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Exhibit 10.7
AMENDED AND RESTATED SEVERANCE AND
BONUS PROGRAM MANAGEMENT INCENTIVE AGREEMENT
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THIS AMENDED AND RESTATED SEVERANCE AND BONUS PROGRAM MANAGEMENT
INCENTIVE AGREEMENT (this "Agreement") is made and entered into as of the 11th
day of October, 1996, by and between Camelot Music, Inc., a Pennsylvania
corporation and a debtor and debtor in possession ("Employer"), and Xxxxx X.
Xxxxxxx ("Employee"), and shall become effective on the date (the "Effective
Date") that this Agreement is approved by the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court").
R E C I T A L S:
A. In early 1996, Employer attempted to resolve certain financial
difficulties in the context of an out-of-court restructuring.
B. Because Employer believed that the success of the financial
restructuring would be aided significantly by the continued efforts of certain
employees (the "Key Employees"), including Employee, Employer entered into those
certain Severance and Bonus Program Management Incentive Agreements, dated May
2, 1996 (the "Existing Agreements") with the Key Employees, in order to induce
the Key Employees to remain in Employer's employ.
C. Pursuant to the Existing Agreements, Employer agreed to provide
certain severance benefits and to make certain bonus payments to the Key
Employees.
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D. Pursuant to Employee's Existing Agreement, Employer agreed, among
other things, to provide Employee with six (6) months of continued salary and
fringe benefits in the event that Employer terminated Employee without cause at
any time prior to Employee's normal retirement date. In addition, Employer
agreed to make conditional lump sum cash payments of $10,000 to Employee on
March 31, 1996 (the "First Bonus Payment") and on August 31,1996 (the "Second
Bonus Payment"). The First Bonus Payment was paid in accordance with the terms
of the Existing Agreement, but the Second Bonus Payment remains unpaid (although
past due as of September 1, 1996).
E. Employer was unable to resolve its financial difficulties in the
context of the financial restructuring, and as such, on August 9, 1996 (the
"Petition Date"), Employer (together with various affiliated entities) filed
petitions for relief under Chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") with the Bankruptcy Court (the "Chapter 11 Case"). Employer
has continued to operate its business and manage its affairs as a debtor in
possession.
F. Employer believes that Employee's continued services are especially
critical to its success now that the Chapter 11 Case has been commenced, and
desires to assume the obligations set forth in the Existing Agreement pursuant
to Section 365(a) of the Bankruptcy Code, as modified herein.
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NOW, THEREFORE, in consideration of the foregoing, Employer and Employee
hereby agree to amend and restate the Existing Agreement in its entirety as
follows:
1. SEVERANCE. In the event Employee's employment is "Terminated without
Cause" by Employer prior to Employee's normal retirement date, Employee shall be
entitled to receive as severance payment, and Employer shall pay to Employee
severance payments in an amount equal to twelve (12) months' worth of the
greater of (a) the salary payment Employee received immediately prior to such
termination or (0) the amount of salary payment Employee is receiving at the
date of this Agreement, payable at the same intervals as Employee's salary had
been paid. Such severance payments shall be made for a period of twelve (12)
full calendar months following such termination, together with a pro rata amount
for any partial calendar month following such termination, and shall be subject
to mitigation. In addition, Employer shall provide to Employee during the period
when severance payments are paid either (a) all the fringe benefits maintained
by Employer which were available to Employee on the date of termination or, if
different, (0) all of the fringe benefits available to Employee at the date of
this Agreement as described on Schedule A attached hereto; Employee may elect
between options (a) and (0) at the time of Employee's termination. Such benefits
will be provided on the terms and conditions in effect as of the date either of
termination or this Agreement as chosen by Employee. The amount of Employee's
salary as of the date of this Agreement is also set forth on Schedule A. The
aforesaid
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severance payments and maintenance of fringe benefits shall be in addition to
and not in lieu of the base salary, bonus compensation, accumulated vacation pay
and other employee benefits payable to Employee at the time of termination, on
account of service prior to Employee's termination.
For purposes of this Agreement, the term "Terminated without Cause"
shall mean termination by reason of layoff or reduction in force or for any
other reason except "Employee's Voluntary Act" or "Termination for Cause" by
Employer. The term "Employee's Voluntary Act" shall mean resignation or quitting
by Employee unless such resignation or quitting is preceded by, or reasonably
contemporaneous with, a "Change in Control". The term "Termination for Cause"
shall mean a termination of Employee arising from gross incompetence,
insubordination, dishonesty in performance of company duties, or conviction of
fraud, theft, embezzlement or any felony. However, any termination for
insubordination is subject to written notice by Employer and a thirty (30) day
cure period to correct the alleged insubordination. The term "Change in Control"
shall mean a change of the holders of 50% or more of the equity of Employer
(other than as a result of the issuance of equity to creditors on emergence from
bankruptcy pursuant to a plan of reorganization proposed by Employer), a change
in the majority of the Board of Directors of Employer (other than pursuant to a
plan of reorganization proposed by Employer), merger with less than 50% of the
merged entity owned by pre-merger shareholders, or sale or abandonment of more
than 50% of Employer's revenue-generating assets.
