THQ 2007 Annual Report Download - page 79

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Thetax benefits associated with certain net operatingloss carryforwards relate to employee stock options.
Pursuant to SFAS No. 109, “Accountingfor Income Taxes” (“SFAS No. 109”), net operating losses have
been reduced by $3.7 million relating to these items which will be credited to additional paid-in capital
when we can reduce ourincome taxes payable.
At March 31, 2007 we hadaccumulatedforeign earnings of $41.5 million. We do not plan to repatriate
these earnings, therefore,no U.S. incometax has been provided on theforeign earnings. Additionally, we
have not tax effected the cumulative translation adjustment as we haveno intention of repatriating foreign
earnings.
13.Employee Defined Contribution Plan
ForourUnited States employeeswesponsor a defined contribution plan underSection401(k) of the
Internal Revenue Code. Theplan allows employees the ability to defer up to 60% of their annual
compensation (up to the annual maximum amount allowablebylaw). Theplanalso provides thatwe will
make amatchingcontribution equaltoeach employee’s deferral,upto 4% of eligible compensation.We
may also contribute funds to the planin theform of a discretionaryprofit-sharing contribution. Employer
contributions under the plan were $4.9 million, $3.5 million and $2.7million in thefiscal years ended
March 31, 2007, 2006 and 2005, respectively.
14.Stock-based Compensation
Prior to July 20, 2006, we utilized two stock option plans: the THQ Inc. Amended and Restated 1997
Stock Option Plan (the “1997 Plan”) and theTHQ Inc. Third Amended andRestated Nonexecutive
Employee Stock Option Plan (the“NEEP Plan”). The1997 Planprovided for the issuance of up to
14,357,500 shares available for employees, consultantsand non-employee directors, and the NEEP plan
provided for theissuance of up to 2,142,000 shares available for nonexecutive employees of THQ of which
no morethan 20% was availablefor awards to ournonexecutive officers and no more than 15% was
availablefor awards to the nonexecutiveofficers or generalmanagers of oursubsidiariesor divisions. The
1997 Planand theNEEP Plan were cancelled on July 20, 2006, thesame dayTHQ’s stockholdersapproved
the THQ Inc.2006 Long-Term Incentive Plan (“LTIP”).
Under the1997 Plan, we granted incentive stock options, non-qualified stock options, performance
accelerated restricted stock (“PARS”) and performance accelerated restricted stock units (“PARSUs”).
TheNEEP Plan provided for thegrant of only non-qualified stock options to non-executive officers of the
Company. The LTIP provides for the grant of stockoptions (including incentive stock options), stock
appreciation rights (SARs), restricted stock awards, other stock unit awards, and performance awards (in
the form of performance shares or performanceunits) to eligibledirectors andemployees of, and
consultants or advisors to, the Company. Subject to certain adjustments, thetotal numberofshares of
THQ commonstock that may be issued under the LTIP shallnot exceed 6,000,000 shares. Shares subject
to awards of stock options or SARs willcount as one sharefor every one sharegranted against theshare
limit, and allother awards willcount as 1.6 shares forevery one granted against the share limit. As of
March 31, 2007, we had 5,692,908shares under the LTIP available forgrant.
Thepurchase price per share of common stock purchasable upon exercise of each option granted under
the 1997 Plan,the NEEP Plan andthe LTIP may not be less thanthe fair market value of such share of
common stock on thedate that such option is granted. Generally, options granted under ourplans become
exercisable over threeyears and expire on thefifth anniversary of the grant date. PARS andPARSUs that
have been granted to our officers under the1997Planand the LTIP vest with respect to 100% of the
shares subject to theaward on the fifth anniversary of the grant date; provided, however, 20% of the shares
subjectto each award will vest on each of the first through fourth anniversaries of the grant date if certain
performance targets forthe Company are attained each fiscal year. To date,no vesting of PARS or