Electronic Arts 2012 Annual Report Download - page 140

approximately $31.74 per share). Upon conversion of the Notes, holders will receive cash up to the principal
amount of each Note, and any excess conversion value will be delivered in shares of our common stock. We used
the net proceeds of the Notes to finance our acquisition of PopCap, which closed in August 2011.
Prior to April 15, 2016, the Notes will be convertible only upon the occurrence of certain events and during
certain periods, and thereafter, at any time until the close of business on the second scheduled trading day
immediately preceding the maturity date of the Notes. The Notes do not contain any financial covenants.
The conversion rate is subject to customary anti-dilution adjustments, but will not be adjusted for any accrued
and unpaid interest. Following certain corporate events described in the indenture governing the notes (the
“Indenture”) that occur prior to the maturity date, the conversion rate will be increased for a holder who elects to
convert its Notes in connection with such corporate event in certain circumstances. The Notes are not redeemable
prior to maturity, and no sinking fund is provided for the Notes.
If we undergo a “fundamental change,” as defined in the Indenture, subject to certain conditions, holders may
require us to purchase for cash all or any portion of their Notes. The fundamental change purchase price will be
100 percent of the principal amount of the Notes to be purchased plus any accrued and unpaid interest up to but
excluding the fundamental change purchase date.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring
and continuing, either the trustee or the holders of at least 25 percent in principal amount of the outstanding
Notes may declare 100 percent of the principal and accrued and unpaid interest on all the Notes to be due and
payable.
In addition, in July 2011, we entered into privately negotiated convertible note hedge transactions (the “Convertible
Note Hedge”) with certain counterparties to reduce the potential dilution with respect to our common stock upon
conversion of the Notes. The Convertible Note Hedge, subject to customary anti-dilution adjustments, provide us
with the option to acquire, on a net settlement basis, approximately 19.9 million shares of our common stock at a
strike price of $31.74, which corresponds to the conversion price of the Notes and is equal to the number of shares
of our common stock that notionally underlie the Notes. As of March 31, 2012, we have not purchased any shares
under the Convertible Note Hedge. We paid $107 million for the Convertible Note Hedge.
Separately, we have also entered into privately negotiated warrant transactions with the certain counterparties
whereby we sold to independent third parties warrants (the “Warrants”) to acquire, subject to customary anti-
dilution adjustments that are substantially the same as the anti-dilution provisions contained in the Notes, up to
19.9 million shares of our common stock (which is also equal to the number of shares of our common stock that
notionally underlie the Notes), with a strike price of $41.14. The Warrants could have a dilutive effect with respect
to our common stock to the extent that the market price per share of its common stock exceeds $41.14 on or prior to
the expiration date of the Warrants. We received proceeds of $65 million from the sale of the Warrants.
See Note 11 to the Consolidated Financial Statements for additional information related to our 0.75%
Convertible Senior Notes due 2016.
Financial Condition
We believe that cash, cash equivalents, short-term investments, marketable equity securities, cash generated from
operations and available financing facilities will be sufficient to meet our operating requirements for at least the
next 12 months, including working capital requirements, capital expenditures, and potentially, future
acquisitions, stock repurchases, or strategic investments. We may choose at any time to raise additional capital to
strengthen our financial position, facilitate expansion, repurchase our stock, pursue strategic acquisitions and
investments, and/or to take advantage of business opportunities as they arise. There can be no assurance,
however, that such additional capital will be available to us on favorable terms, if at all, or that it will not result
in substantial dilution to our existing stockholders.
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