Warrants to Purchase
676,566 Shares
of Common Stock
GUITAR CENTER, INC.
UNDERWRITING AGREEMENT
----------------------
June 3, 1998
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The stockholders of Guitar Center, Inc., a Delaware corporation (the
"Company"), named in Schedule I hereto (collectively, the "Selling
Stockholders"), severally propose to sell warrants (the "Warrants") to purchase
an aggregate of 676,566 shares (the "Shares") of Common Stock, par value $0.01
per share, of the Company (the "Common Stock") to Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation (the "Underwriter").
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-3 (File no. 333-53269) including a
prospectus relating to the Warrants and the Shares (collectively, the
"Securities"), which has been declared effective. The registration statement,
as amended, and the offering thereunder from time to time in accordance with
Rule 415 of the rules and regulations of the Commission under the Act, is
hereinafter referred to as the "Registration Statement"; and the prospectus
constituting a part of the Registration Statement, together with the final
prospectus supplement relating to the offering of the Shares (including any
prospectus subject to completion meeting the requirements
of Rule 434(b), under the Act provided by the Company with any term sheet
meeting the requirements of Rule 434(b) as the prospectus provided to meet the
requirements of Section 10(a) of the Act), in the form first used to confirm
sales of Shares is hereinafter referred to as the "Prospectus." As used herein,
the terms Registration Statement and Prospectus shall be deemed to include
documents incorporated by reference therein.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to
its terms and conditions, (i) each Selling Stockholder agrees, severally and
not jointly, to sell the number of Warrants representing the number of shares
of Common Stock set forth opposite such Selling Stockholder's name in
Schedule I hereto and (ii) the Underwriter agrees to purchase from each
Selling Stockholder at an aggregate purchase price of $16,400,881.25 (the
"Purchase Price") such number of Warrants.
3. TERMS OF PUBLIC OFFERING. The Company and the Selling
Stockholders are advised by the Underwriter that it proposes (i) to exercise the
Warrants and make a public offering of the Shares as soon after the effective
date of the Registration Statement as in your judgment is advisable and (ii)
initially to offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to the Underwriter of and payment
for the Warrants, and issuance of the Shares upon exercise thereof, shall occur
at 10:00 A.M., New York City time, on the third or fourth business day (the
"Closing Date") unless otherwise permitted by the Commission pursuant to Rule
15c6-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") following the date of the initial public offering, at the offices of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx. The Closing Date and the location of delivery of and the form of
payment for the Shares may be varied by agreement between you and the Selling
Stockholders.
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 A.M., New York City time, on
the business day next preceding the
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Closing Date. Certificates in definitive form evidencing the Shares shall be
delivered to you on the Closing Date with any transfer taxes thereon duly paid
by the Selling Stockholder, for your account against payment of the Purchase
Price therefor by wire transfer of federal or other immediately available funds
to the respective account of each Selling Stockholder as shall be specified in
writing by the Selling Stockholders, no later than the Business Day immediately
preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the Company's obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel in connection with the registration and delivery of the
Securities under the Act and all other fees and expenses incurred by or on
behalf of the Company in connection with the preparation, printing, filing and
distribution of the Registration Statement (including financial statements and
exhibits), any preliminary prospectus, the Prospectus and all amendments and
supplements to any of the foregoing, including the mailing and delivering of
copies thereof to the Underwriter and dealers in the quantities specified
herein, (ii) all costs and expenses incurred by or on behalf of the Company
related to the transfer and delivery of the Securities to the Underwriter,
excluding any transfer or other taxes payable thereon, (iii) all costs incurred
by or on behalf of the Company related to the printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Securities, (iv) all expenses in connection
with the registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of the several states and all costs of printing
or producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriter in connection with such registration or qualification and
memoranda relating thereto) (not to exceed $10,000), (v) the filing fees and
disbursements of counsel for the Underwriter in connection with the review and
clearance of the offering of the
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Securities by the National Association of Securities Dealers, Inc. (not to
exceed $5,000), (vi) all fees and expenses, if any, in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to the listing of the Shares on
the Nasdaq National Market, (vii) the cost of printing certificates representing
the Shares, (viii) the costs and charges of any transfer agent, registrar and/or
depositary, (ix) all other costs and expenses of the Company incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section. It is understood that, except as provided
in sections 8 and 12 and the foregoing clauses (iv) and (v), the Underwriter
will pay all of its own costs and expenses, including the fees of its counsel
and any advertising expenses connected with the offers they make.
