8-KMaterial Agreements

ELECTRONIC ARTS INC. 8-K Report, Material Agreement (Aug 2, 2006)

Filed August 2, 2006For Securities:EA

Summary

This 8-K filing from Electronic Arts Inc. (EA) on August 2, 2006, details significant changes to its non-employee director compensation structure. The Board of Directors approved a revised cash compensation plan including annual retainers for general service and specific committee roles, as well as additional retainers for committee chairs and the Lead Director position. A new grant of restricted stock units was also approved for non-employee directors. These changes reflect a strategic move to further align director incentives with shareholder interests through increased equity ownership and to compensate directors appropriately for their oversight and committee responsibilities. The filing also announces a change in the Lead Director role and committee assignments, which are important for understanding the company's governance structure.

Key Highlights

  • 1Modified cash compensation for non-employee directors with tiered annual retainers for board service, committee membership, and committee chair roles.
  • 2Introduction of a $25,000 annual retainer for the Lead Director position.
  • 3Approval of a grant of 700 restricted stock units to each non-employee director, to be made at a future date.
  • 4Current non-employee directors will continue to receive an annual stock option grant for 10,000 shares upon re-election; new directors receive 25,000 shares upon election.
  • 5Directors can elect to receive cash compensation in stock at a 10% premium (110% of value) as an incentive for stock ownership.
  • 6Gary M. Kusin has succeeded Linda J. Srere as the Lead Director of the Board.
  • 7Specific committee assignments and chairs for the Audit, Compensation, and Nominating and Governance Committees have been updated.

Frequently Asked Questions

The company has introduced a new structure for non-employee director compensation, including specific annual cash retainers for board service, committee memberships (Audit, Compensation, Nominating and Governance), and leadership roles within those committees (chairs and Lead Director). Additionally, directors will receive restricted stock units, and stock options remain part of the compensation package.

EA offers directors the option to convert their cash compensation into company stock at a 10% premium (receiving 110% of the cash value). This, along with stock option grants and the new restricted stock unit awards, aims to increase director stock ownership and align their interests with those of shareholders.

Gary M. Kusin has been appointed as the new Lead Director, succeeding Linda J. Srere. The Lead Director role comes with a significant annual retainer of $25,000, reflecting its importance in providing leadership and guidance to the board, especially in situations where the CEO also holds the Chairman title (though not explicitly stated as the case here, it's a common rationale for the role).

Yes, directors can earn up to $1,000 per day for special assignments, provided these assignments and associated payments do not compromise their independence under NASDAQ or SEC rules.