WARRANT AND REGISTRATION RIGHTS AGREEMENT
WARRANT AND REGISTRATION RIGHTS AGREEMENT, dated as of June 16, 1997
(this "Agreement"), is by MUSICLAND STORES CORPORATION, a Delaware corporation
(the "Company"), in favor of the holders from time to time of the Warrant
Certificates referred to below (the "Investors").
WHEREAS, in connection with that certain Term Loan Agreement, dated as
of the date hereof (as the same may be amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"), by and among the Company,
certain lenders (the "Banks") and Xxxxxx Guaranty Trust Company of New York, as
Agent, the Company has agreed to issue certain Warrants (the "Warrants")
evidenced by Warrant Certificates in the form of Exhibit G to the Loan Agreement
(together with any certificates issued in replacement or substitution therefor,
the "Warrant Certificates") to purchase shares of the Company's Common Stock,
par value $.01 per share (the "Common Stock"), pursuant to the terms of such
Warrants; and
WHEREAS, in connection with the Loan Agreement, the Company has agreed
to register for sale by the Investors the shares of Common Stock received by the
Investors upon exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the covenants of
the parties set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to the terms
and conditions set forth herein, the parties hereby agree as follows:
Section 1. Certain Definitions. In this Agreement the following terms
shall have the following meanings:
"Accredited Investor" shall have the meaning set forth in Rule 501 of
the General Rules and Regulations promulgated under the Securities Act.
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Applicable Law" means (a) all applicable common law and principles of
equity and (b) all applicable provisions of all (i) constitutions, statutes,
rules, regulations, ordinances and orders of governmental bodies, (ii)
authorizations, consents, approvals, licenses or exemptions of, registrations or
filings with, or reports or notices to, governmental bodies and (iii) orders,
decisions, judgments and decrees of all courts, administrative agencies and
arbitrators.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Designated Affiliate" means, as to any Bank, an Affiliate of such Bank
designated by such Bank to hold some or all of the Warrants issuable hereunder.
"Effective Date" has the meaning assigned thereto in the Loan Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the relevant time.
"Holders" shall mean (i) the Investors and (ii) each Person holding
Registrable Shares as a result of a transfer or assignment to that Person of
Registrable Shares other than pursuant to an effective registration statement or
Rule 144 (or any successor provision) under the Securities Act.
"Indemnified Party" shall have the meaning ascribed to it in Section
6(c) of this Agreement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset.
"Indemnifying Party" shall have the meaning ascribed to it in Section
6(c) of this Agreement.
"Person" shall mean an individual, corporation, partnership, estate,
trust, association, private foundation, joint stock company or other entity.
The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act providing for the sale by the Holders of
Registrable Shares in accordance with the method or methods of distribution
designated by the Holders, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
"Registrable Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants; provided, however, that any such shares
of Common Stock shall cease to be Registrable Shares when (A) a registration
statement with respect to the sale of such shares shall have become effective
under the Securities Act and such shares shall have been disposed of in
accordance with such registration statement; (B) such shares shall have been
sold in accordance with Rule 144; (C) such
shares shall have been otherwise transferred and new certificates not subject to
transfer restrictions under the Securities Act and not bearing any legend
restricting further transfer shall have been delivered by the Company, and no
other applicable and legally binding restriction on transfer under the federal
securities laws shall exist; or (D) such shares may be sold in accordance with
Rule 144(k) under the Securities Act.
"Registration Expenses" shall mean all out-of-pocket expenses
(excluding Selling Expenses) incurred by the Company in complying with Section 4
hereof, including, without limitation, the following: (a) all registration and
filing fees; (b) fees and expenses of compliance with federal and state
securities laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with state securities qualifications of
the Registrable Shares under the laws of such jurisdictions as the Holders may
reasonably designate); (c) printing (including, without limitation, expenses of
printing or engraving certificates representing the Registrable Shares in a form
eligible for deposit with The Depository Trust Company and otherwise meeting the
requirements of any securities exchange on which they are listed and of printing
registration statements and prospectuses), messenger, telephone, shipping and
delivery expenses; (d) fees and disbursements of counsel for the Company; (e)
fees and disbursements of all independent public accountants of the Company
(including without limitation the expenses of any annual or special audit and
"cold comfort" letters reasonably required by the managing underwriter); (f)
Securities Act liability insurance if the Company so desires; (g) fees and
expenses of other Persons reasonably necessary in connection with the
registration, including any experts, retained by the Company; (h) fees and
expenses incurred in connection with the listing of the Registrable Shares on
each securities exchange on which securities of the same class are then listed;
and (i) fees and expenses associated with any filing with the National
Association of Securities Dealers, Inc. required to be made in connection with
the registration statement.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act, or any successor thereto, as the same shall be in effect at the
relevant time.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same shall be
in effect at the relevant time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to any sale of Registrable
Shares.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
Section 2. Issuance of Warrants. On the Effective Date, in
consideration for the Banks entering into the Loan Agreement, the Company shall
issue to each Bank (or its Designated Affiliate) a Warrant Certificate
representing Warrants to purchase the number of shares of Common Stock set forth
across from such Bank's name on Schedule 3.1(d) to the Loan Agreement.
Section 3. Representations and Warranties. The Company represents
and warrants to the Banks and their Designated Affiliates that:
(a) Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and is duly qualified as a foreign corporation and authorized to do
business in all jurisdictions wherein the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification necessary, except for those jurisdictions in which the failure so
to qualify or be authorized, singly or in the aggregate, have not had and will
not have a materially adverse effect upon the business, financial position or
results of operations of the Company and its Subsidiaries taken as a whole, and
each of the Company and each of its Subsidiaries has all corporate powers, and
all material governmental licenses, authorizations, consents and approvals,
required to carry on its respective businesses as presently conducted.
(b) Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Company of this Agreement and each
Warrant Certificate are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing or recording with, any governmental body, agency or official and
do not (i) contravene, or constitute a default under, any provision of
Applicable Law or of the certificate of incorporation or by-laws of the Company
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company, or (ii) result in the creation or imposition of any
Lien on any asset of the Company or any of its Subsidiaries.
(c) Binding Effect. Each of this Agreement and each Warrant Certificate is
a valid and binding obligation of the Company.
(d) Capitalization of the Company; Reservation of Shares; Other Matters
Relating to Capital Stock.
(i) As of the Effective Date, the authorized capital stock of
the Company consists solely of 75,000,000 shares of Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share ("Preferred Stock"), of
which (assuming no Bank or Designated Affiliate exercises any Warrant)
34,301,956 shares of Common Stock and no shares of Preferred Stock are issued
and outstanding. All of such outstanding capital stock is validly issued, fully
paid and nonassessable and has been issued in compliance with all applicable
securities laws. As of the Effective Date,
except as set forth on Schedule 3(d) and except for the Warrants, there are no
existing options, convertible securities, warrants, calls, pledges, transfer
restrictions (except restrictions imposed by federal and state securities laws),
liens, rights of first offer, rights of first refusal, antidilution provisions
or commitments of any character relating to any issued or unissued shares of
capital stock of the Company. Except for the Warrants or as set forth on
Schedule 3(d), there are no preemptive or other preferential rights applicable
to the issuance and sale of equity securities (or securities convertible or
exercisable into or exchangeable for equity securities) of the Company.
(ii) As of the Effective Date, sufficient shares of authorized
but unissued shares of Common Stock have been reserved by appropriate corporate
action in connection with the prospective exercise of the Warrants. The issuance
of the Warrants will not (x) require any further corporate action by the
stockholders or directors of the Company, (y) be subject to any statutory or
contractual preemptive rights of any present or future stockholders of the
Company or (z) conflict with any provision of any agreement to which the Company
is a party or by which the Company is bound. All shares of Common Stock issuable
upon exercise of the Warrants in accordance with their terms will be validly
authorized, fully paid and nonassessable.
(iii) Neither the Company nor any of its Subsidiaries has
violated any applicable federal or state securities laws in connection with the
offer, sale and issuance of any of its capital stock or securities. The offer,
sale and issuance of the Warrants and the shares of Common Stock issuable upon
exercise thereof do not require registration under the Securities Act or any
applicable federal or state securities laws.
Section 4. Registration.
(a) Company Registration.
(i) If the Company shall determine to Register any of its
equity securities either for its own account or for the account of any
other Person, other than a Registration relating solely to benefit
plans, or a Registration relating solely to a Commission Rule 145
transaction, or a Registration on any registration form which does not
permit secondary sales or does not include substantially the same
information as would be required to be included in a registration
statement covering the sale of Registrable Shares, the Company will:
(A) promptly give to each of the Holders a written
notice thereof (which shall include a list of the
jurisdictions, if any, in which the Company intends to attempt
to qualify such securities under applicable state securities
laws); and
(B) include in such Registration (and any related
qualification under state securities laws or other
compliance), and in any underwriting
involved therein, all the
Registrable Shares specified in a written request or requests,
made by the Holders within ten (10) business days after the
giving of the written notice from the Company described in
clause (i) above, except as set forth in Section 4(a)(ii)
below. Such written request shall specify the amount of
Registrable Shares intended to be disposed of by a Holder and
may specify all or a part of the Holder's Registrable Shares.
