Exhibit 10.39
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective January 5, 2011 (the “Effective Date”), between
HASTINGS ENTERTAINMENT, INC., a Texas corporation (the “Company”), and Scott
Voth, an individual (the “Executive”).
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to set forth the terms of their
agreements relating to the employment of Executive by the Company; and
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
Company and the Executive agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive hereby
accepts such employment subject to the terms and conditions contained in this
Agreement. The Executive is engaged as an employee of the Company. Neither the
Executive nor the Company intend to create a joint venture, partnership or other
relationship that might impose a fiduciary obligation on the Executive or the
Company in the performance of this Agreement, other than as an officer of the
Company.
2. Executive’s Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use the Executive’s
best efforts and due diligence to assist the Company in the objective of
achieving the most profitable operation of the Company and the Company’s
affiliated entities consistent with developing and maintaining a quality
business operation.
2.1 Specific Duties. During the term of this Agreement the Executive will serve
as Vice President of Store Operations for the Company and perform the duties of
such office as set forth in the Bylaws of the Company. The Executive agrees to
use the Executive’s best efforts to perform all of the services required to
fully and faithfully execute the offices and positions to which the Executive is
appointed and elected and such other services as may be reasonably directed by
the Chief Executive Officer of the Company in accordance with this Agreement.
2.2 Modifications. The precise duties to be performed by the Executive may be
extended or curtailed in the discretion of the Chief Executive Officer of the
Company.
2.3 Responsibility. The Board of Directors of the Company retains ultimate
responsibility to determine the duties of the Executive.
2.4 Rules and Regulations. From time to time, the Company may issue policies and
procedures applicable to all its employees including the Executive. These
policies and procedures include, but are not limited to, the Company’s Associate
Handbook and Code of Conduct. The Executive agrees to comply with such policies
and procedures, except to the extent such policies conflict with a material term
or condition contained within this Agreement. Such policies and procedures may
be supplemented, modified, changed or adopted without notice in the sole
discretion of the Company at any time. In the event of a conflict between such
policies and procedures and this Agreement, this Agreement will control unless
compliance with this Agreement will violate any law or regulation applicable to
the Company or its affiliated entities. The Company will apply its existing and
future policies and procedures in a lawful and evenhanded manner.

 

 

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Exhibit 10.39
3. Other Activities. Except for activities approved by the Board of Directors,
during the period of Executive’s employment, the Executive will not: (a) engage
in activities which require such substantial services on the part of the
Executive that the Executive is unable to perform the duties assigned to the
Executive in accordance with this Agreement; (b) serve as an officer or director
of any publicly held entity; or (c) directly or indirectly invest in,
participate in or acquire an interest in any Competing Business as defined in
Paragraph 8(a)(i). The limitations in this paragraph 3 will not prohibit an
investment by the Executive in publicly traded securities as allowed in
Paragraph 8(a)(i). The Executive is not restricted from maintaining or making
investments, or engaging in other businesses, enterprises or civic, charitable
or public service functions if such activities, investments, businesses or
enterprises do not result in a violation of clauses (a) through (c) of this
paragraph 3.
4. Executive’s Compensation. The Company agrees to compensate the Executive as
follows:
4.1 Base Salary. A base salary (the “Base Salary”), in an annual rate of not
less than One Hundred Seventy-Five Thousand Dollars ($175,000.00), will be paid
to the Executive in installments consistent with the Company’s customary payroll
practices, during the term of this Agreement.
4.2 Bonus. In addition to the Base Salary the Executive will participate in the
Corporate Officer Incentive Plan (“COIP”). Executive’s incentive target
expressed as a percentage of Base Salary for the COIP initially shall be
twenty-five percent (25%), proportionately reduced as to any pro-rated
performance period during which Executive is employed.
4.3 Equity Compensation. In addition to the compensation set forth in paragraphs
4.1 and 4.2 of this Agreement, the Executive will be allowed to participate in
grants of stock options, restricted stock or other equity related awards from
the Company’s stock compensation plans put into effect from time to time,
subject to the terms and conditions of such plans.
4.4 Benefits. The Company agrees to extend to the Executive retirement benefits,
deferred compensation, reimbursement of reasonable expenditures for dues, travel
and entertainment and any other benefits the Company provides to other
executives or officers from time to time on the same general terms as such
benefits are provided to such individuals. The Company will also provide the
Executive the opportunity to apply for coverage under the Company’s medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide such coverage on the same terms as is
customarily provided by the Company to the plan participants as modified from
time to time. The following specific benefits will also be provided to the
Executive at the expense of the Company.
4.4.1 Vacation. The Executive will be entitled to take paid vacation (as
approved) each calendar year during the term of this Agreement in accordance
with Company policy, subject to proration for any portion of a calendar year
under this Agreement. No additional compensation will be paid for failure to
take vacation and no vacation may be carried forward from one calendar year to
another.

