Washington, D.C. 20549
I cordially invite you to join me and the other members of Activision Blizzard, Inc.’s Board of Directors at the company’s 2019 annual meeting of stockholders. This proxy statement contains information about the meeting and will serve as your guide to the matters on which you will be asked to vote.
At Activision Blizzard, we know that feedback from our stockholders is essential to our continued success. Regardless of the number of shares you own, this meeting is a wonderful opportunity for you to learn more about developments at our company and, more importantly, to express your opinions and play a part in Activision Blizzard’s future. If you can’t attend the meeting, please share your thoughts or concerns with us by email at ir@activision.com or in care of our Corporate Secretary at Activision Blizzard, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405.
General
Stockholders will elect ten directors at the Annual Meeting. Those elected will serve one-year terms and until their respective successors are duly elected or appointed and qualified or until the earliest of their death, resignation, or removal. Except where otherwise instructed, proxies solicited by this proxy statement will be voted for the election of each nominee. However, if any nominee becomes unable to stand for election as a director at the Annual Meeting, the proxy may be voted for a substitute designated in accordance with our Bylaws.
Director Nominees
In order to have a knowledgeable Board comprised of individuals with distinguished records of leadership and success, the Nominating and Corporate Governance Committee has established criteria it desires in a member of our Board. As a company with a global customer base in the interactive entertainment industry, we consider leadership abilities gained from senior roles as executive officers or board members of large, global corporations in the entertainment field to be particularly relevant to the business of the Company. We believe that our directors bring to our Board the practical wisdom and strong professional characteristics, judgment, and leadership abilities necessary to keep our Company performing competitively in the market. For more about the qualifications we require our directors (and director nominees) to have, see “Corporate Governance Matters—Board of Directors and Committees—Identification of Candidates for Election to Our Board—Experience, Skills, and Other Characteristics of Our Director Candidates” below.
The following biographies of our director nominees describe their noteworthy experience. Also described below are certain individual qualifications and skills of each of our directors that we believe contribute to our Board’s effectiveness and success. For information regarding each nominee’s current Board committee membership, if any, see “Corporate Governance Matters—Board of Directors and Committees—Board Committees” below.
REVETA BOWERS
|
Ms. Bowers, age 70, has served as an independent governance and organizational consultant for non-profit organizations since 2016. From 1972 to 2016, she served as a teacher and administrator at The Center for Early Education, an independent school for children. From 1993 to 2003, she served on the board of directors of The Walt Disney Company, a global entertainment company.
|
Independent
Governance
and
Organizational
Consultant
Director
Since:
2018
Activision
Blizzard
Committee
Membership(s):
Involvement
with
Other
Organization(s):
•
California Teacher Development Collaborative (CATDC) (seminar faculty member)
•
Common Sense Media (chair of national board of directors)
•
Dream Fund for Scholars (member of advisory board)
•
Edward E. Ford Foundation (member of board of advisors)
•
FEDCO Charitable Foundation
•
Rossier School of Education, University of Southern California (chair of board of councilors)
•
Teachers College, Columbia University
|
|
Key
Experience/Qualifications:
•
Extensive public board experience, having served as an outside director of The Walt Disney Company from 1993 to 2003, and as a member of four committees of Disney’s board, including its compensation committee
•
Serves as chair of Common Sense Media, a non-profit organization dedicated to helping children use technology responsibly, safely and effectively
•
At the Center for Early Education, served as an advocate for the use of gaming and technology to enhance childhood education
•
B.A. in humanities from the University of Southern California and M.A. in developmental psychology from the College of Developmental Studies
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ROBERT CORTI
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Mr. Corti, age 69, worked at Avon Products, a global manufacturer and marketer of beauty and related products, for more than 25 years. He joined Avon Products’ tax department as a tax associate in 1976 and held positions of increasing responsibility in the company’s finance department throughout his tenure there, including serving as an executive vice president and the chief financial officer of Avon Products from 1998 until he retired from the chief financial officer role in November 2005 and from the executive vice president role in March 2006.
|
Retired
Chief
Financial
Officer
of
Avon
Products
Director
Since:
2003
Activision
Blizzard
Committee
Membership(s):
•
Audit Committee (Chair)
Private
Company
Directorship(s):
Involvement
with
Other
Organization(s):
•
Manhattan Chapter of the Cystic Fibrosis Foundation
|
|
Key
Experience/Qualifications:
•
Financial expertise, particularly accounting and tax experience, gleaned in part from his long tenure in Avon’s finance department
•
Unique perspective of having helped to guide a large public company with international operations through the changing economic and competitive landscape, gained from having served Avon for more than 25 years and working his way up to increasingly senior roles within that organization
•
Consumer products industry experience from his tenure at Avon
•
Certified public accountant
•
Qualifies as an “audit committee financial expert” and is “financially sophisticated”
•
B.A. in accounting from Queens College and M.B.A. in taxation from St. John’s University
|
HENDRIK HARTONG III
|
Mr. Hartong, age 52, serves as the chairman and chief executive officer of Brynwood Partners, a private equity firm specializing in the consumer products sector, which he joined in 2004 as a managing partner. Mr. Hartong was the president and chief executive officer of Lincoln Snacks Company, a food products company, from 1998, at which point the company was publicly traded, until 2004, when Brynwood Partners divested its ownership in Lincoln Snacks. Prior to joining Lincoln Snacks, Mr. Hartong held various sales and marketing positions of increasing responsibility with Baskin Robbins USA Co. and Nestlé USA, Inc., both of which are food products companies, and, from 1996 to 1998, with Activision Publishing, Inc. (“Activision”), then our sole operating unit.
|
Chairman
and
Chief
Executive
Officer
of
Brynwood
Partners
Director
Since:
2015
Activision
Blizzard
Board
Committee
Membership(s):
Private
Company
Directorship(s):
•
Brynwood Partners (chairman and chairman of executive committee)
•
Harvest Hill Beverage Company (chairman) (a company in which Brynwood Partners has a controlling ownership interest)
•
Hometown Food Company (chairman) (a company in which Brynwood Partners has a controlling ownership interest)
•
Joseph’s Gourmet Pasta Company (chairman) (a company in which Brynwood Partners has a controlling ownership interest)
|
|
Key
Experience/Qualifications:
•
Financial expertise, in particular, from having served as president and chief executive officer of then-publicly traded Lincoln Snacks for six years
•
Wealth of experience in the consumer products industry from his experience guiding Lincoln Snacks and the portfolio companies of Brynwood Partners
•
Qualifies as “audit committee financial expert” and is “financially sophisticated”
•
B.A. in history from Lafayette College and M.B.A. from Harvard University
|
BRIAN KELLY
|
Mr. Kelly, age 56, has held various positions of responsibility with Activision Blizzard since 1991, including serving as a director of the Company since July 1995, the co-chairman of our Board of Directors from October 1998 until 2013 and as chairman of our Board of Directors since 2013.
|
Chairman
of
the
Board
of
Activision
Blizzard
Director
Since:
1995
Involvement
with
Other
Organization(s):
•
Call of Duty Endowment (co-founder)
•
NewYork-Presbyterian Hospital (trustee)
•
Juvenile Diabetes Cure Alliance (founder and chairman)
|
|
Key
Experience/Qualifications:
•
Depth of institutional knowledge and understanding of our organization, which he possesses by virtue of his service as a senior executive of the Company from 1991 until 2008 and as a director for more than 20 years
•
Superior leadership skills, devotion to the Company, and commitment to helping to ensure our ongoing success
•
B.A. in accounting from Rutgers University and J.D. from Fordham University School of Law
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ROBERT KOTICK
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Mr. Kotick, age 56, our Chief Executive Officer, has been a director of Activision Blizzard since February 1991, following his purchase of a significant interest in the Company, which was then on the verge of insolvency. Mr. Kotick was our Chairman and Chief Executive Officer from February 1991 until July 2008, when he became our President and Chief Executive Officer. He served as our President from July 2008 until June 2017, when Mr. Johnson began serving as our President and Chief Operating Officer.
|
Chief
Executive
Officer
of
Activision
Blizzard
Director
Since:
1991
Other
Public
Company
Directorship(s):
•
The Coca-Cola Company (since 2012)
Involvement
with
Other
Organization(s):
•
Call of Duty Endowment (co-founder and co-chairman)
•
The Center for Early Education (member of board of trustees)
•
Los Angeles County Museum of Art (vice chairman of board and chairman of committee of trustees)
•
Harvard-Westlake School (member of board of trustees)
|
|
Key
Experience/Qualifications:
•
Depth of institutional knowledge and understanding of our organization, as well as practical experience in a chief executive officer role, that he possesses by virtue of his more than 25 years of service to the Company, including as our Chief Executive Officer and, previously, as our President and the Chairman of our Board
•
Perspective as a board member at a variety of other organizations and his experience in helping those organizations achieve their diverse goals and overcome a wide range of challenges through changing economic and social times
|
BARRY MEYER
|
Mr. Meyer, age 75, retired as the chairman of Warner Bros. Entertainment Inc., an American producer of film, television, and music, at the end of 2013. He joined Warner Bros. as a director of business affairs in 1971 and held positions of increasing responsibility throughout his tenure there, eventually serving as Warner Bros.’ chief executive officer and chairman from October 1999 until March 2013 and as chairman through December 2013. Mr. Meyer founded the consulting firm North Ten Mile Associates following his retirement from Warner Bros., and currently serves as the manager and co-chief executive officer of that firm.
|
Retired
Chairman
and
Chief
Executive
Officer
of
Warner
Bros.
Entertainment
Director
Since:
2014
Activision
Blizzard
Board
Committee
Membership(s):
•
Nominating and Corporate Governance Committee
Involvement
with
Other
Organization(s):
•
Federal Reserve Bank of San Francisco (chairman)
•
Academy of Motion Picture Arts & Sciences (member)
•
Academy of Television Arts & Sciences (member and former governor)
•
Hollywood Radio and Television Society (member)
•
Human Rights Watch (director emeritus)
•
Smithsonian National Museum of American History (vice chairman of advisory board)
•
USC School of Cinematic Arts (member of board of councilors)
|
|
Key
Experience/Qualifications:
•
Over 40 years of leadership and managerial experience in one of the largest entertainment production companies in the world, including serving as its chief executive officer
•
In-depth knowledge of both the business and creative aspects of the entertainment industry, both from his years at Warner Bros. and the leadership positions he held in various cultural institutions dedicated to visual and cinematic arts
•
Wealth of experience in nearly every facet of the entertainment industry
•
Deep understanding of the unique challenges faced by large, multinational public companies
•
B.A. in English from the University of Rochester and J.D. from Case Western Reserve University School of Law
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ROBERT MORGADO
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Mr. Morgado, age 76, our lead independent director, is chairman of Maroley Media Group, a media entertainment investment company he established in 1995. He previously served as the chairman and the chief executive officer of Warner Music Group, a music content company comprised of recorded music and music publishing businesses, from 1985 to 1995.
|
Retired
Chairman
and
Chief
Executive
Officer
of
Warner
Music
Group
Director
Since:
1997
Activision
Blizzard
Board
Committee
Membership(s):
•
Compensation Committee (Chair)
•
Nominating and Corporate Governance Committee (Chair)
Private
Company
Directorship(s):
•
Kaanapali Kai (chairman)
•
Nest Top (controlling shareholder of Nest Family and Nest Learning Systems)
Involvement
with
Other
Organization(s):
•
Maui Arts & Cultural Center
|
|
Key
Experience/Qualifications:
•
Extensive experience as a chief executive officer and a director at a variety of media and entertainment companies
•
Perspective as the founder and chairman of a media entertainment investment company
•
B.A. in history and philosophy from Chaminade University of Honolulu and M.P.A. from The State University of New York
|
PETER NOLAN
|
Mr. Nolan, age 60, is the chairman of Nolan Capital, a private investment company, and is also a senior advisor to Leonard Green & Partners, L.P., a private equity firm, and was previously the managing partner of Leonard Green & Partners. Prior to becoming a partner at Leonard Green & Partners in 1997, Mr. Nolan served as a managing director and the co-head of Donaldson, Lufkin and Jenrette’s Los Angeles Investment Banking Division from 1990 to 1997, as a first vice president in corporate finance at Drexel Burnham Lambert from 1986 to 1990, and as a vice president at Prudential Securities, Inc. from 1982 to 1986. Prior to 1982, Mr. Nolan was an associate at Manufacturers Hanover Trust Company. Mr. Nolan served on the Company’s Board from December 2003 until July 2008, when he resigned in connection with the 2008 business combination of Activision, Inc. and Vivendi Games, Inc. (the “Vivendi Games Combination”).
|
Senior
Advisor
to
Leonard
Green
&
Partners
Director
Since:
2013 (and from 2003 to 2008)
Activision
Blizzard
Board
Committee
Membership(s):
Private
Company
Directorship(s):
•
AerSale Holdings, Inc. (a company in which Leonard Green & Partners has an ownership interest)
•
Diamond Wipes International, Inc. (a company in which Nolan Capital has an ownership interest)
•
Golden Road Food Services, LLC (a company in which Nolan Capital has an ownership interest)
|
|
Key
Experience/Qualifications:
•
Extensive experience in corporate finance and investment banking, including leadership roles at large international corporations with worldwide operations
•
Extensive and wide-ranging experience is demonstrated by his current directorships in other companies operating in various industries
•
Depth of institutional knowledge about the Company from his service on our Board from 2003 to 2008
•
Qualifies as an “audit committee financial expert” and is “financially sophisticated”
•
B.S. in agricultural economics and finance and M.B.A., both from Cornell University
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CASEY WASSERMAN
|
Mr. Wasserman, age 44, is the chairman and chief executive officer of Wasserman, a sports, entertainment, and lifestyle marketing and management agency that he founded in 2002. Mr. Wasserman also serves as the president and chief executive officer of the Wasserman Foundation.
|
Chairman
and
Chief
Executive
Officer
of
Wasserman
Director
Since:
2015
Activision
Blizzard
Board
Committee
Membership(s):
•
Nominating and Corporate Governance Committee
Other
Public
Company
Directorship(s):
•
Saban Capital Acquisition Corp. (since 2017)
Private
Company
Directorships:
Involvement
in
Other
Organization(s):
•
LA 2028 Organizing Committee for the Olympic and Paralympic Games 2028 (chairman)
•
Los Angeles County Museum of Art (member of board of trustees)
•
UCLA Centennial Campaign (member of executive committee)
|
|
Key
Experience/Qualifications:
•
Extensive management expertise in entertainment, sports, and lifestyle marketing gained from his work as chairman and chief executive officer of Wasserman, which represents brands, properties, and talent on a global basis
•
B.A. in political science from the University of California at Los Angeles
|
ELAINE WYNN
|
Ms. Wynn, age 76, is a co-founder of Wynn Resorts, a developer and operator of high-end hotels and casinos, and served as a director of Wynn Resorts from its inception in 2002 to May 2015. Prior to that, Ms. Wynn served as a director of Mirage Resorts from 1976 to 2000.
|
Co-founder
of
Wynn
Resorts
Director
Since:
2013
Activision
Blizzard
Board
Committee
Membership(s):
Other
Public
Company
Directorship(s):
•
Wynn Resorts (from 2002 to 2015)
Involvement
in
Other
Organization(s):
•
Basketball Hall of Fame (member of the board of governors)
•
Communities in Schools (chairman of the national board)
•
Communities in Schools of Nevada (founding chairman)
•
Los Angeles County Museum of Art (member of board of trustees)
•
Nevada State Board of Education (president)
|
|
Key
Experience/Qualifications:
•
Extensive experience in the entertainment field, stemming from her lengthy service as a director of one of the top resort and casino companies in the world
•
Strong leadership skills, illustrated by her numerous chairmanships in state and national-level organizations dedicated to educational reform, where she has received numerous accolades for her service
•
Strong and practical leadership experience, as well as in-depth knowledge about the operation of a large, international public company
•
B.A. in political science from George Washington University
|
Required Vote and Board Recommendation
In accordance with our Bylaws, a director nominee will be elected in an uncontested election only if the number of shares voted “for” that nominee exceeds the number of shares that are voted “against” that nominee. For more information, see “Procedural Matters—What are my voting options with respect to each proposal and how many votes are required to approve each proposal” above and “Corporate Governance Matters—Board of Directors and Committees—Offer of Resignation in Connection with Failure to Receive More ‘For’ than ‘Against’ Votes” below.
Your Board unanimously recommends that you vote
FOR
the election of each nominee for director.
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CORPORATE GOVERNANCE MATTERS
Overview
Our Board has long adhered to governance principles designed to assure its continued vitality and excellence in the execution of its duties. Our Board has responsibility for management oversight and providing strategic guidance to the Company. Our Board believes that it must remain well-informed about the issues, risks, and opportunities facing the Company so that our Board members can exercise their fiduciary responsibilities to all of our stockholders. Our Board recognizes the importance of constantly improving our corporate governance practices and is committed to regularly reviewing the specific elements of our corporate governance framework and making changes to them when our Board deems them to be in the best interests of the Company and its stakeholders.
Board of Directors and Committees
Our Board of Directors
We believe that our directors bring to our Board the practical wisdom and strong personal and professional characteristics, judgment, and leadership abilities necessary to keep our Company performing competitively in the market. For biographical summaries for our directors, please see “Proposal 1—Election of Directors” above.
Identification of Candidates for Election to Our Board
Nominating and Corporate Governance Committee Process
Pursuant to our Corporate Governance Principles and Policies and the Nominating and Corporate Governance Committee’s charter, both of which can be viewed on our website at
http://investor.activision.com/corporate-governance.cfm
, the Nominating and Corporate Governance Committee identifies and evaluates potential candidates to serve as members of our Board. The committee may consider candidates suggested by its members, other directors, and senior management and may, at the Company’s expense, retain search firms, consultants, and other advisors to identify, screen, and/or evaluate candidates. Candidates may be interviewed in person by directors and management.
In addition, the Nominating and Corporate Governance Committee will consider nominating persons who are submitted by stockholders, as described immediately below.
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Stockholder Recommendation of Director Candidates
Our stockholders may recommend independent director nominees directly to the Nominating and Corporate Governance Committee. In accordance with our Corporate Governance Principles and Policies, the Nominating and Corporate Governance Committee will review the qualifications of, and make recommendations to our Board regarding, any such stockholder recommendation that is submitted to us in writing and includes the following information:
•
the name, address, phone number, and email address of the stockholder and evidence of the stockholder’s ownership of our Common Stock, including the number of shares beneficially owned by such person and the length of time of such ownership;
•
the name of the director candidate, the candidate’s address, phone number, and email address, the candidate’s resume or a list of his or her qualifications to be a director of Activision Blizzard, and the candidate’s consent to be named a director, if nominated, and to serve as a director, if elected; and
•
a description of any agreements, arrangements, understandings, or relationships between the stockholder and the director candidate and any other persons (including those persons’ names), pursuant to which the recommendation is made.
In addition, stockholders may submit candidates directly to our stockholders for election as directors in accordance with our Bylaws, including pursuant to the “proxy access” provisions, pursuant to which eligible stockholders may include nominees in our proxy materials. For more information, please see “Director Nominations and Other Stockholder Proposals for our 2020 Annual Meeting; Communicating with Our Board” below.
Experience, Skills, and Other Characteristics of Our Director Candidates
In accordance with our Corporate Governance Principles and Policies, all director nominees, whether or not they are incumbent directors, are expected to have the appropriate experience, skills, and other characteristics essential to serving as an effective Board member, assessed in the context of the perceived needs of our Board at the time, including:
Experience and Skills
|
|
Accounting/finance
|
|
Corporate governance
|
|
Entertainment industry background
|
|
Legal and regulatory knowledge
|
|
Strategic planning
|
|
International operations
|
In accordance with the Nominating and Corporate Governance Committee’s charter, the Nominating and Corporate Governance Committee, in its selection of director candidates, considers the following attributes, among others: experience; knowledge; skills; expertise; personal and professional integrity; character; business judgment; time availability in light of other commitments; dedication; and independence. The committee evaluates each director nominee’s experience, skills, and other characteristics to ensure that they are consistent with the interests of our stockholders and complementary with the existing Board’s composition and needs. In doing so, it considers whether the nominee has experience or skills in the areas of entertainment, international operations, strategic planning, corporate governance, accounting and finance, law, or other areas that are relevant to our activities and our Board’s effectiveness. The Nominating and Corporate Governance Committee evaluates candidates recommended by stockholders using the same criteria as for other candidates recommended by its members or other members of the Board.
Although our nominating procedures and policies do not prescribe specific standards for diversity, the committee also takes diversity into account, seeking to ensure a representation of diverse perspectives and experience.
Additionally, in accordance with its charter, the Nominating and Corporate Governance Committee annually oversees evaluations of our Board and our Board’s committees, which involve an assessment of the performance of each standing committee of our Board and our Board as a whole. For more information, please see “—Annual Board, Committee, and Director Self Evaluations” below.
Independence Determinations
In making its determination regarding director independence, our Board reviews and discusses all relevant information regarding each director’s relationships, transactions or arrangements, as required by the independence guidelines of the Nasdaq Rules, including current and prior relationships that each director or any of his or her family members has with the Company, our executive management, and our independent accounting firm. To assist our Board in making these determinations, each director is required to complete a questionnaire on an annual basis.
Based on the information provided by each director concerning his or her background, employment, and affiliations, our Board affirmatively determined that each of Messrs. Corti, Hartong, Meyer, Morgado, Nolan, and Wasserman and Mses. Bowers and Wynn is an independent director within the meaning of the Nasdaq Rules. Accordingly, our Board determined there are no relationships or activities between the Company and any of these directors that require further review by our Board or that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, as none of these directors has a direct or indirect material relationship with the Company.
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Board Leadership Structure
Our Board believes that the division between the role of the chief executive officer and the chairman of the Board is appropriate because our chief executive officer is responsible for the day-to-day management of the Company, while the responsibility of our Board is to oversee the chief executive officer’s performance of his or her function. As such, our chief executive officer does not serve as the chairman of our Board. Having different individuals serve as the chief executive officer and the chairman allows the chief executive officer to focus on his or her operational responsibilities, while keeping a measure of independence between the oversight function of our Board and those operating decisions.
Our Board has also appointed a lead independent director, whose duties include coordinating the activities of the independent directors, monitoring the flow of information from the Board committees to the full Board, serving as a liaison between our chairman and our senior management, on the one hand, and the independent directors, on the other, and presiding at executive sessions of the independent directors.
Other Directorships
Pursuant to our Corporate Governance Principles and Policies, our directors must obtain the approval of the Nominating and Corporate Governance Committee before accepting any board membership at another publicly held company, and in no case can any director serve on the boards of more than four other publicly held companies.
Offer of Resignation in Connection with Failure to Receive More “For” than “Against” Votes
In accordance with our Bylaws, a director nominee will be elected in an uncontested election only if the number of shares
voted “for” that nominee exceeds the number of shares that are voted “against” that nominee. If a nominee who currently serves as a director is not re-elected, Delaware law and our Bylaws provide that the director will continue to serve on our Board as a “holdover director” (i.e., until his or her successor has been duly elected and qualified, or until the earliest of his or her death, resignation or removal). Pursuant to our Corporate Governance Principles and Policies, if a director fails to receive the required number of votes for re-election, he or she must offer to resign from our Board.
Our Board or, at our Board’s discretion, the Nominating and Corporate Governance Committee, without the participation of the director offering his or her resignation, will consider whether the continued service of any director so offering to resign is appropriate, by considering any factors it deems relevant (e.g., the underlying reasons for the “against” votes, the length of service and qualifications of the director, that director’s contributions to our Company, and the skills and characteristics of that director) and, if our Board or the Nominating and Corporate Governance Committee, as the case may be, determines that the director continues to contribute significantly to the Company, his or her membership on our Board may continue.
Offer of Resignation Upon Change in Professional Role
Pursuant to our Corporate Governance Principles and Policies, unless the Nominating and Corporate Governance Committee determines otherwise, if an independent director retires, changes employment, or otherwise has a significant change in his or her professional role or responsibilities that may reasonably be seen to affect his or her ability to serve, he or she must offer to resign from our Board. Similarly, unless our Board or the Nominating and Corporate Governance Committee determines otherwise, or the director has an agreement with us to the contrary, if a director who is employed by us retires, resigns, or otherwise has a significant change in his or her professional role or responsibilities, he or she must offer his or her resignation from our Board.
Our Board or, at our Board’s discretion, the Nominating and Corporate Governance Committee, without, in either case, the participation of the director offering his or her resignation, will consider whether the continued service of any director so offering to resign is appropriate in light of that change and, if our Board or the Nominating and Corporate Governance Committee, as the case may be, determines that the director continues to contribute significantly to the Company, his or her membership on our Board may continue.
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Continuing Focus on Board Effectiveness
Our Board and its standing committees are focused on effectively overseeing our business for the benefit of our stockholders.
Board Meetings
In accordance with our Corporate Governance Principles and Policies, our Board generally meets at least quarterly, as well as in conjunction with the annual meeting of our stockholders. Our Board met 12 times during 2018, including at least once per quarter and in conjunction with the 2018 annual meeting of our stockholders. Each person who served on our Board during 2018 attended at least 75% of the aggregate of (1) the total number of meetings held by our Board during the period for which he or she was a director and (2) the total number of meetings held by each committee on which he or she served during the period in which he or she so served during the year.
Our Corporate Governance Principles and Policies also require that the independent directors meet in executive session outside of the presence of our management at least two times per year. Four such executive sessions took place during 2018.
In accordance with our Corporate Governance Principles and Policies, all directors are expected to attend annual meetings of our stockholders. In 2018, all persons serving as directors at the time attended the annual meeting.
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Annual Board, Committee, and Director Self-Evaluations
We recognize the critical role that Board and committee evaluations play in ensuring the effective functions of our Board. To this end, the Nominating and Corporate Governance Committee annually leads an evaluation of our Board’s overall performance and the overall performance of each of our Board’s standing committees.
Complete Questionnaires Each director completes a robust
questionnaire on an annual basis that addresses multiple aspects of Board and committee composition, eectiveness, and morale and
also includes open-ended questions focusing on, among other things: (1) opportunities for improvement in Board performance; (2)
the competency and contributions of individual directors; and (3) dierences between our Board and any other boards on which members
serve.
Aggregate Results Our legal department aggregates the
results for the Nominating and Corporate Governance Committee, so that individual responses are kept condential.
Analyze and Summarize e Nominating and Corporate Governance
Committee discusses the feedback and provides a summary of it to the full Board, along with recommended changes to the Board’s
policies and practices.
Act Responsively e Board acts responsively to address
potential areas of improvement identied through the process, including updating its policies or practices as appropriate.
Director Orientation and Continuing Education
•
Board
Orientation.
New directors are provided with a comprehensive director orientation manual upon joining our Board that provides them with important information about the Company, our Board, and the general roles and responsibilities of directors of publicly traded companies. Each new director is also invited to attend an “onboarding day,” during which he or she meets with our executives and other key members of our senior management.
•
Continuing
Education.
We recognize the benefit of continuing education for our directors. In addition to the education routinely provided to our directors by our executives and other key members of our senior management at meetings of our Board and its committees on topics impacting the Company, including emerging risks, industry trends, technological developments, economic forecasts, and competitive challenges, we may engage third parties to provide in-boardroom education. To supplement the education we provide, we also encourage our directors to attend external programs and provide financial and administrative support to the directors in connection therewith.
Board Committees
Our Board has three standing committees—the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee—each of which operates under a written charter approved by our Board. Further, from time to time, our Board forms special or ad hoc committees to which our Board delegates authority to administer certain of its duties.
Set forth below is the current membership of each of our Board’s standing committees. Since January 1, 2018: (1) Ms. Bowers joined the Compensation Committee upon her election to the Board on January 12, 2018; and (2) as part of its annual assessment of the size, structure and composition of its committees, the Board made the following changes on January 27, 2018: Mr. Nolan replaced Mr.
Morgado on the Audit Committee; Mr. Wasserman ceased to serve on the Compensation Committee; and Mr. Wasserman replaced Mr. Nolan on the Nominating and Corporate Governance Committee.
Also set forth below is a summary of the purpose and key responsibilities of each of the standing Board committees.
