Document:

EX-10.1 EXECUTIVE EMPLOYMENT AGREEMENT

 

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

BETWEEN

MOVIE GALLERY US, LLC

AND

KEITH A. COUSINS

DATED

AUGUST 23, 2006

 

 

TABLE OF CONTENTS

EXECUTIVE EMPLOYMENT AGREEMENT

	 	 	 
	PARAGRAPH	 	PAGE NO.
	1.   Background
	 	3
	 	 	 
	2.   Definitions 
	 	3
	 	 	 
	3.   Employment 
	 	6
	 	 	 
	4.   Responsibilities 
	 	6
	 	 	 
	5.   Stock Compensation and Benefits; Reimbursements 
	 	7
	 	 	 
	6.   Term; Termination 
	 	8
	 	 	 
	7.   Proprietary Information 
	 	9
	 	 	 
	8.   Covenant Not To Compete 
	 	10
	 	 	 
	9.   Non-Disparagement 
	 	10
	 	 	 
	10.   Injunctive Relief 
	 	11
	 	 	 
	11.   Severability 
	 	11
	 	 	 
	12.   Arbitration 
	 	11
	 	 	 
	13.   Attorneys’ Fees 
	 	11
	 	 	 
	14.    Headings 
	 	11
	 	 	 
	15.   Notices 
	 	11
	 	 	 
	16.   General Provisions 
	 	12
	 	 	 
	17.   Entire Agreement 
	 	12

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EXECUTIVE EMPLOYMENT AGREEMENT

     This EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is entered into this 23rd day of
August, 2006 by and between MOVIE GALLERY US, LLC, a Delaware limited liability company, with its
principal offices at 900 West Main Street, Dothan, Alabama 36301 (the “Company”), and KEITH A.
COUSINS (“Employee”), whose address is 9112 Sturbridge Place, Montgomery, Alabama 36116, and shall
be effective on the Effective Date, as defined below.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements of
the parties hereto, the parties do hereby covenant and agree as follows:

     1. Background.

          A. The Company is engaged in the Home Entertainment Business (as hereinafter defined).

          B. The Company desires to secure and retain the services of Employee in the office of
Executive Vice President and Chief Development Officer and such services are considered by the
Company to be valuable with regard to the Home Entertainment Business.

          C. Employee is currently employed with the Company and desires to continue his employment with
the Company, subject to and in accordance with the terms and conditions set forth herein.

     2. Definitions.

     As used in this Agreement, the following terms shall have the meaning as set forth below, and
the parties hereto agree to be bound by the provisions hereof:

          A. Area means the geographic area of the United States, Canada and Mexico, and such other
geographic areas in which operations are performed, supervised, or assisted in by Employee on
behalf of the Company or in which the Company operates, both as of the date hereof and as are
anticipated to be conducted throughout the Term.

          B. Board of Directors means the Board of Directors of the Company.

          C. Change of Control means the occurrence of any of the following events:

               (i) Merger or consolidation where the Company is not the consolidated, continuing or surviving
company, and the surviving or resulting company does not expressly agree to be bound by and have
the benefits of the provisions of this Agreement, Employee’s corporate position is eliminated, or
the scope of Employee’s position or responsibilities is materially changed;

               (ii) Transfer of all or substantially all of the assets or stock of the

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Company, and the
transferee of the Company’s assets or stock does not expressly agree to be bound by and have the
benefits of the provisions of this Agreement, Employee’s corporate position is eliminated, or the
scope of Employee’s position or responsibilities is materially changed; or

               (iii) Change in control of Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 as in effect on the date thereof, and any person or persons acting in concert (as such
term is used in Section 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial holder
directly or indirectly of securities of the Company representing fifty percent (50%) or more of the
combined voting power of Company’s then outstanding securities, and the Employee’s corporate
position is eliminated, or the scope of Employee’s position or responsibilities is materially
changed.

          D. Chief Executive Officer means the Chief Executive Officer of the Company from time to time.

          E. Company means Movie Gallery US, LLC, its parent corporation, Movie Gallery, Inc., and their
respective subsidiaries and successors.

