AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made effective as of July 1, 1998 (the
"AGREEMENT"), between GUITAR CENTER, INC., a Delaware corporation (the
"COMPANY"), and Xxxxx Xxxx (the "EXECUTIVE").
This Agreement amends and restates that certain Employment Agreement,
dated as of June 5, 1996, between the Executive and the Company's predecessor,
Guitar Center Management, Inc., as amended by Amendment No. 1 dated October 15,
1996 and Amendment No. 2 dated as of January 30, 1997 (as so amended, the
"ORIGINAL AGREEMENT"). The Original Agreement was executed and delivered in
connection with the closing of the Stock Purchase Agreement (the "PURCHASE
AGREEMENT") dated June 5, 1996 (the "COMMENCEMENT DATE") by and among the
Company, Chase Venture Capital Associates, L.P., Xxxxx Fargo Small Business
Investment Company, Inc., Weston Presidio Capital II, L.P. (collectively, the
"INVESTORS"), and the security holder of the Company.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the Commencement Date and
ending as provided in paragraph 4 hereof (the "EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, the Executive shall serve
initially as the Chief Financial Officer of the Company and shall have the
normal duties, responsibilities and authority of the Chief Financial Officer,
subject to the power of the board of directors of the Company (the "BOARD") and
the powers delegated to the Executive's superiors (if any) by the Board.
(b) The Executive shall report to the Board or its designee, and
the Executive shall devote his best efforts and substantially all of his
business time, attention and energies (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the business and affairs
of the Company and its Subsidiaries (as defined below). The Executive shall
perform his duties and responsibilities to the best of his abilities in a
diligent, trustworthy, and businesslike manner. During the Employment Period,
the Executive shall not engage in any business activity which, in the reasonable
judgment of the Board, materially conflicts with the duties of the Executive
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; PROVIDED, HOWEVER, that the Company acknowledges that the
Executive may devote such time that the Executive deems appropriate for managing
his own investment portfolio so long as the Executive shall at all times
adequately fulfill his obligations pursuant to this Section 2(b).
(c) For purposes of this Agreement, (i) "SUBSIDIARIES" shall
mean any corporation of which the securities having a majority of the voting
power in electing directors are, at the time of determination, owned by the
Company, directly or through one or more Subsidiaries; and (ii) "PERSON" shall
be construed broadly and shall include, without limitation, an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a limited liability company and a governmental entity or any
department or agency thereof.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, the Executive's base salary
shall be $225,000 per annum or such higher rate as the Board (excluding the
Executive if he should be a member of the Board at the time of such
determination) may designate from time to time (the "BASE SALARY"), which salary
shall be payable in such installments as is the policy of the Company with
respect to its senior executive employees and shall be subject to Federal, state
and local withholding and other payroll taxes. In addition, during the
Employment Period, the Executive shall be entitled to participate in all
employee benefit programs for which all executives of the Company are generally
eligible and the Executive shall be eligible to participate in all insurance
plans available generally to all executives of the Company.
(b) In addition to the Base Salary, for each fiscal year ending
during the Employment Period, Executive shall also be eligible to receive an
annual bonus at the discretion of the Board.
(c) The Company shall reimburse the Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and documenting
such expenses.
(d) During the Employment Period, the Executive shall be
entitled to three weeks paid vacation during each 12-month period worked,
commencing on the date hereof.
(e) Executive has been granted options to acquire shares of
Common Stock under the Company's Amended and Restated 1996 Performance Stock
Option Plan. As set forth on EXHIBIT A hereto, the vesting provisions of
certain of such options are being modified contemporaneous with the execution
and delivery of this Agreement.
4. TERM; SEVERANCE.
(a) Unless renewed by the mutual agreement of the Company and
the Executive, the Employment Period shall end on June 30, 2001; PROVIDED,
HOWEVER, that (i) the Employment Period shall terminate prior to such date upon
the Executive's resignation pursuant to the provisions of Section 4(f) or 4(g)
hereof, or the death or Disability (as hereinafter defined) of Executive; and
(ii) the Employment Period may be terminated by the Company at any time
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prior to such date for Cause (as defined below) or without Cause. For purposes
of this Agreement the term "DISABILITY" means any long-term disability or
incapacity which (i) renders the Executive unable to substantially perform all
of his duties hereunder for 180 days during any 18-month period or (ii) would
reasonably be expected to render the Executive unable to substantially perform
all of his duties for 180 days during any 18-month period, in each case as
determined by the Board (excluding the Executive if he should be a member of the
Board at the time of such determination) in its good faith judgment after
seeking and reviewing advice from a qualified physician.