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AUDIT COMMITTEE
|
|
Robert Corti (Chair)
Hendrik Hartong III
Peter Nolan
|
Meetings
Held
in
2018:
|
7, including at least once per quarter
|
Purposes & Key Responsibilities
•
Selecting, evaluating, and overseeing our independent registered public accounting firm, including determining that firm’s compensation and evaluating that firm’s independence
–
Our independent registered public accounting firm reports directly to the Audit Committee
–
Before we or any of our subsidiaries engage our independent registered public accounting firm to render audit or non-audit services, the Audit Committee must pre-approve the engagement. See “Audit-Related Matters—Pre-Approval Policies and Procedures” below for further detail
•
Overseeing the annual audits and quarterly reviews of our financial statements and our internal control over financial reporting by our independent registered public accounting firm
•
Overseeing our financial reporting process and internal control, including:
–
reviewing and evaluating the adequacy and effectiveness of our internal control over financial reporting and our management’s assessment of the same
–
reviewing, and discussing with the independent registered public accounting firm, the results of the annual audit of our financial statements, including any comments or recommendations of our independent registered public accounting firm, and, based on that review and discussions and other considerations, recommending to our Board whether those financial statements should be included in our Annual Report on Form 10-K
–
reviewing, and discussing with our management, our internal audit projects and the performance of our internal audit function
–
discussing with our management the Company’s process for assessing and managing our exposure to risk
–
meeting periodically with our management, including our Chief Financial Officer, our Chief Accounting Officer, our chief internal audit executive, and our independent registered public accounting firm in separate executive sessions, to discuss any matters that the Audit Committee or any of the above persons or firms believe warrants Audit Committee attention
•
Overseeing policies regarding hiring employees from our independent registered public accounting firm and establishing procedures for the receipt and retention of accounting-related complaints and concerns
•
Overseeing our policies relating to the ethical handling of conflicts of interest, including related party transactions (see “Certain Relationships and Related Person Transactions—Policies and Procedures Regarding Transactions with Related Parties” below)
Membership
•
Must have at least three members
•
All Audit Committee members must be determined by our Board to be independent directors under the Nasdaq Rules and the rules of the U.S. Securities and Exchange Commission (the “SEC”) and otherwise satisfy the Nasdaq Rules and the rules of the SEC with respect to audit committee membership
•
No director may serve as a member of the Audit Committee if that director serves on the audit committees of more than two other public companies, unless our Board determines that the simultaneous service would not impair the ability of that director to effectively serve on the Audit Committee
•
All Audit Committee members must understand fundamental financial statements
•
At least one Audit Committee member must be designated by the Board as an “audit committee financial expert” as defined in the applicable rules of the SEC
•
No Audit Committee member can have participated in the preparation of the financial statements of Activision Blizzard or any of our current subsidiaries at any time during the three years prior to the proposed appointment of that Audit Committee member
•
Based upon information provided by each director concerning his background, employment, and affiliations, our Board has determined that each member of the Audit Committee is an independent director under the Nasdaq Rules and the rules of the SEC and that each otherwise satisfies the Nasdaq requirements for audit committee membership (including that each meets the independence criteria set forth in Rule 10A-3 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and is able to read and understand fundamental financial statements). Our Board has also determined that each Audit Committee member is an “audit committee financial expert” as defined in the applicable rules of the SEC and that each is “financially sophisticated” within the meaning of the Nasdaq Rules
Meetings
Must meet at least quarterly
Committee Charter
Our Audit Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at
http://investor.activision.com/corporate-governance.cfm
Engagement of Outside Consultants
The Audit Committee’s charter authorizes it to engage independent counsel or other consultants or advisors, as it deems appropriate
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COMPENSATION COMMITTEE
|
|
Robert Morgado (Chair)
Reveta Bowers
Elaine Wynn
|
Meetings
Held
in
2018:
|
9, including at least once per quarter
|
Purposes & Key Responsibilities
•
Discharging our Board’s responsibilities relating to compensation paid to our directors and executive officers and overseeing compensation under our equity incentive plans and other compensation policies, programs, agreements, and arrangements
–
The Compensation Committee consults with our management in formulating compensation plans, but ultimately the Compensation Committee exercises independent judgment in approving the compensation of our executive officers
–
Please see “Executive Compensation—Compensation Discussion and Analysis—Decision-Making Approach to Executive Compensation—Roles of the Key Participants in the Executive Compensation Decision-Making Process” and “—Our Board’s Role in Risk Oversight—Compensation Risk Management” below for a further description of such responsibilities
•
Reviewing, and discussing with our management, the compensation-related disclosure included in our proxy statement and Annual Report on Form 10-K
•
Overseeing any proposals we submit to our stockholders on matters relating to executive compensation, including advisory votes on compensation and the frequency of such votes and approval of compensatory plans and any amendments to such plans
Engagement of Outside Consultants
The Compensation Committee’s charter authorizes it to engage independent counsel or other consultants or advisors, including compensation consultants, to advise the Compensation Committee with respect to compensation and benefits for our directors and our executive officers and other employees. Since October 2013, the Compensation Committee has engaged Exequity LLP (“Exequity”) to act as its independent compensation consultant. In accordance with its charter and the Nasdaq Rules, in connection with the engagement of any compensation consultant, the Compensation Committee assesses whether any potential conflicts of interest existed with the compensation consultant, using the following factors: other services, if any, the compensation consultant provided to the Company; the significance of the fees paid by the Company as a percentage of the compensation consultant’s total revenues; the compensation consultant’s policies and procedures designed to prevent conflicts of interest; any business or personal relationships between the compensation consultant professionals engaged to advise our Compensation Committee and the members of our Compensation Committee; ownership of any Company stock by the compensation consultant professionals engaged to advise the Company; and any business or personal relationships between the compensation consultant professionals engaged to advise our Compensation Committee and our executive officers. Based on the evaluation of these factors, including information received from the compensation consultant addressing these factors, the Compensation Committee concluded that Exequity’s service to the Compensation Committee did not raise any conflicts of interest. For additional information regarding the Compensation Committee, including its use of consultants, see “Executive Compensation—Compensation Discussion and Analysis” below.
Membership
•
Must have at least two members
•
All Compensation Committee members must be:
–
determined by our Board to be independent directors under the Nasdaq Rules, including the requirements with respect to compensation committee composition;
–
“non-employee directors” as defined in Rule 16b-3 under the Exchange Act; and
–
“outside directors” as defined under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended (the “Internal Revenue Code”)
•
Based upon information provided by each director concerning his or her background, employment, and affiliations, our Board has determined that each member of the Compensation Committee is an outside director as defined under Section 162(m), a non-employee director as defined in Rule 16b-3 under the Exchange Act, and an independent director under the Nasdaq Rules. Our Board has also determined that none of the members of the Compensation Committee has a relationship to the Company that is material to such director’s ability to be independent of management in connection with the duties of a Compensation Committee member.
Meetings
Must meet at least four times annually
Committee Charter
Our Compensation Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at
http://investor.activision.com/corporate-governance.cfm
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee is or has been an executive officer or other employee of the Company. Additionally, in 2018, none of our executive officers served on the board of directors of any entity that had an executive officer serving on our Board.
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NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE
|
|
Robert Morgado (Chair)
Barry Meyer
Casey Wasserman
|
Meetings
Held
in
2018:
|
2
|
Purposes & Key Responsibilities
•
Assisting in identifying and recruiting director nominees
•
Periodically evaluating the size of our Board and recommending to our Board any appropriate increase or decrease
•
Making recommendations to our Board regarding the size and composition of each standing committee of our Board
•
Overseeing the evaluation of our Board and its committees
•
Providing oversight of our corporate governance affairs and those of our Board
•
Determining the appropriate engagement with stockholder groups and proxy advisory firms on our submissions to our stockholders (which, in the case of matters relating to executive compensation, will be done in conjunction with the Compensation Committee)
•
Evaluating any stockholder proposals submitted to us for inclusion in any proxy statement for, and for consideration at, any meeting of our stockholders (which, in the case of stockholder proposals relating to the compensation of our directors or employees, will be done in conjunction with the Compensation Committee)
Membership
•
Must have at least two members
•
Based upon information provided by each director concerning his background, employment, and affiliations, our Board has determined that each member of the Nominating and Corporate Governance Committee is an independent director under the Nasdaq Rules
Meetings
Must meet at least two times annually
Committee Charter
Our Nominating and Corporate Governance Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at
http://investor.activision.com/corporate-governance.cfm
Engagement of Outside Consultants
The Nominating and Corporate Governance Committee’s charter authorizes it to engage independent counsel or other consultants or advisors as it deems appropriate, including a search firm to assist in the identification of director candidates.
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Our Board’s Role in Risk Oversight
General Risk Oversight
It is the responsibility of our senior management to develop and implement the Company’s financial, operating, and strategic plans, and identify, evaluate, manage, and mitigate the risks inherent in those plans. It is our Board’s responsibility to understand and oversee those plans, the associated risks, and the steps that senior management is taking to manage and mitigate those risks. Our Board, its standing committees, and our senior management exercise this risk oversight function in a variety of ways, including:
RISK OVERSIGHT
BOARD OF DIRECTORS
Annually reviewing
the conclusions and recommendations of our management with respect to current and future potential strategic enterprise-level
risks, as well as the strategies used to mitigate such risks
Annually reviewing succession plans for our senior-most officers
Communicating regularly with our management about risk oversight
Delegating certain
risk-management oversight functions to its standing committees, each of which regularly reports to our Board
Audit Committee
Playing the primary role in overseeing risk mitigation on behalf of our Board
Overseeing compliance with legal and regulatory requirements
Regularly receiving reports from senior management with respect to potential areas of significant risk and our internal controls
and mitigation plans with respect to those risks
Meeting privately on a regular basis with our chief audit executive and representatives of our independent registered public
accounting firm
Receiving regular guidance and feedback from representatives of our independent registered public accounting firm
Having full access to management and the ability to engage independent advisors
Compensation Committee
Overseeing the mitigation of risks that may be created by our compensation programs
Annually reviewing our incentive plans to ensure that they do not encourage excessive risk taking
Having full access to management and the ability to engage independent advisors
Nominating and Corporate Governance Committee
Overseeing the mitigation of risks associated with overall corporate governance and Board succession planning
Having full access to management and the ability to engage independent advisors
MANAGEMENT
Overseeing our day-to-day risk management processes • Regularly communicating with our Board and relevant Board committees
on specific risk-related topics • Conducting annual risk assessments identifying key financial, operating and strategic
risks and presenting those results to our Board
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Cybersecurity Risk Oversight
In order to defend against and respond to the threat of security breaches and cyberattacks, we have developed a comprehensive program that is designed to protect and preserve the confidentiality, integrity, and continued availability of all information owned by, or in the care of, the Company and our partners. This program also includes a cyber-incident response plan. Our Audit Committee oversees the identification and mitigation of potential cybersecurity risk, with the goals of protecting our intellectual property, maintaining consumer confidence, preserving employee data confidentiality, and minimizing information security threats to the Company and the users of our products and services. As part of this oversight, the Audit Committee receives regular updates from members of management with information security responsibilities with respect to the threats we face and our risk mitigation plans to address those threats. These updates include information security maturity assessment results and recommendations provided by a third-party independent review of our information security control environment and operating effectiveness.
Compensation Risk Management
The Compensation Committee, together with its independent compensation consultant, legal counsel, and members of our human resources team, reviews the Company’s incentive compensation plans and practices annually to determine if they encourage employees to take risks that are reasonably likely to have a material adverse effect on the Company. In 2018, as in previous years, this review consisted of an analysis of each of our incentive compensation programs for our executives and other employees, including eligibility, performance measures, payment targets and maximum payments, payment timing, and governance (including the applicable approval process). We concluded our compensation programs do not incentivize employees to take such risks.
The incentive compensation plans in which our employees are eligible to participate are designed to encourage achievement of challenging targets aligned with our overall corporate strategy with upside opportunity for higher levels of performance, while mitigating potential risks. The following factors help mitigate risk:
•
performance objectives underlying awards are designed to focus executive performance on long-term stockholder value creation and balance between financial and strategic targets and short-and long-term time horizons for achievement;
•
cash bonuses to our executives and other employees represent just one element of our employees’ total compensation;
•
cash bonuses to our executives and other employees are only paid if established performance metrics are achieved and/or the underlying operating unit is profitable;
•
our stockholder-approved incentive plan limits the size and/or value of the short- and long-term incentive awards made thereunder that any individual may receive for any given year; and
•
equity awards, which represent a meaningful portion of the compensation paid to our executives, are generally subject to multi-year vesting schedules, and any vesting in respect of underlying performance measures is capped.
We also have a number of governance policies in place that mitigate compensation-related risks, including:
•
cash-based incentive awards generally require at least two levels of approval (including, in the case of any award to an executive officer, Compensation Committee approval and, for any executive other than himself, the chief executive officer’s approval);
•
all equity-based awards to any employee require Compensation Committee approval, in addition to any management-level approval (e.g., for any executive other than himself, the chief executive officer’s approval);
•
written documentation underlying all of our cash-based incentive programs for our principal operating units;
•
our Compensation Committee annually reviews and approves the equity award guidelines for all eligible employees of the Company;
•
our “clawback policy,” which can be viewed on our website at
http://investor.activision.com/corporate-governance.cfm
, pursuant to which performance-based compensation to an executive may be recovered in the event of an earnings restatement due to his or her misconduct to the extent to which the amounts paid were in excess of what would have been paid had the restated numbers been used to determine payments;
•
provisions in our equity award agreements pursuant to which, should an executive officer breach his or her employment agreement with the Company, including his or her post-termination obligations, certain realized gain in respect of his or her awards may be recovered;
•
stock ownership guidelines for our executive officers and the President and/or CEO of each of Activision, Blizzard, and King, which require each person subject to those guidelines to obtain and maintain equity ownership with a value equal to a specified multiple of his or her base salary (which guidelines are expected to be satisfied within five years of the date on which he or she became subject to them (e.g., upon an executive officer’s election));
•
our insider trading policies, which prohibit “shorting” our securities, engaging in “puts,” “calls,” or other hedging transactions involving our securities or using margin accounts with our securities; and
•
our Code of Conduct, compliance with which must be certified by every employee on an annual basis.
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Stockholder Engagement Process
The Company regularly engages with key stockholders to solicit feedback as part of an effort to remain aware of our stockholders’ perspectives with respect to our executive compensation and corporate governance practices, as well as any other matters of importance to them. These efforts enhance the ongoing communications we have with our stockholders regarding our financial and operational performance.
In advance of last year’s annual meeting, members of our management reached out to stockholders who collectively held approximately 65% of our Common Stock and spoke with each such holder who was willing to speak with us. Again, in the fall of 2018, in an effort to gain additional perspective, members of our management reached out to stockholders who collectively held approximately 65% of our Common Stock and spoke with each such holder who was willing to speak with us. Our stockholders gave us feedback on our executive compensation program (please see “Executive Compensation—Compensation Discussion and Analysis—Overview—Stockholder Engagement and Our 2018 Stockholder Advisory Vote on Executive Compensation” below).
The Company reviews feedback sent to us from any of our stockholders, no matter the size of their holdings. If you would like to communicate directly with our full Board, our independent directors, any committee of our Board, any other group of directors or any individual director, you may send written correspondence addressed to such director or directors in care of our Corporate Secretary at Activision Blizzard, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405.
We take the feedback received from stockholders seriously and have taken actions that have advanced our compensation and corporate governance practices in a manner that we believe is both responsive to that feedback and appropriate for the Company. We will continue to incorporate such feedback into our decision-making processes.
Our Executive Officers
Biographical summaries for our executive officers (including for Mr. Kotick, for whom a biographical summary is also set forth under “Proposal 1—Election of Directors” above) can be found in Item 1 of our Annual Report on Form 10-K for the year ended December
31, 2018, filed with the SEC on February 28, 2019 (our “2018 10-K”).
Executive Succession Planning
As a part of various sessions during the year, our Board focuses on human capital, including by conducting formal reviews of our executive team, engaging in succession planning for our chief executive officer and other senior-most officers, and reviewing our overall organizational structure. In these sessions, among other things, our Board reviews the assumptions, processes, and strategy for expected and unexpected events which may result in the need to change our senior executive management team. Our Board’s goals are to have a process for effective executive development and succession and to be prepared for both the unexpected loss of a key leader and planned changes to our management team.
Stock Ownership Guidelines
In order to align the interests of our management with those of our stockholders, we believe that each of our executive officers should maintain a meaningful ownership stake in the Company. Accordingly, the Compensation Committee has adopted guidelines providing that our chief executive officer is expected to beneficially own shares of our Common Stock with a value at least equal to ten times (i.e., 10x) his or her then-current annual base salary and that each other executive officer, as well as the President and/or CEO of each of Activision, Blizzard, and King, is expected to beneficially own shares of our Common Stock with a value at least equal to his or her then-current annual base salary.
The individuals subject to these guidelines are expected to accumulate the required stock within five years (so that any person who has been subject to the guidelines since the date on which these guidelines were adopted in 2012 should be in compliance, and any person who subsequently became subject to them (e.g., upon his or her election as an executive officer) has five years from the date on which he or she became subject to them to be in compliance). Further, if such a person does not satisfy these guidelines within the five-year period, then, until he or she satisfies the guidelines, he or she will be required to hold 50% of the net shares received upon exercise of stock options or upon the vesting of restricted share units awards received, provided such shares received are under equity awards made after the adoption of the ownership guidelines and that such awards are, per their terms, explicitly subject to them.
As of April 1, 2019, each named executive officer who, as of that date, had been an executive officer of the Company for five or more years satisfied these guidelines.
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Political Activities
Pursuant to our Code of Conduct, Company resources may not be used for employees’ personal political activities, and lobbying activities are permitted only in compliance with applicable law and by individuals designated to represent the Company in such capacity. Trade associations of which the Company is a member may take a stance on legislative matters or engage in lobbying on specific issues.
Corporate Governance Principles and Policies
Our Corporate Governance Principles and Policies establish a framework for the Board’s exercise of its duties and responsibilities in service of the best interests of the Company and our stockholders. They address, among other things, the role of our Board, the composition of our Board and that of its standing committees, meetings of the Board and its committees, and director stock ownership requirements. You can access our Corporate Governance Principles and Policies on our website at
http://investor.activision.com/corporate-governance.cfm.
Code of Conduct
We have a code of ethics—our Code of Conduct—which applies to all of our directors and employees worldwide, including our chairman, chief executive officer, chief financial officer, and chief accounting officer. We also have a chief compliance officer, who administers our ethics and compliance program. You can access our Code of Conduct on our website at
http://investor.activision.com/corporate-governance.cfm.
Furthermore, we will post any amendments to, or waivers of, the Code of Conduct that apply to our chairman, chief executive officer, chief financial officer, or chief accounting officer, and any other related information, on that website
.
Additional Corporate Governance Documentation
In addition to finding our Corporate Governance Principles and Policies, Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Code of Conduct, and Policy on Recoupment of Performance-Based Compensation Related to Certain Financial Restatements on our website at
http://investor.activision.com/corporate-governance.cfm
, you can also find many of our other corporate governance documents. Please see “Helpful Resources” below for more information.
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Diversity and Inclusion Initiatives
We aspire to have an inclusive culture where diversity is embraced and everyone can thrive. We believe this is one of the reasons why, for five consecutive years, Activision Blizzard has been recognized as one of the “100 Best Companies to Work For” by Fortune magazine. Activision Blizzard also earned a top score of 100 on the 2019 Human Rights Campaign Foundation’s Corporate Equality Index and the distinction of being one of the “Best Places to Work for LGBTQ Equality” in our inaugural year of participation. We are proud of these accolades because we believe that the most innovative work comes from a culture in which all employees can be their full selves.
Our efforts around diversity and inclusion focus on five strategic areas:
•
Our
People
—In order to create products that attract a growing global audience, it is important that our employees reflect that diversity. While we define diversity in its broadest sense to include characteristics seen and unseen, we know representation at all levels of the organization matters. Our talent acquisition efforts aim to attract, build relationships with, and recruit diverse talent. To that end, we partner with organizations like Grace Hopper and Women in Games International. We also continue to focus on connecting with underrepresented groups through our University Relations programs, where we have continued to increase our representation of women and underrepresented minorities.
•
Our
Leaders
—Our leaders create environments in which their teams are empowered to embrace diversity and inclusion. In 2018, our senior leadership attended “Inclusive Leadership Experience” workshops which were designed to explore unconscious bias and reinforce the characteristics and behaviors of an inclusive leader. This year we intend to extend the workshop to a broader population, in order to further develop this capability with the knowledge and tools needed to lead inclusively.
•
Our
Culture
—Across our entire organization, including Activision, Blizzard, King, and our corporate headquarters, we continue to expand employee resource groups to drive cultural awareness, professional development, networking, community involvement, and player connections. In 2018, we celebrated various heritage moments, including our annual Veterans Day of Service, an International Women’s Day celebration, and a PRIDE celebration at the Activision Blizzard headquarters. Further, Blizzard hosted an “Inclusion Nexus” for the nearly 40,000 people who visit its annual BlizzCon event to share with them how we value diversity and inclusion at Blizzard, in the gaming industry, and in games themselves. During this year’s Game Developers Conference, we hosted our 2nd annual D&I Mixer for employees from across the enterprise. We will continue to celebrate key diversity and inclusion moments through our employee resource groups across the organization.
•
Our
Content
—We believe that inclusive game design is an opportunity for us to lead the industry and influence more open and inclusive gaming communities. King has developed a unique training tool designed to help its employees assess the diversity of the game characters they create, which is now being tested across the broader Activision Blizzard organization. Further, another character from Overwatch, Soldier: 76, was identified as gay, making him the franchise’s second openly LGBTQ character. Creating more diverse characters is only part of what it means to be more inclusive in game design. We are also focused on ways to make our games more accessible to gamers with a wide range of disabilities, including physical, visual, auditory, or cognitive disabilities, with the goal of creating content and experiences that welcome all players.
•
Our
External
Communities
—We see the opportunity to drive positive impact outside our walls through external communities and partners. Last year, Activision Blizzard established a fellowship through Minds Matter of Los Angeles, a non-profit organization that offers college prep programs for students in under-resourced communities. In 2019, King became the first UK-based gaming company to sign onto the “Tech Talent Charter,” a pledge that aims to improve industry diversity in the UK workforce. Across the company, we focus on the next generation of talent through programs that provide young people in underserved communities with exposure to education and career opportunities in science, technology, engineering, and mathematics (STEM). In 2018, Blizzard again partnered with “Girls Who Code,” an organization focused on closing the gender gap in technology, to sponsor two major initiatives, including a seven-week program hosted at Blizzard headquarters for girls to learn to code and gain exposure to technology jobs. For the fourth year in a row, King partnered with Diversi, a nonprofit organization working for greater diversity in gaming, to award 15 female students full scholarships to the Game Developers Conference, with a tailored development program and special access to industry champions. Our University Relations team worked with STEM Advantage, an organization that mentors and prepares women and underserved communities to pursue careers in STEM, in selecting participants for our upcoming 2019 intern program.
While we have made great strides in our diversity and inclusion efforts, we understand and embrace that there is still work to be done, and it remains a priority for us. Our growth is driven by our ability to innovate. Our ability to innovate is enhanced by diverse teams working in an inclusive environment. By firmly anchoring diversity and inclusion in our growth strategy, we focus our efforts to drive meaningful change in all the worlds in which we live, work, and play.
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EXECUTIVE COMPENSATION
The following discussion and tables set forth information with regard to compensation for services rendered by the named executive officers included in the “Summary Compensation Table” below (collectively, our “named executive officers” or “NEOs”) in all capacities to us and our subsidiaries during 2018.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material elements of our executive compensation program and the rationale for the program elements and decisions, through:
•
describing the business environment in which we operate and the resulting requirements for talent;
•
summarizing our compensation principles and objectives;
•
outlining our decision-making approach related to executive compensation; and
•
describing the elements and rationale behind our compensation programs and awards for 2018, as well as changes made for 2019.
This CD&A includes:
Overview
The Compensation Committee oversees Activision Blizzard’s compensation plans and policies, approves compensation for our executive officers, and administers our stock compensation plans. This Compensation Discussion and Analysis describes our executive compensation principles and programs, as well as compensation-related actions taken during 2018 for our named executive officers. For 2018, our named executive officers are:
•
Robert Kotick, our Chief Executive Officer;
•
Spencer Neumann, our former Chief Financial Officer;
•
Collister Johnson, our President and Chief Operating Officer;
•
Michael Morhaime, the former President and Chief Executive Officer of Blizzard;
•
Brian Stolz, our Chief People Officer;
•
Chris B. Walther, our Chief Legal Officer; and
•
Riccardo
Zacconi, the Chief Executive Officer of King.
We
terminated Mr. Neumann’s employment effective as of December 31, 2018, and Mr. Morhaime ceased to be an employee of
the Company on April 7, 2019. Further, in 2018, the heads of our operating units
ceased to be categorized as “executive officers” for purposes of SEC rules, and Messrs. Morhaime and Zacconi are
included as named executive officers in accordance with SEC rules as former executive officers who would have been designated
as NEOs had they been serving as executive officers at the end of the fiscal year.
2018 Business Performance
Based on a number of metrics, 2018 was a strong year for us. For example, during 2018:
•
Net revenues were a record $7.50 billion.
•
Net revenues from digital channels were a record $5.79 billion.
•
Earnings per diluted share were a record $2.35.
•
Operating income was $1.99 billion.
•
Operating cash flow was $1.79 billion.
•
Net bookings
(1)
were a record $7.26 billion.
•
Net bookings
(1)
from digital channels were a record $5.72 billion, and in-game net bookings
(1)
were a record $4.2 billion.
•
In the fourth quarter, we had 356 million monthly active users (“MAUs”),
(2)
53 million of which were at Activision, 35 million of which were at Blizzard, and 268 million of which were at King.
(1)
Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals.
(2)
We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user.
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•
Call
of Duty was again the number-one selling console franchise worldwide for the year, a franchise feat accomplished for nine of the
last 10 years.
(3)
In its launch quarter,
Call of Duty: Black Ops 4
sold-through
more units than
Call of Duty: Black Ops III
, with PC units more than tripling. We released
Call of Duty: Black Ops 4
on PC through Blizzard’s Battle.net for the first time in franchise history.
•
Spyro
Reignited Trilogy
had a strong launch, and
Crash Bandicoot N. Sane Trilogy
passed 10 million units sold-in since its
2017 release, highlighting the enduring nature of Activision’s classic franchises.
•
World
of Warcraft: Battle for Azeroth
set a new day-one franchise record with more than 3.4 million units sold-through.
•
The first season of the Overwatch League culminated in its Grand Finals at Barclays Center in New York in June, which had a sold-out live audience and was watched by millions of viewers worldwide on TV networks and streaming platforms. We sold another eight Overwatch League teams ahead of the second season, which began in February 2019, meaning we now have 20 city-based teams owned by some of the most experienced traditional sports and esports partners in the world.
•
Candy
Crush Saga
was the highest-grossing title in U.S. mobile app stores in 2018, and King had two of the top-10 highest-grossing
titles in the U.S. mobile app stores for the year, a feat that it has now achieved for five years in a row.
(4)
•
Advertising in the King network was profitable each quarter and continued to build momentum, with quarterly revenue growing sequentially throughout the year.
However, we did not achieve all the goals we set for ourselves. As a result, consistent with our pay-for-performance approach, overall CAIP bonus payments to our NEOs ranged between 52% and 103% of target for the year and, for the portion of the outstanding equity awards granted to our NEOs that had the potential to vest based on 2018 financial performance objectives, achievement, as a percentage of target, ranged from 0% to 100%.
Our Relative Total Shareholder Return
The following graph compares the cumulative total shareholder return (“TSR”) on our Common Stock, the Nasdaq Composite Index, the S&P 500 Index, and the RDG Technology Composite Index. The graph assumes that $100 was invested on December 31, 2013, and that dividends were reinvested daily. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
This
performance
graph
shall
not
be
deemed
“filed”
for
purposes
of
Section
18
of
the
Exchange
Act
or
otherwise
subject
to
the
liabilities
under
that
Section,
and
shall
not
be
deemed
to
be
incorporated
by
reference
into
any
filing
of
Activision
Blizzard,
Inc.
under
the
Exchange
Act
or
the
Securities
Act
of
1933.
(3)
Based on data from the NPD Group, GfK, GSD, and internal estimates, based on dollar sales of front-line games.
(4)
Based on U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for 2014–2018.
ACTIVISION BLIZZARD, INC.
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Our Corporate Strategy
Our executive compensation program plays a key role in our financial and operational success. We place great importance on our ability to attract, retain, motivate, and reward talented executives who can continue to grow our business by putting focus on the four key strategic drivers of our business:
•
Strong
cadence
of
major
content
releases
: We are focused on releasing high quality major content for our key internally owned franchises more frequently, to invigorate our communities and bring in new audiences.
•
Growing
stream
of
live
operations
: We continue to grow our “live operations” capabilities, delivering content, services, features, and events, to engage our communities and drive in-game revenues.
•
Expansion
of
our
franchises
to
mobile
: We are building on our mobile leadership as we extend our acclaimed console and PC franchises to the largest and fastest-growing gaming platform.
•
Broader
franchise
engagement
models
: We are expanding the reach, engagement, and monetization of our franchises through initiatives in esports, in-game advertising, and consumer products.
Our executive compensation program is designed to reward the achievement of specific financial objectives and the creation of long-term stockholder value, and the strategic drivers above are the underpinnings of the individual strategic objectives established for our executives.
Aligning Pay with Performance
A
significant portion of the compensation our executive officers receive is in the form of performance-based bonuses and
performance-aligned equity awards. Executive officers are rewarded according to the financial performance of the
Company and/or its operating units, as well as the level at which they achieve the strategic objectives our Compensation
Committee sets for each of them. This approach is designed to hold our executive officers accountable for our performance
and thereby align their interests with those of our stockholders. The following table illustrates certain elements of our
executive compensation program, with a focus on metrics that are most prevalent among our executive officers.*
Name
|
Program
|
Performance
Period
|
Service
Period
|
Performance
Assessment
|
Pay-For-Performance Linkage
|
Annual
incentive
|
CAIP
|
1 year
|
~1.2 years from beginning of performance year
|
AB Adjusted OI, EPS, FCF
|
Annual assessment of performance versus objectives established at beginning of year
|
Blizzard Profit
Sharing Plan
|
Profitability
|
Direct alignment to business unit profitability
|
King Profit Sharing Plan
|
Long-term
incentive
|
PSUs (OI)
|
1 year
|
Varies, generally up to 3.25 years from grant
|
AB Adjusted OI
|
Assessment of performance versus objectives established for relevant performance period
|
PSUs (Long-Range Strategic Plan)
|
3-year cumulative
|
Varies, generally 3.5 years from grant
|
Assessment of financial objectives set forth in the Company’s long-range strategic plan
|
Stock
Options
|
10-year life (contingent on employment)
|
Varies, generally up to 3 years from grant
|
N/A
|
Direct alignment with shareholder interests, as any value appreciation is contingent on stock price performance
|
*
|
This table is not intended to be exhaustive. For example, long-term incentives granted to our NEOs assessed 2018 performance against financial
metrics for AB Adjusted Operating Income, AB Adjusted EPS, AB Adjusted EPS growth, Blizzard Adjusted Operating Income, King
Adjusted Operating Income, and King Adjusted EBITDA.
|
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Our
2018
Financial
Performance.
The Compensation Committee believes that financial objectives aligned with our AOP for a given year are a robust and
meaningful measure of the performance of our executives. The process for creating our AOP is rigorous and includes a detailed
review of market trends, a “bottoms-up” build of financial objectives based on each franchise’s content
plans, and the creation of a detailed budget with respect to all anticipated operating costs. In some instances, our
financial objectives for a year may be lower than the prior year’s objectives or results as underlying variables, like
market trends, the volume of titles or other content we plan to release, or our level of planned investment in growth
initiatives, change.
Set forth below are certain of the Activision Blizzard-level financial metrics used to assess our named
executive officers’ 2018 performance:
Financial Performance Measures
(1)
(dollars in millions, except share-based amounts)
|
Performance Goals and Actual Results
|
AOP
Goal
|
Actual
Results
|
Actual
Achievement
|
|
AB Adjusted Operating Income
|
$
|
2,727
|
$
|
2,482
|
91%
|
|
AB Adjusted EPS
|
$
|
2.68
|
$
|
2.59
|
97%
|
|
AB Adjusted Free Cash Flow
|
$
|
1,660
|
$
|
1,682
|
101%
|
|
(1)
The corporate performance measures underlying 2018 performance-related compensation are non-GAAP measures. For more information on these non-GAAP measures,
including how these measures are calculated and why our Compensation Committee believes they are an appropriate way to assess our executives’ performance, see
“General—Financial Measures Used in this Proxy Statement—Financial Metrics Used to Measure 2018 Compensation-Related Performance” above.
|
Performance
Alignment
via
our
CAIP.
For 2018, each of our executive officers other than Mr. Zacconi was eligible for a bonus under the CAIP, contingent upon the executive’s achievement of the financial and strategic objectives set for him by the Compensation Committee at the beginning of the year. For 2018, financial metrics for all NEOs participating in the CAIP included profitability and free cash flow measures. For purposes of these financial metrics, our performance ranged from 78% to 101% of target, resulting in CAIP-related payouts for those metrics ranging from 0% to 101% of target, while performance against the strategic objectives ranged from 33% to 115% of target. The Compensation Committee did not apply incremental judgment or discretion in determining CAIP bonus payouts and, as such, they directly reflect performance against the specific objectives established by the Compensation Committee at the beginning of the year. As such, for 2018, Mr. Kotick received a CAIP-related payout equal to 70% of his target bonus, and our other NEOs received CAIP-related payouts ranging from 52% to 103% of their target bonuses.
The following tables illustrate the relationship between the Company’s 2018 financial performance, as measured by the Activision Blizzard-level financial objectives underlying the opportunities for our participating NEOs, and the payments awarded them based on both financial and strategic performance, as compared to the range of potential payments:
(1)
Maximum payout potential as a percentage of target as shown above represents the maximum bonus a participating NEO was eligible to receive under the CAIP with regard to the relevant metric. For further detail on the 2018 bonus opportunities under the CAIP for our participating NEOs, please see “—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” below. As discussed under “General—Financial Measures Used in this Proxy Statement” above, performance is measured by reference to non-GAAP measures.
(2)
The actual payout as a percentage of target shown above for each participating NEO represents the bonus amount specifically related to performance measured against his 2018 CAIP opportunity.
Please see “—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Incentive Opportunities under the CAIP” below for more information.
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Performance
Alignment
via
our
Profit
Sharing
Plans.
For 2018, Messrs. Morhaime and Zacconi were each eligible for a cash bonus contingent on the profitability generated by his operating unit, as well as, subject to his right to a specified minimum percentage of any profit sharing pool generated, our assessment of his contributions to his operating unit’s performance. As a result of his contributions and performance during 2018, Messrs. Morhaime and Zacconi each received a profit-sharing payment for the year. Please see “—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” below for more information.
Performance
Alignment
via
our
Equity
Awards.
Equity incentives to our NEOs for 2018 consisted of: (a) performance-based vesting restricted share units, each representing the conditional right to receive one share of our Common Stock upon the achievement of one or more specified performance objectives and continued employment through the stated vesting date (“PSUs”); and (b) stock options. All equity awards granted to our named executive officers during 2018 were aligned with performance, as they were all either PSUs with vesting contingent on the achievement of specified performance objectives or stock options, which are inherently performance-based, since any financial gain is conditioned upon the appreciation in the value of our Common Stock. In addition, all of the PSUs include a threshold level of performance (e.g., 85% of the objective) which, if not satisfied, will result in the cancellation of the award and a maximum level of performance (e.g., 125% of the objective) which, if exceeded, will not result in any additional vesting of the award. Further, each named executive officer had equity awards had the potential to vest based on 2018 financial performance objectives. Please see “—Elements of Our Executive Compensation Program for 2018—Equity Awards” below for more information.
Overall
Pay-For-Performance
Alignment
.
For 2018, 94% of the CEO’s total compensation, and 79% of the average total compensation of the remaining named executive officers, was performance-based, as illustrated below:
As a result of this strong pay-for-performance alignment, overall CAIP bonus payments to our NEOs ranged between 52% and 103% of target
for the year and, for the portion of the outstanding equity awards granted to our NEOs that had the potential to vest based on 2018 financial
performance objectives, achievement, as a percentage of target, ranged from 0% to 100%.
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Our Compensation Program Best Practices
We continue to implement and maintain best practices in our executive compensation programs and policies. These practices include:
•
Performance-Aligned
Equity
Awards
—We award performance-based vesting restricted share units (i.e., PSUs) with vesting contingent on the achievement of specified performance objectives and stock options, for which any financial gain is conditioned upon the appreciation in the value of our Common Stock;
•
Multi-Year
Vesting
of
Equity
Awards
—We generally make equity awards to our executive officers that vest over multiple years, which encourages a focus on long-term stockholder value creation;
•
Conservative
Granting
of
Equity
—In an effort to minimize potential stockholder dilution, our Compensation Committee grants equity incentives judiciously and reviews our share usage (i.e., our so-called “burn rate”) quarterly;
•
No
Guaranteed
Incentive
Bonuses
—The Compensation Committee exercises discretion in determining final award payments under the CAIP, and no bonuses are paid under that plan if a minimum financial objective is not achieved, while our profit sharing plans, by definition, may only result in bonus payments if the applicable underlying operating unit is profitable;
•
Stock
Ownership
Guidelines
—We have meaningful stock ownership guidelines for our executive officers and directors;
•
Limited
Perquisites
and
Retirement
Benefits
—We provide limited perquisites to our executive officers and the only retirement plans they participate in are our 401(k)/qualified defined contribution retirement plans;
•
Formal
Risk
Management
Programs
—We maintain strong internal controls, governance, and review structures, as well as formal risk management programs;
•
No
Hedging
of
Company
Stock
—We prohibit our employees from directly or indirectly “shorting” our securities, engaging in “put” or “call” or other “hedging” transactions involving our stock, or establishing or using a margin account with a broker-dealer to trade our securities;
•
“
Clawback”
Policy
on
Incentive
Awards
—In the event of an earnings restatement, we may “claw back” certain performance-based compensation (including both short-term and long-term incentives) paid to the executives responsible;
•
Independent
Consultant
Reporting
Directly
to
Compensation
Committee
—The Compensation Committee engages the services of an independent compensation consultant that has no other relationship with the Company or its management; and
•
Comparator
Group
Review
—The Compensation Committee monitors our comparator group annually to ensure it continues to reflect an appropriate mix of the industry segments in which we compete, or plan to compete, for key talent.
Stockholder Engagement and Our 2018 Stockholder Advisory Vote on Executive Compensation
The Company regularly engages with key stockholders to solicit feedback as part of an effort to remain aware of our stockholders’ perspectives with respect to our executive compensation and corporate governance practices, as well as any other matters of importance to them. We seek to establish sustained, long-term, and robust stockholder engagement on these topics to ensure our practices align with our stockholders’ interests. Our direct engagement with stockholders, during 2018 as well as in previous years, has influenced a number of important actions taken by our Compensation Committee with respect to compensation for our executive officers.
In conducting our engagement in advance of the 2018 annual meeting, members of our management team reached out to stockholders who collectively held approximately 65% of our Common Stock and spoke with each such holder who was willing to speak with us. Ninety-two percent of the votes cast at the 2018 annual meeting of our stockholders were voted in favor of our advisory “say-on-pay” proposal.
Following the 2018 annual meeting, we continued engagement during the fall of 2018, again reaching out to stockholders who collectively held approximately 65% of our Common Stock to gain additional perspective from them on our executive compensation and corporate governance practices, and any other topics about which they desired to engage. The feedback we received was positive and echoed the results of our recent advisory “say-on-pay” proposal.
A summary of common themes we heard from our stockholders throughout the year with respect to our executive compensation, which was presented to the Compensation Committee, is set forth below, along with key elements of our existing programs.
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Themes We Heard from Our Stockholders
|
|
Highlights of Our Compensation Programs
|
•
Endorsement of continued focus on pay-for-performance alignment with our strategic objectives
•
Continued focus on aggregate levels of compensation paid to our executives
•
Calls for reduced complexity within certain contract provisions
•
Calls for limitation of overlapping pay opportunities
•
Appreciation of our Compensation Committee’s responsiveness and actions to improve our compensation programs
|
|
•
Strong pay-for-performance alignment
|
|
–
94% of total compensation for our Chief Executive Officer for 2018 was performance-based
–
No increase in our Chief Executive Officer’s base salary since 2017
–
No awards of time-based vesting restricted share units to any NEO during 2018
–
A 12% decrease in the annual bonus paid to our Chief Executive Officer under the CAIP for 2018 as compared to 2017, reflecting financial and strategic performance falling short of expectations
|
|
•
Mix of compensation that incentivizes both our short-term strategic objectives (e.g., through cash bonus programs) and long-term strategic objectives (e.g., via equity incentives)
•
Use of clearly-defined performance goals, both short- and long-term, which provide a direct alignment between our business strategy, financial results, and incentive payments
•
Grant performance-based equity awards contingent on cumulative three-year performance for certain executives
•
Utilize certain equity awards that provide for vesting beyond any applicable contract end dates
•
Fiscally responsible and judicious approach to equity usage, with three-year average equity usage among the bottom one-third of our comparator group
|
Actions Taken in Response to 2018 Shareholder Engagement.
While our Compensation Committee and stockholders, as
demonstrated by their vote and feedback received during our engagement, are generally pleased with our compensation programs,
the most actionable feedback we received related to “overlapping pay opportunities for our CEO.” As such, in
determining the 2018 equity award for Mr. Kotick, our Compensation Committee chose a balanced mix of new performance metrics
that were intended to further strengthen the pay-for-performance alignment of his incentives, with the vast majority of these
awards eligible to vest outside of his current contract term, through:
•
|
Stock Options: incentivizing an absolute increase in our stock
price;
|
•
|
PSUs (Relative TSR): incentivizing an increase in our stock price
relative to the S&P 500; and
|
•
|
PSUs (AB Adjusted EPS): incentivizing our profitability over a
cumulative three-year period.
|
For more information, please see “—Employment Agreements—Robert Kotick—Equity
Awards—2018 Equity Awards” below.
Given the support we received from 92% of our stockholders at the 2018 annual meeting, positive feedback
we received from our stockholders, and input we received from our independent compensation consultant, among other considerations,
the Compensation Committee elected to keep our executive compensation principles and programs for 2018 generally consistent with
the prior year.
We are committed to continuing our active engagement with stockholders, in a manner that is both responsive
to the input we receive and appropriate for the company, as well as preserving our emphasis on pay-for-performance.
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Compensation Principles and Objectives
Our Compensation Principles
|
Align
Compensation
with
Stockholder
Interests
—A substantial portion of an executive’s compensation opportunity is variable, stock-based, and linked to performance metrics that are intended to increase stockholder value, so that executive compensation is aligned with the interests of stockholders.
|
Pay
for
Performance—
Annual and long-term incentive awards are linked to the Company’s financial performance, incentivizing executives to drive corporate performance.
|
Pay
Competitively
—We offer competitive total compensation in order to attract, retain, and motivate top executives with the characteristics needed to operate in our industry.
|
The Compensation Committee regularly reviews and refines our executive compensation program to ensure it supports our compensation principles. The following are the current objectives underlying the compensation of our executive officers:
What
We
Do
|
|
We
Balance
Near-Term
and
Long-Term
Strategic
Objectives
—We provide a mix of compensation to incentivize both our short-term strategic objectives (e.g., through cash bonus programs) and long-term strategic objectives (e.g., via equity incentives).
|
|
We
Create
Clearly
Defined
Short-
and
Long-Term
Goals
Aligned
with
Our
Strategy—
Performance goals, both short- and long-term, are clearly defined to provide clear alignment between our business strategy, financial results, and incentive payments.
|
|
We
Balance
the
Objectives
Underlying
Incentive
Bonuses
—The CAIP opportunities for our participating executive officers include both financial and strategic objectives.
|
|
We
Use
Employment
Agreements
to
Attract
and
Retain
Key
Executive
Talent
—We use employment agreements to attract and retain executive talent.
|
|
We
Can
Claw
Back
Improperly
Earned
Compensation
—In the event of an earnings restatement, we may “claw back” performance-based compensation (including both annual and long-term incentive awards) paid to the executives responsible.
|
|
We
Use
Two-Tier
Approval
for
Incentive
Awards
—We generally require at least two levels of approval for incentive awards (i.e., management and our Compensation Committee).
|
|
We
Use
an
Independent
Compensation
Consultant
—Our Compensation Committee receives advice and analysis regarding executive compensation from a consultant that is independent and performs no other work for the Company.
|
|
We
Provide
Limited
Benefits
—We provide modest supplemental health and welfare benefits, retirement benefits, and perquisites.
|
What
We
Don’t
Do
|
|
We
Don’t
Put
Our
Executives
Before
Our
Stockholders
—Executive compensation that is variably linked to the performance of the Company helps to align the goals and interests of executive officers and stockholders.
|
|
We
Don’t
Incentivize
Excessive
Risk
Taking
—Performance goals linked to our executive compensation do not encourage or incentivize excessive risk taking or risk exposure.
|
|
We
Don’t
Use
Arbitrary
Performance
Metrics
—We do not use arbitrary or unreliable measurements of performance in assessing performance-based executive compensation.
|
|
We
Don’t
Make
Biased
Compensation
Decisions
—Reviewing our executive and director compensation plans with an independent consultant introduces an unbiased and professional perspective on executive compensation.
|
|
We
Don’t
Generally
Provide
Change-of-Control
Protection
—Our
Chief Executive Officer and the chief executive officer of King are the only named executive officers entitled to any
change-of-control protection, and each would only receive it if terminated after a change of control (i.e., requiring a
“double trigger”).
|
|
We
Don’t
Gross
Up
Section
280G
Excise
Taxes
—Neither
Mr. Kotick nor Mr. Zacconi—our only two named executive officers entitled to a payment upon a change of control (and
then, only upon a subsequent termination of his employment)—is entitled to a gross-up in respect of any excise taxes
imposed under Section 280G of the Internal Revenue Code on those payments.
|
|
We
Don’t
Reprice
Stock
Options
—The Activision Blizzard, Inc. 2014 Incentive Plan (the “2014 Plan”), the plan under which all of our equity incentive awards are now granted, prohibits the repricing of “underwater” equity awards.
|
|
We
Don’t
Pay
Dividends
on
Unearned
Awards
—None of our equity awards are entitled to receive dividend equivalents, and we do not intend to grant such awards in the future.
|
|
We
Don’t
Guarantee
Salary
Increases
—None of our named executive officers are entitled to a guaranteed salary increase.
|
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Decision-Making Approach to Executive Compensation
Factors Influencing Compensation Decisions
Our Compensation Committee’s believes that pay levels should be determined using a holistic approach, involving an evaluation of a wide variety of factors, rather than targeting a specific percentile of the compensation paid to the executives at companies against which we compete, or may compete, for key talent. These factors include, but are not limited to:
•
Labor
Market
Conditions
—An assessment of the competitive market to provide compensation packages that allow us to attract, retain, and motivate the key executive talent necessary for our long-term success, which may include a review of current executive compensation trends and best practices, as well as compensation data from our comparator group and/or published surveys.
•
Individual
Considerations
—An evaluation of the executive’s individual skill set and experience, his or her historical performance and expected future contributions to the Company, and the potential impact of an executive’s departure if he or she were to leave the Company.
•
Company
Performance
—A review of our recent and historical financial and operating performance, as well as future strategic initiatives, and the executive’s role in helping drive that performance.
•
Internal
Pay
Equity
—A review to determine if compensation levels are internally fair and equitable relative to his or her role, responsibilities, and working and/or reporting relationships.
•
Stockholder
Feedback
—The feedback the Compensation Committee has received from stockholders with respect to our executive compensation practices.
The Compensation Committee does not use a predefined framework to weigh the importance of each of these factors and the emphasis placed on specific factors may vary from executive to executive. Ultimately, the terms on which any given executive officer is employed reflect the Compensation Committee’s independent judgment as to the amount and form of compensation necessary to attract, retain, and motivate that individual.
Highly Competitive Business Environment and Associated Talent Requirements
We operate in the interactive entertainment industry, which sits at the convergence of the gaming, entertainment, and technology sectors. Our industry is intensely competitive and constantly evolving. It features a number of unique characteristics, including:
•
a dependence on a relatively small number of titles for a disproportionate level of revenues and profits;
•
an increasing importance on building and growing franchises with sustained game quality and ongoing content releases;
•
rising costs of development, partially due to increasingly complex technological requirements; and
•
a global consumer base that expects entertainment content delivered through an increasingly varied range of channels.
We believe that, in order to succeed in this fast-changing business environment, we require executive talent with very specialized qualifications, including the following:
•
significant global experience managing complex brands and franchises;
•
in-depth knowledge of sophisticated strategies and operational models in the digital and entertainment segments; and
•
aptitude for, and experience in, managing entertainment and technology products and talent in a rapidly changing, high-risk environment.
Finding top executives with these characteristics requires recruitment of executives from a variety of industries (e.g., gaming, entertainment, and technology), including some that are larger and more mature than ours, and, therefore, the Compensation Committee takes into consideration a wide variety of factors, including compensation paid to executives at companies against which we compete, or may compete, for such talent.
Use of Employment Agreements
Employment agreements are common in the broader entertainment industry, from which we recruit talent, and we believe that having multi-year employment agreements with our executives is critical in enabling us to attract and retain them. Our employment agreements with our executives specify base salary, incentive opportunities, and the terms and conditions of any equity awards, and include provisions regarding the consequences of termination of employment and restrictive covenants, including non-competition and non-solicitation provisions. The terms of each of these agreements have been approved by the Compensation Committee, which utilized its judgment to determine the appropriate amount and form of compensation and other terms of employment necessary to recruit, retain, and motivate the executive, based in part upon the specific negotiations with the executive. Please see “—Employment Agreements” below for further information about the agreements with our named executive officers.
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Comparator Company Data and Compensation Surveys Referenced
The Compensation Committee has selected 16 comparators against which it benchmarks our executive compensation:
Adobe Systems Inc.
|
Netflix, Inc.
|
Booking Holdings Inc.
|
PayPal Holdings, Inc.
|
CBS Corporation
|
Salesforce.com, Inc.
|
Discovery Communications, Inc.
|
Sirius XM Holdings Inc.
|
eBay Inc.
|
Symantec Corporation
|
Electronic Arts Inc.
|
Twenty-First Century Fox, Inc.
|
Expedia, Inc.
|
The Walt Disney Company
|
Intuit Inc.
|
Viacom, Inc.
|
The Compensation Committee, in evaluating our executive compensation program, utilizes compensation data obtained from SEC filings made by companies in our comparator group, including compensation elements of the named executive officers of those companies, company-wide equity usage rates and potential dilution from equity plans.
In selecting this comparator group, the Compensation Committee considered: companies with whom we have historically directly competed for talent; participants within our industry sectors, as well as companies in adjacent industries; companies with comparable business models and organizational complexity; companies with comparable geographic footprints; and companies with comparable annual revenues and/or market capitalization. Among these comparator companies, our 2018 revenues of $7.5 billion approximate the 26
th
percentile (by reference to the most recently available annual data for each), while our market capitalization approximated the 47
t
h
percentile (as of April 2019).
Our management and Compensation Committee regularly monitor our comparator group, as the nature and scope of our business and potential talent pool evolve, to ensure the companies to which we reference continue to reflect an appropriate mix of the industry segments in which we compete, or may compete, for key talent.
In reviewing the compensation of our executive officers, the Compensation Committee, with the support of its independent compensation consultant and our management, also annually consults third-party surveys prepared by compensation specialists with respect to companies with comparable revenues, market capitalization, industry focus, number of employees, and other similar business-related factors in order to discern broader compensation trends in the market. During 2018, the surveys referenced included
ones published by Radford.
These additional sources of data provide robust supplemental pay information that is not publicly available.
This compensation data from
our comparator group and published surveys helps the Compensation Committee understand the sectors in and with which we compete
for talent, providing it with an important frame of reference. The Compensation Committee, as it deems appropriate, considers the
compensation practices of any other companies with which we compete for executive talent. Furthermore, the Compensation Committee
evaluates broader industry trends and practices to determine the appropriate elements of compensation and the effective design
of each element. As noted above, our Compensation Committee does not target a specific percentile of the compensation paid
to the executives at companies against which we compete, or may compete, for key talent but, rather, believes that pay levels should
be determined using a holistic approach, involving an evaluation of a wide variety of factors.
Roles of the Key Participants in the Executive Compensation Decision-Making Process
Decisions regarding compensation for our executive officers are at the discretion of our Compensation Committee. To help inform these decisions, the Compensation Committee regularly reviews materials, advice, and analysis provided by our management and external compensation consultants in deciding on executive compensation matters, as described in more detail below.
Compensation Committee
•
Establishes our executive compensation principles.
•
Reviews and approves all compensation of our executive officers.
•
Has oversight of the Company’s long-term strategy for employee compensation.
•
Reviews and approves the corporate goals and objectives relevant to our chief executive officer’s compensation, evaluates his or her performance in light of those goals and objectives, and determines his or her compensation based on that evaluation.
•
Selects and monitors the Company’s comparator group.
•
Evaluates compensation-related information and recommendations provided by our management and outside advisors.
•
Annually reviews the compensation payable to our Board.
•
Administers our equity incentive plans, including:
–
approving equity award guidelines;
–
approving all equity awards; and
–
monitoring our equity usage and resulting potential dilution.
•
Reviews and approves executive officer employment and severance agreements.
•
Evaluates broad industry trends and practices.
•
Engages, retains, and, where appropriate, terminates its independent compensation consultants.
For additional information regarding the Compensation Committee, see “Corporate Governance Matters—Board of Directors and Committees—Board Committees—Compensation Committee” above.
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Compensation Committee’s Independent Compensation Consultant
•
Reports directly to the Compensation Committee and regularly attends Compensation Committee meetings.
•
Consults with the members of the Compensation Committee outside of formal committee meetings and without the participation of management, when requested by the Committee.
•
At the Compensation Committee’s direction, interacts with our management from time to time in order to obtain the information it deems necessary to form its recommendations to the Committee.
•
Provides the Compensation Committee advice on the appropriateness and market competitiveness of our executive and director compensation programs.
•
Presents third-party data and provides advice and expertise on director and executive compensation trends, pay programs and pay levels, and other emerging “best practices” relating to such compensation.
•
Analyzes materials provided by our management to the Compensation Committee to ensure that those materials are consistent with the Company’s principles with respect to director and executive compensation and reasonable vis-à-vis the Company’s comparator group.
•
Assists the Compensation Committee with its determination as to who should be included in the Company’s comparator group, and reviews current comparator group members.
Since October 2013, the Compensation Committee has retained Exequity as its independent compensation consultant.
Executive Officers and Management
•
Our management assists the Compensation Committee in formulating the Company’s compensation programs and plans, including by, among other things:
–
regularly advising the Compensation Committee with respect to our business strategies and operational goals and plans;
–
regularly making recommendations to the Compensation Committee on the Company’s compensation practices, including with respect to effective types of incentive rewards and the individual performance of our executives;
–
monitoring the Company’s comparator group and trends in the market; and
–
supporting the development of the materials for each Compensation Committee meeting.
•
Our chief executive officer reviews the performance of the Company’s executive officers and provides his or her recommendations to the Compensation Committee with respect to our officers’ compensation.
•
No member of our management has a direct role in determining his or her own compensation. Further, decisions pertaining to the compensation of our chief executive officer are reviewed and discussed by the Compensation Committee in executive session, without the presence of the chief executive officer or any other member of our management.
During 2018, the Compensation Committee consulted with our NEOs and our Chief Compliance Officer and Corporate Secretary, Jeffrey Brown.
Impact of Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code—Limits on Compensation Deductibility
Section 162(m) generally prevents a publicly held corporation from taking a U.S. tax deduction when compensation paid to a “covered employee” exceeds $1.0 million in any taxable year. Prior to the enactment of the Tax Cuts and Jobs Act, signed into law on December 22, 2017 (the “TCJA”), a corporation’s covered employees generally consisted of any person who was the chief executive officer at any time during the tax year and the next three most highly paid NEOs as of the last day of the taxable year, other than the chief financial officer, who was excluded. Further, before the TCJA was enacted, “performance-based” compensation was not subject to this limit on deductibility, provided such compensation met specified requirements. Deductibility of performance-based compensation under Section 162(m) was eliminated by the TCJA, effective January 1, 2018, subject to limited transition rules. In addition, the definition of “covered employees” under Section 162(m) was expanded as of January 1, 2018, to include any person who was the chief financial officer at any time during the relevant tax year and to provide that any person who was a covered employee as of January 1, 2017, or becomes a covered employee thereafter, will remain a covered employee in perpetuity.
As a result, for taxable years beginning after December 31, 2017, other than any compensation “grandfathered” under the TCJA transition rules, we will not be able to deduct any compensation in excess of $1 million paid to any of the executives described above. We have considered, and will continue to consider, the applicability of the transition rules to our executive compensation.
We continue to believe it is important that we retain the flexibility to structure compensation arrangements necessary to attract, retain, and motivate the best executive talent, even if such arrangements may result in non-deductible compensation expenses. We have not currently made any changes to our executive compensation program in response to the TCJA’s impact on Section 162(m).
Section 409A of the Internal Revenue Code—Limits on Deferral of Compensation
To the extent that any compensation paid or committed to any of our named executive officers constitutes a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code, the Compensation Committee intends to cause that compensation to comply with the requirements of Section 409A and to avoid the imposition of penalty taxes and interest upon the person receiving the compensation.
