Exhibit 10.11

 

EMPLOYMENT AGREEMENT

 

Employment Agreement, dated as of March 15, 2012 (the “Effective Date”), by and
between ACTIVISION BLIZZARD, 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”).

 

R E C I T A L S:

 

WHEREAS, the Company and the Executive are parties to an employment agreement
dated May 22, 2000, as amended on December 29, 2006 and as amended and restated
on December 1, 2007, as amended on or about July 8, 2008 (the “Original
Agreement”);

 

WHEREAS, the Executive has agreed to enter into this Employment Agreement (this
“Agreement”), between the Executive and the Company;

 

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 March 14, 2012;

 

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

 

WHEREAS, the Executive acknowledges and agrees that he has had the right to
resign from his position and terminate this Agreement pursuant to Section 7
without liability, the Company has agreed to waive the notice requirements of
Section 8 with respect to such potential resignation and termination and the
Executive has nevertheless elected to enter into this 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 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

 

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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 the 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 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 June 30, 2016 (the “Expiration
Date”).  Notwithstanding anything contained herein to the contrary, the
Executive’s employment pursuant to the terms of this Agreement and the
Employment Period is subject to earlier 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.  For the period from July 1, 2011 through
the end of the Employment Period, the Base Salary shall be at the annual rate of
$2,000,000; provided, however, that the

 

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Base Salary shall be increased as of each January 1st (beginning January 1st of
2013) 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; provided, however, that the Executive shall receive a lump sum payment
equal to the difference between the base salary that has been paid to the
Executive pursuant to the Original Agreement and the Base Salary set forth in
this Agreement beginning with July 1, 2011 through the date hereof (less
applicable withholdings) (the “Salary Adjustment Payment”) as soon as reasonably
practicable, but not later than ten (10) days after the Effective Date.  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 full or partial 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 2008 Incentive Plan (as amended from time to time,
the “2008 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 (2½)
months after the end of the fiscal year for which the Annual Bonus is awarded
provided that, 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.  With
respect to the partial fiscal year of the Employment Period ending on the last
day of the Employment Period, the Executive shall be eligible for an Annual
Bonus if he remains employed by the Company or the Company Group through the
last day of the Employment Period; provided, however, that any such Annual Bonus
shall be equal to the Annual Bonus the Executive earns for the fiscal year
during which the Expiration Date occurs, multiplied by a fraction, the numerator
of which is the number of days worked during the fiscal year in which the
Expiration Date occurs and the denominator of which is 365.  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

 

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Annual Bonus is intended to qualify as annual incentive compensation under
Section 9 of the 2008 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.

 

(d)           Sign-On Bonus.  In connection with the Executive’s execution of
this Agreement, the Executive shall receive a cash sign-on bonus in the
aggregate of $2,500,000, payable in a lump sum cash amount at the same time as
the Salary Adjustment Payment is made.

 

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 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

 

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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.             Restricted Share Unit Grant.  On the date hereof, the Company
shall grant the Executive an award of restricted stock units (the “Restricted
Share Units”) with a value on the date of grant equal to $25,000,000, as
determined by reference to the Company’s average closing stock price as reported
on the NASDAQ Global Market Reporting System (“NASDAQ”) for the thirty (30)
business days prior to the date of grant (the “Grant Date Value”) pursuant to
the 2008 Plan and subject to the further terms and conditions as set forth in an
award agreement to be entered into between the Company and the Executive in the
form set forth in Exhibit A hereto (the “Restricted Share Unit Grant
Agreement”).

 

6.             Performance Share Grant.  On the date hereof, the Company shall
grant the Executive performance shares (the “Performance Shares”) with a Grant
Date Value at target equal to $25,000,000 pursuant to the 2008 Plan and subject
to the further terms and conditions as set forth in an award agreement to be
entered into between the Company and the Executive in the form set forth in
Exhibit B hereto (the “Performance Share Grant Agreement”).  For the avoidance
of doubt, the Performance Share Award granted on July 9, 2008 (the “2008
Performance Shares”) pursuant to Section 6 of the Original Agreement as it was
amended and restated on December 1, 2007 and subsequently amended on or about
July 8, 2008, and the Notice of Performance Share Award and Performance Share
Award Terms dated July 9, 2008 (all of the foregoing being herein referred to
collectively as, the “2008 Performance Share Grant Agreement”), shall remain
outstanding in accordance with such terms (including, without limitation,
Section 6 of the Original Agreement, as subsequently amended), it being
understood that pursuant to such terms, the 2008 Performance Shares expire on
December 31, 2012.

