<PAGE> 1
As filed with the Securities and Exchange Commission
on August 3, 1998
Registration No. 33-_________
Form S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELECTRONIC ARTS INC.
Delaware 94-2838567
(State of Incorporation) (IRS employer identification no.)
1450 Fashion Island Boulevard
San Mateo, California 94404
(Address of principal executive offices)
1991 Stock Option Plan
Employee Stock Purchase Plan
International Employee Stock Purchase Plan
(Full titles of the Plans)
RUTH A. KENNEDY
Senior Vice President, General Counsel and Secretary
Electronic Arts Inc.
1450 Fashion Island Boulevard
San Mateo, California 94404
(650) 571-7171
(Name, address and telephone number of agent for service)
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 2,650,000 (1) $49.125(2) $130,181,250 (2) $39,448.86
($0.01 par value)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
This Registration Statement includes exhibits. The Index to Exhibits appears on
sequentially numbered page 4.
(1) Includes, 2,500,000 shares available for grant under the 1991 Stock
Option Plan and 100,000 shares available for grant under the Employee Stock
Purchase Plan, and 50,000 shares available for grant under the International
Employee Stock Purchase Plan each as of July 30, 1998.
(2) Estimated pursuant to Rule 457(c) as of July 27, 1998 solely for the
purpose of calculating the amount of the registration fee.
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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, Registrant's Form S-8 Registration Statement No. 33-61783
filed August 11, 1995, Registrant's Form S-8 Registration Statement No.
333-09683 filed August 7, 1996, Registrant's Form S-8 Registration Statement No.
333-09893 filed August 9, 1996, and Registrant's Form S-8 Registration Statement
No. 333-32239 filed July 28, 1997, Registrant's Form S-8 Registration Statement
No. 333-32771 filed August 4, 1997, and Registrant's Form S-8 Registration
Statement No. 333-46937 filed February 26, 1998, are hereby incorporated by
reference.
ITEM 4.
Not Applicable
ITEM 5. EXPERTS.
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Registrant by Ruth A. Kennedy, Senior Vice
President, General Counsel and Secretary of the Registrant.
ITEM 7.
Not Applicable
ITEM 8. EXHIBITS
<TABLE>
<S> <C>
4.01 Registrant's 1991 Stock Option Plan and related documents, as amended
4.02 Registrant's Employee Stock Purchase Plan and related documents, as
amended
4.03 Registrant's International Employee Stock Purchase 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 of Registrant (included in Exhibit 5.01).
23.02 Consent of KPMG Peat Marwick LLP, Independent Auditors
24.01 Power of Attorney (see page 2).
</TABLE>
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.
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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 30 day of July, 1998.
ELECTRONIC ARTS INC.
By: /s/ Ruth A. Kennedy
----------------------------------------------
Ruth A. Kennedy, Esq.
Sr. 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:
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
Chief Executive Officer
/s/ Lawrence F. Probst III
- ----------------------------------
Lawrence F. Probst III Chairman and July 30, 1998
Chief Executive Officer
Principal Financial Officer:
/s/ E. Stanton McKee, Jr.
- ----------------------------------
E. Stanton McKee, Jr. Exec. Vice President, July 30, 1998
Chief Financial and
Administrative Officer
Principal Accounting Officer:
/s/ David L. Carbone
- ----------------------------------
David L. Carbone Vice President, Finance July 30, 1998
and Assistant Secretary
Directors:
/s/ M. Richard Asher Director July 30, 1998
- ----------------------------------
M. Richard Asher
/s/ William J. Byron Director July 30, 1998
- ----------------------------------
William J. Byron
/s/ Daniel H. Case III Director July 30, 1998
- ----------------------------------
Daniel H. Case III
/s/ Gary M. Kusin Director July 30, 1998
- ----------------------------------
Gary M. Kusin
/s/ Timothy Mott Director July 30, 1998
- ----------------------------------
Timothy Mott
</TABLE>
3
<PAGE> 4
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
<TABLE>
<S> <C>
4.01 Registrant's 1991 Stock Option Plan and related documents, as amended
4.02 Registrant's Employee Stock Purchase Plan and related documents, as
amended
4.03 Registrant's International Employee Stock Purchase 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 of Registrant (included in Exhibit 5.01)
23.02 Consent of KPMG Peat Marwick LLP
24.01 Power of Attorney (see page 2)
</TABLE>
4
<PAGE> 1
EXHIBIT 4.01
REGISTRANT'S 1991 STOCK OPTION PLAN, AS AMENDED
5
<PAGE> 2
EXHIBIT 4.01
ELECTRONIC ARTS INC.
1991 STOCK OPTION PLAN
APPROVED BY THE STOCKHOLDERS ON JULY 25, 1991
AS AMENDED ON JULY 30,1998
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 15,500,000 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, and
directors who are employees 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.
6
<PAGE> 3
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
7
<PAGE> 4
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 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) 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.
(v) 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.
(vi) 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.
8
<PAGE> 5
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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<PAGE> 6
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.
10
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Employee#:Class
Grant#:______
Location:_____
ELECTRONIC ARTS INC.
NONQUALIFIED STOCK OPTION GRANT
Electronic Arts Inc., a Delaware corporation, (the "Company") hereby
grants to the optionee named below (the "Optionee"), a non-qualified stock
option (the "Option") under the Company's 1991 Stock Option Plan, as amended
(the "Plan"), to purchase the total number of shares set forth below of common
stock of the Company (the "Option Shares") at the exercise price per share set
forth below (the "Exercise Price"). The option is subject to all the terms and
conditions of the Nonqualified Stock Option Grant including the terms and
conditions contained in the attached Appendix A (the "Grant") and the Plan, the
provisions of which are incorporated herein by reference. The principal features
of the option are as follows:
Optionee:
Address:
Number of Option Shares: Exercise Price per Share:
Date of Grant: Expiration Date:
Vest Start Date:
Subject to the terms and conditions of the Plan and this Grant, the
Option shall vest 2% per month for 50 months on the 1st day of each calendar
month until the earlier of (1) the date the option becomes fully vested or (2)
the date the optionee ceases to be employed. An optionee shall be deemed to have
worked a calendar month if optionee has worked any portion of that month.
