<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-K
(Mark one)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   FOR THE FISCAL YEAR ENDED MARCH 31, 1999

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

            For the transition period from __________ to __________

                        Commission File Number 0-12699

                               ACTIVISION, INC.
            (Exact name of registrant as specified in its charter)

             DELAWARE                                 94-2606438
      (State or other jurisdiction of     (I.R.S. Employer Identification No.)
      incorporation or organization)

   3100 OCEAN PARK BLVD., SANTA MONICA, CA                 90405
  (Address of principal executive offices)               (Zip Code)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 255-2000

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                  Common Stock, par value $.000001 per share
                  ------------------------------------------
                              (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X   No
                                      -----  -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the Common Stock of the registrant held by
non-affiliates of the registrant on June 25, 1999 was $295,741,675.

The number of shares of the registrant's Common Stock outstanding as of June 25,
1999 was 22,982,248.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement, to be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year covered by this Form 10-K, with respect to the 1999 Annual Meeting of
Shareholders, are incorporated by reference into Part III of this Annual Report.


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                                      INDEX

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PART I.


         Item 1.    Business .............................................................................   3


         Item 2.    Properties ...........................................................................  14


         Item 3.    Legal Proceedings ....................................................................  14


         Item 4.    Submission of Matters to a Vote of Security Holders ..................................  14


PART II.


         Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters ................  15


         Item 6.    Selected Consolidated Financial Data .................................................  17


         Item 7.    Management's Discussion and Analysis of Financial Condition
                        and Results of Operations ........................................................  18


         Item 7A.   Quantitative and Qualitative Disclosures about Market Risk............................  26


         Item 8.    Consolidated Financial Statements and Supplementary Data .............................  27


PART III.


         Item 10.   Directors and Executive Officers of the Registrant ...................................  28


         Item 11.   Executive Compensation ...............................................................  28


         Item 12.   Security Ownership of Certain Beneficial Owners and Management .......................  28


         Item 13.   Certain Relationships and Related Transactions .......................................  28


PART IV.


         Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K .....................  29

SIGNATURES ...............................................................................................  32
</TABLE>



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                                     PART I



Item 1.  BUSINESS

         (a)      GENERAL

                  Activision, Inc. (together with its subsidiaries, "Activision"
         or the "Company") is a leading international publisher, developer and
         distributor of interactive entertainment and leisure products. The
         Company was incorporated in California in 1979. In December 1992, the
         Company reincorporated in Delaware.

                  The Company's products span a wide range of genres (including
         action, adventure, strategy and simulation) and target markets
         (including game enthusiasts, value buyers and children). In addition to
         its genre and market diversity, the Company publishes, develops and
         distributes products for a variety of game platforms, including
         personal computers ("PCs"), the Sony Playstation console system and the
         Nintendo 64 console system.

                  The Company completed the acquisition of Raven Software
         Corporation ("Raven") on July 13, 1997, NBG EDV Handels- und Verlags
         GmbH ("NBG") on November 26, 1997, S.B.F. Services, Limited dba Head
         Games Publishing ("Head Games") on June 30, 1998, and CD Contact
         Data GmbH ("CD Contact") on September 29, 1998. Each of the above
         transactions originally had been accounted for by the Company as an
         immaterial pooling of interests. The financial results for each such
         acquired company and related cash flows had therefore been included
         in the reported operations of the Company beginning only on the date
         of acquisition. Based on a reevaluation of these transactions,
         including the results of operations of each entity, statements by
         the Securities and Exchange Commission (the "SEC") on materiality of
         pooling transactions and requirements to evaluate the impact on each
         line item in the financial statements and the impact on the
         Company's trends, the Company has restated all financial information
         reported in this Annual Report on Form 10-K for all periods prior to
         the consummation of each transaction to include the financial
         position, results of operations and cash flows of such acquired
         companies.

         (b)     FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

                  The Company has two reportable segments: publishing
         CD-based and cartridge based interactive entertainment and leisure
         software; and distributing interactive entertainment and leisure
         products. Publishing relates to the development (both internally and
         externally), marketing and sale of products owned or controlled by
         the Company, either directly or through its affiliate label program.
         Distribution refers to the sale by the Company's European
         distribution subsidiaries of other publishers' software and related
         products to the marketplace. See the Consolidated Financial
         Statements and Notes thereto included in Item 8 of this Annual
         Report on Form 10-K for certain financial information required by
 
        Item 1.

         (c)      NARRATIVE DESCRIPTION OF BUSINESS

         FACTORS AFFECTING FUTURE PERFORMANCE

                  In connection with the Private Securities Litigation Reform
         Act of 1995 (the "Litigation Reform Act"), the Company is hereby
         disclosing certain cautionary information to be used in connection with
         written materials (including this Annual Report on Form 10-K) and oral
         statements made by or on behalf of its employees and representatives
         that may contain "forward-looking statements" within the meaning of the
         Litigation Reform Act. Such statements consist of any statement other
         than a recitation of historical fact and can be identified by the use
         of forward-looking terminology such as "may," "expect," "anticipate,"
         "estimate" or "continue" or the negative thereof or other variations
         thereon or comparable terminology. The listener or reader is cautioned
         that all forward-looking statements are necessarily speculative and
         there are numerous risks and uncertainties that could cause actual
         events or results to differ materially from those referred to in such
         forward-looking statements. The discussion below highlights some of the
         more important risks identified by management, but should not be
         assumed to be the only factors that could affect future performance.
         The reader or listener is cautioned that the Company does not have a
         policy of updating or revising forward-looking statements and thus he
         or she should not assume that silence by management over time means
         that actual events are bearing out as estimated in such forward-looking
         statements.

                  FLUCTUATIONS IN QUARTERLY RESULTS; FUTURE OPERATING RESULTS
         UNCERTAIN; SEASONALITY. The Company's quarterly operating results have
         varied significantly in the past and will likely vary significantly in
         the future depending on numerous factors, several of which are not
         under the Company's control. Such factors include, but are not limited
         to, demand for products published or distributed by the Company, the
         size and rate of growth of the interactive entertainment and leisure
         markets, development and promotional expenses relating to the
         introduction of new products, changes in computing platforms, product
         returns, the timing of orders from major customers, delays in shipment,
         the level of price competition, the timing of



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         product introductions by the Company and its competitors, product
         life cycles, product defects and other quality problems, the level
         of the Company's international revenues, and personnel changes.
         Products are generally shipped as orders are received, and
         consequently, the Company operates with little or no backlog. Net
         revenues in any quarter are, therefore, substantially dependent on
         orders booked and shipped in that quarter.

                  The Company's expenses are based in part on the Company's
         product development and marketing budgets. Many of the costs incurred
         by the Company to produce and sell its products are expensed as such
         costs are incurred, which often is before a product is released. In
         addition, a significant portion of the Company's expenses are fixed. As
         the Company increases its production and sales activities, current
         expenses will increase and, if sales from previously released products
         are below expectations, net income is likely to be disproportionately
         affected.

                  Due to all of the foregoing, revenues and operating results
         for any future quarter are not predictable with any significant degree
         of accuracy. Accordingly, the Company believes that period-to-period
         comparisons of its operating results are not necessarily meaningful and
         should not be relied upon as indications of future performance.

                  The Company's business has experienced and is expected to
         continue to experience significant seasonality, in part due to consumer
         buying patterns. Net revenues typically are significantly higher during
         the fourth calendar quarter, primarily due to the increased demand for
         consumer software during the year-end holiday buying season. Net
         revenues and net income in other quarters are generally lower and vary
         significantly as a result of new product introductions and other
         factors. For example, the Company's net revenues in its last five
         quarters were $68.1 million for the quarter ended March 31, 1998, $61.5
         million for the quarter ended June 30, 1998, $66.2 million for the
         quarter ended September 30, 1998, $193.5 million for the quarter ended
         December 31, 1998 and $115.2 million for the quarter ended March 31,
         1999. The Company's net income (loss) for the last five quarters was
         $689,000 for the quarter ended March 31, 1998, $(3.7) million for the
         quarter ended June 30, 1998, $(2.2) million for the quarter ended
         September 30, 1998, $16.0 million for the quarter ended December 31,
         1998 and $5.2 million for the quarter ended March 31, 1999. The Company
         expects its net revenues and operating results to continue to reflect
         significant seasonality.

                  DEPENDENCE ON NEW PRODUCT DEVELOPMENT; PRODUCT DELAYS. The
         Company's future success depends in part on the timely introduction of
         successful new products to replace declining revenues from older
         products. If, for any reason, revenues from new products were to fail
         to replace declining revenues from older products, the Company's
         business, operating results and financial condition would be materially
         and adversely affected. In addition, the Company believes that the
         competitive factors in the marketplace for premium-priced interactive
         products create the need for higher quality, distinctive products that
         incorporate increasingly sophisticated effects and the need to support
         product releases with increased marketing, resulting in higher
         development, acquisition and marketing costs. The lack of market
         acceptance or significant delay in the introduction of, or the presence
         of a defect in, one or more premium-priced products could have a
         material adverse effect on the Company's business, operating results
         and financial condition, particularly in view of the seasonality of the
         Company's business. Further, because a large portion of a product's
         revenue generally is associated with initial shipments, the delay of a
         product introduction expected near the end of a fiscal quarter may have
         a material adverse effect on operating results for that quarter.

                  The Company has, in the past, experienced significant delays
         in the introduction of certain new products. The timing and success of
         interactive entertainment products remain unpredictable due to the
         complexity of product development, including the uncertainty associated
         with technological developments. Although the Company has implemented
         substantial development controls, there likely will be delays in
         developing and introducing new products in the future. There can be no
         assurance that new products will be introduced on schedule, or at all,
         or that they will achieve market acceptance or generate significant
         revenues.

                  RELIANCE ON THIRD PARTY DEVELOPERS AND INDEPENDENT
         CONTRACTORS. The percentage of products published by the Company that
         are developed by independent third party developers has increased over
         the last several fiscal years. From time to time, the Company also
         utilizes independent contractors for certain aspects of product
         development and production. The Company has less control over the
         scheduling and the quality of work by independent contractors and third
         party developers than that of its own employees. A delay in the work
         performed by independent contractors and third party developers or poor
         quality of such work may result in product delays. Although the Company
         intends to continue to rely in part on products that are developed
         primarily by its own employees, the Company's ability to grow its
         business and its future operating results will depend, in significant
         part, on the Company's continued ability to maintain relationships with
         skilled independent contractors and third party developers. There can
         be no assurance that the Company will be able to maintain such
         relationships.


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                  UNCERTAINTY OF MARKET ACCEPTANCE; SHORT PRODUCT LIFE CYCLES.
         The market for interactive entertainment and leisure systems and
         interactive software has been characterized by shifts in consumer
         preferences and short product life cycles. Consumer preferences for
         entertainment and leisure software products are difficult to predict
         and few products achieve sustained market acceptance. There can be no
         assurance that new products introduced by the Company will achieve any
         significant degree of market acceptance, that such acceptance will be
         sustained for any significant period, or that product life cycles will
         be sufficient to permit the Company to recoup development, marketing
         and other associated costs. In addition, if market acceptance is not
         achieved, the Company could be forced to accept substantial product
         returns to maintain its relationships with retailers and its access to
         distribution channels. Failure of new products to achieve or sustain
         market acceptance or product returns in excess of the Company's
         expectations would have a material adverse effect on the Company's
         business, operating results and financial condition.

                  PRODUCT CONCENTRATION; DEPENDENCE ON HIT PRODUCTS. The Company
         derives a significant portion of its revenues from a relatively small
         number of products released each year, and many of these products have
         substantial production or acquisition costs and marketing budgets.
         During fiscal 1998, one product accounted for approximately 10.2% of
         the Company's consolidated net revenues. All other products were
         individually less than 10% of the Company's consolidated net revenues.
         During fiscal 1999, no single product accounted for greater than 10% of
         the Company's consolidated net revenues. However, the Company
         anticipates that a limited number of products will continue to produce
         a disproportionate amount of revenues. Due to this dependence on a
         limited number of products, the failure of one or more of these
         products to achieve anticipated results may have a material adverse
         effect on the Company's business, operating results and financial
         results.

                  The Company's strategy also includes as a key component
         publishing titles that have franchise value, such that sequels,
         enhancements and add-on products can be released over time, thereby
         extending the life of the property in the market. While the focus on
         franchise properties, if successful, results in extending product life
         cycles, it also results in the Company depending on a limited number of
         titles for its revenues. There can be no assurance that the Company's
         existing franchise titles can continue to be exploited as successfully
         as in the past. In addition, new products that the Company believes
         will have potential value as franchise properties may not achieve
         market acceptance and therefore may not be a basis for future releases.

                  INDUSTRY COMPETITION; COMPETITION FOR SHELF SPACE. The
         interactive entertainment and leisure industries are intensely
         competitive. Competition in these industries is principally based on
         product quality and features, the compatibility of products with
         popular platforms, company or product line brand name recognition,
         access to distribution channels, marketing effectiveness, reliability
         and ease of use, price and technical support. Significant financial
         resources also have become a competitive factor in these industries,
         principally due to the substantial cost of product development and
         marketing that is required to support best-selling titles. In addition,
         competitors with broad product lines and popular titles typically have
         greater leverage with 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.

                  The Company's competitors range from small companies with
         limited resources to large companies with substantially greater
         financial, technical and marketing resources than those of the Company.
         The Company's competitors currently include Electronic Arts, LucasArts,
         Microsoft, Sega, Nintendo, Sony, Havas, Infogrames, Hasbro, GT
         Interactive and Eidos, among many others.

                  As competition increases, significant price competition,
         increased production costs and reduced profit margins may result.
         Prolonged price competition or reduced demand would have a material
         adverse effect on the Company's business, operating results and
         financial condition. There can be no assurance that the Company will be
         able to compete successfully against current or future competitors or
         that competitive pressures faced by the Company will not have a
         material adverse effect on its business, operating results and
         financial condition.

                  Retailers typically have a limited amount of shelf space, and
         there is intense competition among entertainment and leisure software
         producers for adequate levels of shelf space and promotional support
         from retailers. As the number of interactive entertainment and leisure
         products increase, the competition for shelf space has intensified,
         resulting in greater leverage for retailers and distributors in
         negotiating terms of sale, including price discounts and product return
         policies. The Company's products constitute a relatively small
         percentage of a retailer's sales volume, and there can be no assurance
         that retailers will continue to purchase the Company's products or
         promote the Company's products with adequate levels of shelf space and
         promotional support.

                  DEPENDENCE ON DISTRIBUTORS AND RETAILERS; RISK OF CUSTOMER
         BUSINESS FAILURE; PRODUCT Returns. Certain mass market retailers have
         established exclusive buying relationships under which such retailers
         will buy consumer software only from one intermediary. In such
         instances, the price or other terms on which the Company sells to such
         retailers may be adversely effected by the terms imposed by such
         intermediary, or the Company may be unable to sell to such retailers on
         terms which the Company deems acceptable. The loss


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         of, or significant reduction in sales attributable to, any of the
         Company's principal distributors or retailers could materially
         adversely effect the Company's business, operating results and
         financial condition.

                  Retailers in the computer industry have from time to time
         experienced significant fluctuations in their businesses and there have
         been a number of business failures among these entities. The insolvency
         or business failure of any significant retailer or other wholesale
         purchaser of the Company's products could have a material adverse
         effect on the Company's business, operating results and financial
         condition. Sales are typically made on credit, with terms that vary
         depending upon the customer and the nature of the product. The Company
         does not hold collateral to secure payment. Although the Company has
         obtained insolvency risk insurance to protect against any bankruptcy,
         insolvency, or liquidation that may occur to its customers, such
         insurance contains a significant deductible as well as a co-payment
         obligation, and the policy does not cover all instances of non-payment.
         In addition, the Company maintains a reserve for uncollectible
         receivables that it believes to be adequate, but the actual reserve
         which is maintained may not be sufficient in every circumstance. As a
         result of the foregoing, a payment default by a significant customer
         could have a material adverse effect on the Company's business,
         operating results and financial condition.

                  The Company also is exposed to the risk of product returns
         from retailers and other wholesale purchasers. Although the Company
         provides reserves for returns that it believes are adequate, and
         although the Company's agreements with certain of its customers place
         certain limits on product returns, the Company could be forced to
         accept substantial product returns to maintain its relationships with
         retailers and its access to distribution channels. Product returns that
         exceed the Company's reserves could have a material adverse effect on
         the Company's business, operating results and financial condition.

                  CHANGES IN TECHNOLOGY AND INDUSTRY STANDARDS. The consumer
         software industry is undergoing rapid changes, including evolving
         industry standards, frequent new platform introductions and changes in
         consumer requirements and preferences. The introduction of new
         technologies, including new console systems such as Sega's Dreamcast
         and Sony's PlayStation 2, technologies that support multi-player games,
         and new media formats such as on-line delivery and digital video disks
         ("DVD"), could render the Company's previously released products
         obsolete or unmarketable. The development cycle for products utilizing
         new operating and console systems, microprocessors or formats may be
         significantly longer than the Company's current development cycle for
         products on existing operating systems, microprocessors and formats and
         may require the Company to invest resources in products that may not
         become profitable. There can be no assurance that the mix of the
         Company's future product offerings will keep pace with technological
         changes or satisfy evolving consumer preferences, or that the Company
         will be successful in developing and marketing products for any future
         operating system or format. Failure to develop and introduce new
         products and product enhancements in a timely fashion could result in
         significant product returns and inventory obsolescence and could have a
         material adverse effect on the Company's business, operating results
         and financial condition.

                  RISKS ASSOCIATED WITH LEVERAGE.  As of March 31, 1999, the
         Company had outstanding $60,000,000 of subordinated convertible notes
         due 2005.  In June 1999, the Company obtained a term loan and
         revolving credit facility composed of $25 million of term loans and
         up to $100 million of revolving credit loans and letters of credit.
         The proceeds of the term loan, which is due in June 2002, were used
         to complete the acquisition of Expert Software, Inc. and to pay
         expenses associated with the acquisition and the financing
         transaction.  The revolving credit facility will be used for working
         capital and general corporate purposes.

                  The term loan and the revolving credit facility are secured
         by a pledge of substantially all of the asset of the Company and of
         its US subsidiaries.  The facility contains various financial and
         other covenants that the Company and its subsidiaries must comply
         with.  If the Company were to default under the terms of the credit
         facility, either as a result of a failure to pay principal or
         interest when due or as a result of a breach of a financial or other
         covenant, the lenders could stop providing funds and letters of
         credit to the Company and could declare an event of default and
         foreclose on the collateral.  This could also result in an
         acceleration of the subordinated notes.  A default by the Company
         under the revolving credit and term loan facility would materially
         adversely effect the Company's business and could result in the
         Company declaring bankruptcy.

                  YEAR 2000. Like many other software companies, the year 2000
         computer issue creates risk for the Company. If internal computer and
         embedded systems do not correctly recognize date information when the
         year changes to 2000, there could be an adverse impact on the Company's
         operations. The Company has initiated a comprehensive plan to prepare
         its internal computer and embedded systems for the year 2000 and is
         currently implementing changes to alleviate year 2000 incapabilities.
         As part of such plan, the Company has purchased software programs that
         have been independently developed by third parties which will test year
         2000 compliance for the majority of the Company's systems.

                  All of the entertainment and leisure software products
         currently being shipped by the Company have been tested for year 2000
         compliance and have passed these tests. In addition, all products
         currently in development are being tested as part of the normal quality
         assurance testing process and are scheduled to be released fully year
         2000 compliant. The year 2000 computer issue could, however, still
         affect the ability of consumers to use the PC products sold by the
         Company. For example, if the computer system on which a consumer uses
         the Company's products is not year 2000 compliant, such noncompliance
         could affect the consumer's ability to use the products.

                  The Company has developed ontingency plans to address the most
         material areas of exposure to the Company, such as adding network
         operating systems to back-up the Company's current network server and
         developing back-up plans for telecommunications with external offices
         and customers. In addition, the Company has put in place a staffing
         plan to handle orders manually should there be a failure of electronic
         data interchange connections with its customers and suppliers.
         Management believes that the items mentioned above constitute the
         greatest risk of exposure to the Company and that the plans developed
         by the Company will be adequate for handling these items.

                  The Company also has contacted critical suppliers of products
         and services to determine that the suppliers' operations and the
         products and services they provide are year 2000 compliant. To assist
         suppliers (particularly trading partners using electronic data
         interchange) in evaluating their year 2000 issues, the Company has
         developed a questionnaire designed to asses the ability of each
         supplier to address year 2000


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         incompatibilities. All critical suppliers and trading partners of
         the Company have responded to the questionnaire and confirmed the
         expectation that they will continue providing services and products
         through the change to 2000.

                  Year 2000 compliance testing on substantially all of the
         Company's critical systems have been completed, and corresponding
         changes are anticipated to be made by July 1999. The costs incurred by
         the Company to date related to this testing and modification process
         are less than $100,000. The Company expects that the total cost of its
         year 2000 compliance plan will not exceed $200,000. The total estimated
         cost does not include potential costs related to any systems used by
         the Company's customers, any third party claims, or the costs incurred
         by the Company when it replaces internal software and hardware in the
         normal course of its business. The overall cost of the Company's year
         2000 compliance plan is a minor portion of the Company's total
         information technology budget and is not expected to materially delay
         the implementation of any other unrelated projects that are planned to
         be undertaken by the Company. In some instances, the installation
         schedule of new software and hardware in the normal course of business
         has been accelerated to afford a solution to year 2000 compatibility
         issues. The total cost estimate for the Company's year 2000 compliance
         plan is based on management's current assessment of the projects
         comprising the plan and is subject to change as the projects progress.

                  Based on currently available information, management does not
         believe that the year 2000 issues discussed above related to the
         Company's internal systems or its products sold to customers will have
         a material adverse impact on the Company's financial condition or
         results of operations; however, the specific extent to which the
         Company may be affected by such matters is not certain. In addition,
         there can be no assurance that the failure by a supplier or another
         third party to ensure year 2000 compatibility would not have a material
         adverse effect on the Company.

                  EURO CONVERSION. On January 1, 1999, eleven of the fifteen
         member countries of the European Union adopted the "euro" as their
         common currency. The sovereign currencies of the participating
         countries are scheduled to remain legal tender as denominations of the
         euro between January 1, 1999 and January 1, 2002. Beginning January 1,
         2002, the participating countries will issue new euro-denominated bills
         and coins for use in cash transactions. No later than July 1, 2002, the
         participating countries will withdraw all bills and coins denominated
         in the sovereign currencies, so that the sovereign currencies no longer
         will be legal tender for any transactions, making conversion to the
         euro complete. The Company has performed an internal analysis of the
         possible implications of the euro conversion on the Company's business
         and financial condition, and has determined that the impact of the
         conversion will be immaterial to its overall operations. The Company's
         wholly owned subsidiaries operating in participating countries
         represented 24.1% and 22.1% of the Company's consolidated net revenues
         for the fiscal year ended March 31, 1999 and 1998, respectively.

                  LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY
         RIGHTS; RISK OF LITIGATION. The Company holds copyrights on the
         products, manuals, advertising and other materials owned by it and
         maintains trademark rights in the Company name, the ACTIVISION logo,
         and the names of the products owned by the Company. The Company regards
         its software as proprietary and relies primarily on a combination of
         trademark, copyright and trade secret laws, employee and third-party
         nondisclosure agreements, and other methods to protect its proprietary
         rights. Unauthorized copying is common within the software industry,
         and if a significant amount of unauthorized copying of the Company's
         products were to occur, the Company's business, operating results and
         financial condition could be adversely effected. There can be no
         assurance that third parties will not assert infringement claims
         against the Company in the future with respect to current or future
         products. As is common in the industry, from time to time the Company
         receives notices from third parties claiming infringement of
         intellectual property rights of such parties. The Company investigates
         these claims and responds as it deems appropriate. Any claims or
         litigation, with or without merit, could be costly and could result in
         a diversion of management's attention, which could have a material
         adverse effect on the Company's business, operating results and
         financial condition. Adverse determinations in such claims or
         litigation could also have a material adverse effect on the Company's
         business, operating results and financial condition.

                  Policing unauthorized use of the Company's products is
         difficult, and while the Company is unable to determine the extent to
         which piracy of its software products exists, software piracy can be
         expected to be a persistent problem. In selling its products, the
         Company relies primarily on "shrink wrap" licenses that are not signed
         by licensees and, therefore, may be unenforceable under the laws of
         certain jurisdictions. Further, the Company enters into transactions in
         countries where intellectual property laws are not well developed or
         are poorly enforced. Legal protections of the Company's rights may be
         ineffective in such countries.

                  DEPENDENCE ON KEY PERSONNEL. The Company's success depends to
         a significant extent on the performance and continued service of its
         senior management and certain key employees. Competition for highly
         skilled employees with technical, management, marketing, sales, product
         development and other specialized training is intense, and there can be
         no assurance that the Company will be successful in attracting and
         retaining such personnel. Specifically, the Company may experience
         increased costs in order


                                       7

<PAGE>

         to attract and retain skilled employees. Although the Company enters
         into term employment agreements with most of its skilled employees
         and management personnel, there can be no assurance that such
         employees will not leave the Company or compete against the Company.
         The Company's failure to attract or retain qualified employees could
         have a material adverse effect on the Company's business, operating
         results and financial condition.

                  RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS: CURRENCY
         FLUCTUATIONS. International sales and licensing accounted for 65%, 71%
         and 66% of the Company's total revenues in the fiscal years 1997, 1998
         and 1999, respectively. The Company intends to continue to expand its
         direct and indirect sales, marketing and localization activities
         worldwide. This expansion will require significant management time and
         attention and financial resources in order to develop adequate
         international sales and support channels. There can be no assurance,
         however, that the Company will be able to maintain or increase
         international market demand for its products. International sales are
         subject to inherent risks, including the impact of possible
         recessionary environments in economies outside the United States, the
         costs of transferring and localizing products for foreign markets,
         longer receivable collection periods and greater difficulty in accounts
         receivable collection, unexpected changes in regulatory requirements,
         difficulties and costs of staffing and managing foreign operations, and
         political and economic instability. There can be no assurance that the
         Company will be able to sustain or increase international revenues or
         that the foregoing factors will not have a material adverse effect on
         the Company's future international revenues and, consequently, on the
         Company's business, operating results and financial condition. The
         Company currently does 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 adverse impact on revenues from international
         sales and licensing and thus the Company's business, operating results
         and financial condition.

                  RISK OF DEFECTS. Products such as those offered by the Company
         frequently contain errors or defects. Despite extensive product
         testing, in the past the Company has released products with defects and
         has discovered errors in certain of its product offerings after their
         introduction. In particular, the PC hardware environment is
         characterized by a wide variety of non-standard peripherals (such as
         sound cards and graphics cards) and configurations that make
         pre-release testing for programming or compatibility errors very
         difficult and time-consuming. Despite testing by the Company, new
         products or releases may contain errors after commencement of
         commercial shipments, resulting in a loss of or delay in market
         acceptance, which could have a material adverse effect on the Company's
         business, operating results and financial condition.

                  RISKS ASSOCIATED WITH ACQUISITIONS. The Company is in the
         process of integrating the operations of its recently acquired
         subsidiaries, Head Games, CD Contact and Expert Software, Inc.
         ("Expert") with its previously existing operations. This process, as
         well as the process of managing two significant new operations,
         requires substantial management time and effort and diverts the
         attention of management from other matters. In addition, there is a
         risk of loss of key employees, customers and vendors of the recently
         acquired operations as well as existing operations as this process is
         implemented. The Company may not be successful in integrating these
         operations.

                  Consistent with the Company's strategy of enhancing its
         distribution and product development capabilities, the Company intends
         to continue to pursue acquisitions of companies, intellectual property
         rights and other assets that can be purchased or licensed on acceptable
         terms and which the Company believes can be operated or exploited
         profitably. Some of these transactions could be material in size and
         scope. While the Company will continually be searching for appropriate
         acquisition opportunities, the Company may not be successful in
         identifying suitable acquisitions. If any potential acquisition
         opportunities are identified, the Company may not be able to consummate
         such acquisitions and if any such acquisition does occur, it may not be
         successful in enhancing the Company's business or be accretive to the
         Company's earnings. As the interactive entertainment and leisure
         businesses continue to consolidate, the Company faces significant
         competition in seeking acquisitions and may in the future face
         increased competition for acquisition opportunities. This may inhibit
         the Company's ability to complete suitable transactions. Future
         acquisitions could also divert substantial management time, could
         result in short term reductions in earnings or special transaction or
         other charges and may be difficult to integrate with existing
         operations or assets.

                  The Company may, in the future, issue additional shares of
         common stock in connection with one or more acquisitions, which may
         dilute its existing shareholders. The Company's shareholders will not
         have an opportunity, with respect to most of its future acquisitions,
         to review the financial statements of the entity being acquired or to
         evaluate the benefits of the intellectual property rights being
         purchased or licensed, or to vote on the acquisitions.

                  RISK OF DISTRIBUTION COMPANIES' VENDOR DEFECTIONS; VENDOR
         CONCENTRATION. The Company's CD Contact subsidiary and CenterSoft
         subsidiary perform software distribution services in the Benelux
         territory and in the United Kingdom, respectively, and, via export, in
         other European territories for a variety of entertainment software
         publishers, many of which are competitors of the Company. These
         services are


                                       8

<PAGE>

         generally performed under limited term contracts, some of which
         provide for cancellation in the event of a change of control. While
         the Company expects to use reasonable efforts to retain these
         vendors, the Company may not be successful in this regard. The
         cancellation or non-renewal of one or more of these contracts could
         have a material adverse effect on the Company's business, operating
         results and financial condition. Three of CD Contact's vendors
         accounted for 50%, 11% and 11%, respectively, of CD Contact's net
         revenues in fiscal year 1999. The net revenues from these vendors
         represents 6%, 1% and 1%, respectively, of consolidated net revenues
         of the Company. Two of CentreSoft's vendors accounted for 30% and
         11%, respectively, of CentreSoft's net revenues in fiscal year 1999.
         The net revenues from these vendors represented 11% and 4%,
         respectively, of consolidated net revenues of the Company. All other
         vendors contributed less than 10% individually to the respective
         subsidiary's net revenues.

         STRATEGY

                  The Company's objective is to be a worldwide leader in the
         development, publishing and distribution of quality interactive
         entertainment and leisure products that deliver, at each point of the
         value spectrum, a highly satisfying experience. The Company's strategy
         includes the following elements:

                  CREATE AND MAINTAIN A BALANCED AND DIVERSIFIED PORTFOLIO OF
         OPERATIONS. The Company has assembled a large diversified portfolio of
         development, publishing and distribution operations and relationships
         which are complementary and, at the same time, reduce the Company's
         risk of concentration on any one developer, brand, platform, customer
         or market. The Company has focused historically on the development and
         publishing of premium games which provide the most sophisticated game
         play and entertainment experience at the top price point. While the
         Company will continue to take advantage of its expertise in this area,
         it has recently diversified its business operations and product and
         audience mix, and plans on continuing such diversification in the
         future. For example, the Company acquired several separate companies in
         the last two years in order to establish the distribution business.
         Additionally, the Company believes that its recent acquisition of
         Expert Software Inc., along with the Company's acquisition in June 1998
         of Head Games, positions the Company as a leading publisher of "value"
         products for the PC, which are characterized by less sophisticated game
         play and lower price points. Further, the Company publishes and
         distributes titles that run on a variety of platforms (PC, Sony
         PlayStation and Nintendo 64). This diversification significantly
         reduces the risk of downturn or underperformance in any of the
         Company's individual operations.

                  CREATE AND MAINTAIN STRONG BRANDS. The Company focuses its
         development and publishing activities principally on titles that are,
         or have the potential to become, franchise properties with sustainable
         consumer appeal and brand recognition. These titles can thereby serve
         as the basis for sequels, prequels, mission packs and other add-ons and
         related new titles that can be released over an extended period of
         time. The Company believes that the publishing and distribution of
         products based in large part on franchise properties enhances revenue
         predictability and the probability of high unit volume sales and
         operating profits. In addition, the Company has entered into a series
         of strategic partnerships with the owners of intellectual property
         pursuant to which the Company has acquired the rights to publish titles
         based on franchises such as STAR TREK, various Disney films such as TOY
         STORY 2, A BUG'S LIFE and TARZAN, and SPIDERMAN.

                  FOCUS ON ON-TIME DELIVERY. The success of the Company's
         publishing business is dependent, in significant part, on its ability
         to develop games that will generate high unit volume sales that can be
         completed in accordance with planned budgets and schedules. In order to
         increase its ability to achieve this objective, the Company's
         publishing units have implemented a formal control process for the
         development of the Company's products. This process includes three key
         elements: (i) in-depth reviews are conducted for each project at five
         intervals during the development process by a team that includes
         several of the Company's highest ranking operating managers; (ii) each
         project is led by a small team which is heavily incentivized to deliver
         a high-quality product, on-schedule and within budget; and (iii)
         day-to-day progress is monitored by a dedicated process manager in
         order to insure that issues, if any, are promptly identified and
         addressed in a timely manner.

                  LEVERAGE INFRASTRUCTURE AND ORGANIZATION. The Company is
         continually striving to reduce its risk and increase its operating
         leverage and efficiency through the variabilization of expenses. For
         example, the Company has significantly increased its product making
         capabilities by allocating a larger portion of its product development
         investments to experienced independent development companies. These
         companies generally are small firms focused on a particular product
         type, run and owned by individuals willing to take development risk by
         accepting payments based on the completion of fixed performance
         milestones in exchange for a royalty on the revenue stream of the game
         after the Company recoups its development costs. The Company has also
         broadly instituted objective-based reward programs that provide
         incentives to management and staff to produce results that meet the
         Company's financial objectives.

                  GROW THROUGH CONTINUED STRATEGIC ACQUISITIONS. The interactive
         entertainment and leisure industries are consolidating, and the Company
         believes that success in these industries will be driven in part


                                       9


<PAGE>

         by the ability to take advantage of scale. Specifically, smaller 
         companies are more capital constrained, enjoy less predictability of 
         revenues and cashflow, 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 
         industries 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 
         seven completed acquisitions since 1997, the Company believes that 
         it has successfully diversified its operations, its channels of 
         distribution and its library of titles and has emerged as one of the 
         industry's leaders.

         PRODUCTS

                  The Company currently is best known for its action, adventure,
         strategy and simulation products, although the Company also distributes
         products in other categories such as sports, leisure and role playing.
         The Company may in the future expand its product offerings into new
         categories.

                  The Company's current and upcoming releases are based on a
         combination of characters, worlds and concepts derived from the
         Company's extensive library of titles, original characters and concepts
         owned and created by the Company, and intellectual property or other
         character or story rights licensed from third parties. In publishing
         products based on licensed intellectual property rights, the Company
         generally seeks to capitalize on the name recognition, marketing
         efforts and goodwill associated with the underlying property.

                  In the past year, the Company has entered into a series of
         long term or multi-product agreements with the owners of intellectual
         property that is well known throughout the world. In addition to the
         strategic relationships established by the Company with Disney
         Interactive for several animated film properties and with Viacom
         Consumer Products for STAR TREK, the Company also has entered into an
         exclusive distribution agreement with LucasArts Entertainment which
         gives the Company the right during the term of the agreement to
         distribute all past and future LucasArts PC and PlayStation products in
         the United Kingdom and over 40 other international countries, including
         titles based on STAR WARS: EPISODE ONE and INDIANA JONES.

                  In addition to its own internally developed products, the
         Company publishes and distributes software products for other
         independent developers and publishers such as id Software, Nihilistic
         Software, Ritual Entertainment and Kalisto Entertainment. As the
         Company seeks to associate the "ACTIVISION" mark only with the highest
         quality interactive entertainment products, the Company attempts to be
         selective in acquiring publishing and distribution rights from third
         party developers. Such products typically are marketed under the
         Company's name as well as the name of the original developer. The
         Company believes that these efforts enable the Company to leverage its
         investment in worldwide sales and marketing and add a new source of
         products while balancing the risks inherent in internal product
         development and production. This activity also allows the Company to
         enter new product genres more quickly and provide consumers with a
         wider variety of products.

                  In addition, during the last year, the Company entered the 
         "value priced" software publishing business through its acquisition 
         of Head Games Publishing in June 1998 and of Expert Software Inc. in 
         June 1999. Products published by the Company in this category are 
         generally developed by third parties, often under contract with the 
         Company, and are marketed under the Head Games and Expert Software 
         names.

         PRODUCT DEVELOPMENT AND SUPPORT

                  The Company uses both internal and external resources to
         develop products. The Company also acquires rights to products through
         publishing and distribution arrangements with other interactive
         entertainment and leisure companies.

         INTERNAL DEVELOPMENT

                  The Company's internal development and production groups are
         located at the Company's headquarters in Santa Monica, California and
         at the Company's Raven Software subsidiary located in Madison,
         Wisconsin.

                  Activision internally develops and produces titles using a
         model in which a core group of creative, production and technical
         professionals on staff at the Company, in cooperation with the
         Company's 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, musicians and songwriters, sound effects and special effects
         experts, and sound and video studios. The Company believes that this
         model allows the Company to supplement internal expertise with top
         quality external resources on an as needed basis.

                  The Company has adopted and implemented a rigorous procedure
         for the selection, development, production and quality assurance of its
         internally produced entertainment software titles. The process involves
         one or more pre-development, development and production phases, each of
         which includes a number of specific performance milestones. This
         procedure is designed to enable the Company to manage and control
         production and development budgets and timetables, to identify and
         address production and


                                      10

<PAGE>

         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 the Company's
         creative, technical, marketing and quality assurance/customer
         support personnel, as well as the legal, accounting and finance
         departments.

         EXTERNAL DEVELOPMENT

                  The Company licenses or acquires software products from
         independent developers for publishing or distribution by the Company.
         Acquired titles generally are marketed under the Company's name as well
         as the name of the original developer. The agreements with developers
         provide the Company with exclusive publishing or distribution rights
         for a specific period of time for specified platforms and territories.
         These agreements often grant to the Company the right to publish or
         distribute sequels, enhancements and add-ons to the product originally
         being developed and produced by the developer. In consideration for its
         services, the developer receives a royalty based on sales of the
         product that it has developed. Typically, the developer also receives a
         nonrefundable advance which is recoupable by the Company from the
         royalties otherwise required to be paid to the developer. The royalty
         generally is paid in stages, with the payment of each stage tied to the
         completion of a detailed performance milestone.

                  The Company acquires titles from developers during various
         phases of the development and production processes for such titles. To
         the extent the Company acquires rights early in the development
         process, the Company generally will cause the independent developer to
         comply with the requirements of the pre-development, development and
         production processes applicable to titles internally produced by
         Activision. The Company will assign a game producer to each title who
         will serve as the principal liaison to the independent developer and
         help insure that performance milestones are timely met. The Company
         generally has the right to cease making payments to an independent
         developer if the developer fails to complete its performance milestones
         in a timely fashion.

                  The Company may make, from time to time, an investment and
         hold a minority equity interest in the third party developer in order
         to create a closer relationship between the Company and the developer.
         In this regard, the Company recently acquired a minority equity
         interest in each of Pandemic Studios, Savage Entertainment and
         Hammerhead Studios in connection with several new entertainment
         software products to be developed by each of these developers for the
         Company. There can be no assurance that the Company will realize long
         term benefits from any of these investments or that it will continue to
         carry such investments at its current value.

         PRODUCT SUPPORT

                  The Company provides various forms of product support to both
         its internally and externally developed titles. The Company's quality
         assurance personnel are involved throughout the development and
         production processes for each title published by the Company. All such
         products are subjected to extensive testing before release in order to
         insure 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 its products after release, the
         Company provides on-line support to its 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 AND DISTRIBUTION ACTIVITIES

         MARKETING

                  The Company's marketing efforts include on-line activities
         (such as the creation of World Wide Web pages to promote specific
         Company 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. In addition, the Company's products contain software
         that enables customers to "electronically register" their purchases
         with the Company via modem. Through this process, the Company captures
         electronic mail addresses for its customers as well as a variety of
         additional market research data.

                  The Company believes that certain of its franchise properties
         have loyal and devoted audiences who purchase the Company's sequels as
         a result of dedication to the property and satisfaction from previous
         product purchases. Marketing of these sequels is therefore directed
         both toward the established market as well as broader audiences. In
         marketing titles based on licensed properties, the Company believes
         that it derives marketing synergies and related benefits from the
         marketing and promotional activities of the property owners. In
         marketing titles owned by third party developers, the Company believes
         that it derives


                                      11

<PAGE>

         marketing synergies and related benefits from the previously
         established reputation of the properties owned by the developer.

         SALES AND DISTRIBUTION

                  DOMESTIC SALES AND DISTRIBUTION. The Company's products are 
         available for sale or rental in thousands of retail outlets 
         domestically. The Company's domestic customers include Best Buy, 
         CompUSA, Computer City, Electronic Boutique, Babbages, WalMart, 
         K-Mart, Target and Toys "R" Us. During fiscal 1999, no single 
         domestic customer accounted for more than 10% of consolidated net 
         revenues.

                  In the United States, the Company's 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. The Company believes that
         a direct relationship with retail accounts results in more effective
         inventory management, merchandising and communications than would be
         possible through indirect relationships. The Company has implemented
         electronic data interchange ("EDI") linkage with many of its retailers
         to facilitate the placing and shipment of orders. The Company seeks to
         continue to increase the number of retail outlets reached directly
         through its internal sales force. To a lesser extent, the Company sells
         its products through wholesale distributors, such as Ingram Micro and
         Merisel.

                  INTERNATIONAL SALES AND DISTRIBUTION. The Company conducts its
         international publishing and distribution activities through offices in
         the United Kingdom, Germany, France, Australia and Japan. The Company
         seeks to maximize its worldwide revenues and profits by releasing high
         quality foreign language localizations concurrently with the English
         language releases, whenever practicable, and by continuing to expand
         the number of direct selling relationships it maintains with key
         retailers in major territories.

                   In November 1997, the Company commenced its European
         distribution operations through the acquisitions of NBG in Germany and
         CentreSoft in the United Kingdom. CentreSoft is Sony's exclusive
         distributor of PlayStation products to the independent channel in the
         United Kingdom and employs approximately 150 people, including one of
         the largest entertainment software sales and marketing organizations in
         that country. In September 1998, the Company acquired CD Contact, a
         company specializing in the localization and marketing of entertainment
         software products in the Benelux territories. The assets and personnel
         of CD Contact currently are being combined with the Company's other
         distribution operations to form the core of Activision's international
         distribution operations and a base for further expansion into European
         territories. The Company will emphasize the expansion of CentreSoft's,
         NBG's and CD Contact's channel relations and intends to leverage the
         management expertise of these companies into other territories.

                  AFFILIATE LABELS. In addition to its own products, the Company
         distributes interactive entertainment products that are developed and
         marketed by other third party publishers through its "affiliate label"
         programs. The distribution of other publishers' products allows the
         Company to maximize the efficiencies of its sales force and provides
         the Company with the ability to better insure adequate shelf presence
         at retail stores for all of the products that it distributes. It also
         mitigates the risk associated with a particular title or titles
         published by Activision failing to achieve expectations. Services
         provided by the Company under its affiliate label program include order
         solicitation, in-store marketing, logistics and order fulfillment, and
         sales channel management.

                  The Company's affiliate label partners include LucasArts, as
         described above, Psygnosis, with respect to all of its PC and
         PlayStation products in North America, and Fox Interactive, with
         respect to all Fox Sports branded interactive products in Europe,
         Africa and Asia, excluding Japan.

                  OEM SALES AND DISTRIBUTION. The Company seeks to enhance the
         distribution of its products through licensing arrangements with
         original equipment manufacturers ("OEMs"). Under these arrangements,
         one or more of the Company's titles are "bundled" with hardware or
         peripheral devices sold and distributed by the OEM so that the
         purchaser of the hardware or device obtains the Company's software as
         part of the purchase or on a discounted basis. Although it is customary
         for the Company to receive a lower per unit price on sales through OEM
         bundle arrangements, the OEM customer makes a high unit volume
         commitment to the Company with little associated marketing costs. In
         addition, the Company from time to time receives substantial advance
         payments from the OEM customer. The Company also believes that such
         arrangements can substantially expand the distribution of its titles to
         a broader audience. Recent OEM partners include Diamond Multimedia,
         Gateway, Philips, Epson and Toshiba.


                                      12

<PAGE>


         LICENSING AND MERCHANDISING

                  The Company believes that a number of its products have the
         potential to be exploited in ancillary markets and media, such as
         product merchandising and traditional entertainment media. The Company
         seeks opportunities for the exploitation of these ancillary rights
         directly and through third party agents. Potential opportunities
         include the publication of strategy guides for selected titles, the
         adaptation of titles into comic books, novels, television series or
         motion pictures, and the licensing of product merchandising rights. The
         Company believes that these types of licensing activities can provide
         additional sources of revenue and increase the visibility of the title,
         thereby leading to additional unit sales and greater potential for
         additional sequels. There can be no assurance that the Company will be
         successful in exploiting its properties in ancillary markets or media.

                  Similarly, the Company believes that there are opportunities
         for further exploitation of its titles through the Internet, on-line
         services such as America Online and the Microsoft Network, and through
         recently created on-line gaming services such as Heat and WON. The
         Company has established "900" telephone numbers as hint lines for
         certain of its titles, and has realized revenues from the calls made to
         these numbers. The Company also is actively exploring the establishment
         of on-line game playing opportunities, on-line hint sites, and Internet
         services as a method for realizing additional revenues from its
         products. There can be no assurance that the Company will be successful
         in exploiting these opportunities.

         HARDWARE LICENSES

                  The Company's console products currently are being developed
         or published primarily for the Sony PlayStation and Nintendo 64. In
         order to maintain general access to the console systems marketplace,
         the Company has obtained licenses for the PlayStation, Nintendo 64,
         Nintendo Game Boy and other console systems. Each license allows the
         Company 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 requires that the Company pay the
         licensor a per unit license fee from product sales.

                  In contrast, the Company currently is not required to obtain
         any license for the development and production of PC-CD products.
         Accordingly, the Company's per unit manufacturing cost for PC-CD
         products is less than the per unit manufacturing cost for console
         products.

         MANUFACTURING

                  The Company prepares a set of master program copies,
         documentation and packaging materials for its products for each
         respective hardware platform on which the product will be released.
         Except with respect to products for use on the Sony and Nintendo
         systems, the Company's disk duplication, packaging, printing,
         manufacturing, warehousing, assembly and shipping are performed by
         third party subcontractors.

                  In the case of products for the Sony and Nintendo systems, in
         order to maintain protection over their hardware technologies, such
         hardware producers generally specify and/or control the manufacturing
         and assembly of finished products. The Company delivers the master
         materials to the licensor or its approved replicator which then
         manufactures finished goods and delivers them to the Company for
         distribution under the Company's label. At the time the Company's
         product unit orders are filled by the manufacturer, the Company becomes
         responsible for the costs of manufacturing and the applicable per unit
         royalty on such units, even if the units do not ultimately sell.

                  To date, the Company has not experienced any material
         difficulties or delays in the manufacture and assembly of its products
         or material returns due to product defects.

         COMPETITION

                  The interactive entertainment and leisure industries are
         intensely competitive and are in the process of substantial
         consolidation. The availability of significant financial resources has
         become a major competitive factor in these industries primarily as a
         result of the increasing 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 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. See "Factors Affecting
         Future Performance".

                  The Company seeks to compete by publishing high quality titles
         and by supporting these titles with substantial marketing efforts; by
         focusing on properties with sustainable consumer appeal; by working to
         strengthen its relationships with retailers and other resellers and
         otherwise expanding its channels of distribution; and by pursuing
         opportunities for strategic acquisitions. See "Strategy."


                                      13

<PAGE>

         EMPLOYEES

                  As of March 31, 1999, the Company had 634 employees, including
         207 in product development, 71 in North American publishing, 55 in
         corporate finance, operations and administration, 67 in international
         publishing, and 234 in European distribution activities.

                  As of March 31, 1999, approximately 120 of the Company's
         full-time employees were subject to term employment agreements with the
         Company. These agreements 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 senior
         executives of the Company or members of the product development, sales
         or marketing divisions. These individuals perform services to the
         Company as executives, directors, producers, associate producers,
         computer programmers, game designers, sales directors and marketing
         product managers. The execution by the Company of employment agreements
         with such employees, in the Company's experience, significantly reduces
         the Company's turnover during the development and production of its
         entertainment software products and allows the Company to plan more
         effectively for future development activities.

                  None of the Company's employees are subject to a collective
         bargaining agreement, and the Company has experienced no labor-related
         work stoppages.


         (d)      FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
                  AND EXPORT SALES

                  See Item 7 "Management's Discussion and Analysis of Financial
         Condition and Results of Operations" and Note 6 of Notes to
         Consolidated Financial Statements included in Item 8.


Item 2.  PROPERTIES

                  The Company's principal corporate, administrative, and product
         development offices are located in approximately 98,000 square feet of
         leased space in a building located at 3100 Ocean Park Boulevard, Santa
         Monica, California 90405. The following is a listing of the principal
         offices maintained by the Company at June 25, 1999:

<TABLE>
<CAPTION>
                  Location of
                  Principal Facilities                    Square Feet        Lease Expiration Date
                  --------------------------------------  -----------------  ------------------------------
                  <S>                                     <C>                <C>
                  Santa Monica, California                98,000             April 30, 2007
                  Birmingham, United Kingdom              82,000             March 25, 2011 - June 1, 2012
                  Burglengenfeld, Germany                 35,000             Owned
                  Coral Gables, Florida                   12,994             August 29, 2000
                  Berchem, Belgium                        10,659             April 1, 2001
                  London, United Kingdom                  10,625             July 23, 2005
                  Venlo, the Netherlands                  7,778              February 15, 2000
                  Madison, Wisconsin                      6,660              December 31, 2000
                  Sydney, Australia                       3,400              Month-to-Month
                  Eden Prairie, Minnesota                 3,193              September 30, 2003
                  Eemnes, The Netherlands                 2,000              January 1, 2001
                  Munich, Germany                         4,311              November 30, 2001
                  New York, New York                      1,200              April 30, 2001
                  Tokyo, Japan                            531                August 31, 2000
</TABLE>



Item 3.  LEGAL PROCEEDINGS

                  The Company is party to routine claims and suits brought
         against it in the ordinary course of business including disputes
         arising over the ownership of intellectual property rights and
         collection matters. In the opinion of management, the outcome of such
         routine claims will not have a material adverse effect on the Company's
         business, financial condition, results of operations or liquidity.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.


                                      14

<PAGE>


                                     PART II


 Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                  The Company's Common Stock is quoted on the NASDAQ National
         Market under the symbol "ATVI."

                  The following table sets forth for the periods indicated the
         high and low reported closing sale prices for the Company's Common
         Stock.

<TABLE>
<CAPTION>
                                                                 High            Low
                                                              -----------    -----------
         <S>                                                   <C>             <C>
         Fiscal 1998
         -------------
                    First Quarter ended June 30, 1997          $ 14.75         $  9.87
                    Second Quarter ended September 30, 1997    $ 15.50         $ 11.00
                    Third Quarter ended December 31, 1997      $ 18.62         $ 13.00
                    Fourth Quarter ended March 31, 1998        $ 17.87         $  9.50

         Fiscal 1999
         -------------
                    First Quarter ended June 30, 1998          $ 11.62         $  9.37
                    Second Quarter ended September 30, 1998    $ 13.75         $  9.37
                    Third Quarter ended December 31, 1998      $ 14.87         $  8.75
                    Fourth Quarter ended March 31, 1999        $ 13.81         $  9.75

         Fiscal 2000
         -------------
                    First Quarter through  June 25, 1999       $ 14.25         $ 10.12
</TABLE>


                  On June 25, 1999, the reported last sales price for the Common
         Stock was $13.69. As of March 31, 1999, the Company had approximately
         5,000 stockholders of record, excluding banks, brokers and depository
         companies that are the stockholders of record for the account of
         beneficial owners.

                  The Company paid no cash dividends in 1999 and does not intend
         to pay any cash dividends at any time in the foreseeable future. The
         Company expects that earnings will be retained for the continued growth
         and development of the Company's business. Future dividends, if any,
         will depend upon the Company's earnings, financial condition, cash
         requirements, future prospects and other factors deemed relevant by the
         Company's Board of Directors.

                  In July 1998, the Company granted warrants to purchase 250,000
         shares of the Company's common stock to Disney Enterprises, Inc.
         ("Disney") in connection with a license agreement between the Company
         and Disney's affiliate, Disney Interactive. The warrants have an
         exercise price of $12.70 per share, vest in full on July 2, 1999 and
         expire on July 2, 2008.

                  In September 1998, the Company granted warrants to purchase
         750,000 shares of the Company's common stock to Viacom Consumer
         Products, Inc. ("Viacom") in connection with a license agreement.
         500,000 of the warrants have an exercise price of $10.27 per share,
         vest ratably over five years, beginning on the date of issuance, and
         expire on September 16, 2008. The warrant to purchase the remaining
         250,000 shares also expires on September 16, 2008. These 250,000
         warrants are exercisable ratably over five years beginning September
         16, 2003 and have an exercise price equal to the average closing price
         of the Company's common stock on the NASDAQ National Market for the
         thirty days immediately preceding September 16, 2003.

                  In June 1998, the Company issued a total of 1,000,000 
         shares of the Company's common stock in connection with the 
         acquisition of Head Games. The Company also granted options to 
         purchase 295,000 shares of common stock to certain employees and 
         consultants and at the time of the acquisition.

                  In September 1998, the Company issued a total of 1,900,000
         shares of the Company's common stock in connection with the acquisition
         of CD Contact.

                  On March 23, 1999, options to purchase 1,000,000 shares of  
         the Company's common stock were granted to each of Robert A. 
         Kotick, the Company's Co-Chairman and Chief Executive Officer, and 
         Brian G. Kelly, the Company's Co-Chairman. The options were granted 
         in connection with employment agreements between the Company and 
         each of Mr. Kotick and Mr. Kelly, dated January 12, 1999. The 
         options vest in five equal 

                                      15

<PAGE>

         annual installments beginning on the date of issuance, have an 
         exercise price of $10.50 per share, and expire on January 12, 2009.

                  None of the shares, warrants, options or shares into which 
         the warrants or options are exercisable were registered under the 
         Securities Act of 1933, as amended (the "Securities Act"), by reason 
         of the exemption under Section 4(2) of the Securities Act. The 
         Company subsequently registered the shares, as well as the shares 
         issuable to the former shareholders of Head Games upon the exercise 
         of options, issued in connection with the Head Games and CD Contact 
         transactions for resale by the holders thereof.

                                      16

<PAGE>


Item 6.  SELECTED CONSOLIDATED FINANCIAL DATA

              The following table summarizes certain selected consolidated
         financial data, which should be read in conjunction with the Company's
         Consolidated Financial Statements and Notes thereto and with

         Management's Discussion and Analysis of Financial Condition and Results
         of Operations included elsewhere herein. Selected Consolidated
         Financial Data as of and for each the fiscal years in the four year
         period ended March 31, 1998 have been retroactively restated to reflect
         the effect of pooling of interests transactions as discussed in Item 1
         of this Report. The selected consolidated financial data presented
         below as of and for each of the fiscal years in the five-year period
         ended March 31, 1999 are derived from the audited consolidated
         financial statements of the Company. The Consolidated Balance Sheets as
         of March 31, 1999 and 1998 and the Consolidated Statements of
         Operations and Statements of Cash Flows for each of the fiscal years in
         the three-year period ended March 31, 1999, and the report thereon, are
         included elsewhere in this Form 10-K.


<TABLE>
<CAPTION>

                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                Fiscal Years ended March 31,
                                                          ------------------------------------------------------------------------
                                                                                                  Restated
                                                                          --------------------------------------------------------
                                                            1999            1998            1997            1996             1995
                                                          --------        --------        --------        --------         -------
         <S>                                              <C>             <C>             <C>             <C>              <C>
         STATEMENT OF OPERATIONS DATA:
         Net revenues                                     $436,485        $312,058        $189,239        $ 86,591         $57,750
         Cost of sales - product costs                     260,041         176,188         103,124          34,034          31,731
         Cost of sales - royalties and software                                                                              
           amortization                                     37,825          29,840          13,108           7,333           1,794
         Operating income (loss)                            27,245           9,486          11,531           3,233          (3,275)
         Income (loss) before income taxes                  24,215           8,374          11,612           4,841          (1,776)
         Net income (loss)                                  15,254           5,139           7,631           5,895          (1,875)
         Preferred dividends paid and/or accumulated             -            (116)           (151)              -               -
         Basic net income (loss) per common share         $   0.69        $   0.24        $   0.37        $   0.34         $ (0.11)
         Diluted net income (loss) per common share       $   0.66        $   0.23        $   0.36        $   0.32         $ (0.11)
         Weighted average number of shares used in
           computing basic net income (loss) per
           common share (1)                                 22,162          21,339          20,262          17,232          17,404
         Weighted average number of shares used in
          computing diluted net income (loss) per
          common share (1)                                  23,233          22,210          20,951          18,294          17,404
         SELECTED OPERATING DATA:
         EBITDA (2)                                       $ 56,665        $ 42,760        $ 23,878        $ 13,727         $(1,333)
         CASH (USED IN) PROVIDED BY:
         Operating activities                             $ 18,078        $ 31,180        $  4,956        $  3,807         $  (393)
         Investing activities                             $(64,331)        (43,371)        (19,588)        (11,455)            (61)
         Financing activities                                7,220          62,862          11,981          (4,378)          1,055
</TABLE>



<TABLE>
<CAPTION>
                                                                                       As of March 31,
                                                          ------------------------------------------------------------------------
                                                                                                  Restated
                                                                          --------------------------------------------------------
                                                            1999            1998            1997            1996             1995
                                                          --------        --------        --------        --------         -------
         <S>                                              <C>             <C>             <C>             <C>              <C>
         BALANCE SHEET DATA:
         Working capital                                  $141,314        $115,773        $ 51,997        $39,871          $39,606
         Cash and cash equivalents                          32,847          74,241          23,320         25,792           38,013
         Intangible assets                                  21,647          23,473          23,756         19,583           20,865
         Total assets                                      283,612         229,280         131,952         84,442           71,672
         Long-term debt                                     61,150          61,780           5,907          1,222              986
         Redeemable and convertible preferred stock              -               -           1,500              -                -
         Shareholders' equity                              127,475          97,397          81,634         62,439           61,693
</TABLE>


(1)  The Company has presented basic and diluted net income (loss) per share for
     all periods in accordance with Statement of Financial Accounting Standards
     No. 128 "Earnings per Share."

(2)  EBITDA represents income (loss) before interest, income taxes, depreciation
     and amortization. The Company believes that EBITDA provides useful
     information regarding the Company's ability to service its debt; however,
     EBITDA does not represent cash flow from operations as defined by generally
     accepted accounting principles and should not be considered a substitute
     for net income, as an indicator of the Company's operating performance or
     cash flow, as a measure of liquidity.


                                       17


<PAGE>


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS FORWARD LOOKING 
STATEMENTS REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE 
COMPANY THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES DISCUSSED IN THIS 
CURRENT REPORT ON FORM 10-K UNDER "FACTORS AFFECTING FUTURE PERFORMANCE." 
ACTUAL EVENTS OR THE ACTUAL FUTURE RESULTS OF THE COMPANY MAY DIFFER 
MATERIALLY FROM ANY FORWARD LOOKING STATEMENT DUE TO SUCH RISKS AND 
UNCERTAINTIES.

OVERVIEW

         The Company is a leading international publisher, developer and 
distributor of interactive entertainment and leisure products. The Company 
currently focuses its publishing, development and distribution efforts on 
products designed for personal computers ("PCs") as well as the Sony 
PlayStation and the Nintendo 64 console systems. The Company's products span 
a wide range of genres and target markets.

         Activision distributes its products worldwide through its direct 
sales forces, through its distribution subsidiaries, and through its third 
party distributors and licensees. In addition, in September 1998 the Company 
acquired CD Contact, significantly increasing its European distribution 
capabilities.

         The Company's financial information as of and for the year ended 
March 31, 1999, 1998 and 1997, have been restated to reflect the effect of 
pooling of interests transactions as discussed in Item 1 of this Report.

         The Company recognizes revenue from the sale of its products upon 
shipment. Subject to certain limitations, the Company permits customers to 
obtain exchanges and returns within certain specified periods and provides 
price protection on certain unsold merchandise. Revenues from product sales 
are reflected after deducting the estimated allowance for returns and price 
protection. With respect to license agreements which provide customers the 
right to multiple copies in exchange for guaranteed amounts, revenue is 
recognized upon delivery of the product master or the first copy. Per copy 
royalties on sales which exceed the guarantee are recognized as earned. The 
American Institute of Certified Public Accountants Statement of Position 97-2, 
"Software Revenue Recognition" ("SOP 97-2"), provides guidance on applying 
generally accepted accounting principles in recognizing revenue on software 
transactions. SOP 97-2 was effective for all transactions entered into 
subsequent to March 31, 1998. The Company has adopted SOP 97-2 and such 
adoption did not have a material impact on the Company's financial position, 
results of operations or liquidity. Effective December 15, 1998, the American 
Institute of Certified Public Accountants Statement of Position 98-9, 
"Modification of SOP 97-2, Software Revenue Recognition with Respect to 
Certain Transactions" ("SOP 98-9"), was issued and is effective for 
transactions entered into after March 15, 1999. SOP 98-9 deals with the 
determination of vendor specific objective evidence of fair value in multiple 
element arrangements such as maintenance agreements sold in conjunction with 
software packages. The Company does not believe this will have a material 
impact on the Company's financial position, results of operations or 
liquidity.

         Cost of sales-product costs represents the cost to purchase, 
manufacture and distribute PC and console product units. Manufacturers of the 
Company's PC software are located worldwide and are readily available. 
Console CDs and cartridges are manufactured by the respective video game 
console manufacturers, Sony, Nintendo and Sega, who often require significant 
lead time to fulfill the Company's orders.

         Cost of sales-royalties and software amortization represents amounts 
due developers, product owners and other royalty participants as a result of 
product sales, as well as amortization of capitalized software development 
costs. The costs incurred by the Company to develop products are accounted 
for in accordance with accounting standards which provide for the 
capitalization of certain software development costs once technological 
feasibility is established and such costs are determined to be recoverable. 
Various contracts are maintained with developers, product owners or other 
royalty participants which state a royalty rate, territory and term of 
agreement, among other items. Upon a product's release, prepaid royalties and 
license fees are charged to royalty expense based on the contractual royalty 
rate. The capitalized software costs are then amortized to cost of 
sales-royalties and software amortization on a straight-line basis over the 
estimated product life commencing upon product release or on the ratio of 
current revenues to total projected revenues, whichever amortization amount 
is greater.

         For products that have been released, management evaluates the 
future recoverability of prepaid royalties and capitalized software costs on 
a quarterly basis. Prior to a product's release, the Company expenses, as 
part of product development costs, capitalized costs when, in management's 
estimate, such amounts are not recoverable. The following criteria is used to 
evaluate recoverability: historical performance of comparable products; the 
commercial acceptance of prior products released on a given game engine; 
orders for the product prior to its release; estimated performance of a 
sequel product based on the performance of the product on which the sequel is 
based; and actual development costs of a product as compared to the Company's 
budgeted amount.


                                       18

<PAGE>

         The following table sets forth certain consolidated statements of 
operations data for the periods indicated as a percentage of total net 
revenues and also breaks down net revenues by territory, platform and channel:


<TABLE>
<CAPTION>
                                                                      Fiscal Years Ended March 31,
                                                 --------------------------------------------------------------------
                                                                            (In thousands)
                                                 --------------------------------------------------------------------
                                                         1999                    1998                     1997
                                                 -------------------      -------------------      ------------------
                                                                               Restated                 Restated
                                                                          -------------------      ------------------
<S>                                              <C>          <C>         <C>          <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:                                    $436,485     100.0%      $312,058     100.0%      $189,239    100.0%
     Costs and expenses:
         Cost of sales - product costs            260,041      59.6%       176,188      56.5%       103,124     54.5%
         Cost of sales - royalties and
           software amortization                   37,825       8.7%        29,840       9.6%        13,108      6.9%
         Product development                       21,422       4.9%        27,393       8.8%        20,470     10.8%
         Sales and marketing                       66,419      15.2%        47,714      15.3%        31,178     16.5%
         General and administrative                21,348       4.9%        18,401       5.9%         8,284      4.4%
         Amortization of intangible assets          1,585       0.4%         1,562       0.5%         1,505      0.8%
         Merger expenses                              600       0.1%         1,474       0.4%            39        -
                                                 --------     ------      --------     ------      --------    ------
         Total costs and expenses                 409,240      93.8%       302,572      97.0%       177,708     93.9%
                                                 --------     ------      --------     ------      --------    ------
     Income from operations                        27,245       6.2%         9,486       3.0%        11,531      6.1%
     Interest income (expense), net                (3,030)     (0.7%)       (1,112)     (0.3%)           81        -
                                                 --------     ------      --------     ------      --------    ------
Net income before provision for income
  taxes                                            24,215       5.5%         8,374       2.7%        11,612      6.1%
Income tax provision                                8,961       2.0%         3,235       1.1%         3,981      2.1%
                                                 --------     ------      --------     ------      --------    ------
     Net income                                  $ 15,254       3.5%      $  5,139       1.6%      $  7,631      4.0%
                                                 ========     ======      ========     ======      ========    =======
NET REVENUES BY TERRITORY:
     United States                               $149,664      34.3%      $ 89,936      28.8%      $ 65,695     34.7%
     Europe                                       278,032      63.7%       208,817      66.9%       113,456     60.0%
     Other                                          8,789       2.0%        13,305       4.3%        10,088      5.3%
                                                 --------     ------      --------     ------      --------    ------
     Total net revenues                          $436,485     100.0%      $312,058     100.0%      $189,239    100.0%
                                                 ========     ======      ========     ======      ========    =======
NET REVENUES BY CHANNEL:
     Retailer/Reseller                           $417,447      95.6%      $286,953      92.0%      $168,190     88.9%
     OEM, Licensing, on-line and other             19,038       4.4%        25,105       8.0%        21,049     11.1%
                                                 --------     ------      --------     ------      --------    ------
     Total net revenues                          $436,485     100.0%      $312,058     100.0%      $189,239    100.0%
                                                 ========     ======      ========     ======      ========    =======
ACTIVITY/PLATFORM MIX:
     Publishing:
         Console                                 $111,621      54.3%      $ 26,302      19.8%      $ 18,182     20.7%
         PC                                        93,880      45.7%       106,524      80.2%        69,812     79.3%
                                                 --------     ------      --------     ------      --------    ------
         Total publishing net revenues           $205,501      47.1%      $132,826      42.6%      $ 87,994     46.5%
                                                 --------     ------      --------     ------      --------    ------
     Distribution:
         Console                                 $156,584      67.8%      $105,588      58.9%      $ 50,298     49.7%
         PC                                        74,400      32.2%        73,644      41.1%        50,947     50.3%
                                                 --------     ------      --------     ------      --------    ------
         Total distribution net revenues         $230,984      52.9%      $179,232      57.4%       101,245     53.5%
                                                 --------     ------      --------     ------      --------    ------
         Total net revenues                      $436,485     100.0%      $312,058     100.0%      $189,239    100.0%
                                                 ========     ======      ========     ======      ========    =======
</TABLE>



                                       19

<PAGE>

RESULTS OF OPERATIONS - FISCAL YEARS ENDED MARCH 31, 1998 AND 1999

NET REVENUES

         Net revenues for the fiscal year ended March 31, 1999 increased 
39.9%, from $312.1 million to $436.5 million, over the prior year. The United 
States and international net revenues increased 66.5%, from $89.9 million to 
$149.7 million, and 29.1%, from $222.1 million to $286.8 million, 
respectively, over the prior year. The increase in overall net revenues was 
composed of a 103.3% increase in console net revenues, from $131.9 million to 
$268.2 million, and a 6.6% decrease in PC net revenues, from $180.2 million 
to $168.3 million, respectively, over the prior year.

         Publishing net revenues for the year ended March 31, 1999 increased 
54.7%, from $132.8 million to $205.5 million, over the prior year. Distribution 
net revenues for the year ended March 31, 1999 increased 28.9%, from 
$179.2 million to $231.0 million, over the prior year. These increases were 
primarily attributable to the increases in publishing and distribution 
console net revenues.

         Publishing console net revenues for the year ended March 31, 1999 
increased 324.3%, from $26.3 million to $111.6 million, over the prior year. 
This increase was primarily attributable to the initial release of Tenchu 
(PlayStation), Apocalypse (PlayStation), Vigilante 8 (PlayStation and N64), 
Asteroids (PlayStation), Nightmare Creatures (PlayStation and N64) and 
Activision Classics (PlayStation). Publishing PC net revenues for the year 
ended March 31, 1999 decreased 11.8%, from $106.5 million to $93.9 million, 
over the prior year. This decrease was primarily due to the release of Quake II 
(Windows 95) in the prior year. Publishing PC initial releases during the 
year ended March 31, 1999 included Civilization: Call to Power, Cabela's Big 
Game Hunter, Cabela's Big Game Hunter 2, Asteroids and Sin.

         Distribution console net revenues increased 48.3%, from $105.6 million 
to $156.6 million, over the prior year. This increase was primarily 
attributable to an increase in the number of products released for 
PlayStation and Nintendo N64 and an increase in the Playstation and N64 
hardware installed base. Distribution PC net revenues increased 1.1%, from 
$73.6 million to $74.4 million, over the prior year. Distribution PC net 
revenues remained relatively constant during this period as the number of new 
PC titles released by the publishers utilizing the Company's distribution 
services in each year were approximately the same.

         Net OEM, licensing, on-line and other revenues for the fiscal year 
ended March 31, 1999 decreased 24.3% to $19.0 million from $25 million in the 
prior year. This decrease was due to the release of fewer PC titles during 
the fiscal year that were compatible with OEM customers' products.

COSTS AND EXPENSES

         Cost of sales - product costs represented 59.6% and 56.5% of net 
revenues for the years ended March 31, 1999 and 1998, respectively. The 
increase in cost of sales - product costs as a percentage of net revenues was 
due to the increase in the sales mix related to console products. Console 
products have a higher per unit product cost than PC products.

         Cost of sales - royalties and software amortization expense 
represented 8.7% and 9.6% of net revenues for the years ended March 31, 1999 
and 1998, respectively. The decrease in cost of sales - royalties and 
software amortization expense as a percentage of net revenues was due to 
changes in the Company's product mix, with an increase in products with lower 
royalty obligations as compared to the prior year.

         Product development expenses for the year ended March 31, 1999 
decreased 21.9% from the prior year, from $27.4 million to $21.4 million. The 
decrease in the amount of product development expenses for the year ended 
March 31, 1999 was primarily due to an increase in capitalizable development 
costs relating to sequel products being developed on proven engine 
technologies which have been capitalized in accordance with Statement of 
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of 
Computer Software to be Sold, Leased, or otherwise Marketed".

         As a percentage of net revenues, total product creation costs 
(i.e., royalties and software amortization expenses plus product development 
expenses) for the year ended March 31, 1999, decreased to 13.6% from 18.4% in 
the prior year. This decrease was attributable to decrease in the effective 
royalty rate, as discussed above, and an increase in development costs 
capitalized under SFAS 86, also as discussed above.


                                       20

<PAGE>

         Sales and marketing expenses for the year ended March 31, 1999 
increased 39.2% from the same period last year, from $47.7 million to 
$66.4 million. As a percentage of net revenues, sales and marketing expenses 
decreased slightly from 15.3% to 15.2%. The increase in the amount of sales 
and marketing expenses for the year ended March 31, 1999 was primarily due to 
a significant increase in television advertising and an increase in the 
number of products released during the current year. However, as a percentage 
of net revenues, such expenses have remained relatively constant.

         General and administrative expense for the year ended March 31, 1999 
increased 15.8% from the same period last year, from $18.4 million to 
$21.3 million. As a percentage of net revenues, general and administrative 
expenses decreased from 5.9% to 4.9%. The period over period increase in the 
amount of general and administrative expenses primarily was due to an 
increase in worldwide administrative support needs and headcount related 
expenses. The decrease as a percentage of net revenues relates primarily to 
efficiencies gained in controlling fixed costs and the increase in net 
revenues.

OTHER INCOME (EXPENSE)

         Interest expense, net of interest income, increased to $3.0 million 
for the year ended March 31, 1999, from $1.1 million for the year ended 
March 31, 1998. This increase primarily was the result of interest costs 
associated with the Company's convertible subordinated notes issued in 
December 1997 and short term borrowings under bank line of credit agreements 
which had a greater average outstanding balance in the fiscal year ended 
March 31, 1999.

PROVISION FOR INCOME TAXES

         The income tax provision of $9.0 million for the year ended March 31, 
1999, reflects the Company's effective income tax rate of approximately 37%. 
The realization of deferred tax assets primarily is dependent on the 
generation of future taxable income. Management believes that it is more 
likely than not that the company will generate taxable income sufficient to 
realize the benefit of deferred tax assets recognized.

RESULTS OF OPERATIONS - FISCAL YEARS ENDED MARCH 31, 1997 AND 1998

NET REVENUES

         Net revenues for the year ended March 31, 1998 increased 65.0%, from 
$189.2 million to $312.1 million over the prior year. Net revenues in the 
United States and internationally increased 36.8%, from $65.7 million to 
$89.9 million and 79.8%, from $123.5 million to $222.1 million, respectively, 
over the prior year. The increase in overall net revenues was comprised of a 
92.6% increase in console net revenues, from $68.5 million to $131.9 million, 
and a 49.2% increase in PC net revenues, from $120.8 million to $180.2 
million, respectively, over the prior year.

         Publishing net revenues for the year ended March 31, 1998 increased 
50.9%, from $88.0 million to $132.8 million, over the prior year. 
Distribution net revenues for the year ended March 31, 1998 increased 77.1%, 
from $101.2 million to $179.2 million, over the prior year. These increases 
primarily were attributable to the increases in publishing PC net revenues 
and distribution console net revenues.

         Publishing console net revenues for the year ended March 31, 1998 
increased 44.5%, from $18.2 million to $26.3 million, over the prior year. 
This increase primarily was attributable to the initial release of Pitfall 3D 
(PlayStation), Nightmare Creatures (PlayStation) and Car and Driver's Grand 
Tour Racing (PlayStation.) Publishing PC net revenues for the year ended 
March 31, 1998 increased 52.6%, from $69.8 million to $106.5 million, over 
the prior year. This increase was primarily due to the release of Quake II 
(Windows 95), Dark Reign: The Future of War (Windows 95), Hexen II (Windows 
95), Battlezone (Windows 95) and Heavy Gear (Windows 95).

         Distribution console net revenues increased 109.9%, from $50.3 million 
to $105.6 million, over the prior year. This increase was primarily 
attributable to an increase in the number of products released for PlayStation 
and N64 and an increase in the PlayStation and N64 hardware installed base. 
Distribution PC net revenues increased 44.6%, from $50.9 million to 
$73.6 million, over the prior year. Additionally, distribution net revenues 
increased over the prior fiscal year due to the fact that CentreSoft, which 
began operations in June 1996, contributed only ten months of revenue for the 
year ended March 31, 1997, as opposed to twelve months for the year ended 
March 31, 1998.


                                       21

<PAGE>

         Net OEM, licensing, on-line and other revenue, increased 19.5% to 
$25.1 million from $21.0 million over the prior year. This increase was due 
to an increase in the number of titles made available during the year to 
OEMs, including enhanced 3-D versions of various products.

COSTS AND EXPENSES

         Cost of sales - product costs represented 56.5% and 54.5% of net 
revenues for the years ended March 31, 1998 and 1997, respectively. The 
increase in cost of sales - product costs as a percentage of net revenues was 
due to the increase in the sales mix of console net revenues versus PC net 
revenues.

         Cost of sales - royalties and software amortization expense 
represented 9.6% and 6.9% of net revenues for the years ended March 31, 1998 
and 1997, respectively. The increase in cost of sales - royalties and 
software amortization expense as a percentage of net revenues was due to 
changes in the Company's product mix and primarily was due to royalties 
related to Quake II.

         Product development expenses for the year ended March 31, 1998 
increased 33.7% from the prior year, from $20.5 million to $27.4 million. As 
a percentage of net revenues, product development expenses decreased from 
10.8% to 8.8%. The increase in the amount of product development expenses for 
the year ended March 31, 1998 was primarily due to the increased number of 
new products in development and the increased costs associated with the 
enhanced content and new technologies incorporated into such products. In 
addition, product development expense as a percentage of net revenues 
decreased primarily as a result of an increase in net revenues and an 
increase in costs capitalized in accordance with SFAS No. 86.

         As a percentage of net revenues, total product creation costs 
(i.e., royalties and software amortization expense plus product development 
expense) for the year ended March 31, 1998, increased to 18.4% from 17.7% in 
the prior year. This increase was attributable to increase in the effective 
royalty rate, as discussed above.

         Sales and marketing expenses for the year ended March 31, 1998 
increased 52.9% from the period year, from $31.2 million to $47.7 million. As 
a percentage of net revenues, sales and marketing expenses decreased slightly 
from 16.5% to 15.3%. The increase in the amount of sales and marketing 
expenses for the year ended March 31, 1998 was primarily due to increased 
marketing and promotional activities necessary to release new titles in an 
increasingly competitive environment and the Company's expansion of it's 
European sales and marketing infrastructure. However, as a percentage of net 
revenues, such expense has remained fairly consistent.

         General and administrative expense for the year ended March 31, 1998 
increased 121.7% from the same period last year, from $8.3 million to 
$18.4 million. As a percentage of net revenues, general and administrative 
expenses increased from 4.4% to 5.9%. The period over period increase in the 
amount and as a percentage of net revenues of general and administrative 
expenses for the year ended March 31, 1998 primarily was due to an increase 
in worldwide administrative support needs and headcount related expenses.

OTHER INCOME (EXPENSE)

         Interest expense, net of interest income, increased to $1.1 million 
for the year ended March 31, 1998, from net interest income of $81,000 for 
the year ended March 31, 1997. This increase primarily was the result of 
interest costs associated with the Company's convertible subordinated notes 
issued in December 1997 and short term borrowings under bank line of credit 
agreements.

PROVISION FOR INCOME TAXES

         The income tax provision of $3.2 million for the year ended March 31, 
1998, reflects the Company's estimated effective income tax rate of 
approximately 38.6%. The realization of deferred tax assets primarily is 
dependent on the generation of future taxable income. Management believes 
that it is more likely than not that the company will generate taxable income 
sufficient to realize the benefit of deferred tax assets recognized.

QUARTERLY OPERATING RESULTS

         The Company's quarterly operating results have in the past varied 
significantly and will likely vary significantly in the future, depending on 
numerous factors, several of which are not under the Company's control. See 

I
tem 1. Business - "Certain Cautionary Information." Accordingly, the Company 
believes that period-to-period comparisons of its operating results are not 
necessarily meaningful and should not be relied upon as indications of future 
performance.



                                       22


<PAGE>

         The following table is a comparative breakdown of the Company's 
quarterly results for the immediately preceding eight quarters (amounts in 
thousands, except per share data):


<TABLE>
<CAPTION>

                                                                            Quarter ended
                                 -------------------------------------------------------------------------------------------------
                                                                                                 Restated
                                                                        ----------------------------------------------------------
                                 March 31,    Dec. 31,     Sept. 30,    June 30,    March 31,    Dec. 31,    Sept. 30,    June 30,
                                   1999         1998         1998         1998        1998         1997        1997         1997
                                 ---------    --------     ---------    --------    ---------    --------    ---------    --------
<S>                              <C>          <C>          <C>          <C>         <C>          <C>         <C>          <C>
Net revenues                     $115,235     $193,537     $66,182      $61,531      $68,123     $139,587     $65,788     $38,560
Operating income (loss)             9,337       26,328      (2,783)      (5,637)       1,536       13,742       3,591      (9,383)
Net income (loss)                   5,210       16,022      (2,234)      (3,744)         689        8,334       2,041      (5,925)
Net income (loss) per basic
  share                          $   0.23     $   0.72     $ (0.10)     $ (0.17)     $  0.03     $   0.39     $  0.09     $ (0.28)
Net income (loss) per diluted
share                            $   0.22     $   0.64     $ (0.10)     $ (0.17)     $  0.03     $   0.36     $  0.09     $ (0.28)

</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash and cash equivalents decreased $41.4 million, 
from $74.2 million at March 31, 1998 to $32.8 million at March 31, 1999. 
Approximately $18.1 million in cash and cash equivalents was provided by 
operating activities during the year ended March 31, 1999 versus $31.1 
million provided by operating activities in fiscal 1998. This change was 
primarily attributable to the increases during the year ended March 31, 1999 
in accounts receivable, other current assets, inventories, and a decrease in 
accounts payable resulting from the Company's overall growth during the 
fiscal year ended March 31, 1999 partially offset by an increase in accrued 
expenses.

         Cash and cash equivalents used in investing activities was 
approximately $64.3 million during the year ended March 31, 1999 versus $43.3 
million used in investing activities during the year ended March 31, 1998. 
The increase in cash used in investing activities was due to the significant 
increase in prepaid royalties and capitalized software costs incurred by the 
Company as a result of its execution of new license agreements granting the 
Company long term rights to the intellectual property of third parties, as 
well as the acquisition of publishing or distribution rights to products 
being developed by third parties. Capital expenditures totaled approximately 
$3.8 million for the year ended March 31, 1999 versus $9.3 million in the 
prior year. The decrease in capital expenditures was due to the cost relating 
to the Company moving its Los Angeles office to a new facility in Santa 
Monica, California in the prior year.

