Exhibit 10.2
TRANSITION AGREEMENT
This Transition Agreement (the "Agreement") is made effective as of February 10,
2006, by and between Bruce L. Ross ("Executive") and Guitar Center, Inc., a
Delaware corporation (the "Company"), with reference to the following facts:
A.
Executive and the Company are parties to
that certain Third Amended and Restated Employment Agreement, dated as of
July 1, 2003, as amended by Amendment No. 1 to Third Amended and Restated
Employment Agreement, dated as of January 1, 2004 (collectively, the "Employment
Agreement").
B.
Executive's status as Chief Financial
Officer of the Company will end due to a voluntary resignation from such office
effective on March 31, 2006 (the "Officer Cessation Date"), and Executive's
status as an employee of the Company will end effective on June 30, 2006.
C.
Executive and the Company desire to
assure a smooth and effective transition of Executive's duties to his successor
and to wind-up their employment relationship amicably.
D.
Section 4(f) of the Employment Agreement
provides that as a condition to Executive's receipt of any post termination
benefits described therein, Executive shall be required to execute a release of
all claims.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1.
TERMINATION DATE. EXECUTIVE
ACKNOWLEDGES THAT HIS STATUS AS CHIEF FINANCIAL OFFICER SHALL END DUE TO HIS
VOLUNTARY RESIGNATION FROM SUCH OFFICE ON MARCH 31, 2006, AND HIS EMPLOYMENT
WITH THE COMPANY WILL END DUE TO HIS VOLUNTARY RESIGNATION AS AN EMPLOYEE
EFFECTIVE JUNE 30, 2006 (THE "TERMINATION DATE").
2.
SEPARATION PAYMENTS AND BENEFITS.
WITHOUT ADMISSION OF ANY LIABILITY, FACT OR CLAIM, THE COMPANY HEREBY AGREES,
SUBJECT TO THE EXECUTION HEREOF BY BOTH PARTIES AND EXECUTIVE'S PERFORMANCE OF
HIS CONTINUING OBLIGATIONS PURSUANT TO THIS AGREEMENT AND THE EMPLOYMENT
AGREEMENT, TO PROVIDE EXECUTIVE THE SEVERANCE BENEFITS SET FORTH IN
SECTION 3(B) OF THE EMPLOYMENT AGREEMENT AND CERTAIN OTHER BENEFITS.
SPECIFICALLY, THE COMPANY AND EXECUTIVE AGREE AS FOLLOWS:
(A)
BASE SALARY AND SEVERANCE BENEFIT. THE COMPANY
SHALL CONTINUE TO PAY TO EXECUTIVE HIS BASE SALARY OF $320,000 PER ANNUM ("BASE
SALARY") THROUGH THE TERMINATION DATE IN ACCORDANCE WITH THE COMPANY'S NORMAL
PAYROLL PRACTICES. IN ADDITION, THE COMPANY SHALL PAY TO EXECUTIVE, AS A
SEVERANCE BENEFIT, AN AMOUNT EQUAL TO HIS BASE SALARY FOR THE ONE YEAR PERIOD
BEGINNING JULY 1, 2006 AND ENDING JUNE 30, 2007 (THE "SEVERANCE PERIOD"), WITH
THE PORTION OF SUCH AMOUNT PAYABLE DURING THE SEVERANCE PERIOD TO BE PAID AS
FOLLOWS: (I) NO PAYMENT SHALL BE MADE DURING THE PERIOD FROM JULY 1, 2006
THROUGH DECEMBER 31, 2006, (II) NO LATER THAN JANUARY 10, 2007, THE COMPANY
SHALL MAKE A LUMP-SUM CASH PAYMENT OF $160,000, PLUS AN INTEREST PAYMENT EQUAL
TO THE PRIME RATE (OR SIMILAR BASE RATE) OF INTEREST AS PUBLISHED FROM TIME TO
TIME BY WELLS FARGO BANK, N.A. ("WFB PRIME RATE") TO REFLECT THE PAYMENT OF SUCH
AMOUNT IN A DEFERRED LUMP SUM INSTEAD OF ON A PERIODIC BASIS IN ACCORDANCE WITH
THE COMPANY'S NORMAL PAYROLL PRACTICES, AND (III)