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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use
/X/ Definitive Proxy Statement of the Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to Rule 14a-6(e)(2))
14a-11(c) or 14a-12
ELECTRONICS BOUTIQUE HOLDINGS CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14(a)-6(i)(1) and 0-11.
(1) Title of each class of securities to which investment applies:
-------------------------------------------------------------
(2) Aggregate number of securities to which investment applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
ELECTRONICS BOUTIQUE HOLDINGS CORP.
931 SOUTH MATLACK STREET
WEST CHESTER, PENNSYLVANIA 19382
June 16, 2000
DEAR FELLOW STOCKHOLDER:
On behalf of the Board of Directors, I am pleased to invite you to attend
the annual meeting of stockholders of Electronics Boutique Holdings Corp., to be
held on Monday, July 17, 2000, at 11:00 a.m., local time, at Electronics
Boutique's executive offices, 931 South Matlack Street, West Chester,
Pennsylvania. The official Notice of Meeting, Proxy Statement and form of proxy
are enclosed with this letter.
At the annual meeting, stockholders will elect two persons to serve as
directors of Electronics Boutique, vote upon a proposal to adopt Electronics
Boutique 2000 Employee Stock Purchase Plan, vote upon a proposal to adopt the
Electronics Boutique 2000 Equity Participation Plan and vote upon a proposal to
ratify the Board's appointment of KPMG LLP as independent accountants for
Electronics Boutique for fiscal 2001. Our Annual Report to Stockholders for the
fiscal year ended January 29, 2000 accompanies this Proxy Statement.
I am delighted you have chosen to invest in Electronics Boutique and hope
that, whether or not you plan to attend the annual meeting, you will vote as
soon as possible by completing, signing and returning the enclosed proxy card in
the envelope provided. Your vote is important. Voting by written proxy will
ensure your representation at the annual meeting if you do not attend in person.
I look forward to seeing you at the annual meeting.
Very truly yours,
/s/ James J. Kim
JAMES J. KIM
Chairman of the Board
<PAGE>
[LOGO]
ELECTRONICS BOUTIQUE HOLDINGS CORP.
931 SOUTH MATLACK STREET
WEST CHESTER, PENNSYLVANIA 19382
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 17, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Electronics Boutique Holdings Corp., a Delaware corporation
("Electronics Boutique"), will be held on Monday, July 17, 2000, at 11:00 a.m.,
local time, at Electronics Boutique's executive offices, 931 South Matlack
Street, West Chester, Pennsylvania, for the following purposes:
1. To elect two Class II directors, each to serve for a term of three
years;
2. To consider and vote upon a proposal to approve the adoption of the
Electronics Boutique 2000 Employee Stock Purchase Plan;
3. To consider and vote upon a proposal to approve the adoption of the
Electronics Boutique 2000 Equity Participation Plan;
4. To consider and vote upon a proposal to ratify the appointment of KPMG
LLP, independent certified public accountants, as auditors for
Electronics Boutique for its fiscal year ending February 3, 2001; and
5. To act upon such other matters and transact such other business as may
properly come before the Annual Meeting or any adjournments or
postponements thereof.
The Board of Directors has fixed the close of business on June 9, 2000 as
the record date for determining the stockholders entitled to receive notice of
and to vote, either in person or by proxy, at the Annual Meeting and at any and
all adjournments or postponements thereof.
By Order of the Board of Directors
/s/ John R. Panichello
JOHN R. PANICHELLO
Senior Vice President,
Chief Financial Officer
and Secretary
West Chester, Pennsylvania
June 16, 2000
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID RETURN ENVELOPE.
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-------------------------------
PROXY STATEMENT
------------------------------
This Proxy Statement is furnished to the stockholders of Electronics
Boutique Holdings Corp. in connection with the solicitation on behalf of the
Board of Directors of Electronics Boutique of proxies to be voted at the 2000
Annual Meeting of Stockholders of Electronics Boutique (together with any
adjournments or postponements thereof, the "Annual Meeting"). The Annual Meeting
will be held on Monday, July 17, 2000 at 11:00 a.m., local time, at Electronics
Boutique's principal executive offices, which are located at 931 South Matlack
Street, West Chester, Pennsylvania 19382.
This Proxy Statement, the accompanying proxy and Electronics Boutique's
Annual Report to Stockholders were first mailed to Electronics Boutique's
stockholders on or about June 16, 2000.
All shares represented by properly executed proxies will be voted in
accordance with directions on the proxies. If no direction is indicated, the
shares will be voted at the Annual Meeting FOR the election of all the named
nominees for director, FOR the approval of the adoption of the Electronics
Boutique 2000 Employee Stock Purchase Plan, FOR the approval of the adoption of
the Electronics Boutique 2000 Equity Participation Plan and FOR the ratification
of the appointment of KPMG LLP as independent auditors for Electronics Boutique
for the fiscal year ending February 3, 2001. A stockholder executing and
returning a proxy may revoke it at any time before it is exercised by written
notice to the Secretary of Electronics Boutique or by voting in person at the
Annual Meeting.
The Board of Directors does not know of any matters to be brought
before the Annual Meeting other than the items set forth in the accompanying
Notice of Annual Meeting of Stockholders. The enclosed proxy confers
discretionary authority to the Board-appointed persons named therein to vote on
any other matter that is properly presented for action at the Annual Meeting.
The cost of solicitation of proxies by the Board of Directors is to be
borne by Electronics Boutique. In addition to the use of the mails, proxies may
be solicited by personal interview, telephone and telecopier transmission by the
directors, officers and employees of Electronics Boutique. Arrangements may also
be made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of stock held
of record by such persons, and Electronics Boutique may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith.
YOU ARE HEREBY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY IN THE ACCOMPANYING ENVELOPE, WHICH IS POSTAGE-PAID IF
MAILED IN THE UNITED STATES.
<PAGE>
VOTING SECURITIES
Only holders of record of shares of common stock at the close of
business on June 9, 2000 will be entitled to vote at the Annual Meeting. On that
date, 22,227,862 shares of common stock, the only outstanding voting securities
of Electronics Boutique, were issued and outstanding. Each share of common stock
is entitled to one vote on each proposal submitted to stockholders. Stockholders
of record may vote on a matter by marking the appropriate box on the proxy. A
majority of the voting power of the outstanding shares of capital stock of
Electronics Boutique, represented in person or by proxy, shall constitute a
quorum for the transaction of business at the Annual Meeting. Directors will be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. Action on the other matters scheduled to come before the Annual
Meeting will be authorized by the affirmative vote of the majority of shares
present in person or represented by proxy at the Annual Meeting and entitled to
vote on such matters. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
stockholders for a vote. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote with
respect to that matter.
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ITEM 1 - ELECTION OF DIRECTORS
Electronics Boutique's Certificate of Incorporation and Bylaws provide
that its directors are to be classified into three classes, with the directors
in each class serving for three-year terms and until their successors are
elected.
The Board has nominated Dean S. Adler and Louis J. Siana, each of whom
is currently a member of the Board, for election as Class II Directors. If
elected, such nominees will serve for a three-year term to expire at Electronics
Boutique's annual meeting of stockholders in 2003 or until their successors are
duly elected and qualified. Information regarding the foregoing nominees, as
well as the other persons who are expected to serve on the Board following the
Annual Meeting, is set forth below.
The Board has no reason to believe that either of the nominees will not
serve if elected, but if either nominee should subsequently become unavailable
to serve as a director, the persons named as proxies may, in their discretion,
vote for a substitute nominee designated by the Board or, alternatively, the
Board may reduce the number of directors to be elected at the Annual Meeting.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF BOTH
NOMINEES. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED EXCEPT WHERE AUTHORITY
HAS BEEN WITHHELD.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS - TERM EXPIRES AT THE 2003 ANNUAL
MEETING
DEAN S. ADLER
Mr. Adler, age 43, has served as a Class II Director of Electronics
Boutique since March 1998. In March 1997, Mr. Adler formed Lubert/Adler
Partners, LP, a limited partnership investing primarily in real estate and real
estate_related ventures. For ten years prior thereto, Mr. Adler was a principal
and co_head of the private equity group of CMS Companies, which specialized in
acquiring operating businesses and real estate within the private equity market.
Mr. Adler was also an instructor at The Wharton School of the University of
Pennsylvania. Mr. Adler serves on the Boards of Directors of US Franchise
Systems, Inc., Trans World Entertainment Corporation, and Developers Diversified
Realty Corporation. Mr. Adler is a member of the Audit Committee and
Compensation Committee of the Board.
LOUIS J. SIANA
Mr. Siana, age 68, has served as a Class II Director of Electronics
Boutique since March 1998. Mr. Siana is a certified public accountant and a
senior partner in the accounting firm of Siana, Carr & O'Conner LLP. Mr. Siana
is a member of the Audit Committee and Compensation Committee of the Board.
CLASS III DIRECTORS - TERM EXPIRES AT THE 2001 ANNUAL MEETING
JAMES J. KIM
Mr. Kim, age 64, has served as Electronics Boutique's Chairman and a
Class III Director since March 1998. Mr. Kim founded The Electronics Boutique,
Inc. ("EB"), the predecessor of Electronics Boutique, in 1977 and has served as
its Chairman since its inception. Mr. Kim has served as Chairman and Chief
Executive Officer of Amkor Technology, Inc. ("Amkor") and Amkor Electronics,
Inc. ("AEI") since September 1997 and 1968, respectively. In April 1998, AEI
merged with and into Amkor. Amkor is a semiconductor packaging and test service
company. Mr. Kim also serves as the Chairman of the Anam group of companies,
which consists principally of companies in South Korea in the electronics
industries. Mr. Kim also serves as a member of the Board of Managers of Visalign
LLC, a company which provides information technology services, and as a director
of CFM Technologies, Inc., a manufacturer of equipment used in the manufacturing
process of semiconductors and flat panel displays. Mr. Kim is the father of
Susan Y. Kim, a Class I Director and the father-
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in-law of John R. Panichello, Electronics Boutique's Senior Vice President and
Chief Financial Officer. Mr. Kim is a member of the Compensation Committee of
the Board.
JOSEPH J. FIRESTONE
Mr. Firestone, age 68, has served as the President, Chief Executive
Officer and a Class III Director of Electronics Boutique since March 1998. Mr.
Firestone has served as the President of EB, the predecessor of Electronics
Boutique, since February 1984, and the President and Chief Executive Officer of
EB since February 1995. Mr. Firestone served as a director of an affiliate of
EB, Electronics Boutique Plc ("EB-UK"), from November 1995 until November 1999
and served as the non-executive chairman of EB-UK from November 1995 until June
1998. Mr. Firestone also serves on the Executive Advisory Board of the Center
for Retailing Education and Research of the University of Florida and as a
Director of the National Retail Federation.
CLASS I DIRECTORS - TERM EXPIRES AT THE 2002 ANNUAL MEETING
SUSAN Y. KIM
Ms. Kim, age 37, has served as a Class I Director of Electronics
Boutique since March 1998. Ms. Kim served as a Senior District Manager of EB
from 1991 to 1992, as EB's Personnel Manager from 1989 to 1991, as a Buyer for
EB from 1986 to 1989, and as a Field Manager for EB from 1985 to 1986. Ms. Kim
is the daughter of James J. Kim, Electronics Boutique's Chairman and the wife of
John R. Panichello, Electronics Boutique's Senior Vice President and Chief
Financial Officer.
STANLEY ("MICKEY") STEINBERG
Mr. Steinberg, age 67, has served as a Class I Director of Electronics
Boutique since September 1998. Mr. Steinberg has served as a consultant to Sony
Corp. of America since June 1998. From August 1994 to June 1998, Mr. Steinberg
served as Chairman of Sony Retail Entertainment. From 1989 until 1994, Mr.
Steinberg served as Executive Vice President and Chief Operating Officer of Walt
Disney Imagineering. Mr. Steinberg serves on the Boards of Directors of AMC,
Inc. and Loews Cineplex Entertainment. Mr. Steinberg is a member of the Audit
Committee of the Board.
FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS
ATTENDANCE AT MEETINGS
The Board held three meetings during the fiscal year ended January 29,
2000 ("Fiscal 2000"). No director attended fewer than 75% of the total number of
meetings of the Board and Board Committees on which such director served.
COMMITTEES OF THE BOARD
The Board has established two standing committees: the Audit Committee
and the Compensation Committee.