Vesting will be suspended during any unpaid leave of absence. Optionee may first
exercise the Option with respect to the vested Option Shares on the first day of
the 3rd month from Vest Start Date. Optionee may then exercise the Option with
respect to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A WHICH CONTAINS THE SPECIFIC TERMS AND
CONDITIONS OF THE OPTION.
ELECTRONIC ARTS INC.
By:
------------------------------------------------------------------
Its: Sr. Vice President, Chief Financial and Administrative Officer
------------------------------------------------------------------
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan and a copy of the
Prospectus as amended are available upon request from the Stock Administration
department and can also be accessed electronically. Optionee represents that
Optionee has read and understands the terms and conditions thereof, and accepts
the Option subject to all the terms and conditions of the Plan and the Grant.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ---------------------------------------
Optionee
11
<PAGE> 8
APPENDIX A
ELECTRONIC ARTS INC.
NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS
UNDER THE 1991 STOCK OPTION PLAN, AS AMENDED
1. Form of Option Grant. Each Option granted under the 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 the Plan.
2. Date of Grant. The date of grant of the 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 within a reasonable time after the granting of the Option.
Copies of the Plan and Prospectus are available electronically at
http://www.easm.com.ea.com/legal/91prosp6.htm and
http://www.easm.com.ea.com/legal/91plnus6.htm and can also be obtained by
contacting the Stock Administration Department.
3. Exercise Price. The exercise price of the Option shall be determined
by the Committee on the date the Option is granted; provided that the exercise
price of the Option shall be not less than 100% of the Fair Market Value of the
Shares on the date the Option is granted.
4. 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.
5. Restrictions on Exercise. Exercise of the Option is subject to the
following limitations:
(a) The Option may not be exercised until the Plan has been
approved by the stockholders of the Company as set forth in the Plan.
(b) The 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) The 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 Subsidiary (as defined in the plan) that was granted to
the Optionee before the grant of the Option.
6. Termination of Option.
(a) Except as provided in this section, the 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, the
Option, to the extent it is exercisable 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.
(b) Except as provided in this section, the 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, the Option, to the extent it is exercisable 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,
but in no event later than the Expiration Date.
(i) An Optionee shall be deemed to be a "full time"
employee if Optionee works not less than 40 hours per week, unless prevailed
upon by local law.
(ii) Except as to the number of Option Shares for which
the Option terminates in accordance with subsection (b)(iii) below, the 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 vest start date set forth in the Grant.
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<PAGE> 9
(iii) The number of Option Shares for which the Option
shall terminate in accordance with this Paragraph will be determined by
multiplying the total number of Option Shares by the following fraction:
40 minus [number of hours regularly worked per week]
----------------------------------------------------
40
(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, the Option, to the extent that it is
exercisable 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.
(d) Nothing in the Plan or the 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.
7. Manner of Exercise.
(a) The 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 the 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 (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
the Option, the Optionee must pay or make adequate provision for any applicable
federal, state, or provincial 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.
8. 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.
9. Nontransferability of Option. The 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 the Option shall be binding upon the executors, administrators, successors
and assigns of the Optionee.
10. Tax Consequences. Set forth below is a brief summary as of the date
the form of grant was adopted of some of the federal and California tax
consequences of exercise of the 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 THE 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 may 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, if the
Shares are held for more than twelve (12) months but not more than eighteen (18)
months after the date of transfer of the Shares pursuant to the exercise of a
nonqualified stock option, any gain realized on the disposition of the Shares
will be treated as mid-term capital gain. If the Shares are held for more than
eighteen (18) months any such gain will be treated as long-term capital gain.
The maximum mid-term capital gain rate is twenty-eight percent (28%) and the
maximum long-term capital gain rate is twenty percent (20%).
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<PAGE> 10
11. 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 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.
12. Entire Agreement. The Exercise Notice and Agreement attached as
Exhibit A and the Plan available upon request from the Stock Administration
department and also accessible electronically is incorporated herein by
reference. The Grant, the Plan and the Exercise Notice and Agreement constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
14
<PAGE> 11
EXHIBIT A TO THE GRANT AGREEMENT
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: Sr. Vice President,
General Counsel
Dated: _________________________________ Dated:__________________________
15
<PAGE> 12
ADDENDUM TO THE 1991 STOCK OPTION PLAN
OF ELECTRONIC ARTS INC.
AS AMENDED JULY 31, 1997
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;
"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
16
<PAGE> 13
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.
2.2 Each option agreement shall set out the terms of the Options,
including details of:
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<PAGE> 14
(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) 100,000 (pounds sterling); 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 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
18
<PAGE> 15
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
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<PAGE> 16
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.
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<PAGE> 17
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.
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<PAGE> 18
Employee#:Class
Grant#:______
Location:_____
ELECTRONIC ARTS INC.
