Electronic Arts 2008 Annual Report Download - page 65

the Company’s stockholders, allow for the cancellation of an outstanding option or stock appreciation in
exchange for a new option or stock appreciation right having a lower exercise price. The Compensation
Committee may also, subject to approval by the Company’s stockholders, at any time buy a previously granted
award with payment in cash, shares (including restricted stock) or other consideration, based on such terms
and conditions as the Committee and the Participant may agree.
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 first becomes a member of the
Board of Directors is granted an option to purchase 17,500 shares of common stock and 2,500 restricted stock
units. Upon re-election to our Board of Directors following each annual meeting of our stockholders, each
non-employee director is automatically granted an additional option to purchase 8,400 shares of common stock
and 1,200 restricted stock units.. If a non-employee director has not served on our Board of Directors for a
full year at the time of the annual meeting of our stockholders, such director will receive a pro-rated annual
grant.
Options issued to outside directors upon their initial election to the Board are exercisable as to 2% of the
shares on the date of grant and as to an additional 2% of the shares on the first day of each calendar month
after the date of grant so long as the outside director continues as a member of the Board. The vesting
schedule for all restricted stock units and annual stock option grants made to directors upon their re-election to
the Board is subject to the discretion of the Compensation Committee.
In the event of our dissolution or liquidation or a “change of control” transaction, options granted to our non-
employee directors under the Equity Plan will become 100% vested and exercisable in full.
In addition, our non-employee directors may elect to receive all or a portion of their cash compensation in
shares of common stock. Directors making this election are entitled to receive shares having a value equal to
110% of the amount of the cash compensation foregone.
Stock Appreciation Rights
The Compensation Committee, or a committee to which it has delegated the appropriate authority, may grant
stock appreciation rights (a “SAR” or “SARs”) as stand-alone awards or in addition to, or in tandem with,
other awards under the Equity Plan under such terms, conditions and restrictions as the Compensation
Committee, or a committee to which it has delegated the appropriate authority, may determine; provided,
however, that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is
granted. A SAR is an award which provides the holder with the right to receive the appreciation in value of a
set number of shares of company stock over a set period of time. A SAR is similar to an option in that the
holder benefits from any increases in stock price above the exercise price set forth in the award agreement.
However, unlike an option, the holder is not required to pay an exercise price to exercise a SAR, but simply
receives the net amount of the increase in stock price in the form of cash or stock. The exercise price for a
SAR must be no less than 100% of the “fair market value” (as defined in the Equity Plan) of a share of
common stock at the time the SAR is granted. In addition, the Compensation Committee, or a committee to
which it has delegated the appropriate authority, may, at its discretion, subject SARs to the achievement of one
or more of the performance factors described under the heading “Performance Factors” below.
Restricted Stock Awards
The Compensation Committee may grant restricted stock awards either in addition to, or in tandem with, other
awards under the Equity Plan under such terms, conditions and restrictions as the Compensation Committee
may determine. A restricted stock award is an offer by Electronic Arts to award shares of common stock that
are subject to restrictions established by the Compensation Committee. These restrictions may be based upon
completion by the award holder of a specified number of years of service or by the attainment of one or more
of the performance factors described under the heading “Performance Factors” below. The purchase price, if
any, for each such award is determined by the Compensation Committee at the time of grant. In the case of an
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