TRANS WORLD ENTERTAINMENT CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 1
PURPOSE
Trans World Entertainment Corporation has established the Trans World
Entertainment Corporation Supplemental Executive Retirement Plan (the Plan )
with the intention of retaining executives whose skills and talents are
important to the Company's operations by providing a monthly retirement income
that supplements benefits under other retirement arrangements.
ARTICLE 2
DEFINITIONS
A. "Company" means Trans World Entertainment Corporation, a New York
corporation, and its Subsidiaries.
B. "Subsidiary" means a corporation, or other form of business organization,
the majority interest of which is owned, directly or indirectly, by the
Company.
C. "Board of Directors" means the Board of Directors of the Company.
D. "Change in Control" means the occurrence of any one of the following events
that occur after the date, if ever, that fewer than twenty percent of the
outstanding shares of common stock of the Company in the aggregate are
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934 (the "Exchange Act" )) by Robert J. Higgins, members of his immediate
family and one or more trusts established for the benefit of such individual
or family members for a period of 60 consecutive calendar days: (i) the sale
of the Company substantially as an entirety (whether sale by stock, sale of
assets, merger, consolidation, liquidation, dissolution or similar occurrence)
occurs, where the shareholders of the Company, immediately prior to a
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, shares representing in the aggregate at
least one-half of the voting stock of the corporation issuing cash or
securities in a consolidation or merger (or its ultimate parent corporation,
if any); (ii) any tender offer or exchange offer subject to the regulations of
the Securities and Exchange Commission is made by which any person or group,
other than Robert J. Higgins, members of his immediate family and one or more
trusts established for the benefit of such individual or family members, as
person or group is defined within the meaning of Section 13(d) of the Exchange
Act, becomes the beneficial owner, directly or indirectly, of more than
one-half of the outstanding shares of common stock of the Company; or (iii)
fifty percent or more of the directors elected to the Board of Directors of
the Company are persons who were not nominated by management or the Board of
Directors of the Company in the most recent proxy statement of the Company,
excluding from such computation the replacement of any director or directors
who resign voluntarily and not as a result of any disagreement exp ressed in
writing with the Company's operations, policies or practices. Notwithstanding
the foregoing, a Change in Control shall not be deemed to have occurred for
purposes of clause (i) above solely as the result of an acquisition of
securities by the Company which, by reducing the number of shares of common
stock outstanding, increases the proportionate number of shares of common
stock beneficially owned by any person to 40% or more of the shares of common
stock of the Company then outstanding; provided, however, that if any person
referred to in this sentence shall thereafter become the beneficial owner of
any additional shares of common stock of the Company (other than pursuant to a
stock split, stock dividend or similar transaction), then a Change in Control
shall be deemed to have occurred for purposes hereof.
E. "Committee" means the Compensation Committee of the Board of Directors or
such other persons or group as the Board of Directors may appoint to serve as
the Committee.
F. "Participant" means an executive listed on Exhibit A hereto.
G. "Beneficiary" means a person who is designated by a Participant to receive
a Benefit under the Plan in respect of the Participant following his or her
death. A Beneficiary shall not be considered a Participant by virtue of this
definition.
H. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
I. "Plan Year" means the calendar year.
J. "Normal Retirement Age" means age 65.
K. "Early Retirement Age" means age 60.
L." Benefit" means a series of payments made or due under the Plan.
ARTICLE 3
COVERAGE AND EFFECT
This document states the terms of the Plan as established by Resolution of the
Board of Directors and first effective on March 1, 1997. Participation is
limited to the executives listed on Exhibit A hereto.
ARTICLE 4
MANAGEMENT AND ADMINISTRATION; AMENDMENT
The Plan may be amended from time to time or terminated at any time by written
resolution of the Board of Directors; provided, however, that no such
amendment or termination shall retroactively impair or otherwise adversely
affect the rights of any person to Benefits under the Plan which have accrued
and are vested prior to the date of the amendment or termination.
The Committee shall have the authority to control and manage the operation and
administration of the Plan. The Committee shall have the full power and
authority, in its sole discretion: (a) to promulgate and enforce such rules
and regulations as it shall deem necessary or appropriate for the
administration of the Plan; (b) to interpret the Plan consistent with the
terms and intent thereof; and (d) to resolve any possible ambiguities,
inconsistencies and omissions in the Plan.
The Committee may engage the services of accountants, attorneys, actuaries,
consultants and such other professional personnel as they deem necessary or
advisable to assist them in fulfilling their responsibilities under the Plan.
The Committee and their delegates and assistants shall be entitled to act on
the basis of all tables, valuations, certificates, opinions and reports
furnished by such professional personnel.
