Exhibit 10.3

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

Amended and Restated Employment Agreement, dated as of December 1, 2007 (the
“Effective Date”), by and between ACTIVISION, INC., a Delaware corporation with
its principal offices at 3100 Ocean Park Boulevard, Santa Monica, CA 90405 (the
“Company”), and ROBERT A. KOTICK (the “Executive”).

 

RECITALS:

 

WHEREAS, the Company and the Executive are parties to an employment agreement
dated May 22, 2000 as amended on December 29, 2006 (the “Original Agreement”);

 

WHEREAS, the Company, Vivendi, S.A., a Societe Anonyme organized under the laws
of France (“Vivendi”), Vivendi Games Acquisition Company LLC, a limited
liability company organized under the laws of the State of Delaware (“Vivendi
LLC”), Vivendi Games, Inc., a Delaware corporation (“Games”), and Sego Merger
Corporation, a Delaware corporation (“Merger Sub”), have proposed to enter into
a Business Combination Agreement (“BCA”) in order to combine the respective
businesses of Games and the Company, pursuant to which, among other things, (i)
Vivendi shall purchase (the “Share Purchase”) from the Company a number of newly
issued shares of common stock, par value $0.000001 per share, of the Company
(“Company Common Stock”) and (ii) Merger Sub shall be merged with and into Games
(the “Merger” and, together with the Share Purchase, the “Combination
Transactions”) pursuant to which (x) each share of common stock, par value $0.01
per share, of Games shall be converted into the right to receive a number of
shares of Company Common Stock equal to the Exchange Ratio (as defined in the
BCA) and (y) Games shall become a wholly-owned subsidiary of the Company;

 

WHEREAS, concurrently with the execution of the BCA, in order to induce Vivendi,
Vivendi LLC and Games to enter into the BCA, the Executive has agreed to enter
into this Amended and Restated Employment Agreement (this “Agreement”), between
the Executive and the Company, effective on the Effective Date and subject to
the provisions hereof;

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that
it is in the best interests of the Company and its stockholders to enter into
this Agreement and the Executive is willing to serve as an employee of the
Company subject to the terms and conditions of this Agreement;

 

WHEREAS, the Compensation Committee (the “Compensation Committee”) of the Board
approved the execution and delivery of this Agreement by the Company at a
meeting of the Compensation Committee held on December 1, 2007;

 

WHEREAS, this Agreement has been provided to and reviewed by the Board of
Directors of Vivendi;

 

WHEREAS, the Company, Vivendi and the Executive agree that it is a condition of
the Combination Transactions that the Executive executes the Agreement;

 

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WHEREAS, the Company and the Executive agree that this Agreement will amend and
supersede the Original Agreement in its entirety; and

 

WHEREAS, in consideration for this Agreement, the Executive has waived his
rights to certain payments and benefits under the Original Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1.                                      Position and Duties

 

(a)                                  The Company agrees to continue to employ
the Executive, and the Executive agrees to be employed, as President and Chief
Executive Officer of the Company reporting only to the Board. The Executive
shall be the senior-most employee of the Company, and all employees of the
Company shall report, directly or indirectly, to the Executive. The Executive
shall have such powers, duties, authorities and responsibilities as are
consistent with Executive’s position and title and as are in effect immediately
prior to the Effective Date; provided that following the consummation of the
Combination Transactions (the “Consummation Date”), the Executive’s powers,
duties, authorities and responsibilities shall be consistent with the provisions
of the Company’s amended and restated By-Laws (the “By-Laws”). At all times
during the Employment Period (as defined in Section 2 below), the Executive
shall, unless he otherwise elects, be nominated for election by the shareholders
of the Company to the Board.

 

(b)                                 During the Employment Period and excluding
any periods of vacation, the Executive agrees to devote such time, attention and
efforts to the business and affairs of the Company as may be necessary to
discharge the duties and responsibilities assigned to the Executive hereunder
and to use the Executive’s reasonable best efforts to perform faithfully and
efficiently such duties and responsibilities.

 

(c)                                  It shall not be a violation of this
Agreement for the Executive to engage in any activity which is, in the good
faith opinion of the Executive, not inconsistent with the Company’s interests
and prospects, including, without limitation, (a) serving on civic or charitable
boards or committees; (b) serving as a director of any company that is not in a
Competitive Business (as defined in Section 13(b) below); (c) delivering
lectures, fulfilling speaking engagements or teaching at educational
institutions; (d) managing personal investments; (e) serving as an officer or
director of entities formed to manage family or personal investments; and
(f) attending conferences conducted by business organizations; provided,
however, that such activity does not significantly interfere with the
performance of Executive’s duties and responsibilities hereunder. It is
expressly understood and agreed that to the extent that any activity has been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activity (or the conduct of an activity similar in nature and scope
thereto) during the Employment Period shall be deemed not to interfere with the
performance of the Executive’s duties and responsibilities to the Company and
shall not constitute a violation of this Agreement.

 

(d)                                 Except for periodic travel assignments, the
Executive shall not, without his consent, be required to perform services for
the Company at any place other than the principal

 

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place of the Company’s business which shall at all times, unless the Executive
otherwise consents, be within a 20 mile radius of the Company’s current
principal place of business. Notwithstanding anything herein to the contrary,
the Executive may, at his sole discretion and upon prior written notice to the
Board, relocate at any time to New York, New York in connection with the
establishment by the Company of executive offices in such city.

 

2.                                      Effectiveness; Employment Period

 

The employment of the Executive under the terms of this Agreement (the
“Employment Period”) shall commence on the Effective Date and terminate on
December 31, 2012 (the “Expiration Date”). Notwithstanding anything contained
herein to the contrary, the Executive’s employment pursuant to the terms of this
Agreement is subject to termination pursuant to Section 7 below.

 

3.                                      Compensation

 

The Executive shall receive the following compensation (the ”Compensation”) for
his services hereunder:

 

(a)                                  Base Salary. The Company shall pay to the
Executive a base salary (“Base Salary”) in respect of each calendar year of the
Company or portion thereof during the Employment Period. Commencing on the
Effective Date, the annual Base Salary shall be $950,000; provided, however,
that the Base Salary shall be increased as of each January 1st during the
Employment Period by a percentage equal to the average percentage increase
approved by the Compensation Committee in the base salaries of the members of
the Company’s executive leadership team most recently implemented with respect
to the fiscal year in which such January 1st occurs excluding for these purposes
(i) increases that are required or guaranteed by contract and (ii) increases in
base salaries in connection with a promotion or other significant modification
in an executive’s duties. The Base Salary shall be paid in accordance with the
customary payroll practices of the Company at regular intervals, but in no event
less frequently than every month, as the Company may establish from time to time
for senior executive employees of the Company. The Base Salary shall be prorated
with respect to any partial calendar years during the Employment Period.

 

(b)                                 Annual Bonus. The Executive shall be
entitled to receive an annual bonus for each fiscal year of the Company during
the Employment Period (the “Annual Bonus”), based upon the Company achieving
financial and business objectives for the fiscal year with respect to which the
Annual Bonus accrues. The financial and business objectives for each fiscal year
shall be determined by the Compensation Committee in its sole discretion, after
consultation with the Executive, within the timeframes set forth in Section 9(a)
of the Company’s 2007 Incentive Plan (the “2007 Plan”), or a similar section of
any successor Company incentive plan. The target Annual Bonus for each fiscal
year shall be no less than two hundred percent (200%) of the Base Salary in
effect on the first day of such fiscal year. The Annual Bonus shall be paid in
the form determined by the Compensation Committee in its sole discretion,
including, without limitation, cash, shares of Company Common Stock, stock
options or other equity-based awards. The Company shall pay each Annual Bonus to
the Executive no later than two and a half (21/2) months after the end of the
fiscal year for which the Annual Bonus is awarded provided that,

 

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except as otherwise provided in this Agreement, the Executive remains
continuously employed by the Company or its subsidiaries and affiliates (the
“Company Group”) through the date on which the Annual Bonus is paid. Along with
the payment of each Annual Bonus, the Company shall also deliver to the
Executive a written statement setting forth the basis of its calculation of such
Annual Bonus. The Executive and the Executive’s representatives shall have the
right, at the Executive’s cost, to inspect the records of the Company with
respect to the calculation of any such Annual Bonus, to make copies of said
records utilizing the Company’s facilities without charge, and to have free and
full access thereto upon reasonable notice during the normal business hours of
the Company. The Annual Bonus shall be prorated to the extent it is calculated
for a period of less than a full fiscal year. The Annual Bonus is intended to
qualify as annual incentive compensation under Section 9 of the 2007 Plan, or a
similar section of any successor Company incentive plan, and shall be subject to
the conditions and limitations of such section.

 

(c)                                  Performance Bonus. The Compensation
Committee, in its sole discretion, may award to the Executive a performance
bonus at any time in such amount and in such form as the Compensation Committee
may determine, including, without limitation, in the form of cash, shares of
Company Common Stock, stock options or other equity-based awards, as the case
may be (the “Performance Bonus”), after taking into consideration other
compensation paid or payable to the Executive under this Agreement, as well as
the financial and non-financial progress of the business of the Company and the
contributions of the Executive toward that progress. Any Performance Bonus shall
be prorated to the extent it is calculated for a period of less than a full
fiscal year.

 

4.                                      Other Benefits

 

(a)                                  Benefits and Perquisites. During the
Employment Period, the Executive shall be entitled to participate in all health,
welfare, retirement, pension, life insurance, disability and similar plans,
programs and arrangements generally available to the U.S.-based senior executive
group of the Company in accordance with the terms and conditions of such plans,
programs and arrangements, as amended from time to time. In addition, during the
Employment Period the Executive shall be entitled to participate in all
perquisite programs available to the U.S.-based senior executive group of the
Company on the terms and conditions then prevailing under such programs, as
amended from time to time.

 

(b)                                 Expenses. During the Employment Period, the
Executive shall be reimbursed by the Company for all reasonable travel,
entertainment, conference expenses, organization dues and other business
expenses incurred by the Executive in connection with the performance of the
Executive’s services under this Agreement, subject to the Company’s policies in
effect from time to time with respect to such expenses, including the
requirements with respect to reporting and documentation of such expenses.

 

(c)                                  Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, including personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company at any time during the ninety (90) day
period immediately preceding the Effective Date, or, if more favorable to the
Executive, as

 

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provided at any time after the Effective Date to the Executive or any other
senior executive officers of the Company.

 

(d)                                 Vacation. The Executive shall be entitled to
four (4) weeks paid vacation, or such greater number of weeks as are provided in
the Company’s vacation policy, each fiscal year during the Employment Period, in
addition to regular paid holidays provided to all full-time employees of the
Company in the United States; provided, however, that unused vacation time shall
not be carried over to any subsequent year. Vacation time shall be taken as
determined by the Executive in his reasonable and good faith discretion;
provided, however, that such time taken is mutually convenient to the Company
and not disruptive to the Company’s activities or the Executive’s
responsibilities.

 

(e)                                  Life Insurance. The Company shall continue
for a period of ten (10) years commencing on the Effective Date to maintain a
renewable term insurance policy or policies covering the life of the Executive
in an amount equal to three (3) times the sum of the Executive’s Base Salary and
target Annual Bonus as of the Effective Date, naming the Executive’s estate or
any other person designated by the Executive as beneficiary of such policy or
policies. The Executive has the right to require the Company at any time to
prepay all of the premiums associated with such policy or policies so as to
ensure such policies remain in force for the full ten (10)-year period.