(b) If the Employment Period is terminated by the Company
without Cause or by the Executive with Reasonable Justification, the Executive
shall be entitled to receive as severance the Base Salary, an annual cash bonus
equal to the last annual bonus (excluding any portion thereof that the President
of the Company considered extraordinary and non-recurring) he received prior to
termination (such bonus to be pro-rated for any partial year), and continuation
of his medical benefits (or, if such continuation is not permitted by the
Company's insurers beyond the Employment Period, an annual cash payment equal to
the average premium the company pays to obtain health insurance for an
employee), for the period beginning on the date of such termination and ending
on June 30, 2001, unless the Executive has breached the provisions of this
Agreement, in which case the provisions of paragraph 11(a)(iii) shall apply.
For purposes of this Section 4(b), benefits will not include future
participation in any discretionary bonus or equity incentive pool, other than
continuation of annual cash bonuses as contemplated in the previous sentence.
Such severance payments will be made periodically in the same amounts and at the
same intervals as the Base Salary, annual bonus and benefits (as applicable)
were paid immediately prior to termination of employment. Executive shall have
no duty to mitigate any damages which Executive may suffer as a result of such
termination nor shall the severance benefits payable be reduced by any sums
actually earned by Executive as a result of any other employment obtained by
Executive during the original Employment Period. In addition, if the Employment
Period is terminated by the Company without Cause, all stock options held by the
Executive shall immediately vest pursuant to the terms of the agreements by
which such options were issued.
(c) If the Employment Period is terminated for any reason
(including pursuant to paragraph 4(h)) other than by the Company without Cause
or by the Executive with Reasonable Justification, the Executive shall be
entitled to receive only the Base Salary and then only to the extent such amount
has accrued through the date of termination.
(d) Except as otherwise expressly required by law (E.G., COBRA)
or as specifically provided herein, all of the Executive's rights to salary,
severance, benefits, bonuses and other amounts hereunder (if any) accruing after
the termination of the Employment Period shall cease upon such termination. In
the event that the Employment Period is terminated by the Company without Cause
or by the Executive with Reasonable Justification, the Executive's sole remedy
shall be to receive the severance payments and benefits described in paragraph
4(b) hereof.
(e) For purposes of this Agreement, "CAUSE" means (i) the
repeated
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failure by the Executive to perform such lawful duties consistent with
Executive's position as are reasonably requested by the Board as documented in
writing to the Executive, (ii) the Executive's repeated material neglect of his
duties on a general basis (other than as a result of illness or disability),
notwithstanding written notice of objection from the Board and the expiration of
a thirty (30) day cure period, (iii) the commission by the Executive of any act
of fraud, theft or criminal dishonesty with respect to the Company or any of its
Subsidiaries or affiliates, or the conviction of the Executive of any felony,
(iv) the commission of any act involving moral turpitude which (A) brings the
Company or any of its affiliates into public disrepute or disgrace, or (B)
causes material injury to the customer relations, operations or the business
prospects of the Company or any of its affiliates, and (v) material breach by
the Executive of this Agreement, including, without limitation, any breach by
the Executive of the provisions of paragraph 5, 6 or 7 hereof, not cured within
thirty (30) days after written notice to Executive from the Board; PROVIDED,
HOWEVER, that in the event of an intentional breach of the provisions of
paragraph 5, 6 or 7 hereof, the Executive shall not have the opportunity to
cure.
(f) The Executive may within ninety (90) days, after giving
written notice to the Company and the Company's failure to cure, voluntarily
terminate employment with the Company upon any event giving rise to Reasonable
Justification for such voluntary termination.
