As filed with the Securities and Exchange Commission on December 4, 2001.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
ACTIVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4803544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Ocean Park Boulevard
Santa Monica, California 90405
(310) 255-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT A. KOTICK
Chairman of the Board and Chief Executive Officer
Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, California 90405
(310) 255-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies To:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Kenneth L. Henderson, Esq.
Approximate date of commencement of proposed sale
to the public: From time to time after the effective
date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
===================================== ================= ======================
Proposed Maximum
Title of Class of Amount Offering Price
Securities to be Registered to be Registered Per Share (1)
------------------------------------- ----------------- ----------------------
Common Stock, $.000001 par value(2) 7,500,000 shares $21.55
===================================== ================= ======================
======================= =======================
Proposed
Maximum Aggregate Amount of
Offering Price(1) Registration Fee
----------------------- -----------------------
$161,625,000 $38,628(3)
======================= =======================
(1) Estimated solely for purposes of calculating the registration fee pursuant
to the provisions of Rule 457(c) under the Securities Act of 1933, as
amended, based on the average of the reported last high and low sales
prices on the Nasdaq National Market on November 28, 2001.
(2) Each share of common stock includes a right to purchase one-hundredth of a
share of Series A Junior Preferred Stock pursuant to a rights agreement
between the registrant and Continental Stock Transfer & Trust Company, as
rights agent.
(3) Pursuant to Rule 457(p) of the Securities Act of 1933, as amended, the
registration fee of $38,628 is offset against the $57,141 registration fee
that was previously paid to the Commission relating to 6,000,000 shares of
Common Stock previously registered by the registrant pursuant to its
Registration Statement on Form S-3 filed with the Commission on July 30,
2001, as amended on August 31, 2001 (File No. 333-66280), which
Registration Statement was withdrawn on October 22, 2001, prior to the
issuance of any such shares.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
Subject to Completion, Dated December 4, 2001
Preliminary Prospectus
7,500,000 Shares
ACTIVISION, INC.
Common Stock
---------------------
This prospectus relates to our offer and sale from time to time of
7,500,000 shares of our common stock. We will provide specific terms for the
sale of the shares of common stock in supplements to this prospectus. This
prospectus may not be used to offer and sell securities unless accompanied by a
prospectus supplement. You should read this prospectus and any supplement
carefully before you invest.
Our common stock is traded on the Nasdaq National Market under the symbol
ATVI. On November 30, 2001 the closing sale price of our common stock as
reported by Nasdaq was $24.85.
Investing in our common stock involves risks that are described in the
"Risk Factors" section beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The information in the prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
---------------------
The date of this prospectus is ______, 2001.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS........................................................2
ABOUT ACTIVISION, INC........................................................3
RISK FACTORS.................................................................5
EARNINGS PER SHARE GIVING EFFECT TO NOVEMBER 2001 STOCK SPLIT...............13
USE OF PROCEEDS.............................................................13
DESCRIPTION OF CAPITAL STOCK................................................14
BUSINESS....................................................................14
PLAN OF DISTRIBUTION........................................................28
LEGAL MATTERS...............................................................29
EXPERTS.....................................................................30
WHERE YOU CAN FIND MORE INFORMATION.........................................30
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................30
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under the shelf process, we may, from time to time, sell up to
7,500,000 shares of our common stock in one or more offerings. This prospectus
provides you with a general description of the securities that we may offer.
Each time that we sell securities, we will provide a prospectus supplement that
will contain specific information about the terms of that offering. The
prospectus supplement also may add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information." We may only use this prospectus to sell
securities if it is accompanied by a prospectus supplement. We are only offering
these securities in states where the offer is permitted.
The registration statement that contains this prospectus, including the
exhibits to the registration statement, contains additional information about us
and the securities offered under this prospectus. That registration statement
can be read at the SEC's web site or at the SEC's offices referenced under the
heading "Where You Can Find More Information."
-2-
ABOUT ACTIVISION, INC.
We are a leading international publisher of interactive entertainment
software products. We have built a company with a diverse portfolio of products
that spans a wide range of categories and target markets and that is used on a
variety of game hardware platforms and operating systems. We have created,
licensed and acquired a group of highly recognizable brands which we market to a
growing variety of consumer demographics.
Our products cover the action, adventure, extreme sports, racing, role
playing, simulation and strategy game categories. We offer our products in
versions which operate on the Sony PlayStation, Sony PlayStation 2, Nintendo 64,
Nintendo GameCube, Microsoft Xbox and Sega Dreamcast console systems, the
Nintendo Game Boy Color and Game Boy Advance hand held devices, as well as on
personal computers. Over the next few years, we plan to produce many titles for
the recently released Sony PlayStation 2, Microsoft Xbox and Nintendo GameCube
console systems and Game Boy Advance hand held device. At present we have 159
different titles in various stages of production, development and planning, 79
of which are in production and development and 79 of which are in various
planning stages. Driven partly by the enhanced capabilities of the next
generation of platforms, we believe that in the next few years there will be
significant growth in the market for interactive entertainment software and we
plan to leverage our skills and resources to extend our leading position in the
industry.
Our publishing business involves the development, marketing and sale of
products, either directly, by license or through our affiliate label program
with third party publishers. In addition to publishing, we maintain distribution
operations in Europe that provide logistical and sales services to third party
publishers of interactive entertainment software, our own publishing operations
and manufacturers of interactive entertainment hardware.
Strategy
Our objective is to be a worldwide leader in the development, publishing
and distribution of quality interactive entertainment software products that
deliver a highly satisfying consumer entertainment experience. Our strategy
includes the following elements:
Create and Maintain Diversity in Product Mix, Platforms and Markets. We
believe that maintaining a diversified mix of products can reduce our operating
risks and enhance profitability. Therefore, we develop and publish products
spanning a wide range of categories designed for target audiences ranging from
game enthusiasts and children to mass market consumers and "value priced"
buyers. We typically release our console products for use on multiple platforms
in order to reduce the risks associated with any single platform, leverage our
costs over a larger installed base and increase unit sales.
Create, Acquire and Maintain Strong Brands. We focus development and
publishing activities principally on products that are, or have the potential to
become, franchise properties with sustainable consumer appeal and brand
recognition. These products can thereby serve as the basis for sequels, prequels
and related new products that can be released over an extended period of time.
We believe that the publishing and distribution of products based in large part
on franchise properties enhances predictability of revenues and the probability
of high unit volume sales and operating profits.
-3-
Enforce Disciplined Product Selection and Development Processes. The
success of our publishing business depends, in significant part, on our ability
to develop games that will generate high unit volume sales and that can be
completed up to our high quality standards. Our publishing units have
implemented a formal control process for the selection, development, production
and quality assurance of our products. We apply this process, which we refer to
as the "Greenlight Process," to products under development with external, as
well as internal resources.
We develop our products using a strategic combination of our internal
development resources and external development resources acting under contract
with us. We typically select our external developers based on their track record
and expertise in producing products in the same category. We believe that this
selection process allows us to strengthen and leverage the particular expertise
of our internal and external development resources.
Continue to Improve Profitability. We are continually striving to reduce
our risk and increase our operating leverage and efficiency with the goal of
increased profitability. We believe the key factor affecting our profitability
will be the success rate of our product releases. Therefore, our product
selection and development process includes, as a significant component, periodic
evaluations of the expected commercial success of products under development.
Through this process, titles that we determine to be less promising are either
discontinued before we incur additional development costs, or if necessary,
corrections can be made in the development process. In addition, our focus on
cross platform releases and branded products will, we believe, contribute to
this strategic goal.
In order to further our emphasis on improved profitability, we have
implemented a number of operational initiatives. We have significantly increased
our product development capabilities by allocating a larger portion of our
product development investments to experienced independent development companies
working under contract with us, thereby taking advantage of specialized third
party developers without incurring the fixed overhead obligations associated
with increased internally employed staff. Our sales and marketing operations
work with our studio resources to increase the visibility of new product
launches and to coordinate timing and promotion of product releases. Our finance
and administration and sales and marketing personnel work together to improve
inventory management and receivables collections. We have broadly instituted
objective-based reward programs that provide incentives to management and staff
throughout the organization to produce results that meet our financial
objectives.
Grow Through Continued Strategic Acquisitions and Alliances. The
interactive entertainment industry is consolidating, and we believe that success
in this industry will be driven in part by the ability to take advantage of
scale. Specifically, smaller companies are more capital constrained, enjoy less
predictability of revenues and cash flow, lack product diversity and must spread
fixed costs over a smaller revenue base. Through ten completed acquisitions
since 1997, we believe that we have successfully diversified our operations, our
channels of distribution, our development talent pool and our library of titles,
and have emerged as one of the industry's leaders. We intend to continue to
expand our resources through acquisitions, strategic relationships and key
license transactions. We expect to focus our acquisition strategy on increasing
our development capacity through the acquisition of or investment in selected
experienced development companies, and expanding our intellectual property
library through licenses and strategic relationships with intellectual property
owners.
