**Exhibit10.4**

 

**EXECUTIVESEVERANCE BENEFITS AGREEMENT**

 

This EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the “Agreement”)is made and entered into effective as of         , 2004 (the “CommencementDate”), between **[Guitar Center,Inc.][Musician’s Friend, Inc.][Guitar Center Stores, Inc.]**, aDelaware corporation (the “Company”), and               (the “Executive”).

 

RECITALS:

 

A.                                   Executiveis currently employed by the Company.

 

B.                                     TheCompany and Executive wish to set forth the compensation and benefits which Executiveshall be entitled to receive in the event Executive’s employment with theCompany is terminated under the circumstances described herein.

 

AGREEMENT:

 

In consideration of the mutual covenants containedherein and other good and valuable consideration, the receipt and sufficiencyof which are hereby acknowledged, the parties hereto agree as follows:

 

# 1.                                       TERM OF AGREEMENT. This Agreement shall commence on the Commencement Date hereof and shallcontinue in effect through           , 2007 (the “ScheduledExpiration Date”); provided,**however,that in the event neither party to this Agreement has given written notice tothe other party of its intent to terminate this Agreement by the date that isone hundred twenty (120) days prior to the Scheduled Expiration Date (as may beextended by operation of this Section 1), the Scheduled Expiration Dateshall automatically be extended by an additional twelve (12) months.

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# 2.                                       SEVERANCE.

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(a)                                  SEVERANCE.  No benefits shall be payable under thisAgreement unless there has been a Qualifying Termination.  For purposes of this Agreement, a “QualifyingTermination” shall mean a termination of Executive’s employment with theCompany prior to the Scheduled Expiration Date (i) by the Company without Causeor (ii) by the Executive with Reasonable Justification.  A termination of Executive’s employment as aresult of Executive’s death or Disability shall not be a QualifyingTermination.  In the event of aQualifying Termination, Executive shallbe entitled to receive the following severance benefits, unless Executive hasbreached the provisions of this Agreement, in which case the provisions ofSection 8(a)(ii) shall apply:

 

### (i)                                     ACCRUED BASE SALARY. The Company shall pay to the Executive his current base salary through the date of termination.

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### (ii)                                  CASH SEVERANCE. Executive shall be entitled to receive, at the times specified inSection 2(b), severance pay in an amount equal to the sum of:

 

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(A)                              Executive’scurrent annual base salary as in effect immediately prior to the date oftermination, payable over the twelve (12) month period commencing on the dateof termination (the “Severance Period”); plus

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(B)                                anannual cash bonus equal to the last annual cash bonus (excluding any portionthereof that the Chief Executive Officer of the Company consideredextraordinary and non-recurring) Executive received prior to termination, ifany.  Except as set forth in thepreceding sentence, the Company shall not be obligated to pay any bonus with respectto the year in which the date of termination occurs, regardless of thefinancial performance of the Company or any other Company policy or priorpractice; plus

 

(C) any unpaid vacationaccrued through the date of termination in accordance with Company policy; plus

 

(D) reimbursement for alloutstanding expenses incurred by Executive prior to the date of termination andin the course of performing Executive’s duties as an employee of the Companywhich are consistent with the Company’s policies in effect from time to timewith respect to travel, entertainment and other business expenses, subject tothe Company’s requirements with respect to reporting and documenting suchexpenses.

 

(iii)                               BENEFITS.  In the event that Executive elects tocontinue group health insurance coverage for himself and his eligibledependents who were covered under the Company’s medical plans as of the date oftermination, at the same level in effect as of the date of termination,pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, asamended (“COBRA”), the Company shall pay for the amount of his premium paymentsfor such coverage for the Severance Period (or, if such continuation isnot permitted by the Company’s insurers beyond the date of termination, a cashpayment equal to the average annual premium the Company pays to obtain healthinsurance for an employee).  In theevent Executive desires to discontinue this coverage, he shall notify theCompany in writing which shall promptly terminate the coverage benefit.

