<PAGE>
As filed with the Securities and Exchange Commission
on August 6, 1996
Registration No. 33-
---------
Form S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELECTRONIC ARTS INC.
Delaware 94-2838567
(State of Incorporation) (I.R.S. employer identification no.)
1450 Fashion Island Boulevard
San Mateo, California 94404
(Address of principal executive offices)
1991 Stock Option Plan
(Full title of the Plan)
RUTH A. KENNEDY
Vice President, General Counsel and Secretary
Electronic Arts Inc.
1450 Fashion Island Boulevard
San Mateo, California 94404
(415) 571-7171
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
- --------------------------------------------------------------------------------
Common Stock 900,000 (1) $30.00(2) $26,831,250 (2) $9,252
($0.01 par value)
- --------------------------------------------------------------------------------
This Registration Statement includes exhibits. The Index to Exhibits appears on
sequentially numbered page 4.
(1) Includes 900,000 shares available for grant under the 1991 Stock
Option Plan as of July 31, 1996.
(2) Estimated pursuant to Rule 457(c) as of August 1, 1996 solely for the
purpose of calculating the amount of the registration fee.
<PAGE>
STATEMENT PURSUANT TO GENERAL INSTRUCTION E
Pursuant to General Instruction E, the contents of Registrant's Form S-8
Registration Statement No. 33-41955 filed on July 30, 1991, as amended by
Registrant's Form S-8 Registration Statement No. 33-41955 filed November 6,
1991, Registrant's Form S-8 Registration Statement No. 33-53302 filed October
15, 1992, Registrant's Form S-8 Registration Statement No. 33-55212 filed
December 1, 1992, Registrant's Form S-8 Registration Statement No. 33-66836
filed August 2, 1993, Registrant's Form S-8 Registration Statement No. 33-82166
filed July 29, 1994 and Registrant's Form S-8 Registration Statement No. 33-
61783 filed August 11, 1995 are hereby incorporated by reference.
ITEM 5. EXPERTS.
The consolidated balance sheet statements of the Registrant as of March 31,
1995 and 1996 and the consolidated financial statements and schedules of the
Registrant for each of the years in the three-year period ended March 31, 1996
incorporated by reference in this Registration Statement have been incorporated
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants and upon the authority of said firm as experts in
accounting and auditing. To the extent that KPMG Peat Marwick LLP audits and
reports on financial statements of the Registrant issued at future dates, and
consents to the use of their report thereon, such financial statements also will
be incorporated by reference in the Registration Statement in reliance upon
their report and said authority.
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Registrant by Ruth A. Kennedy, Vice President,
General Counsel and Secretary of the Registrant.
ITEM 8. EXHIBITS
4.01 Registrant's 1991 Stock Option Plan and related documents, as amended.
5.01 Opinion of General Counsel regarding legality of the securities being
issued.
23.01 Consent of General Counsel (included in Exhibit 5.01).
23.02 Consent of KPMG Peat Marwick LLP, Independent Accountants.
24.01 Power of Attorney (see page 2).
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual and corporation whose
signature appears below constitutes and appoints E. Stanton McKee and David L.
Carbone and each of them, his or its true and lawful attorneys-in-fact and
agents with full power of substitution, for him or it and in his or its name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement of Form
S-8, and to file the same with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or it
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the 1933 Act, the Registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of San
Mateo, State of California, on this 6th day of August, 1996
ELECTRONIC ARTS INC.
By: Ruth A. Kennedy
------------------------------------
Ruth A. Kennedy, Esq.
Vice President, General Counsel and
Secretary
Pursuant to the requirements of the 1933 Act, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated:
Name Title Date
- ---- ----- ----
CHIEF EXECUTIVE OFFICER
Lawrence F. Probst III
- ------------------------------
Lawrence F. Probst III President, Chairman August 6, 1996
and Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER:
E. Stanton McKee, Jr.
- ------------------------------
E. Stanton McKee, Jr. Sr. Vice President, August 6, 1996
Chief Financial and
Administrative Officer
PRINCIPAL ACCOUNTING OFFICER:
David L. Carbone
- ------------------------------
David L. Carbone Vice President, August 6, 1996
Controller and
Assistant Secretary
DIRECTORS:
M. Richard Asher
- ------------------------------ Director August 6, 1996
M. Richard Asher
William J. Byron
- ------------------------------ Director August 6, 1996
William J. Byron
Danial H. Case III
- ------------------------------ Director August 6, 1996
Daniel H. Case III
Gary M. Kusin
- ------------------------------ Director August 6, 1996
Gary M. Kusin
Timothy Mott
- ------------------------------ Director August 6, 1996
Timothy Mott
3
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
4.01 Registrant's 1991 Stock Option Plan and
related documents, as amended
5.01 Opinion of General Counsel of Registrant regarding legality
of the securities being issued
23.01 Consent of General Counsel (included in
Exhibit 5.01)
23.02 Consent of KPMG Peat Marwick LLP, Independent Accountants
24.01 Power of Attorney (see page 2)
4
<PAGE>
EXHIBIT 4.01
REGISTRANT'S 1991 OPTION PLAN
<PAGE>
ELECTRONIC ARTS INC.
1991 STOCK OPTION PLAN
APPROVED BY THE STOCKHOLDERS ON JULY 25, 1991
AS AMENDED ON JULY 31, 1996
1. PURPOSE. This 1991 Stock Option Plan ("PLAN") is established as a
compensatory plan to attract, retain and provide equity incentives to selected
persons to promote the financial success and progress of Electronic Arts Inc., a
Delaware corporation, (the "COMPANY"). Capitalized terms not previously defined
herein are defined in Section 16 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (The
"OPTIONS") may be either (a) incentive stock options ("ISOS") within the meaning
of Section 422A of the Internal Revenue Code of 1986, as amended (the "REVENUE
CODE"), or (b) nonqualified stock options ("NQSOS"), as designated at the time
of grant. The shares of stock that may be purchased upon exercise of Options
granted under this Plan (the "SHARES") are shares of the common stock of the
Company.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued
pursuant to options granted under this Plan is 10,800,000 Shares, subject to
adjustment as provided in this Plan. If any Option expires or is terminated
without being exercised in whole or in part, the unexercised or released Shares
from such Options shall be available for future grant and purchase under this
Plan. At all times during the term of this Plan, the Company shall reserve and
keep available such number of Shares as shall be required to satisfy the
requirements of outstanding Options under this Plan.
