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On฀April฀4,฀2002,฀the฀Board฀of฀Directors฀approved฀the฀Activision฀2002฀Incentive฀Plan฀(the฀“2002฀Plan”).฀The฀2002฀Plan฀permits฀the฀granting฀of฀“Awards”฀in฀the฀form฀of฀non-
qualified฀stock฀options,฀ISOs,฀SARs,฀restricted฀stock฀awards,฀deferred฀share฀awards฀and฀other฀common฀stock-based฀awards฀to฀officers฀(other฀than฀executive฀officers),฀
employees,฀consultants,฀advisors฀and฀others.฀The฀2002฀Plan฀requires฀available฀shares฀to฀consist฀in฀whole฀or฀in฀part฀of฀authorized฀and฀unissued฀shares฀or฀treasury฀shares.฀
The฀total฀number฀of฀shares฀of฀common฀stock฀available฀for฀distribution฀under฀the฀2002฀Plan฀is฀13,050,000.฀There฀were฀approximately฀21,200฀shares฀remaining฀available฀for฀
grant฀under฀the฀2002฀Plan฀as฀of฀March฀31,฀2005.
On฀September฀19,฀2002,฀the฀shareholders฀of฀Activision฀approved฀the฀Activision฀2002฀Executive฀Incentive฀Plan฀(the฀“2002฀Executive฀Plan”).฀The฀2002฀Executive฀Plan฀permits฀
the฀granting฀of฀“Awards”฀in฀the฀form฀of฀non-qualified฀stock฀options,฀ISOs,฀SARs,฀restricted฀stock฀awards,฀deferred฀share฀awards฀and฀other฀common฀stock-based฀awards฀to฀
officers,฀employees,฀directors,฀consultants฀and฀advisors.฀The฀total฀number฀of฀shares฀of฀common฀stock฀available฀for฀distribution฀under฀the฀2002฀Executive฀Plan฀is฀7,500,000.฀
The฀2002฀Executive฀Plan฀requires฀available฀shares฀to฀consist฀in฀whole฀or฀in฀part฀of฀authorized฀and฀unissued฀shares฀or฀treasury฀shares.฀There฀were฀approximately฀6,500฀
shares฀remaining฀available฀for฀grant฀under฀the฀2002฀Executive฀Plan฀as฀of฀March฀31,฀2005.
On฀December฀16,฀2002,฀the฀Board฀of฀Directors฀approved฀the฀Activision฀2002฀Studio฀Employee฀Retention฀Incentive฀Plan,฀as฀amended฀(the฀“2002฀Studio฀Plan”).฀The฀2002฀
Studio฀Plan฀permits฀the฀granting฀of฀“Awards”฀in฀the฀form฀of฀non-qualified฀stock฀options฀and฀restricted฀stock฀awards฀to฀key฀studio฀employees฀(other฀than฀executive฀officers)฀
of฀Activision,฀our฀subsidiaries฀and฀affiliates฀and฀to฀contractors฀and฀others.฀The฀2002฀Studio฀Plan฀requires฀available฀shares฀to฀consist฀in฀whole฀or฀in฀part฀of฀authorized฀and฀
unissued฀shares฀or฀treasury฀shares.฀The฀total฀number฀of฀shares฀of฀common฀stock฀available฀for฀distribution฀under฀the฀2002฀Studio฀Plan฀is฀4,500,000.฀There฀were฀approxi-
mately฀3,100฀shares฀remaining฀available฀for฀grant฀under฀the฀2002฀Studio฀Plan฀as฀of฀March฀31,฀2005.
On฀April฀29,฀2003,฀our฀Board฀of฀Directors฀approved฀the฀Activision฀2003฀Incentive฀Plan฀(the฀“2003฀Plan”).฀The฀2003฀Plan฀permits฀the฀granting฀of฀“Awards”฀in฀the฀form฀of฀
non-qualified฀stock฀options,฀SARs,฀restricted฀stock฀awards,฀deferred฀stock฀awards฀and฀other฀common฀stock-based฀awards฀to฀directors,฀officers,฀employees,฀consultants฀
and฀others.฀The฀2003฀Plan฀requires฀available฀shares฀to฀consist฀in฀whole฀or฀in฀part฀of฀authorized฀and฀unissued฀shares฀or฀treasury฀shares.฀The฀total฀number฀of฀shares฀of฀
common฀stock฀available฀for฀distribution฀under฀the฀2003฀Plan฀is฀18,000,000.฀There฀were฀approximately฀16,394,600฀shares฀remaining฀available฀for฀grant฀under฀the฀2003฀
Plan฀as฀of฀March฀31,฀2005.
