**Exhibit 10.42**

** **

***EXECUTION VERSION***

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**CONSENT AND AMENDMENT**

** **

                This**CONSENT AND AMENDMENT** (this “Consent”),dated as of June 9, 2003, is entered into by and among, on the one hand, thelenders identified on the signature pages hereof (such lenders, together withtheir respective successors and assigns, are referred to hereinafter eachindividually as a “Lender” and collectively as the “Lenders”), **WELLS FARGO RETAIL FINANCE, LLC**, a Delawarelimited liability company, as the arranger and administrative agent for theLenders (in such capacity, together with its successors, if any, in suchcapacity, “Agent” and together with the Lenders, collectively, the “LenderGroup”), and, on the other hand, **GUITARCENTER, INC**., a Delaware corporation (“GCI”), **GUITAR CENTER STORES, INC.**, a Delawarecorporation (“GCS”), and **MUSICIAN’SFRIEND, INC.**, a Delaware corporation (“MFI”; together withGCI and GCS, are referred to hereinafter each individually as a “Borrower”,and individually and collectively, jointly and severally, as the “Borrowers”),with reference to the following:

 

**W I T N E S S E T H**

 

                **WHEREAS**, Borrowers and the Lender Group areparty to that certain Loan and Security Agreement, dated as of December 21,2001 (as the same may be amended, restated, supplemented, or otherwise modifiedfrom time to time, including hereby, the “Loan Agreement”), pursuant towhich the Lenders have made certain loans and financial accommodations toBorrowers;

 

                **WHEREAS**, Borrowers have requested that theLender Group consent to (1) GCI’s issuance of unsecured convertible debenturesin the principal amount of up to $100,000,000 (the “Debentures”) uponthe terms and conditions set forth in the Indicative Term Sheet, a copy ofwhich is attached hereto as Exhibit A, and (2) the repayment (together with allprepayment premiums) of the Senior Notes prior to their stated maturity date(the “Prepayment”; together with the issuance of the Debentures, the “Transactions”);and

 

**                WHEREAS**, subject tothe satisfaction of the conditions set forth herein, the Lender Group iswilling to consent to the Transactions.

 

**                NOW, THEREFORE**, for good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties agree as follows:

 

**1.             DEFINITIONS.**  Capitalized terms used herein and nototherwise defined herein shall have the meanings ascribed to them in the LoanAgreement, as amended hereby.  As usedherein, “Fee Letter” means that certain Fee Letter of even date by and betweenthe Borrowers and the Agent.

 

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**2.             CONSENT.**  Subject to the satisfaction of each of theconditions listed in Section 5, the provisions of the Loan Agreement tothe contrary notwithstanding, including without limitation, Sections 7.1 and7.8 of the Loan Agreement, the Lender Group hereby consents to the consummationof the Transactions; providedhowever, that the parties agreethat this Consent will be of no force or effect in the event that theDebentures are not issued by June 20, 2003, and will terminate on June 20, 2003in such event.  Notwithstanding anythingherein to the contrary, Section 5(d) of this Consent will survive if theConsent is of no force and effect on June 20, 2003 or if the Consent terminatesfor any reason.

 

**3.             AMENDMENT TO LOAN AGREEMENT.**

** **

                (a)           Section 1.1 of the Loan Agreement ishereby amended by adding the following definitions in alphabetical orderthereto:

 

““Debentures”means those certain unsecured convertible debentures in the principal amount ofup to $100,000,000 due 2013 of GCI issued and outstanding pursuant to theIndenture.”

 

““Indenture”means the Indenture, to be dated on or about June 13, 2003, but not later thanJune 20, 2003, between GCI, as issuer, and BNY Western Trust Company astrustee, pursuant to which the Debentures were issued, as modified, amended, orreplaced from time to time in a manner permitted by this Agreement.”

 

““IndentureIndebtedness” means the Debentures and any other Indebtedness of anyObligor under the Indenture, together with any refinancings thereof permittedby the terms of Section 7.8(c).”

 

““QualifiedCash Equivalents” means the proceeds of the sale of the Debentures,consisting of (a) marketable direct obligations issued by, or unconditionallyguaranteed by, the United States or issued by any agency thereof and backed bythe full faith and credit of the United States, in each case maturing within 1year from the date of acquisition thereof, (b) marketable direct obligationsissued by any state of the United States or any political subdivision of anysuch state or any public instrumentality thereof maturing within 1 year fromthe date of acquisition thereof and, at the time of acquisition, having one ofthe two highest ratings obtainable from either Standard & Poor’s RatingGroup (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercialpaper maturing no more than 270 days from the date of creation thereof and, atthe time of acquisition, having a rating of at least A-1 from S&P or atleast P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptancesmaturing within 1 year from the date of acquisition thereof issued by any bankorganized under the laws of the United States or any state thereof having atthe date of acquisition thereof combined capital and surplus of not less than$250,000,000, (e) demand Deposit Accounts maintained with any bank organizedunder the laws of the United States or any state thereof so long as the amountmaintained with any individual bank is less than or equal to $100,000 and isinsured by the Federal Deposit Insurance Corporation, and (f) Investments inmoney market funds substantially all of whose assets are invested in the typesof assets described in clauses (a) through (e) above.”