 

5.                                      Stock Options

 

(a)                                  Grant. In addition to the Compensation, on
the third (3rd) business day following the Effective Date, the Company shall
grant the Executive one million eight hundred and fifty thousand (1,850,000)
non-qualified options to purchase the Company Common Stock (the “New Options”).
The New Options shall be granted pursuant to the 2007 Plan.

 

(b)                                 Exercise Price of New Options. The exercise
price of the New Options shall be the closing price of the Company Common Stock
as quoted on the Nasdaq National Market on the third (3rd) business day
following the Effective Date.

 

(c)                                  Vesting. The New Options each shall vest in
sixty (60) equal monthly installments on the first day of each month within the
Employment Period, commencing with the month immediately following the Effective
Date; provided that, except as otherwise provided in this Agreement, the
Executive is continuously employed by the Company Group through the applicable
vesting date.

 

(d)                                 Term of New Options. The term of the New
Options shall be ten (10) years from the Effective Date unless cancelled prior
to such date in accordance with the provisions of this Agreement.

 

6.                                      Performance Shares

 

(a)                                  Grant. On the Consummation Date, the
Company shall grant the Executive one million two hundred and fifty thousand
(1,250,000) performance shares (the “Performance Shares”) pursuant to the 2007
Plan. Each Performance Share represents the right to receive one share of the
Company Common Stock upon satisfaction of, and in accordance with, the

 

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provisions of this Agreement. The Executive shall have no entitlement to the
Performance Shares if the Combination Transactions are not consummated on or
prior to December 31, 2008.

 

(b)                                 Vesting. Subject to the provisions of this
Agreement, the Performance Shares shall vest in five (5) twenty percent (20%)
increments on each of the first, second, third and fourth anniversaries of the
Consummation Date, and on the Expiration Date (each such anniversary and the
Expiration Date, a “Performance Vesting Date”), in each case subject to the
Company achieving or exceeding the Compound Annual Total Shareholder Return
targets (the “Performance Targets”) at the end of the applicable performance
period shown in the following schedule (each, a “Performance Period”): 

 

Performance Period
For the Performance Period
Beginning on the
Consummation Date and
Ending on the:

 

Performance Target
Compound Annual
Total Shareholder
Return to be attained
at the End of
Performance Period*

 

Number of
Performance Shares
to Vest Upon
Attainment of
Performance Target

 

1st anniversary of the Consummation Date

 

0

%

250,000

 

2nd anniversary of the Consummation Date

 

5

%

250,000

 

3rd anniversary of the Consummation Date

 

7.5

%

250,000

 

4th anniversary of the Consummation Date

 

15

%

250,000

 

Expiration Date

 

18

%

250,000

 

 

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*Subject to termination of employment provisions below.

 

; provided, however, that if the Company fails to achieve a Performance Target
as of the last day of an applicable Performance Period (each such Performance
Period, a “Missed Performance Period”), but achieves the Performance Target
required to be attained for a subsequent Performance Period, then, on the
applicable subsequent Performance Vesting Date, the Executive shall vest in all
Performance Shares for the applicable Performance Period and all prior Missed
Performance Periods to the extent not already vested.

 

Subject to Sections 6(c) and 10(b), vesting of the Performance Shares is also
subject to the Executive remaining continuously employed by the Company Group
through the end of the applicable Performance Period. The shares of Company
Common Stock subject to the Performance Shares shall be delivered, to the extent
vested in accordance with the provisions hereof, thirty (30) days following each
Performance Vesting Date (or such other vesting date which occurs in accordance
with Section 6(c) or 10(b), if any). The Company’s compound annual total
shareholder return shall be as reported by Bloomberg L.P. (or such other
comparable reporting service that the Compensation Committee may designate from
time to time).

 

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(c)                                  Termination of Employment. To the extent
not previously vested under Section 6(b) as of the Date of Termination, upon a
termination of employment with the Company Group pursuant to Section 7(a), 7(b),
7(c) or 7(f) (other than a termination following a Change of Control (as defined
in Section 10)), the Executive shall vest in a number of the Performance Shares
determined as follows:

 

(i)                                     If the Date of Termination occurs during
the Performance Period ending on the first anniversary of the Consummation Date
(the “First Performance Period”), (A) the Executive shall vest in one hundred
(100%) percent of the Performance Shares applicable to the First Performance
Period and (B) all Performance Periods following the First Performance Period
shall be treated as Remaining Performance Periods (as defined below) pursuant to
Section 6(c)(iv)).

 

(ii)                                  If the Date of Termination occurs during
the Performance Period ending on the second anniversary of the Consummation Date
(the “Second Performance Period”):

 

(A)                              If the Compound Annual Total Shareholder Return
through the day immediately preceding the Date of Termination (as defined in
Section 8) equals or exceeds the Performance Target that is required to be
achieved for the Second Performance Period, then all of the Performance Shares
that would have vested had the Executive remained employed through the last day
of the Second Performance Period shall vest on the Date of Termination;

 

(B)                                If the Compound Annual Total Shareholder
Return through the day immediately preceding the Date of Termination is less
than the Performance Target that is required to be achieved for the Second
Performance Period, but the Compound Annual Total Shareholder Return through the
end of the Second Performance Period (determined at the end of the Second
Performance Period) equals or exceeds the Performance Target for the Second
Performance Period, then all of the Performance Shares that would have vested
had the Executive remained employed through the last day of the Second
Performance Period shall vest on the last day of the Second Performance Period;
and

 

(C)                                If the Compound Annual Total Shareholder
Return through the day immediately preceding the Date of Termination equals or
exceeds the Performance Target that is required to be achieved for the
Performance Period ending on the third anniversary of the Consummation Date (the
“Third Performance Period”), the Performance Shares that would have vested had
the Executive remained employed through the end of the Third Performance Period
shall vest on the Date of Termination.

 

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(iii)                               If the Termination Date occurs during any of
the Performance Periods ending on the third or fourth anniversary of the
Consummation Date or the Expiration Date (each, a “Termination Performance
Period”):

 

(A)                              If the Compound Annual Total Shareholder Return
through the day immediately preceding the Date of Termination equals or exceeds
the Performance Target that is required to be achieved for the Termination
Performance Period in which the Date of Termination occurred, then all of the
Performance Shares that would have vested had the Executive remained employed
through the last day of such Termination Performance Period shall vest on the
Date of Termination;

 

(B)                                If the Compound Annual Total Shareholder
Return through the day immediately preceding the Date of Termination is less
than the Performance Target that is required to be achieved for the Termination
Performance Period in which the Date of Termination occurred, but the Compound
Annual Total Shareholder Return through the end of such Termination Performance
Period (determined at the end of such Termination Performance Period) equals or
exceeds the Performance Target for such Termination Performance Period, then all
of the Performance Shares that would have vested had the Executive remained
employed through the last day of such Termination Performance Period shall vest
on the last day of such Termination Performance Period;

 

(C)                                If the Compound Annual Total Shareholder
Return through the day immediately preceding the Date of Termination equals or
exceeds the Performance Target that is required to be achieved for the
Performance Period immediately following the Termination Performance Period in
which the Date of Termination occurred, if any (the “Subsequent Performance
Period”), the Performance Shares that would have vested had the Executive
remained employed through the end of the Subsequent Performance Period shall
vest on the Date of Termination; and

 

(D)                               If the Compound Annual Total Shareholder
Return through the day immediately preceding the Date of Termination is less
than the Performance Target that is required to be achieved for the Subsequent
Performance Period, but the Compound Annual Total Shareholder Return through the
end of the Termination Performance Period (determined at the end of the
Termination Performance Period) equals or exceeds the Performance Target for the
Subsequent Performance Period, then all of the Performance Shares that would
have vested had the Executive remained employed through the last day of the
Subsequent Performance

 

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Period shall vest on the last day of the Termination Performance Period.

 

(iv)                              To the extent vesting did not occur pursuant
to Sections 6(c)(i), 6(c)(ii), or 6(c)(iii), if the Company attains or exceeds
the Performance Targets (determined at the end of the applicable Performance
Period) for any Performance Periods following the Performance Period in which
the Date of Termination occurs, if any (each, a “Remaining Performance Period”),
then a Prorated Portion (as defined below) of the Performance Shares that would
have vested had the Executive remained employed through the last day of such
Remaining Performance Period(s) shall vest on such date. The “Prorated Portion”
shall be determined using a fraction, the numerator of which is the number of
days beginning on the Consummation Date and ending on the Date of Termination
and the denominator of which is the number of days beginning on the Consummation
Date and ending on the Expiration Date.

 

(v)                                 The shares of Company Common Stock
underlying the Performance Shares shall be delivered thirty (30) days following
vesting pursuant to this Section 6(c).

 

7.                                      Termination

 

The employment by the Company Group of the Executive shall be terminated as
provided in this Section 7:

 

(a)           Death. Upon the Executive’s death (“Death”).

 

(b)                                 Disability.

 

(i)                                     The Company or the Executive, upon not
less than thirty (30) days written notice to the other party (“Disability
Notice”), may terminate the employment by the Company of the Executive if the
Executive has been unable, by reason of physical or mental disability, to
render, for 120 successive days or for shorter periods aggregating 210 days or
more in any twelve (12) month period, services of the character contemplated by
this Agreement and will be unable to resume providing such services within a
reasonable period of time by reason of such disability (such circumstances being
referred to as “Disability”).

 

(ii)                                  The determination of whether the Executive
has become Disabled within the meaning of this Section 7(b) shall be made (A) in
the case of a termination of employment by the Company, by a medical doctor
selected by the Company, or (B) in the case of a termination of employment by
the Executive, by Executive’s medical doctor. In the event the Company gives a
notice of termination of employment under this Section 7(b), the Executive or
his representative may at any time prior to the effective date of termination
contest the termination and cause a determination of

 

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Disability to be made by Executive’s medical doctor. In the event the Executive
gives a notice of termination of employment under this Section 7(b), the Company
may at any time prior to the effective date of termination contest the
termination and cause a determination of Disability to be made by a medical
doctor selected by the Company. In either case, if such medical doctors do not
agree with regard to the determination of Disability, they shall mutually choose
a third medical doctor to examine the Executive, and the Disability
determination of such third medical doctor shall be binding upon both the
Company and the Executive.

 

(c)                                  Without Cause. By the Company, for any
reason other than Death, Cause or Disability, but only upon a vote of a majority
of the entire Board (or such other vote required pursuant to the By-Laws) at a
meeting duly called and held at which Executive shall have the right to be
present and be heard.

 

(d)                                 Cause. By the Company, for Cause, but only
upon a vote of a majority of the entire Board (or such other vote required
pursuant to the By-Laws) at a meeting duly called and held at which Executive
shall have the right to be present and be heard. The term “Cause” means (i) any
act of fraud or embezzlement in respect of the Company or its funds, properties
or assets; (ii) conviction of a felony relating to the Executive’s actions as an
executive of the Company under the laws of the United States or any state
thereof (provided that all rights of appeal have been exercised or have lapsed)
unless such acts were committed in the reasonable, good faith belief that his
actions were in the best interests of the Company and its stockholders and would
not violate criminal law; (iii) willful misconduct or gross negligence by the
Executive in connection with the performance of his duties that has caused or is
highly likely to cause severe harm to the Company; or (iv) intentional
dishonesty by the Executive in the performance of his duties hereunder which has
a material adverse effect on the Company.

