Electronic Arts 2010 Annual Report Download - page 181

Annual Report
During fiscal year 2010, we issued approximately 2.2 million shares under the ESPP with exercise prices for
purchase rights ranging from $13.86 to $14.08. During fiscal years 2010, 2009 and 2008, the estimated weighted-
average fair values of purchase rights were $6.50, $13.04 and $14.57, respectively.
We issue new common stock out of the ESPP’s pool of authorized shares. The fair values above were estimated
on the date of grant using the Black-Scholes option-pricing model assumptions.
Employee Stock Option Exchange Program
On October 21, 2009, we launched a voluntary Employee Stock Option Exchange Program (“Exchange
Program”) to permit our eligible employees to exchange outstanding eligible options for a lesser number of
restricted stock units, shares of restricted stock (in Canada only), or new options (in China only) to be granted
under our Equity Plan. The Exchange Program offer period began on October 21, 2009 and ended on
November 18, 2009.
The Exchange Program was open to all employees designated for participation by the Compensation Committee
of the Board of Directors. However, members of the Board of Directors, the Named Executive Officers identified
in our definitive proxy statement filed with the SEC on June 12, 2009 and employees of Denmark, due to
restrictions arising under local laws of that country, were not eligible to participate.
Options eligible for the Exchange Program were those options granted prior to October 21, 2008, that had an
exercise price per share greater than $28.18, which was the 52-week high trading price of our common stock
measured as of the start date of the Exchange Program, as reported on the NASDAQ Global Select Market, and
that upon conversion using the exchange ratio applicable for such options resulted in four or more shares of
restricted stock units, shares of restricted stock or new options, as the case may be.
Eligible options exchanged under the program were cancelled following the expiration of the offer and either
restricted stock units, shares of restricted stock or new options, as the case may be, were granted. For restricted
stock units, shares of restricted stock or new options issued in exchange for unvested options, compensation
expense will be recorded based on the grant-date fair value of the options tendered over their remaining original
vesting period of those options. Restricted stock units, shares of restricted stock and new options issued in
connection with the Exchange Program will vest over a period of up to three years.
The Exchange Program resulted in options to purchase approximately 16,561,000 shares of our common stock
being exchanged for restricted stock units to acquire approximately 4,996,000 shares, approximately 923,000
shares of restricted stock awards and new options to purchase approximately 18,000 shares.
Due to the structure of the Exchange Program as a “value-for-value” exchange for the eligible options tendered
for exchange, and certain assumptions we are required to use regarding the eligible options for accounting
purposes, we will recognize an incremental accounting charge of approximately $70 million over the vesting
period of the restricted stock units, restricted stock and options issued in the Exchange Program in addition to
recognizing any remaining unrecognized expense for the stock options surrendered in the exchange. We recorded
approximately $14 million of the incremental charge during the fiscal year ended March 31, 2010.
Deferred Compensation Plan
We have a Deferred Compensation Plan (“DCP”) for the benefit of a select group of management or highly
compensated Employees and Directors, which is unfunded and intended to be a plan that is not qualified within
the meaning section 401(a) of the Internal Revenue Code. The DCP permits the deferral of the annual base salary
and/or Director fees up to a maximum amount. The deferrals are held in a separate trust, which has been
established by us to administer the DCP. The trust is a grantor trust and the specific terms of the trust agreement
provide that the assets of the trust are available to satisfy the claims of general creditors in the event of our
insolvency. The assets held by the trust are classified as trading securities and reflected at their fair value on our
Consolidated Balance Sheets. The assets and liabilities of the DCP are presented in other current assets and other
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