FORM OF EMPLOYMENT AGREEMENT
FOR CHIEF EXECUTIVE OFFICER
This Agreement is made as of July 26, 1999 by and between The Musicland
Group, Inc., a Delaware corporation (the "Company"), Musicland Stores
Corporation, a Delaware corporation (the "Parent") and _______________ (the
"Executive").
WHEREAS the Company and the Parent have employed Executive pursuant to
the terms of Employment and Change of Control Agreements dated August 25, 1988,
as amended January 22, 1992 and November 27, 1995 (the "Prior Agreements");
WHEREAS the Company and the Parent desire to continue to employ
Executive in accordance with the terms and conditions stated in this Agreement,
which shall replace and supersede the Prior Agreements; and
WHEREAS Executive desires to continue employment pursuant to the terms
and conditions of this Agreement and acknowledges that this Agreement replaces
and supersedes the Prior Agreements;
NOW, THEREFORE, for the consideration described below, the parties
agree as follows:
I. EMPLOYMENT
1.1 Employment As Executive. During the Period of Employment described in
Section 1.3 below, the Company and the Parent hereby agree to employ Executive
as Chairman and Chief Executive Officer of the Company and the Parent, unless
terminated earlier pursuant to Article III of this Agreement. Executive accepts
such employment pursuant to the terms of this Agreement. Executive shall be
responsible for managing the Company and the Parent and shall perform such
duties and responsibilities as may be determined from time to time by the Boards
of Directors of the Company and the Parent, which shall be consistent with his
position as a Chief Executive Officer of the Company and the Parent. The Company
and the Parent shall nominate and use their best efforts to secure the election
of Executive as a member of the Boards of Directors of the Company and the
Parent, and Executive shall serve as Director of the Company and the Parent
without additional compensation other than as provided herein. Executive shall
not be required to perform his duties hereunder for more than 60 working days in
any year, or for more than 21 consecutive days at any one time, at any office
located in any place other than the Minneapolis, Minnesota metropolitan area.
1.2 Exclusive Services. Executive agrees to devote his full time,
attention, and energy to performing his duties and responsibilities to the
Company and the Parent
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under this Agreement during the period that this Agreement is in effect, except
for reasonable vacations, illness, or incapacity, provided that nothing in this
Agreement shall preclude Executive from devoting time during reasonable periods
required for (i) serving as a director or member of a committee of any
organization or company involving no conflict of interest with the Company or
the Parent; (ii) delivering lectures, fulfilling speaking engagements; (iii)
engaging in charitable and community activities; and (iv) managing personal or
family finances and investments; provided that such activities do not materially
interfere with the performance of his duties hereunder.
1.3 Period of Employment. The Period of Employment shall be determined as
follows:
(a) Except as provided in subsection (b) in the event of a Change of
Control as defined in Section 4.1, the Period of Employment hereunder
shall be from July 26, 1999 through July 26, 2002, subject to extension
or termination as hereinafter provided. The then-existing Period of
Employment shall be automatically extended by one additional year (to
the next subsequent July 26, but in no event shall the Period of
Employment extend beyond the first day of the month next succeeding the
month in which Executive attains age 65) unless the Company shall
deliver to Executive or Executive shall deliver to the Company written
notice at least 30 months prior to the expiration of the then-existing
Period of Employment that the Period of Employment will not be
extended. In such case, the Period of Employment will end at the
expiration of the then-existing Period of Employment hereunder,
including any previous extension, and shall not be further extended
except by agreement of the Company and Executive. (For example, in
order to avoid the automatic extension of the expiration of the Period
of Employment from July 26, 2002 to July 26, 2003, notice must be given
by January 26, 2000.)
(b) If upon an event constituting a Change of Control the remaining period
in the then-existing Period of Employment (as determined under
subsection (a) above) is less than 36 months, the Period of Employment
shall be extended so that the expiration is on the last business day of
the 36th calendar month following such Change of Control. No adjustment
will be made if the remaining period is more than 36 months at the time
of the Change in Control. In either case, the automatic one year
extensions shall continue to apply as provided in subsection (a) above.
(For example, if a Change in Control occurs January 1, 2000, the
remaining period in the Period of Employment (ending July 26, 2002) is
less than 36 months and would be extended to expire January 1, 2003. In
order to avoid automatic extension of the adjusted Period of Employment
to January 1, 2004, notice must be given by July 1, 2000.)
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(c) The Period of Employment shall continue until the expiration of all
automatic extensions effected as aforesaid, unless and until it sooner
ceases or is terminated as provided in Article III.
II. COMPENSATION, BENEFITS, AND PERQUISITES
2.1 Salary. During the Period of Employment, the Company shall pay
Executive a base salary at the annual rate of $___________ commencing January 1,
1999. The base salary shall be payable in equal bi-weekly installments. The
Compensation Committee of the Board of Directors of the Company may review the
salary periodically and may in its sole discretion increase it to reflect
performance and other factors in accordance with the Company's customary
procedures and practices regarding the salaries of senior officers.
2.2 Disability Pay. In the event of the disability of Executive (within the
meaning of the Company's disability benefit plans in effect at the time of
Executive's disability), the obligation of the Company to make payments of
salary under Section 2.1 shall cease as of the date Executive begins receiving
benefits under the Company's short-term salary continuation plan, and Executive
shall be entitled to benefits under the Company's disability benefit plans in
accordance with the terms of such plans. Notwithstanding the terms of this
Agreement, the Company retains the right to amend, reduce or terminate its
disability benefit plans at any time so long as such amendments, reductions or
terminations apply equally to all senior officers.
