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As Filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
GUITAR CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4600862
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
------------------
5155 CLARETON DRIVE
AGOURA HILLS, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
MUSICIAN'S FRIEND, INC. 1998 STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
------------------
BRUCE ROSS COPY TO:
EXECUTIVE VICE PRESIDENT ANTHONY J. RICHMOND, ESQ.
AND CHIEF FINANCIAL OFFICER LATHAM & WATKINS
GUITAR CENTER, INC. 135 COMMONWEALTH DRIVE
5155 CLARETON DRIVE MENLO PARK, CALIFORNIA 94025
AGOURA HILLS, CALIFORNIA 91301 (650) 328-4600
(818) 735-8800
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ---------------- ---------------------- --------------------- ---------------------
TITLE OF SECURITIES TO BE AMOUNT OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED SHARES TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
REGISTERED SHARE PRICE
- ---------------------------------- ---------------- ---------------------- --------------------- ---------------------
- ---------------------------------- ---------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
COMMON STOCK, $0.01 PAR VALUE
PER SHARE.................. 250,505(1) $20.31(2) $5,087,757(3) $1,415
</TABLE>
(1) 250,505 shares of common stock issuable pursuant to the Musician's Friend
1998 Stock Option Plan (the "1998 Plan"), which plan was assumed by Guitar
Center, Inc. pursuant to the Agreement and Plan of Merger between and among
Guitar Center, Inc., EMIC Corporation, Musician's Friend, Inc. and the
stockholders of Musician's Friend, Inc. (the "Merger"), are being newly
registered hereunder. The number of shares issuable pursuant to such plan
has been calculated pursuant to the exchange ratio utilized in connection
with the Merger.
(2) Pursuant to Rule 457 of the Securities Act, the Proposed Maximum Offering
Price Per Share is based on the weighted average exercise price per share
($20.31) of outstanding options for 250,505 shares under the 1998 Plan. The
weighted average exercise price per share has been calculated in accordance
with the exchange ratio utilized in connection with the Merger.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The information called for in Part I of Form S-8 is not being filed
with or included in this Form S-8 (by incorporation by reference or otherwise)
in accordance with the rules and regulations of the Securities and Exchange
Commission (the "Commission").
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are hereby incorporated by reference in, and shall be deemed to be a
part of, this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ending March 31, 1999;
(c) The Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ending June 30, 1999;
(d) The Registrant's Current Report on Form 8-K dated May
28, 1999;
(e) The Registrant's Current Report on Form 8-K dated
June 4, 1999;
(f) The Registrant's Current Report on Form 8-K/A dated
August 11, 1999; and
(g) The description of the Registrant's Common Stock
contained in the Registration Statement on Form S-1
(No. 333-12547) filed pursuant to Section 5 of the
Securities Act on January 31, 1997, including any
subsequently filed amendments and reports updating
such description.
In addition to the foregoing documents, all documents subsequently
filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
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ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") gives Delaware corporations broad powers to indemnify their present
and former directors and officers against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with threatened, pending or completed actions, suits or
proceedings to which they are parties or are threatened to be made parties by
reason of being or having been such directors or officers, subject to specified
conditions and exclusions; gives a director or officer who successfully defends
an action the right to be so indemnified; and permits a corporation to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or otherwise.
The Registrant's Restated Certificate of Incorporation provides that,
to the fullest extent permitted by the DGCL, directors should not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director. Under Delaware law, a director's liability to the Registrant
or its stockholders may not be limited or eliminated (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) with respect to certain unlawful dividend
payments, stock redemptions or repurchases, or (iv) for any transaction from
which the director derived an improper personal benefit. This provision, in
effect, eliminates the rights of the Registrant and its stockholders (through
stockholders' derivative suits against the Registrant) to recover monetary
damages from a director for breach of his or her fiduciary duty of care as a
director, except in the situations set forth in clauses (i) through (iv) above.
