<PAGE> 1
As filed with the Securities and Exchange Commission
on July 30, 1999
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.)
209 Redwood Shores Parkway
Redwood City, California 94065
(Address of principal executive offices)
1991 Stock Option Plan
1991 Employee Stock Purchase Plan
International Employee Stock Purchase Plan
1998 Directors' Stock Option Plan
(Full titles of the Plans)
RUTH A. KENNEDY
Senior Vice President, General Counsel and Secretary
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, California 94065
(650) 628-1500
(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 3,100,000 (1) $58.625 (2) $181,737,500 (2) $55,072.00
($0.01 par value)
- -------------------------------------------------------------------------------------------------------
</TABLE>
This Registration Statement includes exhibits. The Index to Exhibits appears on
sequentially numbered page 4.
(1) Includes, 2,650,000 shares available for grant under the 1991 Stock
Option Plan, 250,000 shares available for grant under the 1991 Employee Stock
Purchase Plan, 100,000 shares available for grant under the International
Employee Stock Purchase Plan, and 100,000 shares available for grant under the
1998 Directors' Stock Option Plan, each as of July 29, 1999.
(2) Estimated pursuant to Rule 457(c) as of July 26, 1999 solely for the
purpose of calculating the amount of the registration fee.
<PAGE> 2
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, Registrant's Form S-8 Registration Statement
No. 333-46937 filed February 26, 1998, and Registrant's Form S-8 Registration
Statements Nos. 333-60513 and 333-60517 both filed August 3, 1998 are hereby
incorporated by reference.
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 8. EXHIBITS
4.04 Registrant's 1991 Stock Option Plan and related documents, as amended
4.05 Registrant's 1991 Employee Stock Purchase Plan and related documents, as
amended
4.06 Registrant's International Employee Stock Purchase Plan and related
documents, as amended
4.07 Registrant's 1998 Directors' Stock Option Plan and related documents, as
amended
5.02 Opinion of General Counsel of Registrant regarding legality of the
securities being issued.
23.02 Consent of General Counsel of Registrant (included in Exhibit 5.02).
23.03 Consent of KPMG LLP, Independent Auditors
24.02 Power of Attorney (see page 2).
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual and corporation whose
signature appears below constitutes and appoints E. Stanton McKee and David L.
Carbone and each of them, his or its true and lawful attorneys-in-fact and
agents with full power of substitution, for him or it and in his or its name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement of Form
S-8, and to file the same with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or it
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<PAGE> 3
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 29th day of July, 1999.
ELECTRONIC ARTS INC.
By: /s/ Ruth A. Kennedy
-------------------------------------
Ruth A. Kennedy, Esq.
Senior 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 29, 1999
Chief Executive Officer
Principal Financial Officer:
/s/ E. Stanton McKee, Jr.
- -----------------------------------
E. Stanton McKee, Jr. Exec. Vice President, July 29, 1999
Chief Financial and
Administrative Officer
Principal Accounting Officer:
/s/ David L. Carbone
- -----------------------------------
David L. Carbone Vice President, Finance July 29, 1999
and Assistant Secretary
Directors:
/s/ M. Richard Asher Director July 29, 1999
- -----------------------------------
M. Richard Asher
/s/ William J. Byron Director July 29, 1999
- -----------------------------------
William J. Byron
/s/ Daniel H. Case III Director July 29, 1999
- -----------------------------------
Daniel H. Case III
/s/ Gary M. Kusin Director July 29, 1999
- -----------------------------------
Gary M. Kusin
/s/ Timothy Mott Director July 29, 1999
- -----------------------------------
Timothy Mott
</TABLE>
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.04 Registrant's 1991 Stock Option Plan and related documents, as amended
4.05 Registrant's 1991 Employee Stock Purchase Plan and related documents,
as amended
4.06 Registrant's International Employee Stock Purchase Plan and related
documents, as amended
4.07 Registrant's 1998 Directors' Stock Option Plan and related documents,
as amended
5.02 Opinion of General Counsel of Registrant regarding legality of the
securities being issued.