Notwithstanding the foregoing, if, at any time after giving such
written notice of its intention to effect such Registration and prior
to the effective date of the registration statement filed in connection
with such Registration, the Company shall determine for any reason not
to Register such equity securities the Company may, at its election,
give written notice of such determination to the Holders and thereupon
the Company shall be relieved of its obligation to Register such
Registrable Shares in connection with the Registration of such equity
securities (but not from its obligation to pay Registration Expenses to
the extent incurred in connection therewith as provided herein).
(ii) Underwriting. If the Registration of which the Company gives
notice is for a Registered public offering involving an underwriting,
the Company shall so advise each of the Holders as a part of the
written notice given pursuant to Section 4(a)(i)(A). In such event, the
right of each of the Holders to Registration pursuant to this Section
4(a) shall be conditioned upon such Holders' participation in such
underwriting and the inclusion of such Holders' Registrable Shares in
the underwriting to the extent provided herein. The Holders whose
shares are to be included in such Registration shall (together with the
Company and any other Person distributing their securities through such
underwriting) enter into an underwriting agreement in customary form
with the representative of the underwriter or underwriters selected for
the underwriting by the Company or such other Persons, as the case may
be. Such underwriting agreement will contain such representations and
warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to
secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Section 6
hereof. Notwithstanding any other provision of this Section 4(a), if
the representative determines that marketing factors require a
limitation on the number of shares to be underwritten, the Company
shall so advise all holders of securities requesting Registration, and
the number of shares of securities that are entitled to be included in
the Registration and underwriting shall be allocated in the following
manner: the number of shares that may be included in the Registration
and underwriting by each of the Holders and by each stockholder of the
Company (other than the Holders) that on the date hereof has rights to
piggyback registration upon a Company Registration shall be reduced, on
a pro rata basis (based on the number of shares held by such Holder or
stockholder), by such minimum number of shares as is necessary to
comply with such limitation. If any
of the Holders or any officer,
director or stockholder of the Company other than a Holder disapproves
of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any
Registrable Shares or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such Registration.
(b) Shelf Registration. (i) On or before April 30, 1998 the Company
shall file a "shelf" registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration") permitting a continuous or delayed
offering of the Registrable Shares. The Company shall (A) use its best efforts
to have the Shelf Registration declared effective on or before May 15, 1998 and
(B) subject to the Company's Suspension Right (defined below), use its best
efforts to keep the Shelf Registration continuously effective from the date such
Shelf Registration is declared effective until the date when all shares of
Common Stock issued or issuable upon exercise of the Warrants cease to be
Registrable Shares in accordance with the definition thereof in order to permit
the prospectus forming a part thereof to be usable by Holders during such
period.
(ii) Subject to the Company's Suspension Right, the Company shall
supplement or amend the Shelf Registration (A) as required by the registration
form utilized by the Company or by the instructions applicable to such
registration form or by the Securities Act or the rules and regulations
promulgated thereunder and (B) to permit the disposition of Registrable Shares
in the manner requested by any Holder. The Company shall furnish to the Holders
of the Registrable Shares to which the Shelf Registration relates copies of any
such supplement or amendment sufficiently in advance (but in no event less than
five business days in advance) of its use and/or filing with the Commission to
allow the Holders a meaningful opportunity to comment thereon.
(c) Suspension Right. Notwithstanding the provisions of Sections 4(a)
and (b), if the Board of Directors of the Company determines in good faith that
the filing of a registration statement or any supplement or amendment thereto
would interfere with the negotiation or completion of a material transaction or
event being contemplated by the Company, the Company shall have the right to
(the "Suspension Right"), by notice to the Holders in accordance with Section
9(d), defer the filing of a registration statement to effect the Shelf
Registration or suspend the rights of the Holders to make sales pursuant to the
Shelf Registration for such a period of time as the Board of Directors may
determine; provided that no such period of deferral or suspension may exceed 30
consecutive days and that all such periods of deferral or suspension may not
exceed 60 days in the aggregate during any period of 12 consecutive months.
(d) Notices. The Company shall promptly notify the Holders of Registrable
Shares covered by the Shelf Registration of the occurrence of the following
events:
(i) when the Shelf Registration or post-effective amendment thereto filed
with the Commission has become effective:
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration;
(iii) the suspension of sales under the Shelf Registration by the Company
in accordance with Section 4(c) above;
(iv) the Company's receipt of any notification of the suspension of the
qualification of any Registrable Shares covered by the Shelf Registration for
sale in any jurisdiction; and
(v) the existence of any event, fact or circumstance that results in the
registration statement evidencing the Shelf Registration or prospectus relating
to Registrable Shares or any document incorporated therein by reference
containing an untrue statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading during the distribution of securities.
