INTERESTS OF ZYNGA DIRECTORS AND EXECUTIVE OFFICERS IN THE COMBINATION
In considering the recommendations of the Zynga board of directors, Zynga stockholders should be aware that Zynga directors and executive officers may have interests in the combination, including financial interests, which may be different from, or in addition to, the interests of Zynga stockholders generally. These interests are described in more detail below and, with respect to Zynga’s executive officers, are quantified under “—Quantification of Payments and Benefits to Zynga Executive Officers.” The Zynga board of directors was aware of and considered these interests, among other matters, in reaching its determination that the combination is fair to and in the best interests of Zynga and its stockholders, approving and declaring advisable the merger agreement and the transactions contemplated thereby, including the combination, and recommending that Zynga stockholders approve the Zynga merger proposal. See the section titled “The Combination—Background of the Combination” and “The Combination—Zynga’s Reasons for the Combination and Recommendation of the Zynga Board of Directors.” The closing of the combination is expected to constitute a “change in control” (or similar phrase) for purposes of each of Zynga’s compensation plans and agreements, if applicable.
Executive Officers
Zynga’s “executive officers” are:
| • | Frank Gibeau, Chief Executive Officer |
| • | James Gerard Griffin, Chief Financial Officer |
| • | Bernard Kim, President of Publishing |
| • | Phuong Y. Phillips, Chief Legal Officer |
| • | Amy Rawlings, Chief Accounting Officer |
| • | Jeff Ryan, Chief People Officer |
| • | Matthew S. Bromberg, former Chief Operating Officer |
Mr. Gibeau, Mr. Griffin, Mr. Kim, Ms. Phillips, Mr. Ryan and Mr. Bromberg are considered Zynga’s “named executive officers” for purposes of this disclosure.
Mr. Bromberg resigned as Chief Operating Officer of Zynga on November 5, 2021, and served as a Senior Advisor through March 31, 2022. He is considered a named executive officer and included as an executive officer for purposes of this disclosure. Each of the numbers of shares covered by outstanding Zynga equity awards in the section titled “Treatment of Zynga Equity Awards” below exclude shares underlying portions of Zynga equity awards forfeited by Mr. Bromberg under the terms of his Transition Agreement and Release. For more information on this agreement, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Bromberg” below.
Share Ownership
Zynga’s directors and executive officers will receive the same merger consideration as other Zynga stockholders for each share of Zynga common stock that they own at the effective time of the combination. For information regarding beneficial ownership of Zynga common stock by each of Zynga’s current directors, named executive officers and all directors and executive officers as a group, see the section titled “Certain Beneficial Owners of Zynga Common Stock—Security Ownership of Zynga Directors and Executive Officers.”
Treatment of Zynga Equity Awards
Zynga Stock Options
As of March 31, 2022, there were outstanding awards of Zynga options to purchase an aggregate of 22,503,424 shares of common stock of Zynga (referred to as “Zynga options”), of which 20,887,100 shares were subject to
Zynga options held by Zynga’s executive officers. As of the same date, none of Zynga’s non-employee directors held any Zynga options. Pursuant to the merger agreement, at the effective time of the combination, each Zynga option that is outstanding and unexercised as of immediately prior to the effective time will be assumed and converted automatically into an option to acquire a number of shares of Take-Two common stock under the Take-Two 2017 Stock Incentive Plan (referred to as the “Take-Two equity plan”) equal to the product of the aggregate number of shares of Zynga common stock subject to such Zynga option as of immediately prior to the effective time of the combination, multiplied by the equity award exchange ratio (with any resulting fractional share rounded down to the nearest whole share), with a per share exercise price equal to the quotient determined as the per share exercise price of the Zynga option as of immediately prior to the effective time of the combination, divided by the equity award exchange ratio (with any resulting fractional cent rounded up to the nearest whole cent). Other than as described in the immediately preceding sentence, each such Take-Two option generally will be subject to the same terms and conditions as applied to the corresponding Zynga option immediately prior to the effective time of the combination.
The individual award agreements for the Zynga options granted to Zynga’s executive officers do not provide for accelerated vesting in the event of a change in control or a termination of employment. For information on accelerated vesting of Zynga options in the event of a termination of employment, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers” below.
Zynga Restricted Stock Units
As of March 31, 2022, there were outstanding awards of Zynga restricted stock units (referred to as “Zynga RSUs”) covering an aggregate of 68,591,121 shares of Zynga common stock, of which 54,000 shares were subject to Zynga RSUs held by Zynga’s non-employee directors and 6,177,753 shares were subject to Zynga RSUs held by Zynga’s executive officers (including any awards previously granted subject to performance goals for which performance has been achieved, and remain subject to vesting based only on continued service). Pursuant to the merger agreement, at the effective time of the combination, each Zynga RSU that is outstanding as of immediately prior to the effective time of the combination will be assumed by Take-Two and converted automatically into an award of Take-Two restricted share units under the Take-Two equity plan covering a number of shares of Take-Two common stock equal to the product of the number of shares of Zynga common stock subject to the Zynga RSU as of immediately prior to the effective time of the combination, multiplied by the equity award exchange ratio (with any resulting fractional share rounded down to the nearest whole share). Other than as described in the immediately preceding sentence, each such award of Take-Two restricted share units generally will be subject to the same terms and conditions as applied to the corresponding Zynga RSUs immediately prior to the effective time of the combination.
As part of its annual compensation review cycle, Zynga granted awards of RSUs and PSUs to its executive officers in 2022. These awards contain limited severance benefits, and are described below. For more information on Zynga’s practices with respect to annual equity awards to its named executive officers for 2021, please see the “Executive Compensation - Compensation Discussion and Analysis” discussion in Zynga’s Annual Report on Form 10-K, and Amendment No. 1 filed April 4, 2022.
2022 RSUs. On March 15, 2022, each of Mr. Griffin, Mr. Kim, Ms. Phillips, Mr. Ryan and Ms. Rawlings received grants of Zynga RSUs covering 193,798 shares, 290,697 shares, 149,501 shares, 138,427 shares, and 41,528 shares, respectively, and on April 1, 2022, Mr. Gibeau received an award of Zynga RSUs covering 304,540 shares, under Zynga’s 2011 Equity Incentive Plan and subject to the terms of an award agreement thereunder to be entered into between the Zynga executive officer and Zynga. Vesting of such awards is subject to continued service. If the employment of the Zynga executive officer is terminated by Zynga without cause (and other than due to the Zynga executive officer’s death or disability), or is terminated by such individual for good reason, then subject to the Zynga executive officer agreeing to a release of claims in favor of Zynga, the vesting of 1/16th of these Zynga RSUs granted to such Zynga executive officer will accelerate. These Zynga RSUs granted to the Zynga executive officers on March 15 or April 1, 2022 (as applicable), are ineligible to receive any vesting acceleration under any offer letter of the Zynga executive officer or any Zynga Inc. Change in Control Severance Benefit Plan. At the effective time of the combination, these Zynga RSUs that are
outstanding as of immediately prior to the effective time of the combination will be treated in the same manner as the Zynga RSUs described in the immediately preceding paragraph.
Except for the Zynga RSUs granted to Zynga’s executive officers on March 15, 2022, or in the case of Mr. Gibeau, on April 1, 2022, as described above, the individual award agreements for the Zynga RSUs granted to Zynga’s executive officers do not provide for accelerated vesting in the event of a change in control or a termination of employment. For information on accelerated vesting of Zynga RSUs in the event of a termination of employment, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers” below.
Zynga Performance-Based Restricted Stock Units
As of March 31, 2022, there were outstanding awards of Zynga restricted stock units the vesting of which is conditioned in whole or in part on satisfaction of performance criteria (referred to as “Zynga PSUs”) covering an aggregate of 3,711,861 shares of Zynga common stock (at target performance, or 5,131,748 shares at maximum performance), of which Zynga PSUs covering an aggregate of 2,535,243 shares of Zynga common stock (at target performance, or 3,802,863 shares at maximum performance) were held by Zynga’s executive officers. As of the same date, none of Zynga’s non-employee directors held any Zynga restricted stock units that were granted as Zynga PSUs. Pursuant to the merger agreement, at the effective time of the combination, each Zynga PSU that is outstanding as of immediately prior to the effective time of the combination (and provided that any such award that as of immediately prior to the effective time no longer is subject to performance criteria shall be subject to the treatment described in the immediately preceding section above for Zynga RSUs), will be assumed by Take-Two and converted automatically into an award of Take-Two restricted share units under the Take-Two equity plan covering a number of shares of Take-Two common stock equal to the product of the number of shares of Zynga common stock subject to the award of Zynga PSUs, as determined in accordance with the requirements of the applicable Zynga PSU award agreement, multiplied by the equity award exchange ratio (with any resulting fractional share rounded down to the nearest whole share). Other than as described in the immediately preceding sentence, each such award of Take-Two restricted share units generally will be subject to the same terms and conditions as applied the corresponding Zynga PSUs immediately prior to the effective time of the combination.