Consistent with our acquisition strategy, effective October 1, 2001, we
acquired all of the outstanding capital of Treyarch Invention, LLC, a privately
held interactive software developer, with
-4-
whom we have worked over the past several years on a number of our key franchise
titles, in exchange for 818,961 shares of our $.000001 par value common stock,
effected for our November 2001 stock three-for-two split, with a market value of
$14.9 million based on our opening stock price on October 1, 2001. Additional
shares of our common stock also may be issued to Treyarch's equity holders and
employees over the course of several years in the event certain
performance-based criteria are met.
RISK FACTORS
You should carefully consider the risks described below before investing in
our common stock. The occurrence of any of the following risks could harm our
business and our prospects. In that event, our business may be negatively
affected, the price of our stock may decline and you may lose part or all of
your investment.
We depend on a relatively small number of brands for a significant portion of
our revenues and profits.
A significant portion of our revenues are derived from products based on a
relatively small number of popular brands each year. In addition, many of these
products have substantial production or acquisition costs and marketing budgets.
In fiscal 2001, 49% of our worldwide net publishing revenues (37% of
consolidated net revenues) was derived from two brands, one of which accounted
for 39% and the other of which accounted for 10% of worldwide net publishing
revenues (29% and 8%, respectively, of consolidated net revenues). In fiscal
2000, two brands accounted for 34% of our worldwide net publishing revenues (24%
of consolidated net revenues), one of which accounted for 19%, and the other of
which accounted for 15% of worldwide net publishing revenues (13% and 11%,
respectively, of consolidated net revenues). We expect that a limited number of
popular brands will continue to produce a disproportionately large amount of our
revenues. Due to this dependence on a limited number of brands, the failure of
one or more products based on these brands to achieve anticipated results may
significantly harm our business and financial results.
Our future success depends on our ability to release popular products.
The life of any one game product is relatively short, in many cases less
than one year. It is therefore important for us to be able to continue to
develop many high quality new products that are popularly received. If we are
unable to do this, our business and financial results may be significantly
harmed.
We focus our development and publishing activities principally on products
that are, or have the potential to become, franchise brand properties. Many of
these products are based on intellectual property and other character or story
rights acquired or licensed from third parties. The license and distribution
agreements are limited in scope and time, and we may not be able to renew key
licenses when they expire or to include new products in existing licenses. The
loss of a significant number of our intellectual property licenses or of our
relationships with licensors could have a material adverse effect on our ability
to develop new products and therefore on our business and financial results.
-5-
The current transition in console platforms has a material impact on the market
for interactive entertainment software.
When new console platforms are announced or introduced into the market,
consumers typically reduce their purchases of game console entertainment
software products for current console platforms in anticipation of new platforms
becoming available. During these periods, sales of our game console
entertainment software products can be expected to slow down or even decline
until new platforms have been introduced and have achieved wide consumer
acceptance. We are currently experiencing such a transition period. Each of the
three current principal hardware producers launched a new platform. Sony made
the first shipments of its PlayStation 2 console system in North America and
Europe in the fourth quarter of calendar year 2000. During that quarter, Sony's
manufacturing shortages resulted in significant shipment delays of PlayStation 2
units in North America and Europe. In November 2001, Nintendo made the first
shipments of its Nintendo GameCube console system in North America. In addition,
in November 2001, Microsoft made the first shipments of its Xbox console system
in North America, and announced that it will be released in Europe and Japan in
calendar year 2002. In June 2001, Nintendo launched its Game Boy Advance hand
held device. Delays in the launch, shortages of these platforms or lack of
consumer acceptance could adversely affect our sales of products for these
platforms. Current sales of some of our products for the existing PlayStation
and Nintendo 64 platforms have been negatively affected by the new platform
transition.
We must make significant expenditures to develop products for new platforms
which may not be successful or released when anticipated.
The interactive entertainment software industry is subject to rapid
technological change. New technologies could render our current products or
products in development obsolete or unmarketable. We must continually anticipate
and assess the emergence and market acceptance of new interactive entertainment
software platforms well in advance of the time the platform is introduced to
consumers. New platforms have historically required the development of new
software and also have the effect of undermining demand for products based on
older technologies. Because product development cycles are difficult to predict,
we must make substantial product development and other investments in a
particular platform well in advance of introduction of the platform. If the
platforms for which we develop new software products or modify existing products
are not released on a timely basis or do not attain significant market
penetration, or if we develop products for a delayed or unsuccessful platform,
we may not be able to recover in revenues our development costs which could be
significant and our business and financial results could be significantly
harmed. An announcement by Sega Corporation that it has discontinued its
Dreamcast platform shows that even experienced hardware manufacturers are not
immune to failure.
We are exposed to seasonality in the purchases of our products.
The interactive entertainment software industry is highly seasonal, with
the highest levels of consumer demand occurring during the year-end holiday
buying season. As a result, our net revenues, gross profits and operating income
have historically been highest during the second half of the year. Additionally,
in a platform transition period such as the one taking place now, sales of game
console software products can be significantly affected by the timeliness of
introduction of game console platforms by the manufacturers of those platforms,
such as Sony, Microsoft and Nintendo. The timing of hardware platform
introduction is also often tied to holidays and is not within our control.
Further, delays
-6-
in development, licensor approvals or manufacturing can also affect the timing
of the release of our products, causing us to miss key selling periods such as
the year-end holiday buying season.
We depend on skilled personnel.
Our success depends to a significant extent on our ability to identify,
hire and retain skilled personnel. The software industry is characterized by a
high level of employee mobility and aggressive recruiting among competitors for
personnel with technical, marketing, sales, product development and management
skills. We may not be able to attract and retain skilled personnel or may incur
significant costs in order to do so. If we are unable to attract additional
qualified employees or retain the services of key personnel, our business and
financial results could be negatively impacted.
We depend on Sony and Nintendo for the manufacture of products that we develop
for their hardware platforms.
Generally, when we develop interactive entertainment software products for
hardware platforms offered by Sony or Nintendo, the products are manufactured
exclusively by that hardware manufacturer. Our hardware platform licenses with
Sony and Nintendo provide that the manufacturer may change prices for the
manufacturing of products. In addition, these agreements include other
provisions such as approval rights of all products and related promotional
materials that give the manufacturer substantial control over our costs and the
release of new titles. Since each of the manufacturers is also a publisher of
games for its own hardware platforms and manufactures products for all of its
other licensees, a manufacturer may give priority to its own products or those
of our competitors in the event of insufficient manufacturing capacity. Our
business and financial results could be materially harmed by unanticipated
delays in the manufacturing and delivery of our products by Sony or Nintendo. In
addition, our business and financial results could be materially harmed if Sony
or Nintendo used their rights under these agreements to delay the manufacture or
delivery of our products, limit the costs recoverable by us to manufacture
software for their consoles, or elect to manufacture software themselves or use
developers other than us.
If our products contain defects, our business could be harmed significantly.
Software products as complex as the ones we publish may contain undetected
errors when first introduced or when new versions are released. We cannot assure
you that, despite extensive testing prior to release, errors will not be found
in new products or releases after shipment, resulting in loss of or delay in
market acceptance. This loss or delay could significantly harm our business and
financial results.
Inadequate intellectual property protections could prevent us from enforcing or
defending our proprietary technology.
We regard our software as proprietary and rely on a combination of
copyright, trademark and trade secret laws, employee and third party
nondisclosure agreements and other methods to protect our proprietary rights. We
own or license various copyrights and trademarks. While we provide "shrinkwrap"
license agreements or limitations on use with our software, it is uncertain to
what extent these agreements and limitations are enforceable. We are aware that
some unauthorized copying occurs within the computer software industry, and if a
significantly greater amount of unauthorized copying of our interactive
entertainment software products were to occur, it could cause material harm to
our business and financial results.
-7-
Policing unauthorized use of our products is difficult, and software piracy
can be a persistent problem, especially in some international markets. Further,
the laws of some countries where our products are or may be distributed either
do not protect our products and intellectual property rights to the same extent
as the laws of the United States, or are poorly enforced. Legal protection of
our rights may be ineffective in such countries, and as we leverage our software
products using emerging technologies such as the Internet and online services,
our ability to protect our intellectual property rights and to avoid infringing
intellectual property rights of others may diminish. We cannot assure you that
existing intellectual property laws will provide adequate protection for our
products in connection with these emerging technologies.
We may be subject to intellectual property claims.
As the number of interactive entertainment software products increases and
the features and content of these products continue to overlap, software
developers increasingly may become subject to infringement claims. Many of our
products are highly realistic and feature materials that are based on real world
examples, which may inadvertently infringe upon the intellectual property rights
of others. Although we believe that we make reasonable efforts to ensure that
our products do not violate the intellectual property rights of others, it is
possible that third parties still may claim infringement. From time to time, we
receive communications from third parties regarding such claims. Existing or
future infringement claims against us, whether valid or not, may be time
consuming and expensive to defend.
Intellectual property litigation or claims could force us to do one or more
of the following:
o Cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
o Obtain a license from the holder of the infringed intellectual
property, which if available at all, may not be available on
commercially favorable terms; or
o Redesign our interactive entertainment software products, which could
cause us to incur additional costs, delay introduction and possibly
reduce commercial appeal of our products.
Any of these actions may cause material harm to our business and financial
results.
We rely on independent third parties to develop many of our software products.
