Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") is
made and entered into as of July 17, 1995, between WHEREHOUSE
ENTERTAINMENT, INC., a Delaware corporation (the "Company"), and
_____________________ (see attached schedule) ("Executive").
R E C I T A L S
A. Executive is a senior executive officer of the Company.
B. As a result of the Company's current business and
financial condition, and the status of its relationships with its
banks and bondholders, the Company's ability to continue as a
going concern is uncertain, and its continued viability is in
jeopardy.
C. The Board of Directors of the Company has unanimously
determined that Executive's continued employment with the
Company, especially during this period of instability and
uncertainty, is of significant importance to the Company.
D. In order to induce Executive to remain in the employ of
the Company, the Board of Directors of the Company has further
determined that it is appropriate and in the best interests of
the Company and its creditors to provide for specific severance
benefits, on the terms and subject to the conditions of this
Agreement, in order that Executive may be able to continue to
perform his or her duties free from concern as to whether he or
she (as defined below), Executive's employment with the Company
were to be terminated, or if Executive were to determine to
resign and terminate his or her employment with the Company as a
result of a material change in the terms of Executive's employ-
ment, as described below.
A G R E E M E N T
1. EMPLOYMENT.
The Company hereby confirms the continued employment of
Executive, and Executive hereby agrees to continue to serve the
Company, as its ___________________________________ (see attached
schedule), and to perform such senior executive and managerial
duties as are generally incident to his or her office, all on the
terms and subject to the conditions of his or her employment as
are currently in effect, or as the same may hereafter from time
to time be amended or supplemented in accordance with Company
policy and any written agreement (including this Agreement) to
which Executive is a party. Subject to any written agreement to
the contrary, Executive acknowledges and agrees that he or she is
an "at will" employee, and that either Executive or the Company
may terminate Executive's employment with or without cause, and
with or without notice, at any time in accordance with Company
policy.
2. SPECIAL SEVERANCE BENEFITS.
(a) DEFINITIONS. For the purposes of this Agreement, the
following definitions shall apply:
"Acquirors" shall mean any Person or Persons, other
than the current shareholders of WEI Holdings, Inc. ("WEI"), who
hereafter become the Beneficial Owners of an aggregate of at
least 50% of the Common Stock of the Company, provided, however,
that the term "Acquiror" shall not include the Company or WEI.
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and as in effect on the date
hereof.
A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities: (i) which
such Person or any of such Person's Affiliates or Associates,
directly or indirectly beneficially owns (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act); (ii) which such Person or any of such Person's
Affiliates or Associates has, directly or indirectly, (A) the
right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing), or upon
the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; or (B) the right to vote,
including pursuant to any agreement, arrangement or understanding
(written or oral); provided, however, that a Person shall not be
deemed the "Beneficial Owner" of or to "beneficially own" any
security under this clause (ii) (B) as a result of an agreement,
arrangement or understanding to vote such security if such agree-
ment, arrangement or understanding arises solely from a revocable
proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations under the Exchange
Act; or which are beneficially owned, directly to indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or under-
standing (whether or not in writing) for the purpose of acquir-
ing, holding, voting (except pursuant to a revocable proxy as
described above) or disposing of any Common Stock of the Company;
and without limiting the generality of any of the foregoing, any
Person who is the Beneficial Owner or any voting securities of
WEI shall be deemed to beneficially own a similar percentage of
the Common Stock of the Company.
"Change in Control" shall mean the occurrence of any of
the following events: (i) any Person or Persons becomes an
Acquiror: (ii) the consolidation with, or merger with or into,
any other Person, by the Company if, in connection with such
merger or consolidation, the Company is not the continuing or
surviving entity; (iii) the consolidation with, or merger with or
into, any other Person by WEI Holdings, Inc. if, in connection
with such merger or consolidation, WEI Holdings, Inc. is not the
continuing or surviving entity; (iv) the sale or transfer by
other means by the Company or WEI in one transaction or a series
of related transactions, of assets or earning power aggregating
more than 50% of the assets or earning power of the Company and
WEI (taken as a whole and calculated on the basis of the
Company's most recent regularly prepared financial statements) to
any other Person or Persons (but excluding sales of inventory in
the ordinary course of business); (v) individuals who were
members of the Board of Directors of the Company at the date of
this Agreement, or who are hereafter elected or appointed by
Merrill Lynch Capital Partners as directors charged with repre-
senting the interests of Merrill Lynch Capital Partners and its
affiliated investment partnerships, shall cease to constitute a
majority of the Board of Directors of the Company; or (vi) any
other event occurs as a result of which the Board of Directors of
the Company ceases to possess the power and authority as a board
of directors to manage and direct the conduct of the business and
affairs of the Company.