ARTICLE 5
CLAIMS PROCEDURE
If a Participant or Beneficiary believes he or she is entitled to Benefits and
has not received them, the Participant or Beneficiary must submit a written
claim to the Committee. If the Committee denies a claim for Benefits in whole
or in part, the claimant may appeal the denial of the claim in writing within
60 days of receiving the Committee's decision.
ARTICLE 6
VESTING
A Participant's Benefits hereunder shall vest as follows, based on the
Participant's full years of continuous service with the Company or age
attained prior to termination of employment with the Company, whichever
results in the highest percentage of vested Benefit:
Age Years of Service Vested Percentage
5 25%
50 10 50%
55 15 67.5%
60 20 82.5%
65 25 100%
In addition, a Participant's Benefits shall become vested in full upon the
death of the Participant prior to his or her termination of employment with
the Company or upon a Change in Control of the Company prior to his or her
termination of employment with the Company. Any unvested portion of a
Participant's Benefit shall be forfeited upon termination (other than by
reason of his or her death) of the Participant's employment with the Company.
ARTICLE 7
BENEFITS
A. Normal Retirement Benefit
The Normal Retirement Benefit for each Participant shall be the annual benefit
set forth on Exhibit A hereto for the Participant, to the extent vested in
accordance with Article 6 above. Such annual Normal Retirement Benefit shall
be payable in equal monthly installments for a period of 20 years, beginning
on the later of (i) the first business day of the month following the
Participant's attainment of Normal Retirement Age, or (ii) the first business
day of the month following the Participant's termination of employment with
the Comapny.
B. Early Retirement Benefit
a) A Participant whose employment with the Company terminates before
attainment of Normal Retirement Age shall be eligible to receive an Early
Retirement Benefit under the Plan, but only if the Committee, in its sole
discretion, consents in writing to such Early Retirement Benefit. A
Participant's Early Retirement Benefit shall be an amount payable in equal
monthly installments for a period of 20 years beginning on the date set forth
below, the present value of which (using a discount rate of 5%, compounded
annually) is equal to the present value (using a discount rate of 5%,
compounded annually) of the Participant's vested Normal Retirement Benefit, as
set forth in paragraph A of this Article 7. Such Early Retirement Benefit
shall be payable in equal monthly installments for a period of 20 years,
beginning on the latest of (i) the first business day of the month following
the Participant's attainment of Early Retirement Age, (ii) the first business
day of the month following the Participant's termination of employment with
the Company, or (iii) the date agreed in writing by the Participant and the
Company.
C. Benefits for Disabled Participants
A Participant who (i) becomes totally and permanently disabled (as determined
in accordance with the terms of the Company's Long Term Disability Plan), (ii)
remains so disabled until Normal Retirement Age, and (iii) receives benefits
under the Company's Long Term Disability Plan, shall be eligible to receive
his or her Normal Retirement Benefit upon reaching Normal Retirement Age
computed as though the Participant retired at Normal Retirement Age. Such
Benefits shall commence on the later of (i) the first business day of the
month following the Participant's attainment of Normal Retirement Age or (ii)
the first business day of the month following discontinuance of payments to
the Participant under the Company's Long Term Disability Plan.
ARTICLE 8
DEATH BENEFITS
A. Pre-Retirement Death Benefits
In the event a Participant dies prior to termination of his or her employment
with the Company, the Participant's Beneficiary shall be entitled to a
Pre-Retirement Survivor Benefit payable in equal monthly installments for a
period of 20 years beginning on the first business day of the month following
the Participant's death, the present value of which (using a discount rate of
5%, compounded annually) is equal to the present value (using a discount rate
of 5%, compounded annually) of the Participant's Normal Retirement Benefit, as
set forth in paragraph A of Article 7 taking into account full vesting due to
the death of the Participant prior to termination of employment.
B. Post-Termination Death Benefits
(a) In the event a Participant dies after termination of his or her employment
with the Company but prior to the commencement of Benefit payments hereunder,
the Participant's Beneficiary shall be entitled to a Post-Termination Survivor
Benefit payable in equal monthly installments for a period of 20 years
beginning on the first business day of the month following the Participant's
death, the present value of which (using a discount rate of 5%, compounded
annually) is equal to the present value (using a discount rate of 5%,
compounded annually) of the Participant's vested Normal Retirement Benefit, as
set forth in paragraph A of Article 7.
(b) In the event a Participant dies after termination of his or her employment
with the Company and after commencement of Benefit payments hereunder, the
Participant's Beneficiary shall be entitled to receive any remaining Benefits
of the Participant in the same amounts and at the same times as would have
been paid to the Participant if he or she had survived.
