Electronic Arts 2005 Annual Report Download - page 46

As proposed to be amended, the Equity Plan would also authorize the issuance of stock appreciation rights to
employees of EA or any parent or subsidiary of EA, subject to the numerical limits set forth above.
Administration
The Equity Plan is administered by our Compensation Committee. All of the members of the Compensation
Committee are ""non-employee'' and ""independent directors'' under applicable federal securities laws and the
Nasdaq listing requirements and ""outside directors'' as deÑned under applicable federal tax laws. The
Compensation Committee has the authority to construe and interpret the Equity Plan, grant awards and make
all other determinations necessary or advisable for the administration of the Equity Plan. The members of the
Compensation Committee receive no compensation for administering the Equity Plan other than their
compensation for being Board and Committee members. The Company bears all expenses in connection with
administration of the Equity Plan and has agreed to indemnify members of the Compensation Committee in
connection with their administration of the Equity Plan. The Compensation Committee may delegate to one
or more oÇcers of the Company the authority to grant Awards under the Equity Plan to participants who are
not executives of the Company.
Stock Options
Stock options granted under the Equity Plan may be either incentive stock options or nonqualiÑed stock
options. As proposed to be amended, the Equity Plan would provide the Compensation Committee with the
ability, at its discretion, to grant performance-based options subject to the achievement of one or more of the
performance factors described under the heading ""Performance Factors'' below.
Exercise Price; No Repricings
The Compensation Committee determines the exercise price of each option granted under the Equity Plan.
The option exercise price for each incentive and nonqualiÑed stock option share must be no less than 100% of
the ""fair market value'' (as deÑned in the Equity Plan) of a share of common stock at the time the stock
option is granted. In the case of an incentive stock option granted to a stockholder that owns more than 10% of
the total combined voting power of all classes of stock of EA or any parent or subsidiary of EA (a ""Ten
Percent Stockholder''), the exercise price for each such incentive stock option must be no less than 110% of
the fair market value of a share of common stock at the time the incentive stock option is granted. Pursuant to
an amendment to the Equity Plan approved by the Board of Directors in February 2002, the exercise price of
outstanding options issued under the Equity Plan may not be reduced without stockholder approval.
The exercise price of options and purchase price of shares granted under the Equity Plan may be paid as
approved by the Compensation Committee at the time of grant: (a) in cash (by check); (b) by cancellation of
indebtedness of the Company to the optionee; (c) by surrender of shares of the Company's common stock
obtained by the optionee in the public market or owned by the optionee for at least six months and having a
fair market value on the date of surrender equal to the aggregate exercise price of the option; (d) subject to
applicable laws, by tender of a full-recourse promissory note; (e) by waiver of compensation due to or accrued
by the optionee for services rendered; (f) subject to applicable laws, by a ""same-day sale'' commitment from
the optionee and a National Association of Securities Dealers, Inc. (""NASD'') broker; (g) by a ""margin''
commitment from the optionee and an NASD broker; or (h) by any combination of the foregoing.
As proposed to be amended, payment by tender of a full-recourse promissory note would no longer be a
payment option under the Equity Plan, however, payment by withholding from the shares to be issued upon
exercise of an award a number of shares with a fair market value equal to the minimum amount required to
satisfy the exercise or purchase price and applicable tax withholding requirements would be permitted, should
the Compensation Committee elect to include such a payment provision in the applicable award agreement.
Outside Directors
Our non-employee Directors are entitled to receive automatic annual grants of options to purchase shares of
our common stock under the Equity Plan. Each non-employee Director who Ñrst becomes a member of the
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