Exhibit 10.42


 


EXECUTION VERSION


 


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, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO RETAIL FINANCE, LLC, a Delaware
limited liability company, as the arranger and administrative agent for the
Lenders (in such capacity, together with its successors, if any, in such
capacity, “Agent” and together with the Lenders, collectively, the “Lender
Group”), and, on the other hand, GUITAR
CENTER, INC., a Delaware corporation (“GCI”), GUITAR CENTER STORES, INC., a Delaware
corporation (“GCS”), and MUSICIAN’S
FRIEND, INC., a Delaware corporation (“MFI”; together with
GCI 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 are
party to that certain Loan and Security Agreement, dated as of December 21,
2001 (as the same may be amended, restated, supplemented, or otherwise modified
from time to time, including hereby, the “Loan Agreement”), pursuant to
which the Lenders have made certain loans and financial accommodations to
Borrowers;


 


                WHEREAS, Borrowers have requested that the
Lender Group consent to (1) GCI’s issuance of unsecured convertible debentures
in the principal amount of up to $100,000,000 (the “Debentures”) upon
the terms and conditions set forth in the Indicative Term Sheet, a copy of
which is attached hereto as Exhibit A, and (2) the repayment (together with all
prepayment 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 to
the satisfaction of the conditions set forth herein, the Lender Group is
willing to consent to the Transactions.


 


                NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


 


1.             DEFINITIONS.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement, as amended hereby.  As used
herein, “Fee Letter” means that certain Fee Letter of even date by and between
the Borrowers and the Agent.


 

















 


2.             CONSENT.  Subject to the satisfaction of each of the
conditions listed in Section 5, the provisions of the Loan Agreement to
the contrary notwithstanding, including without limitation, Sections 7.1 and
7.8 of the Loan Agreement, the Lender Group hereby consents to the consummation
of the Transactions; provided  however, that the parties agree
that this Consent will be of no force or effect in the event that the
Debentures are not issued by June 20, 2003, and will terminate on June 20, 2003
in such event.  Notwithstanding anything
herein to the contrary, Section 5(d) of this Consent will survive if the
Consent is of no force and effect on June 20, 2003 or if the Consent terminates
for any reason.


 


3.             AMENDMENT TO LOAN AGREEMENT.


 


                (a)           Section 1.1 of the Loan Agreement is
hereby amended by adding the following definitions in alphabetical order
thereto:


 


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


 


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


 


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


 


““Qualified
Cash Equivalents” means the proceeds of the sale of the Debentures,
consisting of (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within 1
year from the date of acquisition thereof, (b) marketable direct obligations
issued by any state of the United States or any political subdivision of any
such state or any public instrumentality thereof maturing within 1 year from
the date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either Standard & Poor’s Rating
Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial
paper maturing no more than 270 days from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptances
maturing within 1 year from the date of acquisition thereof issued by any bank
organized under the laws of the United States or any state thereof having at
the date of acquisition thereof combined capital and surplus of not less than
$250,000,000, (e) demand Deposit Accounts maintained with any bank organized
under the laws of the United States or any state thereof so long as the amount
maintained with any individual bank is less than or equal to $100,000 and is
insured by the Federal Deposit Insurance Corporation, and (f) Investments in
money market funds substantially all of whose assets are invested in the types
of assets described in clauses (a) through (e) above.”


 

















 


““Redemption
Account” means that certain segregated account maintained at BNY Western
Trust Company for the purpose of redeeming the Senior Notes.”


 


“Statement
of Sources and Uses” means that certain statement of sources and uses
respecting the proceeds from the Debentures and attached as Exhibit C to that
certain Consent and Amendment dated as of June 9, 2003 between the Borrowers
and the Lender Group.”


 


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


 


“6.25       The Indenture Indebtedness.


 


(a)           On or before the date upon which the
Debentures are issued, GCI shall deliver the notices of redemption required by
and in accordance with Article III of the Senior Indenture, and shall provide
Agent 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 Agent
pro forma financial information along with balance sheets as of the date the
Senior Notes are paid, in form and substance reasonably satisfactory to the
Agent.


 


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


 


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


 


(e)           Borrowers agree to utilize the
proceeds of the Debentures solely in accordance with the Statement of Sources
and Uses.”


