Exhibit 10.19


 


Date: December 1, 2007


 


Michael
Morhaime

23 Ocean Heights Drive

Newport Beach, CA 92657


 


Dear
Mr. Morhaime:


 


Reference
is made to that certain Business Combination Agreement, dated as of December 1,
2007 (the “Business Combination Agreement”), between Vivendi S.A. (“Vivendi”),
VGAC LLC, Vivendi Games, Inc. (“Vivendi Games”), Activision, Inc.,
and Sego Merger Corporation.  Subject to (i) the
consummation of the transactions contemplated by Business Combination Agreement
and (ii) your remaining in the employment of Vivendi Games or its
subsidiary, Blizzard Entertainment, Inc. (“Blizzard”) from the date hereof
until the Closing Date (as defined in the Business Combination Agreement),
Activision Blizzard, Inc. (the “Company”) shall employ you and you agree
to accept employment upon the terms and conditions set forth in this agreement
(the “Agreement”), effective upon the Closing Date.  In the event the transactions contemplated by
that certain Business Combination Agreement are not consummated for any reason
or you are not in the employment of Vivendi Games or Blizzard for any reason as
of the date one (1) day prior to Closing Date, this Agreement shall be
null and void without either you or the Company having any continuing or
further obligations hereunder.


 


1.             Term.  The term of this Agreement will commence on
the “Closing Date” as such term is defined in the Business Combination
Agreement (the “Commencement Date”), and continues until the last day of the
month in which the fifth (5th) anniversary of
the Commencement Date occurs, unless earlier terminated pursuant to the
provisions of Paragraph 4 (the “Term”). 
Notwithstanding the foregoing, if the Commencement Date does not occur
before July 31, 2008 (or any alternate date mutually agreed by you and the
Company in writing), this Agreement shall be null and void without either you
or the Company having any continuing or further obligations hereunder.  The Company shall notify you in writing on or
before the date which is six (6) months prior to the expiration of the
Term of its desire to renew or extend and continue your employment with the
Company, upon receipt of which notice you and the Company shall promptly
commence discussions concerning such renewal or extension of employment;
provided, that absent your and the Company’s execution of a written agreement
addressing such extension or renewal of employment, nothing contained herein
shall obligate the Company or you to consider or agree to any such renewal or
extension of employment beyond the expiration of the initial Term and each of
you and the Company expressly acknowledges that no promises or understandings
to the contrary have been made or reached. 
You also agree and acknowledge that, absent a contrary written agreement
between you and the Company, should you and the Company choose to continue your
employment for any period of time following the expiration of the Term
(including the expiration of any extensions of the Term), your employment with
the Company will be “at will;” in other words, absent such contrary written
agreement, during any time following the expiration of the Term the Company may
terminate 


 

















 


your
employment at any time, with or without reason and with or without notice, and
you may resign at any time, with or without reason and with or without notice.


 


2.             Duties.  You agree to be employed by the Company and
shall perform your full time business services for Blizzard and its Affiliates
and subsidiaries upon the terms and conditions of this Agreement.  You will continue your services hereunder as
President and Chief Executive Officer of Blizzard and shall report directly to
the Company’s Chief Executive Officer. 
At all times during the Term, you shall remain as Blizzard’s senior most
executive officer.  You will perform
those duties and other services as are consistent with your office and position
as shall be reasonably designated or requested from time to time by the Company’s
Chief Executive Officer, subject to the limitations and exclusions set forth in
Section 4(c).  You will not be
required, without your consent, to perform your primary duties under this
Agreement in a location other than Irvine, California or more than fifteen (15)
miles therefrom, except for normal and customary required travel on the Company’s
business.  Notwithstanding the foregoing
you shall be entitled to (i) with the consent of the Company’s Board of
Directors (which consent shall not be unreasonably be withheld), serve on the
board of directors or other governing board or committees of up to three (3) for
profit corporations or entities which do not engage in the conduct of business
competitive with that of Vivendi S.A. (for so long as it is a shareholder of
the Company), the Company and/or Blizzard, (ii) serve on civic, industry,
or charitable boards or committees and engage or participate in civic,
cultural, philanthropic and community affairs and projects, and (iii) manage
your own personal, financial, investment, and legal affairs (collectively the
foregoing activities described under sub-clauses (i), (ii) and (iii) are
hereinafter collectively referred to as the “Permitted Activities”); provided,
that none of such Permitted Activities unreasonably interfere with your
performance of your full time duties for and on behalf of Blizzard hereunder
and are not in violation of the Company’s ethics codes, conflicts of
interests policies and corporate governance guidelines in effect at the time of
the inception of such Permitted Activities.  In such regard, you shall be entitled to
receive and retain, as your exclusive property and assets, any payments,
compensation, revenues, profits, gains, or other benefits derived from the
Permitted Activities.


 


3.             Compensation
and Related Matters.


 


(a)           Base Salary.  For all services rendered under this
Agreement, commencing as of the Commencement Date the Company will pay you base
salary at an annual rate of Four Hundred Seventy-Five Thousand Dollars
($475,000), payable in accordance with the Company’s customary and applicable
payroll practices, but in no event less frequently than semi-monthly (the “Base
Salary”).  Notwithstanding the foregoing,
commencing as of March 1, 2009 and the same day of each subsequent
calendar year occurring during the Term, your Base Salary shall be increased by
the greatest of (i) five percent (5.0%) of your Base Salary as in effect
on the immediately preceding date, or (ii) the percentage increase in the
Consumer Price Index during the immediately preceding twelve (12) months for
Irvine, California as determined by the U.S. Department of Labor, Bureau of
Labor Statistics, or (iii) such merit increase as shall be awarded to you
and approved by the Company’s Board of Directors.  The Company agrees to review your salary for
merit increases, at the same time as other senior executives of the Company,
but at least once per year.  Any higher
Base Salary paid to you subsequently will be deemed the annual rate for the
purposes of this Agreement and will commence on the date determined by the
Company.  In no event shall your Base
Salary be reduced without your prior written consent.


 


2

















 


(b)           Incentive Bonus Compensation.  You shall participate in the Company
Management Incentive Plan as in effect from time to time or any successor
thereto (the “MIP”).  Your target bonus
under the MIP for each fiscal year shall be seventy-five percent (75%) of your
Base Salary; provided that in all events the total bonus paid to you under the
MIP for any fiscal year shall not be less than thirty seven and one-half
percent (37.5%) of your Base Salary (the “Guaranteed Minimum MIP Bonus”).  Any bonus earned under the MIP shall be based
upon a weighted measurement of ten percent (10%) based upon achievement of the
goals, criteria and performance of the Company and its subsidiaries, and ninety
percent (90%) based upon achievement of goals, criteria and performance of
Blizzard and of your own personal goals (in each case as measured against
pre-established objectives), all in accordance with the terms and conditions of
the MIP.  Notwithstanding the foregoing,
the target bonus level recited herein shall not serve as a limit on the amount
of the bonus which you are entitled to earn and receive under the MIP, as the
MIP shall permit you to earn and receive in aggregate up to two (2) times
the otherwise applicable target bonus level (i.e., to a maximum bonus of 150%
of your Base Salary).  You understand
that your actual bonus above any Guaranteed Minimum MIP Bonus is not guaranteed
compensation and is subject to the discretion of the Company and the terms of
the MIP.


