Document:

Exhibit 10.1

GUITAR
CENTER, INC.

2006 LONG TERM INCENTIVE PLAN

ARTICLE 1.

PURPOSE

The purpose of the Guitar Center, Inc. 2006 Long
Term Incentive Plan (the “Plan”) is to promote the success and enhance
the value of Guitar Center, Inc. (the “Company”) by linking the
personal interests of the senior members of management to those of Company
stockholders and by providing such individuals with an incentive for
outstanding performance to generate superior long-term returns to Company
stockholders and to enable the Company to retain highly qualified managers.

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise. The singular pronoun shall include the plural where the context so
indicates.

2.1           “Award”
means an Option, Performance Share award or such other award determined by the
Committee pursuant to Section 4.6.

2.2           “Award
Limit” means “Award Limit” as defined in the Stock Award Plan.

2.3           “Base
Compensation” means regular compensation paid by the Company to the
Participant including sick pay, vacation pay, and other Company paid time off. Base
Compensation shall exclude any special payments including but not limited to
bonuses, awards, moving or auto allowances, severance, educational
reimbursements, welfare benefits, amounts realized from the exercise, sale,
exchange or other disposition of any stock option or other equity award and
premiums for life and disability insurance.

2.4           “Board”
means the Board of Directors of the Company.

2.5           “Cause” means any termination
by the Company of Participant’s employment within ninety (90) days after the
Board becomes aware of the occurrence of any of the following:

(a)           the ongoing and repeated failure by
the Participant to perform such lawful duties consistent with Participant’s
position as are reasonably requested by either the Chief Executive Officer of
the Company or the Board in good faith as documented in writing to the
Participant;

(b)           the Participant’s ongoing and
repeated material neglect of his duties on a general basis, notwithstanding
written notice of objection from either the Chief Executive Officer of the
Company or the Board and the expiration of a thirty (30) day cure period;

 

(c)           the commission by the Participant of
any act of fraud, theft or criminal dishonesty with respect to the Company or
any of its affiliates, or the conviction of the Participant of any felony;

(d)           the Participant’s failure to adhere
to all policies and procedures established by the Company from time to time in
its discretion, generally applicable to all executives of the Company and
disclosed to Participant, including without limitation, any policies related to
sexual harassment, anti-discrimination and similar employment practices;

(e)           the commission of any act involving
moral turpitude which (i) brings the Company or any of its affiliates into
public disrepute or disgrace, or (ii) causes material injury to the
customer relations, operations or the business prospects of the Company or any
of its affiliates; or

(f)            material breach by the Participant
of any agreement with the Company, including, without limitation, any breach by
the Participant of any written employment agreement or Confidentiality and
Noncompetition Agreement, not cured within thirty (30) days after written
notice to Participant from either the Chief Executive Officer of the Company or
the Board; provided, however, that in the event of an intentional
breach of the provisions of any Confidentiality and Noncompetition Agreement,
the Participant shall not have the opportunity to cure.

Notwithstanding
the foregoing, if “Cause” is otherwise defined in a Participant’s written
employment agreement, the definition contained in such employment agreement
shall apply.

2.6           “Change in Control” means “Change in Control” as
defined in the Stock Award Plan.

2.7           “Code” means the Internal Revenue Code of 1986, as
amended.

2.8           “Committee” means the Compensation Committee of the
Board of Directors of the Company, or any successor or alternative committee
designated by the Board that consists of at least two (2) members of the
Board who qualify as “outside directors” under Section 162(m) of the
Code.

2.9           “Confidentiality and Noncompetition Agreements”
means any confidentiality, noncompetition and/or nonsolicitation agreements
entered into by Participant with the Company and/or its affiliates.

2.10         “Covered Executive” means an Employee who is, or
could be, a “covered employee” within the meaning of Section 162(m) of
the Code as determined by the Committee in its sole discretion.

2.11         “Disability” means “Disability” as defined in the
Stock Award Plan unless otherwise defined in a Participant’s written employment
agreement, in which case, the definition contained in such employment agreement
shall apply.

2.12         “Effective Date” means April 1, 2006.

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2.13         “Employee” means any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the
Company or any Subsidiary.

2.14         “Fair Market Value” means “Fair Market Value” as
defined in the Stock Award Plan.

2.15         “Good Reason” means any voluntary termination by the
Participant of his employment with the Company within ninety (90) days after
the occurrence of any of the following events without Participant’s written consent:

(a)           the Participant is directed to perform an act that the
Participant reasonably believes after consultation with counsel to be in
contravention of law, or which the Participant reasonably believes would
subject the Company and himself to material liability, despite his prior
express written objection addressed to the Board with respect to such action;

(b)           there has been any material reduction in the nature or
scope of Participant’s responsibilities, or the Participant is assigned duties
that are materially inconsistent with his position (in each case, other than on
a temporary basis);

(c)           there is any material reduction in the Participant’s Base
Compensation or a material reduction in Participant’s other benefits (other
than reductions in benefits that generally affect all employees entitled to
such benefits ratably);

(d)           the Participant is required by the Company or any of its
affiliates, after written objection by the Participant addressed to the Chief
Executive Officer of the Company, to relocate his principal place of employment
outside a radius of fifty (50) miles from Participant’s place of employment
immediately prior to such relocation; or

(e)           there is a material failure by the Company or any of its
affiliates to perform any of its obligations to the Participant under any
written employment agreement;

provided , however, that with respect to
breaches of Section 2.15(b), (c) and (e), the Company shall be given
written notice by Participant of such breach and thirty (30) days to cure such
breach.

