Electronic Arts 2007 Annual Report Download - page 29

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, officers and directors. We offer
these incentives in order to assist in recruiting, retaining and motivating qualified employees, officers and
directors. Since the Equity Plan’s adoption, 67,400,000 shares of common stock have been reserved for
issuance. The following summary of the proposed amendments to the Equity Plan is subject to the specific
provisions contained in the full text of the Equity Plan, as proposed to be amended, which we have filed with
the Securities and Exchange Commission along with this proxy statement. For more information regarding the
Equity Plan, we urge you to read the full text of the Equity Plan, as proposed to be amended, or the summary
of its material terms, as proposed to be amended, included as Appendix A of 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 9,000,000 shares to a total of
76,400,000 shares.
We continue to believe that alignment of the interests of our stockholders and our employees, officers 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’, officers’ 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. Equity incentives such as stock options and
restricted stock units 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.
While equity is a strategic tool for recruitment and retention, we also carefully manage stock option and
restricted stock unit issuances and strive to keep the dilutive impact of the equity incentives we offer within
a reasonable range. Historically, we have made a significant portion of our equity grants in a given fiscal
year in connection with our annual reviews and merit increases. In calendar 2007, we re-aligned our annual
review cycle to more closely follow our fiscal year. As part of this re-alignment, we moved the date of our
annual equity grants from March to June and, as a result, did not make any annual equity grants in fiscal
2007. During fiscal 2007, a year in which our employee base grew by over 700 people, we granted stock
options to purchase a total of 4,372,775 shares and restricted stock units to acquire a total of
1,362,439 shares (excluding 444,760 shares underlying restricted stock and restricted stock unit awards
which were granted as part of the Option Exchange Program in which 1,778,780 options were cancelled).
Together these stock option and restricted stock unit grants represent approximately 1.8% of our total shares
outstanding. Excluding stock options and restricted stock units we assumed in connection with our
acquisition of JAMDAT Mobile Inc., during fiscal 2006, we granted stock options and restricted stock units
representing approximately 2.7% of our total shares outstanding. Going forward, we intend to continue to
responsibly manage issuances of equity incentive awards under the Equity Plan.
The Equity Plan also contains several features designed to protect stockholders’ interests. For example, the
Equity Plan does not allow any options to be granted at less than 100% of fair market value, and the
exercise price of outstanding options issued under the Equity Plan may not be reduced without stockholder
approval. The Equity Plan does not contain an “evergreen” provision whereby the number of authorized
shares is automatically increased on a regular basis. In addition, the Equity Plan prohibits us from loaning,
or guaranteeing the loan of, funds to participants under the Equity Plan.
•Decrease by 4 million shares the limit on the total number of shares underlying awards of restricted stock
and restricted stock units that may be granted under the Equity Plan — from 15 million to 11 million
shares.
In May 2005, we began granting restricted stock units to certain of our U.S.-based employees, and in March
2006, we began offering restricted stock units to our employees throughout the world. We expect restricted
stock, restricted stock units and stock options to remain an important form of equity incentive compensation.
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