 

(iv)                              COMPANYCAR.  Executive may at his soleexpense elect to assume the lease on any Company-provided automobile used byExecutive as of the date of termination, if any, or, if such vehicle is ownedby the Company, purchase such vehicle at a price equal to its wholesale “bluebook” value.

 

(v)                                 STOCKOPTIONS.  Following the date oftermination, Executive’s stock options, if any, shall continue to be governedby the terms of the stock option plan and agreements pursuant to which suchoptions were granted.

 

(b)                                 TIMINGOF POST-TERMINATION PAYMENTS.  Theseverance payments provided for in Section 2(a)(ii)(A) above shall be paidperiodically in the same amounts and at the same intervals as Executive’s basesalary was paid immediately prior to the date of termination.  The severance payment provided for inSection 2(a)(ii)(B) above shall

 

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be paid on the last day of the Severance Period.  Notwithstanding the foregoing, the Company,in its sole discretion, may at any time or from time to time elect toaccelerate the payment of any cash severance amount and pay such amount as alump sum, discounted to reflect such early payment at the then prevailing primerate of interest established by Wells Fargo Bank.  In addition, if Executivehas breached the provisions of this Agreement, the Company shall have the rightto terminate the severance payments provided for in this Section 2pursuant to the provisions of Section 8(a)(ii).

 

(c)                                  EXCLUSIVEREMEDY.  Except as otherwiseexpressly required by law (e.g., COBRA) or as specifically provided herein, allof the Executive’s rights to salary, severance, benefits, bonuses and otheramounts hereunder (if any) accruing after the termination of Executive’semployment shall cease upon such termination. In the event of a termination of Executive’s employment with theCompany, the Executive’s sole and exclusive remedy shall be to receive theseverance payments and benefits described in this Section 2.  Executive shall have no duty to mitigate anydamages which Executive may suffer as a result of any termination of employmentnor shall the severance benefits payable to Executive be reduced by any sumsactually earned by Executive as a result of any other employment obtained byExecutive.

 

(d)                                 RELEASE.  As a condition to the Executive’s receipt ofany post-termination benefits described in this Agreement, the Executive shallbe required to execute a Release of all claims arising out of his employment orthe termination thereof, which release will also include a customary non-disparagementcovenant from Executive (the “Release”), in a form reasonably acceptableto the Company.  Such Release shallspecifically relate to all of the Executive’s rights and claims in existence atthe time of such execution but shall exclude any continuing obligations theCompany or any of its affiliates may have to the Executive following the dateof termination under this Agreement or any other agreement expressly providingfor obligations to survive the Executive’s termination of employment.

 

(e)                                  OTHERTERMINATION.  If the EmploymentPeriod is terminated prior to the Scheduled Expiration Date for any reasonother than by the Company without Cause or by the Executive with ReasonableJustification, including as a result of Executive’s death or Disability, theExecutive shall be entitled to receive only his base salary and then only tothe extent such amount has accrued through the date of termination.

 

(f)                                    DEFINITIONOF CAUSE.  For purposes of thisAgreement, “Cause” means any termination by the Company of Executive’semployment within ninety (90) days after the Board of Guitar Center, Inc.(“Parent”) becomes aware of the occurrence of any of the following:

 

(i)                                     theongoing and repeated failure by the Executive to perform such lawful dutiesconsistent with Executive’s position as are reasonably requested by either theChief Executive Officer of the Company or the Board of Parent in good faith asdocumented in writing to the Executive;

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(ii)                                  theExecutive’s ongoing and repeated material neglect of his duties on a generalbasis, notwithstanding written notice of objection from either the

 

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Chief Executive Officerof the Company or the Board of Parent and the expiration of a thirty (30) daycure period;

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(iii)                               thecommission by the Executive of any act of fraud, theft or criminal dishonestywith respect to the Company or any of its affiliates, or the conviction of theExecutive of any felony;