          F. Constructive Termination means a termination of this Agreement resulting from any material
breach by the Company of its obligations under this Agreement which breach is not cured within
thirty (30) days after receipt of notice by the Company from Employee specifying the nature of the
breach, which breach shall include, but shall not be limited to, (a) removal of Employee during the
Term, other than removal as a result of a Termination With Cause or a Voluntary Termination, as
Executive Vice President and Chief Development Officer of the Company or any material change by the
Company in the functions, duties or responsibilities of Employee during the Term from those in
which Employee was engaged as Executive Vice President and Chief Development Officer of the Company
on the Effective Date, without the consent of Employee, (b) a material, non-voluntary reduction in
Employee’s Base Salary and eligibility for bonus amounts, or (c) the occurrence of a Change of
Control. Notwithstanding the foregoing, a Constructive Termination shall occur only (A) after the
Company’s failure to cure a breach of its obligations under this Agreement, as specified above,
within thirty (30) days after its receipt of notice of such breach from Employee, and further
receipt by the Company of notice from Employee specifying that the Company has failed to cure such
breach and that an event of Constructive Termination has occurred, and (B) if Employee provides the
initial notice of breach to the Company within sixty (60) days after the date of the event giving
rise to such breach.

          G. Effective Date means August 23, 2006.

          H. Home Entertainment Business means the business of renting and/or selling movies, games and
other entertainment content, whether delivered, provided and/or displayed via a physical retail
store, kiosk or vending machine, data transmission, the Internet, direct mail, or through any other
form of display or delivery system (whether now know or developed hereafter, whether such system
involves the delivery of a physical or tangible object and including any other technological
evolutions thereof).

          I. Initial Term means the basic term of this Agreement, which shall be

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twelve (12) months,
beginning on the Effective Date and ending on the date which is twelve (12) months following the
Effective Date.

          J. Permanent Disability means a physical or mental condition which renders Employee incapable
of performing his regular duties hereunder for a period of one hundred twenty (120) consecutive
days. In the event of any disagreement between Employee and the Company as to whether Employee is
suffering from Permanent Disability, the determination of Employee’s Permanent Disability shall be
made by one or more board certified licensed physicians practicing the specialty of medicine
applicable to Employee’s disorder in accordance with the provisions of this Subsection J. If
either the Company or Employee desires to initiate the procedure provided in this Section, such
party (the “Initiating Party”) shall deliver written notice to the other party (the “Responding
Party”) in accordance with the provisions of this Agreement specifying that the Initiating Party
desires to proceed with a medical examination and the procedures specified in this Section. Such
notice shall include the name, address and telephone number of the physician selected by the
Initiating party (the “Disability Examination Notice”). If the Responding Party fails within
thirty (30) days after the receipt of the Disability Examination Notice to designate a physician
meeting the standards specified herein, the physician designated by the Initiating Party in the
Disability Examination Notice shall make the determination of Permanent Disability as provided in
this Section. If the Responding Party by written notice notifies the Initiating Party within
thirty (30) days of the receipt by the Responding Party of the Disability Examination Notice by
notice specifying the physician selected by the Responding Party for purposes of this Section, then
each of the two physicians as so designated by the respective parties shall each examine Employee.
Examinations shall be made by each such physician within thirty (30) days of such physician’s
respective designation. Each physician shall render a written report as to whether Employee is, in
such physician’s opinion, suffering Permanent Disability. If the two physicians agree on the
status of Employee for purposes of this Section, such determination shall be conclusive and
dispositive for all purposes of this Section. If the two physicians cannot agree, the two
physicians shall jointly select a third physician meeting the standards specified in this Section
within thirty (30) days after the later report of the two physicians is submitted. The third
physician shall render a written report on the status of Employee within thirty (30) days of
selection and such report shall be dispositive for purposes of this Section. For purposes of this
Subsection J, Employee agrees that he shall promptly submit to such examinations and tests as such
physicians shall reasonably request for purposes of making a determination of Permanent Disability
as provided herein. Failure or refusal of the Company to designate a licensed physician to make a
determination of Permanent Disability as required in accordance with this Section or of Employee to
submit to the examination as required by this Section shall constitute a conclusive admission by
the Company or Employee, as appropriate, that Employee is suffering from a Permanent Disability as
provided herein.

