Electronic Arts, Inc. and Subsidiaries - Page 18




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               Various EA corporate officers served as directors or                   
          corporate officers of EAPR.  As with various officers and                   
          directors of other EA affiliates, they were not separately                  
          compensated for serving as officers of EAPR.  The compensation              
          paid to EA’s officers (including those who were officers of EAPR)           
          was included in EA’s general administrative expense.  EA’s                  
          general administrative expense was included in the computation of           
          the combined profit for purposes of applying the profit split               
          computation under section 936(h).                                           
          G.  EAPR’s Finances                                                         
               EAPR’s cost of goods sold with respect to video games                  
          included direct costs and period costs.  Direct costs included              
          materials and labor.  Labor costs included amounts paid to PPI              
          pursuant to the Agreement.  Period costs included materials and             
          labor for “rework” (a stipulated, but undefined, term).                     
               Table 3 shows EAPR’s total cost of goods sold relating to              
          the video games it sold to EA, and net sales of video games to EA           
          (without regard to the profit split allocation under section                
          936(h)(5)).                                                                 
                                       Table 3                                        
               Fiscal Year         Cost of Goods Sold        Net Sales                
               1993                $21,119,356              $22,488,000               
               1994                     56,807,000          59,211,000                
               1995                     76,429,990          79,559,000                
               1996                     42,500,108          45,004,000                







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