The Company agrees to use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of any such registration statement or any state
qualification at the earliest possible moment.
(e) Registration Statement; Amendments and Supplements. The Company
shall provide to the Holders of Registrable Shares covered by the Shelf
Registration, at no cost to such Holders, a copy of the related registration
statement and any amendment thereto used to effect the Registration of the
Registrable Shares, each prospectus contained in such registration statement or
post-effective amendment and any amendment or supplement thereto and such other
documents as the requesting Holders may reasonably request in order to
facilitate the disposition of the Registrable Shares covered by such
registration statement. The Company consents to the use of each such prospectus
and any supplement thereto by the Holders in connection with the offering and
sale of the Registrable Shares covered by such registration statement or any
amendment thereto. The Company shall also file a sufficient number of copies of
the prospectus and any post-effective amendment or supplement thereto with The
New York Stock Exchange, Inc. (or, if the Common Stock is no longer listed
thereon, with such other securities exchange or market on which the Common Stock
is then listed) so as to enable the Holders to have the benefits of the
prospectus delivery provisions of Rule 153 under the Securities Act.
(f) State Securities Laws. The Company agrees to use its best efforts
to cause the Registrable Shares covered by a registration statement to be
registered with or approved by such state securities authorities as may be
necessary to enable the Holders to consummate the disposition of such shares
pursuant to the plan of
distribution set forth in the registration statement;
provided, however, that the Company shall not be obligated to take any action to
effect any such Registration, qualification or compliance pursuant to this
Section 4 in any particular jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting such
Registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction.
(g) Remediation of Misstatements or Omissions. Subject to the Company's
Suspension Right, if any event, fact or circumstance requiring an amendment to a
registration statement relating to the Registrable Shares or supplement to a
prospectus relating to the Registrable Shares shall exist, immediately upon
becoming aware thereof the Company agrees to notify the Holders and prepare and
furnish to the Holders a post-effective amendment to the registration statement
or supplement to the prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Shares, the prospectus will not contain an
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 not misleading.
(h) Listing on Exchange. The Company agrees to use its best efforts
(including the payment of any listing fees) to obtain the listing of all
Registrable Shares covered by the registration statement on each securities
exchange on which securities of the same class are then listed.
(i) Compliance with Securities Laws. The Company agrees to use its best
efforts to comply with the Securities Act and the Exchange Act in connection
with the offer and sale of Registrable Shares pursuant to a registration
statement, and, as soon as reasonably practicable following the end of any
fiscal year during which a registration statement effecting a Registration of
the Registrable Shares shall have been effective, to make available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
(j) Share Certificates.The Company agrees to: (x) cooperate with the
selling Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold pursuant to a
Registration and not bearing any Securities Act legend; and (y) enable
certificates for such Registrable Shares to be issued for such numbers of shares
and registered in such names as the Holders may reasonably request at least two
business days prior to any sale of Registrable Shares. Each Holder requesting
delivery of certificates not bearing any Securities Act legend shall provide
appropriate representations to the Company of such Holder's intent to comply
with all conditions necessary for sale pursuant to a Registration, including
prospectus delivery requirements.
Section 5. Expenses of Registration. The Company shall pay all
Registration Expenses incurred in connection with the registration,
qualification or compliance
pursuant to Section 4 hereof. All Selling Expenses
incurred in connection with the offer and sale of Registrable Shares by any of
the Holders shall be borne by the Holder offering or selling such Registrable
Shares. The Company shall pay up to $20,000 of the fees and expenses of one
counsel to the Holders in connection with the preparation of the Shelf
Registration.
Section 6. Indemnification.
(a) The Company will indemnify each Holder, each Holder's officers and
directors, each person controlling such Holder within the meaning of Section 15
of the Securities Act and each underwriter, if any, of the Company's securities
covered by any Registration hereunder against all expenses, claims, losses,
damages and liabilities (including reasonable legal fees and expenses), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus relating to
the Registrable Shares, or any amendment or supplement thereto, or based on 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 the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with information furnished in
writing to the Company by such Holder or underwriter for inclusion therein.
