**Exhibit 10.3**

 

**GUITARCENTER, INC.**

 

**DEFERREDSTOCK AGREEMENT**

 

Guitar Center, Inc. (the “Company”)hereby grants                     (the “Director”), an award of Deferred Stock (“Deferred Stock Award”)under the Company’s 2004 Incentive Stock Award Plan (the “Plan”).  The date of this Agreement is                 (the “Vesting Commencement Date”). Subject to the provisions of Appendix A (attached) and ofthe Plan, the principal features of this award are as follows:

 

Number of Shares of Common Stock Subject toDeferred Stock Award:  **                          **

 

Vesting of Deferred Stock:  The Deferred Stock Award will vest accordingto the following schedule:  One hundredpercent (100%) of the Deferred Stock Award shall be vested as of the earliestof:  (i) the fifth (5th)anniversary of the Vesting Commencement Date; (ii) a Change in Control (asdefined in the Plan), in which event the Deferred Stock Award shall be vestedimmediately prior to the Change in Control; or (iii) the Qualified Retirement(as defined below) of the Director from service as a member of the Company’sBoard of Directors or of the board of directors of any successor (the “Board”);*provided* that during the periodbetween the Vesting Commencement Date and such vesting date the Directorcontinuously serves as a member of the Board.

 

For purposes of this Agreement, a “QualifiedRetirement” shall mean that the Director resigns or elects not to stand forreelection to the Board in connection with (i) reaching a mandatory retirementage, (ii) a general cessation of such person’s business activities approved bythe Compensation Committee of the Board (the “Committee”), or (iii) anyother similar event as determined by the Committee, subject in the case of (ii)and (iii) to Paragraph 11 of Appendix A.

 

Unless otherwise defined herein or in AppendixA, capitalized terms herein or in Appendix A shall have the definedmeanings ascribed to them in the Plan.

 

Your signature below indicates your agreementand understanding that this award is subject to all of the terms and conditionscontained in Appendix A and the Plan. For example, important additional information on vesting and forfeitureof the Deferred Stock is contained in Paragraphs 3 through 5 of Appendix A.  PLEASE BE SURE TO READ ALL OF APPENDIX A,WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THIS AGREEMENT.

 

 
| GUITAR  CENTER, INC. | DIRECTOR    |
|----------------------|-------------|
|                 |        |
|                 |        |
| By:                  |        |   |   |
|                 | Name/Title: |   |   | Name: |   |
|                 |        |
| Date:                | , 2004      |   | Date: | , 2004 |   |
|                      |             |  |  |  |  |  |  |  |  |  |

 

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**APPENDIXA**

 

**TERMSAND CONDITIONS OF DEFERRED STOCK AWARD**

 

1.             Grant.  The Company hereby grants to the Directorunder the Plan an award of **                 **shares of ** **Deferred Stock, subject to all ofthe terms and conditions in this Agreement and the Plan.

 

2.             Company’sObligation to Pay.  Each share ofCommon Stock subject to this Deferred Stock Award has a value equal to the FairMarket Value of a share of Common Stock on the date it becomes vested.  Unless and until the Deferred Stock will havevested in the manner set forth in Section 3, the Director will have noright to payment of any such Deferred Stock. Prior to actual payment of any vested Deferred Stock, such DeferredStock will represent an unsecured obligation of the Company, payable (if atall) only from the general assets of the Company.

 

3.             VestingSchedule.  The Deferred Stock awardedby this Agreement will vest in the Director according to the vesting schedule setforth on the attached Deferred Stock Agreement, subject to the Director’scontinuing to be a member of the Board through the vesting date.

 

4.             Forfeitureupon Termination as Service Provider. Notwithstanding any contrary provision of this Agreement, if theDirector terminates service as a member of the Board for any or no reason, thethen-unvested Deferred Stock awarded by this Agreement will thereupon beforfeited at no cost to the Company and the Director shall have no furtherrights thereunder.