Relative Total Stockholder Return Zynga PSUs. Each of Mr. Gibeau, Mr. Griffin, and Mr. Kim holds an outstanding Zynga PSU granted on March 15, 2020, under Zynga’s 2011 Equity Incentive Plan and subject to an award agreement thereunder entered into between the Zynga executive officer and Zynga. Vesting of such awards is subject to both continued service and achievement of pre-established performance criteria relating to Zynga’s relative total stockholder return compared to the S&P MidCap 400 Index of the S&P Dow Jones U.S. equity indices (or “rTSR”). Each such Zynga PSU is outstanding with respect to 1/2 of the target number of shares underlying the award at grant, which portion of the award remains subject to Zynga’s rTSR achievement to be measured over the performance period that began on the Zynga PSU’s grant date and is scheduled to end on December 31, 2022. The other 1/2 of each such Zynga PSU was forfeited based on Zynga’s rTSR achievement measured over the performance period that began on the Zynga PSU’s grant date and ended on December 31, 2021. Under the terms of these awards, if a change in control of Zynga occurs during the performance period for the Zynga PSU (or a portion thereof), then that performance period will be shortened to end within the 15-day period ending with the expected date of the change in control of Zynga (as determined by the administrator of the plan). The rTSR performance will be measured over such shortened performance period, with Zynga’s total stockholder return calculated based on the amount of cash consideration and value of securities or other consideration received by Zynga’s stockholders in such change in control. Any portion of such remaining Zynga PSUs that becomes eligible to vest based on actual performance will be scheduled to vest in 3 equal installments on each of the 3-, 4-, and 5-year anniversaries of the awards’ grant date, subject to the Zynga executive officer remaining in continuous service through the applicable vesting date, and, at the effective time of the combination, will be treated in the same manner as Zynga RSUs described further above under the section titled “Zynga Restricted Stock Units.” Any portion of such awards that does not become eligible to vest based on rTSR achievement will be forfeited and will not be eligible to be assumed and converted into Take-Two restricted share units in connection with the combination.
Treatment in Connection with Involuntary Termination. Except for the Zynga PSUs granted to the Zynga executive officers in 2022 as described further below, with respect to each of the Zynga executive officers’ awards that had been granted as Zynga PSUs, if, other than during the period beginning 3 months before, through 18 months following, a change in control of Zynga, the Zynga executive officer’s employment is terminated by Zynga without cause (and other than due to the Zynga executive officer’s death or disability) or by the Zynga executive officer for good reason, vesting will accelerate with respect to (i) any portion of the award for which performance conditions are satisfied and for which the service conditions would be met within 1 year of the holder’s termination of employment, or (ii) with respect to the Zynga PSUs subject to the rTSR performance goal, 1/3rd of the portion of the award for which the performance conditions are satisfied.
If during the period beginning 3 months before, through 18 months following, a change in control of Zynga, the Zynga executive officer’s employment is terminated by Zynga without cause (and other than due to the Zynga executive officer’s death or disability) or by the Zynga executive officer for good reason, then for awards granted as Zynga PSUs other than those granted to any Zynga executive officers in 2022, vesting will accelerate with respect to the entire portion of the award for which performance conditions are satisfied.
The vesting acceleration with respect to such awards is conditioned on the Zynga executive officer entering into and not revoking a separation agreement and release of claims in favor of Zynga.
2022 Operating Cash Flow PSUs. On March 15, 2022, each of Mr. Griffin, Mr. Kim, Ms. Phillips, and Mr. Ryan received grants of Zynga PSUs covering 193,798 shares, 290,697 shares, 149,501 shares and 138,427 shares, respectively (assuming performance achievement at target levels, or 150% of such target number of shares assuming maximum achievement), and on April 1, 2022, Mr. Gibeau received a Zynga PSU award covering 304,540 shares (assuming performance achievement at target levels, or 150% of such target number of shares assuming maximum achievement), under Zynga’s 2011 Equity Incentive Plan and subject to the terms of an award agreement thereunder to be entered into between the Zynga executive officer and Zynga (referred to as the “Zynga 2022 OCF PSUs”). Vesting of such awards is subject to both continued service and achievement of pre-established performance criteria relating to Zynga’s operating cash flow for 2022. Under the terms of these awards, if a change in control of Zynga occurs during the performance period for these Zynga PSUs (other than due to the combination), then that performance period will be shortened to end on the date determined by the administrator of the plan in its discretion. In this case, operating cash flow performance will be measured over such shortened performance period, with the operating cash flow goals prorated for the percentage of the performance period completed through the end of the shortened period. If a change in control of Zynga occurs during the performance period for these Zynga PSUs as a result of the combination, then Zynga’s performance against the operating cash flow goal will be deemed satisfied at the target level. Any portion of these Zynga PSUs that becomes eligible to vest based on such actual or deemed performance will be scheduled to vest as to 1/4th of the earned Zynga common shares on the one-year anniversary of the vesting commencement date, and as to 1/16th of the earned shares each three (3) months thereafter, in each case, subject to the Zynga executive officer remaining in continuous service through the applicable vesting date. If the employment of the Zynga executive officer is terminated by Zynga without cause (and other than due to the Zynga executive officer’s death or disability), or is terminated by such individual for good reason, then subject to the Zynga executive officer agreeing to a release of claims in favor of Zynga, the next portion of these Zynga PSUs which would have otherwise been scheduled to vest will accelerate (which amount would be equal to 1/4th of the total shares for such involuntary termination of employment that occurs prior to March 15, 2023). At the effective time of the combination, any portion of these Zynga PSUs that has become eligible to vest based on actual or deemed performance, as applicable, will be treated in the same manner as Zynga RSUs described further above under the section titled “Zynga Restricted Stock Units.” Any portion of such awards that does not become eligible to vest based on actual or deemed operating cash flow achievement, as applicable, will be forfeited and will not be eligible to be assumed and converted into Take-Two restricted share units in connection with the combination.
2022 CEO PSU. On April 1, 2022, Mr. Gibeau received a grant of Zynga PSUs covering 221,483 shares (assuming performance achievement at target levels, or 150% of such target number of shares assuming maximum achievement), under Zynga’s 2011 Equity Incentive Plan and subject to the terms of an award
agreement thereunder to be entered into between the Zynga executive officer and Zynga (referred to as the “Zynga 2022 CEO PSUs”). Vesting of such award is subject to both continued service and achievement of pre-established performance criteria relating to Zynga’s bookings and adjusted EBITDA (internal) for 2022. Under the terms of this award, the performance period and criteria would not be affected by a change in control of Zynga which occurs during the performance period. Any portion of this Zynga PSU that becomes eligible to vest based on such actual performance will be scheduled to vest as to 1/4th of the earned Zynga common shares on the one-year anniversary of the vesting commencement date, and as to 1/16th of the earned shares each three (3) months thereafter, in each case, subject to the Zynga executive officer remaining in continuous service through the applicable vesting date. If the employment of the Zynga executive officer is terminated by Zynga without cause (and other than due to the Zynga executive officer’s death or disability), or is terminated by such individual for good reason, then subject to the Zynga executive officer agreeing to a release of claims in favor of Zynga, the next portion of this award which would have otherwise been scheduled to vest will accelerate (which amount would be equal to 1/4th of the total shares for such involuntary termination prior to March 15, 2023). At the effective time of the combination, any earned portion of these Zynga PSUs will be treated in the same manner as Zynga RSUs described further above under the section titled “Zynga Restricted Stock Units.”
Zynga PSUs for Which the Performance Period Already Has Concluded. Each of Mr. Gibeau, Mr. Griffin, Mr. Kim, Ms. Phillips, Mr. Ryan and Mr. Bromberg holds certain outstanding awards that were granted as Zynga PSUs and that required achievement of performance goals over performance periods that already have concluded. Any portion of such outstanding awards that became eligible to vest due to actual performance achievement vested or remains scheduled to vest based on continued service through specified vesting dates, and any remaining portion that had not met the requisite performance was forfeited and no longer is outstanding. These outstanding awards are eligible for the vesting acceleration described further above under the section titled “Zynga Performance-Based Restricted Stock Units—Treatment in Connection with Involuntary Termination.” These outstanding awards (or portions thereof) will be treated in the same manner as Zynga RSUs described further above under the section titled “Zynga Restricted Stock Units.”