(g) For purposes of this Agreement, "REASONABLE JUSTIFICATION"
shall mean any voluntary termination by the Executive of his employment with the
Company within ninety (90) days after the occurrence of any of the following
events:
(i) the Executive is directed to perform an act that the
Executive reasonably believes to be in contravention of law, or which the
Executive reasonably believes would subject the Company and himself to
material liability, despite his express written objection addressed to the
Board with respect to such action;
(ii) there has been any change (on other than a temporary
basis) without the Executive's consent in the Executive's title or any
material reduction in the nature or scope of his responsibilities, or the
Executive is assigned duties that are materially inconsistent with his
position (other than on a temporary basis);
(iii) there is any material reduction in the Executive's
compensation or benefits (other than reductions in benefits that generally
effect all employees entitled to such benefits ratably);
(iv) the Executive is required by the Company, after
written objection by the Executive, to relocate his principal place of
employment outside a radius of fifty miles from his place of employment
immediately prior to such relocation; or
(v) there is a material failure, after notice and an
opportunity to cure, by the Company to perform any of its obligations to
the Executive under this Agreement.
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(h) If at any time during the Employment Period, there is a Sale
of the Company (as defined in that certain Stockholders Agreement, dated as of
June 5, 1996, by and among the Company and certain of its stockholders),
Executive may resign within ninety (90) days of the occurrence of such event by
notifying the Company in writing.
5. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
(a) The Executive will not disclose to a third party or use for
his personal benefit or for the benefit of a third party, at any time, either
during the Employment Period or thereafter, any Confidential Information (as
defined below) of which the Executive is or becomes aware, whether or not such
information is developed by him, except to the extent that such disclosure or
use is directly related to and required by the Executive's performance in good
faith of duties assigned to the Executive by the Company. The Executive will
take all reasonable and appropriate steps to safeguard Confidential Information
and to protect it against disclosure, misuse, espionage, loss and theft. The
Executive shall deliver to the Company at the termination of the Employment
Period or at any time the Company may request all memoranda, notes, plans,
records, reports, computer tapes and software and other documents and data (and
copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of the Company or any of its Subsidiaries which
the Executive may then possess or have under his control.
(b) As used in this Agreement, the term "CONFIDENTIAL
INFORMATION" means information that is not generally known to the public and
that is used, developed or obtained by the Company in connection with its
business, including but not limited to (i) information, observations and data
obtained by the Executive while employed by the Company (including those
obtained prior to the date of this Agreement) concerning the business or affairs
of the Company, (ii) products or services, (iii) fees, costs and pricing
structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports,
(vii) computer software, including operating systems, applications and program
listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x)
accounting and business methods, (xi) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xii) customers and clients and customer or client lists,
(xiii) other copyrightable works, (xiv) all production methods, processes,
technology and trade secrets, and (xv) all similar and related information in
whatever form. Confidential Information will not include any information that
has been published in a form generally available to the public prior to the date
the Executive proposes to disclose or use such information. Confidential
Information will not be deemed to have been published merely because individual
portions of the information have been separately published, but only if all
material features comprising such information have been published in
combination.
6. INVENTIONS AND PATENTS.
(a) The Executive agrees that all inventions, innovations,
improvements, technical information, systems, software developments, methods,
designs,
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analyses, drawings, reports, service marks, trademarks, tradenames, logos and
all similar or related information (whether patentable or unpatentable) which
relates to the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by the Executive (whether or not
during usual business hours and whether or not alone or in conjunction with any
other person) while employed by the Company (including those conceived,
developed or made prior to the date of this Agreement) together with all patent
applications, letters patent, trademark, tradename and service xxxx applications
or registrations, copyrights and reissues thereof that may be granted for or
upon any of the foregoing (collectively referred to herein as, the "WORK
PRODUCT") belong to the Company or such Subsidiary. The Executive will promptly
disclose such Work Product as may be susceptible of such manner of communication
to the Board and perform all actions reasonably requested by the Board (whether
during or after the Employment Period) to establish and confirm such ownership
(including, without limitation, the execution and delivery of assignments,
consents, powers of attorney and other instruments) and to provide reasonable
assistance to the Company or any of its Subsidiaries in connection with the
prosecution of any applications for patents, trademarks, trade names, service
marks or reissues thereof or in the prosecution or defense of interferences
relating to any Work Product.
