**Exhibit10.43**

 

**AMENDMENT NO. 2 TO AMENDED AND RESTATED**

 

**EMPLOYMENT AGREEMENT**

 

 

ThisAMENDMENT No. 2 TOAMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Amendment”) isentered into as of this 1st day of July, 2003, by and between LarryThomas****(“Executive”) and GUITAR CENTER, INC., aDelaware corporation (the “Company”).

 

Executive and the Company wish to amend that certainAmended and Restated Employment Agreement entered into between the two partiesas of June 6, 2001, as amended by that certain Amendment to Amended andRestated Employment Agreement dated as of March 24, 2003 (the “PriorAgreement”) to revise the base salary provisions therein.

 

In consideration of the mutual promises and covenantscontained herein and other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto agree asfollows:

 

**1.****                                     **ThePrior Agreement is amended by amending Section 3(a) in its entirety to read asfollows:

 

(a)                                  Duringthe Employment Period, the Executive’s base salary shall be $625,000 per annumor such higher rate as the Board or the Compensation Committee of the Board(excluding the Executive if he should be a member of the Board at the time ofsuch determination) may designate from time to time (the “Base Salary”),which salary shall be payable in such installments as is the policy of theCompany with respect to its senior executive employees and shall be subject toFederal, state and local withholding and other payroll taxes. During theEmployment Period, the Compensation Committee shall review Executive’s BaseSalary and performance bonuses on at least an annual basis and consider in goodfaith industry practices for compensation for similarly-situated executives, itbeing understood that the ultimate amount and terms of any increase incompensation, if any, shall be within the discretion of the CompensationCommittee or the Board, as the case may be. In addition, during the Employment Period, the Executive shall beentitled to participate in all employee benefit plans and programs for whichsenior executives of the Company are generally eligible and the Executive shallbe eligible to participate in all insurance plans available generally to allexecutives of the Company.

 

**2.****                                     **ThePrior Agreement is amended by amending Section 3(b) in its entirety to read asfollows:

 

(b)                                 Inaddition to the Base Salary, for each fiscal year ending during the EmploymentPeriod, Executive shall be eligible to participate in and receive incentivecompensation payments (the “Annual Bonus”) pursuant to the terms of theEmployer’s Senior Executive Performance Bonus Plan (the “Performance BonusPlan”) upon attainment of the performance goals specified thereunder by theCompensation Committee of the Board. Upon full achievement of the performance goals, the Annual Bonus will beequal to 100% of Executive’s then-current Adjusted Base Salary (as definedbelow), but for less than full achievement of the performance

 

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goals, the Annual Bonus shall be a lesser amount in accordance with aspecific formula determined by the Compensation Committee.  In addition, to the extent the performancegoals are exceeded, the Annual Bonus shall exceed 100% of the Executive’s then-currentAdjusted Base Salary in accordance with a specific formula determined by theCompensation Committee.  In no event,however, shall the Annual Bonus for any fiscal year exceed 200% of theExecutive’s Adjusted Base Salary payable with respect to such fiscal year.  The Annual Bonus shall be paid to Executivein a lump sum promptly following the end of the fiscal year with respect towhich it is payable.  Notwithstandingthe foregoing, Company and Executive understand and agree that the AnnualBonuses are intended to constitute “qualified performance-based compensation”satisfying the requirements of Treasury Regulations Sections 1.162-27(e)(2)through (e)(5), and that the material terms of the performance criteria underwhich amounts are to be paid pursuant to the Performance Bonus Plan, and thepayment of any amounts under the Performance Bonus Plan, shall be subject toapproval by the shareholders of the Company. For purposes of this Agreement, “Adjusted Base Salary” shall meanthe Executive’s then-current Base Salary less $100,000.

 

**3.****                                     **ThePrior Agreement is amended by amending the first sentence of Section 4(a) toread as follows:

 

(a)                                  Inthe event of a Qualifying Termination of Executive, the Executive shall beentitled to receive as severance, for the period beginning on the date of suchtermination and ending on the second anniversary of the date of termination,(i) the Base Salary for such severance period, (ii) an annual cash bonus to bepaid on each annual anniversary of the date of termination during the severanceperiod, in each case equal to 100% of the Adjusted Base Salary, and (iii)continuation of the benefits under Section 3(e) above.

 

**4.****                                     **ThePrior Agreement is amended by amending the first sentence of Section 4(b) toread as follows:

 

(b)                                 Inthe event of a Qualifying Termination of Executive within two years following aSale of the Company, the Executive shall be entitled to receive as severance,for the period beginning on the date of such termination and ending on thethird anniversary of the date of termination, (i) the Base Salary for suchseverance period, (ii) an annual cash bonus to be paid on each annualanniversary of the date of termination during the severance period, in eachcase equal to 100% of the Adjusted Base Salary, and (iii) continuation of thebenefits under Section 3(e) above.

 

**5.****                                     **ThePrior Agreement is amended by amending Section 4(d) in its entirety to read asfollows:

 

(d)                                 Ifthe Employment Period is terminated for any reason other than a QualifyingTermination, the Executive shall be entitled to receive on the date oftermination only the Base Salary and then only to the extent such amount hasaccrued through the date of termination. If the Employment Period is terminated as a result of a QualifyingTermination, in addition to any severance payable to Executive pursuant toSections 4(a) and (b) above, the Executive shall be entitled to receive on thedate of termination (i) the Base Salary to the extent such amount has accruedthrough the date of termination and (ii) a cash bonus equal to 100% of the AdjustedBase

 

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Salary pro-rated for any partial year ending on the date oftermination.

 

**6.****                                     **ThePrior Agreement is amended by amending Section 13(b) in its entirety to read asfollows:

 

(b)                                 COMPLETEAGREEMENT.  This Agreement and thosedocuments expressly referred to herein embody the complete agreement andunderstanding among the parties and supersede and preempt any priorunderstandings, agreements or representations by or among the parties, writtenor oral, which may have related to the subject matter hereof in any way; *provided*, *however*,that any rights of Executive hereunder are in addition to any rights Executivemay have under benefit plans, agreements or arrangements to which he is a partyor is a participant, and this Agreement shall not abrogate any such rights.

 

**7.****                                     **Executivehereby acknowledges and consents to the termination, effective as of June 30,2003, of the Expense Reimbursement and Reporting Policy Applicable to the ChiefExecutive Officer or any Co-Chief Executive Officer previously approved by theCompensation Committee of the Company’s Board of Directors on December 5,2001.  Executive further agrees that noexpenses incurred by Executive on or after July 1, 2003 shall be reimbursedpursuant to such policy.

 

**8.****                                     **Exceptas expressly provided for in this Amendment, no other term or provision of thePrior Agreement is amended or modified in any respect.

 

(Signature Page Follows)

 

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In witness whereof,the parties have executed this Agreement on the day and year first abovewritten.

 
|   | GUITAR  CENTER, INC. |
|--------|----------------------|
|   |                 |   |
|   | By:                  | /s/ Bruce Ross |
|   | Name:                | Bruce Ross |
|   | Title:               | Chief Financial Officer |
|   |                 |   |
|   | EXECUTIVE            |
|   |                 |   |
|   |                 | /s/ Larry Thomas |
|   |                 | Larry Thomas |

 

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