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United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............ to ..............
Commission file number 0-14818
TRANS WORLD ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
NEW YORK 14-1541629
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(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
38 Corporate Circle, Albany, New York 12203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 452-1242
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or an
amendment to this Form 10-K. [ ]
As of April 24, 1996 9,732,814 shares of the Registrant's Common Stock,
excluding 48,394 shares of stock held in Treasury, were issued and
outstanding. The aggregate market value of such shares held by non-affiliates
of the Registrant, based upon the closing sale price of $5.25 on the NASDAQ
National Market System on April 24, 1996, was approximately $23,000,000.
Shares of Common Stock held by the Company's controlling shareholder, who
controls approximately 54.7% of the outstanding Common Stock, have been
excluded for purposes of this computation. Because of such shareholder's
control, shares owned by other officers, directors and 5% shareholders have
not been excluded from the computation.
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TRANS WORLD ENTERTAINMENT CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS WORLD ENTERTAINMENT CORPORATION
June 21, 1996 By: /s/ Robert J. Higgins
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Robert J. Higgins,
President and Director
(Principal Executive Officer)
June 21, 1996 By: /s/ John J. Sullivan
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John J. Sullivan
Senior Vice President
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of February 1, 1996, by and between TRANS WORLD
ENTERTAINMENT CORP., a New York corporation with offices at 38 Corporate
Circle, Albany, New York 12203, (together with RECORD TOWN, INC., and its
other subsidiaries, the "Company" ), and ROBERT J. HIGGINS, whose address is 6
Sage Estate, Menands, New York 12204 ("Higgins").
WHEREAS, Higgins has unique knowledge of business and competitive position
of the Company, has special expertise in the management and future planning of
its affairs, and has helped in the past to develop the image of said business;
and
WHEREAS, it is regarded as essential by the Company that Higgins be
available to aid in its management and planning in the future; and
WHEREAS, a previous employment agreement terminated on January 31, 1996
and it is the desire of the parties to extend the terms thereof.
NOW, THEREFORE, the Company and Higgins agree as follows:
1. SCOPE OF EMPLOYMENT. The Company agrees to, and hereby does, employ
Higgins in accordance with the terms and conditions hereinafter set forth.
The scope of said employment, and the duties and responsibilities to be
performed by Higgins shall consist of the general direction and the
determination of policies for the conduct of the business of the Company, such
duties and responsibilities to be performed by Higgins in collaboration with
directors and executive officers of the Company. Higgins intends and expects
that at all times during said employment he will serve as a director of the
Company and hold the positions and titles of President and Chief Executive
Officer. If the Board of Directors should fail to elect him President and
Chief Executive Officer, or if Higgins should have a policy dispute with the
Board of Directors, or if the shareholders should fail to elect him a
director, Higgins shall have the right, at his election, to terminate this
Agreement or to change his position to that of consultant and advisor, as
described in Section 5 below. The period of such employment as an officer or
consultant (the "Employment Period") shall commence upon the date of this
Agreement and end on January 30, 1999, or at such earlier time as may be
provided hereinabove or in Sections 4 and 6 below.
2. DUTIES OF HIGGINS. Higgins agrees to such employment and agrees to
furnish services to the Company as set forth in Section 1 above. The Company
recognizes that Higgins has and, it is anticipated, will continue to have
throughout the Employment Period, investments and interests in enterprises
other than the Company. Higgins may pursue such activities but only to the
extent that they are non-competitive (as described in Section 7 below) with
the business of the Company and do not interfere with the performance of his
duties under this Agreement. During the Employment Period, the Company shall
furnish to Higgins office space and secretarial and other office personnel on
a level commensurate with a senior executive position to assist him with his
duties and his personal investments. Higgins' base of operations during the
Employment Period shall not be changed without his prior written consent, but
he shall travel for the benefit of the Company, as necessary.