(c) In the event a Participant's Beneficiary dies after commencement of
Benefit payments to such Beneficiary hereunder, the Beneficiary's estate shall
be entitled to receive any remaining Benefits of the Participant in the same
amounts and at the same times as would have been paid to the Participant if he
or she had survived.
ARTICLE 9
FORFEITURE
A. Competitive Conduct
In consideration for the supplemental retirement benefits provided for herein,
for a period of five years following a Participant's termination of employment
with the Company and at all times when Benefits are being paid to the
Participant hereunder, a Participant shall not render services for any
organization, or engage directly or indirectly in any business, which
organization or business is engaged in the sale or distribution of music,
movies or related accessories in the continental United States. A Participant
who has terminated employment shall be free, however, to purchase as an
investment or otherwise, stock or other securities of such organization or
business so long as they are listed upon a recognized securities exchange or
traded over the counter, and such investment does not represent a greater than
10 percent equity interest in the organization or business. The restrictions
set forth in this paragraph A shall not apply to a Participant whose
employment with the Company terminates after a Chan ge in Control.
B. Nonsolicitation
In further consideration for the supplemental retirement benefits provided for
herein, for a period of five years following a Participant's termination of
employment with the Company and at all times when Benefits are being paid to
the Participant hereunder, a Participant shall not, on behalf of himself or
any other person or entity, employ or seek to employ any person who is then
employed by the Company, and he will not induce or attempt to influence any
employee of the Company to terminate his or her employment or association with
the Company for the purposes of obtaining employment with another person or
entity. The restrictions set forth in this paragraph B shall not apply to a
Participant whose employment with the Company terminates after a Change in
Control.
C. Disclosure of Confidential Information
A Participant shall not, without prior written authorization from the Company,
disclose to anyone outside the Company, or use in other than the Company's
business, any Confidential Information, either during or after employment with
the Company. As used herein Confidential Information shall mean information
relating to the business and operations of the Company that has not previously
been publicly released by duly authorized representatives of the Company and
shall include Company information encompassed in all research, plans,
proposals, marketing and sales plans, financial information, costs, pricing
information, customer and supplier information, trade secrets, proprietary
processes, specifications, expertise, techniques, inventions and all
proprietary methods, concepts, or ideas in or reasonably related to the
business of the Company. Notwithstanding the foregoing, Confidential
Information does not include information which is or becomes publicly released
by duly authorized representatives of the Com pany (except as may be disclosed
by the Participant in violation of this provision).
D. Forfeiture and Rescission
Upon retirement, and from time to time thereafter upon request by the
Committee, the Participant shall certify on a form acceptable to the Committee
that he or she is in compliance with the terms and conditions of the Plan.
Failure to comply with the provisions of Section A, B, C or D of this ARTICLE
9 prior to retirement or receipt of any Benefit payment hereunder shall cause
the forfeiture of all Benefits even if the failure to comply is not discovered
until Benefits have commenced. Failure to comply with the provisions of
Section A, B, C and D of this ARTICLE 9 after Benefits have commenced
hereunder shall cause any such payments to be rescinded from the point in time
when the conduct which led to the failure to comply occurred. The Committee
shall notify the Participant in writing of any such rescission, and within 10
days after receiving a notice of rescission from the Company, the Participant
shall pay to the Company in cash the amount of any payment that has been
rescinded in accordance with this ARTICLE 9.
E. Termination for Cause
Notwithstanding any provision in this Plan to the contrary, if the
Participant's employment with the Company is terminated for Cause, all of such
Participant's and his or her Beneficiary's rights to Benefits hereunder shall
be immediately forfeited. For purposes hereof, Cause shall mean (i)
dishonesty materially injurious to the Company or any of its businesses,
operations, assets or condition (an Adverse Effect ); (ii) gross misconduct or
willful neglect to act which misconduct or neglect has an Adverse Effect;
(iii) material breach of the Participant's fiduciary obligations to the
Company which has an Adverse Effect; or (v) the conviction of the Participant
as a felon. Notwithstanding the foregoing, the Participant's employment shall
not be terminated by the Company for Cause under clauses (i), (ii) or (iii)
above unless the Participant shall have been informed as to the particulars of
the basis for termination and provided an opportunity to be heard by the Board
of Directors or its designee, with the assistance of counsel.
ARTICLE 10
OVERPAYMENT OF BENEFITS
If any overpayment of Benefits is made under the Plan, the amount of the
overpayment may be set off against further amounts payable to or on account of
the person who received the overpayment until the overpayment has been
recovered in full. The foregoing remedy is not intended to be exclusive.
