AMENDMENT NO. 1 TO
STOCK OPTION AGREEMENT
This Amendment No. 1 to the Stock Option Agreement ("Stock Option
Agreement") entered into as of June 5, 1996 between Guitar Center Management
Company, Inc., a California corporation (the "Company"), and Xxxxx Xxxxxx
("Optionee") is dated as of the 15th day of October 1996.
WHEREAS, it was the parties intention that Optionee be granted an option to
purchase securities exercising into 2.5% of the Company's equity;
WHEREAS, the parties acknowledge that a mutual mistake resulted in the
failure of Stock Option Agreement to reflect the true intent of the parties;
WHEREAS, the parties desire to amend the Stock Option Agreement to clarify
the intent of the parties.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Amendment, the parties hereto agree as follows:
Section 1. Section 1 of the Stock Option Agreement is hereby deleted in
its entirety and the following is inserted in lieu therefor:
"Section 1. GRANT OF OPTION
On the terms and subject to the conditions stated in
this Agreement, the Company hereby grants to the Optionee an
option (the "Option") to purchase 43,344 Units (the "Option
Units") for a purchase price of $100.00 per Unit (the
"Exercise
Price") once a Unit is exercised, the securities constituting a Unit
shall be detachable from each other."
Section 2. The term "Vested Shares" set forth in the last sentence of
Section 2 of the Stock Option Agreement is hereby deleted in its entirety and
the term "Vested Units" is hereby inserted in lieu thereof.
Section 3. The term "Vested Shares" set forth in the second sentence of
Section 3(b) of the Stock Option Agreement is hereby deleted in its entirety and
the term "Vested Units" is hereby inserted in lieu thereof.
Section 4. The term "Option Shares" set forth in the second sentence of
Section 4 of the Stock Option Agreement is hereby deleted in its entirety and
the term "Option Units" is hereby inserted in lieu thereof.
Section 5. The term "Unvested Shares" set forth in Sections 6(a), 6(b),
6(c), and 6(d) of the Stock Option Agreement is hereby deleted in its entirety
in each subsection, respectively, and the term "Unvested Units" is hereby
inserted in each subsection, respectively, in lieu thereof.
Section 6. The phrase "or Junior Preferred Stock" shall hereby be
inserted immediately after the term "Common Stock" in the first sentence of the
first paragraph of Section 9(a), and in the first and second sentence of the
second paragraph of Section 9(a), respectively.
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Section 7. The phrase "including those shares of Common Stock issuable
upon conversion of Junior Preferred Stock" shall hereby be added immediately
following the term "Option" in Section 9(b) of the Stock Option Agreement.
Section 8. The first sentence of Section 10(a) is hereby deleted in its
entirety and the following is hereby inserted in lieu thereof:
"If the Common Stock and/or Junior Preferred Stock is changed by
reason of a stock split, reverse stock split or stock combination,
stock dividend or distribution, or recapitalization or converted into
or exchanged for other securities as a result of a merger,
consolidation or reorganization (including but not limited to
conversion of the Company's Junior Preferred Stock), the Board shall
make such adjustments in the number and class of shares of stock
constituting a Unit as shall be necessary to preserve the rights
substantially proportionate to Optionee's rights existing immediately
prior to such transaction or event (but subject to the limitations and
restrictions on such rights). The exercise price for each Unit shall
not change notwithstanding any change to the number and class of
shares of stock constituting a Unit."
Section 9. The term "Option Shares" set forth in Sections 10(b) and
10(c) of the Stock Option Agreement is hereby deleted in its entirety and the
term "Option Units" is hereby inserted in lieu thereof, and the phrase "or
shares of Junior Preferred Stock, as applicable," shall hereby be inserted
immediately following the term "Common Stock" in Section 10(b) of the Stock
Option Agreement.
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Section 10. The term "Option Shares" set forth in the first sentence of
Section 11(b) of the Stock Option Agreement is hereby deleted in its entirety
and the term "Option Units" is hereby inserted in lieu thereof.