(b) CALIFORNIA EMPLOYEE PATENT ACT NOTIFICATION. In accordance
with Section 2872 of the California Employee Patent Act, West's Cal. Lab. Code
Section 2870 et. seq., Executive is hereby advised that subparagraph 6(a) does
not apply to any invention, new development or method (and all copies and
tangible embodiments thereof) made solely by Executive for which no equipment,
facility, material, Confidential Information or intellectual property of the
Company or any of its Subsidiaries was used and which was developed entirely on
Employee's own time; PROVIDED, HOWEVER, that subparagraph 6(a) shall apply if
the invention, new development or method (i) relates to the Company's or any of
its Subsidiaries' actual or demonstrably anticipated businesses or research and
development, or (ii) results from any work performed by Executive for the
Company or any of its Subsidiaries.
7. NON-COMPETE AND NON-SOLICITATION.
(a) The Executive acknowledges and agrees with the Company that
during the course of the Executive's involvement and/or employment with, or
ownership of options and/or Common Stock in, the Company, such Executive has had
and will continue to have the opportunity to develop relationships with existing
employees, vendors, suppliers, customers and other business associates of the
Company which relationships constitute goodwill of the Company, and the Company
would be irreparably damaged if the Executive were to take actions that would
damage or misappropriate such goodwill. Accordingly, the Executive agrees as
follows:
(i) The Executive acknowledges that the Company
currently conducts its business throughout the United States, including
without limitation the areas listed on Exhibit B attached hereto (the
"TERRITORY"). Accordingly, during the period commencing on the date hereof
and ending on the later of (x) the termination of the Employment Period or
(y) if the Executive was terminated without Cause or resigns with
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Reasonable Justification, on or before the third anniversary of the
Commencement Date (such period is referred to herein as the "NON-COMPETE
PERIOD"), the Executive shall not, directly or indirectly, enter into,
engage in, assist, give or lend funds to or otherwise finance, be employed
by or consult with, or have a financial or other interest in, any business
which engages in selling at retail musical instruments, pro-audio
equipment or related accessories within the Territory (the "LINE OF
BUSINESS"), whether for or by himself or as a representative for any other
Person.
(ii) Notwithstanding the foregoing, the aggregate
ownership by the Executive of no more than two percent (on a fully-diluted
basis) of the outstanding equity securities of any entity, which securities
are traded on a national or foreign securities exchange, quoted on the
Nasdaq Stock Market or other automated quotation system, and which entity
competes with the Company (or any part thereof) within the Territory, shall
not (by itself) be deemed to be giving or lending funds to, otherwise
financing or having a financial interest in a competitor. In the event
that any entity in which the Executive has any financial or other interest
directly or indirectly enters into the Line of Business during the
Non-Compete Period, the Executive shall divest all of his interest (other
than any amount permitted to be held pursuant to the first sentence of
this Section 7(a)(ii)) in such entity within thirty (30) days after
learning that such entity has entered the Line of Business.
(iii) The Executive covenants and agrees that during the
Non-Compete Period, the Executive will not, directly or indirectly, either
for himself or for any other person or entity, solicit any employee of the
Company (other than such Executive's personal assistant or secretary) or
any Subsidiary to terminate his or her employment with the Company or any
Subsidiary or employ any such individual during his or her employment with
the Company or any Subsidiary and for a period of six months after such
individual terminates his or her employment with the Company or any
Subsidiary.
(b) The Executive understands that the foregoing restrictions
may limit his ability to earn a livelihood in a business similar to the business
of the Company, but he nevertheless believes that he has received and will
receive sufficient consideration and other benefits as an employee or holder of
Common Stock of the Company and as otherwise provided hereunder to clearly
justify such restrictions which, in any event (given his education, skills and
ability), the Executive does not believe would prevent him from otherwise
earning a living.
(c) The provisions of this Section 7 shall terminate in the
event the Company fails to make any payments required by Section 4(b) and such
failure remains uncured for a period equal to at least thirty (30) days after
written notice of such event from Executive.
8. INDEMNIFICATION. The Company and the Executive have entered into
an Indemnification Agreement substantially in the form filed as Exhibit 10.11 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
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9. INSURANCE. The Company may, for its own benefit, maintain
"keyman" life and disability insurance policies covering the Executive, provided
the same does not prevent Executive from obtaining reasonable amounts of
insurance for his family or estate planing needs. The Executive will cooperate
with the Company and provide such information or other assistance as the Company
may reasonably request in connection with the Company obtaining and maintaining
such policies.