ARTICLE 11
ALIENATION OF BENEFITS
No Benefit payable under the Plan shall be subject to alienation, sale,
transfer, assignment, pledge, attachment, garnishment, lien, levy or like
encumbrance. No Benefit under the Plan shall in any manner be liable for or
subject to the debts or liabilities of any person entitled to Benefits under
the Plan.
ARTICLE 12
WITHHOLDING TAXES
The Company shall be entitled to withhold such taxes and make such reports to
governmental authorities as it reasonably believes to be required by law.
ARTICLE 13
DISTRIBUTIONS TO MINORS AND INCOMPETENTS
If the Committee determines that any Participant or Beneficiary receiving or
entitled to receive Benefits under the Plan is incompetent to care for his or
her affairs, and in the absence of the appointment of a legal guardian of the
property of the incompetent, payments due under the Plan (unless prior claim
thereto has been made by a duly qualified guardian, committee or other legal
representative) may be made to the spouse, parent, brother or sister or other
person, including a hospital or other institution, deemed by the Committee to
have incurred or to be liable for expenses on behalf of such incompetent.
In the absence of the appointment of a legal guardian of the property of a
minor, any minor's share of Benefits under the Plan may be paid to such adult
or adults as in the opinion of the Committee have assumed the custody and
principal support of such minor.
The Committee, however, in its sole discretion, may require that a legal
guardian for the property of any such incompetent or minor be appointed before
authorizing the payment of Benefits in such situations. Benefit payments made
under the Plan in accordance with determinations of the Committee pursuant to
this ARTICLE 13 shall be a complete discharge of any obligation arising under
the Plan with respect to such Benefit payments.
ARTICLE 14
NO RIGHT TO EMPLOYMENT
Nothing herein contained shall be deemed to give any employee the right to be
retained in the service of the Company or to interfere with the right of the
Company to discharge any employee at any time without regard to the effect
that such discharge may have upon the employee under the Plan.
ARTICLE 15
UNFUNDED PLAN
The Plan shall be unfunded. The Company shall not be required to segregate
any assets to provide Benefits, nor shall the Plan be construed as providing
for such segregation nor shall the Company or the Committee be deemed to be a
trustee of any assets of the Plan. Any liability of the Company to any
Participant or Beneficiary with respect to Benefits shall be based solely upon
any contractual obligations created by the Plan. No such obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance or
any property of the Company. Neither the Company nor the Committee shall be
required to give any security or bond for the performance of any obligation
created by the Plan.
All payments provided for under the Plan shall be paid in cash from the
general funds of the Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Participant or his or her
Beneficiary from any trust or special or separate fund established by the
Company to assist it in making such payments. The Company may establish and
maintain a trust, the assets of which shall be subject to the claims of
creditors in the event of the Company's bankruptcy or insolvency, in order to
provide a source of funds to assist it in the meeting of its liabilities
hereunder.
ARTICLE 16
MISCELLANEOUS
A. Construction
Unless the contrary is plainly required by the context, wherever any words are
used herein in the masculine gender, they shall be construed as though they
were also used in the female gender, and vice versa, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also used in the plural form, and vice versa.
B. Severability
If any provision of the Plan is held illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if such illegal or invalid
provision had never been inserted herein.
C. Titles and Headings Not to Control
The titles to ARTICLES and the headings of Sections in the Plan are placed
herein for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
D. Complete Statement of Plan
This document is a complete statement of the Plan. The Plan may be amended,
modified or terminated only in writing and then only as provided herein.
ARTICLE 17
SITUS OF PLAN; GOVERNING LAW
The situs of the Plan shall be the State of New York. The Plan shall be
governed by ERISA, and to the extent not preempted by ERISA, the law of the
State of New York.
ARTICLE 18
ARBITRATION
In the event of any dispute or difference between the Company and a
Participant with respect to the subject matter of this Plan and the
enforcement of rights hereunder, the Participant or the Company may, by notice
to the other party, require such dispute or difference to be submitted to
binding arbitration. The arbitrator or arbitrators shall be selected by
agreement of the parties or, if they cannot agree on an arbitrator or
arbitrators within 30 days after one party has notified the other party of the
desire to have the question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration Association ( AAA )
in New York, New York, upon the application of the party requesting
arbitration. The determination reached in such arbitration shall be final and
binding on both parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator or arbitrators may be sought
in any court of competent jurisdiction. The arbitrator or ar bitrators shall
not be bound by judicial formalities and may abstain from following the strict
rules of evidence. Unless otherwise agreed by the parties, any such
arbitration shall take place in New York, New York, and shall be conducted in
accordance with the rules of the AAA.
Exhibit A
Participants Annual Benefit
Robert J. Higgins $525,000
Edward Marshall $135,000
James Litwak $165,000
John Sullivan $ 75,000
Bruce Eisenberg $ 50,000