 


(c)           Holiday Bonus Compensation.  In addition to the MIP, you shall continue to
participate in the Blizzard Entertainment, Inc. Holiday bonus program as
in effect from time to time (the “Holiday Plan”).  Your target bonus under the Holiday Plan for
each fiscal year shall be fifty percent (50%) of your Base Salary; provided
that in all events the total bonus paid to you under the Holiday Plan for any
fiscal year shall not be less than twenty-five percent (25%) of your Base Salary
(the “Guaranteed Minimum Holiday Bonus” which, collectively with the Guaranteed
Minimum MIP Bonus for any fiscal year is herein referred to as the “Guaranteed
Minimum Bonus”).  Any bonus earned under
the Holiday Plan shall be determined by the Chief Executive Officer of the
Company in accordance with the terms and conditions of the Holiday Plan;
provided that references, if any, to “Vivendi Games” or “Vivendi Universal
Games” in applying the Holiday Plan shall be replaced with the Company.  You understand that your actual bonus above
any Guaranteed Minimum Holiday Bonus is not guaranteed compensation and is
subject to the discretion of the Company and the terms of the Holiday Plan.


 


(d)           Profit Sharing Compensation.  In addition to the MIP and the Holiday Plan,
you shall continue to participate in the Blizzard Entertainment Profit Sharing
Plan as in effect from time to time (the “Profit Sharing Plan”) in conformity
with the applicable terms and provisions of the Profit Sharing Plan; provided
that in all events you shall remain entitled to receive not less than three and
one-half percent (3.5%) of the “Profit Sharing Pool” (as currently defined and
determined within the Profit Sharing Plan). 
Any bonus earned under the Profit Sharing Plan (a “Profit Share Bonus”)
shall be determined by the Chief Executive Officer of the Company in accordance
with the terms and conditions of the Profit Sharing Plan; provided that all
references therein to “Vivendi Games” or “Vivendi Universal Games” shall be
replaced with the Company.  You
understand that except for your guaranteed percentage participation of the
Profit Sharing Pool under the Profit Sharing Plan, your actual bonus amount
under the Profit Sharing Plan is dependent upon the amount of such Profit
Sharing Pool being established thereunder, if any.


 


(e)           Bonus Determinations.  For all purposes of this Agreement, the MIP,
the Holiday Plan and Profit Sharing Plan are herein collectively referred to as
the “Bonus Plans” and individually as a “Bonus Plan.”  Notwithstanding any other provision contained
herein or of the 


 


3

















 


Bonus
Plans to the contrary, in the event of the termination of your employment with
the Company by either the Company without Cause or by you for Good Reason or as
a result of your death or Disability (as hereinafter defined) or upon the
expiration of the Term of this Agreement without renewal, you shall remain
entitled and the Company shall pay to you, as and when any such bonus
compensation payments are otherwise remitted under the terms of the Bonus
Plans, each of (i) the full amount of any bonus compensation earned and
owed to you, but remaining unpaid for any fiscal year or period ending on or
prior to any such termination or expiration and (ii) a pro-rata share
(determined on a daily basis) of any bonus compensation otherwise accrued for
you during or for the fiscal year or period in which such termination or
expiration occurs.


 


(f)            Equity Awards.  In addition to the Bonus Plans, (i) upon
the Commencement Date, the Company shall have previously recommended and
obtained authorization from the Compensation Committee of the Company’s Board
of Directors to grant you, and will promptly provide you with a one-time grant
of a “Stock Option” under the Activison Inc. 2007 Incentive Plan (the “2007
Plan”) to purchase 300,000 shares of the Company’s common stock (the “Initial
Equity Award”) and (ii) the Company will recommend to the Compensation
Committee of the Company’s Board of Directors that you be granted, and will use
its reasonable best efforts to cause you to be granted, a “Stock Option” under
the 2007 Plan or its applicable successor plan to purchase 100,000 shares of
the Company’s common stock (the “Annual Equity Award”), to be granted at the
same time such regular annual equity grants are made to other senior executive
officers of the Company commencing in 2009 (but, for the avoidance of doubt,
not more than once per fiscal year during the Term).  The Initial Equity Award and Annual Equity
Awards will be subject to the terms and conditions of the Company’s 2007 Plan
or other succeeding and applicable equity plan and the customary form of award
agreement used thereunder generally for executives of the Company (other than
the Company’s Chief Executive Officer and Co-Chairman), and any specific
standard terms and conditions set forth and uniformly applied by the Company;
provided, however, that the Initial Equity Award will provide for vesting in
equal monthly installments over a period of five (5) years from the grant
date thereof.  The number of shares to be
granted under any Initial Equity Award or Annual Equity Award shall be
appropriately adjusted in the event of a corporate merger, recapitalization,
stock dividend, reorganization or similar event, of the Company.  In addition, you shall be entitled to receive
and participate in any discretionary and meritorious awards of equity
incentives under the 2007 Plan or any successor thereto all upon such terms and
conditions as the Company’s Board of Directors, acting by and through its
Compensation Committee, may determine in its and their sole and absolute
discretion; it being intended that your receipt of the Initial Equity Award and
the Annual Equity Awards shall not be deemed to serve as a limit on the amount of
any such equity incentives the Company may decide, within its sole and absolute
discretion, to award to you based upon your performance or achievements as
determined from time to time.


 


(g)           Blizzard Equity Incentive Plan.  It is hereby acknowledged and agreed that the
consummation of the transactions contemplated by the Business Combination
Agreement shall constitute a Change in Control under the Blizzard Entertainment, Inc. 2006 Equity
Incentive Plan (the “BEP”) resulting in the full and immediate acceleration
and vesting of all outstanding options and/or shares of restricted stock
previously granted to you under the BEP and held by you as of the Closing Date
(collectively “Outstanding Incentives”). 
From and after the Commencement Date, the Company shall cause all
Outstanding Incentives to be paid, liquidated 


 


4

















 


or redeemed or otherwise held, converted or maintained in conformity
with the terms and provisions of the BEP as in effect on October 15, 2007.


 


(h)           Benefits.  You will be entitled to participate in all
welfare benefit plans (including health, medical, hospitalization, dental,
vision, life and disability insurance plans), perquisites and other employee
programs made available from time to time by Blizzard to its senior executive
employees generally (the “Welfare Plans”). 
The Company agrees that during the Term, the Welfare Plans shall, in the
aggregate, be provided on terms and conditions no less favorable that those
welfare benefits made available to you from Blizzard as in effect on October 15,
2007.


