This excerpt taken from the ATVI 8-K filed Jan 8, 2007.
Amendments to Stock Options Agreements of Certain Directors and Officers.
As previously disclosed, the Board of directors of Activision, Inc. (the Company) has appointed a special sub-committee of independent members of the Companys board of directors to conduct a review of the Companys historical stock option grant practices. Although the sub-committees review is not complete, the Company has determined that it appears that actual measurement dates for certain historical stock option grants will be found to differ from the recorded grant dates for such awards. While such options had an exercise price that was equal to the fair market value of the Companys stock on the originally used grant date, the exercise price may be less than the fair market value of the stock on the redetermined measurement date. If certain options are determined to have a measurement date different from the original measurement date, and the exercise price of such option is less than the fair market value of the Companys stock on the redetermined measurement date, the option recipient may be subject to the adverse tax consequences, and the Company may be subject to the reporting and withholding obligations, imposed by Section 409A.
In order to address the potential adverse consequences of Section 409A, certain of the Companys officers and directors have executed a consent (the Consents), pursuant to which each such person has irrevocably agreed either that (i) the exercise price of any of his or her stock options that become subject to Section 409A will be increased so as to be equal to the fair market value of the Companys stock on the redetermined measurement date or (ii) any of such persons stock options that become subject to Section 409A and that vested in 2005 or 2006 must be exercised in 2007 (after the Company establishes the redetermined measurement date) and that any such stock options that vest on or after January 1, 2007 will be exercised in the year of vesting.
The persons signing Consents have agreed not to exercise such options prior to notification from the Company as to whether there has been a redetermination of the measurement date with respect to such options.