Electronic Arts 2000 Annual Report Download - page 51

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(4) COMMITMENTS
LEASE OBLIGATIONS The Company leases certain of its current facilities and certain equipment under non-cancelable operat-
ing lease agreements. The Company is required to pay property taxes, insurance and normal maintenance costs for certain of
its facilities and will be required to pay any increases over the base year of these expenses on the remainder of the
Company’s facilities.
In February 1995, the Company entered into a master operating lease, as subsequently amended, for land and a building to
be constructed in Redwood City, California. The initial term of the lease is for a period of three years from November 30, 1998.
Monthly lease payments are based upon the London InterBank Offered Rate. The Company has the option to purchase the
property for the unamortized financed balance at any time after the non-cancelable lease term, or it may terminate the lease at
any time after the non-cancelable term by arranging a third party sale or by making a termination payment. Should the
Company elect to terminate the lease, it will guarantee a residual value of up to 85% of the unamortized value of the property.
As part of the agreement, the Company must also comply with certain financial covenants.
Total future minimum lease commitments as of March 31, 2000 are:
Year Ended March 31:
(in thousands)
2001 $ 22,760
2002 16,477
2003 7,266
2004 5,681
2005 3,745
Thereafter 7,719
$63,648
Total rent expense for all operating leases was $23,591,000, $19,480,000 and $13,842,000, for the fiscal years ended March
31, 2000, 1999 and 1998, respectively.
(5) AMERICA ONLINE, INC. (“AOL”) AGREEMENT
In November 1999, Electronic Arts Inc., EA.com and AOL entered into a five year agreement which establishes the basis for
EA.com’s production of a games site on the world wide web that will be available to AOL subscribers and to users of other
branded AOL properties. Under this agreement, EA.com is required to launch its site no later than June 1, 2000, although, under
certain circumstances described in the agreement, this date can be extended to September 1, 2000. If the site is not launched
within the specified time frame, and if prescribed additions to the site are not achieved within a specified time frame or the site
does not contain content as required under the agreement, then, under certain circumstances, AOL would have the ability to
terminate the agreement.
EA 2000 AR
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS