Exhibit 10.4


 


April 14, 2003


 


David Hodess


10818 Rochester Avenue 


Los Angeles, CA 90024


 


Dear Dave:


 


On behalf of GameFly, Inc. (the “Company”), I
am pleased to offer you the full time position of President and Chief Executive
Officer of the Company.


 


The terms of your new position with the Company are as set
forth below:


 


1.             Position.


 


a.     You will
become the President and Chief Executive Officer of the Company, working out of
the Company’s headquarters office in Santa Monica, California. You will report
to the Company’s Board of Directors and be a member of that same board so long
as you are the Chief Executive Officer of the Company.


 


b.      You
agree to the best of your ability and experience that you will at all times
loyally and conscientiously perform all of the duties and obligations required
of and from you pursuant to the express and implicit terms hereof, and to the
reasonable satisfaction of the Company. During the term of your employment, you
further agree that you will devote all of your business time and attention to
the business of the Company, the Company will be entitled to all of the
benefits and profits arising from or incident to all such work services and
advice, you will not render commercial or professional services of any nature
to any person or organization, whether or not for compensation, without the
prior written consent of the Company’s Board of Directors, and you will not
directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
letter agreement will prevent you from accepting speaking or presentation
engagements in exchange for honoraria or from serving on boards of charitable
organizations, or from owning no more than one percent (1%) of the outstanding
equity securities of a corporation whose stock is listed on a national stock
exchange.


 


2.             Start Date. Subject to fulfillment of any conditions imposed
by this letter agreement, you will commence this new position with the Company
as of April 28, 2003.


 


3.             Proof of
Right to Work. For
purposes of federal immigration law, you will be required to provide to the
Company documentary evidence of your identity and eligibility for employment in
the United States. Such documentation must be provided to us within three (3) business
days of your date of hire, or our employment relationship with you may be
terminated.


 

















 


4.             Compensation. You will be paid a monthly salary of $16,666.67 which is equivalent to
$200,000 on an annualized basis; Your salary will be payable pursuant to the
Company’s regular payroll policy (or in the same manner as other similarly
situated employees of the Company). Your base salary will be reviewed annually
as part of the Company’s normal salary review process. For the calendar year 2003,
you will also be eligible for a performance bonus targeted at $25,000 based on
meeting or exceeding certain performance objectives set by the Board of
Directors in consultation with you as soon as reasonably possible after your
Start Date.


 


5.             Stock Option Grant. In connection with the commencement of your employment, the Company will
recommend that the Board of Directors grant you an option to purchase 1,078,022
shares of the Company’s Common Stock (“Option Shares”) with an exercise price equal to the fair market value on the date of
grant. The Option Shares will vest as follows: 1/48th of the total number of
Option Shares shall vest on each monthly anniversary of your Vesting
Commencement Date (as defined in your Notice of Stock Option Grant, which will be
your Start Date as defined above). Vesting will, of course, depend on your
continued employment with the Company. In the event you are involuntarily
terminated without Cause (as defined below) or you voluntarily terminate your
own employment with the Company for Good Reason (as defined below), then 25% of
the total number of Option Shares shall immediately vest on such termination
date. In the event you are involuntarily terminated without Cause (as defined
below) in connection with or following a Change in Control (as defined below),
or you voluntarily terminate your own employment with the Company for Good
Reason (as defined below) in connection with or following a Change in Control,
then 25% of the total number of Option Shares shall immediately vest on such
termination date.


 


The option to purchase 164,375 shares of the Company’s
Common Stock previously granted to Mr. Hodess in his capacity as an
advisor to the Company (the “Advisor Option”) shall immediately vest in full as of the Start Date.


 


For purposes of this letter agreement, “Cause” shall mean: (i) your willful failure substantially to perform your
duties and responsibilities to the Company or deliberate violation of a Company
policy; (ii) your commission of any act of fraud, embezzlement, dishonesty
or any other willful misconduct that has caused or is reasonably expected to
result in material injury to the Company; (iii) unauthorized use or
disclosure by you of any proprietary information or trade secrets of the
Company or any other party to whom the you owe an obligation of nondisclosure
as a result of your relationship with the Company; or (iv) your willful
breach of any of your obligations under any written agreement or covenant with
the Company.


 


For purposes of this letter agreement, “Good Reason” for your resignation will exist if you resign in writing within 60 days
after the occurrence of any of the following without your written consent: (i) any
material reduction in your cash compensation; or (ii) a material reduction
in your duties and responsibilities with respect to the Company; or (iii) relocation
of your place of employment to a place that is more than fifty miles from the
previous Company location.


