considered
in conjunction with the entirety of the factual disclosure about the Company in the Company’s public reports filed with the U.S.
Securities and Exchange Commission (the “SEC”). Information concerning the subject matter of the representations and warranties
may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s
public disclosures.