Efiled: Dec 15 2010 3:51PM EST Transaction ID 34879224 Case No

EFiled: Dec 15 2010 3:51PM EST Transaction ID 34879224 Case No. 6074-

IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE

WALTER A. WINSHALL, in his capacity as the ) Stockholders’ Representative, ) ) Plaintiff, ) v. ) Civil Action No. ______) VIACOM INTERNATIONAL, INC., a Delaware ) Corporation, and HARMONIX MUSIC SYSTEMS, ) INC., a Delaware Corporation, ) ) Defendants. )

VERIFIED COMPLAINT

Plaintiff Walter A. Winshall in his capacity as Stockholders’

Representative (“Plaintiff”), by and through his attorneys Richards, Layton & Finger,

P.A., and Sidley Austin LLP, alleges for his Complaint against defendants Viacom

International, Inc. (“Viacom”) and Harmonix Music Systems, Inc. (“Harmonix”) as

follows:

INTRODUCTION

1. Harmonix is the developer of the hugely successful Guitar

Hero™and Rock Band™ video games. Viacom agreed to a merger with Harmonix

pursuant to a contract that provided for “earn-out” payments as an essential part of the

purchase price.

2. Plaintiff, on behalf of the former shareholders of Harmonix,

brings this case to recover damages arising from Viacom’s manipulation of these earn-out

payments by diverting opportunities from Harmonix for its own benefit in breach of the

RLF1 3711391v. 1 implied covenant of good faith and fair dealing that inheres in Viacom’s contract with

Harmonix.

3. In addition, Plaintiff brings this case because Viacom has improperly blocked the release of more than $13 million of escrowed funds to the former

Harmonix shareholders. Viacom has done so by demanding indemnity with respect to several claims made by third parties alleging that Rock Band infringed their patents and intellectual property. Viacom’s indemnity claims are improper under the contract, regardless of the merits of the underlying disputes, because the contract did not warrant non-infringement of patents, and certainly did not warrant to Viacom that products developed in the future under Viacom’s ownership (such as Rock Band),would not infringe on the intellectual property rights of third parties. Accordingly, this Court should enter a declaratory judgment that Viacom is not entitled to indemnity and grant relief ordering Viacom to release the escrowed funds.

PARTIES

4. Plaintiff Walter A. Winshall is a citizen of the State of

Massachusetts.

5. Defendant Viacom is a Delaware corporation with its principal place of business in New York. Viacom is a global entertainment company with operations that include Paramount Pictures®, Nickelodeon® and Nick at Night®,BET

Networks®,MTV®,VH1®, and Comedy Central®.

6. Defendant Harmonix is a Delaware corporation with its principal place of business in Massachusetts.

2 RLF1 3711391v. 1 JURISDICTION

7. The Court has personal jurisdiction over Viacom and Harmonix because each is a corporation organized under the laws of this State. In addition, Plaintiff and Defendants all agreed to submit to the jurisdiction of the courts of the State of

Delaware for any litigation arising out of or relating to (1) the Merger Agreement dated

September 20, 2006, by and among Viacom, Orpheus Acquisition Corp., Harmonix, the

Joining Stockholders of Harmonix, and Plaintiff (“the Merger Agreement”) (the Merger

Agreement and excerpts from the relevant exhibits and schedules thereto are attached as

Ex. A); and (2) the Escrow Agreement dated October 27, 2006, by and among Viacom,

Harmonix, Plaintiff, and the escrow agent Deutsche Bank Trust Company Americas (“the

Escrow Agreement”) (Ex. B).1

8. The Merger Agreement provides that “[a]ll disputes, claims or controversies arising out of or relating to this Agreement, or the negotiation, validity or performance of this Agreement, or the transactions contemplated hereby shall be governed by and construed in accordance with the laws of the State of Delaware without regard to rules of conflict of laws.” (Ex. A § 10.10, p. 78.)

9. The Court of Chancery has jurisdiction pursuant to 8 Del. C.

§ 111(a)(6) because this is a civil action to interpret, apply, and enforce an agreement of merger governed by 8 Del. C. § 251. This Court also has jurisdiction pursuant to 10 Del.

C. § 341.

1 Certain of the exhibits to this Complaint have been filed under seal to avoid any argument that Plaintiff has improperly disclosed confidential information of Defendants. Unless otherwise defined herein, capitalized terms have the meaning ascribed to them in the Merger Agreement and Escrow Agreement.