For purposes of such awards, the following definitions are used:
| • | Cause (other than as such term is used in the Zynga RSUs and Zynga PSUs granted to Mr. Gibeau on April 1, 2022) generally means: (i) any willful, material violation by the Zynga executive officer of any law or regulation applicable to Zynga’s business; (ii) conviction for, or plea of no contest to, a felony or a crime involving moral turpitude; (iii) commission of an act of personal dishonesty intended to result in substantial personal enrichment (excluding inadvertent acts that are promptly cured following notice); (iv) continued material violations of lawful and reasonable duties of employment (including, but not limited to, compliance with material written policies of the Company and material written agreements with the Company), which violations are demonstrably willful and deliberate and that the Zynga executive officer has failed to cure within a prescribed cure period; (v) willful failure (other than due to physical incapacity) to cooperate with an investigation by a governmental authority or Zynga of Zynga’s business or financial condition; (vi) any other willful misconduct or gross negligence that is materially injurious to the financial condition or business reputation of Zynga; or (vii) a material breach of fiduciary duty to Zynga. |
| • | Cause, as such term is used in the Zynga RSUs and Zynga PSUs granted to Mr. Gibeau on April 1, 2022, generally means (i) any willful, material violation of any law or regulation applicable to the business of Zynga; (ii) conviction for, or plea of no contest to, a felony or a crime involving moral turpitude; (ii) commission of an act of personal dishonesty intended to result in the Zynga executive officer’s substantial personal enrichment (excluding inadvertent acts that are promptly cured); (iii) continued material violations of lawful and reasonable duties of employment (including, but not limited to, compliance with material written policies of Zynga and material written agreements with Zynga), which violations are demonstrably willful and deliberate on the Zynga executive officer’s part (after Zynga’s written demand for performance and the Zynga executive officer’s failure to cure); |
| (iv) willful failure (other than due to physical incapacity) to cooperate with an investigation by a governmental authority or Zynga of its business or financial condition; (v) any other willful misconduct or gross negligence that is materially injurious to the financial condition or business reputation of Zynga; or (vi) a material breach of the Zynga executive officer’s fiduciary duty to Zynga. |
| • | Good reason generally means voluntary separation from employment with Zynga after one or more of the following that is undertaken without the Zynga executive officer’s written consent: (i) the assignment to the Zynga executive officer of any authority, duties or responsibilities or the reduction of authority, duties or responsibilities, either of which results in a material diminution in authority, duties or responsibilities as in effect immediately prior to Zynga’s change in control (for example, but not by way of limitation, the Zynga executive officer (a) ceasing to be an “officer” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) who is required to make filings under Section 16(a)(1) of the Securities Exchange Act of 1934, as amended, or (b) not having the same authority, duties or responsibilities with respect to the combined entity following Zynga’s change in control); (ii) the Zynga executive officer being required to report to any individual or board of directors other than the principal executive officer or board of directors of the ultimate parent of the entity that controls Zynga’s assets and/or business, except that if the Zynga executive officer, as of immediately prior to Zynga’s change in control, did not previously report to the principal executive officer of Zynga or the Zynga Board, this clause (ii) will be triggered by a material diminution in the authority, duties or responsibilities of the supervisor to whom the Zynga executive officer reports, as compared to immediately prior to the Zynga change in control; (iii) a material reduction by Zynga in annual base salary or target annual bonus as in effect immediately prior to the Zynga change in control other than a 1-time reduction of 15% or less that is applicable to substantially all other similarly-situated executives; or (iv) a non-temporary relocation of the principal work location office to a location that increases the one way commute from the Zynga executive officer’s principal residence by more than 35 miles as compared to the principal location at which the Zynga executive officer performs duties as of immediately prior to the Zynga change in control. To qualify as good reason, the Zynga executive officer must provide written notice within a 60-day period following when the Zynga executive officer knew or should know of the initial existence of the condition triggering good reason, provide Zynga with a 30-day cure period after which the condition has remained uncured and resign within 60 days after the expiration of the cure period. |
The closing of the combination will constitute a change in control of Zynga for purposes of each of the awards granted as Zynga PSUs and held by Zynga’s executive officers.
Treatment of Zynga’s ESPP
With respect to the Zynga ESPP, the merger agreement provides for Zynga to take all actions necessary or required to ensure that (i) no new offering period under the Zynga ESPP is authorized or commenced on or after the date of the merger agreement, (ii) any current offering period under the Zynga ESPP will expire in accordance with its terms (but no later than immediately prior to the effective time of the combination), (iii) any current offering period is shortened and adjusted to give effect to any earlier termination as previously described, which adjusted offering period will be treated as a fully effective and completed offering period under the Zynga ESPP, (iv) each Zynga ESPP participant’s accumulated contributions under the Zynga ESPP will be used to purchase shares of Zynga common stock as of the end of the current offering period, referred to as the “final exercise date,” as shortened as necessary as previously described, and (v) the Zynga ESPP will terminate in its entirety at the effective time of the combination.
New Compensation Arrangements with Take-Two
Any Zynga executive officers and directors who become officers, directors or employees or who otherwise are retained to provide services to Take-Two or the surviving corporation may enter into new individualized
compensation arrangements and may participate in cash or equity incentive or other benefit plans maintained by Take-Two. As of the date of this joint proxy statement/prospectus, no compensation arrangements between such persons and Take-Two and/or its affiliates have been established.
Employee Benefit Matters
The merger agreement provides that for a period of 1 year following the closing date of the combination, or the “continuation period,” Take-Two, the surviving corporation or their respective subsidiaries will provide continuing employees with employee benefits that are substantially comparable in the aggregate to either, at the election of Take-Two: (i) participation in Take-Two’s employee benefit plans and programs (excluding any equity, equity-based incentive plan and defined benefit plan) to the same extent as similarly situated employees of Take-Two or its subsidiaries, or (ii) continued participation in employee benefit plans, programs and policies of Zynga and its subsidiaries which provide benefits that are no less favorable in the aggregate to the benefits (excluding equity or equity-based compensation) provided to such continuing Zynga employees under Zynga’s employee benefit plans as of immediately prior to the closing date of the combination.
Any continuing Zynga employee whose employment is terminated without cause during the continuation period (other than an employee who is party to an individual contract which provides for the payment of severance), will be entitled to cash severance benefits that are no less favorable, and welfare benefits that are no less favorable in the aggregate, than the cash severance benefits and welfare benefits, respectively, determined in accordance with the terms of Zynga’s separation guidelines, effective as of March 2020, subject to such employee providing a timely and effective release of claims in favor of Take-Two and its affiliates. Following the closing, Take-Two will assume and honor Zynga’s Change in Control Severance Benefit Plan in accordance with its terms.
For purposes of post-closing benefit plans in which a Zynga continuing employee first becomes eligible to participate on or after the effective time of the combination, or a “New Plan,” each continuing Zynga employee will receive full credit for the years of continuous service recognized by Zynga or its subsidiaries prior to the effective time of the combination as if it were service with Take-Two for purposes of (i) satisfying service requirements for eligibility to participate in a New Plan, (ii) vesting in any benefits under a New Plan, and (iii) calculating the level of benefits with respect to severance, non-statutory vacation, personal days off and any other non-statutory welfare-type benefits where service is a factor in calculating benefits (other than with respect to defined benefit pension plans, benefit accrual, equity or equity-based incentives, or otherwise where such credit would result in a duplication of benefits or where service was not recognized under the corresponding Zynga plan). With respect to any New Plan that is a welfare benefit plan, Take-Two will use reasonable best efforts to (i) cause any waiting periods, eligibility requirements, pre-existing condition limitations, physical examination requirements, evidence of insurability requirements, actively-at-work or similar requirements to be waived, except to the extent such requirements or conditions would apply under the analogous Zynga benefit plan as of immediately prior to the effective time of the combination, and (ii) give effect, in determining any deductibles, co-pay, co-insurance, or maximum out of pocket limitations, to amounts paid by such continuing Zynga employees prior to the effective time of the combination under a Zynga benefit plan in which any continuing Zynga employee was a participant as of immediately prior to the effective time of the combination (to the same extent that such credit was given under such Zynga benefit plan prior to the effective time of the combination) in satisfying such requirements during the plan year in which the effective time of the combination occurs.
Zynga Change in Control and Severance Arrangements with Executive Officers
Each of Zynga’s executive officers is party to an offer letter with Zynga. In addition, each of Zynga’s executive officers, other than Mr. Gibeau, is a participant in the Zynga Inc. Change in Control Severance Benefit Plan (or the “Zynga Change in Control Severance Plan”). These offer letters and the Zynga Change in Control Severance Plan provide for certain benefits in the event of termination of employment under qualifying circumstances.
