Document:

exv10w1

 

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

     THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the
20th day of December, 2004 (the “Effective Date”) by and between Gadzooks, Inc. (the “Company”) and
Monty Standifer (the “Executive”).

PRELIMINARY STATEMENTS

     A. The Company desires to employ Executive as Executive Vice President and Chief
Financial Officer (“CFO”), and Executive desires to be employed by the Company in said capacity;
and

     B. Each party desires to set forth in writing the terms and conditions of their understandings
and agreements.

     NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, the
Company hereby agrees to employ Executive and Executive hereby accepts such employment upon the
terms and conditions set forth in this Agreement and the Severance Agreement (as defined herein):

STATEMENT OF AGREEMENT

     1.      Position.

            (a)      The Company agrees to employ Executive in the position of Executive Vice President and
CFO. Executive shall serve and perform the duties which may from time to time be assigned to him
by the Chief Executive Officer (“CEO”) or the Board of Directors of the Company (the “Board”),
provided, however, that such duties shall be similar to the duties of an Executive Vice President
of a company of similar size and function as the Company.

            (b)      Executive agrees to serve as CFO and agrees that he will devote his best efforts and all
of his business time and attention to all facets of the business of the Company and will faithfully
and diligently carry out the duties of CFO. Executive agrees to comply with all Company policies in
effect from time to time, and to comply with all laws, rules and regulations, including, but not
limited to, those applicable to the Company.

            (c)      Executive agrees to travel as necessary to perform his duties under this Agreement.

     2.      Term. The initial term of this Agreement shall be one (1) year from the date
stated above (“Initial Term”), unless otherwise terminated pursuant to Section 5 of this Agreement.
This Agreement shall automatically renew for successive two (2) year terms unless either party
gives written notice of its or his intent not to renew this Agreement at least ninety (90) days
prior to the expiration of the Initial Term or the then-current term (the Initial Term and any
renewal thereof

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being the “Term”). Executive’s continued employment after the expiration of the
Initial Term shall be in accord with and governed by this Agreement, unless modified by the parties
to this Agreement, in writing.

     3.      Compensation & Benefits.

            (a)      Base Salary. The Company shall pay Executive a base salary of $20,000.00 per
month (“Base Salary”). The Board, or the Company’s Compensation Committee, if applicable, may
review and adjust Executive’s Base Salary periodically, but the salary shall not be reduced below
$20,000.00 per month during the Term.

            (b)      Bonus Opportunities. In addition to the Base Salary, Executive shall also be
eligible to receive a discretionary bonus based on exceptional service and/or the performance of
the Company, as determined by the Board, or the Company’s Compensation Committee, if applicable, in
the sole discretion of the Board or the Compensation Committee, as applicable (“Discretionary
Bonus”). In addition, during the Term, Executive shall be eligible to participate in any bonus,
incentive, and/or equity incentive plan provided by the Company to its executive level employees.
Executive shall receive stock options exercisable for 1.5% of the Common stock of the Company to be
outstanding immediately after the consummation of the Rights Offering (“Total Grant”). Such stock
options shall vest in equal one-third (1/3) increments at the end of each year after the effective
date of the Company’s plan of reorganization so long as Executive remains employed by Company.
Executive may exercise such options for five (5) years after the date they are granted. The
exercise price shall be equal to the volume weighted average price (“VWAP”) of the company’s common
shares over a 30-day period commencing on the 31st day after the effective date of the
Company’s plan of reorganization and ending on the 60th day after the effective date of
the Company’s plan of reorganization. The calculation of the VWAP shall be completed in the
ordinary and customary manner for making such calculations. In no event shall the exercise price
be less than the fair market value of the stock of the Company on the date of grant of the stock
option. The options will be granted pursuant to a stock option plan applicable to employees of the
Company generally. The obligations under this Section 3(b) are conditioned upon the Effective Date
of the Company’s Plan of Reorganization, as on file currently in the Bankruptcy Court.

            (c)      Payment. Payment of all compensation to Executive hereunder shall be made in
accordance with the terms of this Agreement and applicable Company policies in effect from time to
time, including normal payroll practices, and shall be subject to all applicable withholdings and
taxes.

