CIO Employment Agreement With Keith W. Hammer

February 1, 1996


EMPLOYMENT AGREEMENT


This Agreement dated as of February 1, 1996, by and between Keith Hammer ("Employee"), and CROWN BOOKS CORPORATION, a Delaware corporation ("Employer").


W I T N E S S E T H:


WHEREAS, the parties hereto desire by this Agreement to provide for the employment of Employee by Employer;


NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt, sufficiency and adequacy of which the parties conclusively acknowledge, the parties hereto, intending to be legally bound, agree as follows:


1. EMPLOYMENT


(a) Duties. Employer hereby employs Employee, and Employee accepts employment by Employer, as Vice President, Chief Information Officer during the Employment period (as defined in Section 2), with such duties, responsibilities and authority as are commensurate with and appropriate to such position and as are from time to time set forth in the bylaws of the Employer and otherwise delegated to him or her by the Board of Directors of the Employer ("the Board of Directors"), and shall report to the Chairman of the Board, the President, and the Board of Directors. Employee agrees to observe and comply with the rules and regulations of Employer as adopted by the Board of Directors respecting the performance of his or her duties and to carry out and follow the orders, policies and directions stated by Employer to him or her from time to time, provided, however, that such regulations and directions are consistent with the authority and responsibility of the position specified above.


(b) Full Time Employment. During the Employment period Employee shall devote all his or her time and attention to his services for Employer and shall diligently perform his or her duties and responsibilities under this Agreement. Employee acknowledges that the proper performance of his or her duties and responsibilities may require the rendering of services not only during normal business hours, but over and beyond those hours as well.


(c) Place of Employment and Travel. Employee's principal place of employment shall be at the executive offices of Employer in Landover, Maryland. If Employer's executive offices are moved from Landover, Maryland, Employee's principal place of employment shall be changed to the location where such executive offices are moved. Employee agrees to travel for the performance of his or her duties under this Agreement as Employer may request from time to time. If Employers executive offices are relocated a distance greater than 100 miles from Landover, Maryland, Employee's relocation expenses will be paid by Employer if Employee elects to relocate. At the


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Employee's option, if Employee decides not to relocate, the relocation of the executive offices will be deemed a termination without cause and the Employee will be eligible to receive severance benefits as outlined in Section 7 (e) of this Agreement.


2. TERM


The term of Employee's employment under this Agreement (the "Employment Period") shall commence on February 1, 1996 and end on February 1, 1997. However, Employer and Employee agree that the term of this agreement automatically extends for an additional one (1) year at the end of each Employment Period, unless Employee has been, or is being, terminated pursuant to Section 7.


3. COMPENSATION


(a) Base Salary. Employee's annual base salary shall be One Hundred Twenty Four Thousand Five Hundred Dollars ($124,500.00), subject to an annual increase as recommended to the Board of Directors by the Compensation Committee of the Board of Directors following review and performance appraisal of Employee, and following approval by the Board of Directors. Employee's base salary shall be paid in accordance with Employer's normal payroll procedure.


(b) Annual Bonus. A bonus of 30% of base salary. Any payments made will be based on the components of your bonus program. This bonus payment is subject to approval by the Board of Directors. Receipt of this bonus is subject to your active employment at Crown Books at the time of bonus payments.


(c) Withholding Tax. All compensation shall be subject to the customary withholding tax and other employment taxes as required with respect to compensation paid by a corporation to an employee.


4. STOCK OPTIONS


(a) Stock Options. Employee shall be eligible for the annual award of stock options pursuant to the stock option plans under which the Employee is currently a participant, as determined by the Board(s) of Directors of the company(s), pursuant to the individual company(s) stock option plan(s).


(b) Exercise upon Certain Terminations of Employment. In the event of the termination of Employee's employment hereunder for any reason other than pursuant to Section 7 (d), Employee shall have the right to exercise, on or before the effective date of the termination of this Agreement, any option which has vested in Employee hereunder coincident with or prior to the effective date of the termination of Employee's employment hereunder, subject to the other terms and conditions of such option plan(s). In addition, in the event of the termination of Employee's employment due to his or her death, the personal representative of the Employee shall have the right to exercise any such


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option within the later of (i) thirty (30) days of notice of such right by Employer to Employee's personal representative or (ii) sixty (60) days of the date of Employee's death.


5. EMPLOYEE BENEFITS


During the Employment Period, Employer shall provide Employee with the following benefits:


(a) Health Plan Coverage. Employer shall provide Employee with health benefits, including major medical health insurance and Long Term Disability (LTD), Accidental Death and Dismemberment (AD&D) and such other benefits that are in effect at the time of this Agreement for the Employee and his or her immediate family all in accordance with Employer's "Executive Health Plan" as now in effect.


(b) Further Benefits. Employee shall, during the term of this Agreement (and thereafter to the extent provided herein), be eligible to participate in all applicable profit sharing and 401 (k) plans and insurance benefits in effect for all salaried employees of the Employer, together with any future improvements in such plans or benefits, subject to the eligibility requirements of such plans. In addition, Employee shall be entitled during the term of this Agreement, and thereafter to the extent provided for herein or in any such plan, to receive such other and further benefits as shall be generally made applicable to key executive employees of the Employer, and such additional benefits, as may be granted from time-to-time by the Board of Directors, in it's sole discretion.


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