Exhibit 10.1

EMPLOYMENT AGREEMENT

 

Parties:    GSI COMMERCE, INC. (“Employer”)    935 First Avenue    King of
Prussia, PA 19406    MICHAEL G. RUBIN (“Executive”)    1840 Aloha Lane   
Gladwyne, PA 19035 Date:    August 23, 2006 Background:    Employer and its
subsidiaries are in the business of providing e-commerce solutions that enable
retailers, branded manufacturers, entertainment companies and professional
sports organizations to operate e-commerce businesses (the “Business”). Employer
desires to employ Executive, and Executive desires to accept such employment, on
the terms and conditions stated below (this “Agreement”).

INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual agreements
stated below, Executive and Employer agree as follows:

1. Employment and Term. Employer hereby employs Executive, and Executive accepts
such employment beginning on July 1, 2006 (the “Effective Date”) for an initial
term of one and one-half years, which term shall expire on December 31, 2007
(the “Initial Term”). Thereafter, this Agreement shall automatically renew for
successive one year terms (each such successive term a “Renewal Term,” and
together with the Initial Term the “Employment Term”), unless at least 90 days’
prior to the commencement of any Renewal Term either party shall have given the
other party written notice of his or its intention not to renew this Agreement,
in which case the Employment Term and this Agreement shall terminate at the
expiration of the Initial Term or the Renewal Term, as the case may be (the
“Expiration Date”). In the event that Employer gives notice under this Section 1
and allows this Agreement to terminate, then such action shall be treated as a
termination pursuant to Section 5.4 hereof, and Executive shall be entitled to
the severance payments and benefits under Section 5.4 hereof. In the event that
Executive gives notice under this Section 1 and allows this Agreement to
terminate, then such action shall be treated as a termination pursuant to
Section 5.6 hereof, and Executive shall not be entitled to any severance
payments or benefits under this Agreement, other than those provided for in
Section 5.6 hereof, and all of Executive’s other rights hereunder shall
terminate as of the Expiration Date.

2. Position and Duties. Executive shall serve as Chairman and Chief Executive
Officer and shall report solely and directly to Employer’s Board of Directors
(the “Board”). In such capacity Executive shall have supervision and control
over, and responsibility for, the overall business, affairs and management of
Employer, and shall have such other duties, responsibilities and authority as
may from time to time be prescribed by the Board and as are customarily
associated with the position of

 

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Chairman and Chief Executive Officer at other similarly situated companies.
Employer will use its best efforts to cause Executive to be appointed as a
member of the Board. Executive shall devote all of his working time, energy,
skill and best efforts to the performance of his duties hereunder in a manner
which will faithfully and diligently further the business and interests of
Employer. Notwithstanding the foregoing, so long as there is no material
interference with the performance of Executive’s duties and responsibilities as
an employee of Employer in accordance with this Agreement, Executive shall be
permitted to engage in any of the following activities: (A) serve on corporate,
civic or charitable boards or committees, with any corporate board service being
subject to approval by the Board (which approval shall not be unreasonably
withheld), provided, however, that Executive’s service on the first such
corporate board shall not be subject to such Board approval; (B) deliver
lectures and fulfill speaking engagements; and (C) manage personal investments.

3. Place of Employment. Executive’s principal place of employment will be at the
Employer’s principal executive office located at 935 First Avenue, King of
Prussia, PA 19406.

4. Compensation, Benefits and Expenses.

4.1 Compensation. Employer shall pay to Executive an annual base salary (“Base
Salary”) in the amount of $474,000 per annum payable in accordance with the then
current payroll policies of the Company. Employer may not decrease Base Salary
during the Employment Term nor does either party contemplate that Base Salary
will be increased during the Employment Term.

4.2 Annual Stock Award. For each year of the Employment Term (including the half
year period from July 1, 2006 until December 31, 2006, the “First Half Year”),
Executive shall be granted a restricted stock unit award (the “Annual Stock
Award”). The Annual Stock Award shall be granted no later than March 31 of each
year of the Employment Term, except that for the First Half Year the date of
grant shall be no later than August 31, 2006. The Annual Stock Award shall
consist of restricted stock units (“RSUs”) having a fair market value of at
least $675,000 as of the date of grant. The Annual Stock Award shall be governed
by the terms and provisions of the Plan and shall be subject to similar
restrictions as are contained in the Annual Stock Awards granted to other
executives of Employer and as are set forth in Executive’s Annual Stock Award
agreement. The RSUs subject to each Annual Stock Award will vest in accordance
with the following schedule; provided that the vesting will cease upon the
termination of Executive’s continuous service (as defined in the Plan) with
Employer; and, provided, further, that such vesting will be subject to
acceleration as provided in Section 5.7 hereof: twenty-five percent (25%) of the
total number of RSUs subject to an Annual Stock Award shall vest on each
anniversary of the date of grant of such Annual Stock Award, with all of the
RSUs subject to an Annual Stock Award becoming fully vested on the fourth
anniversary of the date of grant of such Annual Stock Award.

4.3 Long Term Incentive Opportunity.

(a) Executive shall be granted a Performance Restricted Stock Unit Award for
each year of the Employment Term (collectively, the “PRSU Awards”), each award
being governed by the terms and provisions of Employer’s 2005 Equity Incentive
Plan (the “Plan”) and the terms of

 

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the Stock Award Agreement under which such award is granted (the “Award
Agreement”). The date of grant of each PRSU Award shall be on or before March 31
of each year of the Employment Term, except that for the First Half Year the
date of grant shall be no later than August 31, 2006 (each such date, a “Grant
Date”).