3. COMPENSATION. The minimum base salary of Higgins shall be at the rate
of $575,000 per annum. Higgins' base salary shall be payable in substantially
equal monthly or more frequent installments in accordance with the Company's
customary payroll practice for its senior executives. In addition:
(a) Higgins shall be entitled to reimbursement for expenses reasonably
and necessarily incurred by him in connection with the performance of his
duties under this Agreement. Without limiting the generality of the
foregoing, the Company deems it to be in its best interest for Higgins to meet
with, and entertain in a social setting, business associates, investors,
customers, and other persons with whom the Company has or may have a business
or financial relationship. The Company shall pay throughout the Employment
Period all reasonable expenses, including initiation fee and dues, related to
his membership in the social clubs and other organizations used for such
purposes.
(b) During the Employment Period and upon retirement, Higgins shall be
entitled to such benefits as are provided on a non-discriminatory basis,
relative to base salary, to senior executive officers of the Company under any
retirement, medical, or other employment benefit or incentive plan or pursuant
to other understandings. He shall also be provided with an automobile and
shall be entitled to all fringe benefits and perquisites which he enjoys on
the date of this Agreement or which he received from the Company in the past
or such additional fringe benefits that may be bestowed on senior executive
officers in the future.
(c) The Company agrees to reimburse Higgins for premiums paid by him
for one or more life insurance policies, up to a maximum of $150,000 per
annum.
(d) For the Company's fiscal years ending in 1997 and 1998, Higgins
shall receive a bonus if the Company achieves pre-tax earnings in accordance
with the following formulae:
Bonus Plan
[CONFIDENTIAL EARNINGS ESTIMATES HAVE BEEN REDACTED FROM THIS FILING AND FILED
IN PAPER FORMAT]
1996 1997
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% of % of
Pre-tax Pre-Tax Bonus Pre-tax Pre-Tax Bonus
Earnings Earnings Plan(% of Base) Earnings Earnings Plan(% of Base)
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Threshold [REDACTED] 100% 50% $287,500 [REDACTED] 80% 25% $143,750
Target [REDACTED] 150% 75% $431,250 [REDACTED] 100% 80% $460,000
Maximum [REDACTED] 175% 100% $575,000 [REDACTED] 125% 160% $920,000
4. ACCELERATION OF COMPENSATION. (a) In the event there shall be a
change in the present control of the Company, other than one attributed solely
to Higgins' sale of shares, then Higgins shall have the sole and exclusive
option, exercisable in writing at any time during the Employment Period after
such event, (i) to terminate this Agreement and receive, as a lump sum payment
payable within sixty (60) calendar days, 2.99 times the average of the
aggregate base and incentive compensation paid to Higgins, over the preceding
five years, grossed up to cover any excise taxes that may be payable by
Higgins; or (ii) to change his position to that of consultant and advisor, as
described in Section 5 below. For the purpose of this Agreement the term
"control" shall have the same meaning as presently defined in Reg. 240.12b-2
under the Securities Exchange Act of 1934, as amended.
(b) Upon Higgins' death during the Employment Period, the heirs or
legal representatives of Higgins shall be entitled to receive, as a lump sum
payment payable within sixty (60) calendar days of his death, 2.99 times the
average of the aggregate base and incentive compensation paid to Higgins over
the preceding five years.
5. EMPLOYMENT AS CONSULTANT. Upon the election of Higgins as a result of
a change of position under Section 1, the election of Higgins under Section 4,
or the election of the Company under Section 6, the Company agrees to retain
Higgins and Higgins agrees to serve in a position of consultant and advisor to
the Company (with or without retention of his position as President or Chief
Executive Officer or as a director, at the election of the Company), for a
period commencing upon such election and ending on January 30, 1999. During
the period of consulting and advising, Higgins shall render consulting and
advisory services in matters relating to business activities of the nature
which were carried on by the Company during the period of his employment by
the Company. Higgins shall perform such consulting and advisory services and
attend meetings, as and when reasonably requested by the Company in advance,
provided that Higgins shall not be required to devote thereto in the aggregate
more than 30 days per year and, notwithstanding Section 7 below, that he shall
be free to engage in any other business or enter into any other employment.