 


2

















 


For purposes of this letter agreement, “Change of
Control” means a sale of all or
substantially all of the Company’s assets, or any merger or consolidation of
the Company with or into another corporation other than a merger or
consolidation in which the holders of more than 50% of the shares of capital
stock of the Company outstanding immediately prior to such transaction continue
to hold (either by the voting securities remaining outstanding or by their
being converted into voting securities of the surviving entity) more than 50%
of the total voting power represented by the voting securities of the Company,
or such surviving entity, outstanding immediately after such transaction.


 


6.             Stock Options. Subject to the discretion of the Company’s Board of Directors, you may
be eligible to receive grants of stock options or purchase rights from time to
time in the future, on such terms and subject to such conditions as the Board
of Directors shall determine as of the date of any such grant.


 


7.             Benefits.


 


a.             Insurance Benefits. The Company will provide you with the opportunity to participate in the
standard benefits plans currently available to other similarly situated
employees subject to any eligibility requirements imposed by such plans.


 


b.             Vacation; Sick Leave. You will be entitled to 15 days paid vacation per year, pro-rated for
the remainder of this calendar year. Vacation accrues according to the
Company’s regular vacation accrual policy available to other similarly situated
employees. Vacation may not be taken before it is accrued. In addition, you
will be entitled to take up to 5 sick days per calendar year.


 


8.             Severance
Benefit. You
will be entitled to receive benefits upon termination of your employment with
the Company as described below. Your entitlement to these severance benefits
will be conditioned upon your execution and delivery to the Company of (i) a
general release of all claims, and (ii) a resignation from all of your
positions with the Company.


 


If your employment is
involuntarily terminated by the Company for any reason other than Cause or if
you resign your employment for Good Reason, you will be entitled to receive a
severance benefit equal to 4 months of your then-current base salary. This
severance benefit will be paid over the 4-month period following your termination
date on the Company’s normal payroll dates. In addition, during the severance
period, the Company will reimburse you for the expenses you incur in continuing
your medical coverage under COBRA, provided that you make a timely election for
such continued coverage.


 


9.             Confidential
Information and Invention Assignment Agreement. Your acceptance of this offer and commencement of
employment with the Company is contingent upon the execution, and delivery to
an officer of the Company, of the Company’s Confidential Information and
Invention Assignment Agreement, a copy of which is enclosed for your review and
execution (the “Confidentiality Agreement”), prior to or on your Start Date.


 


3

















 


10.           At-Will
Employment. Your employment with the
Company will be on an “at will” basis, meaning that either you or the Company
may terminate your employment at any time for any reason or no reason, without
further obligation or liability.


 


11.           Series B
Financing Contingency. Your obligations
under this letter agreement following execution hereof are contingent upon the
Company’s fully-diluted capitalization upon the closing of its Series B
Preferred Stock financing (assuming $4.0 million in proceeds with Sequoia
Capital as the investor) being no more than 11,978,022 shares.


 


[Signature Page Follows]


 


4














 





 


To
indicate your acceptance of the Company’s offer, please sign and date this
letter in the space provided below and return it to me, along with
a signed and dated copy of the Confidentiality Agreement. This letter, together
with the Confidentiality Agreement, set forth the terms of your employment with
the Company and supersede any prior representations or
agreements, whether written or oral. This 1etter may not be modified or
amended except by a written agreement, signed by the Company and by you.


 




	
  Very
  truly yours,

  	
   

  	
  ACCEPTED
  AND AGREED:

  
	
   

  	
   

  	
   

  
	
  GAMEFLY,
  INC.

  	
   

  	
  DAVID
  HODESS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  Sean Spector

  	
   

  	
  /s/
  David A. Hodess

  
	
   

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:  

  	
  Founder/VP

  	
   

  	
  4.14.03

  
	
   

  	
   

  	
   

  	
  Date

  






 


Attachment
A: Confidential Information and Invention Assignment Agreement


 


3000 Ocean Park Blvd., Ste. 2014, Santa Monica, CA 90405


Tel: (310) 664-6400 Fax: (310) 664-6788


www.gamefly.com


 


5














 


Attachment A

Confidential Information and Invention Assignment Agreement


 

















 


December 9, 2008


 


David Hodess


10818 Rochester Avenue 


Los Angeles, CA 90024


 


 


Re:          OFFER
LETTER 


 


Dear Dave:


 


You and GameFly, Inc. (the “Company”) signed an offer letter, which you
accepted on April 14, 2003 (the “Offer
Letter”). This letter agreement amends
the Offer Letter in order for the cash severance payments under the Offer
Letter to be exempt from or comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”). Except as otherwise
amended in this letter agreement, the Offer Letter remains in full force and
effect.