(b) Pursuant to each PRSU Award, a certain number of Performance Restricted
Stock Units (“PRSUs”) will be issued, which number shall depend upon the
achievement of certain performance targets (the “Performance Targets”) over a
certain period (the “Performance Period”), as set forth in Employer’s Leadership
Bonus Plan for the year or years in question. For each PRSU Award, the number of
PRSUs that shall be issuable upon the achievement of the 90%, 100%, or 110% or
higher level of the Performance Targets shall be listed in the Award Agreement
and shall have a fair market value, as of the Grant Date (but not necessarily as
of the date of their issuance), of no less than $700,000, $1,400,000, or
$2,100,000, respectively. In the event that the level of the Performance Targets
that is achieved is greater than the 90% level but less than the 100% level, or
greater than the 100% level but less than the 110% level, then the number of
PRSUs that shall be issuable shall have a fair market value, as of the Grant
Date (but not necessarily as of the date of their issuance), equal to the amount
obtained through linear interpolation between $700,000 and $1,400,000 or between
$1,400,000 and $2,100,000, as the case may be. For each PRSU Award, if the 90%
level of the Performance Targets is not achieved, then no PRSUs shall be
issuable under such PRSU Award. Notwithstanding the foregoing, in the case of
the First Half Year’s PRSU Award, the number of PRSUs that shall be issuable
upon the achievement of each level of the Performance Targets shall be one-half
of the number which would have been issuable in any year of the Employment Term
other than the First Half Year.

(c) Prior to the Grant Date of each PRSU Award, the Board or the Compensation
Committee of the Board of Directors (the “Compensation Committee”), after
meeting and consulting with Executive, shall determine the length of the
Performance Period applicable to such PRSU Award and shall determine the number
of PRSUs issuable to Executive based upon the achievement of different
Performance Targets during such Performance Period.

(d) If the Performance Period is less than three (3) years, PRSUs may be subject
to additional time based vesting restrictions as set forth in the Award
Agreement. Any such additional time based vesting restrictions shall be limited
to two (2) years following the date of issuance of the PRSUs with 50% of the
PRSUs vesting on the first anniversary of their issuance and the remaining PRSUs
vesting on the second anniversary of their issuance.

4.4 Other Benefits. Executive shall be entitled to participate in all stock
purchase, profit sharing, savings, health insurance, life insurance, group
insurance, disability insurance, pension, retirement and other benefit plans or
programs of Employer now existing, or established hereafter, on the same terms
and to the same extent as the other senior executives of Employer.
Notwithstanding the foregoing, Executive shall not be entitled to participate in
any equity incentive, stock option, or bonus plans or programs of Employer now
existing, or established hereafter, other than to the extent provided for in
Section 4.2 and Section 4.3 hereof.

 

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4.5 Personal Time-off. Executive will be eligible for paid personal time-off in
accordance with Employer’s policy as in effect from time to time.

4.6 Expenses. Employer shall reimburse Executive for all actual, ordinary,
necessary and reasonable expenses incurred by Executive in the course of his
performance of his duties hereunder, in accordance with Employer’s expense
reimbursement policies for executives and subject to proper accounting for all
such expenses by Executive.

5. Termination and Severance Benefits.

5.1 Termination by Death. In the event of Executive’s death, this Agreement and
the parties’ rights and obligations hereunder shall terminate as of the date of
death. Notwithstanding the foregoing, Executive’s heirs, personal
representatives or estate shall be entitled to the following: (i) payment, in a
lump sum as soon as practicable following the date of death, of (A) the earned
but unpaid portion of Executive’s Base Salary, (B) any other benefits accrued by
Executive pursuant to the benefit plans or programs of Employer up to the date
of termination and (C) any unpaid expenses payable to Executive pursuant to
Section 4.6 hereof (collectively, the “Accrued Benefits”) and (ii) any benefits
which are to be continued or paid after the date of death in accordance with the
terms of the benefit plans or programs of Employer. If Executive’s employment is
terminated pursuant to this Section 5.1, then Executive shall be entitled to the
issuance of the number of PRSUs to which he would have been entitled had he
remained employed throughout the entire Performance Period, based upon the
extent to which the Performance Targets are actually achieved during said
Performance Period. Notwithstanding anything in any Award Agreement to the
contrary, any time based vesting restrictions on any issued PRSUs shall
accelerate should Executive’s employment be terminated pursuant to this
Section 5.1.

5.2 Termination By Employer for Disability. In the event of Executive’s
Disability, Employer may, upon thirty (30) days prior written notice, terminate
this Agreement and Executive’s employment and rights hereunder. Notwithstanding
the foregoing, Executive shall be entitled to the following payments and
benefits upon a termination by Employer for Disability: (i) payment, in a lump
sum as soon as practicable following the date of termination, of the Accrued
Benefits; (ii) continued payment of Executive’s Base Salary for a period of six
(6) months following the date of termination, reduced, dollar-for-dollar, by any
amounts received by Executive under any disability insurance policy or plan
provided to Executive by Employer and (iii) any benefits which are to be
continued or paid after the date of termination in accordance with the terms of
the benefit plans or programs of Employer. If Executive’s employment is
terminated pursuant to this Section 5.2, then Executive shall be entitled to the
issuance of the number of PRSUs to which he would have been entitled had he
remained employed throughout the entire Performance Period, based upon the
extent to which the Performance Targets are actually achieved during said
Performance Period. Notwithstanding anything in any Award Agreement to the
contrary, any time based vesting restrictions on any issued PRSUs shall
accelerate should Executive’s employment be terminated pursuant to this
Section 5.2.