      Employment Agreement — Scott Voth   2

 

 

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Exhibit 10.39
4.5 Gross-Up Payment. In the event it is determined that any payment or
distribution by the Company or the Company’s subsidiaries or affiliates to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
paragraph 4.5) (a “Payment”) is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code (the “Code”) or any interest or
penalties related to such excise tax (collectively, the “Excise Tax”), the
Executive will be entitled to receive an additional payment (a “Gross-Up
Payment”) from the Company. The Gross-Up Payment will be equal to the amount
such that after payment by the Executive of all taxes (including the Excise Tax,
income taxes, interest and penalties imposed with respect to such taxes) on the
Gross-Up Payment, the Executive will retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Payment.
4.5.1 Determination. Subject to the provisions of paragraph 4.5.2 all
determinations required to be made under this paragraph 4.5 (including whether
and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and
the assumptions to be utilized) will be made by a nationally recognized
certified public accounting firm designated by the Executive (the “Accounting
Firm”). The Accounting Firm will provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a Payment, or such
earlier time as is reasonably requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control (as hereinafter defined), the Executive
will be entitled to appoint another nationally recognized accounting firm to
make the determinations required under this paragraph (which accounting firm
will then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm will be paid by the Company. Any Gross-Up
Payment required to be paid under this paragraph 4.5 will be paid by the Company
to the Executive within five (5) days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm will be binding on the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm, the Gross-Up Payment made by the Company may be less than
actually required (an “Underpayment”) consistent with the calculations required
to be made hereunder. In the event that the Company exhausts its remedies
pursuant to paragraph 4.5.2 below and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm will determine the amount
of the Underpayment that has occurred and any such Underpayment will be promptly
paid by the Company to or for the benefit of the Executive.
4.5.2 Contest of Claims. The Executive will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification will be given as
soon as practicable but no later than ten (10) business days after the Executive
is informed in writing of such claim and will apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive will not pay such claim prior to the expiration of the thirty (30) day
period following the date on which the Executive notifies the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such thirty (30) day period that the Company desires to contest
such claim, the Executive will: (a) provide to the Company any information
reasonably requested by the Company relating to such claim; (b) take such action
in connection with contesting such claim as the Company reasonably requests in
writing including, without limitation, accepting legal representation with
respect to

      Employment Agreement — Scott Voth   3

 

 

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Exhibit 10.39
such claim by an attorney reasonably selected by the Company; (c) cooperate with
the Company in good faith as necessary to effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating to such claim.
The Company will bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest of
the claim and agrees to indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such protest (including
payment of costs and expenses as provided hereunder). Without limitation on the
foregoing provisions, the Company will control all proceedings related to such
contested claim, may at its sole option pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may at its sole option either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner. The Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company reasonably
determines. If the Company directs the Executive to pay a claim and sue for a
refund, the Company will be required to advance the amount of such payment to
the Executive on an interest-free basis and agrees to indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance,
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contested claim will be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive will be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
4.5.3 Refunds. If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph 4.5.2, the Executive becomes entitled to
receive any refund with respect to such claim the Executive will (subject to the
Company’s complying with the requirements of paragraph 4.5.2) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph 4.5.2, a
determination is made that the Executive will not be entitled to any refund with
respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior to the expiration of
(30) days after such determination, then the advance will be forgiven and will
not be required to be repaid and the amount of such advance will offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
4.6 Compensation Review. The compensation of the Executive will be reviewed on a
regular basis by the Board of Directors of the Company (or a Compensation
Committee thereof) and shall be reviewed annually if the compensation of other
executive officers of the Company is reviewed at such frequency. The
compensation of the Executive prescribed in paragraph 4 of this Agreement
(including benefits) may be increased at the discretion of the Board of
Directors of the Company or the Compensation Committee.

