THQ 2008 Annual Report Download - page 26

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JAKKS argued that this individual was the only ‘‘shortlist’’ candidate to file certain disclosures within a
time period JAKKS maintains is required by statute. The Court of Appeal granted a temporary stay of the
arbitration on August 30, 2007. On the same day that the Court of Appeal issued its temporary stay,
JAKKS filed a notice with the Superior Court that it was exercising its one-time peremptory challenge
pursuant to the California Code of Civil Procedure to disqualify ‘‘without cause’’ the arbitrator chosen by
the judge. Following a hearing, the Court of Appeal denied JAKKS’s petition in an opinion and order filed
February 28, 2008. The case has now been returned to the trial court for further proceedings. At this time,
we cannot anticipate when the arbitration will commence.
We do not expect the resolution of this dispute to have a material adverse impact on our results of
operations, financial position or cash flows.
Lawsuits related to our historical stock option granting practices
Kukor and Ramsey v. Haller, et. Al. On August 25, 2006, following our announcement of the informal
inquiry by the SEC, a purported shareholder derivative action captioned Ramsey v. Haller et. Al. was filed
against certain of our current and former officers and directors in the California Superior Court, Los
Angeles County. The complaint alleges, among other things, purported improprieties in our issuance of
stock options, breach of fiduciary duty and unjust enrichment. Another lawsuit was subsequently filed by
the same law firm on behalf of another purported shareholder, David Kukor, and the parties stipulated to
consolidate the two actions. On or about April 19, 2007, a Consolidated Shareholder Derivative Complaint
(the ‘‘Consolidated Complaint’’) was filed, alleging the same types of claims and quoting from various
public statements by us since the filing of the original complaint. We are also named as a nominal
defendant. On May 29, 2007, we filed a demurrer to the Consolidated Complaint as a whole. The demurrer
was overruled by the Court on October 11, 2007, and a status conference before the Court is currently
scheduled for May 28, 2008. No discovery has been conducted, nor can it be conducted absent further
court order.
Although litigation is subject to inherent uncertainties, we do not believe the results of the remaining
shareholder action will have a material adverse impact on our consolidated financial position or results of
operations.
Other
We are also involved in additional routine litigation arising in the ordinary course of our business. In the
opinion of our management, none of such pending litigation is expected to have a material adverse effect
on our consolidated financial condition or results of operations.
Terminated Proccedings
SEC Informal Inquiry. On August 4, 2006, we received an informal inquiry from the Securities and
Exchange Commission (‘‘SEC’’) requesting certain documents and information relating to our stock option
grant practices from January 1, 1996 to the present. We fully cooperated with the SEC’s inquiry and on
February 27, 2008 received a notice from the SEC that its investigation of our stock option grant practices
has been completed and that the SEC does not intend to recommend any action against THQ.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year
covered by this Annual Report.
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