AUDIT COMMITTEE. The Audit Committee reviews the professional services
provided by Electronics Boutique's independent accountants and the independence
of such firm from the management of Electronics Boutique. This Committee also
reviews the scope of the audit by Electronics Boutique's independent
accountants, the annual financial statements of Electronics Boutique, its
systems of internal accounting controls and such other matters with respect to
the accounting, auditing and financial reporting practices and procedures as it
may find appropriate or as may be brought to its attention, and meets from time
to time with members of Electronics Boutique's finance and accounting staff. The
Audit Committee is currently comprised of the
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following non-employee directors: Messrs. Adler, Siana and Steinberg. The Audit
Committee met once in connection with the audit for Fiscal 2000.
COMPENSATION COMMITTEE. The Compensation Committee reviews executive
salaries, administers the stock option plan of Electronics Boutique and approves
the salaries, bonuses and other benefits of the executive officers of
Electronics Boutique. In addition, the Compensation Committee advises and
consults with Electronics Boutique's management regarding benefit plans and
compensation policies and practices of Electronics Boutique. The Compensation
Committee is comprised of the following non-employee directors: Messrs: Kim,
Adler and Siana. The Compensation Committee met once during Fiscal 2000.
The Board has not established a Nominating Committee, nor does any
other committee perform similar functions.
DIRECTOR COMPENSATION
Non-employee directors receive a fee of $1,500 for each Board or Board
Committee meeting attended. In addition, beginning in Fiscal 2001, Mr. Kim, the
Chairman of the Board, receives an annual salary of $250,000, payable quarterly,
and a bonus equal to one-half of the annual bonus of Electronics Boutique's
President, along with options to purchase one-half of the number of shares of
common stock granted to Electronics Boutique's President. Directors who are also
full-time employees of Electronics Boutique receive no additional compensation
for service as directors.
EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of
Electronics Boutique who are not members of or nominees for the Board.
JEFFREY W. GRIFFITHS
Mr. Griffiths, age 49, has served as Electronics Boutique's Senior Vice
President of Merchandising and Distribution since March 1998 and President of
the EBKids division since March 1999. Mr. Griffiths has served as Senior Vice
President of Merchandising and Distribution of Electronics Boutique's
predecessor since March 1996. From March 1987 to February 1996, Mr. Griffiths
served as Vice President of Merchandising of Electronics Boutique's predecessor.
SETH P. LEVY
Mr. Levy, age 42, has served as Senior Vice President and Chief
Information Officer and the President of our EBWORLD.COM subsidiary since March
1999. From February 1997 to March 1999, Mr. Levy served as the Vice President
and Chief Information Officer. From 1991 until February 1997, Mr. Levy served as
the Director of System Development for the May Merchandising and May Department
International divisions of May Department Stores.
JOHN R. PANICHELLO
Mr. Panichello, age 38, has served as the Senior Vice President and
Chief Financial Officer of Electronics Boutique since March 1998. Mr. Panichello
has served as the Senior Vice President of Finance of Electronics Boutique's
predecessor and the President of the BC Sports Collectibles division since March
1997. From March 1996 to February 1997, Mr. Panichello served as the President
and Chief Executive Officer of Panichello & Company, a certified public
accounting firm, from May 1990 to May 1994. Mr. Panichello has served as a
director of EB-UK from May 1995 until November 1999. Mr. Panichello is a
Certified Public Accountant. Mr. Panichello is the husband of Susan Y. Kim and
the son-in-law of James J. Kim.
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ITEM 2 - APPROVAL OF THE ADOPTION OF THE ELECTRONICS BOUTIQUE 2000
EMPLOYEE STOCK PURCHASE PLAN
Electronics Boutique is presenting for stockholder approval the
Electronics Boutique 2000 Employee Stock Purchase Plan pursuant to which
eligible employees of Electronics Boutique may purchase up to an aggregate of
1,000,000 shares of common stock through payroll deductions, provided that the
1,000,000 share limit may be restored annually by the amount of shares purchased
under the Electronics Boutique 2000 Employee Stock purchase Plan during the
preceding year.
The Electronics Boutique 2000 Employee Stock Purchase Plan will not be
effective unless stockholders approve this proposal. The Electronics Boutique
2000 Employee Stock Purchase Plan is set forth on Annex A to this Proxy
Statement.
SUMMARY DESCRIPTION OF THE ELECTRONICS BOUTIQUE
2000 EMPLOYEE STOCK PURCHASE PLAN
PURPOSE. The purpose of the Electronics Boutique 2000 Employee Stock Purchase
Plan is to provide an opportunity to employees of Electronics Boutique and its
subsidiary corporations to purchase shares of common stock.
OFFERINGS. Eligible employees may purchase common stock during quarterly
offerings to be made beginning on March 1, 2000 and terminating on March 31,
2000. Subsequent offerings will occur for each calendar quarter thereafter. For
example, an offering will begin on April 1, 2000 and end on June 30, 2000 and
another offering will begin on July 1, 2000 and end on September 30, 2000.
Offerings will occur for a total of ten years. The maximum number of shares
which Electronics Boutique may issue under the 2000 Employee Stock Purchase
Plan, subject to adjustment upon changes in the capitalization of Electronics
Boutique, will be 100,000 shares in each quarterly offering plus all unissued
shares from prior offerings, whether offered or not, not to exceed a total of
1,000,000 shares of common stock for all offerings, provided that the 1,000,000
share limit may be restored annually by the amount of shares purchased under the
Electronics Boutique 2000 Employee Stock Purchase Plan during the preceding
year.
ADMINISTRATION. The Compensation Committee of Electronics Boutique's Board of
Directors will administer the 2000 Employee Stock Purchase Plan. No member of
the Compensation Committee shall be eligible to purchase stock under the 2000
Employee Stock Purchase Plan. The Compensation Committee has the authority in
its discretion to interpret and construe any and all provisions of the 2000
Employee Stock Purchase Plan, to adopt rules and regulations for administering
the 2000 Employee Stock Purchase Plan, to modify any annual replenishment of the
maximum, and to make all other determinations deemed necessary or advisable for
administering the 2000 Employee Stock Purchase Plan.
ELIGIBILITY. Employees of Electronics Boutique are eligible to participate in
offerings under the 2000 Employee Stock Purchase Plan which commence on or after
an employee has completed ninety (90) days of employment and is employed by
Electronics Boutique on the date participation in the 2000 Employee Stock
Purchase Plan is to become effective. An employee is not eligible to participate
in the 2000 Employee Stock Purchase Plan if, immediately after the purchase of
the common stock under the 2000 Employee Stock Purchase Plan, the employee would
own 5% or more of the total combined voting power or value of all classes of
stock of Electronics Boutique; or if the employee has purchased in excess of
$25,000 in fair market value of the common stock under the 2000 Employee Stock
Purchase Plan in any calendar year.
LIMITATIONS. An employee may elect to have deductions made from base pay on each
payday during the time of participation in an offering at the rate of 1, 2, 3,
4, 5, 6, 7, 8, 9 or 10% of the employee's base pay in effect at the beginning of
an offering.
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PURCHASE PRICE. The price of each share of common stock purchased with payroll
deductions made during an offering is the lower of: (i) 85% of the closing price
of the common stock at the beginning of an offering or the nearest prior
business day on which trading occurred on the NASDAQ National Market System; or
(ii) 85% of the closing price of the common stock at the end of an offering or
the nearest prior business day on which trading occurred on the NASDAQ National
Market System. If the common stock is not publicly trading on any of the dates
for which closing prices of the common stock are to be determined, then the
Compensation Committee shall determine the fair market value of the common stock
on that date.
WITHDRAWALS. An employee can make withdrawals of the payroll deductions credited
to his or her account under the 2000 Employee Stock Purchase Plan at any time.
TERMINATION OF EMPLOYMENT. Upon termination of employment with Electronics
Boutique for any reason, including retirement (but excluding death while
employed by Electronics Boutique or continuation of a leave of absence for a
period beyond ninety (90) days), the payroll deductions credited to an
employee's account will be returned to the employee, or, in the case of death
subsequent to the termination of employment, to the person or persons designated
as beneficiaries.
TERMINATION OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN. The Board of Directors has
complete power and authority to terminate or amend the 2000 Employee Stock
Purchase Plan; provided, however, that the Board of Directors may not, without
the approval of the stockholders of Electronics Boutique (i) increase the
maximum number of shares which may be issued under any offering (except for
adjustments upon changes in control of Electronics Boutique); (ii) amend the
requirements as to the class of employees eligible to purchase stock under the
2000 Employee Stock Purchase Plan or permit the members of the Compensation
Committee to purchase common stock under the 2000 Employee Stock Purchase Plan.
No termination, modification or amendment of the 2000 Employee Stock Purchase
Plan may, without the consent of an employee then having a right under the 2000
Employee Stock Purchase Plan to purchase common stock, adversely affect the
rights of such employee.
FEDERAL INCOME TAX CONSEQUENCES. In general, there will be no tax consequences
upon the purchase of common stock under the 2000 Employee Stock Purchase Plan.
If an employee has terminated employment with Electronics Boutique more than
three months before the purchase of the common stock under the 2000 Employee
Stock Purchase Plan or the common stock is deemed not to be granted from an
Internal Revenue Code of 1986, as amended ("Code"') Section 423 plan for any
reason, participants will recognize as compensation income the difference
between the fair market value common stock and the purchase price for the common
stock.
The tax treatment upon a sale or transfer of common stock acquired
under the 2000 Employee Stock Purchase Plan depends on whether the common stock
was disposed of within the statutory holding period for the Section 423 plan
stock and the purchase price of the common stock. The statutory holding period
for Section 423 plan stock is the later of two years after the grant of the
right to acquire the common stock under the 2000 Employee Stock Purchase Plan or
one year from the date of purchase of the common stock under the 2000 Employee
Stock Purchase Plan. In general, if an employee disposes of the common stock
acquired under the 2000 Employee Stock Purchase Plan before the expiration of
the statutory holding period, in the year of the disposition, the employee must
recognize as compensation income the difference between the fair market value on
the date of purchase and the cost basis in the common stock. In addition, since
the purchase price of a share of common stock under the 2000 Employee Stock
Purchase Plan is less than 100% of its fair market value, regardless of whether
the employee holds the stock for the statutory holding period, upon the sale or
disposition of the common stock, the employee will recognize compensation income
equal to the lesser of (i) the excess of the fair market value of the common
stock at the time of the sale or disposition over the cost basis in the common
stock or (ii) the excess of the fair market value of the common stock at the
date when the employee acquired the right to purchase the common stock under the
2000 Employee Stock Purchase Plan over the cost basis in the common stock. The
employee will recognize a capital gain on the balance of the proceeds on the
sale over the cost basis in the common stock.
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THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE ELECTRONICS BOUTIQUE 2000 EMPLOYEE STOCK PURCHASE PLAN. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED FOR THE APPROVAL OF THE ADOPTION OF THE
ELECTRONICS BOUTIQUE 2000 EMPLOYEE STOCK PURCHASE PLAN UNLESS STOCKHOLDERS
SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
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ITEM 3 - APPROVAL OF ADOPTION OF THE ELECTRONICS BOUTIQUE 2000 EQUITY
PARTICIPATION PLAN
Electronics Boutique is presenting for stockholder approval the
Electronics Boutique 2000 Equity Participation Plan pursuant to which 2,000,000
shares of common stock are available for issuance. The Electronics Boutique 2000
Equity Participation Plan is similar to the 1998 Equity Participation Plan
currently in existence and is set forth on Annex B to this Proxy Statement. The
Board believes that the 1998 Equity Participation Plan has played a key role in
assisting Electronics Boutique in the recruitment, retention and motivation of
employees and directors who are in the position to make contributions to
Electronics Boutique's continued progress. The 2000 Equity Participation Plan is
expected to provide similar benefits. The 2000 Equity Participation Plan offers
significant incentives to the employees and directors of Electronics Boutique by
enabling such individuals to acquire common stock thereby increasing their
proprietary interest in the growth and success of Electronics Boutique. The
Board of Directors has determined that appropriate incentives, such as those
available pursuant to the 2000 Equity Participation Plan, benefit Electronics
Boutique and, therefore increase the value of Electronics Boutique for the
benefit of all of its stockholders.
SUMMARY DESCRIPTION OF 2000 EQUITY PARTICIPATION PLAN
PURPOSE. The purpose of the 2000 Equity Participation Plan is to provide for the
grant to employees of incentive stock options within the meaning of Section 422
of the Code, and for the grant to employees, directors and consultants of
non-statutory stock options and stock purchase rights.
