2K Sports 2009 Annual Report Download - page 31

$15.3 million of which will be paid by our insurance carriers and the balance of approximately $4.8 million
has previously been accrued for in our financial statements. In addition to the payment to the settlement
fund, we will also supplement the substantial changes that we have already implemented in our corporate
governance policies and practices. The proposed settlement is subject to the completion of final
documentation and preliminary and final approval by the SDNY Court. Neither we, our subsidiary nor any
of the individuals admit any wrongdoing as part of the proposed settlement agreement
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 SDNY Court against us, as nominal
defendant, and certain of our directors and certain former officers and directors. Certain of 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 these claims would entitle the putative class to monetary damages, but invited briefs from the
individual defendants on this point. In October 2008, these individuals moved to dismiss the remaining
claims against them. Briefing was concluded as of January 16, 2009, and the matter is now pending before
the Court.
Derivative Action—Option Backdating. In July and August 2006, shareholders Richard Lasky and Raeda
Karadsheh filed purported derivative actions in the SDNY Court against us, as nominal defendant, and
certain of our directors and certain former officers and directors. These actions were consolidated in
November 2006 and the plaintiffs filed a consolidated complaint in January 2007, which focused exclusively
on our historical stock option granting practices, alleging violations of federal and state law, including
breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets, and unjust
enrichment. The complaints sought unspecified damages against all of the individual defendants,
reimbursement from certain of the defendants of bonuses or other incentive or equity-based compensation
paid to them, equitable and other relief relating to the proceeds from certain of the defendants’ alleged
improper trading activity in our stock, adoption of certain corporate governance proposals and recovery of
litigation costs. These matters were referred to the Special Litigation Committee, which moved to dismiss
certain parties from the litigation and to have any claims against the remaining parties be assigned to us for
disposition by our management and Board of Directors. On April 21, 2009, the Court granted the Special
Litigation Committee’s motion in its entirety, dismissing all claims against all named defendants except
Ryan A. Brant, James David, Larry Muller, and Kelly G. Sumner, and assigning those remaining claims to
the Company as the sole party plaintiff. On June 15, 2009, the former shareholder plaintiffs applied for the
entry of final judgment in order to permit the immediate appeal of the Court’s April 21, 2009 order
dismissing certain defendants and terminating the former shareholder plaintiffs from consolidated action.
The shareholder plaintiffs’ request for the entry of judgment is pending before the Court. On June 15,
2009, as directed by the Court, the Company filed an amended complaint against the remaining defendants
in the suit. Those defendants have since moved to dismiss the Company’s amended complaint.
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