EXHIBIT 2.2
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT")
is dated as of May 28, 1999, among Guitar Center, Inc., a Delaware Corporation
(the "COMPANY"), and the Shareholders (as defined below).
RECITALS:
A. The predecessor to the Company by merger, Guitar Center Management
Company, Inc., a California corporation, entered into a Registration Rights
Agreement (the "ORIGINAL REGISTRATION RIGHTS AGREEMENT"), dated as of June 5,
1996 among it and the shareholders identified on the signature pages thereto
governing the terms and conditions upon which the Company was obligated to
register certain of its equity securities under the Securities Act (as defined
below).
B. By operation of Rule 144 and Rule 144(k) promulgated under the
Secuities Act, the only remaining "Shareholders" subject to the Original
Registration Rights Agreement are Chase Venture Capital Associates, L.P., Wells
Fargo Small Business Investment Company, Inc., Weston Presidio Capital II, L.P.,
Larry Thomas, Marty Albertson, and certain trusts and other related entities
associated with Messrs. Thomas and Albertson (collectively, the "REMAINING
SHAREHOLDERS").
C. Pursuant to the terms of that certain Agreement and Plan of Merger
(the "MERGER AGREEMENT"), dated as of May 13, 1999, between the Company, EMIC
Acquisition Corporation, Musician's Friend, Inc. ("MFI") and the stockholders of
MFI, each of whom is identified on Annex I thereto, the Company is issuing
shares of its common stock to the former stockholders of MFI in a transaction
exempt from registration under the Securities Act (all such shares of Common
Stock to be issued pursuant to the Merger Agreement being referred to as the
"MFI SHARES"). Upon the terms and subject to the conditions of this Agreement,
the Company desires to agree to register the MFI Shares for resale under the
Securities Act.
D. The Remaining Shareholders along with the Company have the authority,
pursuant to Section 18(f) of the Original Registration Rights Agreement, to
amend that agreement, and desire to exercise that authority to amend and restate
the Original Registration Rights Agreement in order to include the MFI Shares in
the amended and restated agreement, thereby providing a single, unified
agreement governing the registration obligations of the Company.
AGREEMENT:
NOW THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Company and the Shareholders hereby agree
as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings:
"BOARD" means the Board of Directors of the Company.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"COMMISSION" means the Securities and Exchange Commission or any other
governmental body or agency succeeding to the functions thereof.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"DEMAND REGISTRATION" means a registration requested by a Shareholder or
group of Shareholders pursuant to Section 2 or Section 4.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 or any successor
Federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.
"MAJORITY OF REGISTERING SHAREHOLDERS" means, with respect to a
registration that includes Registrable Shares, those Shareholders who, at the
time in question, hold at least a majority of the Registrable Shares included or
proposed to be included in such registration.
"MAJORITY OF SHAREHOLDERS" means those Shareholders who at the time in
question hold at least a majority of the Registrable Shares then held by all
Shareholders.
"MAJORITY OF MFI SHAREHOLDERS" means those MFI Shareholders who at the time
in question hold at least a majority of the Registrable Shares then held by all
Shareholders.
"MATERIAL TRANSACTION" means any material transaction in which the Company
or any of its Subsidiaries proposes to engage or is engaged, including a
purchase or sale of assets or securities, financing, merger, consolidation,
tender offer, and with respect to which the Board reasonably has determined in
good faith that compliance with this Agreement may reasonably be expected to
either materially interfere with the Company's or such Subsidiary's ability to
consummate such transaction in a timely fashion or require the Company to
disclose material, non-public information prior to such time as it would
otherwise be required to be disclosed.
"MFI SHAREHOLDER" means a Shareholder who holds Restricted Shares that
constitute MFI Shares.
"MOU" means that certain Amended and Restated Memorandum of Understanding
and Stock Option Agreement dated as of December 30, 1996.
"OTHER SECURITIES" means at any time those shares of Common Stock or other
securities convertible into, or exchangeable for, shares of Common Stock and
which do not constitute Primary Shares or Registrable Shares.
"PERSON" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint
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venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PRIMARY SHARES" means at any time the authorized but unissued shares of
Common Stock and shares of Common Stock held by the Company in its treasury or
any security convertible into or exchangeable for unissued shares of Common
Stock.
"PROSPECTUS" means the prospectus included in a Registration Statement,
including any prospectus subject to completion, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Shares and, in each
case, by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference therein.
"PUBLIC OFFERING" means the closing of a public offering of Common Stock
pursuant to a Registration Statement declared effective under the Securities
Act, except that a Public Offering shall not include an offering of securities
to be issued as consideration in connection with a business acquisition or an
offering of securities issuable pursuant to an employee benefit plan.
"REGISTRABLE SHARES" means Restricted Shares that constitute Common Stock.
