Document:

Exhibit
10.1

 

 

 

JOINDER
AGREEMENT, CONSENT AND AMENDMENT NO. 10

TO
CREDIT AGREEMENT

 

This JOINDER AGREEMENT,
CONSENT AND AMENDMENT NO. 10 TO CREDIT AGREEMENT (this “Amendment”) dated as of February
3, 2006, is entered into by and
among H&E EQUIPMENT SERVICES L.L.C., a Louisiana limited liability company
(“H&E”), GREAT NORTHERN EQUIPMENT, INC., a Montana corporation (“Great
Northern” and together with H&E, individually an “Existing Borrower”
and jointly, severally and collectively, the “Existing Borrowers”),
H&E HOLDINGS L.L.C., a Delaware limited liability company (“Holdings”),
GNE INVESTMENTS, INC., a Washington corporation, H&E FINANCE CORP., a Delaware corporation, H&E EQUIPMENT SERVICES, INC.,
a Delaware corporation (“H&E Delaware” and together with Existing
Borrowers, individually a “Borrower” and jointly, severally and
collectively, the “Borrowers”), the persons designated as “Lenders” on
the signature pages hereto, and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, as Agent.

 

WHEREAS, Existing Borrowers, the other Credit Parties, the
Lenders (as defined therein) and Agent are party to the Credit
Agreement dated as of June 17, 2002 (including all annexes, exhibits and schedules thereto, and as amended
by Amendment No. 1 dated as of March 31, 2003, Amendment No. 2 dated as of May
14, 2003, Amendment No. 3 dated as of February 10, 2004, Amendment No. 4 dated
as of October 26, 2004, Amendment No. 5 dated as of January 13, 2005, Amendment
No. 6 dated as of March 11, 2005, Amendment No. 7 dated as of March 31, 2005, Amendment No. 8 dated as of October 13, 2005
and Amendment No. 9 dated as of November 16, 2005, and as further amended,
restated, supplemented or otherwise modified and in effect from time to time, “Original
Credit Agreement”; all
capitalized terms defined in the Original Credit Agreement and not otherwise
defined herein have the meanings assigned to them in the Original Credit
Agreement or in Annex A thereto);

 

WHEREAS, Existing Borrowers have informed Lenders and Agent that Holdings
desires to consummate an initial public offering of Stock and, in order to have
a Delaware corporation as the issuer of such Stock, (i) Holdings has formed H&E
Delaware as a direct wholly-owned Subsidiary of Holdings; and (ii) H&E and
H&E Holdings intend to contemporaneously merge with and into H&E
Delaware pursuant to the terms of that certain Agreement and Plan of Merger
dated as of February 3, 2006 (the “Merger Agreement” and the mergers
contemplated thereby, the “Mergers”), as a result of which H&E Delaware
shall be the surviving entity of such mergers and shall succeed to and assume
all of the rights and obligations of H&E and H&E Holdings.  The Existing Borrowers have further informed
Lenders and Agent that immediately following the consummation of the Mergers, H&E
Delaware will consummate an initial public offering of its Stock (such
transaction, the “Initial Public Offering”);

 

WHEREAS, Existing Borrowers
have requested that Lenders and Agent (i) consent to the formation of H&E
Delaware and the consummation of the Mergers to the extent the foregoing would
otherwise contravene any of the provisions of the Original Credit Agreement,
and (ii) amend the Original Credit Agreement in certain respects (collectively,
the “Borrower Requests”);

 

WHEREAS, H&E Delaware is executing this
Agreement to become a party as a “Borrower” to the Credit Agreement and the
other Loan Documents and to induce the Lenders and the Agent to enter into this
Agreement; and

 

WHEREAS, upon the terms and subject to the
conditions hereinafter set forth, Lenders and Agent have agreed to so amend the
Original Credit Agreement and to grant the Borrower Requests;

 

 

NOW, THEREFORE, in consideration of the
premises and the agreements, provisions and covenants herein contained, Existing
Borrowers, the other Credit Parties, H&E Delaware, each Lender and Agent
agree as follows:

 

SECTION
1.

 

LIMITED
CONSENT; LIMITED RELEASE OF COLLATERAL

 

Effective as of the Effective Date, Agent and
Lenders hereby consent to (i) the formation of H&E Delaware by Holdings and
waive compliance and the effects of noncompliance with the provisions of
Section 6.1 of the Original Credit Agreement to the extent those provisions would
otherwise be violated as a consequence thereof and (ii) the consummation of the
Mergers by Holdings, H&E and H&E Delaware in accordance with the terms
of the Merger Agreement and waive compliance and the effects of noncompliance
with the provisions of Sections 5.1, 6.1, 6.5 and 6.15 of the Original Credit
Agreement to the extent those provisions would otherwise be violated as a
consequence thereof or to the extent a Change of Control would otherwise result
therefrom.  In connection with the
consummation of the Mergers, on the Effective Date, Agent and the Lenders
hereby agree that H&E Holdings Pledge Agreement and the H&E Holdings
Guaranty shall each be deemed terminated and of no further force and effect,
and the Lenders hereby authorize and direct the Agent to, and the Agent shall,
deliver to H&E Delaware or its counsel on or promptly following the
Effective Date any and all of the certificates representing the outstanding
Stock of H&E that were delivered by H&E Holdings to the Agent pursuant
to the H&E Holdings Pledge Agreement and are then in the Agent’s
possession.

 

SECTION
2.

 

AMENDMENTS
TO ORIGINAL CREDIT AGREEMENT

 

Effective
as of the Effective Date, the Original Credit Agreement is hereby amended as
follows:

 

(a)                                  the Original Credit Agreement is hereby
amended by replacing the name “H&E” each instance it appears in Section 1.1
with the name “H&E Delaware”.

 

(b)                                 the Original Credit Agreement is hereby
amended by replacing Section 1.3(b)(iii) in its entirety with the following:

 

                                             (iii)                               If any Credit Party issues Stock or any
Indebtedness (other than Indebtedness permitted by Section 6.3) in excess
of $1,000,000 in the aggregate of such Stock and such Indebtedness, no later
than the Business Day following the date of receipt of the cash proceeds
thereof, the issuing Credit Party shall prepay the Loans in an amount equal to
all such proceeds, net of underwriting discounts and commissions and other
reasonable costs paid to non-Affiliates in connection therewith; provided, that no such prepayment shall be required, so long
as no Event of Default has occurred and is continuing, from the proceeds of any
issuance of Stock by a Credit Party (i) to any director, officer or other
employee of such Credit Party pursuant to the stock incentive plan adopted by
H&E Delaware prior to, and as in effect on, the Amendment No. 10 Effective
Date, (ii) in connection with the Related Transactions, (iii) as
consideration for any Person (other than any Affiliate of a Credit
Party) providing permitted Indebtedness under Section 6.3,
(iv) to any other Credit Party (v) as consideration to any Person
(other than an Affiliate) selling assets in any Permitted Acquisition or
(vi) in connection with the Initial Public Offering or the Mergers.  Any such prepayment shall, subject to
Section 1.3(b)(iv), be applied in accordance with Section 1.3(c).

 

2

 

(c)                                  the Original Credit Agreement is hereby
amended by redesignating clauses (x) and (xi) of Section 6.3 as clauses (xi)
and (xii) and inserting the following new clause (x):

 

(x)                                    on and after the Eagle Acquisition Closing Date,
Indebtedness owing by Eagle LLC to CNL Commercial Mortgage Funding, Inc. on the
Eagle Acquisition Closing Date in a principal amount not to exceed $1,285,066.

