Electronic Arts 2008 Annual Report Download - page 30

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, 76,400,000 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 2,185,000 shares to a total of
78,585,000 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. Excluding stock options and restricted stock
units we granted in connection with acquisitions, during fiscal 2008, a year in which our employee base
grew by over 1,100 people, we granted stock options to purchase a total of 6,671,977 shares and restricted
stock units to acquire a total of 2,951,743 shares. Together these stock option and restricted stock unit grants
represent approximately 3% of our total shares outstanding. During fiscal 2007, we granted stock options
and restricted stock units representing approximately 1.8% 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 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.
•Replace the specific limitation on the number of shares that may be granted as restricted stock or
restricted stock unit awards with an alternate method of calculating the number of shares remaining
available for issuance under the Equity Plan.
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 important forms of equity incentive compensation.
If approved by stockholders, the amendment would remove the specific limitation on the number of shares
that may be granted as restricted stock or restricted stock units over the life of the Equity Plan (which is
currently set at 11 million shares) and replace it with an alternate method of calculating the number of
shares remaining available for issuance under the Equity Plan (sometimes referred to as a “fungible equity
grant pool”). As proposed to be amended, each share subject to an option or stock appreciation award would
reduce the number of shares available for issuance under Equity Plan by one (1) share, and each share
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