          K. Renewal Term means the period, if any, following the Initial Term during which the
Agreement is extended as set forth in Section 6B.

          L. Severance Amount shall have the meaning as set forth in Section 5C.

          M. Term means the Initial Term and any Renewal Term.

          N. Termination Date means the following: (a) with respect to Termination
With Cause, the date the Company notifies Employee of the actions giving rise to such
termination and the termination of this Agreement based thereon; (b) with respect to the death of
Employee, the date of his death; (c) with respect to Termination Without Cause, the date on which
the Company gives Employee notice of Termination Without Cause; (d) with respect to Voluntary
Termination, the date on

5

 

which Employee unilaterally terminates his employment relationship with
the Company; (e) with respect to the Permanent Disability of Employee, the date Employee is
determined to be suffering from Permanent Disability, as provided in Subsection 2J; and (f) with
respect to Constructive Termination, the date on which Constructive Termination occurs as provided
in Subsection 2F.

          O. Termination With Cause means the termination of this Agreement and the employment
relationship of Employee with the Company, only for the following:

               (i) Theft or embezzlement with regard to material property of the Company;

               (ii) Criminal conviction punishable by imprisonment;

               (iii) Material breach by Employee of any of his duties or obligations under this Agreement; or

               (iv) Gross insubordination.

          P. Termination Without Cause means a termination by the Company of this Agreement and the
employment relationship of Employee with the Company during the Term which is not a Termination
With Cause, a Voluntary Termination or a Constructive Termination, including the expiration of the
Term as a result of the Company electing not to renew this Agreement at the end of the Initial Term
or any Renewal Term.

          Q. Triggering Event means (i) a termination of Employee’s employment by the Company during the
Term due to a Termination Without Cause or (ii) a Constructive Termination of Employee’s employment
with the Company.

          R. Voluntary Termination means unilateral termination by Employee of his employment with the
Company prior to the end of the Term and in the absence of a Triggering Event, or as a result of
Employee electing not to renew this Agreement at the end of the Initial Term or any Renewal Term.
Notice by Employee to the Company of a breach by the Company of its obligations under this
Agreement pursuant to Section 2F shall not constitute a Voluntary Termination for purposes of this
Agreement.

     3. Employment. The Company agrees to employ Employee in the office of Executive Vice
President and Chief Development Officer of the Company for the Term, and Employee agrees to accept
such employment and office upon the terms and conditions set forth herein.

     4. Responsibilities. Pursuant to this Agreement, Employee shall have the responsibilities,
perform the duties, and exercise the powers as Executive Vice President and Chief Development
Officer of the Company or as designated, assigned or set forth by the Chief Executive Officer or
Board of Directors and consistent with the responsibilities, duties and powers exercised by
Employee as Executive Vice President and Chief Development Officer of the Company as of the Effective Date
and such other duties as may be assigned from time to time by the Chief Executive Officer or Board
of Directors. The Employee agrees to devote his full time and efforts to the performance of his
duties as Executive Vice President and Chief Development Officer of the Company. The Employee
agrees that he will not engage in any other gainful occupation during the term of this Agreement,
without the prior written consent of the Company. Nothing contained herein shall be construed,
however, to

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prevent the Employee from personal business, charitable and professional activities,
from trading, for his own account and benefit, in stocks, bonds, securities, real estate,
commodities, or other forms of investments. Employee agrees to comply with the Company’s policies,
rules and regulations as determined by the Company and shall uphold his fiduciary obligations to
the Company at all times.