Notwithstanding the foregoing, if “Good Reason” or any corresponding
term (e.g., “Reasonable Justification”) is otherwise defined in a Participant’s
written employment agreement, the definition of such term contained in such
employment agreement shall apply.

2.16         “Incentive Stock Option” means an Option that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.

2.17         “Option” means a
right granted to a Participant pursuant to Article 4 of the Plan.

2.18         “Participant”
means an Employee who has been granted an Award pursuant to the Plan.

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2.19         “Performance Criteria”
means “Performance Criteria” as defined in the Stock Award Plan which the
Committee selects for purposes of establishing the Performance Goal or Performance
Goals for Participants for the Performance Period.

2.20         “Performance Goals” means, for a Performance Period,
the goals established in writing by the Committee for the Performance Period
based upon the Performance Criteria. Depending on the Performance Criteria used
to establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, subject to the limitations
of Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of Participants (a) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (b) in recognition of, or in anticipation of,
any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions.

2.21         “Performance Period” means the period of time
beginning on April 1, 2006 and ending on December 31, 2007 over which
the attainment of one or more Performance Goals will be measured for the
purpose of determining a Participant’s right to, and the payment of,
Performance Shares.

2.22         “Performance
Share” means a right granted to a Participant pursuant to Article 5,
to receive shares of Stock, the payment of which is contingent upon achieving
certain Performance Goals or other performance-based targets established by the
Committee.

2.23         “Plan
Year” means a calendar year except that the initial Plan Year shall be the
three fiscal quarter period of time beginning on April 1, 2006 and ending
on December 31, 2006.

2.24         “Qualified
Performance-Based Compensation” means any compensation that is intended to
qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of
the Code.

2.25         “Stock”
means the common stock of the Company, par value $0.01 per share.

2.26         “Stock
Award Plan” means The 2004 Guitar Center, Inc. Incentive Stock Award
Plan, as amended from time to time and any successor plan thereto.

2.27         “Subsidiary”
means any “subsidiary corporation” as defined in Section 424(f) of
the Code and any applicable regulations promulgated thereunder or any other
entity of which a majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.

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ARTICLE
3.

SOURCE OF SHARES
AND ELIGIBILITY

3.1           Source
of Shares. Awards under the Plan shall be granted pursuant to the Stock
Award Plan and upon exercise or issuance, as applicable, shall reduce the
number of shares of Stock available for issuance under the Stock Award Plan. 

3.2           Eligibility. From time to time, the Committee
may select the Employees that may participate in the Plan (each such Employee
an “Eligible Employee”). Employees hired on or after January 1,
2007 shall not be eligible to participate in the Plan.

ARTICLE 4.

STOCK OPTIONS

4.1           General. All Options under the Plan shall be granted pursuant to the
Stock Award Plan and shall be Incentive Stock Options to the maximum extent
permissible by applicable law.

4.2           Aggregate
Limits. The aggregate number of Options that may be granted pursuant to
this Plan in any Plan Year shall not exceed the number of Options remaining
available for issuance under the Stock Award Plan. In addition, the number of
Options that can be granted to a Participant in any Plan Year shall not exceed
the Award Limit, as adjusted in accordance with the Stock Award Plan and the
requirements of Section 162(m) of the Code.

4.3           Individual
Grants. Subject to the limits of Section 4.2, the Committee, in its
sole discretion, shall determine the number of Options to grant to each
Participant and, subject to Section 4.5, the exercise price for such
Options.

4.4           Timing
of Grants. Unless otherwise determined by the Committee in its sole
discretion, Grants of Options pursuant to the Plan shall coincide with the
Company’s regular annual option grants.

4.5           Terms;
Vesting. Unless otherwise provided in such Participant’s written employment
agreement, all Options granted pursuant to the Plan shall have a per share
exercise price not less than the Fair Market Value of a share of Stock on the
date of grant and shall vest over four (4) years with twenty-five percent
(25%) of each grant becoming vested on each anniversary of the date of such
grant based solely on the continued performance of services by the Participant
and shall have a term of ten (10) years unless such Options expire earlier
as a result of the Participant’s termination of employment with the Company or
a Change in Control of the Company.

4.6           Alternative
Awards. Notwithstanding that initial grants pursuant to this Article 4
shall be in the form of Options, the Committee shall retain the authority in
its sole discretion to make subsequent grants in any form of award permissible
under the Stock Award Plan.

4.7           Termination of Employment. Except
as otherwise may be provided in a Participant’s written employment agreement,
including but not limited to any retirement

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provisions thereof, upon a Participant’s termination
of employment, such Participant shall be ineligible for future Option grants
under the Plan, all unvested Options granted pursuant to the Plan shall cease
to vest and any vested Options granted pursuant to the Plan shall be
exercisable pursuant to the terms of the Stock Award Plan, or, if no such terms
are applicable, for ninety (90) days following the date of Participant’s
termination of employment.

ARTICLE 5.

PERFORMANCE SHARES

5.1           Performance Goals. The Committee shall establish
Performance Goals in writing for the purposes of this Article 5 prior to
or on June 29, 2006.