The฀exercise฀price฀for฀Awards฀issued฀under฀the฀1991฀Plan,฀1998฀Plan,฀1999฀Plan,฀2001฀Plan,฀2002฀Plan,฀2002฀Executive฀Plan,฀2002฀Studio฀Plan฀and฀2003฀Plan฀(collectively,฀
the฀“Plans”)฀is฀determined฀at฀the฀discretion฀of฀the฀Board฀of฀Directors฀(or฀the฀Compensation฀Committee฀of฀the฀Board฀of฀Directors,฀which฀administers฀the฀Plans),฀and฀for฀
ISOs,฀is฀not฀to฀be฀less฀than฀the฀fair฀market฀value฀of฀our฀common฀stock฀at฀the฀date฀of฀grant,฀or฀in฀the฀case฀of฀non-qualified฀options,฀must฀exceed฀or฀be฀equal฀to฀85%฀of฀the฀
fair฀market฀value฀of฀our฀common฀stock฀at฀the฀date฀of฀grant.฀Options฀typically฀become฀exercisable฀in฀installments฀over฀a฀period฀not฀to฀exceed฀seven฀years฀and฀must฀be฀
exercised฀within฀10฀years฀of฀the฀date฀of฀grant.฀However,฀certain฀options฀granted฀to฀executives฀vest฀immediately.฀Historically,฀stock฀options฀have฀been฀granted฀with฀exercise฀
prices฀equal฀to฀or฀greater฀than฀the฀fair฀market฀value฀at฀the฀date฀of฀grant.
Other Employee Stock Options
In฀ connection฀ with฀ prior฀ employment฀ agreements฀ between฀ Activision฀ and฀ Robert฀ A.฀ Kotick,฀ Activision’s฀ Chairman฀ and฀ Chief฀ Executive฀ Officer,฀ and฀ Brian฀ G.฀ Kelly,฀
Activision’s฀Co-Chairman,฀Mr.฀Kotick฀and฀Mr.฀ Kelly฀were฀ granted฀options฀to฀purchase฀common฀stock.฀The฀Board฀of฀Directors฀approved฀the฀granting฀ of฀these฀options.฀
Relating฀to฀such฀grants,฀as฀of฀March฀31,฀2005,฀approximately฀6,228,600฀shares฀were฀outstanding฀with฀a฀weighted฀average฀exercise฀price฀of฀$2.32.
We฀ additionally฀ have฀ approximately฀ 70,900฀ options฀ outstanding฀ to฀ employees฀ as฀ of฀ March฀ 31,฀ 2005,฀ with฀ a฀ weighted฀ average฀ exercise฀ price฀ of฀ $4.64.฀ The฀ Board฀ of฀
Directors฀approved฀the฀granting฀of฀these฀options.฀Such฀options฀have฀terms฀similar฀to฀those฀options฀granted฀under฀the฀Plans.
Director Warrants
During฀the฀fiscal฀year฀ended฀March฀31,฀1997,฀we฀issued฀warrants฀to฀purchase฀180,000฀shares฀of฀our฀common฀stock,฀at฀exercise฀prices฀ranging฀from฀$2.63฀to฀$3.08฀to฀two฀
of฀our฀outside฀directors฀in฀connection฀with฀their฀election฀to฀the฀Board.฀Such฀warrants฀vested฀25%฀on฀the฀first฀anniversary฀of฀the฀date฀of฀grant,฀and฀12.5%฀each฀six฀months฀
thereafter฀and฀expire฀within฀10฀years฀from฀the฀date฀of฀grant.฀Relating฀to฀such฀warrants,฀as฀of฀March฀31,฀2005,฀no฀shares฀were฀outstanding.
page 81
Activision, Inc. — 2005 Annual Report