23.02 Consent of General Counsel of Registrant (included in Exhibit 5.02).
23.03 Consent of KPMG LLP, Independent Auditors
24.02 Power of Attorney (see page 2).
</TABLE>
<PAGE> 1
EXHIBIT 4.04
ELECTRONIC ARTS INC.
1991 STOCK OPTION PLAN
APPROVED BY THE STOCKHOLDERS ON JULY 25, 1991
AS AMENDED ON JULY 29, 1999
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 18,150,000 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.
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)
<PAGE> 2
years from the date the Option is granted, and provided further that no ISO
granted to a Ten Percent Stockholder shall be exercisable after the expiration
of five (5) years from the date the Option is granted.
e. Limitations on ISOs. The aggregate Fair Market Value
(determined as of the time an Option is granted) of stock with respect to which
ISOs are exercisable for the first time by an Optionee during any calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of Shares with respect to which ISOs are exercisable for the
first time by an Optionee during any calendar year exceeds $100,000, the Options
for the first $100,000 worth of Shares to become exercisable in such year shall
be ISOs and the Options for the amount in excess of $100,000 that becomes
exercisable in that year shall be NQSOs. In the event that the Revenue Code or
the regulations promulgated thereunder are amended after the effective date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.
f. Options Non-Transferable. Options granted under this Plan, and
any interest therein, shall not be transferable or assignable by Optionee, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of Optionee only by Optionee; provided, however,
that NQSOs held by an Optionee who is not an officer or director of the Company
or other person (in each case, an "Insider") whose transactions in the Company's
common stock are subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), may be transferred to such family
members, trust and charitable institutions as the Committee, in its sole
discretion, shall approve at the time of the grant of such Option.
g. Assumed Options. In the event the Company assumes an option
granted by another company, the terms and conditions of such option shall remain
unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
425(c) of the Revenue Code). In the event the Company elects to grant a new
option rather than assuming an existing option (as specified in Section 4), such
new option may instead be granted with a similarly adjusted exercise price.
h. Limitation on Options granted to Individuals. The number of
options that may be granted to optionees from July 27, 1994 through the end of
the term of the 1991 Plan, April 25, 2001 is limited to one million shares per
individual.
6. EXERCISE OF OPTIONS.
a. Notice. Options may be exercised only by delivery to the
Company of a written stock option exercise agreement (the "Exercise Agreement")
in a form approved by the Committee (which need not be the same for each
Optionee), stating the number of Shares being purchased, the restrictions
imposed on the Shares, if any, and such representations and agreements regarding
Optionee's investment intent and access to information, if any, as may be
required by the Company to comply with applicable securities laws, together with
payment in full of the exercise price for the number of Shares being purchased.
b. Payment. Payment for the Shares may be made in cash (by check)
or, where approved by the Committee in its sole discretion at the time of grant
and where permitted by law: (i) by cancellation of indebtedness of the Company
to the Optionee; (ii) by surrender of shares of common stock of the Company
having a Fair Market Value equal to the applicable exercise price of the
Options, that have been owned by Optionee for more than six (6) months (and
which have been paid for within the meaning of the Securities and Exchange
Commission ("SEC") Rule 144 and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to such
shares), or were obtained by Optionee in the open public market; (iii) by tender
of a full recourse promissory note having such terms as may be approved by the
Committee and bearing interest at a rate sufficient to avoid imputation of
income under Sections 483 and 1274 of the Revenue Code, provided that the
portion of the exercise price equal to the par value of the Shares, if any, must
be paid in cash or other legal consideration; (iv) by waiver of compensation due
or accrued to Optionee for services rendered; (v) provided that a public market
for the Company's stock exists, through a "same day sale" commitment from
Optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby Optionee irrevocably elects to
exercise the option and to sell a portion of the Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; (vi)
provided that a public market for the Company's stock exists, through a "margin"
commitment from Optionee and a NASD Dealer whereby Optionee irrevocably elects
to exercise the Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the exercise price, and whereby the NASD Dealer
<PAGE> 3
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.
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
<PAGE> 4
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 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.
<PAGE> 5
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.