4. ELIGIBILITY. Options may be granted to employees, officers, directors
who are employees of the Company, consultants, independent contractors and
advisers (provided such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities in a capital-
raising transaction) of the Company or any Parent, Subsidiary or Affiliate of
the Company. Directors who are not employees of the Company are not eligible to
participate in this Plan. ISOs may be granted only to employees (including
officers and directors who are also employees) of the Company or a Parent or
Subsidiary of the Company. The Committee (as defined in Section 13) in its sole
discretion shall select the recipients of Options ("OPTIONEES"). An Optionee
may be granted more than one Option under this Plan. The Company may also, from
time to time, assume outstanding options granted by another company, whether in
connection with an acquisition of such other company or otherwise, by either (i)
granting an Option under this Plan in replacement of the option assumed by the
Company, or (ii) treating the assumed option as if it had been granted under
this Plan if the terms of such assumed option could be applied to an Option
granted under this Plan. Such assumption shall be permissible if the holder of
the assumed option would have been eligible to be granted an Option hereunder if
the other company had applied the rules of this Plan to such grant.
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine
whether each Option is to be an ISO or an NQSO, the number of Shares subject to
the Option, the exercise price of the Option, the period during which the Option
may be exercised, and all other terms and conditions of the Option, subject to
the following:
a. FORM OF OPTION GRANT. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant (the "Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
b. DATE OF GRANT. The date of grant of an Option shall be the date
on which the Committee makes the determination to grant such Option unless
otherwise specified by the committee. The Grant representing the Option will be
delivered to Optionee with a copy of this Plan within a reasonable time after
the granting of the Option.
c. EXERCISE PRICE. The exercise price of an Option shall be
determined by the Committee on the date the Option is granted; provided that the
exercise price of an Option shall be not less than 100% of the Fair Market Value
of the Shares on the date the Option is granted; and PROVIDED FURTHER that the
exercise price of any Option granted to a person owning more than 10% of the
total combined voting power of all classes of stock of the Company or any Parent
or Subsidiary of the Company ("TEN PERCENT STOCKHOLDER") shall not be less than
110% of the Fair Market Value of the Shares on the date the Option is granted.
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d. EXERCISE PERIOD. Options shall be exercisable within the times or
upon the events determined by the Committee as set forth in the Grant; provided,
however, that no Option shall be exercisable after the expiration of ten (10)
years from the date the Option is granted, and provided further that no ISO
granted to a Ten Percent Stockholder shall be exercisable after the expiration
of five (5) years from the date the Option is granted.
e. LIMITATIONS ON ISOS. The aggregate Fair Market Value (determined
as of the time an Option is granted) of stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares with respect to which ISOs are exercisable for the first
time by an Optionee during any calendar year exceeds $100,000, the Options for
the first $100,000 worth of Shares to become exercisable in such year shall be
ISOs and the Options for the amount in excess of $100,000 that becomes
exercisable in that year shall be NQSOs. In the event that the Revenue Code or
the regulations promulgated thereunder are amended after the effective date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.
f. OPTIONS NON-TRANSFERABLE. Options granted under this Plan, and
any interest therein, shall not be transferable or assignable by Optionee, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of Optionee only by Optionee; provided, however,
that NQSOs held by an Optionee who is not an officer or director of the Company
or other person (in each case, an "INSIDER") whose transactions in the Company's
common stock are subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), may be transferred to such family
members, trust and charitable institutions as the Committee, in its sole
discretion, shall approve at the time of the grant of such Option.
g. ASSUMED OPTIONS. In the event the Company assumes an option
granted by another company, the terms and conditions of such option shall remain
unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
425(c) of the Revenue Code). In the event the Company elects to grant a new
option rather than assuming an existing option (as specified in Section 4), such
new option may instead be granted with a similarly adjusted exercise price.
h. LIMITATION ON OPTIONS GRANTED TO INDIVIDUALS. The number of
options that may be granted to optionees from July 27, 1994 through the end of
the term of the 1991 Plan, April 25, 2001 is limited to one million shares per
individual.
6. EXERCISE OF OPTIONS.
a. NOTICE. Options may be exercised only by delivery to the Company
of a written stock option exercise agreement (the "EXERCISE AGREEMENT") in a
form approved by the Committee (which need not be the same for each Optionee),
stating the number of Shares being purchased, the restrictions imposed on the
Shares, if any, and such representations and agreements regarding Optionee's
investment intent and access to information, if any, as may be required by the
Company to comply with applicable securities laws, together with payment in full
of the exercise price for the number of Shares being purchased.
b. PAYMENT. Payment for the Shares may be made in cash (by check)
or, where approved by the Committee in its sole discretion at the time of grant
and where permitted by law: (i) by cancellation of indebtedness of the Company
to the Optionee; (ii) by surrender of shares of common stock of the Company
having a Fair Market Value equal to the applicable exercise price of the
Options, that have been owned by Optionee for more than six (6) months (and
which have been paid for within the meaning of the Securities and Exchange
Commission ("SEC") Rule 144 and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to such
shares), or were obtained by Optionee in the open public market; (iii) by tender
of a full recourse promissory note having such terms as may be approved by the
Committee and bearing interest at a rate sufficient to avoid imputation of
income under Sections 483 and 1274 of the Revenue Code, provided that the
portion of the exercise price equal to the par value of the Shares, if any, must
be paid in cash or other legal consideration; (iv) by waiver of compensation due
or accrued to Optionee for services rendered; (v) provided that a public market
for the Company's stock exists, through a "same day sale" commitment from
Optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD DEALER") whereby Optionee irrevocably elects to
exercise the option and to sell a portion of the Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; (vi)
provided that a public market for the Company's stock exists, through a "margin"
commitment from Optionee and a NASD Dealer whereby Optionee irrevocably elects
to exercise the Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the exercise price, and whereby the NASD Dealer
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<PAGE>
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; or (vii) by any combination of the foregoing.
c. WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise
of an Option, Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable.
d. LIMITATIONS ON EXERCISE. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following:
(i) If Optionee ceases to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company for any reason except death or
disability, Optionee may exercise such Optionee's Options to the extent (and
only to the extent) that they would have been exercisable upon the date of
termination, within three (3) months after the date of termination (or such
shorter time period as may be specified in the Grant);
(ii) If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated because of the death of
Optionee or disability of Optionee within the meaning of Section 22(e)(3) of the
Revenue Code, Optionee's Options may be exercised to the extent (and only to the
extent) that they would have been exercisable by Optionee on the date of
termination, by Optionee (or Optionee's legal representative) within twelve (12)
months after the date of termination (or such shorter time period as may be
specified in the Grant), but in any event no later than the expiration date of
the Options.
(iii) The Committee shall have discretion to determine whether
Optionee has ceased to be employed by the Company or any Parent, Subsidiary or
Affiliate of the Company and the effective date on which such employment
terminated.
(iv) In the case of an Optionee who is a director, independent
consultant, contractor or adviser, the Committee will have the discretion to
determine whether Optionee is "employed by the Company or any Parent, Subsidiary
or Affiliate of the Company" pursuant to the foregoing Sections.