 


Specifically, this letter agreement amends and restates Section 8
of the Offer Letter to read in its entirety as follows:


 


8.             Severance
Benefit. If you experience an
Involuntary Termination (as defined below), provided that you satisfy the
Conditions (as defined below) within the Deadline (as defined below), you will
receive continued payment of your base salary at the rate then in effect and
the Company will reimburse your COBRA premiums for a period of four (4) months.
As a condition to receiving such salary continuation payments and reimbursement
of COBRA premiums described in this paragraph, you will be required to execute
a general release of all claims in the form prescribed by the Company (the “Release”) and return all Company property (collectively, the “Conditions”), in each case within thirty (30) days following the Separation (the “Deadline”). The salary continuation payments will be paid in accordance with the
Company’s regular payroll schedule at the same payment rate as was in effect on
the Separation (as defined below) date, commencing on the Company’s first
regular payroll date following the last day of the Deadline. The Company’s
reimbursement of your COBRA premiums will apply retroactively to the first date
on which you lost health care coverage as an employee of the Company.


 


For all purposes under this letter agreement, “Involuntary
Termination” means that you experience an
involuntary separation, as defined in Treasury Regulation 1.409A-1(h) (“Separation”), by the Company for a reason that is other than for Cause, death or
Permanent Disability (as defined below) or by you for Good Reason (as defined
below).


 


For all purposes under this letter agreement, “Permanent
Disability” means your inability to perform
the essential functions of your position with or without reasonable
accommodation for a period of one hundred twenty (120) consecutive days because
of your physical or mental impairment.


 

















 


For
all purposes under this letter agreement, “Good Reason” means: (i) any
material reduction of your base compensation from that which was in effect
immediately prior to the reduction, (ii) a material reduction in your
duties and responsibilities with respect to the Company, or (iii) the
relocation of your place of employment to a place that is more than fifty (50)
miles from the previous Company location. Notwithstanding the foregoing, the
conditions described in this paragraph will constitute “Good Reason” only if (i) you
give the Company written notice of one of the conditions described in this
paragraph within thirty (30) days after the condition comes into existence; (ii) the
Company fails to remedy such condition within fifteen (15) days after receiving
your written notice; and (iii) after the Company’s failure to remedy such
condition within the previously described fifteen (15)-day period, you resign
in writing from the Company within sixty (60) days after such condition has come
into existence without your consent.


 


For
purposes of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), each salary continuation payment that is paid as severance
pay, as described above, is hereby designated as a separate payment.
Notwithstanding anything stated herein to the contrary, each of the salary
continuation payments provided in connection with your Involuntary Termination
is intended to be exempt from Code Section 409A pursuant to Treasury
Regulation Section 1.409A-1(b)(9)(iii) and to the extent it is exempt
pursuant to such section, it will in any event be paid no later than the last
day of your second (2nd) taxable year following the taxable year in which your
Involuntary Termination has occurred; provided that, to the extent that any of
such salary continuation payments and any other payments paid to you in
connection with your Involuntary Termination does not qualify to be exempt from
Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) or
otherwise exceeds the limit set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A) or
any similar limit promulgated by the Treasury or the IRS, the portion of the
salary continuation payments that does not qualify or otherwise exceeds such
limit, as determined by the Company in its sole discretion, will be paid by no
later than the fifteenth (15th) day of the third (3rd) month following the end
of your first (1st) tax year in which your Involuntary Termination occurs, or,
if later, the fifteenth (15th) day of the third (3rd) month following the end
of the Company’s first (1st) tax year in which your Involuntary Termination
occurs, as provided in Treasury Regulation Section 1.409A-1(b)(4).


 


Notwithstanding
the above, if any of the salary continuation payments provided in connection
with your Involuntary Termination does not qualify for any reason to be exempt
from Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) or
Treasury Regulation Section 1.409A-1(b)(4) and you are deemed by the
Company at the time of your Involuntary Termination to be a “specified
employee,” as defined in Code Section 409A, each such salary continuation
payment will not be made or commence until the date which is the first (1st)
day of the seventh (7th) month after your Involuntary Termination and the
installments that otherwise would have been paid during the first six (6) months
after your Involuntary Termination will be paid in a lump sum on the first
(1st) day of the seventh (7th) month after your Involuntary Termination. Such
deferral will only be effected to the extent required to avoid adverse tax
treatment to you, including (without limitation) the additional twenty percent
(20%) federal tax for


 


2

















 


which you would otherwise be liable under Section 409A(a)(1)(B) of
the Code in the absence of such deferral.


 


In addition, the definition of “Good Reason” set forth in this letter agreement will only apply with respect to Section 8
of the Offer Letter.


 


This amendment to the Offer Letter may be executed in two
or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument. To indicate your
acceptance of this amendment to the Offer Letter, please sign and date this
letter in the space provided below and return it to me.


 




	
   

  	
   

  	
  Very truly yours, 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GAMEFLY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sean Spector

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Sean Spector 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: SVP

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  David Hodess

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ David A. Hodess

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  December 9,
  2008

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  






 


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