We often rely on independent third party interactive entertainment software
developers to develop many of our software products. Since we depend on these
developers in the aggregate, we remain subject to the following risks:
o Continuing strong demand for developers' resources, combined with
recognition they receive in connection with their work, may cause
developers who worked for us in the past to either work for our
competitors in the future or to renegotiate our agreements with them
on terms less favorable to us.
-8-
o Limited financial resources and business expertise and inability to
retain skilled personnel may force developers out of business prior to
completing our products or require us to fund additional costs.
Increased competition for skilled third party software developers also has
compelled us to agree to make significant advance payments on royalties to game
developers. If the products subject to these arrangements do not generate
sufficient revenues to recover these royalty advances, we would have to
write-off unrecovered portions of these payments, which could cause material
harm to our business and financial results. In a few cases, we also agree to pay
developers fixed per unit product royalties after royalty advances are fully
recouped. To the extent that sales prices of products on which we have agreed to
pay a fixed per unit royalty are marked down, our profitability could be
adversely affected.
We operate in a highly competitive industry.
The interactive entertainment software industry is intensely competitive
and new interactive entertainment software products and platforms are regularly
introduced. Our competitors vary in size from small companies to very large
corporations with significantly greater financial, marketing and product
development resources than we have. Due to these greater resources, certain of
our competitors can undertake more extensive marketing campaigns, adopt more
aggressive pricing policies, pay higher fees to licensors of desirable motion
picture, television, sports and character properties and pay more to third party
software developers than we can. We believe that the main competitive factors in
the interactive entertainment software industry include: product features; brand
name recognition; compatibility of products with popular platforms; access to
distribution channels; quality of products; ease of use; price; marketing
support; and quality of customer service.
We compete primarily with other publishers of personal computer and video
game console interactive entertainment software. Significant third party
software competitors currently include, among others: Acclaim Entertainment,
Inc.; Capcom Co. Ltd.; Eidos PLC; Electronic Arts Inc.; Infogrames SA; Konami
Company Ltd.; Namco Ltd.; Take-Two Interactive Software, Inc.; THQ Inc. and
Vivendi Universal Publishing. In addition, integrated video game console
hardware and software companies such as Sony Computer Entertainment, Nintendo
Co. Ltd., Microsoft Corporation and Sega Enterprises, Ltd. compete directly with
us in the development of software titles for their respective platforms. In
addition, Sega produces software titles for other platforms.
We also compete with other forms of entertainment and leisure activities.
For example, we believe that the overall growth in the use of the Internet and
online services by consumers may pose a competitive threat if customers and
potential customers spend less of their available time using interactive
entertainment software and more using the Internet and online services.
We may face difficulty obtaining access to retail shelf space necessary to
market and sell our products effectively.
Retailers of our products typically have a limited amount of shelf space
and promotional resources, and there is intense competition among consumer
interactive entertainment software products for high quality retail shelf space
and promotional support from retailers. To the extent that the number of
products and platforms increases, competition for shelf space may intensify and
may require us to increase our marketing expenditures. Retailers with limited
shelf space typically devote the most and highest quality shelf space to the
best selling products. We cannot assure you that our new products will
-9-
consistently achieve such "best seller" status. Due to increased competition for
limited shelf space, retailers and distributors are in an increasingly better
position to negotiate favorable terms of sale, including price discounts, price
protection, marketing and display fees and product return policies. Our products
constitute a relatively small percentage of any retailer's sale volume, and we
cannot assure you that retailers will continue to purchase our products or to
provide our products with adequate levels of shelf space and promotional support
on acceptable terms. A prolonged failure in this regard may significantly harm
our business and financial results.
Our sales may decline substantially without warning and in a brief period of
time because we generally do not have long-term contracts for the sale of our
products.
We currently sell our products directly through our own sales force to mass
merchants, warehouse club stores, large computer and software specialty chains
and through catalogs, as well as to a limited number of distributors, in the
United States and Canada. Outside North America, we sell our products directly
to retailers as well as third party distributors in certain territories. Our
sales are made primarily on a purchase order basis without long-term agreements
or other forms of commitments. The loss of, or significant reduction in sales
to, any of our principal retail customers or distributors could significantly
harm our business and financial results. Our two largest customers, Wal-Mart
Stores, Inc. and Toys "R" Us, Inc., accounted for approximately 13% and 12%,
respectively, of our worldwide net publishing revenues for fiscal 2001 (10% and
9%, respectively, of our consolidated net revenues). Our five largest retailers,
including Wal-Mart and Toys "R" Us, accounted for approximately 45% of our
worldwide net publishing revenues for fiscal 2001 (34% of our consolidated net
revenues). Our two largest customers, Wal-Mart and Toys "R" Us, accounted for
approximately 13% and 9%, respectively, of our worldwide net publishing revenues
for fiscal 2000 (9% and 6%, respectively, of our consolidated net revenues). Our
five largest retailers, including Wal-Mart and Toys "R" Us, accounted for
approximately 37% of our worldwide net publishing revenues for fiscal 2000 (26%
of our consolidated net revenues).
Our customers have the right to return our products and to receive pricing
concessions and such rights could reduce our net revenues and results of
operations.
We are exposed to the risk of product returns and price protection with
respect to our distributors and retailers. Return policies allow distributors
and retailers to return defective, shelf-worn and damaged products in accordance
with negotiated terms. Price protection policies, when negotiated and
applicable, allow customers a credit against amounts they owe us with respect to
merchandise unsold by them. We provide price protection to a number of our
customers to manage our customers' inventory levels in the distribution channel.
We also offer a 90-day limited warranty to our end users that our products will
be free from manufacturing defects. Although we maintain a reserve for returns
and price protection, and although our agreements with a number of our customers
place limits on product returns and price protection, we could be forced to
accept substantial product returns and provide price protection to maintain our
relationships with retailers and our access to distribution channels. Product
returns and price protection that exceed our reserves could significantly harm
our business and financial results.
-10-
We may be burdened with payment defaults and uncollectible accounts if our
distributors or retailers cannot honor their credit arrangements with us.
Distributors and retailers in the interactive entertainment software
industry have from time to time experienced significant fluctuations in their
businesses, and a number of them have failed. The insolvency or business failure
of any significant retailer or distributor of our products could materially harm
our business and financial results. We typically make sales to most of our
retailers and some distributors on unsecured credit, with terms that vary
depending upon the customer and the nature of the product. Although we have
insolvency risk insurance to protect against our customers' bankruptcy,
insolvency or liquidation, this insurance contains a significant deductible and
a co-payment obligation, and the policy does not cover all instances of
non-payment. In addition, while we maintain a reserve for uncollectible
receivables, the reserve may not be sufficient in every circumstance. As a
result, a payment default by a significant customer could significantly harm our
business and financial results.
We may not be able to maintain our distribution relationships with key vendors.
Our CD Contact, NBG and CentreSoft subsidiaries distribute interactive
entertainment software products and provide related services in the Benelux
territories, Germany and the United Kingdom, respectively, and, via export, in
other European territories for a variety of entertainment software publishers,
many of which are our competitors. These services are generally performed under
limited term contracts. While we expect to use reasonable efforts to retain
these vendors, we may not be successful in this regard. The cancellation or
non-renewal of one or more of these contracts could significantly harm our
business and financial results. Sony and Eidos products accounted for
approximately 26% and 13%, respectively, of our worldwide net distribution
revenues for fiscal 2001.
Our international revenues may be subject to regulatory requirements as well as
currency fluctuations.
Our international revenues have accounted for a significant portion of our
total revenues. International sales and licensing accounted for 66%, 51% and 43%
of our total net revenues in fiscal 1999, 2000 and 2001, respectively. We expect
that international revenues will continue to account for a significant portion
of our total revenues in the future. International sales may be subject to
unexpected regulatory requirements, tariffs and other barriers. Additionally,
foreign sales which are made in local currencies may fluctuate. Presently, we do
not engage in currency hedging activities. Although exposure to currency
fluctuations to date has been insignificant, fluctuations in currency exchange
rates may in the future have a material negative impact on revenues from
international sales and licensing and thus our business and financial results.
Our software may be subject to governmental restrictions or rating systems.
Legislation is periodically introduced at the local, state and federal
levels in the United States and in foreign countries to establish a system for
providing consumers with information about graphic violence and sexually
explicit material contained in interactive entertainment software products. In
addition, many foreign countries have laws that permit governmental entities to
censor the content and advertising of interactive entertainment software. We
believe that mandatory government-run rating systems eventually may be adopted
in many countries that are significant markets or potential markets for our
products. We may be required to modify our products or alter our marketing
strategies to comply with new regulations, which could delay the release of our
products in those countries.
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Due to the uncertainties regarding such rating systems, confusion in the
marketplace may occur, and we are unable to predict what effect, if any, such
rating systems would have on our business. In addition to such regulations,
certain retailers have in the past declined to stock some of our products
because they believed that the content of the packaging artwork or the products
would be offensive to the retailer's customer base. While to date these actions
have not caused material harm to our business, we cannot assure you that similar
actions by our distributors or retailers in the future would not cause material
harm to our business.
Our software may be subject to legal claims.
