THQ 2005 Annual Report Download - page 101

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holder of a Right will be entitled to purchase, at the exercise price, a number of shares of common stock of
the acquirer having a current market value equal to two times the exercise price of the Right.
The Board may redeem the Rights at a redemption price of $.001 per Right, subject to adjustment, at any
time until 10 days after the acquisition of 15% or more of the common stock of THQ. At any time after a
person or group has acquired 15% or more but less than50% of the common stock, the Board may
exchange all or part of the Rights for shares of common stock at an exchange ratio of one share of
common stock for each Right or one one-thousandth (1 ⁄ 1000) of a share of Series A Junior Participating
Preferred Stock per Right, subject to adjustment. The Rights expire on June 21, 2010.
15.Commitments and Contingencies
A summary of annual minimum contractual obligations and commercial commitments as of March 31,
2005 is as follows (in thousands):
Contractual Obligations and Commercial Commitments
License /
Fiscal Software
Years Ending Development Letters of
March 31, Commitments(1) Advertising(2) Leases(3) Credit(4)Other(5) Total
2006 .................... $82,157 $ 16,362 $7,65 9$ 3 ,800 $ 2,000$
111,978
2007 .................... 54,221 5,7968,482 —2, 0007
0,499
2008 .................... 43,424 2,4988,751 ——54,673
2009 .................... 37,000 2,3358,357 ——47,692
2010 .................... 12,000 1,7527,515 ——21,267
Thereafter............... 22,000 —28,586 —— 50,586
$ 250,802$ 2 8,743 $ 69,350 $ 3,800$ 4 ,000 $356,695
(1) Licenses and Software Development. We enter into contractual arrangements with third parties for
the rights to intellectual property and for the development of products. Under these agreements, we
commit to provide specified payments to an intellectual property holder or developer. Assumingall
contractual provisions are met, the total future minimum contract commitment for contracts in place
as of March 31, 2005 are approximately $250.8 million. License/software development commitments
included $78.3 million of commitments to licensors that have been included in our consolidated
balance sheet as of March 31, 2005 because the licensors do not have any significant performance
obligations to us. These commitments were included in both current and long-term licenses and
accrued royalties.
(2) Advertising.We have certain minimum advertising commitments under most of our major license
agreements. These minimum commitments generally range from 2% to 12% of net sales related to the
respective license. We estimate that our minimum commitment for advertising in fiscal 2006 will be
$16.4 million.
(3) Leases. We are committed under operating leases withlease termination dates through 2015. On
December 30, 2004, we entered into a lease for premises located in Agoura Hills, California, which we
intend to use as our corporate headquarters. Our current corporate headquarters lease expires in
October 2005. Most of our leases containrent escalations.
Rent expense was $6.0 million, $4.5 million, $1.1 million and $3.4 million for the fiscal years ended
March31, 2005 and 2004, Transition 2003 and the year ended December 31, 2002, respectively.
(4) Letters of Credit. We had approximately $3.8 million in obligations under our credit facility with
respect to letters of credit and no outstanding borrowings.