(b) Each Holder will indemnify the Company, each of its directors and
each of its officers who signs the registration statement and each person who
controls the Company within the meaning of Section 15 of the Securities Act
against all claims, losses, damages and liabilities (including reasonable legal
fees and expenses) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement or prospectus, or any amendment or supplement thereto, or based on 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, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement or prospectus in reliance upon and in conformity with
information furnished in writing to the Company by such Holder for inclusion
therein.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 6 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party, which counsel must be reasonably satisfactory to the
Indemnified Party, and payment of expenses. The Indemnified Party shall
have the right to employ its own counsel in any such case, but the legal fees
and expenses of such counsel shall be at the expense of the Indemnified Party,
unless the employment of such counsel shall have been authorized in writing by
the Indemnifying Party in connection with the defense of such action, or the
Indemnifying Party shall not have employed counsel to take charge of the defense
of such action, or the Indemnified Party shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to direct the defense of such action
on behalf of the Indemnified Party), in any of which events such fees and
expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an Indemnified Party under this
Section 6 in respect of any expenses, claims, losses, damages and liabilities
referred to herein, then each party that would have been an Indemnifying Party
hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to
the amount paid or payable by such Indemnified Party as a result of such
expenses, claims, losses, damages and liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and such Indemnified Party on the other in connection with the statement or
omission which resulted in such expenses, claims, losses, damages and
liabilities, as well as any other relevant equitable considerations. The
relative fault 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 such Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each holder of Registrable Shares agrees
that it would not be just and equitable if contribution pursuant to this Section
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 6(d).
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In no event shall any Holder be liable for any expenses, claims,
losses, damages or liabilities pursuant to this Section 6 in excess of the net
proceeds to such Holder of any Registrable Shares sold by such Holder.
Section 7. Information to be Furnished by Holders. Each Holder shall
furnish to the Company such information as the Company may reasonably request
and as shall be required in connection with the Registration and related
proceedings referred to in Section 4 hereof. If any Holder fails to provide the
Company with such information within three weeks of the Company's request, the
Company's obligations under Section 4 hereof with respect to such Holder or the
Registrable Shares owned by such Holder shall be suspended until such Holder
provides such information.
Section 8. Rule 144 Sales.
(a) The Company covenants that it will file any and all reports
required to be filed by the Company under the Exchange Act so as to enable any
Holder to sell Registrable Shares pursuant to Rule 144 under the Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act,
the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to be
sold and not bearing any Securities Act legend, if deemed appropriate, and
enable certificates for such Registrable Shares to be for such number of shares
and registered in such names as the selling Holder may reasonably request,
provided that such request is made at least two business days prior to any sale
of Registrable Shares.
Section 9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed in all respects by the
laws of the State of New York.
(b) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
(c) Amendment. No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby.
(d) Notices, etc. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication (each of the
foregoing being referred to herein as a notice) required or desired to be given
or made under this Agreement shall be in writing (except as otherwise provided
in this Agreement), and shall be effective and deemed to have been received ()
when delivered in person, () when sent by fax with receipt acknowledged, () five
(5) days after having been mailed by certified or registered United States mail,
postage prepaid, return receipt requested, or () the next business day after
having been sent by a nationally recognized overnight mail or courier service,
receipt requested. Notices shall be addressed as follows: (x) if to any Holder,
at such address or fax number as such
Holder shall have furnished the Company in writing (or, if such Holder is a
Bank, at such Holder's address set forth in the Loan Agreement), or (y) if to
the Company, at the address or fax number of its principal executive offices set
forth below its signature hereon or at such other address or fax number as the
Company shall have furnished to the Investors. Any notice or other communication
required to be given hereunder to a Holder in connection with a registration may
instead be given to the designated representative of such Holder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
(g) Captions. Captions are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
(h) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns. Whether or not any
express assignment has been made in this Agreement, the provisions of this
Agreement that are for the Banks as holders of Registrable Shares are also for
the benefit of, and shall be enforceable by, all subsequent holders of
Registrable Shares.
(i) Remedies. The Company and the Investors acknowledge that there
would be no adequate remedy at law if any Person fails to perform any of its
obligations hereunder, and accordingly agree that the Company and each Holder,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of another
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(j) Attorneys' Fees. If the Company or any Holder brings an action to
enforce its rights under this Agreement, the prevailing party in the action
shall be entitled to recover its costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, incurred in connection with
such action, including any appeal of such action.
(k) No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of Registrable Shares in this Agreement.
(l) Survival of Representations and Warranties. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and any transfer of any Warrant or Common Stock issued upon exercise
thereof.
IN WITNESS WHEREOF, the Company has executed this Agreement as of the
date first above written.
MUSICLAND STORES CORPORATION
By:
Name:
Title:
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel and Corporate
Secretary Facsimile: (000)000-0000
