<PAGE> 1
As filed with the Securities and Exchange Commission on September 28, 1998.
Registration No. ____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
WHEREHOUSE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
-------------------
Delaware 95-4608339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19701 Hamilton Avenue
Torrance, California 90502
(Address of principal executive offices)
1998 Stock Incentive Plan
(Full title of the plan)
ROBERT S. KELLEHER
Chief Financial Officer
Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, California 90502
(Name and address of agent for service)
-------------------
Telephone number, including area code, of agent for service: (310) 538-2314
-------------------
Copy to:
C. James Levin
O'MELVENY & MYERS LLP
400 South Hope Street
Los Angeles, California 90071-2899
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered registered per unit price fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 600,000(1) $ 8.94(2) $5,364,000(2) $1,850(2)
par value $.01 shares
per share
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement covers, in addition to the number of shares of
Common Stock stated above, options and other rights to purchase or acquire
the shares of Common Stock covered by this Registration Statement and,
pursuant to Rule 416(c), an additional indeterminate number of shares
which by reason of certain events specified in the Plan may become subject
to the Plan.
(2) Pursuant to Rule 457(h), the maximum offering price, per share and in the
aggregate, and the registration fee were calculated based upon the book
value of the Common Stock computed as of July 31, 1998.
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE
SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I
of Form S-8 (plan information and registrant information) will be sent or given
to employees as specified by Securities and Exchange Commission Rule 428(b)(1).
Such documents need not be filed with the Securities and Exchange Commission
either as part of this Registration Statement or as prospectuses or prospectus
supplements pursuant to Rule 424. These documents, which include the statement
of availability required by Item 2 of Form S-8, and the documents incorporated
by reference in this Registration Statement pursuant to Item 3 of Form S-8 (Part
II hereof), taken together, constitute a prospectus that meets the requirements
of Section 10(a) of the Securities Act of 1933.
2
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of Wherehouse Entertainment, Inc. (the
"Company") filed with the Securities and Exchange Commission are incorporated
herein by reference:
(a) Annual Report on Form 10-K for the Company's fiscal year ended
January 31, 1998.
(b) Company Quarterly Reports on Form 10-Q for the quarters ended April
30, 1998 and July 31, 1998, the Company's Current Report on Form 8-K
dated September 22, 1998, and all other reports filed by the Company
pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act
of 1934 (the "Exchange Act") since the end of the fiscal year covered
by the Annual Report referred to above; and
(c) The description of the Company's Common Stock contained in its
Registration Statement on Form 8A dated July 27, 1997, and any
amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which de-registers all securities then remaining unsold shall be deemed to be
incorporated by reference into the prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document, all or a portion of which is incorporated or deemed to be incorporated
by reference herein, shall be deemed to be modified or superseded for purposes
of this Registration Statement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or amended, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
The Company's Common Stock, par value $.01 per share, (the
"Common Stock") is registered pursuant to Section 12 of the Exchange Act, and,
therefore, the description of securities is omitted.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the General Corporation Law of
Delaware, the Company's Bylaws provide for indemnification of directors of the
Company against expenses (including attorneys' fees) and other amounts paid in
settlement
3
<PAGE> 4
actually and reasonably incurred by them in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which any such person was or is a party or
is threatened to be made a party, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the Company and, with respect to any criminal action or proceeding,
if such person had no reasonable cause to believe his conduct was unlawful. In
the case of an action or suit by or in the right of the Company, such a person
may not be indemnified in respect of any claim, issue or matter as to which he
has been adjudged liable for negligence or misconduct in the performance of his
duty to the Company, unless and only to the extent the court in which such
action or suit was brought determines that such person is fairly and reasonably
entitled to indemnity for such expenses as such court may deem proper. In each
case, indemnification shall be made only upon specific authorization of a
majority of disinterested directors, by written opinion of independent legal
counsel or by the shareholders, unless the director has been successful on the
merits or otherwise in defense of any such action or suit, in which case he
shall be indemnified without such authorization. The Company's Bylaws require
the Company to pay the expenses incurred by a director in defending or
investigating a threatened or pending action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding upon receipt by the
Company of an undertaking by or on behalf of such director to repay such amount
if it is ultimately determined that he or she is not entitled to
indemnification. The advancement of expenses, as well as indemnification,
pursuant to the Company's Bylaws is not exclusive of any other rights which
those seeking indemnification or advancement of expenses from the Company may
have.
The Company's Certificate of Incorporation eliminates personal
liability of directors to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for: (i) any breach of the
duty of loyalty to the Company or its shareholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or knowing violations of
law; (iii) liability under Section 174 of the Delaware General Corporation Law
relating to certain unlawful dividends and stock repurchases; or (iv) any
transaction from which the director derived an improper personal benefit.