APPROVED UK STOCK OPTION GRANT
Electronic Arts Inc., a Delaware corporation, (the "Company") hereby
grants to the optionee named below (the "Optionee"), a non-qualified stock
option (the "Option") to purchase the total number of shares set forth below of
common stock of the Company (the "Option Shares") at the exercise price per
share set forth below (the "Exercise Price"). The option is subject to all the
terms and conditions of the Approved UK Stock Option Grant including the terms
and conditions contained in the attached Appendix A (the "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") attached as Exhibit
A, the provisions of which are incorporated herein by this reference. The
principal features of the option are as follows:
Optionee:
Address:
Number of Option Shares: Exercise Price per Share:
Date of Grant: Expiration Date:
Vest Start Date:
Subject to the terms and conditions of the Plan and this Grant, the
Option shall vest 2% per month for 50 months on the 1st day of each calendar
month until the earlier of (1) the date the option becomes fully vested or (2)
the date the optionee ceases to be employed. An optionee shall be deemed to have
worked a calendar month if optionee has worked any portion of that month.
Vesting will be suspended during any unpaid leave of absence. Optionee may first
exercise the Option with respect to the vested Option Shares on the first day of
the 12th month from Vest Start Date. Optionee may then exercise the Option with
respect to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A WHICH CONTAINS THE SPECIFIC TERMS AND
CONDITIONS OF THE OPTION.
ELECTRONIC ARTS INC.
By:
-----------------------------------------------------------------
Its: Sr. Vice President, Chief Financial and Administrative Officer
-----------------------------------------------------------------
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan, the Rules and a copy of
the Prospectus as amended are available upon request from the Stock
Administration department and can also be accessed electronically. Optionee
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, 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
22
<PAGE> 19
APPENDIX A
ELECTRONIC ARTS INC.
APPROVED UK STOCK OPTION TERMS AND CONDITIONS
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 beginning on the "Vesting Start Date", and shall
continue until the earlier of (1) the date the Option becomes fully vested or
(2) the date the Optionee ceases to be employed. Vesting will be suspended
during any unpaid leave of absence.
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, 3 months from Vest Start
Date. 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 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 B, 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
24
<PAGE> 20
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 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 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.
25
<PAGE> 21
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: Sr. Vice President, General
Counsel
Dated:__________________________________ Dated:_______________________________
26
<PAGE> 1
EXHIBIT 4.02
REGISTRANT'S EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
27
<PAGE> 2
EXHIBIT 4.02
ELECTRONIC ARTS INC.
EMPLOYEE STOCK PURCHASE PLAN
AS APPROVED BY THE STOCKHOLDERS ON JULY 25, 1991,
AS AMENDED ON JULY 30, 1998
1. Establishment of Plan. Electronic Arts Inc., (the "Company")
proposes to grant options for purchase of the Company's common Stock to eligible
employees of the Company and Subsidiaries (as hereinafter defined) pursuant to
this Employee Stock Purchase Plan (the "Plan"). For purposes of this Plan,
"parent corporation" and "Subsidiary" (collectively, "Subsidiaries") shall have
the same meanings as "parent corporation" and "subsidiary corporation" in
Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code"). The Company intends that the Plan shall qualify as an
"employee stock purchase plan" under Section 423 of the Code (including any
amendments or replacements of such section), and the Plan shall be so construed.
Any term not expressly defined in the Plan but defined for purposes of Section
423 of the Code shall have the same definition herein. A total of 1,250,000
shares of Common Stock are reserved for issuance under the Plan. Such number
shall be subject to adjustments effected in accordance with Section 14 of the
Plan.
2. Purposes. The purpose of the Plan is to provide employees of the
Company and Subsidiaries designated by the Board of Directors as eligible to
participate in the Plan with a convenient means to acquire an equity interest in
the Company through payroll deductions, to enhance such employees' sense of
participation in the affairs of the Company and Subsidiaries, and to provide an
incentive for continued employment.
3. Administration. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). Until 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 Plan shall be administered by the Board or a committee
appointed by the Board consisting of not less than three (3) persons (who are
members of the Board), each of whom is a disinterested director. 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. Subject to the provisions of the Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of the Plan shall be determined by the Committee
and its decisions shall be final and binding upon all participants. Members of
the Committee shall receive no compensation for their services in connection
with the administration of the Plan, other than standard fees as established
from time to time by the Board of Directors of the Company for services rendered
by Board members serving on Board committees. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
4. Eligibility. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under the
Plan except the following:
(a) employees who are not employed by the Company or
Subsidiaries on the fifteenth (15th) day of the month before the beginning of
such Offering Period;
(b) employees who are customarily employed for less than 20
hours per week;
(c) employees who are customarily employed for less than five
(5) months in a calendar year
(d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock or who, as a result of being granted an
option under the Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five (5) percent or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries; and
(e) employees who would, by virtue of their participation in
such Offering Period, be participating simultaneously in more than one Offering
Period under the Plan.
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<PAGE> 3
5. Offering Dates. The Offering Periods of the Plan (the "Offering
Period") shall be of twelve (12) months duration commencing on the first
business day of March and September of each year and ending on the last business
day of February and August, respectively, hereafter. The first Offering Period
shall commence on September 2, 1991. The first day of each Offering Period is
referred to as the "Offering Date". Each Offering Period shall consist of two
(2) six-month purchase periods (individually, a "Purchase Period"), during which
payroll deductions of the participant are accumulated under this Plan. Each such
six-month Purchase Period shall commence on the first business day of March and
September of an Offering Period and shall end on the last business day of the
following August and February, respectively. The last business day of each
Purchase Period is hereinafter referred to as the Purchase Date. The Board of
Directors of the Company shall have the power to change the duration of Offering
Periods or Purchase Periods without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period or Purchase Period, as the case may be, to be affected.
