Exhibit 10.1

 

 

EMPLOYMENT AGREEMENT

 

Employment Agreement (this “Agreement”), dated as of October 1, 2016 (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 March 15, 2012 (the “Prior Agreement”), the term of which has expired;

 

WHEREAS, the Board of Directors of the Company (the “Board”) recognizes that the
Executive has unique and valuable experience and skills that add significant
value to the Company and its stockholders and therefore it is in the best
interests of the Company and its stockholders to enter into this Agreement;

 

WHEREAS, the Executive is willing to continue to serve as an employee of the
Company and is willing to accept the terms and conditions offered in 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 November 22, 2016; and

 

WHEREAS, the Company and the Executive agree that this Agreement will supersede
the Prior Agreement in its entirety to the extent that any provisions thereof
were intended to survive the expiration of the term thereof, except as otherwise
specifically provided herein.

 

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 the 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 as in effect from time to time (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)        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

 

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Company’s business which shall at all times, unless the Executive otherwise
consents, be within a 35 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.

 

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, 2021 (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.  During the Employment Period, the Base
Salary shall be at the annual rate of $1,750,000 beginning January 1, 2017.  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.

 

(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 discretion, after consultation
with the Executive, within the time frames set forth in Section 9(a) of the
Company’s 2014 Incentive Plan (as amended from time to time, the “2014 Plan”),
or a similar section of any successor Company incentive plan.  Starting with the
Company’s 2017 fiscal year, the target Annual Bonus for each fiscal year shall
be equal to 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 discretion, including 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
(2-1/2) 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.  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 2014 Plan, or a similar section of any successor Company
incentive plan, and shall be subject to the conditions and limitations of such
section.

 

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

 

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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)        Travel.  As previously approved by the Board, the Company has
determined that it is in the best interests of the Company for safety, security
and time efficiency to require Executive to use non-commercial transportation
services for business-related travel.  The Company has agreed to pay the
reasonable expenses related thereto, including use of transportation and
aviation services provided by Cove Aviation Partners LLC (“Cove Aviation”), a
FAA certified charter operator indirectly owned and managed by Executive, as
previously approved by the Audit Committee of the Board.  Cove Aviation has
historically offered the Company a discount on its regular hourly flight charge,
and therefore the Company has determined that the arrangement between the
Company and Cove Aviation provides substantial value to the Company on the basis
that the Company’s total cost for such usage is less than if the Company were to
charter comparable transportation and aviation services for Executive from other
aviation operators at market rate hourly flight charges or operate its own
aviation services.

 

(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 administrative
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 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.  Through March 15, 2022, the Company shall continue
to reimburse the Executive for the cost of maintaining the life insurance policy
in effect for the Executive pursuant to the Company’s obligations under the
Prior Agreement.  Commencing on March 16, 2022 and continuing until the tenth
(10th) anniversary of the Effective Date of this Agreement, the Company shall
reimburse the Executive up to a maximum of $80,000 per calendar year for the
cost of maintaining the Executive’s then existing life insurance policies,
subject to the Executive’s presentation of invoices in accordance with the
Company’s expense reimbursement policies in effect.

 

5.         2016 Long-Term Performance Share Grant.  In consideration for
entering into this five-year employment commitment, as soon as reasonably
practicable following the Effective Date, the Company shall grant the Executive
an award of performance shares (the “2016 Performance Share Units”) on such
terms and conditions as the Compensation Committee determines, following
consultation with the Executive.

 

6.         Future Equity/Incentive Awards.

 

(a)        Subject to the last sentence of this Section 6(a), the Executive
shall be granted future equity incentive awards for each of fiscal years 2017,
2018 and 2019 having a target value (determined in accordance with generally
accepted accounting principles) on the date of grant (the “Grant Date Value”) of
each such award determined by the Compensation Committee after taking into
account the Company’s and Executive’s performance; the Company’s applicable peer
companies; any relevant changes

 

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in the business and market dynamics relevant to the Company; the Company’s
projected performance relative to its long-term business plan; and any other
factors the Compensation Committee determines relevant, but in no event equal to
not less than the greatest of (i) the 50th percentile of the Company’s then
applicable group of peer companies’ (as determined by the Compensation Committee
in its discretion) CEO long-term incentive grants; (ii) with respect to the
Executive’s 2017 long-term incentive award, an amount that bears the same
general relationship as the grant value of the 2016 Performance Share Unit award
has to the Company’s group of peer companies’ long-term incentive grant values
(after taking into account average increases in the long-term incentive award
grant values among companies in the Company’s general industry) or (iii) with
respect to long-term incentive awards in years after 2016, the Grant Date Value
of the annual equity incentive awards granted to Executive in the immediately
preceding fiscal year, pursuant to the 2014 Plan and subject to the further
terms and conditions as set forth herein and in an award agreement to be entered
into between the Company and the Executive.  The equity awards contemplated to
be granted to the Executive pursuant to this Section 6(a) shall be referred to
as the “Future Equity Awards.”  The form, amount and terms and conditions of
Future Equity Awards will be determined by the Compensation Committee in its
discretion after consultation with the Executive.