3 RLF1 3711391v. 1 FACTUAL BACKGROUND

10. Harmonix is the world’s leading developer of music-oriented video games. Following the success of Guitar Hero, Harmonix and its stockholders entered into the Merger Agreement with Viacom on September 20, 2006 (“the

Agreement Date”) in order to pursue the multi-billion dollar opportunity of new generations of music video games.

11. Pursuant to the Merger Agreement, Viacom agreed to provide two forms of consideration to the Harmonix stockholders and the persons who held warrants and options on Harmonix stock (the “Merger Consideration Recipients”). The first was a down payment of $175,000,000, called the “Initial Merger Consideration,” which was due at closing. (Ex. A § 2.1(c)(ii)(J), p. 6.) A portion of this Initial Merger

Consideration was to be deposited into an Escrow Account for the account of the

Indemnifying Merger Consideration Recipients.

12. The second form of consideration was the right to be paid “Earn-

Outs,” which were a multiple of the amounts by which the company’s gross profits during the following two years exceeded certain thresholds. Specifically, the 2007 Earn-

Out Payment Amount is 3.5 times any Gross Profit for 2007 in excess of $32,000,000.

(Ex. A § 2.1(c)(ii)(A), p. 4.) The 2008 Earn-Out Payment Amount is 3.5 times any Gross

Profit for 2008 in excess of $45,000,000. (Ex. A § 2.1(c)(ii)(B), p. 5.) Neither the 2007

Earn-Out Payment Amount nor the 2008 Earn-Out Payment Amount is subject to any maximum.

4 RLF1 3711391v. 1 13. Pursuant to the Merger Agreement, if disputes relating to the

Earn-Out Payment Amounts arise, both Plaintiff and Viacom are entitled to submit such disputes to a Resolution Accountant. (Ex. A § 2.4(c), p. 12.)

14. The Merger Agreement designated Plaintiff as the Stockholders’

Representative. In that capacity, Plaintiff is the attorney-in-fact for the Merger

Consideration Recipients with authority to enforce their rights under the Merger

Agreement and the Escrow Agreement. (Ex. A § 10.8, p. 76.)

15. The closing under the Merger Agreement occurred on October 27,

2006 (“the Closing Date”). On that date, Harmonix became a wholly-owned subsidiary of Viacom.

16. More than a year later, on November 20, 2007, Harmonix launched Rock Band, the genre-defining music game platform that allows players to experience music from the world’s biggest rock artists as a virtual band with drums, bass guitar, lead guitars, and vocals. After only 15 months on the market, Rock Band surpassed $1 billion in retail game sales in North America. Rock Band and Rock Band 2 have garnered more than fifty industry awards, including the E3 Game Critics Award for

Best of Show,WIRE’s Game of the Year,USA Today’s Best Video Game for Teens,and one of Time Magazine’s Best Games of 2007.

17. On January 4, 2010, Viacom provided Plaintiff with its calculation of the 2007 Earn-Out Payment Amount. Plaintiff submitted his 2007

Summary of Issues timely on January 22, 2010. On March 9, 2010, Viacom provided

Plaintiff with its calculation of the 2008 Earn-Out Payment Amount. Plaintiff submitted

5 RLF1 3711391v. 1 his 2008 Summary of Issues timely on March 26, 2010. On December 8, 2010, Plaintiff and Viacom submitted disputes regarding the 2007 and 2008 Earn-Out Payment Amounts to the Resolution Accountant who was mutually selected by Plaintiff and Viacom pursuant to the Merger Agreement. (Ex. A § 2.4(c), p. 12.) The amounts of these disputes are substantial.

18. Plaintiff and Defendants have expressly agreed that the claims asserted in this Complaint are not matters that may be submitted to the Resolution

Accountant pursuant to the Merger Agreement.

19. Plaintiff and the Merger Consideration Recipients have fully performed their obligations under the Merger Agreement and the Escrow Agreement.

COUNT I (Manipulation of Earn-Outs in Breach of Covenant of Good Faith and Fair Dealing)

20. Plaintiff incorporates paragraphs 1 through 19 as if specifically alleged herein.

21. Under Delaware law, an implied covenant of good faith and fair dealing inheres in the Merger Agreement.

22. By operation of law, the Merger Agreement includes an implied covenant that Viacom will not engage in arbitrary or unreasonable conduct that would have the effect of denying the Merger Consideration Recipients the fruits of the parties’ bargain with regard to the Earn-Outs.

6 RLF1 3711391v. 1 23. By operation of law, the Merger Agreement includes an implied covenant that Viacom will not use oppressive or underhanded tactics to deny the Merger

Consideration Recipients the fruits of the parties’ bargain with regard to the Earn-Outs.

