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EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Amended and Restated Employment Agreement, dated as of May 22, 2000, by and
between ACTIVISION, INC., a Delaware corporation with its principal offices at
3100 Ocean Park Boulevard, Santa Monica, CA 90405 (the "COMPANY"), and ROBERT A.
KOTICK (the "EXECUTIVE").
RECITALS:
WHEREAS, the Board of Directors of the Company (the "BOARD") approved the
execution and delivery of an Employment Agreement, dated as of January 12, 1999,
by and between the Company and Executive at a meeting of the Board held on
January 12, 1999 (the "EMPLOYMENT AGREEMENT"), pursuant to which, among other
things, the Company granted Executive options to purchase 1,000,000 shares of
common stock of the Company (the "INITIAL OPTIONS");
WHEREAS, on April 18, 2000, a "Change of Control" (as defined in Section
9(a)(i) of the Employment Agreement) occurred when Eastbourne Capital
Management, L.L.C. acquired greater than 15% of the total outstanding voting
stock of the Company (the "EASTBOURNE CHANGE OF CONTROL");
WHEREAS, in accordance with the Employment Agreement, upon the Eastbourne
Change of Control, the Executive became entitled to certain payments and other
benefits from the Company;
WHEREAS, the Board has determined that it is in the best interests of the
Company and its stockholders to enter into this Amended and Restated Employment
Agreement (this "Agreement") to provide, among other things, the Executive with
certain payments and benefits that became due upon the Eastbourne Change of
Control, to reflect certain waivers by the Executive of compensation and other
benefits to which he became entitled as a result of the Eastbourne Change of
Control, and to assure that the Company will have the continued dedication of
the Executive by providing him with the additional compensation and benefit
arrangements contained herein;
WHEREAS, the Compensation Committee of the Board approved the execution and
delivery of this Agreement by the Company at a meeting of the Compensation
Committee of the Board held on May 24, 2000; and
WHEREAS, the Company has entered into an Amended and Restated Employment
Agreement (the "OTHER EXECUTIVE EMPLOYMENT AGREEMENT"), dated as of the date
hereof, on substantially similar terms and conditions as contained herein, with
Brian G. Kelly (the "OTHER EXECUTIVE").
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:
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1. POSITION AND DUTIES.
(a) The Company agrees to continue to employ the Executive, and the
Executive agrees to continue to be employed, as Chairman and Chief Executive
Officer of the Company, subject to the supervision of, and reporting only to,
the Board. The Executive shall have such senior executive powers, duties,
authorities and responsibilities as are consistent with Executive's position and
title and as have historically been performed by Executive, including acting as
co-chairman of any meeting of the Board, supervising financing, acquisitions and
similar major strategic transactions and strategic planning for the Company
consistent with his title and position, supervising the President and Chief
Operating Officer of the Company and managing all non-operating activities of
the Company, including corporate governance, organizational structure,
acquisitions and financing, senior executive compensation, stock and stock
option issuances and stock option plan management. At all times during the
period of Executive's employment, 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 (as defined in Section 2 below) and
excluding any periods of vacation, the Executive agrees to devote such time,
attention and efforts to the business and affairs of the Company as may be
necessary to discharge the duties and responsibilities assigned to the Executive
hereunder and to use the Executive's reasonable best efforts to perform
faithfully and efficiently such duties and responsibilities.
(c) It shall not be a violation of this Agreement for the Executive
to engage in any activity which is, in the good faith opinion of the Executive,
not inconsistent with the Company's interests and prospects, including, without
limitation, (a) serving on civic or charitable boards or committees; (b) serving
as an officer or director of any Company that is not in a Competitive Business
(as defined herein); (c) delivering lectures, fulfilling speaking engagements or
teaching at educational institutions; (d) managing personal investments; and (e)
attending conferences conducted by business organizations; provided, however,
that such activity does not significantly interfere with the performance of
Executive's duties and responsibilities hereunder. It is expressly understood
and agreed that to the extent that any activity has been conducted by the
Executive prior to the date of this Agreement, the continued conduct of such
activity (or the conduct of an activity similar in nature and scope thereto)
during the Employment Period shall be deemed not to interfere with the
performance of the Executive's duties and responsibilities to the Company and
shall not constitute a violation of this Agreement.
(d) Except for periodic travel assignments, the Executive shall not,
without his consent, be required to perform services for the Company at any
place other than the principal place of the Company's business which shall at
all times, unless the Executive otherwise consents, be within a 20 mile radius
of the Company's current principal place of business. Notwithstanding anything
herein to the contrary, the Executive may, at his sole discretion and upon prior
written notice to the Board, relocate
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at any time to New York City, New York in connection with the establishment by
the Company of executive offices in such city.