"REGISTRATION DATE" means the date upon which the Registration Statement
pursuant to which the Company shall have initially registered shares of Common
Stock under the Securities Act for sale in a Public Offering shall have been
declared effective by the Commission.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Registrable Shares and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"RESTRICTED SHARES" means shares of Common Stock, and includes (i) shares
of Common Stock which may be issued as a dividend or distribution, (ii) any
other securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock, and (iii) any securities received in respect of
the foregoing (including securities described in Section 13), in each case in
clauses (i) through (iii) which at any time are held by the Shareholders. As to
any particular Restricted Shares, such Restricted Shares shall cease to be
Restricted Shares when (A) they have been registered under the Securities Act,
the Registration Statement in connection therewith has been declared effective
and they have been disposed of pursuant to and in the manner described in such
effective Registration Statement, (B) they, along with all Restricted Shares of
a Shareholder, may be sold or distributed pursuant to Rule 144 by such
Shareholder within a three-month period, (C) they have been otherwise
transferred and new certificates or other evidences of ownership for them not
bearing a restrictive legend and not subject to any stop transfer order or other
restriction on transfer have been delivered by the Company or the issuer of
other securities issued in exchange for the Restricted Shares, or (D) they have
ceased to be outstanding.
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"RULE 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto.
"SECURITIES ACT" means the Securities Act of 1933 or any successor Federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"SHAREHOLDERS" means, collectively, each of the Shareholders listed on the
signature pages hereto, and includes any successor to, of Restricted Shares or
transferee of Restricted Shares of, any such Person who or which agrees in
writing to be treated as a Shareholder hereunder and to be bound by the terms
and comply with all applicable provisions hereof (including without limitation
any Person who may acquire shares of Common Stock pursuant to the MOU).
"SUBSIDIARY" means, with respect to any Person, any other Person of which
the securities having a majority of the ordinary voting power in electing the
board of directors (or other governing body), at the time as of which any
determination is being made, are owned by such first Person either directly or
through one or more of its Subsidiaries.
2. REQUIRED REGISTRATION.
(a) Subject to Sections 2(b) and 2(d), if the Company shall be requested
by (i) a Majority of Shareholders at any time or (ii) by a majority of MFI
Shareholders at any time prior to the first anniversary of the date of this
Agreement, to effect the registration under the Securities Act of Registrable
Shares, the Company shall use its reasonable best efforts promptly to effect the
registration under the Securities Act of the Registrable Shares which the
Company has been so requested to register.
(b) Promptly after receiving such request pursuant to Section 2(a) above,
the Company shall provide written notice thereof to all Shareholders (other than
the Shareholders that made the request pursuant to Section 2(a) above). Any
Shareholder may, within 15 Business Days of the date of such notice by the
Company, give written notice to the Company that such Shareholder wishes to
participate in the proposed registration and shall specify the number of
Registrable Shares such Shareholder desires to include in such registration.
(c) Anything contained in Section 2(a) to the contrary notwithstanding,
the Company shall not be obligated to effect any registration under the
Securities Act pursuant to Section 2(a) except in accordance with the following
provisions:
(i) the Company shall not be obligated to file and cause to
become effective any Registration Statement during any period in which any other
Registration Statement (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which Primary Shares
are to be or were sold has been filed and not withdrawn or has been declared
effective within the prior 90 days;
(ii) the Company may delay the filing or effectiveness of any
Registration Statement for a period of up to 90 days after the date of a request
for registration pursuant to this
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Section 2 if at the time of such request (A) the Company is engaged, or has
fixed plans to engage within 90 days of the time of such request, in a firm
commitment underwritten public offering of Primary Shares in which the
holders of Registrable Shares may include Registrable Shares pursuant to
Section 3 or (B) a Material Transaction exists at such time, provided that
the Company may only so delay the filing or effectiveness of a particular
Registration Statement once pursuant to this Section 2(c)(ii);
(iii) at any time prior to the effectiveness of a Registration
Statement, the Company may, in its sole discretion, convert a registration
pursuant to Section 2 into a registration pursuant to Section 3, in which case
the provisions (including those governing inclusion of shares) set forth in
Section 3 shall apply and such registration so converted will not count as a
registration pursuant to this Section 2;
(iv) with respect to any registration pursuant to this Section
2, the Company may include in such registration any Primary Shares, Other
Securities and/or other securities; PROVIDED, HOWEVER, that if the managing
underwriter advises the Company that the inclusion of all Registrable Shares,
Primary Shares, Other Securities and/or other securities proposed to be included
in such registration would interfere with the successful marketing (including
pricing) of the Registrable Shares proposed to be included in such registration,
then the number of Registrable Shares, Primary Shares, Other Securities and/or
other securities proposed to be included in such registration shall be included
in the following order:
A. FIRST, all Registrable Shares requested to be included
in such registration by (1) the Majority of Shareholders or Majority of MFI
Shareholders (as the case may be) who requested such registration pursuant to
Section 2(a) and (2) the other Shareholders who requested the inclusion of their
Registrable Shares in such registration pursuant to Section 2(b), pro rata among
all such Shareholders based on the number of Registrable Shares owned by each
such Shareholder;
B. SECOND, the Primary Shares;
C. THIRD, the Other Securities; and
D. FOURTH, other securities requested to be registered
pursuant to agreements providing registration rights to other Persons;
(v) at any time before the Registration Statement covering
Registrable Shares becomes effective, the Shareholder or group of Shareholders
which requested such registration pursuant to Section 2(a) may request the
Company to withdraw or not to file the Registration Statement; and
(vi) the Company may, at its sole option, elect to satisfy a
request for a Demand Registration pursuant to Section 2(a) on Form S-2 or Form
S-3 promulgated under the Securities Act (or any successor forms thereto), if
such forms are then available to the Company.