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:
<PAGE> 6
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
<PAGE> 7
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.
<PAGE> 8
(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. The IRS Restructuring and Reform Act of
1998, enacted in July 1998 modifies and provides technical corrections to the
Taxpayer Relief Act of 1997. The new legislation generally reduces the 18-month
holding period requirement to 12 months for tax years ending after December 31,
1997. Therefore, most capital assets held more than 12 months will be subject to
a maximum capital gains rate of 20% (10% for individuals in the 15% bracket). A
special lower rate of 18% (8% for individuals in a 15% tax bracket) applies to
tax years beginning after December 31, 2000 when the asset was held more than
five years. Capital gains will continue to be offset by capital losses and up to
$3,000 of capital losses may be offset annually against ordinary income.
<PAGE> 9
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.
<PAGE> 10
EXHIBIT A TO THE GRANT AGREEMENT
STOCK OPTION EXERCISE NOTICE AND AGREEMENT
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065
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:__________________________________
<PAGE> 11
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 209 Redwood Shores Parkway,
Redwood City, CA 94065, 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
<PAGE> 12
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:
<PAGE> 13
(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) Pound Sterling30,000; or
(b) four times the amount of the Eligible Employee's Relevant
Emoluments for the current or preceding Year of Assessment (whichever of those
years gives the greater amount) or, if there were no Relevant Emoluments for the
preceding Year of Assessment, four times the amount of the Relevant Emoluments
for the period of twelve months beginning with the first day during the current
Year of Assessment in respect of which there are Relevant Emoluments.
For the purpose of this Rule 3, Options shall include all Options granted under
this Scheme and all options granted under any other scheme approved under
Schedule 9 and established by the Company or any Associated Company thereof.
4. Exercise of Options
4.1 An Option shall lapse on the earliest of the following events:
(a) the tenth anniversary of the Date of Grant;
(b) the first anniversary of the Option holder's death or
disability within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1954 (as amended);
(c) unless the Board otherwise decides, at the expiry of three
months following the Option holder ceasing to be a director or employee of any
Participating Company (except in the circumstances described in Rule 4.1(b) in
which case an Option shall lapse on the first anniversary of such an event;
(d) the expiration of the period within which an Option may be
exercised in accordance with Rule 5.
4.2 Notwithstanding the terms of Rule 4.1 and 7, but subject to Rule
5.3, this Rule 4.2 shall apply in relation to the exercise of an Option:
(a) if at the time of exercise of an Option (or the date of death
of an Option holder if earlier) the Option holder has been continuously employed
by any Participating Company for at least 50 full calendar months from the
Vesting Start Date (as defined below) the Option may be exercised in respect of
all Shares subject to that Option;
(b) to the extent that such continuous employment by an Option
holder has not been attained for 50 full calendar months from the Vesting Start
Date, the Option may be exercised only in respect of 2 per cent of the number of
Shares subject to the Option (rounded down to the nearest whole number of
Shares) for each full calendar month of continuous employment of the Option
holder by any Participating Company from the Vesting Start Date completed at the
time of exercise of an Option (or the date of death of an Option holder if
earlier);
(c) the period of continuous employment shall be determined for
the purpose of this Rule 4.2 by the Board in accordance with such rules as the
Board may notify to the Option holders at the time of grant; in the absence of
any such notification the period of continuous employment shall be the period
from the Vesting Start Date until the date on which the Option holder's
employment by a Participating Company ceases or (if earlier) the date on which
notice is given (either by the Option holder or by the Participating Company) to
determine an Option holder's service agreement with the Participating
<PAGE> 14
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
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:
<PAGE> 15
(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.
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.
<PAGE> 16
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
<PAGE> 17
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 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.
<PAGE> 18
(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.
<PAGE> 19
UK STOCK OPTION EXERCISE NOTICE AND AGREEMENT
Electronic Arts Inc.
209 Redwood Shores Parkway,
Redwood City, CA 94065
USA
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:__________________________________
<PAGE> 1
EXHIBIT 4.05
ELECTRONIC ARTS INC.