 

(b)        On or about March 1, 2021, the Executive shall be paid, subject to
performance and continued employment, an incentive award having a Grant Date
Value (“2020 Long-Term Performance Grant Target Value”) determined by the
Compensation Committee in its discretion after consultation with the Executive
according to the valuation criteria applicable to long-term grant values
described in Section 6(a), including without limitation the provisions of
Section 6(a)(iii), (the “2020 Long-Term Performance Grant”) and a maximum
aggregate value at the date of payment of five hundred percent (500%) of the
2020 Long-Term Performance Grant Target Value (the “Maximum 2020 Long-Term
Performance Grant Value”).  The 2020 Long-Term Performance Grant may be paid in
shares of Company common stock or cash, as determined by the Compensation
Committee in its discretion.  Except as provided in this Agreement, subject to
Executive remaining employed by the Company through the date of payment of the
2020 Long-Term Performance Grant, the share value or the cash value that shall
be paid to Executive pursuant to the 2020 Long-Term Performance Grant shall be
zero if the Company’s annualized total shareholder return (“TSR”) for the period
commencing January 1, 2017 and ending December 31, 2020 (the “2020 Long-Term
Performance Grant Measurement Period”) is less than six percent (6%).  In the
event that the Company’s annualized TSR for the 2020 Long-Term Performance Grant
Measurement Period is six percent (6%) or greater, the share value or cash value
that shall be paid to Executive pursuant to the 2020 Long-Term Performance Grant
shall be determined as a percentage of the 2020 Long-Term Performance Grant
Target Value in accordance with the following:

 

Compound Annual Growth Rate (“CAGR”) for
TSR during 2020 Long-Term Performance Grant
Measurement Period

Payment as Percentage of 2020 Long-Term
Performance Grant Target Value

6%

90%

8%

100%

13%

200%

17%

300%

21.5%

400%

25% or more

Maximum 2020 Long-Term Performance Grant Value

 

Straight-line interpolation will apply to CAGR results between the thresholds
set forth above.

 

(i)         Notwithstanding the foregoing, in the event that the Company’s
annualized TSR for the 2020 Long-Term Performance Grant Measurement Period is
less than six percent (6%)

 

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but equals or exceeds the median total shareholder return of the companies
listed in the Standard & Poor’s 500 Index for the 2020 Long-Term Performance
Grant Measurement Period, then the share value or cash value that shall be paid
to Executive pursuant to the 2020 Long-Term Performance Grant shall be ninety
percent (90%) of the 2020 Long-Term Performance Grant Target Value if the
Company’s TSR for the 2020 Long-Term Performance Grant Measurement Period equals
the median total shareholder return of the companies listed in the Standard &
Poor’s 500 Index for the 2020 Long-Term Performance Grant Measurement Period,
one hundred percent (100%) of the 2020 Long-Term Performance Grant Target Value
if the Company’s TSR for the 2020 Long-Term Performance Grant Measurement Period
exceeds the median total shareholder return of the companies listed in the
Standard & Poor’s 500 Index for the 2020 Long-Term Performance Grant Measure
Period but is less than one hundred ten percent (110%) of such median and one
hundred twenty percent (120%) of the 2020 Long-Term Performance Grant Target
Value if the Company’s TSR for the 2020 Long-Term Performance Grant Measurement
Period is equal to or greater than one hundred ten percent (110%) of the median
total shareholder return of the companies listed in the Standard & Poor’s 500
Index for the 2020 Long-Term Performance Grant Measurement Period; provided
that, if the Company’s annualized TSR for the 2020 Long-Term Performance Grant
Measurement Period is a negative number, then the share value or cash value that
shall be paid to Executive pursuant to the 2020 Long-Term Performance Grant
under this paragraph shall be zero (0) if the Company’s annualized TSR for the
2020 Long-Term Performance Grant Measurement Period is less than the median
total shareholder return of the companies listed in the Standard & Poor’s 500
Index for the 2020 Long-Term Performance Grant Measurement Period but shall be
eighty-five percent (85%) of the 2020 Long-Term Performance Grant Target Value
if the Company’s TSR for the 2020 Long-Term Performance Grant Measurement Period
equals the median total shareholder return of the companies listed in the
Standard & Poor’s 500 Index for the 2020 Long-Term Performance Grant Measurement
Period and shall equal one hundred percent (100%) of the 2020 Long-Term
Performance Grant Target Value if the Company’s annualized TSR is zero percent
(0%).  For all purposes, straight-line interpolation will apply to performance
levels between the levels set forth in this paragraph.