2. EMPLOYMENT PERIOD. The employment of the Executive under the terms of
this Agreement shall become effective on April 1, 2000 and terminate on March
31, 2006 (the "EMPLOYMENT PERIOD"). Notwithstanding anything contained herein to
the contrary, the Executive's employment pursuant to the terms of this Agreement
is subject to termination pursuant to Section 5 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 fiscal year of the Company or portion thereof
during the Employment Period. Commencing on April 1, 2000, the Base Salary for
the Company's fiscal year ending March 31, 2001 shall be $450,000. Thereafter,
on April 1 of each year of the Employment Period, beginning on April 1, 2001,
the Base Salary shall automatically increase to an amount equal to one hundred
ten (110%) percent of the Base Salary for the Company's prior fiscal year. The
Company may withhold from any amounts payable under this Agreement all
applicable tax, Social Security and other legally required withholding pursuant
to any law or regulation ("WITHHOLDING"). The Base Salary shall be paid in
accordance with the customary payroll practices of the Company at regular
intervals, but in no event less frequently than every month, as the Company may
establish from time to time for senior executive employees of the Company. The
Board shall conduct an annual performance appraisal and salary review on behalf
of the Executive and may adjust the Base Salary for any succeeding fiscal year,
but never below the Base Salary that would have been in effect during such
succeeding fiscal year in accordance with this Section 3(a). Any period of less
than a full fiscal year which the Base Salary is calculated shall be pro rata.
(b) ANNUAL BONUS. The Executive shall be entitled to receive an
annual bonus for each fiscal year of the Company (the "ANNUAL BONUS"), beginning
with the fiscal year ending March 31, 2001, based upon the Company achieving
mutually agreed upon financial and business objectives for the fiscal year with
respect to which the Annual Bonus accrues. Such financial and business
objectives for each fiscal year shall be (i) agreed to by the Executive and the
Board not later than fifteen (15) days prior to the beginning of each fiscal
year and shall be (ii) made in accordance with Section 11 of the Company's 1998
Incentive Plan. The Annual Bonus shall take of the form of, without limitation,
cash, shares of common stock of the Company, Options (as defined herein) or
loans, as the case may be. The Company shall pay each Annual Bonus to the
Executive no later than thirty (30) days after the completion of the Company's
audited consolidated financial statements by the Company's auditors for the
subject fiscal year. Each Annual Bonus payment shall be subject to Withholding.
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
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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. Any period of less than a full fiscal year which the
Annual Bonus is calculated shall be pro rata. The Annual Bonus is intended to
qualify as a Performance Award under Section 11 of the Company's 1998 Incentive
Plan and shall be subject to the conditions and limitations of such section.
(c) PERFORMANCE BONUS. The Board, in its sole discretion, may award
to the Executive a performance bonus at any time in such amount and in such form
as the Board may determine, including, without limitation, in the form of cash,
shares of common stock of the Company, Options or loans, as the case may be (the
"PERFORMANCE BONUS"), after taking into consideration other compensation paid or
payable to the Executive under this Agreement, as well as the financial and
non-financial progress of the business of the Company and the contributions of
the Executive toward that progress. Any Performance Bonus shall be subject to
Withholding. Any period of less than a full fiscal year which the Performance
Bonus is calculated shall be pro rata.
4. BENEFITS.
(a) MEDICAL, ETC. The Executive shall be entitled to such medical and
other benefits, including hospitalization, disability, life and health
insurance, to the extent offered by the Company, as are customarily made
available to senior executive officers of the Company and upon the same terms.
The Executive shall also be entitled to receive those benefits and privileges
that the Company currently, and may at any time in the future, provide for its
executive officers upon the same terms.
(b) EXPENSES. The Executive shall be reimbursed by the Company for
all reasonable travel, entertainment, conference expenses, organization dues and
other expenses incurred by the Executive in connection with the performance of
Executive's services under this Agreement, subject to the Company's policies in
effect from time to time with respect to such expenses, including the
requirements with respect to reporting and documentation of such expenses.
(c) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, including personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company at any time during the 90-day period immediately
preceding the date of this Agreement, or, if more favorable to the Executive, as
provided at any time after such date to Executive or other senior executive
officers of the Company.
(d) VACATION. The Executive shall be entitled to four (4) weeks paid
vacation each fiscal year during the Employment Period, in addition to regular
paid holidays provided to all employees of the Company; provided that unused
vacation time shall not be carried over to any subsequent year. Vacation time
shall be taken as
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determined by the Executive in his reasonable and good faith discretion;
provided that such time taken is mutually convenient to the Company and not
disruptive to the Company's activities or the Executive's responsibilities.