THE SHARES. The maximum aggregate number of shares which may be granted under
the 2000 Equity Participation Plan is 2,000,0000, plus an annual increase to be
added on each anniversary date of the adoption of the 2000 Equity Participation
Plan equal to the lesser of (i) the number of shares of common stock needed to
restore the maximum aggregate number of shares of common stock which may be
optioned and sold under the 2000 Equity Participation Plan to 2,000,000 or (ii)
a lesser amount determined by the Compensation Committee.
ADMINISTRATION. The 2000 Equity Participation Plan will be administered by the
Board of Directors or the Compensation Committee. The Board of Directors or the
Compensation Committee, as applicable, has the power to determine the value, to
reduce the exercise price and the fair market value, to reduce the exercise
price of any option to the then current fair market price if the fair market
value of the common stock covered by such option shall have declined since the
date the option was granted, the number of shares subject to the option or stock
purchase right, and the exercisability thereof and the form of consideration
payable upon such exercise. In addition, the Board of Directors has the
authority to amend, suspend or terminate the 2000 Equity Participation Plan,
provided that no action may affect any share of common stock previously issued
and sold or any option previously granted under the 2000 Equity Participation
Plan.
TRANSFERABILITY; EXERCISE. Unless determined otherwise by the Compensation
Committee, options granted under the 2000 Equity Participation Plan are not
transferable by the optionee, and each option and stock purchase right is
generally exercisable during the lifetime of the optionee only by such optionee.
Options granted under the 2000 Equity Participation Plan must generally be
exercised within three months following termination of an optionee's status as
an employee, director or consultant of Electronics Boutique, within twelve
months after an optionee's termination by disability, and within twelve months
after an optionee's termination by death, but in no event later than the
expiration of the option. The exercise price of all incentive stock options
granted under the 2000 Equity Participation Plan must be at least equal to the
fair market value of the shares on the date of grant. The exercise price of
non-statutory stock options granted under the 2000 Equity Participation Plan is
determined by the Compensation Committee, but with respect to non-statutory
stock options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the exercise price must be at least equal
to the fair market value of the common stock on the date of grant. With respect
to any employee who owns stock possessing more than ten percent of the voting
power of all classes of Electronics Boutique, or any parent or subsidiary of
Electronics Boutique's outstanding capital stock, the exercise price of
9
<PAGE>
any incentive stock option granted to such person must equal at least 110% of
the fair market of the common stock on the date of grant and the term of such
incentive stock option must not exceed five years. The term of all other options
granted under the 2000 Equity Participation Plan may not exceed ten years.
SALE, MERGER. The 2000 Equity Participation Plan provides that in the event of a
merger of Electronics Boutique with or into another corporation, or a sale of
substantially all of Electronics Boutique's assets, each outstanding option and
stock purchase right will be assumed or substituted for by the successor
corporation. In the event the successor corporation refuses to assume or
substitute for the option or stock purchase right, the optionee shall have the
right to exercise all of the optioned stock, including shares as to which it
would not otherwise be exercisable.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of an
optionee's participation in the 2000 Equity Participation Plan are complex and
subject to change. The following discussion is only a summary of the general
rules applicable to stock options.
The tax consequences of a stock option depend on whether the stock
option is an incentive stock option ("ISO") or a non-qualified stock option
("NQSO"). An optionee will not recognize income at the time of a grant or
exercise of an ISO and Electronics Boutique may not deduct the related expense
at those times. However, for purposes of the alternative minimum tax, the
difference between the exercise price and the fair market value of the stock
will be included in alternative minimum tax income, and may give rise to a tax
liability. The optionee has a regular income tax recognition event only upon a
later sale or disposition of the stock acquired pursuant to the exercise of the
ISO. The tax treatment of the disposition of the stock will depend on when the
optionee disposes of the stock. An optionee who disposes of stock acquired
pursuant to the exercise of an ISO within one year from the date of exercise or
within two years of the date of grant will recognize ordinary income equal to
the difference between the ISO's exercise price and the lesser of the fair
market value of the stock on the date of exercise or the date of disposition and
capital gain to the extent that the amount received on disposition exceeds such
fair market value on the date of exercise. To the extent that an optionee
recognizes ordinary income pursuant to the preceding sentence, Electronics
Boutique is allowed a deduction for federal income tax purposes in like amount
in the year of disposition. An optionee who disposes of stock after a date that
is both two years after the grant and one year after its exercise will recognize
capital gain equal to the difference between the amount received on disposition
and the cost of the stock.
A different set of rules govern NQSOs. There are no federal income tax
consequences to the optionee or Electronics Boutique upon the grant of NQSOs.
Upon exercise of NQSO, the optionee will recognize ordinary income in the amount
by which the fair market value of the stock purchased upon exercise of the
option exceeds the exercise price of the stock option. Electronics Boutique is
allowed a deduction for federal income tax purposes equal to the amount of
ordinary income recognized by the optionee at the time of exercise of NQSOs. The
optionee's holding period for purposes of determining whether any subsequently
realized gain or loss will be long-term or short-term will begin at the time the
optionee recognizes ordinary income. If, at the time of issuance of the option
shares, the optionee is subject to the restrictions of Section 16(b) of the
Exchange Act, then the optionee generally will recognize ordinary income as of
the later of (i) the date of exercise, or (ii) the expiration of six months from
the date of option grant, based upon the difference between the fair market
value of the option shares at such time and the exercise price.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE ELECTRONICS BOUTIQUE 2000 EQUITY PARTICIPATION PLAN. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED FOR THE ADOPTION OF THE ELECTRONICS
BOUTIQUE 2000 EQUITY PARTICIPATION PLAN UNLESS STOCKHOLDERS SPECIFY IN THEIR
PROXIES A CONTRARY CHOICE.
10
<PAGE>
ITEM 4 - RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board, upon the recommendation of the Audit Committee, has
appointed the firm of KPMG LLP, independent certified public accountants, to
audit the books, records and accounts of Electronics Boutique and its
subsidiaries for the fiscal year ending February 3, 2001, subject to
ratification of such appointment by Electronics Boutique's stockholders. KPMG
LLP and its predecessors have served as independent accountants for Electronics
Boutique and EB since the 1995 fiscal year, and are considered well qualified.
Representatives of KPMG LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so. It is
also expected that they will be available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF
KPMG LLP. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE RATIFICATION OF
KPMG LLP UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table summarizes for Electronics Boutique's last three
fiscal years the compensation of Electronics Boutique's President and Chief
Executive Officer and the other executive officers of Electronics Boutique whose
salary and bonus was in excess of $100,000 during Fiscal 2000 (the "Named
Executive Officers"), for services rendered in all capacities to Electronics
Boutique and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
--------------------------- ---- ------ ----- ----------- ------------
(1)
<S> <C> <C> <C> <C> <C>
Joseph J. Firestone 2000 $529,582 $535,000 30,000 $ 1,590(2)
President, Chief Executive Officer 1999 $488,436 $500,000 428,571 $ 2,000(2)
and Director 1998 $397,159 $250,000 -- $ 152,000(3)
Jeffrey W. Griffiths 2000 $257,749 $129,700 15,000 $ 1,531(2)
Senior Vice President of 1999 $238,852 $121,200 150,000 $ 2,000(2)
Merchandising and Distribution 1998 $218,110 $110,188 -- $ 2,000(2)
John R. Panichello 2000 $192,978 $ 97,100 15,000 $ 1,522(2)
Senior Vice President and Chief 1999 $178,475 $ 90,750 128,571 $ 2,000(2)
Financial Officer 1998 $169,262 $ 82,500 -- --
Seth P. Levy 2000 $173,604 $ 87,725 15,000 $ 1,715(2)
Senior Vice President and 1999 $156,668 $ 29,000 32,143 $ 2,000(2)
Chief Information Officer 1998 $145,638 $ 15,000 -- --
</TABLE>
------------
(1) Amounts have been listed for the year earned although actually paid
in the following fiscal year or deferred at the executive's election
until a subsequent fiscal year.
(2) Consists of Electronics Boutique's $2,000 matching contribution
pursuant to its 401(k) defined contribution plan.
(3) Consists of $150,000 of deferred compensation and Electronics
Boutique's $2,000 matching contribution pursuant to its 401(k)
defined contribution plan.
12
<PAGE>
FISCAL 2000 STOCK OPTION GRANTS
The following table sets forth certain information regarding grants of
stock options made during Fiscal 2000 to the Named Executive Officers pursuant
to Electronics Boutique's stock option plan. No grants of stock appreciation
rights were made during Fiscal 2000 to any of the Named Executive Officers or
any other employees of Electronics Boutique.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED TO ASSUMED ANNUAL RATES OF
UNDERLYING EMPLOYEES STOCK PRICE APPRECIATION
OPTIONS IN FISCAL EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED YEAR PRICE DATE 5% 10%
---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph J. Firestone 30,000 9.2% $19.875/sh 10/19/09 $374,978 $950,269
Jeffrey W. Griffiths 15,000 4.6% $19.875/sh 10/19/09 $187,849 $475,134
John R. Panichello 15,000 4.6% $19.875/sh 10/19/09 $187,849 $475,134
Seth P. Levy 15,000 4.6% $19.875/sh 10/19/09 $187,489 $475,134
</TABLE>
13
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the total
number and aggregate value of options exercised by each of the Named Executive
Officers during Fiscal 2000 and the total number and aggregate value of options
held by each of the Named Executive Officers at January 29, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END (#) YEAR-END ($)
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Joseph J. Firestone 0 0 142,857/458,571 $357,143/$1,146,428
Jeffrey W. Griffiths 0 0 50,000/165,000 $125,000/$412,500
John R. Panichello 0 0 42,857/143,571 $107,143/$358,928
Seth P. Levy 0 0 10,714/47,143 $26,785/$117,858
</TABLE>
-------------
(1) In-the-money options are options having a per share exercise price
below the closing price of shares of Common Stock on the Nasdaq
National Market on January 28, 2000 (the last trading day in Fiscal
2000). The dollar amounts shown represent the amount by which the
product of such closing price and the number of shares purchasable upon
the exercise of such in-the-money options exceeds the aggregate price
payable upon such exercise.
14
<PAGE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
In Fiscal 1999, Electronics Boutique entered into employment agreements
with Messrs. Firestone, Griffiths and Panichello providing for their employment
as Chief Executive Officer, Senior Vice President of Merchandising and
Distribution and Senior Vice President and Chief Financial Officer,
respectively. The agreements are each for a period of three years and, in some
cases, may be extended automatically for additional one year terms, unless
terminated by either party in accordance with their terms. The agreements
provide for compensation consisting of base salaries of $500,000, $242,375 and
$181,500 for Messrs. Firestone, Griffiths and Panichello, respectively, and
certain fringe and other employee benefits that are made available to the senior
executives of Electronics Boutique. In the event that employment is terminated
for any reason other than death, disability or "cause" (as defined in the
agreements), the executive is entitled to receive his then current base salary
for the greater of his remaining term under the employment agreement or a one
year period. The agreements also limit certain severance payments to an amount
equal to $100 less than the maximum that could be paid to the executive and
deducted by Electronics Boutique under Section 280G of the Code in the event of
termination of employment for any reason other than death, disability or
"cause," or if the termination is related to a "change in control." In the event
of disability, the agreements provide for the continuation of the executive's
compensation for a period of one year, or, if greater, the remaining term of the
agreement.
In fiscal 2000, Electronics Boutique entered into an employment
agreement with Mr. Levy providing for his employment as Senior Vice President
and Chief Information Officer. The agreement runs for a period of two years and,
in some cases, may be extended automatically for additional one-year terms,
unless terminated by either party in accordance with its terms. The agreement
provides for compensation consisting of a base salary of $174,500 and certain
fringe and other employee benefits that are made available to the senior
executives of Electronics Boutique. In the event that employment is terminated
for any reason other than death, disability or "cause" (as defined in the
agreement), Mr. Levy is entitled to receive his then current base salary for the
greater of his remaining term under the employment agreement or a one year
period. The agreement also limits certain severance payments to an amount equal
to $100 less than the maximum that could be paid to Mr. Levy and deducted by
Electronics Boutique under Section 280G of the Internal Revenue Code in the
event of termination of employment for any reason other than death, disability
or "cause," or if the termination is related to a "change in control." In the
event of disability, the agreement provides for the continuation of Mr. Levy's
compensation for a period of one year, or, if greater, the remaining term of the
agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW OF ELECTRONICS BOUTIQUE'S EXECUTIVE COMPENSATION POLICIES AND PRACTICES
The current members of the Compensation Committee are Messrs. Kim,
Adler and Siana. Mr. Kim is Electronics Boutique's Chairman and Messrs. Adler
and Siana are non-employee directors of Electronics Boutique. The Compensation
Committee, which was formed in July 1998, is charged with reviewing Electronics
Boutique's compensation practices and policies generally and specifically
establishing such practices and policies for the Chief Executive Officer and the
other executive officers of Electronics Boutique.