Mr. Gibeau
Termination Without a Change in Control
Pursuant to the offer letter between Zynga and Mr. Gibeau, if other than during the 3 month period immediately preceding Zynga’s change in control or the 18-month period following Zynga’s change in control, (i) Zynga terminates Mr. Gibeau’s employment without cause or due to his death or disability, or (ii) Mr. Gibeau resigns in a constructive termination, then Zynga will provide Mr. Gibeau the following severance benefits:
| • | a lump sum cash payment equal to 1.0 times Mr. Gibeau’s annual salary plus his target bonus for the year in which the termination occurred, with such bonus prorated for the number of days such executive officer worked for Zynga in such year, |
| • | accelerated vesting of the executive officer’s equity awards (other than the awards granted to Mr. Gibeau as Zynga PSUs, which, by their terms, are excluded from this acceleration) that would have vested in the 1-year period following the termination, and |
| • | in the event of a termination without cause or resignation in a constructive termination, company-paid premiums for continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (or “COBRA”) for up to 12 months following termination. |
Change in Control
The offer letter between Zynga and Mr. Gibeau provides that if Mr. Gibeau remains employed by Zynga up to the time immediately prior to Zynga’s change in control, Zynga will provide Mr. Gibeau with vesting acceleration as to 25% of any Zynga stock options, Zynga RSUs or other Zynga equity awards that are unvested and outstanding immediately prior to Zynga’s change in control (other than awards granted to Mr. Gibeau as Zynga PSUs, which, by their terms, are excluded from this acceleration).
Termination with a Change in Control
Mr. Gibeau’s offer letter provides that (i) if Zynga terminates Mr. Gibeau’s employment without cause (and other than due to his death or disability) or (ii) if Mr. Gibeau resigns in a constructive termination, in either case during the 3 month period immediately preceding Zynga’s change in control or the 18-month period following Zynga’s change in control, then Zynga will provide Mr. Gibeau the following severance benefits:
| • | a lump sum cash payment equal to 2.0 times the sum of Mr. Gibeau’s annual base salary and his target bonus for the fiscal year in which the termination occurs; |
| • | a lump sum cash payment equal to Mr. Gibeau’s target bonus for the year in which the termination occurs, with such bonus prorated for the number of days Mr. Gibeau worked for Zynga in such year; |
| • | accelerated vesting of Mr. Gibeau’s equity awards (other than any awards granted as Zynga PSUs, which, by their terms, are excluded from this acceleration); and |
| • | COBRA premiums for up to 18 months following termination. |
The severance benefits under the offer letter are subject to Mr. Gibeau’s execution and non-revocation of a release of claims in favor of Zynga and his continued compliance with certain restrictive covenants, including covenants relating to confidentiality, invention assignment, non-solicitation of customers and vendors using confidential information of Zynga for an indefinite period and non-solicitation of employees and consultants that apply for a period of one (1) year after termination of employment.
For purposes of Mr. Gibeau’s offer letter, the following definitions are used:
| • | Cause generally means: (i) any willful, material violation of any law or regulation applicable to the business, conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration of a common law fraud; (ii) commission of an act of personal dishonesty that involves |
| material personal profit in connection with Zynga or any other entity having a business relationship with Zynga; (iii) any material breach of any provision of any agreement or understanding between Zynga and the Zynga executive officer regarding the terms of service as an employee, officer, director, or consultant to Zynga, including without limitation, the willful and continued failure or refusal to perform the material lawful and reasonable duties required of an employee, officer, director or consultant of Zynga, other than due to disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement with Zynga; (iv) willful disregard of a material policy of Zynga so as to cause material loss, damage, or injury to the property, reputation, or employees of Zynga; or (v) any other willful misconduct that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, Zynga. |
| • | Constructive termination generally means a voluntary separation from employment with Zynga after one of the following is undertaken without the Zynga executive officer’s written consent: (i) the assignment of any authority, duties or responsibilities or the reduction of authority, duties or responsibilities, either of which results in a material diminution of the Zynga executive officer’s authority, duties or responsibilities (for example, but not by way of limitation, the Zynga executive officer (a) ceasing to be an “officer” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) who is required to make filings under Section 16(a)(1) of the Securities Exchange Act of 1934, as amended, or (b) not having the same authority, duties or responsibilities with respect to the combined entity following Zynga’s change in control); (ii) the Zynga executive officer being required to report to any individual or entity other than the board of directors of the ultimate parent of the entity that controls Zynga’s assets and/or business; (iii) a material reduction in annual base salary or target annual bonus as in effect immediately prior to such action or actions other than a 1-time reduction of 15% or less that is applicable to substantially all other similarly-situated executives; or (iv) a non-temporary relocation of the Zynga executive officer’s principal work location office to a location that increases the one way commute from the principal residence by more than 35 miles. To qualify as constructive termination, the Zynga executive officer must provide written notice within a 60-day period following when the Zynga executive officer knew or should know of the initial existence of the condition triggering constructive termination, provide Zynga with a 30-day cure period after which the condition has remained uncured and resign within 60 days after the expiration of the cure period. |
The closing of the combination will constitute a change in control of Zynga under Mr. Gibeau’s offer letter. If the severance payments constitute an “excess parachute payment” within the meaning of Section 280G of the Code, they will be reduced if and to the extent that such reduction results in a greater after-tax benefit to Mr. Gibeau.
Mr. Griffin, Mr. Kim, Ms. Phillips, Ms. Rawlings and Mr. Ryan
Termination Without a Change in Control
Pursuant to the offer letters entered into by and between Zynga and each of Mr. Griffin, Mr. Kim, Ms. Phillips and Mr. Ryan, if (i) Zynga terminates the officer’s employment without cause, or (ii) the Zynga executive officer resigns in a constructive termination, then Zynga will provide such Zynga executive officer the following severance benefits:
| • | a lump sum cash payment equal to 1.0 times the Zynga executive officer’s annual salary, |
| • | a lump sum cash payment equal to the Zynga executive officer’s target bonus for the year in which the termination occurred, with such bonus prorated for the number of days such Zynga executive officer worked for Zynga in such year, |
| • | accelerated vesting of the Zynga executive officer’s initial time-based RSU and stock option awards that would have vested in the 1-year period following the termination (other than any awards granted as Zynga PSUs, which, by their terms, are excluded from this acceleration), and |
| • | COBRA premiums for up to 12 months following termination. |
The severance benefits payable under such offer letters are subject to the Zynga executive officer’s execution and non-revocation of a release of claims in favor of Zynga and such Zynga executive officer’s continued compliance with certain restrictive covenants, including covenants relating to confidentiality, invention assignment, non-solicitation of customers and vendors using confidential information of Zynga for an indefinite period, and non-solicitation of employees and consultants that apply for a period of one (1) year after termination of employment.
For purposes of these offer letters, the following definitions are used:
| • | Cause generally means: (i) any willful, material violation of any law or regulation applicable to the business, conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration of a common law fraud; (ii) commission of an act of personal dishonesty that involves material personal profit in connection with Zynga or any other entity having a business relationship with Zynga; (iii) any material breach of any provision of any agreement between Zynga and the Zynga executive officer regarding the terms of service as an employee, officer, director, or consultant to Zynga, including without limitation, the willful and continued failure or refusal to perform the material duties required of an employee, officer, director or consultant of Zynga, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between Zynga and the Zynga executive officer; (iv) willful disregard of a material Zynga policy so as to cause material loss, damage, or injury to the property, reputation, or employees of Zynga; or (v) any other misconduct that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to Zynga. |
| • | Constructive termination generally means voluntary separation from employment with Zynga by the Zynga executive officer after one of the following is undertaken without the Zynga executive officer’s written consent: (i) the assignment of any duties or responsibilities that results in a material diminution in the Zynga executive officer’s employment role as in effect immediately prior to the date of such actions; or (ii) a non-temporary relocation of the Zynga executive officer’s business office to a location that increases the one way commute by more than 35 miles. To qualify as constructive termination, the Zynga executive officer must provide written notice within a 30-day period following the initial existence of the condition triggering constructive termination, provide Zynga with a 30-day cure period after which the condition has remained uncured and resign within 90 days after the expiration of the cure period. |
If the severance payments constitute an “excess parachute payment” within the meaning of Section 280G of the Code, they will be reduced if and to the extent that such reduction results in a greater after-tax benefit to the officer.
The awards granted as Zynga PSUs to Zynga’s executive officers are not eligible for the vesting acceleration severance under the above offer letters and instead contain specific provisions that condition accelerated vesting (if any) on actual performance versus Zynga’s pre-established performance goal. For more information on accelerated vesting of these Zynga PSUs, see the section titled “Treatment of Zynga Equity Awards — Zynga Performance-Based Restricted Stock Units” above.
