Blizzard 2007 Annual Report Download - page 101

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104
A C T I V I S I O N , I N C . • • 2 0 0 7 A N N U A L R E P O R T
Notes to Consolidated Financial Statements
20. Subsequent Events
On May 11, 2007, Activision completed its acquisition of DemonWare, the leading provider of net-
work middleware technologies for console and PC games headquartered in Dublin, Ireland. The
acquisition is expected to enable Activision to gain efficiencies related to online game development
and to position the Company to take advantage of the growth in online gameplay that is expected
to be driven by the next-generation consoles.
On June 8, 2007, with respect to unexercised options subject to Section 409A of the Internal Revenue
Code held by employees who are not executive officers, Activision commenced an offer to amend
the exercise price of these options to eliminate the grantee’s Section 409A tax liability consistent
with Internal Revenue Service guidance. Pursuant to the offer, the Company will also make a cash
payment in January 2008 to employees who accept the offer, in an amount equal to the difference
between the original exercise price of each amended option and the amended exercise price of
each amended option. The offer with respect to all eligible options is considered a modification of
those options for financial reporting purposes. Pursuant to the accounting standards in effect under
SFAS 123R (revised 2004), the fair value of the modified options (including for this purpose the cash
payments that become payable pursuant to the terms of the offer) will be recognized as compensa-
tion expense over the remaining requisite service period with the fair value created as a result of
cash payments that become payable pursuant to the terms of the offer recognized as compensation
expense at the expiration of the offer period on July 6, 2007. In addition, a portion of the compensa-
tion costs associated with the original award may be accelerated and recognized as compensation
expense at the expiration of the offer period as a result of the cash payment.