EXTENSION OF AND AMENDMENT TO THE MANAGEMENT
SERVICES AGREEMENT
This EXTENSION OF AND AMENDMENT TO THE MANAGEMENT SERVICES AGREEMENT
(this "EXTENSION AND AMENDMENT") is dated as of February 1, 1998, and entered
into among WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation formerly known
as WEI Acquisition Co. (the "COMPANY"), XXXXXXX & MARSAL, INC., a New York
corporation ("A&M"), A&M INVESTMENT ASSOCIATES #3, LLC, a Delaware limited
liability company (the "AFFILIATE") and XXXXXXX X. XXXXXXX XX, an individual
("XXXXXXX"), and shall bind the SUPPORT EMPLOYEES (the "SUPPORT EMPLOYEES," as
defined below), each an individual. Reference is made to that certain
Management Service Agreement (the "MANAGEMENT SERVICES AGREEMENT" and as
extended and amended hereby the "EXTENDED AND AMENDED AGREEMENT") dated as of
January 31, 1997 among the Company, A&M, the Affiliate, Xxxxxxx and, with
respect to Section 2(c) and 8 thereof only, Cerberus, and binding upon the
Support Employees. All capitalized terms used herein and not otherwise defined
(including without limitation the term "Support Employees") shall have the
meaning given to such terms in the Management Services Agreement.
RECITALS
WHEREAS, A&M and the Company desire to extend the term of the
Management Services Agreement; and
WHEREAS, A&M, Xxxxxxx, the Affiliate and the Company desire to amend
certain terms and provisions of the Management Services Agreement as provided
herein;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. EXTENSION OF THE MANAGEMENT SERVICES AGREEMENT
Pursuant to Section 2(b) of the Management Services Agreement, the
Company and A&M hereby agree to extend the term of the Management Services
Agreement such that the Extended and Amended Agreement shall terminate on
October 14, 1999, subject to
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earlier termination pursuant to Section 7 of the Extended and Amended Agreement
(such extended term the "FIRST EXTENDED TERM") ; PROVIDED, HOWEVER, that at
least six months prior to the expiration of the First Extended Term, A&M and the
Company shall notify the other as to whether it desires to extend the First
Extended Term. If both A&M and the Company desire to extend the First Extended
Term, they will promptly commence and pursue good faith negotiations regarding
the terms and conditions of such extension. If either A&M or the Company does
not desire to extend the First Extended Term, or if the parties are unable to
reach agreement on the terms and conditions under which the First Extended Term
shall be extended, the Extended and Amended Agreement shall terminate on October
14, 1999, except that each of A&M and the Company shall use its best efforts and
shall provide full cooperation to the other in making a smooth transition in the
management of the Company to the new management selected by the Company. If so
terminated by expiration of the First Extended Term, except as provided in
Section 6(d) of the Extended and Amended Agreement and except for accrued but
unpaid fees due to A&M pursuant to Section 4(a) of the Extended and Amended
Agreement and amounts due pursuant to Section 5 of the Extended and Amended
Agreement, neither party shall have any further obligation to the other either
hereunder or under the Extended and Amended Agreement.
SECTION 2. AMENDMENT TO SECTION 4(a) OF THE MANAGEMENT SERVICES
AGREEMENT
Section 4(a) of the Management Services Agreement is amended to read
in full as follows:
(a) FEES. The Company shall pay A&M the fees set forth below in
this Section 4(a); PROVIDED, that the Company's obligation to pay such fees
may be terminated in accordance with subsection (3) of this Section 4(a);
PROVIDED, FURTHER, that, prior to October 14, 1998, the Company's
obligation to pay such fees may be accelerated or terminated in accordance
with Section 7 or 8.
(1) BASE FEES.
(i) Xxxxxxx and Support Employees. In consideration
for the services of A&M, Xxxxxxx and the Support Employees,
except for the Support Employees named in paragraphs (ii), (iii)
and (iv) of this Section 4(a)(1) (the "NAMED SUPPORT EMPLOYEES"),
for the account, and on behalf of A&M hereunder, the Company
shall pay A&M during the term of this Agreement a management fee
of $50,000 (or a pro-rated portion thereof) per month
irrespective of the number of Support Employees provided by A&M
to the Company.