 

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“Disability” means Executive has suffered a physical or mental sickness or
injury or other incapacity that, in the good faith determination of the Board,
(i) impairs Executive’s ability to effectively perform Executive’s full-time
duties with Employer after a period of one hundred eighty (180) consecutive days
or for periods aggregating more than one hundred eighty (180) days during any
twelve (12) month period and (ii) qualifies Executive for benefits under the
Company’s group long-term disability plan.

5.3 Termination By Employer for Cause. Employer may, upon thirty (30) days prior
written notice to Executive, and subject to any applicable cure period set forth
below, terminate this Agreement and Executive’s employment and rights hereunder,
for Cause (as defined in this Section 5.3). Notwithstanding the foregoing,
Executive shall be entitled to the following payments and benefits upon a
termination for Cause: (i) payment, in a lump sum as soon as practicable
following the date of termination, of the Accrued Benefits and (ii) any benefits
which are to be continued or paid after the date of termination in accordance
with the terms of the benefit plans or programs of Employer. If Executive is
terminated pursuant to this Section 5.3, then all PRSU Awards shall immediately
terminate and Executive shall not be entitled to the issuance of any PRSUs under
such awards, and any unvested PRSUs held by Executive shall immediately
terminate and become forfeited as of the date of termination; provided, however,
that any vested PRSUs whose settlement has been deferred by Executive pursuant
to the terms of his PRSU Award shall be settled according to the terms thereof.

“Cause” shall exist if the Board or the Compensation Committee in good faith
determines that (i) Executive is grossly negligent or engages in willful
misconduct in the performance of his duties under this Agreement, (ii) Executive
is convicted of, or enters a plea of guilty or nolo contendere to, a crime
constituting a felony or any criminal offense involving fraud, dishonesty or
moral turpitude under the laws of the United States or any state thereof other
than an automobile offense or (iii) Executive materially breaches this Agreement
or materially violates Employer’s code of ethics or any other material policy of
Employer. Notwithstanding the foregoing, Cause shall only exist after
(A) Employer delivers written notice to Executive of its intention to terminate
for Cause within ninety (90) days after Employer has actual knowledge of the
facts and circumstances upon which Employer seeks to rely as a basis for its
right to terminate for Cause, (B) such notice sets forth in reasonable detail
such facts and circumstances and (C) Executive has failed to fully correct any
of the events listed in Section 5.3(i)-(iii) above, if such events are
reasonably capable of being fully corrected, within thirty (30) days following
delivery of Employer’s written notice of its intention to terminate for Cause.

5.4 Termination By Employer Without Cause. Employer may, upon thirty (30) days
prior written notice to Executive, terminate this Agreement and Executive’s
employment and rights hereunder, for any reason or for no reason.
Notwithstanding the foregoing, Executive shall be entitled to the following
payments and benefits upon such termination by Employer without Cause: (i) a
payment of severance in the amount of $2,525,000 payable over a period of
twenty-four (24) months following the date of termination (payable in accordance
with the then current payroll policies of Employer), (ii) continuation of
Executive’s medical benefits for the shorter of, a period of twenty-four
(24) months following the date of termination, or until Executive obtains
substantially

 

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comparable medical coverage, (iii) any benefits which are to be continued or
paid after the date of termination in accordance with the terms of the benefit
plans or programs of Employer and (iv) payment, in a lump sum as soon as
practicable following the date of termination, of the Accrued Benefits. If
Executive is terminated pursuant to this Section 5.4, then all PRSU Awards shall
immediately terminate and Executive shall not be entitled to the issuance of any
PRSUs under such awards, and any unvested PRSUs held by Executive shall
immediately terminate and become forfeited as of the date of termination;
provided, however, that any vested PRSUs whose settlement has been deferred by
Executive pursuant to the terms of his PRSU Award shall be settled according to
the terms thereof.

5.5 Resignation By Executive for Good Reason. Executive may, upon thirty
(30) days prior written notice to Employer and subject to any applicable cure
period set forth below, resign his employment for Good Reason (as defined in
this Section 5.5), in which case this Agreement and Executive’s employment and
rights hereunder shall terminate. Notwithstanding the foregoing, Executive shall
be entitled to the payments and benefits described in Section 5.4(i)-(iv) upon a
resignation for Good Reason. If Executive resigns pursuant to this Section 5.5,
then all PRSU Awards shall immediately terminate and Executive shall not be
entitled to the issuance of any PRSUs under such awards, and any unvested PRSUs
held by Executive shall immediately terminate and become forfeited as of the
date of resignation; provided, however, that any vested PRSUs whose settlement
has been deferred by Executive pursuant to the terms of his PRSU Award shall be
settled according to the terms thereof.

“Good Reason” shall mean any of the following events if not consented to by
Executive in writing: (i) Executive is demoted, removed or not re-elected to any
of his positions or offices, including his position as a member of the Board, or
Executive is assigned duties or responsibilities that are materially
inconsistent with, or constitute a material diminishment of, Executive’s title,
position, responsibilities or authorities, including the change in any reporting
relationships of Employer which results in Executive no longer reporting
directly to the Board, (ii) Employer materially breaches this Agreement,
(iii) there is a material reduction in the benefits provided to Executive under
Sections 4.4 and 4.5 hereof, (iv) there is a material reduction in Executive’s
Long Term Incentive Opportunity below that which was provided to Executive in
the first year of the Initial Term that is not the First Half Year,
(v) Executive’s principal place of employment is moved to a location that is
more than fifty (50) miles from the current location listed in Section 3 hereof,
provided that such location is not closer to Executive’s principal residence,
(vi) Employer fails to obtain the assumption of this Agreement by any successor
to the business or substantially all of the assets of Employer or (vii) there is
a purported termination of Executive for Cause which is not effected pursuant to
the method described in Section 5.3 hereof. Notwithstanding the foregoing, Good
Reason shall only exist after (A) Executive delivers written notice to Employer
of his intention to resign for Good Reason within ninety (90) days after
Executive has actual knowledge of the facts and circumstances upon which
Executive seeks to rely as a basis for his right to resign for Good Reason,
(B) such notice sets forth in reasonable detail such facts and circumstances and
(C) Employer has failed to fully correct any of the events listed in
Section 5.5(i)-(vii) above, if such events are reasonably capable of being fully
corrected, within thirty (30) days of Executive’s written notice of his
intention to resign for Good Reason.

