FORM OF EMPLOYMENT AGREEMENT
AGREEMENT dated as of the ____day of _____________, 1998 between ELECTRONICS
BOUTIQUE HOLDINGS CORP., a Delaware corporation (the "Company"), and XXXX X.
XXXXXXXXXX (the "Executive").
WHEREAS, the Executive has been employed by the Company since
_______________; and
WHEREAS, the Company is in the process of an initial public offering of its
capital stock (the "IPO");
WHEREAS, the Company and Executive mutually desire to enter into this
Agreement with respect to Executive's continued employment with the Company on
the terms set forth herein; and
WHEREAS, in consideration for Executive's execution of this Agreement, the
Company will grant to Executive options to purchase $1,800,000 of shares of the
Company's Capital Stock, valued using the IPO price, pursuant to Paragraph 4
hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Company and Executive agree as follows:
1. EMPLOYMENT AND TERM. The Company agrees to continue to employ Executive
and Executive agrees to continue to serve the Company as its Senior Vice
President and Chief Financial Officer, or in such other executive positions as
may be mutually agreed upon by Executive and the Company, during the Term (as
defined below). The term of this Agreement (the "Term") shall commence on the
date of the completion of the IPO, and end on the date which is the third year
anniversary thereof, or such later date to which Executive's employment may be
extended as provided in Section 12 hereof.
2. DUTIES. During the Term, Executive agrees to serve the Company faithfully
and to the best of his ability; to devote his entire working time, energy and
skill (except for illness or incapacity and except for vacation time as provided
herein) to such employment; to use his best efforts, skills and ability to
promote its interests and to perform such duties as from time to time may be
assigned to him, subject to Section 3 hereof. Notwithstanding the foregoing,
Executive may engage in charitable and public and industry service activities so
long as such activities do not materially interfere with the performance of his
duties and responsibilities under this Agreement.
3. RESPONSIBILITIES. Executive's area of responsibility shall be that of
Senior Vice President and Chief Financial Officer, or such other executive
position as may be mutually agreed upon by Executive and the Company, and during
the Term, the Company shall not assign any duties to or remove any duties from
Executive inconsistent therewith and, further, the Company shall at
all times provide Executive with such executive powers and authority as shall
reasonably be required to enable him to discharge such duties in an efficient
manner, together with such facilities and services as are suitable or customary
to such position. During the Term, Executive shall report directly to the Chief
Executive Officer of the Company.
4. COMPENSATION. The Company agrees to pay Executive as compensation for all
duties performed by him in any capacity during the period of his employment
under this Agreement:
(a) base salary ("Base Salary"), payable in accordance with the
Company's normal payroll practices, at the annual rate of $181,500.00, subject
to such adjustments as the Board of Directors or a committee thereof shall
approve.
(b) a bonus (the "Bonus") payable in cash, determined pursuant to a
bonus program adopted by the Board of Directors that will have a target amount
of 50% of Base Salary with objectives to be established in the approved program.
(c) a grant of options to purchase shares of common stock of the
Company in an amount equal to $1,800,000 (valued at the IPO price), which option
vests over three (3) years pursuant to the 1998 Equity Participation Plan, as
more fully set forth in the Stock Option Agreement being executed concurrently
by the Company and the Executive.
(d) from time to time, Executive shall also be eligible to participate
prospectively in the 1998 Equity Participation Plan of the Company, in the
amounts determined by the Board of Directors committee which administers the
1998 Equity Participation Plan.
5. BENEFITS; REIMBURSEMENT OF EXPENSES; VACATION. Executive shall also be
entitled to:
(a) participate in all of the benefit programs which are presently or
may hereafter be provided by the Company including, without limitation, all
stock option, pension, thrift, incentive, deferred compensation, retirement,
health insurance and life insurance programs (collectively, the "benefit
programs"), which includes specifically (i) the policies of "key man" insurance,
if any, on Executive's life, payable at $1 million to each of the Company and
the Executive, and (ii) the deferred compensation plan presently existing
between the Company and the Executive;
(b) reimbursement by the Company of all expenses reasonably incurred by
him in connection with the performance of his duties including, without
limitation, travel and entertainment expenses reasonably related to the business
or interests of the Company, upon submission by him of written documentation of
such expenses;
(c) a vacation of four (4) weeks each year at such time or times as he
shall reasonably determine; and
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(d) have the Company pay the reasonable costs and expenses of a leased
automobile for Executive, commensurate with an automobile for a person with
Executive's position, including the reasonable expense of maintaining and
operating the automobile for business and personal use, in accordance with
Company policy.