            (d)      Benefits Generally. The Company shall make available to Executive, throughout the
Term of this Agreement, such benefits, if any, as are generally provided by the Company to its
executive level employees, including but not limited to any group life, health, dental, vision,
disability or accident insurance (any such insurance coverage shall begin on the first of the month
of the first month after Executive completes his ninetieth (90th) day of employment with
the Company), pension plan, profit-sharing plan, retirement savings plan, 401(k) plan participation
ability beginning January 1, 2006, an automobile allowance of $1,000 per month, or other such
benefit plan or policy that may presently be in effect or that may

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hereafter be adopted during the
Term by the Company for its executive level officers and key management personnel;
provided, however, that nothing herein contained shall be deemed to require the
Company to adopt or maintain any particular plan or policy.

            (e)      Vacation. Executive shall be entitled to paid vacation during each calendar year,
consistent with the policies then applicable to executive level officers of the Company, but in no
event fewer than two (2) weeks.

            (f)      Holidays. Executive shall further be entitled to paid holidays, personal days and
sick days consistent with the policies then applicable to executive level officers of the Company.

            (g)      In Lieu of KERP. It is expressly understood that the compensation and benefits
provided to Executive herein shall be in lieu of any participation in the Key Employee Retention
Plan previously approved by the United States Bankruptcy Court for the Northern District of Texas
in favor of the Company’s management.

     4.      Reimbursement of Expenses. The Company shall reimburse Executive for all business
related expenses, which are reasonable and necessary and are incurred by Executive while performing
his duties under this Agreement, upon presentation of expense statements, receipts and/or vouchers,
or such other information and documentation as the Company may reasonably require. The Company
shall reimburse Executive for the aforementioned business related expenses within thirty (30) days
after he has submitted the required documentation to the Company. Any trip, or combination of
expenditures exceeding $3,000 must be approved in writing by the CEO prior to incurring such
expense. Executive shall provide the CEO with, upon reasonable request, an explanation of the
purpose of any particular business related expense and an estimate of the cost of the same, prior
to incurring any expense related to the same. The CEO reserves the right to reject any business
related expense.

     5.      Termination. This Agreement and Executive’s employment with the Company are
subject to termination as set forth in that certain Severance Protection Agreement by and between
the Company and the Executive, dated as of the date hereof (the “Severance Agreement”). Upon
termination or expiration of this Agreement or the Severance Agreement for any reason, Executive’s
employment shall also terminate and cease.

     6.      Release. The Executive agrees that after termination of employment for any reason
payment of any severance pay or benefits hereunder or under the Severance Agreement is conditioned
upon the execution of a full, general release in favor of the Company, its officers, directors,
employees, and representatives (“Release”) in a form acceptable to the Company.

     7.      Nondisclosure.

            (a)      The Company shall provide Executive, immediately after executing this Agreement, some or
all of the Company’s various trade secrets and confidential or proprietary information (the
“Confidential Information”), including information he has not received before. Confidential
Information consists of, but is not limited to, information relating to (i) business

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operations and
methods, (ii) existing and proposed business strategies, (iii) financial performance, (iv)
compensation arrangements and amounts (whether relating to the Company or to any of its employees,
including the CEO), (v) contractual relationships (including the terms of this Agreement), (vi)
business partners and relationships, (vii) shareholders of the Company, (viii) marketing
strategies, (ix) lists with information related to existing or prospective customers, vendors,
suppliers, service providers, partners or investors, including, but not limited to particular
business objectives, and (x) computerized business approaches, methodologies, systems or programs,
mathematical models, simulated results, simulation software, price or research databases, other
research, algorithms, numerical techniques, analytical results, technical data, regardless of the
medium in which any such information is contained. Confidential Information shall not include: (1)
information that Executive may furnish to third parties regarding his obligations under Sections 7
and 8 or (2) information that (A) becomes generally available to the public by means other than
Executive’s breach of Section 7 (for example, not as a result of Executive’s unauthorized release
of marketing materials), (B) that is in Executive’s possession, or becomes available to Executive,
on a non-confidential basis, from a source other than the Company, or (C) that Executive is
required by law, regulation, court order or discovery demand to disclose; provided, however, that
in the case of clause (C), Executive gives the Company reasonable notice prior to the disclosure of
the Confidential Information and the reasons and circumstances surrounding such disclosure to
provide the Company an opportunity to seek a protective order or other appropriate request for
confidential treatment of the applicable Confidential Information.

