ZNGA Zynga Inc

Item 1.01. Entry into a Material Definitive Agreement.

On August 4, 2020, Zynga Inc., a Delaware corporation (“Zynga”), entered into a Share Sale and Purchase Agreement (the “Agreement”) with the shareholders (collectively, the “Sellers”) of Rollic Games Oyun Yazılım ve Pazarlama Anonim Şirketi (“Rollic”), pursuant to which Zynga will acquire (i) at closing, 80% of all issued and outstanding share capital of Rollic (the “Shares”) in exchange for consideration of $168 million in cash (the “Closing Consideration”), subject to adjustments and certain transaction expenses as set forth within the Agreement, and (ii) the remaining 20% of the Shares for additional consideration (the “Step-In Consideration”) during each of the three years following the closing (the “Step-In Period”) payable annually based upon the achievement of specified profitability metrics by Rollic, as set forth within the Agreement. The Closing Consideration will be increased by the amount of Rollic’s unrestricted cash, cash equivalents, accounts receivable, advances paid and pre-paid VAT and decreased by accounts payable (including unpaid transaction expenses), specified change of control fees and outstanding indebtedness. The Step-In Consideration will consist of at least 50% of each payment in cash and the remainder, at Zynga’s discretion, in cash and unregistered shares of Zynga’s Class A common stock (the “Zynga Stock”) based on the volume-weighted average closing price of the Zynga Stock during a 30 consecutive trading day period in advance of each payment. Following the end of the Step-In Period, Rollic will be a direct, wholly-owned subsidiary of Zynga. The closing is expected to occur on October 1, 2020, subject to satisfaction or waiver of specified conditions.

The Agreement is governed by and shall be construed in accordance with English law. The Agreement provides investors with information regarding its terms. The terms and information in the Agreement should not be relied on as factual disclosure about Zynga or Rollic without consideration of the periodic and current reports and other statements that Zynga files with the Securities and Exchange Commission (the “SEC”). The terms of the Agreement govern the contractual rights and relationships, and allocate risks, among the parties thereto in relation to the transaction. In particular, the Agreement contains customary warranties of each of Zynga and the Sellers. The warranties of each party set forth in the Agreement have been made solely for the benefit of the other parties to the Agreement, and such warranties should not be relied on by any other person. In addition, such warranties (1) have been qualified by a disclosure letter from the Sellers, (2) are subject to the materiality standards set forth in the Agreement, which may differ from what may be viewed as material by investors, (3) in certain cases, were made as of a specific date, and (4) may have been used for purposes of allocating risk between the respective parties rather than establishing matters of fact. Accordingly, no person should rely on the warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of the warranties may change after the date of the execution of the Agreement. Zynga does not undertake any obligation to publicly release any revisions to these warranties, except as required under U.S. federal or other applicable securities laws.

Pursuant to the Agreement, the Sellers have agreed to indemnify Zynga for losses related to specified matters, including, among other things, breaches or inaccuracies of warranties of the Sellers contained in the Agreement, specified tax matters, and for other customary matters. As security for such indemnification obligations, $16 million of the Closing Consideration otherwise payable to the Sellers has been deposited into an escrow fund.

The Agreement may be terminated upon material breach of certain provisions in the Agreement or if the closing has not occurred by October 31, 2020.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement. The Agreement is filed as Exhibit 2.1 hereto and incorporated herein by reference.