10. EXECUTIVE REPRESENTATION. The Executive hereby represents and
warrants to the Company that (a) the execution, delivery and performance of this
Agreement by the Executive does not and will not conflict with, breach, violate
or cause a default under any agreement, contract or instrument to which the
Executive is a party or any judgment, order or decree to which the Executive is
subject, (b) the Executive is not a party to or bound by any employment
agreement, consulting agreement, non-compete agreement, confidentiality
agreement or similar agreement with any other person or entity and (c) upon the
execution and delivery of this Agreement by the Company and the Executive, this
Agreement will be a valid and binding obligation of the Executive, enforceable
in accordance with its terms.
11. NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim or other communication hereunder shall be delivered personally to the
recipient, delivered by United States Post Office mail (postage prepaid and
return receipt requested), telecopied to the intended recipient at the number
set forth therefor below (with hard copy to follow), or sent 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.
0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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If to the Executive, to:
Xxxxx Xxxx
0000 Xxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
or such other address as the recipient party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith. Any such
communication shall deemed to have been delivered and received (a) when
delivered, if personally delivered, sent by telecopier or sent by overnight
courier, and (b) on the fifth business day following the date posted, if sent by
mail.
12. GENERAL PROVISIONS.
(a) SEVERABILITY/ENFORCEMENT.
(i) It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which enforcement is sought. Accordingly, if any particular provision
of this Agreement shall be adjudicated by a court of competent jurisdiction
to be invalid, prohibited or unenforceable for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly
drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn,
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction. Without limiting the generality of the preceding sentence,
if at the time of enforcement of paragraph 5, 6 or 7 of this Agreement, a
court holds that the restrictions stated therein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the
failure of all or any of such provisions to be enforceable shall not impair
or affect the obligations of the Company to pay compensation or severance
obligations under this Agreement.
(ii) Because the Executive's services are unique and
because the Executive has access to Confidential Information and Work
Product, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement by the Executive. Therefore, in
the event of a breach or threatened breach of this Agreement, the Company
or its successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond
or other security).
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(iii) In addition to the foregoing, and not in any way in
limitation thereof, or in limitation of any right or remedy otherwise
available to the Company, if the Executive materially violates any
provision of paragraph 5, 6 or 7 (and such violation, if unintentional on
the part of the Executive, continues for a period of thirty (30) days
following receipt of written notice from the Company), any severance
payments then or thereafter due from the Company to the Executive may be
terminated forthwith and upon such election by the Company, the Company's
obligation to pay and the Executive's right to receive such severance
payments shall terminate and be of no further force or effect. The
Executive's obligations under paragraphs 5, 6 or 7 of this Agreement shall
not be limited or affected by, and such provisions shall remain in full
force and effect notwithstanding the termination of any severance payments
by the Company in accordance with this paragraph 11(a)(iii). The exercise
of the right to terminate such payments shall not be deemed to be an
election of remedies by the Company and shall not in any manner modify,
limit or preclude the Company from exercising any other rights or seeking
any other remedies available to it at law or in equity.
(b) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and all other documents of even date herewith
embody the complete agreement and understanding among the parties and supersede
and preempt any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
(c) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Executive and the Company and their respective successors, assigns,
heirs, representatives and estate; PROVIDED, HOWEVER, that the rights and
obligations of the Executive under this Agreement shall not be assigned without
the prior written consent of the Company.
(d) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE
(WHETHER OF THE STATE OF CALIFORNIA, OR ANY OTHER JURISDICTION), THAT WOULD
CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA TO BE
APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
CALIFORNIA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
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(e) JURISDICTION, ETC.
(i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any California State court or Federal court of the United
States of America sitting in the State of California, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such California State court
or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. Nothing in
this Agreement shall affect any right that any party may otherwise have to
bring any action or proceeding relating to this Agreement in the courts of
any jurisdiction.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any California State or Federal court. Each
of the parties hereto irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(iii) The Company and the Executive further agree that the
mailing by certified or registered mail, return receipt requested, of any
process required by any such court shall constitute valid and lawful
service of process against them, without the necessity for service by any
other means provided by law.