6. Participation in the Plan. Eligible employees may become
participants in an Offering Period under the Plan on the first Offering Date
after satisfying the eligibility requirements by delivering to the Company's or
Subsidiary's (whichever employs such employee) payroll department (the "payroll
department") not later than the 15th day of the month before such Offering Date
unless a later time for filing the subscription agreement is set by the Board
for all eligible Employees with respect to a given Offering Period a
subscription agreement authorizing payroll deductions. An eligible employee who
does not deliver a subscription agreement to the payroll department by such date
after becoming eligible to participate in such Offering Period under the Plan
shall not participate in that Offering Period or any subsequent Offering Period
unless such employee enrolls in the Plan by filing the subscription agreement
with the payroll department not later than the 15th day of the month preceding a
subsequent Offering Date. Once an employee becomes a participant in an Offering
Period, such employee will automatically participate in the Offering Period
commencing immediately following the last day of the prior Offering Period
unless the employee withdraws from the Plan or terminates further participation
in the Offering Period as set forth in Section 11 below. Such participant is not
required to file any additional subscription agreements in order to continue
participation in the Plan. Any participant whose option expires and who has not
withdrawn from the Plan pursuant to Section 11 below will automatically be
re-enrolled in the Plan and granted a new option on the Offering Date of the
next Offering Period. A participant in the Plan may participate in only one
Offering Period at any time.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in
the Plan with respect to an Offering Period will constitute the grant (as of the
Offering Date) by the Company to such employee of an option to purchase on each
Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing the amount accumulated in such employee's payroll
deduction account during such Purchase Period by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date (the "Entry Price") or (ii) eighty-five percent (85%) of
the fair market value of a share of the company's Common Stock on the Purchase
Date, provided, however, that the number of shares of the Company's Common Stock
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (a) the maximum number of shares set by the Board pursuant to Section 10(c)
below with respect to all Purchase Periods within the applicable Offering Period
or Purchase Period, or (b) 200% of the number of shares determined by using 85%
of the fair market value of a share of the Company's Common Stock on the
Offering Date as the denominator. Fair market value of a share of the Company's
Common Stock shall be determined as provided in Section 8 hereof.
8. Purchase Price. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) the fair market value on the Offering Date or
(b) the fair market value on the Purchase Date.
For purposes of the Plan, the term "fair market value" on a given date
shall mean the closing bid from the previous day's trading of a share of the
Company's Common Stock as reported on the NASDAQ National Market System.
9. Payment of Purchase Price; Changes in Payroll Deductions; Issuance
of Shares.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Purchase Period. The deductions are made as
a percentage of the employee's compensation in one percent (1%) increments not
less than two percent (2%) nor greater than ten percent (10%). Compensation
shall mean all W-2 compensation, including, but not limited to base salary,
wages, commissions, overtime, shift premiums and bonuses, plus draws against
29
<PAGE> 4
commissions; provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. Payroll deductions shall commence with
the first pay period following the Offering Date and shall continue to the end
of the Offering Period unless sooner altered or terminated as provided in the
Plan.
(b) A participant may lower (but not increase) the rate of
payroll deductions during a Purchase Period by filing with the payroll
department a new authorization for payroll deductions, in which case the new
rate shall become effective for the next payroll period commencing more than 15
days after the payroll department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one change may be made effective
during any Purchase Period. A participant may increase or lower the rate of
payroll deductions for any subsequent Purchase Period by filing with the payroll
department a new authorization for payroll deductions not later than the 15th
day of the month before the beginning of such Purchase Period.
(c) All payroll deductions made for a participant are credited
to his or her account under the Plan and are deposited with the general funds of
the Company; no interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, as long as the Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to . withdraw from that Offering Period under the Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of the Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash; provided, however, that
any amount remaining in participant's account on a Purchase Date which is less
than the amount necessary to purchase a full share of Common Stock of the
Company shall be carried forward, without interest, into the next Purchase
Period or Offering Period, as the case may be. In the event that the Plan has
been oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the participant. No Common Stock shall be purchased on a
Purchase Date on behalf of any employee whose participation in the Plan has
terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the
Company shall arrange the delivery to each participant, as appropriate, of a
certificate representing the shares purchased upon exercise of his option;
provided that the Board may deliver certificates to a broker or brokers that
hold such certificates in street name for the benefit of each such participant.
(f) During a participant's lifetime, such participant's option
to purchase hares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. Shares to be delivered to a participant
under the Plan will be registered in the name of the participant or in the name
of the participant and his or her spouse.
10. Limitations on Shares to be Purchased.
(a) No employee shall be entitled to purchase stock under the
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in the Plan.
(b) No more than 200% of the number of shares determined by
using 85% of the fair market value of a share of the Company's Common Stock on
the Offering Date as the denominator may be purchased by a participant on any
single Purchase Date.
(c) No employee shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty days prior to the commencement of any Purchase Period, the Board
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date
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<PAGE> 5
(hereinafter the "Maximum Share Amount"). In no event shall the Maximum Share
Amount exceed the amounts permitted under Section 10(b) above. If a new Maximum
Share Amount is set, then all participants must be notified of such Maximum
Share Amount not less than fifteen (15) days prior to the commencement of the
next Purchase Period. Once the Maximum Share Amount is set, it shall continue to
apply with respect to all succeeding Purchase Dates and Purchase Periods unless
revised by the Board as set forth above.
(d) If the number of shares to be purchased on a Purchase Date
by all employees participating in the Plan exceeds the number of shares then
available for issuance under the Plan, the Company shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Board shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each employee affected thereby.
(e) Any payroll deductions accumulated in a participant's
account which are not used to purchase stock due to the limitations in this
Section 10 shall be returned to the participant as soon as practicable after the
end of the Offering Period.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under
the Plan by signing and delivering to the payroll department notice on a form
provided for such purpose. Such withdrawal may be elected at any time at least
fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll
deductions shall be returned to the withdrawn employee and his or her interest
in the Plan shall terminate. In the event an employee voluntarily elects to
withdraw from the Plan, he or she may not resume his or her participation in the
Plan during the same Offering Period, but he or she may participate in any
Offering Period under the Plan which commences on a date subsequent to such
withdrawal by filing a new authorization for payroll deductions in the same
manner as set forth above for initial participation in the Plan. However, if the
participant is an "insider" for purposes of Rule 16(b), he or she shall not be
eligible to participate in any Offering Period under the Plan which commences
less than six (6) months from the date of withdrawal from the Plan.