 

(d)                                 the Original Credit Agreement is hereby
amended by replacing subsection (a) of Section 6.4 with the following new
subsection (a):

 

                                             (a)                                  No Credit Party shall enter into or be a
party to any transaction with any Affiliate of any Credit Party (other than
another Credit Party) thereof except in the ordinary course of and
pursuant to the reasonable requirements of such Credit Party’s business and
upon fair and reasonable terms that are no less favorable to such Credit Party
than would be obtained in a comparable arm’s length transaction with a Person
not an Affiliate of such Credit Party; provided, that
other than a transaction described in any Related Transaction Documents or
Disclosure Schedule 6.4(a), no Credit Party shall in any event enter into
any such transaction or series of related transactions (i) involving
payments in excess of $10,000 without disclosing to Agent in advance the terms
of such transactions and (ii) involving payments in excess of $50,000 in
the aggregate; and provided  further, that H&E Delaware may not later than the third
Business Day following the Amendment No. 10 Effective Date, solely by using
proceeds of Stock sold in the Initial Public Offering, (x) pay to BRS
Management Co. transaction fees in an aggregate amount not to exceed $8,000,000
and accrued management fees and expenses in an aggregate amount not to exceed
$350,000, in each case pursuant to the BRS Management Agreement (which BRS
Management Agreement shall be terminated immediately following the making of
such payments), and (y) pay deferred compensation to Gary W. Bagley and Kenneth
R. Sharp, Jr. in an aggregate amount not to exceed $8,000,000 (including
accrued interest).

 

(e)                                  the Original Credit Agreement is hereby
amended by replacing subsection (b) of Section 6.5 with the following new
subsection (b):

 

(b)                                  make any change in its capital structure as
described in Disclosure Schedule (3.8), including the issuance or sale of
any shares of Stock, warrants or other securities convertible into Stock or any
revision of the terms of its outstanding Stock, provided,
that any Borrower may issue or sell shares of its Stock for cash so long as
(i) the proceeds thereof are applied in prepayment of the Obligations as
required by Section 1.3(b)(iii), (ii) no Change of Control occurs
after giving effect thereto and (iii) other than with respect to H&E
Delaware, such shares are pledged to the Agent for the benefit of the Lenders
pursuant to a Pledge Agreement.

 

(f)                                    the Original Credit Agreement is hereby
amended by replacing the name “H&E” appearing in Section 6.12 with the name
“H&E Delaware”.

 

(g)                                 the Original Credit Agreement is hereby
amended by (i) deleting clause (g) of Section 6.14 in its entirety, (ii)
redesignating clause (h) thereof as the new clause (g), (iii) adding the word “and”
following clause (f) thereof and (iv) replacing clause (d) thereof with the
following new clause (d):

 

(d)                                  to the extent expressly permitted by the second
proviso of Section 6.4, payments on the Amendment No. 10 Effective Date of
transaction fees and accrued management fees and expenses pursuant to the BRS
Management Agreement and of deferred compensation.

 

3

 

(h)                                 the following definitions are added to Annex A
of the Original Credit Agreement in their proper alphabetical place:

 

“Amendment No. 10” means the Joinder Agreement, Consent and Amendment No. 10
to Credit Agreement dated as of February 3, 2006, with respect to this Agreement.

 

“Amendment No. 10 Effective
Date” means the ‘Effective Date’ as defined in Amendment No. 10.

 

“Eagle Acquisition”
means that certain merger and acquisition contemplated by the Eagle Acquisition
Agreement pursuant to which as of the Eagle Acquisition Closing Date Eagle
S-Corp will become a wholly-owned direct subsidiary of H&E Delaware and
Eagle LLC will become a wholly-owned direct and indirect subsidiary of H&E
Delaware.

 

“Eagle Acquisition Agreement” means that
certain Acquisition Agreement dated as of January 4, 2006, by and among
H&E, Eagle Merger Corp., a Delaware corporation and wholly-owned subsidiary
of H&E, Eagle LLC, Eagle
S-Corp, SBN Eagle LLC, a Delaware limited liability company, SummitBridge
National Investments LLC, a Delaware limited liability company and the
shareholders of Eagle S-Corp.

 

“Eagle Acquisition Closing
Date” means the date on which the Eagle
Acquisition is consummated in accordance with the terms of the Eagle
Acquisition Agreement and the Eagle Acquisition Consent and Waiver.

 

“Eagle Acquisition Consent
and Waiver” means the
Consent and Waiver dated as of December 29, 2005, with respect to this
Agreement and the Eagle Acquisition.

 

“Eagle LLC” means Eagle High Reach Equipment, Inc., a California
corporation.

 

“Eagle S-Corp” means Eagle High Reach Equipment, LLC, a Delaware limited
liability company.

 

“H&E Delaware”
means H&E Equipment Services, Inc., a Delaware corporation and the
successor by merger to H&E and H&E Holdings.

 

“H&E  Pledge Agreement”
means the Pledge Agreement dated as of the Amendment No. 10 Effective Date
executed by H&E Delaware in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries owned or held by H&E
Delaware.

 

 “Initial Public Offering” means an initial public offering of
the Stock of H&E Delaware.

 

“Merger Agreement”
means that certain Agreement and Plan of Merger dated as of February 2, 2006,
by and among H&E, H&E Holdings and H&E Delaware, as amended,
restated, modified or supplemented in accordance with the terms hereof and
thereof.

 

“Merger Documents”
means, collectively, (i) the Merger Agreement and (ii) each other document,
agreement and instrument executed or delivered in connection with the 

 

4

 

Mergers, in each case as to clause (ii), as
amended, restated, modified or supplemented in accordance with the terms hereof
and thereof.

 

“Mergers”
means the contemporaneous mergers of H&E and H&E Holdings with and into
H&E Delaware, with H&E Delaware as the surviving entity, in accordance
with the terms of the Merger Documents.

 

(i)                                     Annex A of the Original Credit Agreement is amended
as follows:

 

(i)                                     the definitions of “Adjusted
Interest Coverage Ratio”, “Adjusted Leverage Ratio”,
“EBITDA” and “Leverage
Ratio” are amended by replacing the phrase “H&E Holdings and its
Subsidiaries” each instance it appears therein with the phrase “H&E
Delaware and its Subsidiaries”.

 

(ii)                                  the definitions of “Borrower
Representative”, “Great Northern Advance”,
“H&E Borrowing Base” and “H&E/Great Northern Advance” are
amended by replacing the name “H&E” each instance it appears therein with
the name “H&E Delaware”.

 

(iii)                                the definition of “Change of Control”
is amended by replacing the definition in its entirety with the following new
definition:

 

“Change of Control” means any event, transaction or
occurrence as a result of which (a) prior to any initial public offering
of the Stock of H&E Delaware, BRS together with any BRS Related
Party shall cease to own and control directly or indirectly all of the
voting rights associated with ownership of at least fifty-one percent
(51%) of the outstanding membership interests (or other outstanding
Stock) of H&E Delaware, (b) following any such initial public
offering of the Stock of H&E Delaware, BRS together with any BRS Related
Party together with John Engquist (and the immediate family members, spouse and
lineal descendants of John Engquist) shall cease to own and control directly or
indirectly all of the economic and voting rights associated with ownership of
at least thirty percent (30%) of the outstanding Stock of H&E Delaware,
(c)  H&E Delaware shall cease to own and control all of the economic
and voting rights associated with ownership of at least one hundred percent
(100%) of the outstanding capital Stock of H&E Finance and GNE
Investments, each on a fully diluted basis, (d) GNE Investments shall
cease to own and control all of the economic and voting rights associated with
ownership of at least one hundred percent (100%) of the outstanding
capital Stock of Great Northern on a fully diluted basis, in each case except
pursuant to a merger as provided in Section 6.1(b) or (e) there
shall occur any “Change of Control” as such term is defined in the Senior Note
Indenture or the Senior Subordinated Note Indenture.”

 

(iv)                              the definition of “Guaranties”
is amended by replacing the definition in its entirety with the following new
definition:

 

“Guaranties” means, collectively, each Subsidiary Guaranty
and any other guaranty executed by any Guarantor in favor of Agent and Lenders
in respect of the Obligations.

 

5

 

(v)                                 the definition of “Guarantors”
is amended by replacing the definition in its entirety with the following new
definition:

 

“Guarantors” means Great Northern, each Subsidiary of each
Borrower (other than each such Subsidiary that is a Borrower) and each
other Person, if any, that executes a guaranty or other similar agreement in
favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.

 

(vi)                              the definitions of “H&E
Holdings Guaranty” and “H&E Holdings Pledge
Agreement” are deleted in their entireties.

 

(vii)                           the definition of “Inter-Creditor
Agreement” is amended by replacing the definition in its entirety
with the following new definition:

 

“Inter-Creditor Agreement” means, the intercreditor agreement
of even date herewith entered into by and among Bank of New York as Collateral
Agent, Agent, H&E Finance and H&E Delaware, the successor by merger to H&E.