The Company's Bylaws permit the Company to purchase and
maintain insurance on behalf of any director of the Company against liability
asserted against him or her in any such capacity, whether or not the Company
would have the power to indemnify him against such liability under the
provisions of the Bylaws. However, the Company maintains liability insurance
providing coverage only with respect to claims made against directors as to
which they are entitled to be indemnified by the Company.
Pursuant to a Management Services Agreement, the Company has
agreed to indemnify and hold harmless Mr. Antonio C. Alvarez, II and the support
employees named therein from and against any and all actions, claims, damages,
and liabilities, including the costs of investigating, preparing or defending
any such action or claim, as and when incurred, arising out of such party's
acceptance of or the performance or non-performance of its material obligations
under the Management Services Agreement; provided, however, that such indemnity
does not apply to any such action, claim, damage, liability or cost to the
extent it is found to have resulted from gross negligence or willful misconduct
of that party or to constitute a breach of the Management Services Agreement.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
See the attached Exhibit Index.
ITEM 9. UNDERTAKINGS
4
<PAGE> 5
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus
required by Section 10(a)(3) of the Securities Act of
1933 (the "Securities Act");
(ii) To reflect in the prospectus any
facts or events arising after the effective date of
the Registration Statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in
the information set forth in the Registration
Statement; and
(iii) To include any material
information with respect to the plan of distribution
not previously disclosed in the Registration Statement
or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") that are incorporated by
reference in the Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 6 above,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in
5
<PAGE> 6
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
6
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Torrance, State of California, on September 28,
1998.
By: /s/ ANTONIO C. ALVAREZ, II
------------------------------------
Antonio C. Alvarez, II
Its: Chief Executive Officer
------------------------------------
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Antonio C. Alvarez, II, Robert S. Kelleher and Mehdi Mahdavi his or her
true and lawful attorneys-in-fact and agents, each acting alone, with full
powers of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ANTONIO C. ALVAREZ, II (Principal Executive Officer September 25, 1998
- ------------------------------ ------------------
Antonio C. Alvarez, II and Director)
/S/ ROBERT S. KELLEHER (Principal Financial Officer) September 25, 1998
- ------------------------------ ------------------
Robert S. Kelleher
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C> <C>
/s/ MEHDI MAHDAVI (Principal Accounting Officer September 25, 1998
- ------------------------------ ------------------
Mehdi Mahdavi or Controller)
/s/ ROBERT C. DAVENPORT Director September 25, 1998
- ------------------------------ ------------------
Robert C. Davenport
/s/ JONATHAN GALLEN Director September 25, 1998
- ------------------------------ ------------------
Jonathan Gallen
/s/ JOSEPH J. RADECKI, JR. Director September 25, 1998
- ------------------------------ ------------------
Joseph J. Radecki, Jr.
/s/ JOSEPH B. SMITH Director September 25, 1998
- ------------------------------ ------------------
Joseph B. Smith
</TABLE>
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 Wherehouse Entertainment, Inc. 1998 Stock Incentive Plan.
Incorporated by reference to the Company's Definitive Proxy
Statement on Schedule 14A, which was filed with the Commission on
September 25, 1998.
4.2 Form of Nonqualified Stock Option Award Agreement.
4.3 Form of Incentive Stock Option Award Agreement.
5. Opinion of O'Melveny & Myers (re legality of Common Stock to be issued).
24.1 Consent of Ernst & Young LLP.
24.2 Consent of O'Melveny & Myers (included in Exhibit 5).
25. Power of Attorney (included in this Registration Statement under
"Signatures").
</TABLE>
9
<PAGE> 1
EXHIBIT 4.2
[1998 STOCK INCENTIVE PLAN]
WHEREHOUSE ENTERTAINMENT, INC.
(the "Company")
EMPLOYEE NONQUALIFIED STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT is between the Company and the Optionee named below and evidences
the Company's grant to the Optionee of a Nonqualified Stock Option to purchase
shares of the Company's Common Stock. The Option is granted pursuant to and
subject to the Company's 1998 Stock Incentive Plan (the "Plan") and the Terms
and Conditions for Nonqualified Stock Options Granted Under the Plan (the
"Terms"), incorporated herein by this reference.
