Exhibit 10.3


 


AMENDMENT NO. 1


TO


SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT


 


This AMENDMENT
NO. 1 TO SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”)
is made effective as of July 28, 2005 between GUITAR CENTER, INC., a
Delaware corporation (the “Company”), and Marty Albertson (the “Executive”).  This Amendment amends that certain Second
Amended and Restated Employment Agreement, made effective as of October 8,
2004 (the “Employment Agreement”), between the Company and Executive.


 


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.                                       EQUITY COMPENSATION.  Section 4(f) of the Employment Agreement
is hereby amended in its entirety to read as follows:


 


“(f)


 


(i)                                     Except as otherwise set forth in clause (ii) to
this Section 4(f), on or before August 15 each year during the
Employment Period, Executive shall be granted options to purchase a minimum
of 80,000 shares (as adjusted for stock splits and similar transactions) of the
common stock of the Company (each, an “Annual Grant”), which options
shall vest in equal annual installments over three years, or such other more
favorable vesting as is consistent with the annual grants to the Company’s
senior executive team generally.  During
the Employment Period, the Compensation Committee of the Board shall review the
size of the Annual Grants on at least an annual basis and consider in good
faith industry practices for ongoing option grants to similarly-situated
executives, it being understood that any increase in the amount of any Annual
Grant above 80,000 shares (as adjusted for stock splits and similar
transactions) and terms of any Annual Grant shall be within the discretion of
the Board or the Compensation Committee, as the case may be.  Notwithstanding
the foregoing, the Annual Grants shall have an exercise price not greater than
the fair market value of the common stock of the Company on the date of grant
(unless otherwise required by applicable law), shall have a 10-year term
(subject to such post-termination exercise provisions and other
post-termination rights set forth in the option agreements governing the Annual
Grants, which provisions and rights shall be consistent with the Guitar Center, Inc.
2004 Incentive Stock Award Plan, or a successor broad-based stock option plan)
and shall be granted under and pursuant to the terms of the Guitar Center, Inc.
2004 Incentive Stock Award Plan, or a successor broad-based stock option
plan.  Notwithstanding anything to the
contrary in this Section 3(f), if the accounting rules applicable to
the Company change to require the expensing of stock options by the Company,
the Compensation Committee may, after consultation with the Executive, provide
a modified equity incentive program using restricted stock or other
instruments.


 





















 


(ii)                                  In
lieu of the Annual Grant, it is agreed that for the fiscal years 2005, 2006 and
2007, the Company’s obligations under this Section 4(f) to grant an
equity incentive to Executive shall be satisfied in full by granting to
Executive, upon the terms and subject to the conditions set forth in the Guitar
Center, Inc. 2005 Long Term Incentive Plan (the “2005 LTIP”), (x)
an annual grant of options to purchase 32,000 shares of the common stock of the
Company and (y) 76,800 Performance Shares (as defined in the 2005 LTIP, and
subject to increase or decrease based on performance as provided in the 2005
LTIP).  The terms and conditions set forth
in the third sentence of Section 4(f)(i) shall apply to all stock
options granted under the 2005 LTIP and such stock options shall vest in equal
annual installments over three years, or such other more favorable vesting as
is consistent with the annual grants to the Company’s senior executive team
generally.  Commencing January 1,
2008, all of the provisions of Section 4(f)(i) shall again become
operative absent a subsequent written agreement between the Company and
Executive to the contrary.  In the event
of a Qualifying Termination of Executive prior to the end of the Performance
Period provided for in the 2005 LTIP, (x) the vesting of options granted under
the 2005 LTIP shall be governed by Section 5(c) of this Agreement,
and (y) the vesting of the Performance Shares shall be governed by the
operative terms of the 2005 LTIP.”


 


2.             COMPLETE AGREEMENT.  From and after the execution of this
Amendment, the Employment Agreement and the Amendment shall be read together as
one single agreement.


 


IN WITNESS WHEREOF, the
parties hereto have executed this Amendment No. 1 to Second Amended and
Restated Employment Agreement as of the date first written above.


 


	
   

  	
  GUITAR CENTER,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leland P.
  Smith

  	
   

  
	
   

  	
   

  	
  Name: Leland P. Smith

  	
   

  
	
   

  	
   

  	
  Title: Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Marty
  Albertson

  	
   

  
	
   

  	
   

  	
  Marty Albertson

  	
   

  



 


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