Electronic Arts 2007 Annual Report Download - page 57

Committee shall participate in any review, consideration or approval of any related person transaction with
respect to which such member or any of his or her immediate family members is the related person. The Audit
Committee and Nominating and Governance Committee (or the relevant chairperson) shall approve only those
related person transactions that are in, or are not inconsistent with, the best interests of EA and its
stockholders, as determined in good faith.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
We enter into indemnification agreements with each of the members of our Board of Directors at the time they
join the Board to indemnify them to the extent permitted by law against any and all liabilities, costs, expenses,
amounts paid in settlement and damages incurred by the directors as a result of any lawsuit, or any judicial,
administrative or investigative proceeding in which the directors are sued or charged as a result of their service
as members of our Board of Directors.
In June 2002, we hired Mr. Jenson as Chief Financial and Administrative Officer. As part of our efforts to
recruit Mr. Jenson, we agreed to loan him $4 million, to be forgiven over four years based on his continuing
employment. The loan did not bear interest. The loan was made prior to enactment of the Sarbanes-Oxley Act
of 2002 and its prohibition on loans to executive officers. Although the loan was made prior to the adoption of
our related person transactions policy, our Compensation Committee did review this proposed arrangement in
light of the then-current environment and sensitivity to transactions with management and determined the
environment for recruiting highly regarded and talented chief financial officers was, and has been, intensely
competitive, and the Compensation Committee believed that a competitive compensation offer tied to
continuing service was in EA’s best interests and significantly more beneficial to EA than unrestricted cash
payments. In June 2004, pursuant to the terms of his offer letter and the loan agreement, we forgave $2 million
of the loan and provided Mr. Jenson approximately $1.6 million to offset the tax implications of the
forgiveness. The remaining outstanding loan balance of $2 million was forgiven on June 24, 2006. No
additional funds were provided to Mr. Jenson to offset the tax implications of the forgiveness of the remaining
$2 million.
The sister of Nancy Smith, an executive officer of EA, was an employee of EA until February 2007. During
fiscal 2007, Ms. Smith’s sister was paid cash compensation, including salary, bonus, vacation accrual payout,
and a severance payment, of approximately $299,000 (of this amount, approximately $54,000 was paid in
connection with a bonus she earned during fiscal 2004, which vested over time and was paid in fiscal 2007).
Ms. Smith’s sister did not report directly or indirectly to Ms. Smith at any time during fiscal 2007. Ms. Smith’s
sister’s employment with EA commenced prior to the adoption of our related person transactions policy and
was therefore not approved pursuant to such policy.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From April 1, 2006 (the first day of fiscal 2007) through July 27, 2006, the Compensation Committee
consisted of M. Richard Asher, Robert W. Pittman and Linda J. Srere; from July 27, 2006 through April 1,
2007 (the last day of fiscal 2007), the Compensation Committee consisted of Mr. Asher, Ms. Srere and
Leonard S. Coleman, Jr. None of these individuals is an employee or current or former officer of EA. No EA
officer serves or has served since the beginning of fiscal 2007 as a member of the board of directors or the
compensation committee of a company at which a member of EA’s Compensation Committee is an employee
or officer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires EA’s directors and executive officers, and
persons who own more than ten percent of a registered class of EA’s equity securities, to file reports of
ownership and changes in ownership of common stock and other equity securities of EA. We have adopted
procedures to assist EA’s directors and officers in complying with these requirements, which include assisting
officers and directors in preparing forms for filing.
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