(f) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company, the
Executive and the Investors, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement or any provision hereof.
(g) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY
DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(h) HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first written above.
GUITAR CENTER, INC.
By: ____________________________________
Xxxxx Xxxxxx
Chief Executive Officer
____________________________________
Xxxxx Xxxx
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EXHIBIT A
TERMS OF OPTIONS
GRANTED TO EXECUTIVE
Defined terms used herein, but not defined herein, shall have the meaning
ascribed to them in the attached Employment Agreement or, if not defined in the
attached Employment Agreement, shall have the meanings ascribed to them in the
Company's Amended and Restated 1996 Performance Stock Option Plan, as amended
(the "PLAN"):
1. INITIAL GRANT MADE JUNE 3, 1996. Effective June 3, 1996, the Company
granted the Executive an option to acquire 79,599 shares of Common Stock for a
purchase price of $10.89 per share pursuant to the Plan. To the extent not
previously exercised, these options remain outstanding in accordance with their
respective terms.
2. ADDITIONAL GRANT MADE JANUARY 30, 1997. Effective January 30, 1997,
the Company granted the Executive an option to acquire 79,599 shares of Common
Stock for a purchase price of $10.89 per share pursuant to the terms of Exhibit
A to Amendment No. 2 to the Employment Agreement dated as of June 5, 1996
("EXHIBIT A"). In order to accelerate the time vesting provisions applicable to
such options, the Non-Qualified Stock Option Agreement shall be amended and
restated in the form attached as ANNEX A contemporaneous with the execution of
this Agreement.
A-1
EXHIBIT B
TERRITORY
ARIZONA:
Phoenix metropolitan area
CALIFORNIA:
Los Angeles County metropolitan areas
Orange County metropolitan areas
San Diego County metropolitan areas
San Francisco/Alameda/Contra Costa/Marin/San Mateo
County metropolitan areas
San Bernardino/Riverside County metropolitan area
FLORIDA:
Miami metropolitan area
Ft. Lauderdale/Hollywood metropolitan area
GEORGIA:
Atlanta metropolitan area
ILLINOIS:
Chicago metropolitan area
MARYLAND:
Baltimore metropolitan area
MASSACHUSETTS:
Boston metropolitan area
MICHIGAN:
Detroit metropolitan area
MINNESOTA:
Minneapolis/St. Xxxx metropolitan area
NEW YORK:
New York metropolitan area
TEXAS:
Dallas/Ft. Worth metropolitan area
Houston metropolitan area
WASHINGTON:
Seattle metropolitan area.
B-1
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
dated as of July 1, 1998 between
GUITAR CENTER, INC.,
(formerly Guitar Center Management Company, Inc.)
(the "COMPANY")
and XXXXX XXXX (the "OPTIONEE").
The Company, acting through a Committee (as defined in the Plan) with
the consent of the Company's Board of Directors (the "BOARD") has granted to the
Optionee an option under the Company's Amended and Restated 1996 Performance
Stock Option Plan, as amended (the "PLAN"), to purchase 79,599 shares of Common
Stock on the terms and subject to the conditions set forth in this option
agreement (the "AGREEMENT"), the Amended and Restated Employment Agreement by
and between the Company and Optionee dated as of July 1, 1998 (the "EMPLOYMENT
AGREEMENT"), and the Plan. This Agreement amends and restates the option
agreement dated as of June 5, 1996, as amended, in full as set forth below:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Agreement, the parties hereto agree as follows:
SECTION 1. THE PLAN. The terms and provisions of the Plan are hereby
incorporated into this Agreement as if set forth herein in their entirety. In
the event of a conflict between any provision of this Agreement and the Plan,
the provisions of the Plan shall control unless otherwise provided herein. A
copy of the Plan may be obtained from the Company by the Optionee upon request.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Plan.