 


(i)            Vacation.  In addition to all other paid Company
holidays, you will be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company applicable generally to
similarly situated executives of the Company; provided, however, you will be
entitled to no less than four (4) weeks of paid vacation during each
calendar year, to take at such time as you and the Company may mutually agree
upon, and subject to the otherwise applicable terms of the Company’s vacation
policy as in effect from time to time. 
Specifically, in the event you do not use your available vacation by the
end of the calendar year in which it accrues, you may carry unused vacation
forward to the following year, provided however that additional accrual of
vacation days will cease once you have reached a cap equaling eight (8) weeks
of total available and unused vacation. When you have used sufficient accrued
vacation days to bring your available vacation below the eight (8) week
cap, you will again begin to again accrue vacation.


 


(j)            Car Allowance.  You will be entitled to participate in the
Company’s executive auto allowance program, if any, at the same level of the
other senior executive officers of the Company and in accordance with such
program’s terms and conditions.


 


(k)           Legal Fees.  The Company shall reimburse you (or pay on
your behalf at your direction) for all reasonable legal fees and costs incurred
or paid by you in connection with the negotiation and implementation of this
Agreement; provided that such amount reimbursed or paid to or on your behalf
hereunder shall not exceed Twelve Thousand Five Hundred Dollars ($12,500).


 


(l)            Expense Reimbursements.  During your employment, the Company will
reimburse you for your reasonable and necessary business expenses in accordance
with its then prevailing policy for similarly situated employees (which will
include appropriate itemization and substantiation of expenses incurred).  In furtherance but not in limitation of the
foregoing, when traveling in the course of performing your duties hereunder,
you shall be entitled to reimbursement for business class air travel on all
flights in excess of three (3) hours and be entitled to utilize and be
reimbursed for overnight accommodations at four (4) star facilities (as
measured on a five star scale).  All
reimbursements provided to you hereunder shall be in addition to and not in
limitation or lieu of all other compensations or benefits provided you under
this Agreement.


 


(m)          Financial Stipend.  You shall receive an annual non-accountable
and non-recoupable personal expense allowance of Three Thousand Five Hundred
Dollars ($3,500).  Such stipend shall be
paid to you to assist and reimburse you for your personal financial, 


 


5

















 


accounting,
tax and legal planning and service costs and expenses; provided, that you shall
not be responsible to account to the Company for or with respect to any such
costs or expenses nor submit to the Company any vouchers or other reports
evidencing or supporting the same.  Such
stipend shall be included and reported by the Company in your annual
compensation.


 


(n)           Enhanced Severance Compensation.  The Company hereby agrees that upon either (i) the
termination of your employment by the Company without Cause or (ii) your
termination of your employment for Good Reason (each a “Qualified Separation”),
the Company shall have paid or caused to be paid to you or otherwise caused you
to receive from Blizzard, the Company and/or their Affiliates total
compensation provided under Paragraphs 3(a), 3(b), 3(c), 3(d), and 3(f) of
this Agreement (as determined for the period from the Commencement Date through
and including the date of such termination and including all salary, bonuses
(under all plans) and any amounts earned under all stock-based incentive
compensation plans (including outstanding unexercised stock options or similar
awards, but only to the extent vested and exercisable by you with the value
thereof being determined as the positive difference, if any, between the
closing price for the Company’s stock on the date on which such termination
occurs less the exercise price required to be paid by you for any such shares
of stock) from the Commencement Date through the date of termination)
aggregating not less than the product of (a) Four Million Dollars
($4,000,000) multiplied by (b) the total number of years (including any
partial year expressed as a percentage of an entire year) during which you remained
in the employ of the Company hereunder (such product being herein referred to
as the “Required Total Compensation”). 
Upon any Qualified Separation, in the event the Company has not paid or
caused to be paid to or received by you the Required Total Compensation, the
Company shall within thirty (30) days thereafter, pay to you in a single lump
sum that amount necessary to cause you to have received the Required Total
Compensation hereunder.


 


(o)           Withholding.  The Company will withhold from any payments
and benefits payable under this Agreement such federal, state or local taxes as
will be required to be withheld pursuant to any applicable laws or regulation.


 


4.             Compensation
Upon Certain Termination Events.


 


(a)           Compensation
Payable.  Should your employment with
the Company terminate, you will be entitled to the amounts and benefits set
forth in this Paragraph 4. In the event of such termination, and except for
payments noted in this Paragraph 4, the Company will have no further
obligations to you under this Agreement. 
As such, you agree that you will have no rights or remedies in the event
of your termination other than those set forth in this Paragraph 4.


 


(b)           Termination for
Cause.  The Company may terminate your
employment for Cause.  For purposes
hereof “Cause” will exclusively mean and consist of:


 


(i)            your failure to perform your primary
duties or your breach of the terms of this Agreement in either case resulting
in material and demonstrable damage to the Company or its Affiliates, and which
failure or breach is not remedied by you within thirty (30) days after receipt
of written notice from the Company describing your failure and/or breach and
setting forth the Company’s intention to terminate your employment if the
failure or breach is not duly remedied;


 


6

















 


(ii)           your intentional
and material failure to comply with the Company’s material policies of which
you are provided written notice and the terms of which are equally and
uniformly applied to all executive employees of the Company (as such policies
may be amended from time to time with your having been notified in writing as
to any such amendments).  Notwithstanding
the foregoing, you shall not be terminated under this Paragraph unless and
until you have received written notice from the Company describing your failed
actions committed in violation of the specified Company policy, and setting
forth the Company’s intention to terminate your employment and have failed to
cure and remedy such violation within thirty (30) days after receipt of such
written notice from
the Company; or


 


(iii)          your conviction of
a felony
or other crime involving dishonesty or fraud or that results or would
reasonably be expected to result in the Company becoming subject to public
reprimand or sanction.


 


(c)           Resignation;
Termination for Good Reason.  You may resign your employment with the
Company and terminate this Agreement at any time without advance notice.  Any such resignation may be with or without
Good Reason.  For purposes hereof, “Good
Reason” will mean the Company’s commission or the occurrence without your
consent of any of the events in the immediately succeeding paragraph, which act
or occurrence is not remedied by the Company within thirty (30) days after receipt
of written notice from you specifically delineating each such event which you
claim constitutes Good Reason hereunder and setting forth your intention to
terminate your employment at the end of such 30-day period if such matter is
not duly remedied.  Notice to the Company
must be delivered by you within sixty (60) days after you become aware or
receive notice of the commission or occurrence of such event or events
constituting Good Reason hereunder.