 


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


 


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


 


                (d)           Section 7.1 of the Loan Agreement is
hereby 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 associated
therewith) so long as: (i) the terms and conditions of such refinancings,
renewals, or extensions do not materially impair the prospects of repayment of
the 


 

















 


 


Obligations by Borrowers,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals,
refundings, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, (iv) to the
extent that Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing, renewal, or extension Indebtedness
must be at least as favorable to the Lender Group as those applicable to the
refinanced, 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 is
hereby amended by deleting subsection (a) in its entirety and replacing it with
the following subsection (a):


 


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


 


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


 


“(c)          GCI shall not, and shall not permit
any Subsidiary to, amend, supplement, or modify the Debentures or the Indenture
or repay the principal of, or make any other payment in relation to, the
Debentures; provided, so long as no Event of Default has occurred and is
continuing or would result therefrom, the foregoing shall not prohibit (i) the
payment of regularly scheduled interest on the Debentures, (ii) the repayment
of the Debentures with the proceeds of any refinancing thereof (provided that
such refinancing Indebtedness complies with the requirements of Section
7.1(1) and is otherwise on terms substantially similar to the Debentures),
and (iii) modifications or amendments to the Debentures or the Indenture if the
effect thereof could not be expected to result in a Material Adverse Change and
otherwise do not involve the amendment or modification of provisions which
would increase interest rates, principal or interest payment amounts, total
principal amounts, or require payment of any such amounts at earlier times, or
similar terms and provisions, and”


 


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


 


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


 

















 


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


 


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


 


                (c)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein has been issued and
remains in force by any Governmental Authority against Borrowers, any Guarantor
or any member of the Lender Group;


 


                (d)           No Default or Event of Default has
occurred and is continuing on the date hereof or as of the date of the
effectiveness of this Consent; and


 


                (e)           The representations and warranties in
the Loan Agreement and the other Loan Documents are true and correct in all
material 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 to
an earlier date).


 


5.             CONDITIONS TO THIS CONSENT.  The satisfaction of each of the following
shall constitute conditions to the effectiveness of this Consent and each and every
provision hereof:


 


                (a)           The representations and warranties in
the Loan Agreement and the other Loan Documents shall be true and correct in
all 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 to an
earlier date);


 


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


 


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


 


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


 


                (e)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued and
remain in force by any Governmental Authority against Borrowers or the Lender
Group; and


 


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


 

















 


6.             CONSTRUCTION.  This Consent shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to its conflicts of laws principles (other than any provisions thereof
validating the choice of the laws of the State of California as the governing
law).


 


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


 


8.             COUNTERPARTS; TELEFACSIMILE
EXECUTION.  This
Consent may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Consent by signing any such counterpart.  Delivery of an executed counterpart of this
Consent by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Consent. 
Any party delivering an executed counterpart of this Consent by telefacsimile
also shall deliver an original executed counterpart of this Consent, but the
failure to deliver an original executed counterpart shall not affect the
validity, 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 the
parties and reduced to writing in its entirety and signed and delivered by each
party.


 


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


 

















 


 


                IN
WITNESS WHEREOF, the parties have caused this Consent to be executed and
delivered 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]

  



 

















 


	
   

  	
  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]

  



 

















 


	
   

  	
  FLEET
  RETAIL FINANCE INC,

  
	
   

  	
  a Delaware corporation,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine M. Scott

  
	
   

  	
  Name:

  	
  Christine M. Scott

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [signature
  page continues]

  



 

















 


 


	
   

  	
  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]

  



 

















 


	
   

  	
  CONGRESS
  FINANCIAL CORPORATION

  (WESTERN)

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Whitaker

  
	
   

  	
  Name: 

  	
  Gary Whitaker

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [signature
  page continues]

  



 

















 


	
   

  	
  PNC BANK,
  NATIONAL ASSOCIATION

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lawrence Weinstein

  
	
   

  	
  Name:

  	
  Lawrence Weinstein

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [signature
  page continues]

  



 

















 


	
   

  	
  LASALLE
  BUSINESS CREDIT, INC.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bent Hammeleff

  
	
   

  	
  Name:

  	
  Bent Hammeleff

  
	
   

  	
  Title:

  	
  Vice President