 

In the case of any termination for Cause, the Company shall provide the
Executive with a Notice of Termination (as defined in Section 8) giving the
Executive at least thirty (30) days written notice of its intent to terminate
this Agreement and his employment. The Notice of Termination shall specify (x)
the effective date of his termination and (y) the particular acts or
circumstances that constitute Cause for such termination. The Executive shall be
given the opportunity within fifteen (15) days after receiving the notice to
explain why Cause does not exist or to cure any basis for Cause. Within fifteen
(15) days after any such explanation or cure, the Company will make its final
determination regarding whether Cause exists and deliver such determination to
the Executive in writing. If the final decision is that Cause exists and no cure
has occurred, the Executive’s employment with the Company shall be terminated
for Cause as of the Date of Termination (as defined in Section 8) specified in
the Notice of Termination. If the final decision is that Cause does not exist or
a cure has occurred, the Executive’s employment with the Company shall not be
terminated for Cause at that time.

 

(e)                                  Resignation. By the Executive, other than
for Good Reason (“Resignation”).

 

(f)                                    Good Reason. By the Executive, for Good
Reason. As used herein, the term “Good Reason” means that, without the
Executive’s prior written consent, there shall have occurred: (i) a reduction in
the Executive’s Base Salary; (ii) a material reduction in the

 

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Executive’s benefits as set forth in Section 4(a), 4(d) or 4(e); (iii) the
assignment to the Executive of any duties inconsistent with the Executive’s
position, duties, responsibilities, authority or status with the Company or a
change in Executive’s reporting responsibilities, titles or offices as in effect
prior to such assignment or change; (iv) the Company’s material breach or
failure to perform, when due, any of its obligations under this Agreement;
(v) any purported termination of Executive’s employment which is not effected
pursuant to a Notice of Termination satisfying the applicable requirements with
respect to Section 8 of this Agreement; (vi) a determination by the Executive,
made in good faith, that the Executive is not able to discharge his duties
effectively by reason of directives from the Board requiring the Executive to
perform duties not directly related to the operations of the Company; or (vii)
the purported termination of the Executive’s employment by the Company in
violation of the By-Laws (which purported termination shall be ineffective). For
avoidance of doubt, the failure to pay the Executive an Annual Bonus or the
payment of an Annual Bonus that is less than the Executive’s target Annual
Bonus, in each case as a result of the Company failing to achieve the financial
and business objectives established by the Compensation Committee for the fiscal
year to which the Annual Bonus relates, shall not constitute Good Reason
hereunder.

 

In the case of any termination for Good Reason, the Executive shall provide the
Company with a Notice of Termination giving the Company at least thirty (30)
days written notice of his intent to terminate this Agreement and his
employment. The Notice of Termination shall specify (x) the effective date of
his termination and (y) the particular acts or circumstances that constitute
Good Reason for such termination. The Company shall be given the opportunity
within fifteen (15) days after receiving the Notice of Termination to cure any
basis for Good Reason. If no cure is effected, the Executive’s resignation shall
be effective as of the Date of Termination (as defined in Section 8) specified
in the Notice of Termination. If a cure is effected, the Executive’s resignation
shall not be effective at that time.

 

8.                                      Notice and Date of Termination

 

Any termination of the Executive’s employment with the Company Group under
Section 7, other than by reason of Death, shall be communicated by written
Notice of Termination from the terminating party to the other party hereto. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated. The effective date of any termination of the Executive’s
employment (the “Date of Termination”) shall be:

 

(i)                                     if the Executive’s employment is
terminated by Death, the date of the Executive’s death;

 

(ii)                                  if the Executive’s employment is
terminated without Cause or by the Executive for Good Reason, the later of (A)
thirty (30) days after Notice of Termination is given and (B) the expiration of
any applicable cure period;

 

11

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(iii)                               if the Executive’s employment is terminated
by reason of Disability, (i) thirty (30) days after the Disability Notice or
(ii) upon a final determination, pursuant to Section 7(b) above, as the case may
be, whichever is later; provided that the Executive shall not have returned to
the full-time performance of his duties during such period; and

 

(iv)                              if the Executive’s employment is terminated on
account of Cause or Resignation, the date specified in the Notice of
Termination, which shall be no less than ten (10) nor more than thirty (30) days
after such Notice of Termination is given.

 

9.                                      Compensation Upon Termination. Upon the
termination of the Executive’s employment with the Company Group pursuant to
Section 7, the Executive’s rights and the Company’s obligations under this
Agreement shall immediately terminate and, except as provided in Section 19(m)
of this Agreement, the Executive (or his heirs or estate, as applicable) shall
be entitled to receive the amounts or benefits set forth below. The payments and
benefits provided pursuant to this Section 9 are (x) provided in lieu of any
severance or income continuation protection under any plan of the Company Group
that may now or hereafter exist, (y) provided in addition to any payments the
Executive (or his beneficiaries or estate, as applicable) may be entitled to
receive pursuant to any pension or employee benefit plan or disability or life
insurance policy maintained by the Company Group, and (z) except as provided in
Section 19(m) of this Agreement, deemed to satisfy and be in full and final
settlement of all obligations of the Company Group to the Executive under this
Agreement. The Executive shall have no further right to receive any other
compensation or benefits following the Date of Termination for any reason except
as set forth in this Section 9.

 

(a)                                  Compensation Upon Death. In the event of a
termination of the Executive’s employment with the Company Group upon Death, the
Executive’s heirs, successors or legal representatives shall be entitled to
receive:

 

(i)                                     the Base Salary through the Date of
Termination, any unpaid Annual Bonus and Performance Bonus for any prior fiscal
year, and any reimbursement due to Executive pursuant to Section 4(b) (the
“Accrued Obligations”);

 

(ii)                                  an amount equal to the Annual Bonus the
Executive earned for the fiscal year immediately preceding the fiscal year in
which the Date of Termination occurs, multiplied by a fraction, the numerator of
which is the number of days worked during the fiscal year in which the Date of
Termination occurs and the denominator of which is 365 (the “Pro Rata Annual
Bonus”);

 

(iii)                               the Executive and his then current spouse
and minor children, if any, shall receive the same level of health/medical
insurance or coverage provided immediately prior to the Date of Termination on a
non-taxable basis for two (2) years, with the cost of such continued insurance
or coverage being borne by the Company;

 

12

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(iv)                              all outstanding options to purchase Company
Common Stock granted to the Executive at any time prior to January 1, 2007 (the
“Prior Options”) shall, to the extent not already vested, immediately vest, and
all vested Prior Options (including the Prior Options that vest in accordance
with this Section 9(a)) will remain exercisable until the earlier of their
original expiration date or the fifth (5th) anniversary of the Date of
Termination;

 

(v)                                 all outstanding options to purchase Company
Common Stock granted to the Executive on June 15, 2007 (the “June Options”)
shall, to the extent not already vested, immediately vest, and all vested June
Options (including the June Options that vest in accordance with this Section
9(a)) will remain exercisable until the original expiration date of the June
Options;

 

(vi)                              the Executive shall immediately vest in the
number of additional New Options equal to the lesser of (A) forty (40%) percent
of the New Options or (B) the remaining number of unvested New Options as of the
Date of Termination, and all unvested New Options shall be cancelled
immediately. Vested New Options (including the New Options that vest in
accordance with this Section 9(a)) will remain exercisable until the original
expiration date of the New Options; and

 

(vii)                           the Executive shall be entitled to settlement of
all outstanding Performance Shares that were earned and vested prior to the Date
of Termination in accordance with Section 6; otherwise, the Performance Shares
shall be treated in accordance with Section 6(c) hereof.

 

(b)                                 Compensation Upon Disability. In the event
of termination of the Executive’s employment with the Company Group for
Disability,

 

(i)                                     the Executive shall be entitled to
receive the Accrued Obligations;

 

(ii)                                  the Executive shall be entitled to receive
the Pro Rata Annual Bonus;

 

(iii)                               the Executive shall be entitled to receive
an amount equal to one (1) times his Base Salary;

 

(iv)                              the Executive and his then current spouse and
minor children, if any, shall receive the same level of health/medical insurance
or coverage provided immediately prior to the Date of Termination on a
non-taxable basis for two (2) years, with the cost of such continued insurance
or coverage being borne by the Company;

 

(v)                                 the Prior Options shall, to the extent not
already vested, immediately vest, and all vested Prior Options (including the
Prior Options that vest in accordance with this Section 9(b)) will remain
exercisable until the earlier of their original expiration date or the fifth
(5th) anniversary of the Date of Termination;

 

13

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(vi)                              the June Options shall, to the extent not
already vested, immediately vest, and all vested June Options (including the
June Options that vest in accordance with this Section 9(b)) will remain
exercisable until the original expiration date of the June Options;

 

(vii)                           the Executive shall vest in the number of
additional New Options equal to the lesser of (A) forty (40%) percent of the New
Options or (B) the remaining number of unvested New Options as of the Date of
Termination, and all unvested New Options shall be cancelled immediately;
provided, however, that this Section 9(b)(vii) shall not apply upon a
termination of employment following a Change of Control. Vested New Options
(including the New Options that vest in accordance with this Section 9(b)) will
remain exercisable until the original expiration date of the New Options; and

 

(viii)                        the Executive shall be entitled to settlement of
all outstanding Performance Shares that were earned and vested prior to the Date
of Termination in accordance with Section 6; otherwise, the Performance Shares
shall be treated in accordance with Section 6(c)hereof.

 

Payment of the Pro Rata Annual Bonus, the severance amount described in Section
9(b)(iii) and the accelerated vesting of the options and Performance Shares
described in clauses (v) through (viii) of this Section 9(b) are expressly
conditioned upon the Executive’s execution of a waiver and release agreement in
the form attached as Exhibit A to this Agreement (the “Release”) and the Release
becoming effective and irrevocable in its entirety within ninety (90) days after
the Executive’s Date of Termination (the “Release Period”).

 

NOTWITHSTANDING THE ABOVE, IF THE EXECUTIVE’S DISABILITY IS NOT SUCH THAT THE
EXECUTIVE IS “DISABLED” FOR PURPOSES OF SECTION 409A(A)(2)(C) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), THE PAYMENTS AND BENEFITS
DESCRIBED IN THIS SECTION 9(B) SHALL BE SUBJECT TO SECTION 19(C).

