AGREEMENT AND MUTUAL GENERAL RELEASE
This Agreement and Mutual General Release ("this Agreement")
is entered into between Scott Hessler ("Mr. Hessler") and Where-
house Entertainment, Inc. ("WEI").
WHEREAS, Mr. Hessler and WEI have been parties to that
certain Employment Agreement between them ("Employment Agree-
ment"); and
WHEREAS, Mr. Hessler and WEI seek to terminate the employ-
ment relationship between them;
THEREFORE, it is hereby agreed that:
1. Mr. Hessler's Employment Agreement remained in effect
through January 31, 1994, and he remained employed under that
Employment through that date. Beginning February 1, 1994, WEI
will pay Mr. Hessler twelve full months of his final base salary,
payable in installments on WEI's regular paydates. Mr. Hessler
hereby acknowledges that he has already received the installment
payments from February 1, 1994 through the date of his signature
on this Agreement.
2. WEI will pay Mr. Hessler an additional $25,000, payable
in installments over a twelve-month period, on WEI's regular
paydates, beginning February 1, 1994.
3. WEI will continue Mr. Hessler's current medical
insurance coverage, including Execucare, at WEI's expense, for a
six-month period, beginning February 1, 1994. Mr. Hessler's
normal ability to exercise options under the Comprehensive
Omnibus Budget Reconciliation Act ("COBRA") will come into effect
on the termination of his current medical insurance coverage.
4. For a three-month period beginning February 1, 1994, at
WEI's expense, WEI will arrange to provide Mr. Hessler continued
benefits under the WEI group life insurance plan in existence as
of February 1, 1994 (subject to the limitations described in Mr.
Hessler's Employment Agreement).
5. WEI will assign to Mr. Hessler, without charge, any
life insurance policy now owned by WEI which insures his life
(subject to limitations described in Mr. Hessler's Employment
Agreement).
6. The benefits described in Paragraphs 1 through 5,
above, are subject to the limitation that if Mr. Hessler becomes
employed, otherwise earns income, or becomes covered under a
group medical plan, between February 1, 1994 and January 31,
1995, the amount of income that he earns, and any benefits that
he is entitled to, will be offset against the benefits described
in paragraphs 1 through 5. For example, if Mr. Hessler becomes
newly employed and receives a salary of $200,000 per year, the
payment schedule described in Paragraph 1, above, will be changed
so that Mr. Hessler will receive a bi-weekly sum that equates to
the rate of $65,000 per year. Similarly, if Mr. Hessler becomes
covered under a group medical plan before July 31, 1994, coverage
at WEI's expense under the WEI medical plans will stop; if Mr.
Hessler has problems getting coverage during this period for
"pre-existing conditions", WEI will consider in good faith the
possibility of continuing WEI coverage through July 31, 1994 for
the "pre-existing condition". Mr. Hessler agrees that he will
inform WEI as soon as he is earning income or is covered under
group medical or life insurance.
7. a. Mr. Hessler agrees to sell all of his shares of
WEI common stock and incentive options and vested performance
options to WEI as of January 31, 1994. Mr. Hessler agrees to
accept a gross sale price of $44.00 per share for all shares of
his WEI common stock, (1) minus a personal loan (with accrued
interest thereon) of $25,000 made to Mr. Hessler by WEI for the
purpose of acquiring a portion of this equity, which personal
loan of $25,000 (with accrued interest thereon) shall thereby be
paid by WEI to itself in full payment of such loan, and (2) minus
a personal loan (with accrued interest thereon), if any) of
$25,000 made to Mr. Hessler by Scott Young for the purpose of
acquiring a portion of this equity, which personal loan of
$25,000 shall be paid by WEI directly to Scott Young in full
payment of such loan. WEI shall make one payment without
interest for such common stock on or before May 15, 1994.
b. WEI shall pay Mr. Hessler a grossed up amount
which shall be sufficient after withholding of applicable taxes
to allow him to pay the interest due on the loan from WEI
described in Section 7(a) above.
8. In consideration of the promises and obligations
contained herein, Mr. Hessler hereby releases and discharges
Wherehouse Entertainment, Inc., and each of its representatives
including, without limitation, agents, employees, directors,
shareholders, officers, attorneys, insurers, affiliates, assigns
and successors, and each of them, from any and all claims,
demands, sums of money, actions, rights, causes of action,
obligations and liabilities of any kind or nature whatsoever,
whether known or unknown, present of future which he had or
claims to have had, now has or claims to have, or hereafter may
have or asserts to have, including without limitation, claims as
a result of the termination of his employment with WEI. Mr.
Hessler further understands and agrees that:
a. This letter constitutes a voluntary waiver of any
and all rights and claims Mr. Hessler has against WEI as of the
date of the execution of this letter, including rights or claims
arising under the federal Age Discrimination in Employment Act of
1967, 29 U.S.C. section 621, et seq.;
b. Mr. Hessler has waived rights or claims pursuant
to this Agreement and in exchange for consideration, the value of
which exceeds payment or remuneration to which he was already
entitled;
c. Mr. Hessler is and has been advised to consult
with an attorney concerning this Agreement prior to executing it;
d. Mr. Hessler has been afforded a period of at least
21 days to consider the terms of this Agreement, and in the event
he should decide to execute this Agreement in less than 21 days,
he has done so only after conferring with an attorney of his
choice and with the express understanding that he has been given
and declined the opportunity to consider this Agreement for a
full 21 days; and
e. Mr. Hessler may revoke this Agreement at any time
during the seven (7) days following the date of execution of this
Agreement, and this Agreement shall not become effective or
enforceable until such revocation period has expired.
