Electronic Arts 2009 Annual Report Download - page 33

Proxy Statement
PROPOSAL 3. 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, 78,585,000 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 SEC 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 20,800,000 shares to a total of
99,385,000 shares.
We 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. 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. During fiscal 2009, we granted stock options to
purchase a total of approximately 6,291,000 shares and restricted stock units to acquire a total of 6,394,000
shares. Together these stock option and restricted stock unit grants represented approximately 4% of our total
shares outstanding as of March 31, 2009.
As described in Proposal 2, we expect to implement an Exchange Program under which eligible employees
will be offered the opportunity to surrender underwater stock options in exchange for a lesser number of
restricted stock units to be granted under the Equity Plan. The surrendered options will be cancelled and the
shares subject to the surrendered options will not be available for future issuance under our Equity Plan.
Assuming 100% participation based on our current assumptions regarding the structure of the Exchange
Program, we anticipate that 18,432,341 shares subject to the eligible options would be cancelled and the
Exchange Program will require the issuance of restricted stock units to receive 5,482,504 shares. 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.
•Amend the Equity Plan so that each share subject to a full value stock award would reduce the number of
shares available for issuance by 1.43 shares, instead of the current multiple of 1.82 shares.
At the 2008 Annual Meeting of Stockholders, the stockholders approved an amendment to the Equity Plan to
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 and replaced 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 a result, each share subject to an option or stock appreciation award currently reduces the
number of shares available for issuance under Equity Plan by one (1) share, and each share subject to a full
value stock award (i.e., restricted stock or restricted stock units) reduces the number of shares available for
25