8-KLeadership ChangesExhibits & Filings

ELECTRONIC ARTS INC. 8-K Report, Executive Changes (May 21, 2008)

Filed May 21, 2008For Securities:EA

Summary

Electronic Arts Inc. (EA) filed an 8-K report on May 21, 2008, primarily announcing two key events. Firstly, Timothy Mott, a long-serving director since 1990, has declared his intention to retire from the Board of Directors and will not seek re-election at the upcoming 2008 Annual Meeting of Stockholders. This marks the end of an era for a director who has been with the company for a significant period. Secondly, and more significantly for investors, the Board approved the grant of performance-based restricted stock units (Performance-Based RSUs) to senior executives, including the CEO and CFO. These RSUs are tied to the achievement of specific non-GAAP net income targets for fiscal year 2011, reinforcing the company's long-term financial strategy and aligning executive compensation with performance. The grants are intended to replace annual stock options for fiscal years 2009 and 2010, with vesting contingent on hitting challenging financial objectives.

Key Highlights

  • 1Director Timothy Mott to retire at the 2008 Annual Meeting of Stockholders.
  • 2Grant of performance-based restricted stock units (RSUs) to senior executives approved.
  • 3Performance-based RSUs are linked to achieving specific non-GAAP net income targets by fiscal year 2011.
  • 4These RSUs replace annual stock option grants for fiscal years 2009 and 2010 for eligible executives.
  • 5CEO John Riccitiello received a grant of 200,000 Performance-Based RSUs.
  • 6CFO Eric Brown and EVP Gerhard Florin each received 100,000 Performance-Based RSUs.
  • 7Vesting of RSUs is contingent upon the company reaching progressively higher non-GAAP net income targets, which are considered challenging.

Frequently Asked Questions

The Performance-Based RSUs are designed to align the compensation of senior executives with the company's long-term financial objectives, specifically its strategy to profitably grow its business and achieve non-GAAP net income targets for fiscal year 2011. They are intended to incentivize executives to meet these challenging financial goals.

The Performance-Based RSUs will vest in three equal installments, with each installment contingent upon the company achieving one of three progressively higher non-GAAP net income targets by June 30, 2011. If a target is not met by this date, the corresponding portion of the award will be cancelled.

Yes, in the event of a change of control, the vesting of the Performance-Based RSUs may be accelerated. However, the vesting and potential payout might be adjusted to prevent excise taxes under Section 280G of the Internal Revenue Code, unless the executive would receive a greater net after-tax benefit by incurring the tax.

Grants were made to employees at the senior vice president level and higher. Specifically, CEO John Riccitiello received 200,000 RSUs, CFO Eric Brown received 100,000 RSUs, and EVP Gerhard Florin received 100,000 RSUs. Other named executive officers did not receive these grants.