 

(c)        The Executive shall be granted an incentive award (the “2021
Long-Term Performance Grant”) having a Grant Date Value determined by the
Compensation Committee in its discretion after consultation with the Executive
according to the valuation criteria applicable to long-term grant values
described in Section 6(a), but based on an assumed increase in the long-term
incentive values among companies in the Company’s general industry by applying a
multiple of 1.44 to the Grant Date Value of the Executive’s 2017 long-term
incentive award (the “2021 Long-Term Performance Grant Value”).  The maximum
share value or cash value under the 2021 Long-Term Performance Grant shall be
one point five (1.5) times the 2021 Long-Term Performance Grant Value (the
“Maximum 2021 Long-Term Performance Grant Value”).  Except as otherwise provided
herein, the 2021 Long-Term Performance Grant shall be paid in fiscal year 2022. 
The amount payable under the 2021 Long-Term Performance Grant shall, except as
provided in the last sentence of this Section 6(c), be based on the Company’s
cumulative annual operating income for the period commencing on January 1, 2017
and ending with December 31, 2021 (the “Cumulative OI”) and except as provided
herein shall vest on March 31, 2022 if, and only if the Compensation Committee
determines that the Cumulative Operating Income is ninety percent (90%) or more
of the sum of the 2017 through 2021 annual operating plan operating income
objectives, with such operating income objectives for purposes of the 2021
Long-Term Performance Grant to be the same as the 2017 through 2018 AOP OI
Objectives applicable to the Executive’s 2016 Performance Share Unit award, and
to be determined by the Compensation Committee in its discretion after
consultation with the Executive for each of 2019, 2020 and 2021 (the “Cumulative
OI Objectives”).  If the Cumulative OI falls at any point between ninety percent
(90%) and one hundred percent (100%) of the Cumulative OI Objectives, the share
value or cash value that shall be received by the Executive with regard to the
2021 Long-Term Performance Grant on the applicable vesting date shall be equal
to the 2021

 

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Long-Term Performance Grant Value.  If the Cumulative OI is one hundred
twenty-five percent (125%) of the Cumulative OI Objectives, the share value or
cash value that shall be received with regard to the 2021 Long-Term Performance
Grant on the applicable vesting date shall be equal to the Maximum Long-Term
Performance Grant Value.  If the Cumulative OI is greater than one hundred
percent (100%) but less than one hundred twenty-five percent (125%) of the
Cumulative OI Objectives, the share value or cash value that shall be received
with regard to the 2021 Long-Term Performance Grant on the applicable vesting
date shall be determined based on straight line interpolation between one
hundred percent (100%) of the 2021 Long-Term Performance Grant Value and the
Maximum Long-Term Performance Grant Value.  Notwithstanding the foregoing, the
Compensation Committee in its discretion may determine, following consultation
with Executive, that the 2021 Long-Term Performance Grant shall vest based on a
five (5) year operating income operating plan approved by the Compensation
Committee rather than the foregoing criteria.

 