Termination with a Change in Control
Each of Zynga’s executive officers, other than Mr. Gibeau, is a participant in the Zynga Change in Control Severance Plan. Upon a change in control of Zynga, Zynga will provide to such Zynga executive officer who is a then-current participant and incurs a qualifying termination (meaning any termination by Zynga other than for cause or any voluntary termination with good reason, in each case as defined in the Zynga Change in Control Severance Plan) during the period beginning 3 months before, through 18 months after, Zynga’s change in control (the “CIC Period”):
| • | a lump sum cash payment equal to 1.0 times the officer’s annual salary in effect at termination or if greater, as in effect the day before the start of the CIC Period; |
| • | a lump sum cash payment equal to 1.0 times the officer’s target bonus in effect at termination or if greater, in effect for the most recent bonus period that began before Zynga’s change in control that was established for the officer; |
| • | accelerated vesting of any unvested equity awards (other than each award granted as Zynga PSUs or the Zynga RSUs granted to the Zynga executive officers on March 15 or April 1, 2022 (as applicable), which, by their terms, are excluded from this acceleration); and |
| • | a lump sum cash payment equal to 12 months of COBRA premiums for the officer and any eligible family members, regardless of whether the officer or family members actually elects COBRA coverage. |
The Zynga Change in Control Severance Plan also provides for accelerated vesting of performance-based equity awards at target, unless otherwise specified in the applicable equity award agreement. The Zynga Change in Control Severance Plan is not applicable to the awards granted as Zynga PSUs to Zynga’s executive officers as those awards instead contain specific change in control provisions that base vesting on achievement of actual performance through a date before Zynga’s change in control. The Zynga Change in Control Severance Plan also is not applicable to the awards granted as Zynga RSUs to the Zynga executive officers on March 15 or April 1, 2022 (as applicable), which contain specific provisions for vesting acceleration in connection with certain involuntary terminations of employment, as described further above.
The severance benefits payable under the Zynga Change in Control Severance Plan are subject to reduction by any other statutory or contractual severance benefits, pay in lieu of notice, and other similar benefits that Zynga (or any successor to Zynga) is required to provide in connection with a qualifying termination and that are in the same form as the benefits provided under the Zynga Change in Control Severance Plan. Accordingly, a Zynga executive officer participating in the Zynga Change in Control Severance Plan will receive the more favorable level of benefits (by type of benefit) under either the Zynga Change in Control Severance Plan or the Zynga executive officer’s offer letter, but not duplicative severance benefits under both.
The severance benefits payable under the Zynga Change in Control Severance Plan is subject to the named executive officer’s execution and non-revocation of a release of claims in favor of Zynga, return of all Zynga property, and such Zynga executive officer’s continued compliance with certain restrictive covenants, including non-solicitation of Zynga service providers and non-disparagement of Zynga and its affiliates (and Zynga thereby also will instruct its officers and directors from disparaging the Zynga executive officer), in each case during the 12-month period following termination of employment.
For purposes of the Zynga Change in Control Severance Plan, the following definitions are used:
| • | Cause generally means, with respect to a Zynga executive officer: (i) any willful, material violation by the executive of any law or regulation applicable to Zynga’s business; (ii) the Zynga executive officer’s conviction for, or plea of no contest to, a felony or a crime involving moral turpitude; (iii) commission of an act of personal dishonesty that is intended to result in the substantial personal enrichment of the Zynga executive officer; (iv) continued material violations by the Zynga executive officer of the Zynga executive officer’s lawful and reasonable duties of employment that are demonstrably willful and deliberate (subject to a cure period provided to the executive with respect to such violation); (v) the Zynga executive officer’s willful failure to cooperate with an investigation by a governmental authority or Zynga of Zynga’s business or financial condition; (vi) any other willful misconduct or gross negligence by the Zynga executive officer that is materially injurious to the financial condition or business reputation of Zynga; or (vii) a material breach of the Zynga executive officer’s fiduciary duty to Zynga. |
| • | A good reason termination generally means, with respect to a Zynga executive officer, the Zynga executive officer’s voluntary termination of employment after one or more of the following without the Zynga executive officer’s written consent: (i) material diminution in the executive’s authority, duties or responsibilities at Zynga as in effect immediately prior to the change in control (for example, (a) ceasing to be an officer who is required to make filings under Section 16(a)(1) of the Securities Exchange Act of 1934, as amended, or (b) not having the same authority, duties or responsibilities with respect to the combined entity following the change in control); (ii) being required to report to any individual or board of directors |
| other than the principal executive officer or board of directors of the ultimate parent of the entity that controls Zynga’s assets and/or business, or if the Zynga executive officer did not previously report to the principal executive officer of Zynga or its board as of immediately prior to the change in control, then a material diminution in authority, duties or responsibilities of the supervisor to whom the executive reports, as compared to immediately prior to the change in control; (iii) material reduction in annual base salary or target annual bonus as in effect immediately prior to Zynga’s change in control other than a 1-time reduction of 15% or less that is applicable to substantially all other similarly-situated executives; or (iv) non-temporary relocation of the Zynga executive officer’s principal work location office to a location that increases the Zynga executive officer’s 1-way commute by more than 35 miles as compared to the Zynga executive officer’s principal work location as of immediately prior to Zynga’s change in control. Under a good reason termination, the Zynga executive officer must give Zynga written notice within 60 days after the Zynga executive officer knows or should know of the initial existence of good reason, such event or action must not have been cured within 30 days of written notice, and the Zynga executive officer must terminate employment within 60 days following the end of the cure period. |
The closing of the combination will constitute a change in control of Zynga under the Zynga Change in Control Severance Plan.
For Ms. Rawlings, the amount of severance payable under the Zynga Change in Control Severance Plan in connection with a qualifying termination during the CIC Period based on her current compensation consists of $280,000 of salary severance, $98,000 of bonus severance, an estimated $27,490 of COBRA premium severance, and acceleration of her RSU awards (as described further below in the section titled “Equity Interests of Zynga’s Executive Officers and Non-Employee Directors”). For additional information regarding the amounts of severance payable to the named executive officers upon a qualifying termination during the CIC Period, see the section below titled “Golden Parachute Compensation.”
Mr. Bromberg
Mr. Bromberg entered into a Transition and Release Agreement with Zynga on November 5, 2021, in connection with his resignation from his role as Zynga’s Chief Operating Officer. Under the terms of this agreement, which supersedes the terms of his offer letter, Mr. Bromberg’s employment with Zynga ended on March 31, 2022, without entitlement to severance payments under his offer letter, the Zynga Change in Control Severance Plan, or any vesting acceleration provisions under the award agreements for his outstanding equity awards. Mr. Bromberg continued to receive his standard compensation through March 31, 2022, except that the vesting of Zynga equity compensation otherwise scheduled to vest on March 15, 2022 is subject to Mr. Bromberg signing and not revoking a supplemental release of claims.
Quantification of Payments and Benefits to Zynga’s Named Executive Officers
The following information, table and the related footnotes present information about the compensation payable to Zynga’s named executive officers in connection with the combination.
Golden Parachute Compensation
In accordance with Item 402(t) of Regulation S-K, the table below sets forth the estimated amounts of compensation and benefits that each named executive officer of Zynga could receive that are based on or otherwise relate to the combination. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section such term is used to describe the combination-related compensation payable to Zynga’s named executive officers. The table below sets forth, for the purposes of this golden parachute disclosure, the amount of payments and benefits (on a pre-tax basis) that each of Zynga’s named executive officers would receive, using the following assumptions:
| • | the closing of the combination occurring on May 31, 2022 (which is the assumed date solely for purposes of this section of the joint proxy statement/prospectus, including this golden parachute compensation disclosure); |
| • | the Zynga named executive officers having a qualifying termination of employment that results in severance benefits becoming payable under the Zynga Change in Control Severance Plan, or in the case of Mr. Gibeau, under his offer letter, and vesting acceleration under the Zynga PSU award agreements, in each case without taking into account any possible reduction that might be required to avoid the excise tax in connection with Section 280G under Section 4999 of the Code; |
| • | equity awards that are outstanding as of May 31, 2022, assuming that the Zynga named executive officer remains in continuous service through May 31, 2022; and |
| • | a price per share of Zynga common stock of $9.00, the average closing market price of a share of Zynga common stock over the first 5 business days following the public announcement of the combination on January 10, 2022. |
The narrative and tables that follow are estimates based on multiple assumptions that may or may not actually occur. Accordingly, the actual amounts, if any, to be received by a Zynga named executive officer may differ from the amounts set forth below.
