Electronic Arts 2001 Annual Report Download - page 50

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48
2001 AR
Total future minimum lease commitments as of March 31, 2001 are:
(In thousands)
Year Ended March 31,
2002 $ 20,905
2003 13,887
2004 10,542
2005 8,279
2006 7,874
Thereafter 16,526
$ 78,013
Total rent expense for all operating leases was $27,526,000, $23,591,000 and $19,480,000, for the fiscal years
ended March 31, 2001, 2000 and 1999, 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.
The Company is required to pay $50,000,000 to AOL as a carriage fee under the AOL agreement. Of this amount,
$25,000,000 was paid upon signing the agreement and the remainder is due in four equal installments on the first
four anniversaries of the initial payment. During fiscal 2001, the Company paid AOL the first annual carriage pay-
ment of $6,250,000. The Company is also required to pay to AOL $31,000,000 as an advance of a minimum guar-
anteed revenue share for revenues generated by subscriptions and other certain commercial transactions on the
EA.com site. Of this amount $11,000,000 was paid upon signing of the agreement and the remainder is due in four
equal annual installments on the first anniversary of the initial payment. During fiscal 2001, the Company paid
AOL the first annual revenue share payment of $5,000,000. The fair value of the payments made under the AOL
agreement was determined by an independent valuation and the resulting amounts are being amortized (begin-
ning with the site launch) over the remaining term of the five-year agreement. Advances of $41,462,000 and
$35,395,000 are included in other long-term assets as of March 31, 2001 and 2000, respectively.
The Company also committed to spend $15,000,000 in offline media advertisements promoting its games on
AOL during the term of the agreement.
SALE OF CLASS B COMMON STOCK AND WARRANT TO AOL In connection with the agreement with AOL, the
Company sold shares of Class B common stock to AOL (the “AOL Shares”) representing 10 percent of the initial
equity value attributable to EA.com valued at $18,700,000.
In addition to the AOL Shares, the Company sold AOL a warrant (the “AOL Warrant”) to purchase shares of Class
B common stock representing an additional 5 percent of the initial equity value attributable to EA.com for
$1,300,000. The aggregate exercise price of the AOL Warrant will be $40,000,000. The AOL Warrant expires at the
latest at the fifth anniversary of its date of issuance, and under certain conditions may expire at an earlier date.
AOL EXCHANGE RIGHTS AOL may exchange their Class B common stock shares for a number of Class A common
stock based on the ratio of per share price paid by AOL for the Class B stock relative to $41.89. As of March 31,
2001, none of the AOL shares have been exchanged for Class A common stock.