Accounting Considerations
The Compensation Committee also takes accounting considerations, including the impact of Accounting Standards Codification (“ASC”) Topic 718, into account in structuring compensation programs and determining the form and amount of compensation awarded.
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Elements of Our Executive Compensation Program for 2018
An overview of the primary elements of our executive compensation program and their purposes is presented below. Not all of these elements are applicable to all named executive officers. We aim to incentivize our executives to drive corporate financial performance by basing a significant portion of their compensation on achieving financial and strategic objectives. Our compensation principles allow us to attract, retain, and motivate the best talent in our industry, as evidenced by our performance.
Base Salary
In establishing the annual base salary rates for an executive officer, the Compensation Committee considers his or her role, his or her performance, salaries paid to the executive’s peers within the Company, and the target total compensation paid to executives in comparable positions at other companies by reference to data from our comparator group and published surveys. For information about our comparator group, see “—Decision-Making Approach to Executive Compensation—Comparator Company Data and Compensation Surveys Referenced” above.
None of our named executive officers had contractual entitlements to salary increases during 2018 (see “—Employment Agreements” below). Further, as noted below, Mr. Kotick’s annual base salary was not increased for 2018 or 2019.
Salary increases are generally only provided to an executive officer:
•
upon his or her entry into a new or revised employment agreement with the Company or one of its subsidiaries; or
•
in connection with our annual review of executive base salaries.
The table below reflects the salaries approved for 2018 and 2019 during our annual review process, along with any other adjustments during 2018 and 2019, to date:
Name
|
Salary as of
12/31/2017
($)
|
|
Changes
during 2018
(%)
(1)
|
|
|
Salary as of
12/31/2018
($)
(1)
|
|
|
Changes
during 2019
as of date hereof
(%)
(1)
|
|
Salary as of
date hereof
($
)(1
)
|
|
Robert Kotick
|
|
1,750,000
|
|
—
|
(2)
|
|
1,750,000
|
(2)
|
|
—
|
(2)
|
|
1,750,000
|
(2)
|
Spencer Neumann
|
|
850,000
|
|
+2.5
|
(3)
|
|
871,420
|
|
|
—
|
(4)
|
|
—
|
(4)
|
Collister Johnson
|
|
1,300,000
|
|
+2.3
|
(5)
|
|
1,329,640
|
|
|
+1.5
|
|
|
1,349,585
|
|
Michael Morhaime
|
|
1,367,105
|
(6)
|
+3.0
|
(6)
|
|
1,408,118
|
|
|
—
|
(7)
|
|
—
|
(7)
|
Brian Stolz
|
|
666,380
|
|
+3.0
|
|
|
686,371
|
|
|
+1.0
|
|
|
693,371
|
|
Chris B. Walther
|
|
725,609
|
|
+5.0
|
|
|
761,889
|
|
|
+11.0
|
|
|
845,697
|
|
Riccardo Zacconi
|
|
517,677
|
(8)
|
+3.5
|
|
|
535,795
|
(8)
|
|
—
|
|
|
535,795
|
(8)
|
(1)
Other than as discussed in footnote (7) below, any changes to base salary were effective in February of either 2018 or 2019, following our annual salary review during that year.
(2)
In accordance with his current employment agreement with us, dated as of October 1, 2016 (the “Kotick Employment Agreement”), Mr. Kotick’s annual base salary was decreased by 26% effective January 1, 2017. Mr. Kotick’s salary has not changed since that time. For more information on the Kotick Employment Agreement, see “—Employment Agreements—Robert Kotick” below.
(3)
The 2.5% increase approved for Mr. Neumann during our 2018 annual salary review is equivalent to a 3.0% annualized base salary adjustment, adjusted to reflect his May 30, 2017 date of hire.
(4)
We terminated Mr. Neumann’s employment effective as of December 31, 2018.
(5)
The 2.3% increase approved for Mr. Johnson during our 2018 annual salary review is equivalent to a 3.0% annualized base salary adjustment, adjusted to reflect his June 26, 2017 date of hire.
(6)
On January 1, 2018, the Blizzard Holiday Plan (a broad-based program for employees of Blizzard pursuant to which participants received a percentage of their salary at year-end) was eliminated. As such, the base salary reflected for Mr. Morhaime as of December 31, 2017, has been adjusted to reflect the inclusion of an amount equal to the payment he received under the Blizzard Holiday Plan for 2017 (i.e., $369,218).
(7)
Mr. Morhaime’s base salary was reduced to a rate of $2,500 per month (or $30,000 per year) effective January 1, 2019, in connection with his transition from serving
as the President and Chief Executive Officer of Blizzard to serving the Company in an advisory capacity. Mr. Morhaime ceased to be an employee of the Company on
April 7, 2019.
(8)
Mr. Zacconi is paid in British pounds. The base salaries in the table represent the £410,000 to which he was entitled as of February 2017, the £424,350 to which he was entitled as of February 2018, and the £424,350 to which he was entitled as of February 2019, in each case converted using an end of 2018 spot exchange rate of 1.262626 British pounds to the U.S. dollar.
|
Corporate Annual Incentive Plan and Other Performance-Based Bonuses
Incentive Opportunities under the CAIP
CAIP Plan Design: Driving Financial Results and Strategic Initiatives
Cash bonuses under our CAIP are designed to drive our financial results and to incentivize individual contributions toward operational and other strategic initiatives. To that end, for 2018, 60% of the target opportunity under the CAIP for our executive officers who participated in the plan was based on financial objectives and the remaining 40% was measured against three or four specific, measurable, and non-subjective annual strategic objectives established by the Compensation Committee at the beginning of the year. For 2019, 60% of the target opportunity for the participating executives will continue to be based on financial
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objectives and the remaining 40% will be measured against a broad set of key annual and long-term priorities established by the Compensation Committee.
These bonuses were historically structured to simultaneously achieve tax deductibility under Section 162(m) and allow the Compensation Committee flexibility in awarding pay that matches each executive’s actual performance. To achieve these goals, there was a single performance objective that, if met or exceeded, would allow for the payment of a bonus to each executive to the extent permitted under the 2014 Plan. Then, the Compensation Committee, using the negative discretion permitted by the tax rules, would reduce the payment to him so that his actual bonus would match his actual performance. Following the enactment of the TCJA, the performance-based compensation exception to Section 162(m) that we utilized to achieve deductibility for the bonuses is no longer available. However, because the TCJA was enacted shortly before the Compensation Committee established the 2018 bonus opportunities, and we were not then certain what the scope of the transition relief would be, for 2018 we continued our historic practice of having a single performance metric that, if met or exceeded, would allow for the payment of bonuses under the 2014 Plan, subject to negative discretion. For 2019, given the impact of the TCJA, we did not establish a single objective the achievement of which would “fund” the bonuses for the year (although the Compensation Committee preserved the approach of using a threshold performance measure, as described herein).
For 2018, if AB Adjusted Operating Income for the year was at least 75% of the AB Adjusted Operating Income objective set forth in the AOP for the year, the bonus to be paid to each executive officer would be initially set at the stockholder-approved limit of $10 million, less the amount of any other “senior executive plan bonus” within the meaning of the 2014 Plan that was paid or to be paid to that person for 2018. If AB Adjusted Operating Income for 2018 was greater than 75%, but less than 85%, of the AB Adjusted Operating Income objective set forth in our 2018 AOP, the Compensation Committee would then use its negative discretion to reduce or eliminate the portion of each bonus contingent on financial objectives (so that any bonus an executive received would only reflect his performance vis-à-vis his strategic objectives). In either case, the Compensation Committee would use that discretion to reduce or eliminate the bonus for each executive officer to reflect his performance in accordance with the objectives and formula described below under “—Resulting 2018 Payments under the CAIP”. For 2019, the Compensation Committee expressed the intent to reduce or eliminate all bonuses under the CAIP for our executives, including the portion contingent upon non-financial objectives, if the AB Adjusted Operating Income for 2019 was less than 90% of the AB Adjusted Operating Income objective set forth in the 2019 AOP.
For 2018, as described below under “—Evaluation and Rewarding Performance: Resulting 2018 Payments under the CAIP,” the threshold for performance for the executives’ financial goals was either 75% or 85% of the target for that measure set forth in the 2019 AOP. For 2019, the threshold required to be met before our executives will receive any payment under the CAIP with regard to any financial metric was increased to 90% of the target for that measure set forth in the 2019 AOP.
For 2018, as described below under “—Evaluation and Rewarding Performance: Resulting 2018 Payments under the CAIP,” performance between the threshold and maximum performance level results in an equivalent payment (e.g., 85% performance as a percentage of target results in a payment equal to 85% of the target). For 2019, there will be a reduction in the payments to our executive officers under the CAIP for below-target performance related to a financial metric (so that performance at 90% of the target for that metric set forth in the 2019 AOP will result in a payment of 50% of the target and performance at 95% of the target set forth in the 2019 AOP will result in 85% of the target payment, while above-target performance related to a financial metric will continue to be linear (e.g., 115% performance as a percentage of target results in a payment equal to 115% of the target)).
Setting Target Payout Opportunities under the CAIP
In setting the target payout opportunities for each of our participating named executive officers under the CAIP for 2018, the Compensation Committee considered any requirements set forth in any applicable employment agreement, competitive market data, our desired pay mix, and the compensation levels of our other senior executives. If a participating named executive officer satisfied (but did not exceed) all performance goals, the executive officer was eligible to receive a payment equal to his target payment. Based upon the established performance goals, target opportunities under the CAIP for 2018 to our named executive officers were as follows:
|
2018 CAIP Targets
(as % of 2018 Salary)
(1)
|
|
Robert Kotick
|
200
|
|
Spencer Neumann
|
150
|
|
Collister Johnson
|
100
|
(2)
|
Michael Morhaime
|
20
|
(3)
|
Brian Stolz
|
75
|
|
Chris B. Walther
|
75
|
|
Riccardo Zacconi
|
—
|
(4)
|
(1)
The 2014 Plan caps maximum payments of “senior executive plan bonuses” to each individual executive at $10 million per year. Actual payments under the CAIP are at the Compensation Committee’s discretion and vary for each executive based on his actual base salary, his target opportunity, his financial and strategic objectives, including the relative weighting with respect to each, and his and the Company’s performance measured against those objectives.
(2)
Mr. Johnson also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which cumulative AB Adjusted EPS is 15% or more than the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS. For more information on Mr. Johnson’s bonus opportunity under the CAIP, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.
|
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(3)
In addition to being eligible for a CAIP bonus, during 2018 Mr. Morhaime also participated in the Blizzard Profit Sharing Plan, which is discussed in more detail below (see “—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans”).
(4)
Mr. Zacconi does not participate in the CAIP. He participates in the King Profit Sharing Plan, which is discussed in more detail below (see “—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans”).
|
|
Establishing Challenging Goals for the CAIP Opportunities
In March 2018, our Compensation Committee established the financial and strategic objectives underlying 2018 CAIP opportunities. The Compensation Committee believes that the specific goals chosen required significant profitability, demanded superior performance from our management team, and drove accountability for each participating executive.
The Compensation Committee used operating income as an overall goal, by expressing the intent to use its negative discretion to reduce or eliminate all bonuses under the CAIP if AB Adjusted Operating Income for 2018 was not at least 75% of the AB Adjusted Operating Income objective set forth in our 2018 AOP.
The Compensation Committee then established individual goals for each participating named executive officer.
Financial
Objectives
.
For each participating named executive officer, 60% of his target opportunity under the CAIP for 2018 was based on operating income, earnings per share, and/or free cash flow. The Compensation Committee believes that the financial measures used are robust indicators of our overall performance, capturing fluctuations in sales as well as operating costs, and, as such, provide incentives to our executives to achieve goals that contribute to increasing stockholder value. Other measures the Committee considered but excluded when initially designing the CAIP included revenues, excluded because it does not capture operating costs, and TSR, excluded because awards under our equity incentive plans already incentivize stock appreciation. In some instances, our financial objectives for a year may be lower than the prior year’s objectives or results as underlying variables, like market trends, the volume of titles or other content we plan to release, or our level of planned investment in growth initiatives, change.
Strategic
Objectives
.
The remaining 40% of the target opportunity for each participating named executive officer under the CAIP for 2018 was based on three or four strategic objectives to be achieved during the year that were tailored to the executive officer’s role with the Company. The Compensation Committee believes that the strategic objectives used are important in aligning the interests of our executive officers with the long-term strategic goals of the Company.
These objectives generally fell into the following categories:
•
cross-company collaboration;
•
cultivating new business opportunities;
•
increased productivity; and
•
long-term strategy and organizational plans.
Mr. Johnson also had an opportunity to receive an additional bonus under the CAIP based on AB Adjusted EPS growth. For more information on this opportunity, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.
Evaluating and Rewarding Performance: Resulting 2018 Payments under the CAIP
Since we exceeded the threshold level of 75% of the AB Adjusted
Operating Income objective set forth in our 2018 AOP, each of our
participating named executive officers was eligible to receive a CAIP
bonus for 2018 of up to $10 million (less the amount of any other
“senior executive plan bonus” within the meaning of the 2014 Plan
that he received), subject to the Compensation Committee’s use of
negative discretion to reduce or eliminate that bonus. Further, since
2018 AB Adjusted Operating Income was more than 85% of the AB
Adjusted Operating Income objective set forth in our 2018 AOP,
each was eligible to receive a bonus reflecting performance vis-à-vis
his financial objectives, as well as his strategic objectives. For 2018,
the Compensation Committee did not apply incremental judgment
or discretion in determining CAIP bonus payouts, and such awards
directly reflected performance against the objectives and formula
established at the beginning of the year for each named executive
officer who received a bonus under the CAIP for 2018, as described
above.
To calculate the amount of the bonus that each participating named executive officer would receive for 2018, the following formula, applied using straight-line interpolation, was used:
(1)
For 2018, each participating NEO had two to three financial performance measures tied to his CAIP payout.
(2)
For 2018, each participating NEO had three to four strategic objectives tied to his CAIP payout.
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The following table shows the weighting, expressed as a percentage, assigned to each of the performance measures underlying the 2018 bonus opportunity, along with the maximum and actual payout as a percentage of the target, for each named executive officer who received a bonus under the CAIP for 2018. As achievement of the financial and strategic objectives underlying the bonus opportunities for our named executive officers fell short of expectations, consistent with our pay-for-performance approach, overall CAIP bonus payments to our named executive officers ranged between 52% and 103% of target for the year.
Name/Measure
|
Weight
(as a % of
Opportunity)
|
|
Maximum
CAIP Achievement
(as % of Target)
|
|
Resulting CAIP
Performance
(as % of Target)
|
|
Robert Kotick
|
|
|
|
|
|
|
AB Adjusted Operating Income
|
30
|
|
200
|
|
91
|
|
AB Adjusted
EPS
|
15
|
|
200
|
|
97
|
|
AB Adjusted Free Cash Flow
|
15
|
|
150
|
|
101
|
|
Strategic objectives
(1)
|
40
|
|
120
|
|
33
|
|
TOTAL
|
100
|
|
161
|
|
70
|
|
Collister Johnson
|
|
|
|
|
|
|
AB Adjusted Operating Income
|
30
|
|
200
|
|
91
|
|
AB Adjusted EPS
|
15
|
|
200
|
|
97
|
|
AB Adjusted Free Cash Flow
|
15
|
|
150
|
|
101
|
|
Strategic objectives
(1)
|
40
|
|
120
|
|
33
|
|
TOTAL
|
100
|
|
161
|
|
70
|
|
Michael Morhaime
|
|
|
|
|
|
|
Blizzard Adjusted Operating Income
|
40
|
|
200
|
|
0
|
|
AB Adjusted Operating Income
|
20
|
|
200
|
|
91
|
|
Strategic objectives
(1)
|
40
|
|
120
|
|
85
|
|
TOTAL
|
100
|
|
168
|
|
52
|
|
Brian Stolz
|
|
|
|
|
|
|
AB Adjusted Operating Income
|
30
|
|
200
|
|
91
|
|
AB Adjusted EPS
|
15
|
|
200
|
|
97
|
|
AB Adjusted Free Cash Flow
|
15
|
|
150
|
|
101
|
|
Strategic objectives
(1)
|
40
|
|
120
|
|
75
|
|
TOTAL
|
100
|
|
161
|
|
87
|
|
Chris B. Walther
|
|
|
|
|
|
|
AB Adjusted Operating Income
|
30
|
|
200
|
|
91
|
|
AB Adjusted EPS
|
15
|
|
200
|
|
97
|
|
AB Adjusted Free Cash Flow
|
15
|
|
150
|
|
101
|
|
Strategic objectives
(1)
|
40
|
|
120
|
|
115
|
|
TOTAL
|
100
|
|
161
|
|
103
|
|
(1)
We believe that disclosing the strategic objectives underlying the 2018 bonus opportunities for our NEOs could affect us adversely by, for example, providing confidential information on business operations and forward-looking strategic plans to our customers and competitors that could result in substantial competitive harm. Therefore, only a brief description and the aggregate weighting of those goals for each of our participating NEOs for 2018 are shown. In each case, actual performance at the end of the year was assessed by our management, audited by our internal auditors, and presented for review and approval to our Compensation Committee on a discrete “yes” or “no” basis.
|
All CAIP payments were based on actual eligible earnings and the achievement of specified financial metrics and strategic objectives and the
weighting thereof. For 2018, as noted above, the Compensation Committee did not apply incremental judgment or discretion in determining
CAIP bonus payouts, and such awards directly reflected performance against the objectives and formula established at the beginning of the year
for each named executive officer who received a bonus under the CAIP for 2018, as described above.
Name
|
Target Payment
($)
|
|
Actual Payment
(as % of target)
|
Actual Payment
($)
|
Robert Kotick
|
3,500,000
|
|
70
|
|
2,461,848
|
Collister Johnson
(1)
|
1,323,940
|
|
70
|
|
931,240
|
Michael Morhaime
|
277,206
|
|
52
|
|
144,713
|
Brian Stolz
|
511,895
|
|
87
|
|
445,341
|
Chris B. Walther
|
566,184
|
|
103
|
|
583,161
|
(1)
In addition to Mr. Johnson’s target bonus opportunity of 100% of his base salary, he also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which cumulative AB Adjusted EPS is 15% or more than the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS. The objective was not met for 2018. For more information on Mr. Johnson’s bonus opportunity under the CAIP, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.
|
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Profit Sharing Plans: Driving Success for our Operating Units
Payments under our profit sharing plans are designed to drive the financial performance of the relevant operating unit (e.g., Blizzard for Mr. Morhaime and King for Mr. Zacconi).
In
addition to his opportunity under the CAIP as discussed above, in accordance with his employment agreement, Mr. Morhaime
earned a payment for 2018 under the Blizzard Profit Sharing Plan. The Blizzard Profit Sharing Plan is a broad-based program
that predates the Vivendi Games Combination and provides employees of Blizzard with the opportunity to share in the profits
generated by our Blizzard operating unit. The Compensation Committee made the decision to retain a profit sharing component
in Mr. Morhaime’s compensation following the Vivendi Games Combination due to Mr. Morhaime’s position, as well as
our strategic focus on profitability, the prevalent market practice of profit sharing programs in the interactive
entertainment industry, and our desire to incentivize and reward his contribution to both Blizzard and Activision Blizzard
profits. Pursuant to Mr. Morhaime’s most recent employment agreement with us, dated as of October 3, 2018 (the
“Most Recent Morhaime Employment Agreement”), Mr. Morhaime was entitled to 3.5% of the profit sharing pool
established pursuant to the Blizzard Profit Sharing Plan. However, the Compensation Committee was entitled to exercise
discretion with respect to his actual annual percentage interest in the pool, subject to the specified minimum
percentage.
In accordance with his employment agreement, Mr. Zacconi earned a payment for 2018 under the King Profit Sharing Plan. The King Profit Sharing Plan is a broad-based program established in connection with our acquisition of King on February 23, 2016 (the “King Acquisition”), which provides employees of King with the opportunity to share in the profits generated by our King operating unit. We established the King Profit Sharing Plan because of our strategic focus on profitability, the prevalent market practice of profit sharing programs in the interactive entertainment industry, and our desire to incentivize and reward contributions to both King and Activision Blizzard profits. Pursuant to Mr. Zacconi’s current employment agreement with us, dated as of November 2, 2015 (the “Zacconi Employment Agreement”), Mr. Zacconi is entitled to 6% of the “profit sharing pool” established pursuant to the King Profit Sharing Plan. However, the Compensation Committee may exercise discretion with respect to his actual annual percentage interest in the pool, subject to a specified minimum percentage.
Other Cash Programs or Awards
Long-Term Contract Inducements
Messrs. Neumann and Johnson each received a long-term contract inducement in connection with his hiring by the Company during 2017, a portion of which was paid in 2018. For more information, please see “—Employment Agreements—Spencer Neumann— Long-Term Contract Inducement” and “—Employment Agreements—Collister Johnson—Long-Term Contract Inducement” below.
Special Performance Bonus
The Compensation Committee awarded a special performance bonus to Mr. Walther in recognition of his significant contributions to the Company in 2017, a portion of which was paid in 2018.
Equity Awards
Equity Granting Philosophy: Driving Value Creation
Our equity incentive awards are intended to drive long-term value creation, create alignment with stockholders’ interests and encourage retention of key executives. During 2018, equity awards to our NEOs consisted of PSUs and stock options. In determining the estimated grant value of equity awards to an executive officer, the Compensation Committee considers a number of factors, including his or her role, his or her performance, his or her annualized total compensation, compensation provided to the executive’s peers within the Company, and compensation provided to executives in comparable positions at other companies by reference to data from our comparator group and published surveys.
We utilize a mix of equity awards:
•
PSUs, which are designed to incentivize our executives to achieve specific performance objectives that align with our multi-year business strategy; and
•
stock options, which directly align an executive’s interests to those of our stockholders, since any financial gain is conditioned upon appreciation in the value of our Common Stock and, as such, directly link executive pay with Company performance.
We believe a combination of PSUs and stock options appropriately balances the various objectives of the equity incentive program because it promotes long-term value creation critical to driving TSR, directly aligns executive compensation with stockholder interests through share ownership, and encourages our key executives to remain engaged with our organization through the vesting date of the awards.
Conservative Equity Granting Practices
While we believe that equity awards are an important part of our compensation program, we continue to be very judicious in the granting of equity awards to our employees. Our average “burn rate” over the last three years was 1.8%, and ranks among the bottom third of our comparator group. Our burn rate is calculated as the total number of shares subject to awards we granted in a year, adjusting full-value awards based on a stock price volatility premium, divided by our basic weighted average common shares outstanding for that year. The average burn rate of the companies comprising our comparator group for that similar period ranges from 0.7% to 6.2%.
ACTIVISION
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Use of Equity Awards to Reward Performance
As discussed above (see “—Compensation Principles and Objectives”), the Compensation Committee believes that, in general, equity awards made to an executive officer should include an award with performance-based vesting criteria. Consistent with that philosophy, during 2018, no named executive officers received restricted share unit awards with only time-based vesting. Further, a portion of all equity awards granted to our named executive officers during 2018 had vesting that is contingent on the achievement of specified performance objectives. In addition, each named executive officer was granted equity awards that had the potential to vest based on 2018 financial performance objectives.
Beginning in 2016, we introduced annual grants with vesting contingent on the achievement of a financial objective in our long-range strategic plans. Each of Messrs. Neumann, Johnson, Stolz, and Walther received an award in 2018 that may vest by reference to a cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in our 2018 long-range strategic plan for that three-year period.
Evaluating and Rewarding Performance: 2018 Vesting and Cancellation of Performance-Based Equity Awards
The following table shows whether the portion of the equity awards granted to each of our named executive officers other than Mr. Neumann, whose employment we terminated effective as of December 31, 2018, that had the potential to vest based on our 2018 performance vested (or will vest, subject to his continued employment through the vesting date) or did not vest. As we did not achieve all the goals we set for ourselves, consistent with our pay-for-performance approach, equity award achievement ranged from 0% to 100% of target.
Executive
|
Grant
Type
|
Performance Metric
|
Award
Achievement
(% of
Target)
(1
)
|
|
Aggregate Shares / Options
|
Vesting Date
|
Target
|
|
Maximum
|
|
Achieved
|
|
Robert Kotick
|
PSUs
|
2018 AB Adjusted Operating Income
(2)
|
0
|
(2)
|
0
|
(2)
|
302,664
|
(2)
|
0
|
(2)
|
Did
Not
Vest
(2)
|
Collister Johnson
|
PSUs
|
2018 AB Adjusted EPS
|
97
|
|
15,997
|
|
19,996
|
|
15,492
|
|
June 29, 2019
|
PSUs
|
2018 AB Adjusted Operating Income
|
91
|
|
31,995
|
39,994
|
|
29,121
|
|
June 29, 2019
|
|
PSUs
|
2018 AB Adjusted EPS Growth
|
0
|
|
42,511
|
85,022
|
|
0
|
|
Did
Not
Vest
|
Michael Morhaime
|
PSUs
|
2018 Blizzard Adjusted Operating Income
|
0
|
|
38,896
|
48,620
|
|
0
|
|
Did
Not
Vest
|
Brian Stolz
|
PSUs
|
2018 AB Adjusted Operating Income
|
91
|
|
24,009
|
|
30,011
|
|
21,852
|
|
May 30, 2019
|
Chris B. Walther
|
PSUs
|
2018 AB Adjusted Operating Income
|
91
|
|
28,596
|
|
35,745
|
|
26,027
|
|
March 14, 2019
|
Riccardo Zacconi
|
Options
|
2018 King Adjusted Operating Income
|
100
|
(3)
|
150,542
|
150,542
|
|
150,542
|
|
February 22, 2019
|
|
Options
|
2018 King Adjusted EBITDA
|
0
|
|
150,541
|
150,541
|
|
0
|
|
Did
Not
Vest
|
(1)
Award achievement, as a percent of target, may vary for each executive based on the terms of his underlying award. For more information on these awards, please see “—Employment Agreements.”
(2)
As the threshold objective of 100% of target for this portion of the award was not achieved, no shares vested in respect thereof. However, 857,115 PSUs vested on March 31, 2019, in respect of 2016 and 2017 performance, as Mr. Kotick satisfied the incremental service period requirements for the vesting of those awards on that date. For more information, please see “—Employment Agreements—Robert Kotick—Equity Awards—2016 PSUs” below.
(3)
Actual performance with respect to King Adjusted Operating Income for 2018 was 102% of target, but achievement for this portion of the award was capped at 100% of target.
|
Determinations as to Achievement of Performance Metrics
All determinations as to the level of achievement of a performance metric underlying an equity award are made by our Compensation Committee by reference to auditable financial measures.
No Dividend Equivalents
None of the outstanding equity awards made to our named executive officers is entitled to receive dividend equivalents, and we do not anticipate making time- or performance-based vesting awards with the right to receive dividend equivalents in the future.
Other Award Terms
Stock options have an exercise price equal to the Nasdaq Official Closing Price of our Common Stock as reported on Nasdaq.com on the effective date of the grant.
Equity awards will generally cease to vest upon the termination of the holder’s employment, and vested stock options will generally remain exercisable for a limited period of time (90 days or less) after the termination date. For the impact of the termination of the employment of each named executive officer on his outstanding equity awards, please see “—Potential Payments upon Termination or Change of Control” below.
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Incentive Plan Limitations on Equity Awards
Under the 2014 Plan, the plan under which all of our equity incentive awards are now granted, there are limits on the number of stock options we can grant to anyone, including our executive officers, in a single year. There are similar restrictions on the number of restricted share unit awards and performance shares we can grant to any participant in a single year.
Limited Double-Trigger Change-of-Control Arrangements
Aside from Messrs. Kotick and Zacconi, none of our executives have been provided with any change-of-control protection. Each of Messrs. Kotick and Zacconi has been provided with certain protection in the event he is terminated following a change of control (known as a “double trigger”). These benefits are described under “—Potential Payments upon Termination or Change of Control” below. The Compensation Committee believes these arrangements will incentivize the relevant individuals to maintain objectivity in the context of, and contribute to, a potential change-of-control transaction.
Limited Retirement Benefits
We offer a 401(k) plan to all employees in the United States, including our eligible named executive officers, and we match a certain percentage of each employee’s contributions to our 401(k) plan (which, for Mr. Morhaime was, consistent with the benefits to which he was entitled prior to the Vivendi Games Combination, a higher percentage than our other participating named executive officers). Similarly, Mr. Zacconi is eligible to participate in a qualified defined contribution retirement plan offered to all UK-based King employees subject to an employment agreement, and we match a certain percentage of each employee’s contribution to that retirement plan.
Please see the “Summary Compensation Table” below for further details.
