MAY EITHER ASSUME THE LEASE
OBLIGATION ON THE CAR, OR RETURN IT TO THE COMPANY WHICH WILL THEN ACCEPT ALL
FURTHER RESPONSIBILITY. EXECUTIVE AGREES THAT USAGE OF THE VEHICLE WILL BE
CONSISTENT WITH HIS HISTORICAL PRACTICES.
(F)
STOCK OPTIONS. THE COMPANY AND EXECUTIVE
ACKNOWLEDGE THAT THEY ARE PARTIES TO STOCK OPTION AGREEMENTS REPRESENTING
EXECUTIVE'S RIGHT TO PURCHASE AN AGGREGATE OF 107,000 SHARES OF GUITAR CENTER'S
COMMON STOCK AS SUMMARIZED ON EXHIBIT A TO THIS AGREEMENT (COLLECTIVELY THE
"STOCK OPTION AGREEMENTS"). GUITAR CENTER AND EXECUTIVE ACKNOWLEDGE THAT THE
STOCK OPTION AGREEMENTS REMAIN IN FULL FORCE AND EFFECT IN ACCORDANCE WITH THEIR
TERMS AND THE RELATED PLAN DOCUMENTS AND AGREE THAT (I) ANY SUCH
2
OPTIONS WHICH WERE GRANTED UNDER THE STOCK OPTION AGREEMENTS AND WERE NOT VESTED
ON OR BEFORE THE TERMINATION DATE SHALL BECOME FULLY EXERCISABLE ON THE
TERMINATION DATE AND (II) EXECUTIVE AGREES TO EXERCISE SUCH OPTIONS, IF AT ALL,
(A) ON OR BEFORE DECEMBER 29, 2006 IN THE CASE OF STOCK-OPTIONS IDENTIFIED AS
"NON-QUALIFIED STOCK OPTIONS" ON EXHIBIT A, AND (B) ON OR BEFORE THE 90TH DAY
AFTER THE TERMINATION DATE IN THE CASE STOCK OPTIONS IDENTIFIED AS "INCENTIVE
STOCK OPTIONS" ON EXHIBIT A, SUBJECT TO ANY EXTENDED EXERCISE PERIOD PROVIDED IN
THE OPTION AGREEMENTS (OR THE PLANS UNDER WHICH THE OPTIONS HAVE BEEN GRANTED)
DUE TO DEATH OR DISABILITY. ANY UNEXERCISED OPTIONS GRANTED UNDER THE STOCK
OPTION AGREEMENTS WHICH REMAIN UNEXERCISED AS OF THE CLOSE OF BUSINESS ON THE
LAST DATE THAT SUCH OPTION IS EXERCISABLE PURSUANT TO THE IMMEDIATELY PRECEDING
SENTENCE SHALL IMMEDIATELY THEREAFTER TERMINATE AND BE OF NO FURTHER FORCE OR
EFFECT. EXECUTIVE FURTHER ACKNOWLEDGES THAT HE WILL HAVE CONTINUING OBLIGATIONS
UNDER SECTION 16(A) AND 16(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
TO REPORT HIS TRANSACTIONS IN COMPANY COMMON STOCK FOR SIX MONTHS SUBJECT TO THE
TERMINATION OF HIS STATUS AS AN EXECUTIVE OFFICER OF THE COMPANY ON THE OFFICER
CESSATION DATE.
(G)
LTIP AND OTHER ARRANGEMENTS. FOR THE AVOIDANCE OF
DOUBT, THE COMPANY AND EXECUTIVE ACKNOWLEDGE AND AGREE THAT EXECUTIVE WILL NOT
BE ELIGIBLE TO RECEIVE ANY AWARD UNDER THE GUITAR CENTER, INC. 2005 LONG TERM
INCENTIVE PLAN OR ANY OTHER COMPENSATION ARRANGEMENT EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED FOR HEREIN.
(H)
TAXES. EXECUTIVE UNDERSTANDS AND AGREES THAT ALL
PAYMENTS UNDER THIS AGREEMENT WILL BE SUBJECT TO APPROPRIATE TAX WITHHOLDING AND
OTHER DEDUCTIONS, AS AND TO THE EXTENT REQUIRED BY LAW. TO THE EXTENT ANY TAXES
MAY BE PAYABLE BY THE EXECUTIVE FOR THE BENEFITS PROVIDED TO HIM BY THIS
AGREEMENT BEYOND THOSE WITHHELD BY THE COMPANY, THE EXECUTIVE AGREES TO PAY THEM
HIMSELF AND TO INDEMNIFY AND HOLD THE COMPANY AND THE OTHER ENTITIES RELEASED
HEREIN HARMLESS FOR ANY TAX CLAIMS OR PENALTIES, AND ASSOCIATED ATTORNEYS' FEES
AND COSTS, RESULTING FROM ANY FAILURE BY HIM TO MAKE REQUIRED PAYMENTS
(I)
SOLE SEPARATION BENEFIT. EXECUTIVE AGREES THAT
THE PAYMENTS PROVIDED BY THIS AGREEMENT ARE NOT REQUIRED UNDER THE COMPANY'S
NORMAL POLICIES AND PROCEDURES AND ARE PROVIDED AS A SEVERANCE SOLELY IN