 

(C)                                  COMPENSATION UPON RESIGNATION OR
TERMINATION FOR CAUSE. IN THE EVENT OF TERMINATION OF THE EXECUTIVE’S EMPLOYMENT
WITH THE COMPANY GROUP UPON RESIGNATION OR TERMINATION FOR CAUSE:

 

(I)                                     THE EXECUTIVE SHALL BE ENTITLED TO
RECEIVE THE ACCRUED OBLIGATIONS;

 

(II)                                  UPON A RESIGNATION, THE EXECUTIVE SHALL BE
ENTITLED TO SETTLEMENT OF ALL OUTSTANDING PERFORMANCE SHARES THAT WERE EARNED
AND VESTED PRIOR TO THE DATE OF TERMINATION IN ACCORDANCE WITH SECTION 6;

 

(III)                               ALL OTHER UNVESTED PERFORMANCE SHARES SHALL
EXPIRE ON THE DATE OF TERMINATION;

 

(IV)                              ALL UNVESTED OPTIONS SHALL EXPIRE ON THE DATE
OF TERMINATION;

 

14

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(V)                                 UPON A TERMINATION FOR CAUSE, ALL VESTED
OPTIONS SHALL EXPIRE ON THE DATE OF TERMINATION; AND

 

(VI)                              UPON A RESIGNATION, ALL VESTED OPTIONS WILL
EXPIRE ON THE EARLIER OF (I) THEIR ORIGINAL EXPIRATION DATE OR (II) THE LATER OF
(A) THIRTY (30) DAYS FOLLOWING THE DATE OF TERMINATION AND (B) THE FIRST DATE ON
WHICH THE EXECUTIVE MAY SELL SHARES OF COMPANY COMMON STOCK OVER THE PRIMARY
EXCHANGE ON WHICH SUCH COMMON STOCK IS LISTED FOR TRADING IN ACCORDANCE WITH
APPLICABLE LAW AND ANY APPLICABLE COMPANY POLICY.

 

(D)                                 COMPENSATION UPON TERMINATION BY EXECUTIVE
FOR GOOD REASON OR BY THE COMPANY WITHOUT CAUSE. IN THE EVENT THE EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY GROUP IS TERMINATED BY THE EXECUTIVE FOR GOOD REASON
OR BY THE COMPANY WITHOUT CAUSE OTHER THAN A TERMINATION DURING THE TWELVE (12)
MONTH PERIOD FOLLOWING THE EFFECTIVE DATE OF A CHANGE OF CONTROL:

 

(I)                                     THE EXECUTIVE SHALL BE ENTITLED TO
RECEIVE THE ACCRUED OBLIGATIONS;

 

(II)                                  THE EXECUTIVE SHALL BE ENTITLED TO RECEIVE
THE PRO RATA ANNUAL BONUS;

 

(III)                               THE EXECUTIVE SHALL BE ENTITLED TO RECEIVE
AN AMOUNT EQUAL TO TWO (2) MULTIPLIED BY THE SUM OF (X) THE BASE SALARY IN
EFFECT ON THE DATE OF TERMINATION AND (Y) THE TARGET ANNUAL BONUS FOR THE FISCAL
YEAR IN WHICH THE DATE OF TERMINATION OCCURS;

 

(IV)                              THE EXECUTIVE AND HIS THEN CURRENT SPOUSE AND
MINOR CHILDREN, IF ANY, SHALL RECEIVE THE SAME LEVEL OF HEALTH/MEDICAL INSURANCE
OR COVERAGE PROVIDED IMMEDIATELY PRIOR TO THE DATE OF TERMINATION ON A
NON-TAXABLE BASIS FOR TWO (2) YEARS, WITH THE COST OF SUCH CONTINUED INSURANCE
OR COVERAGE BEING BORNE BY THE COMPANY;

 

(V)                                 THE PRIOR OPTIONS SHALL, TO THE EXTENT NOT
ALREADY VESTED, IMMEDIATELY VEST, AND ALL VESTED PRIOR OPTIONS (INCLUDING THE
PRIOR OPTIONS THAT VEST IN ACCORDANCE WITH THIS SECTION 9(D)) WILL REMAIN
EXERCISABLE UNTIL THE EARLIER OF THEIR ORIGINAL EXPIRATION DATE OR THE FIFTH
(5TH) ANNIVERSARY OF THE DATE OF TERMINATION;

 

(VI)                              THE JUNE OPTIONS SHALL, TO THE EXTENT NOT
ALREADY VESTED, IMMEDIATELY VEST, AND ALL VESTED JUNE OPTIONS (INCLUDING THE
JUNE OPTIONS THAT VEST IN ACCORDANCE WITH THIS SECTION 9(D)) WILL REMAIN
EXERCISABLE UNTIL THE ORIGINAL EXPIRATION DATE OF THE JUNE OPTIONS;

 

(VII)                           THE EXECUTIVE SHALL VEST IN THE NUMBER OF
ADDITIONAL NEW OPTIONS EQUAL TO THE LESSER OF (A) FORTY (40%) PERCENT OF THE NEW
OPTIONS OR (B) THE REMAINING NUMBER OF UNVESTED NEW OPTIONS AS OF THE DATE OF
TERMINATION, AND ANY UNVESTED NEW OPTIONS SHALL BE CANCELLED IMMEDIATELY;
PROVIDED, HOWEVER, THAT THIS SECTION 9(D)(VII) SHALL NOT APPLY UPON A
TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE OF CONTROL. VESTED

 

15

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NEW OPTIONS (INCLUDING THE NEW OPTIONS THAT VEST IN ACCORDANCE WITH THIS SECTION
9(D)) WILL REMAIN EXERCISABLE UNTIL THE ORIGINAL EXPIRATION DATE OF THE NEW
OPTIONS; AND

 

(VIII)                        THE EXECUTIVE SHALL BE ENTITLED TO SETTLEMENT OF
ALL OUTSTANDING PERFORMANCE SHARES THAT WERE EARNED AND VESTED PRIOR TO THE DATE
OF TERMINATION IN ACCORDANCE WITH SECTION 6; OTHERWISE, THE PERFORMANCE SHARES
SHALL BE TREATED IN ACCORDANCE WITH SECTION 6(C) HEREOF.

 

PAYMENT OF THE PRO RATA ANNUAL BONUS, THE SEVERANCE AMOUNT DESCRIBED IN SECTION
9(D)(III) AND THE ACCELERATED VESTING OF THE OPTIONS AND PERFORMANCE SHARES
DESCRIBED IN CLAUSES (V) THROUGH (VIII) OF THIS SECTION 9(D) ARE EXPRESSLY
CONDITIONED UPON THE EXECUTIVE’S EXECUTION OF A RELEASE AND SUCH RELEASE
BECOMING EFFECTIVE AND IRREVOCABLE IN ITS ENTIRETY ON OR PRIOR TO THE LAST DAY
OF THE RELEASE PERIOD.

 

NOTWITHSTANDING THE ABOVE, THE PAYMENTS AND BENEFITS DESCRIBED IN THIS SECTION
9(D) SHALL BE SUBJECT TO SECTION 19(C).

 

(E)                                  NO MITIGATION. THE EXECUTIVE SHALL NOT BE
REQUIRED TO MITIGATE THE AMOUNT OF ANY PAYMENT PROVIDED FOR IN THIS SECTION 9 OR
IN SECTION 10 BY SEEKING OTHER EMPLOYMENT OR OTHERWISE, NOR SHALL THE AMOUNT OF
ANY PAYMENT OR BENEFIT PROVIDED FOR IN THIS SECTION 9 OR IN SECTION 10 BE
REDUCED BY ANY COMPENSATION EARNED BY HIM AS THE RESULT OF EMPLOYMENT BY ANOTHER
EMPLOYER OR BY RETIREMENT BENEFITS AFTER THE DATE OF TERMINATION OR OTHERWISE,
EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION 9 OR IN SECTION 10.

 

(F)                                    TIME AND FORM OF PAYMENT OF SEVERANCE
AMOUNTS. SUBJECT TO SECTION 19(C), (I) THE PRO RATA ANNUAL BONUS SHALL BE PAID
TO THE EXECUTIVE ON THE FIRST (1ST) BUSINESS DAY FOLLOWING THE RELEASE PERIOD;
(II) THE ACCRUED OBLIGATIONS WILL BE PAID TO THE EXECUTIVE IN A LUMP SUM NOT
LATER THAN THE TENTH (10TH) BUSINESS DAY FOLLOWING THE DATE OF TERMINATION AND
(III) THE AMOUNTS PAYABLE PURSUANT TO SECTIONS 9(B)(III), 9(D)(III) AND 10(D)
WILL BE PAID IN EQUAL INSTALLMENTS OVER THE TWELVE (12) MONTH PERIOD COMMENCING
ON THE DATE OF TERMINATION IN ACCORDANCE WITH THE COMPANY’S PAYROLL PRACTICES AS
IN EFFECT FROM TIME TO TIME; PROVIDED, HOWEVER, THAT PAYMENT OF SUCH SEVERANCE
AMOUNTS SHALL IMMEDIATELY CEASE, AND THE EXECUTIVE SHALL HAVE NO FURTHER RIGHTS
WITH RESPECT TO SUCH AMOUNTS, IF THE EXECUTIVE HAS VIOLATED ANY OF THE
PROVISIONS SET FORTH IN SECTIONS 12, 13 OR 14.

 

10.                               Change of Control

 

(A)                                  FOR PURPOSES OF THIS AGREEMENT, A “CHANGE
OF CONTROL” SHALL BE DEEMED TO OCCUR UPON THE OCCURRENCE OF ANY OF THE FOLLOWING
EVENTS:

 

(I)                                     ANY “PERSON” OR “GROUP” (AS SUCH TERMS
ARE USED IN SECTION 13(D) AND 14(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE “EXCHANGE ACT”) AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER) IS OR BECOMES THE “BENEFICIAL OWNER” (AS DEFINED IN RULES 13D-3 AND
13D-5 UNDER THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF MORE THAN 25% OF THE
TOTAL OUTSTANDING VOTING STOCK OF THE COMPANY, PROVIDED, THAT NO CHANGE OF
CONTROL SHALL BE DEEMED TO HAVE OCCURRED UNDER THIS CLAUSE (I) IF THE

 

16

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PERSON OR GROUP ACQUIRING 25% OR MORE OF THE TOTAL OUTSTANDING STOCK OF THE
COMPANY (A) BENEFICIALLY OWNS FEWER SHARES THAN VIVENDI AND ITS AFFILIATES IN
THE AGGREGATE, AND (B) DOES NOT HAVE, BY VIRTUE OF SUCH BENEFICIAL OWNERSHIP OR
BY CONTRACT THE RIGHT TO ELECT A MAJORITY OF THE BOARD;

 

(II)                                  THE INDIVIDUALS WHO CONSTITUTE THE BOARD
AS OF THE EFFECTIVE DATE (OR, IN THE EVENT THAT THE COMBINED TRANSACTIONS ARE
CONSUMMATED, AS OF THE CONSUMMATION DATE) (THE “INCUMBENT BOARD”) CEASE TO
CONSTITUTE A MAJORITY OF THE BOARD, FOR ANY REASON(S) OTHER THAN (A) THE
VOLUNTARY RESIGNATION OF ONE OR MORE BOARD MEMBERS; OR (B) THE REMOVAL OF ONE OR
MORE DIRECTORS BY THE COMPANY’S SHAREHOLDERS FOR GOOD CAUSE; PROVIDED, HOWEVER
(1) THAT IF THE NOMINATION OR ELECTION OF ANY NEW DIRECTOR OF THE COMPANY WAS
APPROVED BY A MAJORITY OF THE INCUMBENT BOARD, SUCH NEW DIRECTOR SHALL BE DEEMED
A MEMBER OF THE INCUMBENT BOARD AND (2) THAT NO INDIVIDUAL SHALL BE CONSIDERED A
MEMBER OF THE INCUMBENT BOARD IF SUCH INDIVIDUAL INITIALLY ASSUMED OFFICE AS A
RESULT OF EITHER AN ACTUAL OR THREATENED “ELECTION CONTEST” (AS DESCRIBED IN
RULE 14A-11 PROMULGATED UNDER THE EXCHANGE ACT) OR AS A RESULT OF A SOLICITATION
OF PROXIES OR CONSENTS BY OR ON BEHALF OF ANY “PERSON” OR “GROUP” IDENTIFIED IN
CLAUSE (A)(I) ABOVE; OR