24. By operation of law, the Merger Agreement includes an implied covenant that Viacom will exercise its discretion reasonably and in good faith.

25. By operation of law, the Merger Agreement includes an implied covenant that Viacom will not take advantage of its position to cause Harmonix or

Viacom to enter other agreements for the purpose of reducing the Earn-Outs.

26. In the course of Plaintiff’s review of materials provided by

Viacom to support its calculations of the Earn-Out Payment Amounts, Plaintiff discovered evidence of a scheme to divert opportunities from Harmonix to Viacom, which on information and belief was undertaken for the purpose of reducing the Earn-Out due for 2008, in breach of Viacom’s covenants under the Merger Agreement.

27. One of the largest single expenses incurred by Harmonix was the fee paid to Electronic Arts, Inc. (“EA”) for the distribution of Rock Band.When

Defendants entered into the original distribution agreement with EA, Rock Band had not yet been developed and its market potential was unproven. The terms of the original distribution agreement reflected this uncertainty. However, the huge and immediate success of Rock Band following its November 2007 launch gave Defendants an opportunity to negotiate for a reduction of the distribution fees in 2008 if EA wanted to retain the distribution rights to Rock Band and its sequels.

7 RLF1 3711391v. 1 28. Although a reduced 2008 EA distribution fee would have increased Harmonix’s Gross Profit and operating profits in 2008, Viacom realized that every $1.00 of distribution fees that Harmonix saved during 2008 would require Viacom to pay an additional $3.50 of Earn-Outs to the Merger Consideration Recipients.

29. Viacom decided to forego the opportunity to reduce EA’s distribution fees during 2008 (or in any other way enhance Harmonix’s net income or

Gross Profit for 2008), and instead demanded benefits for itself (rather than Harmonix) in exchange for allowing EA to continue distributing Rock Band. The benefits that Viacom co-opted for itself pursuant to a 2008 agreement with EA include: firm multi-million dollar commitments by EA to purchase advertising from MTV Networks and other

Viacom media outlets, reduced distribution fees starting in 2009 (after the Earn-Out

Period), and the acceleration of 2009 payments to 2008. On information and belief,

Viacom’s intent in negotiating the 2008 agreement with EA was to manipulate and reduce the 2008 Earn-Out Payment Amount due to the Merger Consideration Recipients.

30. These actions by Viacom breached its implied covenants under the Merger Agreement.

31. The Merger Consideration Recipients have been damaged by

Viacom’s breach. The amount of such damage is reasonably ascertainable as the additional 2008 Earn-Out Payment Amount that the Merger Consideration Recipients would have received if (A) Harmonix had received the value to Viacom of EA’s advertising commitments and accelerated cash payments, and (B) Harmonix had paid during 2008 the lower distribution fee that was applied in 2009.

8 RLF1 3711391v. 1 COUNT II (Declaratory Judgment that Defendants Are Not Entitled to Indemnification)

32. Plaintiff incorporates paragraphs 1 through 31 as if specifically alleged herein.

33. In accordance with the Merger Agreement and the Escrow

Agreement, Viacom deposited $12,000,000 of the Initial Merger Consideration into an

Escrow Account for the account of the Indemnifying Merger Consideration Recipients.

That amount has earned interest and has since grown to more than $13,000,000 (the

“Escrow Cash”).

34. In the Merger Agreement, the Merger Consideration Recipients agreed to indemnify Defendants against Losses due to the breach of certain representations and warranties made by Harmonix, subject to the limitations, terms, and conditions set forth in the Merger Agreement. Defendants have a right under certain circumstances to recover from the Escrow Account amounts due from the Merger

Consideration Recipients on account of their indemnification obligations. (Ex. B § 4(a), p. 5.)

35. In order to recover from the Escrow Account, Viacom or

Harmonix must send an Indemnity Notice to Plaintiff, specifying in reasonable detail the nature and dollar amount of the indemnification claim, and must provide a Certificate of

Instruction to both Plaintiff and the Escrow Agent. (Ex. B § 4(c)(i), p. 6.)

36. The Merger Agreement states that the Merger Consideration

Recipients have no liability with respect to any claim for breach or inaccuracy of a

9 RLF1 3711391v. 1 representation or warranty in the Merger Agreement unless written notice of such claim is provided on or before the date which is 18 months following the Closing Date (the

“Termination Date”), except for certain categories of Excluded Claims. (Ex. A § 8.1, p.

54.)