         Cash and cash equivalents provided by financing activities totaled 
$7.2 million for the year ended March 31, 1999 versus $62.9 million in the 
prior year. The decrease was due to the issuance of $60 million of 
convertible subordinated debt in December 1997.

         In connection with the Company's purchases of N64 hardware and 
software cartridges for distribution in North America and Europe, Nintendo 
requires the Company to provide irrevocable letters of credit prior to 
accepting purchase orders from the Company for the purchase of these 
cartridges. Furthermore, Nintendo maintains a policy of not accepting returns 
of N64 hardware and software cartridges. Because of these and other factors, 
the carrying of an inventory of N64 hardware and software cartridges entails 
significant capital and risk.

         As of March 31, 1999, the Company had a $40.0 million revolving 
credit and letter of credit facility (the "Prior Facility") with a group of 
banks. The Prior Facility currently provides the Company with the ability to 
borrow funds and issue letters of credit against eligible accounts receivable 
up to $40.0 million. The Prior Facility was scheduled to expire in October 
2001. As of March 31, 1999, the Company had $22.4 million in letters of 
credit outstanding and no borrowings against the Prior Facility (there were 
no outstanding letters of credit or borrowings against the Prior Facility in 
the fiscal year ended March 31, 1998). In addition, the Company had a 
$2 million line of credit agreement (the "Asset Line") with a bank that expired 
in September 1998. Approximately $1.1 million and $1.2 million was 
outstanding on this line as of March 31, 1999 and 1998, respectively. 

         In June 1999, the Company replaced the Prior Facility with a 
$125 million revolving credit facility and term loan (the "New Facility") 
with a new group of banks that provides the Company with the ability to 
borrow up to $100 million and issue letters of credit up to $80 million 
against eligible accounts receivable and inventory. (See Note 13, "Subsequent 
Events" in the footnotes to the Consolidated Financial Statements.) The 
$25 million term loan portion of the New Facility was used to acquire Expert 
and pay costs related to such acquisition and the securing of the New 
Facility. The term loan has a three year term with principal amortization on 
a straight line quarterly basis beginning December 31, 1999 and a borrowing 
rate of the banks' base rate (which is generally equivalent to the published 
prime rate) plus 2.0%, or the LIBOR rate 3.0%. The revolving portion of the 
New Facility has a borrowing rate of the banks' base rate plus 1.75% or the 
LIBOR rate of 2.75%. The Company pays a commitment fee of 1/2% based on the 
unused portion of the line.

         In addition, the Company's CentreSoft subsidiary has a revolving 
credit facility (the "UK Facility") with its bank in the United Kingdom for 
approximately $11.2 million. The UK Facility can be used for working capital 
requirements and expires in June 2000. The Company had no borrowings 
outstanding against the UK facility as of March 31, 1999. In the Netherlands, 
the Company's CD Contact subsidiary has a credit facility ("the Netherlands 
Facility") with a bank that permits borrowings against eligible accounts 
receivable and inventory up to approximately $25 million. Borrowings under 
the Netherlands Facility are due on demand and totaled $6.0 as of March 31, 
1999. Letters of credit outstanding under the Netherlands Facility totaled 
$6.9 million as of March 31, 1999.

         The Company will use its working capital ($141.3 million at March 31, 
1999), as well as the proceeds available from the New Facility, the UK 
Facility and the Netherlands Facility, to finance the Company's operational 


                                       23


<PAGE>

requirements for at least the next twelve months, including acquisitions of 
inventory and equipment, the funding of development, production, marketing 
and selling of new products, the acquisition of Expert, and the acquisition 
of intellectual property rights for future products from third parties.

         The Company's management currently believes that inflation has not 
had a material impact on continuing operations.

YEAR 2000

         Like many other software companies, the year 2000 computer issue 
creates risk for the Company. If internal computer and embedded systems do 
not correctly recognize date information when the year changes to 2000, there 
could be an adverse impact on the Company's operations. The Company has 
initiated a comprehensive plan to prepare its internal computer and embedded 
systems for the year 2000 and is currently implementing changes to alleviate 
any year 2000 incapabilities. As part of such plan, the Company has purchased 
software programs that have been independently developed by third parties 
which will test year 2000 compliance for the majority of the Company's 
systems.

         All of the entertainment and leisure software products currently 
being shipped by the Company have been tested for year 2000 compliance and 
have passed these tests. In addition, all such products currently in 
development are being tested as part of the normal quality assurance testing 
process and are scheduled to be released fully year 2000 compliant. 
Notwithstanding the foregoing, the year 2000 computer issue could still 
affect the ability of consumers to use the PC products sold by the Company. 
For example, if the computer system on which a consumer uses the Company's 
products is not year 2000 compliant, such noncompliance could affect the 
consumer's ability to use such products.

         Contingency plans currently have been developed to address the most 
material areas of exposure to the Company, such as adding network operating 
systems to back-up the Company's current network server and developing 
back-up plans for telecommunications with external offices and customers. In 
addition, a staffing plan has been developed to manually handle orders should 
there be a failure of electronic data interchange connections with its 
customers and suppliers. Management believes that the items mentioned above 
constitute the greatest risk of exposure to the Company and that the plans 
developed by the Company will be adequate for handling these items.

         The Company has contacted critical suppliers of products and 
services to determine that the suppliers' operations and the products and 
services they provide are year 2000 compliant. To assist suppliers 
(particularly trading partners using electronic data interchange) in 
evaluating their year 2000 issues, the Company has developed a questionnaire 
which indicates the ability of each supplier to address year 2000 
incompatibilities. All critical suppliers and trading partners of the Company 
have responded to the questionnaire and confirmed the expectation that they 
will continue providing services and products through the change to 2000.

         Year 2000 compliance testing on substantially all of the Company's 
critical systems have been completed, and corresponding changes are expected 
to be made by July 1999. The costs incurred by the Company to date related to 
this testing and modification process are less than $100,000. The Company 
expects that the total cost of its year 2000 compliance plan will not exceed 
$200,000. The total estimated cost does not include potential costs related 
to any systems used by the Company's customers, any third party claims, or 
the costs incurred by the Company when it replaces internal software and 
hardware in the normal course of its business. The overall cost of the 
Company's year 2000 compliance plan is a minor portion of the Company's total 
information technology budget and is not expected to materially delay the 
implementation of any other unrelated projects that are planned to be 
undertaken by the Company. In some instances, the installation schedule of 
new software and hardware in the normal course of business has been 
accelerated to also afford a solution to year 2000 compatibility issues. The 
total cost estimate for the Company's year 2000 compliance plan is based on 
management's current assessment of the projects comprising the plan and is 
subject to change as the projects progress.

         Based on currently available information, management does not 
believe that the year 2000 issues discussed above related to the Company's 
internal systems or its products sold to customers will have a material 
adverse impact on the Company's financial condition or results of operations; 
however, the specific extent to which the Company may be affected by such 
matters is not certain. In addition, there can be no assurance that the 
failure by a supplier or another third party to ensure year 2000 
compatibility would not have a material adverse effect on the Company.

EURO CONVERSION

         On January 1, 1999, eleven of the fifteen member countries of the 
European Union adopted the "euro" as their common currency. The sovereign 
currencies of the participating countries are scheduled to remain legal 
tender as denominations of the euro between January 1, 1999 and January 1, 
2002. Beginning January 1, 2002, the participating countries will issue new 
euro-denominated bills and coins for use in cash transactions. No later than 
July 1, 2002, the participating countries will withdraw all bills and coins 
denominated in the sovereign currencies, so that the sovereign currencies no 
longer will be legal tender for any transactions, making conversion to the 
euro complete. The Company has performed an internal analysis of the possible 
implications of the euro conversion on the 


                                       24


<PAGE>

Company's business and financial condition, and has determined that the 
impact of the conversion will be immaterial to its overall operations. The 
Company's wholly owned subsidiaries operating in participating countries 
represented 24.1% and 22.1% of the Company's consolidated net revenues for 
the years ended March 31, 1999 and 1998, respectively.

RECENTLY ISSUED ACCOUNTING STANDARDS

     SFAS No. 133, "Accounting for Derivative Instruments and Hedging 
Activities," is effective for all fiscal years beginning after June 15, 2000. 
SFAS No. 133 establishes accounting and reporting standards for derivative 
instruments and for hedging activities. It requires that an entity recognize 
all derivatives as either assets or liabilities in the statement of financial 
position and measure those instruments at fair value. The Company does not 
currently participate in hedging activities or own derivative instruments but 
plans to adopt SFAS No. 133 beginning April 1, 2001.

                                       25


<PAGE>


Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company transacts business in many different foreign currencies 
and may be exposed to financial market risk resulting from fluctuations in 
foreign currency exchange rates, particularly the British Pound sterling. The 
volatility of the pound (and all other applicable currencies) will be 
monitored frequently throughout the coming year and the Company may use 
hedging programs, currency forward contracts, currency options and/or other 
derivative financial instruments commonly utilized to reduce financial market 
risks.

         In June 1999, the Company obtained a $125 million revolving credit 
facility and term loan (the "New Facility") with a group of banks. The 
interest rate applied to any debt outstanding under the New Facility is based 
on the published prime rate or LIBOR rate and is, therefore subject to a 
certain amount of risk arising from fluctuations in these rates.

                                       26


<PAGE>


Item 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


<TABLE>
<CAPTION>

                                                                                                   Page
                                                                                                   ----
              <S>                                                                                  <C>
              Independent Auditors' Report                                                         F-1

              Consolidated Balance Sheets as of March 31, 1999 and 1998                            F-2

              Consolidated Statements of Operations for the Years ended March 31, 1999, 1998
                   and 1997                                                                        F-3

              Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
                   March 31, 1999, 1998 and 1997                                                   F-4

              Consolidated Statements of Cash Flows for the Years Ended March 31, 1999,
                   1998 and 1997                                                                   F-5

              Notes to Consolidated Financial Statements                                           F-6

              Schedule II-Valuation and Qualifying Accounts and Reserves as of March 31,
                   1999, 1998 and 1997                                                             F-22


              Item 14.  Exhibit Index                                                              F-23

</TABLE>


          All other schedules of the Registrant are omitted because of the
          absence of conditions under which they are required or because the
          required information is included elsewhere in the financial statements
          or in the notes thereto.


                                       27


<PAGE>


                                   PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item is incorporated by reference to
         the sections of the Company's definitive Proxy Statement for its 1999
         Annual Meeting of Shareholders, entitled "Election of Directors" and
         "Executive Officers and Key Employees" to be filed with the Securities
         and Exchange Commission within 120 days after the end of the fiscal
         year covered by this Form 10-K.


Item 11. EXECUTIVE COMPENSATION

         The information required by this Item is incorporated by reference to
         the sections of the Company's definitive Proxy Statement for its 1999
         Annual Meeting of Shareholders, entitled "Executive Compensation" and
         "Indebtedness of Management" to be filed with the Securities and
         Exchange Commission within 120 days after the end of the fiscal year
         covered by this Form 10-K.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item is incorporated by reference to
         the sections of the Company's definitive Proxy Statement for its 1999
         Annual Meeting of Shareholders, entitled "Security Ownership of Certain
         Beneficial Owners and Management" to be filed with the Securities and
         Exchange Commission within 120 days after the end of the fiscal year
         covered by this Form 10-K.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item is incorporated by reference to
         the sections of the Company's definitive Proxy Statement for its 1999
         Annual Meeting of Shareholders, entitled "Certain Relationships and
         Related Transactions" to be filed with the Securities and Exchange
         Commission within 120 days after the end of the fiscal year covered by
         this Form 10-K.


                                       28


<PAGE>


                                     PART IV


Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


          (a)  1.  FINANCIAL STATEMENTS  See Item 8. - Consolidated Financial
                   Statements and Supplementary Data Index for Financial 
                   Statements and Schedule on page 25 herein.

               2.  FINANCIAL STATEMENT SCHEDULE  The following financial 
                   statement schedule of Activision, Inc. for the years ended
                   March 31, 1999, 1998 and 1997 is filed as part of this report
                   and should be read in conjunction with the Consolidated 
                   Financial Statements of Activision, Inc.

                   Schedule II -- Valuation and Qualifying Accounts and Reserves

                   Other financial statement schedules are omitted because the 
                   information called for is not required or is shown either in 
                   the Consolidated Financial Statements or the notes thereto.

               3.  EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K

          
<TABLE>
          <CAPTION>
                   Exhibit
                   Number                         Exhibit
                   -------                        -------
                   <S>      <C>
                   3.1      Amended and Restated Articles of Incorporation of 
                            Activision, Inc., dated October 15, 1992 
                            (incorporated by reference to Exhibit 4.5 of 
                            Amendment No. 1 to the Company's Form S-8, 
                            Registration No. 33-48411 filed on June 1, 1993).

                   3.2      Bylaws of Activision, Inc. (incorporated by 
                            reference to Exhibit 4.6 of Amendment No. 1 to the 
                            Company's Form S-8, Registration No. 33-48411 filed 
                            on June 1, 1993).

                   10.1     Mediagenic 1991 Stock Option and Stock Award Plan, 
                            as amended (incorporated by reference to Exhibit 4.1
                            to the Company's Registration Statement on Form S-8,
                            Registration No. 33-63638, filed on December 8, 
                            1995).

                   10.2     Mediagenic 1991 Director Warrant Plan as amended 
                            (incorporated by reference to Exhibit 28.2 to the 
                            Company's Registration Statement on Form S-8, 
                            Registration No. 33-63638, filed on June 1, 1993).

                   10.3     Activision, Inc. Employee Stock Purchase Plan
                            (incorporated by reference to Exhibit 4.1 the
                            Company's Form S-8 filed on September 25, 1996).

                   10.4     Activision, Inc. 1998 Incentive Plan (incorporated 
                            by reference to Appendix I of the Company's 1998 
                            Proxy Statement).

                   10.5     Lease Agreement dated as of December 20, 1996, 
                            between the Company and Barclay Curci Investment 
                            Company (incorporated by reference to Exhibit 10.14
                            of the Company's Form 10-Q for the quarter ended 
                            December 31, 1996).

                   10.6     Share Exchange Agreement dated November 23, 1997, 
                            among the Company and the holders of all of the 
                            issued and outstanding capital stock of Combined 
                            Distribution (Holdings), Inc. (incorporated by 
                            reference to Exhibit 10.1 of the Company's Form 8-K
                            filed December 5, 1997).

                   10.7     Purchase Agreement dated as of December 16, 1997, 
                            among the Company and Credit Suisse First Boston 
                            Corporation, Piper Jaffray, Inc. and UBS Securities
                            LLC (the "Initial Purchasers") (incorporated by 
                            reference to Exhibit 10.1 of the Company's Form 8-K
                            filed December 23, 1997).

                   10.8     Registration Rights Agreement dated as of December 
                            16, 1997, among the Company and the Initial 
                            Purchasers (incorporated


                                      29

<PAGE>

                   <S>      <C>
                            by reference to Exhibit 10.2 of the Company's Form 
                            8-K filed December 23, 1997).

                   10.9     Indenture dated as of December 22, 1997, between 
                            the Company and State Street Bank and Trust Company
                            of California, N.A., as Trustee (incorporated by 
                            reference to Exhibit 10.3 of the Company's Form 8-K
                            filed December 23, 1997).

                   10.10    Employment agreement dated January 12, 1999 between
                            the Company and Robert A. Kotick.

                   10.11    Employment agreement dated January 12, 1999 between
                            the Company and Brian G. Kelly.

                   10.12    Employment agreement dated October 19, 1998 between
                            the Company and Ronald Doornink.

                   10.13    Employment agreement dated March 4, 1999 between the
                            Company and Lawrence Goldberg.

                   10.14    Employment agreement dated March 4, 1999 between the
                            Company and Barry J. Plaga.

                   10.15    Employment agreement dated April 1, 1998 between the
                            Company and Mitchell Lasky.

                   10.16    Employment agreement dated April 1, 1998 between the
                            Company and Ronald Scott.

                   10.17    Service Agreement dated November 24, 1997 between 
                            the Combined Distribution (Holdings) Limited and 
                            Richard Andrew Steele.

                   10.18    Employment Agreement dated September 1, 1997 between
                            the Company and Robert Dewar.

                   10.19    Articles of Merger dated June 30, 1998 between 
                            S.B.F. Acquisition Corp., a wholly owned subsidiary
                            of the Company, and S.B.F. Services Limited, Head 
                            Games Publishing, (incorporated by reference to 
                            Exhibit 2.1 of the Company's Form 8-K, filed on 
                            July 2, 1998).

                   10.20    Share Exchange Agreement dated September 29, 1998 
                            by and between the Company and Mr. Frank d'Oleire, 
                            Mrs. Christa d'Oleire, Ms. Fiona d'Oleire, Ms. 
                            Alexa d'Oleire acting as Dr. d'Oleire 
                            Beteiligungsgesellschaft bR, Mr. Martinus J.C. 
                            Bubbert, and Mr. Dennis W. Buis (incorporated by 
                            reference to Exhibit 10.1 of the Company's Form 8-K,
                            filed on October 8, 1998).

                   10.21    Amended and Restated Agreement and Plan of Merger 
                            dated April 19, 1999 by and among the Company, 
                            Expert Acquisition Corp. and Expert Software, Inc.
                            (incorporated by reference to Exhibit 2.1 of the 
                            Form 8-K of Expert Software, Inc., filed April 29, 
                            1999).

                   10.22    Credit Agreement dated as of June 21, 1999 among the
                            Company, Head Games Publishing, Inc., Expert 
                            Software, Inc., various lenders, PNC Bank, National
                            Association, as issuing bank, administrative agent 
                            and collateral agent for such lenders, and Credit 
                            Suisse First Boston, as syndication agent.

                   21.      Principal subsidiaries of the Company.

                   23.      Independent Auditors' Consent.


                                      30

<PAGE>

                   <S>      <C>
                   27.1     Fiscal 1996 Year to Date financial Data Schedule.

                   27.2     Fiscal 1997 Year to Date Financial Data
                            Schedule.

                   27.3     Fiscal 1998 Year to Date Financial Data
                            Schedule.

                   27.4     Fiscal 1999 Year to Date Financial Data
                            Schedule.
</TABLE>


          (b)  1.  Reports on Form 8-K. The following reports on Form 8-K have 
                   been filed by the Company during the last quarter of the 
                   fiscal year ended March 31, 1999:

                   1.1      Form 8-K dated March 10, 1999, containing items 5 
                            and 7.


                                      31

<PAGE>


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: June 28, 1999

ACTIVISION, INC.

By:   /s/  ROBERT A. KOTICK
   ---------------------------
        (Robert A. Kotick)
             Chairman


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


<TABLE>

<S>                                 <C>                                   <C>
By:   /s/  ROBERT A. KOTICK         Chairman, Chief Executive Officer     June 28, 1999
   -----------------------------    (Principal Executive Officer) and
         (Robert A. Kotick)         Director


By:   /s/  BRIAN G. KELLY           Co-Chairman and Director              June 28, 1999
   -----------------------------
          (Brian G. Kelly)


By:   /s/  BARRY J. PLAGA            Chief Financial Officer, and          June 28, 1999
   -----------------------------     Chief Accounting Officer
          (Barry J. Plaga)


By:   /s/  HAROLD A. BROWN           Director                              June 28, 1999
   -----------------------------
         (Harold A. Brown)


By:   /s/  BARBARA S. ISGUR          Director                              June 28, 1999
   -----------------------------
          (Barbara S. Isgur)


By:   /s/  STEVEN T. MAYER           Director                              June 28, 1999
   -----------------------------
          (Steven T. Mayer)


By:   /s/ ROBERT J. MORGADO          Director                              June 28, 1999
   -----------------------------
        (Robert J. Morgado)
</TABLE>



                                      32

<PAGE>



                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders:

We have audited the accompanying consolidated balance sheets of ACTIVISION, INC.
and subsidiaries as of March 31, 1999 and 1998 and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the three-year period ended March 31, 1999. In connection
with our audit of the consolidated financial statements, we also have audited
financial statement schedule II for each of the years in the three-year period
ended March 31, 1999. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACTIVISION, INC. and
subsidiaries as of March 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 1999, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule for each of the years in
the three-year period ended March 31, 1999, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

KPMG LLP


Los Angeles, California
May 3, 1999



                                      F-1

<PAGE>


PART I.  FINANCIAL INFORMATION.

Item I.  Financial Statements.

                        ACTIVISION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                        (In thousands except share data)

<TABLE>
<CAPTION>
                                                                       March 31,      March 31,
                                                                         1999            1998
                                                                       ---------      ---------
                                                                                       Restated
                                                                                      ---------
<S>                                                                    <C>            <C>
ASSETS
     Current assets:
         Cash and cash equivalents                                     $  32,847      $  74,241
         Accounts receivable, net of allowances of $14,979 and
             $15,582, respectively                                       117,522         73,926
         Inventories, net                                                 30,931         19,425
         Prepaid royalties and capitalized software costs                 38,997         12,444
         Deferred income taxes                                             6,044          3,852
         Other current assets                                              9,960          1,988
                                                                       ---------      ---------
              Total current assets                                       236,301        185,876

     Prepaid royalties and capitalized software costs                      6,923              -
     Property and equipment, net                                          10,841         11,944
     Deferred income taxes                                                 2,618          4,665
     Excess purchase price over identifiable assets acquired, net         21,647         23,473
     Other assets                                                          5,282          3,322
                                                                       ---------      ---------
              Total assets                                             $ 283,612      $ 229,280
                                                                       =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY 
     Current liabilities:
         Current portion of notes payable to bank                      $   5,992      $   4,292
         Accounts payable                                                 43,853         50,473
         Accrued expenses                                                 45,142         15,338
                                                                       ---------      ---------
              Total current liabilities                                   94,987         70,103

     Notes payable to bank, less current portion                           1,143          1,692

     Convertible subordinated notes                                       60,000         60,000
     Other liabilities                                                         7             88
                                                                       ---------      ---------
              Total liabilities                                          156,137        131,883
                                                                       ---------      ---------
     Commitments and contingencies

     Shareholders' equity:
         Common stock, $.000001 par value, 50,000,000 shares
             authorized, 23,104,927 and 22,408,415 shares issued and
             22,604,927 and 21,908,415 outstanding, respectively               -              -
         Additional paid-in capital                                      109,251         91,825
         Retained earnings                                                26,012         10,758
         Accumulated other comprehensive income (loss)                    (2,510)            92
         Less:  Treasury stock, cost of 500,000 shares                    (5,278)        (5,278)
                                                                       ---------      ---------
              Total shareholders' equity                                 127,475         97,397
                                                                       ---------      ---------
         Total liabilities and shareholders' equity                    $ 283,612      $ 229,280
                                                                       =========      =========
</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-2

<PAGE>

                        ACTIVISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands except per share data)


<TABLE>
<CAPTION>
                                                                     For the years ended March 31,
                                                       ----------------------------------------------------
                                                           1999                1998                1997
                                                       -------------   -------------------  ---------------
                                                                             Restated            Restated
                                                                       -------------------  ---------------
<S>                                                    <C>             <C>                  <C>
Net revenues                                            $ 436,485           $ 312,058           $ 189,239

Costs and expenses:
     Cost of sales - product costs                        260,041             176,188             103,124
     Cost of sales - royalties and software
         amortization                                      37,825              29,840              13,108
     Product development                                   21,422              27,393              20,470
     Sales and marketing                                   66,419              47,714              31,178
     General and administrative                            21,348              18,401               8,284
     Amortization of intangible assets                      1,585               1,562               1,505
     Merger expenses                                          600               1,474                  39
                                                       -------------   -------------------  ---------------
         Total costs and expenses                         409,240             302,572             177,708
                                                       -------------   -------------------  ---------------
Income from operations                                     27,245               9,486              11,531

Interest income (expense), net                             (3,030)             (1,112)                 81
                                                       -------------   -------------------  ---------------
     Income before income tax provision                    24,215               8,374              11,612

Income tax provision                                        8,961               3,235               3,981
                                                       -------------   -------------------  ---------------
Net income                                              $  15,254           $   5,139           $   7,631
                                                       =============   ===================  ===============
Basic net income per share                              $    0.69           $    0.24           $    0.37
                                                       =============   ===================  ===============
Diluted net income per share                            $    0.66           $    0.23           $    0.36
                                                       =============   ===================  ===============
Number of shares used in computing basic net
    income per share                                       22,162              21,339              20,262
                                                       =============   ===================  ===============
Number of shares used in computing diluted net
    income per share                                       23,233              22,210              20,951
                                                       =============   ===================  ===============
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                      F-3

<PAGE>




<TABLE>
<CAPTION>
                                                                                  Common Stock       Additional                  
                                                                              -------------------     Paid-in       Retained     
                                                                               Shares     Amount      Capital       Earnings     
                                                                              ---------------------------------------------------
<S>                                                                           <C>        <C>        <C>            <C>
BALANCE MARCH 31, 1996                                                         18,471        -      $  67,990      $       2     
                                                                                                                                 
Components of comprehensive income:                                                                                              
    Net income for the year                                                         -        -              -          7,631     
    Foreign currency translation adjustment                                         -        -              -              -     
                                                                                                                                 
         Total comprehensive income                                                 -        -              -              -     
                                                                                                                                 
    Issuance of common stock                                                       63        -            848              -     
    Issuance of common stock pursuant to employee stock option plan               313        -          2,209              -     
    Issuance of common stock pursuant to employee stock purchase plan              19        -            179              -     
    Tax benefit attributable to employee stock option plan                          -        -            736              -     
    Tax benefit derived from net operating loss carryforward utilization            -        -          6,634              -     
    Issuance of  stock on formation of CentreSoft                               2,468        -            268              -     
    Conversion of notes payable to common stock                                     -        -            283              -     
    Dividends declared                                                              -        -              -         (1,270)    
                                                                              ---------------------------------------------------
BALANCE MARCH 31, 1997                                                         21,334        -      $  79,147      $   6,363     
                                                                                                                                 
Components of comprehensive income:                                                                                              
    Net income for the year                                                         -        -              -          5,139     
    Foreign currency translation adjustment                                         -        -              -              -     
                                                                                                                                 
         Total comprehensive income                                                 -        -              -              -     
                                                                                                                                 
    Issuance of common stock and common stock warrants                             82                       -          1,214     
    Issuance of common stock pursuant to employee stock option plan               599        -          4,756              -     
    Issuance of common stock pursuant to employee stock purchase plan              64        -            582              -     
    Tax benefit attributable to employee stock option plan                          -        -          1,247              -     
    Adjustment for change in year-end of pooled subsidiary                          -        -              -           (639)    
    Conversion of Redeemable Preferred Stock                                       87        -          1,286              -     
    Conversion of Convertible Preferred Stock                                      15        -            214              -     
    Conversion of Subordinated Loan  Stock Debentures                             217        -          3,216              -     
    Issuance of stock to affect business combination                               10        -            163             11     
    Dividends declared                                                              -        -              -           (116)    
                                                                              ---------------------------------------------------
BALANCE MARCH 31, 1998                                                         22,408        -      $  91,825      $  10,758     

Components of comprehensive income:                                                                                              
    Net income for the year                                                         -        -              -         15,254     
    Foreign currency translation adjustment                                         -        -              -              -     
                                                                                                                                 
         Total comprehensive income                                                 -        -              -              -     
                                                                                                                                 
    Issuance of common stock and common stock warrants                              -        -          3,368              -     
    Issuance of common stock pursuant to employee stock option plan               605        -          5,271              -     
    Issuance of common stock pursuant to employee stock purchase plan              92        -            798              -     
    Tax benefit attributable to employee stock option plan                          -        -          1,059              -     
    Tax benefit derived from net operating loss carryforward utilization            -        -          2,430              -     
    Conversion of notes payable to common stock                                     -        -          4,500              -     
                                                                              ---------------------------------------------------
BALANCE MARCH 31, 1999                                                        $23,105      $ -      $ 109,251      $  26,012     
                                                                              ===================================================

<CAPTION>

                                                                                                       Accumulated 
                                                                                Treasury Stock            Other
                                                                           -------------------------  Comprehensive    Shareholders'
                                                                              Shares      Amount     Income (loss)        Equity    
                                                                           ---------------------------------------------------------
<S>                                                                        <C>         <C>           <C>               <C>
BALANCE MARCH 31, 1996                                                         (500)    $  (5,278)    $    (335)         $  62,379 
                                                                                                                                   
Components of comprehensive income:                                                                                                
    Net income for the year                                                       -             -             -              7,631 
    Foreign currency translation adjustment                                       -             -           177                177 
                                                                                                                    ---------------
         Total comprehensive income                                               -             -             -              7,808 
                                                                                                                    ---------------
    Issuance of common stock                                                      -             -             -                848 
    Issuance of common stock pursuant to employee stock option plan               -             -             -              2,209 
    Issuance of common stock pursuant to employee stock purchase plan             -             -             -                179 
    Tax benefit attributable to employee stock option plan                        -             -             -                736 
    Tax benefit derived from net operating loss carryforward utilization          -             -             -              6,634 
    Issuance of  stock on formation of CentreSoft                                 -             -             -                268 
    Conversion of notes payable to common stock                                   -             -             -                283 
    Dividends declared                                                            -             -             -             (1,270)
                                                                           --------------------------------------------------------
BALANCE MARCH 31, 1997                                                         (500)    $  (5,278)    $    (158)         $  80,074 
                                                                                                                                   
Components of comprehensive income:                                                                                                
    Net income for the year                                                       -             -             -              5,139 
    Foreign currency translation adjustment                                       -             -           250                250 
                                                                                                                    ---------------
         Total comprehensive income                                               -             -             -              5,389 
                                                                                                                    ---------------
    Issuance of common stock and common stock warrants                            -             -             -              1,214 
    Issuance of common stock pursuant to employee stock option plan               -             -             -              4,756 
    Issuance of common stock pursuant to employee stock purchase plan             -             -             -                582 
    Tax benefit attributable to employee stock option plan                        -             -             -              1,247 
    Adjustment for change in year-end of pooled subsidiary                        -             -             -               (639)
    Conversion of Redeemable Preferred Stock                                      -             -             -              1,286 
    Conversion of Convertible Preferred Stock                                     -             -             -                214 
    Conversion of Subordinated Loan  Stock Debentures                             -             -             -              3,216 
    Issuance of stock to affect business combination                              -             -             -                174 
    Dividends declared                                                            -             -             -               (116)
                                                                           --------------------------------------------------------
BALANCE MARCH 31, 1998                                                         (500)    $  (5,278)    $      92          $  97,397 
                                                                                                                                   
Components of comprehensive income:                                                                                                
    Net income for the year                                                       -             -             -             15,254 
    Foreign currency translation adjustment                                       -             -        (2,602)            (2,602)
                                                                                                                    ---------------
         Total comprehensive income                                               -             -             -             12,652 
                                                                                                                    ---------------
    Issuance of common stock and common stock warrants                            -             -             -              3,368 
    Issuance of common stock pursuant to employee stock option plan               -             -             -              5,271 
    Issuance of common stock pursuant to employee stock purchase plan             -             -             -                798 
    Tax benefit attributable to employee stock option plan                        -             -             -              1,059 
    Tax benefit derived from net operating loss carryforward utilization          -             -             -              2,430 
    Conversion of notes payable to common stock                                   -             -             -              4,500 
                                                                           --------------------------------------------------------
BALANCE MARCH 31, 1999                                                       $ (500)    $  (5,278)    $  (2,510)         $ 127,475 
                                                                           ========================================================
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       F-4

<PAGE>


                        ACTIVISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                  For the years ended March 31,
                                                                       ------------------------------------------------
                                                                                                     Restated
                                                                                          -----------------------------
                                                                          1999               1998               1997
                                                                       ----------         ----------         ----------
<S>                                                                    <C>                <C>                <C>
Cash flows from operating activities:
     Net income                                                         $ 15,254           $  5,139           $  7,631
     Adjustments to reconcile net income to net cash provided
       by operating activities:
         Deferred income taxes                                             3,344             (1,327)             2,929
         Adjustment for change in fiscal year-end for pooled
           subsidiaries                                                        -               (639)                 -
         Depreciation and amortization                                     6,488              5,315              4,167
         Amortization of prepaid royalties and capitalized
           software costs                                                 27,055             29,167              9,045
         Expense related to common stock warrants                              -                200                  -
         Loss on disposal of fixed assets                                      -                  -                 34
     Change in assets and liabilities (net of effects of
       purchases and acquisitions):
         Accounts receivable                                             (43,596)           (25,079)           (13,244)
         Inventories                                                     (11,506)            (6,798)            (5,169)
         Other current assets                                             (7,972)               458             (1,137)
         Other assets                                                      1,408                168               (600)
         Accounts payable                                                 (6,620)            25,410              5,688
         Accrued expenses                                                 34,304               (308)            (5,652)
         Deferred revenue                                                      -                  -              1,301
         Other liabilities                                                   (81)               (83)               (37)
                                                                       ----------         ----------         ----------
     Net cash provided by operating activities                            18,078             31,180              4,956
                                                                       ----------         ----------         ----------
Cash flows from investing activities:
         Cash paid by Combined Distribution (Holdings) Ltd. to
           acquire CentreSoft (net of cash acquired)                           -               (812)            (3,878)
         Capital expenditures                                             (3,800)            (8,872)            (4,580)
         Cash used in purchase acquisitions                                    -               (246)                 -
         Investment in prepaid royalties and capitalized
           software costs                                                (60,531)           (33,213)           (11,130)
         Other                                                                 -               (228)                 -
                                                                       ----------         ----------         ----------
     Net cash used in investing activities                               (64,331)           (43,371)           (19,588)
                                                                       ----------         ----------         ----------
Cash flows from financing activities:
     Proceeds from issuance of common stock                                    -                  -                282
     Proceeds from issuance of common stock upon exercise of
       warrants                                                                -                  -              2,209
     Issuance of common stock pursuant to employee stock
       option  plans                                                       5,271              4,756                  -
     Issuance of common stock pursuant to employee stock
       purchase plan                                                         798                582                179
     Proceeds from issuance of subordinated loan stock
       debentures                                                              -                  -              3,216
     Proceeds from issuance of convertible preferred stock                     -                  -                214
     Proceeds from issuance of redeemable preferred stock                      -                  -              1,286
     Dividends paid (Combined Distribution (Holdings) Ltd.)                    -             (1,256)              (130)
     Borrowing under line-of-credit agreement                              5,300              8,800              1,600
     Payment under line-of-credit agreement                               (5,300)            (8,800)                 -
     Note payable to bank, net                                             1,151                886              3,123
     Proceeds from issuance of subordinated convertible notes                  -             57,900                  -
     Other                                                                     -                 (6)                 2
                                                                       ----------         ----------         ----------
Net cash provided by financing activities                                  7,220             62,862             11,981
                                                                       ----------         ----------         ----------
Effect of exchange rate changes on cash                                   (2,361)               250                179
                                                                       ----------         ----------         ----------
Net increase (decrease) in cash and cash equivalents                     (41,394)            50,921             (2,472)
                                                                       ----------         ----------         ----------
Cash and cash equivalents at beginning of period                          74,241             23,320             25,792
                                                                       ----------         ----------         ----------
Cash and cash equivalents at end of period                              $ 32,847           $ 74,241           $ 23,320
                                                                       ==========         ==========         ==========
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                     F-5

<PAGE>


                        ACTIVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       BUSINESS

       Activision, Inc. (together with its subsidiaries, "Activision" or the
       "Company") is a leading international publisher, developer and
       distributor of interactive entertainment and leisure products. The
       Company was incorporated in California in 1979. In December 1992, the
       Company reincorporated in Delaware.

       The Company's products span a wide range of genres (including action,
       adventure, strategy and simulation) and target markets (including game
       enthusiasts, value buyers and children). In addition to its genre and
       market diversity, the Company publishes, develops and distributes
       products for a variety of game platforms, including personal computers
       ("PCs"), the Sony Playstation console system and the Nintendo 64 console
       system.

       PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of Activision,
       Inc., a Delaware corporation, and its wholly-owned subsidiaries (the
       "Company"). All intercompany accounts and transactions have been
       eliminated in consolidation.

       BASIS OF PRESENTATION

       These consolidated financial statements have been retroactively restated
       to reflect the pooling of interests of the Company with Raven Software
       Corporation ("Raven"), NBG EDV Handels- und Verlags GmbH ("NBG"), S.B.F.
       Services, Limited dba Head Games Publishing ("Head Games") and CD Contact
       Data GmbH ("CD Contact"). Each of the above transactions originally had
       been accounted for by the Company as an immaterial pooling of interests.
       The financial results for each such acquired company and related cash 
       flows had therefore been included in the reported operations of the 
       Company beginning on the date of acquisition. Based on a reevaluation of 
       these transactions, including the results of operations of each entity, 
       statements by the Securities and Exchange Commission ("the SEC") on 
       materiality of pooling transactions and requirements to evaluate the 
       impact on each line item in the financial statements and the impact on 
       the Company's trends, the Company has restated all financial information 
       reported in this Annual Report on Form 10-K for all periods prior to the 
       consummation of each transaction to include the financial position, 
       results of operations and cash flows of such acquired companies.

       CASH AND CASH EQUIVALENTS

       Cash and cash equivalents include cash and short-term investments with
       original maturities of not more than 90 days.

       CONCENTRATION OF CREDIT RISK

       Financial instruments which potentially subject the Company to
       concentration of credit risk consist principally of temporary cash
       investments and accounts receivable. The Company places its temporary
       cash investments with financial institutions. At various times during the
       fiscal years ended March 31, 1999, 1998 and 1997, the Company had
       deposits in excess of the $100,000 Federal Deposit Insurance Corporation
       ("FDIC") limit at these financial institutions. At March 31, 1999, the
       Company had approximately $3.9 million invested in short-term commercial
       paper and short-term United States government backed securities. The
       Company's customer base includes retail outlets and distributors
       including consumer electronics and computer specialty stores, discount
       chains, video rental stores and toy stores in the United States and
       countries worldwide. The Company performs ongoing credit evaluations of
       its customers and maintains allowances for potential credit losses. The
       Company generally does not require collateral or other security from its
       customers.

       FAIR VALUE OF FINANCIAL INSTRUMENTS

       The fair values of the Company's cash and cash equivalents, accounts
       receivable, accounts payable, and accrued liabilities approximate their
       carrying values due to the relatively short maturities of these
       instruments. Trade receivables are primarily due from retailers and
       original equipment manufacturers ("OEMs").


                                     F-6

<PAGE>

       PREPAID ROYALTIES AND CAPITALIZED SOFTWARE COSTS

       Prepaid royalties include payments made to independent software
       developers under development agreements and license fees paid to
       intellectual property rights holders for use of their trademarks or
       copyrights. Intellectual property rights which have alternative future
       uses are capitalized. Capitalized software costs represent costs incurred
       for development that are not recoupable against future royalties.

       The Company accounts for prepaid royalties relating to development
       agreements and capitalized software costs in accordance with Statement of
       Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs
       of Computer Software to be Sold, Leased, or Otherwise Marketed". Software
       development costs and prepaid royalties are capitalized once
       technological feasibility is established. Technological feasibility is
       evaluated on a product by product basis. For products where proven game
       engine technology exists, this may occur early in the development cycle.
       Software development costs are expensed if and when they are deemed
       unrecoverable. Amounts related to software development which are not
       capitalized are charged immediately to product development expense.

       The following criteria is used to evaluate recoverability of software
       development costs: historical performance of comparable products; the
       commercial acceptance of prior products released on a given game engine;
       orders for the product prior to its release; estimated performance of a
       sequel product based on the performance of the product on which the
       sequel is based; and actual development costs of a product as compared to
       the Company's budgeted amount.

       Capitalized software development costs are amortized to cost of sales -
       royalties and software amortization on a straight-line basis over the
       estimated product life (generally one year or less) commencing upon
       product release, or on the ratio of current revenues to total projected
       revenues, whichever amortization amount is greater. Prepaid royalties are
       amortized to cost of sales - royalties and software amortization
       commencing upon the product release at the contractual royalty rate based
       on actual net product sales, or on the ratio of current revenues to total
       projected revenues, whichever amortization amount is greater. For
       products that have been released, management evaluates the future
       recoverability of capitalized amounts on a quarterly basis.

       As of March 31, 1999, prepaid royalties and unamortized capitalized
       software costs totaled $37.1 million (including $6.9 million classified 
       as non-current) and $8.8 million, respectively. As of March 31, 1998, 
       prepaid royalties and unamortized capitalized software costs totaled 
       $10.7 million and $1.7 million, respectively. At March 31, 1998, all 
       prepaid royalties and unamortized capitalized software costs were 
       classified as current. Amortization of prepaid royalties and capitalized 
       software costs was $27.1 million, $29.2 million and $9.0 million for the 
       years ended March 31, 1999, 1998 and 1997, respectively. Write-offs of 
       prepaid royalties and capitalized software costs prior to product release
       were $2.4 million, $363,000 and $588,000 for the years ended March 31, 
       1999, 1998 and 1997, respectively.

       INVENTORIES

       Inventories are valued at the lower of cost (first-in, first-out) or
       market.

       REVENUE RECOGNITION

       The American Institute of Certified Public Accountant's (the "AICPA")
       Statement of Position 97-2 "Software Revenue Recognition" (SOP 97-2) was
       effective for all transactions entered into subsequent to March 31, 1998.
       The adoption of SOP 97-2 did not have a material impact on the Company's
       financial position, results of operations or liquidity.

       Product Sales: The Company recognizes revenue from the sale of its
       products upon shipment. Subject to certain limitations, the Company
       permits customers to obtain exchanges or return products within certain
       specified periods, and provides price protection on certain unsold
       merchandise. Management of the Company has the ability to estimate the
       amount of future exchanges, returns, and price protections. Revenue from
       product sales is reflected net of the allowance for returns and price
       protection.

       Software Licenses: For those license agreements which provide the
       customers the right to multiple copies in exchange for guaranteed
       amounts, revenue is recognized at delivery of the product master or the
       first copy. Per copy royalties on sales which exceed the guarantee are
       recognized as earned.

       ADVERTISING EXPENSES

       The Company expenses advertising and the related costs as incurred.
       Advertising expenses for the years ended March 31, 1999, 1998 and 1997
       were approximately $15,572,000 $6,336,000 and $3,285,000, respectively,
       and are included in sales and marketing expense in the consolidated
       statements of operations.


                                     F-7

<PAGE>

       EXCESS PURCHASE PRICE OVER IDENTIFIABLE ASSETS ACQUIRED, NET AND
       LONG-LIVED ASSETS

       The excess cost over net assets acquired is being amortized on a
       straight-line basis over a 20 year period. As of March 31, 1999 and 1998,
       accumulated amortization amounted to $9,069,000 and $7,904,000,
       respectively. The Company adopted the provisions of SFAS No. 121,
       "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to
       Be Disposed Of," on April 1, 1996. This Statement requires that
       long-lived assets and certain identifiable intangibles be reviewed for
       impairment whenever events or changes in circumstances indicate that the
       carrying amount of an asset may not be recoverable. Recoverability of
       assets to be held and used is measured by a comparison of the carrying
       amount of the asset to undiscounted cash flows expected to be generated
       by the asset. If such assets are considered to be impaired, the
       impairment to be recognized is measured by the amount by which the
       carrying amount exceeds the fair value of the assets. Adoption of this
       Statement did not have a material impact on the Company's financial
       position, results of operations, or liquidity.

       INTEREST INCOME (EXPENSE)

       Interest income (expense), net is comprised of (amounts in thousands):

<TABLE>
<CAPTION>
                                                1999              1998              1997
                                           ----------        ----------        ----------
                                                               Restated          Restated
                                                             ----------        ----------
       <S>                                    <C>               <C>               <C>
       Interest expense                       $(4,973)          $(2,223)          $  (843)
       Interest income                          1,943             1,111               924
                                           ----------        ----------        ----------
       Net interest income (expense)          $(3,030)          $(1,112)          $    81
                                           ==========        ==========        ==========
</TABLE>


       INCOME TAXES

       The Company accounts for income taxes using Statement of Financial
       Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
       Taxes." Under SFAS No. 109, income taxes are accounted for under the
       asset and liability method. Deferred tax assets and liabilities are
       recognized for the future tax consequences attributable to differences
       between the financial statement carrying amounts of existing assets and
       liabilities and their respective tax bases and operating loss and tax
       credit carryforwards. Deferred tax assets and liabilities are measured
       using enacted tax rates expected to apply to taxable income in the years
       in which those temporary differences are expected to be recovered or
       settled. The effect on deferred tax assets and liabilities of a change in
       tax rates is recognized in income in the period that includes the
       enactment date.

       FOREIGN CURRENCY TRANSLATION

       The Company's foreign subsidiaries maintain their accounting records in
       their local currency. The currencies are then converted to United States
       dollars and the effect of the foreign currency translation is reflected
       as a component of shareholders' equity in accordance with Statement of
       Financial Accounting Standards No. 52, "Foreign Currency Translation."

       ESTIMATES

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities at
       the date of the financial statements and the reported amounts of revenues
       and expenses during the reporting period. Actual results could differ
       from those estimates.

       STOCK BASED COMPENSATION

       Prior to April 1, 1996, the Company accounted for its stock option plan
       in accordance with the provisions of Accounting Principles Board ("APB")
       Opinion No. 25, Accounting for Stock Issued to Employees, and related
       interpretations. As such, compensation expense would be recorded on the
       date of the grant only if the current market price of the underlying
       stock exceeded the exercise price. On April 1, 1996 the Company adopted
       SFAS No. 123, Accounting for Stock-Based Compensation, which permits
       entities to recognize as expense over the vesting period the fair value
       of all stock-based awards on the date of the grant. Alternatively, SFAS
       No. 123 also allows entities to continue to apply the provisions of APB
       Opinion No. 25 and provide pro forma net income and pro forma earnings
       per share disclosures for employee stock option grants made in 1995 and
       future years as if the fair-value-based method defined in SFAS No. 123
       had been applied. The Company has elected to continue to apply the
       provisions of APB No. 25 and provide the pro forma disclosure provisions
       of SFAS No. 123.


                                      F-8

<PAGE>

       RECLASSIFICATIONS

       Certain amounts in the consolidated financial statements have been
       reclassified to conform with the current year's presentation.

2.     ACQUISITIONS

       1999 TRANSACTIONS

       As stated below, the acquisition of Head Games and CD Contact were 
       originally treated as immaterial poolings of interest. However, 
       after reviewing the results of operations of the entities, including 
       the materiality and impact on the the Company's trends, the Company 
       has restated the financial statements for all periods prior to the 
       closing of each respective transaction.

       ACQUISITION OF HEAD GAMES

       On June 30, 1998, the Company acquired Head Games in exchange for
       1,000,000 shares of the Company's common stock. The acquisition of Head
       Games was initially accounted for as an immaterial pooling of interests;
       accordingly, periods prior to April 1, 1998 were not retroactively
       restated for this transaction. However with this Annual Report on Form
       10-K, all prior periods have been retroactively restated to reflect the
       effect of the Head Games acquisition in all periods presented.

       ACQUISITION OF CD CONTACT

       On September 29, 1998, the Company acquired CD Contact in exchange for
       1,900,000 shares of the Company's common stock. In addition, $9.1 million
       in outstanding debt was acquired in connection with the CD Contact
       acquisition. The debt is evidenced by notes payable which are due on
       demand and bear interest at approximately 8% per annum. The acquisition
       of CD Contact was initially accounted for as an immaterial pooling of
       interests; accordingly, periods prior to July 1, 1998 were not
       retroactively restated for this transaction. However with this Annual
       Report on Form 10-K, all prior periods have been retroactively restated
       to reflect the effect of the CD Contact acquisition in all periods
       presented.

       The following table represents the results of operations of the
       previously separate companies for the period before the combination was
       consummated that are included in the current combined net income of the
       Company:


<TABLE>
<CAPTION>
                                                               Fiscal Year 1999
                       -----------------------------------------------------------------------------------------------
                                                       Head Games             CD Contact
                               Activision               3 Months               6 Months                 Total
                               Year Ended                 Ended                  Ended               Year Ended
                             March 31, 1999           June 30, 1998       September 30, 1998       March 31, 1999
                       ------------------------  ---------------------  ----------------------  ----------------------
       <S>                        <C>                  <C>                    <C>                      <C>
       Revenues                   $412,225             $  2,195               $ 22,065                 $436,485
       Net income (loss)          $ 14,194             $    394               $    666                 $ 15,254
</TABLE>


       Results for Head Games from July 1, 1998, subsequent to its acquisition
       by the Company and for CD Contact from October 1, 1998, subsequent to 
       its acquisition by the Company, are included in the Activision year ended
       March 31, 1999 column above.

       1998 TRANSACTIONS

       As discussed below, the acquisitions of NBG and Raven were originally 
       accounted for as immaterial poolings of interest. However, based on 
       statements by the SEC regarding materiality and the requirement to 
       evaluate the impact on each line item of the Company's financial 
       statement and the impact on the Company's trends, the Company has 
       restated the financial statements for periods prior to the closing of 
       each respective transaction.

       ACQUISITION OF NBG

       On November 26, 1997, the Company acquired NBG in exchange for 281,206
       shares of the Company's common stock. The acquisition of NBG was
       initially accounted for as an immaterial pooling of interests;
       accordingly, periods prior to October 1, 1997 were not retroactively
       restated for this transaction. However, with this Annual Report on Form
       10-K, all prior periods have been retroactively restated to reflect the
       effect of the NBG acquisition in all periods presented.

       ACQUISITION OF RAVEN SOFTWARE CORPORATION

       On August 26, 1997, the Company acquired Raven in exchange for 1,040,000
       shares of the Company's common stock. The acquisition of Raven was
       initially accounted for as an immaterial pooling of interests;
       accordingly, periods prior to April 1, 1997 were not retroactively
       restated for this transaction. However, with this Annual Report on Form
       10-K, all prior periods have been retroactively restated to reflect the
       effect of the Raven acquisition in all periods presented.


<TABLE>
<CAPTION>
                                                                Fiscal Year 1998
                       -----------------------------------------------------------------------------------------------
                              Activision
                             as Previously          NBG            Head Games        CD Contact           Total
                               Reported          6 Months             Year               Year          Restated Year
                              Year Ended           Ended             Ended              Ended              Ended
                            March 31, 1998    Sept. 30, 1997     March 31, 1998    March 31, 1998     March 31, 1998
                       ---------------------  ----------------  -----------------  ---------------  ------------------
       <S>                      <C>              <C>                <C>                <C>                <C>
       Revenues                 $259,926         $  7,081           $  3,715           $ 41,336           $312,058
       Net income (loss)        $  5,827         $   (106)          $    (70)          $   (512)          $  5,139
</TABLE>



                                      F-9

<PAGE>

<TABLE>
<CAPTION>
                                                                 Fiscal Year 1997
                       ----------------------------------------------------------------------------------------------------
                            Activision
                          as Previously        Raven             NBG         Head Games       CD Contact        Total
                             Reported           Year             Year           Year             Year           Year
                            Year Ended         Ended            Ended           Ended           Ended           Ended
                          March 31, 1997   March 31, 1997  March 31, 1997  March 31, 1997   March 31, 1997  March 31, 1997
                       -----------------  ---------------  --------------  --------------  ---------------- ---------------
       <S>                   <C>              <C>             <C>            <C>              <C>             <C>
       Revenues              $154,644         $  428          $ 19,628       $  1,083         $ 13,456        $189,239
       Net income (loss)     $  9,226         $ (419)         $    179       $ (1,510)        $    155        $  7,631
</TABLE>


       Acquisition of Centresoft

       On November 26, 1997, the Company acquired Centresoft in exchange for 
       2,787,043 shares and 50,325 options to acquire shares of the Company's 
       common stock. The acquisition of Centresoft was accounted for in 
       accordance with the pooling of interests method of accounting and 
       accordingly, the Company's consolidated financial statements were 
       retroactively adjusted as if Centresoft and the Company had operated 
       as one since June 28, 1996 (inception of Centresoft).

3.     INVENTORIES

       Inventories at March 31, 1999, 1998 and 1997 are stated net of an
       adjustment to net realizable value of approximately $1,493,000, $828,000
       and $471,000, respectively. The provisions to adjust inventories to net
       realizable value for the years ended March 31, 1999, 1998 and 1997 were
       approximately $828,000, $1,082,000 and $478,000, respectively.
       Inventories, net of reserves, consisted of (amounts in thousands):

<TABLE>
<CAPTION>
                                                               March 31, 1999        March 31, 1998
                                                             ------------------  ---------------------
                                                                                        Restated
                                                                                 ---------------------
       <S>                                                             <C>              <C>
       Purchased parts and components                                  $ 2,326          $ 1,409
       Finished goods                                                   28,605           18,016
                                                             ------------------  ---------------------
                                                                       $30,931          $19,425
                                                             ==================  =====================
</TABLE>


4.     PROPERTY AND EQUIPMENT

       Property and equipment are recorded at cost. Depreciation and
       amortization are provided using the straight-line method over the shorter
       of the estimated useful lives or the lease term: buildings, 30 years;
       computer equipment, office furniture and other equipment, 3 years;
       leasehold improvements, through the life of the lease. Property and
       equipment, stated at cost, was as follows (amounts in thousands):


<TABLE>
<CAPTION>
                                                               March 31, 1999        March 31, 1998
                                                             ------------------  ---------------------
                                                                                          Restated
                                                                                 ---------------------
          <S>                                                     <C>                   <C>
          Land                                                    $    581              $    581
          Buildings                                                    759                   801
          Computer equipment                                        18,067                15,576
          Office furniture and other equipment                       3,522                 3,480
          Leasehold improvements                                     3,189                 2,974
                                                             ------------------  ---------------------
              Total cost of property and equipment                  26,118                23,412

          Less accumulated depreciation                            (15,277)              (11,468)
                                                             ------------------  ---------------------
              Net cost of property and equipment                  $ 10,841              $ 11,944
                                                             ==================  =====================
</TABLE>

       Depreciation expense for the years ended March 31, 1999, 1998 and 1997
       was $4,903,000, $3,753,000 and $2,662,000, respectively.


                                      F-10

<PAGE>

5.     ACCRUED EXPENSES

       Accrued expenses were as follows (amounts in thousands):


<TABLE>
<CAPTION>
                                               March 31, 1999     March 31, 1998
                                             -----------------  -----------------
                                                                     Restated
                                                                -----------------
          <S>                                          <C>              <C>
          Accrued royalties payable                    $11,249          $ 5,996
          Affiliated label payable                      11,999                -
          Accrued selling and marketing costs            3,082            2,937
          Income tax payable                             5,068            1,360
          Accrued interest expense                       1,013            1,125
          Accrued bonus and vacation pay                 4,473            1,210
          Other                                          8,258            2,710
                                             -----------------  -----------------
                                                       $45,142          $15,338
                                             =================  =================
</TABLE>


6.     OPERATIONS BY REPORTABLE SEGMENTS AND GEOGRAPHIC AREA

              The Company adopted SFAS No. 131, "Disclosure about Segments of an
       Enterprise and Related Information," as of April 1, 1998. SFAS No. 131
       establishes standards for reporting information about an enterprise's
       operating segments and related disclosures about its products, geographic
       areas and major customers.

              The Company publishes, develops and distributes interactive
       entertainment and leisure products for a variety of game platforms,
       including PCs, the Sony PlayStation console system and the Nintendo 64
       console system. Based on its organizational structure, the Company
       operates in two reportable segments: publishing and distribution.

              The Company's publishing segment develops and publishes titles
       both internally through the studios owned by the Company and externally,
       through third party developers. In the United States, the Company's
       products are sold primarily on a direct basis to major computer and
       software retailing organizations, mass market retailers, consumer
       electronic stores, discount warehouses and mail order companies. The
       Company conducts its international publishing activities through offices
       in the United Kingdom, Germany, France, Australia and Japan. The
       Company's products are sold internationally on a direct to retail basis,
       through third party distribution and licensing arrangements, and through
       the Company's owned distribution subsidiaries located in the United
       Kingdom, the Benelux territories and Germany.

              The Company's distribution segment, located in the United Kingdom,
       the Benelux territories and Germany, distributes interactive
       entertainment software and hardware and provides logistical services for
       a variety of publishers and manufacturers. A small percentage of
       distribution sales is derived from Activision-published titles.

              The President and Chief Operating Officer allocates resources to
       each of these segments using information on their respective revenues 
       and operating profits before interest and taxes. The President and Chief 
       Operating Officer has been identified as the Chief Operating Decision 
       Maker as defined by SFAS No. 131.

              The President and Chief Operating Officer does not evaluate
       individual segments based on assets or depreciation.

              The accounting policies of these segments are the same as those
       described in the Summary of Significant Accounting Policies. Revenue
       derived from sales between segments is eliminated in consolidation.

              Information on the reportable segments for the three years ended
       March 31, 1999 is as follows:


<TABLE>
<CAPTION>
                                                               Fiscal Year Ended March 31, 1999
                                                 --------------------------------------------------------------
                                                   Publishing     Distribution     Corporate          Total
                                                 -------------  ---------------  -------------  ---------------
       <S>                                          <C>             <C>             <C>              <C>  
       Revenues from external customers             $186,299        $250,186        $      -         $436,485
       Revenue from sales between segments          $ 19,202        $      -        $      -         $ 19,202
       Operating income (loss)                      $ 17,784        $ 10,685        $ (1,224)        $ 27,245
</TABLE>



                                      F-11

<PAGE>



<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended March 31, 1998
                                                 --------------------------------------------------------------
                                                   Publishing     Distribution     Corporate          Total
                                                 -------------  ---------------  -------------  ---------------
       <S>                                          <C>             <C>             <C>              <C>
       Revenues from external customers             $125,067        $186,991        $      -         $312,058
       Revenue from sales between segments          $  7,759        $      -        $      -         $  7,759
       Operating income (loss)                      $  5,836        $  4,842        $ (1,192)        $  9,486
</TABLE>



<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended March 31, 1997
                                                 --------------------------------------------------------------
                                                   Publishing     Distribution     Corporate          Total
                                                 -------------  ---------------  -------------  ---------------
       <S>                                          <C>             <C>             <C>              <C>
       Revenues from external customers             $ 87,994        $101,245        $      -         $189,239
       Revenue from sales between segments          $      -        $      -        $      -         $      -
       Operating income (loss)                      $ 10,077        $  2,721        $ (1,267)        $ 11,531
</TABLE>


       Operating expenses in the Corporate column consist entirely of
       amortization of goodwill resulting from the Company's merger with the 
       Disc Company Inc., on April 1, 1992.


       Geographic information for the three years ended March 31, 1999 is based
       on the location of the selling entity. Revenues from external customers
       by geographic region were as follows:


<TABLE>
<CAPTION>
                                             Fiscal Year Ended March 31,
                             ----------------------------------------------------
                                1999              1998              1997
                             -----------------  -----------------  --------------
       <S>                         <C>               <C>               <C>
       United States               $149,664          $ 89,936          $ 65,695
       Europe                       278,032           208,817           113,456
       Other                          8,789            13,305            10,088
                             -----------------  -----------------  --------------
       Total                       $436,485          $312,058          $189,239
                             =================  =================  ==============
</TABLE>



       Revenues by platform were as follows:


<TABLE>
<CAPTION>
                                1999               1998                1997
                             -----------------  -----------------  --------------
                                                 Restated            Restated
       <S>                         <C>               <C>               <C>
       Console                     $268,205          $131,890          $ 68,480
       PC                           168,280           180,168           120,759
                             -----------------  -----------------  --------------
       Total                       $436,485          $312,058          $189,239
                             =================  =================  ==============
</TABLE>



                                      F-12

<PAGE>


7.     COMPUTATION OF NET INCOME PER SHARE

       The following table sets forth the computations of basic and diluted net
       income per share:


<TABLE>
<CAPTION>
                                                              (amounts in thousands, except per share data)
                                                                  1999            1998            1997
                                                           ---------------  ---------------  ---------------
                                                                                          Restated
                                                                            --------------------------------
       <S>                                                     <C>               <C>                <C>   
       NUMERATOR
       Net income                                              $ 15,254          $  5,139           $  7,631
           Preferred stock dividends                                  -              (116)              (151)
                                                           ---------------  ---------------  ---------------
           Numerator for basic and diluted net income
           per share-income available to common
           stockholders                                        $ 15,254          $  5,023           $  7,480
                                                           ===============  ===============  ===============
       DENOMINATOR
       Denominator for basic net income per
       share-weighted average shares outstanding                 22,162            21,339             20,262

       Effect of dilutive securities:
           Employee stock options                                   942               801                689
           Warrants to purchase common stock                        129                70                  -
                                                           ---------------  ---------------  ---------------
       Potential dilutive common shares                           1,071               871                689
                                                           ---------------  ---------------  ---------------

           Denominator for diluted net income per
           share-adjusted weighted average shares and
           assumed conversions                                   23,233            22,210             20,951
                                                           ===============  ===============  ===============

           Basic net income per share                          $   0.69          $   0.24           $   0.37
                                                           ===============  ===============  ===============
           Diluted net income per share                        $   0.66          $   0.23           $   0.36
                                                           ===============  ===============  ===============
</TABLE>


       Options to purchase 2,188,175, 1,978,000 and 2,838,000 shares of common
       stock were outstanding for the years ended March 31, 1999, 1998 and 1997,
       respectively, but were not included in the calculations of diluted net
       income per share because their effect would be antidilutive. Convertible
       subordinated notes and convertible preferred stock were not included in
       the calculations of diluted net income per share because their effect
       would be antidilutive.


                                      F-13

<PAGE>


8.     INCOME TAXES

       Domestic and foreign income (loss) before income taxes and details of the
       income tax provision (benefit) are as follows (amounts in thousands):


<TABLE>
<CAPTION>
                                                                      Year ended March 31,
                                                      -------------------------------------------------------
                                                                                      Restated
                                                                        -------------------------------------
                                                              1999               1998               1997
                                                      ----------------  -------------------  ----------------
       <S>                                                <C>                <C>                <C>        
       Income (loss) before income taxes:
           Domestic                                       $  6,524           $ (2,215)          $  2,838
           Foreign                                          17,691             10,589              8,774
                                                      ----------------  -------------------  ----------------
                                                          $ 24,215           $  8,374           $ 11,612
                                                      ================  ===================  ================
       Income tax expense (benefit):
           Current:
                Federal                                   $     37           $  1,133           $   (745)
                State                                          124                 14                 31
                Foreign                                      5,456              3,653              1,530
                                                      ----------------  -------------------  ----------------
                    Total current                            5,617              4,800                816
                                                      ----------------  -------------------  ----------------
           Deferred:
                Federal                                       (202)            (2,580)            (2,961)
                State                                           57               (232)            (1,244)
                                                      ----------------  -------------------  ----------------
                    Total deferred                            (145)            (2,812)            (4,205)
                                                      ----------------  -------------------  ----------------
       Add back benefit credited to additional
           paid-in capital:
           Tax benefit related to stock option
               exercises                                     1,059              1,247                736
           Tax benefit related to utilization of pre-
               bankruptcy net operating loss
               carryforwards                                 2,430                  -              6,634
                                                      ----------------  -------------------  ----------------
                                                             3,489              1,247              7,370
                                                      ----------------  -------------------  ----------------
                                                          $  8,961           $  3,235           $  3,981
                                                      ================  ===================  ================
</TABLE>


       The items accounting for the difference between income taxes computed at
       the U.S. federal statutory income tax rate and the income tax provision
       for each of the years are as follows:


<TABLE>
<CAPTION>
                                                                        Year ended March 31,
                                                      -------------------------------------------------------
                                                                                       Restated
                                                                        -------------------------------------
                                                              1999              1998              1997
                                                      ---------------  --------------------  ----------------
       <S>                                                      <C>               <C>               <C>    
       Federal income tax provision at statutory rate           34.0%             34.0%             35.0%
       State taxes, net of federal benefit                       1.3%             (1.2%)             2.6%
       Nondeductible amortization                                1.7%              4.4%              3.0%
       Nondeductible merger fees                                 0.8%              3.6%                -
       Research and development credits                         (5.4%)            (5.3%)            (6.4%)
       Incremental effect of foreign tax rates                  (0.9%)             0.7%             (3.1%)
       Increase (reduction) of valuation allowance               5.1%              -                 3.1%
       Other                                                     0.4%              2.4%              0.1%
                                                      ---------------  --------------------  ----------------
                                                                37.0%             38.6%             34.3%
                                                      ===============  ====================  ================
</TABLE>



                                      F-14

<PAGE>


       The components of the net deferred tax asset and liability were as
follows (amounts in thousands):


<TABLE>
<CAPTION>
                                                March 31, 1999            March 31, 1998
                                             ----------------------------------------------
                                                                             Restated
                                                                        -------------------
       <S>                                             <C>                       <C>
       Deferred asset:
            Allowance for bad debts                    $    942                  $    358
            Allowance for sales returns                     144                     2,458
            Royalty reserve                               1,649                         -
            Miscellaneous                                 1,591                     1,304
            Tax credit carryforwards                      6,726                     3,320
            Net operating loss carryforwards             10,534                     9,184
                                             ------------------         -------------------
                Deferred asset                           21,586                    16,624
                Valuation allowance                      (6,916)                   (8,107)
                                             ------------------         -------------------
                Net deferred asset                       14,670                     8,517
                                             ------------------         -------------------
       Deferred liability:
                Deferred compensation                       110                         -
                Capitalized research expenses             5,512                         -
                State taxes                                 386                         -
                                             ------------------         -------------------
                Deferred liability                        6,008                         -
                                             ------------------         -------------------
                Net deferred asset                     $  8,662                  $  8,517
                                             ==================         ===================
</TABLE>


       In accordance with Statement of Position 90-7, "Financial Reporting by
       Entities in Reorganization Under the Bankruptcy Code," issued by the
       AICPA, benefits from loss carryforwards arising prior to the Company's
       reorganization are recorded as additional paid-in capital. During the
       year ended March 31, 1999, $2.4 million of such benefit was recognized
       through a reduction in the valuation allowance. The reduction in the
       valuation allowance during the years ended March 31, 1999 was determined
       based on the Company's assessment of the realizability of its deferred
       tax assets, which assessment was based on recent operating history, and
       the Company's expectation that operations will continue to generate
       taxable income, as well as other factors. Realization of the deferred tax
       assets is dependent upon the continued generation of sufficient taxable
       income prior to expiration of tax credits and loss carryforwards.
       Although realization is not assured, management believes it is more
       likely than not that the deferred tax asset of $8.7 million will be
       realized. The amount of deferred tax assets considered realizable,
       however, could be reduced in the future if estimates of future taxable
       income are reduced.

       The Company's available net operating loss carryforward for federal tax
       reporting purposes approximates $31.0 million and is subject to certain
       limitations as defined under Section 382 of the Internal Revenue Code.
       The net operating loss carryforwards expire from 2006 to 2013. The
       Company has tax credit carryforwards of $4.6 million and $2.2 million for
       federal and state purposes, respectively, which expire from 2006 to 2013.

9.     COMMITMENTS, CONTINGENCIES AND DEBT

       BANK LINE OF CREDIT

       As of March 31, 1999, the Company had a $40.0 million revolving credit 
       and letter of credit facility (the "Prior Facility") with a group of 
       banks. The Prior Facility currently provides the Company with the 
       ability to borrow funds and issue letters of credit against eligible 
       accounts receivable up to $40.0 million. The Prior Facility was 
       scheduled to expire in October 2001. As of March 31, 1999 the Company 
       had $22.4 million in letters of credit outstanding and no borrowings 
       against the Prior Facility (there were no outstanding letters of 
       credit or borrowings against the Prior Facility in the fiscal year 
       ended March 31, 1998). In addition, the Company had a $2 million line 
       of credit agreement (the "Asset Line") with a bank that expired in 
       September 1998. Approximately $1.1 million and $1.2 million was 
       outstanding on this line as of March 31, 1999 and 1998, respectively.

       In addition, the Company's CentreSoft subsidiary has a revolving credit
       facility (the "UK Facility") with its bank in the United Kingdom for
       approximately $11.2 million. The UK Facility can be used for working
       capital requirements and expires in June 2000. The Company had no
       borrowings outstanding against the UK facility as of March 31, 1999. In
       the Netherlands, the Company's CD Contact subsidiary has a credit
       facility ("the Netherlands Facility") with a bank that permits borrowings
       against eligible accounts receivable and inventory up to approximately
       $25 million. Borrowings under the Netherlands Facility are due on demand
       and totaled $6.0 as of March 31, 1999. Letters of credit outstanding
       under the Netherlands facility totaled $6.9 million as of March 31, 1999.


                                      F-15

<PAGE>

       PRIVATE PLACEMENT OF CONVERTIBLE SUBORDINATED NOTES

       In December 1997, the Company completed the private placement of $60.0
       million principal amount of 6 3/4% convertible subordinated notes due
       2005 (the "Notes"). The Notes are convertible, in whole or in part, at
       the option of the holder at any time after December 22, 1997 (the date of
       original issuance) and prior to the close of business on the business day
       immediately preceding the maturity date, unless previously redeemed or
       repurchased, into common stock, $.000001 par value, of the Company, at a
       conversion price of $18.875 per share, (equivalent to a conversion rate
       of 52.9801 shares per $1,000 principal amount of Notes), subject to
       adjustment in certain circumstances. The Notes are redeemable, in whole
       or in part, at the option of the Company at any time on or after January
       10, 2001, subject to premiums through December 31, 2003.

       LEASE OBLIGATIONS

       The Company leases certain of its facilities under non-cancelable
       operating lease agreements. Total future minimum lease commitments as of
       March 31, 1999 are as follows (amounts in thousands):


<TABLE>
<CAPTION>
                Year ending March 31,
                         <S>                           <C>
                         2000                          $ 3,760
                         2001                            3,608
                         2002                            3,281
                         2003                            3,139
                         2004                            3,123

                         Thereafter                    $11,450
</TABLE>


       Rent expense for the years ended March 31, 1999, 1998 and 1997 was
       approximately $3,900,000, $3,219,000 and $2,279,000, respectively.

       LEGAL PROCEEDINGS

       The Company is party to routine claims and suits brought against it in
       the ordinary course of business, including disputes arising over the
       ownership of intellectual property rights and collection matters. In the
       opinion of management, the outcome of such routine claims will not have a
       material adverse effect on the Company's business, financial condition,
       results of operations or liquidity.

10.    STOCKHOLDERS' EQUITY AND COMPENSATION PLANS

       OPTION PLANS

       The Company has two stock option plans for the benefit of officers,
       employees, consultants and others.

       The Activision 1991 Stock Option and Stock Award Plan, as amended, (the
       "1991 Plan") permits the granting of non-qualified stock options,
       incentive stock options ("ISOs"), stock appreciation rights ("SARs"),
       restricted stock awards, deferred stock awards and other
       Common-Stock-based awards. The total number of shares of Common Stock
       available for distribution under the 1991 Plan is 7,666,667. The 1991
       Plan requires available shares to consist in whole or in part of
       authorized and unissued shares for treasury shares. There were 156,500
       shares remaining available for grant under the 1991 Plan as of March 31,
       1999.

       On September 23, 1998, the stockholders of the Company approved the
       Activision 1998 Incentive Plan (the "1998 Plan"). The 1998 Plan permits
       the granting of non-qualified stock options, ISOs, restricted stock
       awards, deferred stock awards and other common stock-based awards to
       officers, employees, consultants and others. The total number of shares
       of Common Stock available for distribution under the 1998 Plan is
       3,000,000. The 1998 Plan requires available shares to consist in whole or
       in part of authorized and unissued shares or treasury shares. There were
       1,087,435 remaining shares available for grant under the Incentive Plan
       as of March 31, 1999.

       The exercise price for stock options issued under the 1991 Plan and 1998
       Plan (collectively, the "Plans") is determined at the discretion of the
       Board of Directors (or the Compensation Committee of the Board of
       Directors), and for ISOs, is not to be less than the fair market value of
       the Company's common stock at the date of grant, or in the case of
       non-qualified options, must exceed or be equal to 85% of fair market
       value at date of grant. Options typically become exercisable in equal
       installments over a period not to exceed five years and must be exercised
       within 10 years of date of grant. Historically, stock options have been
       granted with exercise prices equal to or greater than the fair market
       value at the date of grant.


                                      F-16

<PAGE>


       Activity of the Plans during the last three fiscal years was as follows
       (amounts in thousands, except weighted average exercise price amounts):


<TABLE>
<CAPTION>

                                                     1999                         1998                         1997
                                             ----------------------       ----------------------       ---------------------
                                             Shares        Wtd Avg        Shares        Wtd Avg        Shares       Wtd Avg
                                              (000)        Ex Price        (000)        Ex Price        (000)       Ex Price
                                             -------      ---------       -------      ---------       -------     ---------
       <S>                                   <C>          <C>             <C>          <C>             <C>         <C>
       Outstanding at beginning of year       6,218       $   11.47        5,228       $   11.69        3,725      $   11.37
           Granted                            3,538       $   10.27        2,776       $   12.14        1,997      $   11.28
           Exercised                           (605)      $    8.68         (599)      $    8.35         (313)     $    7.05
           Forfeited                         (1,202)      $   15.33       (1,187)      $   14.45         (181)     $    9.24
                                             -------      ---------       -------      ---------       -------     ---------
       Outstanding at end of year             7,949       $   10.54        6,218       $   11.47        5,228      $   11.69
                                             =======      =========       =======      =========       =======     =========

       Exercisable at end of year             3,754           10.00        2,532       $    9.78        3,292      $   12.62

</TABLE>


       The range of exercise prices for options outstanding as of March 31, 1999
       was $.75 to $17.75. The range of exercise prices for options is wide due
       to increases and decreases in the Company's stock price over the period
       of the grants. For the year ended March 31, 1999, 3,320,000 options were
       granted at an exercise price equal to the fair market value on the date
       of grant and 218,000 options were granted at an exercise price greater
       than fair market value on the date of grant.

       The following tables summarize information about stock options
       outstanding as of March 31, 1999:


<TABLE>
<CAPTION>

                                                    Outstanding Options                       Exercisable Options
                                          -------------------------------------------       --------------------------
                                                       Remaining Wtd
                                                            Avg
                                                        Contractual
                                          Shares           Life            Wtd Avg          Shares          Wtd Avg
                                          (000)         (in years)     Exercise Price       (000)       Exercise Price
                                          -------      -------------   --------------       -------     --------------
       <S>                                <C>          <C>             <C>                  <C>         <C>
       Range of exercise prices:
           $0.75 to $9.44                  1,366             6.67           $ 6.91             815           $ 5.52
           $9.46 to $9.87                  1,741             8.45           $ 9.69           1,268           $ 9.71
           $10.00 to $10.50                1,429             8.88           $10.27             463           $10.30
           $10.56 to $11.06                1,324             8.78           $10.77             341           $10.77
           $11.12 to $13.56                1,300             7.60           $12.62             530           $13.03
           $13.62 to $17.00                  788             7.98           $15.37             336           $15.98
           $17.75 to $17.75                    1             6.49           $17.75               1           $17.75

</TABLE>


       These options will expire if not exercised at specific dates ranging from
       January 2000 to April 2009. Prices for options exercised during the three
       year period ended March 31, 1999 ranged from $.75 to $15.75.

       EMPLOYEE STOCK PURCHASE PLAN

       The Company has an employee stock purchase plan for all eligible
       employees (the "Purchase Plan"). Under the Purchase Plan, shares of the
       Company's common stock may be purchased at six-month intervals at 85% of
       the lower of the fair market value on the first or last day of each
       six-month period (the "Offering Period"). Employees may purchase shares
       having a value not exceeding 10% of their gross compensation during an
       Offering Period. Employees purchased 42,093 shares at a price of $9.24
       per share and 45,868 shares at a price of $8.92 per share during the
       Purchase Plan's offering period ended September 30, 1998 and March 31,
       1999, respectively. As of March 31, 1999, 29,939 shares were reserved for
       future issuance under the Purchase Plan.

       EMPLOYEE RETIREMENT PLAN

       The Company has a retirement plan covering substantially all of its
       eligible employees. The retirement plan is qualified in accordance with
       Section 401(k) of the Internal Revenue Code. Under the plan, employees
       may defer up to 15% of their pre-tax salary, but not more than statutory
       limits. The Company contributes 5% of each dollar contributed by a
       participant. The Company's matching contributions to the plan were
       $40,000, $40,000 and $25,000 during the years ended March 31, 1999, 1998
       and 1997, respectively.

       DIRECTOR WARRANT PLAN

       The Director Warrant Plan, which expired on December 19, 1996, provided
       for the automatic granting of warrants ("Director Warrants") to purchase
       16,667 shares of the Common Stock to each director of the Company who was
       not an officer or employee of the Company or any of its subsidiaries.
       Director Warrants granted under the Director 

                                    F-17


<PAGE>

       Warrant Plan vest 25% on the first anniversary of the date of grant, 
       and 12.5% each six months thereafter. The expiration of the Plan had 
       no effect on the outstanding Warrants. As of March 31, 1999, there 
       were no shares of Common Stock available for distribution under the 
       Director Warrant Plan.

       Director Warrant activity was as follows (amounts in thousands, except
       weighted average exercise price amounts):


<TABLE>
<CAPTION>

                                                        1999                    1998                    1997
                                               ---------------------   ---------------------   ---------------------
                                                Shares      Wtd Avg     Shares      Wtd Avg     Shares      Wtd Avg
                                                 (000)      Ex Price     (000)      Ex Price     (000)      Ex Price
                                               --------    ---------   --------    ---------   --------    ---------
       <S>                                     <C>         <C>         <C>         <C>         <C>         <C>
       Outstanding at beginning and end of
           year                                    73        $4.43         73         $4.43        73         $4.43
                                               ========    =========   ========    =========   ========    =========
       Exercisable at end of year                  73        $4.43         73         $4.43        73         $4.43
                                               ========    =========   ========    =========   ========    =========
</TABLE>


       The range of exercise prices for Director Warrants outstanding as of
       March 31, 1999 was $.75 to 8.50. The range of exercise prices for
       Director Warrants is wide due to increases and decreases in the Company's
       stock price over the period of the grants. As of March 31, 1999, 33,300
       of the outstanding and vested Director Warrants have a weighted average
       remaining contractual life of 2.78 years and a weighted average exercise
       price of $.75; 20,000 of the outstanding and vested Director Warrants
       have a weighted average remaining contractual life of 5.82 years and a
       weighted average exercise price of $6.50; and 20,000 of the outstanding
       and vested Director Warrants have a weighted average remaining
       contractual life of 5.82 years and a weighted average exercise price of
       $8.50.

       OTHER OPTIONS AND WARRANTS

       On March 23, 1999, 1,000,000 options to purchase common stock were issued
       to each of Robert A. Kotick, the Company's Chairman and Chief Executive
       Officer, and Brian G. Kelly, the Company's Co-Chairman. The options were 
       granted in connection with employment agreements between the Company and 
       each of Mr. Kotick and Mr. Kelly dated January 12, 1999. The options 
       vest in five equal annual installments beginning on the date of issuance,
       have an exercise price of $10.50 per share, and expire on January 12, 
       2009.

       On December 11, 1998, the Company granted options to purchase 80,000 
       shares of the Company's common stock to four of its outside directors. 
       The options have an exercise price of $11.50, vest in five equal 
       annual installments beginning a year from the date of issuance, and 
       expire on December 11, 2008.

       On June 4, 1998, the Company granted options to purchase 60,000 shares 
       of the Company's common stock to four of its outside directors. The 
       options have an exercise price of $9.50, vest in two equal annual 
       installments beginning a year from the date of issuance, and expire on 
       June 4, 2008.

       During the fiscal year ended March 31, 1998, the Company issued warrants
       to purchase 40,000 shares of the Company's common stock, with a weighted
       average exercise price of $12.88 to two of its outside directors in
       connection with their election to the Board. Such warrants have vesting
       terms identical to the Directors Warrants and expire within 10 years. As
       of March 31, 1999, 19,338 of such warrants were vested and exercisable.

       During the fiscal year ended March 31, 1999, the Company issued the
       following warrants to purchase 1,000,000 shares of common stock in
       connection with software license agreements:


<TABLE>
<CAPTION>

                                        Exercise                                                           Expiration
           Warrants        Shares         Price                  Vesting Schedule                             Date
           --------      ----------     --------     ----------------------------------------------       -------------
           <S>            <C>           <C>          <C>                                                  <C>
              #1          500,000        $ 10.27     Vest ratably over 5 years beginning on date of             9/16/08
                                                     grant.
              #2          250,000            (a)     Vest ratably over 5 years beginning on 9/16/03.            9/16/08
              #3          250,000        $ 12.70     Vest in full on 7/2/99.                                     7/2/08
                         ----------     --------
            Total        1,000,000
                         ==========
</TABLE>


       (a) Exercise price is equal to the average closing price of the Company's
           common stock on the NASDAQ National Market for the thirty trading
           days preceding September 16, 2003.

       The fair value of the warrants was determined using the Black-Scholes 
       pricing model, assuming a risk-free rate of 4.77%, a volatility factor 
       of .66 and expected terms as noted in the above table. In accordance 
       with the Financial Accounting Standards Board's Emerging Issues Task 
       Force Issue No. 96-18 "Accounting for Equity Instruments that are 
       Issued To Other Than Employees for Acquiring or in Connection With 
       Selling Goods or Services" (EITF 96-18), the Company measures the fair 
       value of the securities on the measurement date. The measurement date 
       is the earlier of the date on which the other party's performance is 
       completed or the date of a performance commitment, as defined. The 
       fair value of each warrant is capitalized and amortized to royalty 
       expense when the related product is released and the related revenue 
       is recognized. During 1999, $387,620 was amortized and included in 
       royalty expense relating to warrants. No amortization was recognized 
       in 1998.

