THQ 2009 Annual Report Download - page 101

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would represent significantly excessive compensation to JAKKS for the First Subsequent Distribution
Period, we are not able to predict the outcome of the arbitration or otherwise estimate the amount of the
preferred payment for the First Subsequent Distribution Period. Accordingly, we are currently accruing for
a preferred payment to JAKKS at the previous rate. However, we have advised JAKKS that we do not
intend to make any payment until the amount of the preferred payment payable to JAKKS for the First
Subsequent Distribution Period is agreed or otherwise determined as provided in the operating agreement.
We do not expect the resolution of this dispute to have a material adverse impact on our reported financial
results.
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 Proceedings
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 alleged, 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 were also named as a nominal
defendant. On May 29, 2007, we filed a demurrer to the Consolidated Complaint as a whole, which was
denied. The parties reached a settlement in this matter, which was approved by the Court on February 25,
2009, pursuant to which we agreed to pay a specified amount for plaintiffs’ counsel’s attorneys fees and to
implement certain corporate governance reforms. Most of the attorney fee payment has been paid by our
insurance carrier. The settlement of this action did not have a material adverse impact on our consolidated
financial position or results of operations.
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