37. The Termination Date was April 27, 2008.

38. Viacom never delivered a Certificate of Instruction to Plaintiff or the Escrow Agent on or before the Termination Date.

39. Three days before the Termination Date, on April 24, 2008,

Viacom sent Plaintiff an Indemnity Notice in which it stated that it was providing notice of claims for indemnification pursuant to Section 8.2 of the Merger Agreement. (See Ex.

C.)

40. This is the only Indemnity Notice that Defendants have ever provided to Plaintiff.

41. Viacom did not describe the dollar amount of its claims in the

Indemnity Notice.

42. In an attached letter to Plaintiff dated April 24, 2008, Viacom asserted that Harmonix had breached its representations and warranties under Section

4.15 of the Merger Agreement and that Viacom may be entitled to, or may seek, indemnification pursuant to Section 8.2. (See Ex. D.)

43. Viacom further asserted that it was providing notice to Plaintiff pursuant to Section 8.2(d)(i) of the Merger Agreement of claims that Defendants had received from three parties: (1) 1st Media LLC (“1st Media”), (2) Gibson Guitar Corp.

10 RLF1 3711391v. 1 (“Gibson”), and (3) Activision, Inc. and its subsidiary Red Octane, Inc. (collectively,

“Activision”).

44. Viacom claimed that a duty to indemnify may arise from the matter 1st Media LLC v. doPi Karaoke, Inc. et al., Case No. 2:07-cv-01589 (D. Nev.), in which 1st Media alleged that Rock Band infringes U.S. Patent No. 5,464,946 (the “1st

Media Patent”). On April 26, 2010, the U.S. District Court for the District of Nevada entered judgment in favor of Viacom, Harmonix, and the other defendants, and dismissed with prejudice the amended complaint of 1st Media. The court held that the 1st Media

Patent was unenforceable due to 1st Media’s inequitable conduct.

45. Viacom claimed that a duty to indemnify may arise from the matters Gibson Guitar Corp. v. Harmonix Music Systems, Inc. et al., Case No. 3:08-cv-

00294 (M.D. Tenn.), and Gibson Guitar Corp. v. Wal-Mart Stores, Inc. et al., Case No.

3:08-cv-00279 (M.D. Tenn.), in which Gibson alleged that the Guitar Hero and Rock

Band video games infringed U.S. Patent No. 5,990,405 (the “Gibson Patent”). On May

27, 2009, the court dismissed with prejudice Gibson’s claim that Guitar Hero infringed the Gibson Patent. On June 11, 2010, that court dismissed with prejudice Gibson’s remaining claims. There has been no judicial determination that Defendants infringed the

Gibson Patent.

46. Viacom claimed that a duty to indemnify may arise from

Activision’s allegation that Rock Band infringes U.S. Patent Nos. 6,835,887, 5,739,457,

6,369,313, and 6,018,121 (the “Activision Patents”) and infringes or misappropriates other intellectual property rights of Activision. Defendants entered into a settlement

11 RLF1 3711391v. 1 agreement with Activision in which there was no finding or admission that Defendants infringed or misappropriated any Patents or non-Patent intellectual property of

Activision.

47. On July 21, 2008, Viacom sent Plaintiff a letter stating that it was providing notice pursuant to Section 8.2(d)(i) of the Merger Agreement of a lawsuit,

Konami Digital Entertainment Co., Ltd. and Konami Digital Entertainment, Inc. v.

Harmonix Music Systems, Inc. et al., Case No. 6:08-cv-286 (E.D. Tex.), in which Konami

Digital Entertainment Co., Ltd. and Konami Digital Entertainment, Inc. (collectively,

“Konami”) alleged that Rock Band infringes U.S. Patent Nos. 6,390,923, 6,425,822, and

6,645,067 (the “Konami Patents”). (See Ex. E.) On September 15, 2010, the court dismissed this action with prejudice and without any determination that Defendants infringed the Konami Patents.

48. It was not until after the Termination Date that Defendants notified Plaintiff of a potential claim for indemnity relating to the Konami lawsuit and the

Konami Patents. Konami did not allege infringement of the 1st Media Patent, the Gibson

Patent, or the Activision Patents that were the subject of Viacom’s letter of April 24,

2008 (Ex. D).

49. Defendants did not tender to Plaintiff or the Merger Consideration

Recipients the defense of the claims brought by 1st Media, Gibson, Activision or

Konami. Plaintiff was never asked to assume the defense of any of those claims.