(b) To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective, (ii) of any request by the Commission
for amendments to the Registration Statement or amendments or supplements to the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Securities for offering
or sale in any jurisdiction, or the initiation of any proceeding for such
purposes, and (iv) of the happening of any event during the period referred to
in paragraph (e) below which makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires the making of
any additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal or lifting of such order at the earliest possible time.
(c) To furnish to you, without charge, one signed copy of the
Registration Statement as first filed with the Commission and of each amendment
to it, and to furnish to you and each Underwriter designated by you such number
of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits,
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as you may reasonably request. The terms "supplement" and "amendment" or
"amend" as used in this Agreement shall include all documents subsequently filed
by the Company with the Commission pursuant to the Exchange Act that are deemed
to be incorporated by reference in the Prospectus.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus (including the issuance or
filing of any term sheet within the meaning of Rule 434) of which you shall not
previously have been advised or to which you shall reasonably object; and to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus
(including the issuance or filing of any term sheet within the meaning of Rule
434) which may be necessary or advisable in connection with the distribution of
the Shares by you, and to use its commercially reasonable efforts to cause the
same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period as in the opinion of counsel
for the Underwriter a prospectus is required by law to be delivered in
connection with sales by the Underwriter or a dealer, to furnish to the
Underwriter and dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as the Underwriter or dealer may reasonably
request.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the Underwriter
it becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with any law, forthwith to prepare and file
with the Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented, will not
in the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law, and to furnish to the Underwriter and
to such dealers as you shall specify, such
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number of copies thereof as the Underwriter or dealers may reasonably request;
provided, however, if the event that has occurred that requires such supplement
or amendment is a "Material Transaction" as defined in Section 2.6 of the
Registration Agreement dated as of June 5, 1996 among the Company and certain of
the Selling Stockholders, then the Company shall prepare and file such
supplement or amendment within 90 days of such event; it being understood that
if, at any time, the Company advises the Underwriter and the Selling
Stockholders in writing that the Prospectus needs to be supplemented or amended,
the Underwriter and the Selling Stockholders will cease offering any Warrants or
Shares for sale pursuant to the Prospectus (or otherwise) until the Prospectus
has been supplemented or amended, and following the preparation and filing of
such supplement or amendment, the Underwriter and the Selling Stockholders shall
only offer Warrants or Shares for sale pursuant to the Prospectus, as supplement
or amended.
(g) Prior to any public offering of the Shares, to cooperate
with you and counsel for the Underwriter in connection with the registration or
qualification of the Shares for offer and sale by the Underwriter and by dealers
under the state securities or Blue Sky laws of such jurisdictions as you may
request, to continue such qualification in effect so long as required for
distribution of the Shares and to file such consents to service of process or
other documents as may be necessary in order to effect such registration or
qualification; PROVIDED, HOWEVER, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not already subject generally to
service of process or so qualified.
(h) To use its commercially reasonable efforts to do and perform
in all material respects all things required or necessary to be done and
performed under this Agreement by the Company prior to the Closing Date and to
satisfy in all material respects all conditions precedent to the delivery of the
Shares.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriter that:
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(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and, to the best knowledge of the Company, no proceedings for such purpose are
pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) each part of
the Registration Statement, when such part became effective, did not contain and
each such part, as amended or supplemented, if applicable, will not contain any
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 not misleading,
(iii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act
and (iv) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (b) do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to the Underwriter or any Selling Stockholder
furnished to the Company in writing by the Underwriter or any Selling
Stockholder expressly for use therein.
(c) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the Act, and each registration statement
filed pursuant to Rule 462(b) under the Act, if any, complied when so filed in
all material respects with the Act; and did not contain 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 the light of the circumstances
under which they were made, not misleading.