 


“Good
Reason” will mean the occurrence, without your consent or approval, of: (i) a
reduction in any of your Base Salary, aggregate Guaranteed Minimum Bonus,
target bonus opportunity under the MIP or Holiday Plan (or successor thereto)
or percentage participation in the Profit Sharing Plan (or successor thereto),
any material reduction, in the aggregate, of the benefits described under Section 3(h) hereof,
or any modification, amendment, discontinuation or termination of any Bonus
Plan (or any successor thereto) that either (a) in the aggregate (but
taking into account any new or enhanced bonus, long term incentive or
comparable benefit made available to you), materially reduces your opportunity
to earn compensation under those Bonus Plans (taken as a whole and as compared
to those incentive compensation opportunities available to you under those
Bonus Plans as of immediately prior to the Commencement Date) or (b) in
the aggregate (but taking into account any new or enhanced bonus, long term
incentive or comparable benefit made available to the Blizzard employees),
materially reduces the Blizzard employees’ aggregate overall opportunity to
earn compensation under the Profit Sharing Plan (taken as a whole and as
compared to the aggregate incentive compensation opportunities available to the
Blizzard employees under the Profit Sharing Plan as of immediately prior to the
Commencement Date); (ii) any material default by the Company in paying or
providing you with any compensation or benefits required or any material
obligations owed to you hereunder; (iii) the termination by the Company
without “Cause” (as defined under the applicable employment agreement) of the
Company’s employment of any one or more of the “Blizzard Management Team
Members” (as hereinafter defined); (iv) a change in location of your
primary place of employment from Blizzard’s existing office in the Irvine,
California to a location more than fifteen (15) miles therefrom; (v) a
change in title to one that conveys lesser responsibility or 


 


7

















 


lower
status, or the imposition of any restriction or constraint upon you or the
undertaking of any other act which materially diminishes your position, office,
responsibility, duties or authority; (vi) a change in your reporting
structure and responsibilities
as described in Paragraph 2 of this Agreement; (vii) upon a “Change in
Control of Blizzard” (as hereinafter defined); or (viii) the Company
taking or failing to take any actions, imposing any restrictions or otherwise
engaging in conduct (except as otherwise required by applicable law or
regulation) with respect to the operations or activities of Blizzard which,
taken individually or as a whole, prevent or materially interfere with you
having authority, ability, accountability, and control over the conduct of Blizzard’s
strategic, operational and daily business activities, including without limit
the making, execution or implementation of all decisions concerning Blizzard’s
product development, worldwide operations, officers, personnel, brand,
franchises, and products, including without limit the “CEO Duties” (as
hereinafter defined); provided that at all times you shall exercise the
foregoing authority within the annual, strategic or operating budget parameters
reasonably established and reasonably agreed to between you and the Company
herein and as revisited and modified (including based upon requests or
recommendations initiated by you or the Company each acting in good faith and
in a manner historically and customarily undertaken prior to the Commencement
Date) from time to time (the “Approved Plans”), and within the Company’s
uniformly applicable and standard procedures and policies (the “Company
Policies and Procedures”).


 


For
purposes hereof, the “CEO Duties” shall include and consist of those Blizzard
activities, operations and functions comprised of the following, but qualified
in all instances by and subject to (A) the Company Policies and
Procedures, (B) Approved Plans, and (C) the Exclusions (as defined in
the next paragraph):  (i) product
development (including all greenlight processes, product plans, schedules, ship
dates, technologies, tools, teams, personnel, contracts, and other
methodologies pertaining to same), (ii) exploitation of franchise rights
and intellectual properties, (iii) branding and all brand marketing,
advertising, public relations, community management and licensing (including
merchandising, television, motion pictures and ancillary product licenses and
rights) pertaining to products developed, distributed or sold by Blizzard, as
well as all trademarks and service marks incorporating or involving “Blizzard”
or “Battle.Net,” (iv) human resource, recruiting, finance, information
technologies, network operations, purchasing, quality assurance or control,
customer service, billing and technical support, (v) website design,
content, form, display and function, (vi) new or existing business
development or market growth and pricing functions, (vii) physical plant,
facility and office locations, as well as occupancy and use of all such
premises or facilities, (viii) use or utilization of any outsourced
activities or services, (ix) implementation of all project or other
operating, capital expenditure, or similar budgets, (x) establishment or
implementation (without any required approval) of employee rewards/perquisites
not exceeding Two Hundred Thousand Dollars ($200,000) per year in the
aggregate, (xi) any reorganization of the internal organization or structure of
Blizzard including all matters affecting such internal departmentalization,
titles, and reporting lines of responsibility regarding Blizzard personnel; and
(xii) the preparation of all annual, strategic and operating budgets and
plans for presentation to and approval by the Chief Executive Officer of the
Company (provided, however, the timing of the delivery of such budgets and
plans, as well as the level of detail to be covered thereby and the business
objectives to be accomplished thereby shall be determined in advance by the
Chief Executive Officer of the Company). 
For clarity, the use by the Company, Vivendi S.A. or any of their
subsidiaries of the name of the Company (as amended as of the Commencement Date
to “Activision Blizzard 


 


8

















 


Inc.”),
the name “Blizzard” and the name of any product of Blizzard, in each case, for
any and all general corporate purposes where it is reasonably necessary or
desirable in the sole judgment of the Company or where required by law (e.g.,
for required filings, on corporate communications and communications with
investors, on copyright notices) shall not be deemed a violation of clause (iii) (or
any other clause) of the foregoing definition of CEO Duties.  The Company acknowledges and agrees that
discretionary uses of the name “Blizzard” (other than as set forth in the
immediately preceding sentence) in conjunction with any product of the Company
or its Affiliates other than a product developed, distributed or sold by
Blizzard shall be a violation of clause (iii) unless your prior consent is
obtained for that use.


 


Notwithstanding
anything in this Agreement to the contrary, the CEO Duties with regard to
Blizzard do not include, and you shall not take (or permit or cause Blizzard to
take) any of the following actions without the express prior approval of the
Chief Executive Officer of the Company:  (A) selling,
licensing, transferring or encumbering any intellectual property of Blizzard
other than in the ordinary course of business; (B) terminating any
Blizzard Management Team Member or taking any action that results in any
Blizzard Management Team Member having “Good Reason” (as defined under the
applicable employment agreement) to resign from employment with the Company; (C) entering
into any employment agreement outside the ordinary course of business, adopting
or amending any material employee benefit plan or HR policy; (D) issuing
any securities of Blizzard, including, without limitation, options, warrants or
other rights convertible into or exchangeable for securities of Blizzard; (E) engaging
in any acquisition, disposition or sale of any assets, other than in the
ordinary course of business; (F) investing in any other entity, or
entering into any joint venture agreement (other than, in each case, with a
wholly-owned subsidiary of Blizzard); (G) incurring indebtedness
(excluding indebtedness contemplated by an Approved Plan or variances of not
more than 10% of any budgeted line item within the Approved Plan which
variances do not aggregately cause the total indebtedness with such Approved
Plan to be exceeded); (H) granting any guarantee of obligations of any
entity or individual (other than of a wholly-owned subsidiary of Blizzard); (I) entering
into any affiliate agreement with an employee of Blizzard other than an
agreement related to such employee’s employment by the Company or termination
thereof; (J) entering into any agreement (i) to do any of the
foregoing, or (ii) not contemplated by an Approved Plan and that
contemplates a payment by or to Blizzard (or could reasonably result in a
payment by or to Blizzard) in excess of the amounts set forth in the Approved
Plans, and within the Company Policies and Procedures.  The foregoing matters identified in this
paragraph are the “Exclusions.”