 

(III)                               THE COMPANY CONSOLIDATES WITH, OR MERGES
WITH OR INTO ANOTHER PERSON OR ENTITY OR CONVEYS, TRANSFERS, LEASES OR OTHERWISE
DISPOSES OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS TO ANY PERSON OR ENTITY, OR
ANY PERSON OR ENTITY CONSOLIDATES WITH OR MERGES WITH OR INTO THE COMPANY;
PROVIDED, HOWEVER THAT ANY SUCH TRANSACTION SHALL NOT CONSTITUTE A CHANGE OF
CONTROL IF THE SHAREHOLDERS OF THE COMPANY IMMEDIATELY BEFORE SUCH TRANSACTION
OWN, DIRECTLY OR INDIRECTLY, IMMEDIATELY FOLLOWING SUCH TRANSACTION IN EXCESS OF
SIXTY-FIVE PERCENT (65%) OF THE COMBINED VOTING POWER OF THE OUTSTANDING VOTING
SECURITIES OF THE CORPORATION OR OTHER PERSON OR ENTITY RESULTING FROM SUCH
TRANSACTION IN SUBSTANTIALLY THE SAME PROPORTION AS THEIR OWNERSHIP OF THE
VOTING SECURITIES OF THE COMPANY IMMEDIATELY BEFORE SUCH TRANSACTION.

 

(IV)                              FOR PURPOSES OF THIS SUBSECTION, THE TERM
“AFFILIATE” MEANS, WITH RESPECT TO ANY INDIVIDUAL OR A CORPORATION, PARTNERSHIP,
TRUST, INCORPORATED OR UNINCORPORATED ASSOCIATION, JOINT VENTURE, LIMITED
LIABILITY COMPANY, JOINT STOCK COMPANY, GOVERNMENT (OR AN AGENCY OR POLITICAL
SUBDIVISION THEREOF) OR OTHER ENTITY OF ANY KIND (EACH A “PERSON”), ANY OTHER
PERSON THAT DIRECTLY OR INDIRECTLY CONTROLS OR IS CONTROLLED BY OR UNDER COMMON
CONTROL WITH SUCH PERSON. FOR THE PURPOSES OF THIS DEFINITION, “CONTROL,” WHEN
USED WITH RESPECT TO ANY PERSON, MEANS THE POSSESSION, DIRECT OR INDIRECT, OF
THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF
SUCH PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR
OTHERWISE; AND THE TERMS OF “AFFILIATED,” “CONTROLLING” AND “CONTROLLED” HAVE
MEANINGS CORRELATIVE TO THE FOREGOING

 

17

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; provided, however, that in no event shall the Combination Transactions
constitute a Change of Control under this Agreement; and provided, further, that
no Change of Control shall be deemed to have occurred upon the acquisition of
additional control of the Company by Vivendi or by any one person or more than
one person acting as a group that beneficially owns, directly or indirectly,
more than 50% of the total outstanding voting stock of the Company.

 

(B)                                 IN THE EVENT THAT THE EXECUTIVE IS AN
EMPLOYEE OF THE COMPANY AT THE MOMENT IMMEDIATELY PRIOR TO A CHANGE OF CONTROL:

 

(I)                                     UPON THE CONSUMMATION OF THE CHANGE OF
CONTROL, ALL PRIOR OPTIONS SHALL IMMEDIATELY VEST AND REMAIN EXERCISABLE UNTIL
THEIR ORIGINAL EXPIRATION DATE, WITHOUT REGARD TO EXECUTIVE’S CONTINUED
EMPLOYMENT WITH THE COMPANY PURSUANT TO THIS AGREEMENT AND WITHOUT REGARD TO THE
TERMS OF ANY OPTION AGREEMENT OR OPTION CERTIFICATE APPLICABLE TO ANY PRIOR
OPTIONS;

 

(II)                                  THE EXECUTIVE SHALL IMMEDIATELY VEST, UPON
THE CONSUMMATION OF THE CHANGE OF CONTROL, IN THE NUMBER OF ADDITIONAL JUNE
OPTIONS EQUAL TO TWENTY (20%) PERCENT OF THE JUNE OPTIONS, AND ALL VESTED JUNE
OPTIONS (INCLUDING THE JUNE OPTIONS THAT VEST IN ACCORDANCE WITH THIS SECTION
10(B)) WILL REMAIN EXERCISABLE UNTIL THE ORIGINAL EXPIRATION DATE OF THE JUNE
OPTIONS;

 

(III)                               THE EXECUTIVE WILL IMMEDIATELY VEST, UPON
THE CONSUMMATION OF THE CHANGE OF CONTROL, IN AN ADDITIONAL NUMBER OF THE NEW
OPTIONS AND PERFORMANCE SHARES AS FOLLOWS:

 

If the Change of Control Occurs During the Period:

 

Percentage of Equity
Awards In Addition to
Equity Awards Already
Vested

 

Commencing on the Effective Date and ending on December 31, 2008

 

60

%

Commencing on January 1, 2009 and ending on December 31, 2009

 

40

%

Commencing on January 1, 2010 and ending on December 31, 2010

 

20

%

Commencing on January 1, 2011 and ending on the Expiration Date

 

To a total of 100

%

 

; provided, however, that if the Change of Control occurs on or prior to
December 31, 2010, then the amount of any severance payment made in accordance
with Sections 9(b)(iii), 9(d)(iii) or 10(d) shall be reduced by one dollar for
each dollar by which the aggregate value, determined as of the date of the
occurrence of the

 

18

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Change of Control, of the New Options and the Performance Shares accelerated in
accordance with this Section 10(b)(iii), exceeds twenty five million dollars
($25,000,000). For this purpose, the value of the accelerated New Options shall
be the excess, if any, of the fair market value of the shares of Company Common
Stock underlying such New Options over the aggregate exercise price in respect
of the shares of Company Common Stock underlying such New Options.

 

(IV)                              THE NEW OPTIONS THAT VEST IN ACCORDANCE WITH
SECTION 10(B)(III) WILL REMAIN EXERCISABLE UNTIL THE EARLIER OF (A) THE TENTH
(10TH) ANNIVERSARY OF THE DATE OF THE CHANGE OF CONTROL OR (B) THEIR ORIGINAL
EXPIRATION DATE, WITHOUT REGARD TO EXECUTIVE’S CONTINUED EMPLOYMENT WITH THE
COMPANY PURSUANT TO THIS AGREEMENT AND WITHOUT REGARD TO THE TERMS OF ANY OPTION
AGREEMENT OR OPTION CERTIFICATE APPLICABLE TO THE NEW OPTIONS.

 

(V)                                 THE PERFORMANCE SHARES THAT VEST IN
ACCORDANCE WITH SECTION 10(B)(III) WILL BE SETTLED ON THE EFFECTIVE DATE OF THE
CHANGE OF CONTROL; PROVIDED, HOWEVER, THAT IF THE CHANGE OF CONTROL DOES NOT
ALSO CONSTITUTE A CHANGE OF CONTROL FOR PURPOSES OF SECTION 409A (AS DEFINED IN
SECTION 19(C)), SETTLEMENT SHALL OCCUR ON THE APPLICABLE PERFORMANCE VESTING
DATES.

 

(C)                                  WITH RESPECT TO EACH OUTSTANDING OPTION (AS
DEFINED BELOW) AS OF THE DATE OF THE CHANGE OF CONTROL, IN THE EVENT THAT THE
CLOSING SHARE VALUE (AS DEFINED BELOW) IS GREATER THAN THE EXERCISE PRICE OF ANY
SUCH OUTSTANDING OPTION, THEN THE EXECUTIVE SHALL HAVE THE RIGHT, SEPARATELY
WITH RESPECT TO EACH OF THE OUTSTANDING OPTIONS, TO EITHER (A) RETAIN THE
OUTSTANDING OPTIONS, (B) EXERCISE THE OUTSTANDING OPTIONS, OR (C) FORFEIT THE
OUTSTANDING OPTIONS AND RECEIVE, IN EXCHANGE THEREFOR, A CASH PAYMENT EQUAL TO
THE NUMBER OF SHARES OF COMPANY COMMON STOCK UNDERLYING THE OUTSTANDING OPTIONS
MULTIPLIED BY THE AMOUNT THAT THE CLOSING SHARE VALUE EXCEEDS THE EXERCISE PRICE
OF THE OUTSTANDING OPTIONS. FOR PURPOSES OF THIS SECTION 10(C):

 

(I)                                     “CLOSING SHARE VALUE” SHALL MEAN THE
CLOSING PRICE OF THE SHARES OF THE COMPANY COMMON STOCK ON THE DATE OF THE
CHANGE OF CONTROL;

 

(II)                                  THE “CLOSING PRICE” OF A SHARE OF COMPANY
COMMON STOCK ON ANY DATE SHALL MEAN THE LAST SALE PRICE, REGULAR WAY, OR, IN
CASE NO SUCH SALE TAKES PLACE ON SUCH DATE, THE AVERAGE OF THE CLOSING BID AND
ASKED PRICES, REGULAR WAY, IN EITHER CASE AS REPORTED IN THE PRINCIPAL
CONSOLIDATED TRANSACTION REPORTING SYSTEM WITH RESPECT TO SECURITIES LISTED ON
THE PRINCIPAL NATIONAL SECURITIES EXCHANGE ON WHICH THE SUCH SHARES ARE LISTED
OR ADMITTED TO TRADING OR, IF SUCH SHARES ARE NOT LISTED OR ADMITTED TO TRADING
ON ANY NATIONAL SECURITIES EXCHANGE, THE LAST QUOTED PRICE, OR IF NOT SO QUOTED,
THE AVERAGE OF THE HIGHEST BID AND LOWEST ASK PRICES IN THE OVER-THE-COUNTER
MARKET, AS REPORTED BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
AUTOMATED QUOTATION SYSTEM OR, IF SUCH SYSTEM IS NO LONGER USED, THE PRINCIPAL
OTHER AUTOMATED QUOTATION SYSTEM THAT MAY THEN BE IN USE OR, IF SUCH SHARES ARE
NOT QUOTED BY ANY SUCH ORGANIZATION, THE AVERAGE OF THE CLOSING BID AND ASKED
PRICES AS FURNISHED BY A PROFESSIONAL MARKET MAKER

 

19

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MAKING MARKET IN THE SHARES AS SUCH PERSON IS SELECTED FROM TIME TO TIME BY THE
BOARD OR, IF THERE ARE NO PROFESSIONAL MARKET MAKERS MAKING A MARKET IN THE
SHARES, THEN THE VALUE AS DETERMINED IN GOOD FAITH JUDGMENT OF THE BOARD; AND

 

(III)                               THE TERM “OUTSTANDING OPTIONS” WITH
REFERENCE TO A PARTICULAR DATE SHALL MEAN ALL VESTED OPTIONS TO PURCHASE COMPANY
COMMON STOCK HELD BY THE EXECUTIVE AS AT SUCH DATE, INCLUDING OPTIONS WHICH VEST
AND BECOME EXERCISABLE PURSUANT TO SECTION 10(B).