The compensation of the Chief Executive Officer and the other executive
officers for Fiscal 2000 was agreed to in employment agreements entered into by
Electronics Boutique and each executive prior to the completion of Electronics
Boutique's initial public offering and the formation of the Compensation
Committee. The compensation levels in the employment agreements were based on
recommendations regarding current market data for the specific positions held by
each of the incumbents, as well as individual and Electronics Boutique's prior
year and anticipated future performance. The recommendations were reviewed and
approved by Electronics Boutique's Chairman for the Chief Executive Officer and
by Electronics Boutique's Chief Executive Officer for the other positions.
15
<PAGE>
The Compensation Committee has developed and continuously enhances
compensation policies, plans and programs which align the financial interests of
Electronics Boutique's senior management, in their management capacities, with
those of its stockholders. The Compensation Committee believes that (i)
executive compensation should be meaningfully related to the performance of
Electronics Boutique and the value created for stockholders; (ii) compensation
programs should support both short and long-term goals and objectives of
Electronics Boutique; (iii) compensation programs should reward individuals for
outstanding contributions to Electronics Boutique's success; and (iv) short and
long-term compensation policies play a significant role in attracting and
retaining well qualified executives. For the Chief Executive Officer's
compensation, the Compensation Committee considers the recommendations of
Electronics Boutique's Chairman, who is also a member of the Compensation
Committee, and for the compensation of Electronics Boutique's other executive
officers, the Compensation Committee considers the recommendation of Electronics
Boutique's Chief Executive Officer.
In setting annual compensation for executive officers, the Compensation
Committee reviews a number of criteria relating to the financial performance of
Electronics Boutique generally and of each executive officer specifically during
the prior fiscal year, establishes expectations as to each such individual's
future contributions to Electronics Boutique and considers industry and
comparably-sized company data. In making its decision on compensation levels,
the Compensation Committee does not use any predetermined formula or assign any
particular weight to any individual criteria.
INDUSTRY DATA
Electronics Boutique participates in and subscribes to a number of
compensation and benefits surveys. In Fiscal 2000, the two predominant
compensation surveys utilized to determine the compensation of Electronics
Boutique's executive officers were the 1999 National Retail Federation Survey of
Speciality Store Retailers (the "NRF Survey") and the 1999/2000 ECS Industry and
Geographic Report on Top Management Compensation (the "ECS Report"). The NRF
Survey and the ECS Report were each used to determine the Fiscal 2000
compensation recommendations for Electronics Boutique's executive officers.
The NRF Survey provided detailed compensation information, by position,
including base salary and bonus for executives in the retail industry. In
addition, the NRF Survey reported, as to each position, a compensation
comparison by category. Categories included merchandise (e.g.,
gifts/entertainment, apparel, footwear, etc.), sales volume, number of stores,
number of employees, average store square footage, and primary retail location
(regional malls versus other locations). Each category, as it applied to
Electronics Boutique, was evaluated to determine an average compensation level
for each executive officer.
The ECS Report was compiled by Watson Wyatt Data Services. This report
provided information regarding retail and wholesale trades and identified base
salaries, cash and other incentives and salary ranges applicable to senior
management positions.
BASE SALARY
Recommendations for base salary levels take into account what is being
paid elsewhere in the market, as described above, so that Electronics Boutique
can remain competitive. Increases in base salary also take into account what has
happened in the business in the prior fiscal year as well as what is expected to
happen in the upcoming year. These factors include:
Sales Electronics Boutique's prior fiscal year
sales volume is an important factor when
evaluating base salary increases. Increased
sales volume indicates that the executives
have ensured that products are in Electronics
Boutique's stores at the proper time, stores
are staffed with knowledgeable sales
16
<PAGE>
people, and customers are satisfied with
Electronics Boutique's products and service.
Forecasted Sales Evaluation of industry forecasts for the
retail industry, what new products will be
introduced into the market, and the overall
economic outlook for the country are all
important factors regarding Electronics
Boutique's anticipated profitability and,
therefore, compensation levels.
Growth Electronics Boutique's growth is evaluated,
in both absolute terms and as compared to
planned rates of growth, based on several
determinants, as follows:
- Number of stores
- Comparable store sales
- Overall sales volume
- Market share
- Net income
- Planned vs. actual growth rates
Net Profit Goals These include an evaluation of store profit
and loss, expenses associated with the
management of the stores and support from the
home office and distribution center.
BONUS
Bonus payments are made based on Electronics Boutique's performance for
the prior fiscal year. Provided Electronics Boutique meets or exceeds its goals
for the year, bonuses are paid as per existing employment agreements. Bonus
amounts included in the agreements are determined by performance and compared to
external research provided in the surveys and reports described above to ensure
competitiveness within the industry.
STOCK BASED INCENTIVE AWARDS
The Compensation Committee believes that it is important for
executives, as well as other employees, to have a vested interest in Electronics
Boutique, through the granting of stock options which generally vest over a
three year period, thereby more closely aligning the long-term interest of
executives with that of Electronics Boutique's stockholders. The Compensation
Committee believes that stock options provide incentive to executives by giving
them a strong economic interest in maximizing stock price appreciation and
enhancing their performance in attaining long-term Electronics Boutique
objectives. The Compensation Committee makes grants under Electronics Boutique's
1998 Equity Participation Plan and granted stock options to purchase an
aggregate of 75,000 shares of Common Stock to the Named Executive Officers
during Fiscal 2000. All stock options granted during Fiscal 2000 by Electronics
Boutique had exercise prices equal to the fair market value of the Common Stock
on the date of grant. All employees of Electronics Boutique are eligible to
receive grants of stock options under the 1998 Equity Participation Plan, and
the Compensation Committee, upon senior management's recommendations, makes an
effort to ensure that option grants are made to a significant number of levels
of employees within Electronics Boutique, given the competitive nature of the
industry with respect to recruiting and retaining the best available personnel.
17
<PAGE>
CEO COMPENSATION
In accordance with Mr. Firestone's employment agreement, Mr.
Firestone's annual base salary, beginning in July 1998, was $500,000. Upon
approval of the Compensation Committee, Mr. Firestone's base salary was raised
by 7% to $535,000 in March 1999 and again by 10% to $588,500 in February 2000.
Under his employment agreement, Mr. Firestone is entitled to a cash bonus up to
100% of his annual base salary. Mr. Firestone earned a bonus of $535,000 in
Fiscal 2000, of which $260,000 was paid in April 2000 and $275,000 was deferred
at Mr. Firestone's election. The Compensation Committee awarded Mr. Firestone
the bonus based on Electronics Boutique's achievement of its goals, including
increases in the following measurement areas over Fiscal 1999 levels:
<TABLE>
<CAPTION>
MEASUREMENT AREA PERCENTAGE INCREASE
---------------- -------------------
<S> <C>
Net Sales 26.9%
Number of Stores 17.2 %
Comparable Store Sales 11.6 %
Net Income 12.6 %
</TABLE>
The Compensation Committee believes Mr. Firestone's current
compensation is fully consistent with Electronics Boutique's philosophy on
executive compensation and appropriate in view of Electronics Boutique's
performance in Fiscal 2000.
TAX DEDUCTIBILITY; OTHER
Section 162(m) of the Internal Revenue Code imposes a $1 million limit
on the allowable tax deduction of compensation paid by a publicly-held
corporation to its chief executive officer and its other four most highly
compensated officers employed at year-end, subject to certain pre-established
objective performance-based exceptions. The Compensation Committee intends to
take Section 162(m) into account when formulating its compensation policies for
Electronics Boutique's executive officers and to comply with Section 162(m)
where the Compensation Committee determines compliance to be practicable and in
the best interests of Electronics Boutique and its stockholders.
The Report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934 and shall not otherwise be deemed filed under
such Acts.
CONCLUSION
The Committee intends to seek to continue to operate under, and to
adjust where necessary, these performance-driven compensation policies and
practices to assure that they are consistent with the goals and objectives of
Electronics Boutique, and with the primary mission of the full Board of
increasing long-term stockholder value.
Respectfully submitted,
JAMES J. KIM
DEAN S. ADLER
LOUIS J. SIANA
18
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during Fiscal 2000 were James
J. Kim, Dean S. Adler and Louis J. Siana. Mr. Kim had a direct or indirect
material interest in certain transactions involving Electronics Boutique during
Fiscal 2000. See "Certain Relationships and Related Transactions."
19
<PAGE>
COMPARISON OF TOTAL STOCKHOLDER RETURN
The following graph compares the cumulative total stockholder return on
the Common Stock with the Standard & Poor's 500 Composite Index and the Standard
& Poor's Retail (Specialty) Index for the period from July 28, 1998 through
January 29, 2000, assuming an initial investment of $100 and the reinvestment of
all dividends.
ELECTRONICS BOUTIQUE HOLDINGS CORP. V. S&P 500 V. S&P RETAIL (SPECIALTY)
[THE TABLE BELOW WAS REPRESENTED IN THE PRINTED MATERIAL
BY A LINE GRAPH]
<TABLE>
<CAPTION>
7/28/98 1/30/99 1/29/00
------- ------- -------
<S> <C> <C> <C>
Electronics Boutique Holdings Corp. $100 $131 $ 117
S&P 500 $100 $114 $ 126
S&P Retail (Specialty) $100 $ 91 $ 66
</TABLE>
20
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of May 15, 2000, certain information
regarding the beneficial ownership of Common Stock by each stockholder known to
Electronics Boutique to be the beneficial owner of more than 5% of the Common
Stock, each of Electronics Boutique's directors and Named Executive Officers,
and all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY
BENEFICIAL OWNER (1) OWNED (2)
-------------------------- ----------------------------------
NUMBER PERCENTAGE
------ ----------
<S> <C> <C>
EB Nevada, Inc. (3) 13,669,100 61.5
2255-A Renaissance Drive, Suite 4
Las Vegas, Nevada 89119
James J. and Agnes C. Kim (3) (4) 13,669,200 61.5
931 South Matlack Street
West Chester, Pennsylvania 19382
Dresdner Bank AG(5) 1,299,000 5.8
Jurgen-Ponto-Platz 1
60301 Frankfurt, Germany
Joseph J. Firestone 149,357 *
Dean S. Adler 5,000 *
Susan Y. Kim (3)(4) 43,870 *
Louis J. Siana 5,000 *
Stanley Steinberg 6,000 *
John R. Panichello (4) 43,870 *
Jeffrey W. Griffiths 51,000 *
Seth P. Levy 11,714 *
All directors and executive officers as 271,941 1.2
a group (8 persons) (6)
</TABLE>
--------------
* Less than 1.0%
(1) Unless otherwise noted, Electronics Boutique believes that all persons
named in the above table have sole voting and investment power with
respect to the shares beneficially owned by them.
(2) For purposes of this table, a person is deemed to be the "beneficial
owner" of any shares that such person has the right to acquire within
60 days, including upon the exercise of stock options. For purposes of
computing the percentage of outstanding shares held by each person
named above on a given date, any security that such person has the
right to acquire within 60 days is deemed to be
21
<PAGE>
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) EB Nevada, Inc. is a wholly_owned subsidiary of The Electronics
Boutique, Inc., all of the outstanding capital stock of which is owned
by James J. Kim, Agnes C. Kim, the David D. Kim Trust of December 31,
1987, the John T. Kim Trust of December 31, 1987 and the Susan Y. Kim
Trust of December 31, 1987 (such trusts referred to as the "Kim
Trusts"). Each of the Kim Trusts has in common Susan Y. Kim and John
F.A. Earley as co_trustees, in addition to a third trustee (John T. Kim
in the case of the Susan Y. Kim Trust and the John T. Kim Trust and
David D. Kim in the case of the David D. Kim Trust) (the trustees of
each trust may be deemed to be the beneficial owners of the shares held
by such trust). In addition, the trust agreement for each of these
trusts encourages the trustees of the trusts to vote the shares of
Common Stock held by them, in their discretion, in concert with James
Kim's family. Accordingly, the trusts, together with their respective
trustees and James J. and Agnes C. Kim, may be considered a "group"
under Section 13(d) of the Exchange Act. This group may be deemed to
have beneficial ownership of the shares owned by EB Nevada, Inc.
