THQ 2011 Annual Report Download - page 70

pay $13.2 million to WWE and $20.0 million to Jakks in future installments; and dissolved the LLC as of December 31, 2009.
To determine the appropriate accounting for the December 22, 2009 settlement agreements, we identified each item given and
received to determine whether the items should be recognized as an asset or expense. We determined that the only item received
by THQ in the settlement agreements which meets the definition of an asset that has value to a marketplace participant was the
new WWE license. The fair value of the new WWE license was determined using level 3 valuation inputs; specifically, a discounted
future cash flow over the eight-year term of the new license and we concluded that the contractual rate contained in the new WWE
license approximated fair value. Due to the numerous litigation claims settled and the added complexity of multiple parties
involved, we determined that we were not able to reliably estimate the fair value of the remaining litigation components of the
settlement. The litigation components were valued as the residual value remaining after determining the fair value of the asset
received. As a result, in the period ended December 31, 2009, we recorded the one-time charge of $29.5 million, representing the
present value of the cash payments contained in the settlements, less amounts previously accrued or allocated to the asset received
(the residual value).
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Options and awards outstanding at March 31, 2011 were granted under the THQ Inc. Amended and Restated 1997 Stock Option
Plan (the "1997 Plan") or the THQ Inc. 2006 Long-Term Incentive Plan ("LTIP"). The 1997 Plan provided for the issuance of up
to 14,357,500 shares available for employees, consultants and non-employee directors, and the NEEP Plan provided for the issuance
of up to 2,142,000 shares available for nonexecutive employees of THQ of which no more than 20% was available for awards to
our nonexecutive officers and no more than 15% was available for awards to the nonexecutive officers or general managers of
our subsidiaries or divisions. The 1997 Plan was cancelled on July 20, 2006, the same day THQ's stockholders approved the LTIP.
Under the 1997 Plan, we granted incentive stock options, non-qualified stock options, performance accelerated restricted stock
("PARS") and performance accelerated restricted stock units ("PARSUs"). The LTIP provides for the grant of stock options
(including incentive stock options), stock appreciation rights ("SARs"), restricted stock awards, restricted stock units ("RSUs"),
and other performance awards (in the form of performance shares or performance units) to eligible directors and employees of,
and consultants or advisors to, the Company. Subject to certain adjustments, as of March 31, 2011, the total number of shares of
THQ common stock that may be issued under the LTIP shall not exceed 11,500,000 shares. Shares subject to awards of stock
options or SARs will count as one share for every one share granted against the share limit, and all other awards will count as 2.17
shares for every one granted against the share limit. As of March 31, 2011, we had 4,928,657 shares available for grant under the
LTIP.
The purchase price per share of common stock purchasable upon exercise of each option granted under the 1997 Plan and the
LTIP may not be less than the fair market value of such share of common stock on the date that such option is granted. Generally,
options granted under our plans become exercisable over three years and expire on the fifth anniversary of the grant date. Other
vesting terms are as follows:
• PARS and PARSUs that have been granted to our officers under the 1997 Plan and the LTIP vest with respect to 100%
of the shares subject to the award on the fifth anniversary of the grant date subject to continued employment of the grantee;
provided, however, 20% of the shares subject to each award will vest on each of the first through fourth anniversaries of
the grant date if certain performance targets for the Company are attained each fiscal year.
• PARSUs granted to our non-employee directors under the 1997 Plan are currently fully vested.
• Deferred Stock Units ("DSUs") granted to our non-employee directors under the LTIP vest monthly over a twelve month
period; provided, however, DSUs may not be released to a director until thirteen months after the date of grant. DSUs
granted to our non-employee directors prior to July 31, 2008 under the LTIP vested immediately but were also subject
to a thirteen-month release restriction.
• RSUs granted to our employees do not carry any performance or acceleration conditions. Certain awards vest with respect
to 100% of the shares on the third anniversary of the grant date and other awards vest at each anniversary of the grant
date over a three-year period, all subject to continued employment of the grantee.
The fair value of our restricted stock and restricted stock units is determined based on the closing trading price of our common
stock on the grant date. The fair value of PARS, PARSUs, DSUs and RSUs granted is amortized over the vesting period.
Beginning in March 2007, we offered our non-executive employees the ability to participate in an employee stock purchase plan,
as amended and restated ("ESPP"). Under the ESPP, up to 1,500,000 shares of our common stock may be purchased by eligible
employees during six-month offering periods that commence each March 1 and September 1, or the first business day thereafter
(each, an "Offering Period"). The first business day of each Offering Period is referred to as the "Offering Date." The last business
day of each Offering Period is referred to as the "Purchase Date." Pursuant to our ESPP, eligible employees may authorize payroll
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