(d) Each of the Company and its subsidiaries as defined in Rule
405 of Regulation C under
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the Act (each a "Subsidiary") has been duly incorporated or formed, is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation or as a partnership duly formed and has the corporate or
partnership power and authority, as the case may be, to carry on its business as
it is currently being conducted and to own, lease and operate its properties as
described in the Registration Statement and Prospectus, and each corporate
Subsidiary is duly qualified and is in good standing as a foreign corporation
and each Subsidiary is authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification or authorization, except here the failure to be so qualified and
be in good standing could not, in the aggregate, reasonably be expected to have
a material adverse effect on the business, operations, properties, or financial
or other condition of the Company and its Subsidiaries, considered as a whole.
(e) All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(f) The Warrants have been duly authorized by the Company and
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms (assuming due authorization, execution
and delivery by any other party thereto), subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity.)
(g) The Shares have been duly authorized for issuance by the
Company, have been reserved for issuance upon the exercise of the Warrants and,
when issued upon exercise of the Warrants in accordance with the terms thereof
(including the payment of the exercise price therefor, whether in cash or in
Shares), will be validly issued, fully paid and nonassessable. All Shares, upon
issuance, will be free of preemptive or similar rights.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder severally represents and warrants to the Underwriter that:
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(a) Such Selling Stockholder is the lawful owner of the Warrants
to be sold by such Selling Stockholder pursuant to this Agreement and has, and
on the Closing Date will own such Warrants free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever.
(b) Upon delivery of and payment for such Warrants pursuant to
this Agreement, ownership of such Warrants will pass to the Underwriter free of
all restrictions on transfer, liens, encumbrances, security interests and claims
whatsoever.
(c) Such Selling Stockholder has, and on the Closing Date will
have, full legal right, power and authority to enter into this Agreement and to
sell, assign, transfer and deliver such Warrants in the manner provided herein,
and this Agreement has been duly authorized, executed and delivered by such
Selling Stockholder and this Agreement is a valid and binding agreement of such
Selling Stockholder enforceable in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by applicable law.
(d) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement, and other than as
permitted by the Act, such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(e) The execution, delivery and performance of this Agreement by
such Selling Stockholder, compliance by such Selling Stockholder with all the
provisions thereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body (except
as such may be required under the Act, state securities laws or Blue Sky laws)
and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, organizational documents of such Selling
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Stockholder, if not an individual, or any agreement, indenture or other
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder or property of such Selling Stockholder is bound, or violate or
conflict with any laws, administrative regulation or ruling or court decree
applicable to such Selling Stockholder or property of such Selling Stockholder.
(f) Such parts of the Registration Statement under the caption
"Selling Stockholders" which specifically relate to such Selling Stockholder do
not, and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of circumstances under
which they were made, not misleading.
(g) At any time during the period described in paragraph 5(d)
hereof, if there is any change in the information referred to in paragraph 7(f)
above, the Selling Stockholders will promptly notify you of such change.
8. INDEMNIFICATION. (a) The Company hereby agrees to indemnify and
hold harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to the Underwriter furnished in writing to the Company by
the Underwriter expressly for use therein; provided however, that the foregoing
indemnification with respect to any preliminary prospectus delivered to a person
asserting any such loss, claim, damage, liability or judgment who purchased
Shares shall not inure to the benefit of the
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Underwriter or any person controlling the Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
the Underwriter to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Shares to such person,
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage, liability or judgment.
(b) The Selling Stockholders hereby severally and not jointly
agree to indemnify and hold harmless the Underwriter and each person, if any,
who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that such agreement of each Selling Stockholder to indemnify
and hold harmless shall be limited to losses, claims, damages, liabilities or
judgments caused by any untrue statement or omission or alleged untrue statement
or omission based upon information furnished in writing to the Company by or on
behalf of such Selling Stockholder expressly for use in the Registration
Statement; PROVIDED, FURTHER, that the aggregate liability of any Selling
Stockholder pursuant to the provisions of this paragraph shall be limited to an
amount equal to the aggregate purchase price received by such Selling
Stockholder from the sale of such Selling Stockholder's Shares hereunder.