 

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

 

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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
the 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 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 the 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

 

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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 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 the Executive’s reporting
responsibilities, titles or offices as in effect prior to such assignment or
change; (iv)  the Executive’s failure to be nominated for election, or failure
to be elected or re-elected, as a member of the Board at the expiration of each
term of office; (v) the Company’s material breach or failure to perform, when
due, any of its obligations under this Agreement; (vi) 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;
(vii) 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 (viii) 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.

 

(a)           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

 

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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;

 

(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.

 

(b)           The Executive agrees to resign, on the Date of Termination, as an
officer and director of the Company and any member of the Company Group, as
applicable, and as a fiduciary of any benefit plan of the Company or any member
of the Company Group, as applicable, and to promptly execute and provide to the
Company any further documentation, as requested by the Company, to confirm such
resignation.

 

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 except as provided in Section 19(m), and 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), 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:

 

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(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;

 

(iv)          all outstanding options to purchase Company Common Stock granted
to the Executive at any time prior to January 1, 2007, which the Company
acknowledges are fully vested (the “Prior Options”), shall 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, which the Company acknowledges are fully
vested (the “June Options”), shall remain exercisable until the original
expiration date of the June Options; and

 

(vi)          the Executive shall immediately vest in the remaining number of
unvested options to purchase Company Common Stock granted to the Executive on
December 5, 2007 (the “2007 Options”) as of the Date of Termination, so that the
2007 Options are fully vested.  Vested 2007 Options (including the 2007 Options
that vest in accordance with this Section 9(a)) will remain exercisable until
the original expiration date of the 2007 Options.

 

(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;

 

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(v)           the Prior Options shall 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 remain exercisable until the original
expiration date of the June Options; and

 

(vii)         the Executive shall immediately vest in the number of remaining
unvested 2007 Options equal to the remaining number of unvested 2007 Options as
of the Date of Termination, so that the 2007 Options are fully vested; provided,
however, that this Section 9(b)(vii) shall not apply upon a termination of
employment following a Change of Control.  Vested 2007 Options (including the
2007 Options that vest in accordance with this Section 9(b)) will remain
exercisable until the original expiration date of the 2007 Options.

 

Payment of the Pro Rata Annual Bonus, the severance amount described in
Section 9(b)(iii) and the treatment of the options described in
clauses (v) through (vii) 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 C 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,” and the date on which the
Release has become effective and irrevocable, the “Release Date”).

 

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)           all unvested options shall expire on the Date of Termination;

 

(iii)          upon a termination for Cause, all vested options shall expire on
the Date of Termination; and

 

(iv)          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

 

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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 an amount equal to the
Annual Bonus the Executive earns for the fiscal year during 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 “Current 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 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 remain exercisable until the original
expiration date of the June Options; and

 

(vii)         the Executive shall immediately vest in the number of unvested
2007 Options as of the Date of Termination, so that the 2007 Options are fully
vested; provided, however, that this Section 9(d)(vii) shall not apply upon a
termination of employment following a Change of Control.  Vested 2007 Options
(including the 2007 Options that vest in accordance with this Section 9(d)) will
remain exercisable until the original expiration date of the 2007 Options.

 

Payment of the Current Pro Rata Annual Bonus, the severance amount described in
Section 9(d)(iii) and the treatment of the options described in
clauses (v) through (vii) 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)           Restricted Share Units and Performance Shares.  The vesting of the
Restricted Share Units upon any termination of Executive’s employment shall be
governed by the terms set forth in the Restricted Share Unit Grant Agreement and
the vesting of the Performance Shares upon any termination of Executive’s
employment shall be governed by the terms set forth in the Performance Share
Grant Agreement.  In addition, the vesting of the 2008

 

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Performance Shares upon any termination of the Executive’s employment shall be
governed by the terms set forth in the 2008 Performance Share Grant Agreement.

 

(f)            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.