            (b)      Executive agrees that all Confidential Information, whether prepared by Executive or
otherwise coming into his possession, shall remain the exclusive property of the Company during
Executive’s employment with the Company. Executive agrees that he will use the Confidential
Information for the sole benefit of the Company and that he will exercise all reasonable measures
to maintain it as confidential. Executive further agrees that Executive shall not, without the
prior written consent of the Company, publish or disclose to any third party or use for the benefit
of any third party or of Executive any of the Confidential Information described herein, directly
or indirectly, either during Executive’s employment with the Company or at any time following the
termination of Executive’s employment with the Company.

            (c)      Upon termination or expiration of this Agreement for any reason, Executive agrees that all
Confidential Information and other files, documents, materials, records, notebooks, customer lists,
business proposals, contracts, agreements and other repositories containing information concerning
the Company or the business of the Company (including all copies thereof) in Executive’s
possession, custody or control, whether prepared by Executive or others, shall remain with or be
returned to the Company promptly (within twenty-four (24) hours) after the termination or
expiration date.

     8.      Noncompete and Nonsolicitation.

            (a)      Business Relationships and Goodwill. Executive acknowledges and agrees that as an
employee and representative of the Company, Executive will be given Confidential Information.
Executive acknowledges and agrees that this creates a special relationship of trust and confidence
between the Company, Executive and the Company’s current and prospective

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customers, business
partners, consumers, suppliers, shareholders, vendors, and investors. Executive further
acknowledges and agrees that there is a risk and opportunity for any person given such
responsibility, specialized training, and Confidential Information, to misappropriate the
relationship and goodwill existing between the Company and the Company’s current and prospective
customers, business partners, consumers, suppliers, shareholders, vendors and investors. Executive
therefore acknowledges and agrees that it is fair and reasonable for the Company to take steps to
protect itself from the risk of such misappropriation. In consideration of the Company’s promise
to provide Confidential Information to Executive, this Agreement, and the severance payments to be
made under the Severance Agreement, and in order to protect the Company’s interests in the
Confidential Information and special relationships, Executive agrees to the following
noncompetition and nonsolicitation covenants.

            (b)     Scope of Noncompetition Obligation.

                 (i)      Executive acknowledges and agrees that the period of twelve (12) months following the
termination or expiration of this Agreement for any reason, will constitute the non-compete,
non-solicit and non-divert period (the “Non-Interference Period”). During his employment and
during the Non-Interference Period, Executive will not engage in duties or provide services to a
Competitor which are substantially similar to those Executive provided to the Company under this
Agreement, in any capacity, within the United States. The term “Competitor” means another retail
business with a business model similar to the Company’s, engaged in the sale of apparel or other
products similar to those sold or marketed by the Company or any product lines or lines of business
under development or consideration by the Company during the Term; provided, however, a general
department store that includes as less than 10% of its sales revenues merchandise competitive with
that offered by the Company will not be deemed a Competitor.

                 (ii)      Executive acknowledges and agrees that he shall not at any time during his employment
divert away or attempt to divert away any business from the Company to another company, business,
or individual. Additionally, Executive shall not, during the Non-interference Period, contact,
solicit, attempt to solicit, divert away, or attempt to divert away business, either directly or
indirectly, from any customer, vendor, service provider, or supplier who conducts business with the
Company at any time during the Term of this Agreement and who Executive contacted, solicited,
serviced, or had access to Confidential Information about.

                 (iii)      During the Term and during the Non-Interference Period, Executive agrees and covenants
that, without the prior written approval of the Board, Executive will not, directly or indirectly,
either as an individual or as an employee, partner, officer, director, shareholder, advisor, or
consultant or in any other capacity whatsoever of any entity (A) recruit, hire, assist others in
recruiting or hiring, discuss employment with, or refer to others for employment, any person who
is, or within the six month period immediately preceding the date of any such activity was, an
employee, representative or agent of Company or its affiliates; or to otherwise entice or induce
such person to terminate his or her relationship with the Company, (B) approach any such person for
any of the foregoing purposes; (C) authorize, solicit or assist in the taking of such actions by
any third party, or (D) hire or retain any such person.

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            (c)      Acknowledgement. Executive acknowledges that the compensation, specialized
training, and the Confidential Information provided to Executive pursuant to this Agreement gives
rise to the Company’s interest in restraining Executive from competing with the Company, that the
noncompetition and nonsolicitation covenants are designed to enforce such consideration and that
any limitations as to time, geographic scope and scope of activity to be restrained as defined
herein are reasonable and do not impose a greater restraint than is necessary to protect the
goodwill or other business interest of the Company.