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(iv)                              theExecutive’s failure to adhere to all policies and procedures established by theCompany from time to time in its discretion, generally applicable to allexecutives of the Company and disclosed to Executive, including withoutlimitation, any policies related to sexual harassment, anti-discrimination andsimilar employment practices;

 

(v)                                 thecommission of any act involving moral turpitude which (y) brings the Company orany of its affiliates into public disrepute or disgrace, or (z) causes materialinjury to the customer relations, operations or the business prospects of theCompany or any of its affiliates; or

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(vi)                              materialbreach by the Executive of this Agreement, including, without limitation, anybreach by the Executive of the Confidentiality and Noncompetition Agreements(as defined in Section 3 below), not cured within thirty (30) days afterwritten notice to Executive from either the Chief Executive Officer of theCompany or the Board of Parent; provided, however, that in theevent of an intentional breach of the provisions of the Confidentiality andNoncompetition Agreements, the Executive shall not have the opportunity tocure.

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(g)                                 DEFINITIONOF DISABILITY.  For purposes of thisAgreement the term “Disability” means any long-term disability orincapacity which (i) renders the Executive unable to substantially perform allof his duties hereunder for ninety (90) days during any one hundred eighty(180) day period or (ii) would reasonably be expected to render the Executiveunable to substantially perform all of his duties for ninety (90) days duringany one hundred eighty (180) day period, in each case as determined by theBoard of Parent (excluding the Executive if he should be a member of the Boardof Parent at the time of such determination) in its good faith judgment afterseeking and reviewing advice from a qualified physician.

 

(h)                                 DEFINITIONOF REASONABLE JUSTIFICATION.  Forpurposes of this Agreement, “Reasonable Justification” means anyvoluntary termination by the Executive of his employment with the Companywithin ninety (90) days after the occurrence of any of the following eventswithout Executive’s written consent:

 

(i)                                     theExecutive is directed to perform an act that the Executive reasonably believesafter consultation with counsel to be in contravention of law, or which theExecutive reasonably believes would subject the Company and himself to materialliability, despite his prior express written objection addressed to the Boardof Parent with respect to such action;

 

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(ii)                                  therehas been any material reduction in the nature or scope of Executive’sresponsibilities, or the Executive is assigned duties that are materiallyinconsistent with his position (in each case, other than on a temporary basis);

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(iii)                               thereis any material reduction in the Executive’s compensation or a materialreduction in Executive’s other benefits (other than reductions in benefits that generally affect all employeesentitled to such benefits ratably);

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(iv)                              theExecutive is required by the Company or any of its affiliates, after writtenobjection by the Executive addressed to the Chief Executive Officer of theCompany, to relocate his principal place of employment outside a radius offifty miles from his place of employment immediately prior to such relocation;or

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(v)                                 thereis a material failure by the Company or any of its affiliates to perform any ofits obligations to the Executive under this Agreement;

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provided, however, that withrespect to breaches of Section 2(h)(ii), (iii) and (v), the Company shallbe given written notice by Executive of such breach and thirty (30) days tocure such breach.

 

3.                                       CONFIDENTIALITYAND NONCOMPETITION AGREEMENTS. Executive acknowledges and reaffirms his obligations to the Companypursuant to any confidentiality, noncompetition and/or nonsolicitationagreements entered into by Executive with the Company and/or its affiliates(the “Confidentiality and Noncompetition Agreements”).

 

4.                                       NON-DISPARAGEMENT.  Executive agrees that he will not disparageor denigrate to any person any aspect of his past relationship with the Companyor any of its affiliates, nor the character of the Company or any of itsaffiliates or their respective agents, representatives, products, or operatingmethods, whether past, present, or future, and whether or not based on or withreference to their past relationship; provided, however, thatthis paragraph shall have no application to any evidence or testimony requestedof Executive by any court or government agency.  In the event any government agency or any of Company’s or any ofits affiliates’ present or future labor unions, adverse parties in actual orpotential litigation, suppliers, service providers, employees or customersinitiate communications with the Executive, the Executive agrees that he willinform any such persons, consistent with this paragraph, of his change instatus and direct such persons to an appropriate office or current employee ofCompany.