In addition, the Certificate of Incorporation does not alter the liability of
directors under federal securities law and does not limit or eliminate the right
of the Registrant or any stockholder to seek non-monetary relief, such as an
injunction or rescissions, in the event of a breach in a director's duty of
care. The Restated Certificate of Incorporation requires the Registrant to
indemnify all directors and officers of the Registrant to the fullest extent
permitted by law. The Bylaws also require the Registrant to indemnify and
advance indemnification expenses to the Registrant's officers and directors. The
Registrant has entered into agreements to provide indemnification for the
Registrant's directors and executive officers in addition to the indemnification
permitted by the Certificate of Incorporation. These agreements, among other
things, will indemnify the Registrant's directors and executive officers of
certain expenses (including attorneys' fees), and all losses, claims,
liabilities, judgments, fines and settlement amounts incurred by such person
arising out of or in connection with such person's service as a director or
officer of the Registrant to the fullest extent permitted by applicable laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
3
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ITEM 8. EXHIBITS
See Index to Exhibits on page 7.
ITEM 9. UNDERTAKINGS
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) to reflect in the prospectus any facts or
events arising after the effective date of this registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this registration statement;
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
registration statement or any material change to such information in
this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant
4
<PAGE>
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Agoura Hills, State of California, on this 8th day
of October, 1999.
GUITAR CENTER, INC.,
a Delaware corporation
By: /s/ Bruce Ross
-----------------------------
Bruce Ross
Executive Vice President and
Chief Financial Officer
5
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POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Larry Thomas, Marty Albertson and Bruce Ross, and each or any of them, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities, to sign any and all amendments (including post-effective amendments)
and other documents in connection therewith, with the Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Larry Thomas Co-Chief Executive Officer, Chairman of the October 7, 1999
- ------------------------------------ Board and Director
Larry Thomas
/s/ Marty Albertson Co-Chief Executive Officer, President and October 7, 1999
- ------------------------------------ Director
Marty Albertson
/s/ Bruce Ross Executive Vice President, Chief Financial October 7, 1999
- ------------------------------------ Officer (Principal Financial and Accounting
Bruce Ross Officer)
/s/ Steven Burge Director October 7, 1999
- ------------------------------------
Steven Burge
/s/ David Ferguson Director October 7, 1999
- ------------------------------------
David Ferguson
/s/ Harvey Kibel Director October 7, 1999
- ------------------------------------
Harvey Kibel
/s/ Michael Lazarus Director October 7, 1999
- ------------------------------------
Michael Lazarus
/s/ Peter Starrett Director October 7, 1999
- ------------------------------------
Peter Starrett
/s/ Jeffrey Walker Director October 7, 1999
- ------------------------------------
Jeffrey Walker
</TABLE>
6
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INDEX TO EXHIBITS
EXHIBITS
4.1 Musician's Friend, Inc. 1998 Stock Option Plan.
5.1 Opinion of Latham & Watkins as to the legality of the shares
being registered.
23.1 Consent of Latham & Watkins (included in Exhibit 5.1).
23.2 Consent of KPMG LLP
23.3 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney (included on the signature page to this
Registration Statement).
7
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EXHIBIT 4.1
MUSICIAN'S FRIEND, INC.
