This excerpt taken from the ATVI DEF 14A filed Apr 22, 2009.
Relationships and Transactions with Vivendi and its Affiliates
Combination of Activision and Vivendi Games and Post-Closing Tender Offer
On July 9, 2008, the parties to the Business Combination Agreement dated December 1, 2007 (the "Business Combination Agreement")Activision Blizzard (then known as Activision, Inc.), Sego
Merger Corporation, Vivendi, VGAC and Vivendi Gamesconsummated the Combination. In that transaction:
Following the consummation of the Combination, Vivendi and its subsidiaries owned approximately 54% of the issued and outstanding shares of our Common Stock.
Upon the consummation of the Combination, our Certificate of Incorporation and Bylaws were amended and restated to provide for, among other things, (1) the change of our name to Activision Blizzard, Inc., (2) the change of our fiscal year end to December 31, (3) an increase in the authorized number of shares of our Common Stock, (4) certain majority and minority stockholder protections and (5) certain changes to the structure of our Board. As a result of these amendments, among other things, Vivendi is entitled to appoint a majority of our Board. For more information about our corporate governance, see "Corporate Governance Matters" above and "Investor Agreement" below.
In accordance with the terms of the Business Combination Agreement, on July 16, 2008, we commenced a tender offer to purchase up to 293,000,000 shares of our Common Stock at a price of $13.75 per share. The tender offer expired on August 13, 2008. We purchased 171,832 shares of our Common Stock for an aggregate of approximately $2.3 million as a result of the tender offer and retired and cancelled those shares.
The transactions with Vivendi described below were entered into in connection with the Combination before Vivendi and we were related parties.
Credit Facility Provided by Vivendi
On April 29, 2008, we entered into a senior unsecured credit agreement with Vivendi, which we and Vivendi amended in connection with the consummation of the Combination. Pursuant to the credit agreement, as amended, Vivendi provided us with:
Borrowings under each of the new credit facilities bear interest by reference to LIBOR (and under limited circumstances, at Vivendi's election, a "Base Rate"). The applicable margin with respect to loans bearing interest by reference to LIBOR is (1) 0.85% per annum for loans under the Tranche A Facility and (2) 1.20% per annum for loans under the Tranche B Facility and the Revolving Facility. The applicable margin with respect to loans bearing interest with reference to the Base Rate, if any, is 1.0% lower than the margin applicable to LIBOR borrowings. We did not borrow any amounts under any of these facilities in 2008. The Tranche A Facility and the Tranche B Facility terminated following the completion of the tender offer described above since these facilities were not used to fund the
purchase of shares in the tender offer. The Revolving Facility will terminate and any amounts outstanding will be payable in full on March 31, 2011. Any unused amounts under the Revolving Facility are subject to a commitment fee of 0.42% per annum. We paid Vivendi an aggregate of $969,792 during the nine month period ended December 31, 2008 with respect to these credit facilities.
The credit facilities are subject to customary negative covenants, in each case subject to certain exceptions, qualifications and baskets, including limitations on: indebtedness; liens; investments, mergers, consolidations and acquisitions; transactions with affiliates; issuance of preferred stock by subsidiaries; sale and leaseback transactions; restricted payments; and certain restrictions with respect to subsidiaries.
Voting and Lock-Up Agreements
On December 1, 2007, in connection with entering into the Business Combination Agreement, we and Vivendi entered into voting and lock-up agreements with Mr. Kotick, our Chief Executive Officer, and Mr. Kelly, the Co-Chairman of our Board. Among other things, these agreements governed the voting of Messrs. Kotick and Kelly on the Combination and restricted transfers by each of more than a third of his Activision, Inc. shares and other Activision, Inc. equity securities until 120 days after the consummation of the Combination. These agreements also provide Messrs. Kotick and Kelly with certain registration rights which were effective as of the consummation of the Combination, including the right to require us to file a registration statement with the SEC relating to the sale of their securities and the right to participate in any proposed registered public offering of our securities.
In connection with the consummation of the Combination, on July 9, 2008, we, Vivendi, VGAC and Vivendi Games entered into an investor agreement. The investor agreement contains various agreements among the parties regarding, among other things:
For more information about the investor agreement, see our current report on Form 8-K filed with the SEC on July 15, 2008.
In accordance with the investor agreement and the employment agreement between us and Jean-Francois Grollemund dated July 16, 2008, effective as of the consummation of the Combination we have agreed to reimburse, on a quarterly basis, Vivendi or any of its controlled affiliates for contributions made by Vivendi or any of its controlled affiliates to the French social security system in respect of the employment of Jean-Francois Grollemund (but in no event in excess of the maximum amount of the social security contributions required under applicable law). During the period from July 9, 2008 until December 31, 2008, we paid to Vivendi $33,588 for reimbursement of such social security contributions in accordance with the investor agreement.
Tax Sharing Agreement
Also in connection with the consummation of the Combination, on July 9, 2008, we entered into a tax sharing agreement with Vivendi Games and Vivendi Holding I Corp., a subsidiary of Vivendi ("VHIC"). The tax sharing agreement sets forth various agreements among the parties relating to, among other things:
In addition, the agreement specifies certain procedural matters that will apply in any tax contest with any taxing authority. For more information about the tax sharing agreement, see our current report on Form 8-K filed with the SEC on July 15, 2008.
Cash Management Services Agreement
On June 19, 2008, we entered into a cash management services agreement with Vivendi effective as of the consummation of the Combination on July 9, 2008, pursuant to which Vivendi provides certain treasury-related services to certain of our subsidiaries. The agreement has a term of three years, subject to possible extensions, and may be terminated by either party on not less than three months prior written notice. Vivendi charges us a fee based on Vivendi's estimated cost of providing these
services and we reimburse Vivendi for its out-of-pocket expenses incurred in connection with the services. We also license software from Vivendi on a royalty-free basis in connection with certain of these services. We paid Vivendi an aggregate of $241,258 during the nine month period ended December 31, 2008 in accordance with the cash management services agreement.
Office Space Arrangement with Bruce Hack
In accordance with an employment agreement between us and Bruce Hack dated December 1, 2007, effective as of the consummation of the Combination we furnished Mr. Hack with office facilities and staff support at our executive offices in both Los Angeles and New York. We reimbursed Vivendi, which provided the office space in New York, an aggregate of $151,900 during the period from July 9, 2008 until December 31, 2008 for its out-of-pocket expenses incurred in connection with the provision of such office facilities and staff support.