(ii) Xxxx Xxxxxx. Effective February 1, 1998 and
continuing until the earlier of the termination of this Agreement
or the date on which Xxxx Xxxxxx ceases to serve full-time for
the Company,
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the Company shall pay A&M $16,583.33 per month in consideration
for the full-time services of Xxxx Xxxxxx.
(iii) Xxxxx Xxxxxx. Effective February 1, 1998 and
continuing until the earlier of the termination of this Agreement
or the date on which Xxxxx Xxxxxx ceases to serve full-time for
the Company, the Company shall pay A&M $10,416.67 per month in
consideration for the full-time services of Xxxxx Xxxxxx.
(iv) Xxxx "Nick" Xxxxxxx. Effective February 1, 1998
and continuing until the earlier of the termination of this
Agreement or the date on which Xxxx "Nick" Xxxxxxx ceases to
serve full-time for the Company, the Company shall pay A&M
$10,416.67 per month in consideration for the full-time services
of Xxxx "Nick" Xxxxxxx.
(2) INCENTIVE FEES.
(i) Commencing with the fiscal year ending January 31,
1999, A&M is eligible to receive incentive fees payable by the
Company at the sole discretion of the Company's Board of
Directors, equal in amount to the bonuses, if any, to which each
of the Named Support Employees would be entitled pursuant to the
terms of that certain Corporate Bonus Plan adopted by the
Company's Board of Directors on April 8, 1997 (the "BONUS PLAN"),
as if the Named Support Employees were eligible employees under
the Bonus Plan; PROVIDED, HOWEVER, that the parties acknowledge
and agree that the award of bonuses pursuant to the Bonus Plan is
within the discretion of the Company's Board of Directors, and
therefore neither A&M nor the Named Support Employees shall be
eligible to receive any incentive fees pursuant to this Section
4(a)(2) unless the Company's Board of Directors awards bonuses,
in its sole discretion, pursuant to the terms of the Bonus Plan;
PROVIDED, FURTHER, HOWEVER, that in no case shall the incentive
fee payable to A&M for any such Named Support Employee exceed
more than 40 percent (40%) of the base fee payable to A&M for
such Named Support Employee pursuant to Section 4(a)(1); and
(ii) IF for the fiscal year ended January 31, 1998, the
Company achieves a level of EBITDA after the payment of store
bonuses that authorizes the payment of bonuses to eligible
employees pursuant to the Bonus Plan, and IF, after payment of
such bonuses to eligible employees, the Company's EBITDA exceeds
the corresponding level of "Company EBITDA After Bonuses" as
defined in the Bonus Plan, (such excess EBITDA, the "EXCESS
EBITDA") THEN out of the Excess EBITDA, the Company shall pay
A&M: (A) $125,000 in consideration for the full-time services of
Xxxx "Nick" Xxxxxxx
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performed from February 1, 1997 to January 31, 1998 and (B) in
consideration for the full-time services of Xxxxx Xxxxxx
performed from February 1, 1997 to January 31, 1998, the amount
that equals $125,000 MINUS the total payments made by the Company
for reimbursement of Xxxxx Xxxxxx'x expenses incurred between
February 1, 1997 and January 31, 1998 that would not have been
incurred by an employee hired locally to perform the services
rendered by Xxxxx Xxxxxx (including, but not limited to, airfare
for Xxxxx Xxxxxx to and from Florida and California and lodging
for Xxxxx Xxxxxx in California))]; PROVIDED, that if the Excess
EBITDA is insufficient to cover the amounts set forth in (A) and
(B) of this paragraph then the Company shall pay A&M an amount
equal to the Excess EBITDA.