 

(D)                                 TERMINATION FOLLOWING A CHANGE OF CONTROL.
IN THE EVENT THE EXECUTIVE’S EMPLOYMENT IS TERMINATED BY THE EXECUTIVE FOR GOOD
REASON OR BY THE COMPANY WITHOUT CAUSE AT ANY TIME DURING THE TWELVE (12) MONTH
PERIOD FOLLOWING THE EFFECTIVE DATE OF A CHANGE OF CONTROL, THE EXECUTIVE SHALL
BE ENTITLED TO THE BENEFITS SET FORTH IN SECTIONS 9(D)(I), 9(D)(II), 9(D)(III)
AND 9(D)(IV); PROVIDED, HOWEVER, THAT REFERENCES TO THE CLAUSE “TWO (2)” IN
SECTION 9(D)(III) SHALL BE CHANGED TO “THREE (3)”; AND PROVIDED, FURTHER, THAT
IF, FOLLOWING A CHANGE OF CONTROL, THE EXECUTIVE IS GRANTED ADDITIONAL EQUITY
AWARDS, NOTHING IN THIS SECTION 10(D) WILL PROHIBIT THE EXECUTIVE FROM VESTING
IN SUCH EQUITY AWARDS UPON A SUBSEQUENT TERMINATION OF EMPLOYMENT FOR GOOD
REASON OR WITHOUT CAUSE.

 

11.                               Gross-Up Payment

 

(A)                                  IF, DURING THE EMPLOYMENT PERIOD, THERE IS
A CHANGE IN OWNERSHIP OR CONTROL OF THE COMPANY THAT CAUSES ANY PAYMENT, BENEFIT
OR DISTRIBUTION BY THE COMPANY TO OR FOR THE BENEFIT OF THE EXECUTIVE (WHETHER
PAID OR PAYABLE OR DISTRIBUTED OR DISTRIBUTABLE PURSUANT TO THE TERMS OF THIS
AGREEMENT OR OTHERWISE, BUT DETERMINED WITHOUT REGARD TO ANY ADDITIONAL PAYMENTS
REQUIRED UNDER THIS SECTION 11) (A “PAYMENT”) TO BE SUBJECT TO THE EXCISE TAX
(THE “EXCISE TAX”) IMPOSED BY SECTION 4999 OF THE CODE, THEN THE EXECUTIVE SHALL
BE ENTITLED TO RECEIVE AN ADDITIONAL PAYMENT (A “GROSS-UP PAYMENT”) IN AN AMOUNT
SUCH THAT AFTER PAYMENT BY THE EXECUTIVE OF ALL TAXES, INCLUDING ANY INCOME
TAXES AND EXCISE TAX IMPOSED UPON THE GROSS-UP PAYMENT, THE EXECUTIVE WILL
RETAIN AN AMOUNT OF THE GROSS-UP PAYMENT EQUAL TO THE EXCISE TAX IMPOSED UPON
THE PAYMENTS.

 

(B)                                 DETERMINATION OF THE GROSS-UP PAYMENT.
SUBJECT TO THE PROVISIONS OF THIS SECTION 11, ALL DETERMINATIONS REQUIRED TO BE
MADE UNDER THIS SECTION 11, INCLUDING WHETHER AND WHEN A GROSS-UP PAYMENT IS
REQUIRED AND THE AMOUNT OF SUCH GROSS-UP PAYMENT AND THE ASSUMPTIONS TO BE
UTILIZED IN ARRIVING AT SUCH DETERMINATION, SHALL BE MADE BY A CERTIFIED PUBLIC
ACCOUNTING FIRM DESIGNATED BY THE EXECUTIVE AND REASONABLY ACCEPTABLE TO THE
COMPANY (THE “ACCOUNTING FIRM”), WHICH SHALL PROVIDE DETAILED SUPPORTING
CALCULATIONS BOTH TO THE COMPANY AND THE EXECUTIVE WITHIN FIFTEEN (15) BUSINESS
DAYS OF THE RECEIPT OF NOTICE FROM THE EXECUTIVE THAT THERE HAS BEEN A PAYMENT
WITH RESPECT TO WHICH THE EXECUTIVE IN GOOD FAITH BELIEVES A GROSS-UP PAYMENT
MAY BE DUE UNDER THIS SECTION 11, OR SUCH EARLIER TIME AS IS REQUESTED BY THE
COMPANY. ALL FEES AND EXPENSES OF THE ACCOUNTING FIRM SHALL BE BORNE SOLELY BY
THE COMPANY. ANY GROSS-UP PAYMENT, AS DETERMINED PURSUANT TO THIS SECTION 11,
SHALL BE PAID BY THE COMPANY TO THE EXECUTIVE WITHIN FIVE (5) DAYS OF THE LATER
OF (A) THE DUE DATE FOR THE PAYMENT OF ANY EXCISE TAX AND (B) THE RECEIPT OF THE
ACCOUNTING FIRM’S DETERMINATION. ANY DETERMINATION BY THE ACCOUNTING FIRM SHALL
BE BINDING UPON THE COMPANY AND THE EXECUTIVE. AS A RESULT OF

 

20

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THE UNCERTAINTY IN THE APPLICATION OF SECTION 4999 OF THE CODE AT THE TIME OF
THE INITIAL DETERMINATION BY THE ACCOUNTING FIRM HEREUNDER, IT IS POSSIBLE THAT
GROSS-UP PAYMENTS WHICH WILL NOT HAVE BEEN MADE BY THE COMPANY SHOULD HAVE BEEN
MADE (THE “UNDERPAYMENT”), CONSISTENT WITH THE CALCULATIONS REQUIRED TO BE MADE
HEREUNDER. IN THE EVENT THAT THE COMPANY EXHAUSTS ITS REMEDIES PURSUANT TO THIS
SECTION 11 AND THE EXECUTIVE THEREAFTER IS REQUIRED TO MAKE A PAYMENT OF ANY
EXCISE TAX, THE ACCOUNTING FIRM SHALL DETERMINE THE AMOUNT OF THE UNDERPAYMENT
THAT HAS OCCURRED AND ANY SUCH UNDERPAYMENT SHALL BE PROMPTLY PAID BY THE
COMPANY TO THE EXECUTIVE OR FOR THE EXECUTIVE’S BENEFIT. THE PREVIOUS SENTENCE
SHALL APPLY MUTATIS MUTANDIS TO ANY OVERPAYMENT OF A GROSS-UP PAYMENT.

 

(C)                                  PROCEDURES. THE EXECUTIVE SHALL NOTIFY THE
COMPANY IN WRITING OF ANY CLAIM BY THE INTERNAL REVENUE SERVICE THAT, IF
SUCCESSFUL, WOULD REQUIRE THE PAYMENT BY THE COMPANY OF THE GROSS-UP PAYMENT.
SUCH NOTIFICATION SHALL BE GIVEN AS SOON AS PRACTICABLE BUT NO LATER THAN TEN
(10) BUSINESS DAYS AFTER THE EXECUTIVE IS INFORMED IN WRITING OF SUCH CLAIM AND
SHALL APPRISE THE COMPANY OF THE NATURE OF SUCH CLAIM AND THE DATE ON WHICH SUCH
CLAIM IS REQUESTED TO BE PAID. THE EXECUTIVE SHALL NOT PAY SUCH CLAIM PRIOR TO
THE EXPIRATION OF THE THIRTY (30) DAY PERIOD FOLLOWING THE DATE ON WHICH IT
GIVES SUCH NOTICE TO THE COMPANY (OR SUCH SHORTER PERIOD ENDING ON THE DATE THAT
ANY PAYMENT OF TAXES WITH RESPECT TO SUCH CLAIM IS DUE). IF THE COMPANY NOTIFIES
THE EXECUTIVE IN WRITING PRIOR TO THE EXPIRATION OF SUCH PERIOD THAT IT DESIRES
TO CONTEST SUCH CLAIM, THE EXECUTIVE SHALL:

 

(I)                                     GIVE THE COMPANY ANY INFORMATION
REASONABLY REQUESTED BY THE COMPANY RELATING TO SUCH CLAIM;

 

(II)                                  TAKE SUCH ACTION IN CONNECTION WITH
CONTESTING SUCH CLAIM AS THE COMPANY SHALL REASONABLY REQUEST IN WRITING FROM
TIME TO TIME, INCLUDING, WITHOUT LIMITATION, ACCEPTING LEGAL REPRESENTATION WITH
RESPECT TO SUCH CLAIM BY AN ATTORNEY REASONABLY SELECTED BY THE COMPANY;

 

(III)                               COOPERATE WITH THE COMPANY IN GOOD FAITH IN
ORDER EFFECTIVELY TO CONTEST SUCH CLAIM; AND

 

(IV)                              PERMIT THE COMPANY TO PARTICIPATE IN ANY
PROCEEDINGS RELATING TO SUCH CLAIM;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses incurred in connection with such contest (including payment as incurred
of the fees and expenses of counsel selected by the Executive to represent him
personally in connection with such contest) and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax
imposed as a result of such representation and payment of costs and expenses.
Without limiting the foregoing provisions of this Section 11, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall

 

21

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determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, to the extent permitted by law, the Company
shall advance the amount of such payment to the Executive on an interest-free
basis (which shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid) and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax imposed with respect to such
advance or with respect to any imputed income with respect to such advance; and
provided further that any extension of the statute of limitations relating to
payment of taxes for the Executive’s taxable year with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

 

(D)                                 REFUND. IF, AFTER THE RECEIPT BY THE
EXECUTIVE OF AN AMOUNT ADVANCED BY THE COMPANY PURSUANT TO SECTION 11(C), THE
EXECUTIVE BECOMES ENTITLED TO RECEIVE ANY REFUND WITH RESPECT TO SUCH CLAIM, THE
EXECUTIVE SHALL PROMPTLY PAY TO THE COMPANY THE AMOUNT OF SUCH REFUND (TOGETHER
WITH ANY INTEREST PAID OR CREDITED THEREON AFTER TAXES APPLICABLE THERETO). IF,
AFTER THE EXECUTIVE RECEIVES AN AMOUNT ADVANCED BY THE COMPANY PURSUANT TO
SECTION 11(C), A DETERMINATION IS MADE THAT THE EXECUTIVE SHALL NOT BE ENTITLED
TO ANY REFUND WITH RESPECT TO SUCH CLAIM AND THE COMPANY DOES NOT NOTIFY THE
EXECUTIVE IN WRITING OF ITS INTENT TO CONTEST SUCH DENIAL OF REFUND PRIOR TO THE
EXPIRATION OF THIRTY (30) DAYS AFTER SUCH DETERMINATION, THEN SUCH ADVANCE SHALL
BE FORGIVEN AND SHALL NOT BE REQUIRED TO BE REPAID AND THE AMOUNT OF SUCH
ADVANCE SHALL OFFSET, TO THE EXTENT THEREOF, THE AMOUNT OF GROSS-UP PAYMENT
REQUIRED TO BE PAID.