      Employment Agreement — Scott Voth   4

 

 

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Exhibit 10.39
5. Term. In the absence of an earlier termination as set forth in paragraph 6
below, this Agreement will extend for a term commencing on the Effective Date,
and ending on the final day of the current fiscal year of the Company (the
“Expiration Date”). However, unless the Company provides written notice of
non-extension to the Executive on or before December 1st during the term of this
Agreement, the term and the Expiration Date will be automatically extended for
one (1) additional year.
6. Termination. The Executive’s employment will continue in effect until the
expiration of the term set forth in paragraph 5 of this Agreement unless earlier
terminated pursuant to this paragraph 6.
6.1 Termination by Company. The Company will have the following rights to
terminate Executive’s employment:
6.1.1 Termination without Cause. (a) The Company may terminate Executive’s
employment without Cause at any time by the service of written notice of
termination to the Executive specifying an effective date of such termination
not sooner than ten (10) days after the date of such notice (the “Termination
Date”). In the event the Executive is terminated without Cause (other than a CC
Termination under paragraph 5.3 of this Agreement), the Executive will receive
as termination compensation: (i) for a period of 18 months his Base Salary (as
in effect on the Termination Date) plus bonus payable under COIP (based upon the
incentive target percentage in effect on the Termination Date and assuming
Company performance at 100% of target); and (ii) any vacation pay accrued
through the Termination Date. The payment of such amounts shall be made during
the remaining term of the Agreement in installments consistent with the
Company’s normal payroll practices (including proration of bonus and payment of
bonus when normally paid by the Company) but, if on the Termination Date, the
Executive is a “specified employee” as defined in regulations under Section 409A
of the Code, such payments will commence on the first payroll payment date which
is more than six (6) months following the Termination Date and the first payment
shall include any amounts that would have otherwise been payable during the six
month period.
(b) In the event Executive becomes employed, either full or part-time and
whether as an employee, consultant or otherwise, during the term payments are
due pursuant to this paragraph 6.1.1(a), payments due Executive under
Section 6.1.1(a) shall be reduced by the amount of compensation received by
Executive as a result of such other employment. In no event shall payments due
under Section 6.3 be reduced as a result of Executive’s employment. In all
events, Executive shall retain any rights to continue medical insurance coverage
under the COBRA continuation provisions of the group medical insurance plan by
paying the applicable premium therefor.
6.1.2 Termination for Cause. The Company may terminate Executive’s employment
for Cause. For purposes of this Agreement, “Cause” means either of the
following:
(a) the engagement by the Executive in illegal conduct, gross misconduct or a
clearly established material violation of the Company’s written policies and
procedures; or
(b) the failure of the Executive to perform substantially the Executive’s duties
with the Company or its subsidiaries or affiliates (other than a failure
resulting from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the Chief
Executive Officer which identifies the manner in which the Chief Executive
Officer believes that the Executive has not substantially performed the
Executive’s duties.

      Employment Agreement — Scott Voth   5

 

 