       PRO FORMA INFORMATION

       The Company has elected to follow APB Opinion No. 25, "Accounting for
       Stock Issued to Employees," in accounting for its employee stock options.
       Under APB No. 25, if the exercise price of the Company's employee stock
       options equals the market price of the underlying stock on the date of
       grant, no compensation expense is recognized in the Company's financial
       statements.

                                    F-18


<PAGE>

       Pro forma information regarding net income (loss) and net income (loss)
       per share is required by SFAS No. 123. This information is required to be
       determined as if the Company had accounted for its employee stock options
       (including shares issued under the Purchase Plan and Director Warrant
       Plan, collectively called "options") granted during fiscal 1999, 1998 and
       1997 under the fair value method of that statement. The fair value of
       options granted in the years ended March 31, 1999, 1998 and 1997 reported
       below has been estimated at the date of grant using a Black-Scholes
       option pricing model with the following weighted average assumptions:


<TABLE>
<CAPTION>

                                               Incentive Plan           Purchase Plan           Director Warrant Plan
                                          ----------------------    -----------------------    ----------------------
                                           1999    1998     1997     1999     1998     1997     1999     1998    1997
                                          -----   -----    -----    -----    -----    -----    -----    -----   -----
       <S>                                <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>     <C>
       Expected life (in years)            1.5     3.0      2.2      0.5      0.5      0.5      0.5        -      -
       Risk free interest rate            4.77%   5.62%    6.45%    4.77%    5.62%    6.45%    4.77%       -      -
       Volatility                          .66     .63      .60      .66      .71      .60      .66        -      -
       Dividend yield                        -       -        -        -        -        -        -        -      -

</TABLE>


       The Black-Scholes option valuation model was developed for use in
       estimating the fair value of traded options that have no vesting
       restrictions and are fully transferable. In addition, option valuation
       models require the input of highly subjective assumptions, including the
       expected stock price volatility. Because the Company's options have
       characteristics significantly different from those of traded options, and
       because changes in the subjective input assumptions can materially affect
       the fair value estimate, in the opinion of management, the existing
       models do not necessarily provide a reliable single measure of the fair
       value of its options. The weighted average estimated fair value of Plan
       shares granted during the years ended March 31, 1999, 1998 and 1997 was
       $11.12, $13.47 and $12.72 per share, respectively. The weighted average
       estimated fair value of Employee Stock Purchase Plan shares granted
       during the year ended March 31, 1999 and 1998 were $2.85 and $2.65,
       respectively. No Director Warrants were granted during the year ended
       March 31, 1999.

       For purposes of pro forma disclosures, the estimated fair value of the
       options is amortized to expense over the options' vesting period. The
       Company's pro forma information follows (amounts in thousands except for
       net income (loss) per share information):


<TABLE>
<CAPTION>

                                                                                 Year ended March 31,
                                                                 ------------------------------------------------
                                                                     1999              1998                1997
                                                                 ----------         ----------          ---------
                                                                                     Restated            Restated
                                                                                    ----------          ---------
          <S>                                                    <C>                <C>                 <C>
          Pro forma net income (loss)                            $   1,111          $  (2,253)          $     633
          Pro forma basic net income (loss) per share            $    0.05          $   (0.11)          $    0.03
          Pro forma diluted net income (loss) per share          $    0.05          $   (0.11)          $    0.03

</TABLE>


       The effects on pro forma disclosures of applying SFAS No. 123 are not
       likely to be representative of the effects on pro forma disclosures of
       future years. Because SFAS No. 123 is applicable only to options granted
       during fiscal 1996 through 1999, the pro forma effect will not be fully
       reflected until the fiscal year ended March 31, 2000.

                                    F-19


<PAGE>


11.    SUPPLEMENTAL CASH FLOW INFORMATION

       Non-cash activities and supplemental cash flow information for the fiscal
       years ended March 31, 1999, 1998 and 1997 is as follows (amounts in
       thousands):


<TABLE>
<CAPTION>

                                                                             For the years ended March 31,
                                                                       --------------------------------------
                                                                                               Restated
                                                                                       ----------------------
                                                                         1999            1998            1997
                                                                       ------          ------          ------
<S>                                                                    <C>             <C>             <C>
Non-cash activities:
     Stock and warrants to acquire common stock issued in
         exchange for licensing rights                                 $3,368          $1,214          $  822
     Tax benefit derived from net operating loss carryforward           2,430               -           6,634
         utilization
     Tax benefit attributable to stock option exercises                 1,059           1,247             736
     Subordinated loan stock debentures converted to common
         stock in pooling transaction                                       -           3,216               -
     Redeemable preferred stock converted to common stock                   -           1,286               -
         in pooling transaction
     Convertible preferred stock converted to common stock                  -             214               -
         in pooling transaction
     Stock issued to effect business combination                            -             136               -
     Conversion of notes payable to common stock                        4,500               -             259


Supplemental cash flow information:
     Cash paid for income taxes                                        $2,814          $2,174          $  473
     Cash paid for interest                                             5,513             675               -

</TABLE>


                                    F-20

<PAGE>

12.  QUARTERLY FINANCIAL AND MARKET INFORMATION (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                  Quarter Ended
                                                              -----------------------------------------------------
                                                                                                                            Year
     (Amounts in thousands, except per share data)            June 30        Sept 30         Dec 31         Mar 31          Ended
                                                              -------        -------        --------       --------       --------
     <S>                                                      <C>            <C>            <C>            <C>            <C>
       Fiscal 1999 (quarter ended June 30 restated):
            Net revenues                                      $61,531        $66,182        $193,537       $115,235       $436,485
            Operating income (loss)                            (5,637)        (2,783)         26,328          9,337         27,245
            Net income (loss)                                  (3,744)        (2,234)         16,022          5,210         15,254
            Basic income (loss) per share                     $ (0.17)       $ (0.10)       $   0.72       $   0.23       $   0.69
            Diluted net income (loss) per share               $ (0.17)       $ (0.10)       $   0.64       $   0.22       $   0.66

            Common stock price per share
                High                                          $ 11.62        $ 13.75        $  14.87       $  13.81       $  14.87
                Low                                           $  9.37        $  9.37        $   8.75       $   9.75       $   8.75

       Fiscal 1998 (restated):
            Net revenues                                      $38,560        $65,788        $139,587       $ 68,123       $312,058
            Operating income (loss)                            (9,383)         3,591          13,742          1,536          9,486
            Net income (loss)                                  (5,925)         2,041           8,334            689          5,139
            Basic income (loss) per share                     $ (0.28)       $  0.09        $   0.39       $   0.03       $   0.24
            Diluted net income (loss) per share               $ (0.28)       $  0.09        $   0.36       $   0.03       $   0.23

            Common stock price per share
                High                                          $ 14.75        $ 15.50        $  18.62       $  17.87       $  18.62
                Low                                           $  9.87        $ 11.00        $  13.00       $   9.50       $   9.50

</TABLE>


13.    SUBSEQUENT EVENTS -- UNAUDITED

       BANK LINE OF CREDIT

       On June 22, 1999, the Company replaced the Prior Facility with a $125
       million revolving credit facility and term loan (the "New Facility") with
       a new group of banks that provides the Company with the ability to borrow
       up to $100 million and issue letters of credit up to $80 million against
       eligible accounts receivable and inventory. The $25 million term loan
       portion of the New Facility was used to acquire Expert and pay costs
       related to such acquisition and the securing of the new facility. The
       term loan has a three year term with principal amortization on a straight
       line quarterly basis beginning December 31, 1999 and a borrowing rate of
       the banks' base rate (which is generally equivalent to the published
       prime rate) plus 2.0%, or the LIBOR rate plus 3.0%. The revolving portion
       of the New Facility has a borrowing rate of the banks' base rate plus
       1.75%, or the LIBOR rate plus 2.75%. The Company pays a commitment fee of
       1/2% based on the unused portion of the line.

       ACQUISITION OF EXPERT SOFTWARE

       On March 3, 1999, the Company announced that it had entered into a merger
       agreement with Expert Software ("Expert"), a developer and distributor
       and value-line interactive leisure products, for $2.65 per share of
       outstanding Expert common stock, or total consideration of approximately
       $20.4 million. On June 21, 1999, Expert's shareholders approved the 
       merger at a special meeting of shareholders and on June 22, 1999, the 
       merger was consummated. Proceeds from the term loan portion of the New 
       Facility were used to pay the merger consideration. The acquisition of 
       Expert will be accounted for using the purchase method of accounting.


                                     F-21

<PAGE>

 
                                                                    SCHEDULE II

                       ACTIVISION, INC. AND SUBSIDIARIES
                VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                            (amounts in thousands)


<TABLE>
<CAPTION>
                   Col. A                           Col. B            Col. C            Col. D            Col. E
                   ------                           ------            ------            ------            ------
                                                  Balance at
                                                 Beginning of                         Deductions      Balance at End
                 Description                        Period          Additions         (Describe)        of Period
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>               <C>             <C>
Year ended March 31, 1999

         Allowance for sales returns,
             price protection and doubtful
             accounts                               $15,582          $53,773          $54,376(A)         $14,979

         Inventory valuation                        $   828          $   828          $   163(B)         $ 1,493

         Deferred tax valuation allowance           $ 8,107          $ 1,239          $ 2,430            $ 6,916

Year ended March 31, 1998 (Restated)

         Allowance for sales returns,
             price protection and doubtful
             accounts                               $ 7,674          $39,437          $31,529(A)         $15,582

         Inventory valuation                        $   471          $ 1,082          $   725(B)         $   828

         Deferred tax valuation allowance           $ 8,107                -                -            $ 8,107

Year ended March 31, 1997 (Restated)

         Allowance for sales returns,
             price protection and doubtful          $ 7,005          $18,878          $18,209(A)         $ 7,674
             accounts

         Inventory valuation                        $   145          $   478          $   152(B)         $   471

         Deferred tax valuation allowance           $14,305          $   436          $ 6,634            $ 8,107

</TABLE>


(A)  Actual write-offs of uncollectible accounts receivable or sales returns and
     price protection.
(B)  Actual write-offs of obsolete inventory, scrap and reduction in carrying
     value of certain portions of inventory.


                                     F-22

<PAGE>

                                 EXHIBIT INDEX


ITEM 14(a).  EXHIBITS.


<TABLE>
<CAPTION>

     Exhibit                                                                                Sequential Page
     Number   Exhibit                                                                            Number
     -------  -------                                                                            ------
     <S>      <C>                                                                           <C>
       3.1    Amended and Restated Articles of Incorporation of Activision,
              Inc., dated October 15, 1992 (incorporated by reference to Exhibit
              4.5 of Amendment No. 1 to the Company's Form S-8, Registration No.
              33-48411 filed on June 1, 1993).

       3.2    Bylaws of Activision, Inc. (incorporated by reference to Exhibit
              4.6 of Amendment No. 1 to the Company's Form S-8, Registration No.
              33-48411 filed on June 1, 1993).

       10.1   Mediagenic 1991 Stock Option and Stock Award Plan, as amended
              (incorporated by reference to Exhibit 4.1 to the Company's
              Registration Statement on Form S-8, Registration No. 33-63638,
              filed on December 8, 1995).

       10.2   Mediagenic 1991 Director Warrant Plan as amended (incorporated by
              reference to Exhibit 28.2 to the Company's Registration Statement
              on Form S-8, Registration No. 33-63638, filed on June 1, 1993).

       10.3   Activision, Inc. Employee Stock Purchase Plan (incorporated by
              reference to Exhibit 4.1 the Company's Form S-8 filed on September
              25, 1996.

       10.4   Activision 1998 Incentive Plan (incorporated by reference to
              Appendix I of the Company's 1998 Proxy Statement).

       10.5   Lease Agreement dated as of December 20, 1996, between the Company
              and Barclay Curci Investment Company (incorporated by reference to
              Exhibit 10.14 of the Company's Form 10-Q for the quarter ended
              December 31, 1996).

       10.6   Share Exchange Agreement dated November 23, 1997, among the
              Company and the holders of all of the issued and outstanding
              capital stock of Combined Distribution (Holdings), Inc.
              (incorporated by reference to Exhibit 10.1 of the Company's Form
              8-K filed December 5, 1997).

       10.7   Purchase Agreement dated as of December 16, 1997, among the
              Company and Credit Suisse First Boston Corporation, Piper Jaffray,
              Inc. and UBS Securities LLC (the "Initial Purchasers")
              (incorporated by reference to Exhibit 10.1 of the Company's Form
              8-K filed December 23, 1997).

       10.8   Registration Rights Agreement dated as of December 16, 1997, among
              the Company and the Initial Purchasers (incorporated by reference
              to Exhibit 10.2 of the Company's Form 8-K filed December 23,
              1997).

       10.9   Indenture dated as of December 22, 1997, between the Company and
              State Street Bank and Trust Company of California, N.A., as
              Trustee (incorporated by reference to Exhibit 10.3 of the
              Company's Form 8-K filed December 23, 1997).

       10.10  Employment agreement dated January 12, 1999 between the Company
              and Robert A. Kotick.

       10.11  Employment agreement dated January 12, 1999 between the Company
              and Brian G. Kelly.

       10.12  Employment agreement dated October 19, 1998 between the Company
              and Ronald Doornink.


                                     F-23


<PAGE>

     <S>      <C>                                                                           <C>
       10.13  Employment agreement dated March 4, 1999 between the Company and
              Lawrence Goldberg.

       10.14  Employment agreement dated March 4, 1999 between the Company and
              Barry J. Plaga.

       10.15  Employment agreement dated April 1, 1998 between the Company and
              Mitchell Lasky.

       10.16  Employment agreement dated April 1, 1998 between the Company and
              Ronald Scott.

       10.17  Service Agreement dated November 24, 1997 between Combined
              Distribution (Holdings) Limited and Richard Andrew Steele.

       10.18  Employment Agreement dated September 1, 1997 between the Company
              and Robert Dewar.

       10.19  Articles of Merger dated June 30, 1998 between S.B.F. Acquisition
              Corp., a wholly owned subsidiary of the Company and S.B.F. 
              Services Limited, Head Games Publishing, (incorporated by 
              reference to Exhibit 2.1 of the Company's Form 8-K, filed on
              July 2, 1998).

       10.20  Share Exchange Agreement dated September 29, 1998 by and between
              the Company and Mr. Frank d'Oleire, Mrs. Christa d'Oleire, Ms.
              Fiona d'Oleire, Ms. Alexa d'Oleire acting as Dr. d'Oleire
              Beteiligungsgesellschaft bR, Mr. Martinus J.C. Bubbert, and Mr.
              Dennis W. Buis (incorporated by reference to Exhibit 10.1 of the
              Company's Form 8-K, filed on October 8, 1998).

       10.21  Amended and Restated Agreement and Plan of Merger dated April 19,
              1999 by and among the Company, Expert Acquisition Corp. and Expert
              Software, Inc. (incorporated by reference to Exhibit 2.1 of the
              Form 8-K of Expert Software, Inc., filed April 29, 1999).

       10.22  Credit Agreement dated as of June 21, 1999 among the Company, Head
              Games Publishing, Inc., Expert Software, Inc., various lenders,
              PNC Bank, National Association, as issuing bank, administrative
              agent and collateral agent for such lenders, and Credit Suisse
              First Boston, as syndication agent.

       21.    Principal subsidiaries of the Company.

       23.    Independent Auditors' Consent.

       27.1   Fiscal 1996 Year to Date financial Data Schedule.

       27.2   Fiscal 1997 Year to Date Financial Data Schedule.

       27.3   Fiscal 1998 Year to Date Financial Data Schedule.

       27.4   Fiscal 1999 Year to Date Financial Data Schedule.
</TABLE>


(b)    REPORTS ON FORM 8-K.  The following reports on Form 8-K have been filed
       by the Company during the last quarter of the fiscal year ended March 31,
       1999:

       1.1    Form 8-K dated March 10, 1999, containing items 5 and 7.


                                     F-24





<PAGE>

                                   EXHIBIT 10.10


                                 EMPLOYMENT AGREEMENT

          Employment Agreement, dated as of January 12, 1999, by and between
ACTIVISION, INC.., a Delaware corporation with its principal offices at 3100
Ocean Park Boulevard, Santa Monica, CA  90405 (the "COMPANY"), and ROBERT A.
KOTICK (the "EXECUTIVE").

                                     RECITALS:

     WHEREAS, the Board of Directors of the Company (the "BOARD") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive by
providing him with the compensation and benefit arrangements contained herein;

     WHEREAS, the Board approved the execution and delivery of this Agreement by
the Company at a meeting of the Board held on January 12, 1999;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     1.   POSITION AND DUTIES.

          (a)  The Company agrees to continue to employ the Executive, and 
the Executive agrees to continue to be employed, as Chairman and Chief 
Executive Officer of the Company, subject to the supervision of, and 
reporting only to, the Board.
  The Executive shall have such senior executive 
powers, duties, authorities and  responsibilities as are consistent with the 
Executive's position and title and as have historically been performed by 
Executive, including acting as co-chairman of any meeting of the Board, 
supervising financing, acquisitions and similar major strategic transactions 
and strategic planning for the Company consistent with his title and 
position, supervising the President and Chief Operating Officer of the 
Company and managing all non-operating activities of the Company, including 
corporate governance, organizational structure, acquisitions and financing, 
senior executive compensation, stock and stock option issuances and stock 
option plan management. At all times during the period of Executive's 
employment, the Executive shall, unless he otherwise elects, be nominated for 
election by the shareholders of the Company to the Board.

          (b)  During the Employment Period (as defined in Section 2 below) and
excluding any periods of vacation, the Executive agrees to devote such time,
attention and efforts to the business and affairs of the Company as may be
necessary to discharge the duties and responsibilities assigned to the Executive
hereunder and to use the Executive's reasonable best 


<PAGE>

efforts to perform faithfully and efficiently such duties and responsibilities.

          (c)  It shall not be a violation of this Agreement for the Executive
to engage in any activity which is, in the good faith opinion of the Executive,
not inconsistent with the Company's interests and prospects, including, without
limitation, (a) serving on civic or charitable boards or committees; (b) serving
as an officer or director of any Company that is not in a Competitive Business
(as defined herein); (c) delivering lectures, fulfilling speaking engagements or
teaching at educational institutions; (d) managing personal investments; and (e)
attending conferences conducted by business organizations; provided, however,
that such activity does not significantly interfere with the performance of
Executive's duties and responsibilities hereunder. It is expressly understood
and agreed that to the extent that any activity has been conducted by the
Executive prior to the date of this Agreement, the continued conduct of such
activity (or the conduct of an activity similar in nature and scope thereto)
during the Employment Period shall be deemed not to interfere with the
performance of the Executive's duties and responsibilities to the Company and
shall not constitute a violation of this Agreement.

          (d)  Except for periodic travel assignments, the Executive shall not,
without his consent, be required to perform services for the Company at any
place other than the principal place of the Company's business which shall at
all times, unless the Executive otherwise consents, be within a 20 mile radius
of the Company's current principal place of business. Notwithstanding anything
herein to the contrary, the Executive may, at his sole discretion and upon prior
written notice to the Board, relocate at any time to New York City, New York in
connection with the establishment by the Company of executive offices in such
city.

     2.   EMPLOYMENT PERIOD.  The employment of the Executive under the terms of
this Agreement shall become effective on the date hereof and terminate on March
31, 2004 (the "EMPLOYMENT PERIOD").  Notwithstanding anything contained herein
to the contrary, the Executive's employment pursuant to the terms of this
Agreement is subject to termination pursuant to Section 5 below.

     3.   COMPENSATION.  The Executive shall receive the following compensation
(the Compensation") for his services hereunder:

          (a)  BASE SALARY.  The Company shall pay to the Executive a base
salary ("Base Salary") in respect of each fiscal year of the Company or portion
thereof during the Employment Period.  Commencing on January 12, 1999, the
initial Base Salary for the fiscal year ending March 31, 1999 shall be $297,500.
Commencing on April 1, 1999, the Base Salary for the fiscal year ending March
31, 2000 shall be automatically increased to $350,000.  Thereafter, on April 1
of each year of the Employment Period, beginning on April 1, 2000, the Base
Salary shall automatically increase to an amount equal to one hundred ten (110%)
percent of the Base Salary for the prior fiscal year.  The Company may withhold
from any amounts payable under this Agreement all applicable tax, Social
Security and other legally required withholding pursuant to any law or
regulation ("WITHHOLDING").  The Base Salary shall be paid in accordance with
the customary payroll practices of the Company at regular intervals, but in no


<PAGE>

event less frequently than every month, as the Company may establish from time
to time for senior executive employees of the Company.  The Board shall conduct
an annual performance appraisal and salary review on behalf of the Executive and
may adjust the Base Salary for any succeeding fiscal year, but never below the
Base Salary that would have been in effect during such succeeding fiscal year in
accordance with this Section 3(a).  Any period of less than a full fiscal year
which the Base Salary is calculated shall be pro rata.

          (b)  ANNUAL BONUS.  The Executive shall be entitled to receive an
annual bonus for each fiscal year (the "ANNUAL BONUS"), beginning with the
fiscal year ending March 31, 2000, based upon the Company achieving mutually
agreed upon financial and business objectives for the fiscal year with respect
to which the Annual Bonus accrues.  Such financial and business objectives for
each fiscal year shall be (i) agreed to by the Executive and the Board not later
than fifteen (15) days prior to the beginning of each fiscal year and shall be
(ii) made in accordance with Section 11 of the Company's 1998 Incentive Plan.
The Company shall pay each Annual Bonus to the Executive no later than thirty
(30) days after the completion of the Company's audited consolidated financial
statements by the Company's auditors for the subject fiscal year.  Each Annual
Bonus payment shall be subject to Withholding.  Along with the payment of each
Annual Bonus, the Company shall also deliver to the Executive a written
statement setting forth the basis of its calculation of such Annual Bonus.  The
Executive and the Executive's representatives shall have the right, at the
Executive's cost, to inspect the records of the Company with respect to the
calculation of any such Annual Bonus, to make copies of said records utilizing
the Company's facilities without charge, and to have free and full access
thereto upon reasonable notice during the normal business hours of the Company.
Any period of less than a full fiscal year which the Annual Bonus is calculated
shall be pro rata.  The Annual Bonus is intended to qualify as a Performance
Award under Section 11 of the Company's 1998 Incentive Plan and shall be subject
to the conditions and limitations of such section.

          (c)  PERFORMANCE BONUS.  The Board, in its sole discretion, may award
to the Executive a performance bonus at any time in such amount and in such form
as the Board may determine (the "PERFORMANCE BONUS"), after taking into
consideration other compensation paid or payable to the Executive under this
Agreement, as well as the financial and non-financial progress of the business
of the Company and the contributions of the Executive toward that progress.  Any
Performance Bonus shall be subject to Withholding.  Any period of less than a
full fiscal year which the Performance Bonus is calculated shall be pro rata.
With respect to the fiscal year ending March 31, 1999, the Company shall award
to the Executive a Performance Bonus based upon the achievement by the Company
of its strategic and financial objectives as heretofore presented to the Board.

     4.   BENEFITS.

          (a)  MEDICAL, ETC.  The Executive shall be entitled to such medical
and other benefits, including hospitalization, disability, life and health
insurance, to the extent offered by the Company, as are customarily made
available to senior executive officers of the Company and upon the same terms.
The Executive shall also be entitled to receive those benefits and 

                                    -3-


<PAGE>

privileges that the Company currently, and may at any time in the future, 
provide for its executive officers upon the same terms.

          (b)  EXPENSES.  The Executive shall be reimbursed by the Company for
all reasonable travel, entertainment, conference expenses, organization dues and
other expenses incurred by the Executive in connection with the performance of
Executive's services under this Agreement, subject to the Company's policies in
effect from time to time with respect to such expenses, including the
requirements with respect to reporting and documentation of such expenses.

          (c)  OFFICE AND SUPPORT STAFF.  During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, including personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company at any time during the 90-day period immediately
preceding the date of this Agreement, or, if more favorable to the Executive, as
provided at any time after such date to Executive or other senior executive
officers of the Company.

          (d)  VACATION.  The Executive shall be entitled to four (4) weeks paid
vacation each fiscal year during the Employment Period, in addition to regular
paid holidays provided to all employees of the Company; provided that unused
vacation time shall not be carried over to any subsequent year.   Vacation time
shall be taken as determined by the Executive in his reasonable and good faith
discretion; provided that such time taken is mutually convenient to the Company
and not disruptive to the Company's activities or the Executive's
responsibilities.

          (e)  LIFE INSURANCE.  The Company shall purchase and maintain a
renewable term insurance policy or policies for a period of ten (10) years
commencing as soon as practicable after the date hereof covering the life of the
Executive in an amount of $3,000,000 naming the Executive's estate or any other
person designated by the Executive as beneficiary of such policy or policies.
The Executive has the right to require the Company at any time to prepay all of
the premiums associated with such policy or policies so as to ensure such
policies remain in force for the full ten (10) year period.

     5.   TERMINATION.  The employment by the Company of the Executive shall be
terminated as provided in this Section 5:

          (a)  DEATH.  Upon the Executive's  death ("DEATH").

          (b)  DISABILITY.

               (i)  The Company or the Executive, upon not less than thirty (30)
days written notice to the other party ("DISABILITY NOTICE"), may terminate the
employment by the Company of the Executive if the Executive has been unable, by
reason of physical or mental disability, to render, for 120 successive days or
for shorter periods aggregating 210 days or more 

                                    -4-


<PAGE>

in any twelve month period, services of the character contemplated by this 
Agreement and will be unable to resume providing such services within a 
reasonable period of time by reason of such disability (such circumstances 
being referred to as "DISABILITY").

               (ii) The determination of whether the Executive has become
disabled within the meaning of this Section 5(b) shall be made (A) in the case
of a termination of employment by the Company, by a medical doctor selected by
the Company, or (B) in the case of a termination of employment by the Executive,
by Executive's medical doctor.  In the event the Company gives a notice of
termination of employment under this Section 5(b), the Executive or his
representative may at any time prior to the effective date of termination
contest the termination and cause a determination of Disability to be made by
Executive's medical doctor.  In the event the Executive gives a notice of
termination of employment under this Section 5(b), the Company may at any time
prior to the effective date of termination contest the termination and cause a
determination of Disability to be made by a medical doctor selected by the
Company.  In either case, if such medical doctors do not agree with regard to
the determination of Disability, they shall mutually choose a third medical
doctor to examine the Executive, and the Disability determination of such third
medical doctor shall be binding upon both the Company and the Executive.

          (c)  WITHOUT CAUSE.  By the Company, for any reason other than Death,
Cause or Disability, but only upon a vote of a majority of the entire Board at a
meeting duly called and held at which Executive shall have the right to be
present and be heard.

          (d)  CAUSE.  By the Company, for Cause, but only upon a vote of a
majority of the entire Board at a meeting duly called and held at which
Executive shall have the right to be present and be heard.  The term "Cause"
means (i) any act of fraud or embezzlement in respect of the Company or its
funds, properties or assets; or (ii) conviction of the Executive of a felony
relating to his actions as an executive of the Company under the laws of the
United States or any state thereof (provided that all rights of appeal have been
exercised or have lapsed) unless such acts were committed in the reasonable,
good faith belief that his actions were in the best interests of the Company and
its stockholders and would not violate criminal law; or (iii) willful misconduct
or gross negligence by the Executive in connection with the performance of his
duties that has caused or is highly likely to cause severe harm to the Company;
or (iv) intentional dishonesty by the Executive in the performance of his duties
hereunder which has a material adverse effect on the Company.

          (e)  RESIGNATION.  By the Executive, other than for Good Reason, as
hereinafter defined ("RESIGNATION").

          (f)  GOOD REASON.  By the Executive, for Good Reason.  As used herein,
the term "GOOD REASON" means that, without the Executive's prior written
consent, there shall have occurred: (i) a reduction in the Executive's Base
Salary other than the dollar amount of the Annual Bonus or the dollar amount of
the Performance Bonus; (ii) a material reduction in the  Executive's benefits;
(iii) the assignment to the Executive of any duties inconsistent with the

                                     -5-


<PAGE>

Executive's position, duties, responsibilities, authority or status with the
Company or a change in Executive's reporting responsibilities, titles or offices
as in effect prior to such assignment or change; (iv) the Company's material
breach or failure to perform, when due, any of its obligations under this
Agreement, unless cured within 10 days after receipt of written notice by the
Company from the Executive specifically identifying the manner in which the
Executive believes the Company has materially breached such obligations; (v) any
purported termination of Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the applicable requirements with respect
to Section 6 of this Agreement; or (vi) a determination by the Executive, made
in good faith, that the Executive is not able to discharge his duties
effectively by reason of directives from the Board, a Change of Control or
similar circumstances.

     6.   NOTICE AND DATE OF TERMINATION.  Any termination of the Executive's
employment under Section 5, other than by reason of Death, shall be communicated
by written Notice of Termination from the terminating party to the other party
hereto.  For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.  The effective date of any termination of the
Executive's employment (the "DATE OF TERMINATION") shall be:

          (a)  if the Executive's employment is terminated by Death, the date of
the Executive's death;

          (b)  if the Executive's employment is terminated by the Company
Without Cause or by the Executive for Good Reason, 30 days after Notice of
Termination is given;

          (c)  if the Executive's employment is terminated by reason of
Disability, (i) 30 days after the Disability Notice or (ii) upon a final
determination, pursuant to Section 5(b)(ii) above, as the case may be, whichever
is later; provided that the Executive shall not have returned to the full-time
performance of his duties during such period; and

          (d)  if the Executive's employment is terminated on account of Cause
or Resignation, the date specified in the Notice of Termination, which shall be
no less than ten (10) nor more than 30 days after such Notice of Termination is
given.

     7.   COMPENSATION UPON TERMINATION.  The Executive shall be entitled to the
following Compensation from the Company upon termination of employment pursuant
to Section 5 in full discharge of the Company's obligations (each a "TERMINATION
COMPENSATION"):

          (a)  COMPENSATION UPON DEATH.  In the event of termination of the
Executive's employment upon Death, the Executive's  heirs, successors or legal
representatives shall be entitled to receive: (i) the Base Salary through the
Date of Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any
prior fiscal year; (iii) pro rata Annual Bonus for the current fiscal year; (iv)
an amount equal to 300% of the dollar amount of the Base Salary paid or payable
to the Executive hereunder for the Company's most recent fiscal year immediately
prior 

                                     -6-


<PAGE>

to the Executive's date of death; (v) reimbursement due to Executive pursuant 
to Section 4(b); (vi) the Executive's then current spouse and minor children, 
if any, shall receive the same level of health/medical insurance or coverage 
that was provided to Executive immediately prior to the Executive's death for 
a two year period, with the cost of such continued insurance or coverage 
being borne by the Company.  All such payments shall be in addition to any 
payments the Executive's widow, beneficiaries or estate may be entitled to 
receive pursuant to any pension or employee benefit plan or life insurance 
policy maintained by the Company.  In addition, all options granted to the 
Executive to purchase shares of common stock of the Company, whether granted 
pursuant to this Agreement or granted at any time prior hereto or hereafter, 
then held by the Executive shall immediately vest and become exercisable 
until the later of the fifth anniversary of the Date of Termination or 
January 12, 2009.

          (b)  COMPENSATION UPON DISABILITY.  In the event of termination of the
Executive's employment for Disability, the Executive shall be entitled to
receive: (i) the Base Salary through the Date of Termination; (ii) any unpaid
Annual Bonus and Performance Bonus for any prior fiscal year; (iii) the pro rata
portion of the Annual Bonus and Performance Bonus for the fiscal year in which
the Date of Termination occurs; (iv) reimbursement due to Executive pursuant to
Section 4(b); (v) an amount equal to three hundred (300%) percent of the average
Base Salary paid or payable to the Executive hereunder for the Company's three
most recent fiscal years immediately prior to the Executive's disability
termination less the amount, if any, of any payments received by the Executive
from any Company-funded disability insurance plan, payable in installments at
least as frequent as monthly, subject to Withholding for the longer of two (2)
years or the balance of the Employment Period; and (vi) the Executive and his
then current spouse and minor children, if any, shall receive the same level of
health/medical insurance or coverage provided immediately prior to such
disability termination for the longer of two (2) years or the balance of the
Employment Period, with the cost of such continued insurance or coverage being
borne by the Company.  In addition, all options granted to the Executive to
purchase shares of common stock of the Company, whether granted pursuant to this
Agreement or granted at any time prior hereto or hereafter, then held by the
Executive shall immediately vest and become exercisable until the later of the
fifth anniversary of the Date of Termination or January 12, 2009.

          (c)  COMPENSATION UPON RESIGNATION OR TERMINATION FOR CAUSE.  In the
event of termination of the Executive's employment upon Resignation or
termination for Cause, the Executive shall be entitled to receive the; and (iii)
reimbursement due to Executive pursuant to Section 4(b).

          (d)  COMPENSATION UPON TERMINATION BY EXECUTIVE FOR GOOD REASON OR BY
THE COMPANY WITHOUT CAUSE.  In the event the Executive's employment is
terminated by the Executive for Good Reason or by the Company Without Cause,
then the Executive shall be entitled to receive: (i) the Base Salary through the
Date of Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any
prior fiscal year; (iii) the pro rata portion of the Annual Bonus and
Performance Bonus for the fiscal year in which the Date of Termination occurs;
(iv) reimbursement due to Executive pursuant to Section 4(b); (v) an amount (the
"SEVERANCE 

                                     -7-


<PAGE>

PAYMENT") equal to the dollar amount of the Base Salary and Annual Bonus paid 
or payable to the Executive hereunder for the Company's most recent fiscal 
year immediately prior to the Executive's termination multiplied by the 
greater of (A) three, or (B) the number of months remaining in the term of 
this Agreement had the Executive's employment not been terminated, divided by 
twelve; and (vi) the Executive and his then current spouse and minor 
children, if any, shall receive the same level of health/medical insurance or 
coverage provided immediately prior to such termination for the longer of two 
(2) years or the balance of the Employment Period, with the cost of such 
continued insurance or coverage being borne by the Company; provided, 
however, that the Company shall not be required to provide any such coverage 
after such time as Executive becomes entitled to receive (without regard to 
any individual waivers of coverage or other similar arrangements) comparable 
health/medical benefits of the same type from another employer or recipient 
of Executive's services.  In addition, all options granted to the Executive 
to purchase shares of common stock of the Company, whether granted pursuant 
to this Agreement or granted at any time prior hereto or hereafter, then held 
by the Executive shall immediately vest and become exercisable until the 
later of the fifth anniversary of the Date of Termination or January 12, 2009.

          (e)  The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 or in Section 9(c) by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 7 or in Section 9(c) be reduced by any compensation earned
by him as the result of employment by another employer or by retirement benefits
after the Date of Termination, or otherwise, except as specifically provided in
this Section 7 or in Section 9(c).

          (f)  All amount to be paid to the Executive hereunder shall be paid to
the Executive in a lump sum no later than ten days following the Date of
Termination.

     8.   GRANT OF STOCK OPTION.  In addition to the Compensation described in
Section 3 hereof, the Company shall, on or before March 31, 1999, enter into a
Stock Option Agreement with the Executive granting the Executive options (the
"OPTIONS") to purchase 1,000,000 shares of common stock of the Company (the
"SHARES") at the market price on the date of the grant.

     9.   CHANGE OF CONTROL.  In the event that the Executive is an employee of
the Company at the moment immediately prior to a Change of Control (as defined
herein), the Executive shall be entitled to receive all benefits described in
this Section 9.

          (a)  For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to occur upon the occurrence of any of the following events:

               (i)   any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") and the rules and regulations promulgated thereunder), other
than any "person" or "group" with which the Executive is an Affiliate, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of more than 15% of the total outstanding

                                     -8-


<PAGE>

voting stock of the Company;

               (ii)  the individuals who constitute the Board as of the date of
this Agreement (the "INCUMBENT BOARD") cease to constitute a majority of the
Board, for any reason(s) other than (A) the voluntary resignation of one or more
Board members; (B) the removal of one or more directors by the Company's
shareholders for good cause; provided, however (1) that if the nomination or
election of any new director of the Company was approved by a majority of the
Incumbent Board, such new director shall be deemed a member of the Incumbent
Board and (2) that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened "ELECTION CONTEST" (as described in Rule 14a-11 promulgated
under the Securities Exchange Act of 1934, as amended) or as a result of a
solicitation of proxies or consents by or on behalf of any "person" or "group"
identified in clause (a)(i) above; or

               (iii) the Company consolidates with, or merges with or into
another person or entity or conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any person or entity, or any person or
entity consolidates with or merges with or into the Company; provided, however
that (A) the Executive is not an Affiliate of such person or entity and (B) any
such transaction shall not constitute a Change of Control if the shareholders of
the Company immediately before such transaction own, directly or indirectly,
immediately following such transaction in excess of sixty-five percent (65%) of
the combined voting power of the outstanding voting securities of the
corporation or other person or entity resulting from such transaction in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such transaction.

               (iv)  For purposes of this subsection, the term "AFFILIATE"
means, with respect to any individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind (each a "PERSON"), any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person.  For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.

          (b)  In the event that the Executive is an employee of the Company at
the moment immediately prior to a Change of Control:

               (i)   the Company shall pay ("CHANGE OF CONTROL COMPENSATION")
to the Executive additional compensation in the form of cash equal to, on the
date of a Change of Control and with respect to the Options and all other
options to acquire shares of common stock of the Company granted to the
Executive prior to the date of the Change of Control (whether or not all such
options have vested or are exercisable on such date) (collectively, the Options
and 

                                     -9-


<PAGE>

such other options are referred to as "OUTSTANDING OPTIONS"), the product of 
(x) the number of shares of common stock of the Company underlying each of 
the Outstanding Options and (y) the amount, if any, that the exercise price 
of any Outstanding Options or the Closing Share Value (as defined below), 
whichever is less, exceeds the Initial Share Value (as defined below);

               (ii)  with respect to each Outstanding Option, in the event that
the Closing Share Value is greater than the exercise price of any such
Outstanding Options, then the Executive shall have the right to, separately with
respect to each of the Outstanding Options, to either (A) retain the Outstanding
Options, (B) exercise the Outstanding Options, or (C) forfeit the Outstanding
Options and receive, in exchange therefor, a cash payment equal to the number of
shares of common stock of the Company underlying the Outstanding Options
multiplied by the amount that the Closing Share Value exceeds the exercise price
of the Outstanding Options; and

               (iii) upon the occurrence of a Change of Control, all
Outstanding Options shall immediately vest and become exercisable for a period
of ten (10) years commencing on the Date of Termination without regard to
Executive's continued employment with the Company pursuant to this Agreement and
without regard to the terms of any option agreement or option certificate
applicable to any Outstanding Options.

          (c)  In the event that the Executive's employment is terminated by the
Executive upon Resignation during the six month period following the three month
anniversary of the effective date of the Change of Control, or by the Executive
for Good Reason, or by the Company Without Cause, at any time during the nine
month period following the effective date of the Change of Control, the
Executive shall receive, in addition to the amounts payable pursuant to Section
7(c), (i) the pro rata portion of the Annual Bonus and Performance Bonus for the
fiscal year in which the Change of Control occurs, computed through the Date of
Termination; (ii) an amount equal to the dollar amount of the Base Salary and
Annual Bonus paid or payable to the Executive hereunder for the Company's most
recent fiscal year immediately prior to the Executive's termination multiplied
by the greater of (A) five, or (B) the number of months remaining in the term of
this Agreement had the Executive's employment not been terminated, divided by
twelve; and (iii) the Executive and his then current spouse and minor children,
if any, shall receive the same level of health/medical insurance or coverage
provided immediately prior to such Change of Control for the longer of two (2)
years or the balance of the Employment Period, with the cost of such continued
insurance or coverage being borne by the Company; provided, however, that the
Company shall in not be required to provide any such coverage after such time as
Executive becomes entitled to receive (without regard to any individual waivers
of coverage or other similar arrangements) comparable health/medical benefits of
the same type from another employer or recipient of Executive's services.  All
amounts to be paid to the Executive pursuant to this Section (c) shall be paid
to the Executive not later than ten days following the Date of Termination.

          (d)  If in the opinion of tax counsel selected by the Executive and
reasonably acceptable to the Company, the Executive has or will receive any
compensation or recognize any income (whether or not pursuant to this Agreement
or any plan or other arrangement of the Company and whether or not the
Executive's employment with the Company has terminated) 

                                    -10-


<PAGE>

which constitute an "excess parachute payment" within the meaning of Section 
280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code") (or 
for which a tax is otherwise payable under Section 4999 of the Code), then 
the Company shall pay the Executive an additional amount (the "ADDITIONAL 
AMOUNT") equal to the sum of (i) all taxes payable by the Executive under 
Section 4999 of the Code with respect to (A) all such excess parachute 
payments (or otherwise) and (B) the Additional Amount, plus (ii) all federal, 
state and local income taxes payable by Executive with respect to the 
Additional Amount.  The amounts payable pursuant to this Section 9(d) shall 
be paid by the Company to the Executive concurrently with the payment of such 
compensation or recognition of income giving rise to the Company's 
obligations under this Section 9(d).

          (e)  For purposes of this subsection:

               (i)   "INITIAL SHARE VALUE" shall mean the average of the
Closing Prices of the shares of common stock of the Company for the period
commencing on the 180th day prior to the date of the Change of Control and
ending on the 150th day prior to the date of the Change of Control;

               (ii)  "CLOSING SHARE VALUE" shall mean the Closing Price of the
shares of common stock of the Company on the date of the Change of Control; and

               (iii)  the "CLOSING PRICE" of a share of common stock of the
Company on any date shall mean the last sale price, regular way, or, in case no
such sale takes place on such date, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the such shares are listed or admitted to
trading or, if such shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if such shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making market in the shares as such
person is selected from time to time by the Board or, if there are no
professional market makers making a market in the shares, then the value as
determined in good faith judgement of the Board.

     10.  ADVANCES.  The Company may, upon written consent of the Board, make an
advance to the Executive against any compensation or other amounts to be paid by
the Company to the Executive (an "ADVANCE").  Any amounts due under this
Agreement to the Executive shall, at the election of the Company, be offset by
any then outstanding Advances.  In the event of Executive's termination of
employment, Executive agrees that the Company shall have the right to offset the
amount of any and all outstanding Advance(s) against any compensation or any
other amounts due to the Executive from the Company, and that any remaining
balance of the Advance(s) shall be repaid by the Executive within ninety (90)
days after the termination of Executive's employment by the Company.

                                    -11-


<PAGE>

     11.  NON-COMPETITION AND NON-SOLICITATION.

          (a)  NON-COMPETITION PROHIBITED ACTIVITIES.   During the term of 
his employment hereunder and for two (2) years thereafter (the 
"NON-COMPETITION PERIOD"), the Executive shall not engage (including, without 
limitation, as an officer, director, shareholder, owner, partner, joint 
venturer, member or in a managerial capacity, or as an employee, independent 
contractor, consultant, advisor or sales representative) in any Competitive 
Business (as hereinafter defined) in the Territory (as hereinafter defined).  
For purposes of determining whether the Executive is permitted to be a 
shareholder of a corporation engaged in a Competitive Business, the 
Executive's ownership of less than 5% of the issued and outstanding 
securities of a company whose securities are publicly-traded in any U.S. or 
non-U.S. securities exchanges or quotation system shall be permitted.

          (b)  NON-SOLICITATION PROHIBITED ACTIVITIES.   During the 
Non-Competition Period and in the Territory, the Executive covenants and 
agrees that he shall not solicit, directly or indirectly, any person who is, 
at that time, or who was at any time within three (3) months prior to that 
time, an employee of the Company for the purpose or with the intent of 
enticing such employee away from or out of the employ of the Company.

          (c)  As used herein, the term "COMPETITIVE BUSINESS" shall mean any
business engaged in publishing and distributing video games and entertainment
software for personal computers.

          (d)  As used herein, the term "TERRITORY" shall mean:

               (i)   The following counties in the State of California:
Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El
Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Los
Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey,
Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San
Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo,
Santa Barbara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus,
Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, and Yuba;

               (ii)  Each and every county or other political or geographical
subdivision in the balance of the United States of America and the dependent
territories of the United States of America; and

               (iii) Each and every county or other political or geographical
subdivision in the world.

          (e)  The foregoing prohibitions in subsections (a) and (b) shall 
bind the Executive only so long as the Company pays him the Termination 
Compensation pursuant to Section 7 or the Change of Control Compensation 
pursuant to Section 9 during the Non-

                                    -12-


<PAGE>

Competition Period and otherwise complies with its obligations hereunder.

     12.  CONFIDENTIAL INFORMATION.  The Executive has executed or, if not
previously executed, agrees to execute and be bound by the terms and conditions
of the Company's Employee Proprietary Information Agreement ("PROPRIETARY
INFORMATION AGREEMENT"), attached hereto as Appendix A.

     13.  UNENFORCEABILITY.  If any of the rights or restrictions contained or
provided for in this Agreement shall be deemed by a court of competent
jurisdiction to be unenforceable by reason of the extent, duration or
geographical scope, the parties hereto contemplate that the court shall reduce
such extent, duration, geographical scope and enforce this Agreement in its
reduced form for all purposes in the manner contemplated hereby. Should any of
the provisions of this Agreement require judicial interpretation, it is agreed
that the court interpreting or construing this Agreement shall not apply a
presumption that any provision shall be more strictly construed against one
party by reason of the rule of construction that a document is to be construed
more strictly against the party who itself or through its agents prepared the
same, it being agreed that both parties and their respective agents have
participated in the preparation of this Agreement.

     14.  INJUNCTIVE RELIEF.  The Executive agrees that the restrictions and
covenants contained in Section 11 and in the Proprietary Information Agreement
are necessary for the protection of the Company and any breach thereof will
cause the Company irreparable damages for which there is no adequate remedy at
law.  The Executive further agrees that, in the event of a breach by the
Executive of any of Executive's obligations thereunder, the Company shall have
the absolute right, in addition to any other remedy that might be available to
it, to obtain from any court having jurisdiction, such equitable relief as might
be appropriate, including temporary, interlocutory, preliminary and permanent
decrees or injunctions enjoining any further breach of such provisions.

     15.  INDEMNIFICATION AND ATTORNEYS' FEES.    Subject to applicable laws,
during the Employment Period and thereafter, the Company shall indemnify, hold
harmless and defend the Executive from all damages, claims, losses, and costs
and expenses (including reasonable attorney's fees) arising out of, in
connection with, or relating to all acts or omissions taken or not taken by him
in good faith while performing services for the Company, and shall further
promptly reimburse the Executive for all expenses (including attorney's fees)
incurred in enforcing the benefits of this Agreement.  The Company shall use its
best efforts to continue to maintain, an insurance policy covering the officers
and directors of the Company against claims and/or lawsuits at least as
favorable as such policy that is currently in effect, and the Company shall
cause the Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors during the
Employment Period and for a period of at least six (6) years thereafter.

     16.  MISCELLANEOUS.

          (a)  SEVERABILITY.  If any provision of this Agreement is determined
to be invalid 

                                    -13-


<PAGE>

or unenforceable, it shall not affect the validity or enforceability of any 
of the other remaining provisions hereof.

          (b)  NOTICES.  For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when (i) delivered personally; (ii) sent by facsimile or
other similar electronic device and confirmed; (iii) delivered by courier or
overnight express; or (iv) three business days after being sent by registered or
certified mail, postage prepaid, addressed as follows:

               If to the Company:

               Activision, Inc.
               3100 Ocean Park Boulevard
               Santa Monica, CA  90405
               Attention: General Counsel

               with a copy to:

               Robinson Silverman Pearce Aronsohn & Berman, LLP
               1290 Avenue of the Americas
               New York, NY 10104
               Attention: Kenneth L. Henderson, Esq.

               If to the Executive:

               Robert A. Kotick
               1101 Cove Way
               Beverly Hills, CA 90210

or to such other address as a party may furnish to the other party in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

          (c)  WAIVER.  No waiver by either party hereto of any breach of any
provision of this Agreement shall be deemed a waiver of any preceding or
succeeding breach of such provision or any other provision herein contained.

          (d)  GOVERNING LAW.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
giving effect to the conflict of law principles thereof; provided, however, that
Section 11 of this Agreement shall be governed by, and construed in accordance
with, the laws of the state in which the Executive has his principal office.

          (e)  ENTIRE AGREEMENT.  This Agreement sets forth the entire agreement
of the parties hereto with respect to the subject matter hereof, and is intended
to supersede all prior 

                                    -14-


<PAGE>

employment negotiations, understandings and agreements. No provision of this 
Agreement may be waived or changed, except by a writing signed by the party 
to be charged with such waiver or change.

          (f)  SUCCESSORS: BINDING AGREEMENT.  Neither of the parties hereto
shall have the right to assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that this Agreement shall inure to the benefit or and be binding upon
the successors and assigns of the Company upon any sale of all or substantially
all of the Company's assets, or upon any merger or consolidation of the Company
with or into any other corporation, all as though such successors and assigns of
the Company and their respective successors and assigns were the Company.
Insofar as the Executive is concerned this Agreement, being personal, cannot be
assigned.

          (g)  COUNTERPARTS.  This Agreement may be executed in counterparts,
each of which shall be an original, but together shall constitute one and the
same instrument.

          (h)  HEADINGS.  The headings and captions set forth in this Agreement
are for ease of reference only and shall not be deemed to constitute a part of
the agreement formed hereby or be relevant to the interpretation of any
provisions of this Agreement.

          (i)  SATURDAYS, SUNDAYS AND HOLIDAYS.  Whenever any determination is
to be made or action to be taken on a date specified in this Agreement, if such
date shall fall upon a Saturday, Sunday or a legal holiday in the State of
California, the date for such determination or action shall be extended to the
first business day immediately thereafter.

                   [SIGNATURE PAGES BEGIN ON THE FOLLOWING PAGE]
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.


                              ACTIVISION, INC.


                              By:
                                 -------------------------------------
                              Name:
                              Title:



                              ----------------------------------------
                              Robert A. Kotick

                                    -15-



<PAGE>
                                   EXHIBIT 10.11


                                 EMPLOYMENT AGREEMENT

          Employment Agreement, dated as of January 12, 1999, by and between
ACTIVISION, INC.., a Delaware corporation with its principal offices at 3100
Ocean Park Boulevard, Santa Monica, CA  90405 (the "COMPANY"), and  BRIAN G.
KELLY (the "EXECUTIVE").

                                     RECITALS:

     WHEREAS, the Board of Directors of the Company (the "BOARD") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive by
providing him with the compensation and benefit arrangements contained herein;

     WHEREAS, the Board approved the execution and delivery of this Agreement by
the Company at a meeting of the Board held on January 12, 1999;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     1.   POSITION AND DUTIES.

          (a)  The Company agrees to continue to employ the Executive, and the
Executive agrees to continue to be employed, as Co-Chairman of the Company,
subject to the supervision of, and reporting only to, the Board.  The Executive
shall have
 such senior executive powers, duties, authorities and
responsibilities are consistent with Executive's position and title and as have
historically been performed by Executive, including acting as co-chairman of any
meeting of the Board, supervising financing, acquisitions and similar major
strategic transactions and strategic planning for the Company consistent with
his title and position, supervising the President and Chief Operating Officer of
the Company and managing all non-operating activities of the Company, including
corporate governance, organizational structure, acquisitions and financing,
senior executive compensation, stock and stock option issuances and stock option
plan management.  At all times during the period of Executive's employment, the
Executive shall, unless he otherwise elects, be nominated for election by the
shareholders of the Company to the Board.

          (b)  During the Employment Period (as defined in Section 2 below) and
excluding any periods of vacation, the Executive agrees to devote such time,
attention and efforts to the business and affairs of the Company as may be
necessary to discharge the duties and responsibilities assigned to the Executive
hereunder and to use the Executive's reasonable best 


<PAGE>

efforts to perform faithfully and efficiently such duties and 
responsibilities.

          (c)  It shall not be a violation of this Agreement for the Executive
to engage in any activity which is, in the good faith opinion of the Executive,
not inconsistent with the Company's interests and prospects, including, without
limitation, (a) serving on civic or charitable boards or committees; (b) serving
as an officer or director of any Company that is not in a Competitive Business
(as defined herein); (c) delivering lectures, fulfilling speaking engagements or
teaching at educational institutions; (d) managing personal investments; and (e)
attending conferences conducted by business organizations; provided, however,
that such activity does not significantly interfere with the performance of
Executive's duties and responsibilities hereunder. It is expressly understood
and agreed that to the extent that any activity has been conducted by the
Executive prior to the date of this Agreement, the continued conduct of such
activity (or the conduct of an activity similar in nature and scope thereto)
during the Employment Period shall be deemed not to interfere with the
performance of the Executive's duties and responsibilities to the Company and
shall not constitute a violation of this Agreement.

          (d)  Except for periodic travel assignments, the Executive shall not,
without his consent, be required to perform services for the Company at any
place other than the principal place of the Company's business which shall at
all times, unless the Executive otherwise consents, be within a 20 mile radius
of the Company's current principal place of business. Notwithstanding anything
herein to the contrary, the Executive may, at his sole discretion and upon prior
written notice to the Board, relocate at any time to New York City, New York in
connection with the establishment by the Company of executive offices in such
city.

     2.   EMPLOYMENT PERIOD.  The employment of the Executive under the terms of
this Agreement shall become effective on the date hereof and terminate on March
31, 2004 (the "EMPLOYMENT PERIOD").  Notwithstanding anything contained herein
to the contrary, the Executive's employment pursuant to the terms of this
Agreement is subject to termination pursuant to Section 5 below.

     3.   COMPENSATION.  The Executive shall receive the following compensation
(the Compensation") for his services hereunder:

          (a)  BASE SALARY.  The Company shall pay to the Executive a base
salary ("Base Salary") in respect of each fiscal year of the Company or portion
thereof during the Employment Period.  Commencing on January 12, 1999, the
initial Base Salary for the fiscal year ending March 31, 1999 shall be $297,500.
Commencing on April 1, 1999, the Base Salary for the fiscal year ending March
31, 2000 shall be automatically increased to $350,000.  Thereafter, on April 1
of each year of the Employment Period, beginning on April 1, 2000, the Base
Salary shall automatically increase to an amount equal to one hundred ten (110%)
percent of the Base Salary for the prior fiscal year.  The Company may withhold
from any amounts payable under this Agreement all applicable tax, Social
Security and other legally required withholding pursuant to any law or
regulation ("WITHHOLDING").  The Base Salary shall be paid in accordance with
the customary payroll practices of the Company at regular intervals, but in no


<PAGE>

event less frequently than every month, as the Company may establish from time
to time for senior executive employees of the Company.  The Board shall conduct
an annual performance appraisal and salary review on behalf of the Executive and
may adjust the Base Salary for any succeeding fiscal year, but never below the
Base Salary that would have been in effect during such succeeding fiscal year in
accordance with this Section 3(a).  Any period of less than a full fiscal year
which the Base Salary is calculated shall be pro rata.

          (b)  ANNUAL BONUS.  The Executive shall be entitled to receive an
annual bonus for each fiscal year (the "ANNUAL BONUS"), beginning with the
fiscal year ending March 31, 2000, based upon the Company achieving mutually
agreed upon financial and business objectives for the fiscal year with respect
to which the Annual Bonus accrues.  Such financial and business objectives for
each fiscal year shall be (i) agreed to by the Executive and the Board not later
than fifteen (15) days prior to the beginning of each fiscal year and shall be
(ii) made in accordance with Section 11 of the Company's 1998 Incentive Plan.
The Company shall pay each Annual Bonus to the Executive no later than thirty
(30) days after the completion of the Company's audited consolidated financial
statements by the Company's auditors for the subject fiscal year.  Each Annual
Bonus payment shall be subject to Withholding.  Along with the payment of each
Annual Bonus, the Company shall also deliver to the Executive a written
statement setting forth the basis of its calculation of such Annual Bonus.  The
Executive and the Executive's representatives shall have the right, at the
Executive's cost, to inspect the records of the Company with respect to the
calculation of any such Annual Bonus, to make copies of said records utilizing
the Company's facilities without charge, and to have free and full access
thereto upon reasonable notice during the normal business hours of the Company.
Any period of less than a full fiscal year which the Annual Bonus is calculated
shall be pro rata.  The Annual Bonus is intended to qualify as a Performance
Award under Section 11 of the Company's 1998 Incentive Plan and shall be subject
to the conditions and limitations of such section.

          (c)  PERFORMANCE BONUS.  The Board, in its sole discretion, may award
to the Executive a performance bonus at any time in such amount and in such form
as the Board may determine (the "PERFORMANCE BONUS"), after taking into
consideration other compensation paid or payable to the Executive under this
Agreement, as well as the financial and non-financial progress of the business
of the Company and the contributions of the Executive toward that progress.  Any
Performance Bonus shall be subject to Withholding.  Any period of less than a
full fiscal year which the Performance Bonus is calculated shall be pro rata.
With respect to the fiscal year ending March 31, 1999, the Company shall award
to the Executive a Performance Bonus based upon the achievement by the Company
of its strategic and financial objectives as heretofore presented to the Board.

     4.   BENEFITS.

          (a)  MEDICAL, ETC.  The Executive shall be entitled to such medical
and other benefits, including hospitalization, disability, life and health
insurance, to the extent offered by the Company, as are customarily made
available to senior executive officers of the Company and upon the same terms.
The Executive shall also be entitled to receive those benefits and 

                                     -3-


<PAGE>

privileges that the Company currently, and may at any time in the future, 
provide for its executive officers upon the same terms.

          (b)  EXPENSES.  The Executive shall be reimbursed by the Company for
all reasonable travel, entertainment, conference expenses, organization dues and
other expenses incurred by the Executive in connection with the performance of
Executive's services under this Agreement, subject to the Company's policies in
effect from time to time with respect to such expenses, including the
requirements with respect to reporting and documentation of such expenses.

          (c)  OFFICE AND SUPPORT STAFF.  During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, including personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company at any time during the 90-day period immediately
preceding the date of this Agreement, or, if more favorable to the Executive, as
provided at any time after such date to Executive or other senior executive
officers of the Company.

          (d)  VACATION.  The Executive shall be entitled to four (4) weeks paid
vacation each fiscal year during the Employment Period, in addition to regular
paid holidays provided to all employees of the Company; provided that unused
vacation time shall not be carried over to any subsequent year.   Vacation time
shall be taken as determined by the Executive in his reasonable and good faith
discretion; provided that such time taken is mutually convenient to the Company
and not disruptive to the Company's activities or the Executive's
responsibilities.

          (e)  LIFE INSURANCE.  The Company shall purchase and maintain a
renewable term insurance policy or policies for a period of ten (10) years
commencing as soon as practicable after the date hereof covering the life of the
Executive in an amount of $3,000,000 naming the Executive's estate or any other
person designated by the Executive as beneficiary of such policy or policies.
The Executive has the right to require the Company at any time to prepay all of
the premiums associated with such policy or policies so as to ensure such
policies remain in force for the full ten (10) year period.

     5.   TERMINATION.  The employment by the Company of the Executive shall be
terminated as provided in this Section 5:

          (a)  DEATH.  Upon the Executive's  death ("DEATH").

          (b)  DISABILITY.

               (i)  The Company or the Executive, upon not less than thirty (30)
days written notice to the other party ("DISABILITY NOTICE"), may terminate the
employment by the Company of the Executive if the Executive has been unable, by
reason of physical or mental disability, to render, for 120 successive days or
for shorter periods aggregating 210 days or more 

                                     -4-


<PAGE>

in any twelve month period, services of the character contemplated by this 
Agreement and will be unable to resume providing such services within a 
reasonable period of time by reason of such disability (such circumstances 
being referred to as "DISABILITY").

               (ii) The determination of whether the Executive has become
disabled within the meaning of this Section 5(b) shall be made (A) in the case
of a termination of employment by the Company, by a medical doctor selected by
the Company, or (B) in the case of a termination of employment by the Executive,
by Executive's medical doctor.  In the event the Company gives a notice of
termination of employment under this Section 5(b), the Executive or his
representative may at any time prior to the effective date of termination
contest the termination and cause a determination of Disability to be made by
Executive's medical doctor.  In the event the Executive gives a notice of
termination of employment under this Section 5(b), the Company may at any time
prior to the effective date of termination contest the termination and cause a
determination of Disability to be made by a medical doctor selected by the
Company.  In either case, if such medical doctors do not agree with regard to
the determination of Disability, they shall mutually choose a third medical
doctor to examine the Executive, and the Disability determination of such third
medical doctor shall be binding upon both the Company and the Executive.

          (c)  WITHOUT CAUSE.  By the Company, for any reason other than Death,
Cause or Disability, but only upon a vote of a majority of the entire Board at a
meeting duly called and held at which Executive shall have the right to be
present and be heard.

          (d)  CAUSE.  By the Company, for Cause, but only upon a vote of a
majority of the entire Board at a meeting duly called and held at which
Executive shall have the right to be present and be heard.  The term "Cause"
means (i) any act of fraud or embezzlement in respect of the Company or its
funds, properties or assets; or (ii) conviction of the Executive of a felony
relating to his actions as an executive of the Company under the laws of the
United States or any state thereof (provided that all rights of appeal have been
exercised or have lapsed) unless such acts were committed in the reasonable,
good faith belief that his actions were in the best interests of the Company and
its stockholders and would not violate criminal law; or (iii) willful misconduct
or gross negligence by the Executive in connection with the performance of his
duties that has caused or is highly likely to cause severe harm to the Company;
or (iv) intentional dishonesty by the Executive in the performance of his duties
hereunder which has a material adverse effect on the Company.

          (e)  RESIGNATION.  By the Executive, other than for Good Reason, as
hereinafter defined ("RESIGNATION").

          (f)  GOOD REASON.  By the Executive, for Good Reason.  As used herein,
the term "GOOD REASON" means that, without the Executive's prior written
consent, there shall have occurred: (i) a reduction in the Executive's Base
Salary other than the dollar amount of the Annual Bonus or the dollar amount of
the Performance Bonus; (ii) a material reduction in the  Executive's benefits;
(iii) the assignment to the Executive of any duties inconsistent with the

                                     -5-


<PAGE>

Executive's position, duties, responsibilities, authority or status with the
Company or a change in Executive's reporting responsibilities, titles or offices
as in effect prior to such assignment or change; (iv) the Company's material
breach or failure to perform, when due, any of its obligations under this
Agreement, unless cured within 10 days after receipt of written notice by the
Company from the Executive specifically identifying the manner in which the
Executive believes the Company has materially breached such obligations; (v) any
purported termination of Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the applicable requirements with respect
to Section 6 of this Agreement; or (vi) a determination by the Executive, made
in good faith, that the Executive is not able to discharge his duties
effectively by reason of directives from the Board, a Change of Control or
similar circumstances.

     6.   NOTICE AND DATE OF TERMINATION.  Any termination of the Executive's
employment under Section 5, other than by reason of Death, shall be communicated
by written Notice of Termination from the terminating party to the other party
hereto.  For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.  The effective date of any termination of the
Executive's employment (the "DATE OF TERMINATION") shall be:

          (a)  if the Executive's employment is terminated by Death, the date of
the Executive's death;

          (b)  if the Executive's employment is terminated by the Company
Without Cause or by the Executive for Good Reason, 30 days after Notice of
Termination is given;

          (c)  if the Executive's employment is terminated by reason of
Disability, (i) 30 days after the Disability Notice or (ii) upon a final
determination, pursuant to Section 5(b)(ii) above, as the case may be, whichever
is later; provided that the Executive shall not have returned to the full-time
performance of his duties during such period; and

          (d)  if the Executive's employment is terminated on account of Cause
or Resignation, the date specified in the Notice of Termination, which shall be
no less than ten (10) nor more than 30 days after such Notice of Termination is
given.

     7.   COMPENSATION UPON TERMINATION.  The Executive shall be entitled to the
following Compensation from the Company upon termination of employment pursuant
to Section 5 in full discharge of the Company's obligations (each a "TERMINATION
COMPENSATION"):

          (a)  COMPENSATION UPON DEATH.  In the event of termination of the
Executive's employment upon Death, the Executive's  heirs, successors or legal
representatives shall be entitled to receive: (i) the Base Salary through the
Date of Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any
prior fiscal year; (iii) pro rata Annual Bonus for the current fiscal year; (iv)
an amount equal to 300% of the dollar amount of the Base Salary paid or payable
to the Executive hereunder for the Company's most recent fiscal year immediately
prior 

                                     -6-


<PAGE>

to the Executive's date of death; (v) reimbursement due to Executive pursuant 
to Section 4(b); (vi) the Executive's then current spouse and minor children, 
if any, shall receive the same level of health/medical insurance or coverage 
that was provided to Executive immediately prior to the Executive's death for 
a two year period, with the cost of such continued insurance or coverage 
being borne by the Company.  All such payments shall be in addition to any 
payments the Executive's widow, beneficiaries or estate may be entitled to 
receive pursuant to any pension or employee benefit plan or life insurance 
policy maintained by the Company.  In addition, all options granted to the 
Executive to purchase shares of common stock of the Company, whether granted 
pursuant to this Agreement or granted at any time prior hereto or hereafter, 
then held by the Executive shall immediately vest and become exercisable 
until the later of the fifth anniversary of the Date of Termination or 
January 12, 2009.

          (b)  COMPENSATION UPON DISABILITY.  In the event of termination of the
Executive's employment for Disability, the Executive shall be entitled to
receive: (i) the Base Salary through the Date of Termination; (ii) any unpaid
Annual Bonus and Performance Bonus for any prior fiscal year; (iii) the pro rata
portion of the Annual Bonus and Performance Bonus for the fiscal year in which
the Date of Termination occurs; (iv) reimbursement due to Executive pursuant to
Section 4(b); (v) an amount equal to three hundred (300%) percent of the average
Base Salary paid or payable to the Executive hereunder for the Company's three
most recent fiscal years immediately prior to the Executive's disability
termination less the amount, if any, of any payments received by the Executive
from any Company-funded disability insurance plan, payable in installments at
least as frequent as monthly, subject to Withholding for the longer of two (2)
years or the balance of the Employment Period; and (vi) the Executive and his
then current spouse and minor children, if any, shall receive the same level of
health/medical insurance or coverage provided immediately prior to such
disability termination for the longer of two (2) years or the balance of the
Employment Period, with the cost of such continued insurance or coverage being
borne by the Company.  In addition, all options granted to the Executive to
purchase shares of common stock of the Company, whether granted pursuant to this
Agreement or granted at any time prior hereto or hereafter, then held by the
Executive shall immediately vest and become exercisable until the later of the
fifth anniversary of the Date of Termination or January 12, 2009.

          (c)  COMPENSATION UPON RESIGNATION OR TERMINATION FOR CAUSE.  In the
event of termination of the Executive's employment upon Resignation or
termination for Cause, the Executive shall be entitled to receive the (i) Base
Salary through the Date of Termination; (ii) any unpaid Annual Bonus and
Performance Bonus for any prior fiscal year; and (iii)  reimbursement due to
Executive pursuant to Section 4(b).

          (d)  COMPENSATION UPON TERMINATION BY EXECUTIVE FOR GOOD REASON OR BY
THE COMPANY WITHOUT CAUSE.  In the event the Executive's employment is
terminated by the Executive for Good Reason or by the Company Without Cause,
then the Executive shall be entitled to receive: (i) the Base Salary through the
Date of Termination; (ii) any unpaid Annual Bonus and Performance Bonus for any
prior fiscal year; (iii) the pro rata portion of the Annual Bonus and
Performance Bonus for the fiscal year in which the Date of Termination occurs;
(iv) 

                                     -7-


<PAGE>

reimbursement due to Executive pursuant to Section 4(b); (v) an amount (the 
"SEVERANCE PAYMENT") equal to the dollar amount of the Base Salary and Annual 
Bonus paid or payable to the Executive hereunder for the Company's most 
recent fiscal year immediately prior to the Executive's termination 
multiplied by the greater of (A) three, or (B) the number of months remaining 
in the term of this Agreement had the Executive's employment not been 
terminated, divided by twelve; and (vi) the Executive and his then current 
spouse and minor children, if any, shall receive the same level of 
health/medical insurance or coverage provided immediately prior to such 
termination for the longer of two (2) years or the balance of the Employment 
Period, with the cost of such continued insurance or coverage being borne by 
the Company; provided, however, that the Company shall not be required to 
provide any such coverage after such time as Executive becomes entitled to 
receive (without regard to any individual waivers of coverage or other 
similar arrangements) comparable health/medical benefits of the same type 
from another employer or recipient of Executive's services.  In addition, all 
options granted to the Executive to purchase shares of common stock of the 
Company, whether granted pursuant to this Agreement or granted at any time 
prior hereto or hereafter, then held by the Executive shall immediately vest 
and become exercisable until the later of the fifth anniversary of the Date 
of Termination or January 12, 2009.

          (e)  The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 or in Section 9(c) by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 7 or in Section 9(c) be reduced by any compensation earned
by him as the result of employment by another employer or by retirement benefits
after the Date of Termination, or otherwise, except as specifically provided in
this Section 7 or in Section 9(c).

          (f)  All amount to be paid to the Executive hereunder shall be paid to
the Executive in a lump sum no later than ten days following the Date of
Termination.

     8.   GRANT OF STOCK OPTION.  In addition to the Compensation described in
Section 3 hereof, the Company shall, on or before March 31, 1999, enter into a
Stock Option Agreement with the Executive granting the Executive options (the
"OPTIONS") to purchase 1,000,000 shares of common stock of the Company (the
"SHARES") at the market price on the date of the grant.

     9.   CHANGE OF CONTROL.  In the event that the Executive is an employee of
the Company at the moment immediately prior to a Change of Control (as defined
herein), the Executive shall be entitled to receive all benefits described in
this Section 9.

          (a)  For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to occur upon the occurrence of any of the following events:

               (i)   any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") and the rules and regulations promulgated thereunder), other
than any "person" or "group" with which the Executive is an Affiliate, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 

                                     -8-


<PAGE>

13d-5 under the Exchange Act), directly or indirectly, of more than 15% of 
the total outstanding voting stock of the Company;

               (ii)  the individuals who constitute the Board as of the date of
this Agreement (the "INCUMBENT BOARD") cease to constitute a majority of the
Board, for any reason(s) other than (A) the voluntary resignation of one or more
Board members; (B) the removal of one or more directors by the Company's
shareholders for good cause; provided, however (1) that if the nomination or
election of any new director of the Company was approved by a majority of the
Incumbent Board, such new director shall be deemed a member of the Incumbent
Board and (2) that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened "ELECTION CONTEST" (as described in Rule 14a-11 promulgated
under the Securities Exchange Act of 1934, as amended) or as a result of a
solicitation of proxies or consents by or on behalf of any "person" or "group"
identified in clause (a)(i) above; or

               (iii) the Company consolidates with, or merges with or into
another person or entity or conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any person or entity, or any person or
entity consolidates with or merges with or into the Company; provided, however
that (A) the Executive is not an Affiliate of such person or entity and (B) any
such transaction shall not constitute a Change of Control if the shareholders of
the Company immediately before such transaction own, directly or indirectly,
immediately following such transaction in excess of sixty-five percent (65%) of
the combined voting power of the outstanding voting securities of the
corporation or other person or entity resulting from such transaction in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such transaction.

               (iv)  For purposes of this subsection, the term "AFFILIATE"
means, with respect to any individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind (each a "PERSON"), any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person.  For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.

          (b)  In the event that the Executive is an employee of the Company at
the moment immediately prior to a Change of Control:

               (i)   the Company shall pay ("CHANGE OF CONTROL COMPENSATION")
to the Executive additional compensation in the form of cash equal to, on the
date of a Change of Control and with respect to the Options and all other
options to acquire shares of common stock of the Company granted to the
Executive prior to the date of the Change of Control (whether or 

                                     -9-


<PAGE>

not all such options have vested or are exercisable on such date) 
(collectively, the Options and such other options are referred to as 
"OUTSTANDING OPTIONS"), the product of (x) the number of shares of common 
stock of the Company underlying each of the Outstanding Options and (y) the 
amount, if any, that the exercise price of any Outstanding Options or the 
Closing Share Value (as defined below), whichever is less, exceeds the 
Initial Share Value (as defined below);

               (ii)  with respect to each Outstanding Option, in the event that
the Closing Share Value is greater than the exercise price of any such
Outstanding Options, then the Executive shall have the right to, separately with
respect to each of the Outstanding Options, to either (A) retain the Outstanding
Options, (B) exercise the Outstanding Options, or (C) forfeit the Outstanding
Options and receive, in exchange therefor, a cash payment equal to the number of
shares of common stock of the Company underlying the Outstanding Options
multiplied by the amount that the Closing Share Value exceeds the exercise price
of the Outstanding Options; and

               (iii) upon the occurrence of a Change of Control, all
Outstanding Options shall immediately vest and become exercisable for a period
of ten (10) years commencing on the Date of Termination without regard to
Executive's continued employment with the Company pursuant to this Agreement and
without regard to the terms of any option agreement or option certificate
applicable to any Outstanding Options.

          (c)  In the event that the Executive's employment is terminated by the
Executive upon Resignation during the six month period following the three month
anniversary of the effective date of the Change of Control, or by the Executive
for Good Reason, or by the Company Without Cause, at any time during the nine
month period following the effective date of the Change of Control, the
Executive shall receive, in addition to the amounts payable pursuant to Section
7(c), (i) the pro rata portion of the Annual Bonus and Performance Bonus for the
fiscal year in which the Change of Control occurs, computed through the Date of
Termination; (ii) an amount equal to the dollar amount of the Base Salary and
Annual Bonus paid or payable to the Executive hereunder for the Company's most
recent fiscal year immediately prior to the Executive's termination multiplied
by the greater of (A) five, or (B) the number of months remaining in the term of
this Agreement had the Executive's employment not been terminated, divided by
twelve; and (iii) the Executive and his then current spouse and minor children,
if any, shall receive the same level of health/medical insurance or coverage
provided immediately prior to such Change of Control for the longer of two (2)
years or the balance of the Employment Period, with the cost of such continued
insurance or coverage being borne by the Company; provided, however, that the
Company shall in not be required to provide any such coverage after such time as
Executive becomes entitled to receive (without regard to any individual waivers
of coverage or other similar arrangements) comparable health/medical benefits of
the same type from another employer or recipient of Executive's services.  All
amounts to be paid to the Executive pursuant to this Section (c) shall be paid
to the Executive not later than ten days following the Date of Termination.

          (d)  If in the opinion of tax counsel selected by the Executive and
reasonably acceptable to the Company, the Executive has or will receive any
compensation or recognize any 

                                    -10-


<PAGE>

income (whether or not pursuant to this Agreement or any plan or other 
arrangement of the Company and whether or not the Executive's employment with 
the Company has terminated) which constitute an "excess parachute payment" 
within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 
1986, as amended (the "Code") (or for which a tax is otherwise payable under 
Section 4999 of the Code), then the Company shall pay the Executive an 
additional amount (the "ADDITIONAL AMOUNT") equal to the sum of (i) all taxes 
payable by the Executive under Section 4999 of the Code with respect to (A) 
all such excess parachute payments (or otherwise) and (B) the Additional 
Amount, plus (ii) all federal, state and local income taxes payable by 
Executive with respect to the Additional Amount.  The amounts payable 
pursuant to this Section 9(d) shall be paid by the Company to the Executive 
concurrently with the payment of such compensation or recognition of income 
giving rise to the Company's obligations under this Section 9(d).

          (e)  For purposes of this subsection:

               (i)   "INITIAL SHARE VALUE" shall mean the average of the
Closing Prices of the shares of common stock of the Company for the period
commencing on the 180th day prior to the date of the Change of Control and
ending on the 150th day prior to the date of the Change of Control;

               (ii)  "CLOSING SHARE VALUE" shall mean the Closing Price of the
shares of common stock of the Company on the date of the Change of Control; and

               (iii) the "CLOSING PRICE" of a share of common stock of the
Company on any date shall mean the last sale price, regular way, or, in case no
such sale takes place on such date, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the such shares are listed or admitted to
trading or, if such shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if such shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making market in the shares as such
person is selected from time to time by the Board or, if there are no
professional market makers making a market in the shares, then the value as
determined in good faith judgement of the Board.

     10.  ADVANCES.  The Company may, upon written consent of the Board, make an
advance to the Executive against any compensation or other amounts to be paid by
the Company to the Executive (an "ADVANCE").  Any amounts due under this
Agreement to the Executive shall, at the election of the Company, be offset by
any then outstanding Advances.  In the event of Executive's termination of
employment, Executive agrees that the Company shall have the right to offset the
amount of any and all outstanding Advance(s) against any compensation or any
other amounts due to the Executive from the Company, and that any remaining
balance of the 

                                    -11-


<PAGE>

Advance(s) shall be repaid by the Executive within ninety (90) days after the 
termination of Executive's employment by the Company.

     11.  NON-COMPETITION AND NON-SOLICITATION.

          (a)  NON-COMPETITION PROHIBITED ACTIVITIES.   During the term of 
his employment hereunder and for two (2) years thereafter (the 
"NON-COMPETITION PERIOD"), the Executive shall not engage (including, without 
limitation, as an officer, director, shareholder, owner, partner, joint 
venturer, member or in a managerial capacity, or as an employee, independent 
contractor, consultant, advisor or sales representative) in any Competitive 
Business (as hereinafter defined) in the Territory (as hereinafter defined).  
For purposes of determining whether the Executive is permitted to be a 
shareholder of a corporation engaged in a Competitive Business, the 
Executive's ownership of less than 5% of the issued and outstanding 
securities of a company whose securities are publicly-traded in any U.S. or 
non-U.S. securities exchanges or quotation system shall be permitted.

          (b)  NON-SOLICITATION PROHIBITED ACTIVITIES.   During the 
Non-Competition Period and in the Territory, the Executive covenants and 
agrees that he shall not solicit, directly or indirectly, any person who is, 
at that time, or who was at any time within three (3) months prior to that 
time, an employee of the Company for the purpose or with the intent of 
enticing such employee away from or out of the employ of the Company.

          (c)  As used herein, the term "COMPETITIVE BUSINESS" shall mean any
business engaged in publishing and distributing video games and entertainment
software for personal computers.

          (d)  As used herein, the term "TERRITORY" shall mean:

               (i)   The following counties in the State of California:
Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El
Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Los
Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey,
Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San
Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo,
Santa Barbara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus,
Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, and Yuba;

               (ii)  Each and every county or other political or geographical
subdivision in the balance of the United States of America and the dependent
territories of the United States of America; and

               (iii) Each and every county or other political or geographical
subdivision in the world.

          (e)  The foregoing prohibitions in subsections (a) and (b) shall bind
the 

                                    -12-


<PAGE>

Executive only so long as the Company pays him the Termination Compensation 
pursuant to Section 7 or the Change of Control Compensation pursuant to 
Section 9 during the Non-Competition Period and otherwise complies with its 
obligations hereunder.

     12.  CONFIDENTIAL INFORMATION.  The Executive has executed or, if not
previously executed, agrees to execute and be bound by the terms and conditions
of the Company's Employee Proprietary Information Agreement ("PROPRIETARY
INFORMATION AGREEMENT"), attached hereto as Appendix A.

     13.  UNENFORCEABILITY.  If any of the rights or restrictions contained or
provided for in this Agreement shall be deemed by a court of competent
jurisdiction to be unenforceable by reason of the extent, duration or
geographical scope, the parties hereto contemplate that the court shall reduce
such extent, duration, geographical scope and enforce this Agreement in its
reduced form for all purposes in the manner contemplated hereby. Should any of
the provisions of this Agreement require judicial interpretation, it is agreed
that the court interpreting or construing this Agreement shall not apply a
presumption that any provision shall be more strictly construed against one
party by reason of the rule of construction that a document is to be construed
more strictly against the party who itself or through its agents prepared the
same, it being agreed that both parties and their respective agents have
participated in the preparation of this Agreement.

     14.  INJUNCTIVE RELIEF.  The Executive agrees that the restrictions and
covenants contained in Section 11 and in the Proprietary Information Agreement
are necessary for the protection of the Company and any breach thereof will
cause the Company irreparable damages for which there is no adequate remedy at
law.  The Executive further agrees that, in the event of a breach by the
Executive of any of Executive's obligations thereunder, the Company shall have
the absolute right, in addition to any other remedy that might be available to
it, to obtain from any court having jurisdiction, such equitable relief as might
be appropriate, including temporary, interlocutory, preliminary and permanent
decrees or injunctions enjoining any further breach of such provisions.

     15.  INDEMNIFICATION AND ATTORNEYS' FEES.    Subject to applicable laws,
during the Employment Period and thereafter, the Company shall indemnify, hold
harmless and defend the Executive from all damages, claims, losses, and costs
and expenses (including reasonable attorney's fees) arising out of, in
connection with, or relating to all acts or omissions taken or not taken by him
in good faith while performing services for the Company, and shall further
promptly reimburse the Executive for all expenses (including attorney's fees)
incurred in enforcing the benefits of this Agreement.  The Company shall use its
best efforts to continue to maintain, an insurance policy covering the officers
and directors of the Company against claims and/or lawsuits at least as
favorable as such policy this is currently in effect, and shall cause the
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors during the Employment Period and
for a period of at least six (6) years thereafter.

     16.  MISCELLANEOUS.

                                    -13-


<PAGE>

          (a)  SEVERABILITY.  If any provision of this Agreement is 
determined to be invalid or unenforceable, it shall not affect the validity 
or enforceability of any of the other remaining provisions hereof.