(d)        In the event that, during the Employment Period while the Executive
is the Chief Executive Officer of the Company, the Company consummates the
transaction, or a series of related transactions, that the Compensation
Committee certifies is the “Transformative Transaction,” as determined in the
discretion of the Compensation Committee in accordance with the “Determination
Principles” set forth below, the Executive will receive an award (the
“Transformative Transaction Award”) in shares or cash equal to between one
hundred percent (100%) and one hundred fifty percent (150%) of the 2021
Long-Term Performance Grant Value set forth in Section 6(c).  For purposes of
this Section 6(d), in order for the transaction or series of transactions
consummated by the Company to be eligible to qualify as the Transformative
Transaction, such transaction or series of transactions must satisfy the
following Determination Principles: (i) the transaction or series of
transactions must result in accretive value to the Company’s then-shareholders
of at least fifteen percent (15%) or more over the Company’s market
capitalization as of the date immediately prior to the public announcement of
the transaction (or if a series of transactions, measured from the date of the
public announcement of the first transaction in such series) (the “Accretive
Factor”) and (ii) the Accretive Factor must be maintained for a period of six
(6) consecutive calendar months from the date of the consummation of the
transaction (or if the Accretive Factor is achieved as a result of a series of
transactions, six (6) consecutive calendar months from the date of the
consummation of the last transaction in such series) (the “Transformative
Transaction Measurement Period”).  If the Accretive Factor is maintained for the
Transformative Transaction Measurement Period, the Compensation Committee will
determine in its discretion at the end of the Transformative Transaction
Measurement Period whether the Transformative Transaction has occurred, and if
the Compensation Committee determines in its discretion that the Transformative
Transaction has occurred, the Compensation Committee will so certify in writing
to the Executive (the “Certification Date”).  The Executive will receive the
Transformative Transaction Award within thirty (30) days following the
Certification Date.  If the Accretive Factor as determined by the Compensation
Committee is equal to fifteen percent (15%), the Transformative Transaction
Award will equal one hundred percent (100%) of the 2021 Long-Term Performance
Grant Value.  If the Accretive Factor as determined by the Compensation
Committee is equal to thirty percent (30%) or more, the Transformative
Transaction Award will equal one hundred fifty percent (150%) of the 2021
Long-Term Performance Grant Value.  If the Accretive Factor as determined by the
Compensation Committee is between fifteen percent (15%) and thirty percent
(30%), the value of the Transformative Transaction award will be determined
based on straight line interpolation between one hundred percent (100%) and one
hundred fifty percent (150%) of the 2021 Long-Term performance Grant Value.

 

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”).

 

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(b)        Disability.

 

(i)         The Company or the Executive, upon not less than ninety (90) 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 the thirty (30) day period after
such disability notice (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 in consultation with Executive’s primary care physician, 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 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 or plea of guilty or nolo contendere to a felony
under the laws of the United States or any state thereof; (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; (iv) intentional dishonesty by the Executive in the
performance of his duties hereunder which has a material adverse effect on the
Company; or (v) a material breach by the Executive of his material obligations
under this Agreement.  If, prior to the occurrence of an event specified in
Section 7(d)(ii), the Company terminates the Executive’s employment without
Cause after the Executive has been indicted for, accused of or charged with a
felony, the full amount of any amounts paid to or received by the Executive from
Company as a result of such termination without Cause shall be promptly repaid
to the Company upon the occurrence of an event specified in Section 7(d)(ii).

 

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 sixty (60) 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 ,solely with respect to clause (v) above, 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.

 

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If the final decision is that Cause exists and no permitted 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 permitted
cure has occurred, the Executive’s employment with the Company shall not be
terminated for Cause at that time.  The Board may suspend the Executive with pay
and benefits (which shall not be less than the Executive’s pay as in effect
immediately prior to such suspension) during the foregoing period and it shall
not constitute Good Reason.

 

(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 or
target Annual Bonus; (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 materially inconsistent with the Executive’s position, duties,
responsibilities, authority or status with the Company or a material adverse
change in the Executive’s duties, responsibilities, authorities, reporting
responsibilities, titles or offices as in effect prior to such assignment or
change, including without limitation the Executive ceasing to have the title of
Chief Executive Officer of the Company (and the successor or ultimate parent
entity of the Company, following a Change of Control); (iv) the Executive’s
failure to be nominated for election 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) any purported termination of the
Executive’s employment by the Company in violation of the By-Laws (which
purported termination shall be ineffective).  For the 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 within sixty (60) days of the first occurrence of the
event giving rise to Good Reason, giving the Company at least thirty (30) days
written notice of his intent to terminate this Agreement and his employment. 
The notice shall specify the particular acts or circumstances that constitute
Good Reason for such termination.  The Company shall be given the opportunity
within thirty (30) days after receiving the notice 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 a Notice of
Termination given by the Executive, which in no event shall be later than sixty
(60) days following 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 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;

 

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(ii)        if the Executive’s employment is terminated without Cause or by the
Executive for Good Reason, the date specified in the Notice of Termination;

 

