Blizzard 2004 Annual Report Download - page 64

Legal Proceedings
On March 5, 2004, a class action lawsuit was filed against us and certain of our current and former officers and
directors. The complaint, which asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 based on allegations that our revenues and assets were overstated during the period between February 1,
2001 and December 17, 2002, was filed in the United States District Court, Central District of California by the
Construction Industry and Carpenters Joint Pension Trust for Southern Nevada purporting to represent a class of pur-
chasers of Activision stock. Five additional purported class actions have subsequently been filed by Gianni Angeloni,
Christopher Hinton, Stephen Anish, the Alaska Electrical Pension Fund, and Joseph A. Romans asserting the same claims.
Five of the six actions have been transferred to the same court where the first-filed complaint was pending. In addition,
on March 12, 2004, a shareholder derivative lawsuit was filed, purportedly on behalf of Activision, which in large
measure asserts the identical claims set forth in the federal class action lawsuit. That complaint was filed in Superior
Court for the County of Los Angeles. We strongly deny these allegations and will vigorously defend these cases.
On July 11, 2003, we were informed by the staff of the Securities and Exchange Commission that the Securities and
Exchange Commission has commenced a non-public formal investigation captioned “In the Matter of Certain Video
Game Manufacturers and Distributors.” The investigation appears to be focused on certain accounting practices com-
mon to the interactive entertainment industry, with specific emphasis on revenue recognition. In connection with this
inquiry, the Securities and Exchange Commission submitted to us a request for information. We responded to this inquiry
on September 2, 2003. To date, we have not received a request from the Securities and Exchange Commission for
any additional information. The Securities and Exchange Commission staff also informed us that other companies in the
video game industry received similar requests for information. The Securities and Exchange Commission has advised us
that this request for information should not be construed as an indication from the Securities and Exchange Commission
or its staff that any violation of the law has occurred, nor should it reflect negatively on any person, entity or security.
We have cooperated and intend to continue to cooperate fully with the Securities and Exchange Commission in the
conduct of this inquiry.
On June 30, 2003, we terminated our Star Trek Merchandising License Agreement with Viacom Consumer Products,
Inc. and filed a complaint in the Superior Court of the State of California for breach of contract and constructive trust
against Viacom Consumer Products and Viacom International, Inc. (“Viacom”). On August 15, 2003, Viacom filed its
response to our complaint as well as a cross-complaint alleging, among other matters, a breach of contract by
Activision and seeking claimed damages in excess of $50 million. We strongly dispute the claims by Viacom, consider
the damages alleged by Viacom to be speculative and without merit, and intend to defend vigorously and aggressively
against the cross-complaint.
In addition, we are party to other routine claims and suits brought by us and against us in the ordinary course of
business, including disputes arising over the ownership of intellectual property rights, contractual claims and collection
matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims will not
have a material adverse effect on our business, financial condition, results of operations or liquidity.
15. Stock Compensation and Employee Benefit Plans
Stock Option Plans
We sponsor several stock option plans for the benefit of officers, employees, consultants and others.
Activision, Inc. — 2004 Annual Report
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