 


For
purposes of this Agreement, the “Blizzard Management Team Members” shall
individually consist of each of and collectively be comprised of all of you,
Paul Sams as installed in the office of Chief Operating Officer, Frank Pearce
as installed in the office of Executive Vice President, Product Development,
Robert Pardo as installed in the office of Senior Vice President, Game Design,
Christopher Metzen as installed in the office of Vice President, Creative
Development, and Neal Hubbard, as installed in the office of Vice President,
Global Marketing.


 


For
purposes of this Agreement, a “Change in Control of Blizzard” shall mean the
occurrence of any of the following events: (i) any “person” or “group” (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Securities Exchange Act”)) other than
Vivendi S.A., the Company or one of the Company’s wholly-owned subsidiaries,
becomes the “beneficial owner” (as defined in Rules 13d-3 or 13d-5 of the 


 


9

















 


Securities
Exchange Act), directly or indirectly, of either the voting securities or total
securities of Blizzard representing fifty percent (50%) or more of either the
voting power or total equity represented by Blizzard’s then outstanding voting
or other securities; (ii) the consummation of the sale, transfer, lease,
or other disposition by Blizzard of all or substantially all of its assets in a
single transaction or in a series of related transactions; or (iii) the
consummation of a merger, liquidation, joint venture, combination, consolidation,
recapitalization, or other reorganization transaction of Blizzard, other than
any such transaction which would result in the voting securities of Blizzard
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) more than fifty percent (50%) of the total
voting power represented by the voting securities of Blizzard or such surviving
entity or joint venture outstanding immediately after such transaction.


 


(d)           Termination for Cause; Without
Good Reason.  In the event that your
employment is terminated for Cause or if you resign without Good Reason, you
will be entitled to the following: 
Payment of (1) any accrued but unpaid Base Salary due you through
termination, (2) any accrued but unpaid vacation, (3) any
unreimbursed expenses owed, accrued or incurred by you through termination, and
(4) other unpaid amounts then due you under Company benefit plans,
programs or policies, paid in accordance with the terms of such benefit plans,
programs or policies.


 


(e)           Termination for Disability.  The Company may terminate your employment on
account of a Disability. You will be deemed to have a “Disability” if you are
incapacitated by a physical or mental condition, illness or injury which has
prevented you, after reasonable accommodation, from being able to perform the
essential duties of your position under this Agreement in a satisfactory
fashion for all of a consecutive one hundred eighty (180) day period.  In the event of your suffering any condition
which could result in your having suffered a Disability, your Base Salary shall
continue until the earliest of (i) the 180th day following the start of
your Disability absence or (ii) your death or (iii) the last day of
the then current Term of this Agreement and will (under each of the foregoing
clauses) be reduced by other Company provided disability benefits paid to and
received by you.  In the event your
employment is terminated on account of a Disability, you will be entitled to
the following: payment of (1) any accrued but unpaid Base Salary due you
through termination, (2) any accrued but unpaid vacation, (3) any
unreimbursed expenses owed, accrued or incurred by you through termination; (4) other
unpaid amounts then due you under Company benefit plans, programs or policies,
paid in accordance with the terms of such benefit plans, programs or policies, (5) if
not already due or paid under the terms of an applicable Bonus Plan, both the
full amount of any previously earned or declared but unpaid bonus for any past
fiscal year or period and a prorated bonus for the fiscal year or period in
which such termination occurs, each being paid at such time that such bonus is
paid to similarly situated executives all as contemplated under Paragraphs
3(b), 3(c), 3(d) and 3(e) hereof, and (6) all amounts as
required or provided under Paragraphs 3(f) and 3(g) of this
Agreement.


 


(f)            Death.  If you die while employed under this
Agreement, you will be entitled to the following:  payment of (1) any accrued but unpaid
Base Salary due you through your date of death, (2) any accrued but unpaid
vacation, (3) any un-reimbursed expenses owed, accrued or incurred by you
through your date of death, (4) other unpaid amounts then due you under
Company benefit plans, programs or policies, except that those payments will be
made to your 


 


10

















 


estate
or legal representative, paid in accordance with the terms of such benefit
plans, programs or policies, (5) if not already due or paid under the
terms of an applicable Bonus Plan, both the full amount of any previously
earned or declared but unpaid bonus for any past fiscal year or period and a
prorated bonus for the fiscal year or period in which your death occurs, each
being paid at such time that such bonus is paid to similarly situated
executives all as contemplated under Paragraphs 3(b), 3(c), 3(d) and 3(e) hereof,
(6) any death benefits payable under Company employee benefit plans,
programs or policies, paid in accordance with the terms of such benefit plans,
programs or policies, and (7) all amounts as required or provided under
Paragraphs 3(f) and 3(g) of this Agreement.


 


(g)           Termination Without
Cause/Resignation with “Good Reason.” 
In the event the Company terminates your employment without Cause, or
you resign and terminate your employment with the Company with Good Reason, you
shall be entitled to the following: payment of (1) any accrued but unpaid
Base Salary due you through termination, (2) any accrued but unpaid
vacation, (3) any unreimbursed expenses owed, accrued or incurred by you
through termination, (4) other unpaid amounts then due you under Company
benefit plans, programs or policies, paid in accordance with the terms of such
benefit plans, programs or policies, (5) if not already due or paid under
the terms of an applicable Bonus Plan, both the full amount of any previously
earned or declared but unpaid bonus for any past fiscal year or period and a
prorated bonus for the fiscal year or period in which such termination occurs,
each being paid at such time that such bonus is paid to similarly situated
executives all as contemplated under Paragraphs 3(b), 3(c), 3(d) and 3(e) hereof,
(6) your Base Salary, an amount equal to the sum of the actual annual
bonuses paid to you under the MIP and Holiday Plan for the year immediately
preceding the year of termination, and your benefits under the Welfare Plans
(but not including benefits provided under (i) any plan qualified under Section 401(a) of
the Internal Revenue Code (except that any such benefits accrued, owing or
vested through the date of or as a result of such termination shall remain
payable under such plan in accordance with the terms thereof), (ii) any
nonqualified deferred compensation plan (except that any such benefits accrued,
owing or vested through the date of or as a result of such termination shall
remain payable under such plan in accordance with the terms thereof), and (iii) any
stock or incentive based plan (except that any such benefits accrued, owing or
vested through the date of or as a result of such termination shall remain
payable under such plan in accordance with the terms thereof) each as
determined from the date of such termination through the last day of the
unexpired then current Term of this Agreement, or, if longer, through the date
which is two (2) years from and after the date of such termination, all as
if such termination had not occurred, (7) an amount equal to two (2) times
the actual annual bonus compensation paid to you under the Profit Sharing Plan
for the year immediately preceding the year of termination, and (8) any
and all payments owed to you as provided under Paragraphs 3(f), 3(g) and 3(n) of
this Agreement; provided further that you meet the requirements of Paragraph 5
and that the provision and payment to you of any such continuing benefits shall
be made subject to the terms and conditions of each governing and applicable
benefit plan as in effect on the date of such termination.  All amounts payable to you under sub-clauses
(1), (2), (3), (6), (7) and (8) of this Paragraph shall be remitted
and paid by the Company to you within ten (10) days from and after your
termination of employment hereunder in a single lump sum payment.