 

(viii)                        the definition of “Permitted
Encumbrances” is amended by redesignating clauses (j) and (k)
thereof as clauses (l) and (m) and inserting the following new clauses (j) and
(k):

 

(j)  from and after the Eagle Acquisition Closing
Date, the Santa Fe Springs Liens (as defined in the Disclosure Schedules to the
Eagle Acquisition Agreement), provided, that
such Liens encumber only the Santa Fe Springs Property (as defined in the
Disclosure Schedules to the Eagle Acquisition Agreement) and no other property
of any Credit Party and, provided further,
that the CNL Mortgage (as defined in the Disclosure Schedules to the Eagle
Acquisition Agreement) secures only the Indebtedness permitted by Section
6.3(x) and the BOE Santa Fe Lien secures only the Sales Tax Settlement (as
defined in the Eagle Acquisition Agreement);

 

(j)  from and after the Eagle Acquisition Closing
Date, the Pacific Western Deed of Trust and the BP Deed of Trust (as such terms
are defined in the Disclosure Schedules to the Eagle Acquisition Agreement), provided, that such Liens encumber only Eagle LLC’s
leasehold interest in its lease with Tillotson Corporation with respect to the
Eagle Plaza Property (as defined in the Disclosure Schedules to the Eagle
Acquisition Agreement) and no other property of any Credit Party and, provided further, that such Liens do not secure Indebtedness
of any Credit Party;

 

(ix)                                the definition of “Pledge
Agreements” is amended by replacing the definition in its entirety
with the following new definition:

 

“Pledge Agreements” means the H&E Pledge Agreement, the
GNE Investments Pledge Agreement and any other pledge agreement entered into
after the Closing Date in connection herewith (as required by the Agreement or
any other Loan Document).

 

(x)                                   the definition of “Security
Agreements” is amended by replacing the definition       in its entirety with the following new
definition:

 

6

 

“Security Agreements” means, collectively, each security
agreement entered into on or after the Closing Date in connection herewith (as
required by the Agreement or any other Loan Document) by and among Agent, on
behalf of itself and Lenders, and each Credit Party that is a signatory thereto.

 

(j)                                         Annex E of the Original Credit Agreement is amended
by replacing the name “H&E Holdings” each instance it appears therein with
the name “H&E Delaware”, provided that
(x) the phrase “H&E Holdings and the Borrowers” appearing therein shall be
replaced with “Borrowers” and (y) the last sentence of subsection (d) thereof
shall not be amended.

 

(k)                                      Annex G of the Original Credit Agreement is amended
by replacing the name “H&E Holdings” each instance it appears therein with
the name “H&E Delaware”.

 

(l)                                         Annex I of the Original Credit Agreement is amended by replacing such annex in
its entirety with Annex I attached hereto.

 

(m)                                   Disclosure Schedules 1.1, 3.1 3.2, 3.8, 3.11,
3.12 and 5.1 to the Original Credit Agreement are amended by replacing such
Disclosure Schedules in their entireties with the corresponding Disclosure
Schedules attached hereto.

 

SECTION 3.

 

JOINDER OF H&E DELAWARE

 

(a)                                      Joinder and Assumption.  Effective
as of the Effective Date, in reliance upon the representations and warranties
of the respective Credit Parties set forth herein and in the Original Credit
Agreement, Agent, Lenders, the Credit Parties and H&E Delaware each hereby
acknowledges and agrees that, by H&E Delaware’s execution and delivery
hereof, without further notice or action of any kind whatsoever on its part or
on the part of any other Person,

 

(i)                                     for all
purposes, H&E Delaware is hereby joined automatically as a “Borrower” party
to the Original Credit Agreement, as amended hereby, being hereafter bound by
all of the respective terms and provisions thereof,

 

(ii)                                  H&E Delaware hereby assumes and becomes
liable with Great Northern on a joint and several basis for the prompt payment,
observance and performance of all Obligations, and

 

(iii)                               H&E Delaware hereby makes as of the Effective
Date, and thereafter agrees to make at such time or times as the
representations and warranties therein are deemed to be made or repeated, as to
itself, each of the representations and warranties contained in the Original
Credit Agreement, as amended hereby,

 

in the case of both clauses (i) and (ii)
above, to the same extent and with the same force and effect as if H&E
Delaware had been one of the Existing Borrowers under and an original signatory
to the Original Credit Agreement.  Each
reference to “Borrowers” or a “Borrower” in the Original Credit Agreement, as
amended hereby, and the other Loan Documents shall be deemed to include H&E
Delaware.

 

(b)                                 Appointment as Borrower Representative. 
Effective as of the Effective Date, (i) Great Northern, and to the
extent applicable, each other Credit Party, hereby designates H&E Delaware as
its 

 

7

 

representative and agent on its behalf for
the purposes of issuing Notices of Revolving Credit Advances and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement
of the proceeds of the Loans, selecting interest rate options, requesting
Letters of Credit, giving and receiving all other notices and consents
hereunder or under any of the other Loan Documents and taking all other actions
(including in respect of compliance with covenants) on behalf of any
Credit Party or Credit Parties under the Loan Documents and (ii) H&E
Delaware hereby accepts such appointment as Borrower Representative.  Agent and each Lender may regard any notice
or other communication pursuant to any Loan Document from Borrower
Representative as a notice or communication from all Credit Parties, and may
give any notice or communication required 
or permitted to be given to any Credit Party or Credit Parties hereunder
to Borrower Representative on behalf of such Credit Party or Credit Parties.  Each Credit Party agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by Borrower Representative shall be deemed for all purposes to
have been made by such Credit Party and shall be binding upon and enforceable
against such Credit Party to the same extent as if the same had been made
directly by such Credit Party. 
Notwithstanding anything to the contrary contained herein, unless the
Requisite Lenders shall otherwise agree in writing, the Borrower Representative
shall not make any request for an Advance on behalf of Great Northern and Great
Northern shall not be entitled to borrow from Lenders hereunder, provided, that subject to the terms hereof, H&E Delaware
may make requests for and Lenders shall make H&E/Great Northern Advances.

 

SECTION
4.

 

CONDITIONS TO EFFECTIVENESS

 

This
Amendment No. 10
shall become effective on the date (the “Effective Date”) on which Agent
shall have received the following, each of which shall be in form and substance
satisfactory to Agent:

 

(a)                                  this
Amendment No. 10, duly executed and delivered by Existing Borrowers, the other
Credit Parties, H&E Delaware, Agent and the Lenders,

 

(b)                                 to extent necessary to reflect accurately as
of the Effective Date the matters purported to be set forth therein, updated
Disclosure Schedules to the Original Credit Agreement,

 

(c)                                  Amended
and Restated Notes, duly executed and delivered by H&E Delaware to the
order of each Lender;

 

(d)                                 a Security Agreement, duly executed and
delivered by H&E Delaware and Agent,

 

(e)                                  a Pledge Agreement, duly executed and
delivered by H&E Delaware, covering all of the outstanding Stock of GNE
Investments and H&E Finance, and all documents (including share
certificates and stock powers) required by the terms thereof,

 

(f)                                    a Trademark Security Agreement, duly executed
and delivered by H&E Delaware,

 

8

 

(g)                                 evidence satisfactory to the Agent in its
sole discretion that the Mergers have been consummated in accordance with the
terms of the Merger Documents, together with true and correct copies of the Merger
Documents, each of which shall be in full force and effect,

 

(h)                                 an insurance certificate or certificates
demonstrating that H&E Delaware and the assets acquired by it pursuant to
the Merger Documents have insurance coverage as required the terms of the
Original Credit Agreement,

 

(i)                                     for H&E Delaware, (a) its
certificate of incorporation and all amendments thereto, (a) its by-laws,
together with all amendments thereto, (c) resolutions of its Board of
Directors, approving and authorizing the execution, delivery and performance of
this Amendment No. 10 and the other Loan Documents to which it is a party and
the transactions to be consummated in connection therewith, each certified as
of Amendment No. 10 Effective Date by H&E Delaware’s secretary or an
assistant secretary as being in full force and effect without any modification
or amendment, (d) a good standing certificate (including verification of tax
status) in its state of incorporation, and (e) good standing certificates
(including verification of tax status) and certificates of qualification
to conduct business in each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, each dated
a recent date prior to the Amendment No. 10 Effective Date and certified by the
applicable Secretary of State or other authorized Governmental Authority,

 

(j)                                     such UCC financing statements and such other
filings and recordings as Agent may require to obtain its first priority security
interest in Collateral owned by H&E Delaware and evidence satisfactory to
Agent that Agent has a valid and perfected first priority security interest in
all present and future assets of H&E Delaware and all proceeds thereof;

 

(k)                                  such information from H&E Delaware as
Lender may have requested relative to UCC, lien, tax lien and other searches
and results, satisfactory to Agent, of such UCC, judgment lien, tax lien and
other searches of public records with respect to H&E Delaware, as Agent
shall have required,

 

(l)                                     a legal opinion of Dechert LLP, in form and
substance satisfactory to Agent, as to, among other things, the legality and
enforceability against H&E Delaware of this Amendment and of the Original Credit
Agreement, as amended hereby, and the validity, attachment and perfection of
all security interests required by this Amendment and the other Loan Documents
contemplated hereby, and

 

(m)                               such other agreements, documents,
instruments, certificates and opinions as Agent may have reasonably requested.