5.2           Target Amount. Each Participant shall be awarded
the right to receive a target amount of Performance Shares determined by the
Committee in its discretion (the “Target Performance Share Amount”). For
Participants who become eligible to participate in the Plan after April 1,
2006, the Target Performance Share Amount shall be adjusted to that pro-rata
portion calculated by dividing the number of days during the Performance Period
such Participant was an Employee by the number of days of the Performance Period.

5.3           Timing of Issuances. The Company shall issue
Performance Shares pursuant to the Stock Award Plan upon the Committee’s
written certification of the attainment of Performance Goals for the
Performance Period.

5.4           Number of Performance Shares. The actual number of
Performance Shares issued to each Participant shall be the lower of (a) a
number of Performance Shares determined based on the Company’s performance
during the Performance Period as compared to the Performance Goals or (b) a
lower number of Performance Shares as determined by the Committee in its sole
discretion. The maximum number of Performance Shares issuable to each
Participant shall be the Award Limit, as adjusted in accordance with the Stock
Award Plan and the requirements of Section 162(m) of the Code or such
lesser number as determined by the Committee in its sole discretion; provided,
however, that if the number of Performance Shares issuable pursuant to
this section is reduced because of the Award Limit, the value of the number of Performance
Shares exceeding the Award Limit shall be paid to the Participant in cash
pursuant to Section 5.7.

5.5           Aggregate Limits. The number of Performance Shares
issuable pursuant to this Article 5 to any Participant in any Plan Year
shall not exceed the number of shares of Stock issuable pursuant to the Stock
Award Plan, subject to the Award Limit.

5.6           Fully Vested. All Performance Shares issued
pursuant to this Article 5 shall be fully vested upon issuance.

5.7           Alternative Payment. The Committee shall have the
discretion to make payment in cash in lieu of Performance Shares for any Award
granted pursuant to this Article 5 provided that such discretion does not
result in adverse accounting consequences for the Company, as determined by the
Committee. The amount of such cash payment shall be the value of the
Performance Shares thereby substituted. Notwithstanding the foregoing, the
maximum amount payable to a Participant in any Plan Year pursuant to this Section 5.7
shall be the Award Limit,

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as adjusted in accordance with the Stock Award Plan
and the requirements of Section 162(m) of the Code.

5.8           Termination of Employment Other Than for Cause or for Good Reason.
An Award of Performance Shares shall only be payable if the Participant remains
continuously employed by the Company through the last day of the Performance
Period; provided, however, that upon a
Participant’s termination of employment following December 31, 2006 (i) by
the Company for other than Cause or (ii) voluntarily for Good Reason, a
pro-rata portion of such Participant’s Performance Shares, determined in
accordance with the immediately following sentence, or such lower number of
Performance Shares as determined by the Committee in its sole discretion shall
be issued, if at all, following the end of the Performance Period based on the
Committee’s written certification of the attainment of Performance Goals
measured as of the fiscal year end closest to the Participant’s date of
termination. For the purposes of the preceding sentence, [for a Participant
whose employment terminates between January 1, 2007 and June 30, 2007
the pro-rated portion shall be two-thirds (2/3), and for a Participant whose
employment terminates after June 30, 2007,] the pro-rated potion shall be
calculated by dividing (x) the number of days during the Performance
Period such Participant was an Employee by (y) the number of days in the
Performance Period. For the avoidance of doubt, upon a Participant’s
termination of employment for any reason (except Disability or death) prior to January 1,
2007 or by the Company for Cause or by the Participant without Good Reason
prior to the last day of the Performance Period, the right to any Performance
Shares shall be forfeited.

5.9           Termination Because of Death or Disability. Notwithstanding
Section 5.8 and except as otherwise provided in a Participant’s written
employment agreement, upon a Participant’s termination because of Disability or
death, a pro-rata portion of such Participant’s Performance Shares, calculated
by dividing (i) the number of days during the Performance Period such
Participant was an Employee by (ii) the number of days in the Performance
Period, or such lower number of Performance Shares as determined by the
Committee in its sole discretion shall be issued, if at all, following the end
of the Performance Period based on the Committee’s written certification of the
attainment of Performance Goals for the full Performance Period.

5.10         Section 162(m). It is expressly intended that
each Award of Performance Shares to a Covered Executive be Qualified
Performance-Based Compensation and shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations, rulings
or guidance issued thereunder, including without limitation any such
regulations, rulings or other guidance that may be issued after the Effective
Date, that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and
the Plan shall be deemed amended to the extent necessary to conform to such
requirements. Notwithstanding the foregoing, for Covered Executives who become
eligible to participate in the Plan after June 29, 2006, the Award of
Performance Shares shall not be Qualified Performance-Based Compensation.

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ARTICLE
6.

CHANGES IN CAPITAL STRUCTURE

6.1           Adjustments. In the event of any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation, spin-off, recapitalization or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change
affecting the shares of Stock or the share price of the Stock, the Committee
shall make such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change with respect to the
terms and conditions of any outstanding Awards (including, without limitation,
any applicable performance targets or criteria with respect thereto) and the
exercise price per share for any outstanding Awards under the Plan. Any
adjustment affecting an Award intended as Qualified Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m) of
the Code.