 


(h)                                 In
the event your employment is terminated by the Company without Cause (but not
if you resign with Good Reason), and at that time the Company has in place a
written


 


11
















 


severance plan or policy that has been approved by the Company’s Board
of Directors (“Company Severance Plan”), in addition to the benefits described
in Paragraph 4(g), you may receive a “Lump Sum Severance Payment.”  The Lump Sum Severance Payment will be equal
to the amount, if any, by which the cash payments due to you under the terms of
the Company Severance Plan exceed the Base Salary continuation payable pursuant
to Paragraph 4(g)(6).  It is understood
that the severance pay and benefits due to you under this Agreement are in lieu
of, and not in addition to, any severance pay or benefits due to you under the
Company Severance Plan.


 


(i)                                     No
Mitigation or Offset.  If the Company
terminates your employment other than for Cause or you resign and terminate
your employment for Good Reason, you will have no duty to attempt to seek
alternate employment or otherwise mitigate the payments or benefits owed to you
from the Company under Paragraphs 4(e) or 4(g) hereof.  In addition, the Company will not retain a right
of offset against or have any right to reduce any amounts or benefits payable
or provided to you under this Agreement irrespective of any employment
subsequently obtained by you or any salary, bonus and/or benefits or other
compensation of any kind earned or received by you for services rendered to any
third party, through self-employment or from any source whatsoever from and
after the date of such termination hereunder.


 


5.                                       Covenants.


 


(a)                                  Acknowledgment.  You acknowledge that you currently possess or
will acquire secret, confidential, or proprietary information or trade secrets
concerning the operations, future plans, or business methods of the Company
and/or Blizzard.  You agree that the
Company would be severely damaged if you misused or disclosed this information
or engaged in the activities described herein. 
To prevent this harm, you are making the promises set forth in this
Paragraph 5.  You acknowledge that the
provisions of this Paragraph 5 are reasonable and necessary to protect the
legitimate interests of the Company and that any violation of such provisions
would result in irreparable injury to the Company.  In the event of a violation of the provisions
of this Paragraph 5, you further agree that the Company will, in addition to
all other remedies available to it, be entitled to seek equitable relief by way
of injunction and any other legal or equitable remedies.


 


(b)                                 Promise Not to
Disclose.  You will
hold in a fiduciary capacity, for the benefit of the Company, all confidential
or proprietary information, knowledge and data of the Company and/or Blizzard
and Company Information (as defined below), which you may acquire, learn,
obtain or develop during your employment by the Company.  Further, you will not, during the Term or at
any time thereafter, directly or indirectly use, communicate or divulge for
your own benefit or for the benefit of another any such information, knowledge
or data other than (i) as required by Blizzard or the Company or (ii) as
required by law or as ordered by a court or in connection with governmental
investigation or (iii) with respect to matters that are generally known to
the public (other than as a result of your breach of this Agreement) or (iv) to
your attorneys, but only to the extent necessary to allow their provision to
you of professional services or (v) as necessary to permit you to defend
against any claim or prosecute or enforce any rights dependent or reliant upon
the information so disclosed.  You make
the same commitments with respect to the secret, confidential or proprietary
information, knowledge and data of customers, contractors and others with whom
the Company and/or Blizzard has a business relationship or to whom the Company
and/or Blizzard owes a duty of confidentiality. 
The information covered by 


 


12

















 


this
protection includes, but is not limited to, matters of a business or strategic
nature such as information about costs and profits, projections, personnel
information, reengineering, records, customer lists, contact persons, customer
data, software, sales data, possible new business ventures and/or expansion
plans or matters of a creative nature, including without limitation, matters
regarding ideas of a literary, creative, musical or dramatic nature, or
regarding any form of product produced, distributed or acquired by Blizzard
and/or the Company (“Company Information”). 
Company Information will be considered and kept as the private,
proprietary and confidential information of the Company and Blizzard except
within Blizzard and the Company as required to perform services, and may not be
divulged (A) without the express written authorization of the Company or (B) unless
required by law or ordered by a court or in connection with governmental investigation
or (C) unless the Company Information is generally known to the public or (D) except
to your attorneys, but only to the extent necessary to allow their provision to
you of professional services or (E) except as necessary to permit you to
defend against any claim or prosecute or enforce any rights dependent or
reliant upon the information so disclosed. 
You further agree that you will neither publicly disclose the terms of
this Agreement nor publicly discuss the Company in a manner that tends to portray
the Company in an unfavorable light.


 


(c)                                  Promise Not to
Engage In Certain Activities.  You will not at any time during your
employment by the Company be or become (i) interested or engaged in any
manner, directly or indirectly, either alone or with any person, firm or
corporation now existing or hereafter created, in any business which is or may
be competitive with the Company, Blizzard and/or the “Subject Businesses” of
Vivendi S.A. (for so long as it is a shareholder of the Company) or (ii) directly
or indirectly a stockholder or officer, director, agent, consultant or employee
of, or in any manner associated with, or aid or abet, or give information or
financial assistance to, any such business. 
The provisions of this Paragraph will not be deemed to prohibit your
purchase or ownership, as a passive investment, of not more than five percent
(5%) of the outstanding capital stock of any corporation whose stock is
publicly traded.  For purposes hereof,
the “Subject Businesses” shall be comprised of commercial for profit activities
consisting of either the creation, production, manufacture, sale or
exploitation of either interactive video games or music (including those
distributed by recorded or digital media); provided, that nothing contained
herein shall prevent you from individually engaging in, providing or performing
musical entertainment services as a performing or recording artist.


 


(d)                                 Promise to
Return Property.  All
records, files, lists, drawings, documents, models, equipment, property, computer,
software or intellectual property relating to the Company’s and/or Blizzard’s
business in whatever form (including electronic) will be returned to the
Company upon the termination of your employment, whether such termination is at
your or the Company’s request. 
Notwithstanding the foregoing, upon termination of your employment with
the Company, you shall be entitled to retain possession of any and all personal
files, personal service awards, and personal contact information generated by
you (including your personal rolodex or other physical, digital, electronic or
other repository of such information) in the course of your professional career
and all personal effects or items including furnishings, artwork, decorations,
statues, toys, books, merchandise and other similar personalty.