OPTIONEE: ____________________ EXERCISE PRICE
PER SHARE: $_______(1)
NUMBER OF SHARES: ____________________(1)
GRANT DATE: ___________ __, ____ EXPIRES: ____________,____(2)
VESTING SCHEDULE: % VESTING DATES OF VESTING(1), (2)
_________ ____________ __, ____
_________ ____________ __, ____
_________ ____________ __, ____
_________ ____________ __, ____
_________ ____________ __, ____
Optionee accepts the Option and agrees to and acknowledges receipt of a copy of
the Plan and the Terms.
- ----------
(1) Subject to adjustment under Section 4.3 of the Plan.
(2) Subject to early termination if the Optionee's employment terminates or in
certain other circumstances. See Sections 3 through 5 of the Terms and Sections
1.6 and 4.2 of the Plan for exceptions and additional details regarding possible
early termination of the Option.
WHEREHOUSE ENTERTAINMENT, INC. AGREED AND ACKNOWLEDGED:
(a Delaware corporation)
_________________________________
By: _______________________________ Optionee's Signature)
Its:_____________________
_________________________________
Address
_________________________________
(City, State, Zip Code)
<PAGE> 2
[1998 STOCK INCENTIVE PLAN]
TERMS AND CONDITIONS FOR
NONQUALIFIED OPTIONS GRANTED UNDER THE
1998 STOCK INCENTIVE PLAN
1. Exercisability of Option. The Option shall vest and become
exercisable in percentage installments of the aggregate number of shares of
Common Stock of the Company as set forth in the Award Agreement. The Option may
be exercised only to the extent the Option is exercisable and vested.
(a) Cumulative Exercisability. To the extent the Optionee
does not in any year purchase all the shares that the Optionee
may then exercise, the Optionee has the right cumulatively
thereafter to purchase any shares not so purchased until the
Option terminates or expires.
(b) No Fractional Shares. Fractional share interests shall
be disregarded, but may be cumulated.
2. Method of Exercise of Option. To the extent vested, the Option
may be exercised by the delivery to the Company of an Exercise Agreement (a form
of which is attached as Exhibit I) from the Optionee stating the number of
shares to be purchased pursuant to the Option and accompanied by payment:
(a) made in cash or electronic funds transfer, or by
certified or cashier's check payable to the order of the Company,
in the full amount of the purchase price of the shares and
amounts required to satisfy any applicable withholding taxes, or
(b) by the delivery of shares that have been held by the
Optionee for at least six months, in accordance with Section
2.2.2(vi) of the Plan, unless otherwise provided by the
Committee.
Other payment methods may be permitted only if expressly
authorized by the Committee with respect to this option or all options under the
Plan. The Option is non-transferable and may be exercised only by the Optionee,
except as the Committee may otherwise expressly permit.
3. Continuance of Employment Required. The vesting schedule
requires continued service through each applicable vesting date as a condition
to the vesting of the applicable installment and rights and benefits under this
Agreement. Partial service, even if substantial, during any vesting period will
not entitle the Optionee to any proportionate vesting or avoid or mitigate a
termination of rights and benefits upon or following a termination of employment
or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death. If the
Optionee's employment by either the Company or any subsidiary terminates, the
Option and all other rights and benefits under this Agreement terminate except
that the Optionee may, at any time within the
<PAGE> 3
following periods after the Severance Date, exercise the Option to the extent
the Option was exercisable on the Severance Date and has not otherwise expired:
(a) Termination by the Company or a subsidiary, other than
a Termination for Cause (as defined below) --- for a period of 30
days
(b) Voluntary resignation (other than in anticipation of
or in connection with a Termination for Cause) --for a period of
30 days
(c) Retirement --- for a period of 6 months
(d) Total Disability or death of Optionee --- for a period
of 6 months
In case of a Termination for Cause or a voluntary resignation in
anticipation of or in connection with a Termination for Cause, the Option shall
terminate immediately, in its entirety.
"Termination for Cause" means a termination of service, based
upon a finding by the Company, acting in good faith and based on its reasonable
belief at the time, that the Participant:
(a) is or has been dishonest, incompetent, or negligent in
the discharge of his or her duties to the Company; or has refused
to perform stated or assigned duties; or
(b) has committed a theft or embezzlement, or a breach of
confidentiality or unauthorized disclosure or use of inside
information, customer lists, trade secrets or other confidential
information, or a breach of fiduciary duty involving personal
profit, or a willful or negligent violation of any law, rule or
regulation or of Company rules or policy, in any material
respect; or has been convicted of a felony or misdemeanor (other
than minor traffic violations or similar offenses); or
(c) has materially breached any of the provisions of any
agreement with the Company or a parent corporation; or
(d) has engaged in unfair competition with, or otherwise
acted intentionally in a manner injurious to the reputation,
business or assets of the Company; or has induced a customer to
break or terminate any contract with the Company or an affiliate;
or has induced any principal for whom the Company (or an
affiliate) acts as agent to terminate such agency relationship.