Within the past two years, two lawsuits, Linda Sanders, et al. v. Meow
Media, Inc., et al., United States District Court for the District of Colorado,
and Joe James, et al. v. Meow Media, Inc., et al., United States District Court
for the Western District of Kentucky, Paducah Division, have been filed against
numerous video game companies, including us, by the families of victims who were
shot and killed by teenage gunmen. These lawsuits allege that the video game
companies manufactured and/or supplied these teenagers with violent video games,
teaching them how to use a gun and causing them to act out in a violent manner.
While our general liability insurance carrier has agreed to defend us in these
lawsuits, it is uncertain whether or not the insurance carrier would cover all
or any amounts which we might be liable for if the lawsuits are not decided in
our favor. If either of the lawsuits are decided against us and our insurance
carrier does not cover the amounts we are liable for, it could have a material
adverse effect on our business and financial results. It is possible that
similar additional lawsuits may be filed in the future. Payment of significant
claims by insurance carriers may make such insurance coverage materially more
expensive or unavailable in the future, thereby exposing our business to
additional risk.
We may face limitations on our ability to integrate additional acquired
businesses or to find suitable acquisition opportunities.
We intend to pursue additional acquisitions of companies, properties and
other assets that can be purchased or licensed on acceptable terms and which we
believe can be operated or exploited profitably. Some of these transactions
could be material in size and scope. While we will continually be searching for
additional acquisition opportunities, we may not be successful in identifying
suitable acquisitions. As the interactive entertainment software industry
continues to consolidate, we face significant competition in seeking and
consummating acquisition opportunities. We may not be able to consummate
potential acquisitions or an acquisition may not enhance our business or may
decrease rather than increase our earnings. In the future, we may issue
additional shares of our common stock in connection with one or more
acquisitions, which may dilute our existing stockholders. Future acquisitions
could also divert substantial management time and result in short term
reductions in earnings or special transaction or other charges. In addition, we
cannot guarantee that we will be able to successfully integrate the businesses
that we may acquire into our existing business. Our stockholders may not have
the opportunity to review, vote on or evaluate future acquisitions.
Our shareholder rights plan, charter documents and other agreements may make it
more difficult to acquire us without the approval of our Board of Directors.
We have adopted a shareholder rights plan under which one right entitling
the holder to purchase one one-hundredth of a share of our Series A Junior
Preferred Stock at a price of $40 per share (subject to adjustment) is attached
to each outstanding share of common stock. Such shareholder rights plan
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makes an acquisition of control in a transaction not approved by our Board of
Directors more difficult. Our Amended and Restated By-laws have advance notice
provisions for nominations for election of nominees to the Board of Directors
which may make it more difficult to acquire control of us. Our long-term
incentive plans provide for acceleration of stock options following a change in
control, which has the effect of making an acquisition of control more
expensive. A change in control constitutes a default under our revolving credit
facility. In addition, some of our officers have severance compensation
agreements that provide for substantial cash payments and acceleration of other
benefits in the event of change in control. These agreements and arrangements
may also inhibit a change in control and may have a negative effect on the
market price of our common stock.
Our stock price is highly volatile.
The trading price of our common stock has been and could continue to be
subject to wide fluctuations in response to certain factors, including:
o Quarter to quarter variations in results of operations
o Our announcements of new products
o Our competitors' announcements of new products
o Our product development or release schedule
o General conditions in the computer, software, entertainment, media or
electronics industries
o Timing of the introduction of new platforms and delays in the actual
release of new platforms
o Changes in earnings estimates or buy/sell recommendations by analysts
o Investor perceptions and expectations regarding our products, plans
and strategic position and those of our competitors and customers
o Other events or factors.
In addition, the public stock markets experience extreme price and trading
volume volatility, particularly in high technology sectors of the market. This
volatility has significantly affected the market prices of securities of many
technology companies for reasons often unrelated to the operating performance of
the specific companies. These broad market fluctuations may adversely affect the
market price of our common stock.
We do not pay dividends on our common stock.
We have not paid any dividends on our common stock and do not anticipate
paying dividends in the near future. In addition, our revolving credit facility
currently prohibits us from paying dividends on our common stock.
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EARNINGS PER SHARE GIVING EFFECT TO NOVEMBER 2001 STOCK SPLIT
On October 23, 2001, the Board of Directors authorized a three-for-two split of
our outstanding common shares. The split was payable on November 20, 2001 to
shareholders of record as of November 6, 2001. The par value of our common stock
was maintained at the pre-split amount of $.000001. Following is the pro forma
effect of the split on earnings per share data (in thousands, except per share
data).
(Unaudited)
Six Months Ending
Fiscal Year Ending March 31, September 30,
------------------------------------ -----------------
2001 2000 1999 1998 1997 2001 2000
---- ---- ---- ---- ---- ---- ----
Basic earnings (loss)
per share $ 0.55 $(0.92) $ 0.43 $ 0.15 $ 0.24 $ 0.05 $(0.02)
Diluted earnings
(loss) per share $ 0.50 $ (0.92) $ 0.41 $ 0.14 $ 0.23 $ 0.04 $(0.02)
Basic weighted
average common
shares outstanding 37,298 37,037 34,292 33,057 31,442 47,525 36,582
Diluted weighted
average common
shares outstanding 41,100 37,037 35,898 34,364 32,475 55,128 36,582
USE OF PROCEEDS
Except as otherwise described in the applicable prospectus supplement, the
net proceeds from the sale of our common stock being offered pursuant to this
prospectus will be added to our general funds and used for general corporate
purposes, including, among other things, additions to working capital, repayment
or redemption of existing indebtedness and financing of capital expenditures,
joint ventures and/or strategic acquisitions.
DESCRIPTION OF CAPITAL STOCK
We have 130,000,000 shares of authorized capital stock, $.000001 par value,
consisting of 125,000,000 shares of common stock and 3,750,000 shares of serial
preferred stock and 1,250,000 shares of Series A Junior Preferred Stock. As of
November 30, 2001, 52,688,920 shares of common stock were outstanding. Our
common stock is listed in the NASDAQ National Market System under the symbol
"ATVI."
Each outstanding share of common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors. There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding shares of common stock
can elect all of the directors then standing for election. Subject to
preferences which may be applicable to any outstanding shares of preferred
stock, holders of common stock are entitled to such distributions as may be
declared from time to time by our Board of Directors out of funds legally
available. We have not paid, and have no current plans to pay, dividends on our
common stock. We intend to retain all earnings for use in our business.
Holders of common stock have no conversion, redemption or preemptive rights
to subscribe to any of our securities. All outstanding shares of common stock
are fully paid and nonassessable. In the event of any liquidation, dissolution
or winding-up of the affairs of holders of our common stock will be entitled to
share ratably in our assets remaining after provision for payment of liabilities
to creditors and preferences applicable to outstanding shares of preferred
stock.
The rights, preferences and privileges of holders of common stock are
subject to the rights of the holders of any outstanding shares of preferred
stock. At present, no shares of preferred stock are outstanding. As of
November 30, 2001, we had approximately 3,400 stockholders of record, excluding
banks, brokers and depository companies that are stockholders of record for the
account of beneficial owners.
The transfer agent for our common stock is Continental Stock Transfer &
Trust Company, 17 Battery Place, New York, New York 10004.
BUSINESS
General
We are a leading international publisher of interactive entertainment
software products. We have built a company with a diverse portfolio of products
that spans a wide range of categories and target markets and that is used on a
variety of game hardware platforms and operating systems. We have
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created, licensed and acquired a group of highly recognizable brands which we
market to a growing variety of consumer demographics.
Our products cover the action, adventure, extreme sports, racing, role
playing, simulation and strategy game categories. We offer our products in
versions which operate on the Sony PlayStation, Sony PlayStation 2, Nintendo 64,
Nintendo GameCube, Microsoft Xbox and Sega Dreamcast console systems, the
Nintendo Game Boy Color and Game Boy Advance hand held devices, as well as on
personal computers. Over the next few years, we plan to produce many titles for
the recently released Sony PlayStation 2, Microsoft Xbox and Nintendo GameCube
console systems and Game Boy Advance hand held device. At present we have 159
different titles in various stages of production, development and planning, 80
of which are in production and development and 79 of which are in various
planning stages. Driven partly by the enhanced capabilities of the next
generation of platforms, we believe that in the next few years there will be
significant growth in the market for interactive entertainment software and we
plan to leverage our skills and resources to extend our leading position in the
industry.
Our publishing business involves the development, marketing and sale of
products, either directly, by license or through our affiliate label program
with third party publishers. In addition to publishing, we maintain distribution
operations in Europe that provide logistical and sales services to third party
publishers of interactive entertainment software, our own publishing operations
and manufacturers of interactive entertainment hardware.
Industry Overview
The interactive entertainment software business involves the creation or
acquisition of titles or intellectual property rights, the development of
interactive software products based on these titles or rights, and the
publication, marketing, merchandising, distribution and licensing of the
resulting software products. The interactive entertainment software market
principally consists of (i) software for use solely on dedicated hardware
console systems, (ii) software for portable hand held devices and (iii) software
for use on personal computers.