He shall have discretion in choosing the times and places of performance of
his services to the Company compatible with his other activities.
Compensation to Higgins under this Section 5 shall continue to be due from the
Company as if Higgins were employed in a capacity under Section 1 hereof.
6. DISABILITY. In the event of disability of Higgins either the Company
or Higgins or his representative may give thirty (30) days written notice to
the other of its or his intention to terminate the active employment of
Higgins hereunder because of such disability. In the event Higgins' active
employment is terminated pursuant to this Section 6, the Company may, at its
option, pay Higgins all base salary then due and all base salary payable to
him as if he were in the employ of the Company until January 30, 1999 or may
elect to change his position to that of consultant pursuant to Section 5
above. "Disability" of Higgins for the purposes of this paragraph shall not
be considered to be effective unless and until all of the following conditions
are met: (a) Higgins shall be determined by a medical doctor selected by
Higgins and the Company to be physically or mentally incapable (excluding
infrequent and temporary absences due or ordinary illnesses) of properly
performing the services required of him in accordance with his obligations
hereunder; and (b) such incapacity shall exist for more than 120 days, as
determined by such doctor, in the aggregate, during any period of twelve
consecutive months.
7. NON-COMPETE COVENANT. Higgins agrees that, except as provided in
section 5 or as allowed by section 2, he will not (a) during the period he is
employed by the Company under this Agreement or otherwise engage in, or
otherwise directly or indirectly be employed by, or act as a consultant or
lender to, or be a director, officer, employee, owner, or partner of, any
other business or organization, whether or not such business or organization
now is or shall then be competing with the Company; and (b) for a period of
ninety (90) days after he ceases to be employed by the Company under this
Agreement or otherwise, directly or indirectly compete with or be engaged in
the same business as the Company, or be employed by, or act as consultant or
lender to, or be a director, officer, employee, owner, or partner of, any
business or organization which, at the time of such cessation, competes with
or is engaged in the same business as the Company, except that in each case
the provisions of this Section 7 will not be deemed breached merely because
Higgins owns not more than 10% of the outstanding common stock of a
corporation, if, at the time of its acquisition by Higgins, such stock is
listed on a national securities exchange, is reported on NASDAQ, or is
regularly traded in the over the counter market by a member of a national
securities exchange.
8. ASSUMPTION OF OBLIGATIONS BY SUCCESSORS. Without limiting Higgins'
other rights hereunder, (a) if there shall be a consolidation or merger of the
Company with or into any other corporation, the terms, covenants, and
conditions of the Agreement shall be kept and performed by that company which
shall be formed by, or result from, any such consolidation or merger, as fully
and effectually as if such successor company had been the original party to
this Agreement; and (b) if the Company effects any sale or transfer of all, or
substantially all of its properties and assets to any other company, such
transferee shall, as a condition of such transfer, assume and observe all the
terms, covenants, and conditions of this Agreement with the same force and
effect as if such transferee had been the original party to this Agreement.
9. REMEDIES OF HIGGINS. If there shall be any breach of the Agreement by
the Company, and Higgins shall institute any action (or counterclaim) in
connection therewith, Higgins shall be entitled, if successful in such action
or if the Company sues and if Higgins is successful in that action, to recover
as damages the discounted value (at a rate of 6%) of all amounts unpaid under
this Agreement, or Higgins may, at his election, recover as damages each
monthly payment of salary and additional compensation at such time as it
becomes payable or would have become payable under the terms of this
Agreement, and the Company agrees not only to pay such sums, but, in addition
thereto, interest thereon at the prime rate then in effect, until such payment
is made, plus any and all reasonable counsel fees (not exceeding 15% of the
total recovery), disbursements, and other legal expenses incurred by Higgins
(regardless of whether the same are taxable costs) in any action undertaken by
Higgins to recover any unpaid amounts or damages. In any such action, the
fact that Higgins did or did not seek or engage in other employment or in
other activities shall not affect, reduce or mitigate the amount of recovery
allowable to Higgins. In addition to any other payments to which Higgins may
be entitled, the Company shall also be liable to Higgins for any monies which
would be due him under any fringe benefit plan of the Company, as if said plan
and Higgins' status as an employee thereunder and his compensation immediately
prior to such breach had continued in effect until the end of the term of this
Agreement as the same any have been theretofore extended. Higgins' rights
hereunder shall, upon his death, accrue to his legal representatives or to his
designated beneficiary.