A Termination For Cause shall be deemed to occur (subject to
reinstatement upon a contrary final determination by the Board or Committee) on
the date when the Company first delivers notice to the Participant of a finding
of Termination For Cause and shall be final in all respects.
2
<PAGE> 4
5. Change in Subsidiary's Status; Leaves of Absence. If the
Optionee is employed by an entity that ceases to be a subsidiary, this event is
deemed, for purposes of this Agreement, to be a termination of the Optionee's
employment by the Company other than a Termination for Cause. Absence from work
caused by military service, authorized sick leave or other leave approved in
writing by the Company or the Committee shall not be considered a termination of
employment by the Company for purposes of Section 4; provided that, unless
reemployment upon the expiration of such leave is guaranteed by contract or law,
such leave is for a period of not more than 90 days.
6. Notices. Any notice to be given shall be in writing and
addressed to the Company at its principal office, to the attention of the
General Counsel, and to the Optionee at his or her last address of record, or at
such other address as either party may hereafter designate in writing to the
other for purposes of notices in respect of the Option.
7. Optionee not a Stockholder. Neither the Optionee nor any other
person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of the Company as to any shares of Common Stock
until the issuance and delivery to him or her of a certificate evidencing the
shares registered in his or her name. No adjustment will be made for dividends
or other rights as to a stockholder for which a record date is prior to such
date of delivery.
8. No Employment Commitment by Company. Nothing contained in
these Terms and Conditions or the Award Agreement or in the Plan constitutes an
employment commitment by the Company, affects Optionee's status as an employee
at will who is subject to termination without cause, confers upon Optionee any
right to remain employed by the Company or any subsidiary, interferes in any way
with the right of the Company or any subsidiary at any time to terminate such
employment, or affects the right of the Company or any subsidiary to increase or
decrease Optionee's other compensation.
9. Effect of Award Agreement. The Award Agreement shall be
binding upon and inure to the benefit of any successor or successors of the
Company, except to the extent the Committee determines otherwise.
10. Choice of Law. The constructive interpretation, performance
and enforcement of the Award Agreement and the Option shall be governed by the
laws of the State of Delaware.
11. Defined Terms. Capitalized terms used herein or in the Award
Agreement and not otherwise defined herein shall have the meaning assigned by
the Plan.
12. Plan. The Option and all rights of Optionee thereunder are
subject to, and the Optionee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan. Unless otherwise expressly provided in
these Terms and Conditions, provisions of the Plan that confer discretionary
authority on the Committee do not (and shall not be deemed to) create any
additional rights in the Optionee not expressly set forth in the Optionee's
Award Agreement or in a written amendment thereto. If there is any conflict or
inconsistency between the terms and conditions of this Award Agreement and of
the Plan, the terms and conditions of the Plan
3
<PAGE> 5
govern. The Participant acknowledges receipt of a complete copy of the Plan and
agrees to be bound by its terms.
13. Arbitration. Any controversy or claim arising out of or
relating to this Award Agreement or the Plan, their enforcement or
interpretation, or because of an alleged breach, default, or misrepresentation
in connection with any of their provisions, shall, if the Company requests, be
submitted to arbitration, to be held in Los Angeles County, California in
accordance with California Civil Procedure Code Sections 1282-1284.2. In
the event that arbitration is instituted under this Section 13, the party
prevailing in any such litigation shall be entitled, in addition to all other
relief, to reasonable attorney's fees relating to such arbitration. The
non-prevailing party shall be responsible for all costs of the arbitration,
including but not limited to, the arbitration fees, court reporter fees, etc.
4
<PAGE> 6
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Nonqualified
Stock Option Award Agreement by Wherehouse Entertainment, Inc. I,
________________________, the spouse of the Participant therein named, do hereby
agree to be bound by all of the terms and provisions thereof and of the Plan.
DATED: _________________, _____.
_______________________________________
Signature of Spouse
5
<PAGE> 7
[1998 STOCK INCENTIVE PLAN]
EXHIBIT I
WHEREHOUSE ENTERTAINMENT, INC.
OPTION-EXERCISE AGREEMENT
The Purchaser (as identified in the signature below) is a holder
of a Nonqualified Stock Option ("Option") granted under the 1998 Stock Incentive
Plan (the "Plan") of Wherehouse Entertainment, Inc. (the "Corporation") pursuant
to an Award Agreement dated _________, ___________ (the "Award"), and Purchaser
desires to exercise the Option and purchase from the Corporation _______ shares
of its Common Stock, par value $.01 per share (the "SHARES"), to be sold at a
price of $___________ per share, in accordance with and subject to the terms and
conditions set forth in this Exercise Agreement;
SECTION 1. PURCHASE AND SALE OF COMMON STOCK.