            (d)      Consent to Disclosure. Executive agrees that if he engages in any employment
during the Non-Interference Period, he will notify the Company of the identity and address of each
of his employers and of the nature of such employer’s business. Executive consents and agrees that
the Company can contact any of Executive’s subsequent employers or prospective employers and inform
such entities of Executive’s obligations under Sections 7 and 8 of this Agreement.

            (e)      Survival of Covenants. Sections 7 and 8 shall survive the expiration or
termination of this Agreement for any reason. Executive agrees not to challenge the enforceability
and/or the scope of Sections 7 and 8. Executive further agrees to notify all future persons or
businesses, with which he becomes affiliated with or employed by, of the restrictions set forth in
Sections 7 and 8, prior to the commencement of any such affiliation or employment.

     9.      Severability and Reformation. If any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect, and the invalid, void or
unenforceable provisions shall be deemed severable. Moreover, if any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be reformed by limiting and reducing it to the
minimum extent necessary, so as to be enforceable to the extent compatible with the applicable law
as it shall then appear.

     10.      Entire Agreement. This Agreement, the Severance Agreement set forth the entire
agreement between the parties hereto and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the subject matter
hereof, including such terms and conditions set forth in that certain offer letter from the Company
to Executive dated as of September 20, 2004.

     11.      Notices. All notices and other communications required or permitted to be given
hereunder or in the Severance Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally, mailed by certified mail (return receipt requested) or sent by
overnight delivery service, or electronic mail, or facsimile transmission (with electronic
confirmation of successful transmission) to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice, in order of preference of the
recipient:

	 	 	 
	If to the Company:
	 	Gadzooks, Inc.
	
	 	4121 International Parkway
	
	 	Carrollton, Texas 75007

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	 	Attention: Chief Executive Officer
	
	 	Facsimile: 972-662-4290
	 
	With a copy to:
	 	Chairman of the Compensation
Committee of the Board of Directors
	
	 	c/o Gadzooks, Inc.
	
	 	4121 International Parkway
	
	 	Carrollton, Texas 75007
	
	 	Facsimile: 972-662-4290
	 
	If to Executive:
	 	Monty Standifer
	
	 	1829 Kinsale Drive
	
	 	Roanoke, Texas 76262
	
	 	Facsimile: 817-741-1840

Notice so given shall, in the case of mail, be deemed to be given and received on the fifth
calendar day after posting, in the case overnight delivery service, on the date of actual delivery
and, in the case of facsimile transmission, telex or personal delivery, on the date of actual
transmission or, as the case may be, personal delivery.

     12.      Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of Texas, without regard to any conflict of laws rule or principle which
might refer the governance or construction of this Agreement to the laws of another jurisdiction.

     13.      Assignment. This Agreement is personal to Executive and may not be assigned in
any way by Executive without the prior written consent of the Company. The Company may assign its
rights and obligations under this Agreement.

     14.      Counterparts. This Agreement may be executed in counterparts, each of which will
take effect as an original, and all of which shall evidence one and the same Agreement.

     15.      Amendment. This Agreement may be amended only in a writing signed by Executive
and by a representative of the Company authorized by the Board (other than Executive).

     16.      Construction. The headings and captions of this Agreement are provided for
convenience only and are intended to have no effect in construing or interpreting this Agreement.
The language in all parts of this Agreement shall be in all cases construed in accordance to its
fair meaning and not strictly for or against the Company or Executive.

     17.      Non-Waiver. The failure by either party to insist upon the performance of any one
or more terms, covenants or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any right granted hereunder or of any future performance of any such term,
covenant or condition, and the obligation of either party with respect hereto shall continue in
full force and effect, unless such waiver shall be in writing signed by the Company (other than
Executive) and the Executive.

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     18.      Announcement. Company shall have the right to make public announcements
concerning the execution of this Agreement and the terms contained herein, at the Company’s
discretion.

     19.      Use of Name, Likeness and Biography. Company shall have the right (but not the
obligation) to use, publish and broadcast, and to authorize others to do so, the name, approved
likeness and approved biographical material of Executive to advertise, publicize and promote the
business of Company and its affiliates, but not for the purposes of direct endorsement, and for use
in any filings with the Securities Exchange Commission as may be required by rules and regulations
of the Securities Exchange Commission or any applicable listing standards, without Executive’s
consent. This right shall terminate upon the termination or expiration of this Agreement for any
reason. An “approved likeness” and “approved biographical material” shall be, respectively, any
photograph or other depiction of Executive, or any biographical information or life story
concerning the professional career of Executive.