          (b)  NOTICES.  For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when (i) delivered personally; (ii) sent by facsimile or
other similar electronic device and confirmed; (iii) delivered by courier or
overnight express; or (iv) three business days after being sent by registered or
certified mail, postage prepaid, addressed as follows:

               If to the Company:

               Activision, Inc.
               3100 Ocean Park Boulevard
               Santa Monica, CA  90405
               Attention: General Counsel

               with a copy to:

               Robinson Silverman Pearce Aronsohn & Berman, LLP
               1290 Avenue of the Americas
               New York, NY 10104
               Attention: Kenneth L. Henderson, Esq.

               If to the Executive:

               Brian G. Kelly
               843 Yale Street
               Santa Monica, CA 90403

or to such other address as a party may furnish to the other party in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

          (c)  WAIVER.  No waiver by either party hereto of any breach of any
provision of this Agreement shall be deemed a waiver of any preceding or
succeeding breach of such provision or any other provision herein contained.

          (d)  GOVERNING LAW.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
giving effect to the conflict of law principles thereof; provided, however, that
Section 11 of this Agreement shall be governed by, and construed in accordance
with, the laws of the state in which the Executive has his principal office.

          (e)  ENTIRE AGREEMENT.  This Agreement sets forth the entire agreement
of the 

                                    -14-


<PAGE>

parties hereto with respect to the subject matter hereof, and is intended to 
supersede all prior employment negotiations, understandings and agreements. 
No provision of this Agreement may be waived or changed, except by a writing 
signed by the party to be charged with such waiver or change.

          (f)  SUCCESSORS: BINDING AGREEMENT.  Neither of the parties hereto
shall have the right to assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that this Agreement shall inure to the benefit or and be binding upon
the successors and assigns of the Company upon any sale of all or substantially
all of the Company's assets, or upon any merger or consolidation of the Company
with or into any other corporation, all as though such successors and assigns of
the Company and their respective successors and assigns were the Company.
Insofar as the Executive is concerned this Agreement, being personal, cannot be
assigned.

          (g)  COUNTERPARTS.  This Agreement may be executed in counterparts,
each of which shall be an original, but together shall constitute one and the
same instrument.

          (h)  HEADINGS.  The headings and captions set forth in this Agreement
are for ease of reference only and shall not be deemed to constitute a part of
the agreement formed hereby or be relevant to the interpretation of any
provisions of this Agreement.

          (i)  SATURDAYS, SUNDAYS AND HOLIDAYS.  Whenever any determination is
to be made or action to be taken on a date specified in this Agreement, if such
date shall fall upon a Saturday, Sunday or a legal holiday in the State of
California, the date for such determination or action shall be extended to the
first business day immediately thereafter.

                   [SIGNATURE PAGES BEGIN ON THE FOLLOWING PAGE]
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.


                              ACTIVISION, INC.


                              By:
                                 ------------------------------------
                              Name:
                              Title:




                              ---------------------------------------
                              Brian G. Kelly

                                    -15-



<PAGE>

                                    EXHIBIT 10.12

                                                            October 19, 1998

Mr. Ron Doornink
25 Oakbrook
Coto de Caza, California  92679

Dear Mr. Doornink:

This letter confirms the terms of your employment by Activision, Inc.
("Employer").

1.   TERM

     The term of your employment under this agreement shall commence on
October 27, 1998 and expire on March 31, 2001, unless earlier terminated as
provided below.

2.   SALARY

     (a)  In full consideration for all rights and services provided by you
under this agreement, you shall receive a base salary at the annual rate of
$280,000 during the period commencing on October 27, 1998 and ending on March
31, 1999.  You also shall receive an annual base salary of $300,000 during the
period commencing on April 1, 1999 and ending on March 31, 2000, and an annual
base salary of $320,000 during the period commencing on April 1, 2000 and ending
on March 31, 2001.

     (b)  Base salary payments shall be made in accordance with Employer's then
prevailing payroll policy.  Each base salary referred to in Paragraph 2(a) shall
constitute your minimum base salary during the applicable period, and your base
salary may be increased above the minimum at any time if Employer's Board of
Directors (or the Compensation Committee of such Board of Directors), in its
sole and absolute
 discretion, elects to do so.  In the event of an increase in
your base salary beyond the applicable minimum base salary for a particular
period, such increased base salary shall then constitute your minimum base
salary for all subsequent periods under this agreement.

     (c)  Notwithstanding anything to the contrary set forth above, but subject
to the right of termination granted to you pursuant to Paragraph 11(b), Employer
shall not be required to actually use your services, and payment of your base
salary during the period of your employment under this agreement will discharge
Employer's obligations to you hereunder.  Such payment, however, will not
discharge your obligations to Employer hereunder.

                                  Page 1                           June 25, 1999


<PAGE>

     (d)  In addition to your base salary, you shall be eligible to receive a
performance based bonus of up to 60% of your annual base salary for each fiscal
year of Employer during which you are employed under this agreement (pro-rated
for the amount of time that you actually perform services for Employer during a
particular fiscal year).  All bonus payments will be in compliance with
Employer's Management Bonus Plan for the applicable fiscal year, each of which
is determined by the Compensation Committee of the Board of Directors and is
based on a number of factors including the achievement of specific corporate
sales and profitability levels as well as a discretionary component which will
be based upon your performance, achievement of objectives and contribution to
the success of Employer's goals.

     (e)  You also are being granted, under Employer's 1998 Incentive Plan,
options to purchase 200,000 shares of Employer's common stock.  The options will
be issued on the commencement date of your employment under this agreement and
will have an exercise price that will be the market price of Employer's common
stock on the date the options are issued.  The options will vest as follows:
25,000 of such options will be immediately vested and exercisable; 58,334 of
such options will vest on October 27, 1999; 58,333 of such options will vest on
October 27, 2000; and 58,333 of such options will vest on October 27, 2001.
Notwithstanding the foregoing, if there is a "change of control" of Employer
(which term will be fully defined in the stock option certificate issued to you
by Employer with respect to such stock options and which will be consistent with
the definition contained in other stock option certificates previously issued by
Employer under its 1998 Incentive Plan) during the first twelve months of the
term of your employment under this agreement, and there is a difference of $5.00
or greater between the per share consideration to be received by the
shareholders of Employer upon consummation of the transaction causing such
change of control (the "Transaction Price") and your stock option exercise
price, then 50% of the foregoing options which have not yet vested as of the
date of the change of control shall instead vest on such change of control date,
and the remaining 50% of such unvested options shall instead vest on the first
anniversary of such change of control.  If there is a change of control of
Employer during the first twelve months of the term of your employment under
this agreement and there is a difference of less than $5.00 between the
Transaction Price and your stock option exercise price, or there is a change of
control of Employer after the first twelve months of the term of your employment
under this agreement, then all of the foregoing options which have not yet
vested as of the date of the change of control shall instead vest on such change
of control date.  The foregoing options will be governed in all other respects
by Employer's 1998 Incentive Plan.

     (f)  You also shall be eligible to receive additional options, under
Employer's existing or modified stock option plan, if Employer's Board of
Directors (or the Compensation Committee of such Board of Directors), in its
sole and absolute discretion, determines that the grant to you of additional
options is appropriate.

                                  Page 2                           June 25, 1999


<PAGE>

3.   TITLE

     You are being employed under this agreement in the position of President
and Chief Operating Officer.  In such capacity, you shall be responsible for
overseeing all of Employer's day to day operations.  You will report directly to
the Co-Chairmen of Employer.

4.   DUTIES

     You shall personally and diligently perform, on a full-time and exclusive
basis, such services as Employer may reasonably require, provided that such
services are consistent with your position with Employer.  You shall observe all
reasonable rules and regulations adopted by Employer in connection with the
operation of its business and carry out all instructions of Employer.  You will
at all times perform all of the duties and obligations required by you under
this agreement in a loyal and conscientious manner and to the best of your
ability and experience.

5.   EXPENSES

     To the extent you incur necessary and reasonable business expenses in the
course of your employment, you shall be reimbursed for such expenses, subject to
Employer's then current policies regarding reimbursement of such business
expenses.

6.   OTHER BENEFITS

     You shall be entitled to those benefits which are standard for persons in
similar positions with Employer, including coverage under Employer's health,
life insurance and disability plans, and eligibility to participate in
Employer's 401(k) plan.  In addition, Employer shall reimburse you for the cost
incurred by you to obtain disability insurance in excess of the insurance
provided to you by Employer to the extent necessary to provide you with an
aggregate monthly disability insurance benefit of $15,000, provided that such
cost is pre-approved in writing by Employer (such approval not to be
unreasonably withheld) and you provide Employer with documentation which
adequately evidences such cost.  Nothing paid to you under any such plans and
arrangements (nor any bonus or stock options which Employer's Board of Directors
(or the Compensation Committee of such Board of Directors), in its sole and
absolute discretion, shall provide to you) shall be deemed in lieu, or paid on
account, of your base salary.  You expressly agree and acknowledge that after
expiration or early termination of the term of your employment under this
agreement, you are entitled to no additional benefits not expressly set forth in
this agreement, except as specifically provided under the benefit plans referred
to above and those benefit plans in which you subsequently may become a
participant, subject in each case to the terms and conditions of each such plan.
Notwithstanding anything to the contrary set forth above, you shall be eligible
to 

                                  Page 3                           June 25, 1999


<PAGE>

receive those benefits provided by COBRA upon the expiration or early 
termination of the term of your employment under this Agreement.

7.   VACATION AND PAID HOLIDAYS

     (a)  You will be entitled to paid vacation days in accordance with the
normal vacation policies of Employer in effect from time to time, provided that
in no event shall you be entitled to less than twenty (20) days of paid vacation
per year.

     (b)  You shall be entitled to all paid holidays given by Employer to its
full-time employees.

8.   LOAN

     As an additional incentive to the commencement of your employment with
Employer, and to help facilitate your relocation to the West Los Angeles area,
Employer will provide you with a loan in the principal amount of $100,000 by no
later than October 31, 1998.  Such loan will bear interest at the rate of 6-3/4%
per annum and will be due and payable in full on October 31, 2000.  However, the
principal amount and accrued interest on such loan will be forgiven on a pro
rata basis over the first twenty-four (24) months of your employment, provided
that you remain employed by Employer on the applicable date of forgiveness.  In
order to receive the foregoing loan, you shall be required to execute a
promissory note substantially in the form of Exhibit A attached to this
agreement.

9.   PROTECTION OF EMPLOYER'S INTERESTS

     (a)  During the term of your employment by Employer, you will not compete
in any manner, whether directly or indirectly, as a principal, employee, agent
or owner, with Employer, or any affiliate of Employer, except that the foregoing
will not prevent you from holding at any time less than five percent (5%) of the
outstanding capital stock of any company whose stock is publicly traded.

     (b)  All rights worldwide with respect to any and all intellectual or other
property of any nature produced, created or suggested by you during the term of
your employment or resulting from your services which (i) relate in any manner
at the time of conception or reduction to practice to the actual or demonstrably
anticipated business of Employer, (ii) result from or are suggested by any task
assigned to you or any work performed by you on behalf of Employer, or (iii) are
based on any property owned or idea conceived by Employer, shall be deemed to be
a work made for hire and shall be the sole and exclusive property of Employer.
You agree to execute, acknowledge and deliver to Employer, at Employer's
request, such further documents, including copyright and patent assignments, as
Employer finds appropriate to evidence Employer's rights in such property.

                                  Page 4                           June 25, 1999


<PAGE>

     (c)  Any confidential and/or proprietary information of Employer or any
affiliate of Employer shall not be used by you or disclosed or made available by
you to any person except as required in the course of your employment, and upon
expiration or earlier termination of the term of your employment, you shall
return to Employer all such information which exists in written or other
physical form (and all copies thereof) under your control.  Without limiting the
generality of the foregoing, you acknowledge signing and delivering to Employer
the Activision Employee Proprietary Information Agreement attached to this
agreement as Exhibit B, and you agree that all terms and conditions contained in
such agreement, and all of your obligations and commitments provided for in such
agreement, shall be deemed, and hereby are, incorporated into this agreement as
if set forth in full herein.  The provisions of the immediately preceding four
sentences of this paragraph shall survive the expiration or earlier termination
of this agreement.

10.  SERVICES UNIQUE

     You recognize that the services being performed by you under this agreement
are of a special, unique, unusual, extraordinary and intellectual character
giving them a peculiar value, the loss of which cannot be reasonably or
adequately compensated for in damages, and in the event of a breach of this
agreement by you (particularly, but without limitation, with respect to the
provisions hereof relating to the exclusivity of your services and the
provisions of paragraph 9 of this agreement), Employer shall, in addition to all
other remedies available to it, be entitled to equitable relief by way of
injunction and any other legal or equitable remedies.

11.  TERMINATION

     (a)  At any time during the term of your employment, Employer may terminate
your employment under this agreement for (i) your willful, reckless or gross
misconduct, (ii) your material breach of any term or provision of this
agreement, or (iii) for other good cause, as such term is defined under
California law.  In addition, but subject to the provisions of paragraph 11(c)
below, Employer may terminate your employment under this agreement at any time
without cause.

     (b)  You may terminate your employment under this agreement (i) upon
Employer's material breach of any term or provision of this agreement, (ii) if
Employer elects to not actually use your services and continues to pay your base
salary pursuant to Paragraph 2(c) above for a period of one hundred twenty (120)
consecutive days; or (iii) if there is a change of control of Employer and you
are then instructed to perform a job for Employer that does not have the same
level of responsibility as President or Chief Operating Officer of Employer.

                                  Page 5                           June 25, 1999


<PAGE>

     (c)  In the event of the termination of your employment under this
agreement pursuant to paragraphs 11(a) or 11(b), all obligations of Employer to
you under this agreement shall immediately terminate; provided, however: (i) if
Employer terminates your employment under paragraph 11(a) without cause on or
prior to March 31, 2000, you shall continue to receive your base salary as
stated in paragraph 2(a) in accordance with Employer's then prevailing payroll
policy; or (ii) if Employer terminates your employment under Paragraph 11(a)
without cause after March 31, 2000, or if you terminate your employment under
Paragraph 11(b)(iii), then (A) Employer will pay you "continuation payments" at
a rate equal to your annual base salary in effect at the time of termination, in
accordance with Employer's then prevailing payroll policy, for a period of time
expiring on the sooner of (x) the date upon which you accept employment with
another employer, and (y) the date which is the first anniversary of your
termination date; (B) all accrued but unpaid principal and interest, if any,
under the loan reference in paragraph 8 will be immediately forgiven; (C) you
shall be entitled to receive a pro-rata bonus under Employer's Management Bonus
Plan for the fiscal year in which you are terminated that reflects the services
performed by you during the applicable portion of such fiscal year, subject to
you achieving the performance objectives stated in the Plan for such period; and
(D) to the extent applicable, you shall have a period of one year from the date
of termination to exercise all stock options previously issued to you under this
agreement that were vested on the date of termination.

     (d)  In the event of your death during the term of this agreement, this
agreement shall terminate and Employer only shall be obligated to pay your
estate or legal representative the salary provided for above to the extent
earned by you prior to such event.  In the event you are unable to perform the
services required of you under this agreement as a result of any disability, and
such disability continues for a period of 60 or more consecutive days or an
aggregate of 90 or more days during any 12-month period during the term of this
agreement, then Employer shall have the right, at its option, to terminate your
employment under this agreement.  Unless and until so terminated, during any
period of disability during which you are unable to perform the services
required of you under this agreement, your base salary shall be payable to the
extent of, and subject to, Employer's policies and practices then in effect with
regard to sick leave and disability benefits.

12.  USE OF EMPLOYEE'S NAME

     Employer shall have the right, but not the obligation, to use your name or
likeness for any publicity or advertising purpose.

13.  ASSIGNMENT

                                  Page 6                           June 25, 1999


<PAGE>

     Employer may assign this agreement or all or any part of its rights under
this agreement to any entity which succeeds to all or substantially all of
Employer's assets (whether by merger, acquisition, consolidation, reorganization
or otherwise) or which Employer may own substantially, and this agreement shall
inure to the benefit of such assignee.

14.  NO CONFLICT WITH PRIOR AGREEMENTS

     You represent to Employer that neither your commencement of employment
under this agreement nor the performance of your duties under this agreement
conflicts or will conflict with any contractual commitment on your part to any
third party, nor does it or will it violate or interfere with any rights of any
third party.

15.  POST-TERMINATION OBLIGATIONS

     After the expiration or earlier termination of your employment under this
agreement for any reason whatsoever, you shall not, either alone or jointly,
with or on behalf of others, directly or indirectly, whether as principal,
partner, agent, shareholder, director, employee, consultant or otherwise, at any
time during a period of one (1) year following such expiration or termination,
offer employment to, or solicit the employment or engagement of, or otherwise
entice away from the employment of Employer or any affiliated entity, either for
your own account or for any other person firm or company, any person who was
employed by Employer or any such affiliated entity on the last day of your
employment under this agreement, whether or not such person would commit any
breach of his or her contract of employment by reason of his or her leaving the
service of Employer or any affiliated entity.

16.  ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.

     (a)  This agreement supersedes all prior or contemporaneous agreements and
statements, whether written or oral, concerning the terms of your employment
with Employer, and no amendment or modification of this agreement shall be
binding against Employer unless set forth in a writing signed by Employer and
delivered to you.

     (b)  Except for the fee payable by Employer to Spencer Stuart, you have
given no indication, representation or commitment of any nature to any broker,
finder, agent or other third party to the effect that any fees or commissions of
any nature are, or under any circumstances might be, payable by Employer or any
affiliate of Employer in connection with your employment under this agreement.

     (c)  No waiver by either party of any breach by the other party of any
provision or condition of this agreement shall be deemed a waiver of any similar
or dissimilar provision or condition at the same or any prior or subsequent
time.

                                  Page 7                           June 25, 1999


<PAGE>

     (d)  Nothing contained in this agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this agreement and any present or future
statute, law, ordinance or regulation, the latter shall prevail, but in such
event the provision of this agreement affected shall be curtailed and limited
only to the extent necessary to bring it within legal requirements.

     (e)  This agreement does not constitute a commitment of Employer with
regard to your employment, express or implied, other than to the extent
expressly provided for herein.  Upon termination of this agreement, it is the
contemplation of both parties that your employment with Employer shall cease,
and that neither Employer nor you shall have any obligation to the other with
respect to continued employment.  In the event that your employment continues
for a period of time following the stated expiration date of this contract,
unless and until agreed to in a new subscribed written document, such employment
or any continuation thereof is "at will," and may be terminated without
obligation at any time by either party giving notice to the other.

     (f)  You hereby acknowledge that you have had an opportunity to seek legal
counsel of your own choice regarding the effect and import of entering into this
Agreement.

     (g)  This agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to conflict of law
principles.

     (h)  In accordance with the Immigration Reform and Control Act of 1986,
employment under this agreement is conditioned upon satisfactory proof of your
identity and legal ability to work in the United States.

     (i)  To the extent permitted by law, you will keep the terms of this
agreement confidential, and you will not disclose any information concerning
this agreement to anyone other than your immediate family and professional
representatives (provided they also agree to keep the terms of this agreement
confidential).

17.  NOTICES

     All notices which either party is required or may desire to give the other
shall be in writing and given either personally or by depositing the same in the
United States mail addressed to the party to be given notice as follows:

     To Employer:   3100 Ocean Park Boulevard
                    Santa Monica, California  90405
                    Attention: Senior Vice President,
                    Business Affairs and General Counsel

                                  Page 8                           June 25, 1999


<PAGE>

     To Employee:   25 Oakbrook
                    Coto de Caza, California  92679

     Either party may by written notice designate a different address for giving
of notices.  The date of mailing of any such notices shall be deemed to be the
date on which such notice is given.

18.  HEADINGS

     The headings set forth herein are included solely for the purpose of
identification and shall not be used for the purpose of construing the meaning
of the provisions of this agreement.

     If the foregoing accurately reflects our mutual agreement, please sign
where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                               EMPLOYEE


By:                                    By:
   --------------------------------       --------------------------------
   Robert Kotick                          Ron Doornink
   Co-Chairman and Chief
   Executive Officer


Date:                                  Date:
     ------------------------------         ------------------------------




                                  Page 9                           June 25, 1999

<PAGE>

                                EXHIBIT A
                            PROMISSORY NOTE


$100,000.00                                       October __, 1998
                                                  Santa Monica, California


     FOR VALUE RECEIVED, and subject to the provisions of Paragraph 1 below, the
undersigned, Ron Doornink ("Maker"), promises to pay to Activision, Inc.
("Holder"), or its order, the sum of One Hundred Thousand Dollars ($100,000.00),
together with simple interest on the unpaid principal amount from the date
hereof at the rate of Six and Three Quarters Percent (6-3/4%) per annum, payable
monthly.  The entire principal indebtedness under this Promissory Note and all
accrued but unpaid interest, or so much thereof as may remain unpaid at the
time, shall become due and payable on October __, 2000, and payment of said
principal indebtedness, or the balance thereof, and all interest thereon,
together with all other sums due under the terms hereof, may be enforced and
recovered at once, time being of the essence.

     1.   FORGIVENESS OF INDEBTEDNESS.  The amount of principal due hereunder
automatically will be reduced by Four Thousand One Hundred Sixty-Six and 67/100
Dollars ($4,166.67) per month on the ___ day of each month, commencing on
November __, 1998, provided that the undersigned continues to be employed by the
Holder on the applicable reduction date.  All interest which is accrued but
unpaid as of a particular principal reduction date also shall be forgiven to the
extent a portion of the principal is forgiven on such date.

     2.   PREPAYMENT.  Maker may prepay all or any portion of the principal
amount of this Promissory Note and the interest due thereon at any time or times
during the term of this Promissory Note without any other premium or penalty.

     3.   PAYMENT CREDITS.  Each payment shall, when made, be credited first to
interest then due, then to other expenses payable to Holder, including any
collection costs, and the remainder to principal, and interest shall thereupon
cease upon the principal so credited.  All payments hereunder shall be made in
lawful money of the United States of America at the principal executive offices
of Holder located at 3100 Ocean Park Boulevard, Santa Monica, California  90405.

     4.   ATTORNEYS' FEES.  Maker promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred in the collection and enforcement
of this Promissory Note.

     5.   MAXIMUM INTEREST.  The provisions of this Promissory Note shall not
have the effect of, or be construed as, requiring or committing Maker to pay
interest in excess of the highest rate per annum allowed by the laws for such
jurisdiction whose laws shall govern this Promissory Note.  If, under any
circumstance, Holder shall ever receive as interest an 

                                  Page 10                          June 25, 1999


<PAGE>

amount which would exceed the highest applicable lawful rate as determined by 
a court of competent jurisdiction, then such amount which would be excessive 
interest shall, ipso facto, be applied to the reduction of the unpaid 
principal balance due hereunder and not to the payment of interest.  This 
provision shall control and supersede every other provision of this 
Promissory Note.

     6.   EXERCISE OF RIGHTS.  No single or partial exercise of any power
granted to Holder under this Promissory Note shall preclude other or further
exercise thereof or the exercise of any other power.  No delay or omission on
the part of Holder in exercising any right under this Promissory Note shall
operate as a waiver of such right or of any other right.

     7.   WAIVER OF NOTICE.  The makers, endorsers, guarantors and sureties of
this Promissory Note, and each of them, hereby waive diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
and specifically consent to and waive notice of any renewals or extensions of
this Promissory Note, whether made to or in favor of the makers or any other
person or persons.  The pleading of any statute of limitations as a defense to
any demand against the makers, endorsers, guarantors or sureties is expressly
waived by each and all of said parties.

     8.   SUCCESSORS AND ASSIGNS.  The terms of this Promissory Note apply to,
inure to the benefit of, and bind all parties hereto, their heirs, legatees,
devisees, administrators, executors, successors and assigns.

     9.   SEVERABILITY.  If any portion of this Promissory Note shall be held
invalid or unenforceable, then the remainder of this Promissory Note shall be
considered valid and enforceable according to its terms.

     10.  MISCELLANEOUS.  This Promissory Note shall be governed and interpreted
in accordance with the laws of the State of California.  If suit is instituted
by Maker against Holder or by Holder against Maker for any cause or matter
arising from or in connection with the respective rights or obligations of Maker
or the holder of this Promissory Note hereunder, the sole jurisdiction and venue
for such action shall be the Superior Court of the State of California in and
for the County of Los Angeles.  Captions are for convenience only and shall not
be used in construing meaning.  This Promissory Note may only be changed,
modified, or amended in writing by the mutual consent of Maker and the Holder.
The provisions of this Promissory Note may only be waived in or by a writing
signed by the party against whom enforcement of any waiver is sought.

     IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the date
first written above.


                              ------------------------------
                              RON DOORNINK



                                  Page 11                          June 25, 1999

<PAGE>

                                     EXHIBIT B

                                  ACTIVISION, INC.
                     EMPLOYEE PROPRIETARY INFORMATION AGREEMENT


In consideration of and as a condition of my employment by ACTIVISION, INC.
and/or by companies which it owns, controls, or is affiliated with, and their
successors in business (the "Company" ), and the compensation now and hereafter
paid to me for such employment, I hereby agree as follows:

1.   CONFIDENTIALITY.  I agree to hold in strictest confidence and not to
disclose, make any use of, except for the benefit of the Company, lecture upon
or publish, at any time either during the term of or subsequent to my
employment, any of the Company's Proprietary Information (as defined below)
which I may produce, obtain or otherwise acquire during the course of my
employment, except as the Company may otherwise consent to in writing in its
sole and absolute discretion. I further agree not to deliver, reproduce or in
any way allow such Proprietary Information, or any documentation relating to
such information, to be delivered or used by any third parties without the
specific written direction or consent of a duly authorized representative of the
Company.

The term "Proprietary Information" shall mean any and all trade secrets,
confidential knowledge, data or any other proprietary information pertaining to
any business of the Company or any of its clients, customers or consultants,
licensees or affiliates.  By way of illustration but not limitation,
"Proprietary Information" includes (a) inventions, ideas, improvements,
discoveries, trade secrets, processes, data, programs, knowledge, know-how,
designs, techniques, formulas, test data, computer code, other works of
authorship and designs whether or not patentable, copyrightable, or otherwise
protected by law, and whether or not conceived of or prepared by me, either
alone or jointly with others (hereinafter collectively referred to as
"Inventions"); (b) information regarding research, development, new products and
services, marketing plans and strategies, merchandising and selling, business
plans, strategies, forecasts, projections, profits, investments, operations,
financings, records, budgets and unpublished financial statements, licenses,
prices and costs, suppliers and customers; and (c) identity, requirements,
preferences, practices and methods of doing business of specific parties with
whom the Company transacts business, and information regarding the skills and
compensation of other employees of the Company and independent contractors
performing services for the Company.

2.   THIRD PARTY INFORMATION.  I understand that the Company, from time to time,
may enter into agreements with other parties which impose obligations or
restrictions on the Company regarding Inventions made during the course of the
work under such agreements or regarding the confidential nature of such works,
or otherwise receive from third parties confidential or proprietary information
("Third Party Information") subject to a duty on the Company's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes.  During the term of my employment and thereafter, I agree to be bound
by all such obligations and restrictions, will hold Third Party Information in
the strictest confidence, will not disclose (to anyone other than Company
personnel who need to know such information in connection with their work for
the Company) or use, except in connection with my work for the Company, Third
Party Information unless expressly authorized by the Company in writing, and
will otherwise take all action necessary to discharge the obligations to the
Company arising in connection with such Third Party Information.

3.   WORK FOR HIRE STATEMENT.  I hereby acknowledge and agree that all original
works of authorship (the "Works of Authorship") which are produced, developed or
authored by me (whether alone or jointly with others), or otherwise resulting
from my work within the scope of my employment with the Company and which are
protectible by copyright are "works made for hire," as that term is defined in
the United States Copyright Act (17 U.S.C., Section 101). In the event that any
rights to the Works of Authorship are deemed not to be works made for hire, or
in the event that I should, by operation of law, be deemed to retain any rights
in such Works of 

                                  Page 12                          June 25, 1999


<PAGE>

Authorship, I hereby irrevocably assign, without any further consideration 
and regardless of any use by the Company of any such Work of Authorship, all 
of my rights, title and interest, if any, in and to such Works of Authorship 
to the Company. I agree that the Company, as the owner of all rights to the 
Works of Authorship, has the full and complete right to prepare and create 
derivative works based upon the Works of Authorship and any derivative works 
of such Works of Authorship and to use, reproduce, publish, print, copy, 
market, advertise, distribute, transfer, sell, publicly perform and publicly 
display, and otherwise exploit by all means now known or later developed, 
such Works of Authorship and derivative works anywhere throughout the world.

4.   MORAL RIGHTS.  I hereby irrevocably and unconditionally transfer and assign
to the Company, without any further consideration, any and all Moral Rights (as
defined below) I may have in or with respect to any and all Works of Authorship.
To the extent that I cannot assign such rights, I hereby waive and agree never
to assign such rights against the Company, the Company's successors-in-interest,
or any of their licensees. "Moral Rights" shall mean any right to (i) divulge
such Inventions to the public; (ii) retract such Invention from the public;
(iii) claim authorship of such Invention; (iv) object to any distortion,
mutilation, or other modification of such Invention; and (v) any and all similar
rights, existing under judicial or statutory law of any country or jurisdiction
in the world, or under any treaty regardless of whether or not such right is
called or generally referred to as a "moral right."

5.   ASSIGNMENT OF INVENTIONS.

     (a)  In addition to the foregoing, I hereby assign and transfer to the
Company my entire right, title and interest in and to all Inventions, whether or
not patentable, and whether or not reduced to practice, made, learned or
conceived by me (whether alone or jointly with others) during the period of my
employment with the Company which relate in any manner at the time of conception
or reduction to practice to the actual or demonstrably anticipated research or
product development by the Company or to its business, or result from or are
suggested by any task assigned to me or any work performed by me for or on
behalf of the Company. I agree that all such Inventions shall be the sole and
exclusive property of the Company and its assigns, and the Company and its
assigns shall be the sole owners of all Inventions and any and all patents,
copyrights and other proprietary rights related thereto; provided, however, that
I hereby acknowledge and agree that this Agreement does not require assignments
of an Invention which qualifies fully and expressly for protection under Section
2870 of the California Labor Code.

     (b)  If I have any right or rights to Inventions that cannot be assigned to
the Company or waived by me, I unconditionally grant to the Company during the
term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid
and royalty-free license, with rights to sublicense through multiple levels of
sublicenses, to use, reproduce, publish, create derivative works of, market,
advertise, distribute, sell, publicly perform and publicly display and otherwise
exploit by all means now known or later developed, such Inventions.

6.   DISCLOSURE OF INVENTIONS; PATENTS.  I agree that in connection with any
Invention:

     (a)  I will disclose such Invention promptly in writing to my immediate
supervisor at the Company, with a copy to the Company's then acting Chief
Operating Officer, regardless of whether I believe the invention is protected by
Section 2870 of the California Labor Code, in order to permit the Company to
claim rights to which it may be entitled under this Agreement. Such disclosure
shall be received in confidence by the Company.

     (b)  I will, at the Company's request, promptly execute a written
assignment of title to the Company for any Invention required to be assigned by
Paragraph 4 ("Assignable Invention") and I will preserve any such Assignable
Invention as confidential information of the Company.

     (c)  Upon request, I agree to assist the Company or its nominee (at its
expense) during and at any time subsequent to my employment in every reasonable
way to obtain for its 

                                  Page 13                          June 25, 1999


<PAGE>

own benefit patents and copyrights for such Assignable Inventions in any and 
all countries, which Inventions shall be and remain the sole and exclusive 
property of the Company or its nominee whether or not patented or 
copyrighted. I agree to execute such papers and perform such lawful acts as 
the Company deems to be necessary to allow it to exercise all rights and 
interest in such patents and copyrights.

7.   EXECUTION OF DOCUMENTS.

     (a)  In connection with this Agreement, I further agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all such documents, including application for patents and copyrights and
assignments of inventions, patents and copyrights to be issued therefor, as the
Company may determine necessary or desirable to apply for, and obtain letters,
patents and copyrights on such assignable invention in any and all countries
and/or to protect the interest of the Company or its nominee in such inventions,
patents or copyrights and to vest title thereto in the Company or its nominee.

     (b)  In the event the Company is unable, after reasonable efforts, to
secure my signature on any document or documents needed to apply for or
prosecute any patent, copyright or other right of protection relating to an
Invention, whether because of my physical or mental incapacity or for any other
reason whatsoever, I hereby irrevocably designate and appoint the Company and
its duly authorized officers and agents as my agent and attorney-in-fact, to act
for and in my behalf and stead to execute and file any such application or
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of patents, copyrights or similar protections thereon
with the same legal force and effect as if executed by me; it is being expressly
understood and intended by me that the grant of the foregoing irrevocable power
of attorney is coupled with an interest.

8.   MAINTENANCE OF RECORDS.  I agree to keep and maintain adequate and current
written records of all inventions made by me (in the form of notes, sketches,
and drawings as may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all times.

9.   PRIOR INVENTIONS.  It is understood that all Inventions, if any, patented
or unpatented, which are made by me prior to my employment by the Company, are
excluded from the scope of this Agreement. To preclude any possible uncertainty,
I have set forth on Exhibit I attached to this Agreement a complete list of all
my prior Inventions, including those which are the property of a previous
employer. I represent and covenant that the list is complete and that, if no
items are on the list, I have no such prior Inventions. I agree to notify the
Company in writing before I make any disclosure or perform any work on behalf of
the Company which appears to threaten or conflict with proprietary rights I
claim in any Invention or idea. In the event of my failure to give such notice,
I agree that I will make no claim against the Company with respect to such
Inventions or ideas.

10.  RETURN OF COMPANY PROPERTY.  I acknowledge and agree that all files,
accounts, records, materials, documents, drawings, sketches, designs, diagrams,
models, blue-prints, plans, specifications, manuals, books, forms, receipts,
notes, reports, memoranda, studies, data, calculations, recordings, catalogues,
compilations of information, correspondence and all copies, abstracts and
summaries of the foregoing, instruments, tools and equipment and all other
physical items related to the Company or to my employment with the Company,
other than merely personal items, whether of a public nature or not, and whether
prepared by me or not, are and shall remain the sole and exclusive property of
the Company and shall not be removed from the premises of the Company, except as
required in the course of employment by the Company, without prior written
consent of the Company in each instance. In the event of termination of my
employment with the Company for any reason whatsoever, I agree to promptly
surrender and deliver to the Company all of the foregoing property, and I will
not take with me any description containing or pertaining to any Proprietary
Information which I may produce or obtain during the course of my employment. I
agree to sign and deliver the "Termination Certification" attached to this
Agreement as Exhibit II.

                                  Page 14                          June 25, 1999


<PAGE>

11.  TRADE SECRETS OF OTHERS.  I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence Proprietary Information, knowledge or data
acquired by me in confidence or in trust prior to my employment with the
Company, and during my employment by the Company, I will not improperly use or
disclose to the Company, or induce the Company to use, any confidential or
proprietary information or material belonging to any previous employer or other
parties. I have not brought and will not bring onto the premises of the Company
or use in the performance of my responsibilities at the Company any unpublished
documents or any property belonging to any previous employer or any other person
to whom I have an obligation of confidentiality unless consented to in writing
by that previous employer or person.  I agree not to enter into any agreement
either written or oral in conflict with this Agreement.

12.  CONFLICTING EMPLOYMENT.  I agree that during my employment with the
Company, I will not engage in any other employment, occupation, consulting or
other activity relating to the business in which the Company is now or may
hereafter become engaged, or which would otherwise conflict with my obligations
to the Company.

13.  ENFORCEMENT.

     (a)  I understand and agree that in the event of a prospective or actual
breach of this Agreement by me, damages would not be an adequate remedy to
compensate the Company for the losses suffered as a result of such breach.
Accordingly, in addition to all other rights and remedies the Company has at law
or in equity, in the event of a threatened or actual breach of any of the terms
and provisions of this Agreement, the Company shall be entitled to a temporary
restraining order, and to temporary and permanent injunctive relief, to prevent
or terminate such anticipated or actual breach, without the necessity of proving
actual damages or being required to post any bond or other undertaking in
connection with any such action, provided that nothing in this Agreement shall
be construed to limit the damages otherwise recoverable by the Company in any
such event.

     (b)  In addition, the Company shall have the right to inform any person,
company, organization or business entity, and the principals of the foregoing,
and any other third parties that the Company reasonably believes to be receiving
or intending to receive from me any Proprietary Information in violation of the
terms of this Agreement, that participation by such entity or persons with me in
activities in violation of this Agreement may give rise to claims by Activision
against such entity, persons or third parties.

14.  PURPOSE AND INTENT.  I acknowledge and agree that this Agreement does not
constitute an agreement of employment and that nothing in this Agreement shall
confer any right upon me with respect to my employment by the Company,
including, without limitation continuation of such employment.

15.  REPRESENTATIONS.  I represent and warrant to the Company that:

     (a)  This Agreement does not constitute a violation of any other agreement
to which I am a party and it has been executed and delivered by me after having
an opportunity to consult with my legal and other professional counsel and
advisors.

     (b)  I have full power and authority to enter into, and have obtained all
necessary authorizations and approvals required for the execution and deliver
of, this Agreement.

     (c)  I have taken all necessary actions to execute and deliver this
Agreement, and this Agreement constitutes my valid and binding agreement,
enforceable in accordance with its terms.

16.  MODIFICATION.  This Agreement may not be changed, modified, released,
discharged, abandoned, or otherwise amended, in whole or in part, except by an
instrument in 

                                  Page 15                          June 25, 1999


<PAGE>

writing, signed by me and the Company. I agree that any subsequent change or 
changes in duties, salary, or compensation shall not affect the validity of 
this Agreement.

17.  ENTIRE AGREEMENT.  I acknowledge receipt of this Agreement, and agree that
with respect to the subject matter of this Agreement it is my entire agreement
with the Company, superseding any previous written communications,
representations, understandings or agreements with the Company or any of its
officers or representatives.

18.  SEVERABILITY.  The provisions of this Agreement are severable and if any
one or more provisions may be determined to be unenforceable, in whole or in
part, the remaining provisions, and any partially unenforceable provisions to
the extent enforceable, shall nevertheless be binding and enforceable.

19.  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon my heirs,
executors, administers and other legal representatives and is for the benefit of
the Company, its successors and assigns.

20.  GOVERNING LAW.  This Agreement has been executed and delivered by the
parties hereto in California, and shall be governed by and construed in
accordance with the internal laws (and not laws pertaining to conflicts or
choice of law) of the State of California in all respects, including all matters
of validity, construction and performance of this Agreement.  All parties
consent to the exercise of personal jurisdiction over them in California and
agree that any lawsuit or arbitration arising out of or relating to this
Agreement shall be brought exclusively in a court of competent subject matter
jurisdiction located within the County of Los Angeles, State of California.

21.  COUNTERPARTS.  This Agreement may be signed in two counterparts, each of
which shall be deemed an original and both of which shall together constitute
one agreement.

22.  FAILURE TO ENFORCE.  The failure of the Company to enforce any threatened
or existing violation, default or breach of this Agreement shall not be deemed a
waiver of such a violation, default or breach, and the Company shall have the
right to enforce the same at a later time and the right to waive in writing any
condition imposed herein for its benefit without thereby waiving any other
provision or condition.

ACTIVISION, INC.

By:
   ---------------------------------

Name:
     -------------------------------

Title:
      ------------------------------

Date:
     -------------------------------

Accepted and Agreed:


By:
   ---------------------------------   ---------------------------------
   Employee Signature                  Employee Name (Please Print)


Title:
      ------------------------------
      Employee Job Title

Date:
     -------------------------------

------------------------------------



                                  Page 16                          June 25, 1999

<PAGE>

Witness

                                  Page 17                          June 25, 1999


<PAGE>

                                     EXHIBIT I

                              LIST OF PRIOR INVENTIONS



TITLE             DATE                IDENTIFYING NUMBER OR DESCRIPTION


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                                  Page 18                          June 25, 1999

<PAGE>

                                     EXHIBIT II

                             TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to
return, any files, accounts, records, materials, documents, drawings, sketches,
designs, diagrams, models, blue-prints, plans, specifications, manuals, books,
forms, receipts, notes, reports, memoranda, studies, data, calculations,
recordings, catalogues, compilations of information, correspondence and all
copies, abstracts and summaries of the foregoing, instruments, tools and
equipment and all other physical items that are property of Activision, Inc.
(the "Company") or are otherwise related to my employment with the Company, or
any other property belonging to the Company and/or companies it owns, controls,
or is affiliated with, or their respective successors and assigns.

I further certify that I have complied with and will continue to comply with all
terms of the Employee Proprietary Information Agreement signed by me with the
Company, including, without limitation, the reporting of any Inventions (as
defined therein) conceived or made by me and covered by such agreement.

I further agree that in compliance with the Employee Proprietary Information
Agreement, I will preserve as confidential all trade secrets, confidential
information, knowledge, data or other information relating to products,
processes, know-how, designs, formulas, test data, customer lists and other
information identified as "Proprietary Information" of the Company, companies it
owns, controls, or which are affiliated with the Company, or their successors
and assigns under the terms of the Employee Proprietary Information Agreement.


-----------------------------------    ---------------------------------------
Employee Signature                          Date


                                  Page 19                          June 25, 1999




<PAGE>
                                 EXHIBIT 10.13


                                                                   March 4, 1999


Mr. Lawrence Goldberg
1156 Via de la Paz
Pacific Palisades, California 90272


Dear Mr. Goldberg:

This letter confirms the terms of your employment by Activision, Inc. 
("Employer").

1.   TERM

     The term of your employment under this agreement shall commence on 
April 1, 1999 and expire on April 1, 2001, unless earlier terminated as 
provided below.

2.   SALARY

     (a)  In full consideration for all rights and services provided by you 
under this agreement, you shall receive an annual base salary of $220,000 
during the first year of the term and an annual base salary of $240,000 
during the second year of the term

     (b)  Base salary payments shall be made in accordance with Employer's 
then prevailing payroll policy.  Each base salary referred to in Paragraph 2(a) 
shall constitute your minimum base salary during the applicable period, and 
your base salary may be increased above the minimum at any time if Employer's 
Board of Directors (or the Compensation Committee of such Board of Directors), 
in its sole and absolute discretion, elects to do so.  In the event of an 
increase in your base salary beyond the applicable minimum base salary for a 
particular period, such increased base salary shall then constitute your 
minimum
 base salary for all subsequent periods under this agreement.

     (c)  Notwithstanding anything to the contrary set forth above, but 
subject to the right of termination granted to you pursuant to Paragraph 10(b), 
Employer shall not be required to actually use your services, and payment of 
your base salary during the applicable period of your employment under this 
agreement will discharge Employer's obligations to you hereunder.  Such 
payment, however, will not discharge your obligations to Employer hereunder.

     (d)  In addition to your base salary, you shall be eligible to receive 
an annual performance base bonus of up to sixty percent (60%) of your annual 
base salary, in compliance with Employer's standard bonus plan which is 
established on a yearly basis by Employer's senior management and Board of 
Directors (or the Compensation Committee of such Board of Directors) and is 
based on a number of factors that may 


                                    Page 1                         March 4, 1999

<PAGE>

include, without limitation, the achievement of corporate earnings, return on 
equity goals, as well as discretionary component which will be based upon 
your individual performance, achievement of objectives and contribution to 
the success of the corporate goals and objectives.

     (e)  You also are being granted, under Employer's existing or modified 
stock option plan, options to purchase 33,000 shares of Employer's common 
stock. The options will be issued on March 4, 1999 and will vest ratably over 
three years, with one third (1/3) of the amount granted vesting at the end of 
each such year.  Such options will have an exercise price that will be the 
market price of such common stock on the date the options are issued and will 
be governed in all other respects by Employer's stock option plan in effect 
at the time of grant.  You also shall be eligible to receive additional 
options, under Employer's existing or modified stock option plan, if 
Employer's Board of Directors (or the Compensation Committee of such Board of 
Directors), in its sole and absolute discretion, determines that the grant to 
you of additional options is appropriate.

3.   TITLE

     You are being employed under this agreement in the position of Senior 
Vice President, Business Affairs and General Counsel.

4.   DUTIES

     You shall personally and diligently perform, on a full-time and 
exclusive basis, such services as Employer or any of its divisions may 
reasonably require, provided that such services are consistent with your 
position with Employer. You shall observe all reasonable rules and 
regulations adopted by Employer in connection with the operation of its 
business and carry out all instructions of Employer.  You will at all times 
perform all of the duties and obligations required by you under this 
agreement in a loyal and conscientious manner and to the best of your ability 
and experience.

5.   EXPENSES

     To the extent you incur necessary and reasonable business expenses in 
the course of your employment, you shall be reimbursed for such expenses, 
subject to Employer's then current policies regarding reimbursement of such 
business expenses.

6.   OTHER BENEFITS

     You shall be entitled to those benefits which are standard for persons 
in similar positions with Employer, including coverage under Employer's 
health, life insurance and disability plans, and eligibility to participate 
in Employer's 401(k) plan.  Nothing paid to you under any such plans and 
arrangements (nor any bonus or stock options 


                                    Page 2                         March 4, 1999

<PAGE>

which Employer's Board of Directors (or the Compensation Committee of such 
Board of Directors), in its sole and absolute discretion, shall provide to 
you) shall be deemed in lieu, or paid on account, of your base salary.  You 
expressly agree and acknowledge that after expiration or early termination of 
the term of your employment under this agreement, you are entitled to no 
additional benefits not expressly set forth in this agreement, except as 
specifically provided under the benefit plans referred to above and those 
benefit plans in which you subsequently may become a participant, and subject 
in each case to the terms and conditions of each such plan.  Notwithstanding 
anything to the contrary set forth above, you shall be eligible to receive 
those benefits provided by COBRA upon the expiration or early termination of 
the term of your employment under this Agreement.

7.   VACATION AND PAID HOLIDAYS

     (a)  You will be entitled to paid vacation days in accordance with the 
normal vacation policies of Employer in effect from time to time, provided 
that in no event shall you be entitled to less than fifteen (15) days of paid 
vacation per year.

     (b)  You shall be entitled to all paid holidays given by Employer to its 
full-time employees.

     (c)  You also shall be eligible to receive paid time off in addition to 
your paid vacation days and paid holidays if Employer, in its sole and 
absolute discretion, determines that your receipt of such additional paid 
time off is appropriate.

8.   PROTECTION OF EMPLOYER'S INTERESTS

     During the term of your employment by Employer, you will not compete in 
any manner, whether directly or indirectly, as a principal, employee, agent 
or owner, with Employer, or any affiliate of Employer, except that the 
foregoing will not prevent you from holding at any time less than five 
percent (5%) of the outstanding capital stock of any company whose stock is 
publicly traded.  All rights worldwide with respect to any and all 
intellectual or other property of any nature produced, created or suggested 
by you during the term of your employment or resulting from your services 
which (i) relate in any manner at the time of conception or reduction to 
practice to the actual or demonstrably anticipated business of Employer, 
(ii) result from or are suggested by any task assigned to you or any work 
performed by you on behalf of Employer, or (iii) are based on any property 
owned or idea conceived by Employer, shall be deemed to be a work made for 
hire and shall be the sole and exclusive property of Employer. You agree to 
execute, acknowledge and deliver to Employer, at Employer's request, such 
further documents, including copyright and patent assignments, as Employer 
finds appropriate to evidence Employer's rights in such property.  Any 
confidential and/or proprietary information of Employer or any affiliate of 
Employer shall not be used by you or 


                                    Page 3                         March 4, 1999

<PAGE>

disclosed or made available by you to any person except as required in the 
course of your employment, and upon expiration or earlier termination of the 
term of your employment, you shall return to Employer all such information 
which exists in written or other physical form (and all copies thereof) under 
your control.  Without limiting the generality of the foregoing, you 
acknowledge signing and delivering to Employer the Activision Employee 
Proprietary Information Agreement and you agree that all terms and conditions 
contained in such agreement, and all of your obligations and commitments 
provided for in such agreement, shall be deemed, and hereby are, incorporated 
into this agreement as if set forth in full herein.  The provisions of the 
immediately preceding four sentences of this paragraph shall survive the 
expiration or earlier termination of this agreement.

9.   SERVICES UNIQUE

     You recognize that the services being performed by you under this 
agreement are of a special, unique, unusual, extraordinary and intellectual 
character giving them a peculiar value, the loss of which cannot be 
reasonably or adequately compensated for in damages, and in the event of a 
breach of this agreement by you (particularly, but without limitation, with 
respect to the provisions hereof relating to the exclusivity of your services 
and the provisions of paragraph 8 of this agreement), Employer shall, in 
addition to all other remedies available to it, be entitled to equitable 
relief by way of injunction and any other legal or equitable remedies.

10.  TERMINATION

     (a)  At any time during the term of your employment, Employer may 
terminate your employment under this agreement for (i) your willful, reckless 
or gross misconduct, (ii) your material breach of any term or provision of 
this agreement, or (iii) for other good cause, as such term is defined under 
California law.

     (b)  You may terminate your employment under this agreement (i) upon any 
relocation of the place at which you primarily are performing your services 
to Employer to a location which is outside the metropolitan Los Angeles area, 
(ii) if Employer elects to not actually use your services and continues to 
pay your base salary pursuant to Paragraph 2(c) above for a period of one 
hundred twenty (120) consecutive days, or (iii) in the event Employer 
commences the production or distribution of an entertainment software or 
other product which is pornographic.

     (c)  In the event of the termination of your employment under this 
agreement pursuant to Paragraphs 10(a) or 10(b), all obligations of Employer 
to you under this agreement shall immediately terminate.


                                    Page 4                         March 4, 1999

<PAGE>

     (d)  In the event of your death during the term of this agreement, this 
agreement shall terminate and Employer only shall be obligated to pay your 
estate or legal representative the salary provided for above to the extent 
earned by you prior to such event.  In the event you are unable to perform 
the services required of you under this agreement as a result of any 
disability, and such disability continues for a period of 60 or more 
consecutive days or an aggregate of 90 or more days during any 12-month 
period during the term of this agreement, then Employer shall have the right, 
at its option, to terminate your employment under this agreement.  Unless and 
until so terminated, during any period of disability during which you are 
unable to perform the services required of you under this agreement, your 
base salary shall be payable to the extent of, and subject to, Employer's 
policies and practices then in effect with regard to sick leave and 
disability benefits.

11.  USE OF EMPLOYEE'S NAME

     Employer shall have the right, but not the obligation, to use your name 
or likeness for any publicity or advertising purpose.

12.  ASSIGNMENT

     Employer may assign this agreement or all or any part of its rights 
under this agreement to any entity which succeeds to all or substantially all 
of Employer's assets (whether by merger, acquisition, consolidation, 
reorganization or otherwise) or which Employer may own substantially, and 
this agreement shall inure to the benefit of such assignee.

13.  NO CONFLICT WITH PRIOR AGREEMENTS

     You represent to Employer that neither your commencement of employment 
under this agreement nor the performance of your duties under this agreement 
conflicts or will conflict with any contractual commitment on your part to 
any third party, nor does it or will it violate or interfere with any rights 
of any third party.


                                    Page 5                         March 4, 1999

<PAGE>

14.  POST-TERMINATION OBLIGATIONS

     After the expiration or earlier termination of your employment under 
this agreement for any reason whatsoever, you shall not, either alone or 
jointly, with or on behalf of others, directly or indirectly, whether as 
principal, partner, agent, shareholder, director, employee, consultant or 
otherwise, at any time during a period of one (1) year following such 
expiration or termination, offer employment to, or solicit the employment or 
engagement of, or otherwise entice away from the employment of Employer or 
any affiliated entity, either for your own account or for any other person 
firm or company, any person who was employed by Employer or any such 
affiliated entity on the last day of your employment under this agreement, 
whether or not such person would commit any breach of his or her contract of 
employment by reason of his or her leaving the service of Employer or any 
affiliated entity.

15.  ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.

     (a)  This agreement supersedes all prior or contemporaneous agreements 
and statements, whether written or oral, concerning the terms of your 
employment with Employer, and no amendment or modification of this agreement 
shall be binding against Employer unless set forth in a writing signed by 
Employer and delivered to you.

     (b)  You have given no indication, representation or commitment of any 
nature to any broker, finder, agent or other third party to the effect that 
any fees or commissions of any nature are, or under any circumstances might 
be, payable by Employer or any affiliate of Employer in connection with your 
employment under this agreement.

     (c)  No waiver by either party of any breach by the other party of any 
provision or condition of this agreement shall be deemed a waiver of any 
similar or dissimilar provision or condition at the same or any prior or 
subsequent time.

     (d)  Nothing contained in this agreement shall be construed so as to 
require the commission of any act contrary to law and wherever there is any 
conflict between any provision of this agreement and any present or future 
statute, law, ordinance or regulation, the latter shall prevail, but in such 
event the provision of this agreement affected shall be curtailed and limited 
only to the extent necessary to bring it within legal requirements.

     (e)  This agreement does not constitute a commitment of Employer with 
regard to your employment, express or implied, other than to the extent 
expressly provided for herein.  Upon termination of this agreement, it is the 
contemplation of both parties that your employment with Employer shall cease, 
and that neither Employer nor you shall have any obligation to the other with 
respect to continued employment.  In the event that your employment continues 
for a period of time following the stated expiration 


                                    Page 6                         March 4, 1999

<PAGE>

date of this contract, unless and until agreed to in a new subscribed written 
document, such employment or any continuation thereof is "at will," and may 
be terminated without obligation at any time by either party giving notice to 
the other.

     (f)  You hereby acknowledge that you have had an opportunity to seek 
legal counsel of your own choice regarding the effect and import of entering 
into this Agreement.

     (g)  This agreement shall be governed by and construed in accordance 
with the laws of the State of California without regard to conflict of law 
principles.

     (h)  In accordance with the Immigration Reform and Control Act of 1986, 
employment under this agreement is conditioned upon satisfactory proof of 
your identity and legal ability to work in the United States.

     (i)  To the extent permitted by law, you will keep the terms of this 
agreement confidential, and you will not disclose any information concerning 
this agreement to anyone other than your immediate family and professional 
representatives (provided they also agree to keep the terms of this agreement 
confidential).

16.  NOTICES

     All notices which either party is required or may desire to give the 
other shall be in writing and given either personally or by depositing the 
same in the United States mail addressed to the party to be given notice as 
follows:

     To Employer:        3100 Ocean Park Boulevard
                         Santa Monica, California 90405
                         Attention: President and
                         Chief Operating Officer

     To Employee:        1156 Via de la Paz
                         Pacific Palisades, California 90272

     Either party may by written notice designate a different address for 
giving of notices.  The date of mailing of any such notices shall be deemed 
to be the date on which such notice is given.


                                    Page 7                         March 4, 1999

<PAGE>

17.  HEADINGS

     The headings set forth herein are included solely for the purpose of 
identification and shall not be used for the purpose of construing the 
meaning of the provisions of this agreement.

     If the foregoing accurately reflects our mutual agreement, please sign 
where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                                         EMPLOYEE

By:                                    By:
   --------------------------------       ------------------------------------
   Ron Doornink                           Lawrence Goldberg
   President and Chief
   Operating Officer

Date:                                  Date:
     ------------------------------         ----------------------------------



                                    Page 8                         March 4, 1999



<PAGE>

                                   EXHIBIT 10.14

                                                                   March 4, 1999

Mr. Barry J. Plaga
2421 Frances Street
La Crescenta, California  91214

Dear Mr. Plaga:

This letter confirms the terms of your employment by Activision, Inc.
("Employer").

1.   TERM

     The term of your employment under this agreement shall commence on April 1,
1999 and expire on April 18, 2001, unless earlier terminated as provided below.

2.   SALARY

     (a)  In full consideration for all rights and services provided by you
under this agreement, you shall receive an annual base salary of $190,000 during
the first year of the term and an annual base salary of $195,000 during the
second year of the term

     (b)  Base salary payments shall be made in accordance with Employer's then
prevailing payroll policy.  Each base salary referred to in Paragraph 2(a) shall
constitute your minimum base salary during the applicable period, and your base
salary may be increased above the minimum at any time if Employer's Board of
Directors (or the Compensation Committee of such Board of Directors), in its
sole and absolute discretion, elects to do so.  In the event of an increase in
your base salary beyond the applicable minimum base salary for a particular
period, such increased base salary shall then constitute your minimum base
salary
 for all subsequent periods under this agreement.

     (c)  Notwithstanding anything to the contrary set forth above, but subject
to the right of termination granted to you pursuant to Paragraph 10(b), Employer
shall not be required to actually use your services, and payment of your base
salary during the applicable period of your employment under this agreement will
discharge Employer's obligations to you hereunder.  Such payment, however, will
not discharge your obligations to Employer hereunder.

     (d)  In addition to your base salary, you shall be eligible to receive an
annual performance base bonus of up to sixty percent (60%) of your annual base
salary, in compliance with Employer's standard bonus plan which is established
on a yearly basis by Employer's senior management and Board of Directors (or the
Compensation Committee of such Board of Directors) and is based on a number of
factors that may 

                                  Page 1                           March 4, 1999

<PAGE>

include, without limitation, the achievement of corporate earnings, return on 
equity goals, as well as discretionary component which will be based upon 
your individual performance, achievement of objectives and contribution to 
the success of the corporate goals and objectives.

     (e)  You also shall be eligible to receive additional options to purchase
shares of Employer's common stock, under Employer's existing or modified stock
option plan, if Employer's Board of Directors (or the Compensation Committee of
such Board of Directors), in its sole and absolute discretion, determines that
the grant to you of additional options is appropriate.

3.   TITLE

     You are being employed under this agreement in the position of Senior Vice
President and Chief Financial Officer.

4.   DUTIES

     You shall personally and diligently perform, on a full-time and exclusive
basis, such services as Employer or any of its divisions may reasonably require,
provided that such services are consistent with your position with Employer.
You shall observe all reasonable rules and regulations adopted by Employer in
connection with the operation of its business and carry out all instructions of
Employer.  You will at all times perform all of the duties and obligations
required by you under this agreement in a loyal and conscientious manner and to
the best of your ability and experience.

5.   EXPENSES

     To the extent you incur necessary and reasonable business expenses in the
course of your employment, you shall be reimbursed for such expenses, subject to
Employer's then current policies regarding reimbursement of such business
expenses.

6.   OTHER BENEFITS

     You shall be entitled to those benefits which are standard for persons in
similar positions with Employer, including coverage under Employer's health,
life insurance and disability plans, and eligibility to participate in
Employer's 401(k) plan.  Nothing paid to you under any such plans and
arrangements (nor any bonus or stock options which Employer's Board of Directors
(or the Compensation Committee of such Board of Directors), in its sole and
absolute discretion, shall provide to you) shall be deemed in lieu, or paid on
account, of your base salary.  You expressly agree and acknowledge that after
expiration or early termination of the term of your employment under this
agreement, you are entitled to no additional benefits not expressly set forth in
this agreement, except as specifically provided under the benefit plans referred
to above and 

                                  Page 2                           March 4, 1999

<PAGE>

those benefit plans in which you subsequently may become a participant, and 
subject in each case to the terms and conditions of each such plan.  
Notwithstanding anything to the contrary set forth above, you shall be 
eligible to receive those benefits provided by COBRA upon the expiration or 
early termination of the term of your employment under this Agreement.

7.   VACATION AND PAID HOLIDAYS

     (a)  You will be entitled to paid vacation days in accordance with the
normal vacation policies of Employer in effect from time to time, provided that
in no event shall you be entitled to less than fifteen (15) days of paid
vacation per year.

     (b)  You shall be entitled to all paid holidays given by Employer to its
full-time employees.

     (c)  You also shall be eligible to receive paid time off in addition to
your paid vacation days and paid holidays if Employer, in its sole and absolute
discretion, determines that your receipt of such additional paid time off is
appropriate.

8.   PROTECTION OF EMPLOYER'S INTERESTS

     During the term of your employment by Employer, you will not compete in any
manner, whether directly or indirectly, as a principal, employee, agent or
owner, with Employer, or any affiliate of Employer, except that the foregoing
will not prevent you from holding at any time less than five percent (5%) of the
outstanding capital stock of any company whose stock is publicly traded.  All
rights worldwide with respect to any and all intellectual or other property of
any nature produced, created or suggested by you during the term of your
employment or resulting from your services which (i) relate in any manner at the
time of conception or reduction to practice to the actual or demonstrably
anticipated business of Employer, (ii) result from or are suggested by any task
assigned to you or any work performed by you on behalf of Employer, or (iii) are
based on any property owned or idea conceived by Employer, shall be deemed to be
a work made for hire and shall be the sole and exclusive property of Employer.
You agree to execute, acknowledge and deliver to Employer, at Employer's
request, such further documents, including copyright and patent assignments, as
Employer finds appropriate to evidence Employer's rights in such property.  Any
confidential and/or proprietary information of Employer or any affiliate of
Employer shall not be used by you or disclosed or made available by you to any
person except as required in the course of your employment, and upon expiration
or earlier termination of the term of your employment, you shall return to
Employer all such information which exists in written or other physical form
(and all copies thereof) under your control.  Without limiting the generality of
the foregoing, you acknowledge signing and delivering to Employer the Activision
Employee Proprietary Information Agreement and you agree that all terms 

                                  Page 3                           March 4, 1999

<PAGE>

and conditions contained in such agreement, and all of your obligations and 
commitments provided for in such agreement, shall be deemed, and hereby are, 
incorporated into this agreement as if set forth in full herein.  The 
provisions of the immediately preceding four sentences of this paragraph 
shall survive the expiration or earlier termination of this agreement.

9.   SERVICES UNIQUE

     You recognize that the services being performed by you under this agreement
are of a special, unique, unusual, extraordinary and intellectual character
giving them a peculiar value, the loss of which cannot be reasonably or
adequately compensated for in damages, and in the event of a breach of this
agreement by you (particularly, but without limitation, with respect to the
provisions hereof relating to the exclusivity of your services and the
provisions of paragraph 8 of this agreement), Employer shall, in addition to all
other remedies available to it, be entitled to equitable relief by way of
injunction and any other legal or equitable remedies.

10.  TERMINATION

     (a)  At any time during the term of your employment, Employer may terminate
your employment under this agreement for (i) your willful, reckless or gross
misconduct, (ii) your material breach of any term or provision of this
agreement, or (iii) for other good cause, as such term is defined under
California law.

     (b)  You may terminate your employment under this agreement (i) upon any
relocation of the place at which you primarily are performing your services to
Employer to a location which is outside the metropolitan Los Angeles area, (ii)
if Employer elects to not actually use your services and continues to pay your
base salary pursuant to Paragraph 2(c) above for a period of one hundred twenty
(120) consecutive days, or (iii) in the event Employer commences the production
or distribution of an entertainment software or other product which is
pornographic.

     (c)  In the event of the termination of your employment under this
agreement pursuant to Paragraphs 10(a) or 10(b), all obligations of Employer to
you under this agreement shall immediately terminate.

     (d)  In the event of your death during the term of this agreement, this
agreement shall terminate and Employer only shall be obligated to pay your
estate or legal representative the salary provided for above to the extent
earned by you prior to such event.  In the event you are unable to perform the
services required of you under this agreement as a result of any disability, and
such disability continues for a period of 60 or more consecutive days or an
aggregate of 90 or more days during any 12-month period during the term of this
agreement, then Employer shall have the right, at its option, to 

                                  Page 4                           March 4, 1999

<PAGE>

terminate your employment under this agreement.  Unless and until so 
terminated, during any period of disability during which you are unable to 
perform the services required of you under this agreement, your base salary 
shall be payable to the extent of, and subject to, Employer's policies and 
practices then in effect with regard to sick leave and disability benefits.

11.  USE OF EMPLOYEE'S NAME

     Employer shall have the right, but not the obligation, to use your name or
likeness for any publicity or advertising purpose.

12.  ASSIGNMENT

     Employer may assign this agreement or all or any part of its rights under
this agreement to any entity which succeeds to all or substantially all of
Employer's assets (whether by merger, acquisition, consolidation, reorganization
or otherwise) or which Employer may own substantially, and this agreement shall
inure to the benefit of such assignee.

13.  NO CONFLICT WITH PRIOR AGREEMENTS

     You represent to Employer that neither your commencement of employment
under this agreement nor the performance of your duties under this agreement
conflicts or will conflict with any contractual commitment on your part to any
third party, nor does it or will it violate or interfere with any rights of any
third party.

14.  POST-TERMINATION OBLIGATIONS

     After the expiration or earlier termination of your employment under this
agreement for any reason whatsoever, you shall not, either alone or jointly,
with or on behalf of others, directly or indirectly, whether as principal,
partner, agent, shareholder, director, employee, consultant or otherwise, at any
time during a period of one (1) year following such expiration or termination,
offer employment to, or solicit the employment or engagement of, or otherwise
entice away from the employment of Employer or any affiliated entity, either for
your own account or for any other person firm or company, any person who was
employed by Employer or any such affiliated entity on the last day of your
employment under this agreement, whether or not such person would commit any
breach of his or her contract of employment by reason of his or her leaving the
service of Employer or any affiliated entity.

15.  ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.

     (a)  This agreement supersedes all prior or contemporaneous agreements and
statements, whether written or oral, concerning the terms of your employment
with 

                                  Page 5                           March 4, 1999

<PAGE>

Employer, and no amendment or modification of this agreement shall be binding 
against Employer unless set forth in a writing signed by Employer and 
delivered to you.  Without limiting the generality of the foregoing, you 
acknowledge that this agreement supersedes your prior written agreement with 
Employer dated as of April 1, 1997, and upon the commencement of your 
employment under this agreement, such prior agreement will be terminated and 
of no further force and effect.

     (b)  You have given no indication, representation or commitment of any
nature to any broker, finder, agent or other third party to the effect that any
fees or commissions of any nature are, or under any circumstances might be,
payable by Employer or any affiliate of Employer in connection with your
employment under this agreement.

     (c)  No waiver by either party of any breach by the other party of any
provision or condition of this agreement shall be deemed a waiver of any similar
or dissimilar provision or condition at the same or any prior or subsequent
time.

     (d)  Nothing contained in this agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this agreement and any present or future
statute, law, ordinance or regulation, the latter shall prevail, but in such
event the provision of this agreement affected shall be curtailed and limited
only to the extent necessary to bring it within legal requirements.

     (e)  This agreement does not constitute a commitment of Employer with
regard to your employment, express or implied, other than to the extent
expressly provided for herein.  Upon termination of this agreement, it is the
contemplation of both parties that your employment with Employer shall cease,
and that neither Employer nor you shall have any obligation to the other with
respect to continued employment.  In the event that your employment continues
for a period of time following the stated expiration date of this contract,
unless and until agreed to in a new subscribed written document, such employment
or any continuation thereof is "at will," and may be terminated without
obligation at any time by either party giving notice to the other.

     (f)  You hereby acknowledge that you have had an opportunity to seek legal
counsel of your own choice regarding the effect and import of entering into this
Agreement.

     (g)  This agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to conflict of law
principles.

     (h)  In accordance with the Immigration Reform and Control Act of 1986,
employment under this agreement is conditioned upon satisfactory proof of your
identity and legal ability to work in the United States.

                                  Page 6                           March 4, 1999

<PAGE>

     (i)  To the extent permitted by law, you will keep the terms of this
agreement confidential, and you will not disclose any information concerning
this agreement to anyone other than your immediate family and professional
representatives (provided they also agree to keep the terms of this agreement
confidential).

16.  NOTICES

     All notices which either party is required or may desire to give the other
shall be in writing and given either personally or by depositing the same in the
United States mail addressed to the party to be given notice as follows:

     To Employer:   3100 Ocean Park Boulevard
                    Santa Monica, California  90405
                    Attention: President and
                    Chief Operating Officer

     To Employee:   2421 Frances Street
                    La Crescenta, California  91214

     Either party may by written notice designate a different address for giving
of notices.  The date of mailing of any such notices shall be deemed to be the
date on which such notice is given.

17.  HEADINGS

     The headings set forth herein are included solely for the purpose of
identification and shall not be used for the purpose of construing the meaning
of the provisions of this agreement.

     If the foregoing accurately reflects our mutual agreement, please sign
where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                               EMPLOYEE

By:                                    By:
   --------------------------------       ------------------------------------
   Ron Doornink                           Barry J. Plaga
   President and Chief
   Operating Officer

Date:                                  Date:
     -------------------------------        ----------------------------------



                                  Page 7                           March 4, 1999




<PAGE>

                                 EXHIBIT 10.15


                                                             As of April 1, 1998


Mr. Mitchell Lasky
10368 Ilona Avenue
Los Angeles, California  90064


Dear Mr. Lasky:

This letter confirms the terms of your employment by Activision, Inc. 
("Employer").

1.   TERM

     The term of your employment under this agreement shall commence on 
April 1, 1998 and expire on April 1, 2001, unless earlier terminated as 
provided below.

2.   SALARY

     (a)  In full consideration for all rights and services provided by you 
under this agreement, and subject to the provisions of Paragraph 2(b) of this 
agreement, you shall receive a base salary at the annual rate of $225,000 
during the first year of the term, $245,000 during the second year of the 
term, and $260,000 during the third year of the term.

     (b)  Notwithstanding the provisions of Paragraph 2(a) of this agreement, 
if the actual operating income for the division(s) of Employer over which you 
have primary authority and responsibility during Employer's fiscal year 
ending March 31, 1999 (the "FY99 Operating Income") is greater than 107.5%, 
but less than or equal to 115%, of the established target for such division(s) 
as set forth in Employer's internally published annual operating plan for 
such fiscal year, then your annual base salary for the second year of the 
term will be
 $247,500.  If the FY Operating Income exceeds 115% of the 
established target for such division(s), then your annual base salary will be 
$258,750.  If the actual operating income for the division(s) of Employer 
over which you have primary authority and responsibility during Employer's 
fiscal year ending March 31, 2000 (the "FY 2000 Operating Income") is greater 
than 100%, but less than or equal to 107.5%, of the established target for 
such division(s) as set forth in Employer's internally published annual 
operating plan for such fiscal year, then your annual base salary during the 
third year of the term will be 106% of your annual base salary for the second 
year of the term.  If the FY 2000 Operating Income is greater than 107.5%, 
but less than or equal to 115%, of the established target for such division(s), 
then your annual base salary during the third year of the term will be 110% 
of your annual base salary for the 


                                    Page 1                         June 25, 1999

<PAGE>

second year of the term.  If the FY 2000 Operating Income is greater than 
115% of the established target for such division(s), then your annual base 
salary during the third year of the term will be 115% of your annual base 
salary for the second year of the term.

     (c)  All base salary payments shall be made to you in accordance with 
Employer's then prevailing payroll policy.

     (d)  Notwithstanding anything to the contrary set forth above, but 
subject to the right of termination granted to you pursuant to Paragraph 11(b), 
Employer shall not be required to actually use your services, and payment of 
your base salary during the applicable period of your employment under this 
agreement will discharge Employer's obligations to you hereunder.  Such 
payment, however, will not discharge your obligations to Employer hereunder.

     (e)  In addition to your base salary, you shall be eligible to receive 
bonus compensation if Employer's Board of Directors (or the Compensation 
Committee of such Board of Directors), in its sole and absolute discretion, 
determines that such bonus compensation is appropriate.

     (f)  You also have been granted, under Employer's existing or modified 
stock option plan, options to purchase 85,000 shares of Employer's common 
stock. Such options are in addition to the stock options of Employer 
previously granted to you.  The 85,000 options referred to above were issued 
on March 24, 1998. 25,000 of such options will vest on March 24, 1999; 25,000 
of such options will vest on March 24, 2000; and 35,000 of such options will 
vest on March 24, 2001. All of such options will have an exercise price equal 
to the market price of such common stock on the date the options were issued 
and are governed in all other respects by Employer's stock option plan in 
effect at the time of grant. You also shall be eligible to receive additional 
options, under Employer's existing or modified stock option plan, if 
Employer's Board of Directors (or the Compensation Committee of such Board of 
Directors), in its sole and absolute discretion, determines that the grant to 
you of additional options is appropriate.

3.   TITLE

     You are being employed under this agreement in the position of Senior 
Vice President, Studios.

4.   AUTHORITY

     (a)  During the first year of the term of your employment, you will be 
responsible for managing all of Employer's external studio operations.  By no 
later than the commencement of the second year of the term of your employment, 
you will become responsible for managing all of Employer's studio operations.


                                    Page 2                         June 25, 1999

<PAGE>

     (b)  In addition to any authority that you have with respect to your 
management of Employer's external studio operations, during the first year of 
the term of your employment, you also will have the authority to: (i) finally 
approve the commencement of development on any software product within 
Employer's internal studio operations if such product is not scheduled to be 
completed until the second or third year of the term of your employment, and 
(ii) finally approve the hiring or promotion of any person to the following 
positions within Employer's internal studio operations: vice president of 
production; director of production; producer; director; lead designer; lead 
programmer or lead artist.

5.   MANNER OF PERFORMING DUTIES

     You shall personally and diligently perform, on a full-time and 
exclusive basis, such services as Employer or any of its divisions may 
reasonably require, provided that such services are consistent with your 
position with Employer. You shall observe all reasonable rules and 
regulations adopted by Employer in connection with the operation of its 
business and carry out all instructions of Employer.  You will at all times 
perform all of the duties and obligations required by you under this 
agreement in a loyal and conscientious manner and to the best of your ability 
and experience.

6.   EXPENSES

     To the extent you incur necessary and reasonable business expenses in 
the course of your employment, you shall be reimbursed for such expenses, 
subject to Employer's then current policies regarding reimbursement of such 
business expenses.

7.   OTHER BENEFITS

     You shall be entitled to those benefits which are standard for persons 
in similar positions with Employer, including coverage under Employer's 
health, life insurance and disability plans, and eligibility to participate 
in Employer's 401(k) plan.  Nothing paid to you under any such plans and 
arrangements (nor any bonus or stock options which Employer's Board of 
Directors (or the Compensation Committee of such Board of Directors), in its 
sole and absolute discretion, shall provide to you) shall be deemed in lieu, 
or paid on account, of your base salary.  You expressly agree and acknowledge 
that after expiration or early termination of the term of your employment 
under this agreement, you are entitled to no additional benefits not 
expressly set forth in this agreement, except as specifically provided under 
the benefit plans referred to above and those benefit plans in which you 
subsequently may become a participant, and subject in each case to the terms 
and conditions of each such plan.  Notwithstanding anything to the contrary 
set forth above, you shall be eligible to receive those benefits provided by 
COBRA upon the expiration or early termination of the term of your employment 
under this Agreement.


                                    Page 3                         June 25, 1999

<PAGE>

8.   VACATION AND PAID HOLIDAYS

     (a)  You will be entitled to paid vacation days in accordance with the 
normal vacation policies of Employer in effect from time to time, provided 
that in no event shall you be entitled to less than ten (10) days of paid 
vacation per year.

     (b)  You shall be entitled to all paid holidays given by Employer to its 
full-time employees.

9.   PROTECTION OF EMPLOYER'S INTERESTS

     During the term of your employment by Employer, you will not compete in 
any manner, whether directly or indirectly, as a principal, employee, agent 
or owner, with Employer, or any affiliate of Employer, except that the 
foregoing will not prevent you from holding at any time less than five 
percent (5%) of the outstanding capital stock of any company whose stock is 
publicly traded.  All rights worldwide with respect to any and all intellectual 
or other property of any nature produced, created or suggested by you during 
the term of your employment or resulting from your services which (i) relate 
in any manner at the time of conception or reduction to practice to the 
actual or demonstrably anticipated business of Employer, (ii) result from or 
are suggested by any task assigned to you or any work performed by you on 
behalf of Employer, or (iii) are based on any property owned or idea 
conceived by Employer, shall be deemed to be a work made for hire and shall 
be the sole and exclusive property of Employer. You agree to execute, 
acknowledge and deliver to Employer, at Employer's request, such further 
documents, including copyright and patent assignments, as Employer finds 
appropriate to evidence Employer's rights in such property.  Any confidential 
and/or proprietary information of Employer or any affiliate of Employer shall 
not be used by you or disclosed or made available by you to any person except 
as required in the course of your employment, and upon expiration or earlier 
termination of the term of your employment, you shall return to Employer all 
such information which exists in written or other physical form (and all 
copies thereof) under your control.  Without limiting the generality of the 
foregoing, you acknowledge signing and delivering to Employer the Activision 
Employee Proprietary Information Agreement and you agree that all terms and 
conditions contained in such agreement, and all of your obligations and 
commitments provided for in such agreement, shall be deemed, and hereby are, 
incorporated into this agreement as if set forth in full herein.  The 
provisions of the immediately preceding four sentences of this paragraph 
shall survive the expiration or earlier termination of this agreement.

10.  SERVICES UNIQUE

     You recognize that the services being performed by you under this 
agreement are of a special, unique, unusual, extraordinary and intellectual 
character giving them a peculiar value, the loss of which cannot be 
reasonably or adequately compensated for in 


                                    Page 4                         June 25, 1999

<PAGE>

damages, and in the event of a breach of this agreement by you (particularly, 
but without limitation, with respect to the provisions hereof relating to the 
exclusivity of your services and the provisions of paragraph 9 of this 
agreement), Employer shall, in addition to all other remedies available to 
it, be entitled to equitable relief by way of injunction and any other legal 
or equitable remedies.

11.  TERMINATION

     (a)  At any time during the term of your employment, Employer may 
terminate your employment under this agreement for (i) your willful, reckless 
or gross misconduct, (ii) your material breach of any term or provision of 
this agreement, or (iii) for other good cause, as such term is defined under 
California law.

     (b)  You may terminate your employment under this agreement (i) upon any 
relocation of the place at which you primarily are performing your services 
to Employer to a location which is outside the metropolitan Los Angeles area, 
(ii) if Employer elects to not actually use your services and continues to 
pay your base salary pursuant to Paragraph 2(d) above for a period of one 
hundred twenty (120) consecutive days, or (iii) in the event Employer 
commences the production or distribution of an entertainment software or 
other product which is pornographic.

     (c)  In the event of the termination of your employment under this 
agreement pursuant to Paragraphs 11(a) or 11(b), all obligations of Employer 
to you under this agreement shall immediately terminate.

     (d)  In the event of your death during the term of this agreement, this 
agreement shall terminate and Employer only shall be obligated to pay your 
estate or legal representative the salary provided for above to the extent 
earned by you prior to such event.  In the event you are unable to perform 
the services required of you under this agreement as a result of any 
disability, and such disability continues for a period of 60 or more 
consecutive days or an aggregate of 90 or more days during any 12-month 
period during the term of this agreement, then Employer shall have the right, 
at its option, to terminate your employment under this agreement.  Unless and 
until so terminated, during any period of disability during which you are 
unable to perform the services required of you under this agreement, your 
base salary shall be payable to the extent of, and subject to, Employer's 
policies and practices then in effect with regard to sick leave and 
disability benefits.

12.  USE OF EMPLOYEE'S NAME

     Employer shall have the right, but not the obligation, to use your name 
or likeness for any publicity or advertising purpose.

13.  ASSIGNMENT


                                    Page 5                         June 25, 1999

<PAGE>

     Employer may assign this agreement or all or any part of its rights 
under this agreement to any entity which succeeds to all or substantially all 
of Employer's assets (whether by merger, acquisition, consolidation, 
reorganization or otherwise) or which Employer may own substantially, and 
this agreement shall inure to the benefit of such assignee.

14.  NO CONFLICT WITH PRIOR AGREEMENTS

     You represent to Employer that neither your commencement of employment 
under this agreement nor the performance of your duties under this agreement 
conflicts or will conflict with any contractual commitment on your part to 
any third party, nor does it or will it violate or interfere with any rights 
of any third party.

15.  POST-TERMINATION OBLIGATIONS

     After the expiration or earlier termination of your employment under 
this agreement for any reason whatsoever, you shall not, either alone or 
jointly, with or on behalf of others, directly or indirectly, whether as 
principal, partner, agent, shareholder, director, employee, consultant or 
otherwise, at any time during a period of one (1) year following such 
expiration or termination, offer employment to, or solicit the employment or 
engagement of, or otherwise entice away from the employment of Employer or 
any affiliated entity, either for your own account or for any other person 
firm or company, any person who was employed by Employer or any such 
affiliated entity on the last day of your employment under this agreement, 
whether or not such person would commit any breach of his or her contract of 
employment by reason of his or her leaving the service of Employer or any 
affiliated entity.

16.  ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.

     (a)  This agreement supersedes all prior or contemporaneous agreements 
and statements, whether written or oral, concerning the terms of your 
employment with Employer, and no amendment or modification of this agreement 
shall be binding against Employer unless set forth in a writing signed by 
Employer and delivered to you.  Without limiting the generality of the 
foregoing, you acknowledge that this agreement supersedes your prior written 
agreement with Employer dated as of May 1, 1998, and such agreement is hereby 
declared terminated and of no further force and effect.

     (b)  You have given no indication, representation or commitment of any 
nature to any broker, finder, agent or other third party to the effect that 
any fees or commissions of any nature are, or under any circumstances might 
be, payable by Employer or any affiliate of Employer in connection with your 
employment under this agreement.


                                    Page 6                         June 25, 1999

<PAGE>

     (c)  No waiver by either party of any breach by the other party of any 
provision or condition of this agreement shall be deemed a waiver of any 
similar or dissimilar provision or condition at the same or any prior or 
subsequent time.

     (d)  Nothing contained in this agreement shall be construed so as to 
require the commission of any act contrary to law and wherever there is any 
conflict between any provision of this agreement and any present or future 
statute, law, ordinance or regulation, the latter shall prevail, but in such 
event the provision of this agreement affected shall be curtailed and limited 
only to the extent necessary to bring it within legal requirements.

