2K Sports 2009 Annual Report Download - page 99

October 30, 2008 to consider the exclusion of certain expert testimony and a second hearing was held on
December 18, 2008. On July 29, 2009, the Court entered an order excluding the expert testimony and
granting summary judgment to the Company. Plaintiff Steve Strickland filed a Notice of Appeal on
August 10, 2009. We believe that the claims are without merit and that this action is similar to lawsuits
brought and dismissed by courts in other jurisdictions.
We intend to vigorously defend all of the above pending matters and, with respect to the derivative actions,
we have been advised that the individual defendants will vigorously defend such actions.
12. COMMITMENTS AND CONTINGENCIES
A summary of annual minimum contractual obligations and commitments as of October 31, 2009 is as
follows:
Licensing Convertible
and Software Operating Distribution Notes Convertible
Fiscal year ending October 31, Marketing Development Leases Services Interest Notes Total
2010 $ 59,193 $30,496 $17,425 $2,750 $ 6,038 $ — $115,902
2011 64,877 5,286 14,801 1,500 6,038 — 92,502
2012 65,598 — 12,498 1,500 6,038 — 85,634
2013 1,900 — 10,093 1,250 6,038 — 19,281
2014 1,900 — 6,273 — 6,038 138,000 152,211
Thereafter — — 4,549 — — — 4,549
Total $193,468 $35,782 $65,639 $7,000 $30,190 $138,000 $470,079
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, 2009, $95 of our
guaranteed minimum licensing and marketing commitments were recorded in our consolidated balance
sheet because the licensor did not have any significant remaining performance obligation to us. Licensing
and marketing commitments expire at various times through September 2014 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 payments to developers under several software development agreements that expire at various
times through June 2011. Our aggregate outstanding software development commitments assume
satisfactory performance by third party software developers.
Lease Commitments: Our offices are occupied under non-cancelable operating leases expiring at various
times through January 2017. We also lease certain furniture, equipment and automobiles under
non-cancelable leases expiring through November 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 and recognized
on a straight-line basis over the related lease term. Rent expense amounted to $14,226, $15,924 and
$16,459 for the years ended October 31, 2009, 2008 and 2007, respectively.
Distribution Services: We entered into an Inventory Management Services Agreement to outsource
non-core elements (shipping, receiving, warehouse management and related functions) of our distribution
business which expires in September 2013.
Contingent Consideration: Part of our business acquisition strategy has been to make a portion of the
purchase price of certain acquisitions dependent on product delivery or future product sales. The amounts
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