     20.      Right to Insure. Company shall have the right to secure, in its own name or
otherwise, and at its own expense, life, health, accident or other insurance covering Executive,
and Executive shall have no right, title or interest in and to such insurance. Executive shall
assist Company in procuring such insurance by submitting to examinations and by signing such
applications and other instruments as may be required by the insurance carriers to which
application is made for any such insurance.

     21.      Assistance in Litigation. During his employment and following the termination of
his employment for any reason, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or that may be brought in the future
against or on behalf of the Company that relate to events or occurrences that transpired while
Executive was employed by the Company. Executive’s cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Company at mutually convenient times.
Executive also shall cooperate fully with the Company in connection with any investigation or
review by any federal, state, or local regulatory authority as any such investigation or review
relates, to events or occurrences that transpired while Executive was employed by the Company.
During the Non-Interference Period, the Company will pay Executive’s reasonable out-of-pocket
expenses incurred in connection with such assistance. Following the Non-Interference Period, the
Company will pay Executive an agreed upon hourly rate for Executive’s cooperation pursuant to this
Section 21. Executive’s obligations under this Section 21 shall survive the termination or
expiration of this Agreement.

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     22.      No Inconsistent Obligations. Executive represents and warrants that to his
knowledge he has no obligations, legal, in contract, or otherwise, inconsistent with the terms of
this Agreement or with his undertaking employment with the Company to perform the duties described
herein. Executive will not disclose to the Company, or use, or induce the Company to use, any
confidential, proprietary, or trade secret information of others. Executive represents and warrants
that to his knowledge he has returned all property and confidential information belonging to all
prior employers, if he is obligated to do so.

     23.      Binding Agreement. This Agreement shall inure to the benefit of and be binding
upon Executive, his heirs and personal representatives, and the Company, its successors and
assigns.

     24.      Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be resolved by arbitration administered by the American
Arbitration Association (“AAA”) under its Commercial Arbitration Rules. AAA’s Optional Rules for
Emergency Measures of Protection shall also apply to the proceedings. The arbitration will take
place in Dallas, Texas. All disputes shall be resolved by one (1) arbitrator. The arbitrator will
have the authority to award the same remedies, damages, and costs that a court could award
(including, but not limited to, injunctive relief, declaratory relief, specific performance, and
damages). The arbitrator shall issue a reasoned award explaining the decision, the reasons for the
decision, and any damages awarded. The arbitrator’s decision will be final and binding. The
judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration proceedings, any record of the same, and the award shall be considered
Confidential Information under this Agreement. This provision can be enforced under the Federal
Arbitration Act.

     25.      Enforcement of Sections 7 and 8. Notwithstanding Section 24, the parties
recognize and agree that in the event of an actual or threatened breach of Section 7 or 8 of this
Agreement, money damages would be inadequate and the Company would not have an adequate remedy at
law. Accordingly, the Company may at its option, in addition and supplementary to other rights and
remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief to enforce or prevent any actual or
threatened breach of Section 7 or 8 (without posting a bond or other security). In addition,
Executive agrees that in the event a court of competent jurisdiction or an arbitrator finds that
Executive violated Sections 7 or 8, the time periods set forth in those Sections shall be tolled
until such breach or violation has been cured. Executive further agrees that the Company shall
have the right to offset the amount of any damages resulting from a breach by Executive of Sections
7 or 8 against any payments due Executive under this Agreement and/or the Severance Agreement. The
parties agree that if Executive is found to have breached Section 7 or 8, he shall be required to
pay the Company’s attorney’s fees and costs incurred in prosecuting the violation.

     26.      Voluntary Agreement. Each party to this Agreement has read and fully understands
the terms and provisions hereof, has had an opportunity to review this Agreement with legal
counsel, has executed this Agreement based upon such party’s own judgment and advice of counsel (if
any), and knowingly, voluntarily, and without duress, agrees to all of the terms set forth in this
Agreement. The parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if

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drafted jointly by the parties and no presumption or burden of proof will arise
favoring or disfavoring any party because of authorship of any provision of this Agreement. Except
as expressly set forth in this Agreement, neither the parties nor their affiliates, advisors and/or
their attorneys have made any representation or warranty, express or implied, at law or in equity
with respect of the subject matter contained herein. Without limiting the generality of the
previous sentence, the Company, its affiliates, advisors, and/or attorneys have made no
representation or warranty to Executive concerning the state or federal tax consequences to
Executive regarding the transactions contemplated by this Agreement.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the Company and Executive have executed this Agreement, effective as of
the day and year first above written.