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Exhibit 10.39
For purposes of paragraph 6.1.2(a) of this Agreement, “gross misconduct” means
conduct evidencing a willful or wanton disregard for the legitimate business
interests of the Company, deliberate violations of Company policy or flagrant
disregard for standards of behavior the Company has a right to expect from one
of its corporate officers, to the extent such policy or standards of behavior do
not violate any law or regulation.
Any act, or failure to act, based on authority given pursuant to a resolution
duly adopted by the Board of Directors or based on the advice of counsel for the
Company will be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. In the event
Executive’s employment is terminated for Cause, the Company will not have any
obligation to provide any further payments or benefits to the Executive after
the effective date of such termination, except for prorated bonus, vacation and
any other amounts required by applicable law or policy.
6.2 Termination by Executive. The Executive may voluntarily terminate his
employment with or without Cause by the service of written notice of such
termination to the Company specifying an effective date of such termination
thirty (30) days after the date of such notice, during which time the Executive
may use remaining accrued vacation days, or at the Company’s option, be paid for
such days. In the event his employment is terminated by the Executive, neither
the Company nor the Executive will have any further obligations hereunder,
except for any obligations which expressly survive termination of employment
including, without limitation, any obligation of the Company to provide any
further payments or benefits to the Executive after the effective date of such
termination.
6.3 Termination After Change in Control. If during the term of this Agreement
there is a “Change of Control” and within twenty-four (24) months thereafter
notwithstanding any termination pursuant to Section 5, there is a CC Termination
(as hereafter defined), then the Executive will be entitled to a severance
payment (in addition to any other rights and other amounts payable to the
Executive or under Company plans in which Executive is a participant) payable in
a lump sum in cash within 10 days following the CC Termination in an amount
equal to the sum of the following: (a) the Executive’s Base Salary for the last
eighteen (18) calendar months ending immediately prior to the CC Termination and
bonus paid pursuant to Section 4.2 (based on the average of the last three years
annual bonuses or such lesser number of years as Executive may have been
employed); plus (b) any applicable Gross-Up Payment. If the foregoing amount is
not paid within ten (10) days after the CC Termination, the unpaid amount will
bear interest at the per annum rate of 12%, but in no event higher than the
highest rate allowed by applicable law. Notwithstanding the foregoing, if at the
time of a CC Termination, the Executive is a “specified employee” as defined in
regulations under Section 409A of the Code, such payment will be made on the
first day which is more than six months following the CC Termination. In
connection with any Change of Control, the Company shall obtain the assumption
of this Agreement, without limitation or reduction, by any successor to the
Company or any parent corporation of the Company.

      Employment Agreement — Scott Voth   6

 

 

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Exhibit 10.39
6.3.1 Change of Control. For the purpose of this Agreement, a “Change of
Control” means the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”), other than John H. Marmaduke or his
affiliates (the “Exempt Persons”), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either
(i) the then outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”). For purposes of this
paragraph (a) the following acquisitions by a Person will not constitute a
Change of Control: (i) any acquisition directly from the Company; (ii) any
acquisition by the Company; (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of paragraph
(c) of this paragraph 6.3.1.
(b) The individuals who, as of the date hereof, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors. Any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s shareholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board will be considered a member of the
Incumbent Board as of the date hereof, but any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Incumbent Board will not be deemed a member of the Incumbent Board as
of the date hereof.
(c) The consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), unless following such Business Combination: (i) the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) other than one or
more of the Exempt Persons beneficially owns, directly or indirectly, 40% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination.
(d) The approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

      Employment Agreement — Scott Voth   7

 

 

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Exhibit 10.39
6.3.2 CC Termination. The term “CC Termination” means any of the following:
(a) the Executive’s employment is terminated by the Company other than under
paragraphs 6.1.2, 6.4 or 6.5; or (b) the Executive resigns as a result of change
in the Executive’s duties or title, a reduction in the Executive’s then current
Base Salary that is not generally applicable to all or substantially all of the
Company’s executives or a significant reduction in the Executive’s then current
benefits as provided in Section 4, a relocation of more than 25 miles from the
Executive’s then current place of employment being required by the Board of
Directors or a default by the Company under this Agreement
6.4 Incapacity of Executive. If the Executive suffers from a medically diagnosed
physical or mental condition, which in the reasonable business judgment of the
Company’s Board of Directors, prevents the Executive (in whole or in part) from
performing the duties specified herein for a period of four (4) consecutive
months, the Executive’s employment may be terminated by the Company, in which
event, the Company will pay Executive his Base Salary and Bonus (computed at up
to 100% of plan based on actual performance, but in no event more than 100% of
plan regardless of actual performance) in effect on the date of termination
through the lesser of (i) the death of Executive; or (ii) the remaining term of
this Agreement, but in any event through the Expiration Date, reduced by any
disability payments received by Executive from any third party. The payment of
such amounts shall be made during the remaining term of the Agreement in
installments consistent with the Company’s normal payroll practices, but, if on
the termination date, the Executive is a “specified employee” as defined in
regulations under Section 409A of the Code, such payments will commence on the
first payroll payment date which is more than six months following the
termination date and the first payment shall include any amounts that would have
otherwise been payable during the six (6) month period. Notwithstanding the
foregoing, the amount payable hereunder will be reduced by any benefits payable
under any disability plans provided by the Company under paragraph 4.4 of this
Agreement. Nothing in paragraph will be interpreted or applied so as to lessen
the Executive’s rights under state or federal disability or medical leave laws.
6.5 Death of Executive. If the Executive dies during the term of this Agreement,
Executive’s employment will terminate without compensation to the Executive’s
estate except: (a) the obligation to continue the Base Salary payments under
paragraph 4.1 of this Agreement for twelve (12) months after the date of death
of the Executive, and (b) the benefits described in paragraph 4.4 of this
Agreement accrued through the date of death of the Executive, including a
pro-ration of accrued bonus.
6.6 Resignation Following Constructive Discharge. If at any time, except in
connection with a termination otherwise pursuant to this Agreement, Executive is
Constructively Discharged (as that term is defined in this Section 6) then
Executive shall have the right, by written notice to Company within sixty
(60) days of such Constructive Discharge, to terminate his services hereunder,
effective as of thirty (30) days after such notice. Executive shall in such
event be entitled to the compensation and benefits as if such employment were
terminated pursuant to Section 6.1.1.
For purposes of this Agreement, Executive shall be “Constructively Discharged”
upon the occurrence of any one of the following events:
(a) Executive is removed from his position with the Company other than as a
result of Executive’s appointment to a position of equal or superior scope and
responsibility; or