 

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““RedemptionAccount” means that certain segregated account maintained at BNY WesternTrust Company for the purpose of redeeming the Senior Notes.”

 

“Statementof Sources and Uses” means that certain statement of sources and usesrespecting the proceeds from the Debentures and attached as Exhibit C to thatcertain Consent and Amendment dated as of June 9, 2003 between the Borrowersand the Lender Group.”

 

                (b)           The Loan Agreement is hereby amendedby adding the following new Section 6.25 thereto:

 

“6.25       The Indenture Indebtedness.

 

(a)           On or before the date upon which theDebentures are issued, GCI shall deliver the notices of redemption required byand in accordance with Article III of the Senior Indenture, and shall provideAgent copies of the same.”

 

(b)           On or before the earlier of July 22,2003 and the date the Senior Notes are paid in full, GCI shall provide to the Agentpro forma financial information along with balance sheets as of the date theSenior Notes are paid, in form and substance reasonably satisfactory to theAgent.

 

(c)           Borrowers shall deposit, retain andhold Qualified Cash Equivalents up to the amount required to redeem the SeniorNotes in the Redemption Account and will utilize those funds solely to redeemthe Senior Notes as required under clause (d) of this Section 6.25.

 

(d)           Borrowers shall use the QualifiedCash Equivalents to redeem the Senior Notes on or before July 22, 2003.

 

(e)           Borrowers agree to utilize theproceeds of the Debentures solely in accordance with the Statement of Sourcesand Uses.”

 

                (c)           The Loan Agreement is hereby amendedto add the following new Section 6.26 thereto:

 

                “6.26       Amendment to Schedule 7.1.  On or before July 31, 2003, the Borrowersshall deliver to the Agent an amended Schedule 7.1 which includes the IndentureIndebtedness and otherwise updates such Schedule 7.1 as of July 31,2003.

 

                (d)           Section 7.1 of the Loan Agreement ishereby amended by replacing subsection (l) in its entirety with the following:

 

“refinancings,renewals, or extensions of Indebtedness permitted under clauses (b) through (j)of this Section 7.1 (and continuance or renewal of any Permitted Liens associatedtherewith) so long as: (i) the terms and conditions of such refinancings,renewals, or extensions do not materially impair the prospects of repayment ofthe 

 

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Obligations by Borrowers,(ii) the net cash proceeds of such refinancings, renewals, or extensions do notresult in an increase in the aggregate principal amount of the Indebtedness sorefinanced, renewed, or extended, (iii) such refinancings, renewals,refundings, or extensions do not result in a shortening of the average weightedmaturity of the Indebtedness so refinanced, renewed, or extended, (iv) to theextent that Indebtedness that is refinanced, renewed, or extended wassubordinated in right of payment to the Obligations, then the subordinationterms and conditions of the refinancing, renewal, or extension Indebtednessmust be at least as favorable to the Lender Group as those applicable to therefinanced, renewed, or extended Indebtedness, and (v) if such refinancing,renewal, refunding, or extension involves the Debentures, such refinancing,renewal, refunding, or extension also complies with Section 7.8(c).”

 

                (e)           Section 7.8 of the Loan Agreement ishereby amended by deleting subsection (a) in its entirety and replacing it withthe following subsection (a):

 

“(a)         Except in connection with a refinancingpermitted by Section 7.1(l) or as provided in subsection (c) or (d)below, prepay, redeem, retire, defease, purchase, or otherwise acquire anyIndebtedness owing to any third Person, other than the Obligations andIndebtedness owing to any Borrower in accordance with this Agreement,”

 

                (f)            Section 7.8 of the Loan Agreement ishereby amended by deleting subsection (c) in its entirety and replacing it withthe following subsection (c):

 