(iii)       if the Executive’s employment is terminated by reason of Disability,
(A) thirty (30) days after the Disability Notice or (B) 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 20(n), 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 20(n), 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 earned but
unpaid Annual Bonus for any prior fiscal year, and any reimbursement due to
Executive pursuant to Section 4 (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, subject to general changes in policies for actively-employed
senior executives, with the cost of such continued insurance or coverage being
borne by the Company and provided through the Company’s payment of applicable
COBRA premiums or such other means as the Company shall determine;

 

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(iv)       all of Executive’s outstanding Company equity or equity-based awards,
the vesting of which is based solely on the passage of time and Executive’s
continued performance of services to the Company (“Time-Based Awards”), shall
immediately become vested and/or exercisable as applicable and all outstanding
options to purchase Company Common Stock granted to the Executive at any time
prior to or after the Effective Date (the “Options”) shall remain exercisable
until the earlier of five (5) years from the date of Executive’s Date of
Termination or their original expiration date; provided that the foregoing shall
not extend the exercise period under any stock options outstanding as of the
Effective Date; and

 

(v)        all of Executive’s outstanding Company equity or equity-based awards,
the vesting of which is based in whole or in part on the attainment of one or
more performance targets, the 2020 Long-Term Performance Grant and the 2021
Long-Term Performance Grant (collectively “Performance-Based Awards”), shall,
subject to the terms of the applicable plan, remain outstanding and become
vested based on the attainment of such awards’ performance targets as if
Executive remained continuously employed through such time or times each such
award would otherwise vest and become payable in accordance with its terms
without regard to Executive’s death.

 

(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, subject to general changes in policies for actively-employed senior
executives, with the cost of such continued insurance or coverage being borne by
the Company and provided through the Company’s payment of applicable COBRA
premiums or such other means as the Company shall determine; and

 

(v)        all of Executive’s Time-Based Awards shall immediately become vested
and/or exercisable as applicable and all Options shall remain exercisable until
the earlier of five (5) years from the date of Executive’s Date of Termination
or their original expiration date; provided that the foregoing shall not extend
the exercise period under any stock options outstanding as of the Effective
Date; and

 

(vi)       all of Executive’s Performance-Based Awards, shall, subject to the
terms of the applicable plan, remain outstanding and become vested based on the
attainment of such awards’ performance targets as if Executive remained
continuously employed through such time or times each such award would otherwise
vest and become payable in accordance with its terms without regard to
Executive’s Disability.

 

Payment or treatment of the amounts and equity under Section 9(b), other than
the Accrued Obligations, is 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”).

 

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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 20(d).

 

(c)        Compensation Upon Resignation Or Termination For Cause.  In the event
of termination of the Executive’s employment with the Company upon Resignation
or termination for Cause:

 

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

 

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

 

(iii)       upon a Resignation, all vested options will expire on the earlier of
(A) their original expiration date or (B) the later of (x) ninety (90) days
following the Date of Termination and (y) 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; provided that the foregoing shall not extend the
exercise period under any stock options outstanding as of the Effective Date.

 

(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
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 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 value of the Executive’s 2016 annual bonus;

 

(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, subject to general changes in policies for actively-employed senior
executives, with the cost of such continued insurance or coverage being borne by
the Company and provided through the Company’s payment of applicable COBRA
premiums or such other means as the Company shall determine;

 

(v)        all of Executive’s Time-Based Awards shall immediately become vested
and/or exercisable as applicable and all Options shall remain exercisable until
the earlier of five (5) years from the date of Executive’s Date of Termination
or their original expiration date; provided that the foregoing shall not extend
the exercise period under any stock options outstanding as of the Effective
Date; and

 

(vi)       all of Executive’s Performance-Based Awards, shall, subject to the
terms of the applicable plan (including with respect to treatment of awards upon
a change of control), remain outstanding and become vested and payable based on
the attainment of such awards’

 

11

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performance targets as if Executive remained continuously employed through such
time or times each such award would otherwise vest and become payable in
accordance with its terms without regard to Executive’s termination of
employment.

 

Payment or treatment of the amounts and equity under Section 9(d), other than
the Accrued Obligations, is 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.

 

(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 20(d), (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 (2-1/2) 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, except as provided therein, 10(b)(iii), 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 13, 14 or 15.

 

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;

 

(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 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

 

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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.