     5. Compensation and Benefits; Reimbursements. The Company shall pay, and Employee agrees to
accept, as partial compensation for services to be rendered hereunder during the Term, the
remuneration described below:

          A. Annual Salary. The Company shall pay Employee a base annual salary as of the Effective
Date of Three Hundred Fifty Thousand and No/100 Dollars ($350,000.00) per year (“Base Salary”),
subject to such increases as the Board of Directors in its sole discretion deems appropriate in
accordance with the Company’s customary procedures regarding the salaries of its executive
officers. The Base Salary shall be payable according to the customary payroll practices of the
Company, but in no event less frequently than monthly.

          B. Bonuses. During the Term, Employee shall be entitled to participate in the Company’s
executive officer bonus program, as amended from time to time by the Board of Directors. During
the Term, Employee shall be entitled to participate in other incentive and/or bonus, cash and
equity compensation plans of the Company which provide benefits to senior officers, as determined
by the Board of Directors of the Company.

          C. Severance Payments.

               (i) Upon the occurrence of a Triggering Event, Employee shall be deemed to have earned the
Severance Amount, as defined below, on the effective date of the Triggering Event. The obligation
of the Company under this Subsection 5C(i) shall take the place of any other obligations of the
Company under this Section 5 to pay to Employee for the balance of the Term Employee’s then Base
Salary pursuant to Subsection 5A.

               (ii) For purposes of this Agreement, the term Severance Amount shall mean the
following: (a) if a Triggering Event occurs as a result of a Constructive Termination in
connection with a Change of Control, the Severance Amount shall be an amount equal to one and one
half (11/2) times Employee’s Base Salary; (b) if a Triggering Event (other than a Constructive
Termination in connection with a Change of Control) occurs within one hundred eighty (180) days
prior or subsequent to the date of a Change of Control, or is in any way related to, results from,
arises out of, or is in connection with a Change of Control, the Severance Amount shall be an
amount equal to one and
one-half (11/2) times Employee’s Base Salary; or (c) if a Triggering Event otherwise occurs, the
Severance Amount shall be an amount equal to one (1) times Employee’s Base Salary.

               (iii) If the Severance Amount payable pursuant to this Section is an
amount equal to one and one-half (11/2) times Employee’s Base Salary, then the Severance Amount
shall be paid within thirty (30) days of the date of the Triggering Event. Otherwise, the Severance
Amount payable pursuant to this Section shall be paid over the twelve (12) month period following
the Triggering Event according to the Company’s payroll practices and procedures in effect at the
time of the Triggering Event.

               (iv) Upon the occurrence of a Triggering Event, any and all stock options to purchase shares
of the Company’s Common Stock which are held by Employee shall become

7

 

one hundred percent (100%)
vested and immediately exercisable as of the date of such Triggering Event, and shall be
exercisable by the Employee over the balance of the remaining stated term of such stock options
(which term shall be the term applicable to the Employee in the absence of termination of
employment), notwithstanding any provision contained in the stock option agreement to the contrary.

          D. Insurance and Benefits; Reimbursements.

               (i) Employee shall be entitled to participate in or receive benefits under all employee and
executive benefit plans or arrangements and perquisites of employment, including, without
limitation, plans or arrangements providing for health and disability insurance coverage, life
insurance for the benefit of Employee’s beneficiaries, deferred compensation and pension benefits,
and personal financial, investment, legal or tax advice, all at the highest level that is available
through the Company to other senior officers of the Company subject to the same terms and
conditions as apply to such other senior officers.

               (ii) Employee shall be entitled to all holidays recognized by the Company and vacation time
for not less than three (3) weeks per year plus such additional time as is available under the
vacation policy of the Company in effect for senior officers with continuing payment of all
compensation as set forth herein.

               (iii) Employee shall be reimbursed by the Company for all reasonable expenses incurred by
Employee in connection with the performance of his duties and responsibilities, subject to, or in
accordance with, the then current reimbursement policies of the Company.

               (iv) Nothing paid to Employee under any plan, arrangement or perquisite presently in effect or
made available in the future shall be deemed to be in lieu of the salary and other compensation or
payments paid or payable to Employee under this Agreement.