(4) James J. Kim and Agnes C. Kim are the parents of Susan Y. Kim. John R.
Panichello and Susan Y. Kim are husband and wife.
(5) Based on Schedule 13G dated February 16, 1999.
(6) Excludes shares which may be deemed to be beneficially owned by James
J. Kim.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of a Services Agreement with EB-UK, Electronics
Boutique provides management, administrative and advertising assistance in
exchange for the payment of management fees by EB-UK equal to 1.0% of net sales,
plus a bonus calculated on the basis of net income in excess of a
pre-established target set by EB-UK. Electronics Boutique earned $3.85 million
in management fees under the Services Agreement in Fiscal 2000. As of January
31, 2000, EB Nevada owned approximately 19.1%of the outstanding shares of
capital stock of EB-UK.
Pursuant to the corporate reorganization which took place in connection
with Electronics Boutique's initial public offering, on May 31, 1998,
Electronics Boutique of America Inc. ("EBOA"), an operating subsidiary of
Electronics Boutique, joined EB as a party to certain loan documents with Fleet
Financial Corporation and entered into a lease agreement with EB, pursuant to
which EBOA leases the West Chester headquarters and primary distribution center
from EB. The lease has a two year term and provides EBOA with an option to
purchase the property for $6.7 million, EB's cost of acquisition. The monthly
rent pursuant to such lease is $50,000. EBOA has notified EB of its intention to
exercise the purchase option and intends to complete the purchase by June 30,
2000.
Electronics Boutique has a policy that any transactions between it and
any of its officers, directors, principal stockholders or the affiliates of the
foregoing persons be on terms no less favorable to Electronics Boutique than
could reasonably be obtained in arm's length transactions with independent third
parties, and that any such transactions also be approved by the members of the
Audit Committee who are disinterested in the transaction.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires Electronics Boutique's directors and executive officers, and
certain persons who own more than 10% of the outstanding Common Stock, to file
with the SEC and the Nasdaq Stock Market (the "Nasdaq") initial reports of
ownership and reports of changes in ownership of Common Stock ("Section 16(a)
Reports"). Executive officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish Electronics Boutique with copies of all
Section 16(a) Reports they file. During Fiscal 2000, all of the executive
officers of Electronics Boutique inadvertently failed to file Section 16(a)
Reports with respect to options granted during Fiscal 2000. All Section 16(a)
Reports have been subsequently filed. To Electronic Boutique's knowledge, all
beneficial owners of more than 10% of the Common Stock outstanding complied with
all applicable filing requirements under Section 16(a) of the Exchange Act with
respect to their beneficial ownership of common stock during Fiscal 2000.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at Electronics
Boutique's 2001 annual meeting of stockholders must conform to the applicable
proxy rules of the Securities and Exchange Commission concerning the submission
and content of proposals and must be received in writing by the Secretary of
Electronics Boutique by February 18, 2001, for inclusion in Electronics
Boutique's proxy, notice of meeting and proxy statement relating to the 2001
annual meeting.
Under Electronics Boutique's Bylaws, a stockholder proposal intended to
be included in the proxy material for the 2001 annual meeting must generally be
received by Electronics Boutique not less than 60 nor more than 90 days prior to
the meeting. Any such proposal must also comply with the other provisions
contained in Electronics Boutique's Bylaws relating to stockholder proposals.
23
<PAGE>
ANNUAL REPORT ON FORM 10-K
ELECTRONICS BOUTIQUE WILL FURNISH WITHOUT CHARGE TO ANY STOCKHOLDER,
UPON WRITTEN REQUEST, A COPY OF ELECTRONICS BOUTIQUE'S ANNUAL REPORT ON FORM
10_K FOR THE FISCAL YEAR ENDED JANUARY 29, 2000. REQUESTS FOR THIS REPORT SHOULD
BE ADDRESSED TO INVESTOR RELATIONS, ELECTRONICS BOUTIQUE HOLDINGS CORP., 931
SOUTH MATLACK STREET, WEST CHESTER, PENNSYLVANIA 19382.
OTHER MATTERS
The Board knows of no business which will be presented for
consideration at the Annual Meeting other than that shown above. However, if any
business shall properly come before the Annual Meeting, the persons named in the
enclosed proxy or their substitutes will vote the proxy in respect of any such
business in accordance with their best judgment pursuant to the discretionary
authority conferred thereby.
June 16, 2000
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
24
<PAGE>
Annex A
2000 EMPLOYEE STOCK PURCHASE PLAN
OF
ELECTRONICS BOUTIQUE HOLDINGS CORP.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - PURPOSE............................................................1
1.1 Purpose......................................................1
ARTICLE II - DEFINITIONS.......................................................1
2.1 Base Pay.....................................................1
2.2 Committee....................................................1
2.3 Employee.....................................................1
2.4 Subsidiary Corporation.......................................1
ARTICLE III - ELIGIBILITY AND PARTICIPATION....................................1
3.1 Initial Eligibility..........................................1
3.2 Leave of Absence.............................................1
3.3 Restrictions on Participation................................2
3.4 Commencement of Participation................................2
ARTICLE IV - OFFERINGS.........................................................2
4.1 Annual Offerings.............................................2
ARTICLE V - PAYROLL DEDUCTIONS.................................................2
5.1 Amount of Deduction..........................................2
5.2 Participant's Account........................................3
5.3 Changes in Payroll Deductions................................3
5.4 Leave of Absence.............................................3
ARTICLE VI - GRANTING OF OPTION................................................3
6.1 Number of Option Shares......................................3
6.2 Option Price.................................................3
ARTICLE VII - EXERCISE OF OPTION...............................................4
7.1 Automatic Exercise...........................................4
7.2 Withdrawal of Account........................................4
7.3 Fractional Shares............................................4
7.4 Transferability of Option....................................4
7.5 Delivery of Stock............................................4
ARTICLE VIII - WITHDRAWAL......................................................4
8.1 In General...................................................4
(i)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
8.2 Effect on Subsequent Participation...........................5
8.3 Termination of Employment....................................5
8.4 Termination of Employment Due to Death......................5
8.5 Leave of Absence............................................5
ARTICLE IX - INTEREST.........................................................5
9.1 Payment of Interest.........................................5
ARTICLE X - STOCK.............................................................6
10.1 Maximum Shares..............................................6
10.2 Participant's Interest in Option Stock......................6
10.3 Registration of Stock.......................................6
10.4 Restrictions on Exercise....................................6
ARTICLE XI - ADMINISTRATION...................................................6
11.1 Appointment of Committee....................................6
11.2 Authority of Committee......................................7
11.3 Rules Governing the Administration of the Committee.........7
ARTICLE XII - MISCELLANEOUS...................................................7
12.1 Designation of Beneficiary..................................7
12.2 Transferability.............................................7
12.3 Use of Funds................................................7
12.4 Adjustment Upon Changes in Capitalization...................7
12.5 Amendment and Termination...................................8
12.6 Effective Date..............................................8
12.7 No Employment Rights........................................8
12.8 Effect of Plan..............................................9
12.9 Governing Law...............................................9
(ii)
<PAGE>
ELECTRONICS BOUTIQUE HOLDINGS CORP.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - PURPOSE
1.1 Purpose. The Electronics Boutique Holdings Corp. Employee Stock
Purchase Plan (the "Plan") is intended to provide a method whereby employees of
Electronics Boutique Holdings Corporation and its Subsidiary Corporations
(hereinafter referred to, unless the context otherwise requires, as the
"Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company. It is
the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that Section of the Code.
ARTICLE II - DEFINITIONS
2.1 Base Pay. "Base Pay" shall mean regular earnings excluding payments for
overtime, shift premium, bonuses and other special payments, commissions and
other marketing incentive payments.
2.2 Committee. "Committee" shall mean the individuals described in Article
XI.
2.3 Employee. "Employee" means any person who is customarily employed on a
full-time or part-time basis by the Company and is regularly scheduled to work
more than 20 hours per week.
2.4 Subsidiary Corporation. "Subsidiary Corporation" shall mean any present
or future corporation which (i) would be a "subsidiary corporation" of
Electronics Boutique Holdings Corp. as that term is defined in Section 424 of
the Code and (ii) is designated as a participant in the Plan by the Committee.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.1 Initial Eligibility. Any employee who shall have completed ninety (90)
days' employment and shall be employed by the Company on the date his
participation in the Plan is to become effective shall be eligible to
participate in offerings under the Plan which commence on or after such ninety
day period has concluded.
3.2 Leave of Absence. For purposes of participation in the Plan, a
person on leave of absence shall be deemed to be an employee for the first 90
days of the leave of absence. The employee's employment shall be deemed to
have terminated at the close of business on the 90th day of the leave of
absence unless the employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on
the 90th day. Termination by the Company of any employee's
<PAGE>
leave of absence, other than termination of such leave of absence on return
to full-time or part-time employment, shall terminate an employee's
employment for all purposes of the Plan and shall terminate the employee's
participation in the Plan and right to exercise any option.
3.3 Restrictions on Participation. Notwithstanding any provisions of the
Plan to the contrary, no employee shall be granted an option to participate in
the Plan:
(a) if, immediately after the grant, the employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company (for purposes of this paragraph, the rules of Section 424(d) of the
Code shall apply in determining stock ownership of any employee); or
(b) which permits his rights to purchase stock under all employee stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 in
fair market value of the stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding.
3.4 Commencement of Participation. An eligible employee may become a
participant by completing an authorization for a payroll deduction on the
form provided by the Company and filing the form with the Company's benefits
department on or before the date set by the Committee. The date shall be
prior to the Offering Commencement Date for the Offering (as such terms are
defined below). Payroll deductions for a participant shall commence on the
applicable Offering Commencement Date when the employee's authorization for a
payroll deduction becomes effective and shall end on the Offering Termination
Date of the Offering to which such authorization is applicable unless sooner
terminated by the participant as provided in Article VIII.
ARTICLE IV - OFFERINGS
4.1 Annual Offerings. The Plan encompasses quarterly offerings of the
Company's Common Stock (the "Offerings") beginning on the 1st day of March
2000 and terminating on the following March 31. Subsequent offerings will
occur for each calendar quarter thereafter. For example, an offering will
begin April 1 and end the following June 30 and another offering will begin
July 1 and end September 30. Offerings will occur each calendar quarter for
the next nine years for a total of ten years. The maximum number of shares
issued in the respective calendar quarters shall be: 100,000 plus unissued
shares from the prior offerings.
ARTICLE V - PAYROLL DEDUCTIONS
5.1 Amount of Deduction. At the time a participant files his
authorization for payroll deduction, he shall elect to have deductions made
from his pay on each payday during the time he is a participant in an
Offering at the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his base pay in
effect at the Offering Commencement Date of such Offering. In the case of a
part-time hourly employee, such employee's base
-2-
<PAGE>
pay during an Offering shall be determined by multiplying such employee's
hourly rate of pay in effect on the Offering Commencement Date by the number
of regularly scheduled hours of work for such employee during the year.
5.2 Participant's Account. All payroll deductions made for a participant
shall be credited to his account under the Plan. A participant may not make
any separate cash payment into such account except when on leave of absence
and then only as provided in Section 5.4.
5.3 Changes in Payroll Deductions. A participant may discontinue his
participation in the Plan as provided in Article VIII, but no other change can
be made during an Offering and specifically, a participant may not alter the
amount of his payroll deductions for that Offering.
5.4 Leave of Absence. If a participant goes on a leave of absence, the
participant shall have the right to elect: (a) to withdraw the balance in his
or her account pursuant to Section 7.2, (b) to discontinue contributions to
the Plan but remain a participant in the Plan, or (c) remain a participant in
the Plan during the leave of absence, authorizing deductions to be made from
payments by the Company to the participant during the leave of absence and
undertaking to make cash payments to the Plan at the end of each payroll
period to the extent that amounts payable by the Company to the participant
are insufficient to meet the participant's authorized Plan deductions.
ARTICLE VI - GRANTING OF OPTION
6.1 Number of Option Shares. On the Commencement Date of each Offering,
a participating employee shall be deemed to have been granted an option to
purchase a maximum number of shares of the stock of the Company equal to an
amount determined as follows: an amount equal to (i) that percentage of the
employee's base pay which he has elected to have withheld (but not in any
case in excess of 10%) multiplied by (ii) the employee's base pay during the
period of the offering (iii) divided by 85% of the market value of the stock
of the Company on the applicable Offering Commencement Date. The market value
of the Company's stock shall be determined as provided in paragraphs (a) and
(b) of Section 6.2 below. An employee's base pay during the period of an
offering shall be determined by multiplying his normal weekly rate of pay (as
in effect on the last day prior to the Commencement Date of the particular
offering) by 13 or provided that, in the case of a part-time hourly employee,
the employee's base pay during the period of an offering shall be determined
by multiplying the employee's hourly rate by the number of regularly
scheduled hours of work for the employee during the Offering.