Consoles and Hand Held Devices. Game hardware has evolved significantly from the
early products launched by the initial hardware developers, Nintendo and Sega,
in the 1980's. The processing speed of the console systems has increased from
"8-bit" in the 1980's to "128-bit" in next generation platforms. Technological
developments in both chip processing speed and data storage has substantially
increased opportunities for game developers to provide game players with many
more capabilities such as improved speed of movement, richer content, more
graphic images and improved sound effects.
In addition, innovation in the market for hand held game devices has
brought about many similar changes including capabilities for multi-player
games, color screens and greater processing power within the games.
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The following table illustrates the evolution of the principal platforms of
both console and hand held devices.
Year of U.S.
Manufacturer Product Name Introduction
------------ ------------ ------------
Console Systems
Sega.................... Genesis.................... 1989
Nintendo................ SNES........................1991
Sega.................... Saturn......................1995
Sony.................... PlayStation.................1995
Nintendo................ Nintendo 64.................1996
Sega.................... Dreamcast...................1999
Sony.................... PlayStation 2...............2000
Microsoft............... Xbox........................2001
Nintendo................ GameCube....................2001
Hand Held Devices
Nintendo................ Game Boy....................1989
Nintendo................ Game Boy Color..............1998
Nintendo................ Game Boy Advance............2001
Personal Computers. Technological advancements in personal computers have
been more continuous than for consoles and hand held devices. The introduction
of faster microprocessors, graphics accelerator chips, greater capacity
hard-drives, enhanced operating systems and increases in memory has facilitated
the development of more cost-effective, graphically oriented and user-friendly
personal computer software, including video games. As personal computers become
more powerful, less expensive and easier to use, we expect their use for
interactive entertainment to continue to expand.
Market Size. The breadth of the interactive entertainment industry
continually increases as a result of the large and growing installed base of
video game console systems, advances in personal computers and expanding
game-player demographics. According to The Next Generation of Gaming report
dated April 2001 from International Data Corporation, or IDC, worldwide annual
unit shipments of next generation, interactive entertainment console and hand
held hardware are expected to grow from 39 million units in 2000 to 50 million
units in 2004. IDC estimates the aggregate revenues from the sale of these
products will be approximately $47 billion for the years 2000 to 2004. For those
years, shipments specifically for the PlayStation 2, Microsoft Xbox, Nintendo
GameCube and Nintendo Game Boy Advance are estimated by IDC to total
approximately 64 million units, 44 million units, 34 million units and 69
million units, respectively.
IDC also estimates that the United States market of next generation,
console and hand held interactive entertainment software will grow from 110
million units and $3.7 billion in 2000 to 338 million units and $13.4 billion in
2004. The market for personal computer game software in the United States is
estimated to grow from 82 million units and $2.6 billion in 2000 to 109 million
units and $3.4 billion in 2004.
Industry Trends. Principal trends influencing the current state of the
industry include broadening demographics, continuing technological development,
relationships between hardware and software producers and consolidation among
software developers and publishers.
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While the primary groups that play video games are male teenagers and young
adults, the demographic mix is rapidly expanding to include older adults and
women. Interactive software products have increasingly become a mainstream
entertainment choice for a maturing, technologically sophisticated audience.
According to a survey by Interactive Digital Software Association, 57% of all
Americans who play video games most frequently are over the age of 18 and 26% of
Americans who play video games are female. Interactive Digital Software
Association estimates that the household penetration rate for video game
consoles in the United States is approximately 35% and is expected to increase.
We believe certain other technological innovations such as the ability to
play DVDs and compact discs on certain console platforms and reverse
compatibility, which allows users to play prior generation games on selected
next generation platforms, will broaden the appeal of video game systems. In
addition to the technological developments of the next generation hardware
platforms, advances in communications and other technologies will accelerate
development of online interactive games including use of broadband capabilities
and wireless game devices.
As a result of these rapid technological and demographic shifts,
competition among platform makers is intense. While Sony, Nintendo and Microsoft
produce their own software, they also contract with publishers such as us to
develop new software in order to ensure a steady flow of high quality products.
In addition, they commit significant marketing funds to the industry and provide
support to publishers with which they have contracted to develop software to
stimulate greater consumer acceptance and penetration of their hardware.
There has been significant consolidation among developers and publishers of
interactive entertainment software products in recent years. This has been
driven principally by increasing product development costs, the potential for
economies of scale in the industry and the need to develop an international
presence. The increasing cost of developing products for new generation hardware
platforms requires the support of organizations with better access to capital
and broader management capabilities. Further, companies have leveraged their
development, publishing and distribution resources across a larger number of
titles to generate and sustain greater operating profits. Acquisitions have also
helped companies gain access to international markets. We believe the trend for
consolidation will continue.
Strategy
Our objective is to be a worldwide leader in the development, publishing
and distribution of quality interactive entertainment software products that
deliver a highly satisfying consumer entertainment experience. Our strategy
includes the following elements:
Create and Maintain Diversity in Product Mix, Platforms and Markets. We
believe that maintaining a diversified mix of products can reduce our operating
risks and enhance profitability. Therefore, we develop and publish products
spanning a wide range of product categories, including action, adventure,
extreme sports, racing, role playing, simulation and strategy, and products
designed for target audiences ranging from game enthusiasts and children to mass
market consumers and "value priced" buyers. We develop, publish and distribute
products that operate on Sony PlayStation and PlayStation 2, Sega Dreamcast,
Nintendo 64 and Nintendo GameCube console systems, Nintendo Game Boy hand held
devices and the personal computer. We currently have 69 titles under development
for next generation platforms. We typically release our console products for
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use on multiple platforms in order to reduce the risks associated with any
single platform, leverage our costs over a larger installed base and increase
unit sales.
Create, Acquire and Maintain Strong Brands. We focus development and
publishing activities principally on products that are, or have the potential to
become, franchise properties with sustainable consumer appeal and brand
recognition. These products can thereby serve as the basis for sequels, prequels
and related new products that can be released over an extended period of time.
We believe that the publishing and distribution of products based in large part
on franchise properties enhances predictability of revenues and the probability
of high unit volume sales and operating profits. We have entered into a series
of strategic relationships with the owners of intellectual property pursuant to
which we have acquired the rights to publish products based on franchises such
as Star Trek, various Disney films such as Toy Story 2 and Marvel Comics'
properties such as Spider-Man, X-Men, Blade, Iron Man and Fantastic Four. We
have also capitalized on the success of our Tony Hawk's Pro Skater products to
sign long-term agreements, many of which are exclusive, with numerous other
extreme sports athletes including superstars Mat Hoffman in BMX pro biking,
Kelly Slater in pro surfing, Shaun Palmer in snowboarding and Shaun Murray in
wakeboarding.
Enforce Disciplined Product Selection and Development Processes. The
success of our publishing business depends, in significant part, on our ability
to develop games that will generate high unit volume sales and that can be
completed up to our high quality standards. Our publishing units have
implemented a formal control process for the selection, development, production
and quality assurance of our products. We apply this process, which we refer to
as the "Greenlight Process," to products under development with external, as
well as internal resources. The Greenlight Process includes in-depth reviews of
each project at five intervals during the development process by a team that
includes several of our highest ranking operating managers and coordination
between our sales and marketing personnel and development staff at each step in
the process.
We develop our products using a strategic combination of our internal
development resources and external development resources acting under contract
with us, some of whom are independent and some of whom are partly owned or
otherwise controlled by us. We typically select our external developers based on
their track record and expertise in producing products in the same category. One
developer will often produce the same game for multiple platforms and will
produce sequels to the original game. We believe that this selection process
allows us to strengthen and leverage the particular expertise of our internal
and external development resources.
Continue to Improve Profitability. We are continually striving to reduce
our risk and increase our operating leverage and efficiency with the goal of
increased profitability. We believe the key factor affecting our profitability
will be the success rate of our product releases. Therefore, our product
selection and development process includes, as a significant component, periodic
evaluations of the expected commercial success of products under development.
Through this process, titles that we determine to be less promising are either
discontinued before we incur additional development costs, or if necessary,
corrections can be made in the development process. In addition, our focus on
cross platform releases and branded products will, we believe, contribute to
this strategic goal.
In order to further our emphasis on improved profitability, we have
implemented a number of operational initiatives. We have significantly increased
our product development capabilities by allocating a larger portion of our
product development investments to experienced independent development companies
working under contract with us, thereby taking advantage of specialized third
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party developers without incurring the fixed overhead obligations associated
with increased internally employed staff. Our sales and marketing operations
work with our studio resources to increase the visibility of new product
launches and to coordinate timing and promotion of product releases. Our finance
and administration and sales and marketing personnel work together to improve
inventory management and receivables collections. We have broadly instituted
objective-based reward programs that provide incentives to management and staff
throughout the organization to produce results that meet our financial
objectives.
Grow Through Continued Strategic Acquisitions and Alliances. The
interactive entertainment industry is consolidating, and we believe that success
in this industry will be driven in part by the ability to take advantage of
scale. Specifically, smaller companies are more capital constrained, enjoy less
predictability of revenues and cash flow, lack product diversity and must spread
fixed costs over a smaller revenue base. Several industry leaders are emerging
that combine the entrepreneurial and creative spirit of the industry with
professional management, the ability to access the capital markets and the
ability to maintain favorable relationships with strategic developers, property
owners and retailers. Through ten completed acquisitions since 1997, we believe
that we have successfully diversified our operations, our channels of
distribution, our development talent pool and our library of titles, and have
emerged as one of the industry's leaders. We intend to continue to expand our
resources through acquisitions, strategic relationships and key license
transactions. We expect to focus our acquisition strategy on increasing our
development capacity through the acquisition of or investment in selected
experienced development firms, and expanding our intellectual property library
through licenses and strategic relationships with intellectual property owners.