(c) A participant may participate in the current Purchase Period
under an Offering Period (the "Current Offering Period") and enroll in the
Offering Period commencing after such Purchase Period (the "New Offering
Period") by (i) withdrawing from participating in the Current Offering Period
effective as of the last day of a Purchase Period within that Offering Period
and (ii) enrolling in the New Offering Period. Such withdrawal and enrollment
shall be effected by filing with the payroll department at least fifteen (15)
days prior to the end of a Purchase Period such form or forms as are provided
for such purposes.
12. Termination of Employment. Termination of a participant's
employment for any reason, including retirement or death or the failure of a
participant to remain an eligible employee, terminates his or her participation
in the Plan immediately. In such event, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of his or
her death, to his or her legal representative. For this purpose, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company in the case of sick leave, military leave, or
any other leave of absence approved by the Board of Directors of the Company;
provided that such leave is for a period of not more than ninety (90) days or re
employment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event an employee's interest
in the Plan is terminated by withdrawal, termination of employment or otherwise,
or in the event the Plan is terminated by the Board, the Company shall promptly
deliver to the employee all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.
14. Capital Changes. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided,
31
<PAGE> 6
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
15. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect.
16. Reports. Individual accounts will be maintained for each
participant in the Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within twelve (12) months from the Purchase Date on which such
shares were purchased (the "Notice Period"). Unless such participant is
disposing of any of such shares during the Notice Period, such participant shall
keep the certificates representing such shares in his or her name (and not in
the name of a nominee) during the Notice Period. The Company may, at any time
during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to the Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. Equal Rights and Privileges. All eligible employees shall have
equal rights and privileges with respect to the Plan so that the Plan qualifies
as an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall without further act or amendment by the Company or the Board be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in the Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
32
<PAGE> 7
21. Stockholder Approval of Amendments. Any required approval of the
stockholders of the Company for an amendment shall be solicited at or prior to
the first annual meeting of stockholders held subsequent to the grant of an
option under the Plan as then amended to an officer or director of the Company.
If such stockholder approval is obtained at a duly held stockholders' meeting,
it must be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the company represented and voting at the meeting, or if
such stockholder approval is obtained by written consent, it must be obtained by
the majority of the outstanding shares of the Company; provided, however, that
approval at a meeting or by written consent may be obtained by a lesser degree
of stockholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such lesser degree of
stockholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 423 of the Code or Rule 16b-3
promulgated under the Exchange Act ("Rule 16b-3").
22. Designation of Beneficiary
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of a Purchase Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
24. Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. Amendment or Termination of the Plan. This Plan shall be effective
on the day after the effective date of the Company's Registration Statement
filed with the Securities Exchange Commission under the Securities Act of 1933,
as amended, with respect to the shares issuable under the Plan (the "Effective
Date"), subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the Board of Directors of the
company and the Plan shall continue until the earlier to occur of termination by
the Board, issuance of all of the shares of Common Stock reserved for issuance
under the Plan, or ten (10) years from the adoption of the Plan by the Board.
The Board of Directors of the Company may at any time amend or terminate the
Plan, except that any such termination cannot affect options previously granted
under the Plan, nor may any amendment make any change in an option previously
granted which would adversely affect the right of any participant, nor may any
amendment be made without approval of the stockholders of the Company obtained
in accordance with Section 21 hereof within 12 months of the adoption of such
amendment (or earlier if required by Section 21) if such amendment would:
(a) Increase the number of shares that may be issued under the
Plan;
(b) Change the designation of the employees (or class of
employees) eligible for participation in the Plan or;
(c) Constitute an amendment for which stockholder approval is
required in order to comply with Rule 16b-3 (or any successor rule) of the
Exchange Act.
33
<PAGE> 8
EMPLOYEE STOCK PURCHASE PLAN ACTION FORM
ENROLLMENT/CHANGE/WITHDRAWAL AGREEMENT
Action Complete Sections
- ---------- ------ -----------------
SECTION 1: [ ] New Enrollment 2, 3, 4, 6, 8
- ---------- [ ] Payroll Deduction Change 2, 4, 8
[ ] Withdrawal 2, 5, 8
[ ] Beneficiary Change 2, 6, 8
- -----------
SECTION 2: NAME:________________________________SS#:________________________
PERSONAL ADDRESS:_________________________________________________________
INFORMATION LOCATION:____________
- -----------
- -----------
SECTION 3: I hereby elect to participate in the Electronic Arts Employee
NEW Stock Purchase Plan (the "Plan") and I agree to be bound by its
ENROLLMENT terms. Stock purchased under the Plan should be registered in my
- ---------- name or in my name together with the following name:
_________________________________________________________.
If spouse, circle one: Joint Tenancy / Community Property.
- -------------
SECTION 4: I hereby authorize payroll deductions from each paycheck in that
PAYROLL percentage of my compensation as shown below, in accordance with
DEDUCTION the Plan.
AUTHORIZATION
- ------------- Amount to be Deducted (Circle One):
0% 2% 3% 4% 5% 6% 7% 8% 9% 10%
- ----------
SECTION 5: Effective: _______/_______/_______ I will cease participating
WITHDRAWAL Month Date Year in the Plan, all monies
- ---------- contributed to the Plan thus far will be returned, and I may not
re-enroll until the next Offering Period.