               (v) In the event of a termination of Employee’s employment with the Company as a result of or
in connection with a Triggering Event, and Employee elects under COBRA to continue his group health
coverage, then for a twelve (12) month period following the Termination Date, the Company shall pay
Employee (on a monthly basis) an amount equal to the actual premium cost to Employee for the
portion of such continuation coverage (if any) that was being paid by the Company at the time of
such termination.

     6. Term; Termination.

          A. This Agreement will commence on the Effective Date and shall continue during the Initial
Term.

          B. In addition to the Initial Term, this Agreement shall be renewed for additional one (1)
year periods (the “Renewal”), ad infinitum, unless either party gives notice of non-renewal at
least thirty (30) days prior to the expiration of the Initial Term or the then current Renewal
Term.

          C. During the Term, the Company or Employee may terminate this Agreement, subject to the
terms, conditions and obligations hereof, by any of the following events:

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               (i) Mutual written agreement expressed in a single document signed by both the Company and
Employee;

               (ii) Voluntary Termination by Employee;

               (iii) Death of Employee;

               (iv) Termination Without Cause;

               (v) Termination With Cause;

               (vi) Constructive Termination; or

               (vii) Permanent Disability.

          D. The obligations of Employee under Sections 7, 8 and 9 shall survive termination or
expiration of this Agreement. The obligations of the Company under Section 5 that by their terms
are to be paid or to continue after termination of this Agreement shall also survive such
termination.

     7. Proprietary Information.

          A. Employee acknowledges and agrees that during his employment with the Company, prior to and
subsequent to the date of this Agreement, Employee has had and will continue to have access to
certain confidential and proprietary information of the Company, including:

               (i) information which derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use, and is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy (hereinafter “Trade Secrets” or “Trade Secret”); or

               (ii) information which does not rise to the level of a Trade Secret, but is valuable to the
Company and provided in confidence to Employee (hereinafter “Confidential Information”).

          B. Employee acknowledges and agrees with respect to Trade Secrets and Confidential Information
provided to or obtained by Employee, prior to or subsequent to the date of this Agreement
(hereinafter collectively the “Proprietary Information”):

               (i) that the Proprietary Information is and shall remain the exclusive property of the
Company;

               (ii) to use the Proprietary Information exclusively for the purpose of fulfilling the
obligations under this Agreement;

               (iii) to return the Proprietary Information, and any copies thereof, in his possession or
under his control, to the Company upon request of the Company, or expiration or termination of this
Agreement for any reason; and

9

 

               (iv) to hold the Proprietary Information in confidence and not to copy, publish, or disclose
to others or allow any other party to copy, publish, or disclose to in any form, any Proprietary
Information without the prior written approval of an authorized representative of the Company.

          C. The obligations and restrictions set forth in this Section 7 shall survive expiration or
termination of this Agreement, for any reason, and shall remain in full force and effect as
follows:

               (i) as to Trade Secrets, for so long as such information remains subject to protection under
applicable law;

               (ii) as to Confidential Information, for a period of five (5) years after expiration or
termination of this Agreement for any reason.

     8. Covenant Not To Compete. Employee hereby agrees that during the term hereof, and for a
period of one (1) year from the date of expiration or termination of this Agreement for any reason,
and within the Area, Employee will not:

          A. compete with the Company in the Home Entertainment Business, or engage in or carry on the
Home Entertainment Business, directly or indirectly, through any person or entity, or in any
capacity, including, without limitation, agent, lender, trustee, consultant, shareholder, director,
officer, employee, or partner;

          B. be employed by, or perform any services as employee, consultant, or otherwise for, any
person, firm, partnership, joint venture, corporation or other entity that competes with the
Company in the Home Entertainment Business, or that is engaged in the Home Entertainment Business
within the Area;

          C. employ, solicit for employment, or advise or recommend to any other person or entity that
such person or entity employ, or solicit for employment, any employee of the Company; or

          D. deal with, invest in (other than as a stockholder of less than one percent (1%) of the
issued and outstanding stock of a publicly traded corporation having assets in excess of
$100,000,000.00), lend money to, guarantee loans of, make gifts to, advise, or by any other means
assist any other person or entity that competes with the Company, or that is engaged in the Home
Entertainment Business within the Area.