Golden Parachute Compensation
| Name | Cash ($)(1)(2)(3) |
Equity ($)(4) |
Perquisites / Benefits ($)(5) |
Total ($)(6) |
||||||||||||
| Frank Gibeau |
5,620,548 | 36,474,536 | 41,236 | 42,136,320 | ||||||||||||
| James Gerard Griffin |
1,127,490 | 17,056,591 | — | 18,184,081 | ||||||||||||
| Bernard Kim |
1,127,490 | 16,991,116 | — | 18,118,606 | ||||||||||||
| Phuong Y. Phillips |
876,240 | 4,478,226 | — | 5,354,466 | ||||||||||||
| Jeff Ryan |
797,490 | 3,882,598 | — | 4,680,088 | ||||||||||||
| Matthew S. Bromberg (7) |
— | — | — | — | ||||||||||||
| (1) | For Zynga named executive officers other than Mr. Gibeau and Mr. Bromberg, reflects the amount of “double-trigger” severance payments to which the Zynga named executive officer may become entitled under the Zynga Change in Control Severance Plan. The amount becomes payable if the Zynga named executive officer incurs a qualifying termination (meaning any termination by Zynga other than for cause or any voluntary termination with good reason, in each case as defined in the Zynga Change in Control Severance Plan) during the CIC Period, subject to the Zynga named executive officer’s timely execution and non-revocation of a release of claims in favor of Zynga, return of all Zynga property, and such named executive officer’s continued compliance with certain restrictive covenants, including non-solicitation of Zynga service providers and non-disparagement of Zynga and its affiliates (and Zynga thereby also will instruct its officers and directors from disparaging the Zynga executive officer), in each case during the 12-month period following termination of employment. For additional information regarding the severance benefits payable under the Zynga Change in Control Severance Plan, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Griffin, Mr. Kim, Ms. Phillips and Mr. Ryan” above. |
| (2) | For Mr. Gibeau, reflects the amount of “double-trigger” severance payments to which the named executive officer may become entitled under his offer letter with Zynga. The amount becomes payable if Zynga terminates Mr. Gibeau’s employment without cause or if Mr. Gibeau resigns in a constructive termination, in either case during the CIC Period, subject to Mr. Gibeau’s timely execution and non-revocation of a release of claims in favor of Zynga and his continued compliance with certain restrictive covenants including covenants relating to confidentiality and invention assignment. For additional information regarding the severance benefits payable under Mr. Gibeau’s offer letter, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Gibeau” above. |
| (3) | The amounts represent a lump sum cash severance payment equal to the sum of (x) 2 years for Mr. Gibeau, and 1 year for Mr. Griffin, Mr. Kim, Ms. Phillips and Mr. Ryan, of annual base salary and annual target bonus, each based on salary and target bonus as in effect as of March 1, 2022, (y) for Mr. Gibeau only, a prorated portion of his target annual bonus as in effect as of March 1, 2022, prorated for the number of days during the fiscal year that elapsed prior to (and including) May 31, 2022, and (z) for each of Mr. Griffin, Mr. Kim, Ms. Phillips and Mr. Ryan, 12 months of COBRA premiums, based on the premium payable for the first month of coverage, regardless of whether the Zynga named executive officer or any family members enroll in COBRA, as follows: |
| Named Executive Officer | Base Salary Severance ($) |
Bonus Severance ($) |
Prorated Target Annual Bonus ($) |
COBRA Premiums ($)(a) |
Total ($) | |||||||||||||||
| Frank Gibeau |
2,000,000 | 3,000,000 | 620,548 | — | 5,620,548 | |||||||||||||||
| James Gerard Griffin |
550,000 | 550,000 | — | 27,490 | 1,127,490 | |||||||||||||||
| Bernard Kim |
550,000 | 550,000 | — | 27,490 | 1,127,490 | |||||||||||||||
| Phuong Y. Phillips |
485,000 | 363,750 | — | 27,490 | 876,240 | |||||||||||||||
| Jeff Ryan |
440,000 | 330,000 | — | 27,490 | 797,490 | |||||||||||||||
| Matthew S. Bromberg (b) |
— | — | — | — | — | |||||||||||||||
| (a) | Reflects a lump sum cash payment equal to 12 months of COBRA for each of Mr. Griffin, Mr. Kim, Ms. Phillips and Mr. Ryan, regardless of whether the Zynga named executive officer or any family members enroll in COBRA. Under Mr. Gibeau’s offer letter, Mr. Gibeau is eligible for payment of 18 months of COBRA premiums, subject to his enrollment in and continued eligibility for COBRA. The value of Mr. Gibeau’s COBRA premiums is included in the Perquisites/Benefits column of the Golden Parachute Table. See footnote (5) to the Golden Parachute Table for more information. |
| (b) | Mr. Bromberg is not eligible for any cash severance benefits. See footnote (7) to the above Golden Parachute Compensation table. |
| (4) | Equity. The amounts represent the value of the “double trigger” accelerated vesting of outstanding unvested Zynga options, Zynga RSUs and Zynga PSUs (based on the assumptions described below), and with respect to Mr. Gibeau, “single trigger” accelerated vesting of a portion of certain of his outstanding unvested Zynga options, Zynga RSUs and Zynga PSUs, as discussed in footnote (b) to the table below in this footnote. As described in the section above titled “Treatment of Zynga Equity Awards,” these equity awards will be assumed by Take-Two and converted into Take-Two awards (assuming the Zynga named executive officer is a continuing employee as of immediately following the combination). For additional information regarding the Zynga named executive officers’ equity awards, see the sections titled “Treatment of Zynga Equity Awards” above and “Equity Interests of Zynga’s Executive Officers and Non-Employee Directors” below. |
The values in the equity column of the tables above and below reflect the accelerated vesting terms under Mr. Gibeau’s offer letter and, with respect to the other Zynga named executive officers, under the Zynga Change in Control Severance Plan, as well as for each Zynga executive officer, under the individual award agreements for (x) the awards that were granted as Zynga PSUs and (y) the awards granted on March 15 or April 1, 2022 (as applicable), as Zynga RSUs:
| Named Executive Officer | Value of Unvested Zynga Options($) |
Value of Zynga RSUs($) |
Value of Zynga PSUs($)(a) |
Total ($) | ||||||||||||
| Frank Gibeau (b) |
2,299,027 | 17,515,888 | 16,659,622 | 36,474,536 | ||||||||||||
| James Gerard Griffin |
952,191 | 8,653,980 | 7,450,421 | 17,056,591 | ||||||||||||
| Bernard Kim |
952,191 | 8,370,482 | 7,668,443 | 16,991,116 | ||||||||||||
| Phuong Y. Phillips |
590,126 | 2,146,534 | 1,741,565 | 4,478,226 | ||||||||||||
| Jeff Ryan |
472,099 | 1,851,225 | 1,559,275 | 3,882,598 | ||||||||||||
| Matthew S. Bromberg (c) |
— | — | — | — | ||||||||||||
| (a) | Reflects the values of awards that were granted as Zynga PSUs, including such awards that remain outstanding for which the performance period has ended, and performance has been certified, and Zynga PSUs for which the performance period remains ongoing as follows: |
| Named Executive Officer | Value of Unvested and Outstanding Zynga PSUs for which the Performance Period Has Ended ($)(i)(ii) |
Value of Unvested and Outstanding Zynga PSUs for which the Performance Period Remains Ongoing ($)(ii)(iii) |
Total ($) | |||||||||
| Frank Gibeau |
2,701,602 | 13,958,020 | 16,659,622 | |||||||||
| James Gerard Griffin |
1,377,990 | 6,072,431 | 7,450,421 | |||||||||
| Bernard Kim |
1,377,990 | 6,290,453 | 7,668,443 | |||||||||
| Phuong Y. Phillips |
1,405,188 | 336,377 | 1,741,565 | |||||||||
| Jeff Ryan |
1,247,814 | 311,461 | 1,559,275 | |||||||||
| Matthew S. Bromberg (iv) |
— | — | — | |||||||||
| (i) | Includes the value of the outstanding awards that were granted as Zynga PSUs in 2020 and 2021 with a performance goal relating to achievement of specified levels of Zynga annual operating cash flow for Zynga’s fiscal years 2020 and 2021, respectively. The portion of these awards that satisfied the operating cash flow performance goal remain eligible to vest based on continued service with Zynga and will be treated upon the closing of the combination in the same manner as Zynga RSUs. |
| (ii) | If during the CIC Period, the Zynga named executive officer’s employment is terminated by Zynga without cause (and other than due to the Zynga named executive officer’s death or disability) or by the Zynga named executive officer for good reason, then vesting will accelerate with respect to the entire portion of the award for which performance conditions are satisfied, except with respect to (x) the Zynga 2022 OCF PSUs, for which vesting will accelerate with respect to only the next portion of the award for which performance conditions are or are deemed satisfied, and (y) the Zynga 2022 CEO PSUs, for which vesting will accelerate with respect to only the next portion of the award for which performance conditions are satisfied, in each case subject to the Zynga named executive officer’s timely execution and non-revocation of a separation agreement and release of claims in favor of Zynga. For additional information regarding the severance benefits payable under the Zynga PSUs, see the section titled “Zynga Performance-Based Restricted Stock Units” above. |