(v) The Committee may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an Option, provided that such
minimum number will not prevent Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(vi) An Option shall not be exercisable unless such exercise is
in compliance with the Securities Act of 1933, as amended (the "SECURITIES
ACT"), all applicable state securities laws and the requirements of any stock
exchange or national market system upon which the Shares may then be listed, as
they are in effect on the date of exercise. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or national market system, and the Company shall have no
liability for any inability or failure to do so.
(vii) An Option shall not be exercisable until such time as the
Plan has been approved by the stockholders in accordance with paragraph 12
below.
7. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Committee shall
have the power to modify, extend or renew outstanding Options and to authorize
the grant of new Options in substitution therefor, provided that any such action
may not, without the written consent of Optionee, impair any rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Revenue Code. The Committee shall have the power to reduce the exercise
price of outstanding Options without the consent of Optionees by a written
notice to the Optionees affected; provided, however, that the exercise price per
Share may not be reduced below the minimum exercise price that would be
permitted under Section 5(c) of this Plan for Options granted on the date the
action is taken to reduce the exercise price.
8. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
such Option is properly exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to such date,
except as provided in this Plan. The Company shall provide to each Optionee a
copy of the annual financial statements of the Company at such time after the
close of each fiscal year of the Company as such statements are generally
released by the Company to its common stockholders generally.
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9. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Optionee's
employment or other relationship at any time, with or without cause.
10. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration, or
if a substantial portion of the assets of the Company are distributed, without
consideration in a spin-off or similar transaction, to the stockholders of the
Company, the number of Shares available under this Plan and the number of Shares
subject to outstanding Options and the exercise price per Share of such Options
shall be proportionately adjusted, subject to any required action by the Board
of Directors (the "BOARD") or stockholders of the Company and compliance with
applicable securities laws; provided, however, that a fractional share shall not
be issued upon exercise of any Option and any fractions of a Share that would
have resulted shall either be cashed out at Fair Market Value or the number of
Shares issuable under the Option shall be rounded up to the nearest whole
number, as determined by the Committee; and provided further that the exercise
price may not be decreased to below the par value, if any, for the Shares.
11. ASSUMPTION OF OPTIONS BY SUCCESSORS.
a. In the event of (i) a merger or consolidation in which the
Company is not the surviving corporation (other than a merger or consolidation
with a wholly owned subsidiary, a reincorporation, or other transaction in which
there is no substantial change in the stockholders of the corporation and the
Options granted under this Plan are assumed by the successor corporation, which
assumption shall be binding on all optionees), (ii) a dissolution or liquidation
of the Company, (iii) the sale of substantially all of the assets of the
Company, or (iv) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Revenue Code wherein the stockholders
of the Company give up all of their equity interest in the Company (except for
the acquisition of all or substantially all of the outstanding shares of the
Company), all outstanding Options shall, not -withstanding any contrary terms
of the Grant, accelerate and become exercisable in full prior to the
consummation of such dissolution, liquidation, merger, sale of assets or other
corporate transaction, at such times and on such conditions as the Board shall
determine, unless the successor corporation assumes the outstanding Options or
substitutes substantially equivalent options. If the Fair Market Value of
Shares with respect to which all ISOs are first exercisable in such calendar
year exceeds $100,000, the Options for the first $100,000 worth of Shares to
become exercisable in that year shall be ISOs and the Options for the amount in
excess of $100,000 shall be NQSOs.
b. Subject to the foregoing provisions of this Section 11, in the
event of the occurrence of any transaction described in Section 11(a), any
outstanding Option shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction".
12. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective
on the date that it is adopted by the Board of Directors of the Company. This
Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. Upon the effective date of the
Plan, the Board may grant Options pursuant to this Plan; provided that, in the
event that stockholder approval is not obtained within the time period provided
herein, all Options granted hereunder shall terminate. No Option that is issued
as a result of any increase in the number of shares authorized to be issued
under this Plan shall be exercised prior to the time such increase has been
approved by the stockholders of the Company and all such Options granted
pursuant to such increase shall similarly terminate if such Stockholder approval
is not obtained. After the Company becomes subject to Section 16(b) of the
Exchange Act, the Company will comply with the requirements of Rule 16b-3 with
respect to stockholder approval.
13. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "COMMITTEE"). If at the earlier of
September 1, 1992 or the date that the Board resolves to conform to the amended
Rules promulgated by the SEC effective May 1, 1991 pursuant to Section 16 of the
Exchange Act, the Board is not comprised entirely of Disinterested Persons, the
Company will take appropriate steps to comply with the disinterested director
requirements of Section 16(b) of the Exchange Act, which may consist of the
appointment by the Board of a Committee consisting of not less than two (2)
persons (who are members of the Board), each of whom is a Disinterested Person.
As used in this Plan, references to the "Committee" shall mean either the
committee appointed by the Board to administer this Plan or the Board if no
committee has been established. The interpretation by the Committee of any of
the provisions of this Plan or any Option granted under this Plan shall be final
and binding upon the Company and all persons having an interest in any
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Option or any Shares purchased pursuant to an Option. The Committee may
delegate to officers of the Company the authority to grant Options under this
Plan to Optionees who are not Insiders of the Company.
14. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the date on which this Plan is
adopted by the Board.
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect including (but not limited to)
amendment of any form of grant, exercise agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Committee shall not, without
the approval of the stockholders of the company, amend this Plan in any manner
that requires such stockholder approval pursuant to the Revenue Code or the
regulations promulgated thereunder as such provisions apply to ISO plans or
pursuant to the Exchange Act or Rule 16b-3 (or its successor) promulgated
thereunder.
16. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
a. "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
b. "SUBSIDIARY" means any corporation (other than the company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
c. "AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
d. "DISINTERESTED PERSON" means a director who is not, during the
period that he is a member of the Committee and for one (1) year prior to
service as a member of the Committee, granted or awarded equity securities
pursuant to this Plan or any other plan of the Company or any Parent, Subsidiary
or Affiliate of the Company, except in accordance with the requirements set
forth in Rule 16b-3(c)(2), as promulgated by the SEC under Section 16(b) of the
Exchange act, as such Rule is amended from time to time and as interpreted by
the SEC.
e. "FAIR MARKET VALUE" shall mean the fair market value of the Shares
as determined by the Committee from time to time in good faith. In the event
the common stock of the Company is listed on a stock exchange or on the NASDAQ
National Market System, the Fair Market Value shall be the closing price of the
Corporation's common stock on the date of determination.
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ELECTRONIC ARTS INC.
NONQUALIFIED STOCK OPTION GRANT
Optionee:
Address:
Number of Option Shares:
Exercise Price Per Share:
Date of Grant:
1. GRANT OF OPTION: Electronic Arts Inc. (the "COMPANY"), a Delaware
corporation, hereby grants to the optionee named above (the "OPTIONEE") a
nonqualified stock option (this "OPTION") to purchase the total number of shares
set forth above of Common Stock of the Company (the "OPTION SHARES") at the
exercise price per share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Nonqualified Stock Option Grant ("GRANT")
and the Company's 1991 Stock Option Plan, (the "PLAN"), the provisions of which
are incorporated herein by this reference.