     9. Non-Disparagement. During the Term and for a period of one (1) year from the date of
expiration or termination of this Agreement for any reason, Employee shall maintain a professional
manner, and shall avoid and refrain from: (i) making any disparaging or derogatory remarks or
comments about the Company, or any of its employees, officers, directors, stockholders, members,
representatives or agents; or (ii) engaging in any other conduct which is likely to disparage the
Company, or any of its employees, officers, directors, stockholders, members, representatives or
agents, or otherwise damage, jeopardize or be prejudicial to any business, professional or personal
relationship, interests or reputation of the Company, or any of its employees, officers, directors,
stockholders, members, representatives or agents.

10

 

     10. Injunctive Relief. Employee acknowledges and agrees that any breach by Employee of his
obligations under Section 7, Section 8 or Section 9 of this Agreement will cause irreparable harm
to the Company and agrees to the entry of a temporary restraining order and permanent injunction by
any court of competent jurisdiction to prevent breach or further breach thereof, in addition to any
other remedy available to the Company at law or in equity.

     11. Severability. If any provision of this Agreement is held to be invalid or unenforceable
by any court of competent jurisdiction, such holdings shall not affect the enforceability of any
other provision of this Agreement, and all other provisions shall continue in full force and
effect.

     12. Arbitration. Except as set forth in section 10 above, all disputes between the parties
hereto arising out of, or relating to, this Agreement shall be settled and determined to final
resolution by arbitration. Any such arbitration shall be held in Dothan, Alabama, and shall be
conducted in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. There shall be one arbitrator, as shall be agreed upon by the parties. In the
absence of such agreement, each party in the dispute shall select one arbitrator and the
arbitrators so selected shall select a third arbitrator. In the event the arbitrators cannot agree
upon the selection of a third arbitrator, such third arbitrator shall be appointed by the American
Arbitration Association at the request of the parties in dispute. All of the arbitrators shall be
individuals skilled in the legal and business aspects of the subject matter of this Agreement and
of the dispute. The arbitrator(s) shall be instructed to manage the arbitration to a prompt
resolution. Judgment upon any award obtained in such proceedings may be entered in any court
having jurisdiction over the subject matter of the proceedings. All arbitration costs shall be
paid by the non-prevailing party. The parties agree to be bound by the decision and award of the
arbitrator or arbitrators.

     13. Attorneys’ Fees. If any arbitration, legal action or other proceeding is commenced to
enforce or interpret any provision of, or otherwise relating to, this Agreement, the prevailing
party as determined through arbitration or final judgment of a court of competent jurisdiction
(which arbitration or judgment is not subject to further appeal due to the passage of time or
otherwise) shall be entitled to reimbursement from the other party for reasonable attorneys’ fees
and expenses incurred by the prevailing party in connection with the resolution of the dispute.

     14. Headings. The headings of the several paragraphs in this Agreement are inserted for
convenience of reference only and are not intended to affect the meaning or interpretation of this
Agreement.

     15. Notices. All notices, consents, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given or delivered if (i) delivered
personally; (ii) mailed by certified mail, return receipt requested, with proper postage
prepaid; or (iii) delivered by recognized courier contracting for same day or next day delivery
with signed receipt acknowledgment to the Company at its principal offices, or to Employee at the
address last shown on the records of the Company, or at such other address as the parties hereto
may have last designated by notice to the other party. Any item delivered personally or by
recognized courier contracting for same day or next day delivery shall be deemed delivered on the
date of delivery. Any item mailed shall be deemed to have been delivered on the date evidenced on
the return receipt.

     16. General Provisions. This Agreement shall be governed by and construed under the laws of
the State of Alabama, without giving effect to its conflict of law principles. The terms of this
Agreement shall be binding upon and inure to the benefit of the Company and its successors and
assigns.

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Neither party may assign his or its rights and obligations under this Agreement to any
other party.