 

(b)        In the event that the Executive is an employee of the Company at the
moment immediately prior to a Change of Control and the Executive is then
terminated without Cause or terminates for Good Reason upon or within twelve
(12) months after the Change of Control:

 

(i)         all Options shall remain exercisable until their original expiration
date, without regard to the terms of any option agreement or option certificate
applicable to any Options, provided that neither the foregoing nor anything else
in this Agreement is meant to modify the Company’s rights on a corporate
transaction under the applicable equity plan; and provided, further, that the
foregoing shall not extend the exercise period under any stock options
outstanding as of the Effective Date;

 

(ii)        the Executive will immediately vest in and be paid, upon such
termination, subject to Section 20(d) and subject further to the terms of any
applicable plans with regard to treatment upon a change in control, the 2016
Performance Share Units, the 2020 Long-Term Performance Grant and the 2021
Long-Term Performance Grant, with vesting and payment in each case determined
based upon the greater of (x) target performance and (y) actual performance as
determined by the Compensation Committee in its discretion immediately prior to
the consummation of the Change of Control based upon the Compensation
Committee’s assessment of the projected performance through the end of the
applicable performance period; and

 

(iii)       the Executive shall be entitled to the benefits set forth in
Sections 9(d)(i), 9(d)(ii), 9(d)(iii), 9(d)(iv), 9(d)(v) and 9(d)(vi) (subject
to Section 10(b)(ii) and the terms of the plans with respect to treatment of
such awards upon a change of control), provided, however, that references to the
clause “two (2)” in Section 9(d)(iii) shall be changed to “three (3)”.

 

(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, subject to the provisions of the applicable plan, then the Executive
shall have the right, separately with respect to each of the Outstanding
Options, to either (A) retain the

 

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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 or termination, as
the case may be;

 

(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

 

(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).

 

11.       Code Section 280G.

 

(a)        Notwithstanding anything to the contrary contained in this Agreement,
to the extent that any amount, equity awards or benefits paid or distributed to
the Executive pursuant to this Agreement or any other agreement, plan or
arrangement between the Company or its subsidiaries or affiliates, on the one
hand, and the Executive on the other hand (collectively, the “280G Payments”)
(i) constitute a “parachute payment” within the meaning of Section 280G of the
Code and (ii) but for this provision would be subject to the excise tax imposed
by Section 4999 of the Code (the “Excise Tax”, then the 280G Payments shall be
payable either (a) in full, notwithstanding that some or all portion of such
payment may be subject to the Excise Tax or (b) in such lesser amount that would
result in no portion of such 280G Payments being subject to Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income or excise taxes (including the Excise Tax) results in
Executive’s receipt on an after-tax basis, of the greatest amount or benefits
under this Agreement, notwithstanding that all or some portion of such benefits
may be taxable under Section 4999 of the Code.

 

(b)        To the extent permitted by applicable law, and not a violation of
Code Sections 280G, 409A or 4999, Executive shall be entitled to elect the order
in which payments will be reduced.  If the Executive electing the order in which
payments will be reduced would result in violation of Code Section 409A or loss
of the benefit of reduction under Code Sections 280G or 4999, payments shall be
reduced in the following order (i) severance payment based on multiple of Base
Salary and/or Annual Bonus; (ii) other cash payments; (iii) any Current Pro Rata
Bonus paid as severance; (iv) acceleration of vesting of stock options with an
exercise price that exceeds the then fair market value of stock subject to the
option, provided such options are not permitted to be valued under Treasury
Regulations Section 1.280G-1 Q/A – 24(c); (v) any equity awards accelerated or
otherwise valued at full value, provided such equity awards are not permitted to
be valued under Treasury Regulations Section 1.280G-1 Q/A – 24(c);
(vi) acceleration of vesting of stock options with an exercise price that
exceeds the then fair market value of

 

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stock subject to the option, provided such options are permitted to be valued
under Treasury Regulations Section 1.280G-1 Q/A – 24(c); (vii) acceleration of
vesting of all other stock options and equity awards; and (viii) within any
category, reductions shall be from the last due payment to the first.

 

(c)        All determinations required to be made under this Section 11,
including whether the Executive will receive a full payment or a reduced payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm as may be
designated by the Company and reasonably acceptable to the Executive (the
“Accounting Firm”), which Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within fifteen (15) business
days of the receipt of notice from the Company that there is or may be made a
280G Payment.  All fees and expenses of the Accounting Firm shall be borne
solely by the Company.  Any determination by the Accounting Firm shall be
binding upon the Company and the Executive.

