Exhibit 10.5

 

REPLACEMENT BONUS AGREEMENT

 

This Agreement (the “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 entered into an employment agreement
dated May 22, 2000 (the “Original Employment Agreement”);

 

WHEREAS, on December 29, 2006, the parties amended the Original Employment
Agreement (the “Amended Employment Agreement”) to remove certain provisions that
may have resulted in adverse consequences for the Executive under Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”);

 

WHEREAS, pursuant to the Amended Employment Agreement, the parties agreed to
negotiate in good faith to promptly develop benefits reasonably comparable to
those forgone by the Executive under the Original Employment 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 and this Agreement, the
Executive and the Company have entered into an Amended and Restated Employment
Agreement (the “New Employment Agreement”), which amends and supersedes the
Amended Employment Agreement; and

 

WHEREAS, in entering into the New Employment Agreement, the Executive waived his
rights under the Amended Employment Agreement in connection with the Combination
Transactions to (i) elect to receive a cash payment in respect of all stock
options held by him equal to, as to each share of Company Common Stock subject
to such stock options, the excess of the closing price of the Company Common
Stock on the date of the Combination Transactions over the option exercise
price, (ii) accelerated vesting of all unvested stock options on the date of the
Combination Transactions and (iii) resign for any reason during the six (6)
month period following the three (3) month anniversary of the Combination
Transactions and receive a severance payment equal to five (5) times the sum of
his base salary and most recent annual bonus, a pro-rata annual bonus for the
year of resignation and two years of health insurance continuation; and

 

NOW, THEREFORE, in consideration for the Executive’s relinquishment of certain
rights as described in the Amended Employment Agreement and the Executive’s
entering into the New Employment Agreement, the parties hereto hereby agree as
follows:

 

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1.             Replacement Bonuses

 

(A)           CASH BONUSES. THE EXECUTIVE SHALL BE ENTITLED TO TWO CASH BONUSES
(THE “CASH BONUSES”) PAYABLE AS FOLLOWS:

 

(I)            FIVE MILLION DOLLARS ($5,000,000) (THE “FIRST BONUS”) SHALL BE
PAID IN A CASH LUMP SUM NOT LATER THAN DECEMBER 31, 2007; AND

 

(II)           FIVE MILLION DOLLARS ($5,000,000) (THE “SECOND BONUS”) SHALL BE
PAID IN A CASH LUMP SUM ON THE DATE THE COMBINATION TRANSACTIONS ARE CONSUMMATED
(THE “CONSUMMATION DATE”) PROVIDED THAT THE EXECUTIVE IS CONTINUOUSLY EMPLOYED
BY THE COMPANY GROUP (AS DEFINED IN THE NEW EMPLOYMENT AGREEMENT) THROUGH THE
CONSUMMATION DATE.

 

(B)           RSU BONUS.

 

(I)            GRANT. ON THE CONSUMMATION DATE, THE COMPANY SHALL GRANT THE
EXECUTIVE 363,637 RESTRICTED STOCK UNITS (“RSUS”) PURSUANT TO THE COMPANY’S 2007
INCENTIVE PLAN (THE “2007 PLAN”) PROVIDED THAT THE EXECUTIVE IS CONTINUOUSLY
EMPLOYED BY THE COMPANY GROUP THROUGH THE CONSUMMATION DATE. EACH RSU SHALL
REPRESENT THE RIGHT TO RECEIVE ONE SHARE OF THE COMPANY COMMON STOCK UPON
SATISFACTION OF, AND IN ACCORDANCE WITH, THE PROVISIONS OF THIS AGREEMENT AND,
TO THE EXTENT NOT INCONSISTENT WITH THE PROVISIONS OF THIS AGREEMENT, THE 2007
PLAN. ONE-THIRD (⅓) OF THE RSUS SHALL VEST ON EACH OF DECEMBER 31, 2008, 2009
AND 2010 (EACH, A “VESTING DATE”) PROVIDED THAT THE EXECUTIVE IS CONTINUOUSLY
EMPLOYED BY THE COMPANY THROUGH THE APPLICABLE VESTING DATE.

 

(II)           TERMINATION OF EMPLOYMENT. IN THE EVENT OF A TERMINATION OF THE
EXECUTIVE’S EMPLOYMENT WITH THE COMPANY GROUP FOR ANY REASON OTHER THAN A
TERMINATION BY THE COMPANY FOR CAUSE (AS DEFINED IN THE NEW EMPLOYMENT
AGREEMENT), ALL UNVESTED RSUS SHALL IMMEDIATELY VEST IN FULL. IN THE EVENT OF A
TERMINATION OF THE EXECUTIVE’S EMPLOYMENT BY THE COMPANY FOR CAUSE, THE
EXECUTIVE SHALL FORFEIT ANY RIGHTS TO THE UNVESTED PORTION OF THE RSUS.