2.3 Employee Benefits. Executive shall be entitled to the benefits and
perquisites which the Company generally provides to its other senior officers
under the applicable Company plans and policies. Executive's participation in
such benefit plans shall be on the same basis as applies to other senior
officers of the Company and subject to the terms of applicable law, plan
documents, and insurance policies. Executive shall pay contributions, if any,
which are generally required of the Company's senior officers in order to
receive any such benefits. Specifically, Executive shall:
(a) participate in the Company's Management Incentive Plan and Long-Term
Incentive Plan, or, if applicable, the shareholder approved Alternate
Incentive Plan for Designated Senior Officers (the "Alternate Plan");
(b) be considered by the Compensation Committee of the Board of Directors
for possible grants of stock options, stock appreciation rights,
restricted stock and deferred stock awards, under the Company's stock
option plans, stock incentive plans, or any similar plan adopted by the
Company or the Parent during the Period of Employment;
(c) participate to the permitted extent he wishes in the Company's Capital
Accumulation Plan;
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(d) participate in the Company's Employees' Retirement Plan and
Supplemental Executive Retirement Plan;
(e) participate in the Company's death benefit plans (consisting of its
Group Life Insurance Plan, and accidental death and dismemberment
insurance);
(f) participate in the Company's disability benefit plans (consisting of
its short-term salary continuation, short-term disability and long-term
disability plans);
(g) participate in its senior officer medical, dental, health and welfare
plans;
(h) participate in equivalent successor plans of the Company for which
officers are eligible; and
(i) be provided with one golf membership paid for by the Company regardles
if any other senior officers are provided such perquisite.
Notwithstanding the foregoing, nothing in this agreement shall preclude any
amendment or termination by the Company of any employee benefit plan or practice
(other than (i) above), provided such amendment or termination is applicable to
all of the Company's senior officers generally; provided, however, that in the
event of a Change of Control as defined in Section 4.1 and through the Period of
Employment described in Section 1.3(b), Executive shall be entitled to
perquisites and benefits at least as favorable as those to which Executive was
entitled immediately prior to the Change of Control, and to the extent such
perquisites or benefits are not payable or provided under any such plan of the
Company by reason of the amendment or termination thereof, the Company itself
shall pay or provide therefor.
2.4 Incentive Compensation Following Change of Control. In the event of a
Change of Control as defined in Section 4.1 and through the Period of Employment
described in Section 1.3(b), Executive shall receive an annual award under the
Company's Management Incentive Plan, or, if applicable, the Alternate Plan, or a
plan with substantially equivalent incentives and benefits that may be adopted
by the Company, for each calendar year, or portion thereof, during the Period of
Employment, which shall be payable as soon as practicable after the end of such
calendar year and shall be equal to a percentage of Executive's base salary for
such calendar year. Such percentage shall be the greater of (i) 60% or (ii) the
average of the percentages, for each of the three preceding calendar years (or
such lesser number of years that the Executive has been a participant in the
plan), that result from dividing Executive's annual award under the Management
Incentive Plan (or its successor) for such year by Executive's annual base
salary for that year. Furthermore, Executive shall continue to be a full
participant in the performance awards of the Company's Long-Term Incentive Plan,
or, if applicable, the Alternate Plan, and any other long-term incentive plans
of the Company, and any and all executive incentive plans in which executives of
the
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Company participate that are in effect immediately prior to a Change of Control,
or any amended or successor plans with at least as favorable terms that may be
substituted and that may hereafter be adopted, including, without limitation,
any plan relating to stock options, stock appreciation rights, restricted stock
and deferred stock awards, or equivalent successor plans that may be adopted by
the Company with at least the same reward opportunities that have heretofore
been provided and with such improvements in such plans or other plans as may
from time to time be made in accordance with the present practices of the
Company.
2.5 Employment Taxes and Withholding. Executive recognizes that the
compensation, benefits, and other amounts provided by the Company under this
Agreement may be subject to federal, state, or local income taxes. All such
taxes shall be the responsibility of the Executive. To the extent that federal,
state, or local law requires withholding of taxes on compensation, benefits, or
other amounts provided under this Agreement, the Company shall withhold the
necessary amounts from the amounts payable to Executive under this Agreement.
2.6 Company Not Responsible for Insured Benefits. In this Article II, the
Company is agreeing to provide certain benefits in the form of premiums for
insurance coverage. The Company and the Parent are not themselves promising to
pay the benefit an insurance company is obligated to pay under the policy the
insurance company has issued. If an insurance company does not or cannot pay
benefits it owes to Executive or his beneficiaries under the insurance policy,
neither Executive nor his personal representative or beneficiary shall have any
claim for benefits against the Company or the Parent.
2.7 Expenses. Executive shall be entitled to receive reimbursement from the
Company (in accordance with the policies and procedures then in effect for the
Company's employees) for all reasonable travel and other expenses incurred by
him in connection with his services under this Employment Agreement.
III.TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 Termination of Employment. Notwithstanding any other provision of this
Agreement, Executive's employment and the Period of Employment may be terminated
pursuant to the following:
(a) Executive's employment may be terminated by the Company or the Parent,
on not less than 60 days' notice in writing, for Cause as defined in
Section 3.2. After payment of all amounts accrued to Executive
hereunder through the date of such notice, the Company and the Parent
shall have no further obligation to the Executive hereunder except for
the payment of benefits under the Company's Employees' Retirement Plan
and Supplemental Executive Retirement Plan and Capital Accumulation
Plan vested on such date.
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(b) Executive's employment may be terminated by the Company at any time for
any reason other than Cause as defined in Section 3.2, or Executive may
terminate his employment with the Company and the Parent for Good
Reason as defined in Section 3.3. In the event of termination of
employment by the Company without Cause, or termination by the
Executive for Good Reason, the Company shall pay to Executive, as
liquidated damages or severance pay or both, the amounts described in
Section 3.4.
(c) Executive may terminate his employment with the Company and the Parent
for other than Good Reason. In such event, the Executive's employment
shall terminate as of the 90th day following the giving of written
notice by the Executive to the Company of his decision to terminate
other than for Good Reason, or such earlier date as the Company may
specify in written notice to Executive, and the Company shall pay to
Executive, as severance pay, the amounts described in Section 3.5.