 

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5.6 Resignation By Executive Other than for Good Reason. Executive may, upon
thirty (30) days prior written notice to Employer, resign Executive’s employment
and terminate this Agreement and Executive’s rights hereunder, for any reason
other than a Good Reason, in which case Executive shall be entitled to the
payments and benefits described in Section 5.3(i) and (ii) above. If Executive
resigns his employment pursuant to this Section 5.6, then all PRSU Awards shall
immediately terminate and Executive shall not be entitled to the issuance of any
PRSUs under such awards, and any unvested PRSUs held by Executive shall
immediately terminate and become forfeited as of the date of resignation;
provided, however, that any vested PRSUs whose settlement has been deferred by
Executive pursuant to the terms of his PRSU Award shall be settled according to
the terms thereof.

5.7 Termination By Employer Without Cause; Resignation By Executive Following a
Change in Control.

(a) Notwithstanding any other term or condition in this Agreement, including but
not limited to the other provisions of this Section 5, the terms of this
Section 5.7 shall control.

(b) If within one hundred eighty three (183) days before or one hundred eighty
three (183) days following a Change in Control (including any subsequent period
during which Executive may exercise the Walk Right described in Section 5.7(c)
below), Employer terminates Executive’s employment without Cause, Employer
issues a notice of non-renewal under Section 1 hereof or Executive resigns for
Good Reason (as such term is defined in Section 5.5 above, provided that only a
reduction in Executive’s Base Salary or the occurrence of an event listed in
clause (v) of such definition shall constitute a Good Reason for the purposes of
this Section 5.7(b)), then Executive shall be entitled to the payments and
benefits described in Section 5.4(i)-(iv) upon such termination, non-renewal or
resignation. In addition, notwithstanding anything in any Award Agreement to the
contrary, any time based vesting restrictions on any issued PRSUs and any issued
RSUs shall accelerate should Executive’s employment be terminated pursuant to
this Section 5.7(b). However, if Executive is terminated or resigns pursuant to
this Section 5.7(b), then the PRSU Award that was granted for the Performance
Period in which Executive’s termination or resignation occurred shall
immediately terminate and Executive shall not be entitled to the issuance of any
PRSUs under such award.

(c) After a period of one hundred eighty three (183) days following a Change in
Control (the “No Walk Right Period”), Executive shall have the right (the “Walk
Right”) to resign his employment for any reason or for no reason upon thirty
(30) days’ prior written notice to Employer. Executive must exercise this right
within thirty (30) days of the end of the No Walk Right Period or the Walk Right
shall expire. If Executive exercises the Walk Right, he shall be entitled to the
payments and benefits described in Section 5.4(ii)-(iv) above. In addition,
notwithstanding anything in any Award Agreement or Section 5.6 hereof to the
contrary, any time based vesting restrictions on any issued PRSUs and any issued
RSUs shall accelerate should Executive’s employment be terminated pursuant to
this Section 5.7(c). However, if Executive resigns pursuant to this
Section 5.7(c), then the PRSU Award that was granted for the Performance Period
in which Executive’s resignation occurred shall immediately terminate and
Executive shall not be entitled to the issuance of any PRSUs under such award.

 

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(d) If Employer terminates Executive’s employment without Cause, Employer issues
a notice of non-renewal under Section 1 hereof or Executive resigns for Good
Reason (as defined in Section 5.5 above except that the word “material” shall
not apply in clause (iv) thereof) and such termination, non-renewal or
resignation occurs after the expiration of Executive’s Walk Right but prior to
the date which is seven hundred and thirty (730) days following a Change in
Control, then Executive shall be entitled to the payments and benefits described
in Section 5.4(i)-(iv) upon such termination or resignation. In addition,
notwithstanding anything in any Award Agreement to the contrary, any time based
vesting restrictions on any issued PRSUs and any issued RSUs shall accelerate
should Executive’s employment be terminated pursuant to this Section 5.7(d).
However, if Executive is terminated or resigns pursuant to this Section 5.7(d),
then the PRSU Award that was granted for the Performance Period in which
Executive’s termination or resignation occurred shall immediately terminate and
Executive shall not be entitled to the issuance of any PRSUs under such award.