 


(e)                                  Promise Not to
Solicit.  You will not during (i) the
period of your employment by the Company and (ii) the period after
termination of your employment with the Company and during which you are being
paid under Paragraph 4 of this Agreement (including any period 


 


13

















 


corresponding
to any lump sum payment you may receive) (the “Restricted Period”) directly or
indirectly solicit for employment, employ or induce or attempt to induce any
employees, consultants, contractors or representatives of the Company and/or
Blizzard to stop working for, contracting with or representing the Company
and/or Blizzard.  Notwithstanding the
foregoing, you shall not be in breach or violation hereof in the event you
shall use any form of industry wide or public media to advertise, seek or
solicit employment, consulting, contract or representative services.  During the Restricted Period, you also shall
not, directly or indirectly, solicit, induce, or attempt to solicit or induce
any person known to you to be a customer, client, vendor or supplier of the
Company and/or Blizzard  (a “Customer”)
to terminate his, her or its relationship with the Company and/or Blizzard for
any purpose, including the purposes of decreasing the amount of business that
any such Customer conducts with the Company and/or Blizzard.


 


(f)                                    Promise to
Cooperate.  During any
period which you are being paid under Paragraph 4 of this Agreement after the
termination of your employment with the Company (including any period
corresponding to any lump sum payment you may receive), you agree to make
yourself reasonably available, subject to your other personal and professional
commitments and obligations, to provide information and other assistance as
reasonably requested by the Company (and, at the expense of the Company), with
respect to pending, threatened or potential claims and other matters related to
the business of Blizzard about which you have personal knowledge as a result of
your supervision or other involvement within such claims or matters performed
in connection with your employment.  In
the event you are required to dedicate more than two hours per week or eight
hours per month towards the provision of any support or assistance to the
Company required hereunder, the Company shall compensate you at the same hourly
equivalent rated determined based upon your Base Salary and assuming dedication
of 2,000 hours per year in exchange for same. 
In all events, the Company shall reimburse you or pay on your behalf,
all direct expenses incurred (including any travel) in connection with your
fulfillment of your obligations under this Paragraph.


 


(g)                                 Company
Ownership.  The results
and proceeds of your services hereunder (excluding for all purposes of this
Paragraph any such results or proceeds from your undertaking of the Permitted
Activities), including, without limitation, any works of authorship or works in
progress resulting from your services during your employment with the Company
and/or any of the Company’s Affiliates, will be works-made-for hire and the
Company will be deemed the sole owner throughout the universe of any and all
rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner the Company determines in its sole discretion
without any further payment to you whatsoever. 
If, for any reason, any of such results and proceeds covered by this
Paragraph will not legally be a work-for-hire and/or there are any rights which
do not accrue to the Company under the preceding sentence, then you hereby
irrevocably assign and agree to assign any and all of your right, title and
interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed, to the Company, and the Company will have the right to
use the same in perpetuity throughout the universe in any manner the Company
determines without any further payment to you whatsoever.  You will, from time to time, as may be
requested by the Company, do any and all things which the Company may deem useful
or desirable to establish or document the 


 


14

















 


Company’s
exclusive ownership of any and all rights in any such results and proceeds
covered by this Paragraph, including, without limitation, the execution of
appropriate copyright and/or patent applications or assignments.  To the extent you have any rights in the
results and proceeds of your services covered by this Paragraph that cannot be
assigned in the manner described above, you unconditionally and irrevocably
waive the enforcement of such rights. 
This Paragraph is subject to and will not be deemed to limit, restrict,
or constitute any waiver by the Company of any rights of ownership to which the
Company may be entitled by operation of law by virtue of the Company being your
employer.  You and the Company
acknowledge that pursuant to California Labor Code §2870 certain inventions are
not assignable to the Company, including any invention you develop entirely on
your own time without using the Company’s equipment, supplies, facilities or
trade secret information.  California
Labor Code Section 2870 specifically provides:


 


Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer’s
equipment, supplies, facilities, or trade secret information except for those
inventions that either:


 


(1)                                 Relate
at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or
development of the employer; or


 


(2)                                 Result
from any work performed by the employee for the employer.


 


(h)                                 Prior
Restrictions.  You
represent that you are free to enter into this Agreement and are not restricted
in any manner from performing under this Agreement by any prior agreement,
commitment, or understanding with any third party.  If you have acquired confidential or
proprietary information in the course of your prior employment or as a
consultant, you will fully comply with any duties not to disclose such
information then applicable to you during the Term.


 


6.                                       Services Unique.  You recognize that your services hereunder
are of a special, unique, unusual, extraordinary and intellectual character,
giving them a peculiar value, the loss of which the Company cannot be
reasonably or adequately compensated for in damages.  In the event of a breach of this Agreement by
you (particularly, but without limitation, with respect to the provisions
hereof relating to the exclusivity of your services and subject only to your
performance of the Permitted Activities), the Company will, in addition to all
other remedies available to it, be entitled to seek equitable relief by way of
injunction and any other legal or equitable remedies.  This provision will not be construed as a
waiver of the rights which the Company may have for damages under this
Agreement or otherwise, and all of the Company’s rights and remedies will be
unrestricted.


 


7.                                       Notices.  All notices and other communications
hereunder will be in writing and will be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:


 


15

















 


If
to Employee:


 


At
the address indicated on the first page hereof.


 


With a copy to:


 


Greenberg
Traurig. LLP

3290 Northside Parkway

Suite 400

Atlanta, Georgia 30327

Attention:  Duane D. Sitar


 


If
to the Company:


 


To
the address(es) set forth on Exhibit A


 


or
to such other address as either party will have furnished to the other in
writing.  All notices and communications
shall be deemed to have been duly given and received: (a) on the date of
receipt, if delivered by hand; (b) three (3) business days after
being sent by first class certified mail, return receipt requested, postage
prepaid; or (c) one (1) business day after sending by a nationally
recognized next-day deliver service designated for priority overnight delivery
with all delivery fees prepaid and with confirmation of receipt.  As used herein, the term “business day” means
any day that is not Saturday, Sunday or legal holiday in the State of California.


 


8.                                       Assignment/Affiliated
Corporations.  The Company
will have the right to assign this Agreement to any Affiliate or successor of
the Company as long as such assignee fully assumes this Agreement in writing;
provided, that any such assignment by the Company permitted hereunder shall not
affect or relieve the Company from its continuing and primary responsibility
and liability hereunder to you as a result of such assignee’s breach, violation
or default of any obligation owed to you hereunder.  You acknowledge and agree that all of your
covenants and obligations to the Company, as well as the rights of the Company
hereunder, will run in favor of and will be enforceable by the Company, its
Affiliates and their successors.  Upon to
the Closing (as defined in the Business Combination Agreement), Vivendi Games (i) shall
assign its obligations under this Agreement to the Company and (ii) shall
use its reasonable best efforts to cause the Company to assume this
Agreement.  Vivendi Games hereby
represents and warrants to you that the terms and provisions of the Business
Combination Agreement require that the Company assume this Agreement and employ
you hereunder upon the occurrence of the Closing thereunder and effective as of
the Closing Dote thereunder.  The Company’s
assumption of this Agreement shall be evidenced by an assignment and assumption
agreement, a copy of which will be provided to you promptly following the
Closing Date.