      Employment Agreement — Scott Voth   8

 

 

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Exhibit 10.39
(b) Executive’s targeted total compensation is reduced by more than 20% (other
than across-the-board reductions similarly affecting all executive officers of
Company).
6.7 Effect of Termination. The termination of Executive’s employment will
terminate all obligations of the Executive to render services on behalf of the
Company. The Executive will maintain the confidentiality of all information
acquired by the Executive during the term of his employment in accordance with
paragraph 7 of this Agreement and the covenants set forth in paragraph 8 of this
Agreement. Except as otherwise provided in this paragraph 6, no accrued bonus,
severance pay or other form of compensation will be payable by the Company to
the Executive by reason of the termination of his employment. In the event that
payments are required to be made by the Company under this paragraph 6, the
Executive will not be required to seek other employment as a means of mitigating
the Company’s obligations hereunder resulting from termination of the
Executive’s employment and the Company’s obligations hereunder (including
payment of severance benefits) will not be terminated, reduced or modified as a
result of the Executive’s earnings from other employment or self-employment. All
keys, entry cards, credit cards, files, records, financial information,
furniture, furnishings, equipment, supplies and other items relating to the
Company will remain the property of the Company. The Executive will have the
right to retain and remove all personal property and effects that are owned by
the Executive and located in the offices of the Company, subject to inspection
by the Company. All such personal items will be removed from such offices no
later than ten (10) days after the effective date of termination, and the
Company is hereby authorized to discard any items remaining and to reassign the
Executive’s office space after such date. Prior to the effective date of
termination, the Executive will cooperate with the Company to provide for the
orderly termination of the Executive’s employment.
7. Confidentiality. The Executive recognizes that the nature of the Executive’s
services are such that the Executive is being provided and will have access to
information which constitutes trade secrets, is of a confidential nature, is of
great value to the Company or is the foundation on which the business of the
Company is predicated. The Executive agrees not to disclose to any person other
than the Company’s employees or the Company’s legal counsel or other parties
authorized by the Company to receive confidential information (“Confidential
Information”) nor use for any purpose, other than the performance of this
Agreement, any Confidential Information. Confidential Information includes data
or material (regardless of form) which is: (a) a trade secret; (b) provided,
disclosed or delivered to Executive by the Company, any officer, director,
employee, agent, attorney, accountant, consultant, or other person or entity
employed by the Company in any capacity, any customer, borrower or business
associate of the Company or any public authority having jurisdiction over the
Company of any business activity conducted by the Company; or (c) produced,
developed, obtained or prepared by or on behalf of Executive or the Company
(whether or not such information was developed in the performance of this
Agreement) with respect to the Company or any assets oil and gas prospects,
business activities, officers, directors, employees, borrowers or customers of
the foregoing. However, Confidential Information will not include any
information, data or material which at the time of disclosure or use was
generally available to the public other than by a breach of this Agreement, was
available to the party to whom disclosed on a non-confidential basis by
disclosure or access provided by the Company or a third party, or was otherwise
developed or obtained independently by the person to whom disclosed without a
breach of this Agreement. On request by the Company, the Company will be
entitled to a copy of any Confidential Information in the possession of the
Executive. The provisions of this paragraph 7 will survive the termination,
expiration or cancellation of Executive’s employment for a period of eighteen
(18) months after the date of termination. The Executive will deliver to the
Company all originals and copies of the documents or materials containing
Confidential Information. For purposes of paragraphs 7, 8, and 9 of this
Agreement, the Company expressly includes any of the Company’s subsidiaries or
affiliates.