(c) In case any action shall be brought against the Underwriter
or any person controlling the Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto and with respect to which indemnity may be sought against the
Company or the Selling
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Stockholders, the Underwriter shall promptly notify the Company and the Selling
Stockholders in writing and the Company and/or the Selling Stockholders shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all reasonable fees and
expenses. The Underwriter or any such controlling person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Underwriter or such controlling person unless (i) the employment of such
counsel shall have been specifically authorized in writing by the Company, (ii)
the Company and/or the Selling Stockholders shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the Company or any Selling Stockholder, as the case may
be, and the Underwriter or such controlling person shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company or the
Selling Stockholders, as the case may be (in which case the Company and the
Selling Stockholders shall not have the right to assume the defense of such
action on behalf of the Underwriter or such controlling person, it being
understood, however, that the Company and the Selling Stockholders shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
the Underwriter and its controlling persons, which firm shall be designated in
writing by the Underwriter and that all such reasonable fees and expenses shall
be reimbursed as they are incurred). Neither the Company nor a Selling
Stockholder shall be liable for any settlement of any such action effected
without its written consent, but if settled with its written consent, the
Company and/or such Selling Stockholder agrees to indemnify and hold harmless
the Underwriter and any such controlling person from and against any loss or
liability by reason of such settlement, subject in the case of the Selling
Stockholders to the limits set forth in subsection (b) above. Notwithstanding
the immediately preceding sentence, if in any case where the fees and expenses
of counsel are at the expense of the
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indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such reasonable fees
and expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without a written
consent if (i) such settlement is entered into more than ten business days after
the receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party for
reasonable fees and expenses incurred that have not been disputed in writing by
such indemnifying party, in accordance with such request for reimbursement prior
to the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or has a
right under this Agreement or at law to be a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) The Underwriter agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement, any
person controlling the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each Selling Stockholder and each person, if
any, controlling such Selling Stockholder within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity to the Underwriter but only with reference to information relating to
the Underwriter furnished in writing by Underwriter expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In case
any action shall be brought against the Company, any of its directors, any such
officer or and person controlling the Company or any Selling Stockholder or any
person controlling such Selling Stockholder based on the Registration Statement,
the Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against the Underwriter, the Underwriter shall have the rights and
duties given to the Company and/or the Selling Stockholders (except that if the
Company or any Selling Stockholder shall have assumed the defense thereof, the
Underwriter shall not be required to do so, but may employ separate counsel
therein and
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participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of the Underwriter), and the Company, its directors, any
such officers and any person controlling the Company and the Selling
Stockholders and any person controlling such Selling Stockholders shall have the
rights and duties given to the Underwriter, by Section 8(c) hereof.
(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriter on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, the Selling Stockholders and the Underwriter in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders and the Underwriter shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Selling Stockholders, and the total underwriting
discounts and commissions received by the Underwriter, bear to the total price
to the public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company and the Selling
Stockholders and the Underwriter shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Selling Stockholders and the Underwriter agree
that it would not be just and
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equitable if contribution pursuant to this Section 8(e) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, (a) the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares were offered to the public
exceeds the amount of any damages which the Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission and (b) no Selling Stockholder shall be required to
contribute any amount in excess of the amount of the aggregate purchase price
received by such Selling Stockholder for the sale of such Selling Stockholder's
Shares hereunder. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Selling
Stockholders' obligations to contribute pursuant to this Section 8(e) are
several in proportion to the respective number of such Selling Stockholder's
Shares sold hereunder.
9. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase the Shares under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement that are modified as to materiality shall be true
and correct on the Closing Date and all representations and warranties that are
not modified as to materiality shall be true and correct in all material
respects on the Closing Date, in each case with the same force and effect as if
made on and as of the Closing Date.