     (e)  This agreement does not constitute a commitment of Employer with 
regard to your employment, express or implied, other than to the extent 
expressly provided for herein.  Upon termination of this agreement, it is the 
contemplation of both parties that your employment with Employer shall cease, 
and that neither Employer nor you shall have any obligation to the other with 
respect to continued employment.  In the event that your employment continues 
for a period of time following the stated expiration date of this contract, 
unless and until agreed to in a new subscribed written document, such 
employment or any continuation thereof is "at will," and may be terminated 
without obligation at any time by either party giving notice to the other.

     (f)  You hereby acknowledge that you have had an opportunity to seek 
legal counsel of your own choice regarding the effect and import of entering 
into this Agreement.

     (g)  This agreement shall be governed by and construed in accordance 
with the laws of the State of California without regard to conflict of law 
principles.

     (h)  In accordance with the Immigration Reform and Control Act of 1986, 
employment under this agreement is conditioned upon satisfactory proof of 
your identity and legal ability to work in the United States.

     (i)  To the extent permitted by law, you will keep the terms of this 
agreement confidential, and you will not disclose any information concerning 
this agreement to anyone other than your immediate family and professional 
representatives (provided they also agree to keep the terms of this agreement 
confidential).

17.  NOTICES

     All notices which either party is required or may desire to give the 
other shall be in writing and given either personally or by depositing the 
same in the United States mail addressed to the party to be given notice as 
follows:


                                    Page 7                         June 25, 1999

<PAGE>

     To Employer:             3100 Ocean Park Boulevard
                              Santa Monica, California 90405
                              Attention: Senior Vice President,
                              Business Affairs and General Counsel

     To Employee:             10368 Ilona Avenue
                              Los Angeles, California 90064

     Either party may by written notice designate a different address for 
giving of notices.  The date of mailing of any such notices shall be deemed 
to be the date on which such notice is given.

18.  HEADINGS

     The headings set forth herein are included solely for the purpose of 
identification and shall not be used for the purpose of construing the 
meaning of the provisions of this agreement.

     If the foregoing accurately reflects our mutual agreement, please sign 
where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                                         EMPLOYEE

By:                                    By:
   --------------------------------       ------------------------------------
   Lawrence Goldberg                      Mitchell Lasky
   Senior Vice President, Business
   Affairs and General Counsel

Date:                                  Date:
     ------------------------------         ----------------------------------



                                    Page 8                         June 25, 1999



<PAGE>

                                   EXHIBIT 10.16

                                                            As of April 1, 1998



Mr. Ronald Scott
846 Pleasant Dale Place
Westlake Village, California

Dear Mr. Scott:

This letter confirms the terms of your employment by Activision, Inc.
("Employer").

1.   TERM

     The term of your employment under this agreement shall commence on April 1,
1998 and expire on April 1, 2001, unless earlier terminated as provided below.

2.   SALARY

     (a)  In full consideration for all rights and services provided by you
under this agreement, you shall receive an annual base salary of $185,000 during
the first year of the term, $205,000 during the second year of the term, and
$225,000 during the third year of the term.

     (b)  Base salary payments shall be made in accordance with Employer's then
prevailing payroll policy.  Each base salary referred to in Paragraph 2(a) shall
constitute your minimum base salary during the applicable period, and your base
salary may be increased above the minimum at any time if Employer's Board of
Directors (or the Compensation Committee of such Board of Directors), in its
sole and absolute discretion, elects to do so.  In the event of an increase in
your base salary beyond the applicable minimum base salary for a particular
period, such increased base salary shall then constitute
 your minimum base
salary for all subsequent periods under this agreement.

     (c)  Notwithstanding anything to the contrary set forth above, but subject
to the right of termination granted to you pursuant to Paragraph 10(b), Employer
shall not be required to actually use your services, and payment of your base
salary during the applicable period of your employment under this agreement will
discharge Employer's obligations to you hereunder.  Such payment, however, will
not discharge your obligations to Employer hereunder.


                                    Page 1                   June 25, 1999

<PAGE>

     (d)  In addition to your base salary, you shall be eligible to receive
bonus compensation if Employer's Board of Directors (or the Compensation
Committee of such Board of Directors), in its sole and absolute discretion,
determines that such bonus compensation is appropriate.

     (e)  You also have been granted, under Employer's existing or modified
stock option plan, options to purchase 65,000 shares of Employer's common stock.
Such options are in addition to the stock options of Employer previously granted
to you.  The 65,000 options referred to above were issued on March 24, 1998.
21,667 of such options will vest on April 1, 1999; 21,667 of such options will
vest on April 1, 2000; and 21,666 of such options will vest on April 1, 2001.
All of such options have an exercise price equal to the market price of such
common stock on the date the options were issued and are governed in all other
respects by Employer's stock option plan in effect at the time of grant.  You
also shall be eligible to receive additional options, under Employer's existing
or modified stock option plan, if Employer's Board of Directors (or the
Compensation Committee of such Board of Directors), in its sole and absolute
discretion, determines that the grant to you of additional options is
appropriate.

3.   TITLE

     You are being employed under this agreement in the position of Senior Vice
President, Domestic Distribution.

4.   DUTIES

     You shall personally and diligently perform, on a full-time and exclusive
basis, such services as Employer or any of its divisions may reasonably require,
provided that such services are consistent with your position with Employer.
You shall observe all reasonable rules and regulations adopted by Employer in
connection with the operation of its business and carry out all instructions of
Employer.  You will at all times perform all of the duties and obligations
required by you under this agreement in a loyal and conscientious manner and to
the best of your ability and experience.

5.   EXPENSES

     To the extent you incur necessary and reasonable business expenses in the
course of your employment, you shall be reimbursed for such expenses, subject to
Employer's then current policies regarding reimbursement of such business
expenses.

6.   OTHER BENEFITS

     You shall be entitled to those benefits which are standard for persons in
similar positions with Employer, including coverage under Employer's health,
life insurance and disability plans, and eligibility to participate in
Employer's 401(k) plan.  Nothing 


                                   Page 2                    June 25, 1999

<PAGE>

paid to you under any such plans and arrangements (nor any bonus or stock 
options which Employer's Board of Directors (or the Compensation Committee of 
such Board of Directors), in its sole and absolute discretion, shall provide 
to you) shall be deemed in lieu, or paid on account, of your base salary.  
You expressly agree and acknowledge that after expiration or early 
termination of the term of your employment under this agreement, you are 
entitled to no additional benefits not expressly set forth in this agreement, 
except as specifically provided under the benefit plans referred to above and 
those benefit plans in which you subsequently may become a participant, and 
subject in each case to the terms and conditions of each such plan.  
Notwithstanding anything to the contrary set forth above, you shall be 
eligible to receive those benefits provided by COBRA upon the expiration or 
early termination of the term of your employment under this Agreement.

7.   VACATION AND PAID HOLIDAYS

     (a)  You will be entitled to paid vacation days in accordance with the
normal vacation policies of Employer in effect from time to time, provided that
in no event shall you be entitled to less than ten (10) days of paid vacation
per year.

     (b)  You shall be entitled to all paid holidays given by Employer to its
full-time employees.

8.   PROTECTION OF EMPLOYER'S INTERESTS

     During the term of your employment by Employer, you will not compete in any
manner, whether directly or indirectly, as a principal, employee, agent or
owner, with Employer, or any affiliate of Employer, except that the foregoing
will not prevent you from holding at any time less than five percent (5%) of the
outstanding capital stock of any company whose stock is publicly traded.  All
rights worldwide with respect to any and all intellectual or other property of
any nature produced, created or suggested by you during the term of your
employment or resulting from your services which (i) relate in any manner at the
time of conception or reduction to practice to the actual or demonstrably
anticipated business of Employer, (ii) result from or are suggested by any task
assigned to you or any work performed by you on behalf of Employer, or (iii) are
based on any property owned or idea conceived by Employer, shall be deemed to be
a work made for hire and shall be the sole and exclusive property of Employer.
You agree to execute, acknowledge and deliver to Employer, at Employer's
request, such further documents, including copyright and patent assignments, as
Employer finds appropriate to evidence Employer's rights in such property.  Any
confidential and/or proprietary information of Employer or any affiliate of
Employer shall not be used by you or disclosed or made available by you to any
person except as required in the course of your employment, and upon expiration
or earlier termination of the term of your employment, you shall return to
Employer all such information which exists in written 


                                    Page 3                   June 25, 1999

<PAGE>

or other physical form (and all copies thereof) under your control.  Without 
limiting the generality of the foregoing, you acknowledge signing and 
delivering to Employer the Activision Employee Proprietary Information 
Agreement and you agree that all terms and conditions contained in such 
agreement, and all of your obligations and commitments provided for in such 
agreement, shall be deemed, and hereby are, incorporated into this agreement 
as if set forth in full herein.  The provisions of the immediately preceding 
four sentences of this paragraph shall survive the expiration or earlier 
termination of this agreement.

9.   SERVICES UNIQUE

     You recognize that the services being performed by you under this agreement
are of a special, unique, unusual, extraordinary and intellectual character
giving them a peculiar value, the loss of which cannot be reasonably or
adequately compensated for in damages, and in the event of a breach of this
agreement by you (particularly, but without limitation, with respect to the
provisions hereof relating to the exclusivity of your services and the
provisions of paragraph 8 of this agreement), Employer shall, in addition to all
other remedies available to it, be entitled to equitable relief by way of
injunction and any other legal or equitable remedies.

10.  TERMINATION

     (a)  At any time during the term of your employment, Employer may terminate
your employment under this agreement for (i) your willful, reckless or gross
misconduct, (ii) your material breach of any term or provision of this
agreement, or (iii) for other good cause, as such term is defined under
California law.

     (b)  You may terminate your employment under this agreement (i) upon any
relocation of the place at which you primarily are performing your services to
Employer to a location which is outside the metropolitan Los Angeles area, (ii)
if Employer elects to not actually use your services and continues to pay your
base salary pursuant to Paragraph 2(c) above for a period of one hundred twenty
(120) consecutive days, or (iii) in the event Employer commences the production
or distribution of an entertainment software or other product which is
pornographic.

     (c)  In the event of the termination of your employment under this
agreement pursuant to Paragraphs 10(a) or 10(b), all obligations of Employer to
you under this agreement shall immediately terminate.

     (d)  In the event of your death during the term of this agreement, this
agreement shall terminate and Employer only shall be obligated to pay your
estate or legal representative the salary provided for above to the extent
earned by you prior to such event.  In the event you are unable to perform the
services required of you under this 


                                    Page 4                   June 25, 1999

<PAGE>

agreement as a result of any disability, and such disability continues for a 
period of 60 or more consecutive days or an aggregate of 90 or more days 
during any 12-month period during the term of this agreement, then Employer 
shall have the right, at its option, to terminate your employment under this 
agreement.  Unless and until so terminated, during any period of disability 
during which you are unable to perform the services required of you under 
this agreement, your base salary shall be payable to the extent of, and 
subject to, Employer's policies and practices then in effect with regard to 
sick leave and disability benefits.

11.  USE OF EMPLOYEE'S NAME

     Employer shall have the right, but not the obligation, to use your name or
likeness for any publicity or advertising purpose.

12.  ASSIGNMENT

     Employer may assign this agreement or all or any part of its rights under
this agreement to any entity which succeeds to all or substantially all of
Employer's assets (whether by merger, acquisition, consolidation, reorganization
or otherwise) or which Employer may own substantially, and this agreement shall
inure to the benefit of such assignee.

13.  NO CONFLICT WITH PRIOR AGREEMENTS

     You represent to Employer that neither your commencement of employment
under this agreement nor the performance of your duties under this agreement
conflicts or will conflict with any contractual commitment on your part to any
third party, nor does it or will it violate or interfere with any rights of any
third party.

14.  POST-TERMINATION OBLIGATIONS

     After the expiration or earlier termination of your employment under this
agreement for any reason whatsoever, you shall not, either alone or jointly,
with or on behalf of others, directly or indirectly, whether as principal,
partner, agent, shareholder, director, employee, consultant or otherwise, at any
time during a period of one (1) year following such expiration or termination,
offer employment to, or solicit the employment or engagement of, or otherwise
entice away from the employment of Employer or any affiliated entity, either for
your own account or for any other person firm or company, any person who was
employed by Employer or any such affiliated entity on the last day of your
employment under this agreement, whether or not such person would commit any
breach of his or her contract of employment by reason of his or her leaving the
service of Employer or any affiliated entity.

15.  ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.


                                    Page 5                   June 25, 1999

<PAGE>

     (a)  This agreement supersedes all prior or contemporaneous agreements and
statements, whether written or oral, concerning the terms of your employment
with Employer, and no amendment or modification of this agreement shall be
binding against Employer unless set forth in a writing signed by Employer and
delivered to you.  Without limiting the generality of the foregoing, you
acknowledge that this agreement supersedes your prior written agreement with
Employer dated as of April 1, 1997, and such agreement is hereby declared
terminated and of no further force and effect.

     (b)  You have given no indication, representation or commitment of any
nature to any broker, finder, agent or other third party to the effect that any
fees or commissions of any nature are, or under any circumstances might be,
payable by Employer or any affiliate of Employer in connection with your
employment under this agreement.

     (c)  No waiver by either party of any breach by the other party of any
provision or condition of this agreement shall be deemed a waiver of any similar
or dissimilar provision or condition at the same or any prior or subsequent
time.

     (d)  Nothing contained in this agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this agreement and any present or future
statute, law, ordinance or regulation, the latter shall prevail, but in such
event the provision of this agreement affected shall be curtailed and limited
only to the extent necessary to bring it within legal requirements.

     (e)  This agreement does not constitute a commitment of Employer with
regard to your employment, express or implied, other than to the extent
expressly provided for herein.  Upon termination of this agreement, it is the
contemplation of both parties that your employment with Employer shall cease,
and that neither Employer nor you shall have any obligation to the other with
respect to continued employment.  In the event that your employment continues
for a period of time following the stated expiration date of this contract,
unless and until agreed to in a new subscribed written document, such employment
or any continuation thereof is "at will," and may be terminated without
obligation at any time by either party giving notice to the other.

     (f)  You hereby acknowledge that you have had an opportunity to seek legal
counsel of your own choice regarding the effect and import of entering into this
Agreement.

     (g)  This agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to conflict of law
principles.


                                    Page 6                   June 25, 1999

<PAGE>

     (h)  In accordance with the Immigration Reform and Control Act of 1986,
employment under this agreement is conditioned upon satisfactory proof of your
identity and legal ability to work in the United States.

     (i)  To the extent permitted by law, you will keep the terms of this
agreement confidential, and you will not disclose any information concerning
this agreement to anyone other than your immediate family and professional
representatives (provided they also agree to keep the terms of this agreement
confidential).

16.  NOTICES

     All notices which either party is required or may desire to give the other
shall be in writing and given either personally or by depositing the same in the
United States mail addressed to the party to be given notice as follows:

     To Employer:        3100 Ocean Park Boulevard
                         Santa Monica, California  90405
                         Attention: Senior Vice President,
                         Business Affairs and General Counsel

     To Employee:        846 Pleasant Dale Place
                         Westlake Village, California

     Either party may by written notice designate a different address for giving
of notices.  The date of mailing of any such notices shall be deemed to be the
date on which such notice is given.


                                    Page 7                   June 25, 1999

<PAGE>

17.  HEADINGS

     The headings set forth herein are included solely for the purpose of
identification and shall not be used for the purpose of construing the meaning
of the provisions of this agreement.

     If the foregoing accurately reflects our mutual agreement, please sign
where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                               EMPLOYEE

By:                                    By:
   --------------------------------       ------------------------------------
   Lawrence Goldberg                      Ronald Scott
   Senior Vice President, Business
   Affairs and General Counsel


Date:                                  Date:
     ------------------------------         ----------------------------------




                                    Page 8                   June 25, 1999



<PAGE>


                             SERVICE AGREEMENT

                             (1)  Combined Distribution (Holdings) Limited

                             (2)  Richard Andrew Steele


                             Dated 24 November 1997







                             OSBORNE CLARKE

                             LONDON OFFICE

                             Hillgate House, 26 Old Bailey, London  EC4M 7HS
                             Telephone  0171 600 0155   Facsimile 0171 248 9934

                             BRISTOL OFFICE

                             50 Queen Charlotte Street, Bristol  BS1 4HE
                             Telephone  0117 923 0220   Facsimile 0117 927 9209



<PAGE>

                                   CONTENTS

1. Definitions and interpretation......................................1
2. Appointment.........................................................5
3. Term................................................................5
4. Duties of the Executive.............................................5
5. Hours of work.......................................................6
6. Principal place of work.............................................6
7. Salary..............................................................6
8. Expenses............................................................7
9. Other benefits......................................................7
10. Holidays...........................................................9
11. Sickness or injury................................................10
12. Termination of and suspension from Employment.....................11
13. Acknowledgement by the Executive..................................14
14. Obligations during Employment.....................................15
15. Obligations after Employment......................................18
16. Grievance procedure...............................................20
17. General...........................................................20
18. Governing law and jurisdiction....................................22
The Schedule..........................................................23
Bonus.................................................................23



<PAGE>

THIS AGREEMENT is made the 24th day of November  1997 

BETWEEN:

(1)  COMBINED DISTRIBUTION (HOLDINGS) LIMITED (company number: 3136477) whose 
     registered office is at Unit 4/5 Holford Way Holford Birmingham B6 7AX 
     ("THE COMPANY"); and

(2)  Richard Andrew Steele of 213 Station Road, Knowle, Solihull, B93 0PU 
     ("THE EXECUTIVE").

IT IS AGREED as follows:

1.   DEFINITIONS AND INTERPRETATION

1.1  In this Agreement,
 unless the context otherwise requires, the following 
     expressions have the following meanings:

     "ACTIVISION"            Activision Inc., a Delaware corporation and the 
                             holding company of the Company;
                  
     "THE BOARD"             the board of directors of the Company from time 
                             to time and includes any committee of the Board 
                             duly appointed by it;
                  
     "BUSINESSES"            any trade or other commercial activity of any 
                             Group Company:

                             (a)  with which the Executive is concerned or 
                                  involved to any material extent at any time 
                                  during his Employment; or

                             (b)  which any Group Company shall at the 
                                  Termination Date have determined to carry on 
                                  with a view to profit in the immediate or 
                                  foreseeable future and in relation to which 
                                  the Executive, at the Termination Date, 
                                  possesses any Confidential Information;


                                       1

<PAGE>

     "COMPANY INVENTION"     any improvement, invention or discovery made by 
                             the Executive which in accordance with Section 
                             39, Patents Act 1977 is the property of the 
                             Company or any Group Company ;
                          
     "CONFIDENTIAL           any information relating to the business methods, 
      INFORMATION"           corporate plans, management systems, finances, 
                             new business opportunities, research and 
                             development projects, marketing or sales of any 
                             past, present or future product or service, 
                             trade secrets, secret formulae, processes, 
                             inventions, designs, know-how discoveries, 
                             technical specifications and other technical 
                             information relating to the creation, production 
                             or supply of any past, present or future product 
                             or service of any Group Company and any other 
                             information (whether or not recorded in 
                             documentary form or on computer disk or tape) 
                             which any Group Company identifies or treats as 
                             confidential or in respect of which it owes an 
                             obligation of confidentiality to any third party;
                          
     "CUSTOMER"              any person:  
                          
                             (a) with whom or which the Executive has dealt 
                             or of whom or of which he has knowledge by 
                             virtue of his Duties in the 12 months preceding 
                             the Termination Date; and 
                          
                             (b) either: 
                          
                                 (i)   who or which shall at the Termination 
                                       Date be negotiating with any Group 
                                       Company for the supply of any Restricted 
                                       Products or the provision of any 
                                       Restricted Services; or   
                          
                                       2

<PAGE>

                                 (ii)  to whom or which any Group Company 
                                       shall at any time during the period of 
                                       12 months prior to the Termination Date 
                                       have supplied any Restricted Products or 
                                       Restricted Services;

     "DUTIES"                the duties of the Executive as set out in clause 4;

     "EMPLOYMENT"            the Executive's employment under this Agreement;

     "ERA96"                 Employment Rights Act 1996;

     "GROUP COMPANIES"       the Company, its subsidiaries or subsidiary 
                             undertakings, any holding company or parent 
                             undertaking and any subsidiary or subsidiary 
                             undertaking of any holding company or parent 
                             undertaking and "GROUP COMPANY" means any of 
                             them;

     "MATERIAL INTEREST"     (a) the holding of any position as director, 
                                 officer, employee, consultant, adviser, 
                                 partner, principal or agent;

                             (b) the direct or indirect control or ownership 
                                 (whether jointly or alone) of any shares (or 
                                 any voting rights attached to them) or 
                                 debentures save for the ownership for 
                                 investment purposes only of not more than 
                                 5 per cent of the issued ordinary shares of 
                                 any company whose shares are listed on any 
                                 Recognised Investment Exchange; or

                             (c) the provision of any financial assistance;

                                      3

<PAGE>

     "NOTICE"                includes any notice, demand, consent or other 
                             communication;

     "RECOGNISED INVESTMENT  as defined in Section 207, Financial 
      EXCHANGE"              Services Act, 1986;
                             
                            
     "RESTRICTED AREA"       the United Kingdom of Great Britain and Northern 
                             Ireland;
                            
     "RESTRICTED PRODUCTS"   any products of a kind which are the same or 
                             substantially the same as those dealt in,  
                             marketed or sold by any Group Company in the 
                             ordinary course of the Businesses;
                            
     "RESTRICTED SERVICES"   any services of a kind which are the same or 
                             substantially the same as those provided by any 
                             Group Company in the ordinary course of the 
                             Businesses; and
                            
     "TERMINATION DATE"      the date on which the Employment terminates.

1.2 In this Agreement, unless the context otherwise requires:

    (a) words in the singular include the plural and vice versa and words in 
        one gender include any other gender;

    (b) a reference to a statute or statutory provision includes:

        (i)  any subordinate legislation (as defined in Section 21(1), 
             Interpretation Act 1978) made under it; and

        (ii) any statute or statutory provision which modifies, consolidates, 
             re-enacts or supersedes it; 

    (c) a reference to: 

        (i)  a "PERSON" includes any individual, firm, body corporate, 
             association or partnership, government or state 
             (whether or not having a separate legal personality);

        (ii) clauses and schedules are to clauses and schedules of this 
             Agreement and references to sub-clauses and paragraphs are 
             references to sub-clauses and paragraphs of the clause or 
             schedule in which they appear;

                                       4

<PAGE>

    (d) the table of contents and headings are for convenience only and shall 
        not affect the interpretation of this Agreement; and

    (e) words and phrases defined in the City Code on Take-overs and Mergers 
        or in the Companies Act 1985 have the same meaning in this Agreement.

2.   APPOINTMENT

2.1  The Company appoints the Executive and the Executive agrees to serve as 
     Managing Director of the Company.

2.2  The Executive warrants that he is not bound by, nor subject to, any 
     court order, arrangement, restriction or undertaking which prohibits or 
     restricts him from entering into this Agreement or performing his Duties.

3.   TERM 

3.1  The Employment shall commence on 24 November 1997 and, unless 
     terminated in accordance with clause 12 (Termination of and suspension 
     from Employment), shall continue for a fixed period , to terminate on 30 
     November 1999. The Company shall have the option, at its absolute 
     discretion, to extend the fixed term for up to three additional 
     successive one year periods by not less than four months prior notice 
     before each such relevant one year period. 

3.2  The Executive's previous employment with Combined Distribution 
     (Holdings) Limited shall be treated as part of his continuous period of 
     employment, which accordingly began on 1 July 1985. 

4.   DUTIES OF THE EXECUTIVE

4.1  RELATING TO THE COMPANY

     The Executive shall at all times during his Employment:

     (a) unless prevented by ill health and except during holidays taken in 
         accordance with clause 10 (Holidays), devote the whole of his working 
         time and attention to the service of the Company;

     (b) faithfully and diligently perform the duties attaching to his office 
         or which are from time to time assigned to or vested in him and 
         exercise the powers consistent with them;

     (c) obey all lawful and reasonable directions of the Board and

                                       5

<PAGE>

         implement and abide by any relevant Company policy which may be 
         promulgated or operated in practice from time to time;

     (d) use all reasonable endeavours to promote the interests of each Group 
         Company; and

     (e) keep the Board fully informed (in writing if so requested) of his 
         conduct of the business or affairs of each Group Company and provide 
         such explanations as the Board may require.

4.2  RELATING TO THE GROUP COMPANIES

     The Executive shall (without further remuneration and in addition to his 
     duties to the Company) if and for so long as the Company requires during 
     his Employment:

     (a) carry out any duties as may from time to time be assigned to him in 
         relation to any Group Company; and

     (b) act as an officer of any Group Company or hold any other appointment 
         or office as nominee or representative of any Group Company; and

     in each case as if they were to be performed or held by him for or in 
     relation to the Company.

5.   HOURS OF WORK

     The normal business hours of the Company are 9.00am to 5.30p.m. Monday 
     to Friday.  The Executive shall work such further hours as may be 
     necessary for the proper discharge of his Duties and he shall not be 
     entitled to receive any additional remuneration for work outside normal 
     business hours

6.   PRINCIPAL PLACE OF WORK

6.1  The Executive's principal place of work shall be at Holford Way, 
     Holford, Birmingham, or such other location in the U.K. as constitutes 
     the Company's principal place of business from time to time. 

6.2  The Company may require the Executive to work at a location other than 
     the principal place of work for a period not exceeding 2 weeks as the 
     Company may determine. The Executive shall travel in the UK and abroad 
     as the Board may reasonably require for the performance of his Duties.

                                       6

<PAGE>

7.   SALARY

7.1  During his Employment the Company shall pay to the Executive:

     (a) a basic salary at the rate of L84,500 per annum. This salary shall 
         accrue from day to day, be payable by equal monthly instalments in 
         arrears on or about the last Friday of each month and shall include any
         fees to which the Executive is entitled as a director of  any Group 
         Company ; and

     (b) a bonus calculated in accordance with the provisions of the schedule 
         to this Agreement.

7.2  The Executive's basic salary shall be reviewed with effect from 1 July 
     in each year. The review shall be at the discretion of Activision, 
     provided that the annual basic salary increase shall not be less than 6% 
     of the immediately preceding basic salary.

8.   EXPENSES

8.1  Subject to clause 8.2 below, the Company shall reimburse to the 
     Executive all hotel, travelling, entertainment and other out of pocket 
     expenses reasonably and properly incurred by him in the performance of 
     his Duties subject to him producing to the Company any vouchers or other 
     evidence of actual payment of the expenses as the Company may reasonably 
     require.

8.2  The Company shall reimburse the Executive in respect of his home 
     telephone bill and private and business petrol expenses, provided that 
     such reimbursements shall not be made at a level materially greater than 
     that at which they were made in the six months prior to the date of this 
     Agreement.

8.3  Any credit card or charge card supplied to the Executive by the Company 
     shall be used solely for expenses incurred by him in carrying out his 
     Duties and for private petrol.

9.   OTHER BENEFITS 

     During his Employment the Executive shall be entitled to the following 
     benefits:

9.1  MOTOR CAR

     (a) The Company shall provide and maintain for the sole use of the 
         Executive a Motor Car and all expenses and petrol in 

                                       7

<PAGE>
         connection with its private and business use shall be paid or 
         reimbursed to the Executive by the Company on presentation of 
         appropriate receipts if required, subject to the provisions of 
         clause 8.2 above.

     (b) A new Motor Car will be supplied to the Executive after 3 years or 
         75,000 miles, whichever occurs first.

     (c) The Motor Car may be used by persons other than the Executive with 
         the Executive's permission and provided that such use is in compliance
         with the Company's motor insurance policy covering the Motor Car. 

     (d) The Executive shall not authorise any person to use the Motor Car 
         who is not in possession of a valid driving licence.
 
     (e) The Company reserves the right to vary the terms and/or rules 
         regarding Company vehicles.

     (f) The Executive shall abide by the Company's Car Scheme Rules in force 
         from time to time.

9.2  MOBILE TELEPHONE 

     The Company shall provide to the Executive a mobile telephone and will pay 
     all running expenses except the cost of non-business calls made by him in 
     connection with it.

9.3  PENSION

     (a) Subject to the terms of its deed and rules from time to time, the 
         Executive shall be eligible to join the Stanplan A Pension Scheme 
         details of which are available from the Company Secretary.  

     (b) The Company shall pay into the Scheme or a pension scheme of the 
         Executive's choice an annual sum not less than 10% of the Executive's 
         annual basic salary.

     (c) On the Executive's election to cease to be a member of the Scheme or 
         on termination of this Agreement, benefits accrued under the Scheme 
         shall be capable of transfer to alternative pension arrangements of the
         Executive's direction subject to the rules of the Scheme.

                                       8

<PAGE>

     (d) No contracting-out certificate pursuant to the Pension Schemes Act 
         1993 is in force in respect of the Employment.

9.4  STOCK OPTIONS 

     You will be granted, under Activision's existing or modified stock 
     option plan, options to purchase 50,000 shares of Activision's common 
     stock.  The options will be issued on the commencement date of your 
     employment under this Agreement and will vest rateably over five years, 
     with one fifth (1/5) of the amount granted vesting at the end of each 
     such year.  Such options will have an exercise price that will be the 
     market price of such common stock on the date the options are issued and 
     will be governed in all other respects by Activision's stock option plan 
     in effect at the time of grant.  You also shall be eligible to receive 
     additional options, under Activision's existing or modified stock option 
     plan, if Activision's board of directors (or the compensation committee 
     of such board of directors), in its sole and absolute discretion, 
     determines that the grant to you of additional options is appropriate.

9.5  LIFE ASSURANCE 

     The Executive shall be entitled to participate during his employment in 
     the Company's group life assurance scheme from time to time whereby the 
     Executive's life is insured for the benefit of his estate for four times 
     his salary referred to in clause 7.1(a).

10.  HOLIDAYS

10.1 The Company's holiday year runs from 1 January to 31 December.

10.2 In addition to public holidays and any other holidays observed by the 
     Company, the Executive is entitled to 30 working days' paid holiday in 
     each holiday year, to be taken at such time or times as are agreed with 
     the Board .

10.3 The Executive may not, without the consent of the Board:

     (a) carry forward any unused part of his holiday entitlement to a 
         subsequent holiday year; or

     (b) be entitled to payment in lieu for any unused holiday entitlement.

                                       9

<PAGE>

10.4 For the holiday year during which his Employment commences or 
     terminates, the Executive's entitlement to holiday shall accrue on a pro 
     rata basis for each complete month of his Employment during that holiday 
     year.

10.5 On the termination of his Employment the Executive shall be entitled to 
     pay in lieu of outstanding holiday entitlement and shall be required to 
     repay to the Company any salary received for holiday taken in excess of 
     his actual entitlement.  The basis for calculating the payment and 
     repayment shall be 1/253 of the Executive's annual basic salary for each 
     day.

10.6 Other than at the request of, or with the permission of, the Company, 
     the Executive may not take holiday during a period of notice to 
     terminate his Employment.

11.  SICKNESS OR INJURY

11.1 If the Executive is unable to perform his Duties due to sickness or 
     injury he shall report this fact as soon as possible and, if 
     practicable, by 10 am on the first working day of incapacity to the 
     Company Secretary, and provide, so far as practicable, an expected date 
     of return to work.

11.2 The Executive shall:

     (a) if absent for under 7 days, on his return to work complete a 
         self-certification form detailing the reason for his absence; and

     (b) if absent for 7 or more consecutive days and for shorter absence if 
         so required, produce a doctor's certificate on the eighth day and 
         weekly after that so that the whole period of absence is covered by 
         these certificates.

11.3 Except as set out in sub-clause 11.4, if the Executive is absent due to 
     sickness or injury duly certified in accordance with the provisions of 
     sub-clause 11.2, he shall be paid his full salary for up to 6 months 
     absence in any period of 12 consecutive months and after that such 
     remuneration, if any, as the Board shall determine from time to time.

11.4 Any remuneration paid under sub-clause 11.3 shall:

     (a) not be less than any proceeds received by the Company in respect of 
         the Executive under the Company's permanent health insurance scheme; 
         and

                                       10

<PAGE>

     (b) be inclusive of any Statutory Sick Pay to which the Executive is 
         entitled under the provisions of the Social Security and Housing 
         Benefits Act 1982 and any Social Security Sickness Benefit or other 
         benefits recoverable by the Executive (whether or not recovered) which 
         may be deducted from it.

11.5 For Statutory Sick Pay purposes, the Executive's qualifying days are his 
     normal working days.

11.6 At any time during the period of his Employment, (but not normally more 
     often than once every second year) the Executive shall, at the request 
     and expense of the Company:

     (a) consent to an examination by a doctor to be selected by the Company; 
         and 

     (b) authorise this doctor to disclose to and discuss with the Company's 
         medical adviser, or other nominated officer of the Company, the results
         of or any matter arising out from this examination.

11.7 The Company shall provide and maintain on behalf of the Executive 
     permanent health insurance.

11.8 The Company shall provide and maintain on behalf of the Executive, his 
     wife or partner and any dependent children membership in a BUPA Scheme 
     or any other scheme providing equivalent benefits.

12.  TERMINATION OF AND SUSPENSION FROM EMPLOYMENT

12.1 AUTOMATIC TERMINATION 

     The Employment shall automatically terminate:

     (a) when the Executive reaches the age of 60; or

     (b) if the Executive becomes prohibited by law from being a director; or

     (c) if the Executive resigns his office.

                                       11

<PAGE>

12.2 SUSPENSION 

     In order to investigate a complaint against the Executive of misconduct 
     the Company may suspend the Executive on full pay for so long as may be 
     necessary to carry out a proper investigation and hold a disciplinary 
     hearing. 

12.3 IMMEDIATE DISMISSAL

     The Company may by notice terminate the Employment with immediate effect 
     if the Executive: 

     (a) fails or neglects efficiently, diligently and competently to carry 
         out his Duties or repeats or continues (after a written warning) any 
         other material breach of his obligations under this Agreement;

     (b) commits any act of gross misconduct or is guilty of any conduct 
         which in the opinion of the Board brings him or any Group Company into 
         disrepute or is calculated or likely prejudicially to affect the 
         interests of any Group Company, whether or not the conduct occurs 
         during or in the context of his Employment;

     (c) is convicted of any criminal offence punishable with  imprisonment 
         (other than an offence under road traffic legislation in the United 
         Kingdom or elsewhere for which he is not sentenced to any term of 
         imprisonment whether immediate or suspended); 

     (d) commits any act of dishonesty relating to any Group Company, any of 
         its employees or otherwise;

     (e) becomes a patient within the meaning of the Mental Health Act 1983; 
         or

     (f) becomes bankrupt or makes any arrangement or composition with his 
         creditors generally.

12.4 PAY IN LIEU 

     On serving notice for any reason to terminate the Employment or at any 
     time during the currency of the notice the Company may elect (but shall 
     not be obliged) to terminate the Employment forthwith and to pay to the 
     Executive his basic salary (at the rate then payable under sub-clause 
     7.1(a) for the unexpired portion of the duration of his 

                                       12

<PAGE>


     Employment or entitlement to notice as the case may be during this 
     period.  The Company will pay the salary due and payable under this 
     sub-clause (subject to deduction of tax and national insurance 
     contributions at source) in 4 equal instalments at equally spaced  
     intervals in advance during the period.  

12.5 GARDEN LEAVE

     (a) After notice to terminate the Employment has been given by the 
         Executive or the Company, the Company may in its absolute discretion:

         (i)   require the Executive to perform only such duties (including 
               without limitation research projects) as it may allocate to him;

         (ii)  require the Executive not to perform any of his duties;

         (iii) require the Executive not to have any contact with clients of 
               the Company;

         (iv)  require the Executive not to have any contact with such 
               employees of the Company as the Company shall determine;

         (v)   exclude the Executive from any Company premises 

         provided always that throughout the period of any such action referred
         to in this clause 12.6(a), the Executive's salary and contractual 
         benefits shall not cease to accrue or be paid or provided subject
         to the other provisions of this Agreement.

     (b) The Executive acknowledges that such action taken on the part of the 
         Company shall not constitute a breach of this Agreement of any kind 
         whatsoever nor shall the Executive have any claim against the Company 
         in respect of any such action.

     (c) The Executive shall during any such period of garden leave remain 
         readily contactable and available for work and, should he fail to make 
         himself available for work having been requested by the Company to 
         attend, he shall, notwithstanding any other provision of this 
         Agreement, forfeit his right to salary and contractual benefits in 
         respect of such period of non-availability.

                                       13



<PAGE>

12.6  EFFECT OF TERMINATION

      On the Termination Date:

      (a) the Executive shall at the request of the Company resign (without 
          prejudice to any claims which he may have against any Group Company 
          arising out of the Employment or its termination) from all and any 
          offices which he may hold as a director of any Group Company and from 
          all other appointments or offices which he holds as nominee or 
          representative of any Group Company and if he should fail to do so 
          within 7 days the Company is irrevocably authorised to appoint some 
          person in his name and on his behalf to sign any documents or do any 
          things necessary or requisite to effect such resignation(s) and/or 
          transfer(s); 
 
      (b) the Executive shall:

          (i)   return to the Company all documents, computer disks and tapes 
                and other tangible items in his possession or under his control 
                which belong to any Group Company or which contain or refer to 
                any Confidential Information; and

          (ii)  delete all Confidential Information from any computer disks, 
                tapes or other re-usable material in his possession or under 
                his control and destroy all other documents and tangible items 
                in his possession or under his control which contain or refer 
                to any Confidential Information; and 

      (c) the Company shall be entitled to deduct from any salary or other 
          sum due under to the Executive any sums owed by the Executive to any 
          Group Company.
 
13.   ACKNOWLEDGEMENT BY THE EXECUTIVE

      The Executive acknowledges that:

      (a) each Group Company possesses a valuable body of Confidential 
          Information;

      (b) each Group Company will give him access to Confidential Information 
          to enable him to carry out his Duties;

                                       14

<PAGE>

      (c) his Duties include, amongst other things, a duty of trust and 
          confidence and a duty to act at all times in the best interests of 
          each Group Company;

      (d) the Company requires all its senior employees to accept 
          restrictions which are similar to those set out in clause 14 
          (Obligations during Employment) and clause 15 (Obligations after 
          Employment) for the mutual protection of its Businesses and employees;

      (e) the following would be likely to place that company at a serious 
          competitive disadvantage and cause immeasurable (financial and other) 
          damage to the Businesses:

          (i)   the disclosure of Confidential Information to any customer or 
                actual or potential competitor of any Group Company; and

          (ii)  if, on leaving the Employment, the Executive was to hold any 
                Material Interest in a Customer or any actual or potential 
                competitor of any Group Company; 

      (f) the Confidential Information known by the Executive enables him to 
          perform his management duties;

      (g) the success of the Businesses depends, in part, on the Executive's 
          successor and/or fellow employees establishing business relationships 
          with the customers of and suppliers to the Businesses which are 
          similar to those established and maintained by the Executive during 
          his Employment for the purposes of ensuring an orderly hand over to a 
          successor.

14.   OBLIGATIONS DURING EMPLOYMENT

14.1  INVENTIONS

      (a) The Executive shall promptly disclose to the Company full details, 
          including drawings and models, of any improvement, invention or 
          discovery which he (whether alone or with any other person) makes at 
          any time during his Employment and which relates or could relate, 
          directly or indirectly, to the Businesses.

      (b) If the improvement, invention or discovery is a Company Invention, 
          the Executive shall (to the extent that it does not automatically vest
          in the Company by operation of law) hold it 

                                       15

<PAGE>

          in trust for the Company and, at the request and expense of the 
          Company, do all things necessary or desirable to enable the Company or
          its nominee to obtain for itself the full benefit of and to secure 
          patent or other appropriate forms of protection for the Company 
          Invention throughout the world.

      (c) If the improvement, invention or discovery is not a Company 
          Invention, the Company shall treat all information disclosed to it by 
          the Executive as confidential property of the Executive.

      (d) The patenting and exploitation of any Company Invention shall be at 
          the sole discretion of the Company.

14.2  COPYRIGHT ETC

      (a) The Executive shall promptly disclose to the Company all copyright 
          works or designs originated, conceived, written or made by him alone 
          or with others during his Employment which relate, or could relate, 
          to the Businesses and shall (to the extent that they do not 
          automatically vest in the Company by operation of law) hold them in 
          trust for the Company until such rights have been fully and absolutely
          vested in the Company.

      (b) The Executive assigns to the Company by way of future assignment 
          (to the extent not already vested in the Company by operation of law) 
          all copyright, design rights and other proprietary rights (if any) for
          their full terms throughout the world in respect of all copyright 
          works and designs originated, conceived, written or made by him alone 
          or with others during his Employment which relate, or could relate, 
          to the Businesses.

      (c) The Executive irrevocably and unconditionally waives in favour of 
          the Company any and all moral rights conferred on him by Chapter 
          IV, Part I, Copyright Designs and Patents Act 1988 and any other 
          moral rights provided for under the laws now or in future in force 
          in any part of the world for any work the rights in which are 
          vested in the Company whether by sub-clause (b) or otherwise. 

      (d) The Executive shall, at the request and expense of the Company, do 
          all things necessary or desirable to substantiate the rights of the 
          Company under sub-clauses (b) and (c).

                                       16

<PAGE>


14.3  SHARE DEALINGS ETC

      (a) The Executive shall comply, where relevant, with every rule of law, 
          every requirement of the London Stock Exchange Limited, the United 
          States Security and Exchange Commission or any other Recognised 
          Investment Exchange and every regulation of any Group Company from 
          time to time in force relating to dealings in shares, debentures or 
          other securities of any Group Company and, in relation to overseas 
          dealings, the Executive shall also comply with all laws of the 
          state and all regulations of the stock exchange, market or dealing 
          system in which such dealings take place. 

      (b) The Executive shall not (and shall procure so far as he is able 
          that his spouse and children shall not) deal or become or cease to 
          be interested (within the meaning of Part I, Schedule 13,  
          Companies Act 1985) in any securities of Group Company without 
          complying with such Group Company rules or guidelines from time to 
          time relating to securities transactions by directors.

14.4  CONFLICT OF INTEREST

      The Executive agrees that during his Employment:

      (a) he shall not:

          (i)   directly or indirectly disclose to any person or use other 
                than for any legitimate purposes of any Group Company any 
                Confidential Information;

          (ii)  without the Board's prior written permission hold any 
                Material Interest in any person which:

                (A) is or shall be wholly a party in competition with any of 
                    the Businesses;
 
                (B) impairs or might reasonably be thought by the Company to 
                    impair his ability to act at all times in the best 
                    interests of any Group Company; or 

                (C) requires or might reasonably be thought by the Company to 
                    require him to disclose or make use of any Confidential 
                    Information in order properly to discharge his duties to 
                    or to further his interest in that person;

                                       17

<PAGE>

          (iii) at any time make any untrue or misleading statement in 
                relation to any Group Company.

          (iv)  directly or indirectly receive or obtain in respect of any 
                goods or services sold or purchased or other business transacted
                (whether or not by him) by or on behalf of any Group Company any
                discount, rebate, commission or other inducement (whether in 
                cash or in kind) which is not authorised by any company rules or
                guidelines from time to time and if he or any person in which he
                holds any Material Interest shall obtain any such discount, 
                rebate, commission or inducement, he shall immediately account 
                to the Company for the amount so received;

          (v)   other than to carry out his Duties, without the prior 
                authority of the Company remove from the premises of any Group 
                Company or copy or allow others to copy the contents of any 
                document, computer disk, tape or other tangible item which 
                contains or refers to any Confidential Information or which 
                belongs to any Group Company;

      (b) he shall, at the request of the Company:

          (i)   return to the Company all documents, computer disks and tapes 
                and other tangible items in his possession or under his control 
                which belong to any Group Company or which contain or refer to 
                any Confidential Information; and

          (ii)  delete all Confidential Information from any computer disks, 
                tapes or other re-usable material in his possession or under his
                control and destroy all other documents and tangible items in 
                his possession or under his control which contain or refer to 
                any Confidential Information.

14.5  POWER OF ATTORNEY 

      The Executive irrevocably appoints the Company as his attorney in his 
      name and on his behalf to execute documents, to use his name and to do 
      all things which may be necessary or desirable for the Company to 
      obtain for itself or its nominee the full benefit of the provision of 
      sub-clause 14.1(b) and 14.2(b) and a certificate in writing signed by 
      any director or the Company Secretary that any instrument or act falls 

                                       18

<PAGE>

      within the authority conferred by this paragraph shall be conclusive 
      evidence that such is the case so far as any third party is concerned.

15.   OBLIGATIONS AFTER EMPLOYMENT

15.1  The Executive shall not within the Restricted Area directly or 
      indirectly for the period of 12 months after the Termination Date, hold 
      any Material Interest in any person which:

      (a) is or shall be wholly or partly in competition with any of the 
          Businesses; or

      (b) requires or might reasonably be thought by the Company to require 
          him to disclose or make use of any Confidential Information in order 
          properly to discharge his duties to or to further his interest in that
          person.

15.2  The Executive shall not directly or indirectly, whether on his own 
      behalf or on the behalf of another person:

      (a) for the period of  12 months after the Termination Date:

          (i)   seek, canvass or solicit in any capacity whatsoever any 
                business, orders or custom for any Restricted Products or 
                Restricted Services from any Customer;

          (ii)  accept in any capacity whatsoever orders for any Restricted 
                Products or Restricted Services from any Customer; or 

          (iii) solicit or entice away or seek to entice away from any Group 
                Company any person who is and was at the Termination Date 
                employed by any Group Company in any of the Businesses in a 
                managerial, technical, supervisory, sales, marketing or senior 
                financial capacity;

      (b) at any time after the Termination Date:

          (i)   induce or seek to induce by any means involving the 
                disclosure or use of Confidential Information any Customer to 
                cease dealing with any Group Company or to restrict or vary the 
                terms upon which it deals with any Group Company;

          (ii)  represent himself or permit himself to be held out by 

                                       19

<PAGE>

                any person, as being in any way connected with or interested in 
                any Group Company; and
 
          (iii) disclose to any person, or make use of any Confidential 
                Information.

16.   GRIEVANCE PROCEDURE

16.1  The Executive is subject to the Company's disciplinary rules and 
      procedures, poor performance procedure frequent sickness absence 
      Procedure for the time being in force a copy of which is available from 
      the Company Secretary and such other procedures of this nature as may 
      from time to time be adopted.

16.2  If the Executive has any grievance relating to his Employment (other 
      than one relating to a disciplinary decision) he should refer such 
      grievance to the Chairman of the Board and if the grievance is not 
      resolved by discussion with him it will be referred to the Board for 
      resolution.

17.   GENERAL

17.1  PRIOR AGREEMENTS 

      This Agreement is in substitution for any previous contracts of 
      employment and such prior agreements are hereby terminated.

17.2  ACCRUED RIGHTS 

      The expiration or termination of the Employment or this Agreement 
      however arising shall not operate to affect such of the provisions of 
      this Agreement as are expressed to operate or have effect after that 
      date and shall be without prejudice to any accrued rights or remedies 
      of the parties.

17.3  VARIATION 

      No purported variation of this Agreement shall be effective unless it 
      is in writing and signed by or on behalf of each of the parties.

17.4  INVALIDITY 

      To the extent that any provision of this Agreement is found by any 
      court or competent authority to be invalid, unlawful or unenforceable 
      in any jurisdiction, that provision shall be deemed not to be a part of 
      this Agreement, it shall not affect the enforceability of the remainder 
      of 

                                       20

<PAGE>

      this Agreement nor shall it affect the validity, lawfulness or 
      enforceability of that provision in any other jurisdiction.

17.5  ASSIGNMENT

      The rights and obligations of the Company under this Agreement shall be 
      transferred to its successors and assignors.  The Executive may not, 
      however, transfer or assign his rights or obligations under this 
      Agreement.

17.6  UNDERTAKINGS

      The Executive has given the undertakings contained in clause 15 
      (Obligations after Employment) to the Company as trustee for itself and 
      for each Group Company and will at the request and cost of the Company 
      enter into direct undertakings with any Group Company which correspond 
      to the undertakings in clause 15, (Obligations after Employment) or 
      which are less onerous only to the extent necessary (in the opinion of 
      the Company or its legal advisors) to ensure that such undertakings are 
      valid and enforceable.

17.7  INDEMNITY

      The Executive will indemnify each Group Company from and against all 
      actions, claims, costs, proceedings, expenses, loss or damage 
      (including, without limitation, legal costs) which may arise directly 
      or indirectly from the unauthorised disclosure or use of the 
      Confidential Information by the Executive or directly from any other 
      breach of the terms of this Agreement by the Executive.

17.8  RELEASES AND WAIVERS

      (a) The rights, powers and remedies conferred on any party by this 
          Agreement and remedies available to the Company are cumulative and 
          are additional to any right, power or remedy which it may have under 
          general law or otherwise.

      (b) The Company may, in whole or in part, release, compound, 
          compromise, waive or postpone, in its absolute discretion, any 
          liability owed to it or right granted to it in this Agreement by the 
          Executive without in any way prejudicing or affecting its rights in 
          respect of that or any other liability or right not so released, 
          compounded, compromised, waived or postponed.

      (c) No single or partial exercise, or failure or delay in exercising 
          any right, power or remedy by the Company shall constitute a 

                                       21

<PAGE>


          waiver by it of, or impair or preclude any further exercise of, that 
          or any right, power or remedy arising under this Agreement or 
          otherwise.

18.   GOVERNING LAW AND JURISDICTION

18.1  This Agreement shall be governed by and construed in accordance with 
      English law.

18.2  Each of the parties irrevocably submits for all purposes in connection 
      with this Agreement to the exclusive jurisdiction of the courts of 
      England.

THIS AGREEMENT has been signed on the date appearing at the head of page 1.








                                       22

<PAGE>





                                THE SCHEDULE

                                    BONUS

            FOR THE FINANCIAL PERIOD FROM 1 MAY 1997 TO 30 APRIL 1998

1.    Subject to the following provisions the Executive's entitlement to a 
      bonus under Clause 7.1(b) for the above financial period is as follows;

2.    If Net Profits (as defined in paragraph 8 below) are less than L3.17 
      million ("the Target Profit") the Executive's bonus entitlement shall be 
      nil.

3.    If Net Profits are equal to or greater than the Target Profit then the 
      Executive's basic bonus entitlement ("the Basic Bonus") shall be as 
      follows:

      (a)  0.5 per cent of his basic salary for each L29,250 by which Net 
           Profits exceed L2,000,000 (the "Base Level Profit") up to a maximum 
           of 20 per cent of his basic salary in respect of any financial 
           period; and

      (b)  0.833 per cent of his basic salary each month for achievement of the 
           targeted monthly closing cash position as agreed and set  by the 
           Board by a Board Resolution dated 27 June 1997

      (c)  The Executive's entitlement to the Basic Bonus under this paragraph 
           is limited to a maximum of 30 per cent of his basic salary in respect
           of any one financial period ("the Maximum Basic Bonus")

4.

4.1   If an Executive is entitled to a Maximum Basic Bonus in any one 
      financial year then subject to the following provisions the Executive's
      entitlement to an additional bonus under Clause 7.1(b) ("the Additional
      Bonus") shall be 25 per cent of x/y of the amount by which Net Profits 
      exceed the aggregate of the Target Profit and all Basic Bonuses payable 
      to Executives under paragraph 3 ("the Second Target Profit").

                                       23

<PAGE>

4.2   For the purposes of paragraph 4.1

      x = Agreed basic salary of the Executive

      y = the total of the basic salaries for  R A Steele, N C Brown, A R 
      Waterhouse, D Neal, S G Varnish, G Hawkins and R G Swindells (or, in each 
      case, their replacements).

5.    If during the currency of this Agreement any financial period of the 
      Company shall have a duration other than 365 days (or 366 days in the 
      case of a leap year) the Target Profit and the Second Target Profit shall 
      be adjusted in the same proportion as the number of completed days of the 
      financial period bears to 365.

6.    If the Executive's employment is terminated during the course of a 
      financial year (save as a result of the Executive's resignation or if 
      the Executive's employment is terminated pursuant to clause 12.3 of the 
      Agreement), the Executive shall be entitled to a pro-rata bonus in 
      respect of the financial year in which his employment terminates 
      calculated by reference to the proportion of the financial year worked 
      by the Executive.

7.    The certificate of the auditors of the Company as to the amount of the 
      Basic and Additional Bonuses payable shall, in the absence of manifest 
      error, be final and binding upon the parties and in so certifying the 
      auditors shall be deemed to be acting as experts and not liable in 
      negligence to any person in respect thereof.

8.    "Net Profits" for the purpose of this Schedule means the consolidated 
      net revenue profits shown in the audited consolidated profit and loss 
      account of the Company and its subsidiaries for the relevant financial 
      period subject to the following adjustments (if not already taken into 
      account in the profit and loss accounts):

      (a) before deducting taxation shown by the audited consolidated profit 
          and loss account of the Company and its subsidiaries;
 
      (b) before deducting the bonus payable to the Executive and any other 
          remuneration calculated on or variable with profits payable to any 
          other director, officer or employee of the Company and its 
          subsidiaries;

      (c) before adjustment for extraordinary items not deriving from 
          ordinary activities of the Company and its subsidiaries as required by
          the Statement of Standard Accounting Practice No6 (SSAP6) save for any
          charges actually arising from the 

                                       24

<PAGE>

          amortisation of a payment of L500,000 by the Company to EIDOS PLC as a
          result of Activision's acquisition of the Company, but subject to a 
          maximum charge of L50,000;

      (d) excluding profits or losses of a capital nature;

      (e) before deducting any payments made to holders of preference shares, 
          whether by way of dividend or redemption;

      (f) before deducting all payments to holders of fifteen per cent 
          Secured Subordinated Loan Stock whether by way of redemption or 
          interest;

      (g) before deducting all payments made to the Company's bankers in 
          respect of fixed term loans, whether by way of interest or capital 
          repayments.
  
      (h) subject to the provisions of clause 8(c) before deducting any 
          charge arising from the amortisation of goodwill purchased by the 
          Company upon the acquisition by the Company of CentreSoft Limited and 
          its subsidiaries on 28th June 1996.

      (i) before deducting any directors fees paid or payable by the Company 
          to employees of Activision, Inc.

          FOR EACH FINANCIAL PERIOD OF THE COMPANY SUBSEQUENT TO 30 APRIL 1998

          The Target Profit, Base Level Profit and Second Target Profit 
          figures for each financial period shall be reviewed each year and 
          adjusted to take into account the reasonable projected growth rates 
          of the Company and its subsidiaries and such other areas of 
          responsibility assumed by the Executive during such financial 
          periods and shall be subject to the agreement and approval of such 
          figures by Activision having consulted with the Board and the 
          provisions of paragraph 5 - 8 above shall apply accordingly to the 
          revised bonus entitlement.

                                       25

<PAGE>



EXECUTED as a DEED                 )
(but not delivered until the date  )
appearing at the head of page 1)   )
by COMBINED DISTRIBUTION           )
(HOLDINGS) LIMITED acting by:      )  


                                   
                                    /s/ Lawrence Goldberg
                                    ----------------------------
                                    Director Secretary


                                    /s/ Norman Brown
                                    ----------------------------
                                    Director


EXECUTED as a Deed                 ) /s/ Richard Steele
by RICHARD ANDREW STEELE           ) ----------------------------
in the presence of:                )

Signature of witness:

Name:

Address:



Occupation:




                                       26




<PAGE>

                                   EXHIBIT 10.18

                                                        As of September 1, 1997

Mr. Robert Dewar
The Vinery
Eastrop Grange
Highworth, Swindon
Wiltshire SN6 7AT
United Kingdom

Dear Mr. Dewar:

This letter confirms the terms of your employment by Activision, Inc.
("Employer").

1.         TERM

           (a)  The initial term of your employment under this agreement shall
commence on September 1, 1997 and shall expire on August 31, 1998, unless
earlier terminated as provided below (the "initial period").

           (b)  Employer shall have the irrevocable option to extend the term 
of this agreement beyond the initial period for three additional successive 
one year periods.

           (c)  The options granted to Employer in Paragraph 1(b) of this 
agreement will be exercised by Employer by written notice given to you at 
least six (6) months prior to the expiration of the initial period, the first 
annual option period or the second annual option period, as applicable.

2.         COMPENSATION

           (a)  In full consideration for all rights and services provided by 
you under this agreement, you shall receive an annual base salary of L135,000 
during the initial period.  If Employer exercises its option pursuant to 
Paragraph 1(b) with respect to the first annual option period, your annual 
base salary shall be L142,500 during such first
 annual option period.  If 
Employer exercises its option pursuant to Paragraph 1(b) with respect to the 
second annual option period, your annual base salary shall be L150,000 during 
such second annual option period.  If Employer exercises its option pursuant 
to Paragraph 1(b) with respect to the third annual option period, your annual 
base salary will be L157,500 during such third annual option period.

           (b)  Base salary payments shall be made in accordance with 
Employer's then prevailing payroll policy.  Each base salary referred to in 
Paragraph 2(a) shall constitute 

                                  Page 1                                06/25/99

<PAGE>

your minimum base salary during the applicable period, and your base salary 
may be increased above the minimum at any time if Employer's Board of 
Directors (or the Compensation Committee of such Board of Directors), in its 
sole and absolute discretion, elects to do so.  In the event of an increase 
in your base salary beyond the applicable minimum base salary for a 
particular period, such increased base salary shall then constitute your 
minimum base salary for all subsequent periods under this agreement.

           (c)  Notwithstanding anything to the contrary set forth above, but 
subject to the right of termination granted to you pursuant to Paragraph 
10(b), Employer shall not be required to actually use your services, and 
payment of your base salary during the applicable period of your employment 
under this agreement will discharge Employer's obligations to you hereunder.  
Such payment, however, will not discharge your obligations to Employer 
hereunder.

           (d)  In addition to your base salary, you may be entitled to 
receive an annual performance based bonus of up to 60% of your annual base 
salary, in compliance with the standard company plans and procedures which is 
determined by Employer's senior management and Board of Directors (or the 
Compensation Committee of such Board of Directors) based on a number of 
factors including the achievement of specific corporate sales, profitability 
and return on equity goals, as well as a discretionary component which will 
based upon your performance, achievement of objectives, and contribution to 
the success of the corporate goals and objectives.

           (e)  You also are being granted, under Employer's existing or 
modified stock option plan, options to purchase 7,500 shares of Employer's 
common stock. Such options are in addition to the stock options previously 
issued to you by Employer.  The 7,500 options will be issued on the 
commencement date of your employment under this agreement and will vest 
ratably over five years, with one fifth (1/5) of the amount granted vesting 
at the end of each such year.  Such options will have an exercise price that 
will be the market price of such common stock on the date the options are 
issued and will be governed in all other respects by Employer's stock option 
plan in effect at the time of grant.  You also shall be eligible to receive 
additional options under the company's existing or modified stock option 
plan, if Employer's Board of Directors (or the Compensation Committee of such 
Board of Directors), in its sole and absolute discretion, determines that the 
grant to you of additional options is appropriate.

           (f)  Employer and you acknowledge that, as of the execution date 
of this agreement, you have accrued but have not yet been paid bonus 
compensation in the amount of L10,903 for services previously rendered by you 
to Employer.  Employer and you agree that such L10,903 bonus shall not 
actually be paid to you but instead shall be applied as a reduction of the 
L50,000 loan previously made to you by Employer.  In addition, the 
outstanding loan balance of L39,097 shall automatically be reduced by 
L1,629.04 per month on the last day of each month, commencing on September 
30, 1997, 

                                  Page 2                                06/25/99

<PAGE>

provided that you continue to be employed by Employer under this agreement on 
the applicable reduction date.

3.         TITLE

           You are being employed under this agreement in the position of 
Senior Vice President, International, with your principal responsibility 
being the management and supervision of all of Employer's international 
business operations.

4.         DUTIES

           You shall personally and diligently perform, on a full-time and 
exclusive basis, such services as Employer or any of its divisions may 
reasonably require, provided that such services are consistent with your 
position with Employer. You shall observe all reasonable rules and 
regulations adopted by Employer in connection with the operation of its 
business and carry out all instructions of Employer.  You will at all times 
perform all of the duties and obligations required by you under this 
agreement in a loyal and conscientious manner and to the best of your ability 
and experience.

5.         EXPENSES

           To the extent you incur necessary and reasonable business expenses 
in the course of your employment, you shall be reimbursed for such expenses, 
subject to Employer's then current policies regarding reimbursement of such 
business expenses.

6.         OTHER BENEFITS

           (a)  During the term of your employment by Employer, you shall be 
provided with a car allowance pursuant to which you will be reimbursed the 
sum of L300 per month.

           (b)  You also shall be entitled to those benefits which are 
standard for persons in similar positions with Employer, including coverage 
under Employer's health, life insurance and disability plans.  Nothing paid 
to you under any such plans and arrangements (nor any bonus or stock options 
which Employer's Board of Directors (or the Compensation Committee of such 
Board of Directors), in its sole and absolute discretion, shall provide to 
you) shall be deemed in lieu, or paid on account, of your base salary.  You 
expressly agree and acknowledge that after expiration or early termination of 
the term of your employment under this agreement, you are entitled to no 
additional benefits not expressly set forth in this agreement, except as 
specifically provided under the benefit plans referred to above and those 
benefit plans in which you subsequently may become a participant, and subject 
in each case to the terms and conditions of each such plan.

                                  Page 3                                06/25/99

<PAGE>

7.         VACATION AND PAID HOLIDAYS

           (a)  You will be entitled to paid vacation days in accordance with 
the normal vacation policies of Employer in effect from time to time, 
provided that in no event shall you be entitled to less than ten (10) days of 
paid vacation per year.

           (b)  You shall be entitled to all paid holidays given by Employer 
to its full-time employees.

8.         PROTECTION OF EMPLOYER'S INTERESTS

           During the term of your employment by Employer, you will not 
compete in any manner, whether directly or indirectly, as a principal, 
employee, agent or owner, with Employer, or any affiliate of Employer, except 
that the foregoing will not prevent you from holding at any time less than 
five percent (5%) of the outstanding capital stock of any company whose stock 
is publicly traded.  All rights worldwide with respect to any and all 
intellectual or other property of any nature produced, created or suggested 
by you during the term of your employment or resulting from your services 
which (i) relate in any manner at the time of conception or reduction to 
practice to the actual or demonstrably anticipated business of Employer, (ii) 
result from or are suggested by any task assigned to you or any work 
performed by you on behalf of Employer, or (iii) are based on any property 
owned or idea conceived by Employer, shall be deemed to be a work made for 
hire and shall be the sole and exclusive property of Employer. You agree to 
execute, acknowledge and deliver to Employer, at Employer's request, such 
further documents, including copyright and patent assignments, as Employer 
finds appropriate to evidence Employer's rights in such property.  Any 
confidential and/or proprietary information of Employer or any affiliate of 
Employer shall not be used by you or disclosed or made available by you to 
any person except as required in the course of your employment, and upon 
expiration or earlier termination of the term of your employment, you shall 
return to Employer all such information which exists in written or other 
physical form (and all copies thereof) under your control.  Without limiting 
the generality of the foregoing, you acknowledge signing and delivering to 
Employer the Activision Employee Proprietary Information Agreement and you 
agree that all terms and conditions contained in such agreement, and all of 
your obligations and commitments provided for in such agreement, shall be 
deemed, and hereby are, incorporated into this agreement as if set forth in 
full herein.  The provisions of the immediately preceding four sentences of 
this paragraph shall survive the expiration or earlier termination of this 
agreement.

9.         SERVICES UNIQUE

           You recognize that the services being performed by you under this 
agreement are of a special, unique, unusual, extraordinary and intellectual 
character giving them a peculiar value, the loss of which cannot be 
reasonably or adequately compensated for in damages, 

                                  Page 4                                06/25/99

<PAGE>

and in the event of a breach of this agreement by you (particularly, but 
without limitation, with respect to the provisions hereof relating to the 
exclusivity of your services and the provisions of paragraph 8 of this 
agreement), Employer shall, in addition to all other remedies available to 
it, be entitled to equitable relief by way of injunction and any other legal 
or equitable remedies.

10.        TERMINATION

           (a)  At any time during the term of your employment, Employer may 
terminate your employment under this agreement for (i) your willful, reckless 
or gross misconduct, (ii) your material breach of any term or provision of 
this agreement, or (iii) for other good cause, as such term is defined under 
California law.

           (b)  You may terminate your employment under this agreement (i) if 
Employer elects to not actually use your services and continues to pay your 
base salary pursuant to Paragraph 2(c) above for a period of one hundred 
twenty (120) consecutive days, or (ii) in the event Employer commences the 
production or distribution of an entertainment software or other product 
which is pornographic.

           (c)  In the event of the termination of your employment under this 
agreement pursuant to Paragraphs 10(a) or 10(b), all obligations of Employer 
to you under this agreement shall immediately terminate.

           (d)  In the event of your death during the term of this agreement, 
this agreement shall terminate and Employer only shall be obligated to pay 
your estate or legal representative the salary provided for above to the 
extent earned by you prior to such event.  In the event you are unable to 
perform the services required of you under this agreement as a result of any 
disability, and such disability continues for a period of 60 or more 
consecutive days or an aggregate of 90 or more days during any 12-month 
period during the term of this agreement, then Employer shall have the right, 
at its option, to terminate your employment under this agreement.  Unless and 
until so terminated, during any period of disability during which you are 
unable to perform the services required of you under this agreement, your 
base salary shall be payable to the extent of, and subject to, Employer's 
policies and practices then in effect with regard to sick leave and 
disability benefits.

11.        USE OF EMPLOYEE'S NAME

           Employer shall have the right, but not the obligation, to use your 
name or likeness for any publicity or advertising purpose.

                                  Page 5                                06/25/99

<PAGE>

12.        ASSIGNMENT

           Employer may assign this agreement or all or any part of its 
rights under this agreement to any entity which succeeds to all or 
substantially all of Employer's assets (whether by merger, acquisition, 
consolidation, reorganization or otherwise) or which Employer may own 
substantially, and this agreement shall inure to the benefit of such assignee.

13.        NO CONFLICT WITH PRIOR AGREEMENTS

           You represent to Employer that neither your commencement of 
employment under this agreement nor the performance of your duties under this 
agreement conflicts or will conflict with any contractual commitment on your 
part to any third party, nor does it or will it violate or interfere with any 
rights of any third party.

14.        POST-TERMINATION OBLIGATIONS

           After the expiration or earlier termination of your employment 
under this agreement for any reason whatsoever, you shall not, either alone 
or jointly, with or on behalf of others, directly or indirectly, whether as 
principal, partner, agent, shareholder, director, employee, consultant or 
otherwise, at any time during a period of one (1) year following such 
expiration or termination, offer employment to, or solicit the employment or 
engagement of, or otherwise entice away from the employment of Employer or 
any affiliated entity, either for your own account or for any other person 
firm or company, any person who was employed by Employer or any such 
affiliated entity on the last day of your employment under this agreement, 
whether or not such person would commit any breach of his or her contract of 
employment by reason of his or her leaving the service of Employer or any 
affiliated entity.

15.        ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.

           (a)  This agreement supersedes all prior or contemporaneous 
agreements and statements, whether written or oral, concerning the terms of 
your employment with Employer, and no amendment or modification of this 
agreement shall be binding against Employer unless set forth in a writing 
signed by Employer and delivered to you.  Without limiting the generality of 
the foregoing, you acknowledge that this agreement supersedes your prior 
written agreement with Employer dated August 7, 1996, and such agreement is 
hereby declared terminated and of no further force and effect.

           (b)  You have given no indication, representation or commitment of 
any nature to any broker, finder, agent or other third party to the effect 
that any fees or commissions of any nature are, or under any circumstances 
might be, payable by Employer or any affiliate of Employer in connection with 
your employment under this agreement.

                                  Page 6                                06/25/99

<PAGE>

           (c)  No waiver by either party of any breach by the other party of 
any provision or condition of this agreement shall be deemed a waiver of any 
similar or dissimilar provision or condition at the same or any prior or 
subsequent time.

           (d)  Nothing contained in this agreement shall be construed so as 
to require the commission of any act contrary to law and wherever there is 
any conflict between any provision of this agreement and any present or 
future statute, law, ordinance or regulation, the latter shall prevail, but 
in such event the provision of this agreement affected shall be curtailed and 
limited only to the extent necessary to bring it within legal requirements.

           (e)  This agreement does not constitute a commitment of Employer 
with regard to your employment, express or implied, other than to the extent 
expressly provided for herein.  Upon termination of this agreement, it is the 
contemplation of both parties that your employment with Employer shall cease, 
and that neither Employer nor you shall have any obligation to the other with 
respect to continued employment.  In the event that your employment continues 
for a period of time following the stated expiration date of this contract, 
unless and until agreed to in a new subscribed written document, such 
employment or any continuation thereof is "at will," and may be terminated 
without obligation at any time by either party giving notice to the other.

           (f)  You hereby acknowledge that you have had an opportunity to 
seek legal counsel of your own choice regarding the effect and import of 
entering into this Agreement.

           (g)  This agreement shall be governed by and construed in 
accordance with the laws of the State of California without regard to 
conflict of law principles.

           (h)  To the extent permitted by law, you will keep the terms of 
this agreement confidential, and you will not disclose any information 
concerning this agreement to anyone other than your immediate family and 
professional representatives (provided they also agree to keep the terms of 
this agreement confidential).

                                  Page 7                                06/25/99

<PAGE>

16.        NOTICES

           All notices which either party is required or may desire to give 
the other shall be in writing and given either personally or by depositing 
the same in the United States mail addressed to the party to be given notice 
as follows:

           To Employer:        3100 Ocean Park Boulevard
                               Santa Monica, California  90405
                               Attention: Senior Vice President,
                               Business Affairs and General Counsel

           To Employee:        The Vinery
                               Eastrop Grange
                               Highworth, Swindon
                               Wiltshire SN6 7AT
                               United Kingdom

           Either party may by written notice designate a different address 
for giving of notices.  The date of mailing of any such notices shall be 
deemed to be the date on which such notice is given.

17.        HEADINGS

           The headings set forth herein are included solely for the purpose 
of identification and shall not be used for the purpose of construing the 
meaning of the provisions of this agreement.

           If the foregoing accurately reflects our mutual agreement, please 
sign where indicated.

ACCEPTED AND AGREED TO:

EMPLOYER                               EMPLOYEE

By:                                    By:
   --------------------------------       ------------------------------------
   Lawrence Goldberg                      Robert Dewar
   Senior Vice President, Business
   Affairs and General Counsel


Date:                                  Date:
     -------------------------------        ----------------------------------




                                  Page 8                                06/25/99




<PAGE>

                                 EXHIBIT 10.22


                               CREDIT AGREEMENT

          CREDIT AGREEMENT dated as of June 21, 1999, among ACTIVISION, INC., 
a Delaware corporation ("ACTIVISION"), HEAD GAMES PUBLISHING, INC., a Minnesota 
corporation ("HEAD") and, following the Merger, Expert Software, Inc., a 
Delaware corporation ("EXPERT"; each of Activision, Head and Expert, a 
"BORROWER" and collectively, "BORROWERS"), the Lenders (as defined in 
Article I), PNC BANK, NATIONAL ASSOCIATION, a national banking association, 
as issuing bank (in such capacity, the "ISSUING BANK"), and as administrative 
agent (in such capacity, the "ADMINISTRATIVE AGENT") and collateral agent (in 
such capacity, the "COLLATERAL AGENT") for the Lenders and CREDIT SUISSE 
FIRST BOSTON, a bank organized under the laws of Switzerland, acting through 
its New York branch, as syndication agent (in such capacity, the "SYNDICATION 
AGENT").

          Pursuant to the Merger Agreement (such term and each other 
capitalized term used but not defined herein having the meaning given it in 
Article I), Sub will merge (the "MERGER") with and into Expert, with Expert 
surviving such Merger as a wholly owned Subsidiary of Activision.  In 
connection with the Merger, the existing stockholders of Expert will be 
entitled to receive an aggregate of approximately
 $23,000,000 in cash (the 
"MERGER CONSIDERATION"). Promptly following the Merger, Expert will become a 
party to this Agreement, the Security Documents, the Borrower Guarantee 
Agreement and the Indemnity, Subrogation and Contribution Agreement.

          The Borrowers have requested the Lenders to extend credit in the 
form of (a) Term Loans to be made to Activision on the Closing Date, in an 
aggregate principal amount not in excess of $25,000,000, and (b) Revolving 
Loans on and after the Closing Date and at any time and from time to time 
prior to the Revolving Credit Maturity Date, in an aggregate principal amount 
at any time outstanding not in excess of $100,000,000. The Borrowers have 
requested the Issuing Bank to issue Letters of Credit, in an aggregate face 
amount at any time outstanding not in excess of $80,000,000, to support 
payment obligations incurred in the ordinary course of business by the 
Borrowers.  The proceeds of the Term Loans and up to $36,000,000 of the 
Revolving Loans are to be used solely (a) to pay the Merger Consideration, 
(b) to repay all amounts outstanding under the Existing Credit Agreement and 
(c) to pay related fees and expenses. The proceeds of the Revolving Loans 
(other than proceeds used as described above) are to be used solely for 
general corporate purposes.

          The Lenders are willing to extend such credit to the Borrowers and 
the Issuing Bank is willing to issue Letters of Credit for the account of the 
Borrowers on the terms and subject to the conditions set forth herein. 
Accordingly, the parties hereto agree as follows:


<PAGE>

                                                                               2


                                   ARTICLE I


                                  DEFINITIONS

     SECTION 1.01.  DEFINED TERMS.  As used in this Agreement, the following 
terms shall have the meanings specified below:

     "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans.

     "ABR LOAN" shall mean any ABR Term Loan or ABR Revolving Loan.

     "ABR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a 
rate determined by reference to the Alternate Base Rate in accordance with 
the provisions of Article II.

     "ABR TERM BORROWING" shall mean a Borrowing comprised of ABR Term Loans.

     "ABR TERM LOAN" shall mean any Term Loan bearing interest at a rate 
determined by reference to the Alternate Base Rate in accordance with the 
provisions of Article II.

     "ACQUIRED DEBT" shall mean Indebtedness of an Acquired Entity existing 
at the time of a Permitted Acquisition which was not incurred in 
contemplation of such Permitted Acquisition, is Indebtedness permitted under 
Section 6.01 and, if owed by a Domestic Subsidiary, the terms of such 
Indebtedness permit the Domestic Subsidiary to become a party to the 
Subsidiary Guarantee Agreement, the Pledge Agreement and the Security 
Agreement, to grant to the Collateral Agent a first priority Lien on its 
assets and to make loans, dividends and other distributions to Activision 
and, if owed by a Foreign Subsidiary, is not Guaranteed by any Loan Party.

     "ACQUIRED ENTITY" shall have the meaning set forth in Section 6.04(h).

     "ADJUSTED EBITDA" of a person for any period shall mean (a) EBITDA for 
such period PLUS (b) the aggregate amortization with respect to Development 
Costs for such period which are not otherwise included as amortization 
expenses in calculating EBITDA in accordance with GAAP, MINUS (c) the  
principal amount of loans made during such period to officers and employees 
permitted under Section 6.04(n), to the extent not included in calculating 
EBITDA in accordance with GAAP.

     "ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar 
Borrowing for any Interest Period, an interest rate per annum (rounded 
upwards, if necessary, to the next 1/100 of 1%) equal to the product of 
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.


<PAGE>

                                                                               3


      "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire 
in the form of Exhibit A, or such other form as may be supplied from time to 
time by the Administrative Agent.

     "ADVANCE RATES" shall have the meaning assigned to such term in 
Section 2.01(a).

     "AFFILIATE" shall mean, when used with respect to a specified person, 
another person that directly, or indirectly through one or more 
intermediaries, Controls or is Controlled by or is under common Control with 
the person specified; PROVIDED, HOWEVER, that for purposes of Section 6.07, 
the term "Affiliate" shall also include any person that directly or 
indirectly owns 5% or more of any class of Equity Interests of the person 
specified or that is an officer or director of the person specified.

     "AGENT FEES" shall have the meaning assigned to such term in 
Section 2.08(b).

     "AGGREGATE REVOLVING CREDIT EXPOSURE" shall mean the aggregate amount of 
the Lenders' Revolving Credit Exposures.

     "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded 
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the 
Base Rate in effect on such day and (b) the Federal Funds Effective Rate in 
effect on such day plus 1/2 of 1%.  If for any reason the Administrative 
Agent shall have determined (which determination shall be conclusive absent 
manifest error) that it is unable to ascertain the Federal Funds Effective 
Rate for any reason, including the inability or failure of the Administrative 
Agent to obtain sufficient quotations in accordance with the terms of the 
definition thereof, the Alternate Base Rate shall be determined without 
regard to clause (b) of the preceding sentence until the circumstances giving 
rise to such inability no longer exist.  Any change in the Alternate Base 
Rate due to a change in the Base Rate or the Federal Funds Rate shall be 
effective on the effective date of such change in the Base Rate or the 
Federal Funds Rate, respectively.  The term "BASE RATE" shall mean the base 
commercial lending rate of PNC as publicly announced to be in effect from 
time to time, such rate to be adjusted automatically, without notice, on the 
effective date of any change in such rate.  This rate of interest is 
determined from time to time by PNC as a means of pricing some loans to its 
customers and is neither tied to any external rate of interest or index nor 
does it necessarily reflect the lowest rate of interest actually charged by 
PNC to any particular class or category of customers of PNC.

     "ASSET SALE" shall mean the sale, transfer or other disposition (by way 
of merger or otherwise, and including any casualty event or condemnation that 
results in the receipt of any insurance or condemnation proceeds) by any 
Borrower or any of the Subsidiaries to any person other than a Borrower or 
any Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries 
or (b) any other assets of a Borrower or any of its Subsidiaries (other than 
(i) inventory, excess, damaged, obsolete or worn out assets, scrap 


<PAGE>

                                                                               4


and Permitted Investments, in each case disposed of in the ordinary course of 
business, (ii) assets transferred for an aggregate purchase price not 
exceeding $1,000,000 in any four consecutive fiscal quarters of the 
Borrowers, (iii) dispositions between or among Foreign Subsidiaries or 
(iv) license, distribution or development agreements entered into in the 
ordinary course of business which do not transfer all or substantially all of 
the rights owned by a Borrower or its Subsidiary), PROVIDED that any asset 
sale or series of related asset sales described in clause (b) above having a 
value not in excess of $250,000 shall be deemed not to be an "Asset Sale" for 
purposes of this Agreement.

     "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance 
entered into by a Lender and an assignee, and accepted by the Administrative 
Agent, in the form of Exhibit B, or such other form as shall be approved by 
the Administrative Agent.

     "BOARD" shall mean the Board of Governors of the Federal Reserve System 
of the United States of America.

     "BLOCKED ACCOUNTS" shall have the meaning set forth in Section 5.15.

     "BORROWER GUARANTEE AGREEMENT" shall mean the Borrower Guarantee 
Agreement substantially in the form of Exhibit M, made by the Borrowers in 
favor of the Collateral Agent for the benefit of the Secured Parties.

     "BORROWERS" shall mean Activision, Head, Expert and any other Subsidiary 
of Activision which becomes a Borrower hereunder.

     "BORROWERS' ACCOUNT" shall have the meaning given such term in 
Section 2.07.

     "BORROWING" shall mean a group of Loans of a single Type made by the 
Lenders on a single date and as to which a single Interest Period is in 
effect.

     "BORROWING AGENT" shall mean Activision.

     "BORROWING BASE AVAILABILITY" shall mean that amount determined under 
clauses (i) and  (ii)(A) of the definition of Formula Amount contained in 
Section 2.01(a).

     "BORROWING REQUEST" shall mean a request by the Borrowing Agent on 
behalf of a Borrower in accordance with the terms of Section 2.03 and 
substantially in the form of Exhibit C, or such other form as shall be 
approved by the Administrative Agent.

     "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day 
on which banks in New York City are authorized or required by law to close; 
PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the 
term "BUSINESS DAY" shall also exclude any day on which banks are not open 
for dealings in dollar deposits in the London and New York interbank markets.


<PAGE>

                                                                               5


     "CAPITAL EXPENDITURES" shall mean, for any period and with respect to 
any person, the aggregate amount of all expenditures during such period by 
such person that (a) would be classified as capital expenditures in 
accordance with GAAP or are made in property that is the subject of a 
synthetic lease to which such person becomes a lessee party during such 
period but excluding any such expenditure made (i) to restore, replace or 
rebuild property to the condition of such property immediately prior to any 
damage, loss, destruction or condemnation of such property, to the extent 
such expenditure is made with insurance proceeds or condemnation awards 
relating to any such damage, loss, destruction or condemnation, (ii) with 
proceeds from the sale or exchange of property to the extent utilized to 
purchase functionally equivalent property or equipment or (iii) as the 
purchase price of any Permitted Acquisition; and (b) constitute Development 
Costs.

     "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of 
such person to pay rent or other amounts under any lease of (or other 
arrangement conveying the right to use) real or personal property, or a 
combination thereof, which obligations are required to be classified and 
accounted for as capital leases on a balance sheet of such person under GAAP, 
and the amount of such obligations shall be the capitalized amount thereof 
determined in accordance with GAAP.

     "CASH COLLATERAL" shall mean money or Permitted Investments in the 
possession of the Collateral Agent (including in the Investment Account) as 
collateral hereunder or under any other Loan Document and in which the 
Collateral Agent has a first priority perfected Lien.