50. In the Merger Agreement, Harmonix made several representations and warranties regarding intellectual property rights of third parties, but there was no

12 RLF1 3711391v. 1 representation or warranty that its video games and products would not infringe Patents.

In particular, section 4.15(o)(i) of the Merger Agreement contains a representation and warranty of non-infringement of certain types of intellectual property, but not Patents.

51. With regard to the intellectual property rights of third parties,

Harmonix represented and warranted that (except as disclosed in certain schedules):

(A) there were no pending claims against the Company alleging that the

operation of the Business, any activity of the Company, or any

manufacture, use, importation, offer for sale and/or sale of any Current

Game in accordance with the terms of the applicable Publishing

Agreement infringed the Patent of a third party;

(B) to Harmonix’s knowledge, there were no threatened claims asserted in

writing of patent infringement alleging that the operation of the Business,

any activity of the Company, or any manufacture, use, importation, offer

for sale and/or sale of any Current Game in accordance with the terms of

the applicable Publishing Agreement infringed the Patent of a third party;

Rigopulos, Eran Egozy, Michael Dornbrook, or Greg LoPiccolo that a

reasonable person would interpret as a claim alleging that the operation of

the Business, any activity of the Company, or any manufacture, use,

importation, offer for sale and/or sale of any Current Game in accordance

with the terms of the applicable Publishing Agreement infringed the Patent

of a third party; and

13 RLF1 3711391v. 1 (D) Harmonix had no knowledge of patent infringement in the operation of its

Business, any activity of the Company, or any manufacture, use,

importation, offer for sale and/or sale of any Current Game in accordance

with the terms of the applicable Publishing Agreement.

(Ex. A §§ 4.15(n) and (o), p. 30.)

52. These representations and warranties apply to three categories: the “operation of the Business,” “any activity of the Company,” and the “manufacture, use, sale, importation, offer for sale and/or use of any Current Game.” (Ex. A §§ 4.15(n) and (o), p. 30.)

53. As of both the Agreement Date and the Closing Date, no Rock

Band video games had been made, manufactured, used, sold, offered for sale or use, or imported.

54. To the extent that Harmonix was working to develop the game that became Rock Band as of the Agreement Date and as of the Closing Date, such development work could not and did not constitute the manufacture, use, sale, or offer to sell or use Rock Band, nor could or did such development work infringe on any intellectual property of 1st Media, Gibson, Activision, or Konami.

55. As of both the Agreement Date and the Closing Date, no Rock

Band video games were commercially available.

56. No Rock Band video games were the subject of any Publishing

Agreement on either the Agreement Date or the Closing Date. (Ex. A § 4.15(r), p. 31;

Schedule 4.15(b).)

14 RLF1 3711391v. 1 57. The Rock Band video games were first launched on November 20,

2007, more than a year after both the Agreement Date and the Closing Date.

58. No Rock Band video games were included in the list of Current

Games found in Schedule 4.15(a)(viii) to the Merger Agreement.

59. Rock Band was not a Current Game, as defined in the Merger

Agreement.

60. The Merger Agreement did not contain representations or warranties to Viacom that games developed in the future under Viacom’s ownership and introduced to the market for the first time a year after Viacom acquired Harmonix (such as Rock Band), would not infringe the intellectual property rights of third parties.

61. In Schedule 4.15(n) to the Merger Agreement, Harmonix disclosed that on January 27, 2005, it had received an e-mail from John Devecka asking if Harmonix had interest in discussions relating to U.S. Patent Nos. 5,739,457, 6,018,121,

6,268,557, 6,369,313 or 6,835,887. The rights to those patents were acquired by

Activision in 2006.

62. Harmonix disclosed knowledge of possible claims regarding the

Activision Patents in Schedule 4.15(n) to the Merger Agreement.

63. As of the Agreement Date and the Closing Date, Harmonix did not infringe Activision’s non-Patent intellectual property rights.

64. Harmonix did not represent or warrant in the Merger Agreement that it owned or had rights to use the 1st Media Patent, the Gibson Patent, the Activision

Patents, or the Konami Patents.

15 RLF1 3711391v. 1 65. On June 4, 2008, Plaintiff notified Viacom that he is unaware of any meritorious basis for Viacom’s objection to the release of the Escrow Cash. (See Ex.

F.)

66. On September 26, 2008, Plaintiff notified Viacom that its claims for indemnification were improper, invalid, and ineffective. Plaintiff demanded that

Viacom immediately cooperate in issuing joint written instructions to the Escrow Agent to distribute the Escrow Cash to the Indemnifying Merger Consideration Recipients.

