2K Sports 2008 Annual Report Download - page 94

investigation focused on options backdating. We have fully cooperated and provided the documents and
information called for by the subpoenas.
SEC Investigation. In July 2006, we received notice from the SEC that it was conducting an informal
non-public investigation of certain stock option grants made from January 1997 to 2006 and in April 2007
we received notice from the SEC that it was conducting a formal investigation of such stock option grants.
As a result of the Special Litigation Committee’s internal review of our option grants, in February 2007 we
restated our financial statements for prior periods in our Annual Report on Form 10-K for the fiscal year
ended October 31, 2006. In August 2007, we received a ‘‘Wells’’ notice from the Staff of the Division of
Enforcement of the SEC informing us of its intention to request authority to file charges, and to seek a
civil monetary penalty in connection with its investigation. We submitted a response to the Staff’s notice in
September 2007, urging that no charges should be brought against us. We have continued to cooperate
with the Staff and we continue to expect to resolve this investigation by means of a settlement rather than a
contested litigation of charges.
Tax Inquiries. We have been in contact with and have received requests for information from several
taxing authorities for records relating to the grant and exercise of options and tax deductions taken by us
from October 2000 to October 2006.
13. COMMITMENTS AND CONTINGENCIES
A summary of annual minimum contractual obligations and commitments as of October 31, 2008 is as
follows:
Licensing
and Software Operating Distribution Line of
Fiscal year ending October 31, Marketing Development Leases Services credit Total
2009 $ 65,848 $51,524 $16,156 $ 3,833 $ — $137,361
2010 54,569 13,805 13,325 2,750 — 84,449
2011 59,659 1,120 11,398 1,500 — 73,677
2012 53,008 — 9,496 1,500 70,000 134,004
2013 — — 7,315 1,250 — 8,565
Thereafter — — 3,234 — — 3,234
Total $233,084 $66,449 $60,924 $10,833 $70,000 $441,290
Licensing and Marketing Agreements: Our licensing commitments primarily consist of obligations to
holders of intellectual property rights for use of their trademarks, copyrights, technology or other
intellectual property rights in the development of our products. As of October 31, 2008, $216 of our
guaranteed minimum licensing and marketing commitments were recorded in our consolidated balance
sheet because the licensor did not have any significant performance obligation to us. Licensing and
marketing commitments expire at various times through October 2012 and primarily reflect our
agreements with major sports leagues and players’ associations. Certain of our licensing and marketing
agreements also contain provisions that would impose penalties if we fail to meet agreed upon software
release dates.
Software Development Agreements: We make payments to third party software developers that include
contractual advances and royalties under several software development agreements that expire at various
times through November 2010. Our aggregate outstanding software development commitments assume
satisfactory performance by third party software developers.
Lease Commitments: Our office and warehouse facilities are occupied under non-cancelable operating
leases expiring at various times through June 2015. We also lease certain furniture, equipment and
automobiles under non-cancelable leases expiring through March 2013. Some of the leases have fixed rent
increases and also include inducements to enter into the lease. The effect of such amounts are deferred
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