EMPLOYEE STOCK PURCHASE PLAN
AS APPROVED BY THE STOCKHOLDERS ON JULY 25, 1991,
AS AMENDED ON JULY 29, 1999
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 1,500,000
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.
<PAGE> 2
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,
<PAGE> 3
including, but not limited to base salary, wages, commissions, overtime, shift
premiums and bonuses, plus draws against 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.
<PAGE> 4
(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 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
<PAGE> 5
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 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
<PAGE> 6
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.
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:
<PAGE> 7
(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.
<PAGE> 8
[LOGO]
EMPLOYEE STOCK PURCHASE PLAN ACTION FORM
ENROLLMENT/CHANGE/WITHDRAWAL AGREEMENT
SECTION 1: Action Complete Sections
[ ] 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
NEW Employee Stock Purchase Plan (the "Plan") and I agree to
ENROLLMENT be bound by its 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
PAYROLL in that percentage of my compensation as shown below, in
DEDUCTION accordance with the Plan.
AUTHORIZATION
Amount to be Deducted (Circle One): 0% 2% 3%
4% 5% 6% 7% 8% 9% 10%
SECTION 5: Effective: _______/_______/_______
WITHDRAW Month Date Year
I will cease participating 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:
<TABLE>
<S> <C>
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
</TABLE>
SECTION 7:
ACCUMULATION AND PURCHASE PRICE I understand that my payroll deductions will be
accumulated for the automatic purchase of shares of Common Stock at the end of
each Purchase Period, unless I withdraw from the Plan or become ineligible. The
purchase price per share will be the lower of (i) 85% of the fair market value
on the first day of an Offering Period or (ii) 85% of the fair market value on
the last day of a Purchase Period.
SUCCESSIVE PERIODS I understand that this enrollment will be effective for each
subsequent Offering Period unless I withdraw from the 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 PROSPECTUS I have received a copy of the Company's most recent
prospectus which describes the Plan. I understand that my participation is in
all respects subject to the terms of the Plan.
SECTION 8:
AUTHORIZATION
Signature of Employee: Date:
----------------------- --------------------
PLEASE SEND ORIGINAL TO STOCK ADMINISTRATION AND A COPY OF PAYROLL.
<PAGE> 1
EXHIBIT 4.06
ELECTRONIC ARTS INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
AS APPROVED BY THE BOARD OF DIRECTORS ON JUNE 27, 1996,
AS AMENDED FEBRUARY 24, 1998, MAY 13, 1998 AND OCTOBER 29, 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 350,000 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.
<PAGE> 2
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
bonuses, plus draws against commissions. Payroll deductions shall commence with
the first pay period following the
<PAGE> 3
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 under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum
<PAGE> 4
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.
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
<PAGE> 5
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.
<PAGE> 6
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.
<PAGE> 1
EXHIBIT 4.07
ELECTRONIC ARTS INC.
1998 DIRECTORS' STOCK OPTION PLAN
As Adopted by the Board of Directors on May 13,
1998 As Approved by the Stockholders on July 30, 1998
As Amended on July 29, 1999
1. PURPOSE. This 1998 Directors' Stock Option Plan ("Plan") is
established to provide equity incentives for members of the Board of Directors
of Electronic Arts Inc., a Delaware corporation (the "Company") who are not
employees of the Company, to promote the financial success and progress of the
Company by granting such persons options ("Options") to purchase shares of the
Common Stock ("Shares") of the Company, and to provide the opportunity for such
persons to receive Shares of common stock of the Company in lieu of cash
compensation
2. ADOPTION AND APPROVAL. This Plan shall become effective on the date
it is approved by the affirmative vote or written consent of the holders of a
majority of the outstanding shares of the Company.
3. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan shall be 235,000 Shares, subject to
adjustment as provided in Section 11 below. If any Option is terminated for any
reason without being exercised in whole or in part, the Shares thereby released
from such Option shall continue to be available 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. ADMINISTRATION. This Plan shall be administered by the Board or by a
Committee of not less than three members of the Board appointed to administer
this Plan (as used herein, the term "Board" shall mean either such Committee or
the Board if no Committee has been established). The interpretation by the Board
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 Option or any Shares purchased pursuant to an Option.