(See Ex. G.) On January 26, 2009, Plaintiff again sent a letter to Viacom regarding the release of the Escrow Cash to the Indemnifying Merger Consideration Recipients. (See

Ex. H.)

67. In a letter dated January 28, 2009, Viacom informed Plaintiff that it would not issue joint written instructions to the Escrow Agent to distribute any of the

Escrow Cash to the Indemnifying Merger Consideration Recipients of Harmonix. (See

Ex. I.) Instead, Viacom informed Plaintiff that it believed it had the right to some of the

Escrow Cash.

68. In this letter, Viacom also stated that its “indemnity claims relate to third party lawsuits against Harmonix, each of which contends, among other things, that Harmonix has infringed upon such third party’s intellectual property rights — which such rights Harmonix had represented and warranted in the merger agreement to own or have sufficient right to use and having no knowledge of such a claim.” (Ex. I.)

16 RLF1 3711391v. 1 69. Defendants have asserted that they are entitled to indemnification with respect to the claims asserted by 1st Media, Gibson, Activision, and Konami, and with respect to the costs of defending against those claims.

70. Viacom has asserted that this purported right to indemnification justifies its refusal to instruct the Escrow Agent to release the Escrow Cash to Plaintiff and the Indemnifying Merger Consideration Recipients.

COUNT II-A (1st Media)

71. With respect to 1st Media’s claim that Rock Band infringed the

1st Media Patent, as of both the Agreement Date and the Closing Date:

(A) there was no pending claim that any game or any operation of Harmonix’s

Business or any activity of Harmonix or any manufacture, use,

importation, offer for sale and/or sale of any Current Game infringed the

1st Media Patent;

(B) to Harmonix’s knowledge there were no threatened claims asserted in

writing that any game, or any operation of Harmonix’s Business or any

activity of Harmonix or any manufacture, use, importation, offer for sale

and/or sale of any Current Game infringed the 1st Media Patent;

Rigopulos, Eran Egozy, Michael Dornbrook or Greg LoPiccolo that a

reasonable person would interpret as a claim alleging that any game or any

operation of Harmonix’s Business or any activity of Harmonix or any

17 RLF1 3711391v. 1 manufacture, use, importation, offer for sale and/or sale of any Current

Game infringed the 1st Media Patent; and

(D) Harmonix did not have knowledge of infringement of the 1st Media Patent

by any game or any operation of Harmonix’s Business or any activity of

Harmonix or any manufacture, use, importation, offer for sale and/or sale

of any Current Game.

72. The 1st Media Patent was held unenforceable.

73. Plaintiff is entitled to a declaratory judgment that the Merger

Consideration Recipients have no indemnification obligations to Viacom or Harmonix with respect to the claims asserted by 1st Media or the costs of defending against such claims.

COUNT II-B (Gibson)

74. With respect to Gibson’s claim that Rock Band and Guitar Hero infringed the Gibson Patent, as of both the Agreement Date and the Closing Date:

(A) there was no pending claim that any game or any operation of Harmonix’s

Business or any activity of Harmonix or any manufacture, use,

importation, offer for sale and/or sale of any Current Game infringed the

Gibson Patent;

(B) to Harmonix’s knowledge there were no threatened claims asserted in

writing that any game, or any operation of Harmonix’s Business or any

activity of Harmonix or any manufacture, use, importation, offer for sale

and/or sale of any Current Game infringed the Gibson Patent;

18 RLF1 3711391v. 1 (C) there was no oral statement made directly to or actually known to Alex

Rigopulos, Eran Egozy, Michael Dornbrook or Greg LoPiccolo that a

reasonable person would interpret as a claim alleging that any game or any

operation of Harmonix’s Business or any activity of Harmonix or any

manufacture, use, importation, offer for sale and/or sale of any Harmonix

Current Game infringed the Gibson Patent; and

(D) Harmonix did not have knowledge of infringement of the Gibson Patent

by any game or any operation of Harmonix’s Business or any activity of

Harmonix or any manufacture, use, importation, offer for sale and/or sale

of any Current Game.

75. Gibson has dismissed with prejudice its claims that Guitar Hero and Rock Band infringed the Gibson Patent without any judicial determination that

Defendants infringed the Gibson Patent.

76. Plaintiff is entitled to a declaratory judgment that the Merger

Consideration Recipients have no indemnification obligations to Viacom or Harmonix with respect to the claims asserted by Gibson or the costs of defending against such claims.