We do not provide any other retirement benefits to our employees, including our named executive officers. We believe that retirement arrangements are particular to, and should remain the responsibility of, each individual officer. The emphasis on minimal retirement arrangements ensures that a substantial portion of our named executive officers’ long-term wealth accumulation depends on the achievement of Activision Blizzard profitability objectives and the appreciation in the value of our Common Stock.
Select Health and Welfare Benefits
Our named executive officers are eligible to participate in our medical, vision, and dental insurance programs. Our named executive officers are generally offered these benefits on the same terms as the broad employee population. Further, Mr. Morhaime was eligible to receive full salary-continuation for up to six months of short-term disability, with any portion of his salary not covered by disability insurance to be paid by the Company. For 2018, the Company paid the premiums associated with Mr. Morhaime’s medical, vision, and dental insurance programs, as well as the premiums associated with Mr. Zacconi’s private family medical insurance plan. Please see the “Summary Compensation Table” below for further details.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included under “Executive Compensation—Compensation Discussion and Analysis” above. Based on that review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and also be incorporated by reference into our Annual Report on Form 10-K for the period ended December 31, 2018.
Members
of
the
Compensation
Committee
Robert
Morgado
(Chairperson),
Reveta
Bowers,
and
Elaine
Wynn
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Summary Compensation Table
The table below presents information with respect to each of our named executive officers regarding compensation earned during the periods indicated.
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
(1)
($)
|
|
Stock
Awards
(2)
($)
|
|
Option
Awards
(2)
($)
|
|
Non-Equity
Incentive Plan
Compensation
(3)
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Robert
Kotick
Chief Executive Officer
|
2018
|
1,756,731
|
—
|
|
7,495,745
|
|
19,037,673
|
|
2,461,848
|
|
89,007
|
(4)
|
30,841,004
|
2017
|
1,750,000
|
—
|
|
19,553,653
|
|
4,498,896
|
|
2,808,688
|
|
87,138
|
|
28,698,375
|
|
2016
|
2,375,858
|
—
|
|
24,932,065
|
|
—
|
|
5,590,414
|
|
167,223
|
|
33,065,560
|
Spencer
Neumann
(5)
Former Chief Financial Officer
|
2018
|
871,476
|
1,000,000
|
|
4,838,213
|
(6)
|
—
|
|
—
|
|
28,485
|
(4)
|
6,738,174
|
2017
|
503,461
|
1,000,000
|
|
4,151,199
|
(6)
|
2,800,076
|
(6)
|
1,009,481
|
|
1,590
|
|
9,465,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collister
Johnson
(7)
President and Chief Operating Officer
|
2018
|
1,330,194
|
1,200,000
|
|
4,695,612
|
(8)
|
—
|
|
931,240
|
|
14,075
|
(4)
|
8,171,121
|
2017
|
675,000
|
1,000,000
|
|
2,984,205
|
|
5,990,128
|
|
494,844
|
|
55,263
|
|
11,199,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Morhaime
(9)
Former Chief Executive Officer, Blizzard
|
2018
|
1,407,225
|
—
|
|
3,014,440
|
|
—
|
|
3,518,646
|
|
157,713
|
(4)
|
8,098,024
|
2017
|
991,983
|
369,218
|
|
3,049,205
|
|
4,197,078
|
|
3,651,419
|
|
48,278
|
|
12,307,181
|
|
2016
|
957,378
|
355,018
|
|
2,833,600
|
|
2,532,666
|
|
5,330,175
|
|
69,839
|
|
12,078,676
|
Brian
Stolz
(10)
Chief People Officer
|
2018
|
685,936
|
—
|
|
2,348,814
|
|
—
|
|
445,341
|
|
53,472
|
(4)
|
3,533,563
|
2017
|
663,860
|
1,100,000
|
|
1,585,041
|
|
—
|
|
413,731
|
|
222,413
|
|
3,985,045
|
|
2016
|
387,500
|
1,000,000
|
|
1,436,480
|
|
2,598,458
|
|
301,483
|
|
216,238
|
|
5,940,159
|
Chris
B.
Walther
Chief Legal Officer
|
2018
|
759,238
|
500,000
|
|
2,837,227
|
|
—
|
|
583,161
|
|
83,532
|
(4)
|
4,763,158
|
2017
|
722,886
|
—
|
|
1,936,099
|
|
—
|
|
461,354
|
|
39,002
|
|
3,159,340
|
|
2016
|
705,318
|
—
|
|
605,094
|
|
2,773,879
|
|
609,665
|
|
22,276
|
|
4,716,232
|
Riccardo
Zacconi
(9)(11)
Chief Executive Officer, King
|
2018
|
532,776
|
—
|
|
—
|
|
9,898,137
|
|
9,379,908
|
|
8,330
|
(4)
|
19,819,151
|
2017
|
549,598
|
—
|
|
—
|
|
5,128,966
|
|
9,113,000
|
|
8,112
|
|
14,799,676
|
|
2016
|
415,928
|
—
|
|
—
|
|
4,249,877
|
|
7,700,057
|
|
133,614
|
|
12,499,476
|
(1)
The amounts paid to Mr. Neumann in 2018 and 2017 consist of an inducement to enter into his employment agreement with us, dated as of May 5, 2017 (the
“Neumann Employment Agreement”), $1 million of which was paid in cash in June 2017 and the remaining $1 million of which was paid in cash in March 2018 (see
“—Employment Agreements—Spencer Neumann—Long-Term Contract Inducement” below). The amounts paid to Mr. Johnson in 2018 and 2017 consist of an
inducement to enter into his current employment agreement with us, dated as of May 10, 2017 (the “Johnson Employment Agreement”), $1 million of which was paid
in cash in July 2017 and the remaining $1.2 million of which was paid in cash in January 2018 (see “—Employment Agreements—Collister Johnson—Long-Term
Contract Inducement” below). The amounts paid to Mr. Morhaime for 2017 and 2016 consist of bonuses paid to him pursuant to the Blizzard Holiday Plan (a
broad-based program for employees of Blizzard pursuant to which participants received a percentage of their salary at year-end) which program was eliminated as of
January 1, 2018. The amounts paid to Mr. Stolz for 2017 and 2016 consist of an inducement to enter into his employment agreement with us, dated as of May 10,
2017 (the “Stolz Employment Agreement”), $1 million of which was paid in cash in May 2016 and the remaining $1.1 million of which was paid in cash in May
2017 (see “—Employment Agreements—Brian Stolz—Long-Term Contract Inducement” below). The amount paid to Mr. Walther for 2018 represents one-half of a
special performance award he received in recognition of his significant contributions to the Company in 2017, the second half of which he is expected to receive in June
2019, subject to his continued employment through the relevant date.
(2)
The amounts in the Stock Awards column represent the aggregate grant date fair value of restricted share units (which have time- and performance-based vesting conditions) awarded in the period, computed in accordance with ASC Topic 718. The amounts in the Option Awards column represent the aggregate grant date fair value of stock option awards made in the period computed in accordance with ASC Topic 718. As such, in the year of grant, the full aggregate grant date fair value appears, rather than the portion being expensed for financial statement reporting purposes in that year.
Assumptions and key variables used in the calculation of the grant date fair values:
•
for 2018, are discussed in footnote 16 to our audited financial statements included in our 2018 10-K;
•
for 2017, are discussed in footnote 14 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 27, 2018; and
•
for 2016, are discussed in footnote 14 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017.
|
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Stock awards for each fiscal year include awards subject to performance conditions that were valued based on the probability that performance targets will be achieved. Assuming the highest level of performance conditions are achieved, the grant date stock award values would have been as follows:
|
|
|
Robert
Kotick
($)
|
Spencer
Neumann
($)
|
Collister
Johnson
($)
|
Michael
Morhaime
($)
|
Brian
Stolz
($)
|
Chris B.
Walther
($)
|
Riccardo
Zacconi
($)
|
|
2018
|
18,739,364
|
8,072,835
|
11,837,208
(a)
|
3,768,050
|
2,936,024
|
3,546,560
|
—
|
|
2017
|
46,507,808
|
6,813,747
|
3,730,303
|
3,811,506
|
1,981,320
|
2,420,124
|
—
|
|
2016
|
54,827,475
|
—
|
—
|
2,833,600
|
1,795,600
|
756,367
|
—
|
|
|
(a)
As set forth in footnote (8) below, the grant date fair value of the 2018 AB Adjusted EPS Growth PSUs (as defined below) granted to Mr. Johnson, computed in accordance with ASC Topic 718, was $0. The value reflected in this table includes $5,967,694 attributable to the potential value that could have been realized if the highest level of performance conditions for the 2018 AB Adjusted EPS Growth PSUs were achieved.
|
In addition, the option awards for each fiscal year for Mr. Zacconi are subject to performance conditions. The grant date value of such awards does not change if the highest level of performance conditions is achieved.
(3)
The amount in this column for each year for each named executive officer represents cash incentives paid under the CAIP, except for Mr. Morhaime, for whom the amount represents cash incentives paid under both the CAIP and the Blizzard Profit Sharing Plan, and for Mr. Zacconi, for whom the amount only represents cash incentives paid under the King Profit Sharing Plan (as Mr. Zacconi is not eligible for the CAIP). The amount for Mr. Zacconi under the King Profit Sharing Plan for 2018 includes $3,551,351 that he is expected to receive in September 2019, subject to his continued employment in good standing through the relevant date. The amount for Mr. Zacconi under the King Profit Sharing Plan for 2017 includes $244,500 that he received in September 2018 and an additional $244,500 that he received in March 2019. For a discussion of non-equity incentive plans, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
(4)
The “all other compensation” for 2018 consists of the following:
|
|
Name
|
|
Perquisites, gifts,
and awards
($)
|
|
Taxable income
reimbursement
($)
|
|
Retirement
plan “matching”
contributions
($)
(a)
|
|
Life, disability,
or medical
insurance
premiums
($)
|
Total
“Other
Compensation”
($)
|
|
|
Robert Kotick
|
|
—
|
|
|
—
|
|
|
6,125
|
|
82,882
|
|
89,007
|
|
|
Spencer Neumann
|
|
—
|
|
|
—
|
|
|
4,625
|
|
23,860
|
|
28,485
|
|
|
Collister Johnson
|
|
—
|
|
|
—
|
|
|
4,625
|
|
9,450
|
|
14,075
|
|
|
Michael Morhaime
|
|
106,740
|
(b)
|
|
3,489
|
(c)
|
|
9,900
|
|
37,584
|
|
157,713
|
|
|
Brian Stolz
|
|
18,600
|
(d)
|
|
20,682
|
(e)
|
|
4,625
|
|
9,565
|
|
53,472
|
|
|
Chris B. Walther
|
|
24,600
|
(d)
|
|
27,354
|
(e)
|
|
6,125
|
|
25,453
|
|
83,532
|
|
|
Riccardo Zacconi
|
|
—
|
|
|
—
|
|
|
—
|
|
8,330
|
|
8,330
|
|
|
(a)
These amounts represent “matching” contributions by us under our 401(k) plan.
(b)
This amount represents $100,000 of legal fees Mr. Morhaime incurred in connection with the negotiation of the Most Recent Morhaime Employment Agreement, which we paid on his behalf, and $6,740 in gifts received from the Company, including merchandise he received from Blizzard as part of a broad-based program for Blizzard employees.
(c)
This amount represents a reimbursement for taxes Mr. Morhaime incurred on the gifts referenced in footnote (b).
(d)
These amounts represent travel accommodations and other costs associated with team-building trips Messrs. Stolz and Walther participated in that were paid for by the Company.
(e)
These amounts represent reimbursements for taxes incurred on the compensation referenced in footnote (d).
|
|
We
have calculated the incremental cost to us of the compensation listed above based on the amount of payments made by us for the
provision of such benefits.
(5)
Mr. Neumann’s date of hire was May 30, 2017. We terminated Mr. Neumann’s employment effective as of December 31, 2018.
(6)
We terminated Mr. Neumann’s employment as of December 31, 2018, and, pursuant to the terms of his award agreements, all of his unvested equity was canceled as of that date.
(7)
Mr. Johnson’s date of hire was June 26, 2017.
(8)
On August 6, 2018, pursuant to the Johnson Employment Agreement, the Compensation Committee awarded Mr. Johnson PSUs (the “2018 AB Adjusted EPS Growth PSUs”) with vesting based on AB Adjusted EPS for 2018 as compared to the higher of (x) the AB Adjusted EPS AOP objective for 2017 and (y) the actual AB Adjusted EPS for 2017 (the higher of (x) and (y), the “2017 EPS Objective”). The expected performance of this award on the date of grant was “not probable,” and, as a result, the grant date fair value of the award, computed in accordance with ASC Topic 718, was $0. These PSUs were canceled following the Compensation Committee’s determination that AB Adjusted EPS for 2018 was less than 115% of the 2017 AB Adjusted EPS Objective. For more information on this award, see “—Employment Agreements—Collister Johnson—Equity Awards—Annual Grants of PSUs (AB Adjusted EPS Growth)” below.
(9)
In 2018, the heads of our operating units ceased to be categorized as “executive officers” for purposes of SEC rules. Messrs. Morhaime and Zacconi are included as named executive officers in accordance with SEC rules as former executive officers who would have been designated as NEOs had they been serving as executive officers at the end of the fiscal year.
(10)
Mr. Stolz’s date of hire was May 30, 2016.
(11)
Mr. Zacconi’s term of employment with us began on February 23, 2016, when we closed the King Acquisition. Mr. Zacconi’s salary is paid in British pounds. As such, the salary amounts for 2018 in this table were converted using an end of 2018 spot exchange rate of 1.262626 British pounds to the U.S. dollar. Mr. Zacconi’s insurance premiums were paid in euros. As such, the insurance premiums for Mr. Zacconi for 2018 in this table were converted using an end of 2018 spot exchange rate of 1.141292 euros to the U.S. dollar.
|
ACTIVISION
BLIZZARD, INC.
-
2019 Proxy Statement
55
Back to Contents
Grants of Plan-Based Awards for 2018
The table below provides information regarding the grants of plan-based awards made to each of our named executive officers during 2018:
Name
|
Grant Type
|
Grant Date
|
|
Approval Date
(1)
|
|
Estimated
Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
Threshold
($)
|
Target
($)
|
|
Maximum
($)
|
|
|
Robert Kotick
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
3,500,000
|
|
10,000,000
|
|
|
|
2014 Plan/PSUs
|
12/28/18
|
|
12/27/18
|
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
12/28/18
|
|
12/27/18
|
|
|
|
|
|
|
|
|
2014 Plan/Options
|
11/21/18
|
|
11/21/18
|
|
|
|
|
|
|
|
Spencer Neumann
(7)
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
1,307,130
|
|
10,000,000
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
11/12/18
|
|
10/30/18
|
(10)
|
|
|
|
|
|
|
Collister Johnson
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
1,329,640
|
(12)
|
10,000,000
|
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
8/6/18
|
|
7/25/18
|
(10)
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
11/12/18
|
|
10/30/18
|
(10)
|
|
|
|
|
|
|
Michael Morhaime
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
281,624
|
|
10,000,000
|
|
|
Blizzard Profit Sharing
(16)
|
|
|
|
|
0
|
3,448,809
|
|
—
|
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
Brian Stolz
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
514,778
|
|
10,000,000
|
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
11/12/18
|
|
10/30/18
|
(10)
|
|
|
|
|
|
|
Chris B. Walther
|
2014 Plan/CAIP
(3)
|
|
|
|
|
0
|
571,417
|
|
10,000,000
|
|
|
|
2014 Plan/PSUs
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
|
2014 Plan/PSUs
|
11/12/18
|
|
10/30/18
|
(10)
|
|
|
|
|
|
|
Riccardo Zacconi
|
King Profit Sharing
(22)
|
|
|
|
|
0
|
9,113,000
|
|
—
|
|
|
|
KDE Plan/Options
|
3/9/18
|
|
3/9/18
|
|
|
|
|
|
|
|
(1)
Reflects the date on which the Compensation Committee approved the grant of an equity award or, if later in the case of a performance-based vesting award, the date that the Compensation Committee established the performance metric underlying such award or a component thereof.
(2)
The grant date fair value of the stock and option awards is computed in accordance with ASC Topic 718. Please see footnote (2) to the Summary Compensation Table for information about the assumptions and key variables used in the calculation of the grant date fair values. All stock options awarded have an exercise price equal to the fair market value of a share of our Common Stock on the date of grant, with the exception of the performance-based vesting options granted to Mr. Zacconi by King, described in further detail in footnote (23), which have an exercise price equal to the original exercise price of these options with respect to King ordinary shares divided by the exchange ratio set forth in the King Acquisition transaction agreement.
(3)
Each of our named executive officers other than Mr. Zacconi had an opportunity to earn a CAIP bonus for his 2018 performance under the 2014 Plan. None were entitled to a minimum amount thereunder, and each would have been entitled to receive $0 if the 2018 AB Adjusted Operating Income was not at least 75% of the AB Adjusted Operating Income objective set forth in the AOP for the year. The target bonus for each participating NEO was based on his base salary rate in effect at the time the opportunity was approved by our Compensation Committee and assumes 100% performance for the relevant financial and strategic objectives established under the CAIP. The 2014 Plan caps maximum payments of “senior executive plan bonuses” to each individual participating executive at $10 million per year. Actual payments under the CAIP are at the Compensation Committee’s discretion and vary for each participating executive based on his actual base salary, his target opportunity, his financial and strategic objectives, including the relative weighting with respect to each, and his and the Company’s performance measured against those objectives. For more information about the CAIP and the opportunities for each of our participating NEOs thereunder, including the maximum bonus opportunity for each, please see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Incentive Opportunities under the CAIP” above.
(4)
On December 28, 2018, pursuant to the Kotick Employment Agreement, the Compensation Committee awarded Mr. Kotick performance-based vesting restricted share units (i.e., PSUs). Target performance would result in the vesting of 54,230 PSUs, and maximum performance would result in the vesting of 135,575 PSUs. These PSUs vest on March 31, 2022, subject to Mr. Kotick’s continued employment through that date, by reference to the difference between our cumulative TSR and the rate of return of the S&P 500 Total Return Index (i.e., our TSR minus that index’s rate of return) for the period from the date of grant through December 31, 2021, as follows: (a) if our TSR less the rate of return of the S&P 500 Total Return Index is below -10 percentage points, no PSUs vest; (b) if our TSR less the rate of return of the S&P 500 Total Return Index is between -10 percentage points and 0 percentage points, the number of PSUs that vest is between 50% and 100% of the target (i.e., between 27,115 and 54,230 PSUs), determined using straight-line interpolation; (c) if our TSR less the rate of return of the S&P 500 Total Return Index is 0, 100% of the target number of PSUs (i.e., 54,230 PSUs) vest; (d) if our TSR less the rate of return of the S&P 500 Total Return Index is between 0 percentage points and 50 percentage points, the number of PSUs that vest is between 100% and 250% of the target (i.e., between 54,230 PSUs and 135,575 PSUs), determined using straight-line interpolation; and (e) if our TSR less the rate of return of the S&P 500 Total Return Index is 50 percentage points or more, 250% of the target number of PSUs (i.e., 135,575 PSUs) vest. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. For more information on this award, the “shareholder value creation incentive” and the awards to be made to Mr. Kotick in the future, see “—Employment Agreements—Robert Kotick” below.
|
ACTIVISION
BLIZZARD, INC.
-
2019 Proxy Statement
56
Back to Contents
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
All Other Stock Awards:
Number of Shares of
Stock or Units
(#)
|
|
All Other Option Awards:
Number of Securities
Underlying Options
(#)
|
|
Exercise or Base
Price of Option
Awards
($/Sh)
|
Grant Date Fair
Value of Stock and
Option Awards
($)
|
(2)
|
Threshold
(#)
|
Target
(#)
|
|
Maximum
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,115
(4)
|
54,230
|
(4)
|
135,575
|
(4)
|
|
|
|
|
|
3,500,004
|
(4)
|
|
96,154
(5)
|
106,838
|
(5)
|
267,095
|
(5)
|
|
|
|
|
|
3,995,741
|
(5)
|
|
|
|
|
|
|
|
|
925,057
|
|
50.85
|
19,037,673
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,876
(8)
|
29,862
|
(8)
|
37,328
|
(8)
|
|
|
|
|
|
2,314,305
|
(8)
|
|
0
(9)
|
14,931
|
(9)
|
44,793
|
(9)
|
|
|
|
|
|
1,157,153
|
(9)
|
|
22,082
(11)
|
25,979
|
(11)
|
32,474
|
(11)
|
|
|
|
|
|
1,366,755
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,193
(13)
|
47,992
|
(13)
|
59,990
|
(13)
|
|
|
|
|
|
3,719,380
|
(13)
|
|
4,251
(14)
|
42,511
|
(14)
|
85,022
|
(14)
|
|
|
|
|
|
0
|
(14)
|
|
15,773
(15)
|
18,556
|
(15)
|
23,195
|
(15)
|
|
|
|
|
|
976,231
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,062
(17)
|
38,896
|
(17)
|
48,620
|
(17)
|
|
|
|
|
|
3,014,440
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,408
(18)
|
24,009
|
(18)
|
30,011
|
(18)
|
|
|
|
|
|
1,860,698
|
(18)
|
|
7,886
(19)
|
9,278
|
(19)
|
11,598
|
(19)
|
|
|
|
|
|
488,116
|
(19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,307
(20)
|
28,596
|
(20)
|
35,745
|
(20)
|
|
|
|
|
|
2,227,056
|
(20)
|
|
9,858
(21)
|
11,598
|
(21)
|
14,498
|
(21)
|
|
|
|
|
|
610,171
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,488
(23)
|
150,542
|
(2
3)
|
150,542
|
(23)
|
|
|
|
|
12.39
|
9,898,137
|
(23)
|
(5)
On December 28, 2018, pursuant to the Kotick Employment Agreement, the Compensation Committee awarded Mr. Kotick PSUs. Target performance would result in the vesting of 106,838 PSUs, and maximum performance would result in the vesting of 267,095 PSUs. These PSUs vest on March 31, 2023, subject to Mr. Kotick’s continued employment through that date, by reference to the cumulative AB Adjusted EPS objective for 2020, 2021, and 2022 set forth in the Company’s 2019 long-range strategic plan for that three-year period as follows: (a) if actual performance is below 90% of the objective, no PSUs vest; (b) if actual performance falls between 90% and 100% of the objective, the number of PSUs that vest is between 90% and 100% of the target (i.e., between 96,154 and 106,838 PSUs), determined using straight-line interpolation; (c) if actual performance is 100% of the objective, 100% of the target number of PSUs (i.e., 106,838 PSUs) vest; (d) if actual performance falls between 100% and 137.5% of the number of PSUs that vest is between 100% and 250% of the target (i.e., between 106,838 and 267,095 PSUs), determined using straight-line interpolation; and (e) if actual performance is 137.5% or more of the objective, 250% of the target number of PSUs (i.e., 267,095 PSUs) vest. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement and the amounts in the table reflect only the amount attributable thereto, as the cumulative AB Adjusted EPS objective has not yet been established. For more information on this award, the “shareholder value creation incentive” and the awards to be made to Mr. Kotick in the future, see “—Employment Agreements—Robert Kotick—Equity Awards—2018 Equity Awards—2018 PSUs (AB Adjusted EPS)” below.
(6)
On November 21, 2018, pursuant to the Kotick Employment Agreement, the Compensation Committee awarded Mr. Kotick options to purchase shares of our Common Stock. These options vest on December 31, 2022, subject to Mr. Kotick’s continued employment through that date. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. For more information on this award, the “shareholder value creation incentive” and the awards to be made to Mr. Kotick in the future, see “—Employment Agreements—Robert Kotick” below.
(7)
We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, therefore, he was not eligible to receive a CAIP bonus for 2018. Further, pursuant to the terms of his award agreements, we canceled all of his unvested equity as of that date.
(8)
On August 7, 2017, pursuant to the Neumann Employment Agreement, the Compensation Committee awarded Mr. Neumann PSUs. We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, pursuant to the terms of his award agreement, we canceled these PSUs as of that date. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-fourth of the award) is reflected in this table. Target performance would have resulted in the vesting of 29,862 PSUs, and maximum performance would have resulted in the vesting of 37,328 PSUs. These PSUs would have vested on March 31, 2019, subject to Mr. Neumann’s continued employment through the relevant date, by reference to the AB Adjusted EPS objective set forth in our 2018 AOP as follows: (a) if actual performance is below 90% of the objective, no PSUs vest; (b) if actual performance falls between 90% and 125% of the objective, the number of PSUs that vest is between 90% and 125% of the target (i.e., between 26,876 and 37,328 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 37,328 PSUs) vest. For more information on this award, see “—Employment Agreements—Spencer Neumann—Equity Awards—2017 Equity Award” below.
|
ACTIVISION
BLIZZARD, INC.
-
2019 Proxy Statement
57
Back to Contents
(9)
On August 7, 2017, pursuant to the Neumann Employment Agreement, the Compensation Committee awarded Mr. Neumann PSUs. We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, pursuant to the terms of his award agreement, we canceled these PSUs as of that date. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-fourth of the award) is reflected in this table. Target performance would have resulted in the vesting of 14,931 PSUs share units, and maximum performance would have resulted in the vesting of 44,793 PSUs. These PSUs would have vested on March 31, 2019, subject to Mr. Neumann’s continued employment through the relevant date, by reference to the actual AB Adjusted Operating Income for 2018 as compared to the actual AB Adjusted Operating Income for 2017, as follows: (a) if performance for 2018 is below 100% of the performance for 2017, no PSUs vest, (b) if performance for 2018 falls between 100% and 115% of the performance for 2017, the number of PSUs that vest is between 100% and 150% of the target (i.e., between 14,931 and 22,397 PSUs), determined using straight-line interpolation; and (c) if performance for 2018 is 115% or more of the performance for 2017, 150% of the target number of PSUs (i.e., 22,397 PSUs) vest. Further, if, and only if, the actual AB Adjusted Operating Income for 2018 is 115% of more than the actual AB Adjusted Operating Income for 2017, an additional tranche of PSUs equal to the target number of these PSUs would be eligible to vest on March 31, 2020, subject to Mr. Neumann’s continued employment through that date, by reference to the actual AB Adjusted Operating Income for 2019 as compared to the actual AB Adjusted Operating Income for 2018, as follows: (a) if performance for 2019 is below 100% of the performance for 2018, no PSUs vest, (b) if performance for 2019 falls between 100% and 115% of the performance for 2018, the number of PSUs that vest is between 100% and 150% of the target (i.e., between 14,931 and 22,397 PSUs), determined using straight-line interpolation; and (c) if performance for 2019 is 115% or more of the performance for 2018, 150% of the target number of PSUs (i.e., 22,397 PSUs) vest. For more information on this award, see “—Employment Agreements—Spencer Neumann—Equity Awards—2017 Equity Award” below.
(10)
These equity awards were approved during a “trading blackout” as described in our insider trading and pre-clearance policies, so, in accordance with our equity awarding procedures, the grant date of the awards was the first trading day after that trading blackout period was no longer in effect.
(11)
On November 12, 2018, pursuant to the Neumann Employment Agreement, the Compensation Committee awarded Mr. Neumann PSUs. We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, pursuant to the terms of his award agreement, we canceled these PSUs as of that date. Target performance would have resulted in the vesting of 25,979 PSUs, and maximum performance would have resulted in the vesting of 32,474 PSUs. These PSUs would have vested on March 30, 2022, subject to Mr. Neumann’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 22,082 and 32,474 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 32,474 PSUs) vest. For more information on this award, see “—Employment Agreements—Spencer Neumann—Equity Awards—Annual Grants of PSUs (Long-Range Strategic Plan)” below.
(12)
In addition to Mr. Johnson’s opportunity to receive a bonus with a target amount of 100% of his base salary, he also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which cumulative AB Adjusted EPS is 15% or more than the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS. For more information on Mr. Johnson’s bonus opportunity under the CAIP, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.
(13)
On August 7, 2017, pursuant to the Johnson Employment Agreement, the Compensation Committee awarded Mr. Johnson PSUs. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-third of the award) is reflected in this table. Target performance would result in the vesting of 47,992 PSUs share units, and maximum performance would result in the vesting of 59,990 PSUs. Two-thirds of these PSUs vest on June 29, 2019, subject to Mr. Johnson’s continued employment through that date, by reference to the AB Adjusted Operating Income objective set forth in our 2018 AOP, as follows: (a) if actual performance is below 90% of the objective, no PSUs vest; (b) if actual performance falls between 90% and 125% of the objective, the number of PSUs that vest is between 90% and 125% of the target (i.e., between 28,796 and 39,994 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 39,994 PSUs) vest. One-third of these PSUs vest on June 29, 2019, subject to Mr. Johnson’s continued employment through that date, by reference to the AB Adjusted EPS objective set forth in our 2018 AOP, as follows: (a) if actual performance is below 90% of the objective, no PSUs vest; (b) if actual performance falls between 90% and 125% of the objective, the number of PSUs that vest is between 90% and 125% of the target (i.e., between 14,397 and 19,996 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 19,996 PSUs) vest. For more information on this award, see “—Employment Agreements—Collister Johnson—Equity Awards—2017 Equity Award” below.