1998 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
SECTION 1. PURPOSE.........................................................................................1
SECTION 2. DEFINITIONS.....................................................................................1
(a) "BOARD OF DIRECTORS".....................................................................................1
(b) "CHANGE IN CONTROL"......................................................................................1
(c) "CODE"...................................................................................................2
(d) "COMMITTEE"..............................................................................................2
(e) "COMPANY"................................................................................................3
(f) "EMPLOYEE"...............................................................................................3
(g) "EXERCISE PRICE".........................................................................................3
(h) "FAIR MARKET VALUE"......................................................................................3
(i) "ISO"....................................................................................................4
(j) "NONSTATUTORY OPTION"....................................................................................4
(k) "OPTION".................................................................................................4
(l) "OPTIONEE"...............................................................................................4
(m) "OUTSIDE DIRECTOR".......................................................................................4
(n) "PLAN"...................................................................................................4
(o) "SERVICE"................................................................................................4
(p) "SHARE"..................................................................................................5
(q) "STOCK"..................................................................................................5
(r) "STOCK OPTION AGREEMENT".................................................................................5
(s) "SUBSIDIARY".............................................................................................5
SECTION 3. ADMINISTRATION..................................................................................5
(a) COMMITTEE MEMBERSHIP.....................................................................................5
(b) COMMITTEE PROCEDURES.....................................................................................5
(c) COMMITTEE RESPONSIBILITIES...............................................................................5
SECTION 4. ELIGIBILITY.....................................................................................7
(a) GENERAL RULE.............................................................................................7
(b) ISOS.....................................................................................................7
SECTION 5. STOCK SUBJECT TO PLAN...........................................................................7
(a) BASIC LIMITATION.........................................................................................7
(b) PLAN.....................................................................................................7
(c) ADDITIONAL SHARES........................................................................................8
</TABLE>
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TABLE OF CONTENTS (CONT'D)
<TABLE>>
<S> <C>
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.................................................................8
(a) STOCK OPTION AGREEMENT...................................................................................8
(b) NUMBER OF SHARE..........................................................................................8
(c) EXERCISE PRICE...........................................................................................8
(d) WITHHOLDING TAXES........................................................................................9
(e) EXERCISABILITY AND TERM..................................................................................9
(f) NONTRANSFERABILITY.......................................................................................9
(g) EXERCISE OF OPTIONS ON TERMINATION OF SERVICE............................................................9
(h) NO RIGHTS AS A SHAREHOLDER..............................................................................10
(i) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS.......................................................10
(j) RESTRICTIONS ON TRANSFER OF SHARES......................................................................10
SECTION 7. PAYMENT FOR SHARES.............................................................................10
(a) GENERAL RULE............................................................................................10
(b) SURRENDER OF STOCK......................................................................................10
(c) PROMISSORY NOTES........................................................................................11
(d) CASHLESS EXERCISE.......................................................................................11
SECTION 8. ADJUSTMENT OF SHARES...........................................................................11
(a) GENERAL.................................................................................................11
(b) REORGANIZATIONS.........................................................................................12
(c) RESERVATION OF RIGHTS...................................................................................12
SECTION 9. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.......................................................12
(a) EFFECTIVE DATE..........................................................................................12
(b) ELECTIONS TO RECEIVE NONSTATUTORY OPTIONS...............................................................12
(c) NUMBER AND TERMS OF NONSTATUTORY OPTIONS................................................................13
SECTION 10. LEGAL REQUIREMENTS.............................................................................13
SECTION 11. NO EMPLOYMENT RIGHTS...........................................................................13
SECTION 12. DURATION AND AMENDMENTS........................................................................13
(a) TERM OF THE PLAN........................................................................................13
(b) RIGHT TO AMEND OR TERMINATE THE PLAN....................................................................13
(c) EFFECT OF AMENDMENT OR TERMINATION......................................................................14
SECTION 13. EXECUTION......................................................................................14
</TABLE>
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MUSICIAN'S FRIEND, INC.
1998 STOCK OPTION PLAN
(EFFECTIVE AS OF FEBRUARY 13, 1998)
SECTION 1. PURPOSE.
This Musician's Friend, Inc. 1998 Stock Option Plan (the "Plan")
consists of two component stock option plans, the Musician's Friend, Inc. Key
Employees 1998 Stock Option Plan (the "Key Employees Plan") and the Musician's
Friend, Inc. 1998 Employees Stock Option Plan (the "Employees Plan," and,
together with the "Key Employees Plan," the "Plan"). In general, the provisions
set forth herein shall, except as specifically provided in this Plan, have the
same meaning with respect to each separate component plan. The purpose of the
Plan is to offer selected employees, directors and consultants an opportunity to
acquire a proprietary interest in the success of the Company, or to increase
such interest, to encourage such selected persons to remain in the employ of the
Company and to attract new employees with outstanding qualifications by
purchasing Shares of the Company's Common Stock. The Plan provides for the grant
of Options to purchase Shares. Options granted under the Plan may include
Nonstatutory Options as well as Incentive Stock Options intended to qualify
under section 422 of the Internal Revenue Code. The Plan was initially adopted
effective as of February 13, 1998, subject to the approval of the Company's
shareholders.