3.2 Termination for Cause.
(a) For purposes of this Article III, "Cause" shall mean only the
following:
(1) an intentional act or acts of dishonesty by the Executive
constituting a felony and resulting or intended to result directly
or indirectly in gain to or personal enrichment of the Executive
at the Company's expense;
(2) a deliberate and intentional refusal by the Executive to comply
with Sections 1.1 and 1.2 of this Agreement (other than any such
failure to comply resulting from the Executive's incapacity due to
illness or accident) and which failure to comply results in
demonstrably material injury to the Company, provided, however,
that the Executive shall have either failed to remedy such failure
to comply within 30 days from his receipt of written notice from
the Secretary of the Company demanding that he remedy such failure
to comply, or shall have failed to take all reasonable steps to
that end during such 30-day period and thereafter; or
(3) failure by the Executive, on at least three separate occasions
(each occurring less than 24 months apart), to comply with
Sections 1.1 and 1.2 of this Agreement for a significant period of
time (other than any such failure to comply resulting from the
Executive's incapacity due to illness or accident), and provided
that the Company has, on each such occasion, promptly advised the
Executive of such failure to comply by a written notice which sets
forth the details of such failure to comply.
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(b) Termination shall not be for Cause pursuant to the foregoing unless
there shall be delivered to Executive, along with the termination
notice, a certified copy of a resolution of the Board of Directors of
the Company finding that Executive was guilty of conduct set forth in
subsections (a)(1), (2) or (3) above and specifying the particulars
thereof in detail. The resolution must be adopted by the affirmative
vote of not less than that number of directors equal to the greater of
(i) 4 directors or (ii) two-thirds of the entire membership (whether or
not present) of the Board of Directors (other than Executive and
directors who are employees of the Company or the Parent) at a meeting
called and held for that purpose and at which Executive was given an
opportunity to be heard. For purposes of the minimum number of
directors required in the preceding sentence, any fraction shall be
rounded up to the next higher whole number of directors.
(c) Anything herein to the contrary notwithstanding, the employment of
Executive shall not be considered to have been terminated by the
Company for Cause if termination of his employment took place solely
because of one or more of the following:
(1) as a result of bad judgment of negligence on the part of
Executive, or
(2) as the result of an act or omission without intent of gaining
therefrom directly or indirectly a profit to which Executive was
not legally entitled; provided, however, that this subsection
(c)(2) shall not apply to a termination pursuant to subsection
(a)(3) above, or
(3) because of an act or omission believed by Executive in good faith
to have been in or not opposed to the interests of the Company, or
(4) as the result of an act or omission which occurred more than 12
calendar months prior to Executive's having been given notice of
the termination of his employment for such act or omission unless
the commission of such act or such omission could not at the time
of such commission or omission have been known to a member of the
Board of Directors of the Company (other than Executive), in
which case more than 12 calendar months prior to the date that the
commission of such act or such omission was or could reasonably
have been so known; provided, however, that this subsection (c)(4)
shall not apply to a termination pursuant to subsection (a)(3)
above; or
(5) as a result of a continuing course of action which commenced and
was or could reasonably have been known to a member of the
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Board of Directors of the Company (other than Executive) more than
12 calendar months prior to notice having been given to the
Executive of the termination of his employment; provided, however,
that this subsection (c)(5) shall not apply to a termination
pursuant to subsection (a)(3) above.
3.3 Good Reason
(a) For the purposes of this Article III, "Good Reason" shall mean:
(1) the authority, powers, functions, responsibilities or duties
assigned to Executive pursuant to this Agreement are materially
and adversely diminished without his written consent (except any
diminution that occurs solely as a result of the fact that the
Company or Parent ceases to be a public company);
(2) Executive is removed as a director of the Company and Parent (or
any successor thereto);
(3) a breach of Article II of this Agreement with respect to the
salary, incentive compensation and benefits of Executive; or
(4) after a Change of Control (as defined in Section 4.1), Executive
is required, without his written consent, to locate his office
more than 35 miles distant by public highway from his office
immediately prior to the Change of Control (but only if the
distance between the Executive's residence and such new office is
greater than the distance between his residence and office
immediately prior to the Change in Control) or to travel on
business more than 60 working days in any year or more than 21
consecutive days at any one time.
(b) Executive shall give written notice to the Company of termination for
Good Reason within six months of the event giving rise to such notice
and allow the Company 30 days after the Company's receipt of such
notice to cure such breach. If the Company disputes any contention by
Executive that there has been Good Reason, such dispute shall be
resolved by binding arbitration held in Minneapolis, Minnesota in
accordance with the Employment Dispute Resolution Rules of The American
Arbitration Association then in effect. The arbitrator shall be an
attorney with experience in employment disputes who is mutually
selected by the parties. Judgment may be entered on the arbitration
award in any court having jurisdiction.
(c) In the event of the liquidation, dissolution, consolidation or merger
of the Company or transfer (in one transaction or a series of
transactions) of 70% or more of its assets (regardless of whether such
event is not a
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Change of Control within the meaning of Section 4.1(c) because it is
approved by the Continuing Directors), and the successor entity does
not assume all duties and obligations of the Company under this
Agreement or otherwise make arrangements with Executive satisfactory to
Executive for employment of the Executive by the successor, then
Executive may within 90 days following such event give written notice
to the Company of his termination of employment (effective as of 90
days following such notice or such earlier date as specified by the
Company in written notice to Executive), which shall be deemed
termination for Good Reason.
3.4 Severance Benefits. In the event of termination of Executive's
employment by the Company without Cause, or termination by the Executive for
Good Reason, the Company shall provide Executive with the following compensation
and benefits:
(a) Salary. The Company shall pay Executive during the remainder of the
Period of Employment as in effect immediately prior to such
termination, as if such termination had not occurred, an amount equal
to the base salary provided in Section 2.1, including any increases
therein provided, at the times therein stated, for the month in which
termination shall have occurred and for each month thereafter during
such Period, less in respect of each such month the amounts, if any,
paid to him pursuant to the Company's Employees' Retirement Plan and
Supplemental Executive Retirement Plan and the amounts the Executive
would have paid in cash in respect of employee benefits provided for in
Section 2.3, if Executive were still employed.
Notwithstanding the foregoing, in the event of a termination following
a Change of Control, the salary amount described above shall be (i)
determined based on a remaining Period of Employment of not less than
36 months (even if the actual Period of Employment is shorter) and (ii)
paid in a single lump sum within 20 days after such termination.