 

12.       Shareholder Value Creation Incentive.  In the event that, at any time
prior to December 31, 2021, the closing trading price of a share of the
Company’s common stock equals or exceeds two (2) times the average closing price
of the Company’s common stock as determined during the period beginning on
October 1, 2016 and ending on December 31, 2016, after taking in account any
“Adjustments” (as defined below), and remains at or above that level for at
least ninety (90) consecutive trading days (the “Shareholder Value Creation
Date”), (A) any then outstanding equity compensation awards granted under
Section 6(a) hereof that are held by the Executive shall become vested with
respect to 100% of the shares subject thereto (with the number of shares subject
to performance based awards determined assuming attainment of the “maximum”
level of performance), (B) a payment in shares or cash, as determined by the
Compensation Committee in its discretion, equal to the Grant Date Value, as
determined by the Compensation Committee in its discretion after consultation
with the Executive, of any annual equity grants remaining to be made during the
Employment Period pursuant to Section 6(a), above, shall be made one hundred
twenty (120) days after the Shareholder Value Creation Date, with the amount and
terms of such payment to be made in accordance with the principles set forth in
Section 6 and (C) the 2021 Long-Term Performance Grant shall be paid one hundred
twenty (120) days after the Shareholder Value Creation Date, with the amount
payable pursuant to the 2021 Long-Term Performance Grant to be no less than one
point five (1.5) times the 2021 Long-Term Performance Grant Value.  For the
avoidance of doubt, nothing in this Section 12 shall be construed to apply in
any way to the 2020 Long-Term Performance Grant, which shall not be accelerated
or settled as a consequence of the terms of this Section 12.  For purposes of
this Section 12, “Adjustments” shall mean adjustments to the deemed price of the
Company’s common stock under that are determined by the Compensation Committee,
in its discretion, to be equitably required to prevent dilution or enlargement
arising from any stock dividend, extraordinary dividend, stock split or reverse
stock split, or other change in the capital structure of the Company
substantially similar to and  having an effect similar to any of the foregoing.

 

13.       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.

 

14.       Non-Competition.  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

 

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Executive’s ownership of less than 5% of the issued and outstanding securities
of any company shall be permitted.  The Company and the Executive further agree
that Executive’s ownership of 5% or more of the issued and outstanding
securities of a Competitive Business shall be permitted if such acquisition or
event arises through third-party investments where the Executive does not
control or intentionally influence the investment decision; provided, that
during the Employment Period the Executive regularly uses commercially
reasonable efforts to determine whether his ownership exceeds 5% and upon any
such determination by the Executive, the Executive shall promptly inform the
Governance Committee of the Board and cooperate in good faith with the
Governance Committee to address and resolve any conflicts of interest and
corporate governance issues arising from such ownership.  As used herein, the
term “Competitive Business” shall mean any business in which the Company is then
actively engaged or about which the Board is engaged in active discussions as a
possible expansion of the Company’s business.

 

(a)        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.

 

15.       Confidential Information.  (a)  The Executive has executed or, if not
previously executed, agrees to execute and be bound by the terms and conditions
of an Employee Proprietary Information Agreement (“Proprietary Information
Agreement”), attached hereto as Exhibit A.  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.

 

(b)        Notwithstanding the foregoing or any other provision in this
Agreement or otherwise, nothing herein shall prohibit the Executive from
reporting possible violations of federal or state law or regulation to any
governmental agency or entity or self-regulatory organization including but not
limited to the Department of Justice, the Securities and Exchange Commission,
Congress, and any agency Inspector General, or making other disclosures that are
protected under the whistleblower provisions of federal or state law or
regulation (it being understood that the Executive does not need the Company’s
prior authorization to make any such reports or disclosures and the Executive is
not required to notify the Company that the Executive has made such reports or
disclosures).

 

(c)        Non-compliance with the disclosure provisions of this Agreement shall
not subject the Executive to criminal or civil liability under any federal or
state trade secret law for the disclosure of a Company trade secret: (i) in
confidence to a federal, state or local government official, either directly or
indirectly, or to an attorney in confidence solely for the purpose of reporting
or investigating a suspected violation of law; (ii) in a complaint or other
document filed in a lawsuit or other proceeding, provided that any complaint or
document containing the trade secret is filed under seal; or (iii) to an
attorney representing

 

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the Executive in a lawsuit for retaliation by the Company for reporting a
suspected violation of law or to use the trade secret information in that court
proceeding, provided that any document containing the trade secret is filed
under seal and the Executive does not disclose the trade secret, except pursuant
to court order.

 

16.       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 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.

 

17.       Injunctive Relief.  The Executive agrees that the restrictions and
covenants contained inS Section 13, 14 and 15 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.

