EA Requests Stock Option Revamp To Retain Employees

In an effort to retain valuable employees, videogame maker Electronic Arts will ask its shareholders this month to approve a plan to let employees swap 'underwater options"? for restricted shares, in an effort to boost morale at the company, whose stock has lost about a third of its value over the last 12 months.

EA has, of late, been competing for talent not only with other video game makers but also with technology giants like Google and Yahoo.

Options are considered 'underwater"? when a company's shares are trading at a level lower than the price at which an employee can exercise his or her option to buy shares.

EA shares fell 62 cents to close on Wednesday at $42.81 on the Nasdaq, down from a 52-week high of $63.12 on July 21, 2005.

If approved at EA's shareholder meeting on July 27, 2006, employees holding significantly underwater stock options would be able to trade those in at an exchange rate of between 3-to-1 and 4-to-1, with some of the restricted shares becoming eligible for vesting in as little as two years.

Of note is the fact that executives and directors would not eligible for the program. The company's compensation committee already has approved a retention plan for "key employees", which includes certain named executives, that would grant new stock options and restricted stock unit awards. This plan does not require shareholder approval and EA expects to grant a mix of stock options to purchase about 2.2 million shares and 600,000 restricted stock units under this plan.
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