Consistent with our acquisition strategy, effective October 1, 2001, we acquired
all of the outstanding capital of Treyarch Invention, LLC, a privately held
interactive software developer, with whom we have worked over the past several
years on a number of our key franchise titles, in exchange for 818,961 shares of
our $.000001 par value common stock, effected for our November 2001
three-for-two stock split, with a market value of $14.9 million based on our
opening stock price on October 1, 2001. Additional shares of our common stock
also may be issued to Treyarch's equity holders and employees over the course of
several years in the event certain performance-based criteria are met.
Products
We historically have been best known for our action, adventure, strategy
and simulation products. With the successful introduction of our series of Tony
Hawk's Pro Skater products, we have also become the leader in the extreme sports
category. We have also established ourself as a leader in the "value priced"
software publishing business with such products as Cabela's Big Game Hunter
series and Ski Resort Tycoon. Products published by us in this category are
generally developed by third parties, often under contract with us, and are
marketed under the Activision Value Publishing and Head Games names. Value
priced software is typically less sophisticated and complex, both in terms of
the development process and consumer ease of use. We also publish products in
other categories such as leisure and role playing, and we may in the future
expand our product offerings into new categories.
Hardware Licenses. Our products currently are being developed or published
primarily for Sony PlayStation and PlayStation 2, Nintendo 64 and GameCube and
Microsoft Xbox console systems and Nintendo Game Boy hand held devices. We have
also published games for the Sega Dreamcast. In order to maintain general access
to the console systems marketplace, we have obtained licenses for PlayStation,
PlayStation 2, Nintendo 64, Nintendo GameCube and Microsoft Xbox console systems
and Game Boy hand held devices. Each license allows us to create one or more
products for the applicable system, subject to certain approval rights as to
quality which are reserved by each licensor. Each license also
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requires that we pay the licensor a per unit license fee for each unit
manufactured. In contrast, we currently are not required to obtain any license
for the development and production of products for personal computers.
Intellectual Property Rights. Our current and planned releases are based on
intellectual property and other character or story rights licensed from third
parties, as well as a combination of characters, worlds and concepts derived
from our extensive library of titles, and original characters and concepts owned
and created by us. In publishing products based on licensed intellectual
property rights, we generally seek to capitalize on the name recognition,
marketing efforts and goodwill associated with the underlying property.
In acquiring intellectual property rights from third parties, we seek to
obtain rights to publish titles across a variety of platforms, to include the
ability to produce multiple titles and to retain rights over an extended period
of time. In past years, we have been able to enter into a series of long-term or
multi-product agreements with owners of intellectual properties that are well
known throughout the world, and to create products based on these recognizable
characters, story lines or concepts. These agreements typically provide us with
exclusive publishing rights for a specific period of time, generally between
three and six years, and in some cases for specified platforms. For example, we
have entered into a series of license agreements with Marvel Characters Inc.
granting to us the rights to develop and produce games based on the Spider-Man,
X-Men, Blade, Iron Man and Fantastic Four comic book characters. The agreements
allow us to develop and publish any number of products on any or all platforms
over a five to six year period. To date, we have released eleven titles under
this license on the PlayStation and Nintendo 64 console systems and Game Boy
Color hand held device. Five of these eleven titles have achieved the status of
top ten sellers in their category and platform. We have also entered into a
license agreement with Fox Interactive granting to us the rights to develop and
produce games based on Steven Spielberg's upcoming sci-fi film "Minority
Report," starring Tom Cruise, which is scheduled for release in summer 2002. The
agreement allows us to develop, publish and distribute worldwide a title based
on the movie on any or all platforms over a five year period. We have also
entered into other license agreements, with such companies as Disney Interactive
and Lucas Arts, that are more limited in scope and duration.
We intend to expand our relationships with these intellectual property
owners and to enter into agreements with other intellectual property owners for
other recognizable characters, story lines and concepts. We may not, however, be
able to maintain or expand our existing relationships or to seek out and sustain
new long-term relationships of similar caliber in the future.
In addition to licenses based on existing intellectual property rights, we
acquire the right to base titles on individual sports and other celebrities. In
November 1998, we recognized the potential growth of extreme sports as popular
entertainment and licensed the rights to the name and likeness of Tony Hawk for
a series of skateboarding personal computer and console products. We contracted
with Neversoft, a premier outside developer, which operated under our control
and which we subsequently acquired, to produce the product on selected
platforms. Our initial release, Tony Hawk's Pro Skater, has sold over 5.9
million units through November 30, 2001 on prior generation platforms, which
made it one of the highest selling titles in PlayStation history. We have since
released the sequels, Tony Hawk's Pro Skater 2 and Tony Hawk's Pro Skater 3.
Tony Hawk-based products have been released on Sony PlayStation, Sony Play
Station 2, Microsoft Xbox, Nintendo 64, Nintendo GameCube and Dreamcast console
systems, Game Boy Color and Game Boy Advance hand held devices and personal
computers. In total, under our Tony Hawk brand, we have sold over 15.5 million
units as of November 30, 2001. Based on the success of the Tony Hawk product
releases, we have created an extreme sports product line marketed
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under the "Activision O2" brand, and we have entered into licenses with Mat
Hoffman (pro BMX biking), Kelly Slater (pro surfing), Shaun Palmer (pro
snowboarding) and Shaun Murray (pro wakeboarding) for their names and likenesses
in connection with products based on their particular sports of expertise.
Product Development and Support
We use a strategic mix of internal and external resources to develop our
products. In addition to product developers we own entirely or control, we
consider production developers in which we have a significant minority equity
investment and those with which we have long-term agreements to develop multiple
titles or sequels to be part of our internal product development effort. Of our
80 titles currently in development 44 titles are being developed internally and
36 titles are being developed externally. We currently have under contract
approximately 40 third party developers, some of which we have worked with
regularly for over five years. All our product development efforts are managed
under our "Greenlight Process," a formal management control process for the
selection, development and quality assurance of our products.
We develop and produce titles using a model in which a core group of
creative, production and technical professionals, in cooperation with our
marketing and finance departments, have overall responsibility for the entire
development and production process and for the supervision and coordination of
internal and external resources. This team assembles the necessary creative
elements to complete a title using, where appropriate, outside programmers,
artists, animators, scriptwriters, musicians and songwriters, sound effects and
special effects experts, and sound and video studios. We believe that this model
allows us to supplement internal expertise with top quality external resources
on an as needed basis.
In addition, we often seek out and engage independent third party
developers to create products on our behalf. Such products are usually owned by
us and we have unlimited rights to commercially exploit these products. We
typically select these independent third party developers based on their
expertise in developing products in a specific category and use the same
developer to produce the same game for multiple platforms. Each of our third
party developers is under contract with us for specific or multiple titles. From
time to time, we also license or acquire software products independently created
by third party developers and brought to us for publishing and/or distribution.
In such cases, the agreements with such developers provide us with exclusive
publishing and/or distribution rights for a specific period of time, often for
specified platforms and territories. In either case, we also often have the
ability to publish and/or distribute sequels, conversions, enhancements and
add-ons to the product initially being produced by the independent developer and
frequently have the right to engage the services of the original developer in
regards to such products.
In consideration for the services provided by independent third party
developers, the developer receives a royalty generally based on net sales of the
product that it has developed. Typically, the developer also receives an
advance, which is recoupable by us from the royalties otherwise required to be
paid to the developer. The advance generally is paid in stages with the payment
of each stage tied to the completion of a detailed performance milestone.
Working with independent developers allows us to reduce our fixed development
costs, share development risks with another company, take advantage of third
party developers' expertise in connection with certain categories of products or
certain platforms and gain access to proprietary development technologies.
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From time to time, we may make an investment and hold a minority equity
interest in a third party developer in connection with entertainment software
products to be developed by such developer for us, which we believe helps to
create a closer relationship between us and the developer. We have a minority
interest in Pandemic Studios, Raster Productions and Gray Matter Studios. There
can be no assurance that we will realize long term benefits from such type of
investments or that we will continue to carry such investments at their current
value.
"Greenlight Process"
We have adopted and implemented a rigorous procedure for the selection,
development, production and quality assurance of our internally and externally
produced entertainment software titles. The process, entitled the "Greenlight
Process," involves five phases throughout the pre-development, development and
production phases of the title, each of which includes a number of specific
performance milestones. The five phases of our "Greenlight Process" are the
concept phase, assessment phase, prototype phase, first playable phase and alpha
phase. This procedure is designed to enable us to manage and control production
and development budgets and timetables, to identify and address production and
technical issues at the earliest opportunity, and to coordinate marketing and
quality control strategies throughout the production and development phases, all
in an environment that fosters creativity. Checks and balances are intended to
be provided through the structured interaction of the project team with our
creative, technical, marketing and quality assurance/customer support personnel,
as well as the legal, accounting and finance departments.