The Corporation shall deliver to Purchaser a stock certificate
representing the Shares against delivery to the Corporation by Purchaser of the
purchase price in the sum of $__________ (which represents the product of the
$___________ price per share and the number of Shares, the "PURCHASE PRICE").
SECTION 2. INVESTMENT REPRESENTATIONS.
Purchaser has no need for liquidity in this investment, has the
ability to bear the economic risk of this investment, and can afford a complete
loss of the Purchase Price. Purchaser has received the Corporation's
consolidated financial information which includes information material to the
Corporation's financial condition, operations and prospects. Purchaser also
understands and acknowledges the restrictive legend provision contained in
Section 3 of Appendix A of the Plan.
SECTION 3. LIMITATIONS ON DISPOSITION, REPURCHASE RIGHTS.
The Shares are subject to and Purchaser hereby agrees to be bound
by the provisions of Section 1.7 of the Plan and Appendix A of the Plan,
incorporated herein by this reference, which shall continue in effect as to the
Shares.
SECTION 4. PLAN AND AWARD AGREEMENT.
All rights of the Purchaser under this Exercise Agreement are
subject to, and the Purchaser agrees to be bound by, all of the terms and
conditions of the provisions of the Plan and the Award Agreement, both of which
are incorporated herein by this reference. In the event of a conflict or
inconsistency between the terms and conditions of this Exercise Agreement and of
the Plan or the Award Agreement, the terms and conditions of the Plan or the
Award Agreement shall govern. The Purchaser acknowledges receipt of a copy of
the Plan, including all appendices thereto, and agrees to be bound by the terms
thereof. The Purchaser acknowledges reading and understanding the Plan and all
appendices thereto.
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Exercise Agreement as of
the date first written above.
"THE CORPORATION"
WHEREHOUSE ENTERTAINMENT, INC.
a Delaware corporation
By:_____________________________________
Title:__________________________________
"THE PURCHASER"
________________________________________
Signature
________________________________________
Print Name
________________________________________
Address
________________________________________
City, State, Zip Code
2
<PAGE> 9
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Exercise
Agreement by the Wherehouse Entertainment, Inc., I, _______________________, the
spouse of the Purchaser therein named, do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: _________________, _____
________________________________
Signature of Spouse
3
<PAGE> 1
EXHIBIT 4.3
[1998 STOCK INCENTIVE PLAN]
WHEREHOUSE ENTERTAINMENT, INC.
(the "Company")
EMPLOYEE INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT is between the Company and the Optionee named below and evidences
the Company's grant to the Optionee of a Incentive Stock Option to purchase
shares of the Company's Common Stock. The Option is granted pursuant to and
subject to the Company's 1998 Stock Incentive Plan (the "Plan") and the Terms
and Conditions for Incentive Stock Options Granted Under the Plan (the "Terms"),
incorporated herein by this reference.
OPTIONEE: ____________________ EXERCISE PRICE
PER SHARE: $_______(1), (2)
NUMBER OF SHARES: ____________________(1)
GRANT DATE: ___________ __, ____ EXPIRES: ______ __,____(2), (3)
VESTING SCHEDULE: % VESTING DATES OF VESTING(1), (2), (3)
--------- ----------------
--------- ------------ --, ----
--------- ------------ --, ----
--------- ------------ --, ----
--------- ------------ --, ----
--------- ------------ --, ----
Optionee accepts the Option and agrees to and acknowledges receipt of a copy of
the Plan and the Terms.
- -----------------------------
(1) Subject to adjustment under Section 4.3 of the Plan.
(2) With respect to Optionees who are also 10% shareholders of the Company on
the Grant Date, the Exercise Price of the ISO must be at least 110% of the Fair
Market Value on the Grant Date and the term of the Option must be no longer than
five years. Any Option granted to such a 10% shareholder that does not meet
these requirements will be rendered a Nonqualified Stock Option.
(3) Subject to early termination if the Optionee's employment terminates or in
certain other circumstances. See Sections 3 through 5 of the Terms and Sections
1.6 and 4.2 of the Plan for exceptions and additional details regarding possible
early termination of the Option.