- -----------
SECTION 6: In the event of my death, I hereby designate the following
BENEFICIARY person(s) as my beneficiary(ies) to receive all payments and/or
- ----------- stock due me under the Employee Stock Purchase Plan:
Primary Beneficiary:_______________%:___Relationship:____________
Primary Beneficiary:_______________%:___Relationship:____________
Note: If more than one primary beneficiary listed, please
indicate % allocated to each.
Secondary Beneficiary:__________________Relationship:____________
If primary beneficiary is other than spouse, spouse must consent
to such beneficiary designation.
------------------------------------ ------------------
Spouse Signature Date
34
<PAGE> 9
- ----------
SECTION 7:
- ----------
ACCUMULATION I understand that my payroll deductions will be accumulated for
the automatic purchase of shares of Common Stock AND PURCHASE at the end of
each Purchase Period. The purchase price per share will be the lower of (i)
85% of the fair market PRICE value on the first day of an Offering Period
or (ii) 85% of the fair market value on the last day of an Exercise Period.
SUCCESSIVE I understand that this enrollment will be effective for each
subsequent Offering Period unless I withdraw from the PERIODS Plan or
otherwise become ineligible to participate in the Plan. In the event,
however, that the Offering Price for the new Offering Period for which I am
not enrolled is less than the Offering Price for the Offering Period for
which I am currently enrolled, I understand that I will automatically be
withdrawn from the current Offering Period and re-enrolled in the new
Offering Period unless I notify the Company to the contrary.
REVIEW OF I have received a copy of the Company's most recent prospectus
PROSPECTUS which describes the Plan. I understand that my participation is
in all respects subject to the terms of the Plan.
- -------------
SECTION 8: Signature of Employee:_________________________Date:_____________
AUTHORIZATION
- -------------
White-Stock Administration Yellow-Payroll Pink-Employee
35
<PAGE> 1
EXHIBIT 4.03
REGISTRANT'S INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
36
<PAGE> 2
ELECTRONIC ARTS INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
AS APPROVED BY THE BOARD OF DIRECTORS ON JUNE 27, 1996, AS AMENDED
FEBRUARY 24, 1998 AND MAY 13, 1998
1. Establishment of Plan. Electronic Arts Inc., (the "Company") proposes
to grant options for purchase of the Company's common Stock to employees of the
Company's International Subsidiaries (as hereinafter defined) pursuant to this
International Employee Stock Purchase Plan (the "Plan"). For purposes of this
Plan, "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if 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. "International Subsidiary" means any
Subsidiary organized under the laws of and incorporated and having its principle
place of business outside the United States. A total of 250,000 shares of Common
Stock are reserved for issuance under the Plan. Such number shall be subject to
adjustments effected in accordance with Section 14 of the Plan.
2. Purposes. The purpose of the Plan is to provide certain employees of
the International Subsidiaries of the Company as defined in section 4 below, as
long as no employee is an executive officer or director of the Company
("Employee") with a convenient means to acquire an equity interest in the
Company through payroll deductions, to enhance such Employees' sense of
participation in the affairs of the Company and Subsidiaries, and to provide an
incentive for continued employment.
3. Administration. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). The Plan shall be
administered by the Board or a committee appointed by the Board consisting of
not less than three (3) persons (who are members of the Board), each of whom is
a disinterested director. 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. Subject to the provisions of
the Plan, all questions of interpretation or application of the Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of the Plan, other than
standard fees as established from time to time by the Board of Directors of the
Company for services rendered by Board members serving on Board committees. All
expenses incurred in connection with the administration of the Plan shall be
paid by the Company.
4. Eligibility. Any Employee is eligible to participate in an Offering
Period (as hereinafter defined) under the Plan except the following:
(a) Employees who are not employed by the International Subsidiaries
on the fifteenth (15th) day of the month before the beginning of
such Offering Period;
(b) Employees who are customarily employed for less than 20 hours
per week unless required by local law;
(c) Employees who are customarily employed for less than five (5)
months in a calendar year unless required by local law;
d) Employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the
Internal Revenue Code of 1986, as amended (the "Code"), own
stock or hold options to purchase stock or who, as a result of
being granted an option under the Plan with respect to such
Offering Period, would own stock or hold options to purchase
stock possessing five (5) percent or more of the total combined
voting power or value of all classes of stock of the Company or
any of its subsidiaries; and
(e) Employees who would, by virtue of their participation in such
Offering Period, be participating simultaneously in more than
one Offering Period under the Plan.
37
<PAGE> 3
5. Offering Dates. The Offering Periods of the Plan (the "Offering
Period") shall be of twelve (12) months duration commencing on the first
business day of March and September of each year and ending on the last business
day of February and August, respectively, hereafter. The first Offering Period
shall commence on September 2, 1996. The first day of each Offering Period is
referred to as the "Offering Date". Each Offering Period shall consist of two
(2) six-month purchase periods (individually, a "Purchase Period"), during which
payroll deductions of the participant are accumulated under this Plan. Each such
six-month Purchase Period shall commence on the first business day of March and
September of an Offering Period and shall end on the last business day of the
following August and February, respectively. The last business day of each
Purchase Period is hereinafter referred to as the Purchase Date. The Board of
Directors of the Company shall have the power to change the duration of Offering
Periods or Purchase Periods if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period or Purchase
Period, as the case may be, to be affected.
