Electronic Arts 2004 Annual Report Download - page 104

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Due to the net loss attributable for the twelve months ended March 31, 2003 and 2002 on a diluted basis to
Class B Stockholders, all stock options have been excluded from the Diluted EPS calculation as their
inclusion would have been antidilutive. Had net income been reported for these periods, an additional
1,405,000 and 842,000 shares would have been added to diluted potential common shares for Class B common
stock for the twelve months ended March 31, 2003 and 2002, respectively.
(17) RELATED PARTY TRANSACTIONS
Transactions with Executive OÇcers
On June 24, 2002, we agreed to loan Warren Jenson $4,000,000, to be forgiven over four years based on his
continuing employment. Two million dollars of the note will be forgiven after two years employment (at
which time we will provide Mr. Jenson the funds required to oÅset the tax implications of the forgiveness),
and the remainder forgiven after four years. No additional funds will be provided to oÅset the tax
implications of the forgiveness of the second two million dollars. The loan does not bear interest. The entire
balance of the loan was outstanding as of March 31, 2004.
In April 2002, we agreed to pay certain taxes incurred by Bruce McMillan, Executive Vice President, Group
Studio Head of EA Canada, arising from his temporary employment with us in the United Kingdom.
Mr. McMillan agreed to reimburse us for those payments upon receipt of his corresponding tax refund from
the Canadian taxing authorities. We subsequently paid approximately $168,704 and $32,931 in October 2002
and April 2003, respectively, to the UK Inland Revenue for taxes incurred by Mr. McMillan. In May 2003,
Mr. McMillan became an executive oÇcer of Electronic Arts. As of January 22, 2004, Mr. McMillan had
repaid us the entire amount of the tax payments we made on his behalf.
In May and June 2000, the following executive oÇcers entered into secured full recourse promissory notes to
purchase EA's Class B common stock under Restricted Stock Purchase Agreements: Mr. John Riccitiello,
$449,500; Mr. Don Mattrick, $224,750; Mr. E. Stanton McKee Jr., $134,850; Mr. J. Russell (Rusty)
RueÅ, Jr., $134,850, and Mr. David Carbone, $44,950. The terms of the notes were Ñve years and the interest,
set at a market rate as determined under guidelines set forth in the Internal Revenue Code and state statutes,
was due and payable quarterly. In December 2002 and January 2003, Mr. Riccitiello, Mr. Mattrick,
Mr. McKee, Mr. RueÅ and Mr. Carbone paid in full all principal and accrued interest owed under these notes.
News America Corporation Exchange
On February 7, 2000, we acquired Kesmai from News America Corporation (""News Corp'') in exchange for
$22.5 million in cash and approximately 412,000 shares of our existing common stock valued at $8.6 million.
Under the original agreements, we agreed to spend $12.5 million through the period ended June 1, 2002 in
advertising with News Corp or any of its aÇliates. In addition, under these agreements if certain conditions
were met, including that a qualiÑed public oÅering of Class B common stock did not occur within twenty-four
months of News Corp's purchase of such shares and all of the Class B outstanding shares had been
converted to Class A common stock, then (1) News Corp would have the right to (i) exchange Class B
common stock for approximately 412,000 shares of Class A common stock, and (ii) receive cash from us in
the amount of $9.6 million, and (2) we would agree to spend an additional $11.7 million in advertising with
News Corp and its aÇliates.
On August 30, 2002, we entered into a new agreement with News Corp under which (i) News Corp
exchanged its 2,000,000 shares of Class B common stock for 412,908 shares of Class A common stock and
(ii) we paid News Corp $1.0 million in cash and committed to spend an additional $17.0 million in
advertising with News Corp and its aÇliates through the period ended December 31, 2006. All of our other
obligations to News Corp under the original agreements were terminated. As of March 31, 2004, we had
satisÑed our advertising commitment with News Corp in full.
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