(e) LIFE INSURANCE. The Company shall continue to maintain a
renewable term insurance policy or policies for a period of ten (10) years
commencing on the date hereof covering the life of the Executive in an amount of
$3,000,000 naming the Executive's estate or any other person designated by the
Executive as beneficiary of such policy or policies. The Executive has the right
to require the Company at any time to prepay all of the premiums associated with
such policy or policies so as to ensure such policies remain in force for the
full ten (10) year period.
5. TERMINATION. The employment by the Company of the Executive shall be
terminated as provided in this Section 5:
(a) DEATH. Upon the Executive's death ("DEATH").
(b) DISABILITY.
(i) The Company or the Executive, upon not less than thirty (30)
days written notice to the other party ("DISABILITY NOTICE"), may terminate the
employment by the Company of the Executive if the Executive has been unable, by
reason of physical or mental disability, to render, for 120 successive days or
for shorter periods aggregating 210 days or more in any twelve month period,
services of the character contemplated by this Agreement and will be unable to
resume providing such services within a reasonable period of time by reason of
such disability (such circumstances being referred to as "DISABILITY").
(ii) The determination of whether the Executive has become
disabled within the meaning of this Section 5(b) shall be made (A) in the case
of a termination of employment by the Company, by a medical doctor selected by
the Company, or (B) in the case of a termination of employment by the Executive,
by Executive's medical doctor. In the event the Company gives a notice of
termination of employment under this Section 5(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 5(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.
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(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 at a
meeting duly called and held at which Executive shall have the right to be
present and be heard.
(d) CAUSE. By the Company, for Cause, but only upon a vote of a
majority of the entire Board 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; or (ii) conviction of the Executive of a felony
relating to his actions as an executive of the Company under the laws of the
United States or any state thereof (provided that all rights of appeal have been
exercised or have lapsed) unless such acts were committed in the reasonable,
good faith belief that his actions were in the best interests of the Company and
its stockholders and would not violate criminal law; or (iii) willful misconduct
or gross negligence by the Executive in connection with the performance of his
duties that has caused or is highly likely to cause severe harm to the Company;
or (iv) intentional dishonesty by the Executive in the performance of his duties
hereunder which has a material adverse effect on the Company.
(e) RESIGNATION. By the Executive, other than for Good Reason, as
hereinafter defined ("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 other than the dollar amount of the Annual Bonus or the dollar amount of
the Performance Bonus; (ii) a material reduction in the Executive's benefits;
(iii) the assignment to the Executive of any duties inconsistent with the
Executive's position, duties, responsibilities, authority or status with the
Company or a change in Executive's reporting responsibilities, titles or offices
as in effect prior to such assignment or change; (iv) the Company's material
breach or failure to perform, when due, any of its obligations under this
Agreement, unless cured within 10 days after receipt of written notice by the
Company from the Executive specifically identifying the manner in which the
Executive believes the Company has materially breached such obligations; (v) any
purported termination of Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the applicable requirements with respect
to Section 6 of this Agreement; (vi) a determination by the Executive, made in
good faith, that the Executive is not able to discharge his duties effectively
by reason of directives from the Board, a Change of Control or similar
circumstances; or (vii) a failure by the Company to renew this Agreement at the
conclusion of the Employment Period on such terms and conditions as are similar
to the terms and conditions contained herein.
6. NOTICE AND DATE OF TERMINATION. Any termination of the Executive's
employment under Section 5, 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
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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:
(a) if the Executive's employment is terminated by Death, the date of
the Executive's death;
(b) if the Executive's employment is terminated by the Company
Without Cause or by the Executive for Good Reason, 30 days after Notice of
Termination is given;
(c) if the Executive's employment is terminated by reason of
Disability, (i) 30 days after the Disability Notice or (ii) upon a final
determination, pursuant to Section 5(b)(ii) 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
(d) 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 30 days after such Notice of Termination is
given.