WHEREHOUSE ENTERTAINMENT, INC. AGREED AND ACKNOWLEDGED:
(a Delaware corporation)
---------------------------------
By: _______________________________ Optionee's Signature
Its:_______________________________ _________________________________
Address
---------------------------------
City, State, Zip Code
<PAGE> 2
[1998 STOCK INCENTIVE PLAN]
TERMS AND CONDITIONS FOR
NONQUALIFIED OPTIONS GRANTED UNDER THE
1998 STOCK INCENTIVE PLAN
1. Exercisability of Option. The Option shall vest and become
exercisable in percentage installments of the aggregate number of shares of
Common Stock of the Company as set forth in the Award Agreement. The Option may
be exercised only to the extent the Option is exercisable and vested and during
the Optionees lifetime, only by the Optionee.
(a) Cumulative Exercisability. To the extent the
Optionee does not in any year purchase all the shares that the
Optionee may then exercise, the Optionee has the right
cumulatively thereafter to purchase any shares not so
purchased until the Option terminates or expires.
(b) No Fractional Shares. Fractional share interests
shall be disregarded, but may be cumulated.
2. Method of Exercise of Option. To the extent vested, the
Option may be exercised by the delivery to the Company of an Exercise Agreement
(a form of which is attached as Exhibit I) from the Optionee stating the number
of shares to be purchased pursuant to the Option and accompanied by payment:
(a) made in cash or electronic funds transfer, or by
certified or cashier's check payable to the order of the
Company, in the full amount of the purchase price of the
shares and amounts required to satisfy any applicable
withholding taxes, or
(b) by the delivery of shares that have been held by
the Optionee for at least six months, in accordance with
Section 2.2.2(vi) of the Plan, unless otherwise provided by
the Committee.
Other payment methods may be permitted only if expressly
authorized by the Committee with respect to this Option or all options under the
Plan. The Option is non-transferable and may be exercised only by the Optionee,
except as the Committee may otherwise expressly permit.
3. Continuance of Employment Required. The vesting schedule
requires continued service through each applicable vesting date as a condition
to the vesting of the applicable installment and rights and benefits under this
Agreement. Partial service, even if substantial, during any vesting period will
not entitle the Optionee to any proportionate vesting or avoid or mitigate a
termination of rights and benefits upon or following a termination of employment
or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death. If the
Optionee's employment by either the Company or any subsidiary terminates, the
Option and all other rights and benefits under this Agreement terminate except
that the Optionee may, at any time within the
<PAGE> 3
following periods after the Severance Date, exercise the Option to the extent
the Option was exercisable on the Severance Date and has not otherwise expired:
(a) Termination by the Company or a subsidiary, other
than a Termination for Cause (as defined below) --- for a
period of 30 days
(b) Voluntary resignation (other than in anticipation
of or in connection with a Termination for Cause) --for a
period of 30 days
(c) Retirement --- for a period of 6 months (but
after 3 months of such period, the Option will not be
exercisable as an ISO)
(d) Total Disability or death of Optionee --- for a
period of 6 months
Notwithstanding the foregoing exercise periods after the Severance Date, the
Option will qualify as an ISO under Section 422 of the Code only if it is
exercised within the applicable exercise periods for ISOs and meets all other
requirements of the Code for ISOs. If an Option is not exercised within such
applicable exercise periods or does not meet such other requirements, the Option
will be rendered a Nonqualified Stock Option.
In case of a Termination for Cause or a voluntary resignation
in anticipation of or in connection with a Termination for Cause, the Option
shall terminate immediately, in its entirety.
"Termination for Cause" means a termination of service, based
upon a finding by the Company, acting in good faith and based on its reasonable
belief at the time, that the Participant:
(a) is or has been dishonest, incompetent, or
negligent in the discharge of his or her duties to the
Company; or has refused to perform stated or assigned duties;
or
(b) has committed a theft or embezzlement, or a
breach of confidentiality or unauthorized disclosure or use of
inside information, customer lists, trade secrets or other
confidential information, or a breach of fiduciary duty
involving personal profit, or a willful or negligent violation
of any law, rule or regulation or of Company rules or policy,
in any material respect; or has been convicted of a felony or
misdemeanor (other than minor traffic violations or similar
offenses); or
(c) has materially breached any of the provisions of
any agreement with the Company or a parent corporation; or
(d) has engaged in unfair competition with, or
otherwise acted intentionally in a manner injurious to the
reputation, business or assets of the Company; or has induced
a customer to break or terminate any contract with the Company
or an affiliate; or has induced any principal for whom the
Company (or an affiliate) acts as agent to terminate such
agency relationship.
2
<PAGE> 4
A Termination For Cause shall be deemed to occur (subject to
reinstatement upon a contrary final determination by the Board or Committee) on
the date when the Company first delivers notice to the Participant of a finding
of Termination For Cause and shall be final in all respects.