(14)
On August 6, 2018, pursuant to the Johnson Employment Agreement, the Compensation Committee awarded Mr. Johnson PSUs. Target
performance would result in the vesting of 42,511 PSUs, and maximum performance would result in the vesting of 85,022 PSUs.
These PSUs vest on June 29, 2019, subject to Mr. Johnson’s continued employment through that date, by reference to AB
Adjusted EPS for 2018 as compared to the 2017 EPS Objective as follows: (a) if the AB Adjusted EPS for 2018 is less than 115%
of the 2017 EPS Objective, no PSUs vest; (b) if the AB Adjusted EPS for 2018 falls between 115% and 124% of the 2017 EPS Objective,
the number of PSUs that vest is between 10% and 100% of the target (i.e., between 4,251 and 42,511 PSUs), determined using
straight-line interpolation; (c) if the AB Adjusted EPS for 2018 is 124% of the 2017 EPS Objective, 100% of the target number
of PSUs (i.e., 42,511 PSUs) vest; (d) if the AB Adjusted EPS for 2018 is 124% of the 2017 EPS Objective, 100% of the target
number of PSUs (i.e., 42,511 PSUs) vest; (e) if the AB Adjusted EPS for 2018 falls between 124% and 134% of the 2017 EPS Objective,
the number of PSUs that vest is between 100% and 200% of the target (i.e., between 42,511 and 85,022 PSUs), determined using
straight-line interpolation; (f) if the AB Adjusted EPS for 2018 is 134% or more of the 2017 EPS Objective, 200% of the target
number of PSUs (i.e., 85,022 PSUs) vest. The expected performance of this award on the date of grant was “not probable,”
and, as a result, the grant date fair value of the award, computed in accordance with ASC Topic 718, was $0. These PSUs were
canceled following the Compensation Committee’s determination that AB Adjusted EPS for 2018 was less than 115% of the
2017 EPS Objective. For more information on this award, see “—Employment Agreements—Collister Johnson—Equity
Awards—Annual Grants of PSUs (AB Adjusted EPS Growth)” below.
(15)
On November 12, 2018, pursuant to the Johnson Employment Agreement, the Compensation Committee awarded Mr. Johnson PSUs. Target performance would result in the vesting of 18,556 PSUs, and maximum performance would result in the vesting of 23,195 PSUs. These PSUs vest on March 30, 2022, subject to Mr. Johnson’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 15,773 and 23,195 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 23,195 PSUs) vest. For more information on this award, see “—Employment Agreements—Collister Johnson—Equity Awards—Annual Grants of PSUs (Long-Range Strategic Plan)” below.
(16)
Pursuant to Mr. Morhaime’s most recent employment agreement with us, dated as of October 3, 2018 (i.e., the Most Recent Morhaime Employment Agreement), Mr. Morhaime participates in the Blizzard Profit Sharing Plan (see “—Employment Agreements—Michael Morhaime” below). In accordance therewith, Mr. Morhaime is entitled to share in an annual profit sharing pool, the aggregate amount of which depends upon Blizzard’s profits for that year. While Mr. Morhaime is entitled to an amount equal to 3.5% of the pool, subject to the Compensation Committee’s exercise of discretion, because the amount of the pool cannot be known at the beginning of a year, no target amount is determinable and the target amount shown is a representative amount equal to the amount Mr. Morhaime received under the Blizzard Profit Sharing Plan with respect to 2017. Further, while Mr. Morhaime is entitled to receive an amount equal to a minimum specified percentage of that pool, because there is no certainty there will be a pool, there is no minimum or maximum amount to which he is entitled. For more information about the Blizzard Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” above.
(17)
On May 8, 2017, the Compensation Committee awarded Mr. Morhaime PSUs. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-third of the award) is reflected in this table. Target performance would result in the vesting of 38,896 PSUs share units, and maximum performance would result in the vesting of 48,620 PSUs. These PSUs vest on March 31, 2019, subject to Mr. Morhaime’s continued employment through that date, by reference to the Blizzard Adjusted Operating Income objective set forth in our 2018 AOP, as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 33,062 and 48,260 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 48,260 PSUs) vest. These PSUs were canceled on March 5, 2019, following the Compensation Committee’s determination that Blizzard Adjusted Operating Income for 2018 was 78% of the target objective set forth in our 2018 AOP. Please see Mr. Morhaime’s Form 4 filed with the SEC on May 10, 2017, for more information about these awards.
(18)
On August 8, 2016, pursuant to the Stolz Employment Agreement, the Compensation Committee awarded Mr. Stolz PSUs. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-fourth of the award) is reflected in this table. Target performance would result in the vesting of 24,009 PSUs, and maximum performance would result in the vesting of 30,011 PSUs. These PSUs vest on May 30, 2019, subject to Mr. Stolz’s continued employment through the relevant date, by reference to the AB Adjusted Operating Income objective set forth in our 2018 AOP as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 20,408 and 30,011 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 30,011 PSUs) vest. For more information on the remainder of this award, see “—Employment Agreements—Brian Stolz—Equity Awards—2016 Equity Award” below.
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ACTIVISION
BLIZZARD, INC.
-
2019 Proxy Statement
58
Back to Contents
(19)
On November 12, 2018, pursuant to the Stolz Employment Agreement, the Compensation Committee awarded Mr. Stolz PSUs. Target performance would result in the vesting of 9,278 PSUs, and maximum performance would result in the vesting of 11,598 PSUs. These PSUs vest on March 30, 2022, subject to Mr. Stolz’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 7,886 and 11,598 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 11,598 PSUs) vest. For more information on this award, see “—Employment Agreements—Brian Stolz—Equity Awards—Annual Grants of PSUs (Long-Range Strategic Plan)” below.
(20)
On November 7, 2016, pursuant to Mr. Walther’s current employment agreement with us, dated as of November 1, 2016 (the “Walther Employment Agreement”), the Compensation Committee awarded Mr. Walther PSUs. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 (i.e., one-fourth of the award) is reflected in this table. Target performance would result in the vesting of 28,596 PSUs, and maximum performance would result in the vesting of 35,745 PSUs. These PSUs vest on March 14, 2019, subject to Mr. Walther’s continued employment through the relevant date, by reference to the AB Adjusted Operating Income objective set forth in our 2018 AOP as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 24,307 and 35,745 PSUs), determined using straight-line interpolation; (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 35,745 PSUs) vest. For more information on this award, see “—Employment Agreements—Chris B. Walther—Equity Awards—2016 Equity Award” below.
(21)
On November 12, 2018, pursuant to the Walther Employment Agreement, the Compensation Committee awarded Mr. Walther PSUs. Target performance would result in the vesting of 11,598 PSUs, and maximum performance would result in the vesting of 14,498 PSUs. These PSUs vest on March 30, 2022, subject to Mr. Walther’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period as follows: (a) if actual performance is below 85% of the objective, no PSUs vest; (b) if actual performance falls between 85% and 125% of the objective, the number of PSUs that vest is between 85% and 125% of the target (i.e., between 9,858 and 14,498 PSUs), determined using straight-line interpolation; and (c) if actual performance is 125% or more of the objective, 125% of the target number of PSUs (i.e., 14,498 PSUs) vest. For more information on this award, see “—Employment Agreements—Chris B. Walther—Equity Awards—Annual Grants of PSUs (Long-Range Strategic Plan)” below.
(22)
Pursuant to Mr. Zacconi’s current employment agreement with us, dated as of November 2, 2015 (i.e., the Zacconi Employment Agreement), Mr. Zacconi participates in the King Profit Sharing Plan (see “—Employment Agreements—Riccardo Zacconi” below). In accordance therewith, Mr. Zacconi is entitled to share in an annual profit sharing pool, the aggregate amount of which depends upon King’s profits for that year. While Mr. Zacconi is entitled to an amount equal to 6% of the pool, subject to the Compensation Committee’s exercise of discretion, because the amount of the pool cannot be known at the beginning of a year, no target amount is determinable and the target amount shown is a representative amount equal to the amount Mr. Zacconi received under the King Profit Sharing Plan with respect to 2017. Further, while Mr. Zacconi is entitled to receive an amount equal to a minimum specified percentage of that pool, because there is no certainty there will be a pool, there is no minimum or maximum amount to which he is entitled. For more information about the King Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” above.
(23)
In connection with the consummation of the King Acquisition, these performance-based vesting options to purchase our Common Stock were converted from options with respect to King ordinary shares that Mr. Zacconi held prior to the consummation of the King Acquisition and the performance metrics underlying the original options were replaced with metrics with respect to King’s post-acquisition performance. These performance-based vesting options vest on February 22, 2019, subject to Mr. Zacconi’s continued employment through such date, by reference to the King Adjusted Operating Income objective set forth in our 2018 AOP as follows: (a) if actual performance is below 90% of the objective, no options vest; (b) if actual performance is 90% of the objective, the number of options that vest is 90% of the target (i.e., 135,488 options); (c) if actual performance falls between 90% and 100% of the objective, the number of options that vest is between 90% and 100% of the target (i.e., between 135,488 and 150,542 options), determined using straight-line interpolation; and (d) if actual performance is 100% or more of the objective, 100% of the target number of options (i.e., 150,542 options) vest. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2018 is reflected in this table. For more information on this award, see “—Employment Agreements—Riccardo Zacconi—Equity Awards” below.
|
ACTIVISION
BLIZZARD, INC.
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2019 Proxy Statement
59
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Outstanding Equity Awards at December 31, 2018
The table below sets forth the outstanding equity awards for each of our named executive officers as of December 31, 2018:
Name
|
Option Awards
|
|
Stock Awards
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(1)
(#)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
(2)
($)
|
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested
(#)
|
|
Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested
(2)
($)
|
|
Robert Kotick
|
|
|
|
|
|
|
|
857,115
|
(3)
|
39,915,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,230
|
(4)
|
2,525,491
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
106,838
|
(6)
|
4,975,446
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
71,988
|
(8)
|
3,352,481
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
175,972
|
(10)
|
8,195,016
|
(11)
|
|
—
|
|
190,712
|
(12)
|
62.51
|
8/7/2027
|
|
|
|
|
|
|
|
|
|
|
—
|
|
925,057
|
(13)
|
50.85
|
11/21/2028
|
|
|
|
|
|
|
|
|
|
Spencer Neumann
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collister Johnson
(15)
|
|
|
|
|
|
|
|
44,613
|
(16)
|
2,077,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,556
|
(17)
|
864,153
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
47,992
|
(19)
|
2,234,987
|
(20)
|
|
—
|
|
237,515
|
(21)
|
62.51
|
8/7/2027
|
|
|
|
|
|
|
|
|
|
Michael Morhaime
|
|
|
|
|
|
|
|
23,333
|
(22)
|
1,086,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,886
|
(23)
|
1,857,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,896
|
(24)
|
1,811,387
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
|
16,428
|
(26)
|
765,052
|
(27)
|
|
66,666
|
|
—
|
|
34.59
|
11/13/2025
|
|
|
|
|
|
|
|
|
|
|
66,667
|
|
66,666
|
(28)
|
41.09
|
11/7/2026
|
|
|
|
|
|
|
|
|
|
|
—
|
|
241,953
|
(29)
|
53.99
|
5/8/2027
|
|
|
|
|
|
|
|
|
|
Brian Stolz
|
|
|
|
|
|
|
|
77,360
|
(30)
|
3,602,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,278
|
(31)
|
432,076
|
(32)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,214
|
(33)
|
382,526
|
(34)
|
|
|
|
|
|
|
|
|
|
|
|
|
12,168
|
(35)
|
566,664
|
(36)
|
|
|
|
|
|
|
|
|
|
|
|
|
24,008
|
(37)
|
1,118,053
|
(38)
|
|
—
|
|
179,793
|
(39)
|
40.61
|
8/8/2026
|
|
|
|
|
|
|
|
|
|
Chris B. Walther
(40)
|
|
|
|
|
|
|
|
26,027
|
(41)
|
1,212,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,598
|
(42)
|
540,119
|
(43)
|
|
|
|
|
|
|
|
|
|
|
|
|
10,268
|
(44)
|
478,181
|
(45)
|
|
|
|
|
|
|
|
|
|
|
|
|
15,211
|
(46)
|
708,376
|
(47)
|
|
|
|
|
|
|
|
|
|
|
|
|
57,191
|
(48)
|
2,663,385
|
(49)
|
|
—
|
|
180,122
|
(50)
|
41.09
|
11/7/2026
|
|
|
|
|
|
|
|
|
|
Riccardo Zacconi
(51)
|
|
|
|
|
|
|
|
7,046
|
(52)
|
328,132
|
|
|
|
|
|
|
451,626
|
(53)
|
|
|
12.39
|
11/12/2023
|
|
|
|
|
|
|
|
|
|
|
16,032
|
|
16,040
|
(54)
|
26.41
|
2/15/2025
|
|
|
|
|
|
|
|
|
|
(1)
All exercisable stock options were vested as of December 31, 2018.
(2)
Calculated using the Nasdaq Official Closing Price of $46.57 per share of our Common Stock on December 31, 2018, the last trading day of 2018.
|
ACTIVISION
BLIZZARD, INC.
-
2019 Proxy Statement
60
Back to Contents
(3)
These performance-based vesting restricted share units (i.e., PSUs) vested on March 31, 2019, as follows: (a) 605,327 vested following the Compensation Committee’s determination that the objective with respect to cumulative AB Adjusted EPS for the fourth quarter of 2016 through the fourth quarter of 2017 was achieved; (b) 112,513 vested following the Compensation Committee’s determination that AB Adjusted Operating Income for 2016 was 114% of the target objective set forth in our 2016 AOP; (c) 139,275 vested following the Compensation Committee’s determination that AB Adjusted Operating Income for 2017 was 117% of the target objective set forth in our 2017 AOP; and (d) no additional shares vested following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP.
(4)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 135,575. These PSUs vest on March 31, 2022, based upon the level of performance measured by reference to the Company’s relative TSR during a performance period from the grant date through December 31, 2021, subject to Mr. Kotick’s continued employment through such date. Please see “—Employment Agreements—Robert Kotick—Equity Awards—2018 Equity Awards—2018 PSUs (Relative TSR)” below. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. Please see “—Employment Agreements—Robert Kotick —Long Term Performance Incentives—Shareholder Value Creation Incentive” below.
(5)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $6,313,728.
(6)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 267,095. These PSUs vest on March 31, 2023, based upon the level of performance measured by reference to cumulative AB Adjusted EPS for 2020, 2021, and 2022 set forth in the Company’s 2019 long-range strategic plan for that three-year period, subject to Mr. Kotick’s continued employment through such date. Please see “—Employment Agreements—Robert Kotick—Equity Awards—2018 Equity Awards—2018 PSUs (AB Adjusted EPS)” below. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. Please see “—Employment Agreements—Robert Kotick —Long Term Performance Incentives—Shareholder Value Creation Incentive” below.
(7)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $12,438,614.
(8)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 143,976. These PSUs vest on March 15, 2021, based upon the level of performance measured by reference to the Company’s relative TSR during a performance period from the grant date through December 31, 2020, subject to Mr. Kotick’s continued employment through such date. Please see “—Employment Agreements—Robert Kotick—Equity Awards—2017 Equity Awards—2017 PSUs (Relative TSR)” below.
(9)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $6,704,962.
(10)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 439,930. These PSUs vest on March 15, 2021, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2018, 2019, and 2020 set forth in the Company’s 2017 long-range strategic plan for that three-year period, and further subject to an initial performance objective based on cumulative AB Adjusted EPS for the second half of 2017 and 2018 being met, subject to Mr. Kotick’s continued employment through such date. Please see “—Employment Agreements—Robert Kotick—Equity Awards—2017 Equity Awards—2017 PSUs (AB Adjusted Operating Income)” below. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. Please see “—Employment Agreements—Robert Kotick —Long Term Performance Incentives—Shareholder Value Creation Incentive” below.
(11)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $20,487,540.
(12)
These stock options vest on December 31, 2021, subject to Mr. Kotick’s continued employment through such date. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. Please see “—Employment Agreements—Robert Kotick—Long Term Performance Incentives—Shareholder Value Creation Incentive” below.
(13)
These stock options vest on December 31, 2022, subject to Mr. Kotick’s continued employment through such date. This award is subject to immediate vesting if Mr. Kotick becomes entitled to the “shareholder value creation incentive” in accordance with the Kotick Employment Agreement. Please see “—Employment Agreements—Robert Kotick—Long Term Performance Incentives—Shareholder Value Creation Incentive” below.
(14)
We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, pursuant to the terms of his award agreements, canceled all of his unvested equity as of that date.
(15)
The number of PSUs reflected in the table does not include
42,511 PSUs that were canceled on March 5, 2019, following the Compensation Committee’s determination that the year-over-year AB Adjusted EPS growth objective for 2018 set forth in Mr. Johnson’s employment agreement was not met. For more information on that grant, please see “—Employment Agreements—Collister Johnson—Equity Awards—Annual Grants of PSUs (AB Adjusted EPS Growth)” below.
(16)
These PSUs vest on June 29, 2019, subject to Mr. Johnson’s continued employment through such date, as follows: (a) 29,121 vest following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP; and (b) 15,492 vest following the Compensation Committee’s determination that AB Adjusted EPS for 2018 was 97% of the target objective set forth in our 2018 AOP.
(17)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 23,195. The PSUs vest on March 30, 2022, based upon the level of performance measured by reference to the cumulative AB Adjusted Operating Income for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, subject to Mr. Johnson’s continued employment through such date.
(18)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $1,080,191.
(19)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 59,990. Two-thirds of these PSUs vest on June 29, 2020, based upon the level of performance measured by reference to AB Adjusted Operating Income for 2019. One-third of these PSUs vest on June 29, 2020, based upon the level of performance measured by reference to AB Adjusted EPS for 2019. The number of PSUs reflected in the table does not include: (a) 2,874 PSUs that were canceled following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP; or (b) 505 PSUs that were canceled following the Compensation Committee’s determination that AB Adjusted EPS for 2018 was 97% of the target objective set forth in our 2018 AOP.
(20)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $2,793,734.
(21)
These stock options vest on June 29, 2020, subject to Mr. Johnson’s continued employment through such date.
(22)
These restricted share units were eligible to vest on November 6, 2019, subject to Mr. Morhaime’s continued employment through such date. Mr. Morhaime ceased to be an employee of the
Company on April 7, 2019, and, as a result, these restricted share units were canceled on that date.
(23)
These PSUs vested on March 31, 2019, following the Compensation Committee’s determination that Blizzard Adjusted Operating Income for 2017 was 103% of the target objective set forth in our 2017 AOP. The number of PSUs reflected in the table does not include 38,986 PSUs that were canceled following the Compensation Committee’s determination that Blizzard Adjusted Operating Income for 2018 was 78% of the target objective set forth in our 2018 AOP.
(24)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 48,620. These PSUs were eligible to vest on March 31, 2020, based upon the level of performance measured by reference to Blizzard Adjusted Operating Income for 2019, subject to Mr. Morhaime’s continued employment through the relevant date. Mr.
Morhaime’s employment with the Company concluded on April 7, 2019, and, as such, these PSUs were canceled.
(25)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $2,264,233.
(26)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 20,535. These PSUs were eligible to vest on March 30, 2021, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2018, 2019, and 2020 set forth in the Company’s 2017 long-range strategic plan for that three-year period, subject to Mr. Morhaime’s continued employment with the Company. Mr. Morhaime’s employment with the Company concluded on April 7, 2019, and, as such, these PSUs were canceled.
(27)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $956,315.
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(28)
These stock options were eligible to vest on November 6, 2019, subject to Mr. Morhaime’s continued employment through such date. Mr. Morhaime’s employment with the Company concluded on April 7, 2019, and, as a result, these stock options were canceled on that date.
(29)
Two-thirds of these options vested on March 31, 2019. Mr. Morhaime’s employment with the Company concluded on April 7, 2019, and, as such, the remaining one-third of these options, which were otherwise eligible to vest on March 31, 2020, subject to Mr. Morhaime’s continued employment through such date, were canceled.
(30)
These PSUs vest on May 30, 2019, subject to Mr. Stolz’s continued employment through such date, as follows: (a) 27,356 vest following the Compensation Committee’s determination that AB Adjusted Operating Income for 2016 was 114% of the target objective set forth in our 2016 AOP; (b) 28,152 vest following the Compensation Committee’s determination that AB Adjusted Operating Income for 2017 was 117% of the target objective set forth in our 2017 AOP; and (c) 21,852 vest following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP. The number of PSUs reflected in the table does not include 2,157 PSUs that were canceled following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP.
(31)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 11,598. The PSUs vest on March 30, 2022, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, subject to Mr. Stolz’s continued employment through such date.
(32)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $540,119.
(33)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 10,268. The PSUs vest on March 30, 2021, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2018, 2019, and 2020 set forth in the Company’s 2017 long-range strategic plan for that three-year period, subject to Mr. Stolz’s continued employment through such date.
(34)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $478,181.
(35)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 15,210. The PSUs vest on March 31, 2020, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2017, 2018, and 2019 set forth in the Company’s 2016 long-range strategic plan for that three-year period, subject to Mr. Stolz’s continued employment through such date.
(36)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $708,330.
(37)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 30,010. These PSUs vest on May 30, 2020, based upon the level of performance measured by reference to AB Adjusted Operating Income for 2019.
(38)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $1,397,566.
(39)
Three-quarters of these options vest on May 30, 2019, and one-quarter vests on May 30, 2020, in each case subject to Mr. Stolz’s continued employment through such date.
(40)
As a result of Mr. Walther’s transfer by gift, all of his outstanding equity awards are held in the name of the Walther-Stockton 2013 Family Trust. Mr. Walther and his wife, Susan Stockton, are co-trustees of the trust and share voting and investment power with respect to those securities.
(41)
These PSUs vest on March 14, 2019, following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP, subject to Mr. Walther’s continued employment through such date. The number of PSUs reflected in the table does not include 2,569 PSUs that were canceled following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP.
(42)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 14,498. The PSUs vest on March 30, 2022, based upon the level of performance measured by reference to cumulative AB Adjusted Operating Income for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, subject to Mr. Walther’s continued employment through such date.
(43)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $675,172.
(44)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 12,835. The PSUs vest on March 30, 2021, based upon the level of performance measured by reference to the cumulative AB Adjusted Operating Income for 2018, 2019, and 2020 set forth in the Company’s 2017 long-range strategic plan for that three-year period, subject to Mr. Walther’s continued employment through such date.
(45)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $597,726.
(46)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 19,014. The PSUs vest on March 31, 2020, based upon the level of performance measured by reference to the cumulative AB Adjusted Operating Income for 2017, 2018, and 2019 set forth in the Company’s 2016 long-range strategic plan for that three-year period, subject to Mr. Walther’s continued employment through such date.
(47)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $885,482.
(48)
The number of PSUs reflected in the table is the target amount; the maximum number of PSUs subject to the award is 71,489. One-half of the PSUs vest on each of March 14, 2020 and 2021, in each case based upon the level of performance measured by reference to AB Adjusted Operating Income for the prior year.
(49)
This value is based on the target amount; if the highest level of performance is assumed, the market value of the unvested PSUs, calculated in the manner described in footnote (2), would be $3,329,243.
(50)
Three-fourths of these options vest on March 14, 2020, and one-fourth vest on March 14, 2021, in each case subject to Mr. Walther’s continued employment through such date.
(51)
These equity awards were part of the consideration for the King Acquisition, and, aside from the replacement of the performance metrics underlying the options, do not reflect any compensation decisions by Activision Blizzard.
(52)
One-twelfth of the underlying grant (which was for 84,453 restricted share units) vested on the sixteenth day of every third month, beginning May 16, 2016, subject to Mr. Zacconi’s continued employment through such date. In accordance with that vesting schedule, these restricted share units vested on February 16, 2019.
(53)
These performance-based stock options vested on February 22, 2019, as follows: (a) 150,542 vested following the Compensation Committee’s determination that the King Adjusted Operating Income objective set forth in our 2016 AOP was achieved; (b) 150,542 vested following the Compensation Committee’s determination that the King Adjusted Operating Income objective set forth in our 2017 AOP was achieved; and (c) 150,542 vested following the Compensation Committee’s determination that the King Adjusted Operating Income objective set forth in our 2018 AOP was achieved. The number of stock options reflected in the table does not include 150,541 stock options that were canceled on February 20, 2019, following the Compensation Committee’s determination that the 2018 King Adjusted EBITDA objective set forth in the plan established by King management in connection with the King Acquisition was not met.
(54)
One-twelfth of the underlying grant (which was for 192,392 stock options) vested on the sixteenth day of every third month, beginning May 16, 2016, subject to Mr. Zacconi’s continued employment through such date. In accordance with that vesting schedule, these stock options vested on February 16, 2019.
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For the impact of the termination of the employment of each named executive officer on his equity awards, please see “—Potential Payments upon Termination or Change of Control” below.
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Option Exercises and Stock Vested for 2018
The table below provides information about the value realized by our named executed officers during 2018 from the exercise of stock options and vesting of restricted share units:
Name
|
Option Awards
|
|
Stock Awards
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized on
Exercise
($)
(1)
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized on
Vesting
($)
(2)
|
|
Robert Kotick
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Spencer Neumann
|
—
|
|
|
—
|
|
52,173
|
|
3,519,591
|
|
Collister Johnson
|
—
|
|
|
—
|
|
56,734
|
|
4,329,939
|
|
Michael Morhaime
|
200,000
|
|
|
7,819,548
|
|
46,666
|
|
2,756,561
|
|
Brian Stolz
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Chris B. Walther
|
—
|
|
|
—
|
|
33,531
|
(3)
|
2,488,671
|
|
Riccardo Zacconi
(4)
|
48,096
|
(5)
|
|
2,099,486
|
|
28,148
|
(5)
|
1,837,713
|
|
(1)
As each of these transactions involved a same-day sale, the “Value Realized on Exercise” is computed by multiplying the number of shares exercised by the difference between sale price of the shares and the exercise price of the underlying stock options.
(2)
The “Value Realized on Vesting” is computed by multiplying the number of shares of stock or units by the Nasdaq Official Closing Price of our Common Stock on the vesting date (or if that date is not a trading date, the immediately preceding trading date).
(3)
The PSUs that vested for Mr. Walther during 2018 were held in the Walther-Stockton 2013 Family Trust.
(4)
During 2018, and consistent with 2017 and 2016, Mr. Zacconi also received cash payments for certain equity incentives with respect to King ordinary shares he held prior to the King Acquisition. As these were part of the consideration for the King Acquisition, and do not reflect any compensation decisions by Activision Blizzard, they are not included herein.
(5)
The stock options exercised by, and restricted share units that vested for, Mr. Zacconi during 2018 were converted from awards with respect to King ordinary shares in connection with the consummation of the King Acquisition.
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Employment Agreements
The following is a summary of the material terms set forth in each employment agreement to which we were party with a named executive officer during 2018, with the exception of provisions regarding payments and benefits upon termination or a change of control, which are described under “—Potential Payments upon Termination or Change of Control” below and, as such, are not included in the following summary.
Robert Kotick
Term & Title
Robert Kotick is party to an employment agreement with us, dated as of October 1, 2016 (i.e., the Kotick Employment Agreement), pursuant to which he serves as our Chief Executive Officer. Mr.
Kotick has served as our senior-most executive officer since 1991. Mr. Kotick’s term of employment under the Kotick Employment Agreement began on October 1, 2016, and continues through December 31, 2021.
Base Salary
Pursuant to the Kotick Employment Agreement, Mr. Kotick’s annual base salary was decreased to $1.75 million as of January 1, 2017. The Kotick Employment Agreement does not provide for an increase, or review, of Mr. Kotick’s annual base salary during the term of that agreement. For more information about Mr. Kotick’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Kotick Employment Agreement, Mr. Kotick is entitled to an annual bonus, with a target amount of 200% of his base salary. The form of such bonus shall be determined by the Compensation Committee at its discretion. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity Awards
2016 PSUs
As an inducement to enter into the Kotick Employment Agreement, on November 22, 2016, Mr. Kotick received an equity award consisting of PSUs, where target performance would have resulted in the vesting of 605,327 PSUs (the number of which was based on a target grant date value of approximately $22.5 million) and
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maximum performance would have resulted in the vesting of 250% of the target, or 1,513,317 PSUs.