 

5.                                       TRANSITIONALINQUIRIES.  For a reasonable periodof time following the date of termination, Executive agrees to make himselfavailable to the Company to answer telephone inquiries related to thetransition of his duties.  Executive’sobligations pursuant to this Section 5 are a material inducement to theCompany’s entering into this Agreement with Executive.

 

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# 6.                                       RIGHT TO CONSULT COUNSEL. EXECUTIVE REPRESENTS AND AGREES THAT HE FULLY UNDERSTANDS HIS RIGHT TODISCUSS ALL ASPECTS OF THIS AGREEMENT WITH HIS PRIVATE ATTORNEY, AND THAT TOTHE EXTENT, IF ANY, THAT HE DESIRED, HE AVAILED HIMSELF OF SUCH RIGHT.  EXECUTIVE FURTHER REPRESENTS THAT HE HASCAREFULLY READ AND FULLY UNDERSTANDS ALL OF THE PROVISIONS OF THIS AGREEMENT,THAT HE IS COMPETENT TO EXECUTE THIS AGREEMENT, THAT HIS AGREEMENT TO EXECUTETHIS AGREEMENT HAS NOT BEEN OBTAINED BY ANY DURESS AND THAT HE FREELY ANDVOLUNTARILY ENTERS INTO IT, AND THAT HE HAS READ THIS DOCUMENT IN ITS ENTIRETYAND FULLY UNDERSTANDS THE MEANING, INTENT AND CONSEQUENCES OF THIS DOCUMENT.

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# 7.                                       NOTICES. All notices, requests, demands, claims, and other communicationshereunder shall be in writing.  Anynotice, request, demand, claim or other communication hereunder shall bedelivered personally to the recipient, delivered by United States Post Officemail (postage prepaid and return receipt requested), telecopied to the intendedrecipient at the number set forth therefor below (with hard copy to follow), orsent to the recipient by reputable express courier service (charges prepaid)and addressed to the intended recipient as set forth below: If to the Company,to:

 

Guitar Center, Inc.

5795 Lindero Canyon Road

Westlake Village, California 91362

Attention: General Counsel

Telephone: (818) 735-8800

Telecopier: (818) 735-4923

 

If to the Executive, to the address noted on thesignature page of this Agreement or such other address as the recipient partyto whom notice is to be given may have furnished to the other party in writingin accordance herewith.  Any suchcommunication shall be deemed to have been delivered and received (a) whendelivered, if personally delivered, sent by telecopier or sent by overnightcourier, and (b) on the fifth business day following the date posted, if sentby mail.

 

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# 8.                                       GENERAL PROVISIONS.

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# (a)                                  SEVERABILITY/ENFORCEMENT.

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# (i)                                     It is the desire and intent of theparties hereto that the provisions of this Agreement be enforced to the fullestextent permissible under the laws and public policies applied in eachjurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall beadjudicated by a court of competent jurisdiction to be invalid, prohibited orunenforceable for any reason, such provision, as to such jurisdiction, shall beineffective, without invalidating the remaining provisions of this Agreement oraffecting the validity or enforceability of this Agreement or affecting thevalidity or enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if suchprovision could be more narrowly drawn so as not to be invalid, prohibited orunenforceable in such jurisdiction, it shall, as to such jurisdiction, be sonarrowly drawn, without invalidating the remaining provisions of this Agreementor affecting the validity or enforceability of such provision in any otherjurisdiction.