(b) Annual Incentive. The Company shall pay the Executive during the
remainder of the Period of Employment as in effect immediately prior to
such termination, as if such termination had not occurred, in full
substitution for his rights under the Company's Management Incentive
Plan, or, if applicable, the Alternate Plan, or any successor plan then
in effect, a substitute incentive award, for the year in which
termination occurred and for each subsequent calendar year, or portion
thereof (in which case such substitute award shall be only in
proportion to such portion), during such Period which shall be equal to
the greater of:
(1) 60% of Executive's base salary for the applicable calendar year as
described in Section 2.1 (including any increases therein
provided), or
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(2) the average percentage (of salary) of the awards received by
Executive in respect of the three calendar years next preceding
the year in which the first such substitute incentive award is
paid times such base salary.
The substitute incentive award shall be paid in a single lump sum on
the first day of February of each year, except that a pro rata award
for that portion of the calendar year in which the Period of Employment
ends shall be paid in a single lump sum on the last day of the Period
of Employment.
Notwithstanding the foregoing, in the event of a termination following
a Change of Control, the substitute incentive awards described above
shall be (i) determined based on a remaining Period of Employment of
not less than 36 months (even if the actual Period of Employment is
shorter) and (ii) paid at one time within 20 days after such
termination in an amount equal to the aggregate lump sum value of such
substitute awards.
(c) Long-Term Incentive. The Company shall pay Executive in full
substitution for any rights under all outstanding performance awards
under the Long-Term Incentive Plan, or, if applicable, the Alternate
Plan, or any successor plan then in effect, held by Executive at the
time of such termination, for each year during the remainder of the
Period of Employment a substitute long-term award as follows:
(1) If the termination occurs after the completion of any performance
cycle under the applicable plan but before the award for such
cycle has been paid, the substitute award for the year in which
termination occurs will equal the percentage of Executive's base
salary actually earned under the terms of the applicable plan for
such completed cycles and will be paid at the same time other
participants are paid for such completed cycles. Otherwise, a
substitute long-term award will not be paid in the year of
termination if Executive has already received in such year a
long-term incentive payment pursuant to the applicable plan.
(2) The substitute long-term award for all other years will equal the
greater of (i) 50% of Executive's then current annual base salary
as provided in subsection (a) above or (ii) the average percentage
(of salary) of the two most recent long-term awards paid to the
Executive times such base salary and will be paid by February 1st
of the year for which the payment is being made.
(3) If the final year of the Period of Employment is a partial year,
the substitute long-term award for such year (determined as in
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subparagraph (2) above) will be prorated based on the number of
days in such partial year.
For example: If the Executive is terminated in January 2001 before
payment is made for the completed 1999 - 2000 performance cycle,
the Executive's substitute long-term award for the year of
termination (2001) will be equal to the award earned by the
Executive under such completed cycle and will be paid at the same
time as other participants are paid. If the Executive is
terminated in the year 2001 after the payment for the 1999-2000
performance cycle has been made, the first substitute long-term
award will be paid in the year 2002. In either case, the
Executive's substitute long-term award for the year 2002 will be
paid by February 1, 2002 and will equal the greater of (i) 50% of
Executive's then current annual base salary or (ii) the average
percentage (of salary) of the long-term awards paid to the
Executive in 2000 and 2001 times such base salary.
Notwithstanding the foregoing, in the event of a termination following
a Change of Control, the substitute long term incentive awards
described above shall be (i) determined based on a remaining Period of
Employment of not less than 36 months (even if the actual Period of
Employment is shorter) and (ii) paid at one time within 20 days after
such termination in an amount equal to the aggregate lump sum value of
such substitute awards.
(d) Stock Awards. Each outstanding stock option to purchase shares of the
Company's or the Parent's common stock and any stock appreciation right
that is held by Executive at the time of such termination shall become
vested and exercisable in full. Each stock option to purchase shares of
the Company's or the Parent's common stock granted to Executive on or
after the date hereof shall contain the following provision:
In the event that the Optionee's Period of Employment under his
Employment Agreement with the Company dated as of July 26, 1999 is
terminated pursuant to Section 3.1(b) thereof, this Option shall
become exercisable in full.
In addition, all restrictions upon any restricted stock previously
granted to Executive by the Company or the Parent shall be deemed to
have lapsed and Executive shall be entitled to receive all such shares
of restricted stock. Similarly, Executive shall be entitled to receive
all shares covered by outstanding deferred stock awards previously
granted to Executive by the Company or the Parent as if the deferral
period and all conditions pertaining thereto had expired or been
satisfied, as the case may be.
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(e) Death, Disability and Medical Benefits. During the remainder of the
Period of Employment as in effect immediately prior to such
termination, as if such termination had not occurred, the Executive
shall continue to be entitled to all employee benefits provided for in
Section 2.3(f), (g), and (h), as if Executive were still employed
during such period under this Agreement, with benefits based upon the
compensation and increases provided in subsection (a), and upon the
assumption that Executive was continuing to pay or continued to be
deemed to have paid in cash in respect of such benefits the amounts
(and only the amounts) by which the payments otherwise due Executive
under subsection (a) were reduced in respect to such benefits, and if
and to the extent the said benefits shall not be payable or provided
under any plan by reason of Executive no longer being an employee of
the Company as a result of Executive's termination, the Company itself
shall pay or provider therefor. Notwithstanding the foregoing, if
Executive is entitled to death, disability or medical benefit coverage
of the kind described in Section 2.3(f), (g) or (h) from other
employment or a consulting position during the Period of Employment,
such benefits provided under this Agreement shall be reduced or
coordinated as provided in subsection (g) below.
(f) Retirement Benefits. The Company shall pay to Executive during the
remainder of his life following the expiration of the Period of
Employment as in effect immediately prior to such termination, and,
after his death, to his surviving spouse (subject to such optional
method of payment election as may be made under the Company's
Employees' Retirement Plan and Supplemental Executive Retirement Plan
and as further described below), a supplemental retirement benefit
which shall be equal to the excess of:
(1) an aggregate benefit at least equal to the benefit that would have
been paid under the Employees' Retirement Plan and Supplemental
Executive Retirement Plan, subject to any plan amendments or
terminations generally applicable to all of the Company's senior
officers which are adopted prior to the date of such termination,
if the Executive had continued to be employed and to be entitled
to service credit for benefits during the remainder of such Period
of Employment at an annual rate of compensation equal to his
compensation and increases provided in subsections (a) and (b)
(unless during such remainder the Executive dies or becomes
disabled, in which event such benefit shall be reduced to reflect
application of the last two sentences of subsection(e), over
(2) the aggregate benefit actually payable to the Executive under the
Employees' Retirement Plan and Supplemental Executive Retirement
Plan.