 

5.             Paymentafter Vesting.  Any Deferred Stockthat vests in accordance with Section 3 will be paid to the Director inwhole shares of Common Stock as soon as practicable on or after such vestingdate (subject to Section 6, below), provided that to the extent determinedappropriate by the Company, any federal, state and local withholding taxes withrespect to such Deferred Stock will be paid by reducing the number of shares ofCommon Stock actually paid to the Director by that number of shares of CommonStock having a Fair Market Value equal to the statutory minimum amount requiredto be withheld.

 

6.             Deferralof Stock Issuance.  Pursuant to anadvance written election in accordance with an administrative procedureimplemented by the Chief Financial Officer, the Director may irrevocably electto defer until a specified date or event the receipt of vested shares of CommonStock otherwise issuable under this Deferred Stock Award.

 

7.             Rightsas Stockholder.  Neither the Directornor any person claiming under or through the Director will have any of therights or privileges of a stockholder of the Company in respect of any sharesof Common Stock deliverable hereunder unless and until certificatesrepresenting such shares of Common Stock will have been issued, recorded on therecords of the Company or its transfer agents or registrars, and delivered tothe Director.

 

8.             Grantis Not Transferable.  The rights andprivileges conferred hereby shall not be transferred, assigned, pledged orhypothecated in any way (whether by operation of law or otherwise) and shallnot be subject to sale under execution, attachment or similar process.  Upon any attempt to transfer, assign, pledge,hypothecate or otherwise dispose of this grant, or any right or privilegeconferred hereby, or upon any attempted sale under any execution, attachment orsimilar process, this grant and the rights and privileges conferred herebyimmediately will become null and void.

 

9.             AdditionalConditions to Issuance of Stock.  Ifat any time the Company will determine, in its sole discretion, that thelisting, registration or qualification of the shares of Common Stock upon any

 

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securities exchange or under any state or federal law, or the consentor approval of any governmental regulatory authority is necessary or desirableas a condition to the issuance of shares of Common Stock to the Director (orhis estate), such issuance will not occur unless and until such listing,registration, qualification, consent or approval will have been effected orobtained free of any conditions not acceptable to the Company.  The Company will make all reasonable effortsto meet the requirements of any such state or federal law or securitiesexchange and to obtain any such consent or approval of any such governmentalauthority.

 

10.           PlanGoverns.  This Agreement is subjectto all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreementand one or more provisions of the Plan, the provisions of the Plan will govern.

 

11.           Authorityto Amend.  Without limiting thegeneral authority of the Administrator, the Administrator hereby expresslyreserves the authority at any time to amend, with the consent of the Director,the circumstances under which an Award may become vested by operation of clause(ii) or clause (iii) of the definition of “Qualified Retirement.”

 

12.           AdministratorAuthority.  The Committee shall actas the Administrator with regard to this Agreement unless and until otherwisedetermined by the Board in its sole discretion and shall have the power tointerpret the Plan and this Agreement, to adopt such rules for theadministration, interpretation and application of the Plan as are consistenttherewith and to interpret or revoke any such rules (including, but not limitedto, the determination of whether or not any Deferred Stock has vested).  All actions taken and all interpretations anddeterminations made by the Administrator in good faith will be final andbinding upon Director, the Company and all other interested persons.  No member of the Administrator will bepersonally liable for any action, determination or interpretation made in goodfaith with respect to the Plan or this Agreement.

 

13.           Captions.  Captions provided herein are for convenienceonly and are not to serve as a basis for interpretation or construction of thisAgreement.

 

14.           AgreementSeverable.  In the event that anyprovision in this Agreement will be held invalid or unenforceable, suchprovision will be severable from, and such invalidity or unenforceability willnot be construed to have any effect on, the remaining provisions of thisAgreement.

 

15.           GoverningLaw.  The laws of the State ofDelaware shall govern the interpretation, validity, administration, enforcementand performance of the terms of this Agreement regardless of the law that mightbe applied under principles of conflicts of laws.

 

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