Exhibit 4.9
EXECUTION VERSION
ASSIGNMENT AND
ASSUMPTION
Assignment and Assumption (the
“ Assignment and Assumption ”), dated as of
March 2, 2011, among ACOF II GC Holdings (Direct), L.P. and ACOF
III GC Holdings (Direct), L.P. (collectively, and together with
their respective transferees the “ Assignors ”),
Guitar Center, Inc. (the “ Assignee ”) and
Guitar Center Holdings, Inc. (the “ Issuer
”). Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture, dated as of
August 6, 2008, between the Issuer and The Bank of New York Mellon
Trust Company, N.A. (as amended, restated, supplemented,
restructured or otherwise modified from time to time, the “
HoldCo Indenture ”), governing the 14.09% Senior PIK
Notes due 2016 of the Issuer (the “ HoldCo Notes
”), receipt of a copy of which is hereby acknowledged by the
Assignee.
1.
Assignment
.
a.
With respect to each of the
semi-annual interest periods applicable to the HoldCo Notes
commencing October 16, 2010, April 16, 2011, October 16 2011 and
April 16, 2012 (each a “ Commencement Date ”),
at the Issuer’s election (each such election, an “
Interest Assignment Election ”), subject to and in
accordance with the terms and conditions set forth herein, each
Assignor shall irrevocably sell and assign to the Assignee, and the
Assignee shall irrevocably purchase and assume from each Assignor
(each such assignment, an “ Assignment ”),
effective as of the Interest Payment Date for the applicable
interest period (the “ Assignment Effective Date
”), all of such Assignor’s rights as a Holder to
receive 50% of the interest payable on the HoldCo Notes held by
such Assignor for such interest period on such Interest Payment
Date (the “ Assigned Interest ”), in exchange
for Assignee’s 11.50% Unsecured Senior Notes (“
Additional OpCo Notes ”) issued pursuant to the
Indenture, dated as of August 6, 2008, between the Assignee and The
Bank of New York Mellon Trust Company, N.A. (as amended, restated,
supplemented, restructured or otherwise modified from time to time,
the “ OpCo Indenture ”), governing the
Additional OpCo Notes, in an aggregate principal amount equal to
the Assigned Interest.
b.
For the interest periods commencing
October 16, 2010 and April 16, 2011, the Issuer may make the
Interest Assignment Election by delivering written notice to the
Assignors in the form set forth as Exhibit B on or prior to
April 1, 2011. For the interest periods commencing October
16, 2011 and April 16, 2012, the Issuer may make the Interest
Assignment Election by delivering written notice to the Assignors
in the form set forth as Exhibit B not less than 15 days
prior to the applicable Commencement Date.
c.
On the applicable Assignment
Effective Date, the Assignee shall issue Additional OpCo Notes to
each Assignor, dated (and accruing interest from) the applicable
Assignment Effective Date, in an aggregate principal amount equal
to the Assigned Interest, registered in the name of the Assignor or
its designated nominee.
d.
Each Assignment shall be without
recourse to, or representation (except as set forth in Section 4)
or warranty by, the Assignors.
e.
For U.S. federal income tax
purposes, each party shall treat the Assignment as if the
Issuer is making a cash payment to each Assignor in an amount equal
to the Assigned Interest and such Assignor is making a loan to the
Assignee in such amount pursuant to the issuance of the
Additional OpCo Notes. No party shall take any position on
any of its federal, state or local income or franchise tax returns,
or take any other tax reporting position, that is adverse or
contrary to, or inconsistent with the foregoing, unless otherwise
required by a
final “determination” within
the meaning of Section 1313(a) of the Internal Revenue Code of
1986, or analogous provision of state or local law to the
contrary.
2.
Conditions to
Assignment . Each
Assignment by each Assignor shall be subject to the
satisfaction (or written waiver by such Assignor) of the following
conditions precedent as of the applicable Commencement Date
and Assignment Effective Date:
a.
The Issuer’s Consolidated Net
Leverage Ratio (defined below) as of each of the applicable
Commencement Date and Assignment Effective Date shall be less than
8.5:1.0, calculated on a pro forma basis taking into account the
applicable Assignment and issuance of the Additional OpCo
Notes.