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# (ii)                                  In addition to the foregoing, andnot in any way in limitation thereof, or in limitation of any right or remedyotherwise available to the Company, if the Executive materially violates anyprovision of this Agreement, including, without limitation, Section 5hereof, or Executive’s Confidentiality and Noncompetition Agreements, (and suchviolation, if unintentional on the part of the Executive, continues for aperiod of twenty-one (21) days following receipt of written notice from theCompany), any severance payments then or thereafter due from the Company to theExecutive may be terminated forthwith and upon such election by the Company,the Company’s obligation to pay and the Executive’s right to receive suchseverance payments shall terminate and be of no further force or effect.  The Executive’s obligations under thisAgreement, including, without limitation, Section 5 hereof, or Executive’sConfidentiality and Noncompetition Agreements shall not be limited or affectedby, and such provisions shall remain in full force and effect notwithstandingthe termination of any severance payments by the Company in accordance withthis Section 8(a)(ii).  Theexercise of the right to terminate such payments shall not be deemed to be anelection of remedies by the Company and shall not in any manner modify, limitor preclude the Company from exercising any other rights or seeking any otherremedies available to it at law or in equity.

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# (b)                                 COMPLETE AGREEMENT; SURVIVAL. This Agreement, those documents expressly referred to herein and allother documents of even date herewith embody the complete agreement andunderstanding among the parties and supersede and preempt any prior understandings,agreements or representations by or among the parties, written or oral, whichmay have related to the subject matter hereof in any way; provided, however,that this Agreement shall not amend, supercede or terminate any rights grantedto Executive pursuant to any indemnification agreement between Executive andthe Company or any affiliate of the Company. The representations, warranties, covenants and agreements made hereinshall, as applicable, survive any termination of this Agreement in accordancewith their respective terms.

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(c)                                  SUCCESSORSAND ASSIGNS.  Except as otherwiseprovided herein, this Agreement shall bind and inure to the benefit of and beenforceable by the Executive and the Company and their respective successors,assigns, heirs, representatives and estate;

 

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provided, however, that therights and obligations of the Executive under this Agreement shall not beassigned without the prior written consent of the Company.  Without limiting the foregoing, it isexpressly acknowledged that the Company may transfer Executive and assign thisAgreement to any present or future affiliate of the Company.

 

(d)                                 GOVERNINGLAW.  THIS AGREEMENT WILL BEGOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OFCALIFORNIAWITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISIONOR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA TO BE APPLIED.

 

(e)                                  ARBITRATION.

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(i)                                     Unlessotherwise provided herein, in the event that there shall be a dispute (a “Dispute”)among the parties arising out of or relating to this Agreement, or the breachthereof, the parties agree that such dispute shall be resolved by final andbinding arbitration before a single arbitrator in Los Angeles County, California,administered by the American Arbitration Association (the “AAA”), in accordance with AAA’s Employment ADR Rules.  The arbitrator’s decision shall be final andbinding upon the parties, and may be entered and enforced in any court ofcompetent jurisdiction by either of the parties.  The arbitrator shall have the power to grant temporary,preliminary and permanent relief, including without limitation, injunctiverelief and specific performance.

 

(ii)                                  TheCompany will pay the direct costs and expenses of the arbitration.  Executive and the Company are responsiblefor their respective attorneys’ fees incurred in connection with enforcing thisAgreement; however, Executive and the Company agree that, except as maybe prohibited by law, the arbitrator may, in his or her discretion, awardreasonable attorneys’ fees to the prevailing party.

 

(iii)                               ThisSection 8(e) shall not apply to the Confidentiality and NoncompetitionAgreements.

 

(f)                                    JURISDICTION,ETC.

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(i)                                     Withoutlimiting the generality of the arbitration provisions contained inSection 8(e), each of the parties hereto hereby irrevocably andunconditionally submits, for itself and its property, to the nonexclusivejurisdiction of any California****State court or Federal court of theUnited States of America sitting in the State of California, and any appellate court from any thereof, in anyaction or proceeding arising out of or relating to this Agreement or forrecognition or enforcement of any judgment, and each of the parties heretohereby irrevocably and unconditionally agrees that all claims in respect of anysuch action or proceeding may be heard and determined in any such California****Statecourt or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a finaljudgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law.