“Change in Control,” means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events:

(i) any Exchange Act Person becomes the Owner, directly or indirectly, of
securities of Employer representing more than fifty percent (50%) of the
combined voting power of Employer’s then outstanding securities other than by
virtue of a merger, consolidation or similar transaction, covered by subsection
(ii) below. Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur (A) on account of the acquisition of securities of Employer from
Employer by an investor, any Affiliate (as such term is defined in Rule 405 of
the Securities Act of 1933, as amended) thereof or any other Exchange Act Person
in a transaction or series of related transactions the primary purpose of which
is to obtain financing for Employer through the issuance of equity securities or
(B) solely because the level of Ownership held by any Exchange Act Person (the
“Subject Person”) exceeds the designated percentage threshold of the outstanding
voting securities as a result of a repurchase or other acquisition of voting
securities by Employer reducing the number of shares outstanding, provided that
if a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of voting securities by Employer, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

(ii) there is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) Employer and, immediately after the
consummation of such merger, consolidation or similar transaction, the
stockholders of Employer immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the surviving
corporation, partnership, limited liability company or other entity (each an
“Entity”) in such merger, consolidation

 

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or similar transaction or (B) more than fifty percent (50%) of the combined
outstanding voting power of the parent of the surviving Entity in such merger,
consolidation or similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting securities of Employer
immediately prior to such transaction;

(iii) the stockholders of Employer approve or the Board approves a plan of
complete dissolution or liquidation of Employer, or a complete dissolution or
liquidation of Employer shall otherwise occur;

(iv) there is consummated a sale, lease, exclusive license or other disposition
of all or substantially all of the consolidated assets of Employer and its
subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of Employer and its subsidiaries to
an Entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are Owned by stockholders of Employer in
substantially the same proportions as their Ownership of the outstanding voting
securities of Employer immediately prior to such sale, lease, license or other
disposition; or

(v) individuals who, on the date the Plan was adopted by the Board, are
directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the directors; provided, however, that if the appointment or
election (or nomination for election) of any new director was approved or
recommended by a majority vote of the Incumbent Board, such new director shall
be considered a member of the Incumbent Board, unless such new director’s
initial assumption of office occurs as a result of or in connection with either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended) or other actual or threatened solicitation of proxies or consents by or
on behalf of an Entity other than the Incumbent Board.

“Exchange Act Person” means any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange
Act Person” shall not include (i) Employer or any Affiliate, (ii) any employee
benefit plan of Employer or any Affiliate or any trustee or other fiduciary
holding securities under an employee benefit plan of Employer or any Affiliate,
(iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, (iv) an Entity Owned, directly or indirectly, by the
stockholders of Employer in substantially the same proportions as their
Ownership of stock of Employer or (v) any natural person, Entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended) that, as of the Effective Date, is the Owner, directly or
indirectly, of securities of Employer representing more than fifty percent
(50%) of the combined voting power of Employer’s then outstanding securities.

“Own,” “Owned,” “Owner,” “Ownership” means that in relation to certain
securities, a person or Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting, with respect to
such securities.

 

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5.8 Section 409A. In the event that any cash severance benefit or continued
medical benefit under this Section 5 shall fail to satisfy the distribution
requirement of Section 409A(a)(2)(A) of the Internal Revenue Code of 1986, as
amended (the “Code”), as a result of the application of Section 409A(a)(2)(B)(i)
of the Code, then the payment of such benefits shall be delayed to the minimum
extent necessary so that such benefits are not subject to the provisions of
Section 409A(a)(1) of the Code. The Board may attach conditions to or adjust the
amounts paid pursuant to this Section 5.8 to preserve, as closely as possible,
the economic consequences that would have applied in the absence of this
Section 5.8; provided, however, that no such condition or adjustment shall
result in the payments being subject to Section 409A(a)(1) of the Code. The PRSU
Awards and Annual Stock Awards may contain additional provisions relating to the
application of Section 409A of the Code to this Agreement and the payments and
benefits distributed hereunder.

5.9 Parachute Payments. Anything in this Agreement to the contrary
notwithstanding, if any payment or benefit Executive would receive from Employer
pursuant to this Agreement or otherwise (a “Payment”) would (i) constitute a
“parachute payment” within the meaning of Section 280G of the Code, and (ii) but
for this sentence, be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount.
The “Reduced Amount” shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax or
(y) the largest portion of the Payment, up to and including the total Payment,
whichever amount, after taking into account all applicable federal, state and
local employment taxes, income taxes, and the Excise Tax (all computed at the
highest applicable marginal rate), results in Executive’s receipt, on an
after-tax basis, of the greater amount of the Payment notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax. If a reduction
in payments or benefits constituting “parachute payments” is necessary so that
the Payment equals the Reduced Amount, reduction shall occur in the following
order unless Executive elects in writing a different order: reduction of cash
payments; cancellation of accelerated vesting of equity awards; reduction of
employee benefits. If acceleration of vesting of equity award compensation is to
be reduced, such acceleration of vesting shall be cancelled in the reverse order
of the date of grant of Executive’s equity awards unless Executive elects in
writing a different order for cancellation.

Employer shall appoint a nationally recognized independent accounting firm to
make the determinations required hereunder, which accounting firm shall not then
be serving as accountant or auditor for an individual, entity or group that
effected a Change in Control of Employer. Employer shall bear all expenses with
respect to the determinations by such accounting firm required to be made
hereunder.

The accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, on which
Executive may rely, to Employer and Executive within fifteen (15) calendar days
after the date on which Executive’s right to a Payment is triggered (if
requested at that time by Employer or Executive) or such other time as requested
by Employer or Executive. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish Employer and Executive with an opinion
reasonably acceptable to Executive that no Excise Tax will be imposed with
respect to such Payment. Employer shall be entitled to rely upon the accounting
firm’s determinations, which shall be final and binding on all persons.

 

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6. Procedure Upon Termination. Upon termination of his employment, Executive
shall promptly return to Employer all documents (including copies) and other
materials and property of Employer, or pertaining to its business, including
without limitation customer and prospect lists, contracts, files, manuals,
letters, reports and records in his possession or control, no matter from whom
or in what manner acquired.