“ Consolidated Net Leverage
Ratio ” as of any date means the ratio of (a) the sum of
(i) Consolidated Total Debt (as defined in the Credit Agreement as
in effect on the date hereof) as of such date, minus (ii) the
aggregate amount of unrestricted cash and Cash Equivalents of the
Issuer and its Restricted Subsidiaries on such date to (b)
Consolidated EBITDA (as defined in the Credit Agreement as in
effect on the date hereof) for the most recently ended four fiscal
quarters for which internal financial statements of the Issuer are
available, in each case calculated on a pro forma basis taking into
account the applicable Assignment and issuance of the Additional
OpCo Notes and otherwise calculated in a manner consistent with the
definition of “Fixed Charge Coverage Ratio,” including
with respect to any pro forma calculations.
b.
The representations and warranties
set forth in Section 3 hereof and in Section 3 of the Transaction
Agreement, dated as of February 14, 2011, by and among the parties
hereto, shall be true and correct on and as of each of the
applicable Commencement Date and Assignment Effective Date, as
though made on and as of each such date, and the Assignee shall
have complied with all of its covenants to be complied with on or
prior to each such date.
c.
On each of the applicable
Commencement Date and Assignment Effective Date, there is (and, pro
forma for the applicable Assignment and issuance of the Additional
OpCo Notes there shall be) no Default or Event of Default
under:
(i)
the ABL Facility Credit Agreement,
dated as of October 9, 2007 (as amended, restated, supplemented,
restructured or otherwise modified from time to time), among Guitar
Center, Inc. (as successor to VH Mergersub, Inc.), the facility
guarantors named therein and the agents and lenders party
thereto;
(ii)
the Credit Agreement, dated as of
October 9, 2007 (as amended, restated, supplemented, restructured
or otherwise modified from time to time, the “ Credit
Agreement ”), among Guitar Center, Inc. (as successor to
VH Mergersub, Inc.), the facility guarantors named therein and the
agents and lenders party thereto;
(iii)
the OpCo Indenture; or
(iv)
the HoldCo Indenture.
d.
The Assignor shall have received a
certificate signed by an authorized officer of the Assignee
certifying that each of the foregoing conditions has been satisfied
as of the applicable Assignment Effective Date.
2
3.
Representations of Assignee and
Issuer . Each of
the Assignee and the Issuer represents and warrants that, as of the
date hereof, and as of each Commencement Date and Assignment
Effective Date:
a.
each of them has full power and
authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby,
b.
the execution and delivery of this
Assignment and Assumption and the consummation of the transactions
contemplated hereby will not (i) require the consent of any party
to any material contract to which the Issuer or any of its
Subsidiaries, is a party or by which any of them is bound, or the
consent, approval, order or authorization of, or the registration,
declaration or filing with, any governmental authority, (ii)
violate any applicable law, (iii) result in a breach or violation
of any provision of, or constitute a default under, any such
contract, or (iv) conflict with any provision of the certificate of
incorporation, by-laws or other charter document of the Issuer or
any of its Subsidiaries,
c.
the Assignee is sophisticated with
respect to decisions to acquire assets of the type represented by
the Assigned Interest and either it, or the person exercising
discretion in making its decision to acquire the Assigned Interest,
has experience and expertise in the making of or investing in
commitments, loans or investments such as the HoldCo
Notes,
d.
the Assignee has received a copy of
the HoldCo Indenture, and is familiar with, and has reviewed, the
financial statements of the Issuer and such other documents and
information as it deems appropriate to make its own credit analysis
and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest, and
e.
the Assignee has, independently and
without reliance upon any other person and based on such documents
and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Assignment and Assumption
and to purchase the Assigned Interest.
4.
Representations of
Assignors . Each of the
Assignors represents and warrants that, as of the date hereof, and
as of each Commencement Date and Assignment Effective Date as to
itself:
a.
each of them has full power and
authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby,
b.
the execution and delivery of this
Assignment and Assumption and the consummation of the transactions
contemplated hereby will not (i) require the consent of any party
to any material contract to which the Assignor, is a party or by
which any of them is bound, or the consent, approval, order or
authorization of, or the registration, declaration or filing with,
any governmental authority, (ii) violate any applicable law, (iii)
result in a breach or vio