2. VESTING PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall vest with respect to the Option Shares as
to 2% per month for 50 months as long as Optionee has been continuously employed
by the Company since: .
3. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, Optionee may first exercise this Option with respect to the
vested Option Shares, as described in Paragraph 2, 12 months from
Optionee may then exercise this Option with respect to Vested Option Shares at
any time until expiration or termination.
An optionee shall be deemed to have worked a calendar month if optionee has
worked any portion of that month. The terms and conditions of this Grant
provide that this Option shall expire ten (10) years after the date of grant
(the "DATE OF GRANT") set forth above (the "EXPIRATION DATE") and must be
exercised, if at all, on or before the Expiration Date.
4. RESTRICTIONS ON EXERCISE. Exercise of this Option is subject to the
following limitations:
(a) This Option may not be exercised until the Plan has been approved
by the stockholders of the Company as set forth in the Plan.
(b) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, the Exchange Act of
1934, as amended, all applicable state securities laws, and the requirements of
any stock exchange or national market system on which the Company's Common Stock
may be listed, as they are in effect on the date of exercise.
(c) This Option may be exercised even if there is outstanding, within
the meaning of Section 422A(c)(7) of the Internal Revenue Code of 1954, as
amended (the "CODE"), any incentive stock option to purchase stock of the
Company or its Parent or
<PAGE>
Subsidiary (as defined in the plan) that was granted to the Optionee before the
grant of this Option.
5. TERMINATION OF OPTION.
(a) Except as provided in this Section, this Option shall terminate in
whole if Optionee ceases to be an employee of the Company and may not be
exercised to the extent terminated. If the Optionee ceases to be an employee of
the Company for any reason except by death or disability, this Option, to the
extent it is exercisable by the Optionee on the date on which the Optionee
ceases to be an employee (the "Termination Date"), may be exercised by the
Optionee within three (3) months after the Termination Date, but in no event
later than the Expiration Date set forth in Section 3 above.
(b) Except as provided in this Section, this Option shall terminate in
part, if Optionee ceases to be a full time employee of the Company but remains
an employee of the Company, and may not be exercised to the extent terminated.
If the Optionee ceases to be a full time employee of the Company for any reason
other than disability, this Option, to the extent it is exercisable by the
Optionee on the date on which the Optionee ceases to be a full time employee,
may be exercised by the Optionee within three (3) months after the Termination
Date as defined in subparagraph (a) above, but in no event later than the
Expiration Date set forth in Section 3 above.
(i) An Optionee shall be deemed to be a "full time" employee if
Optionee works not less than 40 hours per week.
(ii) Except as to the number of Option Shares for which this
Option terminates in accordance with Section 4(b) above and subsection (b)(iii)
below, this Option shall continue to vest with respect to Option Shares in equal
monthly amounts from the Termination Date to the time the Optionee has been
continuously employed 50 calendar months from the date set forth in Section 2
above.
(iii) The number of Option Shares for which this Option shall
terminate in accordance with this Paragraph will be determined at a rate
proportional to the percentage of hours not worked to 40 hours/week.
(c) If the Optionee's employment with the Company is terminated
because of the death of the Optionee or disability of the Optionee within the
meaning of Section 22(e)(3) of the Code, this Option, to the extent that it is
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve months after the Termination Date, but in any event no
later than the Expiration Date set forth in Section 3 above.
(d) Nothing in the Plan or this Grant shall confer on Optionee any
right to continue in the employ of, or other relationship with, the Company or
any Parent, Subsidiary or Affiliate of the Company or limit in any way the right
of the Company or any Parent, Subsidiary or Affiliate of the Company to
terminate Optionee's employment or other relationship at any time, with or
without cause.
6. MANNER OF EXERCISE.
(a) This Option shall be exercisable by delivery to the Company of
written notice in the form attached hereto as EXHIBIT A, or in such other form
as may be approved by the Board of Directors of the Company, which shall set
forth the Optionee's election to exercise this Option, the number of Option
Shares being purchased, and such other representations and agreements as to the
Optionee's
<PAGE>
investment intent and access to information as may be required by the Company to
comply with applicable securities laws.
(b) Such notice shall be accompanied by full payment of the Exercise
Price (i) in cash; (ii) by tender of shares of Common Stock of the Company
having a fair market value equal to the Exercise Price; or (iii) a combination
of the foregoing, provided that a portion of the exercise price equal to the
par value of the Shares, if any, must be paid in cash or other legal
consideration.
(c) Prior to the issuance of the Option Shares upon exercise of this
Option, the Optionee must pay or make adequate provision for any applicable
federal or state withholding obligations of the Company.
(d) Provided that such notice and payment are in form and substance
satisfactory to counsel for the Company, the Company shall issue the Option
Shares registered in the name of the Optionee or the Optionee's legal
representative.
7. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
Option Shares shall be subject to compliance by the Company and the Optionee
with all applicable requirements of federal and state laws and with all
applicable requirements of any stock exchange or national market system on which
the Company's Common Stock may be listed at the time of such issuance or
transfer.
8. NONTRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators,
successors and assigns of the Optionee.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
this form of grant was adopted of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares.
Additional information is included in the Prospectus for the Plan, as amended.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE. Upon exercise, Optionee will recognize compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price. The Company will be required to withhold from Optionee's compensation or
collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(b) DISPOSITION OF THE SHARES. For federal tax purposes, for shares
disposed of after 1986, long-term capital gain will generally be treated as
ordinary income subject to the maximum tax rate. If the shares acquired
pursuant to the exercise of a nonqualified stock option are held for at least
six (6) months after the date of transfer pursuant to the exercise of the
nonqualified stock option, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal (but not California) income tax
purposes for potential set-off against capital losses.
10. INTERPRETATION. Any dispute regarding the interpretation of this
agreement shall be submitted by Optionee or the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such
<PAGE>
dispute at its next regular meeting. The resolution of such a dispute by the
Board or committee shall be final and binding on the Company and on Optionee.
11. ENTIRE AGREEMENT. The Plan and the Notice and Agreement attached as
Exhibit A are incorporated herein by reference. This Grant, the Plan and the
Notice and Agreement constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
ELECTRONIC ARTS INC.
By:
--------------------------------------
Its: Sr. Vice President, Chief Financial and Administrative Officer
--------------------------------------------------------------
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, a copy of the
Prospectus, as amended, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option subject to all the terms
and provisions of the Plan and this Grant. Optionee acknowledges that there may
be adverse tax consequences upon exercise of this Option and that Optionee
should consult a tax adviser prior to such exercise.
- ---------------------------------
Optionee
<PAGE>
EXHIBIT A
STOCK OPTION EXERCISE NOTICE AND AGREEMENT
Electronic Arts Inc.