7. Covenants.

7.1 Discoveries. Executive will promptly and fully communicate to Employer, in
writing, all trade secrets, inventions, mask works, ideas, processes, formulas,
source and object codes, data, programs, other works of authorship, know-how,
improvements, discoveries, developments, designs and techniques (collectively
referred to as “Inventions”), whether or not patentable or registrable under
copyright or similar statutes, which are made, conceived, reduced to practice or
learned by Executive, whether alone or jointly with others, at any time during
the Employment Term, which relate to the business or operations of Employer or
which relate to methods, designs, products or systems sold, leased, licensed or
under development by Employer (such concepts, ideas and designs are referred to
as “Employer Inventions”). Executive acknowledges that Employer owns all right,
title and interest in and to any and all Employer Inventions (and all
Proprietary Rights with respect thereto) and hereby assigns and agrees to assign
in the future (when any such Inventions or Proprietary Rights are first reduced
to practice or first fixed in a tangible medium, as applicable) to Employer (or
to such third party as Employer may direct) all of Executive’s right, title and
interest in and to any and all Employer Inventions (and all Proprietary Rights
with respect thereto). Executive acknowledges that all original works of
authorship which are made by Executive (solely or jointly with others) within
the scope of Executive’s employment and which are protectable by copyright are
“works made for hire,” pursuant to United States Copyright Act (17 U.S.C.,
Section 101). Executive will, at Employer’s expense, sign all documents and take
such other actions as Employer may reasonably request to confirm its ownership
in Employer Inventions. “Proprietary Rights” means all trade secret, patent,
copyright, mask work and other intellectual property rights throughout the
world.

7.2 Nondisclosure. At all times during the Employment Term and thereafter,
except with the express prior written consent of an executive officer of
Employer other than Executive, in connection with the proper performance of
services under this Agreement, or as required by law or in any judicial or
administrative proceeding with subpoena powers, Executive will not, directly or
indirectly, communicate, disclose or divulge to any Person, or use for the
benefit of any Person, any Proprietary Information or any Third Party
Information. “Proprietary Information” means any and all confidential and/or
proprietary knowledge, data or information of Employer, no matter when or how
acquired. By way of illustration, but not limitation, Proprietary Information
includes (i) Inventions; (ii) the terms and details of contracts and
arrangements with and proposals to entities for which Employer operates
e-commerce businesses (“Partners”) and prospective Partners; (iii) personal,
financial and other information obtained from customers of the e-commerce
businesses

 

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that Employer operates (“E-Commerce Customers”); (iv) non-public pricing
information, vendor prices, buying and pricing strategies and merchandise plans,
including the terms of contracts and arrangements with vendors; (v) promotional,
marketing and advertising strategies and plans, including the terms of contracts
and arrangements relating to promotions, marketing and advertising;
(vi) non-public financial and statistical information relating to Employer, its
business and the e-commerce businesses operated by Employer, including budgets,
financial and business forecasts, expansion plans and business strategies; and
(vii) information regarding the skills and compensation of other employees of
Employer. For purposes of this Section 7.2, Proprietary Information will not
include any information which is now known by the general public, which becomes
known by the general public other than as a result of a breach of this Agreement
by Executive or which is independently acquired by Executive. “Third Party
Information” means any and all confidential or proprietary data, knowledge and
information received from third parties, including Partners, prospective
Partners and E-Commerce Customers, subject to a duty on Employer’s part to
maintain the confidentiality of such data, knowledge or information and to use
it only for certain purposes.

“Person” means any individual, sole proprietorship, joint venture, partnership,
corporation, association, cooperative, trust, estate, government body,
administrative agency, regulatory authority or other entity of any nature.

7.3 Non-Competition. Executive acknowledges that Employer’s business is highly
competitive. Accordingly, for the longer of (i) two (2) years after the date of
the termination of Executive’s employment with Employer for any reason or
(ii) the period of time with respect to which Employer is paying Executive
severance or separation compensation (the “Restricted Period”), except with
Employer’s express prior written consent, Executive will not, directly or
indirectly, in any capacity, for the benefit of any Person:

(a) Communicate with or solicit any Person who, as of or during the one (1) year
prior to the termination of Executive’s employment with Employer, was an
employee, consultant, agent or representative of Employer or any of its
subsidiaries, or who, during the Restricted Period, becomes an employee,
consultant, agent or representative of Employer or any of its subsidiaries, in
any manner which interferes or might interfere with such Person’s relationship
with Employer or any such subsidiary, or in an effort to obtain any such
employee, consultant, agent or representative as an employee, consultant, agent
or representative of any other Person,

(b) Communicate with or solicit any Person who, as of or during the one (1) year
prior to the termination of Executive’s employment with Employer, was a partner,
customer, client or prospect of Employer or any of its subsidiaries, or who,
during the Restricted Period, becomes a partner, customer, client or prospect of
Employer or any of its subsidiaries, in any manner which interferes or might
interfere with such Person’s relationship with Employer or any such subsidiary,
or in an effort to obtain any such a partner, customer, client or prospect as a
partner, customer, client or prospect of any other Person which conducts a
business competitive with all or any material part of the Business, or

 

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(c) Establish, own, manage, operate or control, or participate in the
establishment, ownership, management, operation or control of, or be a director,
officer, employee, agent or representative of, or be a consultant to, any Person
which conducts a business competitive with all or any material part of the
Business.

7.4 Nondisparagement. During the Restricted Period, both Executive and Employer
shall refrain from making any false, defamatory or disparaging statements about
the other party, and in the case of Executive, about any director, officer,
employee or agent of Employer.