5. ELIGIBILITY AND AWARD FORMULA. Options may be granted only to such
directors of the Company who are not employees of the Company ("Optionees") in
accordance with the following formula:
a. Upon initial election or appointment to the Board of
Directors, each Optionee shall be granted an option to purchase 25,000 shares of
the Company's common stock on the date of election or appointment.
b. Upon re-election to the Board of Directors at the annual
meeting of stockholders of the Company, each Optionee shall be granted an option
to purchase 8,000 shares of the Company's common stock on the date of
re-election; provided, however, that any such Optionee who received such
Optionee's initial grant pursuant to (a) above since the last annual meeting of
stockholders shall receive a prorated annual grant to purchase a number of
shares determined as set forth above and multiplied by a fraction whose
numerator is the number of calendar months or portions thereof that the director
has served since the date of the initial grant and whose denominator is twelve.
The provisions of this Section 5 shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code of 1986,
as amended (the "Code") or the rules thereunder.
6. TERMS AND CONDITIONS OF OPTIONS. The Option shall be subject to the
following terms and conditions:
(a) Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("Grant") in such form as the
Board shall from time to time establish, which Grant shall incorporate the
provisions of this Plan by reference and shall comply with and be subject to the
terms and conditions of this Plan.
(b) Exercise Price. The exercise price of any Option shall be not
less than 100% of the fair market value per share of the Company's common stock
on the date the Option is granted. Fair market value shall be the closing price
on the Nasdaq National Market.
(c) Exercise Period. Options shall be exercisable as to two
percent (2%) of the Shares immediately on the date of grant and as to an
additional two percent (2%) of the Shares on the first day of each calendar
month beginning after
<PAGE> 2
the date of grant; provided, however, that no Option shall be exercisable after
expiration of ten (10) years from the date the Option is granted.
(d) Date of Grant. The date of grant of an Option shall be the
date provided in Section 5 above. The Grant representing the Option shall be
delivered to the Optionee within a reasonable time after the granting of the
Option.
(e) Provision of Information. 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 they are released by the
Company to its stockholders.
7. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery of a
written notice to the Company, in a form approved by the Board, stating the
number of 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, together with
payment 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 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
Optionee making an irrevocable election in writing to reduce cash compensation
in lieu of shares of common stock of the Company as described in Section 9
below; (iv) 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; or (v) by any combination of the foregoing.
(c) Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the 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 limitations:
(i) An Option shall not be exercisable until such time as
the Plan has been approved by the stockholders of the Company in accordance with
Section 3 above.
(ii) An Option shall not be exercisable unless such
exercise is in compliance with the Securities Act of 1933, as amended, and all
applicable state securities laws, as they are in effect on the date of exercise.
(iii) If the Optionee ceases to be a director of the
Company for any reason except death or disability, the 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, but in any event no later than the expiration
date of the Option.
(iv) If the Optionee ceases to be a director of the
Company because of death or disability, the 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, but in
any event no later than the expiration date of the Option.
8. DEFERRAL OF REGULAR CASH COMPENSATION INTO COMMON STOCK OF THE
COMPANY.
Each Optionee may elect to reduce all or part of the cash compensation
otherwise payable for services to be rendered by him as a director (including
the annual retainer and any fees payable for serving on the Board or a Committee
of
<PAGE> 3
the Board) and to receive in lieu thereof Shares. Any such election shall be in
writing and must be made before the services are rendered giving rise to such
compensation, and may not be revoked or changed thereafter during the Director's
term. On such election, the cash compensation otherwise payable will be
increased by 10% for purposes of determining the number of Shares to be credited
to such Optionee.
If an Optionee so elects to defer, there shall be credited to such
Optionee a number of Shares equal to the amount of the deferral (increased by
10% as described in the preceding sentence) divided by the fair market value as
determined by the closing price on the Nasdaq National Market on the day in
which the compensation would have been paid in the absence of a deferral
election.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option may be exercisable only by the Optionee. No Option may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option until
the Option has been validly exercised and the Shares have been issued. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date of issuance, except as provided in
Section 11 below.