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(d) Notwithstanding any provision of this Agreement to the contrary, the
Company shall not be obligated to register any MFI Shares under this Agreement
(whether under Section 2, 3 or 4) except as follows: (i) forty percent (40%) of
the MFI Shares shall constitute Registrable Shares for all purposes of this
Agreement (the "BASE SHARES"); and (ii) MFI Shares in excess of the Base Shares
may constitute Registrable Shares hereunder if, but only if, approved in advance
by the Chairman of the Board of the Company in writing, it being understood that
such approval may be granted or withheld by the Chairman in his sole, absolute
and binding discretion, and which approval may be granted on any number of
shares as determined by the Chairman. The right to register shall be PRO RATA
among all MFI Shareholders; PROVIDED, HOWEVER, that if any MFI Shareholder does
not participate to the full extent of its PRO RATA share, then the participating
MFI Shareholders shall have the right to register that amount of additional
shares. The Base Shares must include the shares contained in the Tax Audit
Escrow Fund (as defined in the Merger Agreement), which must also be the first
shares of the Base Shares registered and sold hereunder.
3. PIGGYBACK REGISTRATION.
If the Company at any time proposes for any reason to register (whether for
itself or others) any of its securities under the Securities Act (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto) other than pursuant to Section 2 hereof, it shall promptly give written
notice to the Shareholders of its intention to so register such shares and, upon
the written request, delivered to the Company within 15 Business Days after the
date of such notice by the Company, of the Shareholders to include in such
registration Registrable Shares (which request shall specify the number of
Registrable Shares proposed to be included in such registration), the Company
shall use its reasonable best efforts to cause all such Registrable Shares to be
included in such registration on the same terms and conditions as the securities
otherwise being sold in such registration; PROVIDED, HOWEVER, that if the
managing underwriter advises the Company that the inclusion of any or all
Registrable Shares and other securities requested to be included in such
registration would materially interfere with the successful marketing (including
pricing) of the Primary Shares or other securities proposed to be registered by
the Company, then the number of Primary Shares, Registrable Shares, Other
Securities and other securities proposed to be included in such registration
shall be included in the following order:
(a) FIRST, in the case of a registration proposed by the Company for its
own account (including by operation of Section 2(c)(iii)), all securities
proposed by the Company to be sold for its own account, or in the case of any
securities initially proposed to be registered by the Company for the accounts
of other Persons pursuant to the exercise of demand registration rights granted
pursuant to an applicable registration rights agreement between the Company and
such other Person, the securities requested to be registered by such Person but
only in such amount and to the extent required by such agreement;
(b) SECOND, such Registrable Shares requested to be included in such
registration pursuant to this Agreement and any securities required to be
included in such registration by
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other Persons who have incidental registration rights, on a PRO RATA basis
with respect to each type of security.
4. REGISTRATIONS ON FORM S-3.
(a) Anything contained in Section 2 to the contrary notwithstanding, at
such time as the Company shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, each
Shareholder (acting alone or with other Shareholders) shall have the right to
request in writing registration of Registrable Shares on Form S-3 or such
successor form, which request or requests shall (i) specify the number of
Registrable Shares intended to be sold or disposed of and the holders thereof,
(ii) state the intended method of disposition of such Registrable Shares and
(iii) relate to Registrable Shares having an anticipated aggregate gross
offering price (before underwriting discounts and commissions) of at least
$5,000,000, and upon receipt of any such request, the Company shall use its
reasonable best efforts promptly to effect the registration under the Securities
Act of the Registrable Shares so requested to be registered; PROVIDED that the
Company shall not be obligated to effect more than two registrations under the
Securities Act pursuant to this Section 4(a) in any twelve month period.