Product Support
We provide various forms of product support to both our internally and
externally developed titles. Our quality assurance personnel are involved
throughout the development and production processes for each title published by
us. All such products are subjected to extensive testing before release in order
to ensure compatibility with the widest possible array of hardware
configurations and to minimize the number of bugs and other defects found in the
products. To support our products after release, we provide online access to our
customers on a 24-hour basis as well as operator help lines during regular
business hours. The customer support group tracks customer inquiries and this
data is used to help improve the development and production processes.
Publishing Activities
Marketing
Our marketing efforts include online activities (such as the creation of
World Wide Web pages to promote specific titles), public relations, print and
broadcast advertising, coordinated in-store and industry promotions including
merchandising and point of purchase displays, participation in cooperative
advertising programs, direct response vehicles, and product sampling through
demonstration software distributed through the Internet or on compact discs.
From time to time, we also receive marketing support from hardware manufacturers
and retailers in connection with their own promotional efforts. In addition, our
products contain software that enables customers to "electronically register"
their purchases with us online.
We believe that certain of our franchise properties have loyal and devoted
audiences who purchase our sequels as a result of dedication to the property and
satisfaction from previous product
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purchases. Marketing of these sequels is therefore directed both toward the
established market as well as broader audiences. In addition, in marketing
titles based on licensed properties, we believe that we derive benefits from the
marketing and promotional activities of the property owners.
Sales and Distribution
Domestic. Our products are available for sale or rental in thousands of
retail outlets domestically. Our domestic customers include Babbages, Best Buy,
CompUSA, Computer City, Electronic Boutique, K-Mart, Target, Toys "R" Us and
Wal-Mart. Our two largest customers, Wal-Mart and Toys "R" Us, accounted for
approximately 13% and 12%, respectively, of our worldwide net publishing
revenues for fiscal 2001 (10% and 9%, respectively, of our consolidated net
revenues). Our five largest retailers, including Wal-Mart and Toys "R" Us,
accounted for approximately 45% of our worldwide net publishing revenues for
fiscal 2001 (34% of our consolidated net revenues). Our two largest customers,
Wal-Mart and Toys "R" Us, accounted for approximately 13% and 9%, respectively,
of our worldwide net publishing revenues for fiscal 2000 (9% and 6%,
respectively, of our consolidated net revenues). Our five largest retailers,
including Wal-Mart and Toys "R" Us, accounted for approximately 37% of our
worldwide net publishing revenues for fiscal 2000 (26% of our consolidated net
revenues).
In the United States, our products are sold primarily on a direct basis to
major computer and software retailing organizations, mass market retailers,
consumer electronic stores and discount warehouses and mail order companies. We
believe that a direct relationship with retail accounts results in more
effective inventory management, merchandising and communications than would be
possible through indirect relationships. We have implemented electronic data
interchange linkages with many of our retailers to facilitate the placing and
shipping of orders. We seek to continue to increase the number of retail outlets
reached directly through our internal sales force. We sell our products to
distributors, such as Ingram Entertainment, for distribution to independent
channels.
International. We conduct our international publishing activities through
offices in the United Kingdom, Germany, France, Canada, Australia and Japan. We
seek to maximize our worldwide revenues and profits by releasing high quality
foreign language releases concurrently with the English language releases,
whenever practicable, and by continuing to expand the number of direct selling
relationships we maintain with key retailers in major territories. We sell
directly to large retailers and retail chains in the United Kingdom and Europe.
We also sell through third party distributors in these territories and
throughout the world.
Affiliate Labels. In addition to our own products, we distribute
interactive entertainment products that are developed and marketed by other
third party publishers through our "affiliate label" programs in North America
and Europe. The distribution of other publishers' products allows us to increase
the efficiencies of our sales force and provides us with the ability to better
ensure adequate shelf presence at retail stores for all of the products that we
distribute. We also mitigate the risk associated with a particular title or
titles published by us failing to achieve expectations. Services provided by us
under our affiliate label program include order solicitation, in-store
marketing, logistics and order fulfillment, sales channel management, as well as
other accounting and general administrative functions. Our affiliate label
partners currently include Lucas Arts and Encore Entertainment. Each affiliate
label relationship is unique and may pertain only to distribution in certain
geographic territories such as the United States or Europe and may be further
limited only to specific titles or titles for specific platforms.
-23-
Distribution
We distribute interactive entertainment hardware and software products in
Europe through our European distribution subsidiaries, CentreSoft in the United
Kingdom, NBG in Germany and CD Contact in the Benelux territories. These
subsidiaries act as wholesalers in the distribution of products and also provide
packaging, logistical and sales services and, in some cases, product
localization for certain vendors. They provide services to our publishing
operations and to various third party publishers, including Sony and Eidos.
CentreSoft is Sony's exclusive distributor of PlayStation products to the
independent channel in the United Kingdom. In the fiscal year ended March 31,
2001, sales for Sony and Eidos accounted for approximately 26% and 13%,
respectively, of our worldwide net distribution revenues.
We acquired CentreSoft and NBG in 1997 and CD Contact in 1998. We entered
into the distribution business to obtain distribution capacity in Europe for our
own products, while at the same time supporting the distribution infrastructure
with third party sales, and in order to diversify our operations into the
European market. CentreSoft and our other distribution subsidiaries operate in
accordance with strict confidentiality procedures in order to provide
independent services to various third party publishers.
Online, Broadband and Wireless Technologies
We believe that there will be opportunities for further exploitation of
titles through the Internet, online services, hand held and other wireless
devices and dedicated Internet online gaming services as platform standards
evolve and become more accepted. We are actively exploring the establishment of
online game playing opportunities and Internet and wireless services as a method
for realizing additional revenue from our products and as an additional platform
for our products. We also plan to develop online components for products
developed for next generation consoles that support online play. Many of our
products released for the personal computer contain multi-player gaming
capabilities. We have engaged a third party developer to develop an online
version of a Tony Hawk game and are currently in the process of negotiations
with third parties to host this product on their web sites. We have licensed
rights to various text-based computer games in our library to Nokia for hand
held wireless devices, and we have licensed certain rights to Star Trek
characters to a company called Digital Bridges for wireless application. We
believe that many of our other properties may have the potential to be exploited
as wireless and online technologies evolve. Manufacturing
We prepare a set of master program copies, documentation and packaging
materials for our products for each respective hardware platform on which the
product will be released. Except for products for use on the Sony and Nintendo
systems, our disk duplication, packaging, printing, manufacturing, warehousing,
assembly and shipping are performed by third party subcontractors.
In order to maintain protection over their hardware technologies, Sony and
Nintendo generally specify or control the manufacturing and assembly of finished
products. We deliver the master materials to the licensor or its approved
replicator, which then manufactures finished goods and delivers them to us for
distribution under our label. At the time our product unit orders are filled by
the manufacturer, we become responsible for the costs of manufacturing and the
applicable per unit royalty on such units, even if the units do not ultimately
sell.
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To date, we have not experienced any material difficulties or delays in the
manufacture and assembly of our products or material returns due to product
defects.
Competition
The interactive entertainment industry is intensely competitive and is in
the process of substantial consolidation. The availability of significant
financial resources has become a major competitive factor in this industry
primarily as a result of the escalating development, acquisition, production and
marketing budgets required to publish quality titles. In addition, competitors
with large product lines and popular titles typically have greater leverage with
retailers, distributors and other customers who may be willing to promote titles
with less consumer appeal in return for access to such competitor's most popular
titles.
Employees
As of November 30, 2001, we had 949 employees, including 396 in product
development, 95 in North American publishing, 80 in international publishing,
108 in operations, corporate finance and administration, and 270 in European
distribution activities.
As of Novembver 30, 2001, approximately 150 of our full-time employees were
subject to term employment agreements with us. These agreements generally commit
such employees to employment terms of between one and three years from the
commencement of their respective agreements. Most of the employees subject to
such agreements are our executives or members of the product development, sales
or marketing divisions. These individuals perform services for us as executives,
directors, producers, associate producers, computer programmers, game designers,
sales directors and marketing product managers. The execution by us of
employment agreements with such employees, in our experience, significantly
reduces our turnover during the development and production of our entertainment
software products and allows us to plan more effectively for future business
activities. None of our employees are subject to a collective bargaining
agreement, and we have not experienced any labor-related work stoppages.
Incorporation
We were originally incorporated in California in 1979. In December 1992, we
reincorporated in Delaware. In June 2000, we reorganized into a holding company
organizational structure.
PLAN OF DISTRIBUTION
General. We may sell the shares of common stock offered hereby directly to
one or more purchasers, through agents on our behalf, or through underwriters or
dealers designated by us from time to time. We may distribute the shares of
common stock from time to time in one or more transactions at a fixed price or
prices (which may be changed from time to time), at market prices prevailing at
the times of sale, at prices related to these prevailing market prices or at
negotiated prices. The applicable prospectus supplement will describe the terms
of the offering of the securities, including:
o the name or names of any underwriters, if any;
-25-
o the purchase price of the shares of common stock;
o the proceeds we will receive from the sale;
o any underwriting discounts and other items constituting underwriters'
compensation; and
o any discounts or concessions allowed or reallowed or paid to dealers.