	 	 	 	 	 
	 	 	COMPANY:

 

GADZOOKS, INC.
	 	 	 	 	 
	Dated: December 20, 2004	 	
By:

 
Name:
Title:
	 	/s/ Gerald R. Szczepanski

Gerald R. Szczepanski

Chief Executive Officer and Chairman of the Board
	 	 	 	 	 

	 	 	 
	 	 	
EXECUTIVE:
	 	 	 
	Dated: December 20, 2004	 	
/s/ Monty Standifer

Monty Standifer
	 	 	
ADDRESS:

1829 Kinsale Drive

Roanoke, Texas  76262

 

EXHIBIT A

Releaseexv10w2

 

Exhibit 10.2

SEVERANCE PROTECTION AGREEMENT

     THIS AGREEMENT made as of December 20, 2004, by and between Gadzooks, Inc. (the “Company”) and
Monty Standifer (the “Executive”).

     WHEREAS, the Board of Directors of the Company (the “Board”) and the Executive desire to enter
into this Agreement as a condition to the Executive’s employment with the Company and to provide
certain benefits to the Executive upon the termination of employment of the Executive under certain
conditions and upon termination of that certain Executive Employment Agreement by and between the
Company and the Executive, dated as of the date hereof (the “Employment Agreement”);

     WHEREAS, in order to induce the Executive to accept a position with the Company, the Company
desires to enter into this Agreement and the Employment Agreement with the Executive to provide the
Executive with certain benefits in the event the Executive’s employment is terminated under certain
conditions, including as a result of, or in connection with, a Change of Control (as defined
herein); and

     WHEREAS, by entering into this Agreement and the Employment Agreement, the Executive will
agree to certain restrictions on his ability to compete with the Company or solicit employees of
the Company following his termination of employment, and the Company will benefit from said
restrictions. Defined terms used herein and not otherwise defined herein shall have the meaning
set forth in the Employment Agreement.

     NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein,
it is agreed as follows:

     1.      Termination.

            (a)      Termination by Either Party. Either Executive or the Company may terminate the
Employment Agreement for any reason upon thirty (30) days written notice (the “Notice Period”). If
Executive terminates the Employment Agreement pursuant to this Section 1(a), the Company will pay
Executive all accrued but unpaid Base Salary and earned bonus amounts through the termination date,
if any (“Accrued Compensation”). If the Company terminates the Employment Agreement pursuant to
this Section 1(a), the Company shall pay Executive: (1) his Accrued Compensation, and, if the
termination is for reasons other than “Cause”, “Death”, or “Disability”, as defined below, (2) an
additional severance payment equal to one year of Executive’s Base Salary then in effect,
calculated from the date the Company gives written notice of termination to Executive (the
“Additional Severance Payment”). If the Company terminates the Employment Agreement pursuant to
this Section 1(a), after the effective date of a confirmed plan of reorganization in the Company’s
bankruptcy case, then the amount of the Additional Severance Payment will be multiplied by two (2).
Any Additional Severance Payment will be paid out in equal monthly installments during the
Non-Interference Period. In addition, if the Company terminates the

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Employment Agreement pursuant
to this Section 1(a), the stock options, if any, that would otherwise vest at the end of the year
in which the Executive is terminated, pursuant to paragraph 3(b) of the Employment Agreement, shall
fully vest upon termination pursuant to this paragraph. Any Additional Severance Payment shall be
reduced by the amount of compensation that Executive earns from any subsequent employer or through
self employment during the Non-Interference Period.