7. COMPENSATION UPON TERMINATION. The Executive shall be entitled to the
following Compensation from the Company upon termination of employment pursuant
to Section 5 in full discharge of the Company's obligations (each a "TERMINATION
COMPENSATION"):
(a) COMPENSATION UPON DEATH. In the event of termination of the
Executive's employment upon Death, the Executive's heirs, successors or legal
representatives shall be entitled to receive: (i) the Base Salary through the
Date of Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any
prior fiscal year; (iii) pro rata Annual Bonus for the current fiscal year; (iv)
an amount equal to 300% of the dollar amount of the Base Salary paid or payable
to the Executive hereunder for the Company's most recent fiscal year immediately
prior to the Executive's date of death; (v) reimbursement due to Executive
pursuant to Section 4(b); (vi) the Executive's then current spouse and minor
children, if any, shall receive the same level of health/medical insurance or
coverage that was provided to Executive immediately prior to the Executive's
death for a two year period, with the cost of such continued insurance or
coverage being borne by the Company. All such payments shall be in addition to
any payments the Executive's widow, beneficiaries or estate may be entitled to
receive pursuant to any pension or employee benefit plan or life insurance
policy maintained by the Company. In addition, all options granted to the
Executive to purchase shares of common stock of the Company, whether granted
pursuant to this Agreement or granted at any time prior hereto or hereafter,
then held by the Executive shall, to the extent not already vested and
exercisable, immediately vest and become exercisable until the later of the
fifth anniversary of the Date of Termination or May 22, 2010.
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(b) COMPENSATION UPON DISABILITY. In the event of termination of the
Executive's employment for Disability, the Executive shall be entitled to
receive: (i) the Base Salary through the Date of Termination; (ii) any unpaid
Annual Bonus and Performance Bonus for any prior fiscal year; (iii) the pro rata
portion of the Annual Bonus and Performance Bonus for the fiscal year in which
the Date of Termination occurs; (iv) reimbursement due to Executive pursuant to
Section 4(b); (v) an amount equal to three hundred (300%) percent of the average
Base Salary paid or payable to the Executive hereunder for the Company's three
most recent fiscal years immediately prior to the Executive's disability
termination less the amount, if any, of any payments received by the Executive
from any Company-funded disability insurance plan, payable in installments at
least as frequent as monthly, subject to Withholding for the longer of two (2)
years or the balance of the Employment Period; and (vi) 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 such
disability termination for the longer of two (2) years or the balance of the
Employment Period, with the cost of such continued insurance or coverage being
borne by the Company. In addition, all options granted to the Executive to
purchase shares of common stock of the Company, whether granted pursuant to this
Agreement or granted at any time prior hereto or hereafter, then held by the
Executive shall, to the extent not already vested and exercisable, immediately
vest and become exercisable until the later of the fifth anniversary of the Date
of Termination or May 22, 2010.
(c) COMPENSATION UPON RESIGNATION OR TERMINATION FOR CAUSE. In the
event of termination of the Executive's employment upon Resignation or
termination for Cause, the Executive shall be entitled to receive the (i) Base
Salary through the Date of Termination; (ii) any unpaid Annual Bonus and
Performance Bonus for any prior fiscal year; and (iii) reimbursement due to
Executive pursuant to Section 4(b).
(d) COMPENSATION UPON TERMINATION BY EXECUTIVE FOR GOOD REASON OR BY
THE COMPANY WITHOUT CAUSE. In the event the Executive's employment is terminated
by the Executive for Good Reason or by the Company Without Cause, then the
Executive shall be entitled to receive: (i) the Base Salary through the Date of
Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any prior
fiscal year; (iii) the pro rata portion of the Annual Bonus and Performance
Bonus for the fiscal year in which the Date of Termination occurs; (iv)
reimbursement due to Executive pursuant to Section 4(b); (v) an amount equal to
the greater of (A) the dollar amount equal to the Base Salary, Annual Bonus and
Performance Bonus paid or payable to the Executive hereunder for the Company's
most recent fiscal year immediately prior to the Executive's termination
multiplied by three, and (B) the dollar amount payable to Executive hereunder
for the remaining term of this Agreement had the Executive's employment not been
terminated (the "Amount Payable"); and (vi) 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 such
termination for the longer of two (2) years or the balance of the Employment
Period, with the cost of such continued insurance or coverage being borne by the
Company; provided, however, that the Company shall not be required to provide
any such coverage after such time as Executive becomes entitled to receive
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(without regard to any individual waivers of coverage or other similar
arrangements) comparable health/medical benefits of the same type from another
employer or recipient of Executive's services. For purposes of computing the
Amount Payable, for each fiscal year during the remainder of the Employment
Period, (A) Base Salary shall be determined in accordance with the terms of
Section 3(a) of this Agreement and (B) the Annual Bonus and Performance Bonus
for each fiscal year of the remaining Employment Period shall be deemed to be
equal to the product of (1) the Base Salary that would have been in effect
during such fiscal year and (2) a fraction, the numerator of which is the total
of the Annual Bonus and Performance Bonus that was paid to the Executive for the
Company's two fiscal years preceding Executive's termination, and the
denominator of which is the Base Salary that was paid to Executive for the
Company's two fiscal years preceding Executive's termination. In addition, all
outstanding loans extended by the Company to Executive shall be forgiven and all
options granted to the Executive to purchase shares of common stock of the
Company, whether granted pursuant to this Agreement or granted at any time
hereafter, then held by the Executive shall immediately vest and become
exercisable until the later of the fifth anniversary of the Date of Termination
or May 22, 2010.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 or in Section 10(c) by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 7 or in Section 10(c) 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 7 or in Section 10(c).
(f) All amounts to be paid to the Executive hereunder shall be paid
to the Executive in a lump sum no later than ten days following the Date of
Termination.
8. ADVISORY AGREEMENT. In the event of termination of Executive's
employment other than upon Death, Disability or termination for Cause, and other
than termination by Executive upon Resignation (other than a Resignation
following a Change of Control) ("ADVISORY TERMINATION"), the Company and
Executive shall enter into a consulting agreement (the "CONSULTING AGREEMENT")
pursuant to which the Company shall retain Executive as a consultant of the
Company for a period of four years following the Advisory Termination. The
Consulting Agreement shall provide for, among other things, (i) payment of fees
to the Executive in an amount equal to 80% of the Executive's Base Salary in
effect during the Company's most recent fiscal year preceding an Advisory
Termination, (ii) that Executive shall continue to receive those benefits
described in Section 4 herein (other than those benefits described in Section
4(e)), (iii) that Executive shall not be restricted from engaging (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 such activities as
the Executive deems appropriate to engage in during the term of the Consulting
Agreement, provided that such activities are not directly competitive with the
activities of the Company, and (iv) that Executive shall not be required to
provide services under the Consulting Agreement in excess of 20 hours per month
and such
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services shall be provided at such times and places as is to be mutually
determined by the Company and the Executive.
9. STOCK OPTIONS.
(a) EXISTING OPTIONS. Any and all options granted to the Executive to
purchase shares of common stock of the Company prior to the date hereof, whether
pursuant to the Employment Agreement or otherwise, (i) vested and became
exercisable in full on April 18, 2000 and shall be exercisable until April 18,
2010, and (ii) shall be transferable in whole or in part, at any time and from
time to time, to the Executive's spouse or children, or to a trust created by
the Executive for the benefit of the Executive or his immediate family or to a
corporation or other entity controlled by the Executive and in which the
Executive or members of his immediate family have all of the economic interests,
without regard to Executive's continued employment with the Company and without
regard to any inconsistent provisions of the agreements pursuant to which such
options were granted.
(b) NEW OPTIONS. In addition to the compensation described in
Section 3 hereof, the Company, as of May 22, 2000, entered into a Stock Option
Agreement with the Executive granting the Executive options (the "OPTIONS") to
purchase 1,000,000 shares of common stock of the Company at the market price on
the close of business on May 22, 2000.
(c) OUTSTANDING OPTIONS. For purposes of this Agreement, the term
"OUTSTANDING OPTIONS" with reference to a particular date shall mean the Options
and all other options to purchase Common Stock held by the Executive as at such
date, whether or not such options are then vested and exercisable.
10. CHANGE OF CONTROL. In the event that the Executive is an employee of
the Company at the moment immediately prior to a Change of Control (as defined
herein), the Executive shall be entitled to receive all benefits described in
this Section 10.