      Employment Agreement — Scott Voth   9

 

 

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Exhibit 10.39
8. Non-Competition.
(a) Scope. During the effectiveness of this Agreement (the “Term”), Executive
shall devote substantially all of his business, time, attention and energies to
the business and interests of Company, and except as otherwise provided herein,
shall not be engaged (whether or not during normal business hours) in any other
business or professional activity (whether or not such activity is pursued for
gain, profit or other pecuniary advantage) without first obtaining the written
consent of the Board of Directors of Company. In return for Company’s disclosure
of Confidential Information and trade secrets in paragraph 7, above, and
Company’s provision of specialized training related to Company’s products,
services, business model, and operations, during the Term of and for a period of
eighteen (18) months after the expiration or termination of this Agreement, for
any reason or for no reason at all, Executive agrees that she will not directly
or indirectly:
(i) Own, have any interest in or be, serve or act as an individual proprietor,
partner, agent, stock holder, officer, employee, consultant, director, joint
venturer, investor, lender, or in any other capacity whatsoever (other than as
the holder of not more than one percent (1%) of the total outstanding stock of a
publicly held company) of or with, or assist in any way, any corporation,
partnership, firm or business enterprise at least 20% of whose sales (in dollar
volume) are books, music or video sales or rentals (whether such book, music or
video [including games] is new or pre-owned) (individually or in the aggregate
with all affiliates thereof) and which does business in any state in which
Company does business on the date Executive ceases to be employed (a “Competing
Business”);
(ii) Solicit or induce, or attempt to induce, any employee or independent
contractor of Company or any other person who shall be in the service of Company
to terminate his employment with or otherwise cease his relationship with
Company; or
(iii) Solicit, divert or take away, or attempt to solicit, divert or take away,
the business or patronage of any of the clients, customers (whether any such
customer has done business once or more than once), suppliers or accounts, or
prospective clients, customers or accounts, or suppliers to Company, but
Executive shall not be prevented from doing business with such persons or
entities.
(b) It is hereby expressly agreed that if any portion of this paragraph 8 or any
of the covenants and provisions set forth in this Agreement regarding
restrictions on competition, confidentiality or solicitation is held to be
unreasonable, arbitrary, against public policy or otherwise unenforceable for
any reason, then each such covenant or provision shall be considered divisible
as to scope, time and geographical area, with each month of a specified period
being deemed a separate period of time and each county within any geographical
area being deemed a separate geographic area. The parties to this agreement also
expressly agree that notwithstanding their mutual expectation that the covenants
and restrictions contained herein will be enforceable and enforced, a lesser
scope, period of time or geographic area shall be enforced to the extent that
the covenants contained herein may be unenforceable as written.
9. Proprietary Matters. The Executive expressly understands and agrees that any
and all improvements, inventions, discoveries, processes or know-how that are
generated or conceived by the Executive during the term of this Agreement,
whether generated or conceived during the Executive’s regular working hours or
otherwise, will be the sole and exclusive property of the Company. Whenever
requested by the Company (either during the term of this Agreement or
thereafter), the Executive will assign or execute any and all applications,
assignments and or other instruments and do all things which the Company deems
necessary or appropriate in order to permit the Company to: (a) assign and
convey or otherwise make available to the Company the sole and exclusive right,
title, and interest in and to said improvements, inventions, discoveries,
processes, know-how, applications, patents, copyrights, trade

