THQ 2012 Annual Report Download - page 80

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minimum contract commitments for such agreements in place as of March 31, 2012 are $128.2 million. License
commitments in the table above include $59.9 million of commitments payable to licensors that are included in both
"Accrued and other current liabilities" and "Other long-term liabilities" in our March 31, 2012 consolidated balance sheet
because the licensors do not have any remaining significant performance obligations.
(2) Advertising. We have certain minimum advertising commitments under many of our major license agreements. These
minimum commitments generally range from 3% to 10% of net sales related to the respective license. Included in the table
above in fiscal 2013, fiscal 2014, fiscal 2015, fiscal 2016, fiscal 2017, and thereafter, are advertising commitments of $1.3
million, $2.2 million, $2.3 million, $2.4 million, $2.5 million, and $4.7 million, respectively, for a total of $15.4 million of
advertising commitments that were cancelled in connection with the termination of the license agreement we had with
Zuffa to make video games based on their UFC content (see "Note 22 — Subsequent Events").
(3) Leases. We are committed under operating leases with lease termination dates through 2020. Most of our leases contain
rent escalations. Of these obligations, $1.8 million and $3.1 million are accrued and classified as "Accrued and other
current liabilities" and "Other long-term liabilities," respectively, in our March 31, 2012 consolidated balance sheet due to
the abandonment of certain lease obligations in connection with our realignment plans (see "Note 5 — Licenses and
Software Development"). We expect future sublease rental income under non-cancellable agreements of approximately
$2.5 million; this income is not contemplated in the lease commitments shown in the table above. Rent expense was $12.1
million, $13.5 million, and $13.9 million for fiscal years 2012, 2011, and 2010, respectively.
(4) Debt. We issued the Notes on August 4, 2009. The Notes pay interest semiannually, in arrears on February 15 and
August 15 of each year, beginning February 15, 2010, through maturity and are convertible at each holder's option at any
time prior to the close of business on the trading day immediately preceding the maturity date. Absent any conversions or
required repurchases of the Notes, we expect to pay $5.0 million in each of the fiscal years 2013 and 2014, and $2.5
million in fiscal 2015, for an aggregate of $12.5 million in interest payments over the remaining term of the Notes (see
"Note 9 —Debt").
(5) Other. As discussed more fully in "Note 14 — Joint Venture and Settlement Agreements," amounts payable to Jakks
totaling $8.0 million are reflected in the table above. The present value of these amounts is included in "Accrued and other
current liabilities" and "Other long-term liabilities" in our consolidated balance sheet at March 31, 2012 (see "Note 4 —
Balance Sheet Details"). The remaining other commitments included in the table above are also included as current or
long-term liabilities in our March 31, 2012 consolidated balance sheet.
(6) We have omitted unrecognized tax benefits from this table due to the inherent uncertainty regarding the timing and amount
of certain payments related to these unrecognized tax benefits. The underlying positions have not been fully developed
under audit to quantify at this time. At March 31, 2012, we had $3.8 million of unrecognized tax benefits. See "Note 16—
Income Taxes" for further information regarding the unrecognized tax benefits.
Manufacturer Indemnification. We must indemnify the platform manufacturers (Microsoft, Nintendo, Sony) of our games with
respect to all loss, liability and expenses resulting from any claim against such manufacturer involving the development,
marketing, sale or use of our games, including any claims for copyright or trademark infringement brought against such
manufacturer. As a result, we bear a risk that the properties upon which the titles of our games are based, or that the
information and technology licensed from others and incorporated into the products, may infringe the rights of third parties.
Our agreements with our third-party software developers and property licensors typically provide indemnification rights for us
with respect to certain matters. However, if a manufacturer brings a claim against us for indemnification, the developers or
licensors may not have sufficient resources to, in turn, indemnify us.
Indemnity Agreements. We have entered into indemnification agreements with the members of our Board of Directors, our
Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of indemnification to such persons to the
extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by any
such person as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued
as a result of service as a member of our Board of Directors, as Chief Executive Officer or as Chief Financial Officer. The
indemnification agreements provide specific procedures and time frames with respect to requests for indemnification and
clarify the benefits and remedies available to the indemnitees in the event of an indemnification request.
Litigation. We are subject to ordinary routine claims and litigation incidental to our business. We do not believe that any
liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would have
a material adverse effect on our financial position or results of operations.