     "CASH COMPONENTS" shall mean, with respect to any Permitted Acquisition, 
the cash expenditures and (without duplication) Indebtedness (including 
Acquired Indebtedness) incurred in connection therewith.

     "CASUALTY" shall have the meaning set forth in each of the Mortgages.

     "CASUALTY PROCEEDS" shall have the meaning set forth in each of the 
Mortgages.

     "CHANGE IN CONTROL" shall be deemed to have occurred if (a) any person 
or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 
1934, as amended, as in effect on the date hereof) shall own directly or 
indirectly, beneficially or of record, shares representing more than 35% of 
the aggregate ordinary voting power represented by the issued and outstanding 
capital stock of Activision, (b) a majority of the seats (other than vacant 
seats) on the board of directors of Activision shall at any time be occupied 
by persons who were neither (i) nominated by the board of directors of 
Activision, nor (ii) appointed by directors so nominated, or (c) any change 
in control (or similar event, however denominated) with respect to Activision 
or any of its Subsidiaries shall occur under and as defined in any indenture 
or agreement in respect of Indebtedness in an aggregate principal amount in 
excess of $2,000,000 to which Activision or any of the 


<PAGE>

                                                                               6


Subsidiaries is a party, or (d) any Subsidiary of Activision which is a 
Borrower or UK Sub ceases to be a wholly-owned Subsidiary of Activision.

     "CHANGE IN LAW" shall mean (a) the adoption of any law, rule or 
regulation after the date of this Agreement, (b) any change in any law, rule 
or regulation or in the interpretation or application thereof by any 
Governmental Authority after the date of this Agreement or (c) compliance by 
any Lender or the Issuing Bank (or, for purposes of Section 2.15, by any 
lending office of such Lender or by such Lender's or the Issuing Bank's 
holding company, if any) with any request, guideline or directive (whether or 
not having the force of law) of any Governmental Authority made or issued 
after the date of this Agreement.

     "CLOSING DATE" shall mean June 22, 1999.

     "CODE" shall mean the Internal Revenue Code of 1986, as amended from 
time to time.

     "COLLATERAL" shall mean all the "Collateral" as defined in any Security 
Document and shall also include any Mortgaged Properties.

     "COMMITMENT" shall mean, with respect to any Lender, such Lender's 
Revolving Credit Commitment and Term Loan Commitment.

     "COMMITMENT FEE" shall have the meaning assigned to such term in 
Section 2.08(a).

     "CONDEMNATION" shall have the meaning set forth in each of the Mortgages.

     "CONDEMNATION PROCEEDS" shall have the meaning set forth in each of the 
Mortgages.

     "CONFIDENTIAL INFORMATION MEMORANDUM" shall mean the Confidential 
Information Memorandum of Activision dated April 1999.

     "CONTROL" shall mean the possession, directly or indirectly, of the 
power to direct or cause the direction of the management or policies of a 
person, whether through the ownership of voting securities, by contract or 
otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings 
correlative thereto.

     "CONVERTIBLE SUBORDINATED NOTE DOCUMENTS" shall mean the Convertible 
Subordinated Notes, the Convertible Subordinated Note Indenture and all other 
documents executed and delivered with respect to the Convertible Subordinated 
Notes or the Convertible Subordinated Note Indenture.


<PAGE>

                                                                               7


     "CONVERTIBLE SUBORDINATED NOTE INDENTURE" shall mean the Indenture dated 
as of December 22, 1997, between Activision and State Street Bank and Trust 
Company of California, N.A., as trustee, as in effect on the Closing Date and 
as thereafter amended from time to time in accordance with the requirements 
hereof and thereof.

     "CONVERTIBLE SUBORDINATED NOTES" shall mean Activision's 6-3/4% 
Convertible Subordinated Notes due 2005 issued pursuant to the Convertible 
Subordinated Note Indenture.

     "CREDIT EVENT" shall have the meaning assigned to such term in 
Section 4.01.

     "DEFAULT" shall mean any event or condition which upon notice, lapse of 
time or both would constitute an Event of Default.

     "DEFAULTING LENDER" shall have the meaning set forth in Section 2.25(a).

     "DEPOSITORY ACCOUNTS" shall have the meaning set forth in Section 5.15.

     "DEVELOPMENT COSTS" shall mean prepaid or guaranteed royalties paid to 
independent software developers, license fees paid to holders of intellectual 
property rights and expenses incurred for product development, in each case 
to the extent such amounts are capitalized in accordance with the Statement 
of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer 
Software to be Sold, Leased or Otherwise Marketed".

     "DILUTION RESERVE" shall mean the percentage of dilution of Receivables 
for the most recent 12 months as determined in the most recent audit by the 
Administrative Agent LESS 20% multiplied by the amount of Eligible 
Receivables.

     "DOLLARS" or "$" shall mean lawful money of the United States of America.

     "DOMESTIC SUBSIDIARIES" shall mean all Subsidiaries incorporated or 
organized under the laws of the United States of America, any State thereof 
or the District of Columbia.

     "EBITDA" for any person for any period shall mean the Net Income of such 
person for such period, to which shall be added back, to the extent deducted 
in calculating Net Income for such period (a) the Interest Expense of such 
person for such period, (b) all charges against income for foreign, Federal, 
state and local income taxes of such person for such period, (c) the 
aggregate depreciation expense of such person for such period, and (d) the 
aggregate amortization expense of such person for such period, each such 
component determined in accordance with GAAP.

     "ELIGIBLE INVENTORY" shall mean and include, with respect to each 
Borrower, 


<PAGE>

                                                                               8


Inventory owned by such Borrower (excluding (a) work in process, (b) Inventory 
not located at a facility owned or leased by a Borrower in the U.S. or a 
warehouse located in the U.S., (c) Inventory on consignment and 
(d) components), valued at the lower of cost or market value, determined on a 
first-in-first-out basis, which is not, in the Administrative Agent's  
Permitted Discretion, obsolete, slow moving or unmerchantable and which the 
Administrative Agent, in its Permitted Discretion, shall not deem ineligible 
Inventory, based on such considerations as the Administrative Agent may from 
time to time in its Permitted Discretion deem appropriate, including, without 
limitation, whether the Inventory is subject to a perfected, first priority 
security interest in favor of the Collateral Agent, subject to no other Lien, 
and whether the Inventory conforms to all standards imposed by any governmental 
agency, division or department thereof which has regulatory authority over 
such goods or the use or sale thereof applicable.  Eligible Inventory shall 
include all Inventory in-transit for which title has passed to the Borrower, 
which is insured to the full value thereof, under policies for which the 
Collateral Agent is a loss payee and for which the Administrative Agent shall 
have in its possession (a) all negotiable bills of lading properly endorsed 
and (b) all non-negotiable bills of lading issued in the Administrative 
Agent's name.

     "ELIGIBLE RECEIVABLES" shall mean and include with respect to each 
Borrower each Receivable of such Borrower arising in the ordinary course of 
such Borrower's business and which the Administrative Agent, in its Permitted 
Discretion, shall deem to be an Eligible Receivable, based on such 
considerations as the Administrative Agent may from time to time in its 
Permitted Discretion deem appropriate.  A Receivable shall not be deemed 
eligible unless such Receivable is subject to the Collateral Agent's first 
priority perfected security interest and no other Lien (other than a 
Permitted Lien on terms acceptable to the Administrative Agent in its 
Permitted Discretion and for which adequate reserves have been established), 
and is evidenced by an invoice or other documentary evidence satisfactory to 
the Administrative Agent. In addition, no Receivable shall be an Eligible 
Receivable if:

     (a)  it arises out of a sale made by a Borrower to an Affiliate of such 
Borrower or to a Person controlled by an Affiliate of such Borrower;

     (b)  it is due or unpaid more than one hundred twenty (120) days after 
the original invoice date or more than sixty (60) days after the due date;

     (c)  fifty percent (50%) or more of the Receivables from such Customer 
are not deemed Eligible Receivables hereunder;

     (d)  any covenant, representation or warranty contained in this Agreement 
or the Security Agreement with respect to such Receivable has been breached in 
any material respect;

     (e)  the Customer shall (i) apply for, suffer, or consent to the 
appointment of, or the taking of possession by, a receiver, custodian, trustee 
or liquidator of itself or of 


<PAGE>

                                                                               9


all or a substantial part of its property or call a meeting of its creditors, 
(ii) admit in writing its inability, or be generally unable, to pay its debts 
as they become due or cease operations of its present business, (iii) make a 
general assignment for the benefit of creditors, (iv) commence a voluntary 
case under any state or federal bankruptcy laws (as now or hereafter in 
effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition 
seeking to take advantage of any other law providing for the relief of 
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is 
filed against it in any involuntary case under such bankruptcy laws, or 
(viii) take any action for the purpose of effecting any of the foregoing;

     (f)  the sale is to a Customer not domiciled in the United States of 
America or Canada unless the sale is on letter of credit, guaranty or 
acceptance terms, or backed by credit insurance, in each case acceptable to 
the Administrative Agent in its Permitted Discretion;

     (g)  the sale to the Customer is on a bill-and-hold, guaranteed sale, 
sale-and-return, sale on approval, consignment or any other similar 
repurchase or return basis (other than return rights customary in the 
Borrower's business) or is evidenced by chattel paper;

     (h)  the Administrative Agent believes, in its Permitted Discretion, 
that collection of such Receivable is insecure or that such Receivable may 
not be paid by reason of the Customer's financial inability to pay;

     (i)  the Customer is the United States of America or Canada , any state 
or province or any department, agency or instrumentality of any of them, 
unless the Borrower assigns its right to payment of such Receivable to the 
Administrative Agent pursuant to the Assignment of Claims Act of 1940, as 
amended (31 U.S.C. Sub-Section 3727 ET SEQ. and 41 U.S.C. Sub-Section 15 
ET SEQ.) or has otherwise complied with other applicable statutes or ordinances;

     (j)  the goods giving rise to such Receivable have not been shipped and 
delivered to the Customer or the services giving rise to such Receivable have 
not been fully performed by the Borrower or the Receivable otherwise does not 
represent a final sale;

     (k)  the Receivables of the Customer exceed a credit limit determined by 
the Administrative Agent, in its Permitted Discretion, to the extent such 
Receivable exceeds such limit;

     (l)  the Receivable is subject to any unwaived offset, deduction, defense, 
dispute, or counterclaim, the Customer is also a creditor or supplier of a 
Borrower or the Receivable is contingent in any respect or for any reason;

     (m)   the Borrower has made any agreement with the Customer for any 
deduction therefrom, except for discounts or allowances made in the ordinary 
course of 


<PAGE>

                                                                              10


business, all of which discounts or allowances are reflected in the 
calculation of the face value of each respective invoice related thereto;

     (n)  any return, rejection or repossession of the merchandise has 
occurred but only to the extent of the portion of the Receivable relating to 
the returned, rejected or repossessed goods;

     (o)  such Receivable is not payable to a Borrower;

     (p)  such Receivable is not otherwise satisfactory to the Administrative 
Agent in its Permitted Discretion;

     (q)  the Borrower has not observed and complied with all laws of the 
jurisdiction in which the Customer or the Receivable is located which, if not 
observed or complied with, would deny the Borrower access to the courts of 
such jurisdiction;

     (r)  the Receivable arises out of sales of Inventory for which the 
Borrower acts solely as a collection agent. or

     (s)  Receivables from original equipment manufacturers or licensees 
unless such Receivables arise out of an invoice issued for shipment of goods 
on normal trade terms.

     "ENVIRONMENT" shall mean ambient air, surface water and groundwater 
(including potable water, navigable water and wetlands), the land surface or 
subsurface strata, the workplace or as otherwise defined in any Environmental 
Law.

     "ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, 
notice of violation, claim, demand, order, directive, cost recovery action or 
other cause of action by, or on behalf of, any Governmental Authority or any 
person for damages, injunctive or equitable relief, personal injury 
(including sickness, disease or death), Remedial Action costs, tangible or 
intangible property damage, natural resource damages, nuisance, pollution, 
any adverse effect on the environment caused by any Hazardous Material, or 
for fines, penalties or restrictions, resulting from or based upon (a) the 
existence, or the continuation of the existence, of a Release (including 
sudden or non-sudden, accidental or non-accidental Releases), (b) exposure to 
any Hazardous Material, (c) the presence, use, handling, transportation, 
storage, treatment or disposal of any Hazardous Material or (d) the violation 
or alleged violation of any Environmental Law or Environmental Permit.

     "ENVIRONMENTAL LAW" shall mean any and all applicable present and future 
treaties, laws, rules, regulations, codes, ordinances, orders, decrees, 
judgments, injunctions, notices or binding agreements issued, promulgated or 
entered into by any Governmental Authority, relating in any way to the 
environment, preservation or reclamation of natural resources, the 
management, Release or threatened Release of any 



<PAGE>

                                                                             11

Hazardous Material or to health and safety matters, including the 
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 
U.S.C. Section 9601 ET SEQ. (collectively "CERCLA"), the Solid Waste 
Disposal Act, as amended by the Resource Conservation and Recovery Act of 
1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section  
6901 ET SEQ., the Federal Water Pollution Control Act, as amended by the 
Clean Water Act of 1977, 33 U.S.C. Section 1251 ET SEQ., the Clean Air Act 
of 1970, as amended 42 U.S.C. Section 7401 ET SEQ., the Toxic Substances 
Control Act of 1976, 15 U.S.C. Section 2601 ET SEQ., the Occupational Safety 
and Health Act of 1970, as amended, 29 U.S.C. Section 651 ET SEQ., the 
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 
11001 ET SEQ., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 
Section 300(f) ET SEQ., the Hazardous Materials Transportation Act, 49 
U.S.C. Section 5101 ET SEQ., and any similar or implementing state, local or 
foreign law, and all amendments or regulations promulgated under any of the 
foregoing.

     "ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.

     "EQUITY INTERESTS" shall mean shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a person.

     "EQUITY ISSUANCE" shall mean any issuance or sale by Activision or any
Subsidiary of any Equity Interests of Activision or any Subsidiary, as
applicable, or any obligations convertible into or exchangeable for, or giving
any person a right, option or warrant to acquire such Equity Interests or such
convertible or exchangeable obligations, except in each case for (a) any
issuance or sale to a Borrower or any Subsidiary, (b) any issuance of directors'
qualifying shares, (c) sales or issuances of common stock of Activision to
management or key employees of Activision or any Subsidiary under any employee
stock option or stock purchase plan or employee benefit plan in existence from
time to time or other stock options from time to time granted to employees or
directors, or in connection with license, distribution or development
agreements, (d) conversion of the Convertible Subordinated Notes into common
stock of Activision, (e) issuance of common stock (or options or warrants to
purchase common stock) of Activision as consideration for any Permitted
Acquisition and (f) other issuances of Equity Interests for non-cash
consideration.

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.

     "ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) that, together with any Borrower, is treated as a single employer
under Section 414(b) or 


<PAGE>

                                                                             12

(c) of the Code, or solely for purposes of Section 302 of ERISA and Section 
412 of the Code, is treated as a single employer under Section 414 of the 
Code.

     "ERISA EVENT" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by a Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any of its ERISA
Affiliates from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of
any liability with respect to the withdrawal from any Plan or Multiemployer
Plan; (g) the receipt by a Borrower or any of its ERISA Affiliates of any
notice, or the receipt by any Multiemployer Plan from a Borrower or any of its
ERISA Affiliates of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan  is, or is expected to
be, insolvent or in reorganization, within the meaning of Title IV of ERISA; or
(h) any Foreign Benefit Event.

     "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar
Loans.

     "EURODOLLAR LOAN" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.

     "EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.

     "EURODOLLAR TERM BORROWING" shall mean a Borrowing comprised of Eurodollar
Term Loans.

     "EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.

     "EUROPEAN DISTRIBUTION SUBSIDIARIES" shall mean Combined Distribution
(Holdings) Limited, PDQ Distribution Limited, CentreSoft Limited, NBG EDV
Handels und Verlags GmbH & Co. KG, Target Software Vertriebs GmbH, CD Contact
Data GmbH, Contact Data N.V., and Contact Data Belgium NV and their respective
successors and assignors and any other Foreign Subsidiary engaged primarily in
the business of distributing a Borrower's and other persons' products in Europe.


<PAGE>

                                                                            13

     "EVENT OF DEFAULT" shall have the meaning assigned to such term in
Article VII.

     "EXCESS CASH FLOW" shall mean, for any fiscal year of Activision, the
excess of (a) the sum, without duplication, of (i) Adjusted EBITDA of the Loan
Parties for such fiscal year, (ii) extraordinary cash receipts of the Loan
Parties during such fiscal year and not included in Adjusted EBITDA  and (iii)
Net Cash Proceeds from the issuance of common stock or stock options which are
not Equity Issuances over (b) the sum, without duplication, of (i) the amount of
any cash income taxes payable by the Loan Parties with respect to such fiscal
year, (ii) cash interest paid (net of cash interest received) by the Loan
Parties during such fiscal year, (iii) Capital Expenditures made by the Loan
Parties in cash during such fiscal year, except to the extent financed with the
proceeds of Indebtedness, casualty proceeds or condemnation proceeds, (iv)
permanent repayments of Indebtedness made by the Loan Parties during such fiscal
year, but only to the extent that such repayments by their terms cannot be
reborrowed or redrawn and do not occur in connection with a refinancing of all
or any portion of such Indebtedness, and (v) extraordinary cash expenses
(including fees paid to lenders which are capitalized in accordance with GAAP)
paid by the Loan Parties, if any, during such fiscal year and not included in
Adjusted EBITDA; PROVIDED that to the extent otherwise included therein, the Net
Cash Proceeds of Asset Sales and dispositions resulting in Casualty Proceeds or
Condemnation Proceeds shall be excluded from the calculation of Excess Cash
Flow.

     "EXCLUDED TAXES" shall mean, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of a Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which a Borrower is located and (c) in the case of
a Foreign Lender (other than an assignee pursuant to a request by the Borrowers
under Section 2.24(a)), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office) or is attributable to such
Foreign Lender's failure to comply with Section 2.23(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrowers with respect to such withholding tax pursuant to
Section 2.23(a).

     "EXISTING CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement dated as of January 14, 1999, among Activision, the banks party
thereto and PNC Bank, National Association, as agent.


<PAGE>

                                                                            14

     "EXISTING LETTER OF CREDIT" shall mean each letter of credit previously
issued for the account of Activision or its Domestic Subsidiaries pursuant to
the Existing Credit Agreement that (a) is outstanding on the Closing Date and
(b) is listed on Schedule 1.01(a).

     "EXPERT" shall mean Expert Software, Inc., a Delaware corporation.

     "FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.

     "FEE LETTER" shall mean the Fee Letter dated concurrently herewith, between
Activision, the Administrative Agent and the Collateral Agent.

     "FEES" shall mean the Commitment Fees, the Agent Fees, the L/C
Participation Fees and the Issuing Bank Fees.

     "FINANCIAL OFFICER" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.

     "FIXED CHARGE COVERAGE RATIO" with respect to any person for any period
shall mean the ratio of (a) Adjusted EBITDA of such person PLUS, in the case of
any Borrower (and without duplication of any amounts included in the Borrowers'
Net Income) the amount of dividends or loans or repayments of loans actually
received from its Foreign Subsidiaries during such period LESS the amount of
loans or capital contributions made to the Foreign Subsidiaries during such
period to (b) Fixed Charges for such period.

     "FIXED CHARGES" with respect to any person for any period shall mean,
without duplication, the sum of (a) Interest Expense for such period, PLUS (b)
payments on long term Indebtedness (including Capital Lease Obligations) of such
person for such period, PLUS (c) Capital Expenditures made by such person during
such period, PLUS (d) taxes paid in cash by such person during such period.

     "FOREIGN BENEFIT EVENT" shall mean, with respect to any Foreign Pension
Plan, (a) the existence of unfunded liabilities in excess of the amount
permitted under any applicable law, or in excess of the amount that would be
permitted absent a waiver from a Governmental Authority, (b) the failure to make
the required contributions or payments, under any applicable law, on or before
the due date for such contributions or payments, (c) the receipt of a notice by
a Governmental Authority relating to the intention to terminate any such Foreign
Pension Plan or to appoint a trustee or similar official to 


<PAGE>

                                                                            15

administer any such Foreign Pension Plan, or alleging the insolvency of any 
such Foreign Pension Plan and (d) the incurrence of any liability in excess 
of $2,000,000 (or the Dollar equivalent thereof in another currency) by a 
Borrower or any of its Subsidiaries under applicable law on account of the 
complete or partial termination of such Foreign Pension Plan or the complete 
or partial withdrawal of any participating employer therein, or (e) the 
occurrence of any transaction that is prohibited under any applicable law and 
could reasonably be expected to result in the incurrence of any liability by 
the Borrower or any of its Subsidiaries, or the imposition on a Borrower or 
any of its Subsidiaries of any fine, excise tax or penalty resulting from any 
noncompliance with any applicable law, in each case in excess of $2,000,000 
(or the Dollar equivalent thereof in another currency).

     "FOREIGN LENDER" shall mean any Lender that is organized under the laws of
a jurisdiction other than that in which a Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

     "FOREIGN PENSION PLAN" shall mean any plan, fund (including any super
annuating fund) or other similar program established or maintained outside the
United States by a Borrower or any one or more of its Subsidiaries primarily for
the benefit of employees of such Borrower or such Subsidiaries residing outside
the United States, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.

     "FOREIGN SUBSIDIARY" shall mean any Subsidiary that is not a Domestic
Subsidiary.

     "FORMULA AMOUNT" shall have the meaning set forth in Section 2.01(a).

     "GAAP" shall mean generally accepted accounting principles in the United
States applied on a consistent basis.

     "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.

     "GRANTING LENDER" shall have the meaning specified in Section 9.04(i).

     "GUARANTEE" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply 


<PAGE>

                                                                            16

funds for the purchase of) any security for the payment of such Indebtedness 
or other obligation, (b) to purchase or lease property, securities or 
services for the purpose of assuring the owner of such Indebtedness or other 
obligation of the payment of such Indebtedness or other obligation or (c) to 
maintain working capital, equity capital or any other financial statement 
condition or liquidity of the primary obligor so as to enable the primary 
obligor to pay such Indebtedness or other obligation; PROVIDED, HOWEVER, that 
the term "Guarantee" shall not include endorsements for collection or deposit 
in the ordinary course of business.

     "HAZARDOUS MATERIALS" shall mean all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBS") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

     "HEDGING AGREEMENT" shall mean any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect against fluctuations in interest or currency exchange rates and not
entered into for speculation.

     "INDEBTEDNESS" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed,
(g) all Guarantees by such person of Indebtedness of others, (h) all Capital
Lease Obligations of such person, (i) all obligations of such person in respect
of Hedging Agreements and (j) all obligations of such person as an account party
in respect of letters of credit and bankers' acceptances.  The Indebtedness of
any person shall include the Indebtedness of any partnership in which such
person is a general partner.  Prepaid or guaranteed royalties to independent
software developers, license fees paid or guaranteed to holders of intellectual
property rights and expenses incurred for product development, whether or not
capitalized, are not Indebtedness hereunder.

     "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes.


<PAGE>

                                                                            17

     "INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrowers, the Subsidiary Guarantors and the Collateral
Agent.

     "INDIVIDUAL FORMULA AMOUNT shall mean, at the date of determination
thereof, with respect to each Borrower an amount equal to: (a) up to the
Receivables Advance Rate of the sum of Eligible Receivables of such Borrower
LESS its Dilution Reserve, PLUS (b) up to the Inventory Advance Rate of the
value of Eligible Inventory of such Borrower; PLUS (c) the product of (i) the
aggregate amount of outstanding Trade L/C Exposure of such Borrower TIMES (ii)
the Inventory Advance Rate, PLUS (d) Cash Collateral of such Borrower, MINUS (e)
such other reserves as the Administrative Agent in its Permitted Discretion
deems proper and necessary from time to time.

     "INTERCOMPANY NOTE" shall mean the demand promissory note in the original
principal amount of approximately $23,000,000 from UK Sub to Activision
evidencing the obligations of UK Sub to Activision, which is secured by the UK
Charge Documents.

     "INTEREST COVERAGE RATIO" with respect to any person for any period shall
mean the ratio of Adjusted EBITDA of such person for such period to the Interest
Expense of such person for such period.

     "INTEREST EXPENSE" with respect to any person for any period shall mean the
total cash interest expense of such person (including amortization of deferred
financing fees, premiums or interest rate protection agreements and original
issue discounts) for such period determined in accordance with GAAP.

     "INTEREST PAYMENT DATE" shall mean (a) with respect to any ABR Loan, the
last Business Day of each month, and (b) with respect to any Eurodollar Loan,
the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, the date of any prepayment
of a Eurodollar Borrowing or conversion of a Eurodollar Borrowing to an ABR
Borrowing.

     "INTEREST PERIOD" shall mean, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrowing Agent may elect (or such other period thereafter as the Borrowing
Agent may request and all the Lenders with Loans included in such Borrowing may
agree); PROVIDED, HOWEVER, that if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period 


<PAGE>

                                                                            18

shall end on the next preceding Business Day.  Interest shall accrue from and 
including the first day of an Interest Period to but excluding the last day 
of such Interest Period.

     "INVESTMENT ACCOUNT" shall mean a cash collateral account maintained by the
Collateral Agent invested in Permitted Investments and under the control of the
Collateral Agent.

     "INVENTORY" with respect to any person shall mean and include all of its
now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in its business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.

     "INVENTORY ADVANCE RATE" shall have the meaning set forth in Section
2.01(a)(ii) hereof.

     "ISSUING BANK"  shall mean as the context may require, (a) PNC Bank,
National Association, with respect to Letters of Credit issued by it, (b) with
respect to each Existing Letter of Credit, the Lender that issued such Existing
Letter of Credit, (c) any other Lender that may become an Issuing Bank pursuant
to Section 2.26(h) or (j), with respect to Letters of Credit issued by such
Lender, or (d) collectively, all the foregoing.

     "ISSUING BANK FEES" shall have the meaning assigned to such term in
Section 2.08(c).

     "JOINDER AGREEMENT" shall mean a Borrower Joinder Agreement substantially
in the form attached hereto as Exhibit E executed by a Domestic Subsidiary which
becomes a Borrower hereunder.

     "L/C COMMITMENT" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.26.

     "L/C DISBURSEMENT" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.

     "L/C EXPOSURE" shall mean at any time of determination, the sum of (a) the
Trade L/C Exposure and (b) the Standby L/C Exposure and "L/C Exposure" of a
Borrower shall mean the sum of (a) the Trade L/C Exposure with respect to Trade
Letters of Credit issued for the account of such Borrower and the Standby L/C
Exposure with respect to Standby Letters of Credit issued for the account of
such Borrower.


<PAGE>

                                                                            19

     "L/C PARTICIPATION FEE" shall have the meaning assigned to such term in
Section 2.06(c).

     "LENDERS" shall mean (a) the financial institutions listed on Schedule 2.01
(other than any such financial institution that has ceased to be a party hereto
pursuant to an Assignment and Acceptance) and (b) any financial institution that
has become a party hereto pursuant to an Assignment and Acceptance.

     "LETTER OF CREDIT" shall mean Trade Letters of Credit, Standby Letters of
Credit and any Existing Letter of Credit.

     "LEVERAGE RATIO" shall mean, (a) with respect to the Loan Parties on any
date, the ratio of the daily average amount of Total Debt of the Loan Parties
for the two months ended on such date to Adjusted EBITDA of the Loan Parties for
the applicable period; and (b) with respect to Activision and its Subsidiaries
on any date, the ratio of Total Debt of Activision and its Subsidiaries on a
consolidated basis on such date to Adjusted EBITDA of Activision and its
Subsidiaries on a consolidated basis for the applicable period.

     "LIBO RATE" shall mean for any Eurodollar Borrowing for the then current
Interest Period relating thereto the interest rate per annum determined by PNC
by dividing (the resulting quotient rounded upwards, if necessary, to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by PNC in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the eurodollar rate two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such
Eurodollar Borrowing and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage.

     "LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

     "LOAN DOCUMENTS" shall mean this Agreement, the Letters of Credit, the
Borrower Guarantee Agreement, the Subsidiary Guarantee Agreement, the Security
Documents, the Indemnity, Subrogation and Contribution Agreement, any Joinder
Agreement and any and all agreements, instruments and documents now or hereafter
executed by a Borrower or a Subsidiary Guarantor and delivered to the
Administrative Agent, the Issuing Bank or any Lender in connection with this
Agreement.

     "LOAN PARTIES" shall mean the Borrowers and the Subsidiary Guarantors.


<PAGE>

                                                                            20

     "LOANS" shall mean the Revolving Loans and the Term Loans.

     "MARGIN STOCK" shall have the meaning assigned to such term in
Regulation U.

     "MASTER NOTE" shall mean any demand promissory note evidencing loans from a
Loan Party to a Foreign Subsidiary.

     "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)   the
condition, operations, assets, business or prospects of the Loan Parties, taken
as a whole, or on Activision and its Subsidiaries, taken as a whole; (b)  the
ability of the Loan Parties taken as a whole to pay or perform the Obligations
in accordance with the terms thereof; (c)  the value of the Collateral or the
Collateral Agent's Liens on the Collateral or the priority of such Liens;
(d)  the validity or enforceability of any Loan Document (other than with
respect to a Subsidiary which is not a Material Subsidiary) or (e)  the
practical realization of the benefits of the Administrative Agent's, the
Collateral Agent's and each Lender's rights and remedies under this Agreement
and the other Loan Documents.

     "MATERIAL CONTRACT" shall mean any and all contracts or agreements of a
Borrower or any Domestic Subsidiary involving amounts remaining to be paid in
excess of $1,000,000.

     "MATERIAL SUBSIDIARY"  shall mean any Subsidiary which has assets with a
book value in excess of $5,000 as of the date of determination.

     "MERGER" shall have the meaning given such term in the preamble to this
Agreement.

     "MERGER AGREEMENT" shall mean the Amended and Restated Agreement and Plan
of Merger dated as of April 19, 1999, by and among Activision, Sub and Expert,
as amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof and thereof.

     "MORTGAGED PROPERTIES" shall mean the owned real properties and leasehold
and subleasehold interests of the Loan Parties at the time subject to the
Mortgages.

     "MORTGAGES" shall mean the mortgages, deeds of trust, leasehold mortgages,
assignments of leases and rents, modifications and other security documents
delivered pursuant to Section 5.12, each in form and substance satisfactory the
Administrative Agent.

     "MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.


<PAGE>
                                                                            21


     "NET CASH PROCEEDS" shall mean (a) with respect to any Asset Sale, the cash
proceeds (including cash proceeds subsequently received (as and when received)
in respect of noncash consideration initially received), net of (i) selling
expenses (including reasonable broker's fees or commissions, legal fees,
transfer and similar taxes and the Borrowers' good faith estimate of income
taxes paid or payable in connection with such sale), (ii) amounts provided as a
reserve, in accordance with GAAP, against any liabilities under any
indemnification obligations associated with such Asset Sale (PROVIDED that, to
the extent and at the time any such amounts are released from such reserve, such
amounts shall constitute Net Cash Proceeds) and (iii) the principal amount,
premium or penalty, if any, interest and other amounts on any Indebtedness for
borrowed money which is secured by the asset sold in such Asset Sale and which
is repaid with such proceeds (other than any such Indebtedness assumed by the
purchaser of such asset or repayments of the Revolving Loans) and (b) with
respect to any issuance or disposition of Indebtedness or any Equity Issuance,
the cash proceeds thereof, net of all taxes and customary fees, commissions,
costs and other expenses incurred in connection therewith.  Notwithstanding the
foregoing, Net Cash Proceeds shall not include any amounts received by the
Borrowers or any Subsidiary in respect of any casualty or condemnation to the
extent Borrower or such Subsidiary uses the amounts so received within 180 days
of the receipt thereof to rebuild, restore or replace the property subject to
such casualty or condemnation.

     "NET INCOME" shall mean, for any period, net income or loss of Activision
and its Subsidiaries, or of the Loan Parties, as the case may be, for such
period determined on a consolidated basis in accordance with GAAP; PROVIDED that
there shall be excluded (a) the income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by the Subsidiary
of that income is prohibited by operation of the terms of its charter or any
agreement, instrument, judgment, decree, statute, rule or governmental
regulation applicable to the Subsidiary except to the extent that dividends or
distributions are actually paid in compliance therewith,  (b) the income (or
loss) of any person accrued prior to the date it becomes a Subsidiary or is
merged into or consolidated with a Borrower or any of the Subsidiaries or the
date that person's assets are acquired by a Borrower or any of the Subsidiaries,
and (c) the income of any Subsidiary which is not a wholly owned Subsidiary
except to the extent that dividends or distributions are actually paid to
Activision.

     "OBLIGATIONS" shall mean and include any and all of each Borrower's
Indebtedness and/or liabilities to the Administrative Agent, the Collateral
Agent, the Issuing Bank or Lenders or any corporation that directly or
indirectly controls or is controlled by or is under common control with the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender of
every kind, nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, due or to become due,
now existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement 



<PAGE>
                                                                            22


or instrument, including, but not limited to, any and all of any Borrower's 
Indebtedness and/or liabilities under this Agreement, the other Loan 
Documents or under any other agreement between the Administrative Agent, the 
Collateral Agent, the Issuing Bank or Lenders and any Borrower and all 
obligations of any Borrower to the Administrative Agent, the Collateral 
Agent, the Issuing Bank or Lenders to perform acts or refrain from taking any 
action.

     "OTHER TAXES" shall mean any and all present or future stamp or documentary
taxes or any  other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

     "PAYMENT OFFICE" shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of the Administrative
Agent, if any, which it may designate by notice to the Borrowing Agent and to
each Lender to be the Payment Office.

     "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

     "PNC" shall mean PNC Bank, National Association.

     "PERFECTION CERTIFICATE" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.

     "PERMITTED ACQUISITION" shall have the meaning assigned to such term in
Section 6.04(h).

     "PERMITTED DISCRETION" means the Administrative Agent's reasonable and good
faith judgment based upon any factor which the Administrative Agent believes in
good faith (a) could reasonably be expected to adversely affect the value of any
Collateral, the enforceability or priority of the Collateral Agent's Liens or
the amount that the Lenders would be likely to receive upon a liquidation of the
Collateral; (b) suggests that any report of Collateral or financial information
is incomplete, inaccurate or misleading in any material respect; (c) could
reasonably be expected to create a Default or Event of Default or increase the
likelihood of an insolvency or bankruptcy proceeding.  In exercising such
judgment  with respect to matters relating to the determination of Eligible
Inventory and Eligible Receivables, changes in advance rates  or the imposition,
increase  or reduction of reserves, the Administrative Agent may reasonably take
into account factors included in the definitions of Eligible Inventory and
Eligible Receivables,  as well as changes in concentration of risk of
Receivables, changes in collection history and dilution, changes in demand for
and pricing of Inventory, and other changes in the value of the Inventory or
Receivables that tend to increase the credit risk of lending to the 



<PAGE>
                                                                            23


Borrowers on the security of Inventory or Receivables.  The burden of 
establishing lack of good faith shall be on the Borrowers.

     "PERMITTED INVESTMENTS" shall mean any of the following:

          (a)  direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any  agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

          (b)  investments in commercial paper maturing within 180 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from  Standard & Poor's Ratings Service or from Moody's
Investors Service, Inc.;

          (c)  investments in certificates of deposit, banker's acceptances and
time deposits maturing within one year from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than $500,000,000;

          (d)  fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria of clause (c) above; and

          (e)  such other investments that are acceptable to the Administrative
Agent.

     "PERSON" shall mean any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.

     "PLAN" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 307 of ERISA, and in respect of which the
Borrowers or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.

     "PLEDGE AGREEMENT" shall mean the Pledge Agreement, substantially in the
form of Exhibit F, between the Borrowers, the Subsidiaries party thereto and the
Collateral Agent for the benefit of the Secured Parties, together with any
pledge or similar agreement required  or advisable under the laws of any foreign
jurisdiction to perfect the pledge the stock of the Foreign Subsidiaries.



<PAGE>
                                                                            24


     "PRO RATA PERCENTAGE" of any Revolving Credit Lender at any time shall mean
the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.

     "RECEIVABLES" of a person shall mean and include all of its accounts,
contract rights, instruments (including those evidencing indebtedness owed to it
by its Affiliates), documents, chattel paper, general intangibles relating to
accounts, drafts and acceptances, and all other forms of obligations owing to
such person arising out of or in connection with the sale or lease of Inventory
or the rendition of services, all guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created, and whether or
not specifically sold or assigned to the Administrative Agent or Collateral
Agent hereunder.

     "RECEIVABLES ADVANCE RATE" shall have the meaning set forth in Section
2.01(a)(i) hereof.

     "REGISTER" shall have the meaning given such term in Section 9.04(d).

     "REGULATION T" shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "REGULATION U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "REGULATION X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "RELATED FUND" shall mean, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.

     "RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.

     "REMEDIAL ACTION" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the 



<PAGE>
                                                                             25


environment; or (iii) perform studies and investigations in connection 
with, or as a precondition to, (i) or (ii) above.

     "REPAYMENT DATE" shall have the meaning given such term in Section 2.12.

     "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans, L/C
Exposure and unused Revolving Credit and Term Loan Commitments representing at
least a majority of the sum of all Loans outstanding, L/C Exposure and unused
Revolving Credit and Term Loan Commitments at such time, subject, however, to
the provisions of Section 2.25 with respect to Defaulting Lenders.

     "RESPONSIBLE OFFICER" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.

     "REVOLVING CREDIT BORROWING" shall mean a Borrowing comprised of Revolving
Loans.

     "REVOLVING CREDIT COMMITMENT" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Revolving Credit Commitment, as applicable, as the same may be
(a) reduced from time to time pursuant to Section 2.11 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.

     "REVOLVING CREDIT EXPOSURE" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender, PLUS the aggregate amount at such time of such Lender's
L/C Exposure.

     "REVOLVING CREDIT LENDER" shall mean a Lender with a Revolving Credit
Commitment.

     "REVOLVING CREDIT MATURITY DATE" shall mean June 21, 2002.

     "REVOLVING LOANS" shall mean the revolving loans made by the Lenders to the
Borrowers pursuant to Section 2.01.  Each Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.

     "SCHEDULE OF RECEIVABLES" shall mean, as to each Borrower, a detailed aged
trial balance of all then existing Receivables of such Borrower in form and
substance satisfactory to the Administrative Agent, specifying in each case the
names, addresses, face amount and dates of invoice(s) for each Customer
obligated on a Receivable so listed and, if requested by the Administrative
Agent, copies of proof of delivery and customer 



<PAGE>
                                                                            26


statements and the original copy of all documents, including, without 
limitation, repayment histories and present status reports, and such other 
matters and information relating to the status of the Receivables and/or the 
Customers so scheduled as the Administrative Agent may from time to time 
reasonably request.

     "SCHEDULE OF PAYABLES" shall mean, as to each Borrower, a detailed aged
listing of such Borrower's existing accounts payable, specifying the names of
each creditor and the amount owed to such creditor and such matters and
information relating to the status of such Borrower's accounts payable so
scheduled as the Administrative Agent may from time to time reasonably request.

     "SECURED PARTIES" shall have the meaning assigned to such term in the
Security Agreement.

     "SECURITY AGREEMENT" shall mean the Security Agreement, substantially in
the form of Exhibit G, among the Borrowers, the Subsidiaries party thereto and
the Collateral Agent for the benefit of the Secured Parties.

     "SECURITY DOCUMENTS" shall mean the Mortgages, the Security Agreement, the
Pledge Agreement and each of the security agreements, mortgages and other
instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.12.

     "SETTLEMENT DATE" shall mean the Closing Date and thereafter Wednesday of
each Week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.

     "SPC" shall have the meaning specified in Section 9.04(i).

     "STANDBY L/C EXPOSURE" shall mean, at any time of determination, the sum of
(a) the aggregate undrawn amount of all outstanding Standby Letters of Credit
and (b) the aggregate amount that has been drawn under any Standby Letter of
Credit but for which the Issuing Bank or the Lenders, as the case may be, have
not been reimbursed by the Borrowers at such time.

     "STANDBY LETTER OF CREDIT" shall mean (a) each irrevocable letter of credit
issued pursuant to Section 2.26(a) under which the Issuing Bank agrees to make
payments for the account of a Borrower, on behalf of such Borrower, in respect
of obligations of such Borrower incurred pursuant to contracts made or
performances undertaken or to be undertaken or like matters relating to
contracts to which a Borrower is or proposes to become a party in the ordinary
course of such Borrower's business and (b) each Existing Letter of Credit.



<PAGE>
                                                                            27


     "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch,
Affiliate, or other fronting office making or holding a Loan) is subject with
respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in
Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to
constitute Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.

     "SUB" shall mean Expert Acquisition Corp., a Delaware corporation.

     "SUBORDINATED DEBT" shall mean unsecured Indebtedness of Activision which
has a maturity date at least one year after the Revolving Credit Maturity Date,
no principal payments due prior to one year after the Revolving Credit Maturity
Date and is otherwise on terms and conditions set forth on Exhibit K hereto.

     "SUBSIDIARY" shall mean, with respect to any person (herein referred to as
the "PARENT"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) that is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent and that is consolidated with such person in accordance with GAAP.

     "SUBSIDIARY" shall mean any subsidiary of Activision.

     "SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit H, made by the Subsidiary
Guarantors in favor of the Collateral Agent for the benefit of the Secured
Parties.

     "SUBSIDIARY GUARANTOR" shall mean each Subsidiary listed on
Schedule 1.01(c), and each other Subsidiary that is or becomes a party to the
Subsidiary Guarantee Agreement.

     "TANGIBLE NET WORTH" for any person shall mean, at a particular date (a)
the aggregate amount of all assets of such person as may be properly classified
as such in accordance with GAAP consistently applied, excluding such assets as
are properly 



<PAGE>
                                                                            28


classified as intangible assets under GAAP and assets evidencing any 
receivable from or investments in any Affiliate LESS (b) the aggregate amount 
of all liabilities of such person.

     "TAXES" shall mean any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

     "TERM BORROWING" shall mean a Borrowing comprised of Term Loans.

     "TERM LOAN COMMITMENT" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.11 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04.

     "TERM LOAN MATURITY DATE" shall mean June 21, 2002.

     "TERM LOANS" shall mean the term loans made by the Lenders to Activision
pursuant to Section 2.01.  Each Term Loan shall be a Eurodollar Term Loan or an
ABR Term Loan.

     "TOTAL DEBT" at any time and with respect to any person shall mean the
total Indebtedness of such person at such time (excluding Indebtedness of the
type described in clause (i) of the definition of such term).

     "TOTAL REVOLVING CREDIT COMMITMENT" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.

     "TRADE L/C EXPOSURE" shall mean, at any time of determination, the sum of
(a) the aggregate undrawn amount of all outstanding Trade Letters of Credit, (b)
the aggregate unpaid amount of all accepted usance drafts drawn under Letters of
Credit and (c) the aggregate amount that has been drawn under any Trade Letter
of Credit but for which the Issuing Bank or the Lenders, as the case may be,
have not been reimbursed by the Borrowers at such time.

     "TRADE LETTER OF CREDIT" shall mean each sight or usance  commercial
documentary letter of credit issued by the Issuing Bank for the account of a
Borrower pursuant to Section 2.26(a)  for the purchase of goods in the ordinary
course of business.

     "TRANSACTIONS" shall have the meaning assigned to such term in
Section 3.02.

     "TYPE", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is 



<PAGE>
                                                                            29


determined.  For purposes hereof, the term "RATE" shall include the Adjusted 
LIBO Rate and the Alternate Base Rate.

     "UK SUB" shall mean Activision UK, Ltd., a corporation organized under the
laws of England and Wales.

     "UK CHARGE DOCUMENTS" shall mean the various pledge and security agreements
securing the Intercompany Note.

     "UNDRAWN AVAILABILITY" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Total Revolving Credit
Commitment MINUS (b) the sum of (i) the Aggregate Revolving Credit Exposure,
PLUS (ii) all amounts due and owing to the Loan Parties' trade creditors which
are outstanding more than 60 days after the due date, PLUS (iii) fees and
expenses for which Borrowers are liable but which have not been paid or charged
to Borrowers' Account.

     "WEEK" shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.

     "WHOLLY OWNED SUBSIDIARY" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person.

     "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.02.  TERMS GENERALLY.  The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.  The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require.  Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; PROVIDED, HOWEVER, that if the Borrowing Agent notifies the
Administrative Agent that the Borrowers wish to amend any covenant in Article VI
or any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such 



<PAGE>
                                                                            30


covenant (or if the Administrative Agent notifies the Borrowing Agent that 
the Required Lenders wish to amend Article VI or any related definition for 
such purpose), then the Borrowers' compliance with such covenant shall be 
determined on the basis of GAAP in effect immediately before the relevant 
change in GAAP became effective, until either such notice is withdrawn or 
such covenant is amended in a manner satisfactory to the Borrowers and the 
Required Lenders.

                                     ARTICLE II

                                     The Credits

     SECTION 2.01. COMMITMENTS; FORMULA AMOUNT. (a)  Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender agrees, severally and not jointly, (i) to make a Term Loan to
Activision on the Closing Date in a principal amount not to exceed its Term Loan
Commitment, and (ii) to make Revolving Loans to the Borrowers, at any time and
from time to time on or after the Closing Date and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in such Lender's
Revolving Credit Exposure exceeding the lesser of (x) such Lender's Revolving
Credit Commitment and (y) such Lender's Pro Rata Percentage of an amount equal
to the sum of the following (the "Formula Amount"):

                    (i)  up to 70%, subject to the provisions of Section 2.01(c)
          hereof ("Receivables Advance Rate"), of  the sum of (A) Eligible
          Receivables of the Borrowers LESS (B) the Dilution Reserve, PLUS

                   (ii)  up to the lesser of (A) the sum of (a) 50%, subject to
          the provisions of Section 2.01(c) hereof ("Inventory Advance Rate"),
          of the value of the Eligible Inventory of the Borrowers (the
          Receivables Advance Rate and the Inventory Advance Rate shall be
          referred to collectively, as the "Advance Rates") and (b) the product
          of (x) the Trade L/C Exposure for Inventory for which title has not
          yet passed to the Borrower TIMES (y) the Inventory Advance Rate, or
          (B) the greater of (a) $15,000,000 or (b) forty percent (40%) of the
          Borrowing Base Availability in the aggregate at any one time, MINUS

                   (iii)  the L/C Exposure, MINUS

                    (iv)  during at least 1 month (as designated by the
          Borrowing Agent by written notice to the Administrative Agent at least
          3 Business Days prior to the beginning of the month) in each of the 6
          month periods of January to June and July to December, an amount
          equal to the


<PAGE>

                                                                              31


          outstanding principal balance of the Term Loans and during at least 
          1 month (as so designated) during each of such periods, an amount 
          equal to 60% of the outstanding principal balance of the Term Loans; 
          PLUS

                (v)  Cash Collateral; MINUS

               (vi)  such other reserves as the Administrative Agent may deem
          proper and necessary from time to time in its Permitted Discretion.

          (b)  Each Revolving Credit Lender agrees, severally and not jointly, 
to make Revolving Loans to each Borrower in aggregate amounts outstanding at 
any time not greater than such Lender's Pro Rata Percentage of such 
Borrower's Individual Formula Amount less such Borrower's L/C Exposure.

          (c)  The Advance Rates may be increased or decreased by the 
Administrative Agent at any time and from time to time in the exercise of its 
Permitted Discretion; PROVIDED, HOWEVER, that (i) any decrease in any Advance 
Rate shall only be effective on the fifth day after the Administrative Agent 
has given the Borrowing Agent notice of such decrease and (ii) any increase 
or decrease in the Receivables Advance Rate shall only apply to Eligible 
Receivables created and assigned to the Administrative Agent after such 
change in Advance Rate becomes effective, but any increase or decrease in the 
Inventory Advance Rate shall apply to all Eligible Inventory whether then 
owned or thereafter acquired.  Each Borrower consents to any such increases 
or decreases and acknowledges that decreasing the Advance Rates or increasing 
the reserves may limit or restrict Revolving Loans or Letters of Credit 
requested by the Borrowing Agent..

          (d)  For purposes of calculating the Formula Amount, Individual 
Formula Amount, Eligible Inventory, and Eligible Receivables, the Receivables 
and Inventory acquired in any Permitted Acquisition shall not be included 
until such time as the Administrative Agent has performed an audit with 
results satisfactory to it in its Permitted Discretion.

     SECTION 2.02.  LOANS.  (a)  Each Loan shall be made as part of a Borrowing 
consisting of Loans made by the Lenders ratably in accordance with their 
applicable Commitments; PROVIDED, HOWEVER, that the failure of any Lender to 
make any Loan shall not in itself relieve any other Lender of its obligation 
to lend hereunder (it being understood, however, that no Lender shall be 
responsible for the failure of any other Lender to make any Loan required to 
be made by such other Lender). Except for Loans deemed made pursuant to 
Section 2.03(a), the Loans comprising any Borrowing shall be in an aggregate 
principal amount that is (i) an integral multiple of $1,000,000 or (ii) equal 
to the remaining available balance of the applicable Commitments.

          (b)  Subject to Sections 2.15 and 2.17, each Borrowing shall be 
comprised entirely of ABR Loans or Eurodollar Loans as the Borrowing Agent 
may request 


<PAGE>

                                                                              32


pursuant to Section 2.03.  Each Lender may at its option make any 
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of 
such Lender to make such Loan; PROVIDED that any exercise of such option 
shall not affect the obligation of the Borrowers to repay such Loan in 
accordance with the terms of this Agreement.  Borrowings of more than one 
Type may be outstanding at the same time; PROVIDED, HOWEVER, that the 
Borrowers shall not be entitled to request any Borrowing that, if made, would 
result in more than five Eurodollar Borrowings outstanding hereunder at any 
time.  For purposes of the foregoing, Borrowings made by a Borrower having 
different Interest Periods, regardless of whether they commence on the same 
date, shall be considered separate Borrowings.

          (c)  Notwithstanding any other provision of this Agreement, the 
Borrowing Agent shall not be entitled to request any Revolving Credit 
Borrowing if the Interest Period requested with respect thereto would end 
after the Revolving Credit Maturity Date.

     SECTION 2.03.  PROCEDURE FOR REVOLVING CREDIT BORROWINGS.  (a)  The 
Borrowing Agent on behalf of any Borrower may notify the Administrative Agent 
prior to 1:00 p.m., New York time, on a Business Day of a Borrower's request 
to make, on that day, a Revolving Credit Borrowing hereunder.  Should any 
amount required to be paid as interest hereunder, or as fees or other charges 
under this Agreement or any other agreement with the Administrative Agent, 
the Collateral Agent or Lenders, or any L/C Disbursement, or with respect to 
any other Obligation, become due, same shall be deemed a request for a 
Revolving Credit Borrowing as of the date such payment is due, in the amount 
required to pay in full such interest, fee, charge or Obligation under this 
Agreement or any other agreement with the Administrative Agent, the 
Collateral Agent or Lenders, and such request shall be irrevocable.  The 
Administrative Agent is hereby irrevocably authorized, in its sole 
discretion, to make Revolving Loans from time to time, or to charge 
Borrowers' Account, to pay any interest, fees or other amounts (including any 
L/C Disbursement) for which payment is due under this Agreement, or at any 
time after the occurrence of an Event of Default to cash collateralize the 
L/C Exposure.

          (b)  Notwithstanding the provisions of Section 2.03(a) above, in 
the event a Borrower desires to make a Eurodollar Borrowing, the Borrowing 
Agent shall give the Administrative Agent at least three (3) Business Days' 
prior written notice, specifying (i) the date of the proposed Borrowing 
(which shall be a Business Day), (ii) the amount on the date of such 
Revolving Credit Borrowing, which amount shall be an integral multiple of 
$1,000,000, and (iii) the duration of the first Interest Period therefor. No 
Eurodollar Borrowing shall be made available to the Borrowers during the 
continuance of a Default or an Event of Default.

          (c)  The Borrowing Agent shall elect the initial Interest Period 
applicable to a Eurodollar Borrowing by its notice of borrowing given to the 
Administrative Agent pursuant to Section 2.03 (a) or by its notice of 
conversion given to the Administrative 


<PAGE>

                                                                              33


Agent pursuant to Section 2.03(d), as the case may be.  The Borrowing Agent 
shall elect the duration of each succeeding Interest Period by giving 
irrevocable written notice to the Administrative Agent of such duration not 
less than three (3) Business Days prior to the last day of the then current 
Interest Period applicable to such Eurodollar Borrowing.  If the Administrative 
Agent does not receive timely notice of the Interest Period elected by the 
Borrowing Agent, the applicable Borrower shall be deemed to have elected to 
convert to an ABR Loan, subject to Section 2.03(d) hereinbelow.

          (d)  Provided that no Default or Event of Default shall have 
occurred and be continuing, the Borrowing Agent may, on the last Business Day 
of the then current Interest Period applicable to any outstanding Eurodollar 
Loan, or on any Business Day with respect to ABR Loans, convert any such Loan 
into a Loan of another type in the same aggregate principal amount; PROVIDED 
that any conversion of a Eurodollar Loan shall be made only on the last 
Business Day of the then current Interest Period applicable to such 
Eurodollar Loan.  If a Borrower desires to convert a Loan, the Borrowing 
Agent shall give the Administrative Agent not less than three (3) Business 
Days' prior written notice to convert from an ABR Loan to a Eurodollar Loan 
or one (1) Business Day's prior written notice to convert from a Eurodollar 
Loan to an ABR Loan, specifying the date of such conversion, the Loans to be 
converted and if the conversion is from an ABR Loan to a Eurodollar Loan, the 
duration of the first Interest Period therefor.  After giving effect to each 
such conversion, there shall not be outstanding more than five (5) Eurodollar 
Borrowings, in the aggregate.

     SECTION 2.04.  DISBURSEMENT OF LOANS.  All Loans shall be disbursed from 
whichever office or other place the Administrative Agent may designate from 
time to time and, together with any and all other Obligations of the 
Borrowers to the Administrative Agent, the Collateral Agent or Lenders, shall 
be charged to the Borrowers' Account on the Administrative Agent's books.  
The Borrowers may use the Revolving Loans by borrowing, prepaying and 
reborrowing, all in accordance with the terms and conditions hereof.  The 
proceeds of each Revolving Credit Borrowing requested by a Borrower or deemed 
to have been requested by or on behalf of a Borrower under Section 2.03(a) 
hereof shall, with respect to requested Revolving Credit Borrowings to the 
extent Lenders make such Revolving Credit Borrowings, be made available to 
such Borrower on the day so requested by way of credit to such Borrower's 
operating account at PNC, in immediately available federal funds or other 
immediately available funds or, with respect to Revolving Credit Borrowings 
deemed to have been requested by the Borrowers, be disbursed to the 
Administrative Agent to be applied to the outstanding Obligations giving rise 
to such deemed request.

     SECTION 2.05.  MANNER OF BORROWING AND PAYMENT.  (a)  Each Revolving 
Credit Borrowing shall be advanced according to the applicable Pro Rata 
Percentages of the Revolving Credit Lenders.  The Term Loans shall be 
advanced pro rata by the Term Lenders.


<PAGE>

                                                                              34


          (b)  Each payment (including each prepayment) by a Borrower on 
account of the principal of and interest on the Revolving Loans shall be 
applied to the Revolving Loans of such Borrower according to the applicable 
Pro Rata Percentages of the Revolving Credit Lenders.  Each payment 
(including each prepayment) by Activision on account of the principal of and 
interest on the Term Loans, shall be made pro rata to the Term Lenders.  
Except as expressly provided herein, all payments (including prepayments) to 
be made by the Borrowers on account of principal, interest and fees shall be 
made without set off or counterclaim and shall be made to the Administrative 
Agent on behalf of the Lenders to the Payment Office, in each case on or 
prior to 1:00 P.M., New York time, in Dollars and in immediately available 
funds.

          (c)  (i)  Notwithstanding anything to the contrary contained in 
Sections 2.03 or 2.05 (a) and (b) hereof, commencing with the first Business 
Day following the Closing Date, each Revolving Loan shall be advanced by the 
Administrative Agent and each payment by the Borrowers on account of 
Revolving Loans shall be applied first to those Revolving Loans advanced by 
the Administrative Agent.  On or before 1:00 P.M., New York time, on each 
Settlement Date commencing with the first Settlement Date following the 
Closing Date, the Administrative Agent and Lenders shall make certain 
payments as follows: (I) if the aggregate amount of new Revolving Loans made 
by the Administrative Agent during the preceding Week (if any) exceeds the 
aggregate amount of repayments applied to outstanding Revolving Loans during 
such preceding Week, then each Lender shall provide the Administrative Agent 
with immediately available funds in an amount equal to its applicable Pro 
Rata Percentage of the difference between (w) such Revolving Loans and 
(x) such repayments and (II) if the aggregate amount of repayments applied to 
outstanding Revolving Loans during such Week exceeds the aggregate amount of 
new Revolving Credit Loans made during such Week, then the Administrative 
Agent shall provide each Lender with immediately available funds in an amount 
equal to its applicable Pro Rata Percentage of the difference between (y) such 
repayments and (z) such Revolving Loans.

                (ii)  Each Lender shall be entitled to earn interest at the 
          rate applicable to the rate on the outstanding Revolving Loans which 
          it has funded.

               (iii)  Promptly following each Settlement Date, the 
          Administrative Agent shall submit to each Lender a certificate with 
          respect to payments received and Revolving Loans made during the Week 
          immediately preceding such Settlement Date.  Such certificate of the 
          Administrative Agent shall be conclusive in the absence of manifest 
          error.

          (d)  Unless the Administrative Agent shall have been notified by 
telephone, confirmed in writing, by any Lender that such Lender will not make 
the amount which would constitute its applicable Pro Rata Percentage of the 
Revolving Loans available to the Administrative Agent, the Administrative 
Agent may (but shall not be obligated to) assume that such Lender shall make 
such amount available to the 


<PAGE>

                                                                              35


Administrative Agent on the next Settlement Date and, in reliance upon such 
assumption, make available to the Borrowers a corresponding amount.  The 
Administrative Agent will promptly notify the Borrowing Agent of its receipt 
of any such notice from a Lender.  If such amount is made available to the 
Administrative Agent on a date after such next Settlement Date, such Lender 
shall pay to the Administrative Agent on demand an amount equal to the 
product of (i) the daily average Federal Funds Rate (computed on the basis of 
a year of 360 days) during such period as quoted by the Administrative Agent, 
times (ii) such amount, times (iii) the number of days from and including 
such Settlement Date to the date on which such amount becomes immediately 
available to the Administrative Agent.  A certificate of the Administrative 
Agent submitted to any Lender with respect to any amounts owing under this 
paragraph shall be conclusive, in the absence of manifest error.  If such 
amount is not in fact made available to the Administrative Agent by such 
Lender within three (3) Business Days after such Settlement Date, the 
Administrative Agent shall be entitled to recover such an amount, with 
interest thereon at the rate per annum then applicable to such Revolving 
Loans hereunder, on demand from the applicable Borrower; PROVIDED, HOWEVER, 
that the Administrative Agent's right to such recovery shall not prejudice or 
otherwise adversely affect the Borrower's rights (if any) against such Lender.

     SECTION 2.06.  EVIDENCE OF DEBT.  (a)  Activision hereby unconditionally 
promises to pay to the Administrative Agent for the account of each Lender 
holding Term Loans, the principal amount of each Term Loan of such Lender as 
provided in Section 2.12(a) and each Borrower hereby unconditionally and 
jointly and severably promises to pay to the Administrative Agent on the 
Revolving Credit Maturity Date (or earlier termination of the Revolving 
Credit Commitments) for the account of each Revolving Credit Lender, the then 
unpaid principal amount of each Revolving Loan made by such Lender to 
Borrowers.

          (b)  Each Lender shall maintain in accordance with its usual 
practice an account or accounts evidencing the indebtedness of the Borrowers 
to such Lender resulting from each Loan made by such Lender from time to 
time, including the amounts of principal and interest payable and paid such 
Lender from time to time under this Agreement.

          (c)  The Administrative Agent shall maintain accounts in which it 
will record (i) the amount of each Loan made hereunder, the Type thereof and 
the Interest Period applicable thereto, (ii) the amount of any principal or 
interest due and payable or to become due and payable from the Borrowers to 
each Lender hereunder and (iii) the amount of any sum received by the 
Administrative Agent hereunder from the Borrowers or any Subsidiary Guarantor 
and each Lender's share thereof.

          (d)  The entries made in the accounts maintained pursuant to 
paragraphs (b) and (c) above shall be PRIMA FACIE evidence of the existence 
and amounts of the obligations therein recorded; PROVIDED, HOWEVER, that the 
failure of any Lender or 


<PAGE>

                                                                              36


the Administrative Agent to maintain such accounts or any error therein shall 
not in any manner affect the obligations of the Borrowers to repay the Loans 
in accordance with their terms.

          (e)  Any Lender may request that Loans made by it hereunder be 
evidenced by a promissory note.  In such event, the Borrowers shall execute 
and deliver to such Lender a promissory note payable to such Lender and its 
registered assigns and in a form and substance reasonably acceptable to the 
Administrative Agent and the Borrowers. Notwithstanding any other provision 
of this Agreement, in the event any Lender shall request and receive such a 
promissory note, the interests represented by such note shall at all times 
(including after any assignment of all or part of such interests pursuant to 
Section 9.04) be represented by one or more promissory notes payable to the 
payee named therein or its registered assigns.

     SECTION 2.07.  STATEMENT OF ACCOUNT.  (a)  The Administrative Agent shall 
maintain, in accordance with its customary procedures, a loan account 
("Borrowers' Account") in the name of the Borrowers in which shall be 
recorded the date and amount of each Borrowing, each L/C Disbursement and the 
date and amount of each payment in respect thereof; PROVIDED, HOWEVER, the 
failure by the Administrative Agent to record the date and amount of any 
Borrowing or L/C Disbursement shall not adversely affect the Administrative 
Agent or any Lender. Each month, the Administrative Agent shall send to the 
Borrowing Agent a statement showing the accounting for the Borrowings made, 
payments made or credited in respect thereof, and other transactions between 
the Administrative Agent and the Borrowers during such month.  The monthly 
statements shall be deemed correct and binding upon the Borrowers in the 
absence of manifest error and shall constitute an account stated between 
Lenders and Borrowers unless the Administrative Agent receives a written 
statement of the Borrowers' specific exceptions thereto within thirty (30) days 
after such statement is received by the Borrowers.  The records of the 
Administrative Agent with respect to Borrowers' Account shall be conclusive 
evidence absent manifest error of the amounts of Loans and other charges 
thereto and of payments applicable thereto.

          (b)  Any sums expended by the Administrative Agent or any Lender 
due to a Borrower's failure to perform or comply with its obligations under 
this Agreement or any Loan Document may be charged to Borrowers' Account as a 
Revolving Loan and added to the Obligations.

     SECTION 2.08.  FEES.  (a)  The Borrowers jointly and severally agree to 
pay to each Lender, through the Administrative Agent, on the last day of 
March, June, September and December in each year and on each date on which 
any Commitment of such Lender shall expire or be terminated as provided 
herein, a commitment fee (a "COMMITMENT FEE") equal to 1/2 of 1% per annum on 
the daily unused amount of the Commitments of such Lender during the 
preceding quarter (or other period commencing with the date hereof or ending 
with the Revolving Credit Maturity Date or the date on 


<PAGE>

                                                                              37


which the Commitments of such Lender shall expire or be terminated).  All 
Commitment Fees shall be computed on the basis of the actual number of days 
elapsed in a year of 360 days.  The Commitment Fee due to each Lender shall 
commence to accrue on the date hereof and shall cease to accrue on the date 
on which the Commitment of such Lender shall expire or be terminated as 
provided herein.

          (b)  The Borrowers jointly and severally agree to pay to the 
Administrative Agent and Collateral Agent, for its own account, the fees set 
forth in the Fee Letter at the times and in the amounts specified therein 
(the "AGENT FEES").

          (c)  The Borrowers jointly and severally agree to pay (i) to each 
Revolving Credit Lender, through the Administrative Agent, on the last 
Business Day of March, June, September and December of each year and on the 
date on which the Revolving Credit Commitment of such Lender shall be 
terminated as provided herein, a fee (an "L/C PARTICIPATION FEE") calculated 
on such Lender's Pro Rata Percentage of the average daily aggregate L/C 
Exposure (excluding the portion thereof attributable to unreimbursed L/C 
Disbursements) during the preceding quarter (or shorter period commencing 
with the date hereof or ending with the Revolving Credit Maturity Date or the 
date on which all Letters of Credit have been canceled or have expired and 
the Revolving Credit Commitments of all Lenders shall have been terminated) 
at a rate equal to (x) in the case of the Standby L/C Exposure, 2.75% per 
annum, and (y) in the case of the Trade L/C Exposure, 1.375% per annum, and 
(ii) to the Issuing Bank with respect to each Letter of Credit a fronting, 
issuance and drawing fee equal to .25% per annum on the face amount of all 
outstanding Letters of Credit, payable quarterly in arrears and on the 
Revolving Credit Maturity Date or the date on which all Letters of Credit 
have been canceled or have expired and the Revolving Credit Commitments of 
all Lenders shall have been terminated (the "ISSUING BANK FEES"). All L/C 
Participation Fees and Issuing Bank Fees shall be computed on the basis of 
the actual number of days elapsed in a year of 360 days.

          (d)  All Fees shall be paid on the dates due, in immediately 
available funds, to the Administrative Agent for distribution, if and as 
appropriate, among the Lenders, except that the Issuing Bank Fees shall be 
paid directly to the Issuing Bank.  Once paid, none of the Fees shall be 
refundable under any circumstances.

     SECTION 2.09.  INTEREST ON LOANS.  (a)  Subject to the provisions of 
Section 2.10, the Loans comprising each ABR Borrowing shall bear interest 
(computed on the basis of the actual number of days elapsed over a year of 
365 or 366 days, as the case may be, when the Alternate Base Rate is 
determined by reference to the Base Rate and over a year of 360 days at all 
other times and calculated from and including the date of such Borrowing to 
but excluding the date of repayment thereof) at a rate per annum equal to the 
Alternate Base Rate plus 1.75% for Revolving Loans and the Alternate Base 
Rate plus 2.0% for Term Loans.


<PAGE>

                                                                              38


          (b)  Subject to the provisions of Section 2.10, the Loans 
comprising each Eurodollar Borrowing shall bear interest (computed on the 
basis of the actual number of days elapsed over a year of 360 days) at a rate 
per annum equal to the Adjusted LIBO Rate for the Interest Period in effect 
for such Borrowing plus 2.75% for Revolving Loans and the Adjusted LIBO Rate 
for the Interest Period in effect for such Borrowing plus 3.00% for Term 
Loans.

          (c)  Interest on each Loan shall be payable on the Interest Payment 
Dates applicable to such Loan except as otherwise provided in this Agreement. 
The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined 
by the Administrative Agent, and such determination shall be conclusive 
absent manifest error.

          (d)  In no event whatsoever shall interest and other charges 
charged hereunder exceed the highest rate permissible under law.  In the 
event interest and other charges as computed hereunder would otherwise exceed 
the highest rate permitted under law, such excess amount shall be first 
applied to any unpaid principal balance owed by the Borrowers, and if the 
then remaining excess amount is greater than the previously unpaid principal 
balance, Lenders shall promptly refund such excess amount to the Borrowers 
and the provisions hereof shall be deemed amended to provided for such 
permissible rate.

     SECTION 2.10.  DEFAULT INTEREST.  Upon and after the occurrence of an 
Event of Default and during the continuation thereof, (i) the Obligations 
other than Eurodollar Loans shall bear interest at the rate otherwise 
applicable to ABR Loans plus two percent (2%) per annum and (ii) Eurodollar 
Loans shall bear interest at the rate otherwise applicable to Eurodollar 
Loans plus two percent (2%) per annum (as applicable, the "Default Rate").

     SECTION 2.11.  TERMINATION AND REDUCTION OF COMMITMENTS.  (a)  The Term 
Loan Commitments shall automatically terminate at 5:00 p.m., New York City 
time, on the Closing Date. The Revolving Credit Commitments, and the L/C 
Commitment shall automatically terminate on the Revolving Credit Maturity 
Date.  Notwithstanding the foregoing, all the Commitments shall automatically 
terminate at 5:00 p.m., New York City time, on June 30, 1999, if the initial 
Credit Event shall not have occurred by such time.

          (b)  Upon at least three Business Days' prior irrevocable written 
or telecopy notice to the Administrative Agent, the Borrowers may at any time 
in whole permanently terminate, or from time to time in part permanently 
reduce, the Term Loan Commitments or the Revolving Credit Commitments; 
PROVIDED, HOWEVER, that (i) each partial reduction of the Term Loan 
Commitments or the Revolving Credit Commitments shall be in an integral 
multiple of $1,000,000 and (ii) the Total Revolving Credit Commitment shall 
not be reduced to an amount that is less than the sum of the Aggregate 
Revolving Credit Exposure at the time.


<PAGE>

                                                                              39


          (c)  Each reduction in the Term Loan Commitments or the Revolving 
Credit Commitments hereunder shall be made ratably among the Lenders in 
accordance with their respective applicable Commitments.  The Borrowers shall 
pay to the Administrative Agent for the account of the applicable Lenders, on 
the date of each termination or reduction, the Commitment Fees on the amount 
of the Commitments so terminated or reduced accrued to but excluding the date 
of such termination or reduction.

     SECTION 2.12.  REPAYMENT OF BORROWINGS.  (a)  The Term Borrowings shall 
be payable as to principal in 10 consecutive installments payable on the last 
Business Day of March, June, September and December of each year, commencing 
on the last Business Day in December 1999 and ending on the Term Loan Maturity 
Date (each such date being called a "REPAYMENT DATE") and shall be due and 
payable in full on the date that the Revolving Credit Commitments terminate.  
Each installment shall be in an amount equal to $2,500,000, with the balance 
due and payable on the Term Loan Maturity Date or any earlier date that the 
Revolving Credit Commitments terminate.

          (b)  Each payment of Term Borrowings pursuant to this Section 2.12 
shall be accompanied by accrued interest on the principal amount paid to but 
excluding the date of payment.

          (c)  The Revolving Loans shall be due and payable in full on the 
Revolving Credit Maturity Date subject to earlier prepayment as herein 
provided.

          (d)  With respect to any deposits in any lockbox or Blocked Account, 
the Borrowers recognize that the amounts evidenced by checks, notes, drafts 
or any other items of payment relating to and/or proceeds of Collateral may 
not be collectible by the Administrative Agent on the date received.  In 
consideration of the Administrative Agent's agreement to conditionally credit 
Borrowers' Account as of the Business Day on which the Administrative Agent 
receives those items of payment, the Borrowers agree that, in computing the 
charges under this Agreement, all items of payment shall be deemed applied by 
the Administrative Agent on account of the Obligations on the Business Day 
the Administrative Agent receives such payments via wire transfer or 
electronic depository check.  The Administrative Agent is not, however, 
required to credit Borrowers' Account for the amount of any item of payment 
which is unsatisfactory to the Administrative Agent and the Administrative 
Agent may charge Borrowers' Account for the amount of any item of payment 
which is returned to the Administrative Agent unpaid.

          (e)  All payments of principal, interest and other amounts payable 
hereunder, or under any of the other Loan Documents, shall be made to the 
Administrative Agent at the Payment Office not later than 1:00 P.M. (New York 
Time) on the due date therefor in lawful money of the United States of 
America in federal funds or other funds immediately available to the 
Administrative Agent.  The Administrative Agent shall have the right to 
effectuate payment on any and all Obligations due and 


<PAGE>

                                                                              40


owing hereunder by charging Borrowers' Account or by making Revolving Loans 
as provided in Section 2.02(a) hereof.

          (f)  Borrowers shall pay principal, interest, and all other amounts 
payable hereunder, or under any related agreement, without any deduction 
whatsoever, including, but not limited to, any deduction for any setoff or 
counterclaim.

     SECTION 2.13.  PREPAYMENT.  (a)  The Borrowers shall have the right at 
any time and from time to time to prepay any Borrowing, in whole or in part, 
upon at least three Business Days' prior written or telecopy notice (or 
telephone notice promptly confirmed by written or telecopy notice) in the 
case of Eurodollar Loans, or written or telecopy notice (or telephone notice 
promptly confirmed by written or telecopy notice) on or prior to the date of 
prepayment in the case of ABR Loans, to the Administrative Agent before 
1:00 p.m., New York City time; PROVIDED, HOWEVER, that each partial 
prepayment shall be in an amount that is an integral multiple of $1,000,000.

          (b)  Optional prepayments of Term Loans shall be applied pro rata 
against the remaining scheduled installments of principal due in respect of 
the Term Loans.

          (c)  Each notice of prepayment shall specify the prepayment date 
and the principal amount of each Borrowing (or portion thereof) to be 
prepaid, shall be irrevocable and shall commit the Borrowers to prepay such 
Borrowing by the amount stated therein on the date stated therein.  All 
prepayments under this Section 2.13 shall be subject to Section 2.19 but 
otherwise without premium or penalty.  All prepayments under this Section 2.13 
shall be accompanied by accrued interest on the principal amount being prepaid 
to the date of payment.

     SECTION 2.14.  MANDATORY PREPAYMENTS.  (a)  In the event of any 
termination of all the Revolving Credit Commitments in accordance with this 
Agreement, the Borrowers shall, on the effective date of such termination, 
repay or prepay all outstanding Revolving Credit Borrowings and Term Loans 
and replace all outstanding Letters of Credit and/or deposit an amount equal 
to 105% of the L/C Exposure in cash in a cash collateral account established 
with the Collateral Agent for the benefit of the Secured Parties and/or 
provide an irrevocable letter of credit in form and substance reasonably 
acceptable to the Administrative Agent from a bank reasonably acceptable to 
the Administrative Agent.  In the event of any partial reduction of the 
Revolving Credit Commitments, then (i) at or prior to the effective date of 
such reduction, the Administrative Agent shall notify the Borrowers and the 
Revolving Credit Lenders of the Aggregate Revolving Credit Exposure after 
giving effect thereto and (ii) if the Aggregate Revolving Credit Exposure 
would exceed the Total Revolving Credit Commitment after giving effect to 
such reduction or termination, then the Borrowers shall, on the effective 
date of such reduction or termination, repay or prepay Revolving Credit 
Borrowings and/or replace or cash collateralize outstanding Letters of Credit 
in an amount sufficient to eliminate such excess.


<PAGE>
                                                                            41


          (b)  If on any date the Aggregate Revolving Credit Exposure shall
exceed the Formula Amount, or the Revolving Loans to a Borrower plus the L/C
Exposure of such Borrower shall exceed the Individual Formula Amount, the
Borrowers shall on such date repay or prepay Revolving Credit Borrowings and/or
replace or cash collateralize outstanding L/C Exposure in an amount sufficient
to eliminate such excess.  Any such excess amount shall constitute part of the
Obligations and be secured by the Collateral.

          (c)  Not later than the third Business Day following the
completion of any Asset Sale, Activision shall apply an amount equal to 100% of
the Net Cash Proceeds received with respect thereto to prepay outstanding Term
Loans in accordance with Section 2.14(h).

          (d)  In the event and on each occasion that an Equity Issuance occurs,
Activision shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the occurrence of such Equity
Issuance, apply 100% of the Net Cash Proceeds therefrom to prepay outstanding
Term Loans in accordance with Section 2.14(h).

          (e)  No later than the earlier of (i) 90 days after the end of each
fiscal year of the Borrowers, commencing with the fiscal year ending on
March 31, 2000, and (ii) the date on which the financial statements with respect
to such period are delivered pursuant to Section 5.04(a), Activision shall
prepay outstanding Term Loans in accordance with Section 2.14(h) in an aggregate
principal amount equal to fifty percent (50%) of Excess Cash Flow for the fiscal
year then ended.

          (f)  In the event that any Loan Party or any subsidiary of a Loan
Party shall receive Net Cash Proceeds from the issuance or other disposition of
Indebtedness for money borrowed of any Loan Party or any subsidiary of a Loan
Party (including any Subordinated Debt but excluding any other Indebtedness for
money borrowed permitted pursuant to Section 6.01), Activision shall,
substantially simultaneously with (and in any event not later than the third
Business Day next following) the receipt of such Net Cash Proceeds by such Loan
Party or such subsidiary, apply an amount equal to 100% of such Net Cash
Proceeds to prepay outstanding Term Loans in accordance with Section 2.14(h).

          (g)  In the event that there shall occur any Casualty or Condemnation
and, pursuant to the applicable Mortgage, the Casualty Proceeds or Condemnation
Proceeds, as the case may be, are required to be used to prepay the Term Loans,
then Activision shall apply an amount equal to 100% of such Casualty Proceeds or
Condemnation Proceeds, as the case may be, to prepay outstanding Term Loans in
accordance with Section 2.14(h).



<PAGE>
                                                                            42


          (h)  Mandatory prepayments of outstanding Term Loans under this
Agreement shall be applied pro rata against the remaining scheduled installments
of principal due in respect of the Term Loans.

          (i)  The Borrowing Agent shall deliver to the Administrative Agent, at
the time of each prepayment required under this Section 2.14, (i) a certificate
signed by a Financial Officer of the Borrowing Agent setting forth in reasonable
detail the calculation of the amount of such prepayment and (ii) to the extent
practicable, at least three days prior written notice of such prepayment.  Each
notice of prepayment shall specify the prepayment date, the Type of each Loan
being prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid.  All prepayments of Borrowings under this Section 2.14 shall be subject
to Section 2.19, but shall otherwise be without premium or penalty.

     SECTION 2.15.  ILLEGALITY.  Notwithstanding any other provision hereof, if
any applicable  law, treaty, regulation or directive, or any change therein or
in the interpretation or application thereof, shall make it unlawful for any
Lender (for purposes of this subsection (g), the term "Lender" shall include any
Lender and the office or branch where any Lender or any corporation or bank
controlling such Lender makes or maintains any Eurodollar Loans) to make or
maintain its Eurodollar Loans, the obligation of Lenders to make Eurodollar
Loans hereunder shall forthwith be canceled and the Borrower shall, if any
affected Eurodollar Loans are then outstanding, promptly upon request from the
Administrative Agent, either pay all such affected Eurodollar Loans or convert
such affected Eurodollar Loans into ABR Loans. If any such payment or conversion
of any Eurodollar Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Loan, the Borrowers shall pay the
Administrative Agent upon the Administrative Agent's request, such amount or
amounts as may be necessary to compensate Lenders for any loss or expense
sustained or incurred by Lenders in respect of such Eurodollar Loan as a result
of such payment or conversion, including (but not limited to) any interest or
other amounts payable by Lenders to lenders of funds obtained by Lenders in
order to make or maintain such Eurodollar Loan.  A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by any
Lender to the Borrowing Agent shall be conclusive absent manifest error.

     SECTION 2.16.  INCREASED COSTS.  In the event that any applicable law,
treaty or governmental regulation, or any change therein or in the
interpretation or application thereof, or compliance by any Lender (for purposes
of this Section 3.7, the term "Lender" shall include the Administrative Agent or
any Lender and any corporation or bank controlling the Administrative Agent or
any Lender) and the office or branch where the Administrative Agent or any
Lender (as so defined) makes or maintains any Eurodollar Loans with any request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:



<PAGE>
                                                                            43


          (a)  subject the Administrative Agent or any Lender to any tax of any
kind whatsoever not currently applicable with respect to this Agreement or any
Loan Document or change the basis of taxation of payments to the Administrative
Agent or any Lender of principal, fees, interest or any other amount payable
hereunder or under any Loan Documents (except for any imposition or changes in
the rate of tax on the overall net income of the Administrative Agent or any
Lender by the jurisdiction in which it maintains its principal office);

          (b)  impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, Loans or loans by, or other credit extended by, any office of
the Administrative Agent or any Lender, including (without limitation) pursuant
to Regulation D of the Board of Governors of the Federal Reserve System; or

          (c)  impose, modify or hold applicable on the Administrative Agent 
or any Lender or the London interbank Eurodollar market any other condition 
with respect to this Agreement or any Loan Document; 

and the result of any of the foregoing is to increase the cost to the 
Administrative Agent or any Lender of making, renewing or maintaining its 
Loans hereunder by an amount that the Administrative Agent or such Lender 
reasonably deems to be material or to reduce the amount of any payment 
(whether of principal, interest or otherwise) in respect of any of the Loans 
by an amount that the Administrative Agent or such Lender reasonably deems to 
be material, then, in any case the Borrowers shall promptly pay the 
Administrative Agent or such Lender, upon its demand, such additional amount 
as will compensate the Administrative Agent or such Lender for such 
additional cost or such reduction, as the case may be, PROVIDED that the 
foregoing shall not apply to increased costs which are reflected in the 
Adjusted LIBO Rate.  The Administrative Agent or such Lender shall certify 
the amount of such additional cost or reduced amount to the Borrowers, and 
such certification shall be conclusive absent manifest error.