10. INVENTIONS AND DISCOVERIES. Higgins hereby gives and, in the event
the consent of others is necessary, agrees to cause such others to give, the
Company the right to use in its business, any ideas, research, concepts,
discoveries, processes, inventions, devices, methods of manufacturing or
improvements of any of the foregoing relating to any product, item or business
of the Company discovered or developed by Higgins alone or in conjunction with
others, prior to or subsequent to the date of this Agreement and during the
Employment Period, whether patentable, copyrightable or not. Higgins
understands and expressly agrees that if he breaches any of the provisions of
this Section 10, the Company shall have the right to require Higgins' specific
performance of all acts necessary to effect the intent and purpose of all
provisions of this Section 10, in addition to any other of the Company's
rights and remedies.
11. INJUNCTIVE RELIEF. Because Higgins shall acquire by reason of his
employment and association with the Company an extensive knowledge of the
Company's trade secrets, suppliers, procedures, and other confidential
information, the parties hereto recognize that in the event of a breach or
threat of breach by Higgins of the terms and provisions contained in Sections
7 and 10, monetary compensation alone to the Company would not be an adequate
remedy for breach of those terms and provisions. Therefore, it is agreed that
in the event of a breach or threat of a breach of the provisions of Sections 7
or 10 by Higgins, the Company shall be entitled, in addition to provable
damages, to an immediate injunction from any court of competent jurisdiction
restraining Higgins from committing or continuing to commit a breach of such
provisions without the showing or proving of actual damages. Higgins hereby
waives any right he may have to require the Company to post a bond or other
security with respect to obtaining or continuing any such injunction or
temporary restraining order.
12. TERMINATION BY COMPANY. If Higgins commits any act or omits to take
any action involving fraud, embezzlement, theft, dishonestly, gross misconduct
or material breach of his fiduciary duty to the Company, to the material
detriment of the Company, the Company shall have the right to give immediate
notice of termination of the Agreement, whereupon Higgins shall not be
entitled to any further compensation other than amounts received in retirement
benefits.
13. NOTICE OF BREACH. Higgins shall not be deemed to be in breach of any
of the provisions of this Agreement unless (a) the Company shall first give
written notice to him at his home address, specifying in detail the breach;
and (b) such breach shall not be corrected or cured by Higgins within thirty
days following his receipt of such notice.
14. REPRESENTATION BY HIGGINS. Higgins represents and warrants to the
Company that he is under no contractual or other restriction which is
inconsistent with his execution of this Agreement, the performance by him of
his duties under this Agreement, or the other rights of the Company under this
Agreement.
15. MODIFICATION. This Agreement sets forth the entire understanding of
these parties with respect to the employment of Higgins and may be modified
only by a written instrument duly executed by each party.
16. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by registered mail
or delivered against receipt (to the attention of the Secretary, in the case
of the Company) to the address of the party first above set forth or to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 16. Any notice or other communication mailed
by registered mail shall be deemed given at the time of registration thereof.
17. PARTIES BOUND BY AGREEMENT. This Agreement is not assignable by
Higgins. None of Higgins' rights under this Agreement shall be subject to any
encumbrance of the claims of Higgins' creditors. This Agreement shall be
binding upon the heirs and legal representatives of Higgins and shall be
binding upon an inure to the benefit of the Company, its successors, and
assigns, and shall likewise inure to the benefit of Higgins, his heirs and
legal representative.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
19. PARTIAL INVALIDITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
WITNESS: TRANS WORLD ENTERTAINMENT CORPORATION
RECORD TOWN, INC.
BY:_________________________ BY:______________________________
WITNESS: ROBERT J. HIGGINS
BY:_________________________ ______________________________
