8-KMaterial AgreementsFinancial EventsExhibits & Filings

ELECTRONIC ARTS INC. 8-K Report, Material Agreement (Apr 11, 2008)

Filed April 11, 2008For Securities:EA

Summary

This Form 8-K filing by Electronic Arts Inc. (EA) primarily concerns the extension of loan financing for its Redwood City, California headquarters facilities, divided into Phase One and Phase Two leases. The company, acting as guarantor, has entered into Fourth Omnibus Amendments for both lease agreements, extending the underlying financing through July 16, 2009. These amendments also involve modifications to the 'Quick Ratio' financial covenant and the definition of 'Cash Equivalents' used in compliance calculations. These extensions provide continued operational stability for EA's headquarters, a crucial hub for its sales, marketing, administration, and research and development functions. Investors should note that these leases are accounted for as operating leases. The report also reiterates EA's options to purchase the facilities or facilitate their sale to a third party, with specific financial obligations outlined in each scenario.

Key Highlights

  • 1EA has extended the loan financing for its Redwood City headquarters facilities (Phase One and Phase Two leases) through July 16, 2009.
  • 2The extensions were secured via Fourth Omnibus Amendments to the lease agreements.
  • 3These amendments modify the 'Quick Ratio' financial covenant and the definition of 'Cash Equivalents' for compliance purposes.
  • 4EA continues to account for these leases as operating leases.
  • 5The company retains the option to purchase the headquarters facilities for $132 million (Phase One) and $115 million (Phase Two), or to arrange their sale to a third party.
  • 6In the event of a third-party sale below the option prices, EA may have to reimburse the lessor for a portion of the difference.

Frequently Asked Questions

The primary purpose of this 8-K filing is to report the extension of loan financing for Electronic Arts Inc.'s (EA) Redwood City headquarters facilities. This extension ensures the continued operability of these key facilities through July 2009.

The 'Quick Ratio' is a financial covenant that EA must satisfy under its lease agreements. 'Cash Equivalents' is a term defined within the lease agreements and used to determine EA's compliance with the 'Quick Ratio'. The amendments modify these specific terms and their calculation methods.

EA leases its Redwood City headquarters facilities under two 'build-to-suit' leases (Phase One and Phase Two). While EA has options to purchase these facilities, they are currently accounted for as operating leases.

If EA arranges a sale of the Phase One facilities to a third party for less than $132 million, it may be obligated to reimburse the difference up to $117 million. For Phase Two, if sold for less than $115 million, EA may have to reimburse the difference up to $105 million, subject to lease terms.