     SECTION 2.17.  BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
In the event that the Administrative Agent or any Lender shall have determined
that:

          (a)  reasonable means do not exist for ascertaining the LIBO Rate for
any Interest Period; or

          (b)  Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Loan, a proposed Eurodollar Borrowing, or a
proposed conversion of an ABR Loan into a Eurodollar Loan; 

then the Administrative Agent shall give the Borrowing Agent prompt written, 
telephonic or telegraphic notice of such determination.  If such notice is 
given, (i) any such 



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                                                                            44


requested Eurodollar Loan shall be made as an ABR Borrowing, unless the 
Borrowing Agent shall notify the Administrative Agent no later than 10:00 
a.m. (New York City time) two (2) Business Days prior to the date of such 
proposed Borrowing, that its request for such Borrowing shall be canceled, 
(ii) any ABR Loan or Eurodollar Loan which was to have been converted to an 
affected type of Eurodollar Loan shall be continued as or converted into an 
ABR Loan, or, if the Borrowing Agent shall notify the Administrative Agent, 
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to 
the proposed conversion, shall be maintained as an unaffected type of 
Eurodollar Loan and (iii) any outstanding affected Eurodollar Loans shall be 
converted into an ABR Loan, or, if Borrower shall notify the Administrative 
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days 
prior to the last Business Day of the then current Interest Period applicable 
to such affected Eurodollar Loan, shall be converted into an unaffected type 
of Eurodollar Loan on the last Business Day of the then current Interest 
Period for such affected Eurodollar Loans.  Until such notice has been 
withdrawn, Lenders shall have no obligation to make an affected type of 
Eurodollar Loan or maintain outstanding affected Eurodollar Loans and the 
Borrowers shall not have the right to convert an ABR Loan or an unaffected 
type of Eurodollar Loan into an affected type of Eurodollar Loan.

     SECTION 2.18.  CAPITAL ADEQUACY.  In the event that the Administrative
Agent or any Lender shall have determined that any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Administrative Agent or any Lender
(for purposes of this Section 2.18, the term "Lender" shall include the
Administrative Agent or any Lender and any corporation or bank controlling the
Administrative Agent or any Lender) and the office or branch where the
Administrative Agent or any Lender (as so defined) makes or maintains any
Eurodollar Loans with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Administrative Agent or any Lender's capital as a consequence of its
obligations hereunder to a level below that which the Administrative Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Administrative Agent's and each Lender's policies
with respect to capital adequacy) by an amount deemed by the Administrative
Agent or any Lender to be material, then, from time to time, the Borrowers shall
pay upon demand to the Administrative Agent or such Lender such additional
amount or amounts as will compensate the Administrative Agent or such Lender for
such reduction.  In determining such amount or amounts, the Administrative Agent
or such Lender may use any reasonable averaging or attribution methods.  The
protection of this Section shall be available to the Administrative Agent and
each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.  A
certificate of the Administrative Agent or a Lender setting forth such amount or
amounts as shall be necessary to compensate the Administrative Agent or such



<PAGE>
                                                                            45


Lender with respect to this Section 2.18 when delivered to the Borrowing Agent
shall be conclusive absent manifest error.

     SECTION 2.19. INDEMNITY. The Borrowers shall jointly and severally
indemnify the Administrative Agent, the Collateral Agent and each Lender against
any loss or expense that the Administrative Agent, the Collateral Agent and such
Lender may sustain or incur as a consequence of (a) any event, other than a
default by such Lender in the performance of its obligations hereunder, which
results in (i) such Lender receiving or being deemed to receive any amount on
account of the principal of any Eurodollar Loan prior to the end of the Interest
Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR
Loan, or the conversion of the Interest Period with respect to any Eurodollar
Loan, in each case other than on the last day of the Interest Period in effect
therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any
Eurodollar Loan to be made pursuant to a conversion or continuation under
Section 2.10) not being made after notice of such Loan shall have been given by
the Borrowing Agent hereunder (any of the events referred to in this clause (a)
being called a "BREAKAGE EVENT") or (b) any default in the making of any payment
or prepayment required to be made hereunder.  In the case of any Breakage Event,
such loss shall include an amount equal to the excess, as reasonably determined
by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that
is the subject of such Breakage Event for the period from the date of such
Breakage Event to the last day of the Interest Period in effect (or that would
have been in effect) for such Loan over (ii) the amount of interest likely to be
realized by such Lender in redeploying the funds released or not utilized by
reason of such Breakage Event for such period.  A certificate of any Lender
setting forth any amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.19 shall be delivered to the Borrowers and shall be
conclusive absent manifest error.

     SECTION 2.20. PRO RATA TREATMENT. Each payment or prepayment of principal
of any Borrowing, each payment of interest on the Loans, each payment of the
Commitment Fees and L/C Participation Fees, each reduction of the Term Loan
Commitments or the Revolving Credit Commitments  and each  conversion of any
Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
be allocated pro rata among the Lenders in accordance with their respective
applicable Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
outstanding Loans).  Each Lender agrees that in computing such Lender's portion
of any Borrowing to be made hereunder, the Administrative Agent may, in its
discretion, round each Lender's percentage of such Borrowing to the next higher
or lower whole dollar amount.

     SECTION 2.21. SHARING OF SETOFFS. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
any Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other 



<PAGE>
                                                                            46


similar law or otherwise, or by any other means, obtain payment (voluntary or 
involuntary) in respect of any Loan or Loans or L/C Disbursement as a result 
of which the unpaid principal portion of its Term Loans and Revolving Loans 
and participations in L/C Disbursements shall be proportionately less than 
the unpaid principal portion of the Term Loans and Revolving Loans and 
participations in L/C Disbursements of any other Lender, it shall be deemed 
simultaneously to have purchased from such other Lender at face value, and 
shall promptly pay to such other Lender the purchase price for, a 
participation in the Term Loans and Revolving Loans and L/C Exposure, as the 
case may be of such other Lender, so that the aggregate unpaid principal 
amount of the Term Loans and Revolving Loans and L/C Exposure and 
participations in Term Loans and Revolving Loans and L/C Exposure held by 
each Lender shall be in the same proportion to the aggregate unpaid principal 
amount of all Term Loans and Revolving Loans and L/C Exposure then 
outstanding as the principal amount of its Term Loans and Revolving Loans and 
L/C Exposure prior to such exercise of banker's lien, setoff or counterclaim 
or other event was to the principal amount of all Term Loans and Revolving 
Loans and L/C Exposure outstanding prior to such exercise of banker's lien, 
setoff or counterclaim or other event; PROVIDED, HOWEVER, that if any such 
purchase or purchases or adjustments shall be made pursuant to this Section 
2.21 and the payment giving rise thereto shall thereafter be recovered, such 
purchase or purchases or adjustments shall be rescinded to the extent of such 
recovery and the purchase price or prices or adjustment restored without 
interest.  The Borrowers expressly consent to the foregoing arrangements and 
agree that any Lender holding a participation in a Term Loan or Revolving 
Loan or L/C Disbursement deemed to have been so purchased may exercise any 
and all rights of banker's lien, setoff or counterclaim with respect to any 
and all moneys owing by the Borrowers to such Lender by reason thereof as 
fully as if such Lender had made a Loan directly to the Borrowers in the 
amount of such participation.

     SECTION 2.22. PAYMENTS.  Except as otherwise expressly provided herein,
whenever any payment (including principal of or interest on any Borrowing or any
Fees or other amounts) hereunder or under any other Loan Document shall become
due, or otherwise would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of interest or Fees, if
applicable.

     SECTION 2.23. TAXES. (a)  Any and all payments by or on account of any
obligation of the Borrowers or any Loan Party hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; PROVIDED that if a Borrower or any Loan Party
shall be required to deduct any Indemnified Taxes or Other Taxes from such
payments, then (i) the sum payable shall be increased as  necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or such
Lender (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or such Loan Party
shall make such deductions and (iii) the Borrower or such Loan Party 



<PAGE>
                                                                            47


shall pay the full amount deducted to the relevant Governmental Authority in 
accordance with applicable law.

          (b)  In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

          (c)  The Borrowers shall jointly and severally indemnify the
Administrative Agent and each Lender, within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrowers or any Loan
Party hereunder or under any other Loan Document (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the amount of such payment or liability
delivered to the Borrowing Agent by a Lender, or by  the Administrative Agent on
its behalf or on behalf of a Lender, shall be conclusive absent manifest error.

          (d)  As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrowers or any other Loan Party to a Governmental
Authority, the Borrowers shall deliver to the Administrative Agent the original
or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative Agent.

          (e)  Any Foreign Lender that is entitled to an exemption from or
reduction of  withholding tax under the law of the jurisdiction in which a
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrowing Agent
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrowers as will permit such
payments to be made without withholding or at a reduced rate, PROVIDED that such
Foreign Lender has received written notice from the Borrowing Agent advising it
of the availability of such exemption or reduction and supplying all applicable
documentation.

     SECTION 2.24. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES; DUTY
TO MITIGATE. (a)  In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.16, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrowers are required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.23, the Borrowers may, at their sole expense and effort
(including with respect to the processing and recordation 



<PAGE>
                                                                            48


fee referred to in Section 9.04(b)), upon notice to such Lender or the 
Issuing Bank and the Administrative Agent, require such Lender or the Issuing 
Bank to transfer and assign, without recourse (in accordance with and subject 
to the restrictions contained in Section 9.04), all of its interests, rights 
and obligations under this Agreement to an assignee that shall assume such 
assigned obligations (which assignee may be another Lender, if a Lender 
accepts such assignment); PROVIDED that (x) such assignment shall not 
conflict with any law, rule or regulation or order of any court or other 
Governmental Authority having jurisdiction, (y) the Borrowers shall have 
received the prior written consent of the Administrative Agent (and, if a 
Revolving Credit Commitment is being assigned, of the Issuing Bank), which 
consent shall not unreasonably be withheld, and (z) the Borrowers or such 
assignee shall have paid to the affected Lender or the Issuing Bank in 
immediately available funds an amount equal to the sum of the principal of 
and interest accrued to the date of such payment on the outstanding Loans or 
L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all 
Fees and other amounts accrued for the account of such Lender or the Issuing 
Bank hereunder (including any amounts under Section 2.15 and Section 2.16); 
PROVIDED FURTHER that, if prior to any such transfer and assignment the 
circumstances or event that resulted in such Lender's or the Issuing Bank's 
claim for compensation under Section 2.16 or notice under Section 2.15 or the 
amounts paid pursuant to Section 2.23, as the case may be, cease to cause 
such Lender or the Issuing Bank to suffer increased costs or reductions in 
amounts received or receivable or reduction in return on capital, or cease to 
have the consequences specified in Section 2.15, or cease to result in 
amounts being payable under Section 2.23, as the case may be (including as a 
result of any action taken by such Lender or the Issuing Bank pursuant to 
paragraph (b) below), or if such Lender or the Issuing Bank shall waive its 
right to claim further compensation under Section 2.14 in respect of such 
circumstances or event or shall withdraw its notice under Section 2.15 or 
shall waive its right to further payments under Section 2.20 in respect of 
such circumstances or event, as the case may be, then such Lender or the 
Issuing Bank shall not thereafter be required to make any such transfer and 
assignment hereunder.

          (b)  If (i) any Lender or the Issuing Bank shall request compensation
under Section 2.16, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.15 or (iii) the Borrowers are required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to
Section 2.23, then such Lender or the Issuing Bank shall use reasonable efforts
(which shall not require such Lender or the Issuing Bank to incur an
unreimbursed loss or unreimbursed cost or expense or otherwise take any action
inconsistent with its internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden deemed by it to be significant) (x) to file
any certificate or document reasonably requested in writing by the Borrowers or
(y) to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.16 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.23, as the case may be, in the future.  The 



<PAGE>
                                                                            49


Borrowers hereby agree to pay all reasonable costs and expenses incurred by 
any Lender or the Issuing Bank in connection with any such filing or 
assignment, delegation and transfer.

     SECTION 2.25.  DEFAULTING LENDER.  (a)  Notwithstanding anything to the
contrary contained herein, in the event any Lender (x) has refused (which
refusal constitutes a breach by such Lender of its obligations under this
Agreement) to make available its portion of any Revolving Credit Borrowing or
reimbursement for drawings under Letters of Credit or (y) notifies either the
Administrative Agent or the Borrowers that it does not intend to make available
its portion of any Revolving Credit Borrowing or reimbursement (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "LENDER DEFAULT"), all rights and obligations hereunder of
such Lender (a "DEFAULTING LENDER") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this Section 2.25 while such Lender Default remains in effect.

          (b)  Revolving Credit Borrowings shall be incurred pro rata from
Lenders (the "NON-DEFAULTING LENDERS") which are not Defaulting Lenders based on
their respective Pro Rata Percentages, and no Pro Rata Percentage of any Lender
or any Pro Rata Percentage of any Revolving Credit Borrowings required to be
advanced by any Lender shall be increased as a result of such Lender Default.
Amounts received in respect of principal of any type of Revolving Loans shall be
applied to reduce the applicable Revolving Loans of each Lender pro rata based
on the aggregate of the outstanding Revolving Loans of that type of all Lenders
at the time of such application; PROVIDED that such amount shall not be applied
to any Revolving Loans of a Defaulting Lender at any time when, and to the
extent that, the aggregate amount of Revolving Loans of any Non-Defaulting
Lender exceeds such Non-Defaulting Lender's Pro Rata Percentage of all Revolving
Loans then outstanding.

          (c)  A Defaulting Lender shall not be entitled to give instructions to
the Administrative Agent or the Collateral Agent or to approve, disapprove,
consent to or vote on any matters relating to this Agreement and the Loan
Documents.  All amendments, waivers and other modifications of this Agreement
and the Loan Documents may be made without regard to a Defaulting Lender and,
for purposes of the definition of "Required Lenders", a Defaulting Lender shall
be deemed not to be a Lender and not to have Loans outstanding.

          (d)  Other than as expressly set forth in this Section 2.25, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify the Administrative Agent or the Collateral Agent) and the other
parties hereto shall remain unchanged.  Nothing in this Section 2.25 shall be
deemed to release any Defaulting Lender from its obligations under this
Agreement and the Loan Documents, shall alter such obligations, shall operate as
a waiver of any default by such Defaulting Lender hereunder, or shall prejudice
any rights which Borrowers, the Administrative Agent, the 



<PAGE>
                                                                            50


Collateral Agent or any Lender may have against any Defaulting Lender as a 
result of any default by such Defaulting Lender hereunder.

          (e)  In the event a Defaulting Lender retroactively cures to the
satisfaction of the Administrative Agent the breach which caused a Lender to
become a Defaulting Lender, such Defaulting Lender shall no longer be a
Defaulting Lender and shall be treated as a Lender under this Agreement.

     SECTION 2.26. LETTERS OF CREDIT. (a)  The Borrowing Agent on behalf of a
Borrower may request the issuance of a Letter of Credit for its own account or
the account of a Borrower, in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time while the
Revolving Credit Commitments remain in effect.  This Section shall not be
construed to impose an obligation upon the Issuing Bank to issue any Letter of
Credit that is inconsistent with the terms and conditions of this Agreement.

          (b)  In order to request the issuance of a Letter of Credit (or to
amend, renew or extend an existing Letter of Credit), the Borrowing Agent shall
hand deliver or telecopy to the Issuing Bank and the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) the Administrative Agent's form of letter of credit application or
the Issuing Bank's form of Letter of Credit Application, completed to the
satisfaction of the Administrative Agent or the Issuing Bank, respectively, or a
notice identifying the Letter of Credit to be amended, renewed or extended, the
date of issuance, amendment, renewal or extension, the date on which such Letter
of Credit is to expire (which shall comply with paragraph (c) below), the amount
of such Letter of Credit, the name and address of the beneficiary thereof and
such other information as shall be necessary to prepare such Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if, and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrowers
shall be deemed to represent and warrant that, after giving effect to such
issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed
$80,000,000 and (ii) the Aggregate Revolving Credit Exposure shall not exceed
the lesser of (x) the Total Revolving Credit Commitment, and (y) the Formula
Amount in effect at such time and (iii) the outstanding principal amount of
Revolving Loans of any Borrower plus such Borrower's L/C Exposure shall not
exceed the Borrower's Individual Formula Amount.

          If the Issuing Bank is not the Administrative Agent, the
Administrative Agent will notify the Issuing Bank via phone, confirmed by
telecopy, of changes in availability to issue Letters of Credit under the
facility, and the Issuing Bank will notify the Administrative Agent via phone,
confirmed by telecopy, of any changes in outstanding balances of Letters of
Credit it has issued.  No new Letter of Credit shall be issued, and no existing
Letter of Credit shall be amended, renewed or extended, by the Issuing Bank
until the Administrative Agent shall have approved, via phone, confirmed by
telecopy, such issuance, amendment, renewal or extension.


<PAGE>

                                                                              51


          (c)  No Letter of Credit shall be issued with a stated expiration 
date or latest maturity date of the accepted draft if a usance letter of 
credit later than the earlier of (i) the close of business on the date that 
is five Business Days prior to the Revolving Credit Maturity Date and (ii) the 
close of business on the date that is (x) 270 days after the date of issuance 
of such Letter of Credit in the case of a Trade Letter of Credit and 
(y) 12 months after the date of issuance of such Letter of Credit in the case 
of a Standby Letter of Credit. Each Letter of Credit shall, among other 
things, (i) provide for the payment of sight drafts or acceptances of usance 
drafts when presented for honor thereunder in accordance with the terms 
thereof and when accompanied by the documents described therein and (ii) have 
an expiry date or latest maturity date in the case of usance drafts not later 
than five Business Days prior to the Revolving Credit Maturity Date.  Each 
Letter of Credit shall be subject to the Uniform Customs and Practice for 
Documentary Credits (1993 Revision), International Chamber of Commerce 
Publication No. 500, and any amendments or revision thereof adhered to by the 
Issuing Bank and, to the extent not inconsistent therewith, the laws of the 
State of New York.

          (d)  By the issuance of a Letter of Credit and without any further 
action on the part of the Issuing Bank or the Lenders, the Issuing Bank 
hereby grants to each Revolving Credit Lender, and each such Lender hereby 
acquires from the applicable Issuing Bank, a participation in such Letter of 
Credit equal to such Lender's Pro Rata Percentage of the aggregate amount 
available to be drawn under such Letter of Credit, effective upon the 
issuance of such Letter of Credit.  In consideration and in furtherance of 
the foregoing, each Revolving Credit Lender hereby absolutely and 
unconditionally agrees to pay to the Administrative Agent, for the account of 
the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement 
made by the Issuing Bank and not reimbursed by the Borrowers (or, if 
applicable, another party pursuant to its obligations under any other Loan 
Document).  Each Revolving Credit Lender acknowledges and agrees that its 
obligation to acquire participations pursuant to this paragraph in respect of 
Letters of Credit is absolute and unconditional and shall not be affected by 
any circumstance whatsoever, including the occurrence and continuance of a 
Default or an Event of Default, and that each such payment shall be made 
without any offset, abatement, withholding or reduction whatsoever.

          (e)  All disbursements or payments with respect to Letters of 
Credit shall be deemed to be Revolving Credit Borrowings consisting of ABR 
Revolving Loans and shall bear interest at the ABR Rate.


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                                                                              52


          (f)  The Borrowers' obligations to reimburse L/C Disbursements as 
provided in paragraph (e) above shall be absolute, unconditional and 
irrevocable, and shall be performed strictly in accordance with the terms of 
this Agreement, under any and all circumstances whatsoever, and irrespective 
of:

            (i) any lack of validity or enforceability of any Letter of Credit
     or any Loan Document, or any term or provision therein;

           (ii) any amendment or waiver of or any consent to departure from all
     or any of the provisions of any Letter of Credit or any Loan Document;

          (iii) the existence of any claim, setoff, defense or other right that
     a Borrowers, any other party guaranteeing, or otherwise obligated with,
     such Borrowers, any Subsidiary or other Affiliate thereof or any other
     person may at any time have against the beneficiary under any Letter of
     Credit, the Issuing Bank, the Administrative Agent or any Lender or any
     other person, whether in connection with this Agreement, any other Loan
     Document or any other related or unrelated agreement or transaction;

           (iv) any draft or other document presented under a Letter of Credit
     proving to be forged, fraudulent, invalid or insufficient in any respect or
     any statement therein being untrue or inaccurate in any respect;

            (v) payment by the Issuing Bank under a Letter of Credit against
     presentation of a draft or other document that does not comply with the
     terms of such Letter of Credit; and

           (vi) any other act or omission to act or delay of any kind of the
     Issuing Bank, the Lenders, the Administrative Agent or any other person or
     any other event or circumstance whatsoever, whether or not similar to any
     of the foregoing, that might, but for the provisions of this Section,
     constitute a legal or equitable discharge of the Borrowers' obligations
     hereunder.

     Without limiting the generality of the foregoing, it is expressly 
understood and agreed that the absolute and unconditional obligation of the 
Borrowers hereunder to reimburse L/C Disbursements will not be excused by the 
gross negligence or willful misconduct of the Issuing Bank.  However, the 
foregoing shall not be construed to excuse the Issuing Bank from liability to 
the Borrowers to the extent of any direct damages (as opposed to consequential 
damages, claims in respect of which are hereby waived by the Borrowers to the 
extent permitted by applicable law) suffered by the Borrowers that are caused 
by the Issuing Bank's gross negligence or willful misconduct in determining 
whether drafts and other documents presented under a Letter of Credit comply 
with the terms thereof; it is understood that the Issuing Bank may accept 
documents that appear on 


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                                                                              53


their face to be in order, without responsibility for further investigation, 
regardless of any notice or information to the contrary and, in making any 
payment under any Letter of Credit (i) the Issuing Bank's exclusive reliance 
on the documents presented to it under such Letter of Credit as to any and 
all matters set forth therein, including reliance on the amount of any draft 
presented under such Letter of Credit, whether or not the amount due to the 
beneficiary thereunder equals the amount of such draft and whether or not any 
document presented pursuant to such Letter of Credit proves to be 
insufficient in any respect, if such document on its face appears to be in 
order, and whether or not any other statement or any other document presented 
pursuant to such Letter of Credit proves to be forged or invalid or any 
statement therein proves to be inaccurate or untrue in any respect whatsoever 
and (ii) any noncompliance in any immaterial respect of the documents 
presented under such Letter of Credit with the terms thereof shall, in each 
case, be deemed not to constitute willful misconduct or gross negligence of 
the Issuing Bank.

          (g)  The Issuing Bank shall, promptly following its receipt 
thereof, examine all documents purporting to represent a demand for payment 
under a Letter of Credit.  The Issuing Bank shall as promptly as possible 
give telephonic notification, confirmed by telecopy, to the Administrative 
Agent and the Borrowing Agent of such demand for payment and whether the 
Issuing Bank has made or will make an L/C Disbursement thereunder; PROVIDED 
that any failure to give or delay in giving such notice shall not relieve the 
Borrowers of their obligation to reimburse the Issuing Bank and the Revolving 
Credit Lenders with respect to any such L/C Disbursement.

          (h)  The Issuing Bank may resign at any time by giving 90 days' 
prior written notice to the Administrative Agent, the Lenders and the 
Borrowers but such resignation shall not be effective until a successor is 
appointed.  Subject to the next succeeding paragraph, upon the acceptance of 
any appointment as the Issuing Bank hereunder by a Lender that shall agree to 
serve as successor Issuing Bank, such successor shall succeed to and become 
vested with all the interests, rights and obligations of the retiring Issuing 
Bank and the retiring Issuing Bank shall be discharged from its obligations 
to issue additional Letters of Credit hereunder.  At the time such removal or 
resignation shall become effective, the Borrowers shall pay all accrued and 
unpaid fees pursuant to Section 2.08(c)(ii).  The acceptance of any 
appointment as the Issuing Bank hereunder by a successor Lender shall be 
evidenced by an agreement entered into by such successor, in a form 
satisfactory to the Borrowers and the Administrative Agent, and, from and 
after the effective date of such agreement, (i) such successor Lender shall 
have all the rights and obligations of the previous Issuing Bank under this 
Agreement and the other Loan Documents and (ii) references herein and in the 
other Loan Documents to the term "Issuing Bank" shall be deemed to refer to 
such successor or to any previous Issuing Bank, or to such successor and all 
previous Issuing Banks, as the context shall require. After the resignation 
or removal of the Issuing Bank hereunder, the retiring Issuing Bank shall 
remain a party hereto and shall continue to have all the rights and 
obligations of an Issuing Bank under this Agreement and the other Loan 
Documents with respect to Letters 


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                                                                              54


of Credit issued by it prior to such resignation or removal, but shall not be 
required to issue additional Letters of Credit.

          (i)  If any Event of Default shall occur and be continuing, the 
Borrowers shall, on the Business Day the Borrowing Agent receives notice from 
the Administrative Agent or the Required Lenders (or, if the maturity of the 
Loans has been accelerated, Revolving Credit Lenders holding participations 
in outstanding Letters of Credit representing greater than 50% of the 
aggregate undrawn amount of all outstanding Letters of Credit) of an Event of 
Default and of the amount to be deposited, deposit in an account with the 
Collateral Agent, for the benefit of the Revolving Credit Lenders, an amount 
in cash equal to 105% of the L/C Exposure as of such date or provide one or 
more letters of credit, in form and substance reasonably satisfactory to the 
Administrative Agent and from a bank acceptable to the Administrative Agent 
for such amount in lieu of or to replace such cash deposit.  Such deposit or 
letter of credit shall be held by the Collateral Agent as collateral for the 
payment and performance of the Obligations.  The Collateral Agent shall have 
exclusive dominion and control, including the exclusive right of withdrawal, 
over such account.  Other than any interest earned on the investment of such 
deposits in Permitted Investments, which investments shall be made at the 
option and sole discretion of the Collateral Agent, such deposits shall not 
bear interest.  Interest or profits, if any, on such investments shall 
accumulate in such account.  Moneys in such account shall (i) automatically 
be applied by the Administrative Agent to reimburse the Issuing Bank for 
L/C Disbursements for which it has not been reimbursed, (ii) be held for the 
satisfaction of the reimbursement obligations of the Borrowers for the 
L/C Exposure at such time and (iii) if the maturity of the Loans has been 
accelerated (but subject to the consent of Revolving Credit Lenders holding 
participations in outstanding Letters of Credit representing greater than 50% 
of the aggregate undrawn amount of all outstanding Letters of Credit), be 
applied to satisfy the Obigations.  If the Borrowers are required to provide 
an amount of cash collateral hereunder as a result of the occurrence of an 
Event of Default, such amount (to the extent not applied as aforesaid) shall 
be returned to the Borrowers within three Business Days after all Events of 
Default have been cured or waived.

          (j)  The Borrowers may, at any time and from time to time with the 
consent of the Administrative Agent (which consent shall not be unreasonably 
withheld) and such Lender, designate one or more additional Lenders to act as 
an issuing bank under the terms of this Agreement.  Any Lender designated as 
an issuing bank pursuant to this paragraph (k) shall be deemed (in addition 
to being a Lender) to be the Issuing Bank with respect to Letters of Credit 
issued or to be issued by such Lender, and all references herein and in the 
other Loan Documents to the term "Issuing Bank" shall, with respect to such 
Letters of Credit, be deemed to refer to such Lender in its capacity as 
Issuing Bank.

          (k)  The  Existing Letters of Credit shall be deemed to be Letters 
of Credit issued hereunder, and on the Closing Date each Revolving Credit 
Lender shall be deemed to have been granted and acquired a participation 
therein pursuant to paragraph (d) above.


<PAGE>

                                                                              55


          (l)  In connection with the issuance of any Letter of Credit, the 
Borrowers shall jointly and severally indemnify, save and hold the 
Administrative Agent, each Lender and each Issuing Bank harmless from any 
loss, cost, expense or liability, including, without limitation, payments 
made by the Administrative Agent, any Lender or any Issuing Bank and expenses 
and reasonable attorneys' fees incurred by the Administrative Agent, any 
Lender or Issuing Bank arising out of, or in connection with, any Letter of 
Credit to be issued or created for any Borrower.  The Borrowers shall be 
bound by the Administrative Agent's or any Issuing Bank's regulations and 
good faith interpretations of any Letter of Credit issued or created for 
Borrowers' Account, although this interpretation may be different from its 
own; and neither the Administrative Agent, nor any Lender, nor any Issuing 
Bank nor any of their correspondents shall be liable for any error, 
negligence, or mistakes, whether of omission or commission, in following the 
applicable Borrowers' instructions or those contained in any Letter of Credit 
or of any modifications, amendments or supplements thereto or in issuing or 
paying any Letter of Credit, except for the Administrative Agent's, any 
Lender's, any Issuing Bank's or such correspondents' willful misconduct or 
gross negligence.

          (m)  If the Administrative Agent is not the Issuing Bank of any 
Letter of Credit, Borrower shall authorize and direct the Issuing Bank to 
deliver to the Administrative Agent all instruments, documents, and other 
writings and property received by the Issuing Bank pursuant to the Letter of 
Credit and to accept and rely upon the Administrative Agent's instructions 
and agreements with respect to all matters arising in connection with the 
Letter of Credit and the application therefor

          (n)  In connection with all Letters of Credit issued or caused to 
be issued by the Administrative Agent under this Agreement, each Borrower 
hereby appoints the Administrative Agent, or its designee, as its attorney, 
with full power and authority (i) to sign and/or endorse such Borrower's name 
upon any warehouse or other receipts, letter of credit applications and 
acceptances; (ii) to sign such Borrower's name on bills of lading; (iii) to 
clear Inventory through the United States of America Customs Department 
("CUSTOMS") in the name of such Borrower or the Administrative Agent or the 
Administrative Agent's designee, and to sign and deliver to Customs officials 
powers of attorney in the name of such Borrower for such purpose; and (iv) to 
complete in such Borrower's name or the Administrative Agent's, or in the 
name of the Administrative Agent's designee, any order, sale or transaction, 
obtain the necessary documents in connection therewith, and collect the 
proceeds thereof.  Neither the Administrative Agent nor its attorneys will be 
liable for any acts or omissions nor for any error of judgment or mistakes of 
fact or law, except for the Administrative Agent's or its attorney's willful 
misconduct.  This power, being coupled with an interest, is irrevocable as 
long as any Letters of Credit remain outstanding.

     SECTION 2.27.  BORROWING AGENCY PROVISIONS.  (a)  Each Borrower hereby 
irrevocably designates the Borrowing Agent to be its attorney and agent and 
in such capacity to borrow, sign and endorse notes, and execute and deliver 
all instruments, 


<PAGE>

                                                                              56


documents, writings and further assurances now or hereafter required hereunder, 
on behalf of such Borrower or Borrowers, and hereby authorizes the 
Administrative Agent to pay over or credit all loan proceeds hereunder in 
accordance with the request of the Borrowing Agent.

          (b)  The handling of this credit facility as a co-borrowing 
facility with a borrowing agent in the manner set forth in this Agreement is 
solely as an accommodation to the Borrowers and at their request.  Neither 
the Administrative Agent, the Collateral Agent, nor any Lender shall incur 
liability to any Borrower as a result thereof.  To induce the Administrative 
Agent, the Collateral Agent and Lenders to do so and in consideration 
thereof, each Borrower hereby indemnifies the Administrative Agent, the 
Collateral Agent and each Lender and holds the Administrative Agent, the 
Collateral Agent and each Lender harmless from and against any and all 
liabilities, expenses, losses, damages and claims of damage or injury 
asserted against the Administrative Agent, the Collateral Agent or any Lender 
by any Person arising from or incurred by reason of the handling of the 
financing arrangements of the Borrowers as provided herein, reliance by the 
Administrative Agent, the Collateral Agent or any Lender on any request or 
instruction from the Borrowing Agent or any other action taken by the 
Administrative Agent, the Collateral Agent or any Lender with respect to this 
Section 2.27, except due to willful misconduct or gross (not mere) negligence 
by the indemnified party.

          (c)  Subject to Section 2.29, all Obligations shall be joint and 
several, and each Borrower shall make payment upon the maturity of the 
Obligations by acceleration or otherwise, and such obligation and liability 
on the part of each Borrower shall in no way be affected by any extensions, 
renewals and forbearance granted by the Administrative Agent, the Collateral 
Agent or any Lender to any Borrower, failure of the Administrative Agent, the 
Collateral Agent or any Lender to give any Borrower notice of borrowing or 
any other notice, any failure of the Administrative Agent, the Collateral 
Agent or any Lender to pursue or preserve its rights against any Borrower, 
the release by Agent or any Lender of any Collateral now or thereafter 
acquired from any Borrower, and such agreement by each Borrower to pay upon 
any notice issued pursuant thereto is unconditional and unaffected by prior 
recourse by the Administrative Agent, the Collateral Agent or any Lender to 
the other Borrowers or any Collateral for such Borrower's Obligations or the 
lack thereof.

     SECTION 2.28.  WAIVER OF SUBROGATION.  Each Borrower expressly waives 
any and all rights of subrogation, reimbursement, indemnity, exoneration, 
contribution of any other claim which such Borrower may now or hereafter have 
against the other Borrowers or other person directly or contingently liable 
for the Obligations hereunder, or against or with respect to the other 
Borrowers' property (including, without limitation, any property which is 
Collateral for the Obligations), arising from the existence or performance of 
this Agreement, until termination of this Agreement and repayment in full of 
the Obligations.

     SECTION 2.29.  BORROWER GUARANTEE AGREEMENT.  The Obligations of the 


<PAGE>

                                                                              57


Borrowers as joint and several obligors shall be subject to all the terms, 
conditions, waivers and agreements contained in the Borrower Guarantee 
Agreement.

                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

     The Borrowers represent and warrant to the Administrative Agent, the 
Collateral Agent, the Issuing Bank and each of the Lenders that:

     SECTION 3.01.  ORGANIZATION; POWERS.  The Borrowers and each of the 
Subsidiaries (a) is duly organized, validly existing and in good standing 
under the laws of the jurisdiction of its organization, (b) has all requisite 
power and authority to own its property and assets and to carry on its 
business as now conducted and as proposed to be conducted, (c) is qualified 
to do business in, and is in good standing in, every jurisdiction where such 
qualification is required, except where the failure so to qualify could not 
reasonably be expected to result in a Material Adverse Effect, and (d) has 
the power and authority to execute, deliver and perform its obligations under 
each of the Loan Documents and each other agreement or instrument contemplated 
hereby to which it is or will be a party and, in the case of the Borrowers, 
to borrow hereunder.

     SECTION 3.02.  AUTHORIZATION.  The execution, delivery and performance by 
(a) each of Activision and Sub of the Merger Agreement and (b) each Loan 
Party of each of the Loan Documents and the consummation of the transactions 
contemplated by the Merger Agreement and the Loan Documents (including the 
borrowings hereunder) (collectively, the "TRANSACTIONS") (i) have been duly 
authorized by all requisite corporate and, if required, stockholder action 
and (ii) will not (x) violate (A) any provision of law, statute, rule or 
regulation, or of the certificate or articles of incorporation or other 
constitutive documents or by-laws of any Borrower or any Subsidiary, (B) any 
order of any Governmental Authority or (C) any provision of any indenture, 
agreement or other instrument to which any Borrower or any Subsidiary is a 
party or by which any of them or any of their property is or may be bound, 
(y) be in conflict with, result in a breach of or constitute (alone or with 
notice or lapse of time or both) a default under, or give rise to any right 
to accelerate or to require the prepayment, repurchase or redemption of any 
obligation under any such indenture, agreement or other instrument or 
(z) result in the creation or imposition of any Lien upon or with respect to 
any property or assets now owned or hereafter acquired by any Borrowers or 
any Subsidiary (other than any Lien created hereunder or under the Security 
Documents).

     SECTION 3.03.  ENFORCEABILITY.  This Agreement has been duly executed and 
delivered by each Borrower and constitutes, and each other Loan Document when 
executed and delivered by the each Loan Party thereto will constitute, a 
legal, valid and binding obligation of such Loan Party enforceable against 
such Loan Party in accordance with its terms.


<PAGE>

                                                                              58


     SECTION 3.04.  GOVERNMENTAL APPROVALS.  No action, consent or approval 
of, registration or filing with or any other action by any Governmental 
Authority is or will be required in connection with the Transactions, except 
for (i) the filing of Uniform Commercial Code financing statements and 
filings with the United States Patent and Trademark Office and the United 
States Copyright Office, (ii) recordation of the Mortgages and (iii) such as 
have been made or obtained and are in full force and effect.

     SECTION 3.05.  FINANCIAL STATEMENTS.  (a)  The Borrowers have heretofore 
furnished to the Lenders Activision's consolidated balance sheets and 
statements of income, stockholder's equity and cash flows (i) as of and for 
the fiscal year ended March 31, 1998, audited by and accompanied by the 
opinion of KPMG Peat Marwick LLP, independent public accountants, and (ii) as 
of and for the fiscal quarter and the portion of the fiscal year ended 
December 31, 1998, certified by its chief financial officer.  Such financial 
statements present fairly the financial condition and results of operations 
and cash flows of Activision and its consolidated Subsidiaries as of such 
dates and for such periods.  Such balance sheets and the notes thereto 
disclose all material liabilities, direct or contingent, of Activision and 
its consolidated Subsidiaries as of the dates thereof required to be 
disclosed therein in accordance with GAAP.  Such financial statements were 
prepared in accordance with GAAP applied on a consistent basis.

          (b)  Activision has heretofore delivered to the Lenders its 
unaudited pro forma consolidated balance sheet and statements of income, 
stockholder's equity and cash flows as of March  31, 1999, prepared giving 
effect to the Transactions as if they had occurred, with respect to such 
balance sheet, on such date and, with respect to such other financial 
statements, on the first day of the 12-month period ending on such date.  
Such pro forma financial statements have been prepared in good faith by the 
Borrowers, based on the assumptions used to prepare the pro forma financial 
information contained in the Confidential Information Memorandum (which 
assumptions are believed by the Borrowers on the date hereof and on the 
Closing Date to be reasonable), are based on the best information available 
to the Borrowers as of the date of delivery thereof, accurately reflect all 
adjustments required to be made to give effect to the Transactions and 
presents fairly on a pro forma basis the estimated consolidated financial 
position of Activision and its consolidated Subsidiaries as of such date and 
for such period, assuming that the Transactions had actually occurred at such 
date or at the beginning of such period, as the case may be.

     SECTION 3.06.  NO MATERIAL ADVERSE CHANGE.  There has been no material 
adverse change in the business, results of operations, property, condition 
(financial or otherwise) or prospects of the Borrowers and the Subsidiaries, 
taken as a whole, since December 31, 1998.

     SECTION 3.07.  TITLE TO PROPERTIES; POSSESSION UNDER LEASES.  (a)  Each of 
the Borrowers and the Subsidiaries has good and marketable title to, or valid 
leasehold 


<PAGE>

                                                                              59


interests in, all its material properties and tangible assets (including all 
Mortgaged Property), except for minor defects in title that do not interfere 
with its ability to conduct its business as currently conducted or to utilize 
such properties and assets for their intended purposes.  All such material 
properties and assets are free and clear of Liens, other than Liens expressly 
permitted by Section 6.02.

          (b)  Each of the Borrowers and the Subsidiaries has complied in all 
material respects with all obligations under all material leases or 
warehousing agreements to which it is a party and all such leases or 
warehousing agreements are in full force and effect.  Each of the Borrowers 
and the Subsidiaries enjoys peaceful and undisturbed possession under all 
such material leases.

          (c)  No Borrower has received any notice of, nor has any knowledge 
of, any pending or contemplated condemnation proceeding affecting the Mortgaged 
Properties or any sale or disposition thereof in lieu of condemnation.

          (d)  No Borrower nor any of the Subsidiaries is obligated under any 
right of first refusal, option or other contractual right to sell, assign or 
otherwise dispose of any Mortgaged Property or any interest therein.

     SECTION 3.08.  SUBSIDIARIES.  Schedule 3.08 sets forth as of the Closing 
Date a list of all Subsidiaries and the percentage ownership interest of the 
Borrowers or their Subsidiaries therein.  The shares of capital stock or 
other ownership interests so indicated on Schedule 3.08 are fully paid and 
non-assessable and are owned by the applicable Borrower or Subsidiary, 
directly or indirectly, free and clear of all Liens, other than Liens in 
favor of the Collateral Agreement, Liens under the Existing Credit Agreement 
and Liens disclosed in Schedule 6.02.

     SECTION 3.09.  LITIGATION; COMPLIANCE WITH LAWS.  (a)  Except as set forth 
on Schedule 3.09, there are not any actions, suits or proceedings at law or 
in equity or by or before any Governmental Authority now pending or, to the 
knowledge of the Borrowers, threatened against or affecting any Borrower or 
any Subsidiary or any business, property or rights of any such person (i) that 
involve any Loan Document or the Transactions or (ii) as to which there is a 
reasonable possibility of an adverse determination and that, if adversely 
determined, could reasonably be expected, individually or in the aggregate, 
to result in a Material Adverse Effect.

          (b)  Neither any Borrower nor any of the Subsidiaries or any of 
their respective material properties or assets is in violation of, nor will 
the continued operation of their material properties and assets as currently 
conducted violate, any law, rule or regulation (including any zoning, 
building, Environmental Law, ordinance, code or approval or any building 
permits) or any restrictions of record or agreements affecting the Mortgaged 
Property, or is in default with respect to any judgment, writ, injunction, 
decree 


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                                                                              60


or order of any Governmental Authority, where such violation or default could 
reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.10.  AGREEMENTS.  (a)  Neither any Borrower nor any of the 
Subsidiaries is a party to any agreement or instrument or subject to any 
corporate restriction that has resulted or could reasonably be expected to 
result in a Material Adverse Effect.

          (b)  Neither any Borrower nor any of the Subsidiaries is in default 
in any manner under any provision of any indenture or other agreement or 
instrument evidencing Indebtedness, or any Material Contract, where such 
default could reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.11.  FEDERAL RESERVE REGULATIONS.  (a)  Neither the Borrowers 
nor any of the Subsidiaries is engaged principally, or as one of its 
important activities, in the business of extending credit for the purpose of 
buying or carrying Margin Stock.

          (b)  No part of the proceeds of any Loan or any Letter of Credit 
will be used, whether directly or indirectly, and whether immediately, 
incidentally or ultimately, for any purpose that entails a violation of, or 
that is inconsistent with, the provisions of the Regulations of the Board, 
including Regulation T, U or X.

     SECTION 3.12.  INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY 
ACT.  Neither any Borrower nor any Subsidiary is (a) an "investment company" 
as defined in, or subject to regulation under, the Investment Company Act of 
1940 or (b) a "holding company" as defined in, or subject to regulation 
under, the Public Utility Holding Company Act of 1935.

     SECTION 3.13.  USE OF PROCEEDS.  The Borrowers will use the proceeds of 
the Loans and will request the issuance of Letters of Credit only for the 
purposes specified in the preamble to this Agreement.

     SECTION 3.14.  TAX RETURNS.  Each of the Borrowers and the Subsidiaries 
has filed or caused to be filed all Federal, state, local and foreign tax 
returns or materials required to have been filed by it and has paid or caused 
to be paid all taxes due and payable by it and all assessments received by 
it, except taxes that are being contested in good faith by appropriate 
proceedings and for which the applicable Borrowers or such Subsidiary, as 
applicable, shall have set aside on its books adequate reserves.

     SECTION 3.15.  NO MATERIAL MISSTATEMENTS.  None of (a) the Confidential 
Information Memorandum or (b) any other written information, report, 
financial statement, exhibit or schedule furnished by the Borrowers to the 
Administrative Agent or any Lender in connection with the Loan Documents or 
included therein or delivered pursuant thereto contained, contains or will 
contain any material misstatement of fact or 


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                                                                              61


omitted, omits or will omit to state any material fact necessary to make the 
statements therein, in the light of the circumstances under which they were, 
are or will be made, not misleading; PROVIDED that to the extent any such 
information, report, financial statement, exhibit or schedule was based upon 
or constitutes a forecast or projection,  the Borrowers represent only that 
they acted in good faith and utilized reasonable assumptions and due care in 
the preparation of such information, report, financial statement, exhibit or 
schedule.

     SECTION 3.16.  EMPLOYEE BENEFIT PLANS.  (a)  Each of the Borrowers and 
its ERISA Affiliates is in compliance in all material respects with the 
applicable provisions of ERISA and the Code and the regulations and published 
interpretations thereunder.  No ERISA Event has occurred or is reasonably 
expected to occur that, when taken together with all other such ERISA Events, 
could reasonably be expected to result in material liability of the Borrowers 
or any of their ERISA Affiliates.  The present value of all benefit 
liabilities under each Plan (based on those assumptions used to fund such 
Plan) did not, as of the last annual valuation date applicable thereto, 
exceed the fair market value of the assets of such Plan, and the present 
value of all benefit liabilities of all underfunded Plans (based on those 
assumptions used to fund each such Plan) did not, as of the last annual 
valuation dates applicable thereto, exceed the fair market value of the 
assets of all such underfunded Plans.

          (b)  Each Foreign Pension Plan is in compliance in all material 
respects with all requirements of law applicable thereto and the respective 
requirements of the governing documents for such plan except to the extent 
such non-compliance could not reasonably be expected to result in a Material 
Adverse Effect.  With respect to each Foreign Pension Plan, none of the 
Borrowers, any Affiliates or any of their directors, officers, employees or 
agents has engaged in a transaction that subjects any Borrower or any of its 
Subsidiaries, directly or indirectly, to a material tax or civil penalty.  
With respect to each Foreign Pension Plan, reserves have been established in 
the financial statements furnished to the Lenders in respect of any unfunded 
liabilities in accordance with applicable law and prudent business practice 
or, where required, in accordance with ordinary accounting practices in the 
jurisdiction in which such Foreign Pension Plan is maintained.  The aggregate 
unfunded liabilities, with respect to such Foreign Pension Plans could not 
reasonably be expected to result in a Material Adverse Effect.  There are no 
actions, suits or claims (other than routine claims for benefits) pending or 
threatened against any Borrower or any of its Affiliates with respect to any 
Foreign Pension Plan that could reasonably be expected, individually or in 
the aggregate, to result in a Material Adverse Effect.


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                                                                             62

     SECTION 3.17. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 
3.17:

          (a)  The properties owned or operated by the Borrowers and the 
Subsidiaries (the "PROPERTIES") do not contain any Hazardous Materials in 
amounts or concentrations which (i) constitute, or constituted a violation 
of, (ii) require Remedial Action under, or (iii) could give rise to liability 
under, Environmental Laws, which violations, Remedial Actions and 
liabilities, in the aggregate, could reasonably be expected to result in a 
Material Adverse Effect;

          (b)  The Properties and all operations of the Borrowers and the 
Subsidiaries are in compliance, and in the last six years have been in 
compliance, with all Environmental Laws and all necessary Environmental 
Permits have been obtained and are in effect, except to the extent that such 
non-compliance or failure to obtain any necessary permits, in the aggregate, 
could not reasonably be expected to result in a Material Adverse Effect;

          (c)  There have been no Releases or threatened Releases at, from, 
under or proximate to the Properties or otherwise in connection with the 
operations of the Borrowers or the Subsidiaries, which Releases or threatened 
Releases, in the aggregate, could  reasonably be expected to result in a 
Material Adverse Effect;

          (d)  Neither any Borrowers nor any of the Subsidiaries has received 
any notice of an Environmental Claim in connection with the Properties or the 
operations of any Borrowers or the Subsidiaries or with regard to any person 
whose liabilities for environmental matters any Borrower or any Subsidiary 
has retained or assumed, in whole or in part, contractually, by operation of 
law or otherwise, which, in the aggregate, could reasonably be expected to 
result in a Material Adverse Effect, nor do the Borrowers or the Subsidiaries 
have reason to believe that any such notice will be received or is being 
threatened; and

          (e)  Hazardous Materials have not been transported from the 
Properties, nor have Hazardous Materials been generated, treated, stored or 
disposed of at, on or under any of the Properties in a manner that could give 
rise to liability under any Environmental Law, nor have the Borrowers or the 
Subsidiaries retained or assumed any liability, contractually, by operation 
of law or otherwise, with respect to the generation, treatment, storage or 
disposal of Hazardous Materials, which transportation, generation, treatment, 
storage or disposal, or retained or assumed liabilities, in the aggregate, 
could reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.18. INSURANCE. Schedule 3.18 sets forth a true, complete and 
correct description of all insurance maintained by the Borrowers or by the 
Borrowers for their Subsidiaries as of the date hereof and the Closing Date.  
As of each such date, such insurance is in full force and effect and all 
premiums have been duly paid.  The 


<PAGE>
                                                                             63

Borrowers and their Subsidiaries have insurance in such amounts and covering 
such risks and liabilities as are in accordance with normal industry practice.

     SECTION 3.19. SECURITY DOCUMENTS.  (a)  The Pledge Agreement is 
effective to create in favor of the Collateral Agent, for the ratable benefit 
of the Secured Parties, a legal, valid and enforceable security interest in 
the Collateral (as defined in the Pledge Agreement) and, when the Collateral 
is delivered to the Collateral Agent (or in the case of Foreign Subsidiaries 
in Germany, the Netherlands and the United Kingdom, when pledge agreements 
complying with applicable foreign laws are executed and delivered), the 
Pledge Agreement shall constitute a fully perfected first priority Lien on, 
and security interest in, all right, title and interest of the pledgors 
thereunder in such Collateral, in each case prior and superior in right to 
any other person.

          (b)  The Security Agreement is effective to create in favor of the 
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, 
valid and enforceable security interest in the Collateral (as defined in the 
Security Agreement) and, when financing statements in appropriate form are 
filed in the offices specified on Schedule 6 to the Perfection Certificate, 
the Security Agreement shall constitute a fully perfected Lien on, and 
security interest in, all right, title and interest of the grantors 
thereunder in such Collateral (other than the Intellectual Property, as 
defined in the Security Agreement), in each case prior and superior in right 
to any other person, other than with respect to Liens expressly permitted by 
Section 6.02.

          (c)  When the Security Agreement is filed in the United States 
Patent and Trademark Office and the United States Copyright Office, the 
Security Agreement shall constitute a fully perfected Lien on, and security 
interest in, all right, title and interest of the grantors thereunder in the 
Intellectual Property (as defined in the Security Agreement), in each case 
prior and superior in right to any other person (it being understood that 
subsequent recordings in the United States Patent and Trademark Office and 
the United States Copyright Office may be necessary to perfect a lien on 
registered trademarks, trademark applications and copyrights acquired by the 
grantors after the date hereof).

          (d)  The Mortgages are effective to create in favor of the 
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, 
valid and enforceable Lien on all of the Loan Parties' right, title and 
interest in and to the Mortgaged Property thereunder and the proceeds 
thereof, and when the Mortgages are filed in the appropriate offices in the 
jurisdictions in which the Mortgaged Properties are located the Mortgages 
shall constitute a fully perfected Lien on, and security interest in, all 
right, title and interest of the Loan Parties in such Mortgaged Property and 
the proceeds thereof, in each case prior and superior in right to any other 
person, other than with respect to the rights of persons pursuant to Liens 
expressly permitted by Section 6.02.


<PAGE>
                                                                             64

          (e)  The UK Charge Documents are effective to create in favor of
Activision a legal, valid and enforceable security interest in and charge over
the personal property assets of UK Sub described therein and, when ______ are
filed in _____, such UK Charge Documents shall constitute a fully perfected Lien
on, and security interest on all right, title and interest of UK Sub in such
personal property assets prior and superior in right to any other person.

     SECTION 3.20. LOCATION OF REAL PROPERTY AND LEASED PREMISES.
(a)  Schedule 3.20(a) lists completely and correctly as of the Closing Date all
real property owned by the Loan Parties and the addresses thereof.  The Loan
Parties own in fee all the real property set forth on Schedule 3.20(a).

          (b)  Schedule 3.20(b) lists completely and correctly as of the 
Closing Date all real property leased by the Loan Parties and all locations 
of Collateral and the addresses thereof.  The Loan Parties have valid leases 
in or valid warehouse agreements with respect to all the real property set 
forth on Schedule 3.20(b) except to the extent set forth on such Schedule.

     SECTION 3.21. LABOR MATTERS.  As of the date hereof and the Closing 
Date, there are no strikes, lockouts or slowdowns against any Borrower or any 
Subsidiary pending or, to the knowledge of the Borrowers, threatened.  The 
hours worked by and payments made to employees of any Borrower and the 
Subsidiaries have not been in violation of the Fair Labor Standards Act or 
any other applicable Federal, state, local or foreign law dealing with such 
matters.  All payments due from the Borrowers or any Subsidiary, or for which 
any claim may be made against any Borrowers or any Subsidiary, on account of 
wages and employee health and welfare insurance and other benefits, have been 
paid or accrued as a liability on the books of such Borrower or such 
Subsidiary.  The consummation of the Transactions will not give rise to any 
right of termination or right of renegotiation on the part of any union under 
any collective bargaining agreement to which any Borrower or any Subsidiary 
is bound.

     SECTION 3.22. SOLVENCY.   Immediately after the consummation of the 
Transactions to occur on the Closing Date and immediately following the 
making of each Loan  and after giving effect to the application of the 
proceeds of each Loan, (a) the fair value of the assets of each Loan Party, 
at a fair valuation, will exceed its debts and liabilities, subordinated, 
contingent or otherwise; (b) the present fair saleable value of the property 
of each Loan Party will be greater than the amount that will be required to 
pay the probable liability of its debts and other liabilities, subordinated, 
contingent or otherwise, as such debts and other liabilities become absolute 
and matured; (c) each Loan Party will be able to pay its debts and 
liabilities, subordinated, contingent or otherwise, as such debts and 
liabilities become absolute and matured; and (d) each Loan Party will not 
have unreasonably small capital with which to conduct the business in which 
it is engaged as such business is now conducted and is proposed to be 
conducted following the Closing Date.


<PAGE>
                                                                             65

     SECTION 3.23. YEAR 2000. No further programming or reprogramming is
required to permit the proper functioning, in and following the year 2000, of
(a) the Borrowers' and their Subsidiaries' computer systems and (b) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which the Borrowers' or their Subsidiaries' systems interface).
The cost to the Borrowers and their Subsidiaries of the reasonably foreseeable
consequences of the year 2000 to the Borrowers and their Subsidiaries (including
reprogramming errors and the failure of others' systems or equipment) will not
result in a Material Adverse Effect.  The computer and management information
systems of the Borrowers and their Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrowers and its Subsidiaries to conduct their
business without Material Adverse Effect.

     SECTION 3.24. LETTERS OF CREDIT.  The Existing Letters of Credit are the
only letters of credit issued for the account of the Borrowers or any of its
Domestic Subsidiaries that are outstanding immediately prior to the Closing
Date.



                                     ARTICLE IV


                               CONDITIONS OF LENDING

     The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:


SECTION 4.01. ALL CREDIT EVENTS. On the date of each Borrowing, and on the date
of each issuance, amendment, extension or renewal of a Letter of Credit (each
such event being called a "CREDIT EVENT"):

          (a)  The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance,
amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance,
amendment, extension or renewal of such Letter of Credit as required by
Section 2.26(b).

          (b)  The representations and warranties set forth in Article III
hereof and in each other Loan Document shall be true and correct in all material
respects on and as of the date of such Credit Event with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date, in which case they shall
have been true and correct as of such earlier date.


<PAGE>
                                                                             66

          (c)  The Borrowers and each other Loan Party shall be in compliance in
all material respects with all the terms and provisions set forth herein and in
each other Loan Document on its part to be observed or performed, and at the
time of and immediately after such Credit Event, no Event of Default or Default
shall have occurred and be continuing, or would exist after giving effect to the
Loan to be made or Letter of Credit to be issued on such date.

     Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrowers on the date of such Credit Event as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.

     SECTION 4.02. FIRST CREDIT EVENT. On the Closing Date (or, as specifically
indicated below, prior to the date hereof):

          (a)  The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Bank, a favorable written opinion of (i)
Robinson Silverman Pearce Aronsohn & Berman LLP, counsel for the Loan Parties,
substantially to the effect set forth in Exhibit I-1, and (ii) each local
counsel listed on Schedule 4.02(a), substantially to the effect set forth in
Exhibit I-2, in each case (A) dated the Closing Date, (B) addressed to the
Issuing Bank, the Administrative Agent, the Collateral Agent and the Lenders,
and (C) covering such other matters relating to the Loan Documents and the
Transactions as the Administrative Agent shall reasonably request, and the
Borrowers hereby request such counsel to deliver such opinions.

          (b)  All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder and the other Loan Documents shall be
satisfactory to the Lenders, to the Issuing Bank and to the Administrative
Agent.

          (c)  The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto, of
each Loan Party, certified as of a recent date by the Secretary of State of the
state of its organization, and a certificate as to the good standing of each
Loan Party as of a recent date, from such Secretary of State; (ii) a certificate
of the Secretary or Assistant Secretary of each Loan Party dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy of the
by-laws of such Loan Party as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such person is a party
and, in the case of the Borrowers, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation of such Loan
Party have not been amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to clause (i) above, and
(D) as to the incumbency and specimen signature of each officer 


<PAGE>
                                                                             67

executing any Loan Document or any other document delivered in connection 
herewith on behalf of such Loan Party; (iii) a certificate of another officer 
as to the incumbency and specimen signature of the Secretary or Assistant 
Secretary executing the certificate pursuant to (ii) above; and (iv) such 
other documents as the Lenders, the Issuing Bank or the Administrative Agent 
may reasonably request; and the Administrative Agent shall have received 
equivalent documents with respect to UK Sub, and the charter documents (or 
commercial register excerpts thereof) of each Foreign Subsidiary whose stock 
is to be pledged under the Pledge Agreement.

          (d)  The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of the Borrowers, confirming
compliance with the conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.

          (e)  The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date (each of which may be
funded out of the initial Loans), including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrowers hereunder or under any other Loan Document.

          (f)  The Pledge Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be in full force and
effect, and all the outstanding Equity Interests of the Subsidiaries and all
instruments, including the Intercompany Note, pledged thereunder shall have been
duly and validly pledged thereunder to the Collateral Agent for the ratable
benefit of the Secured Parties and certificates representing such shares or such
instruments accompanied by instruments of transfer and stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent or such other
action shall have been taken under applicable laws to perfect the pledge;
PROVIDED that to the extent to do so would cause adverse tax consequences to the
Borrowers, (i) neither any Borrower nor any Domestic Subsidiary shall be
required to pledge more than 65% of the voting stock of any Foreign Subsidiary
and (ii) no Foreign Subsidiary shall be required to pledge the capital stock of
any of its Subsidiaries.

          (g)  The Security Agreement shall have been duly executed by the
parties thereto and shall have been delivered to the Collateral Agent and shall
be in full force and effect on such date.  Each document (including without
limitation any Uniform Commercial Code financing statement) required by this
Agreement or the other Loan Documents, or under law, or reasonably requested by
the Administrative Agent or the Collateral Agent to be filed, registered, or
recorded in order to create, in favor of the Collateral Agent, a perfected
security interest in or Lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and the Administrative Agent
shall have received an acknowledgment copy, or other evidence satisfactory to
it, 


<PAGE>
                                                                             68

of each such filing registration or recordation and satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto.

          (h)  Prior to the date hereof, the Collateral Agent shall have
received the results of a search of the Uniform Commercial Code filings (or
equivalent filings) made with respect to the Loan Parties and UK Sub in the
states (or other jurisdictions) in which the chief executive office of each such
person is located, any offices of such persons in which records have been kept
relating to Receivables and the other jurisdictions in which Uniform Commercial
Code filings (or equivalent filings) are to be made pursuant to the preceding
paragraph, together with copies of the financing statements (or similar
documents) disclosed by such search, and accompanied by evidence satisfactory to
the Collateral Agent that the Liens indicated in any such financing statement
(or similar document) would be permitted under Section 6.02 or have been
released.

          (i)  The Collateral Agent shall have received a Perfection Certificate
with respect to the Loan Parties dated the Closing Date and duly executed by a
Responsible Officer of each Loan Party.

          (j)  The Administrative Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts, in form and
substance satisfactory to the Administrative Agent.


          (k)  Each of the Borrower Guarantee Agreement, the Subsidiary
Guarantee Agreement and the Indemnity, Subrogation and Contribution Agreement
shall have been duly executed by the parties thereto, shall have been delivered
to the Collateral Agent and shall be in full force and effect.

          (l)  The Administrative Agent shall have received such information as
is required to calculate the Formula Amount.

          (m)  The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents, each of
which shall be endorsed or otherwise amended to include a "standard" or "New
York" lender's loss payable endorsement and to name the Collateral Agent as
additional insured, in form and substance satisfactory to the Administrative
Agent.

          (n)  The Merger shall have been consummated or shall be consummated
simultaneously with the initial Credit Event on the Closing Date, in compliance
with applicable laws and in all material respects in accordance with the terms
of the relevant documentation therefor, including the Merger Agreement and the
related schedules and attachments thereto in the form in which they were
initially executed (and without the 


<PAGE>
                                                                             69

waiver or amendment of any such terms, except as shall be approved by the 
Required Lenders (which approval shall not be unreasonably withheld)).

          (o)  No litigation, investigation or proceeding before or by any
arbitrator or Governmental Agency shall be continuing or threatened against the
Borrowers or any of its Subsidiaries or any of their officers or directors, (A)
in connection with the Loan Documents or any of the transactions contemplated
thereby and which, in the reasonable opinion of Lenders, is deemed material or
(B) which could, in the opinion of Lenders, reasonably be expected to have a
Material Adverse Effect; and (ii) no injunction, writ, restraining order or
other order of any nature preventing or restricting the conduct of the business
of any Borrower or any of its Material Subsidiaries or consummation of the
Transactions shall have been entered by any Governmental Agency.

          (p)  Prior to the date hereof, the Lenders shall have received (i)
audited consolidated balance sheets and related statements of income,
stockholders' equity and cash flows of the Activision for each of the fiscal
years ended on March 31, 1996, 1997 and 1998, and of Expert for each of the
fiscal years ended on December 31, 1996, 1997 and 1998, and (ii) unaudited
consolidated and consolidating balance sheets and related statements of income,
stockholders' equity and cash flows of Activision and Expert for each subsequent
fiscal quarter, if any, ended 30 days prior to the Closing Date, which financial
statements shall not be materially inconsistent with the financial statements or
forecasts previously provided to the Lenders.

          (q)  All principal, premium, if any, interest, fees and other amounts
due and owing under the Existing Credit Agreement shall have been paid in full
with the proceeds of the initial Loans (and satisfactory arrangements shall have
been made to replace or continue under this Agreement all letters of credit
outstanding thereunder), the commitments thereunder terminated and all
guarantees and security in support thereof released, and the Administrative
Agent shall have received reasonably satisfactory evidence thereof, and after
giving effect to the Transactions and the other transactions contemplated
hereby, the Borrowers and the Subsidiaries shall have outstanding no
Indebtedness or preferred stock other than (i) the Loans and Letters of Credit
hereunder and (ii) the Indebtedness listed on Schedule 6.01.

          (r)  After giving pro forma effect to the Transactions, and after
adding back non-cash prepayments of royalties, the Adjusted EBITDA of Activision
and its consolidated Subsidiaries for the four-quarter period ending March 31,
1999, shall be at least $55,000,000.

          (s)  The Administrative Agent shall have received a Financial
Condition Certificate in the form of Exhibit L.

          (t)  Prior to the date hereof the Administrative Agent shall have
completed Collateral examinations and received appraisals, the results of which
shall be satisfactory 


<PAGE>
                                                                             70

in form and substance to Lenders, of the Receivables, Inventory, general 
intangibles, intellectual property and equipment of the Borrowers, received 
satisfactory trade references and completed a satisfactory review of all 
books and records of the Borrowers.

          (u)  Prior to the date hereof, the Lenders shall have received a copy
of pro forma financial statements after giving effect to the Loans and the
Transactions, which shall be satisfactory in all respects to Lenders, and
projections for the Loan Parties through the Revolving Credit Maturity Date
demonstrating the Borrowers' ability to comply with this Agreement.

          (v)  The Administrative Agent shall have received written instructions
from the Borrowers directing the application of the proceeds of the Borrowings
to be made on the Closing Date.

          (w)  Since December 31, 1998, there shall not have occurred any event,
condition or state of facts which could reasonably be expected to have a
Material Adverse Effect and no representations made or information supplied to
the Administrative Agent or the Lenders shall have proven to be inaccurate or
misleading in any material respect.

          (x)  The Administrative Agent shall have received landlord, mortgagee,
warehouseman or laboratory pledgeholder agreements with respect to all premises
leased by any Loan Party or at which any Inventory is located or appropriate
reserves shall have been established.

          (y)  After giving effect to the Loans to be made on the Closing Date
and the payment of all fees, costs and expenses in connection with the
Transactions, and to the Existing Letters of Credit, the Borrowers shall have
Undrawn Availability of at least $5,000,000 in the aggregate.

          (z)  The Lenders shall be mutually acceptable to the Administrative
Agent, the Syndication Agent and Activision.


                                     ARTICLE V


                               AFFIRMATIVE COVENANTS

     The Borrowers covenant and agree with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts payable under any Loan Document shall have been paid in full and all
Letters of Credit have been canceled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, each Borrower will, and will cause each of the
Subsidiaries to:


<PAGE>
                                                                             71

     SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES. (a)  Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05.

          (b)  Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated or in a
manner reasonably related to present operations; comply in all material respects
with all applicable laws, rules, regulations (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Mortgaged Properties) and
decrees and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.

     SECTION 5.02. INSURANCE. The Loan Parties shall bear the full risk of any
loss of any nature whatsoever with respect to the Collateral.  At the cost and
expense of the Loan Parties in amounts and with carriers reasonably acceptable
to the Administrative Agent, the Loan Parties shall (a) keep all insurable
properties and properties in which any Loan Party has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the business
of the Loan Parties including, without limitation, business interruption
insurance and marine and air cargo insurance, (b) maintain a bond in such
amounts as is customary in the case of companies engaged in businesses similar
to the business of the Loan Parties insuring against larceny, embezzlement or
other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Loan Party either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Loan Party is engaged in business; (e) furnish the
Administrative Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance reasonably satisfactory to the Administrative Agent, naming
the Administrative Agent as a co-insured and loss payee as its interests may
appear with respect to all insurance coverage referred to in clause (a), and
providing (A) 


<PAGE>
                                                                             72

that all proceeds thereunder shall be payable to the Administrative Agent, 
(B) no such insurance shall be affected by any act or neglect of the insured 
or owner of the property described in such policy, and (C) that such policy 
and loss payable clauses may not be canceled, amended or terminated unless at 
least thirty (30) days' prior written notice is given to the Administrative 
Agent.  In the event of any loss thereunder, the carriers named therein 
hereby are directed by the Administrative Agent and the applicable Loan Party 
to make payment for such loss to the Administrative Agent and not to such 
Loan Party and Administrative Agent jointly.  If any insurance losses are 
paid by check, draft or other instrument payable to any Loan Party and the 
Administrative Agent jointly, the Administrative Agent may endorse such Loan 
Party's name thereon and do such Loan Party other things as the 
Administrative Agent may deem advisable to reduce the same to case.  
Following the occurrence of an Event of Default, the Administrative Agent is 
hereby authorized to adjust and compromise claims under insurance coverage 
referred to in clauses (a), and (b).  All loss recoveries received by the 
Administrative Agent upon any such insurance prior to the occurrence of an 
Event of Default shall be applied to the Revolving Loans.  Any surplus shall 
be paid by the Administrative Agent to Borrowers or applied as may be 
otherwise required by law.

     SECTION 5.03. OBLIGATIONS AND TAXES. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise that, if unpaid, might
give rise to a Lien upon such properties or any part thereof; PROVIDED, HOWEVER,
that such payment and discharge shall not be required with respect to any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrowers
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien and,
in the case of a Mortgaged Property, there is no risk of forfeiture of such
property.



<PAGE>

                                                                            73

     SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the 
Borrowers, furnish to the Administrative Agent and each Lender:

     (a)  within 90 days after the end of each fiscal year, its consolidated 
and consolidating balance sheet and related statements of income, 
stockholders' equity and cash flows showing the financial condition and 
Activision and its consolidated Subsidiaries as of the close of such fiscal 
year and the results of its operations and the operations of such 
Subsidiaries during such year  The consolidated financial statements shall be 
audited by KPMG Peat Marwick LLP or other independent public accountants of 
recognized national standing and accompanied by an opinion of such 
accountants (which shall not be qualified in any material respect) to the 
effect that such consolidated financial statements fairly present the 
financial condition and results of operations of Activision and its 
consolidated Subsidiaries on a consolidated basis in accordance with GAAP.  
In addition, Development Costs and the amortization of Development Costs for 
such year shall be identified explicitly in the audited financial statements 
or in the notes thereto;

     (b)  within 45 days after the end of each fiscal quarter of each fiscal 
year, the consolidated and consolidating balance sheet and related statements 
of income, stockholders' equity and cash flows showing the financial 
condition of Activision and its consolidated Subsidiaries, and of the Loan 
Parties as of the close of such fiscal quarter and the results of its 
operations and the operations of such Subsidiaries during such fiscal quarter 
and the then elapsed portion of the fiscal year, all certified by one of its 
Financial Officers as fairly presenting the financial condition and results 
of operations of the Loan Parties and Activision and its consolidated 
Subsidiaries in accordance with GAAP, subject to normal year-end audit 
adjustments;

     (c)  within 20 days after the end of each month, the consolidated and 
consolidating balance sheet and related statements of income, stockholder's 
equity and cash flows showing the financial condition of the Loan Parties  
and of Activision and its consolidated Subsidiaries as of the close of such 
fiscal month and the results of its operations and the operations of such 
Subsidiaries and of the Loan Parties during such fiscal month and the then 
elapsed portion of such fiscal year, all certified by one of its Financial 
Officers as fairly presenting the financial condition and results of 
operations of the Loan Parties and of Activision and its consolidated 
Subsidiaries in accordance with GAAP, subject to normal year-end audit 
adjustments;

     (d)   concurrently with the delivery of financial statements under 
paragraph (b) above, a report in reasonable detail of amounts accrued and 
paid during such quarter for royalties and fees under license, distribution 
or development agreements, in a form reasonably satisfactory to the 
Administrative Agent.

     (e)  concurrently with any delivery of financial statements under 
paragraph (a) or (b) above, a certificate of the accounting firm (in the case 
of paragraph (a)) or Financial Officer (in the case of paragraph  (b)) 
opining on or certifying such statements 


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                                                                            74

(which certificate, when furnished by an accounting firm, may be limited to 
accounting matters and disclaim responsibility for legal interpretations) (i) 
certifying that no Event of Default or Default has occurred or, if such an 
Event of Default or Default has occurred, specifying the nature and extent 
thereof and any corrective action taken or proposed to be taken with respect 
thereto and (ii) setting forth computations in reasonable detail satisfactory 
to the Administrative Agent demonstrating compliance with the covenants 
contained in Sections 6.08, 6.09, 6.10, 6.11, 6.12 and 6.13 and, in the case 
of a certificate delivered with the financial statements required by 
paragraph (a) above, setting forth the Borrowers' calculation of Excess Cash 
Flow;

     (f)  [intentionally omitted]

     (g)  promptly after the same become publicly available, copies of all 
periodic and other reports, proxy statements and other materials filed by 
Activision or any Subsidiary with the Securities and Exchange Commission, or 
any Governmental Authority succeeding to any or all of the functions of said 
Commission, or with any national securities exchange, or distributed to its 
shareholders, as the case may be;

     (h)  promptly after the receipt thereof by any Borrower or any of its 
Subsidiaries, a copy of any "management letter" (whether in draft or final 
form) received by any such person from its certified public accountants and 
the management's responses thereto; and

     (i)  each year, at the time of delivery of annual financial statements 
with respect to the preceding fiscal year pursuant to clause (a) above, the 
Borrowers shall deliver to the Administrative Agent a certificate of a 
Financial Officer of the Borrowers (i) setting forth the information required 
pursuant to Sections 1-4, 6 and 9  of the Perfection Certificate or 
confirming that there has been no change in such information since the date 
of the Perfection Certificate delivered on the Closing Date or the date of 
the most recent certificate delivered pursuant to this Section and (ii) 
certifying that all Uniform Commercial Code financing statements (including 
fixture filings, as applicable) or other appropriate filings, recordings or 
registrations, including all refilings, rerecordings and reregistrations, 
containing a description of the Collateral have been filed of record in each 
governmental, municipal or other appropriate office in each jurisdiction 
identified pursuant to clause (i) above to the extent necessary to protect 
and perfect the security interests under the Security Documents for a period 
of not less than 18 months after the date of such certificate (except as 
noted therein with respect to any continuation statements to be filed within 
such period).

     (j)  on or before the fifteenth (15th) day of each month as and for the 
prior month (a) a Schedule of Receivables, (b) a Schedule of Payables and (c) 
Inventory reports.  In addition, the Borrowers will deliver to the 
Administrative Agent at least once every two weeks (or more frequently at the 
option of the Borrowers) or as the Administrative Agent may require, (i) 
confirmatory assignment schedules, (ii) remittance 


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                                                                            75

schedules and (iii) schedules of credits to Receivables, each certified as 
complete and correct by a Financial Officer of the Borrowers.  Borrowers 
shall also deliver to the Administrative Agent at such intervals as the 
Administrative Agent may require:  (i) copies of Customer invoices (ii) 
evidence of shipment or delivery and (iii) such further schedules, documents 
and/or information regarding the Collateral as the Administrative Agent may 
require including, without limitation, trial balances and test verifications. 
 The Administrative Agent shall have the right to confirm and verify all 
Receivables by any manner and through any medium it considers advisable and 
do whatever it may deem reasonably necessary to protect its interests 
hereunder.  The items to be provided under this Section are to be in form 
reasonably satisfactory to the Administrative Agent and executed by the 
Borrowers and delivered to the Administrative Agent from time to time solely 
for the Administrative Agent's convenience in maintaining records of the 
Collateral, and any Borrower's failure to deliver any of such items to the 
Administrative Agent shall not affect, terminate, modify or otherwise limit 
the Collateral Agent's Lien with respect to the Collateral.

     (k)  no later than forty-five (45) days after the beginning of each 
fiscal year commencing with the fiscal year ending March 31, 2001, a month by 
month projected operating budget and cash flow of Activision and of the Loan 
Parties for such fiscal year (including an income statement for each month 
and a balance sheet as at the end of the last month in each fiscal quarter), 
such projections to be accompanied by a certificate signed by a Financial 
Officer of the Borrowers to the effect that such projections have been 
prepared on the basis of sound financial planning practice consistent with 
past budgets and financial statements and that such officer has no reason to 
question the reasonableness of any material assumptions on which such 
projections were prepared.  In addition, concurrently with the delivery of 
the financial statements referred to in clauses (a), (b) and (c) above the 
Borrowers will deliver a written report summarizing all material variances 
from the budgets submitted by the Borrowers and a discussion and analysis by 
management with respect to such variances.

     (l)  promptly, from time to time, such other information regarding the 
operations, business affairs and financial condition of the Borrowers or any 
Subsidiary, or compliance with the terms of any Loan Document, as the 
Administrative Agent or any Lender may reasonably request.

     SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to the 
Administrative Agent, the Issuing Bank and each Lender prompt written notice 
of the following:

     (a)  any Event of Default or Default, specifying the nature and extent 
thereof and the corrective action (if any) taken or proposed to be taken with 
respect thereto;


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                                                                            76

     (b)  the filing or commencement of, or any threat or notice of intention 
of any person to file or commence, any action, suit or proceeding, whether at 
law or in equity or by or before any Governmental Authority, against any 
Borrower or any Affiliate thereof that could reasonably be expected to result 
in a Material Adverse Effect;

     (c)  any development that has resulted in, or could reasonably be 
expected to result in, a Material Adverse Effect;

     (d)  any event of default or event which, with notice or lapse of one or 
both would constitute an event of default under the Convertible Subordinated 
Note Documents or any agreement with respect to Subordinated Debt;

     (e)  all matters materially affecting the value, enforceability or 
collectibility of any portion of the Collateral, including, without 
limitation, any Loan Party's reclamation or repossession of, or the returns 
to any Loan Party of, a material amount of goods or claims or disputes 
asserted by any Customer or other obligor; and

     (f)  any breach or default under any agreement under which a Loan Party 
is the licensee or distributor or any notice of intent to terminate any such 
agreement.

     SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply in all material respects 
with the applicable provisions of ERISA and the Code and (b) furnish to the 
Administrative Agent (i) as soon as possible after, and in any event within 
10 days after any Responsible Officer of any Borrower or any ERISA Affiliate 
knows or has reason to know that, any ERISA Event has occurred that, alone or 
together with any other ERISA Event could reasonably be expected to result in 
liability of the Borrowers in an aggregate amount exceeding $1,000,000, a 
statement of a Financial Officer of the Borrowers setting forth details as to 
such ERISA Event and the action, if any, that the Borrowers propose to take 
with respect thereto.

     SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. 
Keep proper books of record and account in which full, true and correct 
entries in conformity with GAAP and all requirements of law are made of all 
dealings and transactions in relation to its business and activities.  Each 
Loan Party will, and will cause each of its Subsidiaries to, permit any 
representatives designated by the Administrative Agent or any Lender to visit 
and inspect the financial records and the properties of the Borrowers or any 
Subsidiary at reasonable times and as often as reasonably requested and to 
make extracts from and copies of such financial records, and permit any 
representatives designated by the Administrative Agent or any Lender to 
discuss the affairs, finances and condition of the Borrowers or any 
Subsidiary with the officers thereof and independent accountants therefor.


<PAGE>

                                                                            77

     SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans and request 
the issuance of Letters of Credit only for the purposes set forth in the 
preamble to this Agreement.

     SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause all 
lessees and other persons occupying its Properties to comply, in all material 
respects with all Environmental Laws and Environmental Permits applicable to 
its operations and Properties; obtain and renew all material Environmental 
Permits necessary for its operations and Properties; and conduct any Remedial 
Action in accordance with Environmental Laws; PROVIDED, HOWEVER, that neither 
any Borrowers nor any of the Subsidiaries shall be required to undertake any 
Remedial Action to the extent that its obligation to do so is being contested 
in good faith and by proper proceedings and appropriate reserves are being 
maintained with respect to such circumstances.

     SECTION 5.10. PREPARATION OF ENVIRONMENTAL REPORTS. If a Default caused 
by reason of a breach of Section 3.17 or 5.09 shall have occurred and be 
continuing, at the request of the Required Lenders through the Administrative 
Agent, provide to the Lenders within 45 days after such request, at the 
expense of the Borrowers, an environmental site assessment report for the 
Properties which are the subject of such Default prepared by an environmental 
consulting firm acceptable to the Administrative Agent and indicating the 
presence or absence of Hazardous Materials and the estimated cost of any 
compliance or Remedial Action in connection with such Properties.

     SECTION 5.11. AUDITS.  From time to time upon the request of the 
Collateral Agent or the Required Lenders through the Administrative Agent, 
permit the Collateral Agent or the Lenders to conduct evaluations and 
appraisals of (a) the Borrowers' practices in the computation of the 
Borrowing Base and (b) the assets included in the Borrowing Base.  In 
connection therewith, Borrowers shall pay the costs of the Collateral Agent's 
auditors in accordance with the Agent's Fee Letter.

     SECTION 5.12. FURTHER ASSURANCES. Execute any and all further documents, 
financing statements, agreements and instruments, and take all further action 
(including filing Uniform Commercial Code and other financing statements, 
mortgages and deeds of trust) that may be required under applicable law, or 
that the Required Lenders, the Administrative Agent or the Collateral Agent 
may reasonably request, in order to effectuate the transactions contemplated 
by the Loan Documents and in order to grant, preserve, protect and perfect 
the validity and first priority of the security interests created or intended 
to be created by the Security Documents and the UK Charge Documents.  The 
Borrowers will cause any subsequently acquired or organized Domestic 
Subsidiary which is a Material Subsidiary and any other Domestic Subsidiary 
which becomes a Material Subsidiary to execute a Subsidiary Guarantee 
Agreement, Indemnity Subrogation and Contribution Agreement and each 
applicable Security Document in favor of the Collateral Agent.  If any new 
Domestic Subsidiary is to become a Borrower hereunder, it will execute and 
deliver a Joinder Agreement and the Borrower Guarantee 


<PAGE>

                                                                            78

Agreement, Indemnity, Subrogation and Contribution Agreement and the Security 
Agreement; PROVIDED, HOWEVER, that any new Borrower's Receivables and 
Inventory may not be included in calculating the Formula Amount or Individual 
Formula Amount until the Administrative Agent has completed its audit with 
respect thereto with results satisfactory to it in its Permitted Discretion.  
In addition, from time to time, the Borrowers will, at their cost and 
expense, promptly secure the Obligations by pledging or creating, or causing 
to be pledged or created, perfected security interests with respect to such 
of the assets and properties of the Loan Parties as the Administrative Agent 
or the Required Lenders shall designate (it being understood that it is the 
intent of the parties that the Obligations shall be secured by substantially 
all the assets of the Borrowers and their Domestic Subsidiaries (including 
real and other properties acquired subsequent to the Closing Date)).  Such 
security interests and Liens will be created under the Security Documents and 
other security agreements, mortgages, deeds of trust and other instruments 
and documents in form and substance satisfactory to the Collateral Agent, and 
the Borrowers shall deliver or cause to be delivered to the Lenders all such 
instruments and documents (including legal opinions, title insurance policies 
and lien searches) as the Collateral Agent shall reasonably request to 
evidence compliance with this Section. The Borrowers agree to provide such 
evidence as the Collateral Agent shall reasonably request as to the 
perfection and priority status of each such security interest and Lien.

     SECTION 5.13 GOVERNMENT RECEIVABLES.  Notify the Administrative Agent 
immediately if any Receivables arise out of contracts between any Borrower 
and the United States, any state or any department, agency or instrumentality 
of any of them and take all steps necessary to protect the Collateral Agent's 
interest in the Collateral under the Federal Assignment of Claims Act or 
other applicable state or local statutes or ordinances and deliver to the 
Administrative Agent appropriately endorsed any instrument or chattel paper 
connected with any Receivable arising out of contracts between any Loan Party 
and the United States, any state or any department, agency of instrumentality 
of any of them.