6.2           Acceleration Upon a Change in
Control. Notwithstanding Section 6.1, and except as may otherwise be provided in a
Participant’s written employment agreement, if a Change in Control occurs
during the Performance Period than all outstanding Options shall be subject to
the terms of the Stock Award Plan. In addition immediately prior to such Change
in Control a Participant shall be issued that number of Performance Shares
equal to (a) the greater of (i) [fifty percent (50%)] of such
Participant’s Target Performance Share Amount or (ii) that number of Performance
Shares to which such Participant shall have been entitled based on the
Committee’s written certification of the attainment of Performance Goals
measured by the Committee as of the most recently completed fiscal year
preceding the execution of the definitive agreement giving rise to such Change
in Control or (b) such lower number of Performance Shares as determined by
the Committee in its sole discretion; provided, however, that
notwithstanding the foregoing, in the event of a Change in Control consummated
prior to December 31, 2006 such Participant shall be issued that number of
Performance Shares equal to [one hundred percent (100%)] of such Participant’s
Target Performance Share Amount or such lower number as determined by the
Committee in its sole discretion.

ARTICLE 7.

AMENDMENT,
MODIFICATION, AND TERMINATION

7.1           Amendment, Modification and Termination. Subject to
Sections 5.10 and 8.16, with the approval of the Board, at any time and from
time to time, the Committee may terminate, amend or modify the Plan.

7.2           Awards Previously Granted. Except with respect to amendments
made pursuant to Section 5.10 or Section 8.16, no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted pursuant to the Plan without the prior written
consent of the Participant.

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ARTICLE
8.

GENERAL PROVISIONS

8.1           Decisions Binding. The interpretation of the Plan, any
Awards granted pursuant to the Plan and all decisions and determinations with
respect to the Plan shall be made by the Committee in its sole discretion and
be final, binding, and conclusive on all parties.

8.2           No Rights to Awards. No person shall have any claim to be
granted any Award pursuant to the Plan, and neither the Company nor the
Committee is obligated to treat Eligible Employees, Participants or any other
persons uniformly.

8.3           No Stockholders Rights. Except as otherwise provided herein,
a Participant shall have none of the rights of a stockholder with respect to
shares of Stock covered by any Award until the Participant becomes the record
owner of such shares of Stock.

8.4           Withholding. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal, state, local and
foreign taxes (including the Participant’s employment tax obligations) required
by law to be withheld with respect to any taxable event concerning a
Participant arising as a result of this Plan. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow a Participant
to satisfy any such requirements using any method allowable under the Stock
Award Plan.

8.5          No Right to Employment or Services. Nothing in the Plan shall interfere with or limit in
any way the right of the Company or any Subsidiary to terminate any Participant’s
employment or services at any time, with or without cause and with or without
prior notice, nor confer upon any Participant any right to continue in the
employ or service of the Company or any Subsidiary. 

8.6           Limits on Transfer. No right or interest of a Participant in
any Award may be pledged, encumbered, or hypothecated to or in favor of any
party other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise consented to by the Committee, no
Award shall be assigned, transferred, or otherwise disposed of by a Participant
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or any
regulations, rulings or guidance issued thereunder (a “QDRO”).

8.7           Unfunded Status of Awards. The Plan is intended to be an “unfunded”
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan shall give the
Participant any rights that are greater than those of a general creditor of the
Company or any Subsidiary.

8.8           Good Faith Actions. No members of the Committee or
Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

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8.9           Relationship to other Benefits. No
payment pursuant to the Plan shall be taken into account in determining any
benefits pursuant to any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any Subsidiary
except to the extent otherwise expressly provided in writing in such other plan
or an agreement thereunder.

8.10         Expenses. The expenses of
administering the Plan shall be borne by the Company and its Subsidiaries. Without
limiting the generality of the foregoing, the Committee is authorized to
continue to retain such independent experts, including but not limited to
compensation consultants, as it deems appropriate.

8.11         Titles and Headings. The titles
and headings of the Sections in the Plan are for convenience of reference only
and, in the event of any conflict, the text of the Plan, rather than such
titles or headings, shall control.

8.12         Fractional Shares. No fractional
shares of Stock shall be issued and the Committee shall determine, in its
discretion, whether cash shall be given in lieu of fractional shares or whether
such fractional shares shall be eliminated by rounding up or down as
appropriate.

8.13         Limitations
Applicable to Section 16 Persons. Notwithstanding any other provision
of the Plan, the Plan, and any Award granted or awarded to any Participant who
is then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including any amendment to Rule 16b-3 under the
Exchange Act) that are requirements for the application of such exemptive rule.
To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

8.14         Government and Other Regulations.
The obligation of the Company to make payment of awards in Stock or otherwise
shall be subject to all applicable laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be under
no obligation to register pursuant to the Securities Act, as amended, any of
the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to
the Plan may in certain circumstances be exempt from registration pursuant to
the Securities Act, as amended, the Company may restrict the transfer of such
shares in such manner as it deems advisable to ensure the availability of any
such exemption.

8.15         Governing Law. The Plan and all
Award Agreements shall be construed in accordance with and governed by the laws
of the State of Delaware without regard to principles of conflicts of laws.

8.16         Section 409A.
To the extent applicable, the Plan shall
be interpreted in accordance with Section 409A of the Code or any
regulations, rulings or guidance issued thereunder, including without
limitation any such regulations, rulings or other guidance that may be issued
after the Effective Date. Notwithstanding any provision of the Plan to the
contrary, in the event that following the Effective Date the Committee determines
that any Award may be

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subject to Section 409A
of the Code and related Department of Treasury guidance (including such
Department of Treasury guidance as may be issued after the Effective Date), the
Committee may adopt such amendments to the Plan and the applicable Award
Agreement or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions,
that the Committee determines are necessary or appropriate to (a) exempt
the Award from Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Award, or (b) comply
with the requirements of Section 409A of the Code and related Department
of Treasury guidance.