(b) At the Closing Date no stop order suspending the
effectiveness of the Registration Statement
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shall have been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or contemplated by the Commission.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
business, management or operations, whether or not arising in the ordinary
course of business, of the Company, (ii) since the date of the latest balance
sheet included in the Registration Statement and the Prospectus there shall not
have been any material change, or any development involving a prospective
material adverse change, in the capital stock (except pursuant to existing stock
option plans as in effect prior to the date hereof) or in the long-term debt of
the Company from that set forth in the Registration Statement and Prospectus,
(iii) the Company and its subsidiaries shall have no liability or obligation,
direct or contingent, which is material to the Company and its subsidiaries,
taken as a whole, other than those reflected in the Registration Statement and
the Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by Xxxxx Xxxxxx and Xxxxx Xxxx, in
their capacities as the Chief Executive Officer and Chief Financial Officer of
the Company, confirming the matters set forth in paragraphs (a), (b), and (c) of
this Section 8.
(d) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriter), dated the Closing Date,
of Xxxxxx & Xxxxxxx, outside counsel for the Company, to the effect that:
i) this Agreement has been duly authorized, executed and
delivered by the Company;
ii) such counsel has been advised by the Commission by
telephone that the Registration Statement has become effective under the Act,
and to such counsel's knowledge after due inquiry no stop order suspending its
16
effectiveness has been issued and no proceedings for that purpose are pending
before or contemplated by the Commission;
iii) the Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the State of
Delaware and has the corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease and operate its
properties as described in the Prospectus;
iv) all the outstanding shares of Common Stock have been
duly authorized and validly issued and, to such counsel's knowledge, are fully
paid, non-assessable and not subject to any preemptive rights;
v) the Warrants have been duly authorized by the Company
and constitute legally, valid and binding obligations of the Company and are
enforceable against the Company in accordance with their terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding at equity or at law and to such
other conditions set forth in such counsel's opinion that are reasonably
acceptable to the Underwriter's counsel);
vi) the Shares have been duly authorized and reserved for
issuance upon exercise of the Warrants, and, when issued upon exercise of the
Warrants in accordance with their terms (including payment of the exercise price
therefor), will be validly issued, fully paid and nonassessable and to such
counsel's knowledge, the issuance of such Shares is not subject to any
preemptive rights in favor of any other person; and
vii)(1) each document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and the Prospectus
(except for financial statements, schedules and other financial data as to which
no opinion need be expressed), complied when so filed as to form in all material
respects with the Exchange Act and the applicable rules and regulations of the
17
Commission thereunder, (2) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for financial data, as aforesaid) comply
as to form in all material respects with the Act. In passing on compliance as
to form, such counsel may assume that statements made in the Registration
Statement, the Prospectus and the documents incorporated by reference therein
are correct and complete.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives for the Selling Stockholders and your representatives, at which
the contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of the
statements contained or incorporated by reference in the Registration Statement
and the Prospectus and has not made any independent check or verification
thereof, during the course of such participation, no facts came to such
counsel's attention that caused such counsel to believe that the Registration
Statement, at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus (including the documents incorporated by reference therein), as of
its date, contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that such counsel expresses no belief with respect to the financial statements,
schedules and other financial data included or incorporated by reference in, or
omitted from, the Registration Statement or the Prospectus.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriter), dated the Closing Date,
of counsel to the Selling Stockholders to the effect that:
i) this Agreement has been duly authorized, executed and
delivered by such Selling Stockholder;
18
ii) the execution, delivery and performance of this
Agreement by such Selling Stockholder, compliance by such Selling Stockholder
with all the provisions hereof and the consummation of the transactions
contemplated hereby will not require any consent, approval, authorization or
other order of any California or Federal court, regulatory body, administrative
agency or other governmental body (except as such may be required under the Act
or other securities or Blue Sky laws) and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter,
by-laws or partnership agreement, as the case may be, of such Selling
Stockholder;
iii) the Selling Stockholder has full legal right, power and
authority, and any approval required by law (other than any approval imposed by
the applicable state securities and Blue Sky laws) to sell, assign, transfer and
deliver the Warrants to be sold by it in the manner provided in this Agreement;
and
iv) such Selling Stockholder will be, immediately prior to
the closing on the Closing Date, the sole registered owner of the Warrants to be
sold by such Selling Stockholder at such time pursuant to this Agreement; upon
delivery and payment for such Warrants, and assuming the Underwriter acquired
such Warrants without notice of any adverse claim, the Underwriter will acquire
all rights and interests in such Warrants free of any adverse claim.