9. All rights under California Civil Code section 1542,
are hereby expressly waived by Mr. Hessler. Section 1542 of the
California Civil Code reads as follows: "A general release does
not extend to claims which the creditor does not know or suspect
to exist in his favor at the time of executing the release, which
if known by him must have materially affected his settlement."
Except for the obligations created or confirmed in this Agree-
ment, Mr. Hessler is completely severing his relationship with
WEI, and releasing all rights he may have, known or unknown.
10. In consideration of the promises and release contained
herein, and except as limited in Paragraph 11, below, WEI hereby
releases Scott Hessler from any and all claims, demands, sums of
money, actions, rights, causes of action, obligations and
liabilities of any kind or nature whatsoever, whether known or
unknown, present or future which it had or claims to have had now
has or claims to have, or hereafter may have or asserts to have
against him.
11. Notwithstanding the generality of the release in
Paragraph 10 hereof, WEI does not release Mr. Hessler from any
obligations he may have regarding any trade secrets of WEI.
12. Mr. Hessler and WEI agree that the terms and conditions
of this Agreement shall remain confidential and each shall not
disclose, disseminate or publicize any part of this Agreement to
any other persons, except as follows: (1) the fact that the
Action has settled (without disclosing any other terms); (2)
spouses of the parties; (3) to the extent necessary to report for
bonafide tax, accounting or other reporting requirements; (4) in
response to an order of a court of competent jurisdiction; or (5)
in response to a properly issued subpoena. The agreement to keep
the terms and conditions of this Agreement confidential is a
material inducement for each party to agree to enter into this
Settlement Agreement.
13. WEI agrees that it shall not, directly or indirectly,
by any manner or means, in public or in private, disparage,
demean, insult, or defame Mr. Hessler at any time. Mr. Hessler
agrees that he shall not, directly or indirectly, by any manner
or means, in public or in private, disparage, demean, insult, or
defame WEI, or any other person associated with WEI, at any time.
14. In making and executing this Agreement, Mr. Hessler
does not rely and has not relied upon any statement or represen-
tation, oral or written, made by any other party to this Agree-
ment with regard to any of the facts involved in any dispute or
possible dispute between the parties hereto, or with regard to
any of their rights or asserted rights, or with regard to the
advisability of making and executing this Agreement.
15. Mr. Hessler does hereby expressly assume the risk of
any mistake of fact or that the true facts might be other than or
different from the facts now known or believed to exist, and it
is his express intention to forever settle, adjust and compromise
any and all issues between himself and WEI pertaining to the
subject, matter hereof, finally and forever, and without regard
to who may or may not have been correct in their respective
understandings of the facts or the law relating thereto.
16. Mr. Hessler has made such investigation of the facts
and the law pertaining to the matters described in this Agreement
as he deems necessary and he neither has relied nor does he rely
on any promise or representation made by the other party with
respect to any such matters.
17. In consideration of the actions to be taken by WEI as
set forth herein, Mr. Hessler agrees to take no steps now or in
the future to seek reemployment with WEI, or with any company
associated or affiliated at that time with WEI.
18. In any legal action or proceeding allegedly arising out
of the course and scope of Mr. Hessler's employment with WEI in
which Mr. Hessler is named as a defendant, respondent or charged
party, or in which Mr. Hessler's testimony is sought as a witness
or potential witness (including but not limited to a deposition),
or in which any documents or other things are sought from Mr.
Hessler, WEI shall furnish legal representation to Mr. Hessler at
WEI's sole cost and expense, and WEI shall indemnify Mr. Hessler
against any future legal action brought against WEI or against
Mr. Hessler in his capacity as an officer of WEI in the same
manner as all officers of WEI are currently, or continue to be,
indemnified by WEI. Mr. Hessler shall notify WEI's Chairman or
Chief Financial Officer immediately upon Mr. Hessler's receipt,
by personal service, mail, or otherwise, of any summons and
complaint, subpoena or notice of deposition or appearance at any
trial or proceeding, and subpoena or notice to produce documents
or other things at any trial or proceeding.
19. Mr. Hessler represents and agrees that he has carefully
read and fully understands all of the provisions of this Agree-
ment, that he has been given the opportunity to fully discuss the
contents of this Agreement with independent counsel of his choice
and has done so and that he is voluntarily entering into this
Agreement.
20. Mr. Hessler and WEI have cooperated in the drafting and
preparation of this Agreement. In any construction to be made of
this Agreement, the same shall not be construed against any
party.
21. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof, and the
final, complete and exclusive expression of the terms and
conditions of their Agreement. Any and all prior agreements,
representations, negotiations and understandings made by the
parties, oral and written, express or implied, are hereby
supersede and merged herein.
22. This Agreement shall be binding upon and shall inure to
the benefit of the heirs, successors or assigns of the parties.
23. This Agreement may be executed in counterparts, with
some of each of the signatures appearing on a different page.
The collective signature pages shall constitute a fully executed
agreement as of the date of the final signature.
24. This Agreement is entered into in, and shall be
construed and interpreted in accordance with the laws of, the
State of California.
Dated: April 26, 1994 /s/ Scott Hessler
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Scott Hessler
Dated: April 28, 1994 /s/ Scott Young
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Its: Chairman & CEO