Electronic Arts 2007 Annual Report Download - page 130

The amounts represented in the table above reflect our minimal cash obligations for the respective fiscal years,
but do not necessarily represent the periods in which they will be expensed in our Consolidated Financial
Statements.
Lease commitments include contractual rental commitments of $15 million under real estate leases for
unutilized office space resulting from our restructuring activities. These amounts, net of estimated future
sub-lease income, were expensed in the periods of the related restructuring and are included in our accrued
and other current liabilities reported on our Consolidated Balance Sheets as of March 31, 2007. See Note 6 of
the Notes to Consolidated Financial Statements.
Related Person Transaction
On June 24, 2002, we hired Warren C. Jenson as our Executive Vice President, Chief Financial and
Administrative Officer and agreed to loan him $4 million to be forgiven over four years based on his
continuing employment. The loan did not bear interest. On June 24, 2004, pursuant to the terms of the loan
agreement, we forgave $2 million of the loan and provided Mr. Jenson approximately $1.6 million to offset
the tax implications of the forgiveness. On June 24, 2006, pursuant to the terms of the loan agreement, we
forgave the remaining outstanding loan balance of $2 million. No additional funds were provided to offset the
tax implications of the forgiveness of the $2 million balance.
OFF-BALANCE SHEET COMMITMENTS
In February 1995, we entered into a build-to-suit lease (“Phase One Lease”) with a third-party lessor for our
headquarters facilities in Redwood City, California (“Phase One Facilities”). The Phase One Facilities
comprise a total of approximately 350,000 square feet and provide space for sales, marketing, administration
and research and development functions. In July 2001, the lessor refinanced the Phase One Lease with
Keybank National Association through July 2006. The Phase One Lease expires in January 2039, subject to
early termination in the event the underlying financing between the lessor and its lenders is not extended.
Subject to certain terms and conditions, we may purchase the Phase One Facilities or arrange for the sale of
the Phase One Facilities to a third party.
Pursuant to the terms of the Phase One Lease, we have an option to purchase the Phase One Facilities at any
time for a purchase price of $132 million. In the event of a sale to a third party, if the sale price is less than
$132 million, we will be obligated to reimburse the difference between the actual sale price and $132 million,
up to a maximum of $117 million, subject to certain provisions of the Phase One Lease, as amended.
On May 26, 2006, the lessor extended its loan financing underlying the Phase One Lease with its lenders
through July 2007, and on May 14, 2007, the lenders extended this financing again for an additional year
through July 2008. We may request, on behalf of the lessor and subject to lender approval, an additional one-
year extension of the loan financing between the lessor and the lenders. In the event the lessor’s loan financing
with the lenders is not extended, we may loan to the lessor approximately 90 percent of the financing, and
require the lessor to extend the remainder through July 2009; otherwise the lease will terminate. We account
for the Phase One Lease arrangement as an operating lease in accordance with SFAS No. 13, “Accounting for
Leases”, as amended.
In December 2000, we entered into a second build-to-suit lease (“Phase Two Lease”) with Keybank National
Association for a five and one-half year term beginning in December 2000 to expand our Redwood City,
California headquarters facilities and develop adjacent property (“Phase Two Facilities”). Construction of the
Phase Two Facilities was completed in June 2002. The Phase Two Facilities comprise a total of approximately
310,000 square feet and provide space for sales, marketing, administration and research and development
functions. Subject to certain terms and conditions, we may purchase the Phase Two Facilities or arrange for
the sale of the Phase Two Facilities to a third party.
Pursuant to the terms of the Phase Two Lease, we have an option to purchase the Phase Two Facilities at any
time for a purchase price of $115 million. In the event of a sale to a third party, if the sale price is less than
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