 

SECTION 5.

 

POST-CLOSING
COVENANTS

 

(a)                                  H&E Delaware
hereby agrees (i) as soon as
practicable following the Effective Date, but in no event later than April 28,
2006, to (A) cause each certificate of title for any titled motor vehicle
that constituted P&E of H&E immediately prior to the consummation of
the Mergers, whether or not such certificate of title had been previously
delivered to the Agent by H&E pursuant to the Original Credit Agreement, to
be re-issued by the appropriate Governmental Authority in accordance with
applicable law in order to (1) name H&E Delaware as the vehicle owner on
such certificate of title, (2) cause the Agent’s security interest to be noted
on such certificate of title as a first priority lien, and (3) cause the Collateral
Agent’s security interest to be
separately noted on such certificate of title as a second priority lien, and 

 

9

 

(B) deliver all such
re-issued certificates of title to Agent as collateral security for the Obligations,
and (ii) as soon
as practicable following the Eagle Acquisition Closing Date (as defined
in the Original Credit Agreement, as amended hereby), but in no event later
than ninety (90) days thereafter, to (A) cause each certificate of title for any titled motor vehicle
that constitutes P&E of Eagle LLC (as defined in the Original Credit
Agreement, as amended hereby) to
be re-issued by the appropriate Governmental Authority in accordance with
applicable law in order to (1) name Eagle LLC as the vehicle owner on such
certificate of title, (2) cause the Agent’s security interest to be noted on
such certificate of title as a first priority lien, and (3) cause the
Collateral Agent’s security interest to be separately noted on such
certificate of title as a second priority lien, and (B) cause Eagle LLC to
deliver all such re-issued certificates of title to Agent as collateral
security for the Obligations, in each case at the sole cost and expense of
H&E Delaware.  Each Lender hereby
authorizes and directs the Agent, and the Agent agrees, to deliver to H&E
Delaware at its request any and all certificates of title previously delivered
by H&E to the Agent pursuant to the Original Credit Agreement to the extent
necessary to permit H&E Delaware to perform its obligations under this
Section 5.

 

(b)                                 H&E
Delaware hereby further agrees to deliver to the Agent:

 

(i)                                     not later than
February 28, 2006, evidence satisfactory to the Agent that account number
400-00360-04 maintained by H&E Delaware (as the successor by merger to
H&E) at Wells Fargo Bank, N.A. has been closed;

 

(ii)                                  not later than
February 28, 2006, evidence satisfactory to the Agent that UCC financing
statement number 17-1235774 naming Transamerica Equipment Financial Services
Corporation as secured party and H&E as debtor and filed on July 23, 2003
in East Baton Rouge Parish, Louisiana has been terminated of record;

 

(iii)                               not later than February 28, 2006, an original
Amendment and Reaffirmation of Intercreditor Agreement with respect to each
Vendor Inter-Creditor Agreement in effect on the Effective Date, duly executed
and delivered by H&E Delaware, the Collateral Agent and Ingersoll-Rand
Company, Komatsu America Corp., NMHG Financial Services, Inc., Textron
Financial Corporation, Manitowoc Boom Trucks, Inc., Access Financial Solutions,
Inc., Genie Financial Services, Inc., Manitowoc Cranes, Inc., Grove U.S. L.L.C
and National Crane Corporation, Tymco, Inc., Omniquip Textron, Inc. and Trak
International, Inc., Clark Equipment Company, Genie Industries, Inc. and Terex
Construction Americas, a division of Terex Corporation, as applicable, each in
form and substance satisfactory to the Agent; and

 

(iv)                              not
later than March 31, 2006, original good standing certificates (including
verification of tax status) and certificates of qualification to conduct
business for H&E Delaware in Alabama, Arizona, Arkansas, California,
Florida, Georgia, Idaho, Kentucky, Mississippi, Missouri, Montana, Nevada, New
Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, South Carolina,
Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wyoming, each
dated a recent date and certified by the applicable Secretary of State or other
authorized Governmental Authority.

 

SECTION 6.

 

AMENDMENT TO EAGLE CONSENT AND WAIVER

 

10

 

Effective
as of the Effective Date, the Eagle Consent and Waiver (as defined in the
Original Credit Agreement, as amended hereby) is hereby amended by deleting the
figure “$60,000,000” appearing in Section 1(a)(i) thereof and substituting the
figure “$63,000,000” in lieu thereof.

 

SECTION 7.

 

LIMITATION ON
SCOPE

 

Except as expressly amended
hereby or to the extent noncompliance is consented
to pursuant to the this Amendment, all of the representations, warranties,
terms, covenants and conditions of the Loan Documents shall remain in full
force and effect in accordance with their respective terms.  The amendments set forth herein shall be
limited precisely as provided for herein and shall not be deemed to be waivers
of, amendments of, consents to or modifications of any term or provision of the
Loan Documents or any other document or instrument referred to therein or of
any transaction or further or future action on the part of Borrowers or any
other Credit Party requiring the consent of Agent or Lenders except to the
extent specifically provided for herein. 
Agent and Lenders have not and shall not be deemed to have waived any of
their respective rights and remedies against Borrowers or any other Credit
Party for any existing or future Defaults or Event of Default.

 

SECTION 8.

 

MISCELLANEOUS

 

(a)                                  Each of the Credit Parties hereby represents
and warrants as follows:

 

(i)                                     it has full power and authority to execute
and deliver this Amendment and to perform its obligations hereunder,

 

(ii)                                  upon the execution and delivery hereof by such
Credit Party, this Amendment will be valid, binding and enforceable against
such Credit Party in accordance with its terms, subject to any applicable bankruptcy, insolvency, moratorium or similar
laws affecting creditors’ rights generally and to general principles of equity,

 

(iii)                               the execution and delivery of this Amendment and
the performance by such Credit Party of its obligations hereunder and under the
Original Credit Agreement, as amended hereby, (A) does not and will not
contravene, conflict with, violate or constitute a default under (1) the
organizational documents of such Credit Party or (2) any law or regulation, or
any order or decree of any court or Governmental Authority or any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Credit Party is a party or by which such Credit Party or any of its property is
bound,, (B) do not result in the creation or imposition of any Lien upon
any of the property of such Credit Party other than Permitted Encumbrances or
those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan
Documents; and (C) do not require the consent or approval of any
Governmental Authority or any other Person,

 

(iv)                              no Default or Event of Default presently
exists, in each case, after giving effect to the effectiveness of this
Amendment, and

 

11

 

(v)                                 no Material Adverse Effect has occurred since the date
of the last financial statements delivered by Borrowers to Agent, and as of the
date hereof there shall have occurred no material adverse change in the
financial condition, operations, assets, business or prospects of Borrowers
since the date of the most recent financial statements of Borrowers delivered
to the Agent, and

 

(b)                                 Borrowers repeat and restate the representations
and warranties of Borrowers contained in the Original Credit Agreement as of the
date of this Amendment No. 10 and as of the Effective Date, except to the
extent such representations and warranties relate
to a specific date.

 

(c)                                  This Amendment No. 10 is being delivered in
the State of New York.

 

(d)                                 Borrowers and the other Credit Parties hereby
ratify and confirm the Original Credit Agreement, as amended hereby, and agree
that, as amended hereby, the Original Credit Agreement remains in full force
and effect.