(b) Promptly after receiving such request pursuant to Section 4(a) above,
the Company shall provide written notice thereof to all Shareholders (other than
the Shareholder(s) that made the request pursuant to Section 4(a) above). Any
Shareholder may, within 15 Business Days of the date of the notice from the
Company, give written notice to the Company that such Shareholder wishes to
participate in the proposed registration and shall specify the number of
Registrable Shares such Shareholder desires to include in such registration.
(c) The provisions of Section 2(c) are incorporated into this Section 4 by
reference, with each reference to Section 2 (or any subsection or clause
thereof) being a reference to this Section 4 (or the corresponding subsection or
clause hereof).
5. HOLDBACK AGREEMENT.
(a) If the Company at any time shall register its securities under the
Securities Act for sale to the public pursuant to an underwritten offering
(excluding a registration initiated pursuant to Section 4), to the extent the
following restrictions are legally permitted, the Shareholders shall not sell
publicly, make any short sale of, grant any option for the purchase of, or
otherwise dispose publicly of, any securities of the Company similar to those
being registered (other than securities included in such registration)
without the prior written consent of the Company, for a period designated by
the Company in writing to the Shareholders, which period shall not begin
earlier than 10 days prior to the effectiveness of the Registration Statement
pursuant to which such public offering shall be made and shall not last more
than 90 days after the closing of the sale of securities pursuant to such
Registration Statement. The Company shall obtain the agreement of any Person
permitted to sell securities in a registration to be bound by and to comply
with this Section 5 with respect to such registration as if such Person was a
Shareholder hereunder. The restriction contained in this paragraph may be
enforced by the entry of stop transfer instructions with the Company's
transfer agent.
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(b) If the Company at any time pursuant to Section 2 of this Agreement
shall register under the Securities Act Registrable Shares held by Shareholders
for sale to the public pursuant to an underwritten offering, the Company shall
not, without the prior written consent of a Majority of Shareholders, effect any
public sale or distribution of securities similar to those being registered, or
any securities convertible into or exercisable or exchangeable for such
securities (other than issuances pursuant to compensatory plans, issuances made
in connection with acquisitions, issuances the Company is obligated to make
pursuant to commitments made prior to such holdback period or securities
included in such registration), for such period as shall be determined by the
managing underwriters, which period shall not begin more than 10 days prior to
the effectiveness of the Registration Statement pursuant to which such public
offering shall be made and shall not last more than 60 days after the closing of
the sale of shares pursuant to such Registration Statement.
6. PREPARATION AND FILING.
(a) If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its reasonable best efforts to effect the
registration of, and keep effective a Registration Statement for, any
Registrable Shares, the Company shall, as expeditiously as practicable:
(i) use its reasonable best efforts to cause a Registration
Statement that registers such Registrable Shares to become and remain effective
for a period of 90 days (extended for such period of time as the Shareholders
are required to discontinue disposition of Registrable Shares pursuant to
Section 6(b) below) or until all of such Registrable Shares have been disposed
of (if earlier);
(ii) furnish, at least five Business Days before filing a
Registration Statement that relates to the registration of such Registrable
Shares, a Prospectus relating thereto or any amendments or supplements relating
to such a Registration Statement or Prospectus, to one counsel (the
"SHAREHOLDERS' COUNSEL") selected by a Majority of Registering Shareholders,
copies of all such documents proposed to be filed (it being understood that such
five business day period need not apply to successive drafts of the same
document proposed to be filed so long as such successive drafts are supplied to
the Shareholders' Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
(iii) notify the Shareholders whose Registrable Shares are
included therein of the effectiveness of such Registration Statement and prepare
and promptly file with the Commission such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be
necessary to (A) keep such Registration Statement effective for at least a
period of 90 days (extended for such period of time as Shareholders are required
to discontinue disposition of Registrable Shares pursuant to Section 6(b) below)
or until all of such Registrable Shares have been disposed of (if earlier), (B)
correct any statements or omissions if any event with respect to the Company
shall have occurred as a result of which any such Registration Statement or
Prospectus as then in effect would include an untrue statement of material fact
or omit to state any material fact necessary to make the
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statements therein not misleading, and (C) comply with the provisions of the
Securities Act with respect to the sale or other disposition of such
Registrable Shares;
(iv) notify in writing the Shareholders' Counsel, and the
Shareholders whose Registrable Shares may be included in such Registration
Statement, promptly of (A) the receipt by the Company of any notification with
respect to any comments by the Commission with respect to such Registration
Statement or Prospectus or any amendment or supplement thereto or any request by
the Commission for the amending or supplementing thereof or for additional
information with respect thereto, (B) the receipt by the Company of any
notification or written information with respect to the issuance or threatened
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement or Prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose (and the
Company shall use its reasonable best efforts to prevent the issuance thereof
or, if issued, to obtain its withdrawal) and (C) the receipt by the Company of
any notification with respect to the suspension of the qualification of such
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purposes;