     SECTION 5.14  INTELLECTUAL PROPERTY.  (a)  Each Loan Party shall 
register or cause to be registered (to the extent not already registered) 
with the United States Patent and Trademark Office or the United States 
Copyright Office, as applicable, those intellectual property rights listed on 
the exhibits to the Security Agreement within thirty (30) days of the date of 
this Agreement.  Each Loan Party shall register or cause to be registered 
with the United States Patent and Trademark Office or the United States 
Copyright Office, as applicable, those additional material intellectual 
property rights developed or acquired by such Loan Party from time to time in 
connection with any product prior to the sale or licensing of such product to 
any third party, including without limitation revisions or additions to the 
intellectual property rights listed on such exhibits, when such Loan Party 
reasonably determines that such registration is appropriate; PROVIDED that 
such Loan Party shall in any case register such additional patents, and/or 
copyrights as are developed or 


<PAGE>

                                                                            79

obtained in connection with any product accounting for more than five percent 
(5%) of such Loan Party's gross revenues in any calendar quarter.  
Notwithstanding the foregoing, each Loan Party shall only be required to 
register trademarks when such Loan Party reasonably determines that such 
registration is appropriate.

     (b)  Each Loan Party shall execute and deliver such additional 
instruments and documents from time to time as the Collateral Agent shall 
reasonably request to perfect the Collateral Agent's security interest in the 
Collateral consisting of Intellectual Property (as defined in the Security 
Agreement).

     (c)  Each Loan Party shall (i) protect, defend and maintain the validity 
and enforceability of the Intellectual Property, (ii) use commercially 
reasonable efforts to detect infringements of the Intellectual Property and 
promptly advise the Administrative Agent in writing of material infringements 
detected, and (iii) not allow any Intellectual Property to be abandoned, 
forfeited or dedicated to the public without the written consent of the 
Required Lenders, which shall not be unreasonably withheld.

     (d)  The Collateral Agent shall have the right, but not the obligation, 
to take, at Borrowers' sole expense, any actions that Borrowers are required 
to take under this Section, but fail to take, after fifteen (15) days' notice 
to Borrowers.  Borrowers shall reimburse and indemnify the Administrative 
Agent for all reasonable costs and reasonable expenses incurred in the 
reasonable exercise of its rights under this Section.

     SECTION 5.15  BLOCKED ACCOUNTS.  All proceeds of Collateral shall, at 
the direction of the Administrative Agent, be deposited by the Loan Parties 
into a lock box account, dominion account or such other "blocked account" 
("Blocked Accounts") with PNC or another bank reasonably acceptable to the 
Administrative Agent, that enters into a Lock Box Agreement with the 
Administrative Agent in form and substance acceptable to the Administrative 
Agent.  Each Loan Party shall issue to the institution with which the Blocked 
Accounts are maintained an irrevocable letter of instruction directing said 
bank to transfer such funds so deposited in accordance with a notice from the 
Administrative Agent to the Administrative Agent, either to any account 
maintained by the Administrative Agent at said bank or by wire transfer to 
appropriate account(s) of the Administrative Agent.  All funds deposited in 
such Blocked Accounts shall immediately become the property of the 
Administrative Agent and Borrowers shall obtain the agreement by such bank to 
waive any offset rights against the funds so deposited (except any rights of 
PNC as a Lender hereunder).  Neither the Administrative Agent, the Collateral 
Agent nor any Lender assumes any responsibility for such "blocked account" 
arrangement, including without limitation, any claim of accord and 
satisfaction or release with respect to deposits accepted by any bank 
thereunder.  Alternatively, the Administrative Agent may establish depository 
accounts (the "Depository Accounts") in 


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                                                                            80

the name of the Administrative Agent at a bank or banks for the deposit of 
such funds and the Loan Parties shall deposit all proceeds of Collateral or 
cause same to be deposited, in kind, in such Depository Accounts in lieu of 
depositing same to the Blocked Accounts.

          All funds in the Blocked Accounts or Depository Accounts shall be 
transferred daily to the Administrative Agent to be applied to outstanding 
Revolving Loans which are ABR Loans, and applied to the Obligations as they 
become due.  Any funds remaining after such application may be transferred, 
if all ABR Loans and all other Obligations then due have been paid in full, 
to the Investment Account to be held as Cash Collateral hereunder and applied 
to the Obligations as they become due.  From time to time the Administrative 
Agent shall, upon the request of the Borrowing Agent, transfer funds from the 
Investment Account to Borrower's operating account, but Borrowers may not 
make investments in Permitted Investments other than those held in the 
Investment Account unless no Revolving Loans are outstanding and, after any 
transfer of funds from the Investment Account, Undrawn Availability is at 
least $10,000,000 or such lesser amount to which the Administrative Agent 
otherwise consents.

     SECTION 5.16.  RECEIVABLES.  (a)  Each of the Receivables shall be a 
bona fide and valid account representing a bona fide indebtedness incurred by 
the Customer therein named and each of the Receivables proposed to be 
included as an Eligible Receivable is for a fixed sum as set forth in the 
invoice relating thereto (provided immaterial or unintentional invoice errors 
shall not be deemed to be a breach hereof) with respect to an absolute sale 
or lease and delivery of goods upon stated terms of a Borrower, or work, 
labor or services theretofore rendered by a Borrower as of the date each 
Receivable is created.  Same shall be due and owing in accordance with the 
applicable Borrower's standard terms of sale without dispute, setoff or 
counterclaim except as may be stated on the Schedules of Receivables 
delivered by Borrowers to the Administrative Agent.

     (b)  Each Customer, to the best of each Borrower's knowledge, as of the 
date each Receivable is created, is and will be solvent and able to pay all 
Receivables on which the Customer is obligated in full when due or with 
respect to such Customers of any Borrower who are not solvent such Borrower 
has set up on its books and in its financial records bad debt reserves 
adequate to cover such Receivables.

     (c)  Each Borrower's chief executive office is located at the addresses 
set forth on Schedule 3.20(a) or (b) hereto.  Until written notice is given 
to the Administrative Agent by the Borrowing Agent of any other office at 
which any Borrower keeps its records pertaining to Receivables, all such 
records shall be kept at such executive office.

     (d)  Until any Borrower's authority to do so is terminated by the 
Administrative Agent (which notice the Administrative Agent may give at any 
time following the occurrence of an Event of Default), each Borrower will, at 
such Borrower's sole cost and expense, but on the Administrative Agent's 
behalf and for the Administrative Agent's account, collect as the 
Administrative Agent's property and in 


<PAGE>

                                                                            81

trust for the Administrative Agent all amounts received on Receivables, and 
shall not commingle such collections with any Borrower's funds or use the 
same except to pay Obligations.  Each Borrower shall, upon request, deliver 
to the Administrative Agent, or deposit in the Blocked Account, in original 
form and on the date of receipt thereof, all checks, drafts, notes, money 
orders, acceptances, cash and other evidences of Indebtedness.

     (e)  At any time following the occurrence of an Event of Default, the 
Administrative Agent shall have the right to send notice of the assignment 
of, and the Collateral Agent's security interest in, the Receivables to any 
and all Customers or any third party holding or otherwise concerned with any 
of the Collateral.  Thereafter, the Collateral Agent shall have the sole 
right to collect the Receivables, take possession of the Collateral, or both. 
 The Collateral Agent's actual collection expenses, including, but not 
limited to, stationery and postage, telephone and telegraph, secretarial and 
clerical expenses and the salaries of any collection personnel used for 
collection, may be charged to Borrowers' Account and added to the Obligations.

     (f)  The Collateral Agent shall have the right to receive, endorse, 
assign and/or deliver in the name of the Collateral Agent or any Borrower any 
and all checks, drafts and other instruments for the payment of money 
relating to the Receivables, and each Borrower hereby waives notice of 
presentment, protest and non-payment of any instrument so endorsed.  Each 
Borrower hereby constitutes the Collateral Agent or its designee as such 
Borrower's attorney with power (i) to endorse such Borrower's name upon any 
notes, acceptances, checks, drafts, money orders or other evidences of 
payment or Collateral; (ii) to sign such Borrower's name on any invoice or 
bill of lading relating to any of the Receivables, drafts against Customers, 
assignments and verifications of Receivables; (iii) to send verifications of 
Receivables to any Customer; (iv) to sign such Borrower's name on all 
financing statements or any other documents or instruments deemed necessary 
or appropriate by the Collateral Agent to preserve, protect, or perfect the 
Collateral Agent's interest in the Collateral and to file same; (v) following 
an Event of Default, to demand payment of the Receivables; (vi) following an 
Event of Default, to enforce payment of the Receivables by legal proceedings 
or otherwise; (vii) following an Event of Default, to exercise all of 
Borrowers' rights and remedies with respect to the collection of the 
Receivables and any other Collateral; (viii)following an Event of Default,  
to settle, adjust, compromise, extend or renew the Receivables; (ix) 
following an Event of Default, to settle, adjust or compromise any legal 
proceedings brought to collect Receivables; (x) following an Event of 
Default, to prepare, file and sign such Borrower's name on a proof of claim 
in bankruptcy or similar document against any Customer, (xi) following an 
Event of Default, to prepare, file and sign such Borrower's name on any 
notice of Lien., assignment or satisfaction of Lien or similar document in 
connection with the Receivables; and (xii) to do all other acts and things 
necessary to carry out this Agreement.  All acts of said attorney or designee 
are hereby ratified and approved, and said attorney or designee shall not be 
liable for any acts of omission or commission nor for any error of judgment 
or mistake of fact or of law, unless constituting willful 


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                                                                            82

misconduct or gross (not mere) negligence; this power being coupled with an 
interest is irrevocable while any of the Obligations remain unpaid.  The 
Collateral Agent shall have the right at any time following the occurrence of 
an Event of Default to change the address for delivery of mail addressed to 
any Borrower to such address as the Collateral Agent may designate and to 
receive, open and dispose of all mail addressed to any Borrower.

     (g)  Neither the Administrative Agent, the Collateral Agent nor any 
Lender shall, under any circumstances or in any event whatsoever, have any 
liability for any error or omission or delay of any kind occurring in the 
settlement, collection or payment of any of the Receivables or any instrument 
received in payment thereof, or for any damage resulting therefrom.  
Following the occurrence of an Event of Default the Administrative Agent may, 
without notice or consent from any Borrower, sue upon or otherwise collect, 
extend the time of payment of, compromise or settle for cash, credit or upon 
any terms any of the Receivables or any other securities, instruments or 
insurance applicable thereto and/or release any obligor thereof.  The 
Collateral Agent is authorized and empowered to accept following the 
occurrence of an Event of Default the return of the goods represented by any 
of the Receivables, without notice to or consent by any Borrower, all without 
discharging or in any way affecting any Borrower's liability hereunder.

     (h)  No Borrower will, without the Administrative Agent's consent, 
compromise or adjust any material amount of the Receivables or extend the 
time for payment thereof or accept any material returns of merchandise or 
grant any additional discounts, allowances or credits thereon except for 
those compromises, adjustments, returns, discounts, credits and allowances as 
have been heretofore customary in the business of such Borrower.


                                     ARTICLE VI

                                 NEGATIVE COVENANTS

     The Borrowers covenant and agree with each Lender that, so long as this 
Agreement shall remain in effect and until the Commitments have been 
terminated and the principal of and interest on each Loan, all Fees and all 
other expenses or amounts payable under any Loan Document have been paid in 
full and all Letters of Credit have been canceled or have expired and all 
amounts drawn thereunder have been reimbursed in full, unless the Required 
Lenders shall otherwise consent in writing, no Borrower will nor will it 
cause or permit any of the Subsidiaries to:

     SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist any 
Indebtedness, except:


<PAGE>
                                                                              83

     (a)  Indebtedness for borrowed money existing on the date hereof and set
forth in Schedule 6.01, but not any extensions, renewals or replacements of such
Indebtedness (unless otherwise permitted under this Section 6.01);

     (b)  Indebtedness created hereunder and under the other Loan Documents;

     (c)  Indebtedness evidenced by Capital Lease Obligations, or secured
pursuant to Section 6.02(h), in each case so long as the aggregate principal
amount of all Indebtedness permitted to be outstanding under this paragraph (c)
shall not exceed $5,000,000;

     (d)  Indebtedness in favor of a Lender (or an Affiliate thereof) under one
or more Hedging Agreements approved by the Administrative Agent (such approval
not to be unreasonably withheld);

     (e)  intercompany Indebtedness of Activision and its Subsidiaries to the
extent permitted by Sections 6.04(e), (g) and (o);

     (f)  Indebtedness with respect to any surety bonds required in the ordinary
course of business of the Borrowers and the Subsidiaries, PROVIDED that such
Indebtedness shall not at any time exceed $250,000 in the aggregate;

     (g)  Indebtedness of the European Distribution Subsidiaries in an aggregate
principal amount not to exceed $50,000,000 (or the equivalent thereof) at any
time outstanding, PROVIDED that such Indebtedness shall not be Guaranteed by any
Loan Party other than through one or more Letters of Credit issued hereunder to
support such Indebtedness in a face amount not in excess of $9,000,000;

     (h)  Indebtedness of Foreign Subsidiaries (other than the European
Distribution Subsidiaries) in an aggregate principal amount not to exceed
$15,000,000 (or the equivalent thereof) at any time outstanding, PROVIDED such
Indebtedness shall not be Guaranteed by any Loan Party;

     (i)  other unsecured Indebtedness of the Borrowers and the Subsidiaries in
an aggregate principal amount not to exceed $5,000,000 at any time outstanding;

     (j)  Subordinated Debt in an aggregate principal amount which does not
exceed at the time of incurrence the outstanding principal amount of the Term
Loans plus $15,000,000 in outstanding principal amount; provided that, so long
as the Term Loans are outstanding, the Net Cash Proceeds of any such
Subordinated Debt shall be applied to mandatory prepayment of the Term Loans in
accordance with Section 2.14(f); and

     (k)  Acquired Debt in connection with a Permitted Acquisition.


<PAGE>
                                                                              84

     SECTION 6.02. LIENS. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:

     (a)  Liens on property or assets of the Borrowers and its Subsidiaries
existing on the date hereof and set forth in Schedule 6.02; PROVIDED that such
Liens shall secure only those obligations which they secure on the date hereof
and may not encumber Receivables;

     (b)  any Lien created under the Loan Documents;

     (c)  Liens for taxes not yet due or which are being contested in compliance
with Section 5.03; PROVIDED that the Lien shall have no effect on the priority
of the Liens under the Loan Documents or the value of the Collateral and a stay
of enforcement of any such Lien shall be in effect;

     (d)  carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or which are being contested in
compliance with Section 5.03;

     (e)  Liens (other than any Lien imposed by ERISA), pledges and deposits
made in the ordinary course of business in compliance with workmen's
compensation, unemployment insurance and other social security laws or
regulations;

     (f)  deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;

     (g)  zoning restrictions, easements, rights-of-way, restrictions on use of
real property and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Borrowers or any of its
Subsidiaries;

     (h)  purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by the Borrowers or any Subsidiary; PROVIDED that (i) such security
interests secure Indebtedness permitted by Section 6.01, (ii) such security
interests are incurred, and the Indebtedness secured thereby is created, within
90 days after such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed 85% of the lesser of the cost or the fair market value
of such real property, improvements or equipment at the 


<PAGE>
                                                                              85

time of such acquisition (or construction) and (iv) such security interests 
do not apply to any other property or assets of the Borrowers or any 
Subsidiary;

     (i)  Liens on assets of Foreign Subsidiaries; PROVIDED that (i) such Liens
do not extend to, or encumber, assets of the Borrowers or any of its Domestic
Subsidiaries and (ii) such Liens secure only Indebtedness incurred by such
Foreign Subsidiaries pursuant to Section 6.01 (g),  (h) or (k); and

     (j)  Liens granted to licensors by a Loan Party which encumber only the
licensed intellectual property and inventory produced thereunder (but not any
Receivables from the sale, distribution or licensing thereof), are subordinated
to the Liens of the Collateral Agent on terms and conditions satisfactory to the
Collateral Agent and expressly permit the Liens granted by the Loan Documents
and the exercise of remedies thereunder.

     SECTION 6.03. SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred unless (a) the sale of such property is
permitted by Section 6.05 and (b) the Capital Lease Obligations arising
therefrom are permitted by Section 6.01(c).

     SECTION 6.04. INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire
any Equity Interests, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:

     (a)  investments by the Borrowers existing on the date hereof in the Equity
Interests of the Subsidiaries;

     (b)  Permitted Investments held in the Investment Account and, if Undrawn
Availability is at least $10,000,000 and there are no outstanding Revolving
Loans (or such lesser amount to which the Administrative Agent consents), other
Permitted Investments;

     (c)  Receivables owing to any Borrower or any of its Subsidiaries arising
from sales of Inventory under usual and customary terms in the ordinary course
of business;

     (d)  advances not to exceed $500,000 outstanding at any time to employees
of the Borrowers and the Subsidiaries to meet expenses incurred by such
employees in the ordinary course of business;


<PAGE>
                                                                              86

     (e)  any wholly owned Subsidiary may make intercompany loans to a Borrower
or any other wholly owned Subsidiary and any Borrower may make intercompany
loans and advances to any wholly owned Subsidiary; PROVIDED that any promissory
notes evidencing such intercompany loans shall be pledged (and delivered) by the
applicable Borrower or the respective wholly owned Domestic Subsidiary that is
the lender of such intercompany loan as Collateral pursuant to the Pledge
Agreement; PROVIDED FURTHER that (i) any Borrower or any Domestic Subsidiaries
may make loans to and repay loans from any Foreign Subsidiaries pursuant to this
paragraph (e) only if, after giving effect thereto, the outstanding principal
amount of all loans made by Foreign Subsidiaries to Activision during any Fiscal
Year shall exceed the principal of loans made by any Borrower and its Domestic
Subsidiaries during such period and as of the end of each Fiscal Year the
outstanding principal amount of loans made by Foreign Subsidiaries shall exceed
the outstanding principal amount of loans made by the Borrowers and their
Domestic Subsidiaries by at least $4,000,000 and (ii) any loans made by any
Foreign Subsidiaries to any Borrower or any of its Domestic Subsidiaries
pursuant to this paragraph (e) shall be unsecured and subordinated to the
obligations of the Loan Parties pursuant to subordination provisions in
substantially the form of Exhibit J; and any loans made by any Loan Party to any
Foreign Subsidiary shall be evidenced by one or more revolving Master Notes
pledged to the Collateral Agent pursuant to the Pledge Agreement.

     (f)  the Borrowers may establish Subsidiaries to the extent permitted by
Section 6.15;

     (g)  the Borrowers and the Domestic wholly owned Subsidiaries may make
additional loans and advances to, or other investments in, Foreign Subsidiaries
of the Borrowers with the prior written consent of the Required Lenders;

     (h)  a Borrower or any wholly owned Subsidiary may acquire substantially
all the assets of, or more than 50% of the Equity Interests of, a person (such
assets or such person referred to herein as the "ACQUIRED ENTITY" and any
acquisition completed under this subsection 6.04(h) is a "PERMITTED
ACQUISITION"); PROVIDED that each of the following conditions is satisfied:

          (i)     the Acquired Entity shall be a going concern and shall be in a
line of business reasonably related to that of the Borrowers and their
Subsidiaries as conducted during the current and most recent calendar year;

          (ii)    the Acquired Entity shall have approved such transaction;

          (iii)   the Borrowers shall have delivered to the Administrative Agent
at least 5 Business Days prior to consummation of the acquisition a certificate
of a Financial Officer demonstrating, in reasonable detail, that, at the time of
such transaction (A) both before and after giving effect thereto, no Event of
Default or Default shall have occurred 


<PAGE>
                                                                              87

and be continuing or shall exist, (B) the Borrowers are in compliance with 
the covenants set forth in Sections 6.09, 6.10, 6.11, 6.12 and 6.13 as of the 
last day of the most recent fiscal quarter preceding such acquisition,  and 
would be in compliance on a PRO FORMA basis with such covenants as of the 
last day of the month preceding such acquisition, and (C) all calculations 
necessary to determine compliance with the conditions in clauses (vi) or 
(vii) below.   All PRO FORMA calculations required to be made pursuant to 
this subsection 6.04(h) shall (i) include only those adjustments that would 
be permitted or required by Regulation S-X, (ii) be based on reasonably 
detailed written assumptions which accompany the certificate and shall be 
acceptable to the Administrative Agent, and (iii) be certified by a Financial 
Officer as having been prepared in good faith based upon reasonable 
assumptions;

          (iv)    the Borrowers shall comply with Sections 5.12, 6.15 and the
relevant provisions of the other Loan Documents with respect to the Acquired
Entity and its assets or any new Subsidiary formed to effect the acquisition;

          (v)     the Borrowers shall have delivered to the Lenders
consolidating financial statements for each Borrower, each Subsidiary and the
Acquired Entity for the most recent fiscal year and fiscal quarter prior to the
date of acquistion in question, and the financial statements of the Acquired
Entity for the most recent fiscal year prior to the date of acquistion in
question audited by an independent certified public accountant; PROVIDED THAT if
the total amount expended (including the value of any Equity Issuance) is LESS
than $30,000,000 and the Cash Components for such acquisition are LESS than
$15,000,000, the Borrowers shall not be required to deliver financial statements
for the Acquired Entity audited by an independent certified public accountant to
the extent such statements have not been delivered to the Borrowers or their
subsidiaries;

          (vi)    for any acquisition in which the Cash Components are no more
than $4,000,000 for any individual acquisition or $13,000,000 in  the aggregate
during the term of this Agreement, (a) the Fixed Charge Coverage Ratio for the
four quarters ending on the last day of the most recent fiscal quarter preceding
such acquisition was, and the Fixed Charge Coverage Ratio for the 12 months
ending on the last day of the month preceding such acquisition (such last day of
the preceding month or such last day of the preceding fiscal quarter, a
"Measurement Date"), would be, on a PRO FORMA basis,  at least 0.75 to 1.0 if
the Measurement Date is on or prior to September 30, 1999 and at least 1.0 to
1.0 if the Measurement Date occurs thereafter and (b) after giving effect to the
acquisition, the actual Undrawn Availability at closing (calculated for these
purposes without including the Inventory or Receivables of the Acquired Entity
and without reserving for the Term Loans under Section 2.01(a)(iv)) is at least
the lesser of (x) $5,000,000 and (y) 10% of the sum of the amounts calculated
under clauses (i), (ii) and (v) of the definition of Formula Amount or if the
Administrative Agent has completed its audit of the Acquired Entity with results
satisfactory to the Administrative Agent in its Permitted Discretion, the actual
Undrawn Availability at closing calculated for the Borrowers and the Acquired
Entity (calculated for these purposes without reserving for 


<PAGE>
                                                                              88

the Term Loans under Section 2.01(a)(iv)) is at least $10,000,000;

          (vii)   for any acquisition other than an acquisition described in
clause (vi), (a)  the Cash Components may be no more than $15,000,000 for any
acquisition, no more than $40,000,000 in any twelve month period, and no more
than $60,000,000 during the term of this Agreement; (b) the Fixed Charge
Coverage Ratio for the four quarters ending the last day of the most recent
fiscal quarter preceding such acquisition was, and the Fixed Charge Coverage
Ratio for the 12 months ending on the last day of the month preceding such
acquisition would be, on a PRO FORMA basis, at least the higher of (x) 1.1 to
1.0 or (y) the ratio required by Section 6.10; and (c) after giving effect to
the acquisition, the PRO FORMA average daily Undrawn Availability at closing
(calculated for these purposes without including the Inventory or Receivables of
the Acquired Entity and without reserving for the Term Loans under Section
2.01(a)(iv)) for the most recent January to June period (or until June, 2000,
the Undrawn Availability at closing) would be greater than $15,000,000 or, if
the Administrative Agent has completed its audit of the Acquired Entity with
results satisfactory to the Administrative Agent in its Permitted Discretion,
the actual Undrawn Availability at closing calculated for the Borrowers and the
Acquired Entity (calculated for these purposes without reserving for the Term
Loans under Section 2.01(a)(iv)) is at least $20,000,000;

          (viii)  any Indebtedness incurred in connection with the acquisition,
including any Acquired Debt and any Subordinated Debt, must be permitted under
Section 6.01;  and

          (ix)    in no event may any Equity Issuance in connection with any
acquisition exceed a number of shares of Activision common stock (or
equivalents) equal to 40% of the issued and outstanding common stock of
Activision on such date and all Equity Issuances shall be of common equity or
equivalents;

          (i)   the Borrowers may enter into Hedging Agreements to the extent
permitted in Section 6.01(d);

          (k)  Activision and the Subsidiaries may consummate the Transactions;

          (l)  the Borrowers may make investments in persons not constituting
subsidiaries PROVIDED that such person is in a line of business reasonably
related to the business of the Borrowers and their Subsidiaries as the
Borrowers, any single investment or series of related investments shall not
exceed $2,000,000; all such investments under this Section 6.04(l) shall not
exceed $5,000,000 in any twelve month period; and all capital stock or other
equity interests acquired by a Borrower or any subsidiary shall be pledged to
the Collateral Agent;.

          (m)  the Borrowers and their Subsidiaries may make advance payments of
royalties under license or distribution agreements in the ordinary course of
business;


<PAGE>
                                                                              89

          (n)  Activision may make loans to directors and employees in
connection with the granting of stock options or as incentive or bonus
compensation; and

          (o)  loans from Activision to UK Sub evidenced by the Intercompany
Note may remain outstanding.

     SECTION 6.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS.
(a)  Merge into or consolidate with any other person, or permit any other person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or any
substantial part of the assets of any Borrower (whether now owned or hereafter
acquired) or any Equity Interest of any Subsidiary, or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other person, except that (i) the
Borrowers and any Subsidiary may purchase and sell Inventory in the ordinary
course of business,  (ii) the Borrowers or any wholly owned Subsidiary may make
acquisitions permitted under Section 6.04 above,  (iii) if at the time thereof
and immediately after giving effect thereto no Event of Default or Default shall
have occurred and be continuing (x) any wholly owned Subsidiary may merge into a
Borrower in a transaction in which the Borrower is the surviving corporation and
(y) any wholly owned Subsidiary may merge into or consolidate with any other
wholly owned Subsidiary in a transaction in which the surviving entity is a
wholly owned Subsidiary and no person other than a Borrower or a wholly owned
Subsidiary receives any consideration, PROVIDED that if any such merger
described in this clause (y) shall involve a Domestic Subsidiary, the surviving
entity of such merger shall be a Domestic Subsidiary; and (iv) any Subsidiary
which is not a Material Subsidiary may be wound up and dissolved.

          (b)  Engage in any Asset Sale unless (i) such Asset Sale is for
consideration at least 85% of which is cash, (ii) such consideration is at least
equal to the fair market value of the assets being sold, transferred, leased or
disposed of, (iii) the fair market value of all assets sold, transferred, leased
or disposed of pursuant to this paragraph (b) shall not exceed (i) $5,000,000 in
any fiscal year or (ii) $10,000,000 in the aggregate, and (iv) the Net Cash
Proceeds are applied as required by subsection 2.14(c).

     SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. (a)  Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any of its Equity Interests or directly or indirectly redeem, purchase, retire
or otherwise acquire for value (or permit any Subsidiary to purchase or acquire)
any of its Equity Interests or set aside any amount for any such purpose;
PROVIDED, HOWEVER, that any wholly owned Subsidiary may declare and pay
dividends or make other distributions to the holders of its Equity Interests,
but other Subsidiaries which are not wholly owned may not make dividends or
distributions.


<PAGE>
                                                                              90

          (b)  Permit its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other distributions on its Equity Interests or (ii) make or repay any
loans or advances to a Borrower or the parent of such Subsidiary except (w) for
such encumbrances or restrictions existing under or by reason of (A) applicable
law, (B) this Agreement and the other Loan Documents, (C) the Convertible
Subordinated Note Documents, (x) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of a Borrower or a
Subsidiary of a Borrower, (y) customary provisions restricting assignment of any
agreement entered into by a Borrower or a Subsidiary in the ordinary course of
business, and (z) any holder of a Lien permitted by Section 6.02 may restrict
the transfer of the asset or assets subject thereto.

     SECTION 6.07. TRANSACTIONS WITH AFFILIATES. Except for transactions by or
among Loan Parties, sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except that:

     (a)  a Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to such Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties;

     (b)  dividends may be paid to the extent provided in Section 6.06;

     (c)  loans may be made and other transactions may be entered into between
and among the Borrowers, the Subsidiaries and their respective Affiliates to the
extent permitted by Sections 6.01 and 6.04; and

     (d)  a Borrower or any Subsidiary may pay reasonable compensation to
officers and directors in the ordinary course of business.

     SECTION 6.08. [intentionally omitted].

     SECTION 6.09. INTEREST COVERAGE RATIO.  Permit the Interest Coverage Ratio
for (a) the six-month period ending September 30, 1999, (b) the nine-month
period ending December 31, 1999 or (c) any period of four consecutive fiscal
quarters thereafter, in each case taken as one accounting period, ended on the
last day of the applicable fiscal quarter to be less than (a) 5.00 to 1.00 for
the Borrowers and their Subsidiaries on a consolidated basis or (b) 5.00 to 1.00
for the Loan Parties on a consolidated basis.

     SECTION 6.10. FIXED CHARGE COVERAGE RATIO.  (a) Permit the Fixed Charge
Coverage Ratio of the Loan Parties on a consolidated basis for any period of
four consecutive fiscal quarters in each case taken as one accounting period,
ending on the last


<PAGE>
                                                                              91

day of any fiscal quarter ending during any period set forth below to be less 
than the ratio set forth opposite such period below:



<TABLE>
<CAPTION>
                           PERIOD                        RATIO
                           ------                        -----
             <S>                                     <C>
             September 30, 1999                      .75 to 1.00

             December 31, 1999                       .85 to 1.00

             March 31, 2000                          1.00 to 1.00

             June 30, 2000 through and including     1.10 to 1.00
             March 31, 2001

             June 30, 2001 and thereafter            1.20 to 1.00
</TABLE>


          (b) Permit the Fixed Charge Coverage Ratio of Activision and its
Subsidiaries on a consolidated basis for any period of four consecutive fiscal
quarters in each case taken as one accounting period, ending on the last day of
any fiscal quarter ending during any period set forth below to be less than the
ratio set forth opposite such period below:


<TABLE>
<CAPTION>
                           PERIOD                          RATIO
                           ------                          -----
                    <S>                                   <C>
                    September 30, 1999                    .75 to 1.00

                    December 31, 1999                     .85 to 1.00

                    March 31, 2000                        1.00 to 1.00

                    June 30, 2000 through and including   1.10 to 1.00
                    March 31, 2001

                    June 30, 2001 and thereafter          1.20 to 1.00
</TABLE>


          SECTION 6.11. MAXIMUM LEVERAGE RATIO.  (a) Permit the Leverage Ratio
of the Loan Parties on a consolidated basis at any time during a period set
forth below to be greater than the ratio set forth opposite such period below:


<TABLE>
<CAPTION>
                           PERIOD                       RATIO
                           ------                       -----
               <S>                                   <C>
               Closing Date through and including    2.50 to 1.00




<PAGE>

                                                                              92

               September 30, 1999

               October 1, 1999 through and           2.25 to 1.00
               including December 31, 1999

               January 1, 2000 and thereafter        2.00 to 1.00
</TABLE>


          (b) Permit the Leverage Ratio of Activision and its Subsidiaries on a
consolidated basis at any time during a period set forth below to be greater
than the ratio set forth opposite such period below:


<TABLE>
<CAPTION>
                           PERIOD                       RATIO
                           ------                       -----
                <S>                                     <C>
                Closing Date through and including      2.75 to 1.00
                September 30, 1999

                October 1, 1999 through and             2.50 to 1.00
                including December 31, 1999

                January 1, 2000 and thereafter          2.00 to 1.00
</TABLE>


     SECTION 6.12. MINIMUM ADJUSTED EBITDA. (a)   Permit Adjusted EBITDA of the
Borrowers and their Subsidiaries on a consolidated basis for any period of four
consecutive fiscal quarters, in each case taken as one accounting period, ended
on the last day of any fiscal quarter set forth below to be less than the amount
set forth opposite such fiscal quarter below:


<TABLE>
<CAPTION>
                     FISCAL QUARTER                      AMOUNT
                     --------------                      ------
                     <S>                                 <C>
                     September 30, 1999                  $62,000,000

                     December 31, 1999                   $70,000,000

                     March 31, 2000 through and          $90,000,000
                     including December 31, 2000

                     March 31, 2001 through and          $100,000,000
                     including December 31, 2001

                     March 31, 2002 and thereafter       $120,000,000
</TABLE>


          (b)  Permit Adjusted EBITDA of the Loan Parties on a consolidated
basis for any period of four consecutive fiscal quarters, in each case taken as
one accounting


<PAGE>
                                                                              93

period, ended on the last day of any fiscal quarter set forth below to be 
less than the amount set forth opposite such fiscal quarter below:


<TABLE>
<CAPTION>
                     FISCAL QUARTER                          AMOUNT
                     --------------                          ------
                 <S>                                         <C>
                 Fiscal Quarter                              Amount

                 September 30, 1999                          $55,000,000

                 December 31, 1999                           $60,000,000

                 March 31, 2000 through and including        $75,000,000
                 December 31, 2000

                 March 31, 2001 through and including        $85,000,000
                 December 31, 2001

                 March 31, 2002 and thereafter               $105,000,000
</TABLE>


     SECTION 6.13.  MINIMUM TANGIBLE NET WORTH.  (a) Permit Tangible Net Worth
of the Borrowers and their Subsidiaries on a consolidated basis at any date set
forth below to be less than the amount set forth opposite such date below:


<TABLE>
<CAPTION>
          FISCAL QUARTER                          AMOUNT
          --------------                          ------
          <S>                                     <C>
          September 30, 1999                      $60,000,000
          December 31, 1999                       $70,000,000
          March 31, 2000                          $70,000,000
          June 30, 2000                           $70,000,000
          September 30, 2000                      $75,000,000
          December 31, 2000                       $85,000,000
          March 31, 2001                          $90,000,000
          June 30, 2001                           $90,000,000
          September 30, 2001                      $95,000,000
          December 31, 2001                       $110,000,000
          March 31, 2002                          $115,000,000
</TABLE>


         (b) Permit Tangible Net Worth of the Loan Parties on a consolidated
basis at any date set forth below to be less than the amount set forth opposite
such date:


<TABLE>
<CAPTION>
          FISCAL QUARTER                          AMOUNT
          --------------                          ------
          <S>                                     <C>
          September 30, 1999                      $26,000,000
          December 31, 1999                       $29,000,000
          March 31, 2000                          $34,000,000



<PAGE>
                                                                              94

          June 30, 2000                           $36,000,000
          September 30, 2000                      $40,000,000
          December 31, 2000                       $47,000,000
          March 31, 2001                          $52,000,000
          June 30, 2001                           $55,000,000
          September 30, 2001                      $60,000,000
          December 31, 2001                       $70,000,000
          March 31, 2002                          $78,000,000
</TABLE>


     SECTION 6.14. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF
CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN OTHER AGREEMENTS, ETC.
(a) Amend or modify, or permit the amendment or modification of, any provision
of existing Indebtedness or of any agreement (including any purchase agreement,
indenture, loan agreement or security agreement) relating thereto other than any
amendments or modifications to Indebtedness which do not in any way materially
adversely affect the interests of the Lenders, (b) make (or give any notice in
respect thereof) any voluntary or optional payment or prepayment on or
redemption or acquisition for value of, or any prepayment or redemption as a
result of any asset sale, change of control or similar event of, any Convertible
Subordinated Notes, any Subordinated Debt, the Intercompany Note  or any other
Indebtedness that is expressly subordinated to the Obligations, (c) amend or
modify, or permit the amendment or modification of, the Merger Agreement or any
of the operating agreements entered into in connection therewith or any tax
sharing agreement, in each case except for amendments or modifications which are
not in any way adverse in any material respect to the interests of the Lenders
or (d) amend, modify or change its Certificate of Incorporation (including by
the filing or modification of any certificate of designation) or By-laws, or any
agreement entered into by it, with respect to its Equity Interests (including
any shareholders' agreement), or enter into any new agreement with respect to
its Equity Interests, other than any amendments, modifications or changes
pursuant to this clause (d) or any such new agreements pursuant to this clause
(d) which do not in any way materially adversely affect the interests of the
Lenders.

     SECTION 6.15. LIMITATION ON CREATION OF SUBSIDIARIES.  Establish or create
any additional Subsidiaries; PROVIDED that the Borrowers may establish or create
one or more Subsidiaries of the Borrowers so long as (a) 100% of the Equity
Interests of any new Domestic Subsidiary owned by a Loan Party (or all the
Equity Interests of any new Foreign Subsidiary that is owned by any Loan Party,
except that not more than 65% of the voting Equity Interests of any such Foreign
Subsidiary shall be required to be so pledged) is upon the creation or
establishment of any such new Subsidiary pledged and delivered to the Collateral
Agent for the benefit of the Secured Parties under the Pledge Agreement and (b)
upon the creation or establishment of any such new Domestic Subsidiary such
Domestic Subsidiary becomes a party to the applicable Security Documents in
accordance with Section 5.12 and the other Loan Documents.


<PAGE>
                                                                              95

     SECTION 6.16. BUSINESS.  With respect to the Borrowers and their
Subsidiaries, engage (directly or indirectly) in any business other than the
business in which the Borrowers and their Subsidiaries are engaged on the
Closing Date and other businesses reasonably related thereto.

     SECTION 6.17. FISCAL YEAR; ACCOUNTING CHANGES.  Change its fiscal year end
to a date other than March 31 or make any change in accounting treatment and
reporting practices except as required by GAAP.

                                    ARTICLE VII

                                 EVENTS OF DEFAULT

     In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):

          (a)  any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made, deemed made
or furnished;

          (b)  default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or otherwise;

          (c)  default shall be made in the payment of any interest on any Loan
or any Fee or L/C Disbursement or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the same
shall become due and payable, and such default shall continue unremedied for a
period of three Business Days;

          (d)  default shall be made in the due observance or performance by any
Borrowers or any Subsidiary of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.08 or in Article VI;

          (e)  default shall be made in the due observance or performance by any
Borrower or any Subsidiary or by UK Sub in any UK Charge Document of any
covenant, condition or agreement contained in any Loan Document (other than
those specified in (b), (c) or (d) above) and such default shall continue
unremedied for a period of 30 days;

          (f)  any Loan Party or UK Sub shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess


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                                                                              96

of $2,000,000, when and as the same shall become due and payable, or (ii) 
fail to observe or perform any other term, covenant, condition or agreement 
contained in any agreement or instrument evidencing or governing any such 
Indebtedness if the effect of any failure referred to in this clause (ii) is 
to cause, or to permit the holder or holders of such Indebtedness or a 
trustee on its or their behalf (with or without the giving of notice, the 
lapse of time or both) to cause, such Indebtedness to become due prior to its 
stated maturity;

          (g)  an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of any Borrower or any Subsidiary, or of a substantial part of the
property or assets of any Borrower or a Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or any Subsidiary or for a substantial part of
the property or assets of any Borrower or a Subsidiary or (iii) the winding-up
or liquidation of any Borrower or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

          (h)  any Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Borrower or any
Subsidiary or for a substantial part of the property or assets of any Borrower
or any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;

          (i)  one or more judgments for the payment of money in an aggregate
amount in excess of $250,000 be rendered against any Borrower, any Loan Party or
any combination thereof, unless the same shall be contested in good faith, the
Borrowers have established reserves reasonably satisfactory to the
Administrative Agent and enforcement shall be effectively stayed, satisfied, or
discharged within forty (40) days or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Borrowers or any Loan
Party to enforce any such judgment;

          (j)  an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other such ERISA Events, could


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                                                                              97

reasonably be expected to result in liability of the Borrowers and their ERISA
Affiliates in an aggregate amount exceeding $2,000,000;

          (k)  any security interest purported to be created by any Security
Document or UK Charge Document shall cease to be, or shall be asserted by any
Borrowers or any other Loan Party not to be, a valid, perfected, first priority
(except as otherwise expressly provided in this Agreement or such Security
Document security interest in the securities, assets or properties covered
thereby, except to the extent that any such loss of perfection or priority
results from the failure of the Collateral Agent to maintain possession of
certificates representing securities pledged under the Pledge Agreement and
except to the extent that such loss is covered by a lender's title insurance
policy and the related insurer promptly after such loss shall have acknowledged
in writing that such loss is covered by such title insurance policy;

          (l)  any of the Obligations shall cease to constitute "Senior
Indebtedness" under and as defined in the Convertible Subordinated Note
Indenture, any Subordinated Debt, the Intercompany Note or any Master Note;

          (m)  there shall have occurred a Change in Control;

          (n)  issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of the property of any Loan Party or UK
Sub, or any portion of the Collateral shall be seized or taken by any
Governmental Agency or the title or right of any Loan Party which is the owner
of any material portion, or the Collateral shall have become the subject matter
of any litigation which, in the opinion of the Required Lenders, could
reasonably be expected upon final determination, to result in the impairment or
loss of the security provided by the Security Documents;

          (o)  termination (other than as a result of any Asset Sale, merger or
liquidation of a Subsidiary permitted hereunder) or breach of any Subsidiary
Guarantee Agreement, or any Subsidiary Guarantor attempts to terminate,
challenge the validity of, or its liability under, any such Subsidiary Guarantee
Agreement or UK Sub attempts to challenge the validity of, or its liability
under the Intercompany Note or any UK Charge Document;

then, and in every such event (other than an event with respect to any Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrowing Agent, take either or
both of the following actions, at the same or different times:  (i) terminate
forthwith the Commitments and (ii) declare the Loans then outstanding to be
forthwith due and payable in whole or in part, whereupon the principal of the
Loans so declared to be due and payable, together with accrued interest thereon
and any unpaid accrued Fees and all other liabilities of the Borrowers accrued
hereunder and under any other Loan Document, shall become forthwith due and
payable, without 


<PAGE>
                                                                              98

presentment, demand, protest or any other notice of any kind, all of which 
are hereby expressly waived by the Borrowers, anything contained herein or in 
any other Loan Document to the contrary notwithstanding; and in any event 
with respect to any Borrower described in paragraph (g) or (h) above, the 
Commitments shall automatically terminate and the principal of the Loans then 
outstanding, together with accrued interest thereon and any unpaid accrued 
Fees and all other liabilities of the Borrowers accrued hereunder and under 
any other Loan Document, shall automatically become due and payable, without 
presentment, demand, protest or any other notice of any kind, all of which 
are hereby expressly waived by the Borrowers, anything contained herein or in 
any other Loan Document to the contrary notwithstanding.

     The Administrative Agent shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies the Administrative
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of the Administrative Agent's or Collateral Agent's or
Lenders' rights hereunder.

                                    ARTICLE VIII

                 THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

     In order to expedite the transactions contemplated by this Agreement, PNC
Bank, National Association, is hereby appointed to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes
of this Article VIII, the Administrative Agent and the Collateral Agent are
referred to collectively as the "AGENTS").  Each of the Lenders and each
assignee of any such Lender, hereby irrevocably authorizes the Agents to take
such actions on behalf of such Lender or assignee or the Issuing Bank and to
exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including without limitation,
collection of the Obligations) the Agents shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders (or as otherwise required by
Section 9.08(b)), and such instructions shall be binding; PROVIDED, HOWEVER,
that the Agents shall not be required to take any action which exposes either of
them to liability or which is contrary to this Agreement or the other Loan
Documents or applicable law unless the Agents are  furnished with an
indemnification reasonably satisfactory to each of them with respect thereto.
The Administrative Agent is hereby expressly authorized by the Lenders and the
Issuing Bank, without hereby limiting any implied authority, (a) to receive on
behalf of the Lenders and the Issuing Bank all payments of principal of and
interest on the Loans, all payments in respect of L/C Disbursements and all
other amounts due to the Lenders hereunder, and promptly to 


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                                                                              99

distribute to each Lender or the Issuing Bank its proper share of each 
payment so received; (b) to give notice on behalf of each of the Lenders to 
the Borrowers of any Event of Default specified in this Agreement of which 
the Administrative Agent has actual knowledge acquired in connection with its 
agency hereunder; and (c) to distribute to each Lender copies of all notices, 
financial statements and other materials delivered by the Borrowers or any 
other Loan Party pursuant to this Agreement or the other Loan Documents as 
received by the Administrative Agent. Without limiting the generality of the 
foregoing, the Agents are hereby expressly authorized to execute any and all 
documents (including releases) with respect to the Collateral and the rights 
of the Secured Parties with respect thereto, as contemplated by and in 
accordance with the provisions of this Agreement and the Security Documents.

     Agents shall have no duties or responsibilities except those expressly set
forth in the Loan Documents.  Neither the Agents nor any of their respective
directors, officers, employees or agents shall be liable as such for any action
taken or omitted by any of them except for its or his own gross negligence or
willful misconduct, or be responsible for any statement, warranty or
representation herein or in any Loan Document or the contents of any document
delivered in connection herewith, or be required to ascertain or to make any
inquiry concerning the performance or observance by the Borrowers or any other
Loan Party of any of the terms, conditions, covenants or agreements contained in
any Loan Document.  The Agents shall not be responsible to the Lenders for the
due execution, genuineness, validity, enforceability or effectiveness of this
Agreement or any other Loan Documents, instruments or agreements. The Agents
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the other Loan Documents, or to inspect
the properties, books or records of the Borrowers or any other Loan Party.  The
duties of the Agents as respects the Loans to the Borrowers shall be mechanical
and administrative in nature; the Agents shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Lender; and nothing in this Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon the Agents any obligations in respect of
this Agreement except as expressly set forth herein.

     The Agents shall in all cases be fully protected in acting, or refraining
from acting, in accordance with written instructions signed by the Required
Lenders (or as otherwise required by Section 9.08(b)) and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders.  Each Agent shall, in the
absence of actual knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons.  Neither the
Agents nor any of their respective directors, officers, employees or agents
shall have any responsibility to the Borrowers or any other Loan Party on
account of the failure of or 


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                                                                             100

delay in performance or breach by any Lender or the Issuing Bank of any of 
its obligations hereunder or to any Lender or the Issuing Bank on account of 
the failure of or delay in performance or breach by any other Lender or the 
Issuing Bank or the Borrowers or any other Loan Party of any of their 
respective obligations hereunder or under any other Loan Document or in 
connection herewith or therewith.  Each of the Agents may execute any and all 
duties hereunder by or through agents or employees and shall be entitled to 
rely upon the advice of legal counsel selected by it with respect to all 
matters arising hereunder and shall not be liable for any action taken or 
suffered in good faith by it in accordance with the advice of such counsel 
and the term "Lender" or any similar term shall, unless the context clearly 
otherwise indicates, include the Administrative Agent and the Collateral 
Agent in its individual capacity as a Lender.

     The Agents shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Loans or at any time or times thereafter except as shall be provided by the
Borrowers pursuant to the terms of this Agreement.  The Agents shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection herewith or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any other Loan Document, or of the financial
condition of Borrowers, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement, the other Loan Documents or the financial condition of the Borrowers
or any of its subsidiaries, or the existence of any Event of Default or any
Default.

     Either Agent may resign on sixty (60) days' written notice to each of the
Lenders and the Borrowers and upon such resignation, the Required Lenders will
promptly designate a successor Administrative Agent or Collateral Agent, as the
case may be, reasonably satisfactory to the Borrowers.

     Any such successor Administrative Agent or Collateral shall succeed to the
rights, powers and duties of the Administrative Agent or Collateral Agent, and
the term "the Administrative Agent" or "the Collateral Agent" shall mean such
successor Agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent.  After any Agent's resignation, the
provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Agent under this Agreement.

     If either Agent shall request instructions from Lenders with respect to any
act or action (including failure to act) in connection with this Agreement or
any other Loan  Document, such Agent shall be entitled to refrain from such act
or taking such action unless and until it shall have received instructions from
the Required Lenders; and neither Agent shall incur liability to any person by
reason of so refraining.  Without limiting the foregoing, Lenders shall not have
any right of action whatsoever against either Agent as a 


<PAGE>
                                                                             101

result of its acting or refraining from acting hereunder in accordance with 
the instructions of the Required Lenders.

     The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Loan Documents and its
duties hereunder, upon advice of counsel selected by it.  The Agents may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by the applicable
Agent with reasonable care.

     No Agent shall  be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder or under the other Loan Documents,
unless it has received notice from a Lender or the Borrowers referring to this
Agreement or the other Loan Documents, describing such Default or Event of
Default and stating that such notice is a "notice of default".  In the event
that an Agent receives such a notice, it shall give notice thereof to the
Lenders.  The Agents shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
PROVIDED, THAT, unless and until the Agents shall have received such directions,
the Agents may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.

     The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.

     With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrowers or any Subsidiary or
other Affiliate thereof as if it were not an Agent.

     Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of
its pro rata share (based on the aggregate amount of its outstanding Term Loans
and Revolving Credit Commitments hereunder) of any expenses incurred for the
benefit of the Lenders by the Agents, including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, that
shall not have been reimbursed by the Borrowers and (b) to indemnify and hold
harmless each Agent and any of its directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or 


<PAGE>
                                                                             102

nature whatsoever that may be imposed on, incurred by or asserted against it 
in its capacity as  Agent or any of them in any way relating to or arising 
out of this Agreement or any other Loan Document or any action taken or 
omitted by it or any of them under this Agreement or any other Loan Document, 
to the extent the same shall not have been reimbursed by the Borrowers or any 
other Loan Party, PROVIDED that no Lender shall be liable to an Agent or any 
such other indemnified person for any portion of such liabilities, 
obligations, losses, damages, penalties, actions, judgments, suits, costs, 
expenses or disbursements that are determined by a court of competent 
jurisdiction by final and nonappealable judgment to have resulted from the 
gross negligence or willful misconduct of such Agent or any of its directors, 
officers, employees or agents.  Each Revolving Credit Lender agrees to 
reimburse the Issuing Bank and its directors, employees and agents, in each 
case, to the same extent and subject to the same limitations as provided 
above for the Agents.

     Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement.  Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder. Each of the parties hereto
acknowledges and agrees that the Syndication Agent shall not have any duties,
responsibilities, obligations or liabilities, as such, hereunder or under the
other Loan Documents.

                                     ARTICLE IX

                                   MISCELLANEOUS

     SECTION 9.01. NOTICES. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

          (a)  if to the Borrowers or the Borrowing Agent, to Activision, Inc.
at 3100 Ocean Park Blvd., Santa Monica, California 90405, Attention of Chief
Financial Officer  (Telecopy No. 310-255-2191);

          (b)  if to the Administrative Agent, to PNC Bank, National
Association, Two Tower Center Boulevard, East Brunswick, New Jersey 08816,
Attention of Ryan Peak, (Telecopy No. 732-220-4315    ); and


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                                                                             103

          (c)  if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which
such Lender shall have become a party hereto.

     Any party may change the directions for delivery of notices hereunder by
notice delivered in accordance with this Section 9.01.  All notices and other
communications given to any party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier service or sent by telecopy or on the
date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 9.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 9.01.

     SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated.  The provisions of Sections 2.16, 2.18, 2.19, 2.23 and
9.05 shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments,  the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent,
the Collateral Agent, any Lender or the Issuing Bank.

     SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by the Borrowers and the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.

     SECTION 9.04. SUCCESSORS AND ASSIGNS. (a)  Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrowers, the Administrative Agent, the
Issuing Bank or the Lenders that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.


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                                                                             104

          (b)  Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans at the time owing to it); PROVIDED,
HOWEVER, that (i) except in the case of an assignment to a Lender or an
Affiliate or Related Fund of such Lender, (x) the Borrowers and the
Administrative Agent (and, in the case of any assignment of a Revolving Credit
Commitment, the Issuing Bank) must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld or delayed);
PROVIDED, HOWEVER, that the consent of the Borrowers shall not be required to
any such assignment during the continuance of any Event of Default described in
subsection (g) or (h) of Article VII, and (y) the amount of the Commitment of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 (or, if less, the
entire remaining amount of such Lender's Commitment) or such lesser amount as
the Borrowers and the Administrative Agent may from time to time agree (such
agreement to be conclusively evidenced by the execution of the related
Assignment and Acceptance by all the parties thereto), (ii) the parties to each
such assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together (except in the case of any assignment to an
Affiliate or a Related Fund) with a processing and recordation fee of $[3,500]
(which such fee shall not be required to be paid by the Syndication Agent upon
any assignment by it) and (iii) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.  Upon
acceptance and recording pursuant to paragraph (e) of this Section 9.04, from
and after the effective date specified in each Assignment and Acceptance, (A)
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued
for its account and not yet paid).

          (c)  By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as
follows:  (i) such assigning Lender warrants that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse claim
and that its Term Loan Commitment and Revolving Credit Commitment, and the
outstanding balances of its Term Loans and Revolving Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance, (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations


<PAGE>
                                                                             105

made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrowers or any Subsidiary or the
performance or observance by the Borrowers or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
the Collateral Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Administrative
Agent and the Collateral Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Administrative
Agent and the Collateral Agent, respectively, by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all the obligations which by
the terms of this Agreement are required to be performed by it as a Lender.

          (d)  The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices a copy of each Assignment
and Acceptance delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
"REGISTER").  The entries in the Register shall be conclusive and the Borrowers,
the Administrative Agent, the Issuing Bank, the Collateral Agent and the Lenders
may treat each person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrowers, the Issuing Bank, the Collateral Agent and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.

          (e)  Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
paragraph (b) above and, if required, the written consent of the Borrowers, the
Issuing Bank and the Administrative Agent to such assignment, the Administrative
Agent shall (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Lenders and the Issuing Bank.  No assignment shall be effective
unless it has been recorded in the Register as provided in this paragraph (e).


<PAGE>
                                                                             106

          (f)  Each Lender may without the consent of the Borrowers, the Issuing
Bank or the Administrative Agent sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participating banks or other entities shall be entitled to the benefit of the
cost protection provisions contained in Sections 2.16 and 2.18 to the same
extent as if they were Lenders and (iv) the Borrowers, the Administrative Agent,
the Issuing Bank and the Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrowers relating to the Loans or L/C Disbursements and to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is payable
on the Loans, extending any scheduled principal payment date or date fixed for
the payment of interest on the Loans, increasing or extending the Commitments or
releasing any Subsidiary Guarantor or all or any substantial part of the
Collateral).

          (g)  Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; PROVIDED that, prior to any such disclosure of
information designated by the Borrowers as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.

          (h)  Any Lender may at any time assign all or any portion of its
rights under this Agreement to secure extensions of credit to such Lender or in
support of obligations owed by such Lender; PROVIDED that no such assignment
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.

          (i)  Notwithstanding anything to the contrary contained herein, any
Lender (a "GRANTING LENDER") may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrowers, the option to provide to the
Borrowers all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrowers pursuant to this Agreement; PROVIDED
that (i) nothing herein shall constitute a commitment by any SPC to make any
Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the 


<PAGE>
                                                                             107

Granting Lender shall be obligated to make such Loan pursuant to the terms 
hereof.  The making of a Loan by an SPC hereunder shall utilize the 
Commitment of the Granting Lender to the same extent, and as if, such Loan 
were made by such Granting Lender.  Each party hereto hereby agrees that no 
SPC shall be liable for any indemnity or similar payment obligation under 
this Agreement (all liability for which shall remain with the Granting 
Lender).  In furtherance of the foregoing, each party hereto hereby agrees 
(which agreement shall survive the termination of this Agreement) that, prior 
to the date that is one year and one day after the payment in full of all 
outstanding commercial paper or other senior indebtedness of any SPC, it will 
not institute against, or join any other person in instituting against, such 
SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation 
proceedings under the laws of the United States or any State thereof.  In 
addition, notwithstanding anything to the contrary contained in this Section 
9.04, any SPC may (i) with notice to, but without the prior written consent 
of, the Borrowers and the Administrative Agent and without paying any 
processing fee therefore, assign all or a portion of its interests in any 
Loans to the Granting Lender or to any financial institutions (consented to 
by the Borrowers and Administrative Agent) providing liquidity and/or credit 
support to or for the account of such SPC to support the funding or 
maintenance of Loans and (ii) disclose on a confidential basis any non-public 
information relating to its Loans to any rating agency, commercial paper 
dealer or provider of any surety, guarantee or credit or liquidity 
enhancement to such SPC.

          (j)  No Borrower shall assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.

          (k)  In the event that Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings
Service, in the case of Lenders that are insurance companies (or Best's
Insurance Reports, if such insurance company is not rated by Insurance Watch
Ratings Service)) shall, after the date that any Lender becomes a Revolving
Credit Lender, downgrade the long-term certificate deposit ratings of such
Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of a Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)), then the Issuing Bank
shall have the right, but not the obligation, at its own expense, upon notice to
such Lender and the Administrative Agent, to replace (or to request the
Borrowers to use their reasonable efforts to assist in the replacement of) such
Lender with an assignee (in accordance with and subject to the restrictions
contained in paragraph (b) above), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in paragraph (b) above) all its interests, rights and obligations in
respect of its Revolving Credit Commitment to such assignee; PROVIDED, HOWEVER,
that (i) no such assignment shall conflict with any law, rule and regulation or
order of any Governmental Authority and (ii) the Issuing Bank or such assignee,
as the case may be, shall pay to such Lender in immediately available funds on
the date of such 


<PAGE>
                                                                             108

assignment the principal of and interest accrued to the date of payment on 
the Loans made by such Lender hereunder and all other amounts accrued for 
such Lender's account or owed to it hereunder.

     SECTION 9.05. EXPENSES; INDEMNITY. (a)  The Borrowers jointly and severally
agree to pay all out-of-pocket expenses incurred by the Administrative Agent,
the Collateral Agent, and the Issuing Bank in connection with the syndication of
the credit facilities provided for herein and the preparation and administration
of this Agreement and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Collateral Agent or
any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the fees,
charges and disbursements of counsel for the Administrative Agent and the
Collateral Agent, and, in connection with any such enforcement or protection,
the fees, charges and disbursements of any other counsel for the Administrative
Agent, the Collateral Agent or any Lender.

          (b)  The Borrowers jointly and severally agree to indemnify the
Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank,
each Affiliate of any of the foregoing persons and each of their respective
directors, officers, trustees, employees and agents (each such person being
called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any other Loan Document or
any agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby, (ii) the use of
the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged
presence or Release of Hazardous Materials on any property owned or operated by
any Borrowers or any of the Subsidiaries, or any Environmental Claim related in
any way to any Borrowers or the Subsidiaries; PROVIDED that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

          (c)  The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the 


<PAGE>
                                                                             109

invalidity or unenforceability of any term or provision of this Agreement or 
any other Loan Document, or any investigation made by or on behalf of the 
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank.  
All amounts due under this Section 9.05 shall be payable on written demand 
therefor.

     SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have occurred
and be continuing, each Lender or any affiliate of a Lender is hereby authorized
at any time and from time to time, except to the extent prohibited by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender or any affiliate of a Lender to or for the credit or the account
of any Borrowers against any of and all the obligations of the Borrowers now or
hereafter existing under this Agreement and other Loan Documents held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement or such other Loan Document and although such obligations
may be unmatured.  The rights of each Lender and its affiliate under this
Section 9.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

     SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.  EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 9.08. WAIVERS; AMENDMENT. (a)  No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power.  The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrowers or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.  No notice or 


<PAGE>
                                                                             110

demand on the Borrowers in any case shall entitle the Borrowers to any other 
or further notice or demand in similar or other circumstances.

          (b)  Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Required Lenders; PROVIDED, HOWEVER, that
no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan or any date for reimbursement of an L/C Disbursement,
or waive or excuse any such payment or any part thereof, or decrease the rate of
interest on any Loan or L/C Disbursement or any Fees, without the prior written
consent of each Lender affected thereby, (ii) change or extend the Commitment or
decrease or extend the date for payment of the Commitment Fees of any Lender
without the prior written consent of such Lender, (iii) amend or modify the pro
rata requirements of  Section 2.20, the provisions of Section 9.04(i), the
provisions of this Section, the definition of the term "Required Lenders" or
release any Subsidiary Guarantor or all or any substantial part of the
Collateral, without the prior written consent of each Lender (iv) amend or
modify the protections afforded to an SPC pursuant to the provisions of Section
9.04(i) without the written consent of such SPC, (v) permit any Revolving Credit
Borrowing to be made if after giving effect thereto the Aggregate Revolving
Credit Exposure would exceed the Formula Amount for more than sixty (60)
calendar days or exceed one hundred and ten percent (110%) of the Formula
Amount, or (vi) increase the Advance Rates above the Advance Rates in effect on
the Closing Date, without the prior written consent of each Lender; PROVIDED
FURTHER that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent, the Collateral Agent or the
Issuing Bank hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent, the Collateral Agent or the Issuing
Bank, respectively.

          (c)  In the event that the Administrative Agent requests the consent
of a Lender pursuant to this Section 9.08 and such Lender shall not respond or
reply to the Administrative Agent in writing within 5 days of delivery of such
request, such Lender shall be deemed to have consented to the matter that was
the subject of the request.  In the event that the Administrative Agent requests
the consent of a Lender and such consent is denied, then PNC may, at its option,
require such Lender to assign its interest in the Obligations to PNC or to
another Lender or to any other Person designated by the Administrative Agent
(the "Designated Lender") for a price equal to the then outstanding principal
amount thereof plus accrued and unpaid interest and fees due such Lender, which
interest and fees shall be paid when collected from Borrowers.  In the event
that PNC elects to require any Lender to assign its interest to PNC, or a
Designated Lender, PNC will so notify such Lender in writing within 45 days
following such Lender's denial, and such Lender will assign its interest to PNC
or the Designated Lender no later than 5 days following receipt of such notice
pursuant to an Assignment and Acceptance Agreement executed by such Lender, PNC
or the Designated Lender, as appropriate, and the Administrative Agent.


<PAGE>
                                                                             111

     SECTION 9.09.  [Intentionally Deleted]

     SECTION 9.10. ENTIRE AGREEMENT. This Agreement, the Fee Letter and the
other Loan Documents constitute the entire contract between the parties relative
to the subject matter hereof.  Any other previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents.  Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.

     SECTION 9.11.  WAIVER OF JURY TRIAL; CONSEQUENTIAL DAMAGES. EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS.  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.11.  Neither the Administrative Agent, the
Collateral Agent nor any Lender, nor any agent or attorney for any of them,
shall be liable to any Borrowers or any other Loan Party for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.

     SECTION 9.12. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

     SECTION 9.13. COUNTERPARTS. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute 


<PAGE>
                                                                             112

an original but all of which when taken together shall constitute a single 
contract, and shall become effective as provided in Section 9.03. Delivery of 
an executed signature page to this Agreement by facsimile transmission shall 
be as effective as delivery of a manually signed counterpart of this 
Agreement.

     SECTION 9.14. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

     SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court.  Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this Agreement shall affect any right that the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Borrowers or its properties in the courts
of any jurisdiction.

          (b)  Each Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court.  Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

          (c)  Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

     SECTION 9.16. CONFIDENTIALITY.  The Administrative Agent, the Collateral
Agent, the Issuing Bank, the Syndication Agent, and each of the Lenders agrees
to keep confidential (and to use its best efforts to cause its respective agents
and representatives to keep confidential) the Information (as defined below) and
all copies thereof, extracts therefrom and analyses or other materials based
thereon, except that the Administrative


<PAGE>
                                                                             113

Agent, the Collateral Agent, the Issuing Bank or any Lender shall be 
permitted to disclose Information (a) to such of its respective officers, 
directors, employees, agents, affiliates and representatives as need to know 
such Information, (b) to a potential assignee or participant of such Lender 
or any direct or indirect contractual counterparty in any swap agreement 
relating to the Loans or such potential assignee's or participant's or 
counterparty's advisors who need to know such Information (provided that any 
such potential assignee or participant or counterparty shall, and shall use 
its best efforts to cause its advisors to, keep confidential all such 
information on the terms set forth in this Section 9.16, (c) to the extent 
requested by any regulatory authority, (d) to the extent otherwise required 
by applicable laws and regulations or by any subpoena or similar legal 
process, (e) in connection with any suit, action or proceeding relating to 
the enforcement of its rights hereunder or under the other Loan Documents or 
(f) to the extent such Information (i) becomes publicly available other than 
as a result of a breach of this Section 9.16 or (ii) becomes available to the 
Administrative Agent, the Issuing Bank, the Syndication Agent, any Lender or 
the Collateral Agent on a nonconfidential basis from a source other than a 
Borrower.  For the purposes of this Section, "INFORMATION" shall mean all 
financial statements, certificates, reports, agreements and information 
(including all analyses, compilations and studies prepared by the 
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender 
based on any of the foregoing) that are received from any Borrower and 
related to such Borrower, any Subsidiary, any shareholder of the Borrowers or 
any employee, customer or supplier of the Borrowers, other than any of the 
foregoing that were available to the Administrative Agent, the Collateral 
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its 
disclosure thereto by the Borrowers, and which are in the case of Information 
provided after the date hereof, clearly identified at the time of delivery as 
confidential.  The provisions of this Section 9.16 shall remain operative and 
in full force and effect regardless of the expiration and term of this 
Agreement.


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                    ACTIVISION, INC.,



                                    By
                                         ---------------------------------------
                                         Name:     Lawrence Goldberg
                                         Title:    Executive Vice President and
                                                   General Counsel


                                    HEAD GAMES PUBLISHING, INC.,



                                    By
                                         ---------------------------------------
                                         Name:     Lawrence Goldberg
                                         Title:    Vice President and Secretary


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                    PNC BANK, NATIONAL ASSOCIATION, 
                                    individually and as Administrative Agent, 
                                    Collateral Agent and Issuing Bank,


                                    By
                                         ---------------------------------------
                                         Name:     Ilan Yehros
                                         Title:    Vice President



<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.


                                        CREDIT SUISSE FIRST BOSTON, 
                                        individually and as Syndication Agent,


                                        By
                                             -----------------------------------
                                             Name:
                                             Title:


                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.


                                        COMERICA BANK



                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.


                                        GUARANTEE BUSINESS CREDIT
                                        CORPORATION
                                        d/b/a Fidelity Funding



                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.


                                        GREEN TREE FINANCIAL
                                        SERVICING CORPORATION



                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.



                                        LASALLE BANK NATIONAL 
                                        ASSOCIATION


                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.



                                        MELLON BANK, N.A.


                                        By:
                                             -----------------------------------
                                             Name:  William R. Murray
                                             Title:  Vice President


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.


                                        NATIONAL BANK OF CANADA,
                                        New York Branch



                                        By:
                                             -----------------------------------
                                             Name:  James Drum
                                             Title:   Vice President



                                        By:
                                             -----------------------------------
                                             Name:  Gaetan Frosina
                                             Title:


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.



                                        SANWA BANK CALIFORNIA




                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:



<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                  CREDIT AGREEMENT


                            dated as of  June 21, 1999,



                                       among



                                 ACTIVISION, INC.,
                      and certain of its Domestic Subsidiaries

                             THE LENDERS NAMED HEREIN,


                          PNC BANK, NATIONAL ASSOCIATION,
             as Administrative Agent, Collateral Agent and Issuing Bank

                                        and

                            CREDIT SUISSE FIRST BOSTON,

                       as Lead Arranger and Syndication Agent


                            ___________________________


--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


<PAGE>

                                  TABLE OF CONTENTS


                                     ARTICLE I

                                    Definitions

SECTION 1.01.  DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . 2

SECTION 1.02.  TERMS GENERALLY.. . . . . . . . . . . . . . . . . . . . . . . .29

                                     ARTICLE II

                                    The Credits

SECTION 2.01. COMMITMENTS; FORMULA AMOUNT. . . . . . . . . . . . . . . . . . .30
SECTION 2.02. LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 2.03. PROCEDURE FOR REVOLVING CREDIT BORROWINGS. . . . . . . . . . . .32
SECTION 2.04. DISBURSEMENT OF LOANS. . . . . . . . . . . . . . . . . . . . . .33
SECTION 2.05. MANNER OF BORROWING AND PAYMENT. . . . . . . . . . . . . . . . .33
SECTION 2.06. EVIDENCE OF DEBT . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 2.07. STATEMENT OF ACCOUNT . . . . . . . . . . . . . . . . . . . . . .36
SECTION 2.08. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 2.09. INTEREST ON LOANS. . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 2.10. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 2.11. TERMINATION AND REDUCTION OF COMMITMENTS . . . . . . . . . . . .38
SECTION 2.12. REPAYMENT OF BORROWINGS. . . . . . . . . . . . . . . . . . . . .39
SECTION 2.13. PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 2.14. MANDATORY PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . .40
SECTION 2.15. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 2.16. INCREASED COSTS. . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 2.17. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR . . . .43
SECTION 2.18. CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 2.19. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 2.20. PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 2.21. SHARING OF SETOFFS . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 2.22. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 2.23. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 2.24. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES; DUTY TO
MITIGATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 2.25. DEFAULTING LENDER. . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 2.26. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 2.27. BORROWING AGENCY PROVISIONS. . . . . . . . . . . . . . . . . . .50
SECTION 2.28. WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . . . . . .51



<PAGE>

                                    ARTICLE III

                           Representations and Warranties

SECTION 3.01. ORGANIZATION; POWERS . . . . . . . . . . . . . . . . . . . . . .57
SECTION 3.02. AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 3.03. ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 3.04. GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . .58
SECTION 3.05. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . .58
SECTION 3.06. NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . .58
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES . . . . . . . . . .58
SECTION 3.08. SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . .59
SECTION 3.10. AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .60
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT . . .60
SECTION 3.13. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . .60
SECTION 3.14. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . .60
SECTION 3.15. NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . . . . . . .60
SECTION 3.16. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . .61
SECTION 3.17. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . .62
SECTION 3.18. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 3.19. SECURITY DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 3.20. LOCATION OF REAL PROPERTY AND LEASED PREMISES. . . . . . . . . .64
SECTION 3.21. LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 3.22. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 3.23. YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 3.24. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . .65

                                     ARTICLE IV

                               Conditions of Lending

SECTION 4.01. ALL CREDIT EVENTS. . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 4.02. FIRST CREDIT EVENT . . . . . . . . . . . . . . . . . . . . . . .66

                                     ARTICLE V

                               Affirmative Covenants

SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES . . . . . . . . . . . . . .71
SECTION 5.02. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .71
SECTION 5.03. OBLIGATIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . .72
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC.. . . . . . . . . . . . . . .73
SECTION 5.05. LITIGATION AND OTHER NOTICES . . . . . . . . . . . . . . . . . .75
SECTION 5.06. EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . .76
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. . . .76
SECTION 5.08. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . .77
SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . . . . . . .77
SECTION 5.10. PREPARATION OF ENVIRONMENTAL REPORTS . . . . . . . . . . . . . .77
SECTION 5.11. AUDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
SECTION 5.12. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . .77
SECTION 5.13. GOVERNMENT RECEIVABLES . . . . . . . . . . . . . . . . . . . . .78


<PAGE>

SECTION 5.14  INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . .78
SECTION 5.15  BLOCKED ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . .79

                                     ARTICLE VI

                                 Negative Covenants

SECTION 6.01. INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . .82
SECTION 6.02. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
SECTION 6.03. SALE AND LEASE-BACK TRANSACTIONS . . . . . . . . . . . . . . . .85
SECTION 6.04. INVESTMENTS, LOANS AND ADVANCES. . . . . . . . . . . . . . . . .85
SECTION 6.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS. . . .89
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . .89
SECTION 6.07. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . .90
SECTION 6.08. CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . .90
SECTION 6.09. INTEREST COVERAGE RATIO. . . . . . . . . . . . . . . . . . . . .90
SECTION 6.10. FIXED CHARGE COVERAGE RATIO. . . . . . . . . . . . . . . . . . .90
SECTION 6.11. MAXIMUM LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . .91
SECTION 6.12. MINIMUM ADJUSTED EBITDA. . . . . . . . . . . . . . . . . . . . .92
SECTION 6.13. MINIMUM TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . . .93
SECTION 6.14. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF
CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN OTHER AGREEMENTS, ETC. . . .94
SECTION 6.15. LIMITATION ON CREATION OF SUBSIDIARIES . . . . . . . . . . . . .94
SECTION 6.16. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .95
SECTION 6.17. FISCAL YEAR; ACCOUNTING CHANGES. . . . . . . . . . . . . . . . .95

                                    ARTICLE VII

                                 Events of Default

                                    ARTICLE VIII

                 The Administrative Agent and the Collateral Agent

                                     ARTICLE IX

                                   Miscellaneous

SECTION 9.01. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 9.02. SURVIVAL OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 103
SECTION 9.03. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 9.04. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 103
SECTION 9.05. EXPENSES; INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 108
SECTION 9.06. RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 9.07. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 9.08. WAIVERS; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 9.09. [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . 111
SECTION 9.10. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.11. WAIVER OF JURY TRIAL; CONSEQUENTIAL DAMAGES. . . . . . . . . . 111


<PAGE>

SECTION 9.12. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.13. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.14. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. . . . . . . . . . 112
SECTION 9.16. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 112


<PAGE>


Schedule 1.01(a)          Existing Letters of Credit
Schedule 1.01(b)          Subsidiary Guarantors
Schedule 2.01             Lenders and Commitments
Schedule 3.08             Subsidiaries
Schedule 3.09             Litigation
Schedule 3.17             Environmental Matters
Schedule 3.18             Insurance
Schedule 3.20(a)          Real Property Owned In Fee
Schedule 3.20(b)          Leased Real Property
Schedule 4.02(a)          Other Local Counsel
Schedule 6.01             Outstanding Indebtedness on Closing Date
Schedule 6.02             Liens Existing on Closing Date

Exhibit A             Form of Administrative Questionnaire
Exhibit B             Form of Assignment and Acceptance
Exhibit C             Form of Borrowing Request
Exhibit D             Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E             Form of Joinder Agreement
Exhibit F             Form of Pledge Agreement
Exhibit G             Form of Security Agreement
Exhibit H             Form of Subsidiary Guarantee Agreement
Exhibit I-1           Form of Opinion of Robinson Silverman Pearce Aronsohn &
                      Berman LLP
Exhibit I-2           Form of Opinion of Local Counsel
Exhibit J             Form of Affiliate Subordination Provisions
Exhibit K             Form of Subordinated Debt Terms
Exhibit L             Form of Financial Condition Certificate
Exhibit M             Form of Borrower Guarantee




<PAGE>

                                                                      EXHIBIT 21


                    PRINCIPAL SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
                                                   State or Other Jurisdiction
                                                      of Incorporation or
           Name of subsidiary                             Organization
-----------------------------------------------    -----------------------------
<S>                                                <C>
Activision Australia Pty Ltd.                            Australia

Activision B.V.                                          Netherlands

Activision Deutschland GmbH                              Germany

Activision GmbH                                          Germany

Activision Illinois, Inc.                                Illinois

Activision New York, Inc.                                New York

Activision Productions, Inc.                             Delaware

Activision Texas, Inc.                                   Texas

Activision U.K. Ltd.                                     United Kingdom

CD Contact Data GmbH                                     Germany

CD Contact Data BV                                       Netherlands

CentreSoft Limited                                       United Kingdom

CentreSoft France SARL                                   France

Combined Distribution (Holdings) Ltd.                    United Kingdom

Contact Data Belgium N.V.                                Belgium

The Disc Company International, Inc.                     U.S. Virgin Islands

ES International, Inc.                                   U.S. Virgin Islands

Expert Software, Inc.                                    Delaware

Head Games Publishing, Inc.                              Minnesota

Jotaphoenicis Beteiligungs GmbH                          Germany

Kappaphoenicis Beteiligungs GmbH                         Germany

NBG EDV Handels und Verlags GmbH & Co. KG                Germany

PDQ Ltd.                                                 United Kingdom

Raven Software Corporation                               Wisconsin

Swfte International, Ltd.                                Delaware

Target Software Vertriebs GmbH                           Germany

TDC Group, Inc.                                          Delaware

Ton-Und Studiotechnick GmbH                              Germany
</TABLE>



                                     F-25





<PAGE>

                                                                     EXHIBIT 23


                          INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the registration statements 
(Nos. 333-30303, 333-36949, 333-43961, 333-46425, 333-56879, 333-61571, 
333-67707, 333-06130, 333-12621, 333-06054, 333-40727, 333-61573 and 
333-81239) on Form S-3 and Form S-8 of Activision, Inc. of our report dated 
May 3, 1999, relating to the consolidated balance sheets of ACTIVISION, INC. 
and subsidiaries as of March 31, 1999 and 1998 and the related consolidated 
statements of operations, changes in shareholders' equity, and cash flows for 
each of the years in the three-year period ended March 31, 1999, and the 
related financial statement schedule for each of the years in the three-year 
period ended March 31, 1999, which report appears in the March 31, 1999 
annual report on Form 10-K of ACTIVISION, INC.

KPMG LLP

Los Angeles, California
June 28, 1999


                                     F-26





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1996
<PERIOD-START>                             APR-01-1995
<PERIOD-END>                               MAR-31-1996
<CASH>                                          25,792
<SECURITIES>                                         0
<RECEIVABLES>                                   31,743
<ALLOWANCES>                                     8,614
<INVENTORY>                                      5,294
<CURRENT-ASSETS>                                60,651
<PP&E>                                           6,564
<DEPRECIATION>                                   2,682
<TOTAL-ASSETS>                                  84,442
<CURRENT-LIABILITIES>                           20,780
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                      62,439
<TOTAL-LIABILITY-AND-EQUITY>                    84,442
<SALES>                                         86,591
<TOTAL-REVENUES>                                86,591
<CGS>                                           41,367
<TOTAL-COSTS>                                   41,367
<OTHER-EXPENSES>                                41,992
<LOSS-PROVISION>                                12,667
<INTEREST-EXPENSE>                                 136
<INCOME-PRETAX>                                  4,841
<INCOME-TAX>                                   (1,054)
<INCOME-CONTINUING>                              5,895
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     5,895
<EPS-BASIC>                                       0.34
<EPS-DILUTED>                                     0.32
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1997
<PERIOD-START>                             APR-01-1996
<PERIOD-END>                               MAR-31-1997
<CASH>                                          23,320
<SECURITIES>                                         0
<RECEIVABLES>                                   62,952
<ALLOWANCES>                                    14,105
<INVENTORY>                                     12,627
<CURRENT-ASSETS>                                96,408
<PP&E>                                          14,423
<DEPRECIATION>                                   8,042
<TOTAL-ASSETS>                                 131,952
<CURRENT-LIABILITIES>                           44,411
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                      81,634
<TOTAL-LIABILITY-AND-EQUITY>                   131,952
<SALES>                                        189,239
<TOTAL-REVENUES>                               189,239
<CGS>                                          103,124
<TOTAL-COSTS>                                  116,232
<OTHER-EXPENSES>                                61,476
<LOSS-PROVISION>                                19,609
<INTEREST-EXPENSE>                                 843
<INCOME-PRETAX>                                 11,612
<INCOME-TAX>                                     3,981
<INCOME-CONTINUING>                              7,631
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,631
<EPS-BASIC>                                       0.37
<EPS-DILUTED>                                     0.36
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1998
<PERIOD-START>                             APR-01-1997
<PERIOD-END>                               MAR-31-1998
<CASH>                                          74,241
<SECURITIES>                                         0
<RECEIVABLES>                                   89,508
<ALLOWANCES>                                    15,582
<INVENTORY>                                     19,425
<CURRENT-ASSETS>                               185,876
<PP&E>                                          23,412
<DEPRECIATION>                                (11,468)
<TOTAL-ASSETS>                                 229,280
<CURRENT-LIABILITIES>                           70,103
<BONDS>                                         60,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                           0
<TOTAL-LIABILITY-AND-EQUITY>                    97,397
<SALES>                                        312,058
<TOTAL-REVENUES>                               312,058
<CGS>                                          176,188
<TOTAL-COSTS>                                  206,028
<OTHER-EXPENSES>                                96,544
<LOSS-PROVISION>                                39,112
<INTEREST-EXPENSE>                               2,223
<INCOME-PRETAX>                                  8,374
<INCOME-TAX>                                     3,235
<INCOME-CONTINUING>                              5,139
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     5,139
<EPS-BASIC>                                       0.24
<EPS-DILUTED>                                     0.23
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1999
<PERIOD-START>                             APR-01-1998
<PERIOD-END>                               MAR-31-1999
<CASH>                                          32,847
<SECURITIES>                                         0
<RECEIVABLES>                                  132,501
<ALLOWANCES>                                    14,979
<INVENTORY>                                     30,931
<CURRENT-ASSETS>                               236,301
<PP&E>                                          26,118
<DEPRECIATION>                                (15,277)
<TOTAL-ASSETS>                                 283,612
<CURRENT-LIABILITIES>                           94,987
<BONDS>                                         60,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                     127,475
<TOTAL-LIABILITY-AND-EQUITY>                   283,612
<SALES>                                        436,485
<TOTAL-REVENUES>                               436,485
<CGS>                                          260,041
<TOTAL-COSTS>                                  297,866
<OTHER-EXPENSES>                               111,374
<LOSS-PROVISION>                                53,773
<INTEREST-EXPENSE>                               4,973
<INCOME-PRETAX>                                 24,213
<INCOME-TAX>                                     8,961
<INCOME-CONTINUING>                             15,254
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    15,254
<EPS-BASIC>                                       0.69
<EPS-DILUTED>                                     0.66
        

</TABLE>