The target number of these PSUs vested on March 31, 2019, following Mr. Kotick’s continued employment through that date and the Compensation Committee’s determination that the cumulative AB Adjusted EPS for the period from October 1, 2016 through December 31, 2017 was at least $2.00. Further, as that metric was satisfied, there was an opportunity for the additional 907,990 PSUs to vest on that date, as follows:
•
up to one-third of the additional PSUs, based upon the AB Adjusted Operating Income objective set forth in our 2016 AOP;
•
up to one-third of the additional PSUs, based upon the AB Adjusted Operating Income objective set forth in our 2017 AOP; and
•
up to one-third of the additional PSUs, based upon the AB Adjusted Operating Income objective set forth in our 2018 AOP.
In each case and for each tranche, these additional PSUs were eligible to vest as follows:
•
if actual performance was less than or equal to 100% of the objective, no additional PSUs would vest;
•
if actual performance was between 100% and 137.5% of the objective, a number of additional PSUs of between zero and 250% of the target (i.e., between zero and 302,663 PSUs) would vest, determined using straight-line interpolation; and
•
if actual performance was 137.5% or more of the objective, 250% of the target number of additional PSUs (i.e., 302,663 PSUs) would vest.
Following the Compensation Committee’s determination that AB Adjusted Operating Income for 2016 was 114% of the target objective set forth in our 2016 AOP and that AB Adjusted Operating Income for 2017 was 117% of the target objective set forth in our 2017 AOP, a total of 251,788 additional PSUs vested on March 31, 2019. No additional shares vested following the Compensation Committee’s determination that AB Adjusted Operating Income for 2018 was 91% of the target objective set forth in our 2018 AOP.
2017 Equity Awards
Pursuant to the Kotick Employment Agreement, on August 7, 2017, Mr. Kotick received an equity award consisting of options and PSUs.
2017 Stock Options
Mr. Kotick was awarded an option to purchase 190,712 shares of our Common Stock, the number of which was based on a target grant date value of approximately $4.5 million, which vest in full on December 31, 2021, subject to his continued employment through that date (unless Mr. Kotick becomes entitled to the “shareholder value creation incentive” described herein before the award would otherwise vest).
2017 PSUs (Relative TSR)
Mr. Kotick was awarded PSUs, where target performance results in the vesting of 71,988 PSUs (the number of which was based on a target grant date value of approximately $4.5 million) and maximum performance results in the vesting of 200% of the target, or 143,976 PSUs.
These PSUs vest on March 15, 2021, subject to Mr.
Kotick’s continued employment through that date, by reference to the difference between our cumulative TSR and the rate of return of the S&P 500 Total Return Index (i.e., our TSR minus that index’s rate of return) for the period from the date of grant through December 31, 2020, as follows:
–
if our TSR is less than the rate of return of the S&P 500 Total Return Index, no PSUs vest;
–
if our TSR is equal to the rate of return of the S&P 500 Total Return Index, 100% of the target number of PSUs vest;
–
if our TSR less the rate of return of the S&P 500 Total Return Index is between 0 percentage points and 50 percentage points, the number of PSUs that vest is between 100% and 200% of the target, determined using straight-line interpolation; and
–
if our TSR less the rate of return of the S&P 500 Total Return Index is 50 percentage points or more, 200% of the target number of PSUs vest.
2017 PSUs (AB Adjusted Operating Income)
Mr. Kotick was also awarded PSUs, where target performance results in the vesting of 175,972 PSUs (the number of which was based on a target grant date value of approximately $11 million) and maximum performance results in the vesting of 250% of the target, or 439,930 PSUs.
These PSUs vest on March 15, 2021, subject to Mr. Kotick’s continued employment through that date, if and only if the cumulative AB Adjusted EPS for the period from July 1, 2017 through December 31, 2018 is at least $2.20 (unless Mr. Kotick becomes entitled to the “shareholder value creation incentive” described herein before the award would otherwise vest) and otherwise by reference to the cumulative AB Adjusted Operating Income objective for 2018, 2019, and 2020 set forth in the Company’s 2017 long-range strategic plan for that three-year period as follows:
–
if actual performance is below 90% of the cumulative AB Adjusted Operating Income objective, no PSUs vest;
–
if actual performance is 90% of the cumulative AB Adjusted Operating Income objective, 90% of the target number of PSUs vest;
–
if actual performance falls between 90% and 100% of the cumulative AB Adjusted Operating Income objective, the number of PSUs that vest is between 90% and 100% of the target, determined using straight-line interpolation;
–
if actual performance is 100% of the cumulative AB Adjusted Operating Income objective, 100% of the target number of PSUs vest;
–
if actual performance falls between 100% and 137.5% of the cumulative AB Adjusted Operating Income objective, the number of PSUs that vest is between 100% and 250% of the target, determined using straight-line interpolation; and
–
if actual performance is 137.5% or more of the cumulative AB Adjusted Operating Income objective, 250% of the target number of PSUs vest.
The cumulative AB Adjusted EPS for the period from July 1, 2017 through December 31, 2018 was at least $2.20.
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2018 Equity Awards
Pursuant to the Kotick Employment Agreement, on each of November 21, 2018 and December 28, 2018, Mr. Kotick received an equity award.
2018 Stock Options
Mr. Kotick was awarded an option to purchase 925,057 shares of our Common Stock, the number of which was based on a target grant date value of approximately $19.5 million, which vest in full on December 31, 2022, subject to his continued employment through that date (unless Mr. Kotick becomes entitled to the “shareholder value creation incentive” described herein before the award would otherwise vest).
2018 PSUs (Relative TSR)
Mr. Kotick was awarded PSUs, where target performance results in the vesting of 54,230 PSUs (the number of which was based on a target grant date value of approximately $3.5 million) and maximum performance results in the vesting of 250% of the target, or 135,575 PSUs.
These PSUs vest on March 31, 2022, subject to Mr.
Kotick’s continued employment through that date (unless Mr.
Kotick becomes entitled to the “shareholder value creation incentive” described herein before the award would otherwise vest), by reference to the difference between our cumulative TSR and the rate of return of the S&P 500 Total Return Index (i.e., our TSR as minus that index’s rate of return) for the period from the date of grant through December 31, 2021, as follows:
–
if our TSR less the rate of return of the S&P 500 Total Return Index is below -10 percentage points, no PSUs vest;
–
if our TSR less the rate of return of the S&P 500 Total Return Index is between -10 percentage points and 0 percentage points, the number of PSUs that vest is between 50% and 100% of the target, determined using straight-line interpolation;
–
if our TSR is equal to the S&P 500 Total Return Index, 100% of the target number of PSUs vest;
–
if our TSR less the rate of return of the S&P 500 Total Return Index is between 0 percentage points and 50 percentage points, the number of PSUs that vest is between 100% and 250% of the target, determined using straight-line interpolation; and
–
if our TSR less the rate of return of the S&P 500 Total Return Index is 50 percentage points or more, 250% of the target number of PSUs vest.
2018 PSUs (AB Adjusted EPS)
Mr. Kotick was also awarded PSUs, where target performance results in the vesting of 106,838 PSUs (the number of which was based on a target grant date value of approximately $5
million) and maximum performance results in the vesting of 250% of the target, or 267,095 PSUs.
These PSUs vest on March 31, 2023, subject to Mr. Kotick’s continued employment through that date (unless Mr.
Kotick becomes entitled to the “shareholder value creation incentive” described herein before the award would otherwise vest), by reference to the cumulative AB Adjusted EPS objective for 2020, 2021, and 2022 set forth in the Company’s 2019 long-range strategic plan for that three-year period as follows:
–
if actual performance is below 90% of the cumulative AB Adjusted EPS objective, no PSUs vest;
–
if actual performance is 90% of the cumulative AB Adjusted EPS objective, 90% of the target number of PSUs vest;
–
if actual performance falls between 90% and 100% of the cumulative AB Adjusted EPS objective, the number of PSUs that vest is between 90% and 100% of the target, determined using straight-line interpolation;
–
if actual performance is 100% of cumulative AB Adjusted EPS objective, 100% of the target number of PSUs vest;
–
if actual performance falls between 100% and 137.5% of the cumulative AB Adjusted EPS objective, the number of PSUs that vest is between 100% and 250% of the target, determined using straight-line interpolation; and
–
if actual performance is 137.5% or more of the cumulative AB Adjusted EPS objective, 250% of the target number of PSUs vest.
2019 Equity Awards
Subject to his continued employment, Mr. Kotick may also be granted equity awards in 2019 (unless Mr. Kotick becomes entitled to the “shareholder value creation incentive” described herein before any such grant, in which case he will receive a payment in lieu of such award, as described herein). The amount, form, and terms and conditions of any such award will be determined by the Compensation Committee at its discretion, after consultation with Mr. Kotick. Subject in all cases to its absolute discretion, which it used when determining the grant date value of Mr. Kotick’s 2017 and 2018 awards, the Compensation Committee will consider, in determining the grant date value of each such award, the Company’s and Mr. Kotick’s performance, our applicable comparator companies, any relevant changes in the business and market dynamics relevant to the Company, our projected performance relative to our long-term business plan, and any other factors the Compensation Committee determines relevant. Without limiting the generality of the foregoing, the factors the Compensation Committee will consider, in using its absolute discretion, include: (1) the 50th percentile of the aggregate grant date values of the long-term incentive grants made to the chief executive officers of our then-applicable comparator group during the prior year; and (2) the grant date value of the equity awards made to Mr. Kotick during the prior year.
Long-Term Performance Incentives
2020 Long-Term Performance Incentive
Subject to his continued employment, Mr. Kotick may be granted an incentive award (the “2020 long-term performance grant”) measured against our total TSR and, in certain circumstances, our relative TSR. The award will have a grant date value determined by the Compensation Committee at its discretion, after consultation with Mr. Kotick and upon consideration of the factors relevant to the grant date value of the 2018 and 2019 equity awards described above.
Subject to the Compensation Committee’s discretion, the amount payable at maximum performance will not be more than five times the amount payable at target performance.
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The award will be paid, in cash or shares of our Common Stock, at the Compensation Committee’s discretion, on or about March 1, 2021. For the sake of clarity, the value, if any, of the 2020 long-term performance grant will be determined by the Compensation Committee in 2021.
If the compound annual growth rate for our TSR for the period from January 1, 2017 through December 31, 2020 is at least 6%, the award will vest as follows (and if actual performance is between any two points, the amount earned will be determined using straight-line interpolation):
Annualized TSR during
4-Year Period
|
Resulting
Cumulative 4-Year
TSR Performance
|
Payment as
Percentage of
Target
|
6%
|
26%
|
90%
|
8%
|
36%
|
100%
|
13%
|
63%
|
200%
|
17%
|
87%
|
300%
|
21.5%
|
118%
|
400%
|
≥25%
|
≥144%
|
500%
|
If our annualized TSR for that period is below 6% but is both (1) positive (i.e., equal to or greater than 0%) and (2) greater than or equal to the median TSR of the companies which comprise the Standard and Poor’s 500 Index during that period (the “S&P 500 Median TSR”), the award will vest by reference to the difference between our TSR and S&P 500 Median TSR (i.e., our TSR minus that index’s median rate of return) for the period from January 1, 2017 to December 31, 2020 (“TSR Performance Relative to S&P 500 Median”), as follows:
–
if our TSR Performance Relative to S&P 500 Median is 0%, 90% of the target will be earned;
–
if our TSR Performance Relative to S&P 500 Median is more than 0% but less than 10%, between 90% and 100% of the target will be earned, determined using straight-line interpolation; and
–
if our TSR Performance Relative to S&P 500 Median is 10% or more, 120% of the target will be earned.
If our annualized TSR for that period is negative (i.e., less than 0%) but is greater than or equal to the S&P 500 Median TSR, the award will vest by reference to our TSR Performance Relative to S&P 500 Median, as follows:
–
if our TSR Performance Relative to S&P 500 Median is 0%, 85% of the target will be earned; and
–
if our TSR Performance Relative to S&P 500 Median is more than 0%, 100% of the target will be earned.
For the sake of clarity, if our annualized TSR for the period from January 1, 2017 to December 31, 2020 is neither positive nor greater than the S&P 500 Median TSR, the 2020 long-term performance grant will be canceled and Mr. Kotick will not receive anything thereunder (unless Mr. Kotick’s employment is terminated in certain circumstances following a change of control prior to the end of that period).
2021 Long-Term Performance Incentive
Subject to his continued employment, Mr. Kotick may also be granted an incentive award (the “2021 long-term performance grant”) measured against our cumulative operating income performance over the five-year period from January 1, 2017 to December 31, 2021. The award will have a grant date value determined by the Compensation Committee at its discretion, after consultation with Mr. Kotick and upon consideration of the factors relevant to the grant date value of the 2019 equity awards described above (where, in considering these factors before the Compensation Committee’s use of its absolute discretion, it will be assumed that the average increase in the grant date value of the long-term incentive awards made to other chief executive officers by companies in our industry between 2016 and the grant date could be calculated by applying a multiple of 1.44 to the grant date value of the equity award made to Mr. Kotick in 2017). Subject to the Compensation Committee’s discretion, the amount payable at maximum performance will not be more than 1.5 times the amount payable at target performance. For the sake of clarity, the value, if any, of the 2021 long-term performance grant will be determined by the Compensation Committee in 2022.
The award will be paid, in cash or shares of our Common Stock, at the Compensation Committee’s discretion, in 2022, if either (X) the cumulative AB Adjusted Operating Income for the period from 2017 through 2021 is at least 90% of the sum of AB Adjusted Operating Income objective set forth in our 2017 AOP, the AB Adjusted Operating Income objective set forth in our 2018 AOP, and, for each of 2019, 2020, and 2021, a non-GAAP operating income objective for the Company to be determined by the Committee in its discretion, after consultation with Mr. Kotick (which, for the sake of clarity, may differ from the objective ultimately established pursuant to our AOP for any such year) or (Y) an alternative operating income objective established by the Compensation Committee for that period has been met or exceeded.
The award will vest as follows:
–
if actual performance is at least 90% of the objective, 100% of the target will be earned;
–
if actual performance falls between 100% and 125% of the objective, the amount earned will be determined using straight-line interpolation; and
–
if actual performance is 125% or more of the objective, 150% of the target will be earned.
Shareholder Value Creation Incentive
Subject to Mr. Kotick’s continued employment, if, at any time prior to December 31, 2021, the average closing price of our Common Stock is (a) at least two times the average closing price of our Common Stock during the period from October 1, 2016 to December 31, 2016 (i.e., increasing from $39.98 to $79.96 per share, subject to adjustments by the Compensation Committee to prevent dilution or enlargement as a result of any dividend, stock split, or substantially similar change in our capital structure), and (b) remains at or above that price for at least 90 consecutive trading days:
•
the equity awards granted to Mr. Kotick during 2017 or 2018 pursuant to the Kotick Employment Agreement which are then outstanding, with the exception of the 2017 PSUs which vest by reference to our TSR performance relative to the rate of return of the S&P 500 Total Return Index, will immediately vest
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(assuming, for all performance-based awards, maximum performance);
•
Mr. Kotick will receive a payment equal to the grant date value (as determined by the Compensation Committee at its discretion, after consultation with Mr. Kotick) of any annual equity grants remaining to be made pursuant to the Kotick Employment Agreement, which will be paid, in cash or shares of our Common Stock, in the Compensation Committee’s discretion, within 120 days (and he will not be granted the underlying awards); and
•
the 2021 long-term performance grant will be paid within 120 days, assuming maximum performance (i.e., with the amount payable to be no less than 150% of the 2021 long-term performance grant value).
Transformative Transaction Award
Upon the Compensation Committee’s determination, at its discretion, that we have consummated a transformative transaction during the term of Mr. Kotick’s employment under the Kotick Employment Agreement, he will receive a special award, the form of which shall be determined by the Compensation Committee at its discretion. For a transaction (or series of transactions) to qualify as transformative, it (or they) must, at a minimum:
•
result in accretive value to our then-current shareholders of at least 15% over our market capitalization as of the date immediately prior to the public announcement of the transaction (or, for a series of transactions, the first transaction in the series); and
•
that accretion must be maintained for six consecutive months following the consummation of the transaction (or, for a series of transactions, the last transaction in the series).
The value of such award, as determined by the Compensation Committee, at its discretion, will be equal to between one hundred percent (100%) and one hundred fifty percent (150%) of the 2021 long-term performance grant value, as follows:
–
if the accretive value was at least 15%, 100% of the 2021 long-term performance grant value;
–
if the accretive value was between 15% and 30%, the value of the award is between 100% and 150% of the 2021 long-term performance grant value, determined using straight-line interpolation; and
–
if the accretive value was 30% or more, 150% of the 2021 long-term performance grant value.
Other Benefits
Pursuant to the Kotick Employment Agreement, Mr. Kotick is entitled to participate in all benefit plans generally available to our executive officers. In addition, we are required to maintain a supplemental term life insurance policy in the amount of $18 million for the benefit of his estate until March 15, 2022, and, from March 16, 2022, through the tenth anniversary of his employment agreement (i.e., October 1, 2026), to reimburse him for up to $80,000 per year of premiums in respect of his then-existing life insurance policies. Further, we will pay reasonable expenses related to Mr. Kotick’s use of non-commercial transportation services for business-related travel, including any such services provided by an FAA-certified charter operator indirectly owned and managed by him. Please see “Certain Relationships and Related Person Transactions—Relationships and Transactions—Business Use of Aircraft Indirectly Owned by Our Chief Executive Officer” for more information about our arrangement with this charter operator.
Restrictive Covenants
Pursuant to the Kotick Employment Agreement, until the second anniversary of the expiration of the term of his employment under the agreement, Mr. Kotick is restricted from soliciting the employment of anyone then employed by the Company or our affiliates (or anyone who was employed by us or them during the then-most recent six-month period). Mr. Kotick is also prohibited from competing with us during the term of his employment under the Kotick Employment Agreement.
In addition, during the term of his employment under the Kotick Employment Agreement, Mr. Kotick is prohibited from disclosing or using our confidential information except as required in the course of his employment and, until the second anniversary of the expiration of the term of his employment under the agreement, he cannot use such information to induce any of our employees or business partners to alter its relationship with us.
Spencer Neumann
Term & Title
From May 5, 2017 until December 31, 2018, Spencer Neumann was party to an employment agreement with us (i.e., the Neumann Employment Agreement), pursuant to which he served as our Chief Financial Officer. Mr. Neumann’s term of employment under the Neumann Employment Agreement began on May 30, 2017, and continued until we terminated his employment effective as of December 31, 2018.
Base Salary
Pursuant to the Neumann Employment Agreement, Mr. Neumann’s annual base salary was $850,000 as of May 30, 2017. Thereafter, it was reviewed periodically and increased at the Compensation Committee’s discretion. For more information about Mr. Neumann’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Neumann Employment Agreement, Mr. Neumann was eligible for an annual bonus under the CAIP with a target amount of 150% of his base salary, the actual amount of which was determined at our discretion based on his overall performance, the Company’s performance, and any other factors we chose to consider. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above. As we terminated his employment effective as of December 31, 2018, Mr. Neumann did not receive a bonus under the CAIP for 2018.
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Equity Awards
2017 Equity Award
As an inducement to enter into the Neumann Employment Agreement, on August 7, 2017, Mr. Neumann received an equity award consisting of stock options and PSUs. Please see our proxy statement for our 2018 annual meeting, filed with the SEC on Schedule 14A on April 30, 2018, for more information about these awards.
Annual Grants of PSUs (Long-Range Strategic Plan)
Pursuant to the Neumann Employment Agreement, Mr. Neumann was also eligible to receive additional annual grants of PSUs, with vesting based on the achievement of financial objectives set forth in the Company’s long-range strategic plans, with a target value of $1.4 million per year.
2017 Annual Grants of PSUs
On November 6, 2017, Mr. Neumann was awarded PSUs. Please see our proxy statement for our 2018 annual meeting, filed with the SEC on Schedule 14A on April 30, 2018, for more information about this award.
2018 Annual Grants of PSUs
On November 12, 2018, Mr. Neumann was awarded PSUs, where target performance results in the vesting of 25,979
PSUs and maximum performance results in the vesting of 125% of the target, or 32,474 PSUs.
These PSUs would have vested in full on March 30, 2022, subject to Mr. Neumann’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, as follows:
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if actual performance is below 85% of the objective, no PSUs vest;
–
if actual performance falls between 85% and 125% of the objective, the number of additional PSUs that vest is between 85% and 125%, determined using straight-line interpolation; and
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if actual performance is 125% or more of the objective, 125% of the target number of PSUs vest.
We terminated Mr. Neumann’s employment effective as of December 31, 2018, and, pursuant to the terms of his award agreements, canceled all of his unvested equity as of that date.
Long-Term Contract Inducement
As an inducement to enter into the Neumann Employment Agreement, Mr. Neumann received a payment of $1 million in cash shortly after he commenced employment and received an additional $1 million in cash in March 2018.
Other Benefits
Pursuant to the Neumann Employment Agreement, while employed, Mr. Neumann was entitled to participate in all benefit plans generally available to our executive officers, and we were required to maintain a $5 million supplemental term life insurance policy for the benefit of his estate throughout the term of his employment under the Neumann Employment Agreement.
Restrictive Covenants
Pursuant to the Neumann Employment Agreement, until the second anniversary of the termination of his employment (i.e., until December 31, 2020), Mr. Neumann is restricted from soliciting the employment of anyone then-employed by the Company or our subsidiaries (or anyone who was employed by us or them during his final 90 days of employment). In addition, Mr.
Neumann is prohibited from disclosing or using our confidential information at all times following the termination of his employment. Mr. Neumann was also not permitted to seek or negotiate for other employment before the final six
months of the term of his employment under the Neumann Employment Agreement.
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Collister Johnson
Term & Title
Collister Johnson is party to an employment agreement with us, dated as of May 10, 2017 (i.e., the Johnson Employment Agreement), pursuant to which he serves as our President and Chief Operating Officer. Mr. Johnson’s term of employment under the Johnson Employment Agreement began on June 26, 2017, and continues through June 30, 2020 (subject to our right to extend for an additional year).
Base Salary
Pursuant to the Johnson Employment Agreement, Mr. Johnson’s annual base salary was $1.3 million as of June 26, 2017, and will be reviewed periodically. For more information about Mr. Johnson’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Johnson Employment Agreement, Mr. Johnson is eligible for an annual bonus under the CAIP with a target amount of 100% of his base salary.
He also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which AB Adjusted EPS is 115% or more of the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS (the higher of (x) and (y), the “EPS Objective”), such that his total target bonus opportunity under the CAIP for any year may be up to 200% of his base salary, by reference to the EPS Objective, as follows:
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if performance is less than 115% of the objective, his target bonus will not change;
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if performance is 115% of the objective, his target bonus will be increased by 10% of his base salary;
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if performance falls between 115% and 124% of the objective, the amount by which his target bonus will be increased is between 10% and 100% of his base salary, determined using straight-line interpolation; and
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if performance is 124% or more of the objective, his target bonus will be increased by 100% of his base salary.
The actual amount of any bonus paid to Mr. Johnson under the CAIP will be determined at our discretion based on his overall performance, the Company’s performance, and any other factors we choose to consider. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity Awards
2017 Equity Award
As an inducement to enter into the Johnson Employment Agreement, on August 7, 2017, Mr. Johnson received an equity award consisting of stock options and PSUs. Please see our proxy statement for our 2018 annual meeting, filed with the SEC on Schedule 14A on April 30, 2018, for more information about these awards.
Annual Grants of PSUs (Long-Range Strategic Plan)
Pursuant to the Johnson Employment Agreement, beginning in 2018, Mr. Johnson is also eligible to receive additional annual equity grants with vesting based on the achievement of financial objectives set forth in the Company’s long-range strategic plans, with a target value of $1 million per year.
Accordingly, on November 12, 2018, Mr. Johnson was awarded PSUs, where target performance results in the vesting of 18,556
PSUs, and maximum performance results in the vesting of 125% of the target, or 23,195 PSUs.
These PSUs vest in full on March 30, 2022, subject to Mr. Johnson’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, as follows:
–
if actual performance is below 85% of the objective, no PSUs vest;
–
if actual performance falls between 85% and 125% of the objective, the number of additional PSUs that vest is between 85% and 125%, determined using straight-line interpolation; and
–
if actual performance is 125% or more of the objective, 125% of the target number of PSUs vest.
Annual Grants of PSUs (AB Adjusted EPS Growth)
Pursuant to the Johnson Employment Agreement, beginning in 2018, Mr. Johnson was also eligible to receive additional annual grants of PSUs with vesting based on AB Adjusted EPS growth, with a target value of $3 million per year.
Accordingly, on November 12, 2018, Mr. Johnson was awarded PSUs (i.e., the 2018 AB Adjusted EPS Growth PSUs), where target performance would have resulted in the vesting of 42,511
PSUs, and maximum performance would have resulted in the vesting of 200% of the target, or 85,022 PSUs.
These PSUs would have vested in full on June 29, 2019, subject to Mr. Johnson’s continued employment through such date, by reference to AB Adjusted EPS for 2018 as compared to the 2017 EPS Objective (i.e., the higher of (x) the AB Adjusted EPS AOP objective for 2017 and (y) the actual AB Adjusted EPS for 2017), as follows:
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if the AB Adjusted EPS for 2018 was less than 115% of the 2017 EPS Objective, no PSUs would have vested;
–
if the AB Adjusted EPS for 2018 was 115% of the 2017 EPS Objective, 10% of the target number of PSUs would
have vested;
–
if the AB Adjusted EPS for 2018 fell between 115% and 124% of the 2017 EPS Objective, number of PSUs that
would have vested is between 10% and 100% of the target, determined using straight-line interpolation;
–
if the AB Adjusted EPS for 2018 was 124% of the 2017 EPS Objective, 100% of the target number of PSUs
would have vested;
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if the AB Adjusted EPS for 2018 fell between 124% and 134% of the 2017 EPS Objective, number of PSUs that
would have vested is between 100% and 200% of the target, determined using straight-line interpolation; and
–
if the AB Adjusted EPS for 2018 was 134% or more of the 2017 EPS Objective, 200% of the target number
of PSUs would have vested.
These PSUs were canceled following the Compensation Committee’s determination that AB Adjusted EPS for 2018 was less than 115% of the 2017 EPS Objective.
2020 Equity Award
If we exercise our right to extend his employment term by an additional year,
in 2020 Mr. Johnson is also eligible to receive an additional equity grant with a target value of $3 million, the actual amount, form, and terms and conditions of which will be determined by the Compensation Committee in its discretion.
Long-Term Contract Inducement
As an inducement to enter into the Johnson Employment Agreement, Mr. Johnson received a payment of $1 million in cash shortly after he commenced employment and an additional payment of $1.2 million in cash in January 2018. If his employment had been terminated for any reason other than by us without cause or by him for good reason, or due to his death or disability, prior to the first anniversary of a payment date (i.e., prior to July 7, 2018 or January 15, 2019), Mr. Johnson would have had to repay the portion of the bonus he received on that date.
Other Benefits
Pursuant to the Johnson Employment Agreement, Mr. Johnson is entitled to participate in all benefit plans generally available to our executive officers, and we are required to maintain a $3 million supplemental term life insurance policy for the benefit of his estate throughout the term of his employment under the Johnson Employment Agreement.
Restrictive Covenants
Pursuant to the Johnson Employment Agreement, until the second anniversary of the termination of his employment, Mr. Johnson is restricted from soliciting the employment of anyone then-employed by the Company or our subsidiaries (or anyone who was employed by us or them during his final 90 days of employment). In addition, Mr. Johnson is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. Mr. Johnson is also not permitted to seek or negotiate for other employment before the final six months of the term of his employment under the Johnson Employment Agreement. Mr. Johnson is also prohibited from competing with us during the term of his employment under the Johnson Employment Agreement and is restricted from inducing any of our business partners to alter its relationship with us while he is our employee.
Michael Morhaime
Term & Title
From October 4, 2018 until April 7, 2019, Michael Morhaime was party to an employment agreement with us (i.e., the Most Recent Morhaime Employment Agreement), pursuant to which he provided strategic advice and counsel to the Company and its subsidiaries, including Blizzard. Previously, Mr. Morhaime was party to an employment agreement with us, dated as of December 1, 2007, and amended as of December 15, 2008, March 31, 2009, November 4, 2009, and October 26, 2010 (the “Prior Morhaime Employment Agreement”), pursuant to which he served as the President and Chief Executive Officer of Blizzard. Mr. Morhaime’s term of employment under the Prior Morhaime Employment Agreement began on July 9, 2008, and continued through December 31, 2016. Mr. Morhaime continued to serve, “at will” as the President and Chief Executive Officer of Blizzard after the expiration of the Prior Morhaime Employment Agreement until October 17, 2018, at which point, pursuant to the Most Recent Morhaime Employment Agreement, he transitioned to serving as an advisor to the Company. Mr. Morhaime ceased to be an employee of the Company on April 7, 2019.
