According to the docket, on July 1, 2003, the Court entered the Orders approving the plan of allocation of the settlement proceeds and awarding attorney fees and reimbursement of expenses. In addition, Lead Plaintiffs James Baehler, Anthony Caggiano, Thomas Wiener David Kuhlber, Phillip Little and Jon McNamara were awarded $17,900, $11,000, $8,572.50 $9,275,$10,000 and $6,000, respectively, as reimbursement for costs and expenses related to their representation of the class. The Court further entered the Final Judgment and Order of dismissal with prejudice, and the case was terminated.
By the Notice of Pendency and Proposed Settlement, the parties reached an agreement-in-principle to settle the action. The proposed settlement creates a fund in the amount of $10,150,000 in cash and will include interest that accrues on the fund prior to distribution. Based on the Lead Plaintiffs' estimate of the number of shares entitled to participate in the settlement, and the anticipated number of claims to be submitted by Settlement Class Members, the average distribution per share would be approximately $0.83 before deduction of court approved fees and expenses.
If the settlement is approved by the Court, counsel for the plaintiffs will apply to the Court for attorneys' fees of 30% of the settlement proceeds and reimbursement of out-of pocket expenses not to exceed $780,000 to be paid from the settlement proceeds. If the amount requested by counsel is approved by the Court, the average cost per share of common stock would be $0.31. The average cost per share could vary depending on the number of shares for which claims are filed.
As reported by the Company’s FORM 10-K for the fiscal year ended December 31, 2002, the Company and certain of its officers and directors are defendants in a class action lawsuit filed in the United States District Court for the Central District of California entitled In re THQ Inc. Securities Litigation, Master File No. CV-00-1783-AHM. On December 20, 2000, the court dismissed this action with prejudice as to all of the defendants. On April 23, 2001, the United States District Court for the Central District of California modified its December 20, 2000 order and permitted plaintiffs to file a third amended complaint on that date. Defendants filed an answer denying all of the material allegations of the third amended complaint and asserting legal and factual defenses. The third amended complaint alleges that defendants violated Rule 10b-5 and Section 20(a) of the Securities Exchange Act of 1934, including allegations that defendants manipulated our stock price; distributed false and misleading information concerning revenue recognition, forecasts and earnings estimates; selectively disclosed material information; and engaged in insider trading. The complaint seeks an unspecified amount in damages. As of December 31, 2002, the Company entered into a settlement agreement with the plaintiffs. While the Company continue to deny plaintiffs’ allegations, the Company agreed to pay $10.2 million under the terms of the settlement agreement to resolve all claims by plaintiffs against all defendants. The District Court granted preliminary approval of the settlement on March 17, 2003, and final approval is currently pending. The Company’s directors’ and officers’ insurance coverage should reimburse us $10 million towards the settlement agreement and related legal fees.
The original complaint charges THQ and certain of its officers and directors with violations of the Securities Exchange Act of 1934. THQ develops, publishes and distributes interactive entertainment software worldwide for a variety of hardware platforms including PC CD-ROM and those manufactured by Sega, Nintendo and Sony. The complaint alleges that during the Class Period, THQ falsely represented the state of its business, financial results, and prospects causing its stock price to be inflated to as high as $38-1/4 (split-adjusted). The Individual Defendants named herein took advantage of this inflation and sold 522,912 shared (split-adjusted) of their THQ stock for $14.7 million. Later, THQ selectively disclosed to certain analysts that its first half 2000 results would be much lower than previously represented. After this information was belatedly disseminated to the market, THQ's stock then dropped to as low as $17-3/8 per share.