6. Participation in the Plan. Employees may become participants in an
Offering Period under the Plan on the first Offering Date after satisfying the
eligibility requirements by delivering to the Employee's payroll department (the
"Payroll Department") not later than the 15th day of the month before such
Offering Date unless a later time for filing the subscription agreement is set
by the Board for all Employees with respect to a given Offering Period a
subscription agreement authorizing payroll deductions. An Employee who does not
deliver a subscription agreement to the Payroll Department by such date after
becoming eligible to participate in such Offering Period under the Plan shall
not participate in that Offering Period or any subsequent Offering Period unless
such Employee enrolls in the Plan by filing the subscription agreement with the
Payroll Department not later than the 15th day of the month preceding a
subsequent Offering Date. Once an Employee becomes a participant in an Offering
Period, such Employee will automatically participate in the Offering Period
commencing immediately following the last day of the prior Offering Period
unless the Employee withdraws from the Plan or terminates further participation
in the Offering Period as set forth in Section 11 below. Such participant is not
required to file any additional subscription agreements in order to continue
participation in the Plan. Any participant whose option expires and who has not
withdrawn from the Plan pursuant to Section 11 below will automatically be
re-enrolled in the Plan and granted a new option on the Offering Date of the
next Offering Period. A participant in the Plan may participate in only one
Offering Period at any time.
7. Grant of Option on Enrollment. Enrollment by an Employee in the Plan
with respect to an Offering Period will constitute the grant (as of the Offering
Date) by the Company to such Employee of an option to purchase on each Purchase
Date up to that number of shares of Common Stock of the Company determined by
dividing the amount accumulated in such Employee's payroll deduction account
during such Purchase Period by the lower of (i) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Offering Date
(the "Entry Price") or (ii) eighty-five percent (85%) of the fair market value,
of a share of the company's Common Stock on the Purchase Date, provided,
however, that the number of shares of the Company's Common Stock subject to any
option granted pursuant to this Plan shall not exceed the lesser of (a) the
maximum number of shares set by the Board pursuant to Section 10(c) below with
respect to all Purchase Periods within the applicable Offering Period or
Purchase Period, or (b) 200% of the number of shares determined by using 85% of
the fair market value of a share of the Company's Common Stock on the Offering
Date as the denominator. Fair market value of a share of the Company's Common
Stock shall be determined as provided in Section 8 hereof.
8. Purchase Price. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) the fair market value, in United States dollars, on the
Offering Date or
(b) the fair market value, in United States dollars, on the
Purchase Date.
For purposes of the Plan, the term "fair market value" on a given date
shall mean the closing bid from the previous day's trading of a share of the
Company's Common Stock as reported on the Nasdaq National Market.
9. Payment of Purchase Price; Changes in Payroll Deductions; Issuance of
Shares.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Purchase Period. The deductions are made as
a percentage of the Employee's compensation in one percent (1%) increments not
less than two percent (2%) nor greater than ten percent (10%). Compensation
shall mean all compensation designated as employee compensation, including, but
not limited to base salary, wages, commissions, overtime, shift premiums and
38
<PAGE> 4
bonuses, plus draws against commissions. Payroll deductions shall commence with
the first pay period following the Offering Date and shall continue to the end
of the Offering Period unless sooner altered or terminated as provided in the
Plan.
(b) A participant may lower (but not increase) the rate of
payroll deductions during a Purchase Period by filing with their local Payroll
Department a new authorization for payroll deductions, in which case the new
rate shall become effective for the next payroll period commencing more than 15
days after the Payroll Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one change may be made effective
during any Purchase Period. A participant may increase or lower the rate of
payroll deductions for any subsequent Purchase Period by filing with the Payroll
Department a new authorization for payroll deductions not later than the 15th
day of the month before the beginning of such Purchase Period.
(c) All payroll deductions made for a participant are credited
to his or her account under the Plan and are deposited with the general funds of
the Company; no interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, as long as the Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be refunded to such participant in cash; provided, however, that
any amount remaining in participant's account on a Purchase Date which is less
than the amount necessary to purchase a full share of Common Stock of the
Company shall be carried forward, without interest, into the next Purchase
Period or Offering Period, as the case may be. In the event that the Plan has
been oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the participant. No Common Stock shall be purchased on a
Purchase Date on behalf of any Employee whose participation in the Plan has
terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the
Company shall arrange the delivery to each participant, as appropriate, of a
certificate representing the shares purchased upon exercise of his option;
provided that the Company may deliver certificates to a broker or brokers that
hold such certificates in street name for the benefit of each such participant.
(f) During a participant's lifetime, such participant's option
to purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. Shares to be delivered to a participant
under the Plan will be registered in the name of the participant or in the name
of the participant and his or her spouse.
10. Limitations on Shares to be Purchased.
(a) No Employee shall be entitled to purchase stock under the
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other stock purchase plans of the Company or any Subsidiary, exceeds
$25,000 in fair market value, determined as of the Offering Date for each
calendar year in which the Employee participates in the Plan.
(b) No more than 200% of the number of shares determined by
using 85% of the fair market value of a share of the Company's Common Stock on
the Offering Date as the denominator may be purchased by a participant on any
single Purchase Date.
(c) No Employee shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty days prior to the commencement of any Purchase Period, the Board
may, in its sole discretion, set a maximum number of shares which may be
purchased by any Employee at any single Purchase Date (hereinafter the "Maximum
Share Amount"). In no event shall the Maximum Share Amount exceed the amounts
permitted
39
<PAGE> 5
under Section 10(b) above. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount not less than fifteen
(15) days prior to the commencement of the next Purchase Period. Once the
Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Purchase Periods unless revised by the Board as
set forth above.
(d) If the number of shares to be purchased on a Purchase Date by
all Employees participating in the Plan exceeds the number of shares then
available for issuance under the Plan, the Company shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Board shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each Employee affected thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
Offering Period.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under the
Plan by signing and delivering to the local Payroll Department
notice on a form provided for such purpose. Such withdrawal may
be elected at any time at least fifteen (15) days prior to the
end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll
deductions shall be returned to the withdrawn Employee and his
or her interest in the Plan shall terminate. In the event an
Employee voluntarily elects to withdraw from the Plan, he or she
may not resume his or her participation in the Plan during the
same Offering Period, but he or she may participate in any
Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for
payroll deductions in the same manner as set forth above for
initial participation in the Plan.