 

(E)                                  TIMING OF PAYMENT. NOTWITHSTANDING ANYTHING
IN THIS SECTION 11, ANY GROSS-UP PAYMENT OR REIMBURSEMENT BY THE COMPANY OF
EXPENSES INCURRED BY THE EXECUTIVE IN CONNECTION WITH A LITIGATION PROCEEDING
RELATING TO THE EXCISE TAX, AS PROVIDED FOR IN THIS SECTION 11, SHALL BE PAID NO
LATER THAN THE LAST DAY OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN
WHICH THE EXECUTIVE REMITTED THE EXCISE TAX OR, IF NO EXCISE TAX IS PAID, THE
END OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH THERE IS A FINAL
AND NONAPPEALABLE SETTLEMENT OR OTHER RESOLUTION OF THE LITIGATION.

 

12.                               Non-Solicitation

 

During the Employment Period and for two (2) years thereafter (the “Restricted
Period”), the Executive covenants and agrees that he shall not
directly interfere with or attempt to interfere with the relationship between
the Company Group and any person who is, or was during the then most recent six
(6)-month period, an officer or employee of the Company Group or solicit,
induce, hire or attempt to solicit, induce or hire any of them to leave the
employ of any member of the Company Group or violate the terms of their
respective contracts, or any employment arrangements, with such entities.

 

13.                               Non-Competition

 

(A)                                  DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE
SHALL NOT ENGAGE (INCLUDING, WITHOUT LIMITATION, AS AN OFFICER, DIRECTOR,
SHAREHOLDER, OWNER, PARTNER, JOINT VENTURER, MEMBER OR IN A MANAGERIAL CAPACITY,
OR AS AN EMPLOYEE, INDEPENDENT CONTRACTOR, CONSULTANT, ADVISOR OR SALES
REPRESENTATIVE) IN ANY COMPETITIVE BUSINESS (AS

 

22

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HEREINAFTER DEFINED). FOR PURPOSES OF DETERMINING WHETHER THE EXECUTIVE IS
PERMITTED TO BE A SHAREHOLDER OF A CORPORATION ENGAGED IN A COMPETITIVE
BUSINESS, THE EXECUTIVE’S OWNERSHIP OF LESS THAN 5% OF THE ISSUED AND
OUTSTANDING SECURITIES OF A COMPANY WHOSE SECURITIES ARE PUBLICLY-TRADED IN ANY
U.S. OR NON-U.S. SECURITIES EXCHANGES OR QUOTATION SYSTEM SHALL BE PERMITTED.

 

(B)                                 AS USED HEREIN, THE TERM “COMPETITIVE
BUSINESS” SHALL MEAN ANY BUSINESS ENGAGED IN PUBLISHING, DISTRIBUTING,
PROGRAMMING, DESIGNING AND MARKETING VIDEO GAMES AND ENTERTAINMENT SOFTWARE FOR
PERSONAL COMPUTERS.

 

(C)                                  AS USED HEREIN, THE TERM “TERRITORY” SHALL
MEAN:

 

(I)                                     THE FOLLOWING COUNTIES IN THE STATE OF
CALIFORNIA: ALAMEDA, ALPINE, AMADOR, BUTTE, CALAVERAS, COLUSA, CONTRA COSTA, DEL
NORTE, EL DORADO, FRESNO, GLENN, HUMBOLDT, IMPERIAL, INYO, KERN, KINGS, LAKE,
LASSEN, LOS ANGELES, MADERA, MARIN, MARIPOSA, MENDOCINO, MERCED, MODOC, MONO,
MONTEREY, NAPA, NEVADA, ORANGE, PLACER, PLUMAS, RIVERSIDE, SACRAMENTO, SAN
BENITO, SAN BERNARDINO, SAN DIEGO, SAN FRANCISCO, SAN JOAQUIN, SAN LUIS OBISPO,
SAN MATEO, SANTA BARBARA, SANTA CRUZ, SHASTA, SIERRA, SISKIYOU, SOLANO, SONOMA,
STANISLAUS, SUTTER, TEHAMA, TRINITY, TULARE, TUOLUMNE, VENTURA, YOLO, AND YUBA;

 

(II)                                  EACH AND EVERY COUNTY OR OTHER POLITICAL
OR GEOGRAPHICAL SUBDIVISION IN THE BALANCE OF THE UNITED STATES OF AMERICA AND
THE DEPENDENT TERRITORIES OF THE UNITED STATES OF AMERICA; AND

 

(III)                               EACH AND EVERY COUNTY OR OTHER POLITICAL OR
GEOGRAPHICAL SUBDIVISION IN THE WORLD.

 

14.                               Confidential Information

 

(A)                                  THE EXECUTIVE HAS EXECUTED OR, IF NOT
PREVIOUSLY EXECUTED, AGREES TO EXECUTE AND BE BOUND BY THE TERMS AND CONDITIONS
OF THE COMPANY’S EMPLOYEE PROPRIETARY INFORMATION AGREEMENT (“PROPRIETARY
INFORMATION AGREEMENT”), ATTACHED HERETO AS EXHIBIT B.

 

(B)                                 DURING THE RESTRICTED PERIOD, THE EXECUTIVE
SHALL NOT USE THE CONFIDENTIAL, TRADE SECRET INFORMATION OF THE COMPANY GROUP OR
ANY OTHER UNLAWFUL MEANS TO DIRECTLY OR INDIRECTLY SOLICIT, INDUCE OR ENTICE ANY
EMPLOYEE, CLIENT, CUSTOMER, CONTRACTOR, LICENSOR, AGENT, PARTNER OR OTHER
BUSINESS RELATIONSHIP OF THE COMPANY GROUP TO TERMINATE, DISCONTINUE,
RENEGOTIATE OR OTHERWISE CEASE OR MODIFY ITS RELATIONSHIP WITH THE COMPANY
GROUP.

 

15.                               Unenforceability

 

If any of the rights or restrictions contained or provided for in this Agreement
shall be deemed by a court of competent jurisdiction to be unenforceable by
reason of the extent, duration or geographical scope, the parties hereto
contemplate that the court shall reduce such extent, duration, geographical
scope and enforce this Agreement in its reduced form for all purposes in the
manner contemplated hereby. Should any of the provisions of this Agreement
require

 

23

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judicial interpretation, it is agreed that the court interpreting or construing
this Agreement shall not apply a presumption that any provision shall be more
strictly construed against one party by reason of the rule of construction that
a document is to be construed more strictly against the party who itself or
through its agents prepared the same, it being agreed that both parties and
their respective agents have participated in the preparation of this Agreement.

 

16.                               Injunctive Relief

 

The Executive agrees that the restrictions and covenants contained in Sections
12, 13 and 14 and in the Proprietary Information Agreement are necessary for the
protection of the Company and any breach thereof will cause the Company
irreparable damages for which there is no adequate remedy at law. The Executive
further agrees that, in the event of a breach by the Executive of any of
Executive’s obligations under this Agreement, the Company shall have the
absolute right, in addition to any other remedy that might be available to it,
to obtain from any court having jurisdiction, such equitable relief as might be
appropriate, including temporary, interlocutory, preliminary and permanent
decrees or injunctions enjoining any further breach of such provisions.

 

17.                               Indemnification and Attorneys’ Fees

 

During the Employment Period and thereafter, the Company shall indemnify, hold
harmless and defend the Executive to the fullest extent permitted by Delaware
law and the Company’s articles of incorporation and by-laws in effect from time
to time from all damages, claims, losses, and costs and expenses (including
reasonable attorney’s fees) arising out of, in connection with, or relating to
all acts or omissions taken or not taken by the Executive in good faith while
performing services for the Company, and shall further promptly reimburse the
Executive for all expenses (including attorney’s fees) incurred in (i) enforcing
this Agreement and (ii) to a maximum of $60,000, in negotiating and drafting
this Agreement. The Company shall use its best efforts to continue to maintain
an insurance policy covering the officers and directors of the Company against
claims and/or lawsuits, at least as favorable as such policy that is currently
in effect, and shall cause the Executive to be covered under such policy upon
the same terms and conditions as other similarly situated officers and directors
during the Employment Period and for a period of at least six (6) years
thereafter.

 

18.                               Waiver

 

The Executive hereby waives any and all rights and payments under the Original
Agreement or otherwise that arise or become due to the Executive by virtue of
the Combination Transactions; provided, however, that upon the Consummation
Date, all Prior Options shall immediately vest in full; and provided, further,
that such waiver shall not apply to payments or other benefits that may
hereafter become due to the Executive upon a Change of Control following the
Consummation Date pursuant to the terms and conditions contained herein.

 

19.                               Miscellaneous

 

(A)                                  SEVERABILITY. IF ANY PROVISION OF THIS
AGREEMENT IS HELD TO BE ILLEGAL, INVALID OR UNENFORCEABLE UNDER EXISTING OR
FUTURE LAWS EFFECTIVE DURING THE EMPLOYMENT PERIOD, SUCH PROVISIONS SHALL BE
FULLY SEVERABLE, THE AGREEMENT SHALL BE CONSTRUED AND ENFORCED AS IF SUCH

 

24

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ILLEGAL, INVALID OR UNENFORCEABLE PROVISION HAD NEVER COMPRISED A PART OF THIS
AGREEMENT, AND THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT AND SHALL NOT BE AFFECTED BY THE ILLEGAL, INVALID OR
UNENFORCEABLE PROVISION OR BY ITS SEVERANCE FROM THIS AGREEMENT. FURTHERMORE, IN
LIEU OF SUCH ILLEGAL, INVALID OR UNENFORCEABLE PROVISION, THERE SHALL BE ADDED
AUTOMATICALLY AS PART OF THIS AGREEMENT A PROVISION AS SIMILAR IN TERMS TO SUCH
ILLEGAL, INVALID OR UNENFORCEABLE PROVISION AS MAY BE POSSIBLE AND BE LEGAL AND
ENFORCEABLE.

 

(B)                                 WITHHOLDING. THE COMPANY MAY WITHHOLD FROM
ANY PAYMENTS MADE UNDER THE AGREEMENT ALL FEDERAL, STATE, CITY OR OTHER
APPLICABLE TAXES AS SHALL BE REQUIRED PURSUANT TO ANY LAW, GOVERNMENTAL
REGULATION OR RULING.

 

(C)                                  SECTION 409A.

 

(I)                                     IF ANY AMOUNTS THAT BECOME DUE UNDER
SECTIONS 9 OR 10 OF THIS AGREEMENT CONSTITUTE “NONQUALIFIED DEFERRED
COMPENSATION” WITHIN THE MEANING OF SECTION 409A OF THE CODE AND THE REGULATIONS
PROMULGATED THEREUNDER (“SECTION 409A”), PAYMENT OF SUCH AMOUNTS SHALL NOT
COMMENCE UNTIL THE EXECUTIVE INCURS A “SEPARATION FROM SERVICE” (AS DEFINED
BELOW) IF AND ONLY IF NECESSARY TO AVOID ACCELERATED TAXATION OR TAX PENALTIES
IN RESPECT OF SUCH AMOUNTS.