            (b)      Termination by the Company for Cause. The Company may terminate the Employment
Agreement at any time for Cause. Upon termination by the Company for Cause, Executive shall only
be entitled to his Accrued Compensation. “Cause” means any of the following:

                 (1)      Executive’s commission of theft, embezzlement, any other act of material dishonesty
relating to his employment with the Company or any violation of any law, rules or regulation
applicable to the Company, including, but not limited to, those established by the Securities and
Exchange Commission, or any self-regulatory organization having jurisdiction or authority over
Executive or the Company;

                 (2)      The Board’s reasonable determination that the Executive has committed a criminal act
involving fraud, dishonesty, misappropriation or moral turpitude or the Board’s reasonable
determination that the Executive has committed an act that would harm the reputation of the Company
in its business relationships or the financial markets;

                 (3)      Executive’s conviction of, or pleading guilty or nolo contendere to, a felony or to any
lesser crime having as its predicate element fraud, dishonesty, misappropriation or moral
turpitude;

                 (4)      A reasonable determination by the Company that Executive has materially failed to perform
his duties and obligations under the Employment Agreement (other than during any period of
disability) which failure to perform is not remedied within thirty (30) days after written notice
thereof to the Executive by the Company; or

                 (5)      Executive’s commission of an act or acts in the performance of his duties under the
Employment Agreement amounting to gross negligence or willful misconduct, including, but not
limited to, any breach of Sections 7 or 8 of the Employment Agreement.

            (c)      Termination by Executive for Good Reason. Executive may terminate the Employment
Agreement for Good Reason, and thereby resign his employment, after providing thirty (30) days’
prior written notice to the Company. Upon termination of this Agreement for Good Reason, as
defined herein, Executive shall be entitled to receive the Accrued Compensation and Additional
Severance Payment due at the date of such termination. “Good Reason” means any of the following
reasons:

                 (1)      Following a Change of Control which results in a substantial diminution of Executive’s
duties and responsibilities or a any material reduction of Executive’s Base Salary then in effect;
or

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                 (2)      Executive’s removal from his position as Executive Vice President and CFO, other than for
Cause or by death or disability, as set forth in Sections 1(d) and (e), during the Term; or

                 (3)      The Company failed to make any payment to Executive required to be made under the terms of
the Employment Agreement, if the breach is not cured within twenty (20) days after Executive
provides written notice to the Company which provides in reasonable detail the nature of the
payment; or

                 (4)      Following the adoption or commencement of a plan of complete liquidation or dissolution of
the Company.

As used herein, “Change of Control” shall mean any event, including any sale of more than fifty
percent (50%) of the capital stock of the Company or more than fifty percent (50%) of the assets of
the Company or any merger, conversion or consolidation of the Company, that results in any person
or entity (or persons or entities acting in concert) acquiring the ability to elect a majority of
the members of the Board, which lacked the ability to elect a majority of the members of the Board
prior to the event. Provided however, no Change of Control shall be deemed to have occurred unless
and until such person or entity exercises its authority to actually change the membership of the
majority of the Board. It is expressly understood that a Change of Control shall not be deemed to
occur as a result of the confirmation of a plan of reorganization in the Company’s bankruptcy case
or as a result of any actions or transactions undertaken or required in conjunction with the terms
of such confirmed plan or as a result of any action in any related transaction. Specifically, and
without excluding any other actions excluded by the proceeding sentence, no Change of Control will
be deemed to occur at or through the appointment of the Company’s post-confirmation board of
directors.

            (d)      Disability. The Company may terminate the Employment Agreement at any time if
Executive shall be deemed by the Board to have sustained a “disability.” Executive shall be deemed
to have sustained a “disability” if he shall have been unable to perform his duties for a period of
more than ninety (90) days in any twelve (12) month period. Upon termination of the Employment
Agreement for disability, the Company shall pay Executive his Accrued Compensation.

            (e)      Death. The Employment Agreement will terminate automatically upon Executive’s
death. Upon termination of the Employment Agreement because of Executive’s death, the Company
shall pay Executive’s estate his Accrued Compensation.

            (f)      Termination COBRA Payment. Upon termination of the Employment Agreement for any
reason by the Company pursuant to Section 1(a), the Executive pursuant to Section 1(c), and
termination of the Employment Agreement pursuant to Section 1(d), the Company shall pay the cost to
Executive as such costs become due for continuation coverage under COBRA (hereinafter referred to
as the “Termination COBRA Payments”) during the Continuation Period (as hereafter defined). If and
when the COBRA coverage ceases during the Continuation Period, the Company will reimburse Executive
for comparable coverage as received under COBRA during the reminder of the Continuation Period.
The “Continuation Period” shall be the period commencing on the date of termination of the
Employment Agreement and ending on the earlier of the date

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Executive becomes employed by another
employer or twelve (12) months after the date of termination or expiration of the Employment
Agreement for any reason. Executive acknowledges and agrees to give the Company written notice of
receipt of an offer of employment.