 

(III)          SETTLEMENT OF RSU BONUS. THE SHARES OF COMPANY COMMON STOCK
SUBJECT TO THE RSUS SHALL BE DELIVERED, TO THE EXTENT VESTED IN ACCORDANCE WITH
THE PROVISIONS HEREOF, WITHIN THIRTY (30) DAYS FOLLOWING EACH VESTING DATE (OR
SUCH EARLIER VESTING DATE THAT OCCURS IN ACCORDANCE WITH SECTION 1(B)(II), IF
ANY); PROVIDED, HOWEVER, THAT IF, AT THE TIME OF THE EXECUTIVE’S TERMINATION
THAT CONSTITUTES A “SEPARATION FROM SERVICE” WITHIN THE MEANING OF THE DEFAULT
RULES UNDER SECTION 409A OF THE CODE, THE EXECUTIVE IS A SPECIFIED EMPLOYEE FOR
PURPOSES OF SECTION 409A OF THE CODE (AS DETERMINED UNDER THE COMPANY’S UNIFORM
WRITTEN METHODOLOGY FOR DETERMINING SPECIFIED EMPLOYEES), THEN SETTLEMENT OF ANY
RSUS PRIOR TO THE 6-MONTH ANNIVERSARY OF THE EXECUTIVE’S DATE OF TERMINATION
SHALL BE DELAYED AND SHALL NOT OCCUR UNTIL THE FIRST BUSINESS DAY FOLLOWING THE
6-MONTH ANNIVERSARY OF THE EXECUTIVE’S DATE OF TERMINATION.

 

(C)           ALTERNATIVE TRANSACTION. IN THE EVENT THAT THE COMBINATION
TRANSACTIONS ARE NOT CONSUMMATED ON OR PRIOR TO JUNE 30, 2009, BUT THE COMPANY
ENTERS INTO ANOTHER AGREEMENT

 

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PURSUANT TO WHICH A CHANGE OF CONTROL (AS SUCH TERM IS DEFINED IN THE NEW
EMPLOYMENT AGREEMENT) IS CONSUMMATED ON OR PRIOR TO JUNE 30, 2009 (AN
“ALTERNATIVE TRANSACTION”), THE EXECUTIVE SHALL BE ENTITLED TO THE SECOND BONUS
AND THE RSU BONUS IN ACCORDANCE WITH SECTIONS 1(A)(II) AND 1(B); PROVIDED,
HOWEVER, THAT, FOR PURPOSES OF SECTIONS 1(A)(II) AND 1(B), REFERENCES TO THE
CONSUMMATION DATE WILL BE DEEMED TO REFER TO THE CONSUMMATION DATE OF THE
ALTERNATIVE TRANSACTION.

 

(D)           FAILURE TO TIMELY CONSUMMATE A TRANSACTION. NOTWITHSTANDING THE
FOREGOING, IF THE COMBINATION TRANSACTIONS OR AN ALTERNATIVE TRANSACTION IS NOT
CONSUMMATED ON OR PRIOR TO JUNE 30, 2009, THE EXECUTIVE SHALL HAVE NO
ENTITLEMENT TO, AND THE COMPANY SHALL NOT BE OBLIGATED TO PAY TO THE EXECUTIVE,
THE SECOND BONUS OR THE RSU BONUS.

 

2.             Miscellaneous

 

(A)           TAXATION. 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.

 

(B)           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 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.
3100 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 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.

 

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(C)           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.

 

(D)           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.

 

(E)           ENTIRE AGREEMENT. THIS AGREEMENT SETS FORTH THE ENTIRE AGREEMENT
OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND IS INTENDED
TO SUPERSEDE ALL PRIOR OR CONTEMPORANEOUS EMPLOYMENT NEGOTIATIONS,
UNDERSTANDINGS AND AGREEMENTS (WHETHER WRITTEN OR ORAL), INCLUDING THE AMENDED
EMPLOYMENT 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.

 

(F)            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.

 

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

 

(H)           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.

 

(I)            SURVIVABILITY. THE PROVISIONS OF THIS AGREEMENT SHALL SURVIVE THE
TERMINATION OR EXPIRATION OF THIS AGREEMENT.

 

[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, INC.

 

 

 

 

 

By:

/s/ Robert J. Morgado

 

 

 

Name: Robert Morgado

 

 

Title: Director

 

 

 

 

 

 

/s/ Robert A. Kotick

 

 

 

Robert A. Kotick

 

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