SECTION 2. DEFINITIONS.
(a) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
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(i) the consummation of the acquisition of fifty-one
percent (51%) or more of the outstanding Stock of the Company by one
person or by two or more persons acting as a partnership, limited
partnership, syndicate or other group pursuant to a tender offer
validly made under any federal or state law (other than a tender offer
by the Company);
(ii) the consummation of a merger, consolidation or other
reorganization of the Company (other than a reincorporation of the
Company), if after giving effect to such merger, consolidation or other
reorganization of the Company, the stockholders of the Company
immediately prior to such merger, consolidation or other reorganization
do not represent a majority in interest of the holders of voting
securities (on a fully diluted basis) with the ordinary voting power to
elect directors of the surviving or resulting entity after such merger,
consolidation or other reorganization;
(iii) the sale of all or substantially all of the assets of
the Company to a third party who is not an affiliate (including a
parent or Subsidiary) of the Company;
(iv) the dissolution of the Company pursuant to action
validly taken by the stockholders of the Company in accordance with
applicable state law; or
(v) reorganization, dissolution or other such event or
series of events, which in the opinion of a majority of the Board (as
reflected in a written resolution of the Board) has resulted in a
change of control of the Company.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" shall mean the full Board of Directors and/or a
committee of the Board Directors which is authorized to administer the Plan
under Section 3. Effective as of the initial public offering of the Company's
Stock, the Committee shall have membership composition which enables the Key
Employees Plan to qualify under Rule 16b-3 with regard to
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grant of Options to persons who are subject to Section 16 of the Securities
Exchange Act of 1934. The Board may also appoint one or more separate
committees of the Board, each composed of one or more directors of the
Company who need not qualify under Rule 16b-3, may administer the Key
Employees Plan and the Employees Plan with respect to employees are not
subject to Section 16 of the Exchange Act, may grant Options under the Plan
to employees and may determine all terms of such Options.
(e) "COMPANY" shall mean Musician's Friend, Inc., a Delaware
corporation.
(f) "EMPLOYEE" shall mean (i) any individual who is a common-law
employee of the company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) a consultant who performs services for the Company or a
Subsidiary. Service as a member of the Board of Director as a consultant shall
be considered employment for all purposes of the Plan except the second sentence
of Section 4(a).
(g) "EXERCISE PRICE" shall mean the amount for which one Share may
be purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option agreement.
(h) "FAIR MARKET VALUE" shall mean the fair market value of a
Share, as determined by committee in good faith as follows:
(i) If the Common Shares were traded over-the-counter on
the date in question but were not classified as a national market
issue, then the Fair Market Value shall be equal to the mean between
the last reported representative bid and asked prices quoted by the
Nasdaq system for such date;
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(ii) If the Common Shares were traded over-the-counter on
the date in question and were classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction price
quoted by the Nasdaq system for such date;
(iii) If the Common Shares were traded on a stock exchange
on the date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite transactions
report for such date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on prices reported in the Western Edition of THE WALL STREET JOURNAL.
Such determination shall conclusive and binding on all persons.
(i) "ISO" shall mean an employee incentive stock option described
in section 422(b) of Code.
(j) "NONSTATUTORY OPTION" shall mean an employee stock option that
is not an ISO.
(k) "OPTION" shall mean an ISO or Nonstatutory Option granted
under the Plan and entitling the holder to purchase Shares.
(l) "OPTIONEE" shall mean an individual who holds an Option.
(m) "OUTSIDE DIRECTOR" shall mean a member of the Board of
Directors who is not a common-law employee of the Company or a Subsidiary.
(n) "PLAN" shall mean this Musician's Friend, Inc. 1998 Stock
Option Plan which consists of the Key Employees Plan and the Employees Plan.
(o) "SERVICE" shall mean service as an Employee.
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(p) "SHARE" shall mean one share of Stock, as adjusted in
accordance with Section 8 (if applicable).
(q) "STOCK" shall mean the Common Stock, of the Company, and
such other stock as be substituted therefor in accordance with the adjustment
provisions of the Plan.