(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 date of
this Agreement (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; (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
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deemed a member of the Incumbent Board and (2) that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "ELECTION CONTEST" (as
described in Rule 14a-11 promulgated under the Securities Exchange Act of 1934,
as amended) 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:
(i) the Company shall pay ("CHANGE OF CONTROL COMPENSATION") to
the Executive additional compensation in the form of cash equal to, on the date
of a Change of Control and with respect to all Outstanding Options as of the
date of the Change of Control (whether or not all such Outstanding Options have
vested or are exercisable on such date), the product of (x) the number of shares
of common stock of the Company underlying each of the Outstanding Options and
(y) the amount, if any, that the exercise price of any Outstanding Options (as
adjusted pursuant to Section 10(b)(iv)) (the "EXERCISE PRICE") or the Closing
Share Value (as defined below), whichever is less, exceeds the Initial Share
Value (as defined below);
(ii) with respect to each Outstanding Option as of the date of
the Change of Control, in the event that the Closing Share Value is greater than
the Exercise Price of any such Outstanding Option (as adjusted pursuant to
Section
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10(b)(iv)), then the Executive shall have the right, separately with respect to
each of the Outstanding Options, to either (A) retain the Outstanding Options,
(B) exercise the Outstanding Options, or (C) forfeit the Outstanding Options and
receive, in exchange therefor, a cash payment equal to the number of shares of
common stock of the Company underlying the Outstanding Options multiplied by the
amount that the Closing Share Value exceeds the Exercise Price of the
Outstanding Options (as adjusted pursuant to Section 10(b)(iv));
(iii) upon the occurrence of a Change of Control, all then
Outstanding Options shall immediately vest and become exercisable for a period
of ten (10) years commencing on the Date of Termination without regard to
Executive's continued employment with the Company pursuant to this Agreement and
without regard to the terms of any option agreement or option certificate
applicable to any Outstanding Options;
(iv) upon the occurrence of a Change of Control, the Exercise
Price of all of the then Outstanding Options shall be adjusted ("REPRICING") to
equal the lower of (i) the weighted average exercise price on the date hereof of
all Outstanding Options on the date hereof, (ii) the weighted average exercise
price of all Outstanding Options immediately prior to the date of the Change of
Control, (iii) the weighted average exercise price on the date hereof of all
options to acquire shares of common stock of the Company held by the Other
Executive (the "OTHER EXECUTIVE OUTSTANDING OPTIONS") on the date hereof, or
(iv) the weighted average exercise price of all of the Other Executive
Outstanding Options immediately prior to the date of the Change of Control (the
lesser of such amounts being referred to as the "WEIGHTED AVERAGE EP");
provided, however, that any Outstanding Options with an Exercise Price less than
the Weighted Average EP shall not be subject to Repricing in accordance with the
terms of this Section 10(b)(iv) and shall continue to have the Exercise Price in
effect on the date hereof or immediately prior to the date of the Change of
Control, as the case may be, for such Outstanding Options; and
(v) any and all payments payable to Executive relating to the
Outstanding Options in accordance with this Section 10 ("OPTION PAYMENTS") shall
be computed based on the Exercise Price (as adjusted pursuant to Section 10
(b)(iv))
(c) In the event that the Executive's employment is terminated by the
Executive upon Resignation during the six month period following the three month
anniversary of the effective date of the Change of Control, or by the Executive
for Good Reason, or by the Company Without Cause, at any time during the nine
month period following the effective date of the Change of Control, the
Executive shall receive, in addition to the amounts payable pursuant to Section
7(c), (i) the pro rata portion of the Annual Bonus and Performance Bonus for the
fiscal year in which the Change of Control occurs, computed through the Date of
Termination; (ii) an amount equal to the greater of (A) the dollar amount equal
to the Base Salary, Annual Bonus and Performance Bonus paid or payable to the
Executive hereunder for the Company's most recent fiscal year immediately prior
to the Executive's termination multiplied by five, and (B) the Amount
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Payable; and (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 such Change of Control for the longer of two (2)
years or the balance of the Employment Period, with the cost of such continued
insurance or coverage being borne by the Company; provided, however, that the
Company shall in not be required to provide any such coverage after such time as
Executive becomes entitled to receive (without regard to any individual waivers
of coverage or other similar arrangements) comparable health/medical benefits of
the same type from another employer or recipient of Executive's services. In
addition, all outstanding loans extended by the Company to Executive shall be
forgiven. All amounts to be paid to the Executive pursuant to this Section (c)
shall be paid to the Executive not later than ten days following the Date of
Termination.
(d) If in the opinion of tax counsel selected by the Executive and
reasonably acceptable to the Company, the Executive has or will receive any
compensation or recognize any income (whether or not pursuant to this Agreement
or any plan or other arrangement of the Company and whether or not the
Executive's employment with the Company has terminated) which constitute an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended (the "Code") (or for which a tax is
otherwise payable under Section 4999 of the Code), then the Company shall pay
the Executive an additional amount (the "ADDITIONAL AMOUNT") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to (A) all such excess parachute payments (or otherwise) and (B) the
Additional Amount, plus (ii) all federal, state and local income taxes payable
by Executive with respect to the Additional Amount. The amounts payable pursuant
to this Section 10(d) shall be paid by the Company to the Executive concurrently
with the payment of such compensation or recognition of income giving rise to
the Company's obligations under this Section 10(d).
(e) For purposes of this subsection:
(i) "INITIAL SHARE VALUE" shall mean the average of the Closing
Prices of the shares of common stock of the Company for the period commencing on
the 180th day prior to the date of the Change of Control and ending on the 150th
day prior to the date of the Change of Control;
(ii) "CLOSING SHARE VALUE" shall mean the Closing Price of the
shares of common stock of the Company on the date of the Change of Control; and
(iii) the "CLOSING PRICE" of a share of common stock of the
Company 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
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average of the highest bid and lowest ask prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if such shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker 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 judgement of the Board.