     17. Entire Agreement. This Agreement contains the entire agreement between the parties
hereto, and except as otherwise provided in this Agreement, supersedes and cancels all previous and
contemporaneous written and oral agreements, including all prior employment agreements between the
Company and Employee and amendments thereto. No amendment or modification of this Agreement shall
be valid or binding unless in writing and signed by the party to be bound.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
first above written.

	 	 	 	 	 	 	 
	 
	 	 	 	COMPANY:

	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	MOVIE GALLERY US, LLC
	 
	 	 	 	 	 	 
	/s/ Jeffrey B. Gordon

	 	 	 	By:
	 	/s/ S. Page Todd
	 

	 	 	 	 	 	 
	Assistant Secretary

	 	 	 	 	 	S. Page Todd
	 

	 	 	 	 	 	Its: Executive Vice President
	 	 	 	 	Date: 8/23/2006
	 
	 	 	 	 	 	 
	 	 	 	 	EMPLOYEE:
	 
	 	 	 	 	 	 
	/s/ James H. Cooper

	 	 	 	/s/ Keith A. Cousins
	 

	 	 	 	 
	Witness	 	 	 	Keith A. Cousins
	 	 	 	 	Date: 8/25/2006

13Exhibit 10.1

 

Exhibit 10.1

LANCE, INC.

2007 Stock Option Plan for Officers and Key Managers

	 	 	 
	Purposes and

Introduction

	 	The 2007 Stock Option Plan for Officers and Key Managers (the “2007 Plan”)
provides for awards of Stock Options under the Lance, Inc. 2003 Key
Employee Stock Plan (the “Stock Plan”). Except as otherwise expressly
defined herein, capitalized terms shall be as defined in the Stock Plan.
	 
	 	 
	 

	 	The primary purposes of the 2007 Plan are to:
	 
	 

	 	• Align executives’ interests with those of stockholders by linking a
substantial portion of compensation to the price of the Company’s Common
Stock.
	 
	 	 
	 

	 	• Provide a way to attract and retain key executives and managers who
are critical to Lance’s future success.
	 
	 	 
	 

	 	• Provide competitive total compensation for executives and managers
commensurate with Company performance.

To achieve the maximum motivational impact, the awards will be communicated
to participants as soon as practical after the 2007 Plan is approved by the
Compensation Committee of the Board of Directors.
	 
	 	 
	 

	 	Base salary shall be the annual rate of base compensation as of the first
day of the 2007 fiscal year.
	 
	 	 
	Grant Date,
Exercise Price,
Vesting and Term

	 	The grant date for the Stock Options will be the date the awards are
approved by the Compensation Committee and the exercise price will be the
Fair Market Value of the Common Stock on the grant date. Each stock option
will vest in three substantially equal annual installments beginning one
year after the date of grant and the term of each stock option will be
seven years.
	 
	 	 
	Eligibility and

Participation

	 	Eligibility in the 2007 Plan is limited to Executive Officers and managers
who are key to Lance’s success. The Compensation Committee will review and
approve participants nominated by the President and Chief Executive
Officer. Participation in the 2007 Plan does not guarantee participation
in any subsequent long-term incentive plans, but will be reevaluated and
determined on an annual basis.

 

 

	 	 	 
	 

	 	Attachments A and B include the list of 2007 Plan participants approved by
the Compensation Committee on March 8, 2007.
	 
	 	 
	Target Incentives

	 	Each participant will be assigned a Target Incentive expressed as dollar
amount equal to a percentage of his or her base salary. Participants may
be assigned to a Performance Tier by position, by salary level or based on
other factors as determined by the President and Chief Executive Officer.
	 
	 	 
	 

	 	Attachment A lists the Target Incentives for each Executive Officer
participant for the Plan Year as determined by the Compensation Committee.
Target Incentives will be communicated to each participant as close to the
beginning of the year as practicable, in writing. Target Incentives will
be calculated by multiplying each participant’s base salary by the
appropriate Performance Tier and percentages, as described below.
	 