1450 Fashion Island Blvd.
San Mateo, CA 94404
Attention: Stock Administrator
1. EXERCISE OF OPTION. The undersigned ("OPTIONEE") hereby elects to
exercise Optionee's option to purchase shares of the Common Stock (the
"OPTION SHARES") of Electronic Arts Inc. (the "COMPANY") under and pursuant to
the Company's Stock Option Plan (the "PLAN") and the stock option grant
dated (the "GRANT"). The terms and conditions of
the Plan and the Grant are hereby incorporated into and made a part of this
Agreement by this reference.
2. REPRESENTATIONS OF OPTIONEE. Optionee hereby acknowledges, represents
and warrants that Optionee has received, read and understood the Plan and the
Grant and will abide by and be bound by their terms and conditions.
3. COMPLIANCE WITH SECURITIES LAWS. Optionee understands and
acknowledges that the exercise of any rights to purchase any Option Shares is
expressly conditioned upon compliance with the Securities Act of 1933, the
Exchange Act of 1934, the requirements of any stock exchange or national market
system on which the Company's stock may be listed, and all applicable state
securities laws. Optionee agrees to cooperate with the Company to ensure
compliance with such laws.
4. STOP TRANSFER NOTICES. Optionee understands and agrees that the
Company may issue appropriate "stop transfer" instructions to its transfer agent
to ensure compliance with the restrictions on transfer.
5. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF
THE OPTION SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE OPTION SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(B) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN 83(B) ELECTION
WITH THE INTERNAL REVENUE SERVICE.
6. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
aggregate purchase price of the Option Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.
7. ENTIRE AGREEMENT. This Exercise Agreement, the Plan and the Grant
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and is governed by California law except for that
body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: ELECTRONIC ARTS INC.
-------------------------
(Print Name)
By:
- ----------------------------------- --------------------------------
(Signature) Ruth A. Kennedy
Its: Vice President, General
Counsel
Dated: Dated:
----------------------------- ------------------------------
<PAGE>
ADDENDUM TO THE 1991 STOCK OPTION PLAN
OF ELECTRONIC ARTS INC.
AS AMENDED NOVEMBER 24, 1992, JULY 27, 1993, JULY 27, 1994,
AUGUST 3, 1995 AND JULY 31, 1996
RULES APPLICABLE TO UNITED KINGDOM EMPLOYEES
Pursuant to the authority contained in Section 16 of the 1991 Stock Option
Plan of Electronic Arts Inc. the Board (as defined below) of Electronic Arts
Inc. has amended that Plan by approving the following Rules as a scheme intended
to extend the benefits of stock options granted under the Plan to employees of
Electronic Arts Inc. residents in the United Kingdom and to United Kingdom
resident employees of companies of which Electronic Arts Inc. has control (as
defined below). These Rules are designed to qualify for approval as an approved
share option scheme under Schedule 9 (as defined below).
The Rules should be read in conjunction with the Plan and are subject to
the terms and conditions except to the extent that the terms of the Plan are
specifically disapplied or are inconsistent with the terms of these Rules.
Section 11 of the Plan shall not apply to any options issued subject to these
Rules.
The Rules set out below apply to any grant of options under the Plan:
(a) to individuals who are resident in the United Kingdom for United
Kingdom tax purposes and in respect of whom the limitations in Rule 3 below have
not been breached, and
(b) expressly stated to be subject to these Rules.
1. DEFINITIONS.
1.1 In these Rules the following words and expressions shall have the
following meanings:
"Plan" the 1991 Stock Option Plan of Electronic Arts Inc. (as
amended);
"Approval Date" the later of the date on which these Rules are adopted
by the Board under Section 13 of the Plan or the date
on which these Rules are approved by the Board of
Inland Revenue under Schedule 9;
"Associated Company" has the same meaning as in Section 416 of ICTA 1988;
"Auditors" the Auditors for the time being of the Company (acting
as experts and not as arbitrators);
"Board" the Board of Directors of the Company or such committee
pointed by the Board of Directors to administer the
Plan;
"Company" Electronic Arts Inc., a company incorporated under the
laws of Delaware, USA, having its principal place of
business at 1450 Fashion Island Blvd., San Mateo, CA
94404, USA;
"Control Has the same meaning as in Section 840 of ICTA 1988
"Date of Grant" the date on which the Board makes the determination to
grant an Option under the Scheme;
"Eligible Employee" any director (other than a director of the Company) or
employee of any Participating Company who is required
to devote to his or her duties for all Participating
Companies not less than 25 hours (or, in the case of an
employee who is not a director of any Participating
Company, 20 hours) per week (excluding meal breaks) and
is not precluded by paragraph 8 of Schedule 9 from
participating in the Scheme;
-1-
<PAGE>
"Fair Market Value" the value of a Share on the Date of Grant determined by
the Board in good faith except that the Fair Market
Value in respect of Shares to be offered under option
to an Eligible Employee who owns more than 10% of the
total combined voting power of all classes of stock or
shares of the Company or any Associated Company shall
be equal to at least 110% of the fair market value of
those Shares at the Date of Grant;
"ICTA 1988" The Income and Corporation Taxes Act 1988.
"Market Value" on any day the market value of a Share determined in
accordance with the provisions of Part VIII of the
Taxation of Chargeable Gains Act 1992 and agreed for
the purpose of the Scheme with the United Kingdom
Inland Revenue Share Valuation Division;
"Option" a right to subscribe for Shares granted (or to be
granted) in accordance with the Rules of this Scheme;
"Participating Company" the Company and any other company of which the Company
has Control and which is for the time being nominated
by the Board to be a Participating Company;
"Relevant Emoluments" the meaning which the term bears in sub-paragraph (2)
of paragraph 28 of Schedule 9, by virtue of sub-
paragraph (4) of that paragraph;
"Rules" the Rules of the Scheme as from time to time amended;
"Schedule 9" Schedule 9 of ICTA 1988.
"Scheme" the Plan to the extent governed by these Rules as from
time to time amended;
"Share" a share of the Common Stock of the Company which
satisfies the conditions specified in paragraphs 10 to
14 inclusive of Schedule 9;
"Subscription Price" the price at which each Share subject to an Option may
be acquired on the exercise of that Option being,
subject to Rule 2, the highest of:
(i) the par value of a Share;
(ii) the Fair Market Value on the Date of Grant;
and
(iii) the Market Value on the Date of Grant;
"Subsisting Option" an Option which has neither lapsed nor been exercised;
"Year of Assessment" a year beginning on any 6th April and ending on the
following 5th April.
1.2. Reference to the provision of any statute is a reference to it as
amended or as re-enacted with or without modification.
1.3. Any reference in these Rules to an amount expressed in pounds
sterling shall be treated as a reference to that amount converted into US
dollars at the mid-market spot rate of exchange in force at close of business in
London on the relevant date.