| (iii) | Includes the value of the outstanding Zynga PSUs granted in 2020 with a performance goal relating to Zynga’s total stockholder return compared to the total stockholder returns of the companies in the S&P MidCap 400 Index, measured over the performance period beginning with the awards’ grant date and ending December 31, 2022, or if earlier, as of a date within the 15-day period ending with the expected date of the change in control of Zynga (as determined by the administrator of the plan). The value shown assumes maximum-level achievement of Zynga’s relative total stockholder return performance during such performance period. Also includes the value of a portion of the outstanding Zynga 2022 OCF PSUs equal to 1/4th of the number of shares subject to such awards assuming target-level achievement of the performance goal for those awards, for which performance will be deemed satisfied at target levels in connection with the combination. Includes the value of the outstanding Zynga 2022 CEO PSUs equal to 1/4th of the number of shares subject to such award assuming maximum-level achievement of the performance goals. Maximum achievement of any of these Zynga PSUs would result in 150% of the target number of shares of Zynga common stock subject to the outstanding Zynga PSUs to become eligible to vest. In connection with the combination, with respect to the Zynga 2022 OCF PSUs, the performance goals will be deemed satisfied at the target level. Assuming target achievement with respect to performance under all outstanding Zynga PSUs that remain subject to the satisfaction of performance conditions, the values shown in the table to which this footnote |
| (iii) applies instead would be $9,533,752 for Mr. Gibeau, $4,193,636 for Mr. Griffin, $4,411,658 for Mr. Kim, $336,377 for Ms. Phillips, and $311,461 for Mr. Ryan. |
| (iv) | Mr. Bromberg is not eligible for any accelerated vesting of equity awards in connection with the combination. See footnote (7) to the Golden Parachute Compensation table, above. |
| (b) | Under the terms of his offer letter with Zynga, if Mr. Gibeau remains employed by Zynga up to the time immediately before a change in control of Zynga (which the combination will constitute), then Mr. Gibeau will receive “single-trigger” vesting acceleration in 25% of any Zynga stock options, Zynga RSUs or other Zynga equity awards that are unvested and outstanding immediately prior to Zynga’s change in control (other than any awards granted to him as Zynga PSUs and other than the Zynga RSUs granted to him on April 1, 2022). For additional information regarding this benefit, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Gibeau” above. |
| (c) | Mr. Bromberg is not eligible for any accelerated vesting of equity awards. See footnote (7) to the above Golden Parachute Compensation table. |
| (5) | Perquisites / Benefits. For Mr. Gibeau, the amount shown represents the cost of payment of premiums for coverage under COBRA for Mr. Gibeau and his eligible dependents, if any, for up to 18 months following a qualifying termination, and accordingly these amounts are “double-trigger” payments. For additional information regarding the severance benefits payable under Mr. Gibeau’s offer letter, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Gibeau” above. See footnote (3) to the above Golden Parachute Compensation table for information regarding the COBRA-related cash severance payable to certain Zynga named executive officers under the Zynga Change in Control Severance Plan. |
| (6) | Total. This amount includes the aggregate dollar value of the sum of all amounts reported in the preceding columns. If any of the amounts provided for under the Zynga Change in Control Severance Plan or under Mr. Gibeau’s offer letter or otherwise payable to any of the Zynga named executive officers would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax, the Zynga named executive officer would be entitled to receive either full payment of his or her benefits or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the named executive officer. |
| (7) | Mr. Bromberg resigned as Zynga’s Chief Operating Officer effective November 5, 2021, and as an employee on March 31, 2022. As a result, Mr. Bromberg will not receive any benefits based on or otherwise relating to the combination. For additional information regarding Zynga’s current arrangements with Mr. Bromberg, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers – Mr. Bromberg” above. |
Equity Interests of Zynga’s Executive Officers and Non-Employee Directors
The following table sets forth the number of shares of Zynga common stock, and the number of shares of Zynga common stock underlying Zynga equity awards, that are held by each person who has been an executive officer or director of Zynga at any time since January 1, 2021, and, assuming no sales, transfers or exercises, are expected to be outstanding as of May 31, 2022, the date that for purposes of this section of the joint proxy statement/prospectus is assumed to be the closing date of the combination. The table also sets forth the values of these shares and equity awards, determined as the applicable number of shares multiplied by the average closing market price of a share of Zynga common stock over the first 5 business days following the first public announcement of the combination on January 10, 2022, or $9.00 (minus the applicable per share exercise price for Zynga options).
| Name |
Shares of Zynga Common Stock (#)(1) |
Shares of Zynga Common Stock ($) |
Zynga Options (#)(2)(3) |
Zynga Options ($) |
Zynga RSUs and PSUs (#)(3)(4)(5)(6) |
Zynga RSUs and PSUs ($) |
Total ($) | |||||||||||||||||||||
| Frank Gibeau |
1,727,388 | 15,546,492 | 8,746,966 | 47,908,061 | 3,985,717 | 35,871,453 | 99,326,006 | |||||||||||||||||||||
| James Gerard Griffin |
745,010 | 6,705,090 | 4,055,912 | 21,541,389 | 1,907,657 | 17,168,913 | 45,415,392 | |||||||||||||||||||||
| Bernard Kim |
1,203,914 | 10,835,226 | 6,555,912 | 37,861,389 | 2,063,899 | 18,575,091 | 67,271,706 | |||||||||||||||||||||
| Phuong Y. Phillips |
421,686 | 3,795,174 | 1,059,494 | 4,421,516 | 684,294 | 6,158,646 | 14,375,336 | |||||||||||||||||||||
| Amy Rawlings (7) |
179,884 | 1,618,956 | 0 | 0 | 110,593 | 995,337 | 2,614,293 | |||||||||||||||||||||
| Jeff Ryan |
114,641 | 1,031,769 | 468,816 | 1,678,462 | 612,540 | 5,512,860 | 8,223,091 | |||||||||||||||||||||
| Matthew S. Bromberg (8) |
985,829 | 8,872,461 | 278,599 | 998,897 | — | — | 9,871,358 | |||||||||||||||||||||
| Dr. Regina E. Dugan |
234,046 | 2,106,414 | — | — | — | — | 2,106,414 | |||||||||||||||||||||
| William “Bing” Gordon (9) |
1,318,913 | 11,870,217 | — | — | 9,616 | 86,544 | 11,956,761 | |||||||||||||||||||||
| Louis J. Lavigne, Jr. |
284,064 | 2,556,576 | — | — | — | — | 2,556,576 | |||||||||||||||||||||
| Carol G. Mills |
233,872 | 2,104,848 | — | — | — | — | 2,104,848 | |||||||||||||||||||||
| Mark Pincus |
55,414,847 | 498,733,623 | — | — | — | — | 498,733,623 | |||||||||||||||||||||
| Janice M. Roberts |
233,872 | 2,104,848 | — | — | — | — | 2,104,848 | |||||||||||||||||||||
| Ellen F. Siminoff |
220,572 | 1,985,148 | — | — | — | — | 1,985,148 | |||||||||||||||||||||
| Noel B. Watson, Jr. |
40,857 | 367,713 | — | — | — | — | 367,713 | |||||||||||||||||||||
| (1) | This number includes shares of Zynga common stock beneficially owned as of March 31, 2022 (or, for Mr. Bromberg, shares reported as held in his last Form 4 report filed with the U.S. Securities and Exchange Commission on October 19, 2021), excluding shares issuable upon exercise of stock options or settlement of Zynga RSUs and Zynga PSUs expected to remain outstanding as of May 31, 2022, the date that for purposes of this section of the joint proxy statement/prospectus is assumed to be the closing date of the combination, and any shares that may be purchased under the Zynga ESPP after the date of the filing of this joint proxy statement/prospectus but prior to the closing of the combination, by any Zynga executive officer participating in the Zynga ESPP. Zynga’s non-employee directors are not eligible to participate in the Zynga ESPP. For more information regarding beneficial ownership of Zynga common stock by each of Zynga’s current directors, named executive officers and all directors and executive officers as a group, see the section titled “Certain Beneficial Owners of Zynga Common Stock—Security Ownership of Zynga Directors and Executive Officers.” Refer to footnote (3) to this table below regarding shares subject to Zynga RSUs included in this column. |
| (2) | This number includes shares subject to vested and unvested Zynga options. The number of shares of Zynga common stock subject to the vested and unvested portions of the outstanding Zynga options and the values of the Zynga options are shown in the following table under this footnote (2), assuming that the individual (other than Mr. Bromberg) remains in continuous service with Zynga through the closing of the combination and does not exercise any portion of the Zynga options prior to such date. The values shown in the below table are determined based on, for each share of Zynga common stock subject to a Zynga option, the excess of (i) the average closing market price of a share of Zynga common stock over the first 5 business days following the first public announcement of the combination on January 10, 2022, or $9.00, over (ii) the applicable per share exercise price. |