“(c)          GCI shall not, and shall not permitany Subsidiary to, amend, supplement, or modify the Debentures or the Indentureor repay the principal of, or make any other payment in relation to, theDebentures; provided, so long as no Event of Default has occurred and iscontinuing or would result therefrom, the foregoing shall not prohibit (i) thepayment of regularly scheduled interest on the Debentures, (ii) the repaymentof the Debentures with the proceeds of any refinancing thereof (provided thatsuch refinancing Indebtedness complies with the requirements of Section7.1(1) and is otherwise on terms substantially similar to the Debentures),and (iii) modifications or amendments to the Debentures or the Indenture if theeffect thereof could not be expected to result in a Material Adverse Change andotherwise do not involve the amendment or modification of provisions whichwould increase interest rates, principal or interest payment amounts, totalprincipal amounts, or require payment of any such amounts at earlier times, orsimilar terms and provisions, and”

 

**4.             REPRESENTATIONS AND WARRANTIES.**  Borrowers each hereby represents andwarrants to the Lender Group as follows:

 

                (a)           They have the requisite power andauthority to execute and deliver this Consent and to perform its obligationshereunder and under the Loan Documents to which it is a party.  The execution, delivery, and performance byit of this Consent and the performance by it of each Loan Document to which itis a party (i) have been duly approved by all necessary action and no otherproceedings are necessary to consummate such transactions; and (ii) are not incontravention of (A) any law, rule, or regulation, or any order, judgment,decree, writ, injunction, or award of any arbitrator, court or governmentalauthority binding on it, (B) the terms of its 

 

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organizational documents, or (C) anyprovision of any contract or undertaking to which it is a party or by which anyof its properties may be bound or affected;

 

                (b)           This Consent has been duly executedand delivered by Borrowers.  ThisConsent and each Loan Document to which Borrowers are a party is the legal,valid and binding obligation of Borrowers, enforceable against such Borrowersin accordance with its terms, and is in full force and effect except as suchvalidity and enforceability is limited by the laws of insolvency andbankruptcy, laws affecting creditors’ rights and principles of equityapplicable hereto;

 

                (c)           No injunction, writ, restrainingorder, or other order of any nature prohibiting, directly or indirectly, theconsummation of the transactions contemplated herein has been issued andremains in force by any Governmental Authority against Borrowers, any Guarantoror any member of the Lender Group;

 

                (d)           No Default or Event of Default hasoccurred and is continuing on the date hereof or as of the date of theeffectiveness of this Consent; and

 

                (e)           The representations and warranties inthe Loan Agreement and the other Loan Documents are true and correct in allmaterial respects on and as of the date hereof, as though made on such date(except to the extent that such representations and warranties relate solely toan earlier date).

 

**5.             CONDITIONS TO THIS CONSENT.**  The satisfaction of each of the followingshall constitute conditions to the effectiveness of this Consent and each and everyprovision hereof:

 

                (a)           The representations and warranties inthe Loan Agreement and the other Loan Documents shall be true and correct inall respects on and as of the date hereof, as though made on such date (exceptto the extent that such representations and warranties relate solely to anearlier date);

 

                (b)           Agent shall have received thereaffirmation and consent of each Guarantor, attached hereto as Exhibit B, dulyexecuted and delivered by an authorized official of such Guarantor;

 

                (c)           No Default or Event of Default shallhave occurred and be continuing on the date hereof or as of the date of theeffectiveness of this Consent;

 

                (d)           Borrowers shall have paid the feesand expenses required under the Fee Letter;

 

                (e)           No injunction, writ, restrainingorder, or other order of any nature prohibiting, directly or indirectly, theconsummation of the transactions contemplated herein shall have been issued andremain in force by any Governmental Authority against Borrowers or the LenderGroup; and

 

                (f)            Agent shall have received a copy ofthe Statement of Sources and Uses, attached hereto as Exhibit C.

 

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**6.             CONSTRUCTION.**  This Consent shall be governed by andconstrued in accordance with the laws of the State of California without givingeffect to its conflicts of laws principles (other than any provisions thereofvalidating the choice of the laws of the State of California as the governinglaw).

 

**7.             ENTIRE AGREEMENT.**  This Consent, and terms and provisionshereof, constitute the entire agreement among the parties pertaining to thesubject matter hereof and supersedes any and all prior or contemporaneousamendments relating to the subject matter hereof.  Except as expressly amended hereby, the Loan Agreement and otherLoan Documents shall remain unchanged and in full force and effect.  The agreements set forth herein are limitedto the specifics hereof, shall not apply with respect to any facts oroccurrences other than those on which the same are based, shall not excusefuture non-compliance with the Loan Agreement, and shall not operate as aconsent to any further or other matter, under the Loan Documents.  Without limiting the generality of theforegoing, in no event shall any provision of this Consent be deemed to operateas a consent to any matter which does not meet all of the criteria toconstitute a part of the Transactions. This Consent is a Loan Document. The failure of Borrowers to comply with any of the covenants or otheragreements set forth in this Consent shall constitute an immediate Event ofDefault.

