Activision 2009 Annual Report Download - page 74

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62
Commitments
In the normal course of business, we enter into contractual arrangements with third parties for non-cancelable
operating lease agreements for our offices, for the development of products, and for the rights to intellectual property. Under
these agreements, we commit to provide specified payments to a lessor, developer or intellectual property holder, as the case
may be, based upon contractual arrangements. The payments to third-party developers are generally conditioned upon the
achievement by the developers of contractually specified development milestones. Further, these payments to third-party
developers and intellectual property holders typically are deemed to be advances and are recoupable against future royalties
earned by the developer or intellectual property holder based on the sale of the related game. Additionally, in connection with
certain intellectual property rights acquisitions and development agreements, we will commit to spend specified amounts for
marketing support for the related game(s) which is to be developed or in which the intellectual property will be utilized.
Assuming all contractual provisions are met, the total future minimum commitments for these and other contractual
arrangements in place at December 31, 2010 are scheduled to be paid as follows (amounts in millions):
Contractual Obligations(1)
Facility and
Equipment
Leases
Developer and
Intellectual
Properties Marketing Total
For the years ending December 31,
2011 ............................................... $32 $90 $48 $170
2012 ............................................... 31 69 11 111
2013 ............................................... 29 49 — 78
2014 ............................................... 26 15 — 41
2015 ............................................... 16 — — 16
Thereafter ...................................... 63 — — 63
Total .......................................... $197 $223 $59 $479
(1) We have omitted uncertain tax liabilities from this table due to the inherent uncertainty regarding the
timing of potential issue resolution. Specifically, either (a) the underlying positions have not been
fully developed under audit to quantify at this time or, (b) the years relating to the issues for certain
jurisdictions are not currently under audit. At December 31, 2010, we had $132 million of
unrecognized tax benefits.
Legal Proceedings
After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior
employees at Infinity Ward, the Company terminated its employment of Jason West and Vince Zampella on March 1, 2010.
On March 3, 2010, West and Zampella filed a complaint against the Company in Los Angeles Superior Court for breach of
contract and wrongful termination, among other claims. West and Zampella are seeking damages, including punitive
damages, in excess of $36 million and declaratory relief. On April 9, 2010, the Company filed a cross complaint against West
and Zampella, asserting claims for breach of contract and fiduciary duty, among other claims. The Company is seeking
damages and declaratory relief.
In addition, 38 current and former employees of Infinity Ward filed a complaint against the Company in Los
Angeles Superior Court on April 27, 2010 (Alderman et al. v. Activision Publishing, Inc. et al). An amended complaint was
filed on July 8, 2010, which added seven additional plaintiffs. On October 5, 2010, five plaintiffs, all current employees of
Infinity Ward, filed dismissals without prejudice. There are currently 40 plaintiffs in the case. The plaintiffs have asserted
claims for breach of contract, violation of the Labor Code of the State of California, conversion and other claims. The
plaintiffs claim that the Company failed to pay them bonuses and other compensation allegedly owed to them in an amount of
at least $75 million to $125 million, plus punitive damages. On October 12, 2010, the court consolidated this matter with the
West and Zampella matter.
On August 10, 2010, the Company filed a demurrer to various causes of action in the amended Alderman complaint.
On October 15, 2010, the court overruled the demurrer with respect to all causes of action other than conversion, for which it
was sustained. On November 4, 2010, the Alderman plaintiffs filed a second amended complaint. On November 15, 2010, the
Company filed a demurrer with respect to the claim for conversion in the second amended complaint.