 

(e)                                  Borrowers and the other Credit Parties agree
that all Loan Documents to which each such Person is a party remain in full
force and effect notwithstanding the execution and delivery of this Amendment
No. 10.

 

(f)                                    This Amendment No. 10 may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which counterparts together
shall constitute but one and the same instrument.

 

(g)                                 All references in the Loan Documents to the “Credit
Agreement” and in the Original Credit Agreement as amended hereby to “this
Agreement,” “hereof,” “herein” or the like shall mean and refer to the Original
Credit Agreement as amended by this Amendment No. 10 (as well as by all
subsequent amendments, restatements, modifications and supplements thereto).

 

(h)                                 Each of
the following provisions of the Original Credit Agreement is hereby incorporated
herein by this reference with
the same effect as though set forth in its entirety herein, mutatis mutandis, and as if “this Agreement” in any such
provision read “this Amendment No. 10”: Section 11.6,
(Severability), Section 11.9 (Governing Law), Section 11.10
(Notices), Section 11.11 (Section Titles) Section 11.13 (Waiver
of Jury Trial), Section 11.16 (Advice of Counsel) and Section 11.17
(No Strict Construction).

 

[SIGNATURE PAGES
FOLLOW]

 

12

 

WITNESS the due execution hereof by the respective
duly authorized officers of the undersigned as of the date first written above.

 

	
  BORROWERS:

  
	
   

  
	
  H&E EQUIPMENT
  SERVICES L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GREAT NORTHERN
  EQUIPMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  H&E EQUIPMENT
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  

 

 

[SIGNATURE PAGE TO JOINDER
AGREEMENT, CONSENT

AND AMENDMENT NO. 10 TO CREDIT
AGREEMENT]

 

 

	
  OTHER CREDIT PARTIES:

  
	
   

  
	
   

  
	
  H&E HOLDINGS L.L.C.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GNE INVESTMENTS, INC.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  H&E FINANCE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  

 

 

[SIGNATURE PAGE TO JOINDER
AGREEMENT, CONSENT

AND AMENDMENT NO. 10 TO CREDIT
AGREEMENT]

 

 

	
  AGENT AND LENDERS:

  
	
   

  
	
  GENERAL ELECTRIC CAPITAL CORPORATION, 

  
	
  as Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A.,

  
	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  PNC BANK, NATIONAL ASSOCIATION,

  
	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  LASALLE BUSINESS CREDIT, LLC,

  
	
  as a Lender

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE TO JOINDER
AGREEMENT, CONSENT

AND AMENDMENT NO. 10 TO CREDIT
AGREEMENT]

 

 

ANNEX I (Section 11.10)

to

 

CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

(A)                              If to Agent or GE Capital, at:

 

General
Electric Capital Corporation.
299 Park Ave, 6th Floor  
New York, NY 10171  

Attention: H&E Equipment Services Account Manager

Telephone No.: (212) 370-8003 
Telecopier No.: (646) 428-7398

 

with copies to:

 

Global Sponsor Finance

GE Corporate Financial Services, Inc.

335 Madison Ave. 11th Floor

New York, NY 10003

Attention: Corporate Counsel

Telephone No.: 212-370-8093

Telecopier No.: 212-983-8767

 

and

 

King & Spalding LLP

1185 Avenue of the
Americas 

New York, NY
10036-4003 

Attention: Robert S. Finley

Telephone No.:  (212) 556-2100

Telecopier No.:  (212) 556-2100

 

GE
Capital - Commercial Equipment Finance

NMHG
Financial Services, Inc.,

44
Old Ridgebury Road, Danbury, CT 06810

Attention:
Michael Belville

Telephone
No.: (203) 796-5671

Telecopier
No.: (203) 796-2352

 

(B)                                If to a Lender other than GE Capital, at the
following, as applicable:

 

PNC Bank, National Association

One PNC Plaza

249 Fifth Avenue — 6th Floor

Pittsburgh, PA 15222

Attention: 
Doug Hoffman

Telephone No.: (412) 768-1333

 

 

Telecopier No.: (212) 768-4369

 

LaSalle Business Credit, Inc.

One Centerpointe Drive

Suite 500

Lake Oswego, OR 97035

Attention: Andrew Moulton

Telephone No.: (503) 431-6142

Telecopier No.:
(503) 684-4665

 

Bank of America, N.A.

335 Madison Avenue

6th Floor

New York, NY 
10017

Attention: 
Ed Kahn

Telephone No.: (212) 503-7370

Telecopier No.:
(212) 503-7340

 

(C)                                If to any Credit Party, to Borrower
Representative at:

 

H&E Equipment Services, Inc.

11100 Mead Road, Suite 200

Baton Rouge, LA  70816

Attention:  Leslie Magee

Telecopier No.:  (225) 298-5232

Telephone No.: (225) 298-5332Exhibit 10.1

 

THIRD
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This THIRD
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and
entered into effective as of January 1, 2006 (“Commencement  Date”),
between Musician’s Friend, Inc., a Delaware corporation (the “Company”),
and Robert V. Eastman (the “Executive”). 
This Agreement amends and restates that certain Second Amended and
Restated Employment Agreement that became effective on June 1, 2003 (the “Original
Agreement”).

 

RECITALS:

 

A.                                   Upon
the effectiveness of this Agreement, all prior employment agreements and
related understandings between the Company and the Executive, including the
Original Agreement, shall be terminated and replaced with this Agreement.

 

B.                                     Executive
desires to render services to the Company and the Company desires to employ
Executive, upon the terms and subject to the conditions and other provisions
set forth herein.

 

AGREEMENT:

 

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;
EFFECT OF THIS AGREEMENT.  Upon the
terms and subject to the conditions of this Agreement, effective as of the Commencement
Date, the Company shall employ the Executive, and the Executive accepts
employment with the Company, for the period beginning on the Commencement Date
and ending as provided in Section 4 hereof (the “Employment Period”).

 

2.                                       POSITION
AND DUTIES.

 

(a)                                  During the Employment Period, the
Executive shall serve initially as the Chief Executive Officer of the Company
and shall have the normal duties, responsibilities and authority of the Chief
Executive Officer, or such other duties and responsibilities reasonably consistent
therewith with the Company or any Affiliate of the Company as the Board of
Directors (“Board”) of the Company or Guitar Center, Inc. (“Parent”)
may request from time to time, subject to the power of the Board of the Company
and Parent and the powers delegated to the Executive’s superiors (if any) by
the Board of the Company or Parent or the executive officers of Parent.  At the request of Parent, Executive will also
serve as a director of the Company and any subsidiary.

 

(b)                                 Subject to Section 2(d), the
Executive shall report to the Chief Executive Officer of Parent, 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

 

 

Affiliates.  The Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy, and
businesslike manner.  Except with the
prior written approval of the Board of the Company, Executive during the
Employment Period will not (i) accept any other employment with a third
party, (ii) serve on the board of directors or similar body of any other
business entity or (iii) engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary advantage) that in the
reasonable determination of the Board of the Company is or may be competitive
with, or that might place him in a competing position to or otherwise conflict
with, the interests of the Company or any of its Affiliates.

 

(c)                                  Nothing contained herein shall limit
the authority of the Board of the Company or executive officers of Parent to
elect one or more officers of the Company with authority senior to that of
Executive with respect to Executive’s duties hereunder.

 

(d)                                 In the event that the Company
engages a full-time replacement Chief Executive Officer during the Employment Period,
the Board of the Company or Parent may elect that the Executive cease to be Chief
Executive Officer of the Company and instead change his role to be solely the
Chairman of the Board of the Company for the remainder of the Employment Period
on the terms and conditions set forth in this Section 2(d) (a “Role
Conversion”).

 

(i)                                     Following a Role Conversion, the
Executive shall report to the Chief Executive Officer of Parent and shall have
such duties and responsibilities as are determined by the Board of the Company
or Parent, and the Executive agrees to continue to serve in such capacity.  In such capacity, the Executive shall
continue to devote such percentage of his business time, attention and energies
to the performance of his duties as Chairman of the Board of the Company as may
be mutually agreed upon by the Chief Executive Officer of Parent and the
Executive, upon the terms and subject to the conditions of this Agreement.  It is expressly agreed that a Role Conversion
in compliance with this Section 2(d) (including any corresponding
adjustment of the Executive’s compensation) shall not constitute termination of
the Executive’s employment without “Cause” or “Reasonable Justification” for
the Executive’s voluntary termination of his employment.

