Electronic Arts 2010 Annual Report Download - page 42

strengthening the link between executive officer compensation and achievement of the Company’s long-term
financial objectives. Upon hire in fiscal 2010, Mr. Schappert was eligible for a Performance-Based RSU on the
same terms and conditions as the other NEOs and was granted an award of 125,000 shares. The Performance-
Based RSUs vest in three equal amounts, with the vesting of each amount being contingent upon the Company’s
achievement of one of three progressively higher adjusted non-GAAP net income targets (as measured on a
trailing-four-quarter basis). At the time the Performance-Based RSUs were granted to our NEOs, we believed
that achievement of the first adjusted non-GAAP net income target was probable. These targets range from
approximately two to three times the Company’s non-GAAP net income for fiscal 2008. To the extent that the
Company does not achieve one or more of the non-GAAP net income targets, the portion of the award that would
have vested upon the achievement of the applicable target will be cancelled.
The Performance-Based RSUs were originally designed to vest, if at all, during a performance period of May 2008
through June 30, 2011. During the fourth quarter of fiscal 2009, Company management and the Committee
re-evaluated the program in light of changing market conditions and the Company’s performance, and determined
that the program had lost much of its value as a retention and motivational tool. The Committee made the decision
to extend the performance period during which the Performance-Based RSUs may vest for an additional two years
through June 30, 2013. Due to the extension of the performance period, the Performance-Based RSUs will not
qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code.
CEO Equity Awards
During his tenure as CEO, Mr. Riccitiello’s equity awards prior to fiscal 2010 consisted of stock options to
purchase 850,000 shares of common stock, with an exercise price of $49.90 granted in May 2007 in connection
with his appointment as CEO, and 200,000 Performance-Based RSUs, which were granted in May 2008.
However, there was no delivered value associated with these awards as of September 16, 2009. The following
table shows the discrepancy between the value of Mr. Riccitiello’s equity awards for financial accounting and
reporting purposes, as reported in the “Stock Awards” and “Option Awards” columns of the Summary
Compensation Table (“Accounting Value”), and the actual value of these awards to Mr. Riccitiello, as of
September 16, 2009 (“Delivered Value”).
Award Award Date
Option
Exercise
Price
Closing Price Of
EA Stock On
September 16, 2009
Outstanding
Awards As Of
September 16, 2009
Vested Awards
As Of
September 16, 2009
Accounting
Value(1)
Delivered
Value(2)
Stock Options ...... May2007 $49.90 $18.85 850,000 174,000 $16,002,578 $0
Performance-
Based RSUs ...... May2008 N/A $18.85 200,000 0(3) $ 3,306,633(4) $0
(1) Accounting Value is the aggregate grant-date fair value as determined under applicable accounting standards.
Grant-date fair value for restricted stock units (“RSUs”) is determined based on the number of shares granted
multiplied by the quoted market price of our common stock on the grant date. The valuation assumptions used
to calculate the fair value of stock options are discussed in Note 13, “Stock-Based Compensation and
Employee Benefit Plans”, of the Consolidated Financial Statements in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2010.
(2) Delivered Value of the stock options is the difference between the exercise price of the options vested as of
September 16, 2009 and the closing price of our stock on September 16, 2009. Delivered Value of RSUs is the
number of vested shares multiplied by the closing price of our stock on September 16, 2009.
(3) The Performance-Based RSUs vest in three equal amounts, with the vesting of each amount being contingent
upon the Company’s achievement of one of three progressively higher adjusted non-GAAP net income targets
(as measured on a trailing-four-quarter basis). As of September 16, 2009, none of the Performance-Based
RSUs had vested.
(4) Represents the aggregate grant-date fair value of one-third of the Performance-Based RSUs granted in May
2008. At the time the Performance-Based RSUs were granted, we believed that the vesting of one-third of the
award was probable based upon the achievement of the first non-GAAP net income target. Assuming the
highest level of performance condition is probable, the maximum grant-date fair value for the Performance-
Based RSUs would be $9,920,000.
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