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In clarification of the foregoing paragraph (1), in determining
whether any actuarial reduction would apply (and the amount of such
reduction, if any) under the early retirement provisions of the
Employees' Retirement Plan and Supplemental Executive Retirement Plan
(to reflect the early commencements of benefits), the age which the
Executive would have attained at the expiration of such Period, and the
accredited service he would have had at such time, shall be used. An
election made by Executive under the Employees' Retirement Plan and
Supplemental Executive Retirement Plan as to a joint and survivor or
other optional method of payment and as to the time for commencement of
payments shall be applicable to such supplemental retirement benefit,
with application of discount factors no less favorable to Executive
than those in effect under the Employees' Retirement Plan and
Supplemental Executive Retirement Plan on the date of such termination.
Notwithstanding the foregoing, Executive may, by a notice in writing
filed with the Plan Administrator for the Employees' Retirement Plan
and Supplemental Executive Retirement Plan, designate any person as the
payee of amounts due hereunder after his death (in the manner, and with
the effect, described in the Company's Employees' Retirement Plan and
Supplemental Executive Retirement Plan).
Notwithstanding the foregoing, in the event of a termination following
a Change of Control, the supplemental retirement benefit described
above shall be (i) calculated based upon the Executive's years of
service at the time of the termination plus an additional five years
and disregarding the requirement of five years of participation in the
Supplemental Executive Retirement Plan, and (ii) paid in a single sum
within 20 days after such termination in an amount equal to the lump
sum value of such benefit.
(g) Subsequent Employment. Notwithstanding the foregoing, to the extent
that the Executive shall receive cash compensation that is subject to
federal income taxation in respect of other employment or a consulting
position with another company and that is payable to Executive solely
in respect of the remainder of the Period of Employment as in effect
immediately prior to such termination, or a portion thereof, the
payments to be made by the Company under subsections (a), (b), and (c)
for the remainder of the Period of Employment as in effect immediately
prior to such termination or such portion thereof, as the case may be,
shall be correspondingly reduced, and any supplemental retirement
benefit payments pursuant to subsection (f) shall be calculated after
taking such reduction into account. In the event Executive has received
lump sum payments following a Change of Control as provided above,
Executive agrees to re-pay the Company in quarterly payments the
reductions described in the foregoing sentence.
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Furthermore, to the extent that benefits of the kind provided for in
Section 2.3 (f), (g) and (h) are payable in respect of such other
employment or consulting position, any death or disability benefits so
payable under subsequent employment shall reduce benefits of such kind
otherwise payable under subsection (e) above and any medical/dental/
welfare benefits so payable under subsequent employment shall be deemed
the primary coverage for purposes of coordination of benefits under
subsection (e) above and avoiding duplication of benefits.
Notwithstanding the foregoing, Executive shall not be required to
minimize damages or severance payments under this Agreement by seeking
or accepting other employment or a consulting position.
(h) After Death or Disability. Upon the death of Executive during the
period that payment of the amounts specified in subsection (a) above
are required to be made, the obligation of the Company to make payments
to the Executive under this Section 3.4 shall cease as of the date of
death and the benefits described in Section 3.7 shall become payable.
In the event of the disability of the Executive during such Period, the
obligation to make payments under subsections (a) and (b) above shall
be suspended as of the date specified in Section 2.2 for the cessation
of payments of salary and Executive shall be entitled to the benefits
described in Section 3.6, and such obligation shall be reinstated again
only if during such period Executive ceases to be disabled.
3.5 Severance Pay Upon Voluntary Termination. In the event Executive
terminates employment with the Company other than for Good Reason, the Company
shall provide Executive with the following compensation and benefits:
(a) Executive shall receive monthly an amount equal to his monthly salary
(at his annual rate of salary in effect on the date of such
termination) for the month in which termination shall have occurred and
for each month thereafter during the period ending the earlier of
(1) the expiration of the 12 months immediately following the date of
such termination, or
(2) the end of the Period of Employment under Section 1.3,
less in respect of each such month the amount, if any, paid to him
pursuant to the Company's Employees' Retirement Plan and Supplemental
Executive Retirement Plan and the amounts Executive would have paid in
cash in respect of employee benefits provided for in Section 2.3 if the
executive were still employed.
14
(b) During the period that the payments of the amounts specified in
subsection (a) are required to be made, Executive shall continue to be
entitled to all employee benefits provided for in Section 2.3(f), (g),
and (h) as if Executive were still employed during such period under
this Agreement, with benefits based upon the compensation provided in
subsection (a) and upon the assumption that Executive was continuing to
pay or continued to be deemed to have paid in cash in respect to such
benefits the amounts (and only the amounts) by which the payments
otherwise due Executive under subsection (a) were reduced in respect of
such benefits, and if and to the extent that such benefits shall not be
payable or provided under any such plan by reason of Executive no
longer being an employee of the Company as a result of Executive's
termination, the Company itself shall pay or provide therefor.
Notwithstanding the foregoing, if Executive is entitled to disability
or medical benefit coverage of the kind described in Section 2.3(g) or
(h) from other employment or a consulting position during the Period of
Employment, such benefits provided under this Agreement shall be
coordinated as provided in subsection (d) below.
(c) The Company shall pay to the Executive during the remainder of his life
following the expiration of the period specified in subsection (a) and,
after his death, to his surviving spouse (subject to such optional
method of payment election as may be made under the Company's
Employees' Retirement Plan and Supplemental Executive Retirement Plan
and as further described below), a supplemental retirement benefit
which shall be equal to the excess of
(1) an aggregate benefit at least equal to the benefit that would have
been paid under the Company's Employees' Retirement Plan and
Supplemental Executive Retirement Plan, subject to any plan
amendments or terminations generally applicable to all of the
Company's senior officers which are adopted prior to the date of
such termination, if the Executive had continued to be employed
and to be entitled to service credit for benefits during such
period specified in subsection (a) at an annual rate of
compensation equal to his compensation provided in subsection (a)
(unless during such remainder the Executive dies or becomes
disabled, in which event such benefit shall be reduced to reflect
application of the last two sentences of subsection (b)), over
(2) the aggregate benefit actually payable to Executive under the
Employees' Retirement Plan and Supplemental Executive Retirement
Plan .