      Employment Agreement — Scott Voth   10

 

 

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Exhibit 10.39
names or trademarks; or (b) apply for, obtain, maintain, enforce and defend
patents, copyrights, trade names, or trademarks of the United States or of
foreign countries for said improvements, inventions, discoveries, processes or
know-how. However, the improvements, inventions, discoveries, processes or
know-how generated or conceived by the Executive and referred to above (except
as they may be included in the patents, copyrights or registered trade names or
trademarks of the Company, or corporations, partnerships or other entities which
may be affiliated with the Company) will not be exclusive property of the
Company at any time after having been disclosed or revealed or have otherwise
become available to the public or to a third party on a non-confidential basis
other than by a breach of this Agreement, or after they have been independently
developed or discussed without a breach of this Agreement by a third party who
has no obligation to the Company or the Company Entities.
10. Arbitration. The parties will attempt to promptly resolve any dispute or
controversy arising out of or relating to this Agreement or termination of the
Executive by the Company. Any negotiations pursuant to this paragraph 10 are
confidential and will be treated as compromise and settlement negotiations for
all purposes. If the parties are unable to reach a settlement amicably, the
dispute will be submitted to binding arbitration before a single arbitrator in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. The arbitrator will be instructed and empowered to take
reasonable steps to expedite the arbitration and the arbitrator’s judgment will
be final and binding upon the parties subject solely to challenge on the grounds
of fraud or gross misconduct. Except for damages arising out of a breach of
paragraphs 6, 7, 8 or 9 of this Agreement, the arbitrator is not empowered to
award total damages (including compensatory damages) that exceed 300% of
compensatory damages and each party hereby irrevocably waives any damages in
excess of that amount. The arbitration will be held in Potter County, Texas.
Judgment upon any verdict in arbitration may be entered in any court of
competent jurisdiction and the parties hereby consent to the jurisdiction of,
and proper venue in, the federal and state courts located in Potter County,
Texas. The Company will pay the costs and expenses of the arbitration including,
without implied limitation, the fees for the arbitrators. Subject to the
provisions of Section 11.7, Executive shall pay for the fees and expenses of his
counsel, experts and any other advisors. Unless otherwise expressly set forth in
this Agreement, the procedures specified in this paragraph 10 will be the sole
and exclusive procedures for the resolution of disputes and controversies
between the parties arising out of or relating to this Agreement.
Notwithstanding the foregoing, a party may seek a preliminary injunction or
other provisional judicial relief if in such party’s judgment such action is
necessary to avoid irreparable damage or to preserve the status quo.
11. Miscellaneous. The parties further agree as follows:
11.1 Time. Time is of the essence of each provision of this Agreement.
11.2 Notices. Any notice, payment, demand or communication required or permitted
to be given by any provision of this Agreement will be in writing and will be
deemed to have been given when received by personal delivery, by facsimile, by
overnight courier, or by certified mail, postage and charges prepaid, directed
to the following address or to such other or additional addresses as any party
might designate by written notice to the other party:

         
 
  To the Company:   Hastings Entertainment, Inc.
Attn: President
P. O. Box 35350 (79120)
3601 Plains Blvd.
Amarillo, TX 79102

      Employment Agreement — Scott Voth   11

 

 

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Exhibit 10.39

         
 
      With a copy to:
 
      Sprouse Shrader Smith P.C.
Attn: Jeffrey G. Shrader
P. O. Box 15008 (79105)
701 S. Taylor, Suite 500
Amarillo, TX 79101
 
       
 
  To the Executive:   Scott Voth
Hastings Entertainment, Inc.
P. O. Box 35350 (79120)
3601 Plains Blvd.
Amarillo, Texas 79102