 

(g)           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 Date; provided, however, that
if the Release Period begins in one taxable year and ends in the subsequent
taxable year, the Pro Rata Annual Bonus shall be paid on the later of the
Release Date or the first business day of such subsequent taxable year; (ii) the
Current Pro Rata Bonus shall be paid to the Executive during the fiscal year
following the year in which the Date of Termination occurs on the date that
annual bonuses relating to the fiscal year in which the Executive’s Date of
Termination occurs are paid to executive officers of the Company, and no later
than two and a half (2½) months after the fiscal year in which the Date of
Termination occurs; (iii) 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 (iv) 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 Release Date in accordance with the Company’s
payroll practices as in effect from time to time; provided, however, that if the
Release Period begins in one taxable year and ends in the subsequent taxable
year such payments shall commence on the later of the Release Date or the first
business day of such subsequent taxable year, provided further, 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 person or group acquiring 25% or
more of the total outstanding stock of the Company (A) beneficially owns fewer
shares than Vivendi, S.A., a Societe Anonyme organized under the laws of France
(“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
(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

 

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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; provided, however, 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 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)           upon the consummation of the Change of Control, all June Options
shall remain exercisable until the original expiration date of the June Options;

 

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(iii)          the Executive shall immediately vest, upon the consummation of
the Change of Control, in the 2007 Options;

 

(iv)          The 2007 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 2007 Options, and all other
vested 2007 Options shall remain exercisable in accordance with their terms;

 

(v)           the Restricted Share Units shall vest in accordance with the terms
of the Restricted Share Unit Grant Agreement and the Performance Shares shall
vest in accordance with the terms of the Performance Share Grant Agreement; and

 

(vi)          the Executive will immediately vest, upon the consummation of the
Change of Control, in all of the 2008 Performance Shares in accordance with the
terms of the 2008 Performance Share Grant Agreement.

 

(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 NASDAQ 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 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

 

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(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 of 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(a)(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.

 

(e)           Change of Control Success Bonus.  If, during the Employment Period
but after 2012, there is a Change of Control, the Executive shall receive a cash
bonus in an amount equal to at least $30,000,000, which amount may be increased
(but not decreased) in the good faith discretion of the Compensation Committee
to no more than $45,000,000 (the “Change of Control Success Bonus”); provided,
however, that if the Executive’s employment is terminated by the Company without
Cause, and a Change of Control is consummated within six (6) months after such
Date of Termination, the Executive shall receive the Change of Control Success
Bonus.  The Change of Control Success Bonus shall be paid by the Company to the
Executive in a lump sum as soon as practicable, but not more than ten (10) days
following the Change of Control; provided, however, that in the event that the
Executive’s employment is terminated by the Company without Cause prior to the
consummation of a Change of Control, the Change of Control Success Bonus shall
be paid on the date occurring six (6) months after such Date of Termination.

 

11.          Gross-Up Payment.  (a)  If, whether during or after 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

 

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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 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.

 

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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 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.

 

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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 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 D.

 

(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 judicial interpretation, it is agreed
that the court

 

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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 the 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, except to the extent such Original
Agreement relates to the 2008 Performance Shares and the 2008 Performance Share
Grant Agreement.  Notwithstanding any other provision of this Agreement to the
contrary, if the Executive provides a Notice of Termination on account of
Resignation on the Effective Date and effective on such date, then this
Agreement shall be terminated without liability to the Executive.

 

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 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

 

19

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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 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

 

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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 Blizzard, Inc.

 

3100 Ocean Park Boulevard

 

Santa Monica, CA 90405

 

Attention: Chief Legal Officer

 

 

If to the Executive:

Robert A. Kotick

 

c/o Activision Blizzard, Inc.

 

3100 Ocean Park Boulevard

 

Santa Monica, CA 90405

 

 

with a copy to:

Grubman Indursky Shire & Meiselas, P.C.

 

152 West 57th Street

 

New York, NY 10019

 

Attention: Allen J. Grubman

 

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.

 

(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, the Restricted Share Unit Grant
Agreement, the Performance Share Grant Agreement, the 2008 Performance Share
Grant 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

 

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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
(and the Employment Period) 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 9, 10, 11, 12, 13, 14,
15, 16, 17 and 19(c) of this Agreement shall survive the termination or
expiration of this Agreement, in accordance with their terms.  The provisions of
the Restricted Share Grant Agreement, the Performance Share Grant Agreement and
the 2008 Performance Share Grant Agreement shall survive the termination or
expiration of this Agreement and shall continue to remain in effect in
accordance with their terms.

 

(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 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]

 

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

 

 

 

ACTIVISION BLIZZARD, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Chris B. Walther

 

 

 

Name:

Chris B. Walther

 

 

 

Title:

Chief Legal Officer

 

 

 

 

 

 

 

 

 

 

 

/s/ Robert A. Kotick

 

 

 

Robert A. Kotick

 

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