In clarification of the foregoing paragraph (1), in determining whether
any actuarial reduction would apply (and the amount of such reduction,
if any,
15
under the early retirement provisions of the Employees' Retirement Plan
and Supplemental Executive Retirement Plan (to reflect the early
commencement of benefits), the age which Executive would have attained
at the expiration of such period, and the accredited service he would
have had at such time, shall be used. An election made by Executive
under the Employees' Retirement Plan and Supplemental Executive
Retirement Plan as to a joint and survivor or other optional method of
payment and as to the time for commencement of payments shall be
applicable to such supplemental retirement benefit, with application of
discount factors no less favorable to Executive than those in effect
under the Employees' Retirement Plan and Supplemental Executive
Retirement Plan on the date of such termination. Notwithstanding the
foregoing, Executive may, by a notice in writing filed with the Plan
Administrator for the Employees' Retirement Plan and Supplemental
Executive Retirement Plan, designate any person as the payee of amounts
due hereunder after his death (in the manner, and with the effect,
described in the Company's Employees' Retirement Plan and Supplemental
Executive Retirement Plan).
(d) Notwithstanding the foregoing, to the extent that Executive shall
receive cash compensation that is subject to federal income taxation in
respect of other employment or a consulting position with another
company and that is payable to Executive solely in respect to the
period specified in subsection (a) or a portion thereof, the payments
to be made by the Company under subsection (a) for such period or such
portion thereof, as the case may be, shall be correspondingly reduced,
and any supplemental retirement benefit payments pursuant to subsection
(c) shall be calculated after taking such reduction into account.
Furthermore, to the extent that benefits of the kind provided for in
Section 2.3(g) and (h) are payable in respect of such other employment
or consulting position, disability benefits of the kind described in
Section 2.3(g) so payable shall reduce benefits of such kind otherwise
payable under subsection(b) and medical and dental benefits of the kind
described in Section 2.3(h) so payable shall be deemed the primary
coverage for purposes of coordination of benefits and avoiding
duplication of benefits. Notwithstanding the foregoing, the Executive
shall not be required to minimize payments of benefits under this
Agreement by seeking or accepting other employment or a consulting
position.
(e) Upon the death of the Executive during the period that payments of the
amounts specified in subsection (a) are required to be made, the
obligation of the Company to make payments to the Executive under this
Section 3.5 shall cease as of the date of death and the benefits
described in Section 3.7 shall become payable. In the event of the
disability of the Executive during the period that payments of the
amounts specified in subsection (a) are required to be made, the
obligation to make payments
16
under subsection (a) shall be suspended as of the date specified in
Section 2.2 and Executive shall be entitled to the benefits described
in Section 3.6, and such obligation shall be reinstated again only if
during such period Executive ceases to be disabled.
3.6 Disability. If Executive has become disabled from performing his duties
under this Agreement and the disability has continued for a period of six
consecutive months or for an aggregate of 180 days during nine consecutive
months, the Period of Employment under this Agreement shall terminate. Such
termination shall not result in payments pursuant to Sections 3.4 or 3.5 above,
the disability benefits provided by the Company being in full satisfaction of
the Company's obligation to Executive.
3.7 Death. Upon the death of Executive during the Period of Employment, the
Period of Employment and the obligation of the Company to make payments under
Section 2.1 shall cease as of the date of death, and benefits shall become
payable under the death benefit plans described in Section 2.3(f) in accordance
with their terms, exclusive of any plan amendments that reduce or terminate
benefits thereunder not generally applicable to all of the Company's senior
officers.
3.8 Non-Competition and Confidentiality. In consideration for the payments
and benefits to be provided to Executive under this Agreement, Executive agrees
to comply with the following requirements:
(a) Agreement Not to Compete. Executive agrees that, on or before the first
anniversary of the date Executive's employment under this Agreement
terminates under Section 3.1, he will not, unless he receives the prior
written approval of the Chairman of the Board of the Parent, directly
or indirectly engage in any of the following actions:
(1) Own an interest in (except as provided below), manage, operate,
join, control, lend money or render financial or other assistance
to, or participate in or be connected with, as an officer,
director, employee, partner, stockholder, consultant or otherwise,
any entity that is a competitor of the Company if the amount of
competition is significant, i.e., the competition is in a line of
business or products that constitute more than five percent of the
gross revenues of both the Company and its consolidated
subsidiaries and the competitor. However, nothing in this
subsection (a) shall preclude Executive from (i) holding less than
one percent of the outstanding capital stock of any corporation
required to file periodic reports with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the securities of which are listed on any
securities exchange, quoted on the National Association of
Securities Dealers Automated Quotation System or traded in the
over-the-counter market or (ii) continuing to engage in any
activities or investments that the Executive
17
participated in prior to his termination of employment if such
activities or investments did not violate Company policy.
(2) Intentionally solicit, endeavor to entice away from the Parent or
the Company, or any of their subsidiaries, or otherwise interfere
with the relationship of the Parent or the Company, or any of
their subsidiaries with, any person who is employed by or
otherwise engaged to perform services for the Parent or the
Company, or any of their subsidiaries (including, but not limited
to, any independent sales representatives or organizations), or
any persons or entity who is, or was within the then most recent
12-month period, a customer or client of the Parent or the
Company, or any of their subsidiaries, whether for Executive's own
account or for the account of any other individual, partnership,
firm corporation or other business organization.
If the scope of the restrictions in this subsection are determined by a
court of competent jurisdiction to be too broad to permit enforcement
of such restrictions to their full extent, then such restrictions shall
be construed or rewritten (blue-lined) so as to be enforceable to the
maximum extent permitted by law, and Executive hereby consents, to the
extent he may lawfully do so, to the judicial modification of the scope
of such restrictions in any proceeding brought to enforce them.