(r) "STOCK OPTION AGREEMENT" shall mean the agreement between
the Company and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her Option.
(s) "SUBSIDIARY" shall mean any corporation, of which the
Company and/or one or more other Subsidiaries own not less than 50 percent of
the total combined voting power of all classes outstanding stock of such
corporation. A corporation that attains the status of a Subsidiary on a date
after the adoption of the Plan shall be considered a Subsidiary commencing as
of such date.
SECTION 3. ADMINISTRATION.
(a) COMMITTEE MEMBERSHIP. The Plan shall be administered by the
Committee, which shall consist of members of the Board of Directors. The
members of the Committee shall be appointed by the Board of Directors. If no
Committee has been appointed, the entire Board of Directors shall constitute
the Committee.
(b) COMMITTEE PROCEDURES. The Board of Directors shall
designate one of the members of the Committee as chairperson. The Committee
may hold meetings at such times and places as it shall determine. The acts of
a majority of the Committee members present at meetings at which a quorum
exists, or acts reduced to or approved in writing by all Committee members,
shall be valid acts of the Committee.
(c) COMMITTEE RESPONSIBILITIES. Subject to the provisions of
the Plan, the Committee shall have full authority and discretion to take the
following actions:
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(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and
forms relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Options are to be granted under the
Plan;
(v) To select the Optionees;
(vi) To determine the number of Shares to be made subject
to each Option;
(vii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, to determine whether
such Option is to be classified as an ISO or as a Nonstatutory Option,
and to specify the provisions of the Stock Option Agreement relating to
such Option;
(viii) To amend or terminate any outstanding Stock Option
Agreement;
(ix) To determine the disposition of an Option in the
event of an Optionee's divorce or dissolution of marriage;
(x) To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan and any Option;
(xi) To prescribe the consideration for the grant of each
Option under the Plan and to determine the sufficiency of such
consideration; and
(xii) To take any other actions deemed necessary or
advisable for the administration of the Plan.
All decisions, interpretations and other actions of the Committee
shall be final and binding on all Optionees, and all persons deriving their
rights from an Optionee. No member of
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Committee shall be liable for any action that he or she has taken or has
failed to take in good faith with respect to the Plan or any Option.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULE. Only Employees, as defined in Section 2(e),
shall be eligible for designation as Optionees under either the Key Employees
Plan or the Employees Plan by the committee. In addition, only individuals
who are employed as common-law employees by the company or a Subsidiary shall
be eligible for the grant of ISOs. Further, with respect to the Employees
Plan, no Employee who is subject to Section 16 of the Securities Exchange Act
of 1934 shall be eligible for designation as an Optionee.
(b) ISOS. Only Employees who are common-law employees of the
Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In
addition, an Employee who owns more than five percent (5%) of the total
combined voting power of all classes of outstanding stock of the Company or
any of its Parents or Subsidiaries shall not be eligible for the grant of ISO
unless the requirements set forth in section 422(c)(5) of the Code are
satisfied.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) BASIC LIMITATION. Shares offered under the Plan shall be
authorized but unissued Shares. The number of Shares which are subject to
Options outstanding at any time under the Plan shall not exceed the number of
Shares which then remain available for issuance under the
(b) PLAN. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan. The aggregate number of Shares which may be issued
under the Key Employees Plan (upon exercise of Options) shall not exceed
20,500 Shares, subject to adjustment pursuant to Section 8. The aggregate
number of
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Shares which may be issued under the Employees Plan (upon exercise of
options) shall not exceed 4,500 Shares, subject to adjustment pursuant to
Section 8.
(c) ADDITIONAL SHARES. In the event that any outstanding Option
for any reason expires is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option shall again be available
for the purposes of the Plan under which the Option was originally granted.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option shall be
evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements need not be identical.
(b) NUMBER OF SHARE. Each Stock Option Agreement shall specify
the number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify
the Exercise Price. The Exercise Price of an ISO shall not be less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of
grant. Subject to the preceding sentence, the Exercise Price under any Option
shall be determined by the Committee in its sole discretion. The Exercise
Price shall be payable in a form described in Section 7.