 


9.                                       Miscellaneous.  No provisions of this Agreement may be
amended, modified, waived, or discharged except by a written document signed by
you and a duly authorized officer of the Company.  A waiver of any conditions or provisions of
this Agreement in a given instance will not be deemed a waiver of such
conditions or provisions at any other time. 
The validity, interpretation, construction, and performance of this
Agreement will be governed by the laws of the State of California.  This Agreement will be binding upon, and will
inure to the benefit of, you and your estate and the Company and any successor
thereto, but neither this Agreement nor any rights arising under it may be
assigned or pledged by you.


 


16

















 


10.                                 Validity.  If any of the provisions of this Agreement
shall otherwise contravene or be invalid under the laws of any state, country
or other jurisdiction where this Agreement is applicable but for such
contravention or invalidity, such contravention or invalidity shall not
invalidate all of the provisions of this Agreement but rather it shall be
construed, insofar as the laws of that state, country or jurisdiction are
concerned, as not containing the provision or provisions contravening or
invalid under the laws of that state or jurisdiction, and the rights and
obligations created hereby shall be construed and enforced accordingly.


 


11.                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all of which
together will constitute the same instrument.


 


12.                                 Entire
Agreement.  This
Agreement along with the Exhibits attached hereto set forth the entire
understanding between you and the Company; all oral or written agreements or
representations, express or implied, with respect to the subject matter of this
Agreement are set forth in this Agreement or within the plans, policies or
programs referenced herein.  All prior
employment agreements, understandings and obligations (whether written, oral,
express or implied) between you and the Company, if any, are terminated as of
the Commencement Date of the Term and are superseded by this Agreement.


 


13.                                 Section 409A.


 


(a)                                  Specified
Employee.  If you are
a “specified employee” as defined in Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations, rulings and
guidance issued thereunder (“Section 409A”), then you shall not be
entitled to any payments or benefits hereunder that constitute deferred
compensation subject to Section 409A, and whose payment or provision is
triggered by your termination of employment (whether such payments or benefits
are provided to you under this Agreement or under any other plan, program or
arrangement of the Company or Blizzard) and is not otherwise subject to or
qualifies for an exemption or exception from the application of Section 409A,
until the earlier of (i) the date which is the first business day
following the six-month anniversary of your termination of employment for any
reason other than death (on which date all payments otherwise due or owing to you
which are delayed hereunder shall be retroactively made in full) or (ii) your
date of death.  The Company shall make
the determination as to whether you are a “specified employee” in good faith in
accordance with its uniform methodology and procedures adopted in accordance
with Section 409A and, at the time of your termination of employment will
notify you whether or not you are a “specified employee.”  For all purposes of this Agreement, it is
hereby agreed that each and every payment made to you as a result of your
termination of employment hereunder (notwithstanding any expression or
remittance of same upon installment or similar terms) shall constitute a
separate payment for all purposes of Section 409A.


 


(b)                                 Section 409A
Matters.  This Agreement is intended to
satisfy the requirements of Section 409A of the Code with respect to
amounts, if any, subject thereto and shall be interpreted and construed and
shall be performed by the parties consistent with such intent.  If either party notifies the other in writing
that, based on the advice of legal or tax counsel, one or more of the
provisions of this Agreement contravenes Section 409A or causes any
amounts to be subject to interest, additional tax or penalties under Section 409A,
the parties shall promptly and reasonably consult with each other (and with
their legal counsel), and shall use their reasonable 


 


17

















 


best
efforts, to reform the provisions hereof to (i) maintain to the maximum
extent practicable the original intent of the applicable provisions without
violating the provisions of Section 409A of the Code or increasing the
costs to the Company of providing or decrease the amount received by you under
the applicable benefit or payment and (ii) to the extent possible, to
avoid the imposition of any interest, additional tax or other penalties under Section 409A
upon you or the Company.  Except as
expressly provided otherwise herein, no reimbursement payable to you pursuant
to any provisions of this Agreement or pursuant to any plan or arrangement of
the Company or Blizzard 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, and no such reimbursement during any calendar year shall
affect the amounts eligible for reimbursement in any other calendar year,
except, in each case, to the extent that the right to reimbursement does not
provide for a “deferral of compensation” within the meaning of Section 409A.


 


14.                                 Indemnity.  Notwithstanding anything contained herein to
the contrary, the Company hereby agrees to fully and unconditionally indemnify,
defend and hold you harmless to the maximum extent permitted under applicable
law from and against any and all lawsuits, claims, causes of action,
allegations or accusation incurred or encountered by you as a result, in
connection with or arising from or under your good faith performance or
rendering of any duties, services, or activities for or on behalf of the Company
or its Affiliates or your status as an employee, officer, director,
shareholder, owner, agent, fiduciary or representative of the Company.  In furtherance of the foregoing, the Company
agrees to both (i) throughout the Term and for not less than six (6) years
from and after the termination of your employment with the Company, to maintain
or cause to be maintained errors and omissions, directors and officers, and
such other liability insurance upon terms and conditions no less favorable than
those currently in effect or otherwise hereafter maintained by any Company
Affiliate and to cause you to be named as an additional insured under any such
insurance policies with all coverage provided thereunder being primary and with
all rights of subrogation as against you under such policies being waived and (ii) extend
all rights of indemnification from the Company to you upon terms and conditions
and subject to insurance coverage levels no less favorable than those offered
or extended by the Company or its Affiliates to the Company’s or such
Affiliates employees, officers or directors.


 


15.                                 Affiliates.  For all purposes of this Agreement, the term “Affiliates”
as it applies to any party hereto shall mean, as applicable, (a) any
person or entity which directly or indirectly (through one or more
intermediaries) is controlling, controlled by or under common control with that
party, (b) any person or entity owning or controlling more than ten
percent (10%) of the outstanding voting securities or beneficial interests of
that party, or (c) in the case of an individual, such party’s spouse,
lineal descendants or lineal ancestors. 
For purposes of this Agreement, “control” means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise, including the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such party.


 


[The remainder of this page is
intentionally blank

Signatures contained on the following page.]


 


18

















 


If
the foregoing terms are acceptable to you, please execute this letter below and
return it to me. A duplicate original is enclosed for your records.


 


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VIVENDI
  GAMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  Bruce L. Hack

  
	
   

  	
   

  	
      Bruce
  L. Hack, Chief Executive Officer

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
      /s/ Michael Morhaime

  	
   

  	
   

  
	
  Michael Morhaime

  	
   

  
				



 


 


[signature
page to employment agreement]


 

















 


Exhibit A – Notices