Activision Blizzard (ATVI)

2006 Stock Based Grants

Stock option grants continue to be an important aspect of compensation because in the view of the Compensation Committee, they align the interests of the recipient with stockholder interest. The Compensation Committee also believes that, properly structured, options place a premium on loyalty to the Company, foster the retention of key executives and emphasize a long-term perspective. However, in recent years, other than grants in connection with new hires at senior positions, the amounts awarded have been gradually reduced to modify their dilutive characteristics and to seek to comport with Institutional Shareholder Service's guidelines and to adjust for potential future stock option expensing requirements. For fiscal year 2006, the Compensation Committee limited

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aggregate grants to no more than three percent of the total shares outstanding. As a result, the Company has reduced the annual dilutive impact of its stock-based compensation program and, combined with its enhanced operating position, is now better positioned to implement stock option expensing requirements, as and when required.

2005 Stock Based Grants

Stock option grants continue to be an important aspect of compensation because they align the interests of the recipient with stockholder interest. The Compensation Committee also believes that, properly structured, options place a premium on loyalty to the Company, foster the retention of key executives and emphasize a long-term perspective. However, in recent years, the amounts awarded have been gradually reduced to modify their dilutive characteristics and to seek to comport with Institutional Shareholder Service's guidelines and to adjust for potential future stock option expensing requirements. For fiscal year 2005, the Compensation Committee limited aggregate grants to no more than three percent of the total shares outstanding. This guideline has been in place for the last two fiscal years. As a result, the Company has significantly reduced the annual dilutive impact of its stock-based compensation program and, combined with its enhanced operating position, is now better positioned to implement stock option expensing requirements, as and when required.

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