6. DISABILITY OR DEATH.
(a) If, during the Term of this Agreement, Executive becomes disabled
or incapacitated as determined under the Company's Long Term Disability Policy
("Permanently Disabled"), the Company shall have the right at any time
thereafter, so long as Executive is then still Permanently Disabled, to
terminate this Agreement. If the Company elects to terminate this Agreement by
reason of Executive becoming Permanently Disabled, the Company, for the
unexpired Term of this Agreement, shall (whether or not such benefits are
covered under the Company's Long Term Disability Policy), continue to pay:
(i) to Executive, sixty percent (60%) of his Base Salary (through
insurance or otherwise) at the rate in effect on the date of such termination,
such payments to be made as set forth in Section 4;
(ii) in the event of Executive's death after such termination for
Permanent Disability, then to the persons and in the manner set forth in
subparagraph (c) of this Section 6, an amount per annum equal to sixty percent
(60%) of Executive's Base Salary at the rate in effect on the date this
Agreement is terminated by the Company, such payments to be made as set forth in
Section 4; or
(iii) if, and so long as, the Company does not elect to terminate
this Agreement as a result of Executive's Permanent Disability, this Agreement
shall continue in full force and effect and Executive shall be entitled to all
benefits including compensation as set forth herein.
(b) If Executive dies during the Term, this Agreement shall
automatically terminate, and the Company shall pay to the persons set forth in
Subparagraph (c) of this Section 6, all accrued but unpaid salary, bonus
(calculated for the then current year prorated up to the date of death),
benefits and other amounts, as required by law.
(c) Any payments to be made pursuant to subparagraph (a) or (b) of this
Section 6 to persons other than Executive in the event of the death of Executive
shall be made to Executive's designated beneficiaries or, if no such designation
has been made and Executive's spouse survives Executive, then the payments shall
be made to Executive's spouse, and if such spouse subsequently dies before all
such payments are made, the remaining payments shall be made to the estate of
Executive's spouse. If Executive is not survived by a spouse, then the payments
shall be made among Executive's issue who survive Executive, PER STIRPES, and if
any individual who is issue of Executive and who as of the date of death of
Executive is entitled to receive payments dies after
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Executive's death, the payments which such issue would have been entitled to
receive shall be made to his or her estate. If at the date of Executive's death
Executive is not survived by any spouse, or any issue, then the payments shall
be made to Executive's estate.
7. CONFIDENTIAL INFORMATION; CONFLICT OF INTEREST; NON-COMPETE.
(a) Without the express prior written consent of the Board of
Directors, Executive shall not disclose or make available to anyone outside the
Company, its subsidiaries or affiliated corporations or entities any
confidential or proprietary information of, or concerning, the Company,
including, without limitation, trade secrets, knowhow, customer lists,
inventions or other information not generally known or reasonably available to
any competitor of the Company, its subsidiaries or affiliated corporations or
entities.
(b) In consideration of the compensation, grant of stock options and
other benefits payable to Executive hereunder, Executive agrees that he shall
not, without the prior written consent of the Company, engage in the management
of or advising the management of any entity engaged in a manner similar to the
Company in the retail distribution and sale of video games and entertainment,
personal computers or computer software or computer accessories (the "Prohibited
Business") during the Term, and for a three year period following the Term (the
"Non-Compete"). Executive shall be regarded as engaged in a Prohibited Business
if he engages as partner, owner, agent, representative, executive, officer,
director or consultant or participates, directly or indirectly, whether through
investment, partnership, license, joint venture, or otherwise, in any Prohibited
Business. Nothing set forth above shall be deemed to prevent Executive, from
merely acquiring or owning for investment purposes only five percent (5%) or
less of any entity, whether public or private, regardless of the business in
which such entity is engaged, except to the extent such ownership violates any
state or federal law, rule or regulation governing the issuance, purchase or
sale of securities. No such acquisition or ownership shall be made during the
Term by Executive to the extent such ownership exceeds the percentage ownership
Executive has in the Company.
(c) Executive shall not, directly or indirectly, engage in any or have
an interest, financial or otherwise, in any other business enterprise which
interferes or is likely to interfere with Executive's independent exercise of
judgment in the Company's best interests. Executive will not undertake
involvement in any outside business interest without first assuring that no
conflict of interest exists and obtaining prior written approval of the Board of
Directors of the Company to undertake the contemplated involvement. Executive
acknowledges that he has a continuing responsibility for insuring that no
outside business interest in which Executive presently is involved or in the
future may be involved is detrimental to the interests of the Company.
(d) Upon the termination of this Agreement (including any renewal term)
or earlier as provided herein, Executive shall be permitted to act as a
consultant to any entity as to any business or investment other than a
Prohibited Business.
