EXHIBIT 10.35
BOARD REPRESENTATION AGREEMENT
Board Representation Agreement ("Agreement") dated as of June 5, 1996
between GUITAR CENTER MANAGEMENT COMPANY, INC., a California corporation (the
"Company"), the Xxxxxxx Xxxxxx Living Trust (the "Trust") and Xxxxxxx Xxxxxx
("Xxxxxx").
W I T N E S S E T H
WHEREAS, the Company and the Trust are parties (defined as the
"Company" and the "Xxxxxx Stockholders," respectively), together with the
"Institutional Investors," the "Undesignated Stockholders" and the "Management
Stockholders," as defined therein, to that certain Stockholders Agreement dated
as of June 5, 1996 (the "Stockholders Agreement");
WHEREAS, the Company and Xxxxxx are parties to that certain Employment
Agreement dated as of June 5, 1996, providing for the employment of Xxxxxx by
the Company in accordance with the terms and conditions thereof;
WHEREAS, pursuant to Section 10 of the Stockholders Agreement, the
Stockholders (as defined therein) have agreed to vote all of the Stockholder
Shares (as defined therein) owned by them for, or consent in writing with
respect to such shares in favor of, the election to the Board of Directors of,
among others, one director designated and approved by the holders of at least a
majority of the then outstanding Xxxxxx Stockholder Shares (as defined therein);
WHEREAS, pursuant to Section 17(a) of the Stockholders Agreement, such
Agreement, including the obligation of Stockholders to vote their shares for (or
otherwise consent to) the election to the Board of Directors of the designee of
the Xxxxxx Stockholders, shall terminate, among other reasons, upon a Qualified
Public Offering (as defined therein);
WHEREAS, the Company and Xxxxxx desire that in the event of
termination of the Stockholders Agreement by reason of a Qualified Public
Offering, that the Company be assured of the continued representation afforded
by Xxxxxx on its Board of Directors so long as Xxxxxx and the Trust continue to
hold a significant equity interest in the Company;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Stockholders
Agreement.
2. AGREEMENT TO NOMINATE, ETC. Subsequent to a termination of the
Stockholders Agreement by reason of a Qualified Public Offering pursuant to
Section 17(a)(B) thereof, and so long as Xxxxxx, his Affiliates and his Family
Group, and the Trust together collectively hold at least five percent (5%) of
the Fully Diluted Common Shares, at each annual meeting of the holders of any
class of Stock, and at each special meeting of the holders of any class of Stock
called for the purpose of electing directors of the Company, and at any time at
which holders of any class of stock shall have the right to, or shall, vote for
or consent in writing to the election of directors of the Company, then, and in
each such event, the Company shall nominate, and cause the nomination of Xxxxxx
to be a member of the Board of Directors, to include Xxxxxx in any proxy
statement and related materials used by the Company in respect of the election
to which such
nomination pertains, and shall otherwise use its best efforts cause the
election of Xxxxxx as a member of the Board of Directors; provided that the
Company's obligations hereunder shall terminate and be of no further force
and effect in the event that Xxxxxx suffers a Disability or Xxxxxx commits a
Prohibited Act.
As used herein, "DISABILITY" means any long-term disability or
incapacity which (i) renders Xxxxxx unable to substantially perform all of his
duties hereunder for 180 days during any 18-month period or (ii) would
reasonably be expected to render Xxxxxx unable to substantially perform all of
his duties for 180 days during any 18-month period, in each case as determined
by the Board (excluding Xxxxxx if he should be a member of the Board at the time
of such determination) in its good faith judgment.
As used herein, a "PROHIBITED ACT" means (i) the commission by Xxxxxx
or any of his Affiliates under his control of any act of fraud, theft or
criminal dishonesty with respect to the Company or any of its affiliates, or the
conviction of Xxxxxx or any of his Affiliates under his control of any felony,
or the commission of any act or moral turpitude constituting a criminal act,
(ii) a material breach by Xxxxxx of Sections 8.12 or 8.13 of the Purchase
Agreement (as defined in the Stockholder Agreement), or (iii) Xxxxxx takes any
action or fails to take any action which is materially inconsistent with his
position as a director of the Company, as determined in good faith by the vote
of 70% of the directors then in office (excluding Xxxxxx if he should be a
member of the Board at the time of the determination). For purposes of
illustration, an action or inaction described in clause (iii) shall include
Xxxxxx'x refusal to execute a customary confidentiality agreement, Xxxxxx'x use
for his own benefit or for the benefit of others, confidential or proprietary
information of the Company without the Company's consent, or Xxxxxx'x refusal to
certify information about himself and his Affiliates which the Company
reasonably requires to comply with any disclosure or due diligence obligations
pursuant to applicable securities laws or otherwise. Xxxxxx shall not be deemed
to violate clause (iii) if he refuses to take any action if all other directors
of the Company are not requested to take substantially similar actions.
3. MISCELLANEOUS. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not; provided that the rights conferred on Xxxxxx hereby shall be personal to
him and not assignable. This Agreement may be executed and will be consummated
in the state of California and is to be governed by and interpreted under the
laws of that state, without giving effect to the principles of conflicts of laws
thereof.
This Agreement constitutes the entire agreement (other than the
Stockholders Agreement) between the parties hereto with respect to the subject
matter hereof and no amendment, alteration or modification of this Agreement
shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument executed by each of the
parties hereto. No waiver of any provision of this Agreement shall be valid
unless it is expressed in a written instrument duly executed by the party or
parties making such waiver. The failure of any party to insist, in any one or
more instances, upon performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment of any rights
granted hereunder or of the future performance of any such term, covenant or
condition but the obligation of any party with respect thereto shall continue in
full force and effect.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed first class registered with postage
prepaid to the address of the party set forth on the signature page hereto, or
to such other address as a party hereto supplies to each other party in writing.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
The headings of the sections of this Agreement have been inserted for
the convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date above written.
GUITAR CENTER MANAGEMENT COMPANY, INC.
By: /s/Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title:President
Address: 0000 Xxxxxxxx Xxxx
Xxxxxx Xxxxx, XX
00000
XXXXXXX XXXXXX LIVING TRUST
By: /s/Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx, Trustee
Address: 0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX
00000
/s/Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx, individually
Address: 0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX
00000