6.2 Option Price. The option price of stock purchased with payroll
deductions made during such annual offering for a participant therein shall
be the lower of:
(a) 85% of the closing price of the stock on the Offering Commencement
Date or the nearest prior business day on which trading occurred on the
NASDAQ National Market System; or
-3-
<PAGE>
(b) 85% of the closing price of the stock on the Offering Termination
Date or the nearest prior business day on which trading occurred on the
NASDAQ National Market System. If the Common Stock of the Company is not
admitted to trading on any of the aforesaid dates for which closing prices of
the stock are to be determined, then reference shall be made to the fair
market value of the stock on that date, as determined on such basis as shall
be established or specified for the purpose by the Committee.
ARTICLE VII - EXERCISE OF OPTION
7.1 Automatic Exercise. Unless a participant gives written notice to the
Company as hereinafter provided, his option for the purchase of stock with
payroll deductions made during any offering will be deemed to have been
exercised automatically on the Offering Termination Date applicable to such
offering, for the purchase of the number of full shares of stock which the
accumulated payroll deductions in his account at that time will purchase at
the applicable option price (but not in excess of the number of shares for
which options have been granted to the employee pursuant to Section 6.1), and
any excess in his account at that time will be returned to him.
7.2 Withdrawal of Account. By written notice to the Company's benefits
department, at any time prior to the Offering Termination Date applicable to
any Offering, a participant may elect to withdraw all the accumulated payroll
deductions in his account at such time.
7.3 Fractional Shares. Fractional shares shall be issued under the Plan.
7.4 Transferability of Option. During a participant's lifetime, options
held by such participant shall be exercisable only by that participant.
7.5 Delivery of Stock. As promptly as practicable after the Offering
Termination Date of each Offering, the Company will deliver to each
participant, as appropriate, the stock purchased upon exercise of his option.
ARTICLE VIII - WITHDRAWAL
8.1 In General. As indicated in Section 7.2, a participant may withdraw
payroll deductions credited to his account under the Plan at any time by
giving written notice to the Company's benefits department. All of the
participant's payroll deductions credited to his account will be paid to him
as soon as practicable after receipt of his notice of withdrawal, and no
further payroll deductions will be made from his pay during such Offering.
The Participant will not be entitled to interest on the amount in his
account. The Company may, at its option, treat any attempt to borrow by an
employee on the security of his accumulated payroll deductions as an
election, under Section 7.2, to withdraw such deductions.
-4-
<PAGE>
8.2 Effect on Subsequent Participation. A participant's withdrawal from
any Offering will not have any effect upon his eligibility to participate in
any succeeding Offering or in any similar plan which may hereafter be adopted
by the Company.
8.3 Termination of Employment. Upon termination of the participant's
employment for any reason, including retirement (but excluding death while in
the employ of the Company or continuation of a leave of absence for a period
beyond 90 days), the payroll deductions credited to his account will be
returned to him, or, in the case of his death subsequent to the termination
of his employment, to the person or persons entitled thereto under Section
12.1.
8.4 Termination of Employment Due to Death. Upon termination of the
participant's employment because of his death, his beneficiary (as defined in
Section 12.1) shall have the right to elect, by written notice given to the
Company's benefits department prior to the earlier of the Offering
Termination Date or the expiration of a period of sixty (60) days commencing
with the date of the death of the participant, either:
(a) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
(b) to exercise the participant's option for the purchase of stock on
the Offering Termination Date next following the date of the participant's
death for the purchase of the number of full shares of stock which the
accumulated payroll deductions in the participant's account at the date of
the participant's death will purchase at the applicable option price, and any
excess in such account will be returned to the beneficiary, without interest.
In the event that no written notice of election shall be duly received
by the Company's benefits department, the beneficiary shall automatically be
deemed to have elected, pursuant to paragraph (b), to exercise the
participant's option.
8.5 Leave of Absence. A participant on leave of absence shall, subject
to the election made by the participant pursuant to Section 5.4, continue to
be a participant in the Plan so long as such participant is on continuous
leave of absence. A participant who has been on leave of absence for more
than 90 days and who therefore is not an employee for the purpose of the Plan
shall not be entitled to participate in any offering commencing after the
90th day of such leave of absence. Notwithstanding any other provisions of
the Plan, unless a participant on leave of absence returns to regular
full-time or part-time employment with the Company at the earlier of: (a) the
termination of such leave of absence or (b) three months from the 90th day of
such leave of absence, the participant's participation in the Plan shall
terminate on whichever of such dates first occurs.
ARTICLE IX - INTEREST
-5-
<PAGE>
9.1 Payment of Interest. No interest will be paid or allowed on any
money paid into the Plan or credited to the account of any participant
employee.
ARTICLE X - STOCK
10.1 Maximum Shares. The maximum number of shares which shall be issued
under the Plan, subject to adjustment upon changes in capitalization of the
Company as provided in Section 12.4 shall be 100,000 shares in each quarterly
Offering plus in each Offering all unissued shares from prior Offerings,
whether offered or not, not to exceed 1,000,000 shares for all Offerings,
provided that the maximum shall be increased on each January 1 by an amount
equal to the lesser of: (i) the number of shares required to restore the
maximum aggregate number of shares which may be sold under the Plan to
1,000,000, or (ii) a lesser amount determined by the Committee. If the total
number of shares for which options are exercised on any Offering Termination
Date in accordance with Article VI exceeds the maximum number of shares for
the applicable offering, the Company shall make a pro rata allocation of the
shares available for delivery and distribution in as nearly a uniform manner
as shall be practicable and as it shall determine to be equitable, and the
balance of payroll deductions credited to the account of each participant
under the Plan shall be returned to him or her as soon as practicable.
10.2 Participant's Interest in Option Stock. The participant will have
no interest in stock covered by the option until such option has been
exercised.
10.3 Registration of Stock. Stock to be delivered to a participant under
the Plan will be registered in the name of the participant, or, if the
participant so directs by written notice to the Company's benefits department
prior to the Offering Termination Date applicable thereto, in the names of
the participant and one such other person as may be designated by the
participant, as joint tenants with rights of survivorship or as tenants by
the entireties, to the extent permitted by applicable law.
10.4 Restrictions on Exercise. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the
shares of Common Stock reserved for issuance upon the exercise of the option
shall have been duly listed, upon official notice of issuance, upon a stock
exchange, and that either:
(a) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or
(b) the participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is his intention to
purchase the shares for investment and not for resale or distribution.
ARTICLE XI - ADMINISTRATION
-6-
<PAGE>
11.1 Appointment of Committee. The compensation committee (the
"Committee") of the Board of Directors shall administer the Plan. No member
of the Committee shall be eligible to purchase stock under the Plan.
11.2 Authority of Committee. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to
interpret and construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all other determinations
deemed necessary or advisable for administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive.
11.3 Rules Governing the Administration of the Committee. The Board of
Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee may select one of
its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable and may hold telephonic meetings. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. The Committee may
correct any defect or omission or reconcile any inconsistency in the Plan, in
the manner and to the extent it shall deem desirable. Any decision or
determination reduced to writing and signed by a majority of the members of
the Committee shall be as fully effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
ARTICLE XII - MISCELLANEOUS
12.1 Designation of Beneficiary. A participant's beneficiary shall be
his estate. The executor or administrator of the estate of the participant
shall receive any stock and/or cash due in accordance with a Section 8.4
election. If no executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver
the stock and/or cash to the spouse or to any one or more dependents of the
participant as the Company may designate.
12.2 Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with
Section 7.2.
12.3 Use of Funds. All payroll deductions received or held by the
Company under this Plan may be used by the Company for any corporate purpose
and the Company shall not be obligated to segregate such payroll deductions.
-7-
<PAGE>
12.4 Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares of
Common Stock of the Company have increased, decreased, changed into, or been
exchanged for a different number or kind of shares or securities of the
Company through reorganization, merger, recapitalization, reclassification,
stock split or similar transaction, appropriate and proportionate adjustments
may be made by the Committee in the number and/or kind of shares which are
subject to purchase under outstanding options and on the option exercise
price or prices applicable to such outstanding options. In addition, in any
such event, the number and/or kind of shares which may be offered in the
Offerings described in Article IV hereof shall also be proportionately
adjusted. No adjustments shall be made for stock dividends. For the purposes
of this Paragraph, any distribution of shares to shareholders in an amount
aggregating 20% or more of the outstanding shares shall be deemed a stock
split and any distributions of shares aggregating less than 20% of the
outstanding shares shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all of the property or stock of
the Company to another corporation, the holder of each option then
outstanding under the Plan will thereafter be entitled to receive at the next
Offering Termination Date upon the exercise of such option for each share as
to which such option shall be exercised, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of one share
of the Common Stock was entitled to receive upon and at the time of such
transaction. The Board of Directors shall take such steps in connection with
such transactions as the Board shall deem necessary to assure that the
provisions of this Section 12.4 shall thereafter be applicable, as nearly as
reasonably may be determined, in relation to the said cash, securities and/or
property as to which such holder of such option might thereafter be entitled
to receive.
12.5 Amendment and Termination. The Board of Directors shall have
complete power and authority to terminate or amend the Plan; provided,
however, that the Board of Directors shall not, without the approval of the
stockholders of the Corporation (i) increase the maximum number of shares
which may be issued under any Offering (except pursuant to Section 12.4);
(ii) amend the requirements as to the class of employees eligible to purchase
stock under the Plan or permit the members of the Committee to purchase stock
under the Plan. No termination, modification, or amendment of the Plan may,
without the consent of an employee then having an option under the Plan to
purchase stock, adversely affect the rights of such employee under such
option.
12.6 Effective Date. The Plan shall become effective as of March 1,
2000, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the shareholders
held on or before March 1, 2001. If the Plan is not so approved, the Plan
shall not become effective.
-8-
<PAGE>
12.7 No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the
Company, and it shall not be deemed to interfere in any way with the
Company's right to terminate, or otherwise modify, an employee's employment
at any time.
12.8 Effect of Plan. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors
of each employee participating in the Plan, including, without limitation,
the employee's estate and the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or representative
of creditors of such employee.
12.9 Governing Law. The law of the State of Delaware will govern all
matters relating to this Plan except to the extent it is superseded by the
laws of the United States.
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<PAGE>
Annex B
2000 EQUITY PARTICIPATION PLAN
OF
ELECTRONICS BOUTIQUE HOLDINGS CORP.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS....................................................1
1.1. General......................................................1
1.2. Award Limit..................................................1
1.3. Board........................................................1
1.4. Change in Control............................................1
1.5. Code.........................................................2
1.6. Committee....................................................2
1.7. Common Stock.................................................2
1.8. Company......................................................2
1.9. Corporate Transaction........................................2
1.10. Director.....................................................2
1.11. Dividend Equivalent..........................................2
1.12. Employee.....................................................2
1.13. Exchange Act.................................................3
1.14. Fair Market Value............................................3
1.15. Incentive Stock Option.......................................3
1.16. Independent Director.........................................3
1.17. Non-Qualified Stock Option...................................3
1.18. Option.......................................................3
1.19. Optionee.....................................................3
1.20. Plan.........................................................3
1.21. QDRO.........................................................4
1.22. Rule 16b-3...................................................4
1.23. Section 162(m) Participant...................................4
1.24. Share........................................................4
1.25. Subsidiary...................................................4
1.26. Termination of Consultancy...................................4
1.27. Termination of Directorship..................................4
1.28. Termination of Employment....................................4
ARTICLE 2. SHARES SUBJECT TO PLAN.........................................5
2.1. Shares Subject to Plan.......................................5
2.2. Add-back of Options and Other Rights.........................5
ARTICLE 3. GRANTING OF OPTIONS............................................6
3.1. Eligibility..................................................6
3.2. Disqualification for Stock Ownership.........................6
(i)
<PAGE>
TABLE OF CONTENTS
(Continued)
3.3. Qualification of Incentive Stock Options.....................6
3.4. Granting of Options..........................................6
ARTICLE 4. TERMS OF OPTIONS...............................................7
4.1. Option Agreement.............................................7
4.2. Option Price.................................................7
4.3. Option Term..................................................8
4.4. Option Vesting...............................................8
4.5. Continued Employment.........................................9
ARTICLE 5. EXERCISE OF OPTIONS............................................9
5.1. Partial Exercise.............................................9
5.2. Manner of Exercise...........................................9
5.3. Conditions to Issuance of Stock.............................10
5.4. Rights as Stockholders......................................11
5.5. Ownership and Transfer Restrictions.........................11
5.6. Limitations on Exercise of Options..........................11
ARTICLE 6. ADMINISTRATION................................................12
6.1. Compensation Committee......................................12
6.2. Duties and Powers of Committee..............................12
6.3. Majority Rule; Unanimous Written Consent....................12
6.4. Compensation; Professional Assistance: Good Faith Actions...12
ARTICLE 7. MISCELLANEOUS PROVISIONS......................................13
7.1. Not Transferable............................................13
7.2. Amendment, Suspension or Termination of this Plan...........13
7.4. Approval of Plan by Stockholders............................16
7.5. Tax Withholding.............................................16
7.6. Loans.......................................................17
7.7. Forfeiture Provisions.......................................17
7.8. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation..............................17
7.9. Effect of Plan Upon Options and Compensation Plans..........17
7.10. Compliance with Laws........................................18
7.11. Titles......................................................18
7.12. Governing Law...............................................18
(ii)
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THE 2000 EQUITY PARTICIPATION PLAN
OF ELECTRONICS BOUTIQUE HOLDINGS CORP.