7.5 Consideration and Enforcement of Covenants. Executive expressly acknowledges
that the covenants contained in Sections 7.1 to 7.4 of this Agreement (the
“Covenants”) are a material part of the consideration bargained for by Employer
and, without the agreement of Executive to be bound by the Covenants, Employer
would not have agreed to enter into this Agreement. Executive acknowledges that
any breach by Executive of any of the Covenants will result in irreparable
injury to Employer for which money damages could not adequately compensate. If
there is such a breach, Employer will be entitled, in addition to all other
rights and remedies which Employer may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining Executive and
all other Persons involved therein from continuing such breach. The existence of
any claim or cause of action which Executive or any such other Person may have
against Employer will not constitute a defense or bar to the enforcement of any
of the Covenants. If Employer must resort to litigation to enforce any of the
Covenants which has a fixed term, then such term will be extended for a period
of time equal to the period during which a breach of such Covenant was
occurring, beginning on the date of a final court order (without further right
of appeal) holding that such a material breach occurred or, if later, the last
day of the original fixed term of such Covenant. If any portion of any Covenant
or its application is construed to be invalid, illegal or unenforceable, then
the other portions and their application will not be affected thereby and will
be enforceable without regard thereto. If any of the Covenants is determined to
be unenforceable because of its scope, duration, geographical area or similar
factor, then the court making such determination will have the power to reduce
or limit such scope, duration, area or other factor, and such Covenant will then
be enforceable in its reduced or limited form.

7.6 Severance Obligations. Any breach of the Covenants contained herein shall
constitute a material breach of this Agreement and shall discharge, to the
extent not prohibited by applicable law, Employer from any and all of its
obligations to make payments or provide benefits under any provision of this
Agreement including Section 5 hereof.

8. Clawback. In the event that the Board or the Compensation Committee
determines in good faith that the earlier determination as to the achievement of
the Performance Targets was based on incorrect data, which incorrect data would
require the restatement of Employer’s financial statements for reasons other
than changes in law or accounting principles, and that in fact the Performance
Targets had not been achieved or had been achieved to a lesser extent than
originally determined and a portion of any PRSUs granted under any PRSU Award
would not have been issued, vested or settled, given the correct data, then
(i) such portion of PRSUs that were issued shall be forfeited and cancelled as
provided by the Board or the Compensation Committee, (ii) such

 

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portion of PRSUs that became vested shall be deemed to be not vested and shall
be deemed to be forfeited and cancelled as provided by the Board or the
Compensation Committee and (iii) such portion of PRSUs that were settled in
exchange for shares of Employer’s stock (or if such shares were disposed of the
cash equivalent) shall be paid by Executive to Employer upon notice from
Employer as provided by the Board or the Compensation Committee.

9. No Mitigation. Executive shall not be required to mitigate the amount of any
benefits under this Agreement by seeking other employment or otherwise. The
benefits to be provided pursuant to Section 5 hereof shall not be reduced by any
compensation or benefits payable or provided to Executive as a result of
employment by another employer after the date of termination or otherwise,
except as set forth in Section 5.4(ii) above. The specific arrangements referred
to in this Agreement are not intended to exclude any other benefits which may be
available to Executive upon a termination of employment with Employer pursuant
to any other agreement between Employer and Executive.

10. Release. Executive shall not receive any of the payments or benefits set
forth under Section 5 hereof, and Employer shall have no obligation to provide
such payments or benefits, unless and until, Executive furnishes Employer with
an effective waiver and release of claims (the “Release”) substantially in the
form attached hereto as Exhibit A with only such changes, if any, as counsel to
Employer opines are required by applicable law.

11. Indemnification. Executive shall be indemnified by Employer to the fullest
extent permitted by its bylaws or applicable law. Employer shall ensure that
Executive is covered by Employer’s director and officer liability insurance
policies during the Employment Term and for at least four (4) years thereafter
in an amount reasonably determined by the Board.

12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the substantive laws (and not the choice of law rules) of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed
entirely therein. Each of the parties irrevocably consents to service of process
by certified mail, return receipt requested, postage prepaid, to the address at
which such party is to receive notice in accordance herewith. Each of the
parties irrevocably consents to the jurisdiction of the state courts in
Montgomery County, Pennsylvania and the federal courts in the Eastern District
of Pennsylvania in any and all actions between the parties arising hereunder.

13. Survival of Obligations. Notwithstanding anything to the contrary contained
herein, Section 6 through Section 20 of this Agreement shall survive any
termination of this Agreement and the termination of the Employment Term.
Certain payments and benefits owed to Executive under Section 5 hereof shall
survive the termination of this Agreement to the extent provided for in
Section 5.

14. Legal Fees. Employer shall pay the reasonable legal fees and expenses of
Executive in connection with the negotiation, execution and delivery of this
Agreement up to a maximum amount of $30,000. In connection with the enforcement
of any right or remedy or the obtaining of any benefit under this Agreement,
Employer shall pay all reasonable legal fees and expenses if Executive
substantially prevails.

 

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15. Notices. All notices, consents or other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given (i) when delivered personally, (ii) three (3) business days
after being mailed by first class certified mail, return receipt requested,
postage prepaid or (iii) one (1) business day after being sent by a nationally
recognized express courier service, postage or delivery charges prepaid, to the
parties at their respective addresses stated on the first page of this
Agreement. Notices may also be given by prepaid telegram or facsimile and shall
be effective on the date transmitted if confirmed within twenty-four (24) hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Either party may change its address for notice and the address to
which copies must be sent by giving notice of the new addresses to the other
party in accordance with this Section 15, provided that any such change of
address notice shall not be effective unless and until received.