11.3 Assignment. Neither this Agreement nor any of the parties’ rights or
obligations hereunder can be transferred or assigned without the prior written
consent of the other parties to this Agreement.
11.4 Construction, Choice of Law & Choice of Forum. This Agreement is intended
to be interpreted, construed and enforced in accordance with the laws of the
state of Texas. Further, any claim or cause of action or judicial proceedings
that arise under or relate to this Agreement must be brought in a court of
competent jurisdiction in and for Potter County, Texas which shall be the
exclusive forum.
If any provision of this Agreement or the application thereof to any person or
circumstances is determined, to any extent, to be invalid or unenforceable, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which the same is held invalid or
unenforceable, will not be affected thereby, and each term and provision of this
Agreement will be valid and enforceable to the fullest extent permitted by law.
11.5 Entire Agreement. Except as provided in paragraph 2.3 of this Agreement,
this Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter herein contained, and no modification hereof will
be effective unless made by a supplemental written agreement executed by all of
the parties hereto.
11.6 Binding Effect. This Agreement will be binding on the parties and their
respective successors, legal representatives and permitted assigns. In the event
of a merger, consolidation, combination, dissolution or liquidation of the
Company, the performance of this Agreement will be assumed by any entity which
succeeds to or is transferred the business of the Company as a result thereof.
11.7 Attorneys’ Fees. If any party institutes an action, proceeding or
arbitration against any other party relating to the provisions of this Agreement
or any default hereunder, each Party will be responsible for paying their own
legal fees and expenses, unless an award of fees by the arbitrator or court
provides otherwise, including any costs of appeal.
11.8 Supercession. This Agreement is the final, complete and exclusive
expression of the agreement between the Company and the Executive and supersedes
and replaces in all respects any prior oral or written employment agreements. On
execution of this Agreement by the Company and the Executive, the relationship
between the Company and the Executive after the effective date of this Agreement
will be governed by the terms of this Agreement and not by any other agreements,
oral or otherwise.

      Employment Agreement — Scott Voth   12

 

 

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Exhibit 10.39
11.9 Non-Contravention. Executive represents and warrants to the Company that
the execution and performance of this Agreement will not violate, constitute a
default under, or otherwise give rights to any third party, pursuant to the
terms of any Agreement to which Executive is a party.
11.10 Indemnity. EXECUTIVE AGREES TO INDEMNIFY AND HOLD HARMLESS THE COMPANY,
ITS DIRECTORS, OFFICERS AND EMPLOYEES AND AGENTS (THE “INDEMNIFIED PARTIES”)
AGAINST ANY LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE, AS INCURRED, (“LOSS”) TO
WHICH THE INDEMNIFIED PARTIES MAY BECOME SUBJECT OR INCUR, INSOFAR AS SUCH LOSS
ARISES OUT OF OR IS BASED UPON ANY INACCURACY IN ANY REPRESENTATION OR WARRANTY
GIVEN BY EMPLOYEE IN SECTION 11.9 OF THIS AGREEMENT AND TO REIMBURSE THE
INDEMNIFIED PARTIES FOR ANY AND ALL EXPENSES (INCLUDING THE FEES AND
DISBURSEMENTS OF COUNSEL CHOSEN BY THE INDEMNIFIED PARTIES) AS SUCH EXPENSES ARE
REASONABLY INCURRED BY THE INDEMNIFIED PARTIES IN CONNECTION WITH INVESTIGATING,
DEFENDING, SETTLING, COMPROMISING OR PAYING ANY SUCH LOSS.
11.11 Compliance with Section 409A of the Code. This Agreement is intended to
comply with Section 409A of the Code and shall be construed and interpreted in
accordance with such intent. To the extent any benefit paid under this Agreement
shall be subject to Section 409A of the Code, such benefit shall be paid in a
manner that will comply with Section 409A, including any IRS 409A Guidance. Any
provision of this Agreement that would cause the payment of any benefit to fail
to satisfy Section 409A of the Code shall have no force and effect until amended
to comply with Section 409A (which amendment may be retroactive to the extent
permitted by the IRS 409A Guidance.
11.12 Termination of Any Prior Employment Agreements. Any prior employment
agreement or contract between Executive and Company is terminated as of the
Effective Date.
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective the
Effective Date.

                  HASTINGS ENTERTAINMENT, INC.
 
           
 
  By:   /s/ John H. Marmaduke    
 
           
 
      John H. Marmaduke    
 
      President    
 
           
 
      (the “Company”)    
 
           
 
  By:   /s/ Scott Voth    
 
           
 
      Scott Voth, Vice President of Store Operations    
 
           
 
      (the “Executive”)    

      Employment Agreement — Scott Voth   13