(c) A participant may participate in the current Purchase Period
under an Offering Period (the "Current Offering Period") and
enroll in the Offering Period commencing after such Purchase
Period (the "New Offering Period") by (i) withdrawing from
participating in the Current Offering Period effective as of the
last day of a Purchase Period within that Offering Period and
(ii) enrolling in the New Offering Period. Such withdrawal and
enrollment shall be effected by filing with the local Payroll
Department at least fifteen (15) days prior to the end of a
Purchase Period such form or forms as are provided for such
purposes.
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement or death or the failure of a participant to
remain an Employee, terminates his or her participation in the Plan immediately
on the date which Employee's employment with the Company ceases, or if earlier,
the date on which the Company gives notice of such termination. In no event
shall participation in this plan extend beyond the participant's termination
date, nor shall any potential value of a purchase under this Plan be considered
in determining any notice or compensation in lieu of notice that may be required
or given upon termination of participant's employment by the Company.
Participant agrees that this provision is a condition to this Plan and
enrollment in the Plan waives any and all rights and claims participant may have
to value attributable to a purchase under this Plan which would have under any
circumstances taken place after the termination date. In such event, the payroll
deductions credited to the participant's account will be returned to him or her
or, in the case of his or her death, to his or her legal representative. For
this purpose, an Employee will not be deemed to have terminated employment or
failed to remain in the continuous employ of the Company in the case of sick
leave, military leave, or any other leave of absence approved by the Board of
Directors of the Company; provided that such leave is for a period of not more
than ninety (90) days or re employment upon the expiration of such leave is
guaranteed by contract or statute.
13. Return of Payroll Deductions. In the event an Employee's interest in
the Plan is terminated by withdrawal, termination of employment or otherwise, or
in the event the Plan is terminated by the Board, the Company shall promptly
deliver to the Employee all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.
40
<PAGE> 6
14. Capital Changes. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
15. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect.
16. Reports. Individual accounts will be maintained for each participant
in the Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within twelve (12) months from the Purchase Date on which such
shares were purchased (the "Notice Period"). Unless such participant is
disposing of any of such shares during the Notice Period, such participant shall
keep the certificates representing such shares in his or her name (and not in
the name of a nominee) during the Notice Period. The Company may, at any time
during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to the Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant
of any option hereunder shall confer any right on any Employee to remain in the
employ of the Company or any Subsidiary or restrict the right of the Company or
any Subsidiary to terminate such Employee's employment.
19. Equal Rights and Privileges. All Employees shall have equal rights
and privileges with respect to the Plan.
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20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Designation of Beneficiary
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such
participant's death subsequent to the end of a Purchase Period
but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death
prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the
death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of
such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares or cash to the spouse or to
any one or more dependents or relatives of the participant, or
if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
22. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
23. Applicable Law. Except as otherwise expressly required under the
laws of a country, the Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the state of California, United States
of America. Should any provision of this Plan be determined by a court of
competent jurisdiction to be unlawful or unenforceable for a country, such
determination shall in no way affect the application of that provision in any
other country, or any of the remaining provisions of the Plan.
24. Amendment or Termination of the Plan. This Plan shall be effective
on the day after the effective date of the Company's Registration Statement
filed with the Securities Exchange Commission under the Securities Act of 1933,
as amended, with respect to the shares issuable under the Plan (the "Effective
Date"), and the Plan shall continue until the earlier to occur of termination by
the Board, issuance of all of the shares of Common Stock reserved for issuance
under the Plan, or ten (10) years from the adoption of the Plan by the Board.
The Board of Directors of the Company may at any time amend or terminate the
Plan, except that any such termination cannot affect options previously granted
under the Plan, nor may any amendment make any change in an option previously
granted which would adversely affect the right of any participant.
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EXHIBIT 5.01
(INCLUDES EXHIBIT 23.01)
July 30, 1998
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 Sr. 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 3, 1998 in connection with the registration
under the Securities Act of 1933, as amended, of an additional 2,500,000 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 and employees pursuant to EA's 1991 Stock Option Plan
(the "1991 Plan"), an additional 100,000 shares of Common Stock that may be sold
by EA to eligible employees of EA and its subsidiaries pursuant to EA's Employee
Stock Purchase Plan (the "ESP Plan") and an additional 50,00 shares of Common
Stock that may be sold by EA to eligible international employees located in EA's
international subsidiaries pursuant to EA's Internastional Employee Stock
Purchase Plan (the "IESP Plan").
As General Counsel for EA, I have examined the proceedings taken by EA in
connection with the 1991 Plan, the ESP Plan and the IESP Plan to add the shares
being registered hereby.
It is my opinion that the additional 2,500,000 shares of Common Stock that may
be issued and sold by EA pursuant to the 1991 Plan, the additional 100,000
shares of Common Stock that may be issued and sold by EA pursuant to the ESP
Plan, and the additional 50,00 shares of Common Stock that may be issued and
sold by EA pursuant to the IESP Plan, when issued and sold in the manner
referred to in the applicable Prospectus associated with the Registration
Statement and the 1991 Plan, the ESP Plan or the IESP 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.
Ruth A. Kennedy
Sr. Vice President, General Counsel and Secretary
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Electronic Arts Inc.:
We consent to incorporation by reference in the registration statement dated
August 3, 1998, on Form S-8 of Electronic Arts Inc. of our report dated May 1,
1998, relating to the consolidated balance sheets of Electronic Arts Inc. and
subsidiaries as of March 31, 1998 and 1997, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended March 31, 1998, and the related schedule, which
reports appear in the March 31, 1998, annual report on Form 10-K of Electronic
Arts Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Mountain View, California
August 3, 1998
44