 

(ii)                                  The
Executive’s compensation for his services under this Agreement during the
Employment Period after a Role Conversion shall be set by the Compensation
Committee of the Board of Parent.

 

(iii)                               Except as expressly
provided in this Section 2(d), all other terms and conditions of this
Agreement shall remain unchanged as a result of a Role Conversion.

 

3.                                       BASE
SALARY AND BENEFITS

 

(a)                                  Effective January 1, 2006, the
Executive’s base salary shall be $412,500 per annum or such higher rate as the
Compensation Committee of the Board of Parent (excluding the Executive if he
should be a member of such Board at the time of such

 

2

 

determination) may designate from
time to time (as adjusted from time to time pursuant to this Agreement, the “Base
Salary”), which Base 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.  During the Employment Period, the
Compensation Committee of the Board of Parent shall review the Executive’s Base
Salary on at least an annual basis and consider in good faith industry
practices for compensation for similarly-situated executives, it being
understood that the ultimate amount and terms of any increase in the Base
Salary, if any, shall be within the discretion of the Compensation Committee of
the Board of Parent.  In addition, during
the Employment Period, the Executive shall be entitled to participate in all
employee fringe 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 (the “Annual Bonus”) at the
discretion of the Compensation Committee of the Board of Parent upon the
attainment of the operating income target for the Company (the “Performance
Target”) as determined by the Compensation Committee of the Board of Parent
in advance of such fiscal year and communicated in writing to Executive.  For any fiscal year ending during the
Employment Period that the Company attains the Performance Target for the
Company, Executive shall be eligible to receive an Annual Bonus equal to seventy-five
percent (75%) of Executive’s then-current Base Salary, but for less than
full achievement of the Performance Target, the Annual Bonus shall be a lesser
amount determined by the Compensation Committee of the Board of Parent, in its discretion.  In
addition, to the extent the Performance Target is exceeded during any fiscal
year, the Annual Bonus shall exceed seventy-five percent (75%) of the Executive’s
then-current Base Salary by an amount determined by the Compensation
Committee of the Board of Parent, in its discretion.  In no event, however, shall the Annual Bonus
for any fiscal year exceed one hundred fifty percent (150%) of the Executive’s
then-current Base Salary payable with respect to such fiscal year.  The Compensation Committee of the Board of
Parent shall adjust the Performance Target as it determines necessary to
reflect unusual or non-recurring events impacting the Company’s operating
income.

 

(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 four weeks paid vacation during each 12-month
period worked.  Vacation time not used in
a given year will not accrue and may not be carried forward to any future
period.

 

(e)                                  During
the period beginning on the date of termination of the Employment Period and
ending on the date the Executive attains the age of 65, the Executive shall be
permitted to purchase, at cost, medical, dental and vision coverage under the
Company’s employee benefit plans.  If the
Company or Parent creates a program under which insurance for medical expenses
not covered by Medicare is offered on a group basis, the Executive will be

 

3

 

permitted to purchase, at
cost, coverage under such a plan.  This Section 3(e) shall
survive any termination of the Employment Period or this Agreement.

 

(f)                                    Any payments made
or benefits provided to Executive under this Agreement shall be reduced by any
applicable withholding taxes or other amounts required to be withheld by law.

 

4.                                       TERM;
SEVERANCE.

 

(a)                                  Unless renewed by the mutual written
agreement of the Company and the Executive, the Employment Period shall end on December 31,
2008; provided, however, that (i) the Employment Period
shall terminate prior to such date upon the Executive’s resignation or the
death or Disability (as hereinafter defined) of the Executive; (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause (as defined below) or without Cause; and (iii) the
Employment Agreement Period may be terminated by the Executive at any time
prior to such date with Reasonable Justification (as defined below) in
accordance with Section 4(i).

 

(b)                                 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 one
hundred eighty (180) days during any three hundred sixty-five (365) day period
or (ii) would reasonably be expected to render the Executive unable to
substantially perform all of his duties for one hundred eighty (180) days
during any three hundred sixty-five (365) day period, in each case as
determined by the Board of the Company (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.

 

(c)                                  If the Employment Period is
terminated by the Company without Cause or by the Executive with Reasonable
Justification on or before December 31, 2006, the Executive shall be
entitled to receive as severance: (i) the Base Salary for twenty-four (24)
months; and (ii) one annual cash bonus equal to the last annual bonus
(excluding any portion thereof that the Board of Parent or its Compensation
Committee considered extraordinary and non-recurring) he received prior to
termination.  If the Employment Period is
terminated by the Company without Cause or by the Executive with Reasonable
Justification after December 31, 2006, the Executive shall be entitled to
receive as severance: (i) the Base Salary for the greater of (A) twelve
(12) months or (B) the period beginning on the date of such termination
and ending on December 31, 2008; and (ii) one annual cash bonus equal
to the last annual bonus (excluding any portion thereof that the Board of
Parent or its Compensation Committee considered extraordinary and
non-recurring) he received prior to termination.  In addition, during the applicable severance
period, (x) to the extent the Executive is eligible for coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
the Company shall reimburse the Executive on a monthly basis for the amount of
his premium payments for group health coverage elected by the Executive
pursuant to COBRA, and (y) for any remaining portion of the applicable
severance period during which the Executive is not eligible for coverage under
COBRA (if any), the Company shall reimburse the Executive on a monthly basis for
an amount equal to the premium payments the Executive would be required to

 

4

 

pay in order to continue medical,
dental and vision benefits which are substantially the same as the benefits
provided to the Executive immediately prior to his termination of employment,
in each case unless the Executive has breached the provisions of this Agreement,
in which case the provisions of Section 12(a)(iii) shall apply.  For purposes of this Section 4(c),
benefits will not include future participation in any bonus or equity incentive
pool, other than continuation of the annual cash bonus as contemplated in the
previous sentence.  Subject to Section 12(k),
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.  The 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 subsequent
to the termination of the Employment Period. 
Notwithstanding anything to the contrary in this Agreement, no amounts
shall be payable to the Executive pursuant to this Section 4(c) solely
as a result of the expiration of the Employment Period.

 

(d)                                 If the Employment Period is
terminated for any reason 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.

 

(e)                                  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 and
exclusive remedy shall be to receive the severance payments and benefits
described in Section 4(c) hereof.

 

(f)                                    If at any time that Executive is
employed by the Company hereunder (i) the Employment Period is terminated
as a result of the Executive’s death or Disability, (ii) there is a Sale
of the Business or (iii) the Employment Period is terminated by the
Company without Cause or by the Executive with Reasonable Justification, (x) all
stock options then held by the Executive and granted to him on or after June 1,
2003 shall immediately vest and become exercisable and/or all restrictions on
shares of restricted stock then held by the Executive shall immediately lapse,
and (y) any other rights of Executive as a participant under the Guitar Center, Inc.
2005 Long Term Incentive Plan or any successor thereto shall be treated as
provided for by such plan.

 

(g)                                 As a condition to the Executive’s
receipt of any post-termination benefits described in Sections 4(c) or (f) hereof,
the Executive shall be required to execute a Release of all claims arising out
of his employment or the termination thereof, which release will also include a
customary non-disparagement covenant from Executive (the “Release”), in
a form reasonably acceptable to the Company.  Such Release shall specifically relate to all
of the Executive’s rights and claims in existence at the time of such execution
but shall exclude any continuing obligations the Company may have to the
Executive following the date of termination under this Agreement or any other
agreement providing for obligations to survive the Executive’s termination of
employment.