(v) use its reasonable best efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
domestic jurisdictions as the Shareholders reasonably request and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the Shareholders to consummate the disposition in such jurisdictions of the
Registrable Shares owned by the Shareholders; PROVIDED, HOWEVER, that the
Company will not be required to qualify generally to do business, subject itself
to general taxation or consent to general service of process in any jurisdiction
where it would not otherwise be required to do so but for this clause (v) or to
provide any material undertaking or make any changes in its By-laws or
Certificate of Incorporation which the Board determines to be contrary to the
best interests of the Company;
(vi) furnish to the Shareholders holding such Registrable
Shares such number of copies of a Prospectus, including a preliminary
Prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such Shareholders may legally require and may reasonably
request in order to facilitate the public sale or other disposition of such
Registrable Shares;
(vii) use its reasonable best efforts to cause such Registrable
Shares to be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Company to enable the Shareholders holding such Registrable Shares to consummate
the disposition of such Registrable Shares;
(viii) notify the Shareholders holding such Registrable Shares on
a timely basis at any time when a Prospectus relating to such Registrable Shares
is required to be delivered under the Securities Act within the appropriate
period mentioned in clause (i) of this Section 6(a), of the happening of any
event as a result of which the Prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of
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the circumstances under which they were made, not misleading, and prepare and
furnish to such Shareholders a reasonable number of copies of, and file with
the Commission, a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the offerees of such shares,
such Prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
(ix) subject to the execution of confidentiality agreements in
form and substance satisfactory to the Company, make available upon reasonable
notice and during normal business hours, for inspection by the Shareholders
holding Registrable Shares requested to be included in such registration, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by the
Shareholders or underwriter (collectively, the "INSPECTORS"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), and cause the Company's officers,
directors and employees to supply all information (together with the Records,
the "INFORMATION") reasonably requested by any such Inspector, in each case as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility in connection with such Registration Statement; PROVIDED,
HOWEVER, that any of the Information that the Company determines in good faith
to be confidential, and of which determination the Inspectors are so notified,
shall not be disclosed by the Inspectors unless (A) the disclosure of such
Information is necessary to avoid or correct a misstatement or omission in the
Registration Statement or Prospectus, (B) the release of such Information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or, upon the written advice of counsel, is otherwise required by
law, or (C) such Information has been made generally available to the public,
and the Shareholders agree that they will, upon learning that disclosure of such
Information is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Information deemed confidential;
(x) use its reasonable best efforts to obtain from its
independent certified public accountants "cold comfort" letters in customary
form and at customary times and covering matters of the type customarily
covered by cold comfort letters to the extent such a letter may be obtained
under then-prevailing guidelines applicable to independent certified public
accountants;
(xi) use its reasonable best efforts to obtain from its counsel
an opinion or opinions in customary form naming the Shareholders as additional
addressees or parties who may rely thereon;
(xii) provide a transfer agent and registrar (which may be the
same entity and which may be the Company) for such Registrable Shares;
(xiii) issue to any underwriter to which the Shareholders holding
such Registrable Shares may sell shares in such offering certificates evidencing
such Registrable Shares;
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(xiv) list such Registrable Shares on any national securities
exchange on which any shares of the Common Stock are listed or, if the Common
Stock is not listed on a national securities exchange, use its reasonable best
efforts to qualify such Registrable Shares for inclusion on the Nasdaq Stock
Market;
(xv) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements (which
need not be audited) covering a period of 12 months beginning within three
months after the effective date of the Registration Statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(xvi) use its reasonable best efforts to take all other steps
necessary to effect the registration of, and maintain an effective Registration
Statement with respect to, such Registrable Shares contemplated hereby.
(b) Each holder of the Registrable Shares, upon receipt of any notice from
the Company of any event of the kind described in Section 6(a)(viii) or Section
7 hereof, shall forthwith discontinue disposition of the Registrable Shares
pursuant to the Registration Statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(a)(viii) hereof, and, if so directed by the Company,
such holder shall deliver to the Company all copies, other than permanent file
copies then in such holder's possession, of the most recent Prospectus covering
such Registrable Shares at the time of receipt of such notice.
7. SUSPENSION.
Anything contained in this Agreement to the contrary notwithstanding, the
Company may, by notice in writing to each holder of Registrable Shares to which
a Prospectus relates, require such holder to suspend, for up to 90 days (the
"SUSPENSION PERIOD"), the use of any Prospectus included in a Registration
Statement filed under Section 2, 3 or 4 hereof if a Material Transaction exists
that would require an amendment to such Registration Statement or supplement to
such Prospectus (including any such amendment or supplement made through
incorporation by reference to a report filed under Section 13 of the Exchange
Act). The Company may (but shall not be obligated to) withdraw the
effectiveness of any Registration Statement subject to this provision.
