Type: EX-10.1 Employment Agreement by and between the Company and Xxxx X. Xxxx
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the ninth day of July, 1999 between ELECTRONICS
BOUTIQUE HOLDINGS CORP., a Delaware corporation (the "Company"), and XXXX X.
XXXX (the "Executive").
WHEREAS, the Executive has been employed by the Company since February
4, 1997; and
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
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/Chief Information Officer and President XXXxxxx.Xxx 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 July 9, 1999, and end on the date which is the second
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/Chief Information Officer and President XXXxxxx.Xxx,
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 $175,450, 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) 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, 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
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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 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.
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(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 a
"Prohibited Business" (as defined herein) during the Term and for a
three-year period following the Term (the "Non-Compete"). For this purpose,
the term "Prohibited Business" shall mean the development, distribution, or
retail sale of video games, personal computer gaming or similar entertainment
software and devices, personal computers and related devices that facilitate
or enhances the use of gaming and similar entertainment equipment, devices,
programs and software for game systems or personal computers provided such
business does or is intended to amount to more than an insubstantial part of
the annual revenue of the entity engaged in such business. Executive shall be
regarded as engaged in a Prohibited Business if he engages as partner, owner,
agent, representative, executive, officer, director, employee 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 the Executive from merely
acquiring or owning for investment purposes only five percent 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 Federal
or state 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:
(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;
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(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. 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 (American Arbitration Association) in Philadelphia, Pennsylvania upon
the demand of either party, the results of which may be transferred to a court
of competent
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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.
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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ELECTRONICS BOUTIQUE HOLDINGS
CORP.
BY: /s/ Xxxxxx X. Xxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
EXECUTIVE: /s/ Xxxx X. Xxxx
----------------
Xxxx X. Xxxx
SVP/CIO
President, XXXxxxx.xxx
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