*              *              *              *              *              *

 

 11Exhibit 10.1

BOARD
REPRESENTATION AGREEMENT

THIS AGREEMENT,
dated as of June 26, 2006 (the “Agreement”), is by and between Carreker
Corporation, a Delaware corporation (the “Company”), Riley Investment
Management, LLC (“Riley Management”), SACC Partners LP (“SACC”), and Bryant R.
Riley (“Riley”), (Riley Management, SACC, and Riley are referred to
collectively as the “Riley Parties”). This Agreement shall not apply to B.
Riley & Co., Inc. with respect to client accounts, subject to the
last sentence of Section 3(d).

WHEREAS, the Riley
Parties are, in the aggregate, the beneficial owners of 2,482,039 shares of
common stock, par value $0.01 per share, of 
the Company (the “Common Stock”), constituting approximately 9.76% of
the outstanding Common Stock of the Company (the “Shares”);

WHEREAS, the Riley
Parties have filed a Schedule 13D with the Securities and Exchange Commission
(the “SEC”) on June 16, 2006 with respect to their ownership of shares of
the Company;

WHEREAS, in lieu of
separately pursuing other actions to obtain board representation with the
Company, the Riley Parties desire that Riley be appointed to the Board of
Directors of the Company to fill the vacancy of a resigning director;

WHEREAS, the
Governance and Nominating Committee of the Board of Directors (the “Nominating
Committee”) has evaluated the candidacy of Riley consistent with the criteria
set forth in the Company’s Corporate Governance Guidelines and, subject to the
terms and conditions set forth in this Agreement, has recommended to the Board
of Directors the appointment of Riley to fill the unexpired term of the
resigning director;

NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

1.             REPRESENTATIONS.

(a)  Binding
Agreement; Authority. The Company hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered by the Company and
is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. Each of the Riley Parties represents and
warrants that this Agreement has been duly authorized, executed and delivered
by such person and is a valid and binding obligation of such person,
enforceable against such person in accordance with its terms.

(b)  Share
Ownership of Common Stock. Each of the Riley Parties hereby represents and
warrants that, as of the date hereof, it and its Affiliates and Associates (as
such terms are hereinafter defined) are the “beneficial owners” (as such term
is hereinafter defined) of an aggregate of 2,482,039 shares of Common Stock
(the “Shares”), and that neither it nor its Affiliates or Associates beneficially
owns, or has any rights, options or agreements to acquire or vote, any other
shares of Common Stock or any other capital stock or other securities of the
Company.

(c)  Defined
Terms. For purposes of this Agreement, the terms “Affiliate” and “Associate”
shall have the respective meanings set forth in Rule 12b-2
promulgated by the Securities and Exchange Commission (the “SEC”) under
Exchange Act. For purposes of this Agreement, the terms “beneficial owner” and “beneficially
own” shall have the same meanings as set forth in Rule 13d-3
promulgated by the SEC under the Exchange Act except that a person shall also
be deemed to be the beneficial owner of all shares of Common Stock which such
person has the right to acquire pursuant to the exercise of any rights in
connection with any securities or any agreement, regardless of when such rights
may be exercised and whether they are conditional.

2.             DIRECTOR.

(a)  Appointment
of Director. The Riley Parties and the Company agree that upon the
execution and delivery of this Agreement by the parties, the Board of Directors
of the Company will immediately appoint Riley (the “Riley Appointee”) as a Class III
Director of the Board of Directors (with the remaining term of such
directorship expiring at the Company’s 2007 annual meeting of stockholders).
The Riley Appointee hereby agrees to serve as a director upon such appointment
and agrees that he shall be bound by the terms and conditions of the Company’s
Insider Trading Policy, its

 

Code of Ethics
and Business Conduct, its Corporate Governance Guidelines and all other
policies applicable to the Company’s directors.

(b)  Re-nomination
of Director. At the request of SACC, the Riley Appointee shall be
considered by the Company’s Nominating Committee for nomination for election as
a director of the Company, for the seat then held by him, at the election to be
held at the Company’s 2007 Annual Meeting on the same basis as all other
serving directors of the Company are considered for nomination. However,
neither the Nominating Committee nor the Company shall be under any obligation
to nominate the Riley Appointee for election to the Board of Directors at such
time.

(c)  Rights
and Duties as Director. The Riley Appointee shall be accorded the same
rights and privileges and access to information as the other directors of the
Company and shall perform all the duties of a director of the Company and shall
commit the requisite time and attention thereto on the same basis as the other
directors.

(d)  Compensation.
The Riley Appointee shall be compensated for his service as a director and
shall be reimbursed for his expenses on the same basis as all other
non-employee directors of the Company are compensated and shall be eligible for
stock options (or other stock-based compensation) on the same basis as all
other directors of the Company. The annual retainer will be prorated for the
current year in accordance with the Company’s customary practice. Notwithstanding
anything contained herein, the receipt of stock options (or other stock-based
compensation) by the Riley Appointee in his capacity as a director of the
Company (or the exercise of any such stock options or vesting of other
stock-based compensation) shall not result in the violation of any other terms
of this Agreement.