Electronics Boutique Holdings Corp., a Delaware corporation (the
"Company"), has adopted the 2000 Equity Participation Plan (the "Plan"),
effective February 1, 2000, for the benefit of eligible employees,
consultants and directors of the Company.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees and
consultants to further the growth, development and financial success of the
Employer by personally benefitting through the ownership of Company stock
and/or rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of directors
and of key Employees and consultants considered essential to the long range
success of the Company offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE 1. DEFINITIONS
1.1. General. Wherever the following initially capitalized terms are
used in this Plan they shall have the meanings specified below, unless the
context clearly indicates otherwise.
1.2. Award Limit. "Award Limit" shall mean 250,000 shares of Common
Stock.
1.3. Board. "Board" shall mean the Board of Directors of the Company, as
comprised from time to time.
1.4. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions.
1.4.1. 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 pursuant to a tender or
exchange offer made directly to the Company's stockholders which the Board
does not recommend such stockholders to accept; or
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1.4.2. 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.
1.5. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6. Committee. "Committee" shall mean the Compensation Committee of the
Board, appointed as provided in Section 6.1, as comprised from time to time,
or such other Committee designated by the Board to administer the provisions
of this Plan.
1.7. Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share.
1.8. Company. "Company" shall mean Electronics Boutique Holdings Corp.,
a Delaware corporation, and where the context requires, shall include all
Subsidiaries.
1.9. Corporate Transaction. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company is a
party:
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to (i)
change the State in which the Company is incorporated, (ii) form a holding
company, or (iii) effect a similar reorganization as to form whereupon this
Plan and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred
or issued to a person or persons different from those who held such
securities immediately prior to such merger.
1.10. Director. "Director" shall mean a member of the Board.
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1.11. Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article 7 of this Plan.
1.12. Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company.
Employee shall also include individuals employed by Walden Books who have a
title of Store Manager or above and who are covered by the Consulting
Agreement dated July 23, 1993 between the Company and Walden Books.
1.13. Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.14. Fair Market Value. "Fair Market Value" of a share of Common Stock,
as of a given date shall be (i) the closing price of a share of Common Stock
on the principal exchange on which shares of Common Stock are then trading,
if any (or as reported on any composite index which includes such principal
exchange), on the trading day previous to such date, or if shares were not
traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, either the
(i) closing sale price or (i) the mean between the closing representative bid
and asked prices for the Common Stock on the trading day previous to such
date as reported by NASDAQ or such successor quotation systems, as may be
appropriate, or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the Fair Market
Value of a share of Common Stock as established by the Committee (or the
Board, in the case of Options granted to Independent Directors) acting in
good faith.
1.15. Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.16. Independent Director. "Independent Director" shall mean a member
of the Board who is not also an Employee of the Company.
1.17. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.18. Option. "Option" shall mean a stock option granted under Article 3
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
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1.19. Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.20. Plan. "Plan" shall mean the 2000 Equity Participation Plan of
Electronics Boutique Holdings Corp., as amended from time to time.
1.21. QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
1.22. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.23. Section 162(m) Participant. "Section 162(m) Participant" shall
mean any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated
or a future fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code, as determined by the
Committee in its sole discretion.
1.24. Share. "Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 7.3 of the Plan.
1.25. Subsidiary. "Subsidiary" shall mean a corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.26. Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of an Optionee as a consultant to the
Employer is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of
employment with the Employer. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge
for good cause, the application of the provisions of Section 7.7, and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
1.27. Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a
termination by resignation, failure to be re-elected, death or retirement.
The Board, in its
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sole and absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Directorship with respect to
Independent Directors.
1.28. Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee and the
Employer is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement, but excluding (i) terminations where there is a
simultaneous reemployment or continuing employment of an Optionee by the
Employer, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee- employer relationship, and (iii) at
the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Employer with
the former employee. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Employment (subject to the provisions of any agreement between an Employee
and the Employer), including, but not by way of limitation, the question of
whether a Termination of Employment resulted from a discharge for good cause,
the application of the provisions of Section 7.7, and all questions of
whether particular leaves of absence constitute Terminations of Employment,
provided, however, that, unless otherwise determined by the Committee in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for
the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section. Notwithstanding, any
other provision of this Plan, the Employer has an absolute and unrestricted
right to terminate an Employee's employment at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in writing.
ARTICLE 2. SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan. Subject to the provisions of Section 7.3 of
the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 2,000,000 Shares, plus an annual increase to be added
on each anniversary date of the adoption of the Plan equal to the lesser of
(i) the number of Shares required to restore the maximum aggregate number of
Shares which may be optioned and sold under the Plan to 2,000,000, or (ii) a
lesser amount determined by the Committee. The Shares may be authorized, but
unissued, or reacquired Common Stock.
(a) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any fiscal year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the
Award Limit and if, after grant of an Option, the price of shares subject to
such Option is reduced, the transaction is treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be canceled
and the Option deemed to be granted are counted against the Award Limit.
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2.2. Add-back of Options and Other Rights. If any Option expires or is
canceled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by this Plan, the number of shares subject to such
Option but as to which such Option was not exercised prior to its expiration,
cancellation or exercise may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Furthermore, any shares subject to
Options or other awards which are adjusted pursuant to Section 7.3 and become
exercisable with respect to shares of stock of another corporation shall be
considered canceled and may again be optioned hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered by the
Optionee or withheld by the Company upon the exercise of any Option under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding, the provisions of this Section 2.2, no shares of Common
Stock may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE 3. GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected by the Committee
pursuant to Section 3.4.1.1 shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options
at the times and in the manner set forth in Section 4.4.1.
3.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person (i) is not an Employee,
or (ii) at the time the Incentive Stock Option is granted, the Employee owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any then existing Subsidiary
or parent corporation (within the meaning of Section 422 of the Code) unless
such Incentive Stock Option conforms to the applicable provisions of Section
422 of the Code.
3.3. Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4. Granting of Options.
3.4.1. The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
3.4.1.1. Determine which Employees are key Employees and select
from among the key Employees or consultants (including Employees or
consultants who have previously received Options or other awards under
this Plan) such of them as in its opinion should be granted Options;
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3.4.1.2. Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected key Employees or
consultants;
3.4.1.3. Subject to Section 3.3, determine whether such Options are
to be Incentive Stock Options or Non-Qualified Stock Options and whether
such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
3.4.1.4. Determine the terms and conditions of such Options,
consistent with this Plan, provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
3.4.2. Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee
or consultant that the Employee or consultant surrender for cancellation some
or all of the unexercised Options which have been previously granted to him
under this Plan or otherwise. An Option, the grant of which is conditioned
upon such surrender, may have an option price lower (or higher) than the
exercise price of such surrendered Option or other award, may cover the same
(or a lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate, and
shall be exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of
such surrendered Option or other award.
3.4.3. Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
ARTICLE 4. TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as
the Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.
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<PAGE>
4.2. Option Price. The price per share of the shares subject to each
Option shall be set by the Committee, provided, however, that such price
shall be no less than the par value of a share of Common Stock, unless
otherwise permitted by applicable state law, and (i) in the case of Incentive
Stock Options and Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price
shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted; (ii) in the case of Incentive Stock
Options granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code) such price shall not
be less than 110% of the Fair Market Value of a share of Common Stock on the
date the Option is granted; and (iii) in the case of Non-Qualified Stock
Options granted to Independent Directors, such price shall equal 100% of the
Fair Market Value of a share of Common Stock on the date the Option is
granted; provided, however, that the price of each share subject to each
Option granted to Independent Directors on the date of the initial public
offering of Common Stock shall equal the initial public offering price per
share of Common Stock.
4.3. Option Term. The term of an Option shall be set by the Committee in
its discretion, provided, however, that, (i) in the case of Non-Qualified
Stock Options granted to Independent Directors, the term shall be ten (10)
years from the date the Option is granted, without variation or acceleration
hereunder, but subject to Section 5.6, and (ii) in the case of Incentive
Stock Options, the term shall not be more than ten (10) years from the date
the Incentive Stock Option granted, or five (5) years from such date if the
Incentive Stock Option is granted to an Employee then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code).
Except as limited by requirements of Section 422 of the Code and regulations
and rulings thereunder applicable to Incentive Stock Options and by Section
7.2 hereof, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy
of the Optionee, or amend any other term or condition of such Option relating
to such a termination.
4.4. Option Vesting
4.4.1. The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted; provided, however, that
Options granted to Independent Directors shall become exercisable in
cumulative annual installments of 33 1/3% on each of the first, second and
third anniversaries of the date of Option grant, without variation or
acceleration hereunder except as provided in Section 7.3. At any time after
grant of an Option, the Committee may, in its sole and absolute discretion
and subject to whatever terms and conditions it selects, accelerate the
period during which an Option (except an Option granted to an Independent
Director) vests.
4.4.2. No portion of an Option which is unexercisable at Termination of'
Employment, Termination of Directorship or Termination of Consultancy, as the
case may be, shall thereafter become
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exercisable, except as may be otherwise provided by the Committee (in
the case of Options granted to Employees or consultants) or by the Board (in
the case of Options granted to Independent Directors) either in the Stock
Option Agreement or by action of the Committee or the Board, as the case may
be, following the grant of the Option.
4.4.3. To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during, any calendar year
(under the Plan and all other incentive stock option plans of the Company and
any Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Options to the extent required or permitted by Section 422 of
the Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For
purposes of this Section 4.4.3., the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.
4.5. Continued Employment. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in
the employ of, or as a consultant for, the Employer, or as a director of the
Company, or shall interfere with or restrict in any the rights of the
Employer, hereby expressly reserved, to discharge any Optionee at any time
for any reason whatsoever, with or without good cause.
ARTICLE 5. EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the
Option, a partial exercise can only be effective with respect to a minimum
number of shares.
5.2. Manner of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:
5.2.1. A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;
5.2.2. Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Committee or Board
may, in its absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
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5.2.3. In the event that the Option shall be exercised pursuant to
Section 7.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option (such as
a copy of the appropriate court order); and
5.2.4. Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However,
the Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised, (ii)
allow payment, in whole or in part, through the delivery of shares of Common
Stock owned by the Optionee, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in
whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof, (iv) allow payment, in whole or in part, through
the delivery of property of any kind which constitutes good and valuable
consideration, (v) allow payment, in whole or in part, through the delivery
of a full recourse promissory note bearing interest (at no less than such
rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board,
(vi) allow payment, in whole or in part, through the delivery of a notice
that the Optionee has placed a market sell order with a broker with respect
to shares of Common Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds
of the sale to the Company in satisfaction of the Option exercise price; or
(vii) allow payment through any combination of the consideration provided in
the foregoing subparagraphs (iii), (iv), (v) and (vi). In the case of a
promissory note, the Committee (or the Board, in the case of Options granted
to Independent Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised, however,
by delivery of a promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law.
5.3. Conditions to Issuance of Stock. The Company shall not be required
to issue or deliver any certificate or other indicium evidencing ownership of
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
5.3.1. The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
5.3.2. The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall in its absolute discretion, deem
necessary or advisable;
5.3.3. The obtaining of any approval or other clearance from any state
or federal governmental agency or transfer agent based on Committee
instructions for non-certificated shares which
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the Committee (or Board, in the case of Options ranted to Independent
Directors) shall, in its absolute discretion, determine to be necessary or
advisable.