8. EXPENSES.
All expenses (other than underwriting discounts and commissions relating to
the Registrable Shares, as provided in the last sentence of this Section 8)
incurred by the Company in complying with Section 6, including, without
limitation, all registration and filing fees (including all expenses incident to
filings with the National Association of Securities Dealers, Inc.), fees and
expenses of complying with securities and blue sky laws, printing expenses, fees
and expenses of the Company's counsel and accountants and fees and expenses of
the Shareholders' Counsel, shall be paid by the Company; PROVIDED, HOWEVER, that
all underwriting discounts and selling commissions applicable to the Registrable
Shares and Other Shares shall be borne by the
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holders selling such Registrable Shares and Other Shares, in proportion to
the number of Registrable Shares and Other Shares sold by each such holder.
9. INDEMNIFICATION.
(a) In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless, to the fullest extent permitted by law, each holder of
Registrable Shares, each underwriter, broker or any other Person acting on
behalf of the holders of Registrable Shares and each other Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
(each such indemnified Person being referred to herein as an "INDEMNIFIED
PERSON") against any losses, claims, damages or liabilities, joint or several
(or actions in respect thereof), to which any of the foregoing Persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or allegedly untrue statement of a material
fact contained in or incorporated by reference in the Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary Prospectus or final Prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any Prospectus, necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or any violation by the Company of the Securities Act or state
securities or blue sky laws applicable to the Company and relating to action or
inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and shall promptly
reimburse the Indemnified Persons for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to any such Indemnified Person to the
extent that any such loss, claim, damage, liability or action (including any
legal or other expenses incurred) arises out of or is based upon an untrue
statement or allegedly untrue statement or omission or alleged omission made in
said Registration Statement, preliminary Prospectus, final Prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Indemnified Person
specifically for use in the preparation thereof; PROVIDED FURTHER, HOWEVER, that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any untrue statement, allegedly untrue statement, omission or
alleged omission made in any preliminary Prospectus but eliminated or remedied
in the final Prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any Indemnified Person
from whom the Person asserting any loss, claim, damage, liability or expense
purchased the Restricted Shares which are the subject thereof, if a copy of such
final Prospectus had been made available to such Indemnified Person and such
final Prospectus was not delivered to such Person with or prior to the written
confirmation of the sale of such Registrable Shares to such Person.
12
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each holder of Registrable Shares
being registered shall, severally and not jointly, to the fullest extent
permitted by law, indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 9(a) above) the Company, each director of
the Company, each officer of the Company who shall have signed such Registration
Statement, each agent, underwriter, broker or other Person acting on behalf of
the Company, each other holder of Registrable Shares or Other Shares and each
Person who controls any of the foregoing Persons within the meaning of the
Securities Act with respect to any statement or omission from such Registration
Statement, any preliminary Prospectus or final Prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company or such underwriter by or on behalf
of such holder specifically for use in connection with the preparation of such
Registration Statement, preliminary Prospectus, final Prospectus, amendment,
supplement or document; PROVIDED, HOWEVER, that the maximum amount of liability
in respect of such indemnification shall be limited, in the case of each holder
of Registrable Shares, to an amount equal to the net proceeds actually received
by such holder from the sale of Registrable Shares effected pursuant to such
registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 9(a) or (b),
such indemnified party will, if a claim in respect thereof is made against an
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the indemnified party's failure to give
such notice shall not release, relieve or in any way affect the indemnifying
party's obligation hereunder to indemnify the indemnified party unless and only
to the extent that the rights of the indemnifying party are prejudiced thereby.
In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its selection so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; PROVIDED, HOWEVER, that if any indemnified party shall have reasonably
concluded (based on the written advice of counsel) that there may be one or more
legal or equitable defenses available to such indemnified party which are
additional to or conflict with those available to the indemnifying party, or
that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 9, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party and such indemnifying party shall reimburse
such indemnified party and any Person controlling such indemnified party for
that portion of the fees and expenses reasonably incurred by counsel retained by
the indemnified party which is reasonably related to the matters covered by the
indemnity agreement provided in this Section 9.
(d) If the indemnification provided for in this Section 9 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim,
13
damage, liability or action referred to herein (other than as a result of the
applicability of the two provisos in Section 9(a)), then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such loss, claim, damage, liability
or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
10. UNDERWRITING AGREEMENT.
(a) Notwithstanding the provisions of Sections 5, 6, 8 and 9, to the
extent that the Company and at least the Majority of Registering Shareholders
shall enter into an underwriting or similar agreement that contains provisions
which conflict with any provision of any such Sections, the provisions contained
in such agreement shall control with respect to such underwritten offering.
(b) If any registration pursuant to Section 2 is requested to be an
underwritten offering, the Company shall negotiate in good faith to enter into a
reasonable and customary underwriting agreement with the underwriters thereof.