"Common Stock" of a Person shall mean the common stock
(or, in the case of a trust, partnership or other unincorporated
entity, the equivalent equity interest) with the greatest voting
power of such Person (or if such Person is a Subsidiary of
another Person, the Person which ultimately controls such first-
mentioned Person), together with all rights and benefits (however
denominated or constituted) relating to such common stock
(including, without limitation, any rights or warrants to acquire
additional shares of such common stock or other securities or
assets, or to participate in any trust for the benefit of holders
of such shares, or to share in the benefits of any agreements or
other arrangements for the benefit of such holders), whether or
not such rights are yet exercisable, and together with any other
securities which are represented by the certificates for such
shares or are transferred in connection with transfers of such
shares.
"Continuing" or "Surviving" Company. The determination
as to which party to a merger or consolidation is the "continu-
ing" or "surviving" corporation shall be made on the basis of the
relative equity interests of the shareholders in the corporation
existing after the merger or consolidation, as follows: if
following any merger or reorganization, the holders of outstand-
ing Common Stock of WEI or the Company immediately prior to the
merger or consolidation Beneficially Own more than fifty percent
(50%) of the Common Stock of the corporation existing following
the merger or consolidation, then for purposes of this Agreement,
WEI or the Company, as the case may be, shall be the survivor or
continuing corporation; and in all other events, the other party
or parties to the merger or consolidation shall be the survivor
or continuing corporation. In making the determination of Bene-
ficial Ownership by the shareholders of a corporation immediately
after the merger or consolidation, of equity securities which the
shareholders owned immediately before the merger or consolida-
tion, shares which they Beneficially Owned as shareholders of
another party to the transaction shall be disregarded.
"Just Cause" shall mean (i) any material breach by
Executive of the material terms of his employment with the
Company, but only following written notice and a reasonable
opportunity to cure, or (ii) Executive's conviction of any crime
involving embezzlement or misappropriation of funds or property
of the Company or felonious conduct.
"Person" shall mean any individual, firm, corporation,
trust, partnership or other entity, whether similar or dissimilar
to the foregoing.
"Subsidiary" or "Subsidiaries" shall mean, with respect
to any Person, any other Person of which securities or other
ownership interests having ordinary voting power, in the absence
of contingencies, to elect a majority of the board of directors
or other Persons performing similar functions are at the time
directly or indirectly owned by such first Person.
(b) SEVERANCE PAYMENT FOLLOWING CHANGE OF CONTROL. In the
event that a Change in Control occurs at any time during the term
of Executive's employment with the Company, and if in connection
therewith, or as a condition thereto, or thereafter and on or
prior to the expiration of 12 full calendar months following the
date upon which such Change in Control occurs, any one or more of
the following events shall occur:
(i) the Company terminates Executive's employment,
other than for Just Cause or because Executive is perma-
nently disabled and not otherwise qualified to perform the
duties of his office; or
(ii) Executive resigns or otherwise terminates his or
her employment with the Company as a result of any of the
following, the existence of which must be specified in his
or her written notice of resignation or termination: (A)
Executive's duties or responsibilities, or the mode or
manner in which they are to be carried out, are substantial-
ly altered from those currently in effect; (B) Executive's
title is changed in any material respect; (C) the Company
relocates its main office outside the County of Los Angeles;
(D) the compensation, benefits, or other material terms and
conditions of Executive's employment with the Company are
changed or altered in a manner adverse to Executive; (E) the
Company delivers to Executive notice of termination of
Executive's employment, other than for Just Cause, regard-
less of the effective date of such termination; or (F) the
Company shall materially breach any of its material obliga-
tions to Executive under this Agreement, any other agreement
between the Company and Executive, or under the Company's
general policies governing Executive's employment; provided,
however, that none of the events set forth in clauses (A)
through (F), above, shall constitute grounds for termination
by Executive if Executive shall have given his or her prior
written consent to such event;
then in addition to any and all other amounts then due Executive
(other than severance under the Company's severance policies as
then in effect, which shall not be payable to Executive), (I) the
Company shall pay to Executive, without offset, concurrent with
Executive's last day of employment with the Company, a severance
payment in an amount equal to the greater of (A) Executive's
average annual base salary over the ___________ period (see
attached schedule) ending 30 days prior to the date of termina-
tion; or (B) Executive's annual base salary, as in effect on the
date of termination, multiplied by (C) a factor of 1 (and thus,
if Executive's base salary, as determined pursuant to (A) or (B)
above, as applicable, was $100,000, Executive would receive
$100,000), and (II) any and all benefits applicable to Executive
under the Company's pension, profit sharing, disability, health
and welfare plans, and all other plans and/or perquisites of the
Company in which Executive participates, shall continue for a
period of at least 90 days following the last day of Executive's
employment with the Company.