5.3.4. The lapse of such reasonable period of time following, the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons
of administrative convenience; and
5.3.5. The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4. Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates or other indicia representing such shares have
been issued by the Company to such holders.
5.5. Ownership and Transfer Restrictions. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose at the time of grant such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of
an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the
certificates or other indicia evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option
within (i) two years from the date of granting such Option to such Employee
or (ii) one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates or other indicia evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
5.6. Limitations on Exercise of Options. No Option granted hereunder may
be exercised to any extent by anyone after the first to occur of the
following events:
5.6.1. The expiration of twelve (12) months from the date of the
Optionee's death;
5.6.2. The expiration of twelve (12) months from the date of the
Optionee's Termination of Employment, Consulting or Directorship by reason of
his permanent and total disability (within the meaning of Section 22(e)(3) of
the Code);
5.6.3. The expiration of three (3) months from the date of the
Optionee's Termination of Employment, Consulting or Directorship for any
reason other than such Optionee's death or his permanent and total
disability, unless the Optionee dies within said three-month period; or
5.6.4. The expiration of ten years from the date the Option was granted.
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ARTICLE 6. ADMINISTRATION
6.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming, the functions of the
Committee under this Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each
of whom is both a "non-employee director" as defined by Rule 16b-3 and an
"outside director" for purposes of Section 162(m) of the Code. Appointment of
Committee members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board.
6.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this
Plan and the agreements pursuant to which Options are granted or awarded, and
to adopt such rules for the administration, interpretation, and application
of this Plan as are consistent therewith and to interpret, amend or revoke
any such rules. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration
of the Plan with respect to Options granted to Independent Directors. Any
such grant or award under this Plan need not be the same with respect to each
Optionee. Any such interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of Section 422 of the Code.
In its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 or Section 162(m) of
the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
6.3. Majority Rule; Unanimous Written Consent. The Committee shall act
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members
of the Committee.
6.4. Compensation; Professional Assistance: Good Faith Actions. Unless
otherwise determined by the Board, members of the Committee shall receive no
compensation for their services. All expenses and liabilities which members
of the Committee incur in connection with the administration of this Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or
other persons. The Committee, the Company and the Company's officers and
Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No members of the Committee or Board shall be personally liable for
any action, determination or interpretation made in good faith with respect
to this Plan, or Options and all members of the Committee and the Board shall
be fully protected by the Company in respect of any such action,
determination or interpretation.
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ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1. Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of
descent and distribution or pursuant to a QDRO or by transfer to a member of
the Optionee's family or a trust or other entity created for the benefit of
or owned by Optionee or members of his family, unless and until such Options
have been exercised, or the shares underlying such Options have been issued.
No Option or interest or right therein shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee, only he or she or his or her
personal representatives may exercise an Option (or any portion thereof)
granted to him or her under the Plan, unless it has been disposed of pursuant
hereto. After the death of the Optionee or Grantee, any exercisable portion
of an Option or other right or award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his or her personal representative or by any
person empowered to do so under the deceased Optionee's or Grantee's will or
under the then applicable laws of descent and distribution.
7.2. Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 7.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board or the Committee. However, without the approval of
the Company's stockholders given within twelve months before or after the
action by the Board or the Committee, no action of the Board or the Committee
may, except as provided in Section 7.3, increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under this
Plan or modify the Award Limit, and no action of the Board or the Committee
may be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination
of this Plan shall, without the consent of the holder of Options, alter or
impair any rights or obligations under any Options theretofore granted or
awarded, unless the award itself otherwise expressly so provides. No Options
may be granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the following events:
7.2.1. The expiration of ten years from the date the Plan is adopted by
the Board: or
7.2.2. The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 7.4.
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7.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
7.3.1. Subject to Section 7.3, in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), on account of a
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole
discretion (or in the case of Options granted to Independent Directors, the
Board's sole discretion), affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to an Option, then the Committee (or
the Board, in the case of Options granted to Independent Directors) shall, in
such manner as it may deem equitable, adjust any or all of
7.3.1.1. the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options may be granted
under the Plan (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares
which may be issued and adjustments of the Award Limit),
7.3.1.2. the number and kind of shares of Common Stock, (or other
securities or property) subject to outstanding Options, and
7.3.1.3. the grant or exercise price with respect to any Option.
7.3.2. Subject to this Section 7.3, in the event of any Corporate
Transaction or other transaction or event described in Section 7.3.1 or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one
or more of the following actions whenever the Committee (or the Board, in the
case of Options granted to Independent Directors) determines that such action
is appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to any option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
7.3.2.1. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent
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Directors) may provide, either by the terms of the agreement or by
action taken prior to the occurrence of such transaction or event and
either automatically or upon the optionee's request, for either the
purchase of any such Option for the payment of an amount of cash equal
to the amount that could have been attained upon the exercise of such
option, right or award or realization of the optionee's rights had such
option been currently exercisable or payable or fully vested or the
replacement of such option with other rights or property selected by the
Committee (or the Board, in the case of Options granted to Independent
Directors) in its sole discretion;
7.3.2.2. In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide in terms of such Option that it cannot be exercised after such
event;
7.3.2.3. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option or by action taken prior to the occurrence of
such transaction or event, that for a specified period of time prior to
such transaction or event, such option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in (i)
Section 4.4 or (ii) the provisions of such Option;
7.3.2.4. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option or by action taken prior to the occurrence of
such transaction or event, that upon such event, such option be assumed
by the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options covering the
stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices; and
7.3.2.5. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments
in the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options and/or in the terms and
conditions of (including the grant or exercise price), and the criteria
included in, outstanding options and options which may be granted in the
future.
7.3.2.6. None of the foregoing discretionary actions taken under
this Section 7.3 shall be permitted with respect to Options granted to
Independent Directors to the extent that such discretion would be
inconsistent with the applicable exemptive conditions of Rule 16b-3. In
the event of a Change in Control or a Corporate Transaction, to the
extent that the Board does not have the ability under Rule 16b-3 to take
or to refrain from taking the discretionary actions set forth in Section
7.3.2.3 above, each Option granted to an Independent Director shall
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be exercisable as to all shares covered thereby upon such Change in
Control or during the five days immediately preceding the consummation
of such Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or the vesting
schedule of such Options. In the event of a Corporate Transaction, to
the extent that the Board does not have the ability under Rule 16b-3 to
take or to refrain from taking the discretionary actions set forth in
Section 7.3.2.3 above, no Option granted to an Independent Director may
be exercised following such Corporate Transaction unless such Option is,
in connection with such Corporate Transaction, either assumed by the
successor or survivor corporation (or parent or subsidiary thereof) or
replaced with a comparable right with respect to shares of the capital
stock of the successor or survivor corporation (or parent or subsidiary
thereof).
7.3.3. Subject to Section 7.3.4 and 7.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
at the time of grant, include such further provisions and limitations in any
Option agreement or certificate, as it may deem equitable and in the best
interests of the Company.
7.3.4. With respect to Options which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation
under Section 162(m)(4)(C), no adjustment or action described in this Section
7.3 or in any other provision of the Plan shall be authorized to the extent
that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such option to fail to so qualify under
Section 162(m)(4)(C), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Committee (or the Board, in the case of Options granted to
Independent Directors) determines that the option is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any
option shall always be rounded to the next whole number.
7.4. Approval of Plan by Stockholders. This Plan will be submitted for
the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options may be awarded
prior to such stockholder approval, provided that such Options shall not be
exercisable prior to the time when this Plan is approved by the stockholders,
and provided further that if such approval has not been obtained at the end
of said twelve-month period, all Options previously granted shall thereupon
be canceled and become null and void.
7.5. Tax Withholding. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee any
sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting or exercise of any Option. The Committee (or the
Board, in the case of Options granted to Independent Directors) may in its
discretion and in satisfaction of the foregoing requirement allow such
Optionee to elect to have the Company withhold shares of
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Common Stock otherwise issuable under such Option (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums
required to be withheld.
7.6. Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise of an Option granted
under this Plan. The terms and conditions of any such loan shall be set by
the Committee.
7.7. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options made
under the Plan, or to require the recipient to agree by separate written
instrument, that (i) any proceeds, gains or other economic benefit actually
or constructively received by the recipient upon any exercise of the Option,
or upon the receipt or resale of any Common Stock underlying such Option,
must be paid to the Company, and (ii) the Option shall terminate and any
unexercised portion of such Option (whether or not vested) shall be
forfeited, if (a) a Termination of Employment, Termination of Consultancy or
Termination of Directorship occurs prior to a specified date, or within a
specified time period following receipt or exercise of the award, or (b) the
recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee
(or the Board, as applicable).
7.8. Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, and any
Option awarded to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable
law, the Plan, Options hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option which is granted
to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
7.9. Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in
effect for the Employer. Nothing in this Plan shall be construed to limit the
right of the Employer (i) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Employer, or (ii)
to grant or assume options or other rights otherwise than under this Plan in
connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease,
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merger, consolidation or otherwise, of the business stock or assets of
any corporation, partnership, limited liability company, firm or association.
7.10. Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common
Stock or under Options hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements)
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be
subject to such restrictions, and the person acquiring such securities shall,
if requested by the Company, provide such assurances and representations to
the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent permitted by
applicable law, the Plan and Options granted shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
7.11. Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
7.12. Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State
of Delaware without regard to conflicts of laws thereof.
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of ___________________ on ____________, 2000.
Executed on this ____ day of _________, 2000.
Secretary,
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ELECTRONICS BOUTIQUE HOLDINGS CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - JULY 17, 2000
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The undersigned stockholder of ELECTRONICS BOUTIQUE HOLDINGS CORP. ("Electronics
Boutique"), revoking all previous proxies, hereby constitutes and appoints
Joseph J. Firestone and John R. Panichello, and each of them acting
individually, as the agents and proxies of the undersigned, with full power of
substitution in each, for and in the name and stead of the undersigned, to
attend the 2000 Annual Meeting of Stockholders of Electronics Boutique to be
held on Monday, July 17, 2000 at 11:00 A.M., local time, at Electronics
Boutique's executive offices, 931 South Matlack Street, West Chester,
Pennsylvania 19382, and to vote all shares of Common Stock of Electronics
Boutique which the undersigned would be entitled to vote if personally present
at the 2000 Annual Meeting, and at any adjournment or postponement thereof;
provided, that said proxies are authorized and directed to vote as indicated
with respect to the matters set forth on the reverse side hereof:
This Proxy will be voted in the manner directed herein by the undersigned
stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" ALL
NOMINEES FOR DIRECTOR, "FOR" THE APPROVAL OF THE ADOPTION OF THE ELECTRONICS
BOUTIQUE 2000 EMPLOYEE STOCK PURCHASE PLAN, "FOR" THE APPROVAL OF THE ADOPTION
OF THE ELECTRONICS BOUTIQUE 2000 EQUITY PARTICIPATION PLAN AND "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP. This Proxy also delegates
discretionary authority to vote with respect to any other business which may
properly come before the 2000 Annual Meeting or any adjournment or postponement
thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT, NOTICE OF THE
2000 ANNUAL MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
The undersigned also hereby ratifies all that the said agents and proxies may do
by virtue hereof and hereby confirms that this Proxy shall be valid and may be
voted whether or not the stockholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exists.
(CONTINUED ON THE REVERSE SIDE.)
<PAGE>
1. Election of Directors
/ / FOR all nominees.
/ / WITHHOLD all nominees.
/ / FOR, except vote withheld from the following nominee(s): ___________.
Nominees: DEAN S. ADLER and LOUIS J. SIANA will be considered nominees for
election at the 2000 Annual Meeting.
2. Approval of the adoption of the Electronics Boutique 2000 Employee Stock
Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the adoption of the Electronics Boutique 2000 Equity
Participation Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. The ratification of the appointment of KPMG LLP, independent certified
public accountants, as auditors for Electronics Boutique for the fiscal
year ending February 3, 2001.
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion, the proxies will vote on such other business as may
properly come before the 2000 Annual Meeting.
/ / Please check here if you plan to attend the 2000 Annual Meeting in
person.
NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
Please sign this Proxy exactly as name(s) appear in address below. When signing
as attorney-in-fact, executor, administrator, trustee or guardian, please add
your title as such. Corporations please sign with full corporate name by a duly
authorized officer and affix the corporate seal.
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Signature(s) Date