(e)  Indemnification
and Insurance. The Riley Appointee shall be entitled to the same rights of
indemnification as the other directors except with respect to any action
brought by any of the Riley Parties or their Affiliates, Associates or
Representatives or by a third party at their behest as to which the Riley
Appointee hereby waives and releases such rights of indemnification. The Riley
Appointee shall be added to the Company’s Directors’ and Officers’ Liability
Insurance Policy as an insured party.

(f)  Information.
The Riley Parties agree to provide the Company with such information concerning
the Riley Appointee as is required under the Proxy Rules under the
Exchange Act in connection with the preparation and filing of the Company’s
proxy statements relating to its annual meetings of stockholders or its other
reports or registration statements to be filed with the SEC. The Riley Parties
hereby represent and warrant that all such information heretofore or hereafter
provided shall be accurate and complete in all material respects.

3.             CONFIDENTIALITY.

(a)  In
his capacity as a director of the Company, the Riley Appointee will obtain
and/or have access to information concerning the Company’s business, assets,
liabilities, financial condition, results of operations, cash flows, markets
and marketing, customers, employees, processes, products, strategies, plans,
projections and forecasts and other information about the Company (together
with all analyses, compilations, studies, notes, summaries or other documents
containing or based on the information obtained from the Company, the “Company
Information”) on the same basis as other non-employee directors of the Company.
The Riley Appointee acknowledges and agrees that, to the extent the Riley
Appointee continues to serve as a director of the Company, such person owes a
fiduciary duty to the Company to refrain from improper disclosure of
confidential information.

(b)  To
the extent consistent with his fiduciary duties as a director of the Company
and with the provisions of federal securities laws, the Riley Appointee may
disclose Company Information to any other Riley Party, and, to the extent
consistent with the provisions of federal securities laws, any such Riley Party
who is not a director of the Company may disclose Company Information to any
other Riley Party. To the extent consistent with his fiduciary duties as a
director of the Company and with the provisions of federal securities laws, the
Riley Appointee and any other Riley Party may also disclose Company Information
to any Representative of a Riley Party who has executed and delivered to Riley
Management, with a copy to the Company’s General Counsel, an undertaking in the
form of Exhibit A hereto. The Riley Parties are specifically prohibited
from disclosing Company Information to any other stockholder of the Company who
is not a Riley Party, except that such restriction shall not apply (i) to
any communication by the Riley Appointee with the stockholders of Company, to
the extent that such communication is consistent with the fiduciary duties of
the Riley Appointee to the Company and its stockholders under applicable laws,
or (ii) any involvement of the Riley Appointee in or with respect to any
communication made by the Company to its stockholders generally that is authorized
by the officers of the Company or by resolution of the Board of Directors. For
proposes hereof, the Representatives of a person shall be its directors,
officers, legal counsel and accountants (“Representatives”).

 

(c)  All
parties to this Agreement acknowledge that the restrictions of disclosure of
Company Information shall not apply to information that (i) was in or
enters the public domain or was or becomes generally available to the public
other than as a result of disclosure by a Riley Party or any Representative
thereof, (ii) was independently acquired by a Riley Party (other than
information acquired by the Riley Appointee as a result of his membership on
the Board of Directors) without violating any of the obligations of any of the
Riley Parties or any of their Representatives under this Agreement or any other
confidentiality agreement, or under any other contractual, legal, fiduciary or
binding obligation or duty of any Riley Party or its Representatives, (iii) was
available, or becomes available, to a Riley Party on a non-confidential basis
other than as a result of its disclosure to a Riley Party by the Company or any
director, officer, employee or agent of the Company, but only if to the
knowledge of the Riley Parties the source of such information is not bound by a
confidentiality agreement with the Company or is not otherwise prohibited from
transmitting the information to a Riley Party or its Representatives by a
contractual, legal, fiduciary or other binding obligation, or (iv) was authorized
in writing by the Company to be disclosed.

(d)  Each
Riley Party acknowledges that the federal securities laws prohibit it from
trading in Common Stock or other securities of the Company while in the
possession of material non-public information relating to the Company, or from
communicating such information or otherwise making trading recommendations to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to trade in Common Stock or other securities of the
Company. Accordingly, the Riley Parties and their respective partners,
managers, directors, employees, advisors and affiliates will refrain from
trading in Common Stock or other securities of the Company, or recommending
that others trade in Common Stock or other securities of the Company, at any
time while in the possession of Company Information that constitutes “material
non-public information” within the meaning of the federal securities laws.
Without limiting the generality of the foregoing, each Riley Party agrees to be
bound by and to comply with the Company’s Insider Trading Policy. The Company
acknowledges that B. Riley & Co., Inc. may continue to trade on
behalf of customers/clients provided the persons executing or recommending such
trades are not given access to Company Information and such trades are not
based on Company Information disclosed in violation of this Agreement.

(e)  The
Riley Parties acknowledge that the Company makes no express or implied
representation or warranty as to the accuracy or completeness of the Company
Information, and that the Company shall have no liability resulting from the
use of the Company Information, errors therein or omissions therefrom. The
Riley Parties and their respective partners, managers, directors, employees,
advisers and affiliates and other Representatives are not entitled to rely on
the accuracy or completeness of the Company Information.