 

18.       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 $80,000, 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.

 

19.       Waiver.  The Executive hereby waives any and all rights and payments
under the Prior 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.

 

20.       Miscellaneous.

 

(a)        No Violation.  It shall not be a violation of this Agreement for the
Executive to engage in any activity which is 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; (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

 

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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 (including, but not
limited to, Executive’s current status as a board member or officer of Coca-Cola
(KO), The Center for Early Education, Harvard-Westlake School, Los Angeles
County Museum of Art, 1011 Foundation, Inc., Cove Partners LLC, and RTMH, Inc.),
the continued conduct of such activity (or the conduct of an activity similar in
nature and scope thereto) during the Employment Period has been determined by
the Company not to interfere with the performance of the Executive’s duties and
responsibilities to the Company and therefore is not a violation of this
Agreement.  Notwithstanding the foregoing, the Executive’s engagement in such
activities shall be subject to and governed by the governance rules in effect
from time to time applicable to members of the Board, including the Company’s
Corporate Governance Principles and Policies.

 

(b)        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 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.

 

(c)        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.

 

(d)        Section 409A.

 

(i)         This Agreement is intended to comply with, or be exempt from,
Section 409A of the Code and the regulations promulgated thereunder
(“Section 409A”), and will be interpreted, administered and operated in a manner
consistent with that intent.  If any amounts that become due under Sections 9 or
10 of this Agreement constitute “nonqualified deferred compensation” within the
meaning of 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.

 

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(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)       For purposes of Section 409A, each of the payments that may be made
under this Agreement are designated as separate payments.  Anything in this
Agreement to the contrary notwithstanding, (1) 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, (2) the right to reimbursement or in-kind benefits
shall not be subject to liquidation or exchange for another benefit and (3) no
amount reimbursed during any calendar year shall affect the amounts eligible for
reimbursement in any other calendar year.

 

(e)        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:

Chris Driscoll

 

Cove Partners LLC

 

3435 Ocean Park Blvd. #107 PMB K

 

Santa Monica, CA 90405

 

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.

 

(f)        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.

 

(g)        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 13, 14
and 15 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.

 

(h)        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

 

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intended to supersede all prior or contemporaneous employment negotiations,
understandings and agreements (whether written or oral), including the Prior
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.

 

(i)         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.

 

(j)         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.

 

(k)        Counterparts.  This Agreement may be executed in counterparts, each
of which shall be an original, but together shall constitute one and the same
instrument.

 

(l)         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.

 

(m)       Saturdays, Sundays and Holidays, etc.  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.  Any reference herein to a
determination of the Board or the Compensation Committee “in its discretion”
shall mean a determination in the sole discretion of such body.

 

(n)        Survivability.  The provisions of Sections 10, 11, 12, 13, 14, 15,
16, 17, 18, 20(d) and 20(o) of this Agreement shall survive the termination or
expiration of this Agreement, in accordance with their terms.

 

(o)        Arbitration.  Except as set forth in Section 17, any disagreement,
dispute, controversy or claim arising out of or relating to this Agreement or
the interpretation of this Agreement or any arrangements relating to this
Agreement or contemplated in this Agreement or the breach, termination or
invalidity thereof shall be settled by final and binding arbitration
administered by JAMS/Endispute in Los Angeles, California in accordance with the
then existing JAMS/Endispute Arbitration Rules and Procedures for Employment
Disputes.  In the event of such an arbitration proceeding, Executive and the
Company shall select a mutually acceptable neutral arbitrator from among the
JAMS/Endispute panel of arbitrators.  In the event Executive and the Company
cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint
an arbitrator.  Neither Executive nor the Company nor the arbitrator shall
disclose the existence, content, or results of any arbitration hereunder without
the prior written consent of all parties.  Except as provided herein, the
Federal Arbitration Act shall govern the interpretation, enforcement and all
proceedings.  The arbitrator shall apply the substantive law (and the law of
remedies, if applicable) of the state of California, or federal law, or both, as
applicable, and the arbitrator is without jurisdiction to apply any different
substantive law.  The arbitrator shall have the authority to entertain a

 

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motion to dismiss and/or a motion for summary judgment by any party and shall
apply the standards governing such motions under the Federal Rules of Civil
Procedure.  The arbitrator shall render an award and a written, reasoned opinion
in support thereof.  Judgment upon the award may be entered in any court having
jurisdiction thereof.

 

(p)        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

 

 

[Signature Page to Employment Agreement]

 

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