(b) Non-Disclosure of Information. During the period of his employment
hereunder, and at all times thereafter, Executive shall not, without
the written consent of the Chief Executive Officer of the Parent,
disclose to any person, other than an employee of the Parent or the
Company, or any of their subsidiaries or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance
by Executive of his duties as an executive of the Parent or the
Company, except where such disclosure may be required by law, any
material confidential information obtained by him while in the employ
of the Parent or the Company with respect to any of their products,
technology, know-how or the like, services, customers, methods or
future plans, all of which Executive acknowledges are valuable, special
and unique assets the disclosure of which Executive acknowledges may be
materially damaging to the Parent or the Company.
(c) Remedies. Executive acknowledges that the Parent's or the Company's
remedy at law for any breach or threatened breach by Executive of
subsection (a) or (b) will be inadequate. Therefore, the Parent or the
Company shall be entitled to injunctive and other equitable relief
restraining Executive from violating those requirements, in addition to
any other remedies that may be available to the Parent or the Company
under this Agreement or applicable law.
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IV. CHANGE OF CONTROL
4.1 Change of Control Defined. For purposes of this Agreement, "Change of
Control" means the occurrence of any of the following:
(a) The acquisition by any person, entity or "group" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended ("xxx 0000 Xxx"), other than the Company, the Parent or any of
their affiliates, or any employee benefit plan of the Company and/or
its affiliates, of beneficial ownership (within the meaning of Rule
13(d)-3 under the 0000 Xxx) of shares of stock of the Company or the
Parent having twenty five percent (25%) or more of the total number of
votes that may be cast for election of the Directors of the Company or
the Parent in a transaction or series of transactions not approved in
advance by a vote of at least three-quarters of the Continuing
Directors (as defined below).
(b) A change in the composition of the Board of Directors of the Company or
the Parent such that at any time a majority of the Board are not
Continuing Directors. "Continuing Directors" refers to the individuals
who serve as Directors at the effective date of this Agreement and any
individual whose term of office as a Director begins thereafter if the
nomination or election of such Director was approved in advance by a
vote of at least three-quarters of the then serving Continuing
Directors (other than a nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
solicitation with respect to the election or removal of the Directors,
as such terms are used in Rule 14a-11 of Regulation 14A under the 1934
Act).
(c) The approval by the shareholders of the Company or the Parent of a
reorganization, merger, consolidation, liquidation or dissolution of
the Company or the Parent, or of the sale (in one transaction or a
series of transactions) of all or substantially all of the assets of
the Company or the Parent other than a reorganization, merger,
consolidation, liquidation, dissolution or sale approved in advance by
a vote of at least three-quarters of the Continuing Directors.
(d) Any other occurrence if at least a majority of the Continuing Directors
determine in their discretion that there has been a Change of Control
of the Company or the Parent.
4.2 Vesting of Stock Options and Restricted Stock. Upon a Change of
Control, the right of Executive to exercise any and all stock options to
purchase shares of the Company's or the Parent's stock and any stock
appreciation rights held by Executive shall, to the extent that such options and
rights shall not theretofore have been exercised, become fully vested and
exercisable immediately, all restrictions upon any restricted stock previously
granted to Executive shall be deemed to have lapsed
19
and the deferral period and all conditions pertaining to any deferred stock
awards previously granted to Executive shall be deemed to have expired or have
been satisfied, as the case may be, and Executive shall be entitled to receive
all such shares of restricted or deferred stock. All restricted stock and all
deferred stock awards granted to Executive on or after the date hereof shall be
awarded subject to the conditions described in the immediately preceding
sentence. All options issued or awarded to the Executive on or after the date
hereof shall contain the following provision:
Notwithstanding anything herein contained to the contrary, in the event
that a Change of Control, as defined in Section 4.1 of the Optionee's
Employment Agreement with the Company dated as of July 26, 1999 should
occur, this Option shall immediately thereafter become exercisable in
full.
4.3 Trust Requirement After Change of Control. To assure the performance of
the Company and the Parent of their obligations under this Agreement in the
event of a Change of Control, the Company or the Parent shall, upon the request
of Executive immediately prior to a Change of Control, deposit in an irrevocable
trust with a trustee designated by Executive, an amount of liquid assets equal
to the present value of the maximum amount of all lump amounts which could be
paid to Executive under Section 3.4 in the event of a termination of employment
of Executive without Cause following a Change of Control. Such trust shall be
established and funded only if and to the extent that the establishment of such
trust does not contravene the provisions of any loan agreement under which the
Company or the Parent is obligated; provided, however, that the Company and
Parent (as opposed to the lender under any such loan agreement) may not seek to
preclude the establishment of such trust by initiating the entering into,
renegotiating or amending of any such loan agreement, a principal purpose which
entering into, renegotiating or amendment is such preclusion. The trust shall be
reasonably satisfactory in form and substance to the Executive, with no greater
rights in Executive than an unsecured creditor of the Company and Parent. To the
extent there are not amounts in trust sufficient to pay Executive under this
Agreement, the Company and Parent shall be and remain liable therefore.
V. MISCELLANEOUS
5.1 Amendment. This Agreement may be amended only in a writing that is
signed by all parties.
5.2 Entire Agreement. This Agreement contains the entire understanding of
the parties with regard to the employment of the Executive by the Company and
the Parent. There are no other agreements, conditions, or representations, oral
or written, expressed or implied, with regard thereto. This Agreement supersedes
all prior agreements, promises, and representations relating to the employment
of Executive by the Company and the Parent.
20
5.3 Assignment. The Company may in its sole discretion assign this
Agreement to any entity which succeeds to some or all of the business of the
Company through merger, consolidation, a sale of some or all of the assets of
the Company, or any similar transaction. Executive acknowledges that the
services to be rendered by him are unique and personal. Accordingly, Executive
may not assign any of his rights or obligations under this Agreement.
5.4 Successors. Subject to Section 5.3, the provisions of this Agreement
shall be binding upon the parties hereto, upon any successor to or assign of the
Company and the Parent, and upon Executive's heirs and the personal
representative of Executive or Executive's estate.
5.5 Notices. Any notice required to be given under this Agreement shall be
in writing and shall be delivered either in person or by certified or registered
mail, return receipt requested. Any notice by mail shall be addressed as
follows:
If to the Company, to:
The Musicland Group, Inc.
