FORM OF EMPLOYMENT AGREEMENT
AGREEMENT dated as of the __ day of _________________, 1998 between
ELECTRONICS BOUTIQUE HOLDINGS CORP., a Delaware corporation (the "Company"),
and XXXXXXX X. XXXXXXXXX (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 $2,100,000 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, 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, 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 $242,375.00,
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 $2,100,000 (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
(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,
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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 Executive's death, the payments which such issue would
have been entitled to receive shall be made
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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, computer software or Company 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.
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:
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(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 by 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 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.
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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.
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.
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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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XXXXXXX X. XXXXXXXXX
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