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Exhibit 10.5
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT
(hereinafter referred to as “Agreement” ) is
entered into as of May 20, 2008, by and between CLARENCE J.
GABRIEL, JR. (hereinafter referred to as
“Executive” ) and MOVIE GALLERY, INC., a
Delaware corporation, (hereinafter referred to as the
“Company” ).
1. Duties and Scope of
Employment .
(a) Position . For the
term of his employment under this Agreement, the Company agrees to
employ Executive in the position of President and Chief Executive
Officer. Executive shall report directly to the Company’s
Board of Directors (the “Board” ).
(b) Obligations to the
Company . During the term of his employment with the Company,
Executive shall devote his best efforts, talents and skills, and
substantially all of his time and attention to furthering the
Company’s success, and follow and abide by all Company
policies, rules, and procedures. Unless he obtains prior consent
from the Board, Executive shall not serve as an employee, officer,
or director of, or as a consultant or advisor to, any other
for-profit or not-for-profit entity, or in any similar
capacity.
(c) No Conflicting
Obligations . Executive represents and warrants to the Company
that he is under no obligations or commitments, whether contractual
or otherwise, that are inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use
or disclose, in connection with his employment by the Company, any
trade secrets or other proprietary information or intellectual
property in which Executive or any other person has any right,
title or interest and that, his employment by the Company as
contemplated by this Agreement will not infringe or violate the
rights of any other person or entity. Executive represents and
warrants to the Company that he has returned all property and
confidential information belonging to any prior
employers.
(d) Commencement Date
. Executive shall commence full-time employment with the Company on
May 21, 2008 (hereinafter referred to as the
“Commencement Date” ).
2. Term of Employment
.
(a) At-Will Employment
. The term of Executive’s employment with the Company shall
be from the Commencement Date until the date when Executive’s
employment terminates pursuant to Section 2(b) below.
Executive’s employment with the Company shall be “at
will,” which means that either Executive or the Company may
terminate Executive’s employment at any time, for any or no
reason.
EMPLOYMENT AGREEMENT - 1
Exhibit 10.5
(b) Termination . The
Company may terminate Executive’s employment at any time and
for any or no reason, by giving Executive thirty (30) days
advance notice of termination of employment in writing (unless the
termination is for Cause in which case Executive’s
termination of employment may be effected by the Company
immediately pursuant to Section 9(d)). Executive may terminate
his employment at any time, for any or no reason, by giving the
Company sixty (60) days advance notice in writing.
Executive’s employment shall terminate automatically in the
event of his death or Permanent Disability as defined in
Section 9(a) herein.
(c) Termination of
Agreement . This Agreement shall terminate when all obligations
of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of
Executive’s obligations under Sections 10 and 11.
3. Compensation
.
(a) Salary . The
Company shall pay Executive as compensation for his services an
annual base salary in the amount of Five Hundred Thousand Dollars
($500,000), less applicable taxes and withholdings ( “Base
Salary” ), payable in accordance with the Company’s
standard payroll practices and procedures.
(b) Annual Bonus . For
each calendar year in which Executive achieves his target
performance goals as set by the Board, Executive shall earn and be
paid a bonus (the “Annual Bonus” ) equal to 100%
of Base Salary. The amount of the Annual Bonus shall be determined
based on the achievement of performance goals established by the
Board. The Annual Bonus may be adjusted down from 100% for
objectives not achieved. The performance goals shall be determined
by the Board no later than ninety (90) calendar days after the
first day of each calendar year. The Annual Bonus for each calendar
year shall be paid no later than March 15 th following the calendar year to which the
Annual Bonus applies.
4. Equity .
(a) Stock Option Grant
. The Company shall grant Executive an option (the
“Option” ) to purchase shares of the
Company’s common stock equal to one percent (1%) of
23,366,498 (the common stock of the Company outstanding on
May 21, 2008), under the Company’s 2008 Omnibus Equity
Incentive Plan, as it may be amended from time to time (the
“Plan” ). The date on which any Option or
Additional Option (defined below) is granted shall be the
“Grant Date” . The Grant Date of the Option
shall be as soon as practical after the Commencement Date (the
“Option Grant Date” ). The per share exercise
price of the Option will be the Fair Market Value of a share of
common stock on the Option Grant Date.
“Fair
EMPLOYMENT AGREEMENT - 2
Exhibit 10.5
Market Value”
shall have the meaning given to it under the Plan. The Executive
shall vest in the Option over three (3) years in equal
installments of one-third ( 1 / 3 ) of the
Option on each of the first three anniversaries of the Option Grant
Date. The Option shall be subject to the terms of the Plan and the
option agreement pursuant to which the Option shall be granted to
Executive, and execution and delivery of such option agreement
shall be a condition of the grant of the Option.
(b) Executive shall be
entitled to receive an additional option (the “Additional
Option” ) to purchase shares of common stock in the
Company at an exercise price per share at the greater of
(i) the Fair Market Value on the Option Grant Date, or
(ii) the Fair Market Value on the Grant Date of any such
Additional Option, if the Company exceeds its 2009 business plan in
effect as of the date of this Agreement (the “2009
Business Plan” ) as follows:
More than $75 million and up
to $100 million over 2009 Business Plan EBITDA: An Additional
Option to purchase one percent (1%) of 23,366,498 (the common
stock of the Company outstanding on May 21, 2008).
