Electronic Arts 2008 Annual Report Download - page 48

Post-Employment Arrangements
Change of Control Plan
In February 2008, our Board of Directors approved a “double-trigger” change of control plan, entitled the
Electronic Arts Inc. Key Employee Continuity Plan (the “CoC Plan”). Pursuant to the CoC Plan, any eligible
employee, including the Named Executive Officers, may receive certain benefits if his or her employment is
terminated either without “cause” (as defined in the CoC Plan) or if he or she resigns for “good reason” (as
defined in the CoC Plan) during the 12-month period following a change of control of the company or if his
or her employment is terminated “without cause” during the two-month period preceding a change of control
of the company. Eligible employees include all employees at the level of vice president and above.
The CoC Plan benefits include:
• a cash severance payment based on a multiple of base salary and target bonus or annual incentive
opportunity;
• continued health benefits for a period ranging from six to 18 months, depending on the executive’s
position with the Company; and
• full and immediate vesting of all outstanding and unvested equity awards (other than certain portions of
performance-based awards, which may be subject to acceleration depending on the specific terms of
such awards).
The cash severance payment that Mr. Riccitiello, company-level presidents (including the presidents of our
labels and our president of publishing), and executive vice presidents (including Mr. Brown, our Chief
Financial Officer) are entitled to receive upon a qualifying termination of employment under the CoC Plan is
equal to 150% of the sum of that executive’s annual base salary and target annual bonus or incentive
opportunity. We believe that this level of severance benefits will assist us in recruiting talented individuals to
join and remain a part of our management team. From time to time, we may recruit executives from other
companies where they have job security, tenure and career opportunities. In accepting a position with us, an
executive is often giving up his or her current job stability for the challenges and potential risks of a new
position. This severance benefit mitigates the harm that the executive would suffer if he or she were terminated
by the Company for reasons beyond his or her control in conjunction with a change of control of the
Company. Severance benefits also allow existing executives to focus on the Company’s business without being
unduly distracted by concerns about their job security in the event of a change of control. Finally, we expect
that these severance benefits will act as an additional incentive for eligible participants to comply with their
post-termination covenants, such as the non-solicitation requirement described below, and confidentiality
obligations.
Upon a change of control of the Company, an executive may be subject to certain excise taxes imposed under
Section 280G of the Internal Revenue Code (“Section 280G”). The CoC Plan does not provide for any
additional payments (for example, tax gross-ups or reimbursements) in the event that the benefits under the
CoC Plan and other arrangements offered by the Company or its affiliates cause an executive to owe an excise
tax under Section 280G. However, the CoC Plan provides that, if an executive would receive a greater net
after-tax benefit by having CoC Plan benefits reduced to an amount that would avoid the imposition of the
Section 280G excise tax, his or her cash severance payment will be reduced accordingly.
As a condition to each executive’s right to receive the benefits provided under the CoC Plan, the executive is
required to execute a waiver of claims against the Company and will be bound by the terms of a non-
solicitation agreement prohibiting the executive, for a one-year period following his or her termination of
employment, from soliciting our employees to leave the Company.
Severance Plan
We maintain an ERISA-governed severance plan (the “Severance Plan”) that applies to (a) all of our
U.S.-based employees whose jobs are terminated due to a reduction in force and (b) any other employee we
select to participate in the plan upon his or her termination of employment. Under the Severance Plan, eligible
34