11. FAVORED NATIONS. If the Other Executive shall receive a Benefit (as
defined herein) pursuant to the provisions of the Other Executive's Employment
Agreement or otherwise, which is in excess of a Benefit, if any, received by the
Executive pursuant to the provisions of this Agreement or otherwise (such date,
if any, that the Other Executive or the Executive receives a Benefit, a "BENEFIT
DATE"), the Company shall provide to the Executive a cash payment in an amount
that is equivalent to the value of the Benefit received by the Other Executive
less the value of the Benefit, if any, received by the Executive at a Benefit
Date ("FAVORED PAYMENT").
(a) For purposes of computing a Favored Payment, the Executive and
the Board shall endeavor to mutually determine, in good faith, the dollar value
of a Favored Payment. If the Executive and the Board do not determine the dollar
value of a Favored Payment within 30 days of a Benefit Date, the dollar value of
the Favored Payment shall be determined by independent public accountants
mutually acceptable to the Company and the Executive, which determination shall
be conclusive and binding.
(b) For purposes of this Agreement, a "BENEFIT" shall be deemed to
include any payment or other benefit which is received by the Executive or the
Other Executive or granted to the Executive or the Other Executive, as the case
may be, pursuant to the terms of this Agreement or the Other Executive
Employment Agreement or otherwise, including, without limitation, the Repricing
of either of the Outstanding Options or the Other Executive Outstanding Options,
other than:
(i) a Benefit which the Compensation Committee of the Board or
the Board, as the case may be, shall specifically determine at the time the
Benefit is approved by the Compensation Committee or the Board, as the case may
be, to not be a Benefit for purposes of this Agreement; or
(ii) a Favored Payment.
12. ADVANCES. The Company may, upon written consent of the Board, make an
advance to the Executive against any compensation or other amounts to be paid by
the Company to the Executive (an "ADVANCE"). Any amounts due under this
Agreement to the Executive shall, at the election of the Company, be offset by
any then outstanding Advances. In the event of Executive's termination of
employment, Executive agrees that the Company shall have the right to offset the
amount of any and all outstanding Advance(s) against any compensation or any
other amounts due to the Executive from
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the Company, and that any remaining balance of the Advance(s) shall be repaid by
the Executive within ninety (90) days after the termination of Executive's
employment by the Company.
13. NON-COMPETITION AND NON-SOLICITATION.
(a) NON-COMPETITION PROHIBITED ACTIVITIES. During the term of his
employment hereunder and for two (2) years thereafter (the "NON-COMPETITION
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) in the Territory (as hereinafter defined). For purposes of determining
whether the Executive is permitted to be a shareholder of a corporation engaged
in a Competitive Business, the Executive's ownership of less than 5% of the
issued and outstanding securities of a company whose securities are
publicly-traded in any U.S. or non-U.S. securities exchanges or quotation system
shall be permitted.
(b) NON-SOLICITATION PROHIBITED ACTIVITIES. During the
Non-Competition Period and in the Territory, the Executive covenants and agrees
that he shall not solicit, directly or indirectly, any person who is, at that
time, or who was at any time within three (3) months prior to that time, an
employee of the Company for the purpose or with the intent of enticing such
employee away from or out of the employ of the Company.
(c) As used herein, the term "COMPETITIVE BUSINESS" shall mean any
business engaged in publishing and distributing video games and entertainment
software for personal computers.
(d) 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.
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(e) The foregoing prohibitions in subsections (a) and (b) shall bind
the Executive only so long as the Company pays him the Termination Compensation
pursuant to Section 7 or the Change of Control Compensation pursuant to Section
10 during the Non-Competition Period and otherwise complies with its obligations
hereunder.
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14. CONFIDENTIAL INFORMATION. The Executive has executed or, if not
previously executed, agrees to execute and be bound by the terms and conditions
of the Company's Employee Proprietary Information Agreement ("PROPRIETARY
INFORMATION AGREEMENT"), attached hereto as Appendix A.
15. UNENFORCEABILITY. If any of the rights or restrictions contained or
provided for in this Agreement shall be deemed by a court of competent
jurisdiction to be unenforceable by reason of the extent, duration or
geographical scope, the parties hereto contemplate that the court shall reduce
such extent, duration, geographical scope and enforce this Agreement in its
reduced form for all purposes in the manner contemplated hereby. Should any of
the provisions of this Agreement require judicial interpretation, it is agreed
that the court interpreting or construing this Agreement shall not apply a
presumption that any provision shall be more strictly construed against one
party by reason of the rule of construction that a document is to be construed
more strictly against the party who itself or through its agents prepared the
same, it being agreed that both parties and their respective agents have
participated in the preparation of this Agreement.