(c) EXCISE TAX. Notwithstanding any other provision in
this Agreement to the contrary, the amounts to be paid to
Executive under this Section 2 shall in no event exceed the
maximum amount (when aggregated with other payments received by
Executive related to the occurrence of a Change in Control) that
could be paid without causing Executive to become subject to
excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended.
(d) NO MITIGATION. In the event of any termination of the
employment of Executive to which this Section 2 applies,
Executive shall have no obligation to seek other employment in
mitigation of damages; and no compensation received by Executive
from other employment or other sources shall be considered as a
mitigation of amounts owing to Executive hereunder.
3. MISCELLANEOUS.
(a) WAIVER. The waiver by any party hereto of a
breach of any of the provisions of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
(b) NOTICE. Any notice to be given hereunder
shall be sent by registered mail addressed, if to the Company, to
Wherehouse Entertainment, Inc., 19701 Hamilton Avenue, Torrance,
California 90502-1334; Attn.: President, or at such other address
as the Company shall hereafter specify in writing, or if to
Executive to Executive's then-current address, as reflected in
the employment records of the Company, or at such other address
as Executive shall hereafter specify in writing.
(c) NO ASSIGNMENT. This Agreement is personal in
its nature and neither of the parties hereto shall, without the
consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder; provided, if the Company effects
any merger, consolidation or transfer or sale of all or substan-
tially all the assets of the Company in a transaction in which
the Company is not the surviving entity, this Agreement shall be
binding upon such successor entity and such successor entity
shall discharge and perform all the obligations of the Company
hereunder.
(d) ENTIRE AGREEMENT. This Agreement embodies
the entire agreement of the parties respecting the matters within
its scope and may be modified only in writing.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, ITS BORDERS.
(f) ATTORNEYS' FEES. If either party hereto
brings an action or proceeding for a declaration of the rights of
the parties under injunctive relief, or for an alleged breach or
default of, or any other action arising out of this Agreement,
the prevailing party in any such action out of this Agreement,
the prevailing party in any such action shall be entitled to an
award of the prevailing party's actual attorneys' fees and any
court costs incurred in such action or proceeding, in addition to
any other damages or relief awarded.
(g) FEDERAL AND STATE TAX WITHHOLDING. The
Company shall have the right to withhold from any compensation
due Executive all amounts necessary to satisfy applicable federal
and state income tax withholding obligations.
(h) SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
WHEREHOUSE ENTERTAINMENT, INC.
EXECUTIVE:
/s/ Executive's signature By: /s/ Jerry E. Goldress
------------------------- ---------------------------
Name of Executive Jerry E. Goldress
Title of Executive Its: Chief Executive Officer
SCHEDULE TO EXHIBIT 10.1
(Pursuant to instruction 2 to
item 601 to Regulation S-K)
Each of the executive officers of Registrant named below
have entered into a Change of Control Agreement with Registrant,
which agreements are substantially identical in all terms and
particulars, except that the period during which severance
benefits are to be payable varies, as provided in the following
table:
Name and Title of Period of Severance
Executive Officer ("Severance Factor")
----------------- --------------------
Barbara C. Brown 24 months
Senior Vice President,
Sales and Operations
Stephen P. Brown, 24 months
Senior Vice President,
General Merchandise Manager
Henry Del Castillo 24 months
Senior Vice President,
Chief Financial Officer
Eliot Cobb 12 months
Vice President,
Financial Reporting and Treasurer
Stanley A. Kelley 12 months
Vice President,
Management Information Systems
Gregory A. Fisher 12 months
Vice President,
Real Estate
Michael T. Buskey 12 months
Vice President,
General Manager - Standard Stores
Helen N. Holmes 12 months
Vice President,
Store Operations
Timothy N. Tinen 12 months
Vice President,
Used Product
Barbara Lewis 12 months
Vice President,
Advertising and Promotion
Renee Nesland 12 months
Vice President,
Human Resources
Lauren Margulies 12 months
Vice President,
Video Buying
Connie Jones
Vice President,
General Manager - Mall Stores 12 months
Donald D. Bales 6 months
Assistant Vice President,
Systems Development
Randy Malinoff 6 months
Assistant Vice President,
Purchasing/Facilities