(f)  In
the event that any Riley Party or any of its Representatives is required
(whether by oral questions, interrogatories, requests for information or
documents, subpoenas, civil or criminal investigative or discovery demands or
similar legal processes, or otherwise) to disclose any Company Information,
such Riley Party first provides the Company with prompt written notice of such
requirement so that the Company may seek a protective order or other
appropriate remedy, and/or waive compliance with the provisions of this Section 3,
and it will cooperate and will cause its Representatives to cooperate with the
Company with respect to the foregoing. However, such Riley Party or its
Representative shall be permitted to disclose that portion (and only that
portion) of the Company Information that such Riley Party or Representative is
legally compelled to disclose unless a protective order is in place.

(g)  To
the extent that any Company Information may include materials subject to the
attorney-client privilege, the Company is not waiving and will not be deemed to
have waived or diminished its attorney work-product protections,
attorney-client privileges or similar protections and privileges as a result of
the disclosure of any Company Information (including Company Information
related to pending or threatened litigation) to any Riley Party. The Company
acknowledges that disclosures to the Riley Appointee are within such privilege.

(h)  The
provisions of this Section 3 shall supersede the terms of the
Confidentiality Agreement between the Company and Riley dated June 20,
2006 (which is hereby terminated) and shall survive the termination of the
Standstill Period (as defined below) and the expiration or the termination of
this Agreement.

4.             ACQUISITIONS AND DISPOSITIONS OF
STOCK.

(a)  Each
of the Riley Parties covenants and agrees that, during the Standstill Period
(as defined below), neither it nor any of its Affiliates or Associates will,
without the prior written consent of the Company specifically expressed in a
vote adopted by the Board of Directors, directly or indirectly, purchase or
cause to be purchased or otherwise acquire or agree to acquire, become or agree
to become the beneficial owner of, announce an intention to acquire, or offer
or propose

 

to acquire, or
solicit an offer to sell, any Common Stock or other securities  issued by the Company (other than the Shares),
or any securities convertible into or exchangeable for Common Stock or any
other equity securities of the Company, if in any such case immediately after
the taking of such action such Riley Party and its Affiliates and Associates
would, in the aggregate, beneficially own more than fifteen percent (15%) of
the then outstanding shares of Common Stock; provided that this Section shall
not apply to any Common Stock or other securities of the Company acquired
pursuant to or resulting from any Director’s compensation, stock split, stock
dividend, recapitalization, reclassification, or similar transaction.

(b)  If
any Riley Party owns or acquires any Common Stock or other securities of the
Company in violation of this agreement, such Common Stock or other securities
in excess of those permitted  by this
Agreement shall immediately be disposed of to persons who are not Affiliates or
Associates of the Riley Parties in bona fide “brokers’ transactions” (as
defined under Rule 144 under the Securities Act of 1933, as amended), and,
while owned or held by such Riley Party, any shares in excess of the number
permitted to be owned by this Agreement shall not be voted while such violation
persists.

5.             STANDSTILL ARRANGEMENTS.

Each of the Riley Parties agrees that, during the
period from the date of this Agreement through the earlier of (i) the
ninetieth (90th)
day after the date of the 2007 Annual Meeting of Stockholders of the Company or
(ii) October 31, 2007 (the “Standstill Period”), so long as the
Company continues to nominate the Riley Appointee, neither it nor any of its
Affiliates or Associates will, without the written consent of the Company,
directly or indirectly, solicit, request, advise, assist or encourage others
to:

(a) 
solicit proxies or written consents of stockholders with respect to Common
Stock under any circumstances, or make, or in any way participate in, any “solicitation”
of any “proxy” to vote any shares of Common Stock, or become a “participant” in
any contested solicitation for the election of directors with respect to the
Company (as such terms are defined or used in Rules 14a-1 and Item 4
of Schedule 14A under the Exchange Act), or seek to advise or influence any
person with respect to the voting, holding or disposition of any shares of
Common Stock; provided, however, that nothing contained herein shall prohibit
the Riley Appointee from exercising his rights, duties or obligations as a
director of the Company;

(b)  seek
to call, or request the call of, a special meeting of the stockholders of the
Company (other than, in the case of the Riley Appointee, a call made as a
member of the Board of Directors as such), or make, or induce any other
stockholder to make, any stockholder proposal in respect of the Company,
regardless of whether such proposal is made for inclusion in the Company’s
proxy materials, is made at or in respect of any stockholders meeting or is
made in connection with any attempt to solicit stockholder consents, or induce
or assist any other stockholder in doing the same, or make a request for a list
of the Company’s stockholders;

(c) 
nominate or propose any person or persons as a director or directors of the
Company to be elected at any annual or special meeting of stockholders of the
Company, or induce or assist or request any other stockholder to do the same, except by way of recommending one or more persons to
the Company’s Nominating Committee; provided that this prohibition shall
not apply to any actions of the Riley Parties pursuant to and in accordance
with Section 2 hereof;

(d)  make
or encourage any other person to make a demand for inspection of any of the
books and records of the Company; provided, however, that nothing contained
herein shall prohibit the Riley Appointee from exercising his rights, duties or
obligations as a director of the Company;

(e) 
instigate, encourage or assist or enter into any discussions or arrangements
with, any person to do any of the actions prohibited or restricted by Section 4
or this Section 5.

6.             PRESS RELEASES AND OTHER PUBLIC
STATEMENTS.

During the
Standstill Period, the Company and the Riley Parties agree as follows:

(a)  The
Company agrees, subject to the requirements of applicable federal securities
laws, to provide the Riley Parties with an opportunity to review and comment on
any press release, public filing, or letter to the Company’s stockholders

 

containing
statements about the Riley Parties, prior to its public release.