Section 11. The definition of "Calculated Corporate Value" in Section 12
of the Stock Option Agreement is hereby deleted in its entirety and the
following definition is hereby inserted in lieu thereof:
"'Calculated Corporate Value' (a) in connection with any Qualified
Public Offering or Market Price Determination means an amount equal to
the sum of (x) the aggregate liquidation value of the Junior Preferred
Stock outstanding on the date of measurement plus (y) the Public
Offering Price or Current Public Market Value, applicable to such
Qualified Public Offering or Market Price Determination, multiplied by
the number of Option Vesting Determination Shares, and (b) in
connection with any Company Sale means the calculated Corporate Value
as defined in the Company's Amended and Restated 1996 Performance
Stock Option Plan."
Section 12. The definition of "Current Public Market Value" set forth in
Section 12 of the Stock Option Agreement is amended to add the following phrase
immediately after the word "determined" in the last sentence:
"provided that the Current Public Market Value of a share of
Junior Preferred Stock shall not be less than its
liquidation valued per share."
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Section 13. The definition of "Organic Change" in Section 12 of the
Stock Option Agreement shall be amended to add the phrase "or Junior Preferred
Stock" immediately following the term "Common Stock" in each place it shall
appear.
Section 14. The definition of "Option Shares" set forth in Section 12 of
the Stock Option Agreement is hereby deleted in its entirety and the following
definition is hereby inserted in lieu thereof:
"`Option Units' has the meaning giving to such term in
Section 1."
Section 15. The definition of "Option Vesting Determination Shares" in
Section 12 of the Stock Option Agreement is hereby deleted in its entirety and
the following definition is hereby inserted in lieu thereof:
"`Option Vesting Determination Shares' means the shares of
Common Stock and Common Stock Equivalents outstanding minus
any shares of Common Stock issuable upon exercise of options
to purchase Units not classified under the Company's Amended
and Restated 1996 Performance Stock Option Plan as Units
Available for Award."
Section 16. The following definition is added to Section 12:
"'Junior Preferred Stock Equivalents' means the right to acquire,
whether or not immediately exercisable, one share of Junior Preferred
Stock, whether
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evidenced by an option, warrant, convertible security or other
instrument or agreement."
Section 17. The definition of "Purchase Price" in Section 12 of the
Stock Option Agreement is hereby deleted in its entirety and the following
definition is hereby inserted in lieu thereof:
"`Purchase Price' means the Exercise Price multiplied by the
number of Units with respect to which the Option is being
exercised."
Section 18. The definition of "Share" in Section 12 of the Stock Option
Agreement is hereby deleted in its entirety and the following definition is
hereby inserted in lieu thereof:
"`Share' shall mean one share of Common Stock or one share
of Junior Preferred Stock, whichever is the case, as
adjusted in accordance with Section 10 (if applicable)."
Section 19. The definition of the term "Transfer" in Section 12 of the
Stock Option Agreement shall be amended to add the phrase "or Junior Preferred
Stock" inserted immediately following the term "Common Stock."
Section 20. Section 12 of the Stock Option Agreement shall be amended to
add the following definition:
"`Units' shall mean a strip of securities constituting one
share of Common Stock and 99/100th of a share of Junior
Preferred Stock, in each case as adjusted pursuant to
Section 10 hereof.
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For purposes of this Agreement a single Unit shall both be a Common
Stock Equivalent and 99/100th of a Junior Stock Equivalent."
Section 21. The definition of "Unvested Shares" in Section 12 of the
Stock Option Agreement is hereby deleted in its entirety and the following is
hereby inserted in lieu thereof:
"`Unvested Units' means the number of Option Units which
have not vested in accordance with Sections 3 or 6 of this
Agreement."
Section 22. The definition of "Vested Shares" set forth in Section 12 of
the Stock Option Agreement is hereby deleted in its entirety and the following
is hereby inserted in lieu thereof:
"`Vested Units' means the number of Option Units, if any,
which have vested in accordance with Sections 3 or 6 of this
Agreement."
Section 23. Except as set forth herein, the provisions of the Stock
Option Agreement shall remain in full force and effect.
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Section 24. This Amendment Number 1 to the Stock Option Agreement shall
become effective as of June 5, 1996.
IN WITNESS WHEREOF, the Company has caused this Amendment Number 1 to be
executed on its behalf by its officer duly authorized to act on behalf of the
Board, and the Optionee has personally executed this Agreement.
GUITAR CENTER MANAGEMENT
COMPANY, INC.
By______________________________________
Name:______________________________
Title:_____________________________
________________________________________
Xxxxx Xxxxxx
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