THQ 2007 Annual Report Download - page 88

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80
against us for indemnification, the developers or licensors may not have sufficient resources to, in turn,
indemnify us.
Director IndemnityAgreements. We have entered into indemnification agreements with the members of
our Board of Directors to provide a contractual right of indemnification to our Directors to the extent
permitted by law against any and all liabilities,costs, expenses, amounts paid in settlement and damages
incurred by theDirectors as a result of any lawsuit, or any judicial, administrative or investigative
proceeding in which theDirectors aresued as aresult of their service as members of our Board of
Directors. Theindemnification agreements provide specific procedures and time frames with respect to
requests for indemnification and clarify thebenefits and remedies available to Directors in theevent of an
indemnification request.
Litigation.
WWE related Lawsuits
On October19, 2004, World Wrestling Entertainment, Inc. (“WWE”) filed alawsuit in the United States
District Court for theSouthern District of New York (the “Court”) against JAKKS Pacific, Inc.
(“JAKKS”), THQ, THQ/JAKKS Pacific LLC(the“LLC”), and others, alleging, among other claims,
improper conduct by JAKKS, certain executivesofJAKKS, an employee of theWWE and an agent of the
WWE in granting theWWE videogamelicense to the LLC. Thecomplaint seeksvarious forms of relief,
including monetary damages and a judicial determination that, among other things, the WWE videogame
license is void. On March 30, 2005, WWE filed an amended complaint, adding both new claims and THQ’s
president and chief executive officer, Brian Farrell, as adefendant. In August 2005,the Court directed the
partiesto file briefs on the three federal law claims alleged by thePlaintiffs (i.e., Robinson-Patman, and
Sherman Act, andathreshold issueconcerningthe Plaintiff’s RICO claim).The motions to dismissthe
amended complaint based on theseissues werefully briefedand argued and, on March 31, 2006, theCourt
granted the defendants’motion to dismisstheRobinson-PatmanActandSherman Actclaims and denied
the defendants’motion seeking to dismissthe RICO claims on thebasis of the threshold “enterprise” issue
that was briefed (the “March 31 Order”).
On April7, 2006, the Company and theother defendantssought certification to appeal from theportion of
the March 31 Order denying the motion to dismiss the RICO claim on theone ground that was briefed.
Shortly thereafter, WWE filedamotion for re-argument with respectto theportion of the March 31 Order
thatdismissedtheSherman Act claim and, alternatively, sought judgment with respect to theSherman Act
claim so that it could pursue an immediate appeal. At a court hearing on April 26,2006,the Court
deferred a ruling on the requests for partial judgment and for certification and set briefing schedules with
respect to theremaining grounds for defendants’ motion to dismiss theRICO claim, currently the sole
remaining basis for federal jurisdiction in this action, that were not the subject of the first round of
briefing. The Courtalso established a briefing schedule for WWE’s motion for re-argument of the
dismissal of the Sherman Act claim. The briefingwascompleted in August of 2006 and a hearing was held
in September of 2006. The Court hasnot yet ruledon thepending motions. Discovery in this action
remains stayed.
THQ believes that neither it, nor Brian Farrell, is primarily accused of any wrongdoing in the complaint or
the amended complaint, and believes that either there is no basis for terminatingthe WWE videogame
license, or thatTHQ will be made wholebythose whose conduct is eventually found to be unlawful.We
intendto vigorously protect ourrights and, if necessary, pursueappropriate claims against third parties.
On October 12, 2006, WWEfiled aseparate lawsuit against the Company and the LLC in the Superior
Court of theState of Connecticut, alleging that the Company’s agreements with Yuke’s Co., Ltd.
(“Yukes”), a developer and distributor in Japan, violated aprovisionof the WWE videogame license
prohibiting sublicenses without WWE’s written consent. The lawsuit seeks, among other things, a