16. INJUNCTIVE RELIEF. The Executive agrees that the restrictions and
covenants contained in Section 13 and in the Proprietary Information Agreement
are necessary for the protection of the Company and any breach thereof will
cause the Company irreparable damages for which there is no adequate remedy at
law. The Executive further agrees that, in the event of a breach by the
Executive of any of Executive's obligations thereunder, the Company shall have
the absolute right, in addition to any other remedy that might be available to
it, to obtain from any court having jurisdiction, such equitable relief as might
be appropriate, including temporary, interlocutory, preliminary and permanent
decrees or injunctions enjoining any further breach of such provisions.
17. INDEMNIFICATION AND ATTORNEYS' FEES. Subject to applicable laws,
during the Employment Period and thereafter, the Company shall indemnify, hold
harmless and defend the Executive 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 him
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 enforcing the benefits of this Agreement. The Company shall use its
best efforts to continue to maintain an insurance policy covering the officers
and directors of the Company against claims and/or lawsuits, at least as
favorable as such policy that is currently in effect, and shall cause the
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors during the Employment Period and
for a period of at least six (6) years thereafter.
18. WAIVER. Executive hereby waives any and all rights to payment (whether
the Executive is entitled to a cash payment or other payment arising on account
of the Initial Options), and hereby agrees that this Agreement satisfies any and
all obligations that are due to Executive, pursuant to the Employment Agreement
that became due to the Executive by virtue of the Eastbourne Change of Control,
provided, however, that such
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waiver shall not apply to payments or other benefits that may hereafter become
due to Executive upon a Change of Control pursuant to the terms and conditions
contained herein.
19. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement is determined to
be invalid or unenforceable, it shall not affect the validity or enforceability
of any of the other remaining provisions hereof.
(b) NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when (i) delivered personally; (ii) sent by facsimile or
other similar electronic device and confirmed; (iii) delivered by courier or
overnight express; or (iv) three business days after being sent by registered or
certified mail, postage prepaid, addressed as follows:
If to the Company:
Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, CA 90405
Attention: General Counsel
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman, LLP
1290 Avenue of the Americas
New York, NY 10104
Attention: Kenneth L. Henderson, Esq.
If to the Executive:
Robert A. Kotick
1101 Cove Way
Beverly Hills, CA 90210
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.
(c) WAIVER. No waiver by either party hereto of any breach of any
provision of this Agreement shall be deemed a waiver of any preceding or
succeeding breach of such provision or any other provision herein contained.
(d) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California, without giving effect
to the conflict of law principles thereof; provided, however, that Section 13 of
this
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Agreement shall be governed by, and construed in accordance with, the laws
of the state in which the Executive has his principal office.
(e) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties hereto with respect to the subject matter hereof, and is intended
to supersede all prior employment negotiations, understandings and agreements.
No provision of this Agreement may be waived or changed, except by a writing
signed by the party to be charged with such waiver or change.
(f) SUCCESSORS: BINDING AGREEMENT. Neither of the parties hereto
shall have the right to assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that this Agreement shall inure to the benefit or and be binding upon
the successors and assigns of the Company upon any sale of all or substantially
all of the Company's assets, or upon any merger or consolidation of the Company
with or into any other corporation, all as though such successors and assigns of
the Company and their respective successors and assigns were the Company.
Insofar as the Executive is concerned this Agreement, being personal, cannot be
assigned.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but together shall constitute one and the
same instrument.
(h) HEADINGS. The headings and captions set forth in this Agreement
are for ease of reference only and shall not be deemed to constitute a part of
the agreement formed hereby or be relevant to the interpretation of any
provisions of this Agreement.
(i) SATURDAYS, SUNDAYS AND HOLIDAYS. Whenever any determination is to
be made or action to be taken on a date specified in this Agreement, if such
date shall fall upon a Saturday, Sunday or a legal holiday in the State of
California, the date for such determination or action shall be extended to the
first business day immediately thereafter.
[SIGNATURE PAGES BEGIN ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ACTIVISION, INC.
By: /s/ BRIAN G. KELLY
-----------------------------------
Name: Brian G. Kelly
Title: Co-Chairman
/s/ ROBERT A. KOTICK
-----------------------------------
Robert A. Kotick
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