COUNT II-C (Activision)

77. With respect to Activision’s claim that Rock Band infringed the

Activision Patents, as of both the Agreement Date and the Closing Date (except as disclosed in Schedule 4.15(n) of the Merger Agreement):

19 RLF1 3711391v. 1 (A) there was no pending claim that any game or any operation of Harmonix’s

Business or any activity of Harmonix or any manufacture, use,

importation, offer for sale and/or sale of any game infringed the Activision

Patents;

(B) to Harmonix’s knowledge there were no threatened claims asserted in

writing that any game, or any operation of Harmonix’s Business or any

activity of Harmonix or any manufacture, use, importation, offer for sale

and/or sale of any game infringed the Activision Patents;

Rigopulos, Eran Egozy, Michael Dornbrook or Greg LoPiccolo that a

reasonable person would interpret as a claim alleging that any game or any

operation of Harmonix’s Business or any activity of Harmonix or any

manufacture, use, importation, offer for sale and/or sale of any Harmonix

game infringed the Activision Patents; and

(D) Harmonix did not have knowledge of infringement of the Activision

Patents by any game or any operation of Harmonix’s Business or any

activity of Harmonix or any manufacture, use, importation, offer for sale

and/or sale of any Harmonix game.

78. As of the Agreement Date and the Closing Date, Harmonix did not infringe Activision’s non-Patent intellectual property rights.

79. Defendants denied that they infringed the Activision Patents or that they infringed or misappropriated any non-Patent intellectual property of Activision,

20 RLF1 3711391v. 1 and believe they have meritorious defenses to such claims. There has been no judicial or arbitral determination that Defendants infringed the Activision Patents or that they infringed or misappropriated any non-Patent intellectual property of Activision.

80. Activision has released Defendants with respect to any claim that

Defendants infringed or misappropriated any Patents or non-Patent intellectual property of Activision. There was no finding or admission that Defendants infringed or misappropriated any Patents or non-Patent intellectual property of Activision.

81. Plaintiff is entitled to a declaratory judgment that the Merger

Consideration Recipients have no indemnification obligations to Viacom or Harmonix with respect to the claims asserted by Activision or the costs of defending against such claims.

COUNT II-D (Konami)

82. Pursuant to Section 8.1 of the Merger Agreement, Defendants are not entitled to indemnification with respect to Konami’s claims of patent infringement because Defendants did not provide notice of such claims prior to the Termination Date.

Defendants’ claim for indemnification relating to the lawsuit by Konami is not an

Excluded Claim under Section 8.1 of the Merger Agreement.

83. With respect to Konami’s claim that Rock Band infringed the

Konami Patents, as of both the Agreement Date and the Closing Date:

(A) there was no pending claim that any game or any operation of Harmonix’s

Business or any activity of Harmonix or any manufacture, use,

21 RLF1 3711391v. 1 importation, offer for sale and/or sale of any Current Game infringed the

Konami Patents;

(B) to Harmonix’s knowledge there were no threatened claims asserted in

writing that any game, or any operation of Harmonix’s Business or any

activity of Harmonix or any manufacture, use, importation, offer for sale

and/or sale of any Current Game infringed the Konami Patents;

Rigopulos, Eran Egozy, Michael Dornbrook or Greg LoPiccolo that a

reasonable person would interpret as a claim alleging that any game or any

operation of Harmonix’s Business or any activity of Harmonix or any

manufacture, use, importation, offer for sale and/or sale of any Harmonix

Current Game infringed the Konami Patents; and

(D) Harmonix did not have knowledge of infringement of the Konami Patents

by any game or any operation of Harmonix’s Business or any activity of

Harmonix or any manufacture, use, importation, offer for sale and/or sale

of any Current Game.

84. Defendants denied that they infringed any of the Konami Patents and believe they have meritorious defenses to such claims.

85. Konami has dismissed with prejudice its claim that Defendants infringed the Konami Patents. There was no judicial determination that Defendants infringed any of the Konami Patents.

22 RLF1 3711391v. 1 86. Plaintiff is entitled to a declaratory judgment that the Merger

Consideration Recipients have no indemnification obligations to Viacom or Harmonix with respect to the claims asserted by Konami or the costs of defending against such claims.

COUNT III (Breach of Contract in Blocking the Release of Escrow Funds)

87. Plaintiff incorporates paragraphs 1 through 86 as if specifically alleged herein.

88. With regard to the patent infringement claims brought by 1st

Media, Gibson, Activision, and Konami, there was no breach of any representation or warranty in the Merger Agreement because on both the Agreement Date and the Closing

Date there was (A) no pending claim of infringement of any of those patents, (B) no threatened claim of infringement of any of those patents asserted in writing known to

Harmonix, (C) no oral statement made directly to Alex Rigopulos, Eran Egozy, Michael

Dornbrook or Greg LoPiccolo that a reasonable person would interpret as a claim of infringement of any of those patents, and (D) no knowledge by Harmonix of infringement of any of those patents, other than the claims disclosed in Schedule 4.15(n) to the Merger

Agreement.