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Secretary
If to Executive, to:
The Musicland Group, Inc.
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: _________________
With an additional copy to (home address):
----------------------
----------------------
----------------------
or to such other addresses as either party may be designate in writing to the
other party from time to time.
5.6 Waiver of Breach. Any waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any other provision of this Agreement or of any subsequent breach
by such party of a provision of this Agreement.
21
5.7 Potential Excise Taxes.
(a) Gross-Up Payment. Anything to the contrary notwithstanding, in the
event it shall be determined that any payment, distribution
or benefit made or provided by or on behalf of the Company or
Parent to or for the benefit of the Executive (whether pursuant to
this Agreement or otherwise) (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986. as amended (the "Code"), or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, being, collectively
referred to as the "Excise Tax"), then the Company shall pay the
Executive in cash an additional amount (the "Gross-Up Payment")
such that, after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including but not limited to income taxes (and any interest and
penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed on the Payments.
Notwithstanding the foregoing, no amount shall be paid under this
Section 5.7, and the amounts payable to Executive under this
Agreement shall be reduced to the amount at which no such Excise
Tax is payable, if the result of such reduction is to place
Executive in the same or a better after-tax position than would
result from making the additional payments provided under this
Section.
(b) Determination of Gross-Up Payment. Subject to sub-paragraph (c)
below, all determinations required to be made under this Section
5.7, including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit
its financial statements for the year immediately preceding the
Change of Control (the "Accounting Firm") which shall provide
detailed supporting calculations to the Company and the Executive
within 30 days after the date of the Executive's termination of
employment. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group
affecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations
required under this Section 5.7 (which accounting firm shall then
be referred to as the "Accounting Firm"). All fees and expenses of
the Accounting Firm in connection with the work it performs
pursuant to this Section 5.7 shall be promptly paid by the
Company. Any Gross-Up Payment shall be paid by the Company to the
Executive within 5 days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by the Executive, it shall furnish the Executive
22
with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not
result in the imposition of a penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
by the Accounting Firm, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment"). In the event that the Company exhausts its
remedies pursuant to sub-paragraph (c) below, and the Executive is
thereafter required to make a payment of Excise Tax, the
Accounting Firm shall promptly determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
paid by the Company to the Executive within 5 days after such
determination.
(c) Contest. The Executive shall notify the Company in writing of any
claim made by the Internal Revenue Service that if successful,
would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than 10 business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Employee
shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim;
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in waiting from time to
time, without limitation, accepting legal representation with
respect to such claim by an attorney selected by the Company
and reasonably acceptable to the Executive;
(3) cooperate with the Company in good faith in order to
effectively contest such claim; and
(4) permit the Company to participate in any proceedings relating
to such claim, provided that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto,
23
imposed as a result of such representation and payment of
costs and expenses.
Without limitation on the foregoing provisions of this
subparagraph (c), the Company shall control all proceedings taken
in connection with such contest. At its sole option, the Company
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim and may either direct the Executive to pay
the tax claimed and xxx for a refund or contest the claim in any
permissible manner. The Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as
the Company shall determine, provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. The Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
Furthermore, the Company agrees to hold in confidence and not to
disclose, without Executive's prior written consent, any
information with regard to Executive's tax position which the
Company obtains pursuant to this Section 5.7.
(d) Suit for Refund. If the Company directs the Executive to pay any
claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis. If
the Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If a determination is
made that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Indemnification. The Company will indemnify Executive (and his legal
representatives or other successors) to the fullest extent permitted (including
payment of expenses in advance of final disposition of a proceeding) by the laws
of the State of Delaware, as in effect at the time of the subject act or
omission, or by the Restated Certificate of Incorporation and By-Laws of the
Company, as in effect at such time or on the effective date of this Agreement,
or by the terms of any indemnification agreement between the Company and
Executive, whichever affords or afforded greater protection
24
to Executive, and the Executive shall be entitled to the protection of any
insurance policies the Company may elect to maintain generally for the benefit
of its directors and officers (and to the extent the Company maintains such an
insurance policy or policies, Executive shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage affordable for any Company officer or director), against all costs,
charges and expenses whatsoever incurred or sustained by him or his legal
representatives at the time such costs, charges and expenses are incurred or
sustained, in connection with any actions, suit or proceeding to which he (or
his legal representatives or their successors) may be made a party by reason of
his being or having been a director, officer or employee of the Company, the
Parent or any subsidiary of either of them, or his serving or having served any
other enterprise as a director, officer or employee at the request of the
Company.
5.9 Attorney's Fees. In the event of any litigation, arbitration, or other
proceeding between the Company and Executive with respect to this Agreement or
the enforcement of Executive's rights hereunder, the Company shall periodically
reimburse Executive for all of the reasonable costs and expenses relating to
such litigation, arbitration or proceeding (including, without limitation,
reasonable attorneys' fees), regardless of outcome. In no event shall Executive
be required to reimburse the Company or the Parent for any of the costs or
expenses relating to such litigation, arbitration, or proceeding.
5.10 Joint and Several Liability. All duties, undertakings, obligations, and
liabilities of the Company and the Parent arising under this Agreement shall be
the joint and several liability of the Company and the Parent.
5.11 Severability. If any one or more of the provisions (or portions
thereof) of this Agreement shall for any reason be held by a final determination
of a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provisions (or portions of the provisions) of this Agreement, and the
invalid, illegal, or unenforceable provision shall be deemed replaced by a
provision that is valid, legal, and enforceable and that comes closest to
expressing intention of the parties.
5.12 Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Minnesota, without giving effect to
conflict of law principles.
5.13 Headings. The headings of articles and sections herein are included
solely for convenience and reference and shall not control the meaning of
interpretation of any of the provisions of this Agreement.
5.14 Counterparts. This Agreement may be executed by either of the parties
in counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute a single instrument.
25
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date set forth above.
MUSICLAND STORES CORPORATION
THE MUSICLAND GROUP, INC.
By:
-----------------------------------
Xxxxxxx X. Xxxxxx
Chairman, Compensation Committee
EXECUTIVE
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