2. GRANT OF OPTIONS
2.1 At any time or times not earlier than the Approval Date nor later than
the expiration or termination of the Plan the Board may at its absolute
discretion select any number of individuals who are on the Date of Grant
Eligible Employees or who may on the date on which an Option is to be granted to
them be Eligible Employees and may grant to each such individual an Option by
means of the issue of a written option agreement duly signed by the Company's
representatives in such form, not inconsistent with these Rules, as the Board
may determine.
-2-
<PAGE>
2.2 Each option agreement shall set out the terms of the Options,
including details of:
(a) the number of Shares over which that Eligible Employee has been
granted Options (being less than that number of Shares which would cause
the limit specified in Rule 3 to be exceeded); and
(b) the Subscription Price at which Shares may be acquired on the
exercise of any Option granted.
2.3 No Option may be transferred, assigned or charged and any purported
transfer, assignment or charge shall cause the Option to lapse forthwith. Each
option agreement shall carry a statement to this effect.
3. LIMITATIONS ON GRANTS
No Option shall be granted to an Eligible Employee if immediately following
such grant he or she would hold Subsisting Options over Shares with an aggregate
Subscription Price exceeding the greater of:
(a) L100,000; or
(b) four times the amount of the Eligible Employee's Relevant
Emoluments for the current or preceding Year of Assessment (whichever of those
years gives the greater amount) or, if there were no Relevant Emoluments for the
preceding Year of Assessment, four times the amount of the Relevant Emoluments
for the period of twelve months beginning with the first day during the current
Year of Assessment in respect of which there are Relevant Emoluments.
For the purpose of this Rule 3, Options shall include all Options granted
under this Scheme and all options granted under any other scheme approved under
Schedule 9 and established by the Company or any Associated Company thereof.
4. EXERCISE OF OPTIONS
4.1 An Option shall lapse on the earliest of the following events:
(a) the tenth anniversary of the Date of Grant;
(b) the first anniversary of the Option holder's death or
disability within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1954 (as amended);
(c) unless the Board otherwise decides, at the expiry of three
months following the Option holder ceasing to be a director or employee of any
Participating Company (except in the circumstances described in Rule 4.1(b) in
which case an Option shall lapse on the first anniversary of such an event;
(d) the expiration of the period within which an Option may be
exercised in accordance with Rule 5.
4.2 Notwithstanding the terms of Rule 4.1 and 7, but subject to Rule
5.3, this Rule 4.2 shall apply in relation to the exercise of an Option:
(a) if at the time of exercise of an Option (or the date of
death of an Option holder if earlier) the Option holder has been continuously
employed by any Participating Company for at least 50 full calendar months from
the Vesting Start Date (as defined below) the Option may be exercised in respect
of all Shares subject to that Option;
(b) to the extent that such continuous employment by an Option
holder has not been attained for 50 full calendar months from the Vesting Start
Date, the Option may be exercised only in respect of 2 per cent of the number of
Shares subject to the Option (rounded down to the nearest whole number of
Shares) for each full calendar month of continuous employment of the Option
holder by any Participating Company from the Vesting Start Date completed at the
time of exercise of an Option (or the date of death of an Option holder if
earlier);
(c) the period of continuous employment shall be determined for
the purpose of this Rule 4.2 by the Board in accordance with such rules as the
Board may notify to the Option holders at the time of grant; in the absence of
any such notification the period of continuous employment shall be the period
from the Vesting Start
-3-
<PAGE>
Date until the date on which the Option holder's employment by a Participating
Company ceases or (if earlier) the date on which notice is given (either by the
Option holder or by the Participating Company) to determine an Option holder's
service agreement with the Participating Company; and accordingly the provision
of Sections 51 and Schedule 13 of the Employment Protection (Consolidation) Act
of 1978 as amended (which define "continuous employment" for certain purposes)
shall not apply;
(d) in this Rule 4.2, "Vesting Start Date" shall be such date
not later than the Date of Grant as may be specified in the option agreement.
5. TAKEOVERS AND LIQUIDATIONS
5.1 If any person obtains Control of the Company as a result of
making:
(a) a general offer to acquire the whole of the issued share
capital of the Company which is made on a condition such that if it is satisfied
the person making the offer will have Control of the Company; or
(b) a general offer to acquire all the shares in the Company
which are of the same class as the Shares then any Subsisting Option may be
exercised (subject to Rules 4.2 and 5.4) within six months of the time when the
person making the offer has obtained Control of the Company and any condition
subject to which the offer is made has been satisfied.
5.2 If the Company is to be dissolved or liquidated or substantially
all of the assets of the Company are sold, any Subsisting Option may be
exercised (to the extent permitted by Rule 4.2) within six months of the date
(or dates) fixed by the Board prior to the effective date of such dissolution,
liquidation or sale. If the Board does not fix any such date, then this Rule
5.2 shall not apply.
5.3 If any person obtains Control of the Company or purchases
substantially all of its assets, but does not assume all Subsisting Options or
substitute substantially equivalent options therefor, then the exerciseability
of such Subsisting Options will no longer be restricted by Rule 4.2.
5.4 If as a result of the events specified in Rule 5.1 a company has
obtained Control of the Company, the Company shall seek the agreement of that
other company (the "Acquiring Company") and if such agreement is obtained shall
exchange each Subsisting Option for a new Option which satisfies the following
conditions:
(a) the new Option is over shares in the Acquiring Company or a
company Controlling the Acquiring Company which satisfy the conditions specified
in paragraphs 10 to 14 inclusive of Schedule 9 (and the term "Shares" in this
Scheme shall thereafter be construed accordingly);
(b) the new Option is a right to acquire such number of such
Shares as has on acquisition of the new Option an aggregate Market Value equal
to the aggregate Market Value of the Shares subject to the old Option on its
disposal;
(c) the new Option has a Subscription Price per Share such that
the aggregate price payable on complete exercise equals the aggregate price
which would have been payable on complete exercise of the old Option; and
(d) the new Option is otherwise identical in terms to the old
Option.
The new Option shall, for all other purposes of this Scheme, be treated as
having been acquired at the same time as the Old Option for which it is
exchanged.
5.5 For the purposes of this Rule 5 (other than Rule 5.4) a person
shall be deemed to have obtained Control of a Company if he or she and others
acting in concert with him have together obtained Control of it.
5.6 The exercise of an Option pursuant to the preceding provisions of
this Rule 5 shall be subject to the provisions of Rule 7 below.
6. VARIATION OF SHARE CAPITAL
-4-
<PAGE>
In the event of any capitalization or rights issue or any consolidation,
sub-division or reduction of capital by the Company, the number of Shares
subject to any Option and the Subscription Price for each of those Shares shall
be adjusted in such manner as the Auditors confirm to be fair and reasonable
provided that:
(a) the aggregate amount payable on the exercise of an Option in
full is not increased;
(b) the Subscription Price for a Share is not reduced below its
nominal value (if any);
(c) no adjustment shall be made without the prior approval of
the United Kingdom Board of Inland Revenue; and
(d) following the adjustment the Shares continue to satisfy the
conditions specified in paragraph 10 to 14 inclusive of Schedule 9.