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2. EMPLOYMENT AT WILL. Notwithstanding anything in this Agreement to the
contrary, to the extent that Employee is an at-will employee on the date of
execution and delivery of this Agreement, Employee remains an at-will employee
thereafter. An at-will employee may be discharged or may quit for any or no
reason, and the rights of Employee and Employer upon termination shall be as set
forth herein. Nothing in this Agreement obligates Employee to remain in
Employer's employ for any particular period or prevents Employee from resigning
at any time for any reason with or without notice to Employer.
3. BONUS PAYMENT. In addition to the annual base salary, bonus
compensation, accumulated vacation pay and other employee benefits otherwise
payable to Employee, and in addition to the severance payments described in
Section 1, in the event that Employee shall be actively employed by Employer on
the date that this Agreement is approved by the Bankruptcy Court (the "Bonus
Payment Date"), Employee shall be entitled to receive a lump-sum cash payment of
the amount specified on Schedule B attached hereto and made a part of this
Agreement (the "Bonus Payment") within three (3) business days of the Bonus
Payment Date. In consideration of payment and receipt of the Bonus Payment,
Employee agrees to remain in the employ of Employer from receipt of such payment
until the end of Employer's fiscal year on March 1, 1997 (the "Employment
Period"). In the event that Employee's employment is terminated as a result of
Employee's Voluntary Act prior to the expiration of the Employment Period,
Employee agrees to repay to Employer the entire
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amount of the Bonus Payment. To secure such repayment, Employer has a right of
setoff against any payments payable to Employee pursuant to this Agreement or
otherwise.
4. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
prior understanding whether written or oral.
5. AMENDMENT. This Agreement may be amended only by written agreement
signed by each of the parties hereto.
6. CHOICE OF LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Ohio.
7. NOTICE. Any notice to be given in connection with this Agreement
shall be deemed to have been effectively given if hand-delivered to the
recipient or sent by certified mall, return receipt requested, to the recipient
at the address last provided by recipient for purposes of receiving notices
hereunder or, unless or until such address shall be so furnished, to the address
indicated opposite his, her or its signature to this Agreement.
8. ASSIGNABILITY. This Agreement, and all actions and decisions
hereunder, shall inure to the benefit of and be binding upon Employer, its
representatives, successors and assigns, and upon Employee, and Employee's
heirs, executors, successors and assigns. None of the rights of Employee to
receive any form of compensation or benefit payable pursuant to this Agreement
shall be assignable or
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transferable except through a testamentary disposition or by the laws of descent
and distribution upon the death of Employee. Any attempted assignment, transfer,
conveyance or other disposition (other than as aforesaid) of any interest in the
rights of Employee to receive any form of compensation or benefit to be paid by
Employer pursuant to this Agreement shall be void.
9. SEVERABILITY. In the event that any provision of this Agreement shall
be held to be illegal, invalid or unenforceable for any reason, said illegality,
invalidity or unenforceability shall not affect the remaining provisions, but
shall be fully severable and the Agreement shall be construed and enforced as if
said illegal, invalid or unenforceable provisions had never been inserted
herein.
10. EFFECTIVENESS. Employer hereby represents and warrants to Employee
that execution and performance of this Agreement shall become a valid and
binding obligation of Employer upon the approval of this Agreement by the
Bankruptcy Court.
11. COMPLIANCE WITH APPLICABLE LAW. Employer reserves discretion to
interpret and apply the terms and conditions of this Agreement consistent with
applicable law.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
and year first above written.
CAMELOT MUSIC, INC.
By /s/ Xxxx X. Xxxxxx
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For Notices:
0000 Xxxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxx, Xxxx 00000
Attention: President
EMPLOYEE:
By /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
0000 Xxxxxxxxxx Xxxx, X.X.
Xxxxxxxxx, Xxxx 00000
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Schedule A
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to
Amended and Restated Severance and
Bonus Program Management Incentive Agreement
Name of Employee: Xxxxx X. Xxxxxxx
Amount of Monthly Salary Payment as of date of this Agreement: $13,750
Fringe Benefits Available to Employee as of the date of this Agreement which
will be continued during the severance period:
Group Medical
Group Dental
Group Long-Term Disability
Group Life Insurance
Fringe Benefits Available to Employee as of the date of this Agreement which
will be continued under the terms of a separate contract:
Second Amended and Restated Supplemental Executive Retirement
Agreement, dated as of the date of this Agreement
Fringe Benefits Available to Employee as of the date of this Agreement which
will not be continued after the date of termination:
Individual Split Dollar Insurance Program as per agreement
dated September 1, 1986 and amended on December 31, 1990
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Schedule B
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to
Amended and Restated Severance and
Bonus Program Management Incentive Agreement
Name of Employee: Xxxxx X. Xxxxxxx
Xxxxx Amount of Lump Sum Cash Payment (subject to normal withholding taxes)
Payable on Bonus Payment Date:
Bonus Payment: $10,000