89. With regard to the claims involving Rock Band asserted by 1st

Media, Gibson, Activision, and Konami, there was no breach of any representation or warranty in the Merger Agreement because Harmonix made no representations or warranties that future video games (such as Rock Band) would not infringe the Patents of third parties.

23 RLF1 3711391v. 1 90. With regard to Activision’s claims that Rock Band infringed its non-Patent intellectual property rights, there was no breach of any such representation or warranty in the Merger Agreement because Harmonix did not infringe Activision’s non-

Patent intellectual property rights.

91. The Merger Consideration Recipients have no indemnification obligations with regard to the claims asserted by 1st Media, Gibson, Activision, and

Konami because Defendants did not deliver a Certificate of Instruction to Plaintiff or the

Escrow Agent on or before the Termination Date.

92. The Merger Consideration Recipients have no indemnification obligations with respect to the claims asserted by Konami because Defendants did not notify Plaintiff of such claims on or before the Termination Date.

93. The Merger Consideration Recipients have no indemnification obligations with respect to the claims asserted by Activision, or the costs of defending such claims, because Defendants denied liability for those claims, which have been resolved without any determination of infringement or misappropriation.

94. The Merger Consideration Recipients have no indemnification obligations with respect to the claims asserted by 1st Media or the costs of defending such claims, because Defendants denied infringement for those claims, which have been resolved without any determination of infringement or misappropriation.

95. The Merger Consideration Recipients have no indemnification obligations with respect to the claims asserted by Gibson or the costs of defending such

24 RLF1 3711391v. 1 claims, because Defendants denied infringement for those claims, which have been resolved without any determination of infringement or misappropriation.

96. The Merger Consideration Recipients have no indemnification obligations with respect to the claims asserted by Konami or the costs of defending such claims, because Defendants denied infringement for those claims, which have been resolved without any determination of infringement or misappropriation.

97. As matters now stand, under the terms of the Escrow Agreement, the Escrow Agent may not release the Escrow Cash to Plaintiff and the Indemnifying

Merger Consideration Recipients unless Viacom instructs the Escrow Agent to do so.

98. Viacom wrongly refuses to instruct the Escrow Agent to release the Escrow Cash to Plaintiff and the Indemnifying Merger Consideration Recipients.

99. Plaintiff has no adequate remedy at law. Plaintiff and the

Indemnifying Merger Consideration Recipients will suffer irreparable harm if Viacom is not required to instruct the Escrow Agent to release the Escrow Cash to Plaintiff and the

Indemnifying Merger Consideration Recipients.

WHEREFORE, Plaintiff requests judgment against Defendants Viacom

International, Inc., and Harmonix Music Systems, Inc., awarding Plaintiff the following relief:

1. An award of damages due to Viacom’s breach of the covenant of good faith and fair dealing and pre-judgment and post-judgment interest on that award.

2. A declaratory judgment that Defendants are not entitled to indemnification from the Merger Consideration Recipients with respect to the claims

25 RLF1 3711391v. 1 asserted by 1st Media, Gibson, Activision, and Konami, or the costs of defending such claims.

3. An order requiring Viacom to issue written instructions to the

Escrow Agent releasing the Escrow Cash to Plaintiff and the Indemnifying Merger

Consideration Recipients in accordance with Plaintiff’s directions, or, in the alternative, an order awarding Plaintiff the Escrow Cash, plus interest.

4. Interest, costs, attorneys’ fees, and any other and further relief as the Court may deem just and proper.

OF COUNSEL: /s/ Gregory V. Varallo (#2242) David M. Schiffman Gregory V. Varallo (No. 2242) Linton J. Childs Scott W. Perkins (No. 5049) Jennifer Peltz Richards, Layton & Finger, P. A. Sidley Austin LLP One Rodney Square One South Dearborn Street 920 N. King Street Chicago, Illinois 60603 Wilmington, Delaware 19801 Tel.: (312) 853-7000 Tel.: (302) 651-7700 Fax: (312) 853-7036 Fax: (302) 498-7772

Dated: December 15, 2010 Counsel for Plaintiff Walter A. Winshall

26 RLF1 3711391v. 1