2K Sports 2008 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2008 2K Sports annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

settlement class on the basis that, under controlling case law issued after the parties negotiated the
settlement, the plaintiffs could no longer meet their burden of showing that the case could proceed on the
proposed class basis, regardless of whether the purpose of certification was for litigation or settlement. The
plaintiffs have applied for permission to appeal. We express no opinion as to the likelihood of permission
to appeal being granted or the outcome of any such appeal, and will continue to defend this case
vigorously.
City of Los Angeles Consumer Litigation. In January 2006, the City of Los Angeles filed a complaint
against us in the Superior Court of the State of California alleging violations of California law on
substantially the same basis as the consumer class action regarding Grand Theft Auto: San Andreas. The
complaint seeks injunctive and other relief. The case was removed and transferred to the U.S. District
Court for the Southern District of New York. We have engaged in settlement discussions with the City of
Los Angeles and expect that they will lead to a resolution of this matter after the resolution of such
consumer class action.
Securities Class Action—Grand Theft Auto: San Andreas and Option Backdating. In February and March
2006, four purported class action complaints were filed against us and certain of our former officers and
directors in the U.S. District Court for the Southern District of New York. The actions were consolidated,
and in April 2007 the lead plaintiff filed a consolidated second amended complaint which contained
allegations related to purported ‘‘hidden content’’ contained in Grand Theft Auto: San Andreas and the
backdating of stock options, including the investigation thereof conducted by the Special Litigation
Committee of the Board of Directors and the restatement of our financial statements relating thereto. This
complaint was filed against us, our former Chief Executive Officer, our former Chief Financial Officer, our
former Chairman of the Board, our Rockstar Games subsidiary, and one officer and one former officer of
our Rockstar Games subsidiary. He sought unspecified compensatory damages and costs including
attorneys’ fees and expenses. In April 2008, the Court dismissed, with leave to amend, all claims as to all
defendants relating to Grand Theft Auto: San Andreas and certain claims as to our former CEO, CFO and
certain director defendants relating to the backdating of stock options. In September 2008, the lead
plaintiff filed a third amended consolidated complaint seeking to reinstate these claims. We express no
opinion as to the outcome of the complaint and will continue to defend this case vigorously.
St. Clair Derivative Action. In January 2006, the St. Clair Shores General Employees Retirement System
filed a purported class and derivative action complaint in the U.S. District Court for the Southern District
of New York against us, as nominal defendant, and certain of our directors and certain former officers and
directors. The factual allegations in this action are similar to those in the securities class action described
above. The plaintiff asserts that certain defendants breached their fiduciary duty by selling their stock while
in possession of certain material non-public information and that we violated Section 14(a) of the
Exchange Act and Rule 14a-9 thereunder by failing to disclose material facts in our 2003, 2004 and 2005
proxy statements in which we solicited approval to increase share availability under our 2002 Stock Option
Plan. The plaintiff seeks the return of all profits from the alleged insider trading conducted by the
individual defendants who sold our stock, unspecified compensatory damages with interest and its costs in
the action. In March 2007, the Special Litigation Committee moved to dismiss the complaint based on,
among other things, the Committee’s conclusion that ‘‘future pursuit of this action is not in the best
interests of Take-Two or its shareholders.’’ In August 2007, the plaintiff filed an Amended Derivative and
Class Action Complaint alleging, among other things, that defendants breached their fiduciary duties in
connection with the issuance of proxy statements from 2001 through 2005. In September 2007, the Special
Litigation Committee moved to dismiss the Amended Complaint or to consolidate certain of its claims
with the securities class action. In July 2008, the Court dismissed all claims against us and all claims against
all defendants that arose out of the plaintiff’s derivative claims. The Court expressly did not determine
whether the remaining claims, which are related to the proxy statements, would entitle the putative class to
monetary damages. We intend to continue to vigorously defend against the remainder of the plaintiff’s
claims.
24