 

5

 

(h)                                 For purposes of this Agreement, “Cause”
means any termination by the Company of Executive’s employment within ninety (90)
days after the Board of Parent becomes aware of the occurrence of any of the
following:

 

(i)                                     the ongoing and repeated failure by
the Executive to perform such lawful duties consistent with Executive’s
position as are reasonably requested by the Board of Parent or the Company in
good faith as documented in writing to the Executive (other than as a result of
Executive’s illness or disability);

 

(ii)                                  the Executive’s ongoing and repeated
material neglect of his duties on a general basis (other than as a result of
Executive’s illness or disability), notwithstanding written notice of objection
from the Board of Parent or the Company 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 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; or

 

(v)                                 material breach by the Executive of
this Agreement, including, without limitation, any breach by the Executive of
the provisions of Sections 5, 6 or 7 hereof, not cured within thirty (30) days
after written notice to Executive from the Board of Parent or the Company; provided,
however, that in the event of an intentional breach of the provisions of
Sections 5, 6 or 7 hereof, the Executive shall not have the opportunity to
cure.

 

(i)                                     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.

 

(j)                                     For purposes of this Agreement, “Reasonable
Justification” means 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 without Executive’s written consent:

 

(i)                                     the Executive is directed to perform
an act that the Executive reasonably believes after consultation with counsel
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 of Parent with respect to such action;

 

6

 

(ii)                                  there has been any material
reduction in the nature or scope of Executive’s responsibilities, or the
Executive is assigned duties that are materially inconsistent with his position
(in each case, other (x) than on a temporary basis or (y) as provided for in Section 2(d));

 

(iii)                               there is any material reduction in
the Executive’s compensation or a material reduction in Executive’s other
benefits (other than (x)
reductions in benefits that generally affect all employees entitled to such
benefits ratably or (y) as provided for in Section 2(d));

 

(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 (50) miles from his place of
employment immediately prior to such relocation; or

 

(v)                                 there is a material failure by the
Company to perform any of its obligations to the Executive under this
Agreement;

 

provided,
however, that with respect to unintentional breaches of Section 4(j)(ii),
(iii) and (v), the Board of the Parent shall be given written notice by
Executive of such breach and thirty (30) days to cure such breach, if curable.

 

(k)                                  For purposes of this Agreement, “Sale
of the Business” shall mean a transaction or series of integrated
transactions involving an Independent Third Party or group of Independent Third
Parties acting in concert pursuant to which such party or parties acquire (i) capital
stock of the Parent or the Company possessing the voting power to elect a
majority of the entire board of directors of the Parent or the Company, as the
case may be (whether by merger, consolidation or issuance of the Parent’s
capital stock), or (ii) all or substantially all of the Parent’s or the
Company’s assets determined on a consolidated basis, or (iii) sixty
percent (60%) or more of all of the Parent’s or the Company’s common stock, on
a fully diluted basis.

 

(l)                                     For purposes of this Agreement, “Independent
Third Party” shall mean any Person who, immediately prior to a contemplated
transaction, individually and with its Group or Family Group, as the case may
be, does not own in excess of 10% of the Parent’s common stock, on a
fully-diluted basis.

 

(m)                               For purposes of this Agreement, “Group”
shall mean:

 

(i)                                     in the case of a partnership, (A) such
partnership and any of its limited or general partners, (B) any
corporation or other business organization to which such partnership shall sell
all or substantially all of its assets or with which it shall be merged, (C) any
Affiliate of such partnership, and (D) with respect to any individual
identified in clauses (A) through (C) above, members of his Family
Group; and

 

(ii)                                  in the case of a corporation, (A) such
corporation, (B) any corporation or other business organization to which
such corporation shall sell or transfer all or substantially all of its assets
or with which it shall be merged, (C)

 

7

 

any Affiliate of such corporation,
and (D) with respect to any individual identified in clauses (A) through
(C) above, members of his Family Group.

 

(n)                                 For purposes of this Agreement, “Family
Group” shall mean an individual’s spouse, ancestors and/or descendants
(whether natural or adopted) and the estate of and any trust solely for the
benefit of such individual and/or the individual’s spouse, ancestors and/or
descendants.

 

(o)                                 For purposes of this Agreement, “Affiliate”
shall mean with respect to any Person, (i) a director, officer or partner
of such Person or any Person identified in clause (iii) below, (ii) a
spouse, parent, sibling or descendant of such Person (or a spouse, parent,
sibling or descendant of any director or executive officer of such Person), and
(iii) any other Person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person.  The term “control”
includes, without limitation, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.  For the avoidance of doubt,
the “Affiliates” of the Company shall, without limitation, include Parent and
each direct and indirect subsidiary of Parent.

 

(p)                                 For purposes of this Agreement, “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.

 

(q)                                 Upon termination of the Employment
Period for any reason, Executive shall be deemed to have resigned from all
offices and directorships, if any, then held with the Company or any of its
Affiliates.

 

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 on the
date hereof or hereafter 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 or as required by law or necessary for
Executive to enforce his rights hereunder. 
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 files and software and other documents and data (and
copies thereof) relating to the Confidential Information, Work Product (each as
defined below) or the business of the Company or any of its Affiliates which
the Executive may then possess or have under his control.

 

8

 

(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 or its Affiliates in
connection with their 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, 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
Affiliates’ 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 mark 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 Affiliate.  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 Affiliates 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., if applicable, Executive is hereby advised that Section 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 Affiliates was used and which was developed

 

9

 

entirely on Employee’s own time; provided,
however, that Section 6(a) shall apply if the invention, new
development or method (i) relates at the time of its conception or
reduction to practice to the Company’s or any of its Affiliates’ business, or actual
or demonstrably anticipated research and development, or (ii) results from
any work performed by Executive for the Company or any of its Affiliates.

 

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, the Company, or Parent, as the case may be, 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 and its Affiliates 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 and that such harm is inconsistent with the duty
owed by Executive as a senior officer and/or director of Parent and/or the
Company to preserve the value of such goodwill for the benefit of the
stockholders.  Accordingly, the Executive
agrees as follows:

 

(i)                                     The Executive acknowledges that the
Company and its Affiliates currently conduct business throughout the United
States, including without limitation the areas listed on Exhibit A
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) for so long as severance payments
are being made to the Executive pursuant to Section 4(c) (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 the retail level,
(including, without limitation, through retail stores, by phone, by mail, by
catalog or by Internet or other means of electronic commerce) 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 (2%) (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.

 

10

 

(iii)                               The Executive covenants and agrees
that during the period
commencing on the date hereof and ending on the later of (x) the first
anniversary of the termination of the Employment Period or (y) for so long as
severance payments are being made to the Executive pursuant to Section 4(c),
the Executive will not, directly or indirectly, either for himself or for any
other Person, (1) solicit any employee of the Company (other than such
Executive’s personal assistant or secretary) or any Affiliate to terminate his
or her employment with the Company or any Affiliate, (2) employ any such
individual during his or her employment with the Company or any Affiliate and
for a period of six months after such individual terminates his or her
employment with the Company or any Affiliate or (3) solicit any vendor or
business affiliate of the Company to cease to do business with the Company or
to change its practices with respect to the Company or any Affiliate.

 

(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 or its Affiliates, but he nevertheless
believes that he has received and will receive sufficient consideration and
other benefits as an employee of the Company or holder of common stock of
Parent 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 covenants contained in Section 7(a) and
7(b) are for the sole benefit of the Company and may be reduced (but not
increased) in scope, or curtailed as to Territory, time period, or both,
without resulting in a modification of any other provision of this Agreement,
as the Company may determine in its sole discretion.

 

(d)                                 The provisions of this Section 7
shall terminate in the event the Company fails to make any payments required by
Section 4(c) and such failure remains uncured for a period equal to
at least thirty (30) days after written notice of such event from Executive.

 

8.                                       EMPLOYMENT-AT-WILL.  Subject to the termination obligations, if
any, provided for in this Agreement, Executive hereby agrees that the Company
may dismiss him and terminate his employment with the Company without regard to
(i) any general or specific policies (whether written or oral) of the
Company relating to the employment or termination of its employees, or (ii) any
statements made to Executive, whether made orally or contained in any document,
pertaining to Executive’s relationship with the Company, or (iii) assignment
of Cause by the Executive.  Inclusion
under any benefit plan or compensation arrangement will not give the Executive
any right or claim to any benefit hereunder except to the extent such right has
become fixed under the express terms of this Agreement.

 

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 planning 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.

 

11

 

10.                                 EXECUTIVE
REPRESENTATION.

 

(a)                                  The Executive hereby represents and
warrants to the Company that (i) 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, (ii) 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 (iii) 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.

 

(b)                                 During the Employment Period,
Executive shall 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 Executive, including without
limitation, any policies related to sexual harassment, anti-discrimination and
similar employment practices.