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8. TERMINATION. In addition to the provisions of Section 1 hereof, this
Agreement may be terminated prior to the expiration of its Term as follows:
(a) Automatically upon Executive's death, in which event the provisions
of Section 6 shall be applicable;
(b) Upon notice from the Company upon Executive's Permanent Disability,
in the event of the Company elects to terminate Executive's employment pursuant
to the provisions of Section 6;
(c) Upon thirty (30) days' prior written notice from the Company for
"cause," which for purposes hereof shall mean that (i) Executive has been found
guilty of committing any felony, or (ii) in the reasonable judgment of the
Board, Executive has been negligent or has committed willful misconduct in
carrying out his duties hereunder (unless Executive cures such breach, or has
taken substantial and continuing actions to cure such breach, within such thirty
(30) day notice period);
(d) Upon thirty (30) days notice from Executive upon the Company's
breach of any material provision of this Agreement (unless the Company cures
such breach within the thirty (30) notice period). Without limiting the
generality of the foregoing, it is acknowledged and agreed that Sections 2, 3,
4, 5 and 8 of this Agreement are material provisions of this Agreement; or
(e) Upon notice from Executive following a "change in control". "Change
in Control" shall mean a change in ownership or control of the Company effected
through either of the following transactions.
i. any person or related group of persons (other than the Company
or a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding, securities through a transaction which the
Board does not recommend or approve or through a negotiated sale of securities
to any person or persons who is considered hostile; or
ii. there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a majority of
the Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved hy the Board.
9. WRONGFUL TERMINATION; COMPANY BREACH; CHANGE IN CONTROL. In the event of
the termination of this Agreement by Executive pursuant to paragraph (d) or (e)
of Section 8, or in the event of termination of this Agreement by the Company
other than pursuant a notice of termination
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under paragraph (b) or (c) of Section 8, Executive shall be entitled to receive
all of the compensation and benefits provided herein until the later of (i) the
date the Term would have expired absent any termination of this Agreement, or
(ii) twelve (12) months from the effective date of such termination. In no event
will an amount be payable to Executive in excess of $100 less than the maximum
amount of compensation deductible to the Company under Section 280G of the
Internal Revenue Code of 1986, as amended. If the Company and Executive shall
become involved in a dispute relating to any alleged breach of this Agreement by
the Company or Executive, the dispute shall be submitted to binding arbitration
by the AAA in Philadelphia, Pennsylvania upon the demand of either party, the
results of which may be transferred to a court of competent jurisdiction and
entered of record as a judgment upon which execution may issue. If Executive
substantially prevails (by judgment, settlement or otherwise) in such dispute,
the Company shall reimburse Executive for all reasonable costs (including
reasonable fees and disbursements of counsel) incurred by him in connection with
such dispute upon presentation to the Company of evidence of such costs. Nothing
herein shall prevent either party from going directly to a court of competent
jurisdiction for any form of injunctive or other equitable relief, whereby the
other party shall not have any right to mandate the arbitration provisions.
10. TERMINATION OF PRIOR AGREEMENTS. This Agreement expressly supersedes all
agreements and understandings between the parties regarding the subject matter
hereof and any such agreement or understanding is terminated as of the date the
IPO is completed.
11. RENEWAL/NON-RENEWAL. This Agreement shall be automatically extended
without further action by the parties for one (1) additional year unless either
party shall, at least 90 days prior to the expiration date have given notice to
the other party that this Agreement shall not be so extended.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereof, their respective legal representatives and to any
successor of the Company, which successor shall be deemed substituted for the
Company under the terms of this Agreement. As used in this Agreement, the term
"successor" shall include any person, firm, corporation or other business entity
which at any time, whether by merger, purchase or otherwise, acquires all or
substantially all of the assets or business of the Company. The Executive
consents to the assignment of this Agreement to any successor who or which
agrees to be bound by all of its provisions without modification adverse to the
Executive.
13. WAIVER OF BREACH. The waiver by the Company of a breach of any provision
of this Agreement by Executive shall not operate or be construed as a waiver of
any subsequent breach.
14. NOTICES. Any notice required or permitted to be given hereunder shall be
sufficient if in writing and if sent by registered or certified mail to
Executive at his residence or to the Company at its principal place of business.
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15. ENTIRE AGREEMENT. This document contains the entire agreement of the
parties and may not be changed except in a writing signed by both parties.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania as applied to
contracts executed and performed wholly within the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
ELECTRONICS BOUTIQUE HOLDINGS CORP.
BY:
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EXECUTIVE:
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XXXX X. XXXXXXXXXX
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