11. 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 or similar change in the capital
structure 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 or stockholders of the Company; provided, however, that no
certificate or scrip representing fractional shares shall be issued upon
exercise of any Option and any resulting fractions of a share shall be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or in any Option
granted under this Plan shall confer on any Optionee any right to continue as a
Director.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to compliance with all
applicable requirements of law, including without limitation compliance with the
Securities Act of 1933, as amended, any required approval by the Commissioner of
Corporations of the State of Delaware, compliance with all applicable state
securities laws and compliance with the requirements of any stock exchange on
which the Shares may be listed.
14. ACCELERATION OF EXERCISABILITY ON CHANGE IN CONTROL. Upon a Change
in Control (as defined below) of the Company, all options theretofore granted
and not previously exercisable shall become fully exercisable to the same extent
and in the same manner as if they had become exercisable by passage of time in
accordance with the provisions of the Plan relating to periods of exercisability
and to termination of employment. As used in this section, a Change in Control
of the Company means (i) a dissolution or liquidation of the Company, (ii) a
merger or consolidation whereby the Company becomes a subsidiary of another
corporation or, 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), (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).
15. AMENDMENT OR TERMINATION OF PLAN. Subject to the limitations set
forth in Section 6 above, the Board may at any time terminate or amend this
Plan; provided, however, that the Board shall not, without the approval of the
stockholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 3 and 11 above) or
change the class of persons eligible to receive Options. In any case, no
amendment of this Plan may adversely affect any then outstanding Options or any
unexercised portions thereof without the written consent of the Optionee.
16. EFFECTIVE PERIOD OF PLAN. Options may be granted pursuant to this
Plan from time to time from the date this Plan is approved by the stockholders
of the Company but no later than July 30, 2008.
<PAGE> 4
ELECTRONIC ARTS INC.
1998 DIRECTORS NONQUALIFIED STOCK OPTION GRANT
Optionee:
Address: c/o Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City CA
94065
Number of Option Shares:
Exercise Price per Share: $
Date of Grant:
Expiration Date:
1. Grant of Option: Electronic Arts Inc. (the "Company"), a Delaware
corporation, hereby grants to the optionee named above (the "Optionee") a
nonqualified stock option (this "Option") to purchase the total number of shares
set forth above of Common Stock of the Company (the "Option Shares") at the
exercise price per share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Nonqualified Stock Option Grant ("Grant")
and the Company's 1998 Directors Stock Option Plan, (the "Plan"), the provisions
of which are incorporated herein by this reference.
2. Exercise Period of Option. Subject to the terms and conditions of the
Plan and this Grant, this Option shall become exercisable as to two percent (2%)
of the Shares immediately on the date of grant set forth above (the "Date of
Grant") and as to an additional two percent (2%) of the Shares on the first day
of each calendar month beginning after the Date of Grant.
3. Restrictions on Exercise. Exercise of this Option is subject to the
following limitations:
(a) This Option may not be exercised until the Plan has been
approved by the stockholders of the Company as set forth in the Plan.
(b) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, the Exchange Act of
1934, as amended, all applicable state securities laws, and the requirements of
any stock exchange or national market system on which the Company's Common Stock
may be listed, as they are in effect on the date of exercise.
4. Termination of Option.
(a) Except as provided in this Section, this Option shall
terminate in whole if Optionee ceases to be a member (a "Board Member") of the
Board of Directors of the Company or any Parent, Subsidiary or Affiliate of the
Company and may not be exercised to the extent terminated. If the Optionee
ceases to be a Board Member of the Company for any reason except by death or
disability, this Option, to the extent it is exercisable by the Optionee on the
date on which the Optionee ceases to be a Board Member (the "Termination Date"),
may be exercised by the Optionee within 90 days after the Termination Date, but
in no event later than the Expiration Date.
(b) If the Optionee ceases to be a Board Member because of the
death of the Optionee or disability of the Optionee within the meaning of
Section 22(e)(3) of the Code, this Option, to the extent that it is exercisable
by the Optionee on the Termination Date, may be exercised by the Optionee (or
the Optionee's legal representative) at any time prior to the expiration of
twelve months after the Termination Date, but in any event no later than the
Expiration Date.
5. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Company
of written notice in the form attached hereto as Exhibit A, or in such other
form as may be approved by the Board of Directors or the committee thereof that
administers the Plan, which shall set forth the Optionee's election to exercise
this Option, the number of Option Shares being
<PAGE> 5
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; (iii) by tender
of a full-recourse promissory note in such form as the Board may approve at the
time the Option is granted; or (iv) by any combination of the foregoing.
(c) Prior to the issuance of the Option Shares upon exercise of
this Option, the Optionee must pay or make adequate provision for any applicable
federal or state withholding obligations of the Company. If Optionee is an
Insider subject, at the time of exercise of this Option, to Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Optionee may provide for
payment of withholding taxes upon exercise of the Option by requesting that the
Company retain Shares with a Fair Market Value equal to the minimum amount of
taxes required to be withheld, all as set forth in Section 8(c) of the Plan. In
such case, the Company shall issue the net number of Shares to the Optionee by
deducting the Shares retained from the Shares exercised.
(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.
6. 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.
7. 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.
8. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. Additional information is
included in the Prospectus for the Plan, as amended. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise. Upon exercise, Optionee will recognize compensation
income in an amount equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price for those Shares.
Optionee represents that Optionee has consulted any tax consultant(s) Optionee
deems advisable in connection with the purchase of the Shares.
(b) Disposition of the Shares. For federal tax purposes, for
shares disposed of after 1986, long-term capital gain will generally be treated
as ordinary income subject to the maximum tax rate. If the shares acquired
pursuant to the exercise of a nonqualified stock option are held for at least
six (6) months after the date of transfer pursuant to the exercise of the
nonqualified stock option, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal (but not California) income tax
purposes for potential set-off against capital losses.
9. 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.
10. Entire Agreement. The Plan and the Notice and Agreement attached as
Exhibit A are incorporated herein by reference. This Grant, the Plan and the
Notice and Agreement constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
ELECTRONIC ARTS INC.
<PAGE> 6
By:________________________________
Its:_______________________________
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan and a copy of
the Prospectus, as amended, represents that Optionee has read and understands
the terms and provisions thereof, and accepts this Option subject to all the
terms and provisions of the Plan and this Grant. Optionee acknowledges that
there may be adverse tax consequences upon exercise of this Option and that
Optionee should consult a tax adviser prior to such exercise.
___________________________________
Optionee
<PAGE> 7
ELECTRONIC ARTS INC.
NON-REVOCABLE NOTICE OF ELECTION OF DEFERRAL
UNDER THE 1998 DIRECTORS' STOCK OPTION PLAN, AS AMENDED
Service Year Of Deferral: From August, 1999 through July, 2000
I. ______________________________, a director (the "Director") of the Board
of Directors of Electronic Arts Inc. (the "Company"), hereby elects to
receive shares of Common Stock of the Company, (the "Shares") in lieu of
cash compensation pursuant to the 1998 Directors' Stock Option Plan (the
"Plan") effective July 30, 1999. The Director acknowledges that this
election is irrevocable for the service year.
II. Designation of cash compensation to use for purchasing the Shares:
Formula: [Compensation x 110% / Common Stock FMV on date of service]
Dollar Amount: $_____________
or
Percentage of Director's yearly fees: ______________%
Source of fees (check all that apply):
Annual Retainer: ______
Committee Meetings ______
III. Certificate registration and mailing instructions:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
IV. The Director hereby acknowledges that:
- The Shares will be issued under the Plan quarterly and delivered in
certificate form within a reasonable time and at such place as the
Director requests. Any amount remaining from the Directors'
compensation that is insufficient to purchase a full Share shall be
carried forward, without interest, to the next quarterly Shares
purchase.
- The Shares will be issued 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 issue.