(3) TERMINATION OF NAMED SUPPORT EMPLOYEES. Either A&M or
the Company may terminate any and all of the Named Support Employees
full-time services to the Company upon providing 45 days notice to the
other and to the Named Support Employee, in which case upon such
termination the Company shall no longer be obligated to pay to A&M the
fees allocable to such Named Support Employee under Section 4(a)(1).
SECTION 3. AMENDMENT TO SECTION 5 OF THE MANAGEMENT SERVICES
AGREEMENT
Section 5 of the Management Services Agreement is amended to add the
following sentence to the end of that section:
Notwithstanding anything herein to the contrary, effective
February 1, 1998, no Named Support Employee shall be entitled to
reimbursement of any living expenses or Travel Expenses that would not
have been incurred by an employee hired locally.
SECTION 4. AMENDMENT TO SECTION 7 OF THE MANAGEMENT SERVICES
AGREEMENT
Section 7 of the Management Services Agreement is amended by
renumbering subsection (e) as (f) and by inserting a new subsection (e) that
reads as follows:
(e) TERMINATION ON OR AFTER OCTOBER 14, 1998. On or after October
14, 1998, this Agreement may be terminated by either the Company or A&M upon 60
days written notice to the other.
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SECTION 5. GENERAL
(a) REFERENCE TO AND EFFECT ON THE MANAGEMENT SERVICES
AGREEMENT.
(i) On and after the effective date of this Extension and
Amendment, each reference in the Management Services Agreement to
"this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Management Services Agreement shall mean and
be a reference to the Extended and Amended Agreement; and
(ii) The execution, delivery and performance of this
Extension and Amendment shall not, except as expressly provided herein
or therein, constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the Company under, the
Management Services Agreement.
(b) AMENDMENT. No modification or amendment of, or waiver
under, this Extension and Amendment shall be valid unless in writing and
signed by each of the parties hereto.
(c) BINDING AGREEMENT. This Extension and Amendment and the
Extended and Amended Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
(d) AUTHORIZATION. Each of the Company and the A&M Parties
represents and warrants that its execution, delivery and performance of
this Extension and Amendment has been duly authorized by all necessary
corporate action.
(e) GOVERNING LAW. This Extension and Amendment shall be
governed by and construed in accordance with the internal laws of the State
of New York without regard to conflict of law principles.
(f) SEVERABILITY. If any term, provision, covenant or
restriction herein is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Extension and Amendment shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated thereby.
(g) TAX INDEMNIFICATION. A&M, Xxxxxxx and each Support Employee
agree jointly and severally to indemnify and hold the Company harmless
against and reimburse the Company on demand for any federal, state or local
taxes, workers compensation, health or disability benefits, and any
penalties and interest thereon, payable by or on behalf of the Company in
respect of the services of A&M, Xxxxxxx and the Support Employees furnished
to the Company pursuant to this Extension and Amendment or the Extended and
Amended Agreement.
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(h) ENTIRE AGREEMENT. This Extension and Amendment and the
Extended and Amended Agreement contain the entire understanding of the
parties hereto respecting the subject matter hereof and supersedes all
prior discussions and understandings.
(i) HEADINGS. Section and subsection headings in this Extension
and Amendment are included herein for convenience of reference only and
shall not constitute a part of this Extension and Amendment for any other
purpose or be given any substantive effect.
(j) COUNTERPARTS; EFFECTIVENESS. This Extension and Amendment
may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument; signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Extension and Amendment shall become effective upon the
execution of a counterpart hereof by the Company, A&M, the Affiliate and
Xxxxxxx and receipt by the Company of written or telephonic notification of
such execution and authorization of delivery thereof.
[Remainder of this page intentionally left blank.]
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IN WITNESS THEREOF, the parties have executed this Extension and
Amendment as of the day and year first above written.
XXXXXXX & MARSAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Its: Vice President
----------------------------
A&M INVESTMENT ASSOCIATES #3, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Its: Co-Manager
----------------------------
XXXXXXX X. XXXXXXX XX
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
WHEREHOUSE ENTERTAINMENT, INC.
By: /s/ X.X. Xxxxxxxx
----------------------------
Its: C.F.O.
----------------------------
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