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(d) WITHHOLDING TAXES. As a condition to the exercise of an
Option, the Optionee shall such arrangements as the Committee may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee
shall also make such arrangements as the Committee may require for the
satisfaction o f any federal, state, local or foreign withholding tax
obligations that may arise in connection with the disposition of Shares
acquired by exercising an Option.
(e) EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed ten (10)
years from the date of grant. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end
of its term in the event of the termination of the Optionee's Service. The
Committee may determine, at the time of granting an Option or thereafter,
that such Option shall become fully exercisable as to all Common Shares
subject to such Option in the event that a Change in Control occurs with
respect to the Company.
(f) NONTRANSFERABILITY. Except as provided in the applicable
Stock Option Agreement, no Option shall be transferable by the Optionee other
than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only by him or by guardian or
legal representative. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
(g) EXERCISE OF OPTIONS ON TERMINATION OF SERVICE. Each Option
shall set forth the extent to which the Optionee shall have the right to
exercise the Option following termination of
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Optionee's Service with the Company and its Subsidiaries. Such provisions
shall be determined in the sole discretion of the Committee, need not be
uniform among all Options issue pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment.
(h) NO RIGHTS AS A SHAREHOLDER. An Optionee, or a transferee of
an Optionee, shall have no rights as a shareholder with respect to any Shares
covered by an Option until the date of issuance of a stock certificate for
such Shares.
(i) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within
the limitations of the Plan, the Committee may modify, extend or assume
outstanding Options or may accept the cancellation of outstanding Options
(whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of Shares and at the same or a
different Exercise Price or for other consideration.
(j) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon
exercise of an Option shall be subject to such rights of repurchase, rights
of first refusal and other transfer restrictions the Committee may determine.
Such restrictions shall be set forth in the applicable Stock Option Agreement
and shall apply in addition to any restrictions that may apply to holders of
Shares generally.
SECTION 7. PAYMENT FOR SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued
under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided in
Subsections (b), (c) and (d) below.
(b) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares which
have already been owned by the Optionee or the Optionee's representative for
any time period specified by the Committee and which are
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surrendered to the Company in good form for transfer. Such Shares shall be
valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.
(c) PROMISSORY NOTES. To the extent that a Stock Option
Agreement so provides, payment may be made all, or in part with a full
recourse promissory note executed by the Optionee. The interest rate and
other terms and conditions of such note shall be determined by Committee. The
Committee may require that the Optionee pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares be released to the
Optionee until such note is paid in full.
(d) CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists, payment may
be made all or in part by delivery (on a form prescribed by the Committee) of
an irrevocable direction to a securities broker to sell Shares and to deliver
all or part of the sale proceeds to the Company in payment of the aggregate
Exercise Price.
SECTION 8. ADJUSTMENT OF SHARES.
(a) GENERAL. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the value of Shares, a combination or consolidation of outstanding
Stock into a lesser number of Shares, a recapitalization, a reclassification
or a similar occurrence, the Committee shall make appropriate adjustments in
one or more of (i) the number of Shares available for future grants under
Section 5, (ii) the number of Shares covered each outstanding Option or (iii)
the Exercise Price under each outstanding Option.
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(b) REORGANIZATIONS. In the event that the Company is a party
to a merger or reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization.
(c) RESERVATION OF RIGHTS. Except as provided in this Section
8, an Optionee shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of
any class. Any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or Exercise Price of Shares subject to an Option. The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
SECTION 9. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
(a) EFFECTIVE DATE. No provision of this Article 9 shall be
effective unless and until the Board of Directors has determined to implement
such provision.
(b) ELECTIONS TO RECEIVE NONSTATUTORY OPTIONS. An Outside
Director may elect to receive his or her annual retainer payments and meeting
fees from the Company in the form of cash, Nonstatutory Options, or a
combination thereof. Such Nonstatutory Options shall be issued under the Key
Employees Plan. An election under this Article 9 shall be filed with the
Company on the prescribed form and subject to such filing deadlines and
election procedures as shall be established by the Committee.
