Electronic Arts 2005 Annual Report Download - page 25

PROPOSAL 2. AMENDMENTS TO THE 2000 EQUITY INCENTIVE PLAN
The 2000 Equity Incentive Plan, which initially was approved by the stockholders on March 22, 2000,
continues EA's program of providing equity incentives to eligible employees, oÇcers and Directors. We oÅer
these incentives in order to assist in recruiting, retaining and motivating qualiÑed employees, oÇcers and
Directors. Since the Equity Plan's adoption, 57,400,000 shares of common stock have been reserved for
issuance. The following summary of the proposed amendments to the Equity Plan is subject to the speciÑc
provisions contained in the full text of the Equity Plan, as proposed to be amended, which we have Ñled with
the Securities and Exchange Commission along with this proxy statement. For more information regarding the
Equity Plan, we urge you to read a summary of its material terms, as proposed to be amended, included as
Appendix A of this proxy statement, as well as the copy of the Equity Plan, as proposed to be amended, that
we Ñled with the Securities and Exchange Commission along with this proxy statement.
We are proposing amendments to the 2000 Equity Incentive Plan that would:
‚Increase the number of shares authorized under the Equity Plan by 10,000,000 shares to a total of
67,400,000 shares. We continue to believe that alignment of the interests of our stockholders and our
employees, oÇcers and Directors is best advanced through the issuance of equity incentives as a
portion of their total compensation. In this way, we reinforce the link between our stockholders and our
employees', oÇcers' and Directors' focus on personal responsibility, creativity and stockholder returns.
We also believe that delivering a portion of their total compensation in the form of long-term equity
compensation helps encourage a long-term view in an industry that is subject to lengthy business
cycles. Stock options also play an important role in our recruitment and retention strategies, as the
competition for creative and technical talent and leadership in our industry is intense.
Proxy Statement
Having said this, we also recognize our responsibility to keep the dilutive impact of stock options and
other equity incentives within a reasonable range. For example, we decreased the size of option grants
we made to our executive oÇcers in Ñscal 2004 and, following the two-for-one split of our common
stock in November 2003, we did not increase our broad-based stock option award guidelines to reÖect
the split. During Ñscal 2005, a year in which our employee base grew by approximately 1,350 people,
we carefully managed stock option issuances, granting options to purchase a total of 8,962,290 shares
(excluding 128,418 shares underlying options we assumed in connection with our acquisition of
Criterion Software), or approximately 3% of our total shares outstanding. During Ñscal 2005, Ñscal
2004 and Ñscal 2003, we granted stock options at an average annual rate of approximately 3.6% of total
shares outstanding.
The Equity Plan also contains several features designed to protect stockholders' interests. For example,
the exercise price of outstanding options issued under the Plan may not be reduced without stockholder
approval, and the Plan does not allow any options to be granted at less than 100% of fair market value.
The Equity Plan also does not contain an ""evergreen'' provision whereby the number of authorized
shares is automatically increased on a regular basis. In addition, as proposed to be amended, the Equity
Plan would prohibit us from loaning, or guaranteeing the loan of, funds to participants under the Equity
Plan.
In an eÅort to further align the interests of our Directors, executive oÇcers and stockholders, we have
implemented minimum stock ownership requirements for our Directors and executive oÇcers.
Going forward, we intend to continue to responsibly manage issuances of equity incentive awards under
the Equity Plan. We also will continue our comprehensive review and analysis of our compensation
programs overall to ensure their continued eÅectiveness and to prepare for the likelihood of mandatory
stock option expensing.
‚Authorize the issuance of awards of stock appreciation rights in addition to awards of stock options,
restricted stock and restricted stock units. We believe that our ability to employ diÅerent forms of
equity incentives is important, and stock appreciation rights provide additional and alternative methods
of providing equity incentives to our employees.
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