 

(II)                                  NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, IF THE EXECUTIVE IS A “SPECIFIED EMPLOYEE,” FOR PURPOSES OF SECTION
409A, ON THE DATE ON WHICH HE INCURS A SEPARATION FROM SERVICE, ANY PAYMENT
HEREUNDER THAT PROVIDES FOR THE “DEFERRAL OF COMPENSATION” WITHIN THE MEANING OF
SECTION 409A SHALL BE PAID ON THE FIRST (1ST) BUSINESS DAY AFTER THE DATE THAT
IS SIX (6) MONTHS FOLLOWING THE EXECUTIVE’S “SEPARATION FROM SERVICE” (THE “409A
DELAYED PAYMENT DATE”); PROVIDED, HOWEVER, THAT SUCH DELAY SHALL APPLY IF AND
ONLY IF NECESSARY TO AVOID ACCELERATED TAXATION OR TAX PENALTIES IN RESPECT OF
SUCH AMOUNTS; PROVIDED, FURTHER, THAT A PAYMENT DELAYED PURSUANT TO THE
PRECEDING CLAUSE SHALL COMMENCE EARLIER THAN THE 409A DELAYED PAYMENT DATE IN
THE EVENT OF THE EXECUTIVE’S DEATH PRIOR TO THE END OF THE SIX (6) MONTH PERIOD.
ON THE 409A DELAYED PAYMENT DATE, THE EXECUTIVE SHALL BE PAID A LUMP SUM PAYMENT
IN CASH EQUAL TO ANY PAYMENTS DELAYED BECAUSE OF THE PRECEDING SENTENCE (THE
“CATCH-UP AMOUNT”), PLUS INTEREST ON THE CATCH-UP AMOUNT EQUAL TO THE SHORT TERM
FEDERAL RATE APPLICABLE UNDER SECTION 7872(F)(2)(A) OF THE CODE FOR THE MONTH IN
WHICH OCCURS THE EXECUTIVE’S SEPARATION FROM SERVICE. SUCH INTEREST SHALL BE
PAID AT THE SAME TIME THAT THE CATCH-UP AMOUNT IS PAID. THEREAFTER, THE
EXECUTIVE SHALL RECEIVE ANY REMAINING BENEFITS AS IF THERE HAD NOT BEEN AN
EARLIER DELAY.

 

(III)                               FOR PURPOSES OF THIS AGREEMENT, “SEPARATION
FROM SERVICE” SHALL HAVE THE MEANING SET FORTH IN SECTION 409A(A)(2)(A)(I) OF
THE CODE AND DETERMINED IN ACCORDANCE WITH THE DEFAULT RULES UNDER SECTION 409A.
“SPECIFIED EMPLOYEE” SHALL HAVE THE MEANING SET FORTH IN
SECTION 409A(A)(2)(B)(I) OF

 

25

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THE CODE, AS DETERMINED IN ACCORDANCE WITH THE UNIFORM METHODOLOGY AND
PROCEDURES ADOPTED BY THE COMPANY AND THEN IN EFFECT.

 

(IV)                              ANYTHING IN THIS AGREEMENT TO THE CONTRARY
NOTWITHSTANDING, NO REIMBURSEMENT PAYABLE TO THE EXECUTIVE PURSUANT TO ANY
PROVISIONS OF THIS AGREEMENT OR PURSUANT TO ANY PLAN OR ARRANGEMENT OF THE
COMPANY GROUP COVERED BY THIS AGREEMENT SHALL BE PAID LATER THAN THE LAST DAY OF
THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH THE RELATED EXPENSE WAS
INCURRED, EXCEPT TO THE EXTENT THAT THE RIGHT TO REIMBURSEMENT DOES NOT PROVIDE
FOR A “DEFERRAL OF COMPENSATION” WITHIN THE MEANING OF SECTION 409A. NO AMOUNT
REIMBURSED DURING ANY CALENDAR YEAR SHALL AFFECT THE AMOUNTS ELIGIBLE FOR
REIMBURSEMENT IN ANY OTHER CALENDAR YEAR.

 

(D)                                 NOTICES. FOR PURPOSES OF THIS AGREEMENT,
NOTICES AND ALL OTHER COMMUNICATIONS PROVIDED FOR HEREIN SHALL BE IN WRITING AND
SHALL BE DEEMED TO HAVE BEEN DULY GIVEN WHEN (I) DELIVERED PERSONALLY; (II) SENT
BY FACSIMILE OR OTHER SIMILAR ELECTRONIC DEVICE AND CONFIRMED; (III) DELIVERED
BY COURIER OR OVERNIGHT EXPRESS; OR (IV) THREE (3) BUSINESS DAYS AFTER BEING
SENT BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, ADDRESSED AS FOLLOWS:

 

 

If to the Company:

Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, CA 90405
Attention: General Counsel

 

 

 

 

with a copy to:

Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
Attention: Linda E. Rappaport

 

 

 

 

If to the Executive:

Robert A. Kotick
c/o Activision, Inc.
100 Ocean Park Boulevard
Santa Monica, CA 90405

 

 

 

 

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd St.
New York, NY 10019
Attention: Michael J. Segal

 

or to such other address as a party may furnish to the other party in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

 

(E)                                  NO WAIVER. NO WAIVER BY EITHER PARTY HERETO
OF ANY BREACH OF ANY PROVISION OF THIS AGREEMENT SHALL BE DEEMED A WAIVER OF ANY
PRECEDING OR SUCCEEDING BREACH OF SUCH PROVISION OR ANY OTHER PROVISION HEREIN
CONTAINED.

 

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(F)                                    GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF;
PROVIDED, HOWEVER, THAT SECTIONS 12, 13 AND 14 OF THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH
THE EXECUTIVE HAS HIS PRINCIPAL OFFICE.

 

(G)                                 ENTIRE AGREEMENT. THIS AGREEMENT AND THE
PROPRIETARY INFORMATION AGREEMENT SET FORTH THE ENTIRE AGREEMENT OF THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND ARE INTENDED TO SUPERSEDE
ALL PRIOR OR CONTEMPORANEOUS EMPLOYMENT NEGOTIATIONS, UNDERSTANDINGS AND
AGREEMENTS (WHETHER WRITTEN OR ORAL), INCLUDING THE ORIGINAL AGREEMENT. NO
PROVISION OF THIS AGREEMENT MAY BE WAIVED OR CHANGED, EXCEPT BY A WRITING SIGNED
BY THE PARTY TO BE CHARGED WITH SUCH WAIVER OR CHANGE.

 

(H)                                 SUCCESSORS; BINDING AGREEMENT. NEITHER OF
THE PARTIES HERETO SHALL HAVE THE RIGHT TO ASSIGN THIS AGREEMENT OR ANY RIGHTS
OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY;
PROVIDED, HOWEVER, THAT THIS AGREEMENT SHALL INURE TO THE BENEFIT OR AND BE
BINDING UPON THE SUCCESSORS AND ASSIGNS OF THE COMPANY UPON ANY SALE OF ALL OR
SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS, OR UPON ANY MERGER OR CONSOLIDATION
OF THE COMPANY WITH OR INTO ANY OTHER CORPORATION, ALL AS THOUGH SUCH SUCCESSORS
AND ASSIGNS OF THE COMPANY AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS WERE THE
COMPANY. INSOFAR AS THE EXECUTIVE IS CONCERNED, THIS AGREEMENT, BEING PERSONAL,
CANNOT BE ASSIGNED; PROVIDED, HOWEVER, THAT THIS AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE EXECUTIVE AND HIS EXECUTORS, ADMINISTRATORS AND
LEGAL REPRESENTATIVES.

 

(I)                                     EXPIRATION. THIS AGREEMENT DOES NOT
CONSTITUTE A COMMITMENT OF THE COMPANY WITH REGARD TO THE EXECUTIVE’S
EMPLOYMENT, EXPRESS OR IMPLIED, OTHER THAN TO THE EXTENT EXPRESSLY PROVIDED FOR
HEREIN. UPON THE EXPIRATION DATE, OR, IF EARLIER, THE TERMINATION OF THE
EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT PURSUANT TO SECTION 7, NEITHER THE
COMPANY NOR THE EXECUTIVE SHALL HAVE ANY OBLIGATION TO THE OTHER WITH RESPECT TO
THE EXECUTIVE’S CONTINUED EMPLOYMENT.

 

(J)                                     COUNTERPARTS. THIS AGREEMENT MAY BE
EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT TOGETHER SHALL
CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

(K)                                  HEADINGS. THE HEADINGS AND CAPTIONS SET
FORTH IN THIS AGREEMENT ARE FOR EASE OF REFERENCE ONLY AND SHALL NOT BE DEEMED
TO CONSTITUTE A PART OF THE AGREEMENT FORMED HEREBY OR BE RELEVANT TO THE
INTERPRETATION OF ANY PROVISIONS OF THIS AGREEMENT.

 

(L)                                     SATURDAYS, SUNDAYS AND HOLIDAYS.
WHENEVER ANY DETERMINATION IS TO BE MADE OR ACTION TO BE TAKEN ON A DATE
SPECIFIED IN THIS AGREEMENT, IF SUCH DATE SHALL FALL UPON A SATURDAY, SUNDAY OR
A LEGAL HOLIDAY IN THE STATE OF CALIFORNIA, THE DATE FOR SUCH DETERMINATION OR
ACTION SHALL BE EXTENDED TO THE FIRST (1ST) BUSINESS DAY IMMEDIATELY THEREAFTER.

 

(M)                               SURVIVABILITY. THE PROVISIONS OF SECTIONS 6,
9, 10, 11, 12, 13, 14, 15, 16, 17 AND 19(C) SHALL SURVIVE THE TERMINATION OR
EXPIRATION OF THIS AGREEMENT.

 

(N)                                 LEGAL COUNSEL; RIGHT TO NEGOTIATE. THE
EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN THE OPPORTUNITY TO CONSULT WITH
LEGAL COUNSEL OR ANY OTHER ADVISOR OF HIS OWN CHOOSING REGARDING THIS AGREEMENT.
THE EXECUTIVE UNDERSTANDS AND AGREES THAT ANY ATTORNEY

 

27

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RETAINED BY THE COMPANY OR ANY MEMBER OF MANAGEMENT WHO HAS DISCUSSED ANY TERM
OR CONDITION OF THIS AGREEMENT WITH HIM IS ONLY ACTING ON BEHALF OF THE COMPANY
AND NOT ON THE EXECUTIVE’S BEHALF. THE EXECUTIVE HEREBY ACKNOWLEDGES THAT HE HAS
BEEN GIVEN THE OPPORTUNITY TO PARTICIPATE IN THE NEGOTIATION OF THE TERMS OF
THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND CONFIRMS THAT HE HAS READ THIS
AGREEMENT AND FULLY UNDERSTANDS ITS TERMS AND CONTENTS.

 

[SIGNATURE PAGES BEGIN ON THE FOLLOWING PAGE]

 

28

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

 

ACTIVISION, INC.

 

 

 

 

 

By:

/s/ Robert J. Morgado

 

 

 

Name:  Robert Morgado

 

 

Title: Director

 

 

 

 

 

 

/s/ Robert A. Kotick

 

 

 

Robert A. Kotick

 

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Exhibit A

 

Release

 

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Exhibit B

 

Proprietary Information Agreement

 

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