 

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(ii)                                  Eachof the parties hereto irrevocably and unconditionally waives, to the fullestextent it may legally and effectively do so, any objection that it may now orhereafter have to the laying of venue of any suit, action or proceeding arisingout of or relating to this Agreement in any California****State orFederal court.  Each of the parties hereto irrevocably waives,to the fullest extent permitted by law, the defense of an inconvenient forum tothe maintenance of such action or proceeding in any such court.

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(iii)                               TheCompany and the Executive further agree that the mailing by certified orregistered mail, return receipt requested, of any process required by any such court shall constitute valid andlawful service of process against them, without the necessity for service byany other means provided by law.

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(g)                                 AMENDMENTAND WAIVER.  The provisions of thisAgreement may be amended and waived by mutual agreement of the parties only bya written instrument executed by the Company and Executive which makes expressreference to this Agreement and no course of conduct or failure or delay inenforcing the provisions of this Agreement shall affect the validity, bindingeffect or enforceability of this Agreement or any provision hereof.

 

(h)                                 WAIVEROF JURY TRIAL.  CONSISTENT WITH THEINTENTION OF SECTION 8(E), EACH PARTY HERETO HEREBY IRREVOCABLY ANDUNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DOSO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.

 

(i)                                     HEADINGS.  The section headings contained in thisAgreement are for reference purposes only and shall not affect in any way themeaning or interpretation of this Agreement.

 

(j)                                     COUNTERPARTS.  This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original and all of whichtogether shall constitute one and the same instrument.

 

(k)                                  CONSTRUCTION.  The parties participated jointly in thenegotiation and drafting of this Agreement and the language used in thisAgreement shall be deemed to be the language chosen by the parties to expresstheir mutual intent.  If an ambiguity orquestion of intent or interpretation arises, then this Agreement willaccordingly be construed as drafted jointly by the parties to this Agreement,and no presumption or burden of proof will arise favoring or disfavoring anyparty to this Agreement by virtue of the authorship of any of the provisions ofthis Agreement.

 

(l)                                     AT-WILL EMPLOYMENT.  The Company and Executive acknowledge thatExecutive’s employment is and shall continue to be at-will, as defined underapplicable law.  Executive acknowledgesand agrees that nothing in this Agreement shall confer upon Executive any rightwith respect to continuation of employment by the Company, nor shall it interferein any way with Executive’s right or the Company’s right to terminateExecutive’s employment at any time, with or without cause and with or withoutprior notice.

 

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(m)                               NOTHIRD PARTY BENEFICIARIES.  Nothingin this Agreement, expressed or implied, is intended to confer on any personother than the parties and their respective successors and permitted assignsany rights or remedies under or by reason of this Agreement.

 

## (n)                                 RESIGNATION AS OFFICER AND DIRECTOR. Effective as of the date of termination of employment with the Companyfor any reason, Executive shall be deemed to have resigned from all offices anddirectorships, if any, then held with the Company or any of its affiliates.

 

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the parties hereto have executedthis Executive Severance Benefits Agreement as of the date first written above.

 
|   | **[GUITAR  CENTER, INC.]**          |
|--------|-------------------------------------|
|   | **[MUSICIAN’S  FRIEND, INC.]** |
|   | **[GUITAR  CENTER STORES, INC.]**   |
|   |                                |
|   |                                |
|   | By:                                 |   |   |
|   |                                | Authorized Signatory |
|   |                                |
|   |                                |
|   | EXECUTIVE                           |
|   |                                |
|   |                                |
|   |                                |   |
|   |                                | [Name of Executive] |
|   |                                |
|   | Address for Notice:                 |
|   |                                |
|   |                                |
|   |                                |
|   |                                |
|        |                                     |  |  |  |  |

 

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