- In connection with any registration of the Company's securities, upon
the request of the Company or the underwriters managing any public
offering of the Company's securities, the Director will not sell or
otherwise dispose of any Shares without the prior written consent of
the Company or such underwriters, as the case may be, for a period of
time (not to exceed 180 days) from the effective date of such
registration as the Company or the underwriters may specify for
employee stockholders generally.
- The Shares will have restricted legends placed upon the Certificate
pursuant to Rule 144 and Section 16(b)(3). The Company may issue
appropriate "stop transfer" instructions to its transfer agent to
ensure compliance with the restrictions on transfer.
- Copies of the Plan and Prospectus are available upon request from the
Stock Administration department.
- The Director understands that the Director may suffer adverse tax
consequences as a result of the Director's purchase or disposition of
the Shares. The Director represents that the Director has consulted
with any tax consultant(s) the Director deems advisable in connection
with the purchase or disposition of the Shares and that the Director
is not relying on the Company for any tax advice.
______________________________ _______________________________
Signature of Director Ruth A. Kennedy, Secretary
Date__________________________ Date___________________________
<PAGE> 8
EXHIBIT A
STOCK OPTION EXERCISE NOTICE AND AGREEMENT
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065-1175
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 1998 Directors' 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.
6. Delivery of Payment. Optionee (or Optionee's broker acting as agent)
herewith delivers to the Company the aggregate purchase price of the Option
Shares that Optionee has elected to purchase, in cash (by check payable to
Electronic Arts Inc.) in the amount of $_________________ , receipt of which is
acknowledged by the Company.
Submitted by: Accepted by:
OPTIONEE:_________________________ ELECTRONIC ARTS INC.
(Print Name)
__________________________________ By:____________________________________
(Signature)
Its: Senior Vice President, General
Counsel
Dated:__________________ Dated::__________________
<PAGE> 1
EXHIBIT 5.02
(INCLUDES EXHIBIT 23.02)
July 29, 1999
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 Senior 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 July 30, 1999 in connection with the registration
under the Securities Act of 1933, as amended, of an additional 2,650,000 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 250,000 shares of Common Stock that may be sold
by EA to eligible employees of EA and its subsidiaries pursuant to EA's 1991
Employee Stock Purchase Plan (the "ESP Plan"), an additional 100,000 shares of
Common Stock that may be sold by EA to eligible international employees located
in EA's international subsidiaries pursuant to EA's International Employee Stock
Purchase Plan (the "IESP Plan"), and 100,000 shares of Common Stock that may be
sold by EA to non-employee Directors pursuant to EA's 1998 Directors' Stock
Option Plan (the "Directors' Plan").
As General Counsel for EA, I have examined the proceedings taken by EA in
connection with the 1991 Plan, the ESP Plan IESP Plan and the Director's Plan to
add the shares being registered hereby.
It is my opinion that the additional 2,650,000 shares of Common Stock that may
be issued and sold by EA pursuant to the 1991 Plan, the additional 250,000
shares of Common Stock that may be issued and sold by EA pursuant to the ESP
Plan, the additional 100,000 shares of Common Stock that may be issued and sold
by EA pursuant to the IESP Plan, and the additional 100,000 shares of Common
Stock that may be issued and sold by EA pursuant to the Directors' 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, the
IESP Plan or the Directors' Plan, as applicable, will be legally issued, fully
paid and nonassessable.
I consent to the use of this opinion as an exhibit to the Registration Statement
and further consent to all references to this opinion, if any, in the
Registration Statement and amendments thereto.
Very truly yours,
ELECTRONIC ARTS INC.
/s/ Ruth A. Kennedy
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Ruth A. Kennedy
Senior Vice President,
General Counsel and Secretary
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Electronic Arts Inc.:
We consent to incorporation by reference in the registration statement dated
July 30, 1999, on Form S-8 of Electronic Arts Inc. of our report dated April 30,
1999, relating to the consolidated balance sheets of Electronic Arts Inc. and
subsidiaries as of March 31, 1999 and 1998, 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, 1999, and the related schedule, which
reports appear in the March 31, 1999, annual report on Form 10-K of Electronic
Arts Inc.
/s/ KPMG LLP
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KPMG LLP
Mountain View, California
July 30, 1999