	 	 

	 	 	 
	 	 	Percentage of Base Salary
	Performance Tier	 	for 2007 Target Incentives
	2

3

4
	 	20%

15%

10%

	 	 	 
	 
	 	 
	Awards

	 	The number of Stock Options awarded to each participant will equal the
dollar value of the participant’s Target Incentive divided by the
Black-Scholes value of the Stock Options, with the result rounded up to the
nearest multiple of 3 shares.
	 
	 	 
	Certain
Terminations of
Employment

	 	In the event a participant voluntarily terminates employment (other than by
retirement) or is terminated involuntarily or in the event of death,
Disability or retirement, vesting and the post-termination exercise period
for Stock Options will be as follows:
	 
	 	 
	 

	 	Voluntary termination (other
than retirement): Stock Options, whether
vested or unvested, cease to be exercisable as of the date of termination.
	 
	 

	 	Involuntary termination: vested Stock Options will remain exercisable for
a period of 30 days following the date of termination (or, if earlier, the
original expiration date of the option); unvested Stock Options will be
forfeited as of the date of termination.
	 
	 	 
	 

	 	Death: Stock Options will remain exercisable for a period of one year
following the date of death (or, if earlier, the original

2

 

	 	 	 
	 

	 	expiration date of the option); unvested Stock Options will become fully vested as of the
date of termination.
	 
	 	 
	 

	 	Disability: vested Stock Options will remain exercisable through the
original expiration date of the option; unvested Stock Options will become
fully vested as of the date of termination.
	 
	 	 
	 

	 	Retirement: vested Stock Options will remain exercisable for a period of
three years following retirement (or, if earlier, the original expiration
date of the option); unvested Stock Options will continue to vest for a
period of six months after Retirement and any remaining unvested Stock
Options will be forfeited as of such date.
	 
	 	 
	 

	 	For purposes hereof, “retirement” means the participant’s termination of
employment with the Company either (i) after attainment of age 65 or (ii)
after attainment of age 55 with the prior consent of the Compensation
Committee.
	 
	 	 
	Change In Control

	 	In the event of a Change in Control, the vesting of awards will be
accelerated to fully vest upon the effective date of a Change in Control.
	 
	 	 
	Withholding

	 	The Company shall withhold from awards any Federal, foreign, state or local
income or other taxes required to be withheld.
	 
	 	 
	Communications

	 	Progress reports should be made to participants annually, showing
performance results.
	 
	 	 
	Executive Officers

	 	Notwithstanding any provisions to the contrary above, participation, awards
and prorations for Executive Officers, including the President and Chief
Executive Officer, shall be approved by the Compensation Committee.
	 
	 	 
	Governance

	 	The Compensation Committee of the Board of Directors of Lance, Inc. is
ultimately responsible for the administration and governance of the 2007
Plan. Actions requiring Committee approval include final determination of
plan eligibility and participation, identification of performance measures
and goals, final award components and determination and amendments to the
2007 Plan. The decisions of the Committee shall be conclusive and binding
on all participants. Final Awards will be evidenced by an award agreement
under the Stock Plan, which, together with the Stock Plan, will in all
events be the governing document for the award.

3

 

Attachment A

2007 Stock Option Plan for Officers and Key Managers

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Award	 	Target	 	Option
	Name	 	Title	 	Percentage	 	Incentive	 	Shares
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	R. D. Puckett

	 	Executive Vice President,

Chief Financial Officer 

and Secretary
	 	 	20	%	 	$	73,500	 	 	 	16,260	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Glenn A. Patcha

	 	Senior Vice President — 

Sales and Marketing
	 	 	20	%	 	$	66,000	 	 	 	14,601	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	E. D. Leake

	 	Senior Vice President —
 Human Resources
	 	 	20	%	 	$	45,000	 	 	 	9,957	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	F. I. Lewis

	 	Senior Vice President — Sales
	 	 	20	%	 	$	53,040	 	 	 	11,736	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	B. W. Thompson

	 	Senior Vice President —
 Supply Chain
	 	 	20	%	 	$	55,000	 	 	 	12,168	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	M. E. Wicklund

	 	Controller and 
Assistant Secretary
	 	 	15	%	 	$	25,500	 	 	 	5,643

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