5. Change in Subsidiary's Status; Leaves of Absence. If the
Optionee is employed by an entity that ceases to be a subsidiary, this event is
deemed, for purposes of this Agreement, to be a termination of the Optionee's
employment by the Company other than a Termination for Cause. Absence from work
caused by military service, authorized sick leave or other leave approved in
writing by the Company or the Committee shall not be considered a termination of
employment by the Company for purposes of Section 4; provided that, unless
reemployment upon the expiration of such leave is guaranteed by contract or law,
such leave is for a period of not more than 90 days.
6. Notices. Any notice to be given shall be in writing and
addressed to the Company at its principal office, to the attention of the
General Counsel, and to the Optionee at his or her last address of record, or at
such other address as either party may hereafter designate in writing to the
other for purposes of notices in respect of the Option.
7. Optionee not a Stockholder. Neither the Optionee nor any
other person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of the Company as to any shares of Common Stock
until the issuance and delivery to him or her of a certificate evidencing the
shares registered in his or her name. No adjustment will be made for dividends
or other rights as to a stockholder for which a record date is prior to such
date of delivery.
8. No Employment Commitment by Company. Nothing contained in
these Terms and Conditions or the Award Agreement or in the Plan constitutes an
employment commitment by the Company, affects Optionee's status as an employee
at will who is subject to termination without cause, confers upon Optionee any
right to remain employed by the Company or any subsidiary, interferes in any way
with the right of the Company or any subsidiary at any time to terminate such
employment, or affects the right of the Company or any subsidiary to increase or
decrease Optionee's other compensation.
9. Additional ISO Provisions.
(a) ISO Value Limit. If the aggregate Fair Market
Value of Shares with respect to which ISOs (whether granted
under this Option or otherwise) first become exercisable by
the Participant in any calendar year exceeds $100,000 as
measured on the applicable Grant Dates, the limitations of
Section 2.3.1 of the Plan shall apply and to such extent this
Option will be rendered a Nonqualified Stock Option.
(b) Notice of Sale. The Participant agrees to notify
the Corporation of any sale or other disposition of any Shares
if such sale or disposition of any
3
<PAGE> 5
Shares occurs within two years after the Grant Date or within
one year after the date of exercise.
(c) Tax Withholding. If any portion of the Option is
rendered a NQSO in accordance with the terms hereof, the
Participant shall pay or make provision for the payment of any
applicable withholding taxes upon exercise of the Option as
provided in Section 6.5 of the Plan.
(d) Transferability. In accordance with Sections
1.9.1 and 1.9.2 of the Plan and the Code, the Option is not
transferable by the Optionee other than by will or the laws of
descent and distribution, and is exercisable during the
Optionee's lifetime only by the Optionee.
10. Effect of Award Agreement. The Award Agreement shall be
binding upon and inure to the benefit of any successor or successors of the
Company, except to the extent the Committee determines otherwise.
11. Choice of Law. The constructive interpretation,
performance and enforcement of the Award Agreement and the Option shall be
governed by the laws of the State of Delaware.
12. Defined Terms. Capitalized terms used herein or in the
Award Agreement and not otherwise defined herein shall have the meaning assigned
by the Plan.
13. Plan. The Option and all rights of Optionee thereunder are
subject to, and the Optionee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan. Unless otherwise expressly provided in
these Terms and Conditions, provisions of the Plan that confer discretionary
authority on the Committee do not (and shall not be deemed to) create any
additional rights in the Optionee not expressly set forth in the Optionee's
Award Agreement or in a written amendment thereto. If there is any conflict or
inconsistency between the terms and conditions of this Award Agreement and of
the Plan, the terms and conditions of the Plan govern. The Participant
acknowledges receipt of a complete copy of the Plan and agrees to be bound by
its terms.
14. Arbitration. Any controversy or claim arising out of or
relating to this Award Agreement or the Plan, their enforcement or
interpretation, or because of an alleged breach, default, or misrepresentation
in connection with any of their provisions, shall, if the Company requests, be
submitted to arbitration, to be held in Los Angeles County, California in
accordance with California Civil Procedure Code Sections 1282-1284.2. In the
event that arbitration is instituted under this Section 14, the party prevailing
in any such litigation shall be entitled, in addition to all other relief, to
reasonable attorney's fees relating to such arbitration. The non-prevailing
party shall be responsible for all costs of the arbitration, including but not
limited to, the arbitration fees, court reporter fees, etc.