            (g)      Employment. Upon termination or expiration of the Employment Agreement for any
reason, Executive’s employment shall also terminate and cease.

            (h)      Transition Period. Upon termination or expiration of the Employment Agreement for
any reason, and for a period of ninety (90) days thereafter (the “Transition Period”), Executive
agrees to make himself available to assist the Company with transition projects assigned to him by
the Board. Executive will be paid at an agreed upon hourly rate for any work performed for the
Company during the Transition Period.

     2.      Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be provided as set forth in the Employment Agreement.

     3.      Governing Law. This Agreement will be governed by and construed in accordance with
the laws of the State of Texas, without regard to any conflict of laws rule or principle which
might refer the governance or construction of this Agreement to the laws of another jurisdiction.

     4.      Assignment. This Agreement is personal to Executive and may not be assigned in
any way by Executive without the prior written consent of the Company. The Company may assign its
rights and obligations under this Agreement.

     5.      Counterparts. This Agreement may be executed in counterparts, each of which will
take effect as an original, and all of which shall evidence one and the same agreement.

     6.      Amendment. This Agreement may be amended only in a writing signed by Executive
and by a representative of the Company duly authorized by the Board (other than Executive).

     7.      Construction. The headings and captions of this Agreement are provided for
convenience only and are intended to have no effect in construing or interpreting this Agreement.
The language in all parts of this Agreement shall be in all cases construed in accordance to its
fair meaning and not strictly for or against the Company or Executive.

     8.      Non-Waiver. The failure by either party to insist upon the performance of any one
or more terms, covenants or conditions of this Agreement or the Employment Agreement shall not be
construed as a waiver or relinquishment of any right granted hereunder or of any future performance
of any such term, covenant or condition, and the obligation of either party with respect hereto
shall continue in full force and effect, unless such waiver shall be in writing signed by the
Company (other than Executive) and the Executive.

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     9.      Binding Agreement. This Agreement shall inure to the benefit of and be binding
upon Executive, his heirs and personal representatives, and the Company, its successors and
assigns.

     10.      Entire Agreement. This Agreement and the Employment Agreement set forth the
entire agreement between the parties hereto and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the subject matter
hereof, including such terms and conditions set forth in that certain offer letter from the Company
to Executive dated as of September 20, 2004.

     11.      Arbitration. The parties agree that any controversy or claim arising out of or
relating to this Agreement or the Employment Agreement, or the breach thereof, shall be resolved by
arbitration administered by the American Arbitration Association (“AAA”) under its Commercial
Arbitration Rules. AAA’s Optional Rules for Emergency Measures of Protection shall also apply to
the proceedings. The arbitration will take place in Dallas, Texas. All disputes shall be resolved
by one (1) arbitrator. The arbitrator will have the authority to award the same remedies, damages,
and costs that a court could award, and will have the additional authority to award those remedies
set forth in Section 24 of the Employment Agreement. The arbitrator shall issue a reasoned award
explaining the decision, the reasons for the decision, and any damages awarded, including those set
forth in Section 24 of the Employment Agreement, where the arbitrator finds Executive violated
Sections 7 or 8 of the Employment Agreement. The arbitrator’s decision will be final and binding.
The judgment on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitration proceedings, any record of the same, and the award shall be
considered Confidential Information under this Agreement and the Employment Agreement. This
provision can be enforced under the Federal Arbitration Act.

     12.      Severability and Reformation. If any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect, and the invalid, void or
unenforceable provisions shall be deemed severable. Moreover, if any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be reformed by limiting and reducing it to the
minimum extent necessary, so as to be enforceable to the extent compatible with the applicable law
as it shall then appear.

     13.      Release. The Executive agrees that payment hereunder is conditioned upon the
execution of a release (“Release”) in the form attached hereto.

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer and Executive has executed this Agreement as of the day and year first above
written.

	 	 	 	 	 
	 	 	Gadzooks, Inc., a Texas corporation
	 	 	 	 	 
	 	 	
By:

 
Name:
Title:
	 	/s/ Gerald R. Szczepanski

Gerald R. Szczepanski

Chief Executive Officer and Chairman of the Board
	 	 	 	 	 
	 	 	
By:

 
Name:
	 	/s/ Monty Standifer

Monty Standifer

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Exhibit A

Release

7

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