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How Much Is It Worth To Hire Someone To Save Your Company, Zynga Edition
A quick analysis of Zynga's employment arrangement with its new CEO.
4 Min Read
About $0.15/share for a company trading at $3.30 (as of this writing).
Cross-posted at Underdisclosed.com
So, Mark Pincus is out and Don Mattrick is in as Zynga CEO. So, how much is it worth to try to revive the once high-flying company?
Here are the highlights of Mattrick’s employment offer:
Salary
$1,000,000, which may be increased, but not decreased.
Annual Bonus
Guaranteed annual bonus equal to the greater of:
200% of the annual base salary (pro-rated for the number of days employed)
Bonus rate paid to other Zynga executive officers (pro-rated for the number of days employed)
For 2014, Mattrick will max out at 4x annual salary for his bonus.
Benefits
Mattrick can participate in regular health insurance and other employee benefit plans established by Zynga.
Sign-On Bonus
$5,000,000 for just showing up!
Stock Awards
Make-Whole Award
Mattrick will receive 8,928,571 restricted stock units, vesting three installments, at a rate of:
45.32% on the first anniversary of his start date
45.32% on the day prior to Zynga’s 2015 annual meeting of shareholders
9.36% on the third anniversary of his start date.
Incentive Awards
He will also receive an additional 1,785,714 restricted stock units and options to purchase an additional 7,357,143 shares. These awards vest in three installments between the third and fifth anniversary of his start date.
Annual Awards
He will also be eligible to receive additional annual awards for that number of shares equal to $7,000,000 divided by the average closing trading price of Zynga’s common stock for the thirty days prior to the date of grant.
Severance
If Mattrick is fired without cause, he gets twice his annual salary at the time of termination, plus twice his target bonus for the fiscal year of termination plus a pro-rated bonus for the fiscal year in which termination occurs.
His stock awards will vest. For the incentive and annual awards, his awards vest for any shares that would have vested in the one year following termination.
If he is fired before the Make-Whole grant date, Mattrick gets $25 million. If he is fired before the Incentive Award grant date, he gets $3 million.
Attorney’s Fees
Zynga will pay Mattrick’s lawyers up $60,000 for work related to his employment agreement.
Over the next 5 years (using the expected term of his Incentive Awards and the quantifiable terms of the employment agreement), Mattrick stands to earn a minimum of:
Type of Comp. | Number | Reference Share Price | Amount ($) |
Salary |
|
| 5,000,000 |
Guaranteed Bonus |
|
| 10,000000 |
Sign-on Bonus |
|
| 5,000,000 |
Make-Whole Award(1) | 8,928,571 | 3.43(3) | 30,624,999 |
Incentive Awards(1) | 1,785,714 | 3.43(3) | 6,124,999 |
Incentive Awards(2) | 7,357,143 | - | See Note (2) to the table |
Annual Awards |
|
| 35,000,000 |
Attorney’s Fees |
|
| 60,000 |
|
| Total: | $91,809,998 |
_____________
(1)According to Section 7.1 of Zynga’s 2007 Equity Incentive Plan, a restricted stock unit is an award covering a number of shares that may be settled in cash or by issuance of those shares at a date in the future. No purchase price applies to an RSU settled in shares other than the payment of the aggregate par value ($0.00000625 per share) of all Shares issuable upon such settlement.
(2)Since options have an grant date exercise price, we are not ascribing a value to those in this table. However, with Zynga’s stock price in the low single digits, there is significant room for growth.
(3)Closing stock price as of Friday, July 5, 2013.
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