16. Prior Agreements. Executive represents to Employer (i) that there are no
restrictions, agreements or understandings whatsoever to which Executive is a
party which would prevent or make unlawful his execution of this Agreement or
his employment hereunder, (ii) that Executive’s execution of this Agreement and
Executive’s employment hereunder do not constitute a breach of any contract,
agreement or understanding, oral or written, to which Executive is a party or by
which Executive is bound and (iii) that Executive has full legal right and
capacity to execute this Agreement and to enter into employment with Employer.
All prior employment agreements between Executive and Employer are hereby
terminated as of the date hereof as fully performed on both sides.

17. Parties in Interest. This Agreement is for the personal services of
Executive and shall not be assignable by either party without the express prior
written consent of the other party; provided, however, that Employer shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of Employer to assume and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to perform if no
such succession had taken place; provided, further, that no such assumption or
agreement by such successor shall relieve Employer of any of its obligations
under this Agreement. Subject to the provisions of Section 5 and this
Section 17, this Agreement shall inure to the benefit of and bind each of the
parties hereto and the successors and assigns of Employer and the personal
representatives, estate and heirs of Executive.

18. Entire Understanding. This Agreement and the Release set forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous, oral or written, express or
implied, agreements and understandings.

19. Amendment and Waiver. This Agreement shall not be amended, modified or
terminated unless in writing and signed by Executive and a representative of
Employer, other than Executive, who is duly authorized by the Board or the
Compensation Committee. No waiver with respect to this Agreement shall be
enforceable unless in writing and signed by the parties against which
enforcement is sought (which, in the case of Employer, must be someone other
than Executive

 

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who is duly authorized by the Board or the Compensation Committee). Neither the
failure nor any delay on the part of either party to exercise any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence.

20. Section Headings. Any headings preceding the text of any of the Sections or
Subsections of this Agreement are inserted for convenience of reference only,
and shall neither constitute a part of this Agreement nor affect its
construction, meaning or effect.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the date first stated above.

 

GSI COMMERCE, INC.    By:  

/s/ Michael Perlis

  

/s/ Michael G. Rubin

Name:   Michael Perlis    Michael G. Rubin Title:   Chairman of the Compensation
Committee of the Board of Directors   

[Signature page to Employment Agreement]

 

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EXHIBIT A

RELEASE AND WAIVER OF CLAIMS

In consideration of the benefits and mutual agreements set forth in the
Employment Agreement, effective as of August 23, 2006 (the “Agreement”), between
GSI Commerce, Inc, (“Employer”) and Michael Rubin (“Executive”), to which this
form is attached, Executive, intending to be legally bound, agrees to the
following release and waiver (“Release and Waiver”):

In exchange for the consideration provided to Executive by the Agreement that
Executive is not otherwise entitled to receive and the other commitments of
Employer in the Agreement, Executive and his heirs, representatives, agents and
attorneys hereby generally and completely releases Employer and its directors,
officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct or
omissions occurring prior to Executive signing this Release and Waiver. This
general release includes, but is not limited to: (1) all claims arising out of
or in any way related to Executive’s employment with Employer or the termination
of that employment; (2) all claims related to Executive’s compensation or
benefits from Employer, including, but not limited to, salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in Employer;
(3) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (4) all tort claims, including,
but not limited to, claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including, but not limited to, claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) (“ADEA”), and the Pennsylvania Fair Employment and Housing Act
(as amended). Notwithstanding the foregoing, this general release specifically
excludes any and all claims that Executive may have in regard to (a) any ongoing
severance or employment obligations of Employer to Executive under the Agreement
or any other written agreement or arrangement between Employer and Executive,
including any bonus plan, benefit plan and other agreement or arrangement,
(b) any ongoing obligations of Employer to Executive under any written stock
option agreement, restricted stock award agreement, restricted stock unit award
agreement or other equity award agreement evidencing an option or other equity
award granted or awarded by Employer to Executive, (c) any indemnification
obligations of Employer to Executive as a former director, officer and/or
employee of Employer or any of its subsidiaries pursuant to Employer’s
certificate of incorporation or bylaws or any indemnification or other written
agreement, (d) any rights Executive may have under any directors and officers
liability insurance policy of Employer, and (e) any rights Executive may have
arising by virtue of his status as a stockholder of Employer.

Executive also acknowledges that he has read and understands Section 1542 of the
Pennsylvania Civil Code which reads as follows: “A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the

 

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release, which if known by him must have materially affected his settlement with
the debtor.” Executive hereby expressly waives and relinquishes all rights and
benefits under that section and any law of any jurisdiction of similar effect
with respect to any claims he may have against Employer.

Executive acknowledges that, among other rights, he is waiving and releasing any
rights he may have under ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which he was already entitled as an executive
of Employer. Executive further acknowledges that he has been advised, as
required by the Older Workers Benefit Protection Act, that: (a) the release and
waiver granted herein does not relate to claims under the ADEA which may arise
after this Release and Waiver is executed; (b) he should consult with an
attorney prior to executing this Release and Waiver; (c) he has twenty-one
(21) days in which to consider this Release and Waiver (although he may choose
voluntarily to execute this Release and Waiver earlier); (d) he has seven
(7) days following the execution of this Release and Waiver to revoke his
consent to this Release and Waiver; and (e) this Release and Waiver shall not be
effective until the eighth day after he executes this Release and Waiver and the
revocation period has expired (the “Effective Date”).

This Release and Waiver, including any referenced documents, constitutes the
complete, final and exclusive embodiment of the entire agreement between
Employer and Executive with regard to the subject matter hereof. Executive is
not relying on any promise or representation by Employer that is not expressly
stated herein. This Release and Waiver may only be modified by a writing signed
by both Executive and a duly authorized officer of Employer.

 

Date: ________________    By:  

 

     MICHAEL G. RUBIN

 

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