GameStop 2008 Annual Report Download - page 58

The Company has entered into employment agreements with R. Richard Fontaine, Executive Chairman,
Daniel A. DeMatteo, Chief Executive Officer, J. Paul Raines, Chief Operating Officer, David W. Carlson, Executive
Vice President and Chief Financial Officer and Tony D. Bartel, Executive Vice President — Merchandising and
Marketing. The terms of the employment agreements with Mr. Fontaine and Mr. DeMatteo commenced on April 11,
2005 and continued for a period of three years thereafter and were automatically renewed in April 2008 for an
additional year. The term of the employment agreement for Mr. Raines commenced on September 7, 2008 and
continues for a period of three years thereafter. The term of the employment agreement for Mr. Carlson commenced
on April 3, 2006 and continued for a period of two years thereafter and was automatically renewed in April 2008 for
an additional year. The term of the employment agreement for Mr. Bartel commenced on October 24, 2008 and
continues for a period of three years thereafter. Each of these employment agreements contains provisions for
automatic annual renewals unless either party gives notice of non-renewal at least six months prior to expiration.
The employment agreements for Mr. Fontaine, Mr. DeMatteo and Mr. Carlson will automatically renew in April
2009 for a period of one year as no notice of non-renewal was given.
Each of the employment agreements was amended and restated on December 31, 2008 to bring them into
compliance with Section 409A of the Internal Revenue Code of 1986, as amended, enacted as part of the American
Jobs Creation Act of 2004. The minimum annual salaries during the term of employment under the amended and
restated employment agreements for Messrs. Fontaine, DeMatteo, Raines, Carlson and Bartel shall be no less than
$650,000, $535,000, $900,000, $350,000 and $400,000, respectively. The Board of Directors of the Company has
set Messrs. Fontaine’s, DeMatteo’s, Raines’, Carlson’s and Bartel’s annual salaries for fiscal 2009 at $1,200,000,
$1,250,000, $920,000, $500,000 and $500,000, respectively.
As of January 31, 2009, we had standby letters of credit outstanding in the amount of $7.7 million and had bank
guarantees outstanding in the amount of $12.9 million, $7.9 million of which are cash collateralized.
As of January 31, 2009, the Company had $32.2 million of income tax liability, including accrued interest and
penalties related to unrecognized tax benefits in other long-term liabilities in its consolidated balance sheet. At the time of
this filing, the settlement period for the noncurrent portion of our income tax liability cannot be determined. In addition,
any payments related to unrecognized tax benefits would be partially offset by reductions in payments in other
jurisdictions.
In 2003, the Company purchased a 51% controlling interest in GameStop Group Limited. Under the terms of
the purchase agreement, the individual owners of the remaining 49% interest have the ability to require the
Company to purchase their remaining shares in incremental percentages at a price to be determined based partially
on the Company’s price to earnings ratio and GameStop Group Limited’s earnings. In June 2008, additional shares
representing an interest of approximately 16% were purchased by the Company. The Company already consolidates
the results of GameStop Group Limited; therefore, any additional amounts acquired will not have a material effect
on the Company’s financial statements.
Off-Balance Sheet Arrangements
As of January 31, 2009, the Company had no off-balance sheet arrangements as defined in Item 303 of
Regulation S-K.
Impact of Inflation
We do not believe that inflation has had a material effect on our net sales or results of operations.
Certain Relationships and Related Transactions
The Company operates departments within nine bookstores operated by Barnes & Noble, a related party through
a common stockholder who is chairman of the board of directors of Barnes & Noble and a member of the Company’s
Board of Directors. The Company pays a license fee to Barnes & Noble on the gross sales of such departments. The
Company deems the license fee to be reasonable and based upon terms equivalent to those that would prevail in an
arm’s length transaction. During the 52 weeks ended January 31, 2009 and February 2, 2008 and the 53 weeks ended
February 3, 2007, these charges amounted to $1.3 million, $1.2 million and $1.0 million, respectively.
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