 

(c)                                  Executive represents and agrees that
he fully understands his right to discuss all aspects of this Agreement with
his private attorney, and that to the extent, if any, that he desired, he
availed himself of such right.  Executive
further represents that he has carefully read and fully understands all of the
provisions of this Agreement, that he is competent to execute this Agreement,
that his agreement to execute this Agreement has not been obtained by any
duress and that he freely and voluntarily enters into it, and that he has read
this document in its entirety and fully understands the meaning, intent and
consequences of this document.

 

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:

 

Musician’s
Friend, Inc.

931
Chevy Drive

Medford,
Oregon 97504

Attention:  Board of Directors

 

with a
copy to:

 

Guitar
Center, Inc.

5795
Lindero Canyon Road

Westlake
Village, California 91362

Attention:  General Counsel

Telephone:  (818) 735-8800

 

12

 

Telecopier:  (818) 735-8833

 

with a
copy to:

 

Latham & Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Attention: 
Anthony J. Richmond, Esq.

Telephone: (650) 328-4600

Telecopier: (650) 463-2600

 

If to
the Parent or its Board, to Guitar Center, Inc. with a copy to outside
counsel as noted above.

 

If to
the Executive, to the address noted on the signature page of this
Agreement 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 be 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 Section 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

 

13

 

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).

 

(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 Section 5,
6 or 7 (and such violation, if unintentional on the part of the Executive,
continues for a period of twenty-one (21) 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 Sections 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 Section 12(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; SURVIVAL. 
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.  The representations, warranties, covenants
and agreements made herein shall, as applicable, survive any termination of
this Agreement in accordance with their respective terms.

 

(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 DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED.

 

14

 

(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 Oregon State court or Federal court of the
United States of America sitting in the State of Oregon, 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 Oregon 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.  Without limiting the foregoing,
Executive acknowledges that 10 Del. C. Section 3114, as amended effective January 1,
2004, applies to Executive as Chief Executive Officer of the Company and that
any violation of Sections 5, 6 or 7 hereof shall be deemed also to constitute a
breach of his duties to the Company as an officer and/or director thereof.

 

(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 Oregon 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 by mutual
agreement of the parties only by a written instrument executed by the Company
and Executive which makes express reference to this Agreement 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.

 

15

 

(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.

 

(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.

 

(j)                                     CONSTRUCTION. 
The parties participated jointly in the negotiation and drafting of this
Agreement and the language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent.  If an ambiguity or question of intent or
interpretation arises, then this Agreement will accordingly be construed as
drafted jointly by the parties to this Agreement, and no presumption or burden
of proof will arise favoring or disfavoring any party to this Agreement by
virtue of the authorship of any of the provisions of this Agreement.

 

(k)                                  INTERNAL
REVENUE CODE SECTION 409A.  This
Agreement shall be interpreted, construed and administered in a manner that
satisfies the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and the Treasury Regulations thereunder,
and any payment scheduled to be made hereunder that would otherwise violate Section 409A
of the Code shall be delayed to the extent necessary for this Agreement and
such payment to comply with Section 409A and the Treasury Regulations
thereunder.

 

(Signature Page Follows)

 

16

 

IN
WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Employment Agreement as of the date first written above.

 

	
   

  	
  MUSICIAN’S
  FRIEND, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Leland P. Smith

  	
   

  
	
   

  	
   

  	
   Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   /s/ Robert
  V. Eastman

  	
   

  
	
   

  	
   

  	
  Robert V.
  Eastman

  
	
   

  	
   

  	
   

  
	
  Address for
  Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

 

S-1

 

EXHIBIT A

 

TERRITORY

 

Retail
Stores:

 

ALABAMA:

Mobile metropolitan area

Birmingham metropolitan
area

 

ARIZONA:

Phoenix/Mesa metropolitan
area

Tucson metropolitan area

 

ARKANSAS:

Little Rock/North Little
Rock metropolitan area

 

CALIFORNIA:

Los Angeles/Ventura
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

Bakersfield metropolitan
area

Fresno metropolitan area

Sacramento/Yolo metropolitan
area

Modesto metropolitan area

 

COLORADO:

Denver/Boulder/Greeley
metropolitan area

Colorado Springs
metropolitan area

Pueblo metropolitan area

 

CONNECTICUT:

Hartford metropolitan
area

New Haven metropolitan
area

 

DISTRICT OF
COLUMBIA:

Washington, D.C.
metropolitan area

 

FLORIDA:

Miami metropolitan area

Ft. Lauderdale/Hollywood
metropolitan area

Orlando metropolitan area

Tampa Bay metropolitan area

Lakeland/Winter Haven metropolitan area

Fort Meyers/Cape Coral metropolitan area

Pensacola metropolitan area

Tallahassee metropolitan area

Jacksonville metropolitan area

 

GEORGIA:

Atlanta metropolitan area

 

A-1

 

IDAHO:

Boise metropolitan area

 

ILLINOIS:

Chicago/Gary/Kenosha metropolitan area

Peoria/Pekin metropolitan area

 

INDIANA:

Indianapolis metropolitan area

South Bend metropolitan area

Gary metropolitan area

Fort Wayne metropolitan area

 

IOWA:

Des Moines metropolitan area

 

LOUISIANA:

New Orleans metropolitan area

Baton Rouge metropolitan area

 

MARYLAND:

Baltimore metropolitan area

 

MASSACHUSETTS:

Boston/Worcester/Lawrence metropolitan area

Attleboro metropolitan area

Salem metropolitan area

 

MICHIGAN:

Detroit/Ann Arbor/Flint metropolitan area

Kalamazoo/Battle Creek metropolitan area

Saginaw/Bay City/Midland metropolitan area

Grand Rapids/Muskegon/Holland metropolitan area

 

MINNESOTA:

Minneapolis/St. Paul metropolitan area

 

MISSOURI:

St. Louis metropolitan area

Independence metropolitan area

 

NEVADA:

Las Vegas metropolitan area

 

NEW HAMPSHIRE:

Nashua metropolitan area

 

NEW JERSEY:

Camden metropolitan area

Newark/North New Jersey metropolitan area

Atlantic City metropolitan area

 

NEW MEXICO:

Albuquerque metropolitan area

 

A-2

 

NEW YORK:

Buffalo/Niagara Falls metropolitan area

New York City/Long Island metropolitan area

Rochester metropolitan area

Albany/Schenedtady/Troy metropolitan area

Syracuse metropolitan area

 

NORTH CAROLINA:

Charlotte/Gastonia/Rock Hill metropolitan area

Raleigh/Durham/Chapel Hill metropolitan area

 

OHIO:

Cincinnati/Hamilton metropolitan area

Cleveland/Akron metropolitan area

Columbus metropolitan area

Toledo metropolitan area

Youngstown metropolitan area

 

OKLAHOMA:

Oklahoma City metropolitan area

Tulsa metropolitan area

 

OREGON:

Portland/Salem metropolitan area

Medford/Ashland metropolitan area

Eugene/Springfield metropolitan area

 

PENNSYLVANIA:

Philadelphia/Wilmington metropolitan area

Pittsburgh metropolitan area

Harrisburg/Lebanon/Carlisle metropolitan area

 

RHODE ISLAND:

Providence/Fall River/Warwick metropolitan area

 

SOUTH CAROLINA;

Charleston metropolitan area

Greenville metropolitan area

 

TENNESSEE:

Knoxville metropolitan area

Memphis metropolitan area

Nashville metropolitan area

Chattanooga metropolitan area

 

TEXAS:

Dallas/Ft. Worth metropolitan area

Houston metropolitan area

Austin/San Marcos metropolitan area

Corpus Christi metropolitan area

 

UTAH:

Salt Lake City metropolitan area

Ogden metropolitan area

 

A-3

 

VIRGINIA:

Norfolk/Virginia Beach/Newport News metropolitan area

Washington, D.C. metropolitan area

Richmond/Petersburg metropolitan area

Fredericksburg metropolitan area

 

WASHINGTON:

Seattle/Tacoma/Bremerton metropolitan areas

Spokane metropolitan area

 

WISCONSIN:

Milwaukee/Racine metropolitan area

 

Catalog
and Electronic Commerce:

The United States of America and Canada

 

A-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]