4
<PAGE> 6
CONSENT OF SPOUSE
In consideration of the execution of the foregoing
Nonqualified Stock Option Award Agreement by Wherehouse Entertainment, Inc., I,
________________________, the spouse of the Participant therein named, do hereby
agree to be bound by all of the terms and provisions thereof and of the Plan.
DATED: _________________, _____.
_____________________________________
Signature of Spouse
5
<PAGE> 7
[1998 STOCK INCENTIVE PLAN]
EXHIBIT I
WHEREHOUSE ENTERTAINMENT, INC.
OPTION-EXERCISE AGREEMENT
The Purchaser (as identified in the signature below) is a
holder of an Incentive Stock Option ("Option") granted under the 1998 Stock
Incentive Plan (the "Plan") of Wherehouse Entertainment, Inc. (the
"Corporation") pursuant to an Award Agreement dated _________, ___________ (the
"Award"), and Purchaser desires to exercise the Option and purchase from the
Corporation _______ shares of its Common Stock, par value $.01 per share (the
"SHARES"), to be sold at a price of $___________ per share, in accordance with
and subject to the terms and conditions set forth in this Exercise Agreement;
SECTION 1. PURCHASE AND SALE OF COMMON STOCK.
The Corporation shall deliver to Purchaser a stock certificate
representing the Shares against delivery to the Corporation by Purchaser of the
purchase price in the sum of $__________ (which represents the product of the
$___________ price per share and the number of Shares, the "PURCHASE PRICE").
SECTION 2. INVESTMENT REPRESENTATIONS.
Purchaser has no need for liquidity in this investment, has
the ability to bear the economic risk of this investment, and can afford a
complete loss of the Purchase Price. Purchaser has received the Corporation's
consolidated financial information which includes information material to the
Corporation's financial condition, operations and prospects. Purchaser also
understands and acknowledges the restrictive legend provision contained in
Section 3 of Appendix A of the Plan.
SECTION 3. LIMITATIONS ON DISPOSITION, REPURCHASE RIGHTS.
The Shares are subject to and Purchaser hereby agrees to be
bound by the provisions of Section 1.7 of the Plan and Appendix A of the Plan,
incorporated herein by this reference, which shall continue in effect as to the
Shares.
SECTION 4. PLAN AND AWARD AGREEMENT.
All rights of the Purchaser under this Exercise Agreement are
subject to, and the Purchaser agrees to be bound by, all of the terms and
conditions of the provisions of the Plan and the Award Agreement, both of which
are incorporated herein by this reference. In the event of a conflict or
inconsistency between the terms and conditions of this Exercise Agreement and of
the Plan or the Award Agreement, the terms and conditions of the Plan or the
Award Agreement shall govern. The Purchaser acknowledges receipt of a copy of
the Plan, including all appendices thereto, and agrees to be bound by the terms
thereof. The Purchaser acknowledges reading and understanding the Plan and all
appendices thereto.
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Exercise Agreement as of
the date first written above.
"THE CORPORATION"
WHEREHOUSE ENTERTAINMENT, INC.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"THE PURCHASER"
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Address
----------------------------------------
City, State, Zip Code
2
<PAGE> 9
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Exercise
Agreement by the Wherehouse Entertainment, Inc., I, _______________________, the
spouse of the Purchaser therein named, do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: _________________, _____
_____________________________________
Signature of Spouse
3
<PAGE> 1
EXHIBIT 5
September 25, 1998
Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, California 90502
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
You have advised us that you propose to file a Registration Statement on
Form S-8 with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended, of 600,000 shares of
Common Stock, $ .01 par value (the "Shares") of Wherehouse Entertainment, Inc.
(the "Company"), to be issued pursuant to the 1998 Stock Incentive Plan (the
"Plan"). At your request, we have examined the proceedings heretofore taken and
to be taken in connection with the authorization of the Plan and the Common
Stock to be issued pursuant to and in accordance with the Plan.
Based upon such examination and upon such matters of fact and law as we
have deemed relevant, we are of the opinion that the Shares have been duly
authorized by all necessary corporate action on the part of the Company and,
when issued in accordance with such authorization and appropriate Committee
action under the Plan, the provisions of the Plan and relevant agreements duly
authorized by and in accordance with the terms of the Plan, will be validly
issued, fully paid and nonassessable shares of Common Stock.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Respectfully submitted,
O'Melveny & Myers LLP
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) and related Prospectus pertaining to the 1998 Stock Incentive Plan of our
report dated April 17, 1998 with respect to the consolidated financial
statements and schedules of Wherehouse Entertainment, Inc. included in its
Annual Report (Form 10-K) for the year ended January 31, 1998 filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Los Angeles, California
September 24, 1998