SECTION 2. OPTION; OPTION PRICE. On the terms and subject to the
conditions of the Plan and this Agreement, the Optionee shall have the option
(the "OPTION") to purchase up to 79,599 shares of Common Stock (the "OPTIONS")
at the price of $10.89 per share (the "OPTION PRICE") at the times and in the
manner provided herein. Payment of the Option Price may be made in the manner
specified by Section 10(a) of the Plan. The Option is not intended to qualify
for federal income tax purposes as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
SECTION 3. TERM. The term of the Option (the "OPTION TERM") shall
commence on the date hereof and expire on the tenth anniversary of the Effective
Date, unless the Option shall have sooner been terminated in accordance with the
terms of the Plan (including, without limitation, Section 8 of the Plan) or this
Agreement.
SECTION 4. TIME VESTING. The Option shall vest as follows: (i) 25%
on July 1, 1998; (ii) 25% on December 31, 1998; (iii) 25% on December 31, 1999;
and (iv) 25% on December 31, 2000, subject to acceleration pursuant to the terms
and subject to the limitations of Section 5 of this Agreement.
SECTION 5. ACCELERATION OF VESTING. Notwithstanding the time vesting
provision provided in Section 4 and notwithstanding the provisions of Section
5(c) of the Plan, the vesting of the Option provided for in this Agreement shall
be accelerated as follows:
(a) upon the death of the Optionee during the Employment Period
(as such term is defined in the Employment Agreement);
(b) upon the Disability (as such term is defined in the
Employment Agreement) of the Optionee during the Employment
Period;
(c) upon a Sale of the Company during the Employment Period; or
(d) upon the termination of the Employment Period by the Company
without Cause (as defined in the Employment Agreement) or by the
Optionee with Reasonable Justification (as defined in the
Employment Agreement).
SECTION 6. RESTRICTION ON TRANSFER. The Option may not be
transferred, pledged, assigned, hypothecated or otherwise disposed of in any way
by the Optionee and may be exercised during the lifetime of the Optionee only by
the Optionee. If the Optionee dies, the Option shall thereafter be exercisable,
during the period specified in Section 8 of the Plan, by his executors or
administrators to the full extent to which the Option was exercisable by the
Optionee at the time of his death. The Option shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
SECTION 7. OPTIONEE'S EMPLOYMENT. Nothing in the Option shall confer
upon the Optionee any right to continue in the employ of the Company or any of
its affiliates or interfere in any way with the right of the Company or its
affiliates or stockholders, as the case may be, to terminate the Optionee's
employment or to increase or decrease the Optionee's compensation at any time,
with or without cause and with or without notice.
SECTION 8. NOTICES. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
(a) if to the Company, to it at:
Guitar Center, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to the General Counsel.
(b) if to the Optionee, to him at:
0000 Xxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (i) in the case of
personal delivery, on the date of such delivery (or if such date is not a
business day, on the next business after the date of delivery), (ii) in the case
of nationally-recognized overnight courier, on the next business day after the
date sent, (iii) in the case of telecopy transmission, when received (or if not
sent on a business day, on the next business day after the date sent), and (iv)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication is posted.
SECTION 9. WAIVER OF BREACH. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other or subsequent breach.
SECTION 10. OPTIONEE'S UNDERTAKING. The Optionee hereby agrees to
take whatever additional actions and execute whatever additional documents the
Company may in its reasonable judgment deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
the Optionee pursuant to the express provisions of this Agreement and the Plan.
SECTION 11. MODIFICATION OF RIGHTS. The rights of the Optionee are
subject to modification and termination in certain events as provided in this
Agreement, the Employment Agreement and the Plan.
SECTION 12. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR ROLE (WHETHER OF THE
STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA TO BE APPLIED. IN FURTHERANCE
OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF CALIFORNIA WILL CONTROL THE
INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW
OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION
WOULD ORDINARILY APPLY.
SECTION 13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and each such counterpart shall be deemed to be an original,
but all such counterparts together shall constitute but one agreement.
SECTION 14. ENTIRE AGREEMENT. This Agreement and the Plan (and the
other writings referred to herein) constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersede all
prior written or oral negotiations, commitments, representations and agreements
with respect thereto.
SECTION 15. SEVERABILITY. It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 16. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(Signature Page Follows)
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Nonqualified Stock Option Agreement effective as of the date first
written above.
GUITAR CENTER, INC.
By:___________________________________
Xxxxx Xxxxxx
Chief Executive Officer
OPTIONEE
______________________________________
Xxxxx Xxxx