| Vested Stock Options |
Unvested Stock Options |
Total Stock Options (Vested and Unvested) |
||||||||||||||||||||||
| Name | Number of Shares (#) |
Value ($) | Number of Shares (#) |
Value ($) | Total Number of Shares (#) |
Total Value ($) |
||||||||||||||||||
| Frank Gibeau |
8,027,171 | 45,609,034 | 719,795 | 2,299,027 | 8,746,966 | 47,908,061 | ||||||||||||||||||
| James Gerard Griffin |
3,754,696 | 20,589,199 | 301,216 | 952,191 | 4,055,912 | 21,541,389 | ||||||||||||||||||
| Bernard Kim |
6,254,696 | 36,909,199 | 301,216 | 952,191 | 6,555,912 | 37,861,389 | ||||||||||||||||||
| Phuong Y. Phillips |
862,343 | 3,831,390 | 197,151 | 590,126 | 1,059,494 | 4,421,516 | ||||||||||||||||||
| Amy Rawlings |
— | — | — | — | — | — | ||||||||||||||||||
| Jeff Ryan |
311,096 | 1,206,364 | 157,720 | 472,099 | 468,816 | 1,678,462 | ||||||||||||||||||
| Matthew S. Bromberg (a) |
278,599 | 998,897 | — | — | 278,599 | 998,897 | ||||||||||||||||||
| (a) | Mr. Bromberg is not eligible for any acceleration of equity awards in connection with the combination. See footnote (7) to the Golden Parachute Compensation table, above. |
| (3) | Mr. Gibeau’s offer letter entered into with Zynga provides to Mr. Gibeau, and the Zynga Change in Control Severance Plan provides to each of the other executive officers, a right to full acceleration of unvested and outstanding time-vesting Zynga options and Zynga RSUs (other than awards granted as Zynga PSUs and other than the Zynga RSUs granted on March 15 or April 1, 2022, as applicable) upon a qualifying termination after a change in control of Zynga (which the combination will constitute). For more information on these rights to acceleration, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers” above. |
| (4) | This number does not include the following shares of Zynga common stock subject to Zynga RSUs (including awards granted as Zynga PSUs for which performance already has been achieved) that are scheduled to vest on April 15, 2022, subject to continued service through the applicable date: 68,387 shares with respect to Mr. Gibeau, 67,475 shares with respect to Mr. Griffin, 29,920 shares with respect to Mr. Kim, 6,412 shares with respect to Ms. Phillips, 3,245 shares with respect to Ms. Rawlings, and 3,420 shares with respect to Mr. Ryan. All such shares instead are included in the column entitled “Shares of Zynga Common Stock” in the table above. |
| (5) | Zynga makes annual grants of Zynga RSUs to Zynga’s non-employee directors. The most recent such awards were granted on May 17, 2021. These awards are scheduled to vest in 4 approximately equal tranches on a quarterly basis, with a 4th tranche covering 5,548 shares of Zynga common stock (with a value of $49,932, assuming a Zynga stock price of $9.00) scheduled to vest, subject to continued service, on the date of the next annual stockholder meeting of Zynga, or if earlier, the 1-year anniversary of the grant date of the awards, or May 17, 2022. As of May 31, 2022, the date that for purposes of this section of the joint proxy statement/prospectus is assumed to be the closing date of the combination, all shares subject to these annual RSU awards would be vested. All such shares instead are included in the column entitled “Shares of Zynga Common Stock” in the table above. |
| (6) | The award agreements for each award granted as Zynga PSUs prior to 2022 provide for accelerated vesting in the event of a qualifying termination after a change in control event such as the combination, to the extent that the performance goals have been satisfied in advance of such event. With respect to the Zynga 2022 OCF PSUs, in connection with the combination, Zynga’s performance against the operating cash flow goal will be deemed satisfied at the target level and, in the event of a qualifying termination, such Zynga 2022 OCF PSUs will accelerate vesting as to the next portion of award which would have otherwise been scheduled to vest. The performance period and performance criteria of the Zynga 2022 CEO PSUs will not be affected by a change in control of Zynga that occurs during the performance period. The number of shares and values shown assume the achievement or deemed achievement at the target levels for the applicable performance goal or goals. At maximum levels of achievement (other than for the Zynga 2022 OCF PSUs for which performance will be deemed satisfied at the target levels in connection with the combination), the number of shares would be 4,560,359 for Mr. Gibeau, 2,116,412 for Mr. Griffin, 2,272,654 for Mr. Kim, 684,294 for Ms. Phillips, and 612,540 for Mr. Ryan. For more information on these rights to acceleration, see the section titled “Treatment of Zynga Equity Awards – Zynga Performance-Based Restricted Stock Units” above. For additional information regarding awards granted as Zynga PSUs to Zynga’s named executive officers, see the table set forth in the section titled “Quantification of Payments and Benefits to Zynga’s Named Executive Officers — Golden Parachute Compensation.” |
| (7) | Under the terms of Ms. Rawlings, participation in the Zynga Change in Control Severance Plan, the outstanding Zynga RSU awards for Ms. Rawlings, will accelerate and become fully vested upon her qualifying termination during the CIC Period (provided that the Zynga RSUs granted to Ms. Rawlings on March 15, 2022, will accelerate vesting with respect to 1/16th of the shares subject to the award, which is the next portion of the award which otherwise would have vested after such qualifying termination). Those Zynga RSU awards are expected to cover 110,593 shares of Zynga stock as of May 31, 2022, the date that for purposes of this section of the joint proxy statement/prospectus is assumed to be the closing date of the combination, and represents a value of $995,337, assuming a Zynga stock price of $9.00. For more information on the Zynga Change in Control Severance Plan, see the section titled “Zynga Change in Control and Severance Arrangements with Executive Officers” above. |
| (8) | Mr. Bromberg’s employment with Zynga ended on March 31, 2022. Any portion of his Zynga equity awards that had a scheduled or potential vesting date later than March 31, 2022, were forfeited by him pursuant to his Transition and Release Agreement. |
| (9) | Mr. Gordon received an additional annual award of Zynga RSUs with respect to his service as a consultant to Zynga. This award is scheduled to vest quarterly over a 1-year period, subject to his continued service through the applicable vesting date. The shares included in the table above for Mr. Gordon reflect shares under a 4th tranche of a Zynga RSU award granted on June 15, 2021, which are scheduled to vest on June 15, 2022, and thus are expected to remain outstanding as of May 31, 2022, the date that for purposes of this section of the joint proxy statement/prospectus is assumed to be the closing date of the combination. |
Membership on the Take-Two Board of Directors
Pursuant to the terms of the merger agreement, Take-Two has agreed to appoint, on or prior to the effective time, two members of the Zynga board of directors, selected by Zynga and approved by Take-Two, to the Take-Two board of directors. Take-Two will be required to approve at least two of the Zynga’s current directors and, if any of such Zynga-selected directors that have been approved by Take-Two are unable or unwilling to serve on the Take-Two board of directors, then Zynga may select, prior to the effective time, an alternative member of the Zynga board of directors who, subject to approval by Take-Two, will be appointed to the Take-Two board of directors as of the effective time. The two members of the Zynga board of directors selected by Zynga for appointment to the Take-Two board of directors pursuant to this provision of the merger agreement are Ellen Siminoff and William “Bing” Gordon. The appointment of Ms. Siminoff and Mr. Gordon remain subject to the review and approval by Take-Two’s Corporate Governance Committee and Board of Directors prior to the effective time. Non-employee members of the Take-Two’s board of directors will be compensated for such service.
Insurance and Indemnification Interests of Directors and Executive Officers
Pursuant to the terms of the merger agreement, Zynga’s directors and officers will be entitled to certain ongoing indemnification rights. In addition, Zynga will purchase, prior to the effective time, a six year “tail” prepaid directors’ and officers’ liability insurance policy covering Zynga’s directors and officers, which Take-Two is required to maintain in effect. This indemnification and insurance coverage is further described in the section entitled “The Merger Agreement—Indemnification and Insurance.”