(b)  The
Riley Parties agree, subject to the requirements of applicable federal
securities laws, to provide to the Company an opportunity to review and comment
on any press release, public filing, or letter to the Company’s stockholders
containing statements about the Company, prior to its public release.

(c) 
Promptly after the execution of this Agreement the parties hereto shall issue a
press release in the form previously agreed to in writing by the parties
hereto.

(d) 
Neither the Company nor any of the Riley Parties, nor any of their respective
Affiliates or Associates, shall directly or indirectly make or issue or cause
to be made or issued any disclosure, announcement or statement (including
without limitation the filing of any document or report with the SEC or any
other governmental agency or any disclosure to any journalist, member of the
media or securities analyst) concerning any other party to this Agreement or
any of its respective past, present or future general partners, directors,
officers or employees, which disparages, libels or defames such  person or persons or is reasonably likely to
be considered to be derogatory or detrimental to the good name or business
reputation of such person or persons; provided that, this Section does not
preclude criticism of prior business practices or decisions so long as such
criticism does not constitute a personal attack (i.e. criticism shall be
couched as a disagreement or a change).

7.             REMEDIES.

(a)  Each
party hereto hereby acknowledges and agrees that irreparable harm would occur
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court in
the State of Delaware, in addition to any other remedy to which they may be
entitled at law or in equity. Any requirements for the securing or posting of
any bond with such remedy are hereby waived.

(b)  The
parties hereto agree that any actions, suits or proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
brought solely and exclusively in the courts of the State of Delaware and/or
the courts of The United States of America located in the State of Delaware
(and the parties agree not to commence any action, suit or proceeding relating
thereto except in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to the respective addresses
set forth in Section 10 hereof shall be effective service of process for
any such action, suit or proceeding brought against any party in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the courts of the State of Delaware
or The United States of America located in the State of Delaware, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in any inconvenient forum.

(c)  If
action is initiated to enforce the provisions hereof, the prevailing party
shall be entitled to reimbursement of all reasonable costs and expenses,
including reasonable attorneys’ fees, incurred by it in connection therewith.

8.             ENTIRE AGREEMENT.

This Agreement
contains the entire understanding of the parties with respect to the subject
matter hereof and supersedes any prior understandings or agreements among them
respecting any matters covered by this Agreement.

9.             NOTICES.

All notices,
consents, requests, instructions, approvals and other communications provided
for herein and all legal process in regard hereto shall be validly given, made
or served, if in writing and sent by U.S. registered mail, return receipt
requested:

if to the Company:

Carreker
Corporation.

4055 Valley View Lane, Suite 1000

Dallas, Texas 75244

Attention:   John S. Davis, Executive
Vice President and General Counsel

 

with a copy to:

Locke Liddell & Sapp LLP

2200 Ross Avenue, Suite 2200

Dallas, Texas 75210

Attention: John McKnight, Esq.

if
to the Riley Parties:

Riley
Investment Management, LLC

11000 Santa Monica Blvd., Suite 800

Los Angeles, California 90025

Attention: Bryant R. Riley

with a copy to:

Paul, Hastings, Janofsky & Walker, LLP

695 Towne Center Drive

Costa Mesa, California 92626

Attention; Peter J. Tennyson

10.          LAW GOVERNING.

This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without regard
to any conflict of laws provisions thereof.

11.          COUNTERPARTS.

This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

12.          NO PRESUMPTION AGAINST DRAFTSMAN;
NO ADMISSION.

Each of the undersigned parties hereby acknowledges
the undersigned parties fully negotiated the terms of this Agreement, that each
such party had the advice of legal counsel and an equal opportunity to
influence the drafting of the language contained in this Agreement and that
there shall be no presumption against any such party on the ground that such
party was responsible for preparing this Agreement or any part hereof. Nothing
contained herein shall constitute an admission by any party hereto of liability
or wrongdoing.

13.          ENFORCEABILITY.

If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that the parties would have
executed the remaining terms, provisions, covenants and restrictions without including
any of such which may be hereafter declared invalid, void or unenforceable. In
addition, the parties agree to use their best efforts to agree upon and
substitute a valid and enforceable term, provision, covenant or restriction for
any such that is held invalid, void or unenforceable by a court of competent
jurisdiction.

14.          AMENDMENT AND WAIVER.

All modifications and amendments to, and waivers of,
this Agreement must be in writing. No amendment or waiver of any provision of
this Agreement shall be implied by any failure of any party to enforce any
remedy upon the violation of such provision, even if such violation is
continued or repeated subsequently.

[Signature page follows]

 

IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement, or caused the same to be executed by its duly
authorized representative as of the date first above written.

	
  CARREKER CORPORATION

  	
  RILEY INVESTMENT

  MANAGEMENT, LLC

   

  
	
                                                                

  By: John D.
  Carreker, Jr., Chairman & CEO

  	
                                                                

  By: Bryant R. Riley, President

  
	
   

  	
  SACC PARTNERS LP

   

  
	
   

  	
  By:,

  	
  Riley Investment Management,

  LLC, General Partner

   

  
	
   

  	
   

  	
  By:                                                                

  
	
   

  	
   

  	
                
  Bryant R. Riley, President

   

  
	
   

  	
                                                                

  Bryant R. Riley

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