 

**8.             COUNTERPARTS; TELEFACSIMILEEXECUTION.**  ThisConsent may be executed in any number of counterparts, all of which takentogether shall constitute one and the same instrument and any of the partieshereto may execute this Consent by signing any such counterpart.  Delivery of an executed counterpart of thisConsent by telefacsimile shall be equally as effective as delivery of anoriginal executed counterpart of this Consent. Any party delivering an executed counterpart of this Consent by telefacsimilealso shall deliver an original executed counterpart of this Consent, but thefailure to deliver an original executed counterpart shall not affect thevalidity, enforceability, and binding effect of this Consent.

 

**9.             AMENDMENTS.**  This Consent cannot be altered, amended,changed or modified in any respect or particular unless each such alteration,amendment, change or modification shall have been agreed to by each of theparties and reduced to writing in its entirety and signed and delivered by eachparty.

 

**10           MISCELLANEOUS.**  The lender group hereby reserves allremedies, powers, rights, and privileges that the lender group may have underthe Loan Agreement or the other Loan Documents, at law (including under thecode), in equity, or otherwise. 

 

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                INWITNESS WHEREOF, the parties have caused this Consent to be executed anddelivered as of the date first written above.

 
|                        | **GUITAR  CENTER, INC.,**          |
|-----------------------------|------------------------------------|
|                        | a Delaware corporation             |
|                        |                               |   |
|                        | By:                                | /s/ Bruce Ross |
|                        | Title:                             | Executive Vice President  and Chief Financial Officer |
|                        |                               |   |
|                        | **GUITAR  CENTER STORES, INC.,**   |
|                        | a Delaware corporation             |
|                        |                               |   |
|                        | By:                                | /s/ Erick Mason |
|                        | Title                              | Executive Vice President |
|                        |                               |   |
|                        | **MUSICIAN’S  FRIEND, INC.,** |
|                        | a Delaware corporation             |
|                        |                               |   |
|                        | By:                                | /s/ Bruce Ross |
|                        | Title:                             | Executive Vice President  and Chief Financial Officer |
|                        |                               |   |
|                        |                               |   |
| [signature  page continues] |

 

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|                        | **WELLS  FARGO RETAIL FINANCE, LLC,**                           |
|-----------------------------|-----------------------------------------------------------------|
|                        | a Delaware limited  liability company, as Agent and as a Lender |
|                        |                                                            |   |
|                        | By:                                                             | /s/ Daniel Durkin |
|                        | Name:                                                           |   |
|                        | Title:                                                          | Vice President |
|                        |                                                            |   |
|                        |                                                            |   |
| [signature  page continues] |

 

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|                        | **FLEET  RETAIL FINANCE INC,** |
|-----------------------------|--------------------------------|
|                        | a Delaware corporation,        |
|                        |                           |   |
|                        | By:                            | /s/ Christine M. Scott |
|                        | Name:                          | Christine M. Scott |
|                        | Title:                         | Vice President |
|                        |                           |   |
|                        |                           |   |
| [signature  page continues] |

 

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|                        | **UNION  BANK OF CALIFORNIA, N.A.,** |
|-----------------------------|--------------------------------------|
|                        | as a Lender                          |
|                        |                                 |   |
|                        | By:                                  | /s/ T. Kevin Powells |
|                        | Name:                                | T. Kevin Powells |
|                        | Title:                               | Assistant Vice President |
|                        |                                 |   |
|                        |                                 |   |
| [signature  page continues] |

 

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|                        | **CONGRESS  FINANCIAL CORPORATION  (WESTERN)** |
|-----------------------------|------------------------------------------------|
|                        | as a Lender                                    |
|                        |                                           |   |
|                        | By:                                            | /s/ Gary Whitaker |
|                        | Name:                                          | Gary Whitaker |
|                        | Title:                                         | Vice President |
|                        |                                           |   |
|                        |                                           |   |
| [signature  page continues] |

 

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|                        | **PNC BANK,  NATIONAL ASSOCIATION** |
|-----------------------------|-------------------------------------|
|                        | as a Lender                         |
|                        |                                |   |
|                        | By:                                 | /s/ Lawrence Weinstein |
|                        | Name:                               | Lawrence Weinstein |
|                        | Title:                              | Vice President |
|                        |                                |   |
|                        |                                |   |
| [signature  page continues] |

 

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|   | **LASALLE  BUSINESS CREDIT, INC.** |
|--------|------------------------------------|
|   | as a Lender                        |
|   |                               |   |
|   | By:                                | /s/ Bent Hammeleff |
|   | Name:                              | Bent Hammeleff |
|   | Title:                             | Vice President |

 

 

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