7. MANNER OF EXERCISE OF OPTIONS
7.1 No Option may be exercised by an individual at any time when he
or she is precluded by Paragraph 8 of Schedule 9 from participating in the
Scheme.
7.2 No Option may be exercised by an individual at any time when the
Option holder has not completed three full months of continuous employment with
any Participating Company ending on the proposed date of exercise or death of
the Option holder if earlier.
7.3 No Option may be exercised at any time when each of the shares
which may be thereby acquired is not a Share as defined in Rule 1.1.
7.4 Options shall be exercised by the Option holder, or as the case
may be, his or her personal representatives, giving notice to the Company in
writing of the number of Shares in respect of which he or she wishes to exercise
Options accompanied by the appropriate cash payment in US dollars and a
completed Option Exercise Notice and Agreement, and shall be effective on the
date of its receipt by the Company, provided always that the Board will accept
cash payments only and shall have no discretion to permit payments in money's
worth.
7.5 Shares shall be allotted and issued within 30 days of the date of
exercise. Save for any rights determined by reference to a date preceding the
date of allotment, such Shares shall rank pari passu with the other shares of
the same class in issue at the date of allotment.
7.6 When an Option is exercised only in part the balance shall remain
exercisable on the same terms as originally applied to the whole Option.
However no Option may be exercised over a fraction of a Share.
8. ADMINISTRATION AND AMENDMENT
8.1 The Scheme shall be administered by the Board whose decision on
all disputes shall be final.
8.2 The Board may from time to time amend these Rules provided that:
(a) no amendment may detrimentally affect an Option holder as
regards an Option granted prior to the amendment being made;
(b) no amendment may be made which would make the terms on which
Options may be granted materially more generous or would increase the limits
specified in Rule 3 without the prior approval of the Company in general
meeting; and
(c) no amendment shall have effect until approved by the United
Kingdom Board of Inland Revenue.
8.3 The cost of establishing and operating the Scheme shall be borne
by the Participating Companies in such proportions as the Board shall determine.
-5-
<PAGE>
8.4 Any notice or other communication under or in connection with the
Scheme may be given by the Company either personally or by post, and to the
Company either personally or by post to the Board; items sent by post shall be
pre-paid and shall be deemed to have been received 7 days after posting.
9. HEADINGS
The headings herein are provided for reference and convenience only,
shall not be considered part of the Scheme, and shall not be employed in
construction of the Scheme.
10. CONTROLLING LAW
This Scheme shall be construed and enforced according to the laws of
England.
-6-
<PAGE>
ELECTRONIC ARTS INC.
APPROVED UK STOCK OPTION GRANT
Optionee:
-------------------------------
Address:
-------------------------------
-------------------------------
Number of Option Shares: Shares
-----------
Exercise Price per Share:
--------------
Date of Grant:
---------------
1. GRANT OF OPTION: Electronic Arts Inc. (the "COMPANY"), a Delaware
corporation, hereby grants to the optionee named above (the "OPTIONEE") a
nonqualified stock option (this "OPTION") to purchase the total number of shares
set forth above of Common Stock of the Company (the "OPTION SHARES") at the
exercise price per share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Approved UK Stock Option Grant ("GRANT") and
the Addendum to the Company's 1991 Stock Option Plan entitled Rules Applicable
to United Kingdom Employees" as amended to date (the "RULES"), the provisions of
which are incorporated herein by this reference.
2. VESTING PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall vest with respect to the Option Shares as
to 2% per month for 50 months as long as Optionee has been continuously employed
by the Company since: .
3. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, Optionee may first exercise this Option with respect to the
vested Option Shares, as described in Paragraph 2, 12 months from .
Optionee may then exercise this Option with respect to Vested Option Shares at
any time until expiration or termination.
An optionee shall be deemed to have worked a calendar month if optionee has
worked any portion of that month. The terms and conditions of this Grant
provide that this Option shall expire ten (10) years after the date of grant
(the "DATE OF GRANT") set forth above (the "EXPIRATION DATE") and must be
exercised, if at all, on or before the Expiration Date.
The terms and conditions of this Grant provide that this Option shall
expire on the earlier of (the "EXPIRATION DATE"):
(a) the tenth anniversary of the Date of Grant, as specified above;
(b) such earlier date as may be provided in Section 4 of this Grant;
or
(c) such other earlier date as may be provided for in the Rules as a
result of certain events including a takeover or sale of the Company.
4. RESTRICTIONS ON EXERCISE. Exercise of this Option is subject to the
following limitations:
(a) This Option may not be exercised unless such exercise is in
compliance with the United States Securities Act of 1933, as amended, the United
States Exchange Act of 1934, as amended, all applicable state securities laws,
and the requirements of
<PAGE>
any stock exchange or national market system on which the Company's Common Stock
may be listed, as they are in effect on the date of exercise.
(b) This Option may be exercised even if there is outstanding, within
the meaning of Section 422A(c)(7) of the United States Internal Revenue Code of
1954, as amended (the "CODE"), any incentive stock option to purchase stock of
the Company or its Parent or Subsidiary (as defined in the plan) that was
granted to the Optionee before the grant of this Option.
5. TERMINATION OF OPTION. Except as provided in this Section, this
Option shall terminate and may not be exercised if the Optionee ceases to be an
employee or director of a Participating Company.
(a) If the Optionee ceases to be an employee or Director of a
Participating Company for any reason except death or disability, this Option, to
the extent that it is exercisable by the Optionee on the date on which the
Optionee ceases to be an employee (the "Termination Date"), may be exercised by
the Optionee within 3 months after the Termination Date, but in no event later
than the Expiration Date.
(b) If the Optionee's employment with the Company is terminated
because of the death of the Optionee or disability of the Optionee within the
meaning of Section 22(e)(3) of the Code, this Option, to the extent that it is
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) at any time within one year
after the Termination Date, but in any event no later than the Expiration Date.
6. MANNER OF EXERCISE.
(a) This Option shall be exercisable by delivery to the Company of
written notice in the form attached hereto as EXHIBIT A, or in such other form
as may be approved by the Board, which shall set forth the Optionee's election
to exercise this Option, the number of Option Shares being purchased, and such
other representations and agreements as to the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws.
(b) Such notice shall be accompanied by full payment of the Exercise
Price in cash in U.S. dollars.
(c) Prior to the issuance of the Option Shares upon exercise of this
Option, the Optionee must pay or make adequate provision for any applicable
national or regional withholding obligations of the Company.
(d) Provided that such notice and payment are in form and substance
satisfactory to counsel for the Company, the Company shall issue the Option
Shares registered in the name of the Optionee or the Optionee's legal
representative.
7. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
Option Shares shall be subject to compliance by the Company and the Optionee
with all applicable requirements of United States federal and state laws and
with all applicable requirements of any stock exchange or national market system
on which the Company's Common Stock may be listed at the time of such issuance
or transfer.
8. NONTRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators,
successors and assigns of the Optionee.
9. TAX CONSEQUENCES. Set forth below is a brief summary of the current
Inland Revenue tax consequences with regard to the exercise of this Option and
the
<PAGE>
subsequent sale of the Option Shares. THIS IS A SUMMARY FOR OPTIONEE'S
INFORMATION ONLY AND OPTIONEE IS ADVISED TO SEEK INDIVIDUAL TAX ADVICE.
(a) The Addendum to the Plan under which this Option has been granted
has been approved by the UK Board of Inland Revenue under paragraph 1, Schedule
9.
(b) Unless and until approval is withdrawn, there will be no charge
to UK income tax on the exercise of an Option in accordance with the Plan at a
time when:
(i) at least 3 but not more than 10 years have passed from the
Date of Grant of the Option; and
(ii) at least 3 years have elapsed since the latest previous
exercise by the Optionee of any option (granted under a scheme which is approved
under the ICTA 1988) which enjoyed relief from income tax.
(c) On a subsequent sale of the Option Shares, the Optionee will be
liable to pay capital gains tax on the resultant gains.
(d) The Company intends to maintain in force the UK Inland Revenue
approval for the Plan. However, if it is unable or unwilling to do so, it shall
be under no liability to the Optionee as a result of any increased tax liability
incurred by him or her whether on exercise of the Option, sale of the Option
Shares or otherwise.
10. INTERPRETATION. Any dispute regarding the interpretation of this
Grant shall be submitted by Optionee or the Company forthwith to the Board,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board shall be final and binding on the Company and on
Optionee.
11. ENTIRE AGREEMENT. The Rules and the Notice and Agreement attached as
Exhibit A are incorporated herein by reference. This Grant, the Rules and the
Notice and Agreement constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
ELECTRONIC ARTS INC.
By:
-----------------------------
Its: Sr. Vice President, Chief Financial and Administrative Officer
-------------------------------------------------------------------
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Rules, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and provisions of the Rules and
this Grant. Optionee acknowledges that there may be adverse tax consequences
upon exercise of this Option and that Optionee should consult a tax adviser
prior to such exercise.
- ---------------------------------
Optionee
<PAGE>
UK STOCK OPTION EXERCISE NOTICE AND AGREEMENT
Electronic Arts Inc.
1450 Fashion Island Blvd.
San Mateo, California USA 94404
Attention: Stock Administrator
1. EXERCISE OF OPTION. The undersigned ("OPTIONEE") hereby elects to
exercise Optionee's option to purchase shares of the Common Stock
(the "OPTION SHARES") of Electronic Arts Inc. (the "COMPANY") under and pursuant
to the Addendum to the Company's Stock Option Plan titled "Rules
Applicable to United Kingdom Employees," as amended to date (the "Rules") and
the stock option grant dated (the "GRANT"). The
terms and conditions of the Rules and the Grant are hereby incorporated into and
made a part of this Agreement by this reference.
2. REPRESENTATIONS OF OPTIONEE. Optionee hereby acknowledges, represents
and warrants that Optionee has received, read and understood the Rules and the
Grant and will abide by and be bound by their terms and conditions. Optionee
represents that Optionee is purchasing the Option Shares for Optionee's own
account for investment and not with a view to, or for sale in connection with, a
distribution of any of such Option Shares.
3. COMPLIANCE WITH SECURITIES LAWS. Optionee understands and
acknowledges that the exercise of any rights to purchase any Option Shares is
expressly conditioned upon compliance with the United States Securities Act of
1933, the United States Exchange Act of 1934, the requirements of any stock
exchange or national market system on which the Company's stock may be listed,
and all applicable state securities laws. Optionee agrees to cooperate with the
Company to ensure compliance with such laws.
4. STOP TRANSFER NOTICES. Optionee understands and agrees that the
Company may issue appropriate "stop transfer" instructions to its transfer agent
to ensure compliance with the restrictions on transfer.
5. TAX CONSEQUENCES. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Option Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Option Shares and that Optionee is not relying on the Company
for any tax advice.
6. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
aggregate purchase price of the Option Shares that Optionee has elected to
purchase and has made provision for the payment of any national or regional
withholding taxes required to be paid or withheld by the Company.
7. ENTIRE AGREEMENT. This Exercise Agreement, the Rules and the Grant
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and is governed by the laws of England.
Submitted by: Accepted by:
OPTIONEE: ELECTRONIC ARTS INC.
-------------------------
(Print Name)
By:
- ----------------------------------- --------------------------------
(Signature) Ruth A. Kennedy
Its: Vice President, General
Counsel
Dated: Dated:
---------------------------- ------------------------------
<PAGE>
EXHIBIT 5.01
(INCLUDES EXHIBIT 23.01)
August 5, 1996
Securities and Exchange Commission
Division of Corporation Finance
450 5th Street, N.W.
Washington, D.C. 20549
Re: Electronic Arts Inc. ("EA")
Registration Statement on Form S-8
----------------------------------
Ladies/Gentlemen:
I am an attorney licensed to practice law in the states of California and New
York and I am Vice President, General Counsel and Secretary of EA. I have
examined EA's Registration Statement on Form S-8 (the "REGISTRATION STATEMENT")
to be filed by EA on or about August 6, 1995 in connection with the registration
under the Securities Act of 1933, as amended, of an additional 900,000 shares of
Common Stock of Electronic Arts Inc., $0.01 par value per share ("Common
Stock"), that may be sold by EA upon the exercise of options granted or to be
granted by EA to officers, employees, independent contractors, consultants and
advisors pursuant to EA's 1991 Stock Option Plan (the "1991 PLAN").
As General Counsel for EA, I have examined the proceedings taken by EA in
connection with the amendment of the 1991 Plan to add the shares being
registered hereby.
It is my opinion that the additional 900,000 shares of Common Stock that may be
issued and sold by EA pursuant to the 1991 Plan, when issued and sold in the
manner referred to in the applicable Prospectus associated with the Registration
Statement and the 1991 Plan, as applicable, will be legally issued, fully paid
and nonassessable.
I consent to the use of this opinion as an exhibit to the Registration Statement
and further consent to all references to this opinion, if any, in the
Registration Statement and amendments thereto.
Very truly yours,
ELECTRONIC ARTS INC.
/s/ Ruth A. Kennedy
Ruth A. Kennedy
Vice President, General Counsel and Secretary
<PAGE>
EXHIBIT 23.02
CONSENT OF KPMG PEAT MARWICK, LLP AS INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Electronic Arts Inc.:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement
/s/ KPMG PEAT MARWICK LLP
Palo Alto, California
August 6, 1996