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(c) NUMBER AND TERMS OF NONSTATUTORY OPTIONS. The number of
Nonstatutory Options to be granted to Outside Directors in lieu of annual
retainers and meeting fees that would otherwise be paid in cash shall be
calculated in a manner determined by the Board. The terms of such
Nonstatutory Options shall also be determined by the Board.
SECTION 10. LEGAL REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of
1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange on
which the Company's securities may then be listed.
SECTION 11. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as,
or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.
SECTION 12. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall
become effective on the date its adoption by the Board of Directors, subject
to the approval of the Company's shareholders within twelve (12) months after
its adoption by the Board of Directors. The Plan shall terminate
automatically ten (10) years after its initial effective date of the Plan,
and may be terminated on any earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of
Directors may amend the an at any time and from time to time. Rights and
obligations under any Option granted before
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amendment of the Plan shall not be materially altered, or impaired adversely,
by such amendment, except with consent of the person to whom the Option was
granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be
issued or sold under the Plan after the termination thereof, except upon
exercise of an Option granted prior to such termination. The termination of
the Plan, or any amendment thereof, shall not affect any Option previously
granted under the Plan.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board of Directors, the
Company has caused its authorized officer to execute the same as of February
13, 1998.
MUSICIAN'S FRIEND, INC.
By
-------------------------------
As Its
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EXHIBIT 5.1
[LETTERHEAD]
October 7, 1999
Guitar Center, Inc.
5155 Clareton Drive
Agoura Hills, California 91301
Ladies and Gentlemen:
This opinion is rendered in connection with the filing by
Guitar Center, Inc., a Delaware corporation (the "Company"), of its Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
with respect to the issuance and sale by the Company of up to 250,505 shares of
the Company's common stock, par value $.01 per share (the "Shares"), under the
Musician's Friend, Inc. 1998 Stock Option Plan. We have acted as special counsel
to the Company in connection with the preparation of the Registration Statement.
In our capacity as such counsel, we are familiar with the
proceedings taken and to be taken by the Company in connection with the
authorization, issuance, and sale of the Common Stock. In addition, we have made
such legal and factual examinations and inquiries, including an examination of
originals (or copies certified or otherwise identified to our satisfaction as
being true reproductions of originals) or such documents, corporate records and
other instruments, and have obtained from officers of the Company and agents
thereof such certificates and other representations and assurances, as we have
deemed necessary or appropriate for the purposes of this opinion.
<PAGE>
LATHAM & WATKINS
October 7, 1999
Page 2
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
legal capacity of natural persons executing such documents and the authenticity
and conformity to original documents of documents submitted to us as certified
or photostatic copies.
We are opining herein as to the effect on the subject
transaction only of the General Corporation Law of the State of Delaware,
including statutory and reported decisional law thereunder, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction or, in the case of Delaware, any other laws, or
as to any matters of municipal law or the laws of any local agencies within any
state.
Subject to the foregoing and the other qualifications set
forth herein, it is our opinion that, as of the date hereof, based on the
foregoing and the proceedings to be taken by the Company as referred to above,
we are of the opinion that the Shares have been duly authorized, and upon the
exercise of options granted to pursuant to the Plan and the issuance and sale of
the Shares, each in the manner contemplated by the Registration Statement, and
each in accordance with the terms of the Plan, and upon the issuance of Shares
and payment therefor of legal consideration in excess of the aggregate per value
share of the Shares issued, such Shares will be validly issued, fully paid and
nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE>
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Guitar Center, Inc.:
We consent to the use of our report dated February 9, 1999 incorporated
herein by reference, which report is included in the Guitar Center, Inc. 1998
Annual Report on Form 10-K.
/s/ KPMG LLP
Los Angeles, California
October 4, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated May 28, 1999, relating to the
financial statements of Musician's Friend, Inc., which appears in the Current
Report on Form 8-K/A of Guitar Center, Inc. dated August 10, 1999.
PricewaterhouseCoopers LLP
Portland, Oregon
October 4, 1999