More than $100 million and up
to $125 million over 2009 Business Plan EBITDA: An Additional
Option to purchase two percent (2%) of 23,366,498 (the common
stock of the Company outstanding on May 21, 2008).
More than $125 million and up
to $150 million over 2009 Business Plan EBITDA: An Additional
Option to purchase three percent (3%) of 23,366,498 (the
common stock of the Company outstanding on May 21,
2008).
More than $150 million over
2009 Business Plan EBITDA: An Additional Option to purchase four
percent (4%) of 23,366,498 (the common stock of the Company
outstanding on May 21, 2008).
The Grant Date of any
Additional Option shall be as soon as practical after the
achievement of performance criteria related to the 2009 Business
Plan EBITDA described above are determined by the Board. The
Executive shall vest in the Additional Option over three
(3) years in equal installments of one-third ( 1 / 3 ) of the
Additional Option on each of the first three anniversaries of the
Grant Date of the Additional Option. The Additional Option shall be
subject to the terms of the Plan and the option agreement pursuant
to which the Additional Option shall be granted to Executive, and
execution and delivery of such option agreement shall be a
condition of the grant of the Additional Option. If there is a
Change of Control in 2009 or soon thereafter prior to the Grant
Date of the Additional Option, and the Executive is employed by the
Company, and the Company is on target to achieve the performance
goals in the 2009 Business Plan (as determined by the Board by
looking at the twelve (12) months immediately preceding the
date of the Change
EMPLOYMENT AGREEMENT - 3
Exhibit 10.5
of Control), then the Executive shall
vest in the proportion of the applicable percentage of the
Additional Option based on achievement of performance goals in
accordance with the following schedule:
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Change of Control
Date
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Proportion of Percentage
Vested in Additional Option (1%, 2%, 3%, or 4%
Based on Achievement of Performance Goals)
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January 1, 2009 through
March 31, 2009
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25% |
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April 1, 2009 through June 30,
2009
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50% |
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July 1, 2009 through
September 30, 2009
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75% |
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October 1, 2009 and
thereafter
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100% |
(c) Change of Control
. In the event of a Change of Control during Executive’s
employment, Executive shall immediately and fully vest in his
Option and in any Additional Option granted to him.
“Change of Control” means the consummation and
completion of any fundamental transaction by which a change in
control of the Company occurs as follows: (i) consummation and
completion of a sale of all the equity securities of the Company to
an unrelated entity, (ii) consummation and completion of a
sale of substantially all the assets of the Company to an unrelated
entity, or (iii) consummation and completion of a merger,
consolidation or reorganization with an unrelated business
organization where less than forty percent (40%) of the voting
power and economic interest of the Company or the surviving entity
or the parent of either, are retained by the shareholders of the
Company immediately prior to such merger, consolidation or
reorganization.
5. Executive Benefits
. During the term of his employment, Executive shall be eligible to
participate in benefit programs available to senior executives of
the Company in accordance with the terms of such programs in effect
from time to time. During the term of his employment, either
through a benefit program sponsored by the Company or through an
individual arrangement with an insurance company, the Company shall
provide Executive with supplemental life insurance coverage of two
(2) times Base Salary. During the term of his employment, the
Company shall provide Executive with the use of a Company car in
accordance with the terms of its policies as in effect from time to
time. During the term of his employment, the Company shall provide
financial planning assistance to Executive on an annual basis in
accordance with the terms of its policies as in effect from time to
time. The costs and expenses incurred by Executive in calendar year
2008, in the preparation and negotiation of this Agreement shall be
reimbursed to Executive by the Company in an amount not to exceed
$7,500 within thirty (30) calendar days after the applicable
invoices are presented to the Company, provided that such invoices
are presented to the Company no later than sixty (60) calendar
days after execution of this Agreement by both parties.
EMPLOYMENT AGREEMENT - 4
Exhibit 10.5
6. Business Expenses .
During the term of his employment, the Company shall reimburse
Executive reasonable and necessary business expenses incurred by
Executive in the performance of his duties subject to all
applicable Company policies regarding business expense
reimbursement.
7. Moving Expenses .
The Company shall reimburse reasonable moving expenses that
Executive incurs in moving his household goods to his new residence
near his place of employment, the costs of up to two house-hunting
trips for Executive, the costs of temporary housing for Executive
for up to six (6) months, the closing costs and real estate
commissions incurred in selling Executive’s current
residence, any financial loss incurred from the sale of
Executive’s current residence, and the closing costs for the
purchase of a new residence near his place of employment; provided
that such reimbursements in total shall not exceed $250,000. Any
moving expenses incurred on or before the earlier of April 30,
2010 or Executive’s employment termination date, shall be
reimbursed to Executive on May 31, 2010; provided that
appropriate documentation evidencing that such moving expenses were
incurred is submitted to the Company by May 15,
2010.
8. Taxes and Applicable
Withholdings . All payments made under this Agreement shall be
subject to reduction to reflect taxes and other amounts required to
be withheld by law.
9. Termination
Benefits .
(a) Termination by Reason
of Death or Permanent Disability . Executive’s employment
hereunder shall automatically terminate in the event of
Executive’s death or Permanent Disability (as defined in this
Section 9(a)). Within thirty (30) calendar days after the
Executive’s death or Permanent Disability, Executive or
Executive’s estate (as applicable) shall receive
Executive’s accrued Base Salary ea
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