The Company shall be entitled to receive indemnities from lead institutions,
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement and to
the extent customarily given their role in such distribution.
(c) No Shareholder may participate in any registration hereunder that is
underwritten unless such Shareholder agrees to (i) sell such Shareholder's
Registrable Shares proposed to be included therein on the basis provided in any
underwriting arrangements approved by the Company and the Majority of
Registering Shareholders (which approval shall not be unreasonably withheld by
such Shareholders) and (ii) as expeditiously as possible, notify the Company of
the occurrence of any event concerning such Shareholder as a result of which the
Prospectus relating to such registration contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
11. NOMINEES FOR BENEFICIAL OWNERS.
In the event that any Registrable Shares are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election by
written notice to the Company effective upon receipt by the Company, be treated
as a Shareholder for purposes of any request or other action by any Shareholder
pursuant to this Agreement or any determination of any number
14
or percentage of shares of Registrable Shares held by any Shareholder
contemplated by this Agreement. If the beneficial owner of any Registrable
Shares so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Shares. Prior
to receipt by the Company of written notice contemplated hereby, any action
taken by any nominee shall be binding upon any such beneficial owner.
12. INFORMATION BY HOLDER.
The Shareholders shall furnish to the Company such written information
regarding the Shareholders and the distribution proposed by the Shareholders as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
13. EXCHANGE ACT COMPLIANCE.
From the Registration Date or such earlier date as a Registration Statement
filed by the Company pursuant to the Exchange Act relating to any class of the
Company's securities shall have become effective, the Company shall comply with
all of the reporting requirements of the Exchange Act applicable to it and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall cooperate with the Shareholders in
supplying such information as may be necessary for the Shareholders to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
14. MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"REGISTRABLE SHARES" shall be deemed to include the shares of common stock, if
any, that the Shareholders would be entitled to receive in exchange for Common
Stock under any such merger, consolidation or reorganization; PROVIDED, HOWEVER,
that, to the extent the Shareholders receive securities that are by their terms
convertible into shares of common stock of the issuer thereof, then only such
shares of common stock as are issued or issuable upon conversion of said
convertible securities shall be included within the definition of "Registrable
Securities."
15. NEW CERTIFICATES.
As expeditiously as possible after the effectiveness of any Registration
Statement filed pursuant to this Agreement, the Company will deliver in exchange
for any legended certificate evidencing Restricted Shares so registered, new
stock certificates not bearing any restrictive legends, provided that in the
event less than all of the Restricted Shares evidenced by such
15
legended certificate are registered, the holder thereof agrees that a new
certificate evidencing such unregistered shares will be issued bearing the
appropriate restrictive legend.
16. NO CONFLICT OF RIGHTS; SELECTION OF UNDERWRITER.
The Company shall not, at any time after the date hereof, grant any
registration rights that conflict with, or have any priority over, the
registration rights granted hereby. In any Public Offering, the managing
underwriter shall be a nationally recognized investment banking firm chosen by
the Board.
17. TERMINATION.
This Agreement shall terminate and be of no further force or effect when
there shall no longer be any Registrable Shares outstanding.
18. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Company and the Shareholders and, subject to Section 18(b), the
respective successors and assigns of the Company and the Shareholders. Except as
otherwise expressly provided in Sections 2, 3 and 5, this Agreement is not
intended to create any third party beneficiaries.
(b) ASSIGNMENT. Each Shareholder may assign its rights hereunder to any
purchaser or transferee of Registrable Shares; PROVIDED, HOWEVER, that such
purchaser or transferee shall, as a condition to the effectiveness of such
assignment, be required to execute a counterpart to this Agreement agreeing to
be treated as an Shareholder, whereupon such purchaser or transferee shall have
the benefits of and shall be subject to the restrictions contained in this
Agreement as if such purchaser or transferee was originally included in the
definition of a Shareholder and had originally been a party hereto. For
purposes of this Agreement, any trust, charitable foundation, family partnership
or similar entity that is a transferee of Mr. Thomas or Mr. Albertson shall be
considered a Shareholder under this Agreement provided they counterpart of this
Agreement as contemplated by the immediately preceding sentence.
(c) SEVERABILITY. 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.
16
(d) ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto contain the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous arrangements or understandings with respect hereto and
thereto.
(e) NOTICES. All communications hereunder to any party shall be deemed to
be sufficient if contained in a written instrument delivered in person or sent
by telecopy, nationally-recognized overnight courier guaranteeing next day
delivery or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at its address below or such other
address as such party may hereafter designate in writing: if to the Company, to:
Guitar Center, Inc.
5155 Clareton Drive
Agoura Hills, CA 91362
Attention: Chief Executive Officer
Telecopier: (818) 735-8833;
with copies to:
Guitar Center, Inc.