Only underwriters named in the prospectus supplement, if any, are
underwriters of the securities offered with the prospectus supplement.
Sales Directly to Purchasers. We may enter into agreements directly with
one or more purchasers. Such agreements may provide for the sale of our common
stock at a fixed price, based on the market price of the common stock or
otherwise. Alternatively, such agreements may provide for the sale of common
stock over a period of time by means of draw downs at our election which the
purchaser would be obligated to accept under specified conditions. Under this
form of agreement, we may sell common stock at a per share price which is
discounted from the market price. Such agreements also may provide for sales of
common stock based on combinations of or variations from these methods.
Use of Underwriters and Agents. If underwriters are used in the sale, they
will acquire the securities for their own account and may resell them from time
to time in one or more transactions at a fixed public offering price or at
varying prices determined at the time of sale. We may offer the shares of common
stock to the public through underwriting syndicates represented by managing
underwriters or by underwriters without a syndicate. Subject to certain
conditions, the underwriters will be obligated to purchase all the shares of
common stock offered by the prospectus supplement. Any public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may change
from time to time.
We may sell shares of common stock directly or through agents we designate
from time to time. We will name any agent involved in the offering and sale of
our common stock and we will describe any commissions we will pay the agent in
the prospectus supplement. Unless the prospectus supplement states otherwise,
our agent will act on a best-efforts basis for the period of its appointment. We
may authorize agents or underwriters to solicit offers by certain types of
institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
We will describe the conditions to these contracts and the commissions we must
pay for solicitation of these contracts in the prospectus supplement.
Deemed Underwriters. In connection with the sale of the securities offered
with this prospectus, underwriters, dealers or agents may receive compensation
from us or from purchasers of the securities for whom they may act as agents, in
the form of discounts, concessions or commissions. The underwriters, dealers or
agents which participate in the distribution of the securities may be deemed to
be underwriters under the Securities Act and any discounts or commissions
received by them and any profit on the resale of the securities received by them
may be deemed to be underwriting discounts and commissions under the Securities
Act. Anyone deemed to be an underwriter under the Securities Act may be subject
to statutory liabilities, including Sections 11, 12 and 17 of the Securities Act
and Rule 10b-5 under the Securities Exchange Act.
Indemnification and Other Relationships. We may provide agents and
underwriters with indemnification against certain civil liabilities, including
liabilities under the Securities Act, or contribution with respect to payments
that the agents or underwriters may make with respect to such liabilities.
-26-
Agents and underwriters may engage in transactions with, or perform
services for, us in the ordinary course of business.
LEGAL MATTERS
The validity of the shares offered by this prospectus will be passed upon
by Robinson Silverman Pearce Aronsohn & Berman LLP,1290 Avenue of the Americas,
New York, New York 10104. Kenneth L. Henderson, one of our directors, is a
managing partner of Robinson Silverman. In addition, Robinson Silverman owns
approximately 14,250 shares of our common stock.
EXPERTS
Our consolidated financial statements as of March 31, 2000, and for each of
the years in the two-year period ended March 31, 2000, have been incorporated by
reference herein in reliance upon the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing. The consolidated financial
statements as of and for the year ended March 31, 2001 have been incorporated by
reference herein in reliance upon the report of PricewaterhouseCoopers LLP,
incorporated by reference herein, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission, or the SEC. You may read and copy such material at the Public
Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for more information on the
operation of the Public Reference Room. You can also find our SEC filings at the
SEC's web site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
o Our Annual Report on Form 10-K for the fiscal year ended March 31,
2001;
o Our Quarterly Reports on Form 10-Q for the quarterly periods ended
June 30, 2001 and September 30, 2001;
o Our Current Reports on Form 8-K filed on July 11, 2001, July 31, 2001,
and October 4, 2001;
-27-
o Our Proxy Statement on Schedule 14A for the 2001 Annual Meeting of the
Stockholders, filed on July 30, 2001;
o The description of our common stock and the rights associated with our
common stock contained in our Registration Statement on Form S-3,
Registration No. 333-46425, and our Registration Statement on Form
8-A, File No. 001-15839, filed on April 19, 2000.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, California 90405
(310) 255-2000
Attn: Investor Relations
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Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Company in
connection with the offering of the common stock being registered. All the
amounts shown are estimates except the Securities and Exchange Commission (the
"Commission") registration fee.
Item Amount
Registration Fee - Securities and Exchange Commission $38,628*
Legal Fees and Expenses 10,000
Accounting Fees and Expenses 5,000
Miscellaneous 5,000
-------
TOTAL $58,628
=======
_________________
* Pursuant to Rule 457(p) of the Securities Act of 1933, as amended, the
registration fee of $38,628 is offset against the $57,141 registration fee
that was previously paid to the Commission relating to 6,000,000 shares of
Common Stock previously registered by the registrant pursuant to its
Registration Statement on Form S-3 filed with the Commission on July 30,
2001, as amended on August 31, 2001 (File No. 333-66280), which
Registration Statement was withdrawn on October 22, 2001, prior to the
issuance of any such shares.
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL"), paragraph B
of Article SIXTH of the Company's Amended and Restated Certificate of
Incorporation and paragraph 5 of Article VII of the Company's By-laws provide
for the indemnification of the Company's directors and officers in a variety of
circumstances, which may include liabilities under the Securities Act of 1933,
as amended (the "Securities Act").
Paragraph B of Article SIXTH of the Amended and Restated Certificate of
Incorporation provides mandatory indemnification rights to any officer or
director of the Company who, by reason of the fact that he or she is an officer
or director of the Company, is involved in a legal proceeding of any nature.
Such indemnification rights shall include reimbursement for expenses incurred by
such officer or director in advance of the final disposition of such proceeding
in accordance with the applicable provisions of the DGCL. Paragraph 5 of Article
VII of the Company's By-laws currently provide that the Company shall indemnify
its directors and officers to the fullest extent permitted by the DGCL.
Paragraph A of Article SIXTH of the Amended and Restated Certificate of
Incorporation contains a provision which eliminates the personal liability of a
director to the Company and its
-29-
stockholders for certain breaches of his or her fiduciary duty of care as a
director. This provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the Delaware statutory provision making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the Board
of Directors of the Company protection against awards of monetary damages
resulting from negligent (except as indicated above) and "grossly" negligent
actions taken in the performance of their duty of care, including grossly
negligent business decisions made in connection with takeover proposals for the
Company. As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care.
The Company maintains a directors' and officers' insurance policy which
insures the officers and directors of the Company from any claim arising out of
an alleged wrongful act by such persons in their respective capacities as
officers and directors of the Company. In addition, the Company has entered into
indemnification agreements with its officers and directors containing provisions
which are in some respects broader than the specific indemnification provisions
contained in the DGCL. The indemnification agreements require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature) and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these agreements are necessary to attract and retain qualified persons as
directors and officers.
It is currently unclear as a matter of law what impact these provisions
will have regarding securities law violations. The Commission takes the position
that indemnification of directors, officers and controlling persons against
liabilities arising under the Securities Act is against public policy as
expressed in the Securities Act and therefore is unenforceable.
Item 16. Exhibits
(a) Exhibits:
1.1 Form(s) of Underwriting Agreement(s).*
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP as to
the legality of securities being registered.
23.1 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(included as part of Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
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24.1 Power of attorney (included on signature page).
________________________
* To be filed by amendment or by a report on Form 8-K, to the extent
applicable, in connection with an offering.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the "Commission")
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement;
Provided, however, that clauses (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by
such clauses is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a
-31-
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of
such issue.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)1 or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was
declared effective.
(7) That, for the purpose of determining any liability under the
Securities Act, each post- effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
-32-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on December 3,
2001.
ACTIVISION, INC.
By:/s/ Robert A. Kotick
--------------------------
Robert A. Kotick, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert A. Kotick and Brian G. Kelly, and
each or any of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective documents in connection therewith), with the Securities and
Exchange Commission, granting unto each said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent or either of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
/s/ Robert A. Kotick Chairman, Chief Executive Officer December 3, 2001
------------------------ (Principal Executive Officer)
(Robert A. Kotick) and Director
/s/ Brian G. Kelly Co-Chairman and Director December 3, 2001
------------------------
(Brian G. Kelly)
/s/ William Chardavoyne Executive Vice President and December 3, 2001
------------------------ Chief Financial Officer (Principal
(William Chardavoyne) Financial and Accounting Officer)
/s/ Kenneth L. Henderson Director December 3, 2001
------------------------
(Kenneth L. Henderson)
/s/ Barbara S. Isgur Director December 3, 2001
------------------------
(Barbara S. Isgur)
/s/ Steven T. Mayer Director December 3, 2001
------------------------
(Steven T. Mayer)
/s/ Robert J. Morgado Director December 3, 2001
------------------------
(Robert J. Morgado)
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EXHIBIT INDEX
Exhibit Page Number in Signed
No. Description Registration Statement
1.1 Form(s) of Underwriting Agreement(s).*
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP as to the
legality of securities being registered.
23.1 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP (included
as part of Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of attorney (included on signature page).
________________________
* To be filed by amendment or by a report on Form 8-K, to the extent
applicable, in connection with an offering.