(g) You shall have received letters on and as of the Closing
Date, in form and substance satisfactory to you, from each of Ernst & Young LLP
and KPMG Peat Marwick, LLP, independent public accountants, with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus and substantially in the form and
substance of the letters delivered to you by each such accountant on the date of
this Agreement.
(h) The Company shall not have failed at or prior to the Closing
Date to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company at or prior to the
Closing Date.
19
10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution of this Agreement.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole,
or the earnings, affairs, or business prospects of the Company and its
Subsidiaries, taken as a whole, whether or not arising in the ordinary course of
business, which would, in your judgment, make it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions the effect of which on the
financial markets of the United States or elsewhere, in your judgment, is
material and adverse and would, in your judgment, make it impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus,
(iii) the suspension or material limitation of trading in securities on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market or
limitation on prices for securities on any such exchange or the National Market
System, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority that in your opinion materially and adversely affects, or
will materially and adversely affect, the business or operations of the Company
and its Subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
11. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling Stockholder
severally agrees with you and the Company:
20
(a) To pay or to cause to be paid all transfer taxes with respect to
the Warrants to be sold by such Selling Stockholder; and
(b) To take all reasonable actions in cooperation with the Company
and the Underwriter to cause the Registration Statement to become effective at
the earliest possible time, to do and perform all things to be done and
performed under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Warrants pursuant to this Agreement.
12. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a)if to the Company, to Guitar
Center, Inc., 0000 Xxxxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000, (b) if to
the Selling Stockholders, to DLJ Merchant Banking Partners, L.P., 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxx, Esq. and (c) if to
the Underwriter, to Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Stockholders, the Company, its
officers and directors and of the Underwriter set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriter or by or on behalf of the Selling Stockholders, the officers or
directors of the Company or any controlling person of the Company or the Selling
Stockholders, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriter because of
any failure or refusal on the part of the Company or the Selling Stockholders to
comply with the terms or to fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Underwriter for all out-of-pocket expenses
(including the fees and disbursements of counsel) reasonably incurred by them.
21
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriter, any controlling persons referred to herein and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any rights under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from the Underwriter merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
22
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the Underwriter.
Very truly yours,
GUITAR CENTER, INC.
By: /s/ XXXXX X. XXXX
-----------------------------
Name: Xxxxx X. Xxxx
Title: Chief Financial Officer
DLJ MERCHANT BANKING PARTNERS, L.P.
By: DLJ Merchant Banking, Inc.
By: /s/ XXX XXXXX
-----------------------------
Name: Xxx Xxxxx
Title: Vice President
DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ Merchant Banking, Inc.
By: XXX XXXXX
-----------------------------
Name: Xxx Xxxxx
Title: Vice President
DLJ MERCHANT BANKING FUNDING, Inc.
By: DLJ Merchant Banking, Inc.
By: /s/ XXX XXXXX
-----------------------------
Name: Xxx Xxxxx
Title: Vice President
DLJ FIRST ESC, L.P.
By: DLJ LBO Management Corporation
By: /s/ XXX XXXXX
-----------------------------
Name: Xxx Xxxxx
Title: Vice President
DLJ OFFSHORE PARTNERS, C.V.
By:
-----------------------------
Name:
Title:
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
By:
-----------------------------
Name:
Title:
SCHEDULE I
SELLING STOCKHOLDERS
SHARES
UNDERLYING THE
WARRANTS
DLJ Merchant Banking Partners, L.P. 314,217
DLJ International Partners, C.V. 151,962
DLJ Merchant Banking Funding, Inc. 121,386
DLJ First ESC, L.P. 80,921
DLJ Offshore Partners, C.V. 8,080
--------------
676,566