Base Salary
Pursuant to the Most Recent Morhaime Employment Agreement, until December 31, 2018, Mr. Morhaime continued to receive the annual base salary of $1,408,118 that he received immediately prior to his entry into that agreement. As of January 1, 2019, his base salary was reduced to $2,500 per month (or $30,000 per year).
Annual Bonus
Pursuant to the Most Recent Morhaime Employment Agreement, as Mr. Morhaime remained employed through December 31, 2018, he was (1) entitled to 3.5% of the profit sharing pool created pursuant to the Blizzard Profit Sharing Plan for 2018 and (2) eligible for a bonus under the CAIP for 2018.
Restrictive Covenants
Pursuant to the Most Recent Morhaime Employment Agreement, Mr. Morhaime is restricted from soliciting the employment of anyone employed by the Company or any of our subsidiaries as of his termination date until June 30, 2019. Mr. Morhaime is also prohibited from using our confidential information to induce any of our business partners to alter its relationship with us or any of our subsidiaries. In addition, Mr. Morhaime agreed not to disparage us or our affiliates (including the directors and employees of any them) for a period of approximately one year (i.e., until December 31, 2019). In addition, pursuant to the Prior Morhaime Employment Agreement, Mr. Morhaime is prohibited from disclosing or using our confidential information at all times following the termination of his employment.
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Brian Stolz
Term & Title
Brian Stolz is party to an employment agreement with us, dated as of May 18, 2016 (i.e., the Stolz Employment Agreement), pursuant to which he serves as our Chief People Officer. Mr. Stolz’s term of employment under the Stolz Employment Agreement began on May
30, 2016, and continues through June 4, 2019. Thereafter, we anticipate Mr. Stolz will be employed on an “at will” basis.
Base Salary
Pursuant to the Stolz Employment Agreement, Mr. Stolz’s annual base salary was $650,000 as of May 30, 2016. It was, and will be, reviewed periodically and may be increased—but not decreased—in the Compensation Committee’s discretion. For more information about Mr. Stolz’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Stolz Employment Agreement, Mr. Stolz is eligible for an annual bonus under the CAIP with a target amount of 75% of his base salary, the actual amount of which will be determined at our discretion based on his overall performance, the Company’s performance, and any other factors we choose to consider. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity Awards
2016 Equity Award
As an inducement to enter into the Stolz Employment Agreement, on August 8, 2016, Mr. Stolz received an equity award consisting of stock options and PSUs. Please see Mr. Stolz’s Form 4 filed with the SEC on August 10, 2016, for more information about these awards.
Annual Grants of PSUs (Long-Range Strategic Plan)
During the term of the Stolz Employment Agreement, Mr. Stolz is also eligible to receive additional annual grants of PSUs, with vesting based on the achievement of financial objectives set forth in the Company’s long-range strategic plans, with a target value of $500,000 per year.
2017 Annual Grants of PSUs
On November 6, 2017, Mr. Stolz was awarded PSUs. Please see Mr. Stolz’s Form 4 filed with the SEC on November 8, 2017, for more information about this award.
2018 Annual Grants of PSUs
On November 12, 2018, Mr. Stolz was awarded PSUs, where target performance results in the vesting of 9,278
PSUs and maximum performance results in the vesting of 125% of the target, or 11,598 PSUs.
These PSUs vest in full on March 30, 2022, subject to Mr. Stolz’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, as follows:
–
if actual performance is below 85% of the objective, no PSUs vest;
–
if actual performance falls between 85% and 125% of the objective, the number of additional PSUs that vest is between 85% and 125%, determined using straight-line interpolation; and
–
if actual performance is 125% or more of the objective, 125% of the target number of PSUs vest.
Long-Term Contract Inducement
As an inducement to enter into the Stolz Employment Agreement, Mr. Stolz received a payment of $1 million in cash shortly after he commenced employment and an additional payment of $1.1 million in cash in May 2017. If his employment is terminated for any reason other than by us without cause or by him for good reason, or due to his death or disability, prior to the third anniversary of the effective date of the Stolz Employment Agreement payment date (i.e., prior to May 30, 2019), Mr. Stolz must repay a pro-rated portion of the bonus based on his length of service through the date of termination.
Other Benefits
Pursuant to the Stolz Employment Agreement, Mr. Stolz is entitled to participate in all benefit plans generally available to our executive officers. He also received certain relocation assistance (which, had his employment been terminated for any reason other than by us without cause or by him for good reason, or due to his death or disability, prior to the first anniversary of the effective date of the Stolz Employment Agreement payment date (i.e., prior to May 30, 2017), he would have had to repay).
Restrictive Covenants
Pursuant to the Stolz Employment Agreement, until the second anniversary of the termination of his employment, Mr. Stolz is restricted from soliciting the employment of anyone then-employed by the Company or our subsidiaries (or anyone who was employed by us or them during his final 90 days of employment). In addition, Mr.
Stolz is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. Mr. Stolz is also not permitted to seek or negotiate for other employment before the final six months of the term of his employment under the Stolz Employment Agreement. Mr. Stolz is also prohibited from competing with us during the term of his employment under the Stolz Employment Agreement and is restricted from inducing any of our business partners to alter its relationship with us while he is our employee.
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Chris B. Walther
Term & Title
Chris B. Walther is party to an employment agreement with us, dated as of November 1, 2016 (i.e., the Walther Employment Agreement), pursuant to which he serves as our Chief Legal Officer. Mr. Walther’s term of employment under the Walther Employment Agreement began on October 1, 2016, and continues through March 31, 2020 (subject to our right to extend for an additional year).
Base Salary
Pursuant to the Walther Employment Agreement, Mr. Walther’s annual base salary was $707,911 as of October 1, 2016. It was, and will be, reviewed periodically and may be increased—but not decreased—at the Compensation Committee’s discretion. For more information about Mr. Walther’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Walther Employment Agreement, Mr. Walther is eligible for an annual bonus under the CAIP with a target amount of 75% of his base salary, the actual amount of which will be determined at our discretion based on his overall performance, the Company’s performance, and any other factors we choose to consider. For more information about performance-based bonuses, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.
Equity Awards
2016 Equity Award
As an inducement to enter into the Walther Employment Agreement, on November 7, 2016, Mr. Walther received an equity award consisting of stock options and PSUs. Please see Mr.
Walther’s Form 4 filed with the SEC on November 9, 2016, for more information about these awards.
Annual Grants of PSUs (Long-Range Strategic Plan)
Pursuant to the Walther Employment Agreement, Mr. Walther is also eligible to receive additional annual grants of PSUs, with vesting based on the achievement of financial objectives set forth in the Company’s long-range strategic plans, with a target value of $625,000 per year.
2017 Annual Grants of PSUs
On November 6, 2017, Mr. Walther was awarded PSUs. Please see Mr. Walther’s Form 4 filed with the SEC on November 8, 2017, for more information about this award.
2018 Annual Grants of PSUs
On November 12, 2018, Mr. Walther was awarded PSUs, where target performance results in the vesting of 11,598
PSUs and maximum performance results in the vesting of 125% of the target, or 14,498 PSUs.
These PSUs vest in full on March 30, 2022, subject to Mr. Walther’s continued employment through that date, by reference to the cumulative AB Adjusted Operating Income objective for 2019, 2020, and 2021 set forth in the Company’s 2018 long-range strategic plan for that three-year period, as follows:
–
if actual performance is below 85% of the objective, no PSUs vest;
–
if actual performance falls between 85% and 125% of the objective, the number of additional PSUs that vest is between 85% and 125%, determined using straight-line interpolation; and
–
if actual performance is 125% or more of the objective, 125% of the target number of PSUs vest.
Other Benefits
Pursuant to the Walther Employment Agreement, Mr. Walther is entitled to participate in all benefit plans generally available to our executive officers, and we are required to maintain a $2 million supplemental term life insurance policy for the benefit of his estate throughout the term of his employment under the Walther Employment Agreement.
Restrictive Covenants
Pursuant to the Walther Employment Agreement, until the second anniversary of the termination of his employment, Mr. Walther is restricted from soliciting the employment of anyone then-employed by the Company or our subsidiaries (or anyone who was employed by us or them during his final 90 days of employment). In addition, Mr.
Walther is prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. Mr. Walther is also not permitted to seek or negotiate for other employment before the final six months of the term of his employment under the Walther Employment Agreement. Mr. Walther is also prohibited from competing with us during the term of his employment under the Walther Employment Agreement and is restricted from inducing any of our business partners to alter its relationship with us while he is our employee.
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Riccardo Zacconi
Term & Title
Riccardo Zacconi is party to an employment agreement with us, dated as of November 2, 2015 (i.e., the Zacconi Employment Agreement), pursuant to which he serves as the Chief Executive Officer of King. The initial term of Mr. Zacconi’s employment under the Zacconi Employment Agreement began on February 23, 2016 (i.e., the date on which we closed the King Acquisition) and continued through February 23, 2019. Thereafter, Mr. Zacconi will continue to be employed under the Zacconi Employment Agreement until either party provides the other with 12 months’ prior notice of its intent to terminate.
Base Salary
Pursuant to the Zacconi Employment Agreement, Mr. Zacconi’s annual base salary was £400,000 as of February 23, 2016, and has been and will be reviewed annually. It may be increased at our discretion and any higher base salary paid to Mr. Zacconi will then be deemed to be the annual rate for purposes of the Zacconi Employment Agreement. For more information about Mr. Zacconi’s base salary, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Base Salary” above.
Annual Bonus
Pursuant to the Zacconi Employment Agreement, Mr. Zacconi is eligible for annual performance-based cash compensation based upon King’s profits under the King Profit Sharing Plan. Specifically, Mr. Zacconi is entitled to 6% of the profit sharing pool created pursuant to the King Profit Sharing Plan. The Compensation Committee may exercise discretion with respect to his actual annual percentage interest in the pool, subject to a specified minimum percentage. For more information about the King Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2018—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Profit Sharing Plans” above.
Equity Awards
Upon the consummation of the King Acquisition, the unvested awards with respect to King ordinary shares Mr. Zacconi held prior to then were converted into awards of the same type with respect to shares of our Common Stock. In addition, pursuant to the Zacconi Employment Agreement, the performance metrics underlying a portion of his options were replaced with metrics with respect to King’s post-acquisition performance. Please see our proxy statement for our 2017 annual meeting, filed with the SEC on Schedule 14A on April 21, 2017, for more information about these awards.
Further, the unvested “linked options” and King ordinary shares linked to those options that Mr. Zacconi held prior to the closing of the King Acquisition
were converted into the right to receive the cash consideration to which Mr. Zacconi would have been entitled upon consummation of the King Acquisition if he had then held the underlying shares, less any applicable taxes, paid to him on the dates on which the underlying options would have vested had the King Acquisition not occurred.
Other Benefits
Pursuant to the Zacconi Employment Agreement, Mr. Zacconi is generally entitled to receive the same level of benefits as he did prior to the King Acquisition. He is also entitled to participate in King’s qualified defined contribution retirement plan.
Restrictive Covenants
During the term of his employment under the Zacconi Employment Agreement, Mr. Zacconi is restricted from: (1) being employed or engaged by, or interested in, any other business; (2) from holding any material interest in any entity which competes with us or our business partners, impairs, or might reasonably be thought by us to impair, his ability to always act in our best interest or requires, or might reasonable be thought to require, him to make use of our confidential information in order to properly discharge his duties to, or further his interests in, that entity; (3) preparing to engage in any competing business; and (4) knowingly making untrue or misleading statements about us. Mr. Zacconi is also prohibited from disclosing or using our confidential information during his employment, except as required in the course of his employment, and at all times following the termination of his employment. In addition, during the 12 months following the termination of his employment (less any time prior to then he was on “garden leave” or his employment was otherwise suspended), Mr. Zacconi is restricted from: (1) competing with us in any country in which we did, or intended to do, business during the final year of his employment; (2) employing, or soliciting the employment of, anyone then-employed by us or our subsidiaries in a relatively senior position and with whom Mr. Zacconi had material dealings in the 12 months prior to his termination; and (3) interfering with the relationship between us and our business partners or any of our subsidiaries and its business partners.
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Potential Payments upon Termination or Change of Control
The table below outlines the potential payments to our named executive officers upon the occurrence of certain termination events or a change of control, assuming that each of these events occurred on December 31, 2018, with the exception of Mr. Neumann, as we terminated his employment for cause effective as of December 31, 2018. As such references to “named executive officers” in the table below refer to our named executive officers but for Mr. Neumann.
Name and Type of Payment/Benefit
|
Death
(1)(2)
($)
|
Disability
(1)(2)
($)
|
Termination by
Activision
Blizzard For
Cause or
Performance
Termination
(1)(3)
($)
|
Termination by
Activision
Blizzard Without
Cause or
Termination by
Employee for
Good Reason
(1)(4)
($)
|
Termination by
Activision Blizzard
Without Cause or
Termination by
Employee for Good
Reason Following a
Change of
Control
(4)(5)
($)
|
Robert
Kotick
|
|
|
|
|
|
Lump-sum bonus-based severance
|
2,808,688
|
2,808,688
|
0
|
11,916,268
|
16,643,478
|
Other lump-sum severance
|
0
|
0
|
0
|
0
|
0
|
Lump-sum salary-based severance
|
0
|
1,750,000
|
0
|
3,500,000
|
5,250,000
|
Salary continuation
|
0
|
0
|
0
|
0
|
0
|
Benefits continuation
(6)
|
79,623
|
343,702
|
317,161
|
343,702
|
343,702
|
Impact on equity awards
(7)
|
—
|
—
|
0
|
—
|
58,964,280
|
TOTAL
|
2,888,311
|
4,902,390
|
317,161
|
15,759,970
|
81,201,460
|
Spencer
Neumann
(8)
|
|
|
|
|
|
Lump-sum bonus-based severance
|
|
|
0
|
|
|
Other lump-sum severance
|
|
|
0
|
|
|
Lump-sum salary-based severance
|
|
|
0
|
|
|
Salary continuation
|
|
|
0
|
|
|
Benefits continuation
|
|
|
0
|
|
|
Impact on equity awards
|
|
|
0
|
|
|
TOTAL
|
|
|
0
|
|
|
Collister
Johnson
|
|
|
|
|
|
Lump-sum bonus-based severance
|
931,240
|
931,240
|
0
|
931,240
|
931,240
|
Other lump-sum severance
|
2,000,000
|
2,000,000
|
0
|
2,000,000
|
2,000,000
|
Lump-sum salary-based severance
|
2,659,280
|
0
|
0
|
0
|
0
|
Salary continuation
|
0
|
1,994,460
|
0
|
1,994,460
|
1,994,460
|
Benefits continuation
(6)
|
0
|
0
|
0
|
0
|
0
|
Impact on equity awards
(7)
|
—
|
—
|
0
|
—
|
—
|
TOTAL
|
5,590,520
|
4,925,700
|
0
|
4,925,700
|
4,925,700
|
Michael
Morhaime
|
|
|
|
|
|
Lump-sum bonus-based severance
|
3,518,646
|
3,518,646
|
0
|
3,518,646
|
3,518,646
|
Other lump-sum severance
|
0
|
0
|
0
|
0
|
0
|
Lump-sum salary-based severance
|
0
|
0
|
0
|
0
|
0
|
Salary continuation
|
0
|
0
|
0
|
0
|
0
|
Benefits continuation
(6)
|
0
|
0
|
0
|
0
|
0
|
Impact on equity awards
(7)
|
0
|
0
|
0
|
0
|
0
|
TOTAL
|
3,518,646
|
3,518,646
|
0
|
3,518,646
|
3,518,646
|
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Name and Type of Payment/Benefit
|
Death
(1)(2)
($)
|
Disability
(1)(2)
($)
|
Termination by
Activision
Blizzard For
Cause or
Performance
Termination
(1)(3)
($)
|
Termination by
Activision
Blizzard Without
Cause or
Termination by
Employee for
Good Reason
(1)(4)
($)
|
Termination by
Activision Blizzard
Without Cause or
Termination by
Employee for Good
Reason Following a
Change of
Control
(4)(5)
($)
|
Brian
Stolz
|
|
|
|
|
|
Lump-sum bonus-based severance
|
445,341
|
445,341
|
0
|
445,341
|
445,341
|
Other lump-sum severance
|
1,300,000
|
1,300,000
|
0
|
1,300,000
|
1,300,000
|
Lump-sum salary-based severance
|
1,372,743
|
0
|
0
|
0
|
0
|
Salary continuation
|
0
|
285,988
|
0
|
285,988
|
285,988
|
Benefits continuation
(6)
|
0
|
0
|
0
|
0
|
0
|
Impact on equity awards
(7)
|
0
|
0
|
0
|
2,254,180
|
2,254,180
|
TOTAL
|
3,118,084
|
2,031,329
|
0
|
4,285,509
|
4,285,509
|
Chris
B.
Walther
|
|
|
|
|
|
Lump-sum bonus-based severance
|
583,161
|
583,161
|
0
|
583,161
|
583,161
|
Other lump-sum severance
|
700,000
|
700,000
|
0
|
700,000
|
700,000
|
Lump-sum salary-based severance
|
1,523,778
|
0
|
0
|
0
|
0
|
Salary continuation
|
0
|
952,361
|
0
|
952,361
|
952,361
|
Benefits continuation
(6)
|
0
|
0
|
0
|
0
|
0
|
Impact on equity awards
(7)
|
0
|
0
|
0
|
—
|
—
|
TOTAL
|
2,806,939
|
2,235,522
|
0
|
2,235,522
|
2,235,522
|
Riccardo
Zacconi
|
|
|
|
|
|
Lump-sum bonus-based severance
|
5,828,557
|
5,828,557
|
0
|
5,828,557
|
5,828,557
|
Other lump-sum severance
|
0
|
0
|
0
|
0
|
0
|
Lump-sum salary-based severance
|
0
|
0
|
0
|
0
|
0
|
Salary continuation
|
538,795
|
267,898
|
0
|
614,676
|
614,676
|
Benefits continuation
(6)
|
8,330
|
4,165
|
0
|
9,556
|
9,556
|
Impact on equity awards
(7)
|
21,233,567
|
21,233,567
|
0
|
21,233,567
|
21,233,567
|
TOTAL
|
27,606,249
|
27,334,187
|
0
|
27,686,356
|
27,686,356
|
Footnotes for this table can be found on the pages immediately following (pages 76–83).
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(1) Bonus Payments upon Termination
In the event his employment was terminated by us without cause or by him for good reason (including, for Mr. Kotick, such a termination during the 12-month period following a change of control), or due to his death or disability, each of our named executive officers would have received any earned but unpaid bonuses for prior years (of which there were none as of December 31, 2018).
Each would also have received a pro rata bonus for the year in which the termination occurred, as described below.
Kotick.
Subject to his execution of an effective and irrevocable release (other than in the event of a termination of his employment due to death), Mr. Kotick would have received:
•
in the event of his termination due to his death or disability, a lump-sum payment equal to the bonus he would have received under the CAIP for the year immediately preceding the year in which the termination occurred, multiplied by a fraction, the numerator of which is the number of days worked during the year in which the termination occurred and the denominator of which is 365; and
•
in the event of the termination by us without cause or by him for
good reason (whether or not during the 12-month period
following a change of control), a lump-sum payment equal to the
bonus he would have received under the CAIP for the year in
which the termination occurred (where all objectives would have
been measured by actual performance), multiplied by a fraction,
the numerator of which is the number of days worked during the
year in which the termination occurred and the denominator of
which is 365 (as well as the lump sum payment described in footnote (4) based in part upon
his target annual bonus for 2016).
Johnson,
Stolz,
and
Walther.
Subject to his or his legal representative’s execution of an effective and irrevocable release (other than in the event of a termination of his employment due to death), Messrs. Johnson, Stolz, and Walther would have each received:
•
a lump-sum payment equal to the bonus he would have received under the CAIP for the year in which the termination occurred (where all objectives would have been measured by actual performance), multiplied by a fraction, the numerator of which is the number corresponding to the month in which the termination occurred and the denominator of which is 12.
Morhaime.
Pursuant to the Most Recent Morhaime Employment Agreement, as Mr. Morhaime remained employed through December 31, 2018, he would have received (1) 3.5% of the profit sharing pool created pursuant to the Blizzard Profit Sharing Plan for 2018 and (2) a bonus under the CAIP for 2018.
Zacconi.
Subject to his or his legal representative’s execution of a release, Mr. Zacconi would have received (whether or not during a change of control period):
•
a lump-sum payment equal to any amount he would have received under the King Profit Sharing Plan for the year in which the termination occurred, multiplied by a fraction, the numerator of which is the number corresponding to the month in which the termination occurred and the denominator of which is 12.
None of our NEOs would have been entitled to a bonus with respect to the year of termination of his employment in connection with a termination for cause, although Mr. Kotick would have received any earned but unpaid bonus for prior years (of which there were none as of December 31, 2018).
In the event of a termination of his employment due to his death or disability on December 31, 2018 (which termination due to disability would have been, for Mr. Kotick, subject to certain advance notice requirements, as would a termination of Mr. Zacconi’s employment due to his mental disorder), each of our named executive officers or his estate, except for Mr. Morhaime (as the Most Recent Morhaime Employment Agreement did not provide for payments upon termination in any circumstance), would have received, in addition to any amounts to which he was entitled under applicable law, such as earned but unpaid salary, accrued but unused vacation, unreimbursed business expenses, and any amounts then due under our benefit plans, programs or policies (collectively, “accrued obligations”) (which for purposes of this table, are assumed to have been paid or reimbursed in full as of December 31, 2018), severance, as described below.
Kotick.
Mr. Kotick would have received:
•
in the event of his termination due to disability, subject to his execution of an effective and irrevocable release, an amount equal to 100% of his annual base salary in effect on his termination date, which amount would have been paid to him in equal installments over the 12-month period following his termination date;
•
in the event of his termination due to his death or disability, subject to, in the event of a termination of his employment due to disability, his execution of an effective and irrevocable release, continuation of health/medical insurance benefits for him and his then-current spouse and minor children, as applicable, for a period of two years following his termination date; and
•
in the event of his termination due to disability, continuation of his supplemental life insurance benefits via our reimbursement of the premiums in respect of his existing policy through its expiration on March 15, 2022, and, from March 16, 2022, through the tenth anniversary of his employment agreement (i.e., October 1, 2026), of up to $80,000 per year of premiums in respect of his then-existing policies.
Johnson,
Stolz,
and
Walther.
Messrs. Johnson, Stolz, and Walther would each have received, subject to, in the event of a termination of his employment due to disability, his or his legal representative’s execution of an effective and irrevocable release:
•
in the event of his termination due to death, a lump-sum payment
equal to 200% of his annual base salary in effect on his
termination date, less any payments received or to which he
became entitled under Company-provided life insurance (which
payments, for purposes of this table, are assumed to be zero); and
•
in the event of his termination due to disability, salary continuation through the expiration date of his employment agreement in an amount equal to 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period, less any payments received or to which he became entitled under Company-provided long-term disability insurance (which payments, for purposes of this table, are assumed to be zero).
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In addition, if (1) Mr. Johnson’s employment is terminated due to his death or disability after the end of 2017, 2018, and/or 2019 (but, in each case, before June 29, 2020) and (2) AB Adjusted Operating Income for the applicable year (i.e., 2017, 2018 and/or 2019) is both (x) 90% or more of the target set forth in the Company’s AOP for the year and (y) positive, then Mr. Johnson will receive an additional payment of $2 million, subject to his or his legal representative’s execution of an effective and irrevocable release, which amounts are cumulative to the extent the underlying conditions are met.
Similarly, if (1) Mr. Stolz’s employment is terminated due to his disability after the end of 2016, 2017, and/or 2018 (but, in each case, before May 31, 2019) and (2) AB Adjusted Operating Income for the applicable year (i.e., 2016, 2017 and/or 2018) is both (x) 85% or more of the target set forth in the Company’s AOP for the year and (y) positive, then Mr. Stolz will receive an additional payment of $650,000, subject to his or his legal representative’s execution of an effective and irrevocable release, which amounts are cumulative to the extent the underlying conditions are met.
Similarly, if (1) Mr. Walther’s employment is terminated due to his disability after the end of 2017, 2018, and/or 2019 (but, in each case, before March 14, 2020) or after the end of 2020 (but before March 14, 2021), and (2) AB Adjusted Operating Income for the applicable year (i.e., 2017, 2018, and/or 2019, on the one hand, or 2020, on the other) is both (x) 85% or more of the target set forth in the Company’s AOP for the year and (y) positive, then Mr. Walther will receive an additional payment of $700,000, subject to his or his legal representative’s execution of an effective and irrevocable release, which amounts are cumulative to the extent the underlying conditions are met.
Morhaime.
Mr. Morhaime would not have received any payments in connection with a termination of his employment due to his death or disability other than in respect of a bonus, as discussed in footnote (1), and in respect of accrued obligations.
Zacconi.
Mr. Zacconi would have received, subject to his or his legal representative’s execution of a release:
•
in the event of his termination due to death, (x) salary continuation through the first anniversary of such termination date, in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for his then-current spouse and minor children, as applicable, during that period or (y) if greater, any payments received or to which he became entitled under Company-provided life insurance (which payments, for purposes of this table, are assumed to be zero); and
•
in the event of a termination due to his mental incapacity, (x)
salary continuation through that date which is six months after such termination date, in an amount equal to the sum of (i) 100% of the base salary (at the rate in effect on his termination date) that would have been payable to him during that period and (ii) the cost to us of continuing health/medical insurance and retirement benefits for him and his then-current spouse and minor children, as applicable, during that period or (y) if greater, any payments received or to which he became entitled under Company-provided long-term disability insurance (which payments, for purposes of this table, are assumed to be zero).
Mr. Zacconi does not have any specific rights in connection with a termination due to any disability other than his mental capacity. Such a termination would have been treated as a termination by us without cause, discussed in footnote (4).
Any payment in respect of a bonus that any of our NEOs would have received in connection with a termination due to his death or disability is discussed in footnote (1). The effects of a termination due to death or disability on outstanding equity and, in the case of Mr. Kotick, other incentive awards, are discussed in footnote (7).
Except as otherwise indicated, the amounts reflected in the table are in addition to (or, in the case of Mr. Zacconi, in lieu of) any proceeds from Company-provided insurance the executive or his estate would have received upon death or disability, as the case may
be.
Each
of our named executive officers is subject to an employment agreement (other than Mr. Morhaime, whose employment
was “at will”), which may, subject to certain advanced notice requirements, be terminated for “cause”
if any of the following occur:
•
For Mr. Kotick, a determination by our Board that he: (1) engaged in an act of fraud or embezzlement in respect of us or our funds, properties, or assets; (2) was convicted of, or pled guilty or
nolo
contendere
to, a felony under the laws of the United States or any state thereof; (3) engaged in willful misconduct or gross negligence in connection with the performance of his duties that has caused or is highly likely to cause severe harm to us; (4) was intentionally dishonest in the performance of his duties under his employment agreement and such dishonesty had a material adverse effect on us; or (5) materially breached his material obligations under his employment agreement;
•
For Mr. Johnson, our reasonable and good-faith determination that he: (1) engaged in gross negligence in the performance of his duties or willfully and continuously failed or refused to perform any duties reasonably requested in the course of his employment; (2) engaged in fraud, dishonesty, or any other serious misconduct that caused, or has the potential to cause, harm to us or our subsidiaries, including our business or reputation; (3) materially violated any of our lawful directives or policies, any such directives or policies of our subsidiaries or any applicable laws, rules, or regulations in connection with the performance of his duties; (4) materially breached his employment agreement; (5)
materially breached any proprietary information or confidentiality agreement with us or our subsidiaries; (6) was convicted of, or pled guilty or no contest to, a felony or crime involving dishonesty or moral turpitude; or (7) materially breached his fiduciary duties to us or our subsidiaries;
•
For Mr. Stolz, our good-faith determination that he: (1) engaged in misconduct or gross negligence in the performance of his duties or willfully and continuously failed or refused to perform any duties reasonably requested in the course of his employment; (2) engaged in fraud, dishonesty, or any conduct that caused, or has the potential to cause, appreciable harm to us or our subsidiaries, including our business or reputation; (3) violated any of our lawful directives or policies, any such directives or policies of our subsidiaries or any applicable laws, rules, or regulations; (4) materially breached his employment agreement; (5) materially
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breached any proprietary information or confidentiality agreement with us or our subsidiaries; (6) was convicted of, or pled guilty or no contest to, a felony or crime involving dishonesty or moral turpitude; or (7) breached his fiduciary duties to us or our subsidiaries; and