5155 Clareton Drive
Agoura Hills, California 91362
Attention: General Counsel
Telecopier: (818) 735-8833
and to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Anthony J. Richmond, Esq.
Telecopier: (650) 463-2600
and if to any Shareholder, to such Shareholder at the address indicated on the
signature pages hereto.
All such notices, requests, consents and other communications shall be
deemed to have been given and received (i) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (ii) in the case of dispatch
by nationally-recognized overnight courier, on the next Business Day following
such dispatch and (iii) in the case of mailing, on the fifth Business Day after
the posting thereof.
(f) MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of this
Agreement may not be modified or amended, nor may any provision be waived,
except pursuant to a writing signed by the Company and the Majority of
Shareholders; PROVIDED, HOWEVER, that no such modification, amendment or waiver
that would treat any Shareholder in a non-ratable,
17
discriminatory manner shall be made without the prior written consent of such
Shareholder; and PROVIDED, FURTHER, that a modification, amendment or waiver
to Section 2(d) shall require only the consent of the Company and the
Majority of MFI Shareholders proposing to participate in a given
registration. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms. The
Shareholders, to the fullest extent permitted by applicable laws, release the
members of the Board from any and all claims for breach of fiduciary duty
arising out of the application of this Section 18(f).
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(h) HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
(i) GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the 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. In furtherance of
the foregoing, the internal laws of the State of Delaware will control the
interpretation and construction of this agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
(j) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) NOUNS AND PRONOUNS. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural
and vice-versa.
(l) CONSTRUCTION. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
(m) APPROVAL OF AMENDMENT AND RESTATEMENT. By execution of this
Agreement, the undersigned, consistituting all holders of Registrable Securities
under the Original Registration Rights Agreement, hereby approve the amendment
and restatement of that agreement made by this Agreement.
(Signature pages follow)
18
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Registration Rights Agreement on the date first written above.
GUITAR CENTER, INC.
By:
--------------------------------------
Larry Thomas
Co-Chief Executive Officer
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners
Its General Partner
By:
--------------------------------------
A General Partner
Address for Notice:
380 Madison Avenue, 12th Floor
New York, New York 10017
Attention: Chief Administrative Officer
Telecopy: (212) 622-3101
S-1
WESTON PRESIDIO CAPITAL II, L.P.
By: Weston Presidio Capital Management II,
L.P.,
Its General Partner
By:
--------------------------------------
Michael P. Lazarus,
General Partner
Address for Notice:
343 Sansome Street, Suite 1210
San Francisco, California 94104
Attention: Michael P. Lazarus
Telecopy: (415) 398-0990
WELLS FARGO SMALL BUSINESS
INVESTMENT COMPANY, INC.
By:
--------------------------------------
Steven W. Burge
Managing Director
Address for Notice:
Norwest Equity Partners
333 South Grand Avenue, Suite 1200
Los Angeles, California 90071
Attention: Steven W. Burge
Telecopy: (213) 621-2623
S-2
--------------------------------------
Larry Thomas
Address for Notice:
--------------------------------------
--------------------------------------
Telecopy:
----------------------------
--------------------------------------
Marty Albertson
Address for Notice:
--------------------------------------
--------------------------------------
Telecopy:
---------------------------
S-3
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THE MFI STOCKHOLDERS
AMAZING GRACE FOUNDATION
By:
-----------------------------
Robert V. Eastman
Trustee
By:
-----------------------------
DeAnna L. Eastman
Trustee
THE EMMANUEL FOUNDATION
By:
-----------------------------
Allen J. Dinardi
Trustee
By:
-----------------------------
Sheraine Dinardi
Trustee
MIDAS TOUCH INVESTMENTS TRUST
By:
-----------------------------
Robert V. Eastman
Trustee
By:
-----------------------------
DeAnna L. Eastman
Trustee
S-4
STERLING INVESTMENTS TRUST
By:
-----------------------------
Allen J. Dinardi
Trustee
By:
-----------------------------
Sheraine Dinardi
Trustee
SYRINGA INVESTMENTS TRUST
By:
-----------------------------
Maxine E. Jackson
Trustee
By:
-----------------------------
Robert V. Eastman
Trustee
EIGER MOUNTAIN REAL ESTATE TRUST
By:
-----------------------------
Robert V. Eastman
Trustee
By:
-----------------------------
DeAnna L. Eastman
Trustee
S-5
PROMISE LAND REAL ESTATE DEVELOPMENT TRUST
By:
-----------------------------
Allen J. Dinardi
Trustee
By:
-----------------------------
Sheraine Dinardi
Trustee
MUSICIAN'S FRIEND TRUST
By:
-----------------------------
Robert V. Eastman
Trustee
By